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Risk Management And Fair Values | 6 Months Ended
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Jun. 30, 2022
Risk Management And Fair Values | RISK MANAGEMENT AND FAIR VALUES (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy) Market Risk In the normal course of business, Entergy is exposed to a number of market risks. Market risk is the potential loss that Entergy may incur as a result of changes in the market or fair value of a particular commodity or instrument. All financial and commodity-related instruments, including derivatives, are subject to market risk including commodity price risk, equity price, and interest rate risk. Entergy uses derivatives primarily to mitigate commodity price risk, particularly power price and fuel price risk. 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 derivative 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. As a wholesale generator, Entergy Wholesale Commodities’ core business was selling energy, measured in MWh, to its customers. Entergy Wholesale Commodities entered into forward contracts with its customers and also sold energy and capacity in the day ahead or spot markets. In addition to its forward physical power and gas contracts, Entergy Wholesale Commodities used a combination of financial contracts, including swaps, collars, and options, to mitigate commodity price risk. When the market price fell, the combination of financial contracts was expected to settle in gains that offset lower revenue from generation, which resulted in a more predictable cash flow. Consistent with management’s strategy to shut down and sell all plants in the Entergy Wholesale Commodities merchant fleet, the Entergy Wholesale Commodities portfolio of derivative instruments expired in April 2021, which was the settlement date for the last financial derivative contracts in the Entergy Wholesale Commodities portfolio. Entergy’s exposure to market risk is determined by a number of factors, including the size, term, composition, and diversification of positions held, as well as market volatility and liquidity. For instruments such as options, the time period during which the option may be exercised and the relationship between the current market price of the underlying instrument and the option’s contractual strike or exercise price also affects the level of market risk. A significant factor influencing the overall level of market risk to which Entergy is exposed is its use of hedging techniques to mitigate such risk. Hedging instruments and volumes are chosen based on ability to mitigate risk associated with future energy and capacity prices; however, other considerations are factored into hedge product and volume decisions including corporate liquidity, corporate credit ratings, counterparty credit risk, hedging costs, firm settlement risk, and product availability in the marketplace. Entergy manages market risk by actively monitoring compliance with stated risk management policies as well as monitoring the effectiveness of its hedging policies and strategies. Entergy’s risk management policies limit the amount of total net exposure and rolling net exposure during the stated periods. These policies, including related risk limits, are regularly assessed to ensure their appropriateness given Entergy’s objectives. Derivatives Some derivative instruments are classified as cash flow hedges due to their financial settlement provisions while others are classified as normal purchase/normal sale transactions due to their physical settlement provisions. Normal purchase/normal sale risk management tools include power purchase and sales agreements, fuel purchase agreements, capacity contracts, and tolling agreements. Financially-settled cash flow hedges can include natural gas and electricity swaps and options. Entergy may enter into financially-settled swap and option contracts to manage market risk that may or may not be designated as hedging instruments. Entergy entered into derivatives to manage natural risks inherent in its physical or financial assets or liabilities. Electricity over-the-counter instruments and futures contracts that financially settled against day-ahead power pool prices were used to manage price exposure for Entergy Wholesale Commodities generation. Entergy used standardized master netting agreements to help mitigate the credit risk of derivative instruments. These master agreements facilitated the netting of cash flows associated with a single counterparty and may have included collateral requirements. Cash, letters of credit, and parental/affiliate guarantees were obtained as security from counterparties in order to mitigate credit risk. The collateral agreements required a counterparty to post cash or letters of credit in the event an exposure exceeded an established threshold. The threshold represented an unsecured credit limit, which may have been supported by a parental/affiliate guarantee, as determined in accordance with Entergy’s credit policy. In addition, collateral agreements allowed for termination and liquidation of all positions in the event of a failure or inability to post collateral. Certain of the agreements to sell the power produced by Entergy Wholesale Commodities power plants contained provisions that required an Entergy subsidiary to provide credit support to secure its obligations depending on the mark-to-market values of the contracts. The primary form of credit support to satisfy these requirements was an Entergy Corporation guarantee. If the Entergy Corporation credit rating fell below investment grade, Entergy would have had to post collateral equal to the estimated outstanding liability under the contract at the applicable date. There were no outstanding derivative contracts held by Entergy Wholesale Commodities as of June 30, 2022 and December 31, 2021. As of June 30, 2022, $12 million in cash collateral was required to be posted by the Entergy subsidiary to its counterparties. As of December 31, 2021, $8 million in cash collateral was required to be posted by the Entergy subsidiary to its counterparties. Entergy manages fuel price volatility for its Louisiana jurisdictions (Entergy Louisiana and Entergy New Orleans) and Entergy Mississippi through the purchase of natural gas swaps and options that financially settle against either the average Henry Hub Gas Daily prices or the NYMEX Henry Hub. These swaps and options 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 and projected winter purchases for gas distribution at Entergy New Orleans. The maximum length of time over which Entergy has executed natural gas swaps and options as of June 30, 2022 is 1.75 years for Entergy Louisiana and the maximum length of time over which Entergy has executed natural gas swaps as of June 30, 2022 is 6 months, each, for Entergy Mississippi and Entergy New Orleans. The total volume of natural gas swaps and options outstanding as of June 30, 2022 is 27,681,400 MMBtu for Entergy, including 12,800,000 MMBtu for Entergy Louisiana, 14,771,300 MMBtu for Entergy Mississippi, and 110,100 MMBtu for Entergy New Orleans. Credit support for these natural gas swaps and options 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. During the second quarter 2022, Entergy participated in the annual financial transmission rights auction process for the MISO planning year of June 1, 2022 through May 31, 2023. Financial transmission rights are derivative instruments that represent economic hedges of future congestion charges that will be incurred in serving Entergy’s customer load. They are not designated as hedging instruments. Entergy initially records financial transmission rights at their estimated fair value and subsequently adjusts the carrying value to their estimated fair value at the end of each accounting period prior to settlement. Unrealized gains or losses on financial transmission rights held by Entergy Wholesale Commodities are included in operating revenues. The Utility operating companies recognize regulatory liabilities or assets for unrealized gains or losses on financial transmission rights. The total volume of financial transmission rights outstanding as of June 30, 2022 is 135,179 GWh for Entergy, including 30,477 GWh for Entergy Arkansas, 61,242 GWh for Entergy Louisiana, 14,621 GWh for Entergy Mississippi, 5,720 GWh for Entergy New Orleans, and 22,950 GWh for Entergy Texas. Credit support for financial transmission rights held by the Utility operating companies is covered by cash and/or letters of credit issued by each Utility operating company as required by MISO. Credit support for financial transmission rights held by Entergy Wholesale Commodities is covered by cash. No cash or letters of credit were required to be posted for financial transmission rights exposure for Entergy Wholesale Commodities as of June 30, 2022 and December 31, 2021. Letters of credit posted with MISO covered the financial transmission rights exposure for Entergy Mississippi and Entergy Texas as of June 30, 2022 and as of December 31, 2021. The fair values of Entergy’s derivative instruments in the consolidated balance sheet as of June 30, 2022 are shown in the table below. Certain investments, including those not designated as hedging instruments, are subject to master netting agreements and are presented in the balance sheet on a net basis in accordance with accounting guidance for derivatives and hedging.
Instrument |  | Balance Sheet Location |  | Gross Fair Value (a) |  | Offsetting Position (b) |  | Net Fair Value (c) (d) |  | Business
|  |  |  | (In Millions) |  |
Derivatives not designated as hedging instruments |  |  |  |  |  |  |  |  |  |
Assets: |  |  |  |  |  |  |  |  |  |
Natural gas swaps and options |  | Prepayments and other |  | $37 |  | $— |  | $37 |  | Utility
Natural gas swaps and options |  | Other deferred debits and other assets |  | $9 |  | $— |  | $9 |  | Utility
Financial transmission rights |  | Prepayments and other |  | $13 |  | ($1) |  | $12 |  | Utility and Entergy Wholesale Commodities
The fair values of Entergy’s derivative instruments in the consolidated balance sheet as of December 31, 2021 are shown in the table below.
Instrument |  | Balance Sheet Location |  | Gross Fair Value (a) |  | Offsetting Position (b) |  | Net Fair Value (c) (d) |  | Business
|  |  |  | (In Millions) |  |
Derivatives not designated as hedging instruments |  |  |  |  |  |  |  |  |  |
Assets: |  |  |  |  |  |  |  |  |  |
Natural gas swaps and options |  | Prepayments and other |  | $6 |  | $— |  | $6 |  | Utility
Natural gas swaps and options |  | Other deferred debits and other assets |  | $5 |  | $— |  | $5 |  | Utility
Financial transmission rights |  | Prepayments and other |  | $4 |  | $— |  | $4 |  | Utility and Entergy Wholesale Commodities
Liabilities: |  |  |  |  |  |  |  |  |  |
Natural gas swaps and options |  | Other current liabilities |  | $7 |  | $— |  | $7 |  | Utility
(a)Represents the gross amounts of recognized assets/liabilities (b)Represents the netting of fair value balances with the same counterparty (c)Represents the net amounts of assets/liabilities presented on the Entergy Corporation and Subsidiaries’ Consolidated Balance Sheet (d)Excludes cash collateral in the amount of $12 million posted as of June 30, 2022 and $8 million posted as of December 31, 2021. Also excludes letters of credit in the amount of $6 million posted as of June 30, 2022. As discussed above, the Entergy Wholesale Commodities portfolio of derivative instruments expired in April 2021, which was the settlement date for the last financial derivative contracts in the Entergy Wholesale Commodities portfolio. For the three months ended June 30, 2021, there were no effects resulting from Entergy’s derivative instruments designated as cash flow hedges on the consolidated statements of operations. The effects of Entergy’s derivative instruments designated as cash flow hedges on the consolidated statements of operations for the six months ended June 30, 2021 were as follows:
Instrument |  | Amount of gain (loss) recognized in other comprehensive income |  | Income Statement location |  | Amount of gain (loss) reclassified from accumulated other comprehensive income into income (a)
|  | (In Millions) |  |  |  | (In Millions)
Electricity swaps and options |  | $2 |  | Competitive businesses operating revenues |  | $40
(a) Before taxes of $8 million for the six months ended June 30, 2021 Prior to the expiration of the Entergy Wholesale Commodities portfolio of derivative instruments, Entergy may have effectively liquidated a cash flow hedge instrument by entering into a contract offsetting the original hedge, and then de-designating the original hedge in this situation. Gains or losses accumulated in other comprehensive income prior to de-designation would have continued to be deferred in other comprehensive income until they were included in income as the original hedged transaction occurred. From the point of de-designation, the gains or losses on the original hedge and the offsetting contract were recorded as assets or liabilities on the balance sheet and offset as they flowed through to earnings. The effects of Entergy’s derivative instruments not designated as hedging instruments on the consolidated statements of operations for the three months ended June 30, 2022 and 2021 were as follows:
Instrument |  | Income Statement location |  | Amount of gain (loss) recorded in the income statement
|  |  |  | (In Millions)
2022 |  |  |  |
Natural gas swaps |  | Fuel, fuel-related expenses, and gas purchased for resale | (a) | $23
Financial transmission rights |  | Purchased power expense | (b) | $37
2021 |  |  |  |
Natural gas swaps |  | Fuel, fuel-related expenses, and gas purchased for resale | (a) | $18
Financial transmission rights |  | Purchased power expense | (b) | $16
Electricity swaps and options (c) |  | Competitive business operating revenues |  | $—
The effects of Entergy’s derivative instruments not designated as hedging instruments on the consolidated statements of operations for the six months ended June 30, 2022 and 2021 were as follows:
Instrument |  | Income Statement location |  | Amount of gain (loss) recorded in the income statement
|  |  |  | (In Millions)
2022 |  |  |  |
Natural gas swaps and options |  | Fuel, fuel-related expenses, and gas purchased for resale | (a) | $78
Financial transmission rights |  | Purchased power | (b) | $60
2021 |  |  |  |
Natural gas swaps and options |  | Fuel, fuel-related expenses, and gas purchased for resale | (a) | $25
Financial transmission rights |  | Purchased power | (b) | $144
Electricity swaps and options (c) |  | Competitive business operating revenues |  | ($2)
(a)Due to regulatory treatment, the natural gas swaps and options are marked-to-market through fuel, fuel-related expenses, and gas purchased for resale and then such amounts are simultaneously reversed and recorded as an offsetting regulatory asset or liability. The gains or losses recorded as fuel expenses when the swaps and options are settled are recovered or refunded through fuel cost recovery mechanisms. (b)Due to regulatory treatment, the changes in the estimated fair value of financial transmission rights for the Utility operating companies are recorded through purchased power expense and then such amounts are simultaneously reversed and recorded as an offsetting regulatory asset or liability. The gains or losses recorded as purchased power expense when the financial transmission rights for the Utility operating companies are settled are recovered or refunded through fuel cost recovery mechanisms. (c)There were no gains (losses) recognized in accumulated other comprehensive income from electricity swaps and options prior to the expiration of the Entergy Wholesale Commodities portfolio of derivative instruments in April 2021. The fair values of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their balance sheets as of June 30, 2022 are shown in the table below. Certain investments, including those not designated as hedging instruments, are subject to master netting agreements and are presented in the balance sheet on a net basis in accordance with accounting guidance for derivatives and hedging.
Instrument |  | Balance Sheet Location |  | Gross Fair Value (a) |  | Offsetting Position (b) |  | Net Fair Value (c) (d) |  | Registrant
|  |  |  | (In Millions) |  |
Assets: |  |  |  |  |  |  |  |  |  |
Natural gas swaps and options |  | Prepayments and other |  | $16.1 |  | $— |  | $16.1 |  | Entergy Louisiana
Natural gas swaps and options |  | Other deferred debits and other assets |  | $8.7 |  | $— |  | $8.7 |  | Entergy Louisiana
Natural gas swaps |  | Prepayments and other |  | $20.6 |  | $— |  | $20.6 |  | Entergy Mississippi
Financial transmission rights |  | Prepayments and other |  | $4.5 |  | ($0.1) |  | $4.4 |  | Entergy Arkansas
Financial transmission rights |  | Prepayments and other |  | $5.3 |  | ($0.6) |  | $4.7 |  | Entergy Louisiana
Financial transmission rights |  | Prepayments and other |  | $0.5 |  | $— |  | $0.5 |  | Entergy Mississippi
Financial transmission rights |  | Prepayments and other |  | $0.6 |  | $— |  | $0.6 |  | Entergy New Orleans
Financial transmission rights |  | Prepayments and other |  | $1.7 |  | ($0.2) |  | $1.5 |  | Entergy Texas
Liabilities: |  |  |  |  |  |  |  |  |  |
Natural gas swaps |  | Other current liabilities |  | $0.2 |  | $— |  | $0.2 |  | Entergy New Orleans
The fair values of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their balance sheets as of December 31, 2021 were as follows:
Instrument |  | Balance Sheet Location |  | Gross Fair Value (a) |  | Offsetting Position (b) |  | Net Fair Value (c) (d) |  | Registrant
|  |  |  | (In Millions) |  |
Assets: |  |  |  |  |  |  |  |  |  |
Natural gas swaps and options |  | Prepayments and other |  | $5.7 |  | $— |  | $5.7 |  | Entergy Louisiana
Natural gas swaps and options |  | Other deferred debits and other assets |  | $5.3 |  | $— |  | $5.3 |  | Entergy Louisiana
Financial transmission rights |  | Prepayments and other |  | $2.3 |  | $— |  | $2.3 |  | Entergy Arkansas
Financial transmission rights |  | Prepayments and other |  | $0.6 |  | $— |  | $0.6 |  | Entergy Louisiana
Financial transmission rights |  | Prepayments and other |  | $0.3 |  | $— |  | $0.3 |  | Entergy Mississippi
Financial transmission rights |  | Prepayments and other |  | $0.1 |  | $— |  | $0.1 |  | Entergy New Orleans
Financial transmission rights |  | Prepayments and other |  | $0.8 |  | $— |  | $0.8 |  | Entergy Texas
Liabilities: |  |  |  |  |  |  |  |  |  |
Natural gas swaps |  | Other current liabilities |  | $6.7 |  | $— |  | $6.7 |  | Entergy Mississippi
Natural gas swaps |  | Other current liabilities |  | $0.5 |  | $— |  | $0.5 |  | Entergy New Orleans
(a)Represents the gross amounts of recognized assets/liabilities (b)Represents the netting of fair value balances with the same counterparty (c)Represents the net amounts of assets/liabilities presented on the Registrant Subsidiaries’ balance sheets (d)As of June 30, 2022, letters of credit posted with MISO covered financial transmission rights exposure of $0.4 million for Entergy Mississippi and $5.3 million for Entergy Texas. As of December 31, 2021, letters of credit posted with MISO covered financial transmission rights exposure of $0.2 million for Entergy Mississippi and $0.1 million for Entergy Texas. The effects of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their income statements for the three months ended June 30, 2022 and 2021 were as follows:
Instrument |  | Income Statement Location |  | Amount of gain (loss) recorded in the income statement |  | Registrant
|  |  |  | (In Millions) |  |
2022 |  |  |  |  |  |
Natural gas swaps and options |  | Fuel, fuel-related expenses, and gas purchased for resale |  | $8.7 | (a) | Entergy Louisiana
Natural gas swaps |  | Fuel, fuel-related expenses, and gas purchased for resale |  | $14.6 | (a) | Entergy Mississippi
Natural gas swaps |  | Fuel, fuel-related expenses, and gas purchased for resale |  | ($0.2) | (a) | Entergy New Orleans
Financial transmission rights |  | Purchased power expense |  | $16.0 | (b) | Entergy Arkansas
Financial transmission rights |  | Purchased power expense |  | $16.1 | (b) | Entergy Louisiana
Financial transmission rights |  | Purchased power expense |  | $2.2 | (b) | Entergy Mississippi
Financial transmission rights |  | Purchased power expense |  | $1.6 | (b) | Entergy New Orleans
Financial transmission rights |  | Purchased power expense |  | $1.0 | (b) | Entergy Texas
2021 |  |  |  |  |  |
Natural gas swaps and options |  | Fuel, fuel-related expenses, and gas purchased for resale |  | $4.9 | (a) | Entergy Louisiana
Natural gas swaps |  | Fuel, fuel-related expenses, and gas purchased for resale |  | $13.2 | (a) | Entergy Mississippi
Natural gas swaps |  | Fuel, fuel-related expenses, and gas purchased for resale |  | $0.1 | (a) | Entergy New Orleans
Financial transmission rights |  | Purchased power expense |  | $3.4 | (b) | Entergy Arkansas
Financial transmission rights |  | Purchased power expense |  | $5.9 | (b) | Entergy Louisiana
Financial transmission rights |  | Purchased power expense |  | $0.7 | (b) | Entergy Mississippi
Financial transmission rights |  | Purchased power expense |  | $0.8 | (b) | Entergy New Orleans
Financial transmission rights |  | Purchased power expense |  | $4.8 | (b) | Entergy Texas
The effects of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their income statements for the six months ended June 30, 2022 and 2021 were as follows:
Instrument |  | Income Statement Location |  | Amount of gain (loss) recorded in the income statement |  | Registrant
|  |  |  | (In Millions) |  |
2022 |  |  |  |  |  |
Natural gas swaps and options |  | Fuel, fuel-related expenses, and gas purchased for resale |  | $19.8 | (a) | Entergy Louisiana
Natural gas swaps |  | Fuel, fuel-related expenses, and gas purchased for resale |  | $57.4 | (a) | Entergy Mississippi
Natural gas swaps |  | Fuel, fuel-related expenses, and gas purchased for resale |  | $0.9 | (a) | Entergy New Orleans
Financial transmission rights |  | Purchased power |  | $23.5 | (b) | Entergy Arkansas
Financial transmission rights |  | Purchased power |  | $25.5 | (b) | Entergy Louisiana
Financial transmission rights |  | Purchased power |  | $3.2 | (b) | Entergy Mississippi
Financial transmission rights |  | Purchased power |  | $2.4 | (b) | Entergy New Orleans
Financial transmission rights |  | Purchased power |  | $4.9 | (b) | Entergy Texas
2021 |  |  |  |  |  |
Natural gas swaps and options |  | Fuel, fuel-related expenses, and gas purchased for resale |  | $6.7 | (a) | Entergy Louisiana
Natural gas swaps |  | Fuel, fuel-related expenses, and gas purchased for resale |  | $18.3 | (a) | Entergy Mississippi
Financial transmission rights |  | Purchased power |  | $29.5 | (b) | Entergy Arkansas
Financial transmission rights |  | Purchased power |  | $18.2 | (b) | Entergy Louisiana
Financial transmission rights |  | Purchased power |  | $7.9 | (b) | Entergy Mississippi
Financial transmission rights |  | Purchased power |  | $2.0 | (b) | Entergy New Orleans
Financial transmission rights |  | Purchased power |  | $82.7 | (b) | Entergy Texas
(a)Due to regulatory treatment, the natural gas swaps and options are marked-to-market through fuel, fuel-related expenses, and gas purchased for resale and then such amounts are simultaneously reversed and recorded as an offsetting regulatory asset or liability. The gains or losses recorded as fuel expenses when the swaps and options are settled are recovered or refunded through fuel cost recovery mechanisms. (b)Due to regulatory treatment, the changes in the estimated fair value of financial transmission rights for the Utility operating companies are recorded through purchased power expense and then such amounts are simultaneously reversed and recorded as an offsetting regulatory asset or liability. The gains or losses recorded as purchased power expense when the financial transmission rights for the Utility operating companies are settled are recovered or refunded through fuel cost recovery mechanisms. 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 are 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. Accounting standards define fair value as an exit price, or the price that would be received to sell an asset or the amount that would be paid to transfer a liability in an orderly transaction between knowledgeable market participants at the date of measurement. Entergy and the Registrant Subsidiaries use assumptions or market input data that market participants would use in pricing assets or liabilities at fair value. The inputs can be readily observable, corroborated by market data, or generally unobservable. Entergy and the Registrant Subsidiaries endeavor to use the best available information to determine fair value. Accounting standards establish a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy establishes the highest priority for unadjusted market quotes in an active market for the identical asset or liability and the lowest priority for unobservable inputs. The three levels of the fair value hierarchy are: •Level 1 - Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the entity has the ability to access at the measurement date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 primarily consists of individually owned common stocks, cash equivalents (temporary cash investments, securitization recovery trust account, and escrow accounts), debt instruments, and gas swaps traded on exchanges with active markets. Cash equivalents includes all unrestricted highly liquid debt instruments with an original or remaining maturity of three months or less at the date of purchase. •Level 2 - Level 2 inputs are inputs other than quoted prices included in Level 1 that are, either directly or indirectly, observable for the asset or liability at the measurement date. Assets are valued based on prices derived by independent third parties that use inputs such as benchmark yields, reported trades, broker/dealer quotes, and issuer spreads. Prices are reviewed and can be challenged with the independent parties and/or overridden by Entergy if it is believed such would be more reflective of fair value. Level 2 inputs include the following: –quoted prices for similar assets or liabilities in active markets; –quoted prices for identical assets or liabilities in inactive markets; –inputs other than quoted prices that are observable for the asset or liability; or –inputs that are derived principally from or corroborated by observable market data by correlation or other means. Level 2 consists primarily of individually-owned debt instruments and gas swaps and options valued using observable inputs. •Level 3 - Level 3 inputs are pricing inputs that are generally less observable or unobservable from objective sources. These inputs are used with internally developed methodologies to produce management’s best estimate of fair value for the asset or liability. Level 3 consists primarily of financial transmission rights and derivative power contracts used as cash flow hedges of power sales at merchant power plants. Consistent with management’s strategy to shut down and sell all plants in the Entergy Wholesale Commodities merchant fleet, the Entergy Wholesale Commodities portfolio of derivative instruments expired in April 2021, which was the settlement date for the last financial derivative contracts in the Entergy Wholesale Commodities portfolio. The values for power contract assets or liabilities prior to expiration in April 2021 were based on both observable inputs including public market prices and interest rates, and unobservable inputs such as implied volatilities, unit contingent discounts, expected basis differences, and credit adjusted counterparty interest rates. They were classified as Level 3 assets and liabilities. The valuations of these assets and liabilities were performed by the Office of Corporate Risk Oversight and the Entergy Wholesale Commodities Accounting group. The primary related functions of the Office of Corporate Risk Oversight included: gathering, validating and reporting market data, providing market risk analyses and valuations in support of Entergy Wholesale Commodities’ commercial transactions, developing and administering protocols for the management of market risks, and implementing and maintaining controls around changes to market data in the energy trading and risk management system. The Office of Corporate Risk Oversight was also responsible for managing the energy trading and risk management system, forecasting revenues, forward positions and analysis. The Entergy Wholesale Commodities Accounting group performed functions related to market and counterparty settlements, revenue reporting and analysis, and financial accounting. The Office of Corporate Risk Oversight reports to the Vice President and Treasurer while the Entergy Wholesale Commodities Accounting group reports to the Chief Accounting Officer. The amounts reflected as the fair value of electricity swaps were based on the estimated amount that the contracts were in-the-money at the balance sheet date (treated as an asset) or out-of-the-money at the balance sheet date (treated as a liability) and equaled the estimated amount receivable to or payable by Entergy if the contracts were settled at that date. These derivative contracts included cash flow hedges that swapped fixed for floating cash flows for sales of the output from the Entergy Wholesale Commodities business. The fair values were based on the mark-to-market comparison between the fixed contract prices and the floating prices determined each period from quoted forward power market prices. The differences between the fixed price in the swap contract and these market-related prices multiplied by the volume specified in the contract and discounted at the counterparties’ credit adjusted risk free rate were recorded as derivative contract assets or liabilities. For contracts that had unit contingent terms, a further discount was applied based on the historical relationship between contract and market prices for similar contract terms. The amounts reflected as the fair values of electricity options were valued based on a Black Scholes model, and were calculated at the end of each month for accounting purposes. Inputs to the valuation included end of day forward market prices for the period when the transactions settled, implied volatilities based on market volatilities provided by a third-party data aggregator, and U.S. Treasury rates for a risk-free return rate. As described further below, prices and implied volatilities were reviewed and could be adjusted if it was determined that there was a better representation of fair value. On a daily basis, the Office of Corporate Risk Oversight calculated the mark-to-market for electricity swaps and options. The Office of Corporate Risk Oversight also validated forward market prices by comparing them to other sources of forward market prices or to settlement prices of actual market transactions. Significant differences were analyzed and potentially adjusted based on these other sources of forward market prices or settlement prices of actual market transactions. Implied volatilities used to value options were also validated using actual counterparty quotes for Entergy Wholesale Commodities transactions when available and compared with other sources of market implied volatilities. Moreover, on a quarterly basis, the Office of Corporate Risk Oversight confirmed the mark-to-market calculations and prepared price scenarios and credit downgrade scenario analysis. The scenario analysis was communicated to senior management within Entergy and within Entergy Wholesale Commodities. Finally, for all proposed derivative transactions, an analysis was completed to assess the risk of adding the proposed derivative to Entergy Wholesale Commodities’ portfolio. In particular, the credit and liquidity effects were calculated for this analysis. This analysis was communicated to senior management within Entergy and Entergy Wholesale Commodities. The values of financial transmission rights are based on unobservable inputs, including estimates of congestion costs in MISO between applicable generation and load pricing nodes based on the 50th percentile of historical prices. They are classified as Level 3 assets and liabilities. The valuations of these assets and liabilities are performed by the Office of Corporate Risk Oversight. The values are calculated internally and verified against the data published by MISO. Entergy’s Entergy Wholesale Commodities Accounting group reviews these valuations for reasonableness, with the assistance of others within the organization with knowledge of the various inputs and assumptions used in the valuation. The Office of Corporate Risk Oversight reports to the Vice President and Treasurer. The Entergy Wholesale Commodities Accounting group reports to the Chief Accounting Officer. The following tables set forth, by level within the fair value hierarchy, Entergy’s assets and liabilities that are accounted for at fair value on a recurring basis as of June 30, 2022 and December 31, 2021. The assessment of the significance of a particular input to a fair value measurement requires judgment and may affect its placement within the fair value hierarchy levels.
2022 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $514 |  |  | $— |  |  | $— |  |  | $514 |
Decommissioning trust funds (a): |  |  |  |  |  |  |  |
Equity securities |  | 18 |  |  | — |  |  | — |  |  | 18 |
Debt securities (b) |  | 598 |  |  | 1,095 |  |  | — |  |  | 1,693 |
Common trusts (c) |  |  |  |  |  |  |  | 2,379 |
Securitization recovery trust account |  | 28 |  |  | — |  |  | — |  |  | 28 |
Escrow accounts |  | 331 |  |  | — |  |  | — |  |  | 331 |
Gas hedge contracts |  | 37 |  |  | 9 |  |  | — |  |  | 46 |
Financial transmission rights |  | — |  |  | — |  |  | 12 |  |  | 12 |
|  | $1,526 |  |  | $1,104 |  |  | $12 |  |  | $5,021 |
2021 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $398 |  |  | $— |  |  | $— |  |  | $398 |
Decommissioning trust funds (a): |  |  |  |  |  |  |  |
Equity securities |  | 132 |  |  | — |  |  | — |  |  | 132 |
Debt securities (b) |  | 770 |  |  | 1,407 |  |  | — |  |  | 2,177 |
Common trusts (c) |  |  |  |  |  |  |  | 3,205 |
Securitization recovery trust account |  | 29 |  |  | — |  |  | — |  |  | 29 |
Escrow accounts |  | 49 |  |  | — |  |  | — |  |  | 49 |
Gas hedge contracts |  | 6 |  |  | 5 |  |  | — |  |  | 11 |
Financial transmission rights |  | — |  |  | — |  |  | 4 |  |  | 4 |
|  | $1,384 |  |  | $1,412 |  |  | $4 |  |  | $6,005 |
Liabilities: |  |  |  |  |  |  |  |
Gas hedge contracts |  | $7 |  |  | $— |  |  | $— |  |  | $7 |
(a)The decommissioning trust funds hold equity and fixed income securities. Equity securities are invested to approximate the returns of major market indices. Fixed income securities are held in various governmental and corporate securities. See Note 9 to the financial statements herein for additional information on the investment portfolios. (b)The decommissioning trust funds fair value presented herein does not include the recognition pursuant to ASU 2016-13 of a credit loss valuation allowance of $0.4 million as of December 31, 2021 on debt securities. See Note 9 to the financial statements herein for additional information on the allowance for expected credit losses. (c)Common trust funds are not publicly quoted and are valued by the fund administrators using net asset value as a practical expedient. Accordingly, these funds are not assigned a level in the fair value table. The fund administrator of these investments allows daily trading at the net asset value and trades settle at a later date. The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the three months ended June 30, 2022 and 2021:
|  | 2022 |  |  | 2021
|  |  | Financial transmission rights |  |  |  | Financial transmission rights
|  | (In Millions)
Balance as of April 1, |  |  | $1 |  |  |  |  | $4 |
Total gains (losses) for the period |  |  |  |  |  |  |
Included as a regulatory liability/asset |  |  | 32 |  |  |  |  | 15 |
Issuances of financial transmission rights |  |  | 16 |  |  |  |  | 12 |
Settlements |  |  | (37) |  |  |  |  | (16) |
Balance as of June 30, |  |  | $12 |  |  |  |  | $15 |
The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the six months ended June 30, 2022 and 2021:
|  |  | 2022 |  | 2021
|  |  | Financial transmission rights |  | Power Contracts |  | Financial transmission rights
|  |  | (In Millions)
Balance as of January 1, |  |  | $4 |  |  | $38 |  |  | $9 |
Total gains (losses) for the period |  |  |  |  |  |  |
Included in earnings |  |  | — |  |  | (2) |  |  | 3 |
Included in other comprehensive income |  |  | — |  |  | 2 |  |  | — |
Included as a regulatory liability/asset |  |  | 52 |  |  | — |  |  | 135 |
Issuances of financial transmission rights |  |  | 16 |  |  | — |  |  | 12 |
Settlements |  |  | (60) |  |  | (38) |  |  | (144) |
Balance as of June 30, |  |  | $12 |  |  | $— |  |  | $15 |
The fair values of the Level 3 financial transmission rights are based on unobservable inputs calculated internally and verified against historical pricing data published by MISO. The following table sets forth an analysis of each of the types of unobservable inputs impacting the fair value of items classified as Level 3 within the fair value hierarchy, and the sensitivity to changes to those inputs:
Significant Unobservable Input |  | Transaction Type |  | Position |  | Change to Input |  | Effect on Fair Value
Unit contingent discount |  | Electricity swaps |  | Sell |  | Increase (Decrease) |  | Decrease (Increase)
The following table sets forth, by level within the fair value hierarchy, the Registrant Subsidiaries’ assets and liabilities that are accounted for at fair value on a recurring basis as of June 30, 2022 and December 31, 2021. The assessment of the significance of a particular input to a fair value measurement requires judgment and may affect its placement within the fair value hierarchy levels. Entergy Arkansas
2022 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $58.2 |  |  | $— |  |  | $— |  |  | $58.2 |
Decommissioning trust funds (a): |  |  |  |  |  |  |  |
Equity securities |  | 4.1 |  |  | — |  |  | — |  |  | 4.1 |
Debt securities |  | 131.6 |  |  | 353.2 |  |  | — |  |  | 484.8 |
Common trusts (b) |  |  |  |  |  |  |  | 705.9 |
Financial transmission rights |  | — |  |  | — |  |  | 4.4 |  |  | 4.4 |
|  | $193.9 |  |  | $353.2 |  |  | $4.4 |  |  | $1,257.4 |
2021 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $4.8 |  |  | $— |  |  | $— |  |  | $4.8 |
Decommissioning trust funds (a): |  |  |  |  |  |  |  |
Equity securities |  | 16.7 |  |  | — |  |  | — |  |  | 16.7 |
Debt securities |  | 119.5 |  |  | 406.8 |  |  | — |  |  | 526.3 |
Common trusts (b) |  |  |  |  |  |  |  | 895.4 |
Financial transmission rights |  | — |  |  | — |  |  | 2.3 |  |  | 2.3 |
|  | $141.0 |  |  | $406.8 |  |  | $2.3 |  |  | $1,445.5 |
Entergy Louisiana
2022 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $65.7 |  |  | $— |  |  | $— |  |  | $65.7 |
Decommissioning trust funds (a): |  |  |  |  |  |  |  |
Equity securities |  | 12.6 |  |  | — |  |  | — |  |  | 12.6 |
Debt securities |  | 225.0 |  |  | 508.3 |  |  | — |  |  | 733.3 |
Common trusts (b) |  |  |  |  |  |  |  | 1,010.6 |
Escrow accounts |  | 290.1 |  |  | — |  |  | — |  |  | 290.1 |
Gas hedge contracts |  | 16.1 |  |  | 8.7 |  |  | — |  |  | 24.8 |
Financial transmission rights |  | — |  |  | — |  |  | 4.7 |  |  | 4.7 |
|  | $609.5 |  |  | $517.0 |  |  | $4.7 |  |  | $2,141.8 |
2021 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $18.4 |  |  | $— |  |  | $— |  |  | $18.4 |
Decommissioning trust funds (a): |  |  |  |  |  |  |  |
Equity securities |  | 20.2 |  |  | — |  |  | — |  |  | 20.2 |
Debt securities |  | 262.6 |  |  | 531.6 |  |  | — |  |  | 794.2 |
Common trusts (b) |  |  |  |  |  |  |  | 1,300.1 |
Gas hedge contracts |  | 5.7 |  |  | 5.3 |  |  | — |  |  | 11.0 |
Financial transmission rights |  | — |  |  | — |  |  | 0.6 |  |  | 0.6 |
|  | $306.9 |  |  | $536.9 |  |  | $0.6 |  |  | $2,144.5 |
Entergy Mississippi
2022 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $26.1 |  |  | $— |  |  | $— |  |  | $26.1 |
Escrow accounts |  | 41.1 |  |  | — |  |  | — |  |  | 41.1 |
Gas hedge contracts |  | 20.6 |  |  | — |  |  | — |  |  | 20.6 |
Financial transmission rights |  | — |  |  | — |  |  | 0.5 |  |  | 0.5 |
|  | $87.8 |  |  | $— |  |  | $0.5 |  |  | $88.3 |
2021 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $47.6 |  |  | $— |  |  | $— |  |  | $47.6 |
Escrow accounts |  | 48.9 |  |  | — |  |  | — |  |  | 48.9 |
Financial transmission rights |  | — |  |  | — |  |  | 0.3 |  |  | 0.3 |
|  | $96.5 |  |  | $— |  |  | $0.3 |  |  | $96.8 |
Liabilities: |  |  |  |  |  |  |  |
Gas hedge contracts |  | $6.7 |  |  | $— |  |  | $— |  |  | $6.7 |
Entergy New Orleans
2022 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $25.7 |  |  | $— |  |  | $— |  |  | $25.7 |
Securitization recovery trust account |  | 1.7 |  |  | — |  |  | — |  |  | 1.7 |
Financial transmission rights |  | — |  |  | — |  |  | 0.6 |  |  | 0.6 |
|  | $27.4 |  |  | $— |  |  | $0.6 |  |  | $28.0 |
Liabilities: |  |  |  |  |  |  |  |
Gas hedge contracts |  | $0.2 |  |  | $— |  |  | $— |  |  | $0.2 |
2021 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $42.8 |  |  | $— |  |  | $— |  |  | $42.8 |
Securitization recovery trust account |  | 2.0 |  |  | — |  |  | — |  |  | 2.0 |
Financial transmission rights |  | — |  |  | — |  |  | 0.1 |  |  | 0.1 |
|  | $44.8 |  |  | $— |  |  | $0.1 |  |  | $44.9 |
Liabilities: |  |  |  |  |  |  |  |
Gas hedge contracts |  | $0.5 |  |  | $— |  |  | $— |  |  | $0.5 |
Entergy Texas
2022 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $14.4 |  |  | $— |  |  | $— |  |  | $14.4 |
Securitization recovery trust account |  | 26.6 |  |  | — |  |  | — |  |  | 26.6 |
Financial transmission rights |  | — |  |  | — |  |  | 1.5 |  |  | 1.5 |
|  | $41.0 |  |  | $— |  |  | $1.5 |  |  | $42.5 |
2021 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Securitization recovery trust account |  | $26.6 |  |  | $— |  |  | $— |  |  | $26.6 |
Financial transmission rights |  | — |  |  | — |  |  | 0.8 |  |  | 0.8 |
|  | $26.6 |  |  | $— |  |  | $0.8 |  |  | $27.4 |
System Energy
2022 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $134.6 |  |  | $— |  |  | $— |  |  | $134.6 |
Decommissioning trust funds (a): |  |  |  |  |  |  |  |
Equity securities |  | 1.7 |  |  | — |  |  | — |  |  | 1.7 |
Debt Securities |  | 241.1 |  |  | 233.1 |  |  | — |  |  | 474.2 |
Common trusts (b) |  |  |  |  |  |  |  | 662.9 |
|  | $377.4 |  |  | $233.1 |  |  | $— |  |  | $1,273.4 |
2021 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $89.1 |  |  | $— |  |  | $— |  |  | $89.1 |
Decommissioning trust funds (a): |  |  |  |  |  |  |  |
Equity securities |  | 12.9 |  |  | — |  |  | — |  |  | 12.9 |
Debt securities |  | 273.0 |  |  | 251.5 |  |  | — |  |  | 524.5 |
Common trusts (b) |  |  |  |  |  |  |  | 847.9 |
|  | $375.0 |  |  | $251.5 |  |  | $— |  |  | $1,474.4 |
(a)The decommissioning trust funds hold equity and fixed income securities. Equity securities are invested to approximate the returns of major market indices. Fixed income securities are held in various governmental and corporate securities. See Note 9 to the financial statements herein for additional information on the investment portfolios. (b)Common trust funds are not publicly quoted and are valued by the fund administrators using net asset value as a practical expedient. Accordingly, these funds are not assigned a level in the fair value table. The fund administrator of these investments allows daily trading at the net asset value and trades settle at a later date. The following table sets forth a reconciliation of changes in the net assets for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the three months ended June 30, 2022.
| Entergy Arkansas |  | Entergy Louisiana |  | Entergy Mississippi |  | Entergy New Orleans |  | Entergy Texas
| (In Millions)
Balance as of April 1, | $0.4 |  |  | $0.3 |  |  | $0.2 |  |  | $0.1 |  |  | $0.5 |
Issuances of financial transmission rights | 5.4 |  |  | 5.3 |  |  | 0.8 |  |  | 0.8 |  |  | 3.9 |
Gains (losses) included as a regulatory liability/asset | 14.6 |  |  | 15.2 |  |  | 1.7 |  |  | 1.3 |  |  | (1.9) |
Settlements | (16.0) |  |  | (16.1) |  |  | (2.2) |  |  | (1.6) |  |  | (1.0) |
Balance as of June 30, | $4.4 |  |  | $4.7 |  |  | $0.5 |  |  | $0.6 |  |  | $1.5 |
The following table sets forth a reconciliation of changes in the net assets for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the three months ended June 30, 2021.
| Entergy Arkansas |  | Entergy Louisiana |  | Entergy Mississippi |  | Entergy New Orleans |  | Entergy Texas
| (In Millions)
Balance as of April 1, | $1.4 |  |  | $1.2 |  |  | $0.3 |  |  | $0.1 |  |  | $0.5 |
Issuances of financial transmission rights | 2.8 |  |  | 4.1 |  |  | 1.7 |  |  | 0.4 |  |  | 2.7 |
Gains (losses) included as a regulatory liability/asset | 3.0 |  |  | 5.4 |  |  | 0.8 |  |  | 0.9 |  |  | 5.4 |
Settlements | (3.4) |  |  | (5.9) |  |  | (0.7) |  |  | (0.8) |  |  | (4.8) |
Balance as of June 30, | $3.8 |  |  | $4.8 |  |  | $2.1 |  |  | $0.6 |  |  | $3.8 |
The following table sets forth a reconciliation of changes in the net assets for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the six months ended June 30, 2022.
| Entergy Arkansas |  | Entergy Louisiana |  | Entergy Mississippi |  | Entergy New Orleans |  | Entergy Texas
| (In Millions)
Balance as of January 1, | $2.3 |  |  | $0.6 |  |  | $0.3 |  |  | $0.1 |  |  | $0.8 |
Issuances of financial transmission rights | 5.4 |  |  | 5.3 |  |  | 0.8 |  |  | 0.8 |  |  | 3.9 |
Gains (losses) included as a regulatory liability/asset | 20.2 |  |  | 24.3 |  |  | 2.6 |  |  | 2.1 |  |  | 1.7 |
Settlements | (23.5) |  |  | (25.5) |  |  | (3.2) |  |  | (2.4) |  |  | (4.9) |
Balance as of June 30, | $4.4 |  |  | $4.7 |  |  | $0.5 |  |  | $0.6 |  |  | $1.5 |
The following table sets forth a reconciliation of changes in the net assets for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the six months ended June 30, 2021.
| Entergy Arkansas |  | Entergy Louisiana |  | Entergy Mississippi |  | Entergy New Orleans |  | Entergy Texas
| (In Millions)
Balance as of January 1, | $2.7 |  |  | $4.2 |  |  | $0.6 |  |  | $0.1 |  |  | $1.6 |
Issuances of financial transmission rights | 2.8 |  |  | 4.1 |  |  | 1.7 |  |  | 0.4 |  |  | 2.7 |
Gains (losses) included as a regulatory liability/asset | 27.8 |  |  | 14.7 |  |  | 7.7 |  |  | 2.1 |  |  | 82.2 |
Settlements | (29.5) |  |  | (18.2) |  |  | (7.9) |  |  | (2.0) |  |  | (82.7) |
Balance as of June 30, | $3.8 |  |  | $4.8 |  |  | $2.1 |  |  | $0.6 |  |  | $3.8 |
Entergy Arkansas [Member] |
Risk Management And Fair Values | RISK MANAGEMENT AND FAIR VALUES (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy) Market Risk In the normal course of business, Entergy is exposed to a number of market risks. Market risk is the potential loss that Entergy may incur as a result of changes in the market or fair value of a particular commodity or instrument. All financial and commodity-related instruments, including derivatives, are subject to market risk including commodity price risk, equity price, and interest rate risk. Entergy uses derivatives primarily to mitigate commodity price risk, particularly power price and fuel price risk. 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 derivative 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. As a wholesale generator, Entergy Wholesale Commodities’ core business was selling energy, measured in MWh, to its customers. Entergy Wholesale Commodities entered into forward contracts with its customers and also sold energy and capacity in the day ahead or spot markets. In addition to its forward physical power and gas contracts, Entergy Wholesale Commodities used a combination of financial contracts, including swaps, collars, and options, to mitigate commodity price risk. When the market price fell, the combination of financial contracts was expected to settle in gains that offset lower revenue from generation, which resulted in a more predictable cash flow. Consistent with management’s strategy to shut down and sell all plants in the Entergy Wholesale Commodities merchant fleet, the Entergy Wholesale Commodities portfolio of derivative instruments expired in April 2021, which was the settlement date for the last financial derivative contracts in the Entergy Wholesale Commodities portfolio. Entergy’s exposure to market risk is determined by a number of factors, including the size, term, composition, and diversification of positions held, as well as market volatility and liquidity. For instruments such as options, the time period during which the option may be exercised and the relationship between the current market price of the underlying instrument and the option’s contractual strike or exercise price also affects the level of market risk. A significant factor influencing the overall level of market risk to which Entergy is exposed is its use of hedging techniques to mitigate such risk. Hedging instruments and volumes are chosen based on ability to mitigate risk associated with future energy and capacity prices; however, other considerations are factored into hedge product and volume decisions including corporate liquidity, corporate credit ratings, counterparty credit risk, hedging costs, firm settlement risk, and product availability in the marketplace. Entergy manages market risk by actively monitoring compliance with stated risk management policies as well as monitoring the effectiveness of its hedging policies and strategies. Entergy’s risk management policies limit the amount of total net exposure and rolling net exposure during the stated periods. These policies, including related risk limits, are regularly assessed to ensure their appropriateness given Entergy’s objectives. Derivatives Some derivative instruments are classified as cash flow hedges due to their financial settlement provisions while others are classified as normal purchase/normal sale transactions due to their physical settlement provisions. Normal purchase/normal sale risk management tools include power purchase and sales agreements, fuel purchase agreements, capacity contracts, and tolling agreements. Financially-settled cash flow hedges can include natural gas and electricity swaps and options. Entergy may enter into financially-settled swap and option contracts to manage market risk that may or may not be designated as hedging instruments. Entergy entered into derivatives to manage natural risks inherent in its physical or financial assets or liabilities. Electricity over-the-counter instruments and futures contracts that financially settled against day-ahead power pool prices were used to manage price exposure for Entergy Wholesale Commodities generation. Entergy used standardized master netting agreements to help mitigate the credit risk of derivative instruments. These master agreements facilitated the netting of cash flows associated with a single counterparty and may have included collateral requirements. Cash, letters of credit, and parental/affiliate guarantees were obtained as security from counterparties in order to mitigate credit risk. The collateral agreements required a counterparty to post cash or letters of credit in the event an exposure exceeded an established threshold. The threshold represented an unsecured credit limit, which may have been supported by a parental/affiliate guarantee, as determined in accordance with Entergy’s credit policy. In addition, collateral agreements allowed for termination and liquidation of all positions in the event of a failure or inability to post collateral. Certain of the agreements to sell the power produced by Entergy Wholesale Commodities power plants contained provisions that required an Entergy subsidiary to provide credit support to secure its obligations depending on the mark-to-market values of the contracts. The primary form of credit support to satisfy these requirements was an Entergy Corporation guarantee. If the Entergy Corporation credit rating fell below investment grade, Entergy would have had to post collateral equal to the estimated outstanding liability under the contract at the applicable date. There were no outstanding derivative contracts held by Entergy Wholesale Commodities as of June 30, 2022 and December 31, 2021. As of June 30, 2022, $12 million in cash collateral was required to be posted by the Entergy subsidiary to its counterparties. As of December 31, 2021, $8 million in cash collateral was required to be posted by the Entergy subsidiary to its counterparties. Entergy manages fuel price volatility for its Louisiana jurisdictions (Entergy Louisiana and Entergy New Orleans) and Entergy Mississippi through the purchase of natural gas swaps and options that financially settle against either the average Henry Hub Gas Daily prices or the NYMEX Henry Hub. These swaps and options 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 and projected winter purchases for gas distribution at Entergy New Orleans. The maximum length of time over which Entergy has executed natural gas swaps and options as of June 30, 2022 is 1.75 years for Entergy Louisiana and the maximum length of time over which Entergy has executed natural gas swaps as of June 30, 2022 is 6 months, each, for Entergy Mississippi and Entergy New Orleans. The total volume of natural gas swaps and options outstanding as of June 30, 2022 is 27,681,400 MMBtu for Entergy, including 12,800,000 MMBtu for Entergy Louisiana, 14,771,300 MMBtu for Entergy Mississippi, and 110,100 MMBtu for Entergy New Orleans. Credit support for these natural gas swaps and options 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. During the second quarter 2022, Entergy participated in the annual financial transmission rights auction process for the MISO planning year of June 1, 2022 through May 31, 2023. Financial transmission rights are derivative instruments that represent economic hedges of future congestion charges that will be incurred in serving Entergy’s customer load. They are not designated as hedging instruments. Entergy initially records financial transmission rights at their estimated fair value and subsequently adjusts the carrying value to their estimated fair value at the end of each accounting period prior to settlement. Unrealized gains or losses on financial transmission rights held by Entergy Wholesale Commodities are included in operating revenues. The Utility operating companies recognize regulatory liabilities or assets for unrealized gains or losses on financial transmission rights. The total volume of financial transmission rights outstanding as of June 30, 2022 is 135,179 GWh for Entergy, including 30,477 GWh for Entergy Arkansas, 61,242 GWh for Entergy Louisiana, 14,621 GWh for Entergy Mississippi, 5,720 GWh for Entergy New Orleans, and 22,950 GWh for Entergy Texas. Credit support for financial transmission rights held by the Utility operating companies is covered by cash and/or letters of credit issued by each Utility operating company as required by MISO. Credit support for financial transmission rights held by Entergy Wholesale Commodities is covered by cash. No cash or letters of credit were required to be posted for financial transmission rights exposure for Entergy Wholesale Commodities as of June 30, 2022 and December 31, 2021. Letters of credit posted with MISO covered the financial transmission rights exposure for Entergy Mississippi and Entergy Texas as of June 30, 2022 and as of December 31, 2021. The fair values of Entergy’s derivative instruments in the consolidated balance sheet as of June 30, 2022 are shown in the table below. Certain investments, including those not designated as hedging instruments, are subject to master netting agreements and are presented in the balance sheet on a net basis in accordance with accounting guidance for derivatives and hedging.
Instrument |  | Balance Sheet Location |  | Gross Fair Value (a) |  | Offsetting Position (b) |  | Net Fair Value (c) (d) |  | Business
|  |  |  | (In Millions) |  |
Derivatives not designated as hedging instruments |  |  |  |  |  |  |  |  |  |
Assets: |  |  |  |  |  |  |  |  |  |
Natural gas swaps and options |  | Prepayments and other |  | $37 |  | $— |  | $37 |  | Utility
Natural gas swaps and options |  | Other deferred debits and other assets |  | $9 |  | $— |  | $9 |  | Utility
Financial transmission rights |  | Prepayments and other |  | $13 |  | ($1) |  | $12 |  | Utility and Entergy Wholesale Commodities
The fair values of Entergy’s derivative instruments in the consolidated balance sheet as of December 31, 2021 are shown in the table below.
Instrument |  | Balance Sheet Location |  | Gross Fair Value (a) |  | Offsetting Position (b) |  | Net Fair Value (c) (d) |  | Business
|  |  |  | (In Millions) |  |
Derivatives not designated as hedging instruments |  |  |  |  |  |  |  |  |  |
Assets: |  |  |  |  |  |  |  |  |  |
Natural gas swaps and options |  | Prepayments and other |  | $6 |  | $— |  | $6 |  | Utility
Natural gas swaps and options |  | Other deferred debits and other assets |  | $5 |  | $— |  | $5 |  | Utility
Financial transmission rights |  | Prepayments and other |  | $4 |  | $— |  | $4 |  | Utility and Entergy Wholesale Commodities
Liabilities: |  |  |  |  |  |  |  |  |  |
Natural gas swaps and options |  | Other current liabilities |  | $7 |  | $— |  | $7 |  | Utility
(a)Represents the gross amounts of recognized assets/liabilities (b)Represents the netting of fair value balances with the same counterparty (c)Represents the net amounts of assets/liabilities presented on the Entergy Corporation and Subsidiaries’ Consolidated Balance Sheet (d)Excludes cash collateral in the amount of $12 million posted as of June 30, 2022 and $8 million posted as of December 31, 2021. Also excludes letters of credit in the amount of $6 million posted as of June 30, 2022. As discussed above, the Entergy Wholesale Commodities portfolio of derivative instruments expired in April 2021, which was the settlement date for the last financial derivative contracts in the Entergy Wholesale Commodities portfolio. For the three months ended June 30, 2021, there were no effects resulting from Entergy’s derivative instruments designated as cash flow hedges on the consolidated statements of operations. The effects of Entergy’s derivative instruments designated as cash flow hedges on the consolidated statements of operations for the six months ended June 30, 2021 were as follows:
Instrument |  | Amount of gain (loss) recognized in other comprehensive income |  | Income Statement location |  | Amount of gain (loss) reclassified from accumulated other comprehensive income into income (a)
|  | (In Millions) |  |  |  | (In Millions)
Electricity swaps and options |  | $2 |  | Competitive businesses operating revenues |  | $40
(a) Before taxes of $8 million for the six months ended June 30, 2021 Prior to the expiration of the Entergy Wholesale Commodities portfolio of derivative instruments, Entergy may have effectively liquidated a cash flow hedge instrument by entering into a contract offsetting the original hedge, and then de-designating the original hedge in this situation. Gains or losses accumulated in other comprehensive income prior to de-designation would have continued to be deferred in other comprehensive income until they were included in income as the original hedged transaction occurred. From the point of de-designation, the gains or losses on the original hedge and the offsetting contract were recorded as assets or liabilities on the balance sheet and offset as they flowed through to earnings. The effects of Entergy’s derivative instruments not designated as hedging instruments on the consolidated statements of operations for the three months ended June 30, 2022 and 2021 were as follows:
Instrument |  | Income Statement location |  | Amount of gain (loss) recorded in the income statement
|  |  |  | (In Millions)
2022 |  |  |  |
Natural gas swaps |  | Fuel, fuel-related expenses, and gas purchased for resale | (a) | $23
Financial transmission rights |  | Purchased power expense | (b) | $37
2021 |  |  |  |
Natural gas swaps |  | Fuel, fuel-related expenses, and gas purchased for resale | (a) | $18
Financial transmission rights |  | Purchased power expense | (b) | $16
Electricity swaps and options (c) |  | Competitive business operating revenues |  | $—
The effects of Entergy’s derivative instruments not designated as hedging instruments on the consolidated statements of operations for the six months ended June 30, 2022 and 2021 were as follows:
Instrument |  | Income Statement location |  | Amount of gain (loss) recorded in the income statement
|  |  |  | (In Millions)
2022 |  |  |  |
Natural gas swaps and options |  | Fuel, fuel-related expenses, and gas purchased for resale | (a) | $78
Financial transmission rights |  | Purchased power | (b) | $60
2021 |  |  |  |
Natural gas swaps and options |  | Fuel, fuel-related expenses, and gas purchased for resale | (a) | $25
Financial transmission rights |  | Purchased power | (b) | $144
Electricity swaps and options (c) |  | Competitive business operating revenues |  | ($2)
(a)Due to regulatory treatment, the natural gas swaps and options are marked-to-market through fuel, fuel-related expenses, and gas purchased for resale and then such amounts are simultaneously reversed and recorded as an offsetting regulatory asset or liability. The gains or losses recorded as fuel expenses when the swaps and options are settled are recovered or refunded through fuel cost recovery mechanisms. (b)Due to regulatory treatment, the changes in the estimated fair value of financial transmission rights for the Utility operating companies are recorded through purchased power expense and then such amounts are simultaneously reversed and recorded as an offsetting regulatory asset or liability. The gains or losses recorded as purchased power expense when the financial transmission rights for the Utility operating companies are settled are recovered or refunded through fuel cost recovery mechanisms. (c)There were no gains (losses) recognized in accumulated other comprehensive income from electricity swaps and options prior to the expiration of the Entergy Wholesale Commodities portfolio of derivative instruments in April 2021. The fair values of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their balance sheets as of June 30, 2022 are shown in the table below. Certain investments, including those not designated as hedging instruments, are subject to master netting agreements and are presented in the balance sheet on a net basis in accordance with accounting guidance for derivatives and hedging.
Instrument |  | Balance Sheet Location |  | Gross Fair Value (a) |  | Offsetting Position (b) |  | Net Fair Value (c) (d) |  | Registrant
|  |  |  | (In Millions) |  |
Assets: |  |  |  |  |  |  |  |  |  |
Natural gas swaps and options |  | Prepayments and other |  | $16.1 |  | $— |  | $16.1 |  | Entergy Louisiana
Natural gas swaps and options |  | Other deferred debits and other assets |  | $8.7 |  | $— |  | $8.7 |  | Entergy Louisiana
Natural gas swaps |  | Prepayments and other |  | $20.6 |  | $— |  | $20.6 |  | Entergy Mississippi
Financial transmission rights |  | Prepayments and other |  | $4.5 |  | ($0.1) |  | $4.4 |  | Entergy Arkansas
Financial transmission rights |  | Prepayments and other |  | $5.3 |  | ($0.6) |  | $4.7 |  | Entergy Louisiana
Financial transmission rights |  | Prepayments and other |  | $0.5 |  | $— |  | $0.5 |  | Entergy Mississippi
Financial transmission rights |  | Prepayments and other |  | $0.6 |  | $— |  | $0.6 |  | Entergy New Orleans
Financial transmission rights |  | Prepayments and other |  | $1.7 |  | ($0.2) |  | $1.5 |  | Entergy Texas
Liabilities: |  |  |  |  |  |  |  |  |  |
Natural gas swaps |  | Other current liabilities |  | $0.2 |  | $— |  | $0.2 |  | Entergy New Orleans
The fair values of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their balance sheets as of December 31, 2021 were as follows:
Instrument |  | Balance Sheet Location |  | Gross Fair Value (a) |  | Offsetting Position (b) |  | Net Fair Value (c) (d) |  | Registrant
|  |  |  | (In Millions) |  |
Assets: |  |  |  |  |  |  |  |  |  |
Natural gas swaps and options |  | Prepayments and other |  | $5.7 |  | $— |  | $5.7 |  | Entergy Louisiana
Natural gas swaps and options |  | Other deferred debits and other assets |  | $5.3 |  | $— |  | $5.3 |  | Entergy Louisiana
Financial transmission rights |  | Prepayments and other |  | $2.3 |  | $— |  | $2.3 |  | Entergy Arkansas
Financial transmission rights |  | Prepayments and other |  | $0.6 |  | $— |  | $0.6 |  | Entergy Louisiana
Financial transmission rights |  | Prepayments and other |  | $0.3 |  | $— |  | $0.3 |  | Entergy Mississippi
Financial transmission rights |  | Prepayments and other |  | $0.1 |  | $— |  | $0.1 |  | Entergy New Orleans
Financial transmission rights |  | Prepayments and other |  | $0.8 |  | $— |  | $0.8 |  | Entergy Texas
Liabilities: |  |  |  |  |  |  |  |  |  |
Natural gas swaps |  | Other current liabilities |  | $6.7 |  | $— |  | $6.7 |  | Entergy Mississippi
Natural gas swaps |  | Other current liabilities |  | $0.5 |  | $— |  | $0.5 |  | Entergy New Orleans
(a)Represents the gross amounts of recognized assets/liabilities (b)Represents the netting of fair value balances with the same counterparty (c)Represents the net amounts of assets/liabilities presented on the Registrant Subsidiaries’ balance sheets (d)As of June 30, 2022, letters of credit posted with MISO covered financial transmission rights exposure of $0.4 million for Entergy Mississippi and $5.3 million for Entergy Texas. As of December 31, 2021, letters of credit posted with MISO covered financial transmission rights exposure of $0.2 million for Entergy Mississippi and $0.1 million for Entergy Texas. The effects of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their income statements for the three months ended June 30, 2022 and 2021 were as follows:
Instrument |  | Income Statement Location |  | Amount of gain (loss) recorded in the income statement |  | Registrant
|  |  |  | (In Millions) |  |
2022 |  |  |  |  |  |
Natural gas swaps and options |  | Fuel, fuel-related expenses, and gas purchased for resale |  | $8.7 | (a) | Entergy Louisiana
Natural gas swaps |  | Fuel, fuel-related expenses, and gas purchased for resale |  | $14.6 | (a) | Entergy Mississippi
Natural gas swaps |  | Fuel, fuel-related expenses, and gas purchased for resale |  | ($0.2) | (a) | Entergy New Orleans
Financial transmission rights |  | Purchased power expense |  | $16.0 | (b) | Entergy Arkansas
Financial transmission rights |  | Purchased power expense |  | $16.1 | (b) | Entergy Louisiana
Financial transmission rights |  | Purchased power expense |  | $2.2 | (b) | Entergy Mississippi
Financial transmission rights |  | Purchased power expense |  | $1.6 | (b) | Entergy New Orleans
Financial transmission rights |  | Purchased power expense |  | $1.0 | (b) | Entergy Texas
2021 |  |  |  |  |  |
Natural gas swaps and options |  | Fuel, fuel-related expenses, and gas purchased for resale |  | $4.9 | (a) | Entergy Louisiana
Natural gas swaps |  | Fuel, fuel-related expenses, and gas purchased for resale |  | $13.2 | (a) | Entergy Mississippi
Natural gas swaps |  | Fuel, fuel-related expenses, and gas purchased for resale |  | $0.1 | (a) | Entergy New Orleans
Financial transmission rights |  | Purchased power expense |  | $3.4 | (b) | Entergy Arkansas
Financial transmission rights |  | Purchased power expense |  | $5.9 | (b) | Entergy Louisiana
Financial transmission rights |  | Purchased power expense |  | $0.7 | (b) | Entergy Mississippi
Financial transmission rights |  | Purchased power expense |  | $0.8 | (b) | Entergy New Orleans
Financial transmission rights |  | Purchased power expense |  | $4.8 | (b) | Entergy Texas
The effects of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their income statements for the six months ended June 30, 2022 and 2021 were as follows:
Instrument |  | Income Statement Location |  | Amount of gain (loss) recorded in the income statement |  | Registrant
|  |  |  | (In Millions) |  |
2022 |  |  |  |  |  |
Natural gas swaps and options |  | Fuel, fuel-related expenses, and gas purchased for resale |  | $19.8 | (a) | Entergy Louisiana
Natural gas swaps |  | Fuel, fuel-related expenses, and gas purchased for resale |  | $57.4 | (a) | Entergy Mississippi
Natural gas swaps |  | Fuel, fuel-related expenses, and gas purchased for resale |  | $0.9 | (a) | Entergy New Orleans
Financial transmission rights |  | Purchased power |  | $23.5 | (b) | Entergy Arkansas
Financial transmission rights |  | Purchased power |  | $25.5 | (b) | Entergy Louisiana
Financial transmission rights |  | Purchased power |  | $3.2 | (b) | Entergy Mississippi
Financial transmission rights |  | Purchased power |  | $2.4 | (b) | Entergy New Orleans
Financial transmission rights |  | Purchased power |  | $4.9 | (b) | Entergy Texas
2021 |  |  |  |  |  |
Natural gas swaps and options |  | Fuel, fuel-related expenses, and gas purchased for resale |  | $6.7 | (a) | Entergy Louisiana
Natural gas swaps |  | Fuel, fuel-related expenses, and gas purchased for resale |  | $18.3 | (a) | Entergy Mississippi
Financial transmission rights |  | Purchased power |  | $29.5 | (b) | Entergy Arkansas
Financial transmission rights |  | Purchased power |  | $18.2 | (b) | Entergy Louisiana
Financial transmission rights |  | Purchased power |  | $7.9 | (b) | Entergy Mississippi
Financial transmission rights |  | Purchased power |  | $2.0 | (b) | Entergy New Orleans
Financial transmission rights |  | Purchased power |  | $82.7 | (b) | Entergy Texas
(a)Due to regulatory treatment, the natural gas swaps and options are marked-to-market through fuel, fuel-related expenses, and gas purchased for resale and then such amounts are simultaneously reversed and recorded as an offsetting regulatory asset or liability. The gains or losses recorded as fuel expenses when the swaps and options are settled are recovered or refunded through fuel cost recovery mechanisms. (b)Due to regulatory treatment, the changes in the estimated fair value of financial transmission rights for the Utility operating companies are recorded through purchased power expense and then such amounts are simultaneously reversed and recorded as an offsetting regulatory asset or liability. The gains or losses recorded as purchased power expense when the financial transmission rights for the Utility operating companies are settled are recovered or refunded through fuel cost recovery mechanisms. 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 are 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. Accounting standards define fair value as an exit price, or the price that would be received to sell an asset or the amount that would be paid to transfer a liability in an orderly transaction between knowledgeable market participants at the date of measurement. Entergy and the Registrant Subsidiaries use assumptions or market input data that market participants would use in pricing assets or liabilities at fair value. The inputs can be readily observable, corroborated by market data, or generally unobservable. Entergy and the Registrant Subsidiaries endeavor to use the best available information to determine fair value. Accounting standards establish a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy establishes the highest priority for unadjusted market quotes in an active market for the identical asset or liability and the lowest priority for unobservable inputs. The three levels of the fair value hierarchy are: •Level 1 - Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the entity has the ability to access at the measurement date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 primarily consists of individually owned common stocks, cash equivalents (temporary cash investments, securitization recovery trust account, and escrow accounts), debt instruments, and gas swaps traded on exchanges with active markets. Cash equivalents includes all unrestricted highly liquid debt instruments with an original or remaining maturity of three months or less at the date of purchase. •Level 2 - Level 2 inputs are inputs other than quoted prices included in Level 1 that are, either directly or indirectly, observable for the asset or liability at the measurement date. Assets are valued based on prices derived by independent third parties that use inputs such as benchmark yields, reported trades, broker/dealer quotes, and issuer spreads. Prices are reviewed and can be challenged with the independent parties and/or overridden by Entergy if it is believed such would be more reflective of fair value. Level 2 inputs include the following: –quoted prices for similar assets or liabilities in active markets; –quoted prices for identical assets or liabilities in inactive markets; –inputs other than quoted prices that are observable for the asset or liability; or –inputs that are derived principally from or corroborated by observable market data by correlation or other means. Level 2 consists primarily of individually-owned debt instruments and gas swaps and options valued using observable inputs. •Level 3 - Level 3 inputs are pricing inputs that are generally less observable or unobservable from objective sources. These inputs are used with internally developed methodologies to produce management’s best estimate of fair value for the asset or liability. Level 3 consists primarily of financial transmission rights and derivative power contracts used as cash flow hedges of power sales at merchant power plants. Consistent with management’s strategy to shut down and sell all plants in the Entergy Wholesale Commodities merchant fleet, the Entergy Wholesale Commodities portfolio of derivative instruments expired in April 2021, which was the settlement date for the last financial derivative contracts in the Entergy Wholesale Commodities portfolio. The values for power contract assets or liabilities prior to expiration in April 2021 were based on both observable inputs including public market prices and interest rates, and unobservable inputs such as implied volatilities, unit contingent discounts, expected basis differences, and credit adjusted counterparty interest rates. They were classified as Level 3 assets and liabilities. The valuations of these assets and liabilities were performed by the Office of Corporate Risk Oversight and the Entergy Wholesale Commodities Accounting group. The primary related functions of the Office of Corporate Risk Oversight included: gathering, validating and reporting market data, providing market risk analyses and valuations in support of Entergy Wholesale Commodities’ commercial transactions, developing and administering protocols for the management of market risks, and implementing and maintaining controls around changes to market data in the energy trading and risk management system. The Office of Corporate Risk Oversight was also responsible for managing the energy trading and risk management system, forecasting revenues, forward positions and analysis. The Entergy Wholesale Commodities Accounting group performed functions related to market and counterparty settlements, revenue reporting and analysis, and financial accounting. The Office of Corporate Risk Oversight reports to the Vice President and Treasurer while the Entergy Wholesale Commodities Accounting group reports to the Chief Accounting Officer. The amounts reflected as the fair value of electricity swaps were based on the estimated amount that the contracts were in-the-money at the balance sheet date (treated as an asset) or out-of-the-money at the balance sheet date (treated as a liability) and equaled the estimated amount receivable to or payable by Entergy if the contracts were settled at that date. These derivative contracts included cash flow hedges that swapped fixed for floating cash flows for sales of the output from the Entergy Wholesale Commodities business. The fair values were based on the mark-to-market comparison between the fixed contract prices and the floating prices determined each period from quoted forward power market prices. The differences between the fixed price in the swap contract and these market-related prices multiplied by the volume specified in the contract and discounted at the counterparties’ credit adjusted risk free rate were recorded as derivative contract assets or liabilities. For contracts that had unit contingent terms, a further discount was applied based on the historical relationship between contract and market prices for similar contract terms. The amounts reflected as the fair values of electricity options were valued based on a Black Scholes model, and were calculated at the end of each month for accounting purposes. Inputs to the valuation included end of day forward market prices for the period when the transactions settled, implied volatilities based on market volatilities provided by a third-party data aggregator, and U.S. Treasury rates for a risk-free return rate. As described further below, prices and implied volatilities were reviewed and could be adjusted if it was determined that there was a better representation of fair value. On a daily basis, the Office of Corporate Risk Oversight calculated the mark-to-market for electricity swaps and options. The Office of Corporate Risk Oversight also validated forward market prices by comparing them to other sources of forward market prices or to settlement prices of actual market transactions. Significant differences were analyzed and potentially adjusted based on these other sources of forward market prices or settlement prices of actual market transactions. Implied volatilities used to value options were also validated using actual counterparty quotes for Entergy Wholesale Commodities transactions when available and compared with other sources of market implied volatilities. Moreover, on a quarterly basis, the Office of Corporate Risk Oversight confirmed the mark-to-market calculations and prepared price scenarios and credit downgrade scenario analysis. The scenario analysis was communicated to senior management within Entergy and within Entergy Wholesale Commodities. Finally, for all proposed derivative transactions, an analysis was completed to assess the risk of adding the proposed derivative to Entergy Wholesale Commodities’ portfolio. In particular, the credit and liquidity effects were calculated for this analysis. This analysis was communicated to senior management within Entergy and Entergy Wholesale Commodities. The values of financial transmission rights are based on unobservable inputs, including estimates of congestion costs in MISO between applicable generation and load pricing nodes based on the 50th percentile of historical prices. They are classified as Level 3 assets and liabilities. The valuations of these assets and liabilities are performed by the Office of Corporate Risk Oversight. The values are calculated internally and verified against the data published by MISO. Entergy’s Entergy Wholesale Commodities Accounting group reviews these valuations for reasonableness, with the assistance of others within the organization with knowledge of the various inputs and assumptions used in the valuation. The Office of Corporate Risk Oversight reports to the Vice President and Treasurer. The Entergy Wholesale Commodities Accounting group reports to the Chief Accounting Officer. The following tables set forth, by level within the fair value hierarchy, Entergy’s assets and liabilities that are accounted for at fair value on a recurring basis as of June 30, 2022 and December 31, 2021. The assessment of the significance of a particular input to a fair value measurement requires judgment and may affect its placement within the fair value hierarchy levels.
2022 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $514 |  |  | $— |  |  | $— |  |  | $514 |
Decommissioning trust funds (a): |  |  |  |  |  |  |  |
Equity securities |  | 18 |  |  | — |  |  | — |  |  | 18 |
Debt securities (b) |  | 598 |  |  | 1,095 |  |  | — |  |  | 1,693 |
Common trusts (c) |  |  |  |  |  |  |  | 2,379 |
Securitization recovery trust account |  | 28 |  |  | — |  |  | — |  |  | 28 |
Escrow accounts |  | 331 |  |  | — |  |  | — |  |  | 331 |
Gas hedge contracts |  | 37 |  |  | 9 |  |  | — |  |  | 46 |
Financial transmission rights |  | — |  |  | — |  |  | 12 |  |  | 12 |
|  | $1,526 |  |  | $1,104 |  |  | $12 |  |  | $5,021 |
2021 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $398 |  |  | $— |  |  | $— |  |  | $398 |
Decommissioning trust funds (a): |  |  |  |  |  |  |  |
Equity securities |  | 132 |  |  | — |  |  | — |  |  | 132 |
Debt securities (b) |  | 770 |  |  | 1,407 |  |  | — |  |  | 2,177 |
Common trusts (c) |  |  |  |  |  |  |  | 3,205 |
Securitization recovery trust account |  | 29 |  |  | — |  |  | — |  |  | 29 |
Escrow accounts |  | 49 |  |  | — |  |  | — |  |  | 49 |
Gas hedge contracts |  | 6 |  |  | 5 |  |  | — |  |  | 11 |
Financial transmission rights |  | — |  |  | — |  |  | 4 |  |  | 4 |
|  | $1,384 |  |  | $1,412 |  |  | $4 |  |  | $6,005 |
Liabilities: |  |  |  |  |  |  |  |
Gas hedge contracts |  | $7 |  |  | $— |  |  | $— |  |  | $7 |
(a)The decommissioning trust funds hold equity and fixed income securities. Equity securities are invested to approximate the returns of major market indices. Fixed income securities are held in various governmental and corporate securities. See Note 9 to the financial statements herein for additional information on the investment portfolios. (b)The decommissioning trust funds fair value presented herein does not include the recognition pursuant to ASU 2016-13 of a credit loss valuation allowance of $0.4 million as of December 31, 2021 on debt securities. See Note 9 to the financial statements herein for additional information on the allowance for expected credit losses. (c)Common trust funds are not publicly quoted and are valued by the fund administrators using net asset value as a practical expedient. Accordingly, these funds are not assigned a level in the fair value table. The fund administrator of these investments allows daily trading at the net asset value and trades settle at a later date. The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the three months ended June 30, 2022 and 2021:
|  | 2022 |  |  | 2021
|  |  | Financial transmission rights |  |  |  | Financial transmission rights
|  | (In Millions)
Balance as of April 1, |  |  | $1 |  |  |  |  | $4 |
Total gains (losses) for the period |  |  |  |  |  |  |
Included as a regulatory liability/asset |  |  | 32 |  |  |  |  | 15 |
Issuances of financial transmission rights |  |  | 16 |  |  |  |  | 12 |
Settlements |  |  | (37) |  |  |  |  | (16) |
Balance as of June 30, |  |  | $12 |  |  |  |  | $15 |
The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the six months ended June 30, 2022 and 2021:
|  |  | 2022 |  | 2021
|  |  | Financial transmission rights |  | Power Contracts |  | Financial transmission rights
|  |  | (In Millions)
Balance as of January 1, |  |  | $4 |  |  | $38 |  |  | $9 |
Total gains (losses) for the period |  |  |  |  |  |  |
Included in earnings |  |  | — |  |  | (2) |  |  | 3 |
Included in other comprehensive income |  |  | — |  |  | 2 |  |  | — |
Included as a regulatory liability/asset |  |  | 52 |  |  | — |  |  | 135 |
Issuances of financial transmission rights |  |  | 16 |  |  | — |  |  | 12 |
Settlements |  |  | (60) |  |  | (38) |  |  | (144) |
Balance as of June 30, |  |  | $12 |  |  | $— |  |  | $15 |
The fair values of the Level 3 financial transmission rights are based on unobservable inputs calculated internally and verified against historical pricing data published by MISO. The following table sets forth an analysis of each of the types of unobservable inputs impacting the fair value of items classified as Level 3 within the fair value hierarchy, and the sensitivity to changes to those inputs:
Significant Unobservable Input |  | Transaction Type |  | Position |  | Change to Input |  | Effect on Fair Value
Unit contingent discount |  | Electricity swaps |  | Sell |  | Increase (Decrease) |  | Decrease (Increase)
The following table sets forth, by level within the fair value hierarchy, the Registrant Subsidiaries’ assets and liabilities that are accounted for at fair value on a recurring basis as of June 30, 2022 and December 31, 2021. The assessment of the significance of a particular input to a fair value measurement requires judgment and may affect its placement within the fair value hierarchy levels. Entergy Arkansas
2022 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $58.2 |  |  | $— |  |  | $— |  |  | $58.2 |
Decommissioning trust funds (a): |  |  |  |  |  |  |  |
Equity securities |  | 4.1 |  |  | — |  |  | — |  |  | 4.1 |
Debt securities |  | 131.6 |  |  | 353.2 |  |  | — |  |  | 484.8 |
Common trusts (b) |  |  |  |  |  |  |  | 705.9 |
Financial transmission rights |  | — |  |  | — |  |  | 4.4 |  |  | 4.4 |
|  | $193.9 |  |  | $353.2 |  |  | $4.4 |  |  | $1,257.4 |
2021 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $4.8 |  |  | $— |  |  | $— |  |  | $4.8 |
Decommissioning trust funds (a): |  |  |  |  |  |  |  |
Equity securities |  | 16.7 |  |  | — |  |  | — |  |  | 16.7 |
Debt securities |  | 119.5 |  |  | 406.8 |  |  | — |  |  | 526.3 |
Common trusts (b) |  |  |  |  |  |  |  | 895.4 |
Financial transmission rights |  | — |  |  | — |  |  | 2.3 |  |  | 2.3 |
|  | $141.0 |  |  | $406.8 |  |  | $2.3 |  |  | $1,445.5 |
Entergy Louisiana
2022 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $65.7 |  |  | $— |  |  | $— |  |  | $65.7 |
Decommissioning trust funds (a): |  |  |  |  |  |  |  |
Equity securities |  | 12.6 |  |  | — |  |  | — |  |  | 12.6 |
Debt securities |  | 225.0 |  |  | 508.3 |  |  | — |  |  | 733.3 |
Common trusts (b) |  |  |  |  |  |  |  | 1,010.6 |
Escrow accounts |  | 290.1 |  |  | — |  |  | — |  |  | 290.1 |
Gas hedge contracts |  | 16.1 |  |  | 8.7 |  |  | — |  |  | 24.8 |
Financial transmission rights |  | — |  |  | — |  |  | 4.7 |  |  | 4.7 |
|  | $609.5 |  |  | $517.0 |  |  | $4.7 |  |  | $2,141.8 |
2021 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $18.4 |  |  | $— |  |  | $— |  |  | $18.4 |
Decommissioning trust funds (a): |  |  |  |  |  |  |  |
Equity securities |  | 20.2 |  |  | — |  |  | — |  |  | 20.2 |
Debt securities |  | 262.6 |  |  | 531.6 |  |  | — |  |  | 794.2 |
Common trusts (b) |  |  |  |  |  |  |  | 1,300.1 |
Gas hedge contracts |  | 5.7 |  |  | 5.3 |  |  | — |  |  | 11.0 |
Financial transmission rights |  | — |  |  | — |  |  | 0.6 |  |  | 0.6 |
|  | $306.9 |  |  | $536.9 |  |  | $0.6 |  |  | $2,144.5 |
Entergy Mississippi
2022 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $26.1 |  |  | $— |  |  | $— |  |  | $26.1 |
Escrow accounts |  | 41.1 |  |  | — |  |  | — |  |  | 41.1 |
Gas hedge contracts |  | 20.6 |  |  | — |  |  | — |  |  | 20.6 |
Financial transmission rights |  | — |  |  | — |  |  | 0.5 |  |  | 0.5 |
|  | $87.8 |  |  | $— |  |  | $0.5 |  |  | $88.3 |
2021 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $47.6 |  |  | $— |  |  | $— |  |  | $47.6 |
Escrow accounts |  | 48.9 |  |  | — |  |  | — |  |  | 48.9 |
Financial transmission rights |  | — |  |  | — |  |  | 0.3 |  |  | 0.3 |
|  | $96.5 |  |  | $— |  |  | $0.3 |  |  | $96.8 |
Liabilities: |  |  |  |  |  |  |  |
Gas hedge contracts |  | $6.7 |  |  | $— |  |  | $— |  |  | $6.7 |
Entergy New Orleans
2022 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $25.7 |  |  | $— |  |  | $— |  |  | $25.7 |
Securitization recovery trust account |  | 1.7 |  |  | — |  |  | — |  |  | 1.7 |
Financial transmission rights |  | — |  |  | — |  |  | 0.6 |  |  | 0.6 |
|  | $27.4 |  |  | $— |  |  | $0.6 |  |  | $28.0 |
Liabilities: |  |  |  |  |  |  |  |
Gas hedge contracts |  | $0.2 |  |  | $— |  |  | $— |  |  | $0.2 |
2021 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $42.8 |  |  | $— |  |  | $— |  |  | $42.8 |
Securitization recovery trust account |  | 2.0 |  |  | — |  |  | — |  |  | 2.0 |
Financial transmission rights |  | — |  |  | — |  |  | 0.1 |  |  | 0.1 |
|  | $44.8 |  |  | $— |  |  | $0.1 |  |  | $44.9 |
Liabilities: |  |  |  |  |  |  |  |
Gas hedge contracts |  | $0.5 |  |  | $— |  |  | $— |  |  | $0.5 |
Entergy Texas
2022 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $14.4 |  |  | $— |  |  | $— |  |  | $14.4 |
Securitization recovery trust account |  | 26.6 |  |  | — |  |  | — |  |  | 26.6 |
Financial transmission rights |  | — |  |  | — |  |  | 1.5 |  |  | 1.5 |
|  | $41.0 |  |  | $— |  |  | $1.5 |  |  | $42.5 |
2021 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Securitization recovery trust account |  | $26.6 |  |  | $— |  |  | $— |  |  | $26.6 |
Financial transmission rights |  | — |  |  | — |  |  | 0.8 |  |  | 0.8 |
|  | $26.6 |  |  | $— |  |  | $0.8 |  |  | $27.4 |
System Energy
2022 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $134.6 |  |  | $— |  |  | $— |  |  | $134.6 |
Decommissioning trust funds (a): |  |  |  |  |  |  |  |
Equity securities |  | 1.7 |  |  | — |  |  | — |  |  | 1.7 |
Debt Securities |  | 241.1 |  |  | 233.1 |  |  | — |  |  | 474.2 |
Common trusts (b) |  |  |  |  |  |  |  | 662.9 |
|  | $377.4 |  |  | $233.1 |  |  | $— |  |  | $1,273.4 |
2021 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $89.1 |  |  | $— |  |  | $— |  |  | $89.1 |
Decommissioning trust funds (a): |  |  |  |  |  |  |  |
Equity securities |  | 12.9 |  |  | — |  |  | — |  |  | 12.9 |
Debt securities |  | 273.0 |  |  | 251.5 |  |  | — |  |  | 524.5 |
Common trusts (b) |  |  |  |  |  |  |  | 847.9 |
|  | $375.0 |  |  | $251.5 |  |  | $— |  |  | $1,474.4 |
(a)The decommissioning trust funds hold equity and fixed income securities. Equity securities are invested to approximate the returns of major market indices. Fixed income securities are held in various governmental and corporate securities. See Note 9 to the financial statements herein for additional information on the investment portfolios. (b)Common trust funds are not publicly quoted and are valued by the fund administrators using net asset value as a practical expedient. Accordingly, these funds are not assigned a level in the fair value table. The fund administrator of these investments allows daily trading at the net asset value and trades settle at a later date. The following table sets forth a reconciliation of changes in the net assets for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the three months ended June 30, 2022.
| Entergy Arkansas |  | Entergy Louisiana |  | Entergy Mississippi |  | Entergy New Orleans |  | Entergy Texas
| (In Millions)
Balance as of April 1, | $0.4 |  |  | $0.3 |  |  | $0.2 |  |  | $0.1 |  |  | $0.5 |
Issuances of financial transmission rights | 5.4 |  |  | 5.3 |  |  | 0.8 |  |  | 0.8 |  |  | 3.9 |
Gains (losses) included as a regulatory liability/asset | 14.6 |  |  | 15.2 |  |  | 1.7 |  |  | 1.3 |  |  | (1.9) |
Settlements | (16.0) |  |  | (16.1) |  |  | (2.2) |  |  | (1.6) |  |  | (1.0) |
Balance as of June 30, | $4.4 |  |  | $4.7 |  |  | $0.5 |  |  | $0.6 |  |  | $1.5 |
The following table sets forth a reconciliation of changes in the net assets for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the three months ended June 30, 2021.
| Entergy Arkansas |  | Entergy Louisiana |  | Entergy Mississippi |  | Entergy New Orleans |  | Entergy Texas
| (In Millions)
Balance as of April 1, | $1.4 |  |  | $1.2 |  |  | $0.3 |  |  | $0.1 |  |  | $0.5 |
Issuances of financial transmission rights | 2.8 |  |  | 4.1 |  |  | 1.7 |  |  | 0.4 |  |  | 2.7 |
Gains (losses) included as a regulatory liability/asset | 3.0 |  |  | 5.4 |  |  | 0.8 |  |  | 0.9 |  |  | 5.4 |
Settlements | (3.4) |  |  | (5.9) |  |  | (0.7) |  |  | (0.8) |  |  | (4.8) |
Balance as of June 30, | $3.8 |  |  | $4.8 |  |  | $2.1 |  |  | $0.6 |  |  | $3.8 |
The following table sets forth a reconciliation of changes in the net assets for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the six months ended June 30, 2022.
| Entergy Arkansas |  | Entergy Louisiana |  | Entergy Mississippi |  | Entergy New Orleans |  | Entergy Texas
| (In Millions)
Balance as of January 1, | $2.3 |  |  | $0.6 |  |  | $0.3 |  |  | $0.1 |  |  | $0.8 |
Issuances of financial transmission rights | 5.4 |  |  | 5.3 |  |  | 0.8 |  |  | 0.8 |  |  | 3.9 |
Gains (losses) included as a regulatory liability/asset | 20.2 |  |  | 24.3 |  |  | 2.6 |  |  | 2.1 |  |  | 1.7 |
Settlements | (23.5) |  |  | (25.5) |  |  | (3.2) |  |  | (2.4) |  |  | (4.9) |
Balance as of June 30, | $4.4 |  |  | $4.7 |  |  | $0.5 |  |  | $0.6 |  |  | $1.5 |
The following table sets forth a reconciliation of changes in the net assets for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the six months ended June 30, 2021.
| Entergy Arkansas |  | Entergy Louisiana |  | Entergy Mississippi |  | Entergy New Orleans |  | Entergy Texas
| (In Millions)
Balance as of January 1, | $2.7 |  |  | $4.2 |  |  | $0.6 |  |  | $0.1 |  |  | $1.6 |
Issuances of financial transmission rights | 2.8 |  |  | 4.1 |  |  | 1.7 |  |  | 0.4 |  |  | 2.7 |
Gains (losses) included as a regulatory liability/asset | 27.8 |  |  | 14.7 |  |  | 7.7 |  |  | 2.1 |  |  | 82.2 |
Settlements | (29.5) |  |  | (18.2) |  |  | (7.9) |  |  | (2.0) |  |  | (82.7) |
Balance as of June 30, | $3.8 |  |  | $4.8 |  |  | $2.1 |  |  | $0.6 |  |  | $3.8 |
Entergy Louisiana [Member] |
Risk Management And Fair Values | RISK MANAGEMENT AND FAIR VALUES (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy) Market Risk In the normal course of business, Entergy is exposed to a number of market risks. Market risk is the potential loss that Entergy may incur as a result of changes in the market or fair value of a particular commodity or instrument. All financial and commodity-related instruments, including derivatives, are subject to market risk including commodity price risk, equity price, and interest rate risk. Entergy uses derivatives primarily to mitigate commodity price risk, particularly power price and fuel price risk. 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 derivative 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. As a wholesale generator, Entergy Wholesale Commodities’ core business was selling energy, measured in MWh, to its customers. Entergy Wholesale Commodities entered into forward contracts with its customers and also sold energy and capacity in the day ahead or spot markets. In addition to its forward physical power and gas contracts, Entergy Wholesale Commodities used a combination of financial contracts, including swaps, collars, and options, to mitigate commodity price risk. When the market price fell, the combination of financial contracts was expected to settle in gains that offset lower revenue from generation, which resulted in a more predictable cash flow. Consistent with management’s strategy to shut down and sell all plants in the Entergy Wholesale Commodities merchant fleet, the Entergy Wholesale Commodities portfolio of derivative instruments expired in April 2021, which was the settlement date for the last financial derivative contracts in the Entergy Wholesale Commodities portfolio. Entergy’s exposure to market risk is determined by a number of factors, including the size, term, composition, and diversification of positions held, as well as market volatility and liquidity. For instruments such as options, the time period during which the option may be exercised and the relationship between the current market price of the underlying instrument and the option’s contractual strike or exercise price also affects the level of market risk. A significant factor influencing the overall level of market risk to which Entergy is exposed is its use of hedging techniques to mitigate such risk. Hedging instruments and volumes are chosen based on ability to mitigate risk associated with future energy and capacity prices; however, other considerations are factored into hedge product and volume decisions including corporate liquidity, corporate credit ratings, counterparty credit risk, hedging costs, firm settlement risk, and product availability in the marketplace. Entergy manages market risk by actively monitoring compliance with stated risk management policies as well as monitoring the effectiveness of its hedging policies and strategies. Entergy’s risk management policies limit the amount of total net exposure and rolling net exposure during the stated periods. These policies, including related risk limits, are regularly assessed to ensure their appropriateness given Entergy’s objectives. Derivatives Some derivative instruments are classified as cash flow hedges due to their financial settlement provisions while others are classified as normal purchase/normal sale transactions due to their physical settlement provisions. Normal purchase/normal sale risk management tools include power purchase and sales agreements, fuel purchase agreements, capacity contracts, and tolling agreements. Financially-settled cash flow hedges can include natural gas and electricity swaps and options. Entergy may enter into financially-settled swap and option contracts to manage market risk that may or may not be designated as hedging instruments. Entergy entered into derivatives to manage natural risks inherent in its physical or financial assets or liabilities. Electricity over-the-counter instruments and futures contracts that financially settled against day-ahead power pool prices were used to manage price exposure for Entergy Wholesale Commodities generation. Entergy used standardized master netting agreements to help mitigate the credit risk of derivative instruments. These master agreements facilitated the netting of cash flows associated with a single counterparty and may have included collateral requirements. Cash, letters of credit, and parental/affiliate guarantees were obtained as security from counterparties in order to mitigate credit risk. The collateral agreements required a counterparty to post cash or letters of credit in the event an exposure exceeded an established threshold. The threshold represented an unsecured credit limit, which may have been supported by a parental/affiliate guarantee, as determined in accordance with Entergy’s credit policy. In addition, collateral agreements allowed for termination and liquidation of all positions in the event of a failure or inability to post collateral. Certain of the agreements to sell the power produced by Entergy Wholesale Commodities power plants contained provisions that required an Entergy subsidiary to provide credit support to secure its obligations depending on the mark-to-market values of the contracts. The primary form of credit support to satisfy these requirements was an Entergy Corporation guarantee. If the Entergy Corporation credit rating fell below investment grade, Entergy would have had to post collateral equal to the estimated outstanding liability under the contract at the applicable date. There were no outstanding derivative contracts held by Entergy Wholesale Commodities as of June 30, 2022 and December 31, 2021. As of June 30, 2022, $12 million in cash collateral was required to be posted by the Entergy subsidiary to its counterparties. As of December 31, 2021, $8 million in cash collateral was required to be posted by the Entergy subsidiary to its counterparties. Entergy manages fuel price volatility for its Louisiana jurisdictions (Entergy Louisiana and Entergy New Orleans) and Entergy Mississippi through the purchase of natural gas swaps and options that financially settle against either the average Henry Hub Gas Daily prices or the NYMEX Henry Hub. These swaps and options 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 and projected winter purchases for gas distribution at Entergy New Orleans. The maximum length of time over which Entergy has executed natural gas swaps and options as of June 30, 2022 is 1.75 years for Entergy Louisiana and the maximum length of time over which Entergy has executed natural gas swaps as of June 30, 2022 is 6 months, each, for Entergy Mississippi and Entergy New Orleans. The total volume of natural gas swaps and options outstanding as of June 30, 2022 is 27,681,400 MMBtu for Entergy, including 12,800,000 MMBtu for Entergy Louisiana, 14,771,300 MMBtu for Entergy Mississippi, and 110,100 MMBtu for Entergy New Orleans. Credit support for these natural gas swaps and options 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. During the second quarter 2022, Entergy participated in the annual financial transmission rights auction process for the MISO planning year of June 1, 2022 through May 31, 2023. Financial transmission rights are derivative instruments that represent economic hedges of future congestion charges that will be incurred in serving Entergy’s customer load. They are not designated as hedging instruments. Entergy initially records financial transmission rights at their estimated fair value and subsequently adjusts the carrying value to their estimated fair value at the end of each accounting period prior to settlement. Unrealized gains or losses on financial transmission rights held by Entergy Wholesale Commodities are included in operating revenues. The Utility operating companies recognize regulatory liabilities or assets for unrealized gains or losses on financial transmission rights. The total volume of financial transmission rights outstanding as of June 30, 2022 is 135,179 GWh for Entergy, including 30,477 GWh for Entergy Arkansas, 61,242 GWh for Entergy Louisiana, 14,621 GWh for Entergy Mississippi, 5,720 GWh for Entergy New Orleans, and 22,950 GWh for Entergy Texas. Credit support for financial transmission rights held by the Utility operating companies is covered by cash and/or letters of credit issued by each Utility operating company as required by MISO. Credit support for financial transmission rights held by Entergy Wholesale Commodities is covered by cash. No cash or letters of credit were required to be posted for financial transmission rights exposure for Entergy Wholesale Commodities as of June 30, 2022 and December 31, 2021. Letters of credit posted with MISO covered the financial transmission rights exposure for Entergy Mississippi and Entergy Texas as of June 30, 2022 and as of December 31, 2021. The fair values of Entergy’s derivative instruments in the consolidated balance sheet as of June 30, 2022 are shown in the table below. Certain investments, including those not designated as hedging instruments, are subject to master netting agreements and are presented in the balance sheet on a net basis in accordance with accounting guidance for derivatives and hedging.
Instrument |  | Balance Sheet Location |  | Gross Fair Value (a) |  | Offsetting Position (b) |  | Net Fair Value (c) (d) |  | Business
|  |  |  | (In Millions) |  |
Derivatives not designated as hedging instruments |  |  |  |  |  |  |  |  |  |
Assets: |  |  |  |  |  |  |  |  |  |
Natural gas swaps and options |  | Prepayments and other |  | $37 |  | $— |  | $37 |  | Utility
Natural gas swaps and options |  | Other deferred debits and other assets |  | $9 |  | $— |  | $9 |  | Utility
Financial transmission rights |  | Prepayments and other |  | $13 |  | ($1) |  | $12 |  | Utility and Entergy Wholesale Commodities
The fair values of Entergy’s derivative instruments in the consolidated balance sheet as of December 31, 2021 are shown in the table below.
Instrument |  | Balance Sheet Location |  | Gross Fair Value (a) |  | Offsetting Position (b) |  | Net Fair Value (c) (d) |  | Business
|  |  |  | (In Millions) |  |
Derivatives not designated as hedging instruments |  |  |  |  |  |  |  |  |  |
Assets: |  |  |  |  |  |  |  |  |  |
Natural gas swaps and options |  | Prepayments and other |  | $6 |  | $— |  | $6 |  | Utility
Natural gas swaps and options |  | Other deferred debits and other assets |  | $5 |  | $— |  | $5 |  | Utility
Financial transmission rights |  | Prepayments and other |  | $4 |  | $— |  | $4 |  | Utility and Entergy Wholesale Commodities
Liabilities: |  |  |  |  |  |  |  |  |  |
Natural gas swaps and options |  | Other current liabilities |  | $7 |  | $— |  | $7 |  | Utility
(a)Represents the gross amounts of recognized assets/liabilities (b)Represents the netting of fair value balances with the same counterparty (c)Represents the net amounts of assets/liabilities presented on the Entergy Corporation and Subsidiaries’ Consolidated Balance Sheet (d)Excludes cash collateral in the amount of $12 million posted as of June 30, 2022 and $8 million posted as of December 31, 2021. Also excludes letters of credit in the amount of $6 million posted as of June 30, 2022. As discussed above, the Entergy Wholesale Commodities portfolio of derivative instruments expired in April 2021, which was the settlement date for the last financial derivative contracts in the Entergy Wholesale Commodities portfolio. For the three months ended June 30, 2021, there were no effects resulting from Entergy’s derivative instruments designated as cash flow hedges on the consolidated statements of operations. The effects of Entergy’s derivative instruments designated as cash flow hedges on the consolidated statements of operations for the six months ended June 30, 2021 were as follows:
Instrument |  | Amount of gain (loss) recognized in other comprehensive income |  | Income Statement location |  | Amount of gain (loss) reclassified from accumulated other comprehensive income into income (a)
|  | (In Millions) |  |  |  | (In Millions)
Electricity swaps and options |  | $2 |  | Competitive businesses operating revenues |  | $40
(a) Before taxes of $8 million for the six months ended June 30, 2021 Prior to the expiration of the Entergy Wholesale Commodities portfolio of derivative instruments, Entergy may have effectively liquidated a cash flow hedge instrument by entering into a contract offsetting the original hedge, and then de-designating the original hedge in this situation. Gains or losses accumulated in other comprehensive income prior to de-designation would have continued to be deferred in other comprehensive income until they were included in income as the original hedged transaction occurred. From the point of de-designation, the gains or losses on the original hedge and the offsetting contract were recorded as assets or liabilities on the balance sheet and offset as they flowed through to earnings. The effects of Entergy’s derivative instruments not designated as hedging instruments on the consolidated statements of operations for the three months ended June 30, 2022 and 2021 were as follows:
Instrument |  | Income Statement location |  | Amount of gain (loss) recorded in the income statement
|  |  |  | (In Millions)
2022 |  |  |  |
Natural gas swaps |  | Fuel, fuel-related expenses, and gas purchased for resale | (a) | $23
Financial transmission rights |  | Purchased power expense | (b) | $37
2021 |  |  |  |
Natural gas swaps |  | Fuel, fuel-related expenses, and gas purchased for resale | (a) | $18
Financial transmission rights |  | Purchased power expense | (b) | $16
Electricity swaps and options (c) |  | Competitive business operating revenues |  | $—
The effects of Entergy’s derivative instruments not designated as hedging instruments on the consolidated statements of operations for the six months ended June 30, 2022 and 2021 were as follows:
Instrument |  | Income Statement location |  | Amount of gain (loss) recorded in the income statement
|  |  |  | (In Millions)
2022 |  |  |  |
Natural gas swaps and options |  | Fuel, fuel-related expenses, and gas purchased for resale | (a) | $78
Financial transmission rights |  | Purchased power | (b) | $60
2021 |  |  |  |
Natural gas swaps and options |  | Fuel, fuel-related expenses, and gas purchased for resale | (a) | $25
Financial transmission rights |  | Purchased power | (b) | $144
Electricity swaps and options (c) |  | Competitive business operating revenues |  | ($2)
(a)Due to regulatory treatment, the natural gas swaps and options are marked-to-market through fuel, fuel-related expenses, and gas purchased for resale and then such amounts are simultaneously reversed and recorded as an offsetting regulatory asset or liability. The gains or losses recorded as fuel expenses when the swaps and options are settled are recovered or refunded through fuel cost recovery mechanisms. (b)Due to regulatory treatment, the changes in the estimated fair value of financial transmission rights for the Utility operating companies are recorded through purchased power expense and then such amounts are simultaneously reversed and recorded as an offsetting regulatory asset or liability. The gains or losses recorded as purchased power expense when the financial transmission rights for the Utility operating companies are settled are recovered or refunded through fuel cost recovery mechanisms. (c)There were no gains (losses) recognized in accumulated other comprehensive income from electricity swaps and options prior to the expiration of the Entergy Wholesale Commodities portfolio of derivative instruments in April 2021. The fair values of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their balance sheets as of June 30, 2022 are shown in the table below. Certain investments, including those not designated as hedging instruments, are subject to master netting agreements and are presented in the balance sheet on a net basis in accordance with accounting guidance for derivatives and hedging.
Instrument |  | Balance Sheet Location |  | Gross Fair Value (a) |  | Offsetting Position (b) |  | Net Fair Value (c) (d) |  | Registrant
|  |  |  | (In Millions) |  |
Assets: |  |  |  |  |  |  |  |  |  |
Natural gas swaps and options |  | Prepayments and other |  | $16.1 |  | $— |  | $16.1 |  | Entergy Louisiana
Natural gas swaps and options |  | Other deferred debits and other assets |  | $8.7 |  | $— |  | $8.7 |  | Entergy Louisiana
Natural gas swaps |  | Prepayments and other |  | $20.6 |  | $— |  | $20.6 |  | Entergy Mississippi
Financial transmission rights |  | Prepayments and other |  | $4.5 |  | ($0.1) |  | $4.4 |  | Entergy Arkansas
Financial transmission rights |  | Prepayments and other |  | $5.3 |  | ($0.6) |  | $4.7 |  | Entergy Louisiana
Financial transmission rights |  | Prepayments and other |  | $0.5 |  | $— |  | $0.5 |  | Entergy Mississippi
Financial transmission rights |  | Prepayments and other |  | $0.6 |  | $— |  | $0.6 |  | Entergy New Orleans
Financial transmission rights |  | Prepayments and other |  | $1.7 |  | ($0.2) |  | $1.5 |  | Entergy Texas
Liabilities: |  |  |  |  |  |  |  |  |  |
Natural gas swaps |  | Other current liabilities |  | $0.2 |  | $— |  | $0.2 |  | Entergy New Orleans
The fair values of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their balance sheets as of December 31, 2021 were as follows:
Instrument |  | Balance Sheet Location |  | Gross Fair Value (a) |  | Offsetting Position (b) |  | Net Fair Value (c) (d) |  | Registrant
|  |  |  | (In Millions) |  |
Assets: |  |  |  |  |  |  |  |  |  |
Natural gas swaps and options |  | Prepayments and other |  | $5.7 |  | $— |  | $5.7 |  | Entergy Louisiana
Natural gas swaps and options |  | Other deferred debits and other assets |  | $5.3 |  | $— |  | $5.3 |  | Entergy Louisiana
Financial transmission rights |  | Prepayments and other |  | $2.3 |  | $— |  | $2.3 |  | Entergy Arkansas
Financial transmission rights |  | Prepayments and other |  | $0.6 |  | $— |  | $0.6 |  | Entergy Louisiana
Financial transmission rights |  | Prepayments and other |  | $0.3 |  | $— |  | $0.3 |  | Entergy Mississippi
Financial transmission rights |  | Prepayments and other |  | $0.1 |  | $— |  | $0.1 |  | Entergy New Orleans
Financial transmission rights |  | Prepayments and other |  | $0.8 |  | $— |  | $0.8 |  | Entergy Texas
Liabilities: |  |  |  |  |  |  |  |  |  |
Natural gas swaps |  | Other current liabilities |  | $6.7 |  | $— |  | $6.7 |  | Entergy Mississippi
Natural gas swaps |  | Other current liabilities |  | $0.5 |  | $— |  | $0.5 |  | Entergy New Orleans
(a)Represents the gross amounts of recognized assets/liabilities (b)Represents the netting of fair value balances with the same counterparty (c)Represents the net amounts of assets/liabilities presented on the Registrant Subsidiaries’ balance sheets (d)As of June 30, 2022, letters of credit posted with MISO covered financial transmission rights exposure of $0.4 million for Entergy Mississippi and $5.3 million for Entergy Texas. As of December 31, 2021, letters of credit posted with MISO covered financial transmission rights exposure of $0.2 million for Entergy Mississippi and $0.1 million for Entergy Texas. The effects of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their income statements for the three months ended June 30, 2022 and 2021 were as follows:
Instrument |  | Income Statement Location |  | Amount of gain (loss) recorded in the income statement |  | Registrant
|  |  |  | (In Millions) |  |
2022 |  |  |  |  |  |
Natural gas swaps and options |  | Fuel, fuel-related expenses, and gas purchased for resale |  | $8.7 | (a) | Entergy Louisiana
Natural gas swaps |  | Fuel, fuel-related expenses, and gas purchased for resale |  | $14.6 | (a) | Entergy Mississippi
Natural gas swaps |  | Fuel, fuel-related expenses, and gas purchased for resale |  | ($0.2) | (a) | Entergy New Orleans
Financial transmission rights |  | Purchased power expense |  | $16.0 | (b) | Entergy Arkansas
Financial transmission rights |  | Purchased power expense |  | $16.1 | (b) | Entergy Louisiana
Financial transmission rights |  | Purchased power expense |  | $2.2 | (b) | Entergy Mississippi
Financial transmission rights |  | Purchased power expense |  | $1.6 | (b) | Entergy New Orleans
Financial transmission rights |  | Purchased power expense |  | $1.0 | (b) | Entergy Texas
2021 |  |  |  |  |  |
Natural gas swaps and options |  | Fuel, fuel-related expenses, and gas purchased for resale |  | $4.9 | (a) | Entergy Louisiana
Natural gas swaps |  | Fuel, fuel-related expenses, and gas purchased for resale |  | $13.2 | (a) | Entergy Mississippi
Natural gas swaps |  | Fuel, fuel-related expenses, and gas purchased for resale |  | $0.1 | (a) | Entergy New Orleans
Financial transmission rights |  | Purchased power expense |  | $3.4 | (b) | Entergy Arkansas
Financial transmission rights |  | Purchased power expense |  | $5.9 | (b) | Entergy Louisiana
Financial transmission rights |  | Purchased power expense |  | $0.7 | (b) | Entergy Mississippi
Financial transmission rights |  | Purchased power expense |  | $0.8 | (b) | Entergy New Orleans
Financial transmission rights |  | Purchased power expense |  | $4.8 | (b) | Entergy Texas
The effects of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their income statements for the six months ended June 30, 2022 and 2021 were as follows:
Instrument |  | Income Statement Location |  | Amount of gain (loss) recorded in the income statement |  | Registrant
|  |  |  | (In Millions) |  |
2022 |  |  |  |  |  |
Natural gas swaps and options |  | Fuel, fuel-related expenses, and gas purchased for resale |  | $19.8 | (a) | Entergy Louisiana
Natural gas swaps |  | Fuel, fuel-related expenses, and gas purchased for resale |  | $57.4 | (a) | Entergy Mississippi
Natural gas swaps |  | Fuel, fuel-related expenses, and gas purchased for resale |  | $0.9 | (a) | Entergy New Orleans
Financial transmission rights |  | Purchased power |  | $23.5 | (b) | Entergy Arkansas
Financial transmission rights |  | Purchased power |  | $25.5 | (b) | Entergy Louisiana
Financial transmission rights |  | Purchased power |  | $3.2 | (b) | Entergy Mississippi
Financial transmission rights |  | Purchased power |  | $2.4 | (b) | Entergy New Orleans
Financial transmission rights |  | Purchased power |  | $4.9 | (b) | Entergy Texas
2021 |  |  |  |  |  |
Natural gas swaps and options |  | Fuel, fuel-related expenses, and gas purchased for resale |  | $6.7 | (a) | Entergy Louisiana
Natural gas swaps |  | Fuel, fuel-related expenses, and gas purchased for resale |  | $18.3 | (a) | Entergy Mississippi
Financial transmission rights |  | Purchased power |  | $29.5 | (b) | Entergy Arkansas
Financial transmission rights |  | Purchased power |  | $18.2 | (b) | Entergy Louisiana
Financial transmission rights |  | Purchased power |  | $7.9 | (b) | Entergy Mississippi
Financial transmission rights |  | Purchased power |  | $2.0 | (b) | Entergy New Orleans
Financial transmission rights |  | Purchased power |  | $82.7 | (b) | Entergy Texas
(a)Due to regulatory treatment, the natural gas swaps and options are marked-to-market through fuel, fuel-related expenses, and gas purchased for resale and then such amounts are simultaneously reversed and recorded as an offsetting regulatory asset or liability. The gains or losses recorded as fuel expenses when the swaps and options are settled are recovered or refunded through fuel cost recovery mechanisms. (b)Due to regulatory treatment, the changes in the estimated fair value of financial transmission rights for the Utility operating companies are recorded through purchased power expense and then such amounts are simultaneously reversed and recorded as an offsetting regulatory asset or liability. The gains or losses recorded as purchased power expense when the financial transmission rights for the Utility operating companies are settled are recovered or refunded through fuel cost recovery mechanisms. 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 are 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. Accounting standards define fair value as an exit price, or the price that would be received to sell an asset or the amount that would be paid to transfer a liability in an orderly transaction between knowledgeable market participants at the date of measurement. Entergy and the Registrant Subsidiaries use assumptions or market input data that market participants would use in pricing assets or liabilities at fair value. The inputs can be readily observable, corroborated by market data, or generally unobservable. Entergy and the Registrant Subsidiaries endeavor to use the best available information to determine fair value. Accounting standards establish a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy establishes the highest priority for unadjusted market quotes in an active market for the identical asset or liability and the lowest priority for unobservable inputs. The three levels of the fair value hierarchy are: •Level 1 - Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the entity has the ability to access at the measurement date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 primarily consists of individually owned common stocks, cash equivalents (temporary cash investments, securitization recovery trust account, and escrow accounts), debt instruments, and gas swaps traded on exchanges with active markets. Cash equivalents includes all unrestricted highly liquid debt instruments with an original or remaining maturity of three months or less at the date of purchase. •Level 2 - Level 2 inputs are inputs other than quoted prices included in Level 1 that are, either directly or indirectly, observable for the asset or liability at the measurement date. Assets are valued based on prices derived by independent third parties that use inputs such as benchmark yields, reported trades, broker/dealer quotes, and issuer spreads. Prices are reviewed and can be challenged with the independent parties and/or overridden by Entergy if it is believed such would be more reflective of fair value. Level 2 inputs include the following: –quoted prices for similar assets or liabilities in active markets; –quoted prices for identical assets or liabilities in inactive markets; –inputs other than quoted prices that are observable for the asset or liability; or –inputs that are derived principally from or corroborated by observable market data by correlation or other means. Level 2 consists primarily of individually-owned debt instruments and gas swaps and options valued using observable inputs. •Level 3 - Level 3 inputs are pricing inputs that are generally less observable or unobservable from objective sources. These inputs are used with internally developed methodologies to produce management’s best estimate of fair value for the asset or liability. Level 3 consists primarily of financial transmission rights and derivative power contracts used as cash flow hedges of power sales at merchant power plants. Consistent with management’s strategy to shut down and sell all plants in the Entergy Wholesale Commodities merchant fleet, the Entergy Wholesale Commodities portfolio of derivative instruments expired in April 2021, which was the settlement date for the last financial derivative contracts in the Entergy Wholesale Commodities portfolio. The values for power contract assets or liabilities prior to expiration in April 2021 were based on both observable inputs including public market prices and interest rates, and unobservable inputs such as implied volatilities, unit contingent discounts, expected basis differences, and credit adjusted counterparty interest rates. They were classified as Level 3 assets and liabilities. The valuations of these assets and liabilities were performed by the Office of Corporate Risk Oversight and the Entergy Wholesale Commodities Accounting group. The primary related functions of the Office of Corporate Risk Oversight included: gathering, validating and reporting market data, providing market risk analyses and valuations in support of Entergy Wholesale Commodities’ commercial transactions, developing and administering protocols for the management of market risks, and implementing and maintaining controls around changes to market data in the energy trading and risk management system. The Office of Corporate Risk Oversight was also responsible for managing the energy trading and risk management system, forecasting revenues, forward positions and analysis. The Entergy Wholesale Commodities Accounting group performed functions related to market and counterparty settlements, revenue reporting and analysis, and financial accounting. The Office of Corporate Risk Oversight reports to the Vice President and Treasurer while the Entergy Wholesale Commodities Accounting group reports to the Chief Accounting Officer. The amounts reflected as the fair value of electricity swaps were based on the estimated amount that the contracts were in-the-money at the balance sheet date (treated as an asset) or out-of-the-money at the balance sheet date (treated as a liability) and equaled the estimated amount receivable to or payable by Entergy if the contracts were settled at that date. These derivative contracts included cash flow hedges that swapped fixed for floating cash flows for sales of the output from the Entergy Wholesale Commodities business. The fair values were based on the mark-to-market comparison between the fixed contract prices and the floating prices determined each period from quoted forward power market prices. The differences between the fixed price in the swap contract and these market-related prices multiplied by the volume specified in the contract and discounted at the counterparties’ credit adjusted risk free rate were recorded as derivative contract assets or liabilities. For contracts that had unit contingent terms, a further discount was applied based on the historical relationship between contract and market prices for similar contract terms. The amounts reflected as the fair values of electricity options were valued based on a Black Scholes model, and were calculated at the end of each month for accounting purposes. Inputs to the valuation included end of day forward market prices for the period when the transactions settled, implied volatilities based on market volatilities provided by a third-party data aggregator, and U.S. Treasury rates for a risk-free return rate. As described further below, prices and implied volatilities were reviewed and could be adjusted if it was determined that there was a better representation of fair value. On a daily basis, the Office of Corporate Risk Oversight calculated the mark-to-market for electricity swaps and options. The Office of Corporate Risk Oversight also validated forward market prices by comparing them to other sources of forward market prices or to settlement prices of actual market transactions. Significant differences were analyzed and potentially adjusted based on these other sources of forward market prices or settlement prices of actual market transactions. Implied volatilities used to value options were also validated using actual counterparty quotes for Entergy Wholesale Commodities transactions when available and compared with other sources of market implied volatilities. Moreover, on a quarterly basis, the Office of Corporate Risk Oversight confirmed the mark-to-market calculations and prepared price scenarios and credit downgrade scenario analysis. The scenario analysis was communicated to senior management within Entergy and within Entergy Wholesale Commodities. Finally, for all proposed derivative transactions, an analysis was completed to assess the risk of adding the proposed derivative to Entergy Wholesale Commodities’ portfolio. In particular, the credit and liquidity effects were calculated for this analysis. This analysis was communicated to senior management within Entergy and Entergy Wholesale Commodities. The values of financial transmission rights are based on unobservable inputs, including estimates of congestion costs in MISO between applicable generation and load pricing nodes based on the 50th percentile of historical prices. They are classified as Level 3 assets and liabilities. The valuations of these assets and liabilities are performed by the Office of Corporate Risk Oversight. The values are calculated internally and verified against the data published by MISO. Entergy’s Entergy Wholesale Commodities Accounting group reviews these valuations for reasonableness, with the assistance of others within the organization with knowledge of the various inputs and assumptions used in the valuation. The Office of Corporate Risk Oversight reports to the Vice President and Treasurer. The Entergy Wholesale Commodities Accounting group reports to the Chief Accounting Officer. The following tables set forth, by level within the fair value hierarchy, Entergy’s assets and liabilities that are accounted for at fair value on a recurring basis as of June 30, 2022 and December 31, 2021. The assessment of the significance of a particular input to a fair value measurement requires judgment and may affect its placement within the fair value hierarchy levels.
2022 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $514 |  |  | $— |  |  | $— |  |  | $514 |
Decommissioning trust funds (a): |  |  |  |  |  |  |  |
Equity securities |  | 18 |  |  | — |  |  | — |  |  | 18 |
Debt securities (b) |  | 598 |  |  | 1,095 |  |  | — |  |  | 1,693 |
Common trusts (c) |  |  |  |  |  |  |  | 2,379 |
Securitization recovery trust account |  | 28 |  |  | — |  |  | — |  |  | 28 |
Escrow accounts |  | 331 |  |  | — |  |  | — |  |  | 331 |
Gas hedge contracts |  | 37 |  |  | 9 |  |  | — |  |  | 46 |
Financial transmission rights |  | — |  |  | — |  |  | 12 |  |  | 12 |
|  | $1,526 |  |  | $1,104 |  |  | $12 |  |  | $5,021 |
2021 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $398 |  |  | $— |  |  | $— |  |  | $398 |
Decommissioning trust funds (a): |  |  |  |  |  |  |  |
Equity securities |  | 132 |  |  | — |  |  | — |  |  | 132 |
Debt securities (b) |  | 770 |  |  | 1,407 |  |  | — |  |  | 2,177 |
Common trusts (c) |  |  |  |  |  |  |  | 3,205 |
Securitization recovery trust account |  | 29 |  |  | — |  |  | — |  |  | 29 |
Escrow accounts |  | 49 |  |  | — |  |  | — |  |  | 49 |
Gas hedge contracts |  | 6 |  |  | 5 |  |  | — |  |  | 11 |
Financial transmission rights |  | — |  |  | — |  |  | 4 |  |  | 4 |
|  | $1,384 |  |  | $1,412 |  |  | $4 |  |  | $6,005 |
Liabilities: |  |  |  |  |  |  |  |
Gas hedge contracts |  | $7 |  |  | $— |  |  | $— |  |  | $7 |
(a)The decommissioning trust funds hold equity and fixed income securities. Equity securities are invested to approximate the returns of major market indices. Fixed income securities are held in various governmental and corporate securities. See Note 9 to the financial statements herein for additional information on the investment portfolios. (b)The decommissioning trust funds fair value presented herein does not include the recognition pursuant to ASU 2016-13 of a credit loss valuation allowance of $0.4 million as of December 31, 2021 on debt securities. See Note 9 to the financial statements herein for additional information on the allowance for expected credit losses. (c)Common trust funds are not publicly quoted and are valued by the fund administrators using net asset value as a practical expedient. Accordingly, these funds are not assigned a level in the fair value table. The fund administrator of these investments allows daily trading at the net asset value and trades settle at a later date. The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the three months ended June 30, 2022 and 2021:
|  | 2022 |  |  | 2021
|  |  | Financial transmission rights |  |  |  | Financial transmission rights
|  | (In Millions)
Balance as of April 1, |  |  | $1 |  |  |  |  | $4 |
Total gains (losses) for the period |  |  |  |  |  |  |
Included as a regulatory liability/asset |  |  | 32 |  |  |  |  | 15 |
Issuances of financial transmission rights |  |  | 16 |  |  |  |  | 12 |
Settlements |  |  | (37) |  |  |  |  | (16) |
Balance as of June 30, |  |  | $12 |  |  |  |  | $15 |
The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the six months ended June 30, 2022 and 2021:
|  |  | 2022 |  | 2021
|  |  | Financial transmission rights |  | Power Contracts |  | Financial transmission rights
|  |  | (In Millions)
Balance as of January 1, |  |  | $4 |  |  | $38 |  |  | $9 |
Total gains (losses) for the period |  |  |  |  |  |  |
Included in earnings |  |  | — |  |  | (2) |  |  | 3 |
Included in other comprehensive income |  |  | — |  |  | 2 |  |  | — |
Included as a regulatory liability/asset |  |  | 52 |  |  | — |  |  | 135 |
Issuances of financial transmission rights |  |  | 16 |  |  | — |  |  | 12 |
Settlements |  |  | (60) |  |  | (38) |  |  | (144) |
Balance as of June 30, |  |  | $12 |  |  | $— |  |  | $15 |
The fair values of the Level 3 financial transmission rights are based on unobservable inputs calculated internally and verified against historical pricing data published by MISO. The following table sets forth an analysis of each of the types of unobservable inputs impacting the fair value of items classified as Level 3 within the fair value hierarchy, and the sensitivity to changes to those inputs:
Significant Unobservable Input |  | Transaction Type |  | Position |  | Change to Input |  | Effect on Fair Value
Unit contingent discount |  | Electricity swaps |  | Sell |  | Increase (Decrease) |  | Decrease (Increase)
The following table sets forth, by level within the fair value hierarchy, the Registrant Subsidiaries’ assets and liabilities that are accounted for at fair value on a recurring basis as of June 30, 2022 and December 31, 2021. The assessment of the significance of a particular input to a fair value measurement requires judgment and may affect its placement within the fair value hierarchy levels. Entergy Arkansas
2022 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $58.2 |  |  | $— |  |  | $— |  |  | $58.2 |
Decommissioning trust funds (a): |  |  |  |  |  |  |  |
Equity securities |  | 4.1 |  |  | — |  |  | — |  |  | 4.1 |
Debt securities |  | 131.6 |  |  | 353.2 |  |  | — |  |  | 484.8 |
Common trusts (b) |  |  |  |  |  |  |  | 705.9 |
Financial transmission rights |  | — |  |  | — |  |  | 4.4 |  |  | 4.4 |
|  | $193.9 |  |  | $353.2 |  |  | $4.4 |  |  | $1,257.4 |
2021 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $4.8 |  |  | $— |  |  | $— |  |  | $4.8 |
Decommissioning trust funds (a): |  |  |  |  |  |  |  |
Equity securities |  | 16.7 |  |  | — |  |  | — |  |  | 16.7 |
Debt securities |  | 119.5 |  |  | 406.8 |  |  | — |  |  | 526.3 |
Common trusts (b) |  |  |  |  |  |  |  | 895.4 |
Financial transmission rights |  | — |  |  | — |  |  | 2.3 |  |  | 2.3 |
|  | $141.0 |  |  | $406.8 |  |  | $2.3 |  |  | $1,445.5 |
Entergy Louisiana
2022 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $65.7 |  |  | $— |  |  | $— |  |  | $65.7 |
Decommissioning trust funds (a): |  |  |  |  |  |  |  |
Equity securities |  | 12.6 |  |  | — |  |  | — |  |  | 12.6 |
Debt securities |  | 225.0 |  |  | 508.3 |  |  | — |  |  | 733.3 |
Common trusts (b) |  |  |  |  |  |  |  | 1,010.6 |
Escrow accounts |  | 290.1 |  |  | — |  |  | — |  |  | 290.1 |
Gas hedge contracts |  | 16.1 |  |  | 8.7 |  |  | — |  |  | 24.8 |
Financial transmission rights |  | — |  |  | — |  |  | 4.7 |  |  | 4.7 |
|  | $609.5 |  |  | $517.0 |  |  | $4.7 |  |  | $2,141.8 |
2021 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $18.4 |  |  | $— |  |  | $— |  |  | $18.4 |
Decommissioning trust funds (a): |  |  |  |  |  |  |  |
Equity securities |  | 20.2 |  |  | — |  |  | — |  |  | 20.2 |
Debt securities |  | 262.6 |  |  | 531.6 |  |  | — |  |  | 794.2 |
Common trusts (b) |  |  |  |  |  |  |  | 1,300.1 |
Gas hedge contracts |  | 5.7 |  |  | 5.3 |  |  | — |  |  | 11.0 |
Financial transmission rights |  | — |  |  | — |  |  | 0.6 |  |  | 0.6 |
|  | $306.9 |  |  | $536.9 |  |  | $0.6 |  |  | $2,144.5 |
Entergy Mississippi
2022 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $26.1 |  |  | $— |  |  | $— |  |  | $26.1 |
Escrow accounts |  | 41.1 |  |  | — |  |  | — |  |  | 41.1 |
Gas hedge contracts |  | 20.6 |  |  | — |  |  | — |  |  | 20.6 |
Financial transmission rights |  | — |  |  | — |  |  | 0.5 |  |  | 0.5 |
|  | $87.8 |  |  | $— |  |  | $0.5 |  |  | $88.3 |
2021 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $47.6 |  |  | $— |  |  | $— |  |  | $47.6 |
Escrow accounts |  | 48.9 |  |  | — |  |  | — |  |  | 48.9 |
Financial transmission rights |  | — |  |  | — |  |  | 0.3 |  |  | 0.3 |
|  | $96.5 |  |  | $— |  |  | $0.3 |  |  | $96.8 |
Liabilities: |  |  |  |  |  |  |  |
Gas hedge contracts |  | $6.7 |  |  | $— |  |  | $— |  |  | $6.7 |
Entergy New Orleans
2022 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $25.7 |  |  | $— |  |  | $— |  |  | $25.7 |
Securitization recovery trust account |  | 1.7 |  |  | — |  |  | — |  |  | 1.7 |
Financial transmission rights |  | — |  |  | — |  |  | 0.6 |  |  | 0.6 |
|  | $27.4 |  |  | $— |  |  | $0.6 |  |  | $28.0 |
Liabilities: |  |  |  |  |  |  |  |
Gas hedge contracts |  | $0.2 |  |  | $— |  |  | $— |  |  | $0.2 |
2021 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $42.8 |  |  | $— |  |  | $— |  |  | $42.8 |
Securitization recovery trust account |  | 2.0 |  |  | — |  |  | — |  |  | 2.0 |
Financial transmission rights |  | — |  |  | — |  |  | 0.1 |  |  | 0.1 |
|  | $44.8 |  |  | $— |  |  | $0.1 |  |  | $44.9 |
Liabilities: |  |  |  |  |  |  |  |
Gas hedge contracts |  | $0.5 |  |  | $— |  |  | $— |  |  | $0.5 |
Entergy Texas
2022 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $14.4 |  |  | $— |  |  | $— |  |  | $14.4 |
Securitization recovery trust account |  | 26.6 |  |  | — |  |  | — |  |  | 26.6 |
Financial transmission rights |  | — |  |  | — |  |  | 1.5 |  |  | 1.5 |
|  | $41.0 |  |  | $— |  |  | $1.5 |  |  | $42.5 |
2021 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Securitization recovery trust account |  | $26.6 |  |  | $— |  |  | $— |  |  | $26.6 |
Financial transmission rights |  | — |  |  | — |  |  | 0.8 |  |  | 0.8 |
|  | $26.6 |  |  | $— |  |  | $0.8 |  |  | $27.4 |
System Energy
2022 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $134.6 |  |  | $— |  |  | $— |  |  | $134.6 |
Decommissioning trust funds (a): |  |  |  |  |  |  |  |
Equity securities |  | 1.7 |  |  | — |  |  | — |  |  | 1.7 |
Debt Securities |  | 241.1 |  |  | 233.1 |  |  | — |  |  | 474.2 |
Common trusts (b) |  |  |  |  |  |  |  | 662.9 |
|  | $377.4 |  |  | $233.1 |  |  | $— |  |  | $1,273.4 |
2021 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $89.1 |  |  | $— |  |  | $— |  |  | $89.1 |
Decommissioning trust funds (a): |  |  |  |  |  |  |  |
Equity securities |  | 12.9 |  |  | — |  |  | — |  |  | 12.9 |
Debt securities |  | 273.0 |  |  | 251.5 |  |  | — |  |  | 524.5 |
Common trusts (b) |  |  |  |  |  |  |  | 847.9 |
|  | $375.0 |  |  | $251.5 |  |  | $— |  |  | $1,474.4 |
(a)The decommissioning trust funds hold equity and fixed income securities. Equity securities are invested to approximate the returns of major market indices. Fixed income securities are held in various governmental and corporate securities. See Note 9 to the financial statements herein for additional information on the investment portfolios. (b)Common trust funds are not publicly quoted and are valued by the fund administrators using net asset value as a practical expedient. Accordingly, these funds are not assigned a level in the fair value table. The fund administrator of these investments allows daily trading at the net asset value and trades settle at a later date. The following table sets forth a reconciliation of changes in the net assets for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the three months ended June 30, 2022.
| Entergy Arkansas |  | Entergy Louisiana |  | Entergy Mississippi |  | Entergy New Orleans |  | Entergy Texas
| (In Millions)
Balance as of April 1, | $0.4 |  |  | $0.3 |  |  | $0.2 |  |  | $0.1 |  |  | $0.5 |
Issuances of financial transmission rights | 5.4 |  |  | 5.3 |  |  | 0.8 |  |  | 0.8 |  |  | 3.9 |
Gains (losses) included as a regulatory liability/asset | 14.6 |  |  | 15.2 |  |  | 1.7 |  |  | 1.3 |  |  | (1.9) |
Settlements | (16.0) |  |  | (16.1) |  |  | (2.2) |  |  | (1.6) |  |  | (1.0) |
Balance as of June 30, | $4.4 |  |  | $4.7 |  |  | $0.5 |  |  | $0.6 |  |  | $1.5 |
The following table sets forth a reconciliation of changes in the net assets for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the three months ended June 30, 2021.
| Entergy Arkansas |  | Entergy Louisiana |  | Entergy Mississippi |  | Entergy New Orleans |  | Entergy Texas
| (In Millions)
Balance as of April 1, | $1.4 |  |  | $1.2 |  |  | $0.3 |  |  | $0.1 |  |  | $0.5 |
Issuances of financial transmission rights | 2.8 |  |  | 4.1 |  |  | 1.7 |  |  | 0.4 |  |  | 2.7 |
Gains (losses) included as a regulatory liability/asset | 3.0 |  |  | 5.4 |  |  | 0.8 |  |  | 0.9 |  |  | 5.4 |
Settlements | (3.4) |  |  | (5.9) |  |  | (0.7) |  |  | (0.8) |  |  | (4.8) |
Balance as of June 30, | $3.8 |  |  | $4.8 |  |  | $2.1 |  |  | $0.6 |  |  | $3.8 |
The following table sets forth a reconciliation of changes in the net assets for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the six months ended June 30, 2022.
| Entergy Arkansas |  | Entergy Louisiana |  | Entergy Mississippi |  | Entergy New Orleans |  | Entergy Texas
| (In Millions)
Balance as of January 1, | $2.3 |  |  | $0.6 |  |  | $0.3 |  |  | $0.1 |  |  | $0.8 |
Issuances of financial transmission rights | 5.4 |  |  | 5.3 |  |  | 0.8 |  |  | 0.8 |  |  | 3.9 |
Gains (losses) included as a regulatory liability/asset | 20.2 |  |  | 24.3 |  |  | 2.6 |  |  | 2.1 |  |  | 1.7 |
Settlements | (23.5) |  |  | (25.5) |  |  | (3.2) |  |  | (2.4) |  |  | (4.9) |
Balance as of June 30, | $4.4 |  |  | $4.7 |  |  | $0.5 |  |  | $0.6 |  |  | $1.5 |
The following table sets forth a reconciliation of changes in the net assets for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the six months ended June 30, 2021.
| Entergy Arkansas |  | Entergy Louisiana |  | Entergy Mississippi |  | Entergy New Orleans |  | Entergy Texas
| (In Millions)
Balance as of January 1, | $2.7 |  |  | $4.2 |  |  | $0.6 |  |  | $0.1 |  |  | $1.6 |
Issuances of financial transmission rights | 2.8 |  |  | 4.1 |  |  | 1.7 |  |  | 0.4 |  |  | 2.7 |
Gains (losses) included as a regulatory liability/asset | 27.8 |  |  | 14.7 |  |  | 7.7 |  |  | 2.1 |  |  | 82.2 |
Settlements | (29.5) |  |  | (18.2) |  |  | (7.9) |  |  | (2.0) |  |  | (82.7) |
Balance as of June 30, | $3.8 |  |  | $4.8 |  |  | $2.1 |  |  | $0.6 |  |  | $3.8 |
Entergy Mississippi [Member] |
Risk Management And Fair Values | RISK MANAGEMENT AND FAIR VALUES (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy) Market Risk In the normal course of business, Entergy is exposed to a number of market risks. Market risk is the potential loss that Entergy may incur as a result of changes in the market or fair value of a particular commodity or instrument. All financial and commodity-related instruments, including derivatives, are subject to market risk including commodity price risk, equity price, and interest rate risk. Entergy uses derivatives primarily to mitigate commodity price risk, particularly power price and fuel price risk. 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 derivative 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. As a wholesale generator, Entergy Wholesale Commodities’ core business was selling energy, measured in MWh, to its customers. Entergy Wholesale Commodities entered into forward contracts with its customers and also sold energy and capacity in the day ahead or spot markets. In addition to its forward physical power and gas contracts, Entergy Wholesale Commodities used a combination of financial contracts, including swaps, collars, and options, to mitigate commodity price risk. When the market price fell, the combination of financial contracts was expected to settle in gains that offset lower revenue from generation, which resulted in a more predictable cash flow. Consistent with management’s strategy to shut down and sell all plants in the Entergy Wholesale Commodities merchant fleet, the Entergy Wholesale Commodities portfolio of derivative instruments expired in April 2021, which was the settlement date for the last financial derivative contracts in the Entergy Wholesale Commodities portfolio. Entergy’s exposure to market risk is determined by a number of factors, including the size, term, composition, and diversification of positions held, as well as market volatility and liquidity. For instruments such as options, the time period during which the option may be exercised and the relationship between the current market price of the underlying instrument and the option’s contractual strike or exercise price also affects the level of market risk. A significant factor influencing the overall level of market risk to which Entergy is exposed is its use of hedging techniques to mitigate such risk. Hedging instruments and volumes are chosen based on ability to mitigate risk associated with future energy and capacity prices; however, other considerations are factored into hedge product and volume decisions including corporate liquidity, corporate credit ratings, counterparty credit risk, hedging costs, firm settlement risk, and product availability in the marketplace. Entergy manages market risk by actively monitoring compliance with stated risk management policies as well as monitoring the effectiveness of its hedging policies and strategies. Entergy’s risk management policies limit the amount of total net exposure and rolling net exposure during the stated periods. These policies, including related risk limits, are regularly assessed to ensure their appropriateness given Entergy’s objectives. Derivatives Some derivative instruments are classified as cash flow hedges due to their financial settlement provisions while others are classified as normal purchase/normal sale transactions due to their physical settlement provisions. Normal purchase/normal sale risk management tools include power purchase and sales agreements, fuel purchase agreements, capacity contracts, and tolling agreements. Financially-settled cash flow hedges can include natural gas and electricity swaps and options. Entergy may enter into financially-settled swap and option contracts to manage market risk that may or may not be designated as hedging instruments. Entergy entered into derivatives to manage natural risks inherent in its physical or financial assets or liabilities. Electricity over-the-counter instruments and futures contracts that financially settled against day-ahead power pool prices were used to manage price exposure for Entergy Wholesale Commodities generation. Entergy used standardized master netting agreements to help mitigate the credit risk of derivative instruments. These master agreements facilitated the netting of cash flows associated with a single counterparty and may have included collateral requirements. Cash, letters of credit, and parental/affiliate guarantees were obtained as security from counterparties in order to mitigate credit risk. The collateral agreements required a counterparty to post cash or letters of credit in the event an exposure exceeded an established threshold. The threshold represented an unsecured credit limit, which may have been supported by a parental/affiliate guarantee, as determined in accordance with Entergy’s credit policy. In addition, collateral agreements allowed for termination and liquidation of all positions in the event of a failure or inability to post collateral. Certain of the agreements to sell the power produced by Entergy Wholesale Commodities power plants contained provisions that required an Entergy subsidiary to provide credit support to secure its obligations depending on the mark-to-market values of the contracts. The primary form of credit support to satisfy these requirements was an Entergy Corporation guarantee. If the Entergy Corporation credit rating fell below investment grade, Entergy would have had to post collateral equal to the estimated outstanding liability under the contract at the applicable date. There were no outstanding derivative contracts held by Entergy Wholesale Commodities as of June 30, 2022 and December 31, 2021. As of June 30, 2022, $12 million in cash collateral was required to be posted by the Entergy subsidiary to its counterparties. As of December 31, 2021, $8 million in cash collateral was required to be posted by the Entergy subsidiary to its counterparties. Entergy manages fuel price volatility for its Louisiana jurisdictions (Entergy Louisiana and Entergy New Orleans) and Entergy Mississippi through the purchase of natural gas swaps and options that financially settle against either the average Henry Hub Gas Daily prices or the NYMEX Henry Hub. These swaps and options 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 and projected winter purchases for gas distribution at Entergy New Orleans. The maximum length of time over which Entergy has executed natural gas swaps and options as of June 30, 2022 is 1.75 years for Entergy Louisiana and the maximum length of time over which Entergy has executed natural gas swaps as of June 30, 2022 is 6 months, each, for Entergy Mississippi and Entergy New Orleans. The total volume of natural gas swaps and options outstanding as of June 30, 2022 is 27,681,400 MMBtu for Entergy, including 12,800,000 MMBtu for Entergy Louisiana, 14,771,300 MMBtu for Entergy Mississippi, and 110,100 MMBtu for Entergy New Orleans. Credit support for these natural gas swaps and options 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. During the second quarter 2022, Entergy participated in the annual financial transmission rights auction process for the MISO planning year of June 1, 2022 through May 31, 2023. Financial transmission rights are derivative instruments that represent economic hedges of future congestion charges that will be incurred in serving Entergy’s customer load. They are not designated as hedging instruments. Entergy initially records financial transmission rights at their estimated fair value and subsequently adjusts the carrying value to their estimated fair value at the end of each accounting period prior to settlement. Unrealized gains or losses on financial transmission rights held by Entergy Wholesale Commodities are included in operating revenues. The Utility operating companies recognize regulatory liabilities or assets for unrealized gains or losses on financial transmission rights. The total volume of financial transmission rights outstanding as of June 30, 2022 is 135,179 GWh for Entergy, including 30,477 GWh for Entergy Arkansas, 61,242 GWh for Entergy Louisiana, 14,621 GWh for Entergy Mississippi, 5,720 GWh for Entergy New Orleans, and 22,950 GWh for Entergy Texas. Credit support for financial transmission rights held by the Utility operating companies is covered by cash and/or letters of credit issued by each Utility operating company as required by MISO. Credit support for financial transmission rights held by Entergy Wholesale Commodities is covered by cash. No cash or letters of credit were required to be posted for financial transmission rights exposure for Entergy Wholesale Commodities as of June 30, 2022 and December 31, 2021. Letters of credit posted with MISO covered the financial transmission rights exposure for Entergy Mississippi and Entergy Texas as of June 30, 2022 and as of December 31, 2021. The fair values of Entergy’s derivative instruments in the consolidated balance sheet as of June 30, 2022 are shown in the table below. Certain investments, including those not designated as hedging instruments, are subject to master netting agreements and are presented in the balance sheet on a net basis in accordance with accounting guidance for derivatives and hedging.
Instrument |  | Balance Sheet Location |  | Gross Fair Value (a) |  | Offsetting Position (b) |  | Net Fair Value (c) (d) |  | Business
|  |  |  | (In Millions) |  |
Derivatives not designated as hedging instruments |  |  |  |  |  |  |  |  |  |
Assets: |  |  |  |  |  |  |  |  |  |
Natural gas swaps and options |  | Prepayments and other |  | $37 |  | $— |  | $37 |  | Utility
Natural gas swaps and options |  | Other deferred debits and other assets |  | $9 |  | $— |  | $9 |  | Utility
Financial transmission rights |  | Prepayments and other |  | $13 |  | ($1) |  | $12 |  | Utility and Entergy Wholesale Commodities
The fair values of Entergy’s derivative instruments in the consolidated balance sheet as of December 31, 2021 are shown in the table below.
Instrument |  | Balance Sheet Location |  | Gross Fair Value (a) |  | Offsetting Position (b) |  | Net Fair Value (c) (d) |  | Business
|  |  |  | (In Millions) |  |
Derivatives not designated as hedging instruments |  |  |  |  |  |  |  |  |  |
Assets: |  |  |  |  |  |  |  |  |  |
Natural gas swaps and options |  | Prepayments and other |  | $6 |  | $— |  | $6 |  | Utility
Natural gas swaps and options |  | Other deferred debits and other assets |  | $5 |  | $— |  | $5 |  | Utility
Financial transmission rights |  | Prepayments and other |  | $4 |  | $— |  | $4 |  | Utility and Entergy Wholesale Commodities
Liabilities: |  |  |  |  |  |  |  |  |  |
Natural gas swaps and options |  | Other current liabilities |  | $7 |  | $— |  | $7 |  | Utility
(a)Represents the gross amounts of recognized assets/liabilities (b)Represents the netting of fair value balances with the same counterparty (c)Represents the net amounts of assets/liabilities presented on the Entergy Corporation and Subsidiaries’ Consolidated Balance Sheet (d)Excludes cash collateral in the amount of $12 million posted as of June 30, 2022 and $8 million posted as of December 31, 2021. Also excludes letters of credit in the amount of $6 million posted as of June 30, 2022. As discussed above, the Entergy Wholesale Commodities portfolio of derivative instruments expired in April 2021, which was the settlement date for the last financial derivative contracts in the Entergy Wholesale Commodities portfolio. For the three months ended June 30, 2021, there were no effects resulting from Entergy’s derivative instruments designated as cash flow hedges on the consolidated statements of operations. The effects of Entergy’s derivative instruments designated as cash flow hedges on the consolidated statements of operations for the six months ended June 30, 2021 were as follows:
Instrument |  | Amount of gain (loss) recognized in other comprehensive income |  | Income Statement location |  | Amount of gain (loss) reclassified from accumulated other comprehensive income into income (a)
|  | (In Millions) |  |  |  | (In Millions)
Electricity swaps and options |  | $2 |  | Competitive businesses operating revenues |  | $40
(a) Before taxes of $8 million for the six months ended June 30, 2021 Prior to the expiration of the Entergy Wholesale Commodities portfolio of derivative instruments, Entergy may have effectively liquidated a cash flow hedge instrument by entering into a contract offsetting the original hedge, and then de-designating the original hedge in this situation. Gains or losses accumulated in other comprehensive income prior to de-designation would have continued to be deferred in other comprehensive income until they were included in income as the original hedged transaction occurred. From the point of de-designation, the gains or losses on the original hedge and the offsetting contract were recorded as assets or liabilities on the balance sheet and offset as they flowed through to earnings. The effects of Entergy’s derivative instruments not designated as hedging instruments on the consolidated statements of operations for the three months ended June 30, 2022 and 2021 were as follows:
Instrument |  | Income Statement location |  | Amount of gain (loss) recorded in the income statement
|  |  |  | (In Millions)
2022 |  |  |  |
Natural gas swaps |  | Fuel, fuel-related expenses, and gas purchased for resale | (a) | $23
Financial transmission rights |  | Purchased power expense | (b) | $37
2021 |  |  |  |
Natural gas swaps |  | Fuel, fuel-related expenses, and gas purchased for resale | (a) | $18
Financial transmission rights |  | Purchased power expense | (b) | $16
Electricity swaps and options (c) |  | Competitive business operating revenues |  | $—
The effects of Entergy’s derivative instruments not designated as hedging instruments on the consolidated statements of operations for the six months ended June 30, 2022 and 2021 were as follows:
Instrument |  | Income Statement location |  | Amount of gain (loss) recorded in the income statement
|  |  |  | (In Millions)
2022 |  |  |  |
Natural gas swaps and options |  | Fuel, fuel-related expenses, and gas purchased for resale | (a) | $78
Financial transmission rights |  | Purchased power | (b) | $60
2021 |  |  |  |
Natural gas swaps and options |  | Fuel, fuel-related expenses, and gas purchased for resale | (a) | $25
Financial transmission rights |  | Purchased power | (b) | $144
Electricity swaps and options (c) |  | Competitive business operating revenues |  | ($2)
(a)Due to regulatory treatment, the natural gas swaps and options are marked-to-market through fuel, fuel-related expenses, and gas purchased for resale and then such amounts are simultaneously reversed and recorded as an offsetting regulatory asset or liability. The gains or losses recorded as fuel expenses when the swaps and options are settled are recovered or refunded through fuel cost recovery mechanisms. (b)Due to regulatory treatment, the changes in the estimated fair value of financial transmission rights for the Utility operating companies are recorded through purchased power expense and then such amounts are simultaneously reversed and recorded as an offsetting regulatory asset or liability. The gains or losses recorded as purchased power expense when the financial transmission rights for the Utility operating companies are settled are recovered or refunded through fuel cost recovery mechanisms. (c)There were no gains (losses) recognized in accumulated other comprehensive income from electricity swaps and options prior to the expiration of the Entergy Wholesale Commodities portfolio of derivative instruments in April 2021. The fair values of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their balance sheets as of June 30, 2022 are shown in the table below. Certain investments, including those not designated as hedging instruments, are subject to master netting agreements and are presented in the balance sheet on a net basis in accordance with accounting guidance for derivatives and hedging.
Instrument |  | Balance Sheet Location |  | Gross Fair Value (a) |  | Offsetting Position (b) |  | Net Fair Value (c) (d) |  | Registrant
|  |  |  | (In Millions) |  |
Assets: |  |  |  |  |  |  |  |  |  |
Natural gas swaps and options |  | Prepayments and other |  | $16.1 |  | $— |  | $16.1 |  | Entergy Louisiana
Natural gas swaps and options |  | Other deferred debits and other assets |  | $8.7 |  | $— |  | $8.7 |  | Entergy Louisiana
Natural gas swaps |  | Prepayments and other |  | $20.6 |  | $— |  | $20.6 |  | Entergy Mississippi
Financial transmission rights |  | Prepayments and other |  | $4.5 |  | ($0.1) |  | $4.4 |  | Entergy Arkansas
Financial transmission rights |  | Prepayments and other |  | $5.3 |  | ($0.6) |  | $4.7 |  | Entergy Louisiana
Financial transmission rights |  | Prepayments and other |  | $0.5 |  | $— |  | $0.5 |  | Entergy Mississippi
Financial transmission rights |  | Prepayments and other |  | $0.6 |  | $— |  | $0.6 |  | Entergy New Orleans
Financial transmission rights |  | Prepayments and other |  | $1.7 |  | ($0.2) |  | $1.5 |  | Entergy Texas
Liabilities: |  |  |  |  |  |  |  |  |  |
Natural gas swaps |  | Other current liabilities |  | $0.2 |  | $— |  | $0.2 |  | Entergy New Orleans
The fair values of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their balance sheets as of December 31, 2021 were as follows:
Instrument |  | Balance Sheet Location |  | Gross Fair Value (a) |  | Offsetting Position (b) |  | Net Fair Value (c) (d) |  | Registrant
|  |  |  | (In Millions) |  |
Assets: |  |  |  |  |  |  |  |  |  |
Natural gas swaps and options |  | Prepayments and other |  | $5.7 |  | $— |  | $5.7 |  | Entergy Louisiana
Natural gas swaps and options |  | Other deferred debits and other assets |  | $5.3 |  | $— |  | $5.3 |  | Entergy Louisiana
Financial transmission rights |  | Prepayments and other |  | $2.3 |  | $— |  | $2.3 |  | Entergy Arkansas
Financial transmission rights |  | Prepayments and other |  | $0.6 |  | $— |  | $0.6 |  | Entergy Louisiana
Financial transmission rights |  | Prepayments and other |  | $0.3 |  | $— |  | $0.3 |  | Entergy Mississippi
Financial transmission rights |  | Prepayments and other |  | $0.1 |  | $— |  | $0.1 |  | Entergy New Orleans
Financial transmission rights |  | Prepayments and other |  | $0.8 |  | $— |  | $0.8 |  | Entergy Texas
Liabilities: |  |  |  |  |  |  |  |  |  |
Natural gas swaps |  | Other current liabilities |  | $6.7 |  | $— |  | $6.7 |  | Entergy Mississippi
Natural gas swaps |  | Other current liabilities |  | $0.5 |  | $— |  | $0.5 |  | Entergy New Orleans
(a)Represents the gross amounts of recognized assets/liabilities (b)Represents the netting of fair value balances with the same counterparty (c)Represents the net amounts of assets/liabilities presented on the Registrant Subsidiaries’ balance sheets (d)As of June 30, 2022, letters of credit posted with MISO covered financial transmission rights exposure of $0.4 million for Entergy Mississippi and $5.3 million for Entergy Texas. As of December 31, 2021, letters of credit posted with MISO covered financial transmission rights exposure of $0.2 million for Entergy Mississippi and $0.1 million for Entergy Texas. The effects of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their income statements for the three months ended June 30, 2022 and 2021 were as follows:
Instrument |  | Income Statement Location |  | Amount of gain (loss) recorded in the income statement |  | Registrant
|  |  |  | (In Millions) |  |
2022 |  |  |  |  |  |
Natural gas swaps and options |  | Fuel, fuel-related expenses, and gas purchased for resale |  | $8.7 | (a) | Entergy Louisiana
Natural gas swaps |  | Fuel, fuel-related expenses, and gas purchased for resale |  | $14.6 | (a) | Entergy Mississippi
Natural gas swaps |  | Fuel, fuel-related expenses, and gas purchased for resale |  | ($0.2) | (a) | Entergy New Orleans
Financial transmission rights |  | Purchased power expense |  | $16.0 | (b) | Entergy Arkansas
Financial transmission rights |  | Purchased power expense |  | $16.1 | (b) | Entergy Louisiana
Financial transmission rights |  | Purchased power expense |  | $2.2 | (b) | Entergy Mississippi
Financial transmission rights |  | Purchased power expense |  | $1.6 | (b) | Entergy New Orleans
Financial transmission rights |  | Purchased power expense |  | $1.0 | (b) | Entergy Texas
2021 |  |  |  |  |  |
Natural gas swaps and options |  | Fuel, fuel-related expenses, and gas purchased for resale |  | $4.9 | (a) | Entergy Louisiana
Natural gas swaps |  | Fuel, fuel-related expenses, and gas purchased for resale |  | $13.2 | (a) | Entergy Mississippi
Natural gas swaps |  | Fuel, fuel-related expenses, and gas purchased for resale |  | $0.1 | (a) | Entergy New Orleans
Financial transmission rights |  | Purchased power expense |  | $3.4 | (b) | Entergy Arkansas
Financial transmission rights |  | Purchased power expense |  | $5.9 | (b) | Entergy Louisiana
Financial transmission rights |  | Purchased power expense |  | $0.7 | (b) | Entergy Mississippi
Financial transmission rights |  | Purchased power expense |  | $0.8 | (b) | Entergy New Orleans
Financial transmission rights |  | Purchased power expense |  | $4.8 | (b) | Entergy Texas
The effects of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their income statements for the six months ended June 30, 2022 and 2021 were as follows:
Instrument |  | Income Statement Location |  | Amount of gain (loss) recorded in the income statement |  | Registrant
|  |  |  | (In Millions) |  |
2022 |  |  |  |  |  |
Natural gas swaps and options |  | Fuel, fuel-related expenses, and gas purchased for resale |  | $19.8 | (a) | Entergy Louisiana
Natural gas swaps |  | Fuel, fuel-related expenses, and gas purchased for resale |  | $57.4 | (a) | Entergy Mississippi
Natural gas swaps |  | Fuel, fuel-related expenses, and gas purchased for resale |  | $0.9 | (a) | Entergy New Orleans
Financial transmission rights |  | Purchased power |  | $23.5 | (b) | Entergy Arkansas
Financial transmission rights |  | Purchased power |  | $25.5 | (b) | Entergy Louisiana
Financial transmission rights |  | Purchased power |  | $3.2 | (b) | Entergy Mississippi
Financial transmission rights |  | Purchased power |  | $2.4 | (b) | Entergy New Orleans
Financial transmission rights |  | Purchased power |  | $4.9 | (b) | Entergy Texas
2021 |  |  |  |  |  |
Natural gas swaps and options |  | Fuel, fuel-related expenses, and gas purchased for resale |  | $6.7 | (a) | Entergy Louisiana
Natural gas swaps |  | Fuel, fuel-related expenses, and gas purchased for resale |  | $18.3 | (a) | Entergy Mississippi
Financial transmission rights |  | Purchased power |  | $29.5 | (b) | Entergy Arkansas
Financial transmission rights |  | Purchased power |  | $18.2 | (b) | Entergy Louisiana
Financial transmission rights |  | Purchased power |  | $7.9 | (b) | Entergy Mississippi
Financial transmission rights |  | Purchased power |  | $2.0 | (b) | Entergy New Orleans
Financial transmission rights |  | Purchased power |  | $82.7 | (b) | Entergy Texas
(a)Due to regulatory treatment, the natural gas swaps and options are marked-to-market through fuel, fuel-related expenses, and gas purchased for resale and then such amounts are simultaneously reversed and recorded as an offsetting regulatory asset or liability. The gains or losses recorded as fuel expenses when the swaps and options are settled are recovered or refunded through fuel cost recovery mechanisms. (b)Due to regulatory treatment, the changes in the estimated fair value of financial transmission rights for the Utility operating companies are recorded through purchased power expense and then such amounts are simultaneously reversed and recorded as an offsetting regulatory asset or liability. The gains or losses recorded as purchased power expense when the financial transmission rights for the Utility operating companies are settled are recovered or refunded through fuel cost recovery mechanisms. 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 are 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. Accounting standards define fair value as an exit price, or the price that would be received to sell an asset or the amount that would be paid to transfer a liability in an orderly transaction between knowledgeable market participants at the date of measurement. Entergy and the Registrant Subsidiaries use assumptions or market input data that market participants would use in pricing assets or liabilities at fair value. The inputs can be readily observable, corroborated by market data, or generally unobservable. Entergy and the Registrant Subsidiaries endeavor to use the best available information to determine fair value. Accounting standards establish a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy establishes the highest priority for unadjusted market quotes in an active market for the identical asset or liability and the lowest priority for unobservable inputs. The three levels of the fair value hierarchy are: •Level 1 - Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the entity has the ability to access at the measurement date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 primarily consists of individually owned common stocks, cash equivalents (temporary cash investments, securitization recovery trust account, and escrow accounts), debt instruments, and gas swaps traded on exchanges with active markets. Cash equivalents includes all unrestricted highly liquid debt instruments with an original or remaining maturity of three months or less at the date of purchase. •Level 2 - Level 2 inputs are inputs other than quoted prices included in Level 1 that are, either directly or indirectly, observable for the asset or liability at the measurement date. Assets are valued based on prices derived by independent third parties that use inputs such as benchmark yields, reported trades, broker/dealer quotes, and issuer spreads. Prices are reviewed and can be challenged with the independent parties and/or overridden by Entergy if it is believed such would be more reflective of fair value. Level 2 inputs include the following: –quoted prices for similar assets or liabilities in active markets; –quoted prices for identical assets or liabilities in inactive markets; –inputs other than quoted prices that are observable for the asset or liability; or –inputs that are derived principally from or corroborated by observable market data by correlation or other means. Level 2 consists primarily of individually-owned debt instruments and gas swaps and options valued using observable inputs. •Level 3 - Level 3 inputs are pricing inputs that are generally less observable or unobservable from objective sources. These inputs are used with internally developed methodologies to produce management’s best estimate of fair value for the asset or liability. Level 3 consists primarily of financial transmission rights and derivative power contracts used as cash flow hedges of power sales at merchant power plants. Consistent with management’s strategy to shut down and sell all plants in the Entergy Wholesale Commodities merchant fleet, the Entergy Wholesale Commodities portfolio of derivative instruments expired in April 2021, which was the settlement date for the last financial derivative contracts in the Entergy Wholesale Commodities portfolio. The values for power contract assets or liabilities prior to expiration in April 2021 were based on both observable inputs including public market prices and interest rates, and unobservable inputs such as implied volatilities, unit contingent discounts, expected basis differences, and credit adjusted counterparty interest rates. They were classified as Level 3 assets and liabilities. The valuations of these assets and liabilities were performed by the Office of Corporate Risk Oversight and the Entergy Wholesale Commodities Accounting group. The primary related functions of the Office of Corporate Risk Oversight included: gathering, validating and reporting market data, providing market risk analyses and valuations in support of Entergy Wholesale Commodities’ commercial transactions, developing and administering protocols for the management of market risks, and implementing and maintaining controls around changes to market data in the energy trading and risk management system. The Office of Corporate Risk Oversight was also responsible for managing the energy trading and risk management system, forecasting revenues, forward positions and analysis. The Entergy Wholesale Commodities Accounting group performed functions related to market and counterparty settlements, revenue reporting and analysis, and financial accounting. The Office of Corporate Risk Oversight reports to the Vice President and Treasurer while the Entergy Wholesale Commodities Accounting group reports to the Chief Accounting Officer. The amounts reflected as the fair value of electricity swaps were based on the estimated amount that the contracts were in-the-money at the balance sheet date (treated as an asset) or out-of-the-money at the balance sheet date (treated as a liability) and equaled the estimated amount receivable to or payable by Entergy if the contracts were settled at that date. These derivative contracts included cash flow hedges that swapped fixed for floating cash flows for sales of the output from the Entergy Wholesale Commodities business. The fair values were based on the mark-to-market comparison between the fixed contract prices and the floating prices determined each period from quoted forward power market prices. The differences between the fixed price in the swap contract and these market-related prices multiplied by the volume specified in the contract and discounted at the counterparties’ credit adjusted risk free rate were recorded as derivative contract assets or liabilities. For contracts that had unit contingent terms, a further discount was applied based on the historical relationship between contract and market prices for similar contract terms. The amounts reflected as the fair values of electricity options were valued based on a Black Scholes model, and were calculated at the end of each month for accounting purposes. Inputs to the valuation included end of day forward market prices for the period when the transactions settled, implied volatilities based on market volatilities provided by a third-party data aggregator, and U.S. Treasury rates for a risk-free return rate. As described further below, prices and implied volatilities were reviewed and could be adjusted if it was determined that there was a better representation of fair value. On a daily basis, the Office of Corporate Risk Oversight calculated the mark-to-market for electricity swaps and options. The Office of Corporate Risk Oversight also validated forward market prices by comparing them to other sources of forward market prices or to settlement prices of actual market transactions. Significant differences were analyzed and potentially adjusted based on these other sources of forward market prices or settlement prices of actual market transactions. Implied volatilities used to value options were also validated using actual counterparty quotes for Entergy Wholesale Commodities transactions when available and compared with other sources of market implied volatilities. Moreover, on a quarterly basis, the Office of Corporate Risk Oversight confirmed the mark-to-market calculations and prepared price scenarios and credit downgrade scenario analysis. The scenario analysis was communicated to senior management within Entergy and within Entergy Wholesale Commodities. Finally, for all proposed derivative transactions, an analysis was completed to assess the risk of adding the proposed derivative to Entergy Wholesale Commodities’ portfolio. In particular, the credit and liquidity effects were calculated for this analysis. This analysis was communicated to senior management within Entergy and Entergy Wholesale Commodities. The values of financial transmission rights are based on unobservable inputs, including estimates of congestion costs in MISO between applicable generation and load pricing nodes based on the 50th percentile of historical prices. They are classified as Level 3 assets and liabilities. The valuations of these assets and liabilities are performed by the Office of Corporate Risk Oversight. The values are calculated internally and verified against the data published by MISO. Entergy’s Entergy Wholesale Commodities Accounting group reviews these valuations for reasonableness, with the assistance of others within the organization with knowledge of the various inputs and assumptions used in the valuation. The Office of Corporate Risk Oversight reports to the Vice President and Treasurer. The Entergy Wholesale Commodities Accounting group reports to the Chief Accounting Officer. The following tables set forth, by level within the fair value hierarchy, Entergy’s assets and liabilities that are accounted for at fair value on a recurring basis as of June 30, 2022 and December 31, 2021. The assessment of the significance of a particular input to a fair value measurement requires judgment and may affect its placement within the fair value hierarchy levels.
2022 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $514 |  |  | $— |  |  | $— |  |  | $514 |
Decommissioning trust funds (a): |  |  |  |  |  |  |  |
Equity securities |  | 18 |  |  | — |  |  | — |  |  | 18 |
Debt securities (b) |  | 598 |  |  | 1,095 |  |  | — |  |  | 1,693 |
Common trusts (c) |  |  |  |  |  |  |  | 2,379 |
Securitization recovery trust account |  | 28 |  |  | — |  |  | — |  |  | 28 |
Escrow accounts |  | 331 |  |  | — |  |  | — |  |  | 331 |
Gas hedge contracts |  | 37 |  |  | 9 |  |  | — |  |  | 46 |
Financial transmission rights |  | — |  |  | — |  |  | 12 |  |  | 12 |
|  | $1,526 |  |  | $1,104 |  |  | $12 |  |  | $5,021 |
2021 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $398 |  |  | $— |  |  | $— |  |  | $398 |
Decommissioning trust funds (a): |  |  |  |  |  |  |  |
Equity securities |  | 132 |  |  | — |  |  | — |  |  | 132 |
Debt securities (b) |  | 770 |  |  | 1,407 |  |  | — |  |  | 2,177 |
Common trusts (c) |  |  |  |  |  |  |  | 3,205 |
Securitization recovery trust account |  | 29 |  |  | — |  |  | — |  |  | 29 |
Escrow accounts |  | 49 |  |  | — |  |  | — |  |  | 49 |
Gas hedge contracts |  | 6 |  |  | 5 |  |  | — |  |  | 11 |
Financial transmission rights |  | — |  |  | — |  |  | 4 |  |  | 4 |
|  | $1,384 |  |  | $1,412 |  |  | $4 |  |  | $6,005 |
Liabilities: |  |  |  |  |  |  |  |
Gas hedge contracts |  | $7 |  |  | $— |  |  | $— |  |  | $7 |
(a)The decommissioning trust funds hold equity and fixed income securities. Equity securities are invested to approximate the returns of major market indices. Fixed income securities are held in various governmental and corporate securities. See Note 9 to the financial statements herein for additional information on the investment portfolios. (b)The decommissioning trust funds fair value presented herein does not include the recognition pursuant to ASU 2016-13 of a credit loss valuation allowance of $0.4 million as of December 31, 2021 on debt securities. See Note 9 to the financial statements herein for additional information on the allowance for expected credit losses. (c)Common trust funds are not publicly quoted and are valued by the fund administrators using net asset value as a practical expedient. Accordingly, these funds are not assigned a level in the fair value table. The fund administrator of these investments allows daily trading at the net asset value and trades settle at a later date. The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the three months ended June 30, 2022 and 2021:
|  | 2022 |  |  | 2021
|  |  | Financial transmission rights |  |  |  | Financial transmission rights
|  | (In Millions)
Balance as of April 1, |  |  | $1 |  |  |  |  | $4 |
Total gains (losses) for the period |  |  |  |  |  |  |
Included as a regulatory liability/asset |  |  | 32 |  |  |  |  | 15 |
Issuances of financial transmission rights |  |  | 16 |  |  |  |  | 12 |
Settlements |  |  | (37) |  |  |  |  | (16) |
Balance as of June 30, |  |  | $12 |  |  |  |  | $15 |
The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the six months ended June 30, 2022 and 2021:
|  |  | 2022 |  | 2021
|  |  | Financial transmission rights |  | Power Contracts |  | Financial transmission rights
|  |  | (In Millions)
Balance as of January 1, |  |  | $4 |  |  | $38 |  |  | $9 |
Total gains (losses) for the period |  |  |  |  |  |  |
Included in earnings |  |  | — |  |  | (2) |  |  | 3 |
Included in other comprehensive income |  |  | — |  |  | 2 |  |  | — |
Included as a regulatory liability/asset |  |  | 52 |  |  | — |  |  | 135 |
Issuances of financial transmission rights |  |  | 16 |  |  | — |  |  | 12 |
Settlements |  |  | (60) |  |  | (38) |  |  | (144) |
Balance as of June 30, |  |  | $12 |  |  | $— |  |  | $15 |
The fair values of the Level 3 financial transmission rights are based on unobservable inputs calculated internally and verified against historical pricing data published by MISO. The following table sets forth an analysis of each of the types of unobservable inputs impacting the fair value of items classified as Level 3 within the fair value hierarchy, and the sensitivity to changes to those inputs:
Significant Unobservable Input |  | Transaction Type |  | Position |  | Change to Input |  | Effect on Fair Value
Unit contingent discount |  | Electricity swaps |  | Sell |  | Increase (Decrease) |  | Decrease (Increase)
The following table sets forth, by level within the fair value hierarchy, the Registrant Subsidiaries’ assets and liabilities that are accounted for at fair value on a recurring basis as of June 30, 2022 and December 31, 2021. The assessment of the significance of a particular input to a fair value measurement requires judgment and may affect its placement within the fair value hierarchy levels. Entergy Arkansas
2022 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $58.2 |  |  | $— |  |  | $— |  |  | $58.2 |
Decommissioning trust funds (a): |  |  |  |  |  |  |  |
Equity securities |  | 4.1 |  |  | — |  |  | — |  |  | 4.1 |
Debt securities |  | 131.6 |  |  | 353.2 |  |  | — |  |  | 484.8 |
Common trusts (b) |  |  |  |  |  |  |  | 705.9 |
Financial transmission rights |  | — |  |  | — |  |  | 4.4 |  |  | 4.4 |
|  | $193.9 |  |  | $353.2 |  |  | $4.4 |  |  | $1,257.4 |
2021 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $4.8 |  |  | $— |  |  | $— |  |  | $4.8 |
Decommissioning trust funds (a): |  |  |  |  |  |  |  |
Equity securities |  | 16.7 |  |  | — |  |  | — |  |  | 16.7 |
Debt securities |  | 119.5 |  |  | 406.8 |  |  | — |  |  | 526.3 |
Common trusts (b) |  |  |  |  |  |  |  | 895.4 |
Financial transmission rights |  | — |  |  | — |  |  | 2.3 |  |  | 2.3 |
|  | $141.0 |  |  | $406.8 |  |  | $2.3 |  |  | $1,445.5 |
Entergy Louisiana
2022 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $65.7 |  |  | $— |  |  | $— |  |  | $65.7 |
Decommissioning trust funds (a): |  |  |  |  |  |  |  |
Equity securities |  | 12.6 |  |  | — |  |  | — |  |  | 12.6 |
Debt securities |  | 225.0 |  |  | 508.3 |  |  | — |  |  | 733.3 |
Common trusts (b) |  |  |  |  |  |  |  | 1,010.6 |
Escrow accounts |  | 290.1 |  |  | — |  |  | — |  |  | 290.1 |
Gas hedge contracts |  | 16.1 |  |  | 8.7 |  |  | — |  |  | 24.8 |
Financial transmission rights |  | — |  |  | — |  |  | 4.7 |  |  | 4.7 |
|  | $609.5 |  |  | $517.0 |  |  | $4.7 |  |  | $2,141.8 |
2021 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $18.4 |  |  | $— |  |  | $— |  |  | $18.4 |
Decommissioning trust funds (a): |  |  |  |  |  |  |  |
Equity securities |  | 20.2 |  |  | — |  |  | — |  |  | 20.2 |
Debt securities |  | 262.6 |  |  | 531.6 |  |  | — |  |  | 794.2 |
Common trusts (b) |  |  |  |  |  |  |  | 1,300.1 |
Gas hedge contracts |  | 5.7 |  |  | 5.3 |  |  | — |  |  | 11.0 |
Financial transmission rights |  | — |  |  | — |  |  | 0.6 |  |  | 0.6 |
|  | $306.9 |  |  | $536.9 |  |  | $0.6 |  |  | $2,144.5 |
Entergy Mississippi
2022 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $26.1 |  |  | $— |  |  | $— |  |  | $26.1 |
Escrow accounts |  | 41.1 |  |  | — |  |  | — |  |  | 41.1 |
Gas hedge contracts |  | 20.6 |  |  | — |  |  | — |  |  | 20.6 |
Financial transmission rights |  | — |  |  | — |  |  | 0.5 |  |  | 0.5 |
|  | $87.8 |  |  | $— |  |  | $0.5 |  |  | $88.3 |
2021 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $47.6 |  |  | $— |  |  | $— |  |  | $47.6 |
Escrow accounts |  | 48.9 |  |  | — |  |  | — |  |  | 48.9 |
Financial transmission rights |  | — |  |  | — |  |  | 0.3 |  |  | 0.3 |
|  | $96.5 |  |  | $— |  |  | $0.3 |  |  | $96.8 |
Liabilities: |  |  |  |  |  |  |  |
Gas hedge contracts |  | $6.7 |  |  | $— |  |  | $— |  |  | $6.7 |
Entergy New Orleans
2022 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $25.7 |  |  | $— |  |  | $— |  |  | $25.7 |
Securitization recovery trust account |  | 1.7 |  |  | — |  |  | — |  |  | 1.7 |
Financial transmission rights |  | — |  |  | — |  |  | 0.6 |  |  | 0.6 |
|  | $27.4 |  |  | $— |  |  | $0.6 |  |  | $28.0 |
Liabilities: |  |  |  |  |  |  |  |
Gas hedge contracts |  | $0.2 |  |  | $— |  |  | $— |  |  | $0.2 |
2021 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $42.8 |  |  | $— |  |  | $— |  |  | $42.8 |
Securitization recovery trust account |  | 2.0 |  |  | — |  |  | — |  |  | 2.0 |
Financial transmission rights |  | — |  |  | — |  |  | 0.1 |  |  | 0.1 |
|  | $44.8 |  |  | $— |  |  | $0.1 |  |  | $44.9 |
Liabilities: |  |  |  |  |  |  |  |
Gas hedge contracts |  | $0.5 |  |  | $— |  |  | $— |  |  | $0.5 |
Entergy Texas
2022 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $14.4 |  |  | $— |  |  | $— |  |  | $14.4 |
Securitization recovery trust account |  | 26.6 |  |  | — |  |  | — |  |  | 26.6 |
Financial transmission rights |  | — |  |  | — |  |  | 1.5 |  |  | 1.5 |
|  | $41.0 |  |  | $— |  |  | $1.5 |  |  | $42.5 |
2021 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Securitization recovery trust account |  | $26.6 |  |  | $— |  |  | $— |  |  | $26.6 |
Financial transmission rights |  | — |  |  | — |  |  | 0.8 |  |  | 0.8 |
|  | $26.6 |  |  | $— |  |  | $0.8 |  |  | $27.4 |
System Energy
2022 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $134.6 |  |  | $— |  |  | $— |  |  | $134.6 |
Decommissioning trust funds (a): |  |  |  |  |  |  |  |
Equity securities |  | 1.7 |  |  | — |  |  | — |  |  | 1.7 |
Debt Securities |  | 241.1 |  |  | 233.1 |  |  | — |  |  | 474.2 |
Common trusts (b) |  |  |  |  |  |  |  | 662.9 |
|  | $377.4 |  |  | $233.1 |  |  | $— |  |  | $1,273.4 |
2021 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $89.1 |  |  | $— |  |  | $— |  |  | $89.1 |
Decommissioning trust funds (a): |  |  |  |  |  |  |  |
Equity securities |  | 12.9 |  |  | — |  |  | — |  |  | 12.9 |
Debt securities |  | 273.0 |  |  | 251.5 |  |  | — |  |  | 524.5 |
Common trusts (b) |  |  |  |  |  |  |  | 847.9 |
|  | $375.0 |  |  | $251.5 |  |  | $— |  |  | $1,474.4 |
(a)The decommissioning trust funds hold equity and fixed income securities. Equity securities are invested to approximate the returns of major market indices. Fixed income securities are held in various governmental and corporate securities. See Note 9 to the financial statements herein for additional information on the investment portfolios. (b)Common trust funds are not publicly quoted and are valued by the fund administrators using net asset value as a practical expedient. Accordingly, these funds are not assigned a level in the fair value table. The fund administrator of these investments allows daily trading at the net asset value and trades settle at a later date. The following table sets forth a reconciliation of changes in the net assets for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the three months ended June 30, 2022.
| Entergy Arkansas |  | Entergy Louisiana |  | Entergy Mississippi |  | Entergy New Orleans |  | Entergy Texas
| (In Millions)
Balance as of April 1, | $0.4 |  |  | $0.3 |  |  | $0.2 |  |  | $0.1 |  |  | $0.5 |
Issuances of financial transmission rights | 5.4 |  |  | 5.3 |  |  | 0.8 |  |  | 0.8 |  |  | 3.9 |
Gains (losses) included as a regulatory liability/asset | 14.6 |  |  | 15.2 |  |  | 1.7 |  |  | 1.3 |  |  | (1.9) |
Settlements | (16.0) |  |  | (16.1) |  |  | (2.2) |  |  | (1.6) |  |  | (1.0) |
Balance as of June 30, | $4.4 |  |  | $4.7 |  |  | $0.5 |  |  | $0.6 |  |  | $1.5 |
The following table sets forth a reconciliation of changes in the net assets for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the three months ended June 30, 2021.
| Entergy Arkansas |  | Entergy Louisiana |  | Entergy Mississippi |  | Entergy New Orleans |  | Entergy Texas
| (In Millions)
Balance as of April 1, | $1.4 |  |  | $1.2 |  |  | $0.3 |  |  | $0.1 |  |  | $0.5 |
Issuances of financial transmission rights | 2.8 |  |  | 4.1 |  |  | 1.7 |  |  | 0.4 |  |  | 2.7 |
Gains (losses) included as a regulatory liability/asset | 3.0 |  |  | 5.4 |  |  | 0.8 |  |  | 0.9 |  |  | 5.4 |
Settlements | (3.4) |  |  | (5.9) |  |  | (0.7) |  |  | (0.8) |  |  | (4.8) |
Balance as of June 30, | $3.8 |  |  | $4.8 |  |  | $2.1 |  |  | $0.6 |  |  | $3.8 |
The following table sets forth a reconciliation of changes in the net assets for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the six months ended June 30, 2022.
| Entergy Arkansas |  | Entergy Louisiana |  | Entergy Mississippi |  | Entergy New Orleans |  | Entergy Texas
| (In Millions)
Balance as of January 1, | $2.3 |  |  | $0.6 |  |  | $0.3 |  |  | $0.1 |  |  | $0.8 |
Issuances of financial transmission rights | 5.4 |  |  | 5.3 |  |  | 0.8 |  |  | 0.8 |  |  | 3.9 |
Gains (losses) included as a regulatory liability/asset | 20.2 |  |  | 24.3 |  |  | 2.6 |  |  | 2.1 |  |  | 1.7 |
Settlements | (23.5) |  |  | (25.5) |  |  | (3.2) |  |  | (2.4) |  |  | (4.9) |
Balance as of June 30, | $4.4 |  |  | $4.7 |  |  | $0.5 |  |  | $0.6 |  |  | $1.5 |
The following table sets forth a reconciliation of changes in the net assets for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the six months ended June 30, 2021.
| Entergy Arkansas |  | Entergy Louisiana |  | Entergy Mississippi |  | Entergy New Orleans |  | Entergy Texas
| (In Millions)
Balance as of January 1, | $2.7 |  |  | $4.2 |  |  | $0.6 |  |  | $0.1 |  |  | $1.6 |
Issuances of financial transmission rights | 2.8 |  |  | 4.1 |  |  | 1.7 |  |  | 0.4 |  |  | 2.7 |
Gains (losses) included as a regulatory liability/asset | 27.8 |  |  | 14.7 |  |  | 7.7 |  |  | 2.1 |  |  | 82.2 |
Settlements | (29.5) |  |  | (18.2) |  |  | (7.9) |  |  | (2.0) |  |  | (82.7) |
Balance as of June 30, | $3.8 |  |  | $4.8 |  |  | $2.1 |  |  | $0.6 |  |  | $3.8 |
Entergy New Orleans [Member] |
Risk Management And Fair Values | RISK MANAGEMENT AND FAIR VALUES (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy) Market Risk In the normal course of business, Entergy is exposed to a number of market risks. Market risk is the potential loss that Entergy may incur as a result of changes in the market or fair value of a particular commodity or instrument. All financial and commodity-related instruments, including derivatives, are subject to market risk including commodity price risk, equity price, and interest rate risk. Entergy uses derivatives primarily to mitigate commodity price risk, particularly power price and fuel price risk. 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 derivative 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. As a wholesale generator, Entergy Wholesale Commodities’ core business was selling energy, measured in MWh, to its customers. Entergy Wholesale Commodities entered into forward contracts with its customers and also sold energy and capacity in the day ahead or spot markets. In addition to its forward physical power and gas contracts, Entergy Wholesale Commodities used a combination of financial contracts, including swaps, collars, and options, to mitigate commodity price risk. When the market price fell, the combination of financial contracts was expected to settle in gains that offset lower revenue from generation, which resulted in a more predictable cash flow. Consistent with management’s strategy to shut down and sell all plants in the Entergy Wholesale Commodities merchant fleet, the Entergy Wholesale Commodities portfolio of derivative instruments expired in April 2021, which was the settlement date for the last financial derivative contracts in the Entergy Wholesale Commodities portfolio. Entergy’s exposure to market risk is determined by a number of factors, including the size, term, composition, and diversification of positions held, as well as market volatility and liquidity. For instruments such as options, the time period during which the option may be exercised and the relationship between the current market price of the underlying instrument and the option’s contractual strike or exercise price also affects the level of market risk. A significant factor influencing the overall level of market risk to which Entergy is exposed is its use of hedging techniques to mitigate such risk. Hedging instruments and volumes are chosen based on ability to mitigate risk associated with future energy and capacity prices; however, other considerations are factored into hedge product and volume decisions including corporate liquidity, corporate credit ratings, counterparty credit risk, hedging costs, firm settlement risk, and product availability in the marketplace. Entergy manages market risk by actively monitoring compliance with stated risk management policies as well as monitoring the effectiveness of its hedging policies and strategies. Entergy’s risk management policies limit the amount of total net exposure and rolling net exposure during the stated periods. These policies, including related risk limits, are regularly assessed to ensure their appropriateness given Entergy’s objectives. Derivatives Some derivative instruments are classified as cash flow hedges due to their financial settlement provisions while others are classified as normal purchase/normal sale transactions due to their physical settlement provisions. Normal purchase/normal sale risk management tools include power purchase and sales agreements, fuel purchase agreements, capacity contracts, and tolling agreements. Financially-settled cash flow hedges can include natural gas and electricity swaps and options. Entergy may enter into financially-settled swap and option contracts to manage market risk that may or may not be designated as hedging instruments. Entergy entered into derivatives to manage natural risks inherent in its physical or financial assets or liabilities. Electricity over-the-counter instruments and futures contracts that financially settled against day-ahead power pool prices were used to manage price exposure for Entergy Wholesale Commodities generation. Entergy used standardized master netting agreements to help mitigate the credit risk of derivative instruments. These master agreements facilitated the netting of cash flows associated with a single counterparty and may have included collateral requirements. Cash, letters of credit, and parental/affiliate guarantees were obtained as security from counterparties in order to mitigate credit risk. The collateral agreements required a counterparty to post cash or letters of credit in the event an exposure exceeded an established threshold. The threshold represented an unsecured credit limit, which may have been supported by a parental/affiliate guarantee, as determined in accordance with Entergy’s credit policy. In addition, collateral agreements allowed for termination and liquidation of all positions in the event of a failure or inability to post collateral. Certain of the agreements to sell the power produced by Entergy Wholesale Commodities power plants contained provisions that required an Entergy subsidiary to provide credit support to secure its obligations depending on the mark-to-market values of the contracts. The primary form of credit support to satisfy these requirements was an Entergy Corporation guarantee. If the Entergy Corporation credit rating fell below investment grade, Entergy would have had to post collateral equal to the estimated outstanding liability under the contract at the applicable date. There were no outstanding derivative contracts held by Entergy Wholesale Commodities as of June 30, 2022 and December 31, 2021. As of June 30, 2022, $12 million in cash collateral was required to be posted by the Entergy subsidiary to its counterparties. As of December 31, 2021, $8 million in cash collateral was required to be posted by the Entergy subsidiary to its counterparties. Entergy manages fuel price volatility for its Louisiana jurisdictions (Entergy Louisiana and Entergy New Orleans) and Entergy Mississippi through the purchase of natural gas swaps and options that financially settle against either the average Henry Hub Gas Daily prices or the NYMEX Henry Hub. These swaps and options 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 and projected winter purchases for gas distribution at Entergy New Orleans. The maximum length of time over which Entergy has executed natural gas swaps and options as of June 30, 2022 is 1.75 years for Entergy Louisiana and the maximum length of time over which Entergy has executed natural gas swaps as of June 30, 2022 is 6 months, each, for Entergy Mississippi and Entergy New Orleans. The total volume of natural gas swaps and options outstanding as of June 30, 2022 is 27,681,400 MMBtu for Entergy, including 12,800,000 MMBtu for Entergy Louisiana, 14,771,300 MMBtu for Entergy Mississippi, and 110,100 MMBtu for Entergy New Orleans. Credit support for these natural gas swaps and options 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. During the second quarter 2022, Entergy participated in the annual financial transmission rights auction process for the MISO planning year of June 1, 2022 through May 31, 2023. Financial transmission rights are derivative instruments that represent economic hedges of future congestion charges that will be incurred in serving Entergy’s customer load. They are not designated as hedging instruments. Entergy initially records financial transmission rights at their estimated fair value and subsequently adjusts the carrying value to their estimated fair value at the end of each accounting period prior to settlement. Unrealized gains or losses on financial transmission rights held by Entergy Wholesale Commodities are included in operating revenues. The Utility operating companies recognize regulatory liabilities or assets for unrealized gains or losses on financial transmission rights. The total volume of financial transmission rights outstanding as of June 30, 2022 is 135,179 GWh for Entergy, including 30,477 GWh for Entergy Arkansas, 61,242 GWh for Entergy Louisiana, 14,621 GWh for Entergy Mississippi, 5,720 GWh for Entergy New Orleans, and 22,950 GWh for Entergy Texas. Credit support for financial transmission rights held by the Utility operating companies is covered by cash and/or letters of credit issued by each Utility operating company as required by MISO. Credit support for financial transmission rights held by Entergy Wholesale Commodities is covered by cash. No cash or letters of credit were required to be posted for financial transmission rights exposure for Entergy Wholesale Commodities as of June 30, 2022 and December 31, 2021. Letters of credit posted with MISO covered the financial transmission rights exposure for Entergy Mississippi and Entergy Texas as of June 30, 2022 and as of December 31, 2021. The fair values of Entergy’s derivative instruments in the consolidated balance sheet as of June 30, 2022 are shown in the table below. Certain investments, including those not designated as hedging instruments, are subject to master netting agreements and are presented in the balance sheet on a net basis in accordance with accounting guidance for derivatives and hedging.
Instrument |  | Balance Sheet Location |  | Gross Fair Value (a) |  | Offsetting Position (b) |  | Net Fair Value (c) (d) |  | Business
|  |  |  | (In Millions) |  |
Derivatives not designated as hedging instruments |  |  |  |  |  |  |  |  |  |
Assets: |  |  |  |  |  |  |  |  |  |
Natural gas swaps and options |  | Prepayments and other |  | $37 |  | $— |  | $37 |  | Utility
Natural gas swaps and options |  | Other deferred debits and other assets |  | $9 |  | $— |  | $9 |  | Utility
Financial transmission rights |  | Prepayments and other |  | $13 |  | ($1) |  | $12 |  | Utility and Entergy Wholesale Commodities
The fair values of Entergy’s derivative instruments in the consolidated balance sheet as of December 31, 2021 are shown in the table below.
Instrument |  | Balance Sheet Location |  | Gross Fair Value (a) |  | Offsetting Position (b) |  | Net Fair Value (c) (d) |  | Business
|  |  |  | (In Millions) |  |
Derivatives not designated as hedging instruments |  |  |  |  |  |  |  |  |  |
Assets: |  |  |  |  |  |  |  |  |  |
Natural gas swaps and options |  | Prepayments and other |  | $6 |  | $— |  | $6 |  | Utility
Natural gas swaps and options |  | Other deferred debits and other assets |  | $5 |  | $— |  | $5 |  | Utility
Financial transmission rights |  | Prepayments and other |  | $4 |  | $— |  | $4 |  | Utility and Entergy Wholesale Commodities
Liabilities: |  |  |  |  |  |  |  |  |  |
Natural gas swaps and options |  | Other current liabilities |  | $7 |  | $— |  | $7 |  | Utility
(a)Represents the gross amounts of recognized assets/liabilities (b)Represents the netting of fair value balances with the same counterparty (c)Represents the net amounts of assets/liabilities presented on the Entergy Corporation and Subsidiaries’ Consolidated Balance Sheet (d)Excludes cash collateral in the amount of $12 million posted as of June 30, 2022 and $8 million posted as of December 31, 2021. Also excludes letters of credit in the amount of $6 million posted as of June 30, 2022. As discussed above, the Entergy Wholesale Commodities portfolio of derivative instruments expired in April 2021, which was the settlement date for the last financial derivative contracts in the Entergy Wholesale Commodities portfolio. For the three months ended June 30, 2021, there were no effects resulting from Entergy’s derivative instruments designated as cash flow hedges on the consolidated statements of operations. The effects of Entergy’s derivative instruments designated as cash flow hedges on the consolidated statements of operations for the six months ended June 30, 2021 were as follows:
Instrument |  | Amount of gain (loss) recognized in other comprehensive income |  | Income Statement location |  | Amount of gain (loss) reclassified from accumulated other comprehensive income into income (a)
|  | (In Millions) |  |  |  | (In Millions)
Electricity swaps and options |  | $2 |  | Competitive businesses operating revenues |  | $40
(a) Before taxes of $8 million for the six months ended June 30, 2021 Prior to the expiration of the Entergy Wholesale Commodities portfolio of derivative instruments, Entergy may have effectively liquidated a cash flow hedge instrument by entering into a contract offsetting the original hedge, and then de-designating the original hedge in this situation. Gains or losses accumulated in other comprehensive income prior to de-designation would have continued to be deferred in other comprehensive income until they were included in income as the original hedged transaction occurred. From the point of de-designation, the gains or losses on the original hedge and the offsetting contract were recorded as assets or liabilities on the balance sheet and offset as they flowed through to earnings. The effects of Entergy’s derivative instruments not designated as hedging instruments on the consolidated statements of operations for the three months ended June 30, 2022 and 2021 were as follows:
Instrument |  | Income Statement location |  | Amount of gain (loss) recorded in the income statement
|  |  |  | (In Millions)
2022 |  |  |  |
Natural gas swaps |  | Fuel, fuel-related expenses, and gas purchased for resale | (a) | $23
Financial transmission rights |  | Purchased power expense | (b) | $37
2021 |  |  |  |
Natural gas swaps |  | Fuel, fuel-related expenses, and gas purchased for resale | (a) | $18
Financial transmission rights |  | Purchased power expense | (b) | $16
Electricity swaps and options (c) |  | Competitive business operating revenues |  | $—
The effects of Entergy’s derivative instruments not designated as hedging instruments on the consolidated statements of operations for the six months ended June 30, 2022 and 2021 were as follows:
Instrument |  | Income Statement location |  | Amount of gain (loss) recorded in the income statement
|  |  |  | (In Millions)
2022 |  |  |  |
Natural gas swaps and options |  | Fuel, fuel-related expenses, and gas purchased for resale | (a) | $78
Financial transmission rights |  | Purchased power | (b) | $60
2021 |  |  |  |
Natural gas swaps and options |  | Fuel, fuel-related expenses, and gas purchased for resale | (a) | $25
Financial transmission rights |  | Purchased power | (b) | $144
Electricity swaps and options (c) |  | Competitive business operating revenues |  | ($2)
(a)Due to regulatory treatment, the natural gas swaps and options are marked-to-market through fuel, fuel-related expenses, and gas purchased for resale and then such amounts are simultaneously reversed and recorded as an offsetting regulatory asset or liability. The gains or losses recorded as fuel expenses when the swaps and options are settled are recovered or refunded through fuel cost recovery mechanisms. (b)Due to regulatory treatment, the changes in the estimated fair value of financial transmission rights for the Utility operating companies are recorded through purchased power expense and then such amounts are simultaneously reversed and recorded as an offsetting regulatory asset or liability. The gains or losses recorded as purchased power expense when the financial transmission rights for the Utility operating companies are settled are recovered or refunded through fuel cost recovery mechanisms. (c)There were no gains (losses) recognized in accumulated other comprehensive income from electricity swaps and options prior to the expiration of the Entergy Wholesale Commodities portfolio of derivative instruments in April 2021. The fair values of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their balance sheets as of June 30, 2022 are shown in the table below. Certain investments, including those not designated as hedging instruments, are subject to master netting agreements and are presented in the balance sheet on a net basis in accordance with accounting guidance for derivatives and hedging.
Instrument |  | Balance Sheet Location |  | Gross Fair Value (a) |  | Offsetting Position (b) |  | Net Fair Value (c) (d) |  | Registrant
|  |  |  | (In Millions) |  |
Assets: |  |  |  |  |  |  |  |  |  |
Natural gas swaps and options |  | Prepayments and other |  | $16.1 |  | $— |  | $16.1 |  | Entergy Louisiana
Natural gas swaps and options |  | Other deferred debits and other assets |  | $8.7 |  | $— |  | $8.7 |  | Entergy Louisiana
Natural gas swaps |  | Prepayments and other |  | $20.6 |  | $— |  | $20.6 |  | Entergy Mississippi
Financial transmission rights |  | Prepayments and other |  | $4.5 |  | ($0.1) |  | $4.4 |  | Entergy Arkansas
Financial transmission rights |  | Prepayments and other |  | $5.3 |  | ($0.6) |  | $4.7 |  | Entergy Louisiana
Financial transmission rights |  | Prepayments and other |  | $0.5 |  | $— |  | $0.5 |  | Entergy Mississippi
Financial transmission rights |  | Prepayments and other |  | $0.6 |  | $— |  | $0.6 |  | Entergy New Orleans
Financial transmission rights |  | Prepayments and other |  | $1.7 |  | ($0.2) |  | $1.5 |  | Entergy Texas
Liabilities: |  |  |  |  |  |  |  |  |  |
Natural gas swaps |  | Other current liabilities |  | $0.2 |  | $— |  | $0.2 |  | Entergy New Orleans
The fair values of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their balance sheets as of December 31, 2021 were as follows:
Instrument |  | Balance Sheet Location |  | Gross Fair Value (a) |  | Offsetting Position (b) |  | Net Fair Value (c) (d) |  | Registrant
|  |  |  | (In Millions) |  |
Assets: |  |  |  |  |  |  |  |  |  |
Natural gas swaps and options |  | Prepayments and other |  | $5.7 |  | $— |  | $5.7 |  | Entergy Louisiana
Natural gas swaps and options |  | Other deferred debits and other assets |  | $5.3 |  | $— |  | $5.3 |  | Entergy Louisiana
Financial transmission rights |  | Prepayments and other |  | $2.3 |  | $— |  | $2.3 |  | Entergy Arkansas
Financial transmission rights |  | Prepayments and other |  | $0.6 |  | $— |  | $0.6 |  | Entergy Louisiana
Financial transmission rights |  | Prepayments and other |  | $0.3 |  | $— |  | $0.3 |  | Entergy Mississippi
Financial transmission rights |  | Prepayments and other |  | $0.1 |  | $— |  | $0.1 |  | Entergy New Orleans
Financial transmission rights |  | Prepayments and other |  | $0.8 |  | $— |  | $0.8 |  | Entergy Texas
Liabilities: |  |  |  |  |  |  |  |  |  |
Natural gas swaps |  | Other current liabilities |  | $6.7 |  | $— |  | $6.7 |  | Entergy Mississippi
Natural gas swaps |  | Other current liabilities |  | $0.5 |  | $— |  | $0.5 |  | Entergy New Orleans
(a)Represents the gross amounts of recognized assets/liabilities (b)Represents the netting of fair value balances with the same counterparty (c)Represents the net amounts of assets/liabilities presented on the Registrant Subsidiaries’ balance sheets (d)As of June 30, 2022, letters of credit posted with MISO covered financial transmission rights exposure of $0.4 million for Entergy Mississippi and $5.3 million for Entergy Texas. As of December 31, 2021, letters of credit posted with MISO covered financial transmission rights exposure of $0.2 million for Entergy Mississippi and $0.1 million for Entergy Texas. The effects of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their income statements for the three months ended June 30, 2022 and 2021 were as follows:
Instrument |  | Income Statement Location |  | Amount of gain (loss) recorded in the income statement |  | Registrant
|  |  |  | (In Millions) |  |
2022 |  |  |  |  |  |
Natural gas swaps and options |  | Fuel, fuel-related expenses, and gas purchased for resale |  | $8.7 | (a) | Entergy Louisiana
Natural gas swaps |  | Fuel, fuel-related expenses, and gas purchased for resale |  | $14.6 | (a) | Entergy Mississippi
Natural gas swaps |  | Fuel, fuel-related expenses, and gas purchased for resale |  | ($0.2) | (a) | Entergy New Orleans
Financial transmission rights |  | Purchased power expense |  | $16.0 | (b) | Entergy Arkansas
Financial transmission rights |  | Purchased power expense |  | $16.1 | (b) | Entergy Louisiana
Financial transmission rights |  | Purchased power expense |  | $2.2 | (b) | Entergy Mississippi
Financial transmission rights |  | Purchased power expense |  | $1.6 | (b) | Entergy New Orleans
Financial transmission rights |  | Purchased power expense |  | $1.0 | (b) | Entergy Texas
2021 |  |  |  |  |  |
Natural gas swaps and options |  | Fuel, fuel-related expenses, and gas purchased for resale |  | $4.9 | (a) | Entergy Louisiana
Natural gas swaps |  | Fuel, fuel-related expenses, and gas purchased for resale |  | $13.2 | (a) | Entergy Mississippi
Natural gas swaps |  | Fuel, fuel-related expenses, and gas purchased for resale |  | $0.1 | (a) | Entergy New Orleans
Financial transmission rights |  | Purchased power expense |  | $3.4 | (b) | Entergy Arkansas
Financial transmission rights |  | Purchased power expense |  | $5.9 | (b) | Entergy Louisiana
Financial transmission rights |  | Purchased power expense |  | $0.7 | (b) | Entergy Mississippi
Financial transmission rights |  | Purchased power expense |  | $0.8 | (b) | Entergy New Orleans
Financial transmission rights |  | Purchased power expense |  | $4.8 | (b) | Entergy Texas
The effects of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their income statements for the six months ended June 30, 2022 and 2021 were as follows:
Instrument |  | Income Statement Location |  | Amount of gain (loss) recorded in the income statement |  | Registrant
|  |  |  | (In Millions) |  |
2022 |  |  |  |  |  |
Natural gas swaps and options |  | Fuel, fuel-related expenses, and gas purchased for resale |  | $19.8 | (a) | Entergy Louisiana
Natural gas swaps |  | Fuel, fuel-related expenses, and gas purchased for resale |  | $57.4 | (a) | Entergy Mississippi
Natural gas swaps |  | Fuel, fuel-related expenses, and gas purchased for resale |  | $0.9 | (a) | Entergy New Orleans
Financial transmission rights |  | Purchased power |  | $23.5 | (b) | Entergy Arkansas
Financial transmission rights |  | Purchased power |  | $25.5 | (b) | Entergy Louisiana
Financial transmission rights |  | Purchased power |  | $3.2 | (b) | Entergy Mississippi
Financial transmission rights |  | Purchased power |  | $2.4 | (b) | Entergy New Orleans
Financial transmission rights |  | Purchased power |  | $4.9 | (b) | Entergy Texas
2021 |  |  |  |  |  |
Natural gas swaps and options |  | Fuel, fuel-related expenses, and gas purchased for resale |  | $6.7 | (a) | Entergy Louisiana
Natural gas swaps |  | Fuel, fuel-related expenses, and gas purchased for resale |  | $18.3 | (a) | Entergy Mississippi
Financial transmission rights |  | Purchased power |  | $29.5 | (b) | Entergy Arkansas
Financial transmission rights |  | Purchased power |  | $18.2 | (b) | Entergy Louisiana
Financial transmission rights |  | Purchased power |  | $7.9 | (b) | Entergy Mississippi
Financial transmission rights |  | Purchased power |  | $2.0 | (b) | Entergy New Orleans
Financial transmission rights |  | Purchased power |  | $82.7 | (b) | Entergy Texas
(a)Due to regulatory treatment, the natural gas swaps and options are marked-to-market through fuel, fuel-related expenses, and gas purchased for resale and then such amounts are simultaneously reversed and recorded as an offsetting regulatory asset or liability. The gains or losses recorded as fuel expenses when the swaps and options are settled are recovered or refunded through fuel cost recovery mechanisms. (b)Due to regulatory treatment, the changes in the estimated fair value of financial transmission rights for the Utility operating companies are recorded through purchased power expense and then such amounts are simultaneously reversed and recorded as an offsetting regulatory asset or liability. The gains or losses recorded as purchased power expense when the financial transmission rights for the Utility operating companies are settled are recovered or refunded through fuel cost recovery mechanisms. 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 are 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. Accounting standards define fair value as an exit price, or the price that would be received to sell an asset or the amount that would be paid to transfer a liability in an orderly transaction between knowledgeable market participants at the date of measurement. Entergy and the Registrant Subsidiaries use assumptions or market input data that market participants would use in pricing assets or liabilities at fair value. The inputs can be readily observable, corroborated by market data, or generally unobservable. Entergy and the Registrant Subsidiaries endeavor to use the best available information to determine fair value. Accounting standards establish a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy establishes the highest priority for unadjusted market quotes in an active market for the identical asset or liability and the lowest priority for unobservable inputs. The three levels of the fair value hierarchy are: •Level 1 - Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the entity has the ability to access at the measurement date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 primarily consists of individually owned common stocks, cash equivalents (temporary cash investments, securitization recovery trust account, and escrow accounts), debt instruments, and gas swaps traded on exchanges with active markets. Cash equivalents includes all unrestricted highly liquid debt instruments with an original or remaining maturity of three months or less at the date of purchase. •Level 2 - Level 2 inputs are inputs other than quoted prices included in Level 1 that are, either directly or indirectly, observable for the asset or liability at the measurement date. Assets are valued based on prices derived by independent third parties that use inputs such as benchmark yields, reported trades, broker/dealer quotes, and issuer spreads. Prices are reviewed and can be challenged with the independent parties and/or overridden by Entergy if it is believed such would be more reflective of fair value. Level 2 inputs include the following: –quoted prices for similar assets or liabilities in active markets; –quoted prices for identical assets or liabilities in inactive markets; –inputs other than quoted prices that are observable for the asset or liability; or –inputs that are derived principally from or corroborated by observable market data by correlation or other means. Level 2 consists primarily of individually-owned debt instruments and gas swaps and options valued using observable inputs. •Level 3 - Level 3 inputs are pricing inputs that are generally less observable or unobservable from objective sources. These inputs are used with internally developed methodologies to produce management’s best estimate of fair value for the asset or liability. Level 3 consists primarily of financial transmission rights and derivative power contracts used as cash flow hedges of power sales at merchant power plants. Consistent with management’s strategy to shut down and sell all plants in the Entergy Wholesale Commodities merchant fleet, the Entergy Wholesale Commodities portfolio of derivative instruments expired in April 2021, which was the settlement date for the last financial derivative contracts in the Entergy Wholesale Commodities portfolio. The values for power contract assets or liabilities prior to expiration in April 2021 were based on both observable inputs including public market prices and interest rates, and unobservable inputs such as implied volatilities, unit contingent discounts, expected basis differences, and credit adjusted counterparty interest rates. They were classified as Level 3 assets and liabilities. The valuations of these assets and liabilities were performed by the Office of Corporate Risk Oversight and the Entergy Wholesale Commodities Accounting group. The primary related functions of the Office of Corporate Risk Oversight included: gathering, validating and reporting market data, providing market risk analyses and valuations in support of Entergy Wholesale Commodities’ commercial transactions, developing and administering protocols for the management of market risks, and implementing and maintaining controls around changes to market data in the energy trading and risk management system. The Office of Corporate Risk Oversight was also responsible for managing the energy trading and risk management system, forecasting revenues, forward positions and analysis. The Entergy Wholesale Commodities Accounting group performed functions related to market and counterparty settlements, revenue reporting and analysis, and financial accounting. The Office of Corporate Risk Oversight reports to the Vice President and Treasurer while the Entergy Wholesale Commodities Accounting group reports to the Chief Accounting Officer. The amounts reflected as the fair value of electricity swaps were based on the estimated amount that the contracts were in-the-money at the balance sheet date (treated as an asset) or out-of-the-money at the balance sheet date (treated as a liability) and equaled the estimated amount receivable to or payable by Entergy if the contracts were settled at that date. These derivative contracts included cash flow hedges that swapped fixed for floating cash flows for sales of the output from the Entergy Wholesale Commodities business. The fair values were based on the mark-to-market comparison between the fixed contract prices and the floating prices determined each period from quoted forward power market prices. The differences between the fixed price in the swap contract and these market-related prices multiplied by the volume specified in the contract and discounted at the counterparties’ credit adjusted risk free rate were recorded as derivative contract assets or liabilities. For contracts that had unit contingent terms, a further discount was applied based on the historical relationship between contract and market prices for similar contract terms. The amounts reflected as the fair values of electricity options were valued based on a Black Scholes model, and were calculated at the end of each month for accounting purposes. Inputs to the valuation included end of day forward market prices for the period when the transactions settled, implied volatilities based on market volatilities provided by a third-party data aggregator, and U.S. Treasury rates for a risk-free return rate. As described further below, prices and implied volatilities were reviewed and could be adjusted if it was determined that there was a better representation of fair value. On a daily basis, the Office of Corporate Risk Oversight calculated the mark-to-market for electricity swaps and options. The Office of Corporate Risk Oversight also validated forward market prices by comparing them to other sources of forward market prices or to settlement prices of actual market transactions. Significant differences were analyzed and potentially adjusted based on these other sources of forward market prices or settlement prices of actual market transactions. Implied volatilities used to value options were also validated using actual counterparty quotes for Entergy Wholesale Commodities transactions when available and compared with other sources of market implied volatilities. Moreover, on a quarterly basis, the Office of Corporate Risk Oversight confirmed the mark-to-market calculations and prepared price scenarios and credit downgrade scenario analysis. The scenario analysis was communicated to senior management within Entergy and within Entergy Wholesale Commodities. Finally, for all proposed derivative transactions, an analysis was completed to assess the risk of adding the proposed derivative to Entergy Wholesale Commodities’ portfolio. In particular, the credit and liquidity effects were calculated for this analysis. This analysis was communicated to senior management within Entergy and Entergy Wholesale Commodities. The values of financial transmission rights are based on unobservable inputs, including estimates of congestion costs in MISO between applicable generation and load pricing nodes based on the 50th percentile of historical prices. They are classified as Level 3 assets and liabilities. The valuations of these assets and liabilities are performed by the Office of Corporate Risk Oversight. The values are calculated internally and verified against the data published by MISO. Entergy’s Entergy Wholesale Commodities Accounting group reviews these valuations for reasonableness, with the assistance of others within the organization with knowledge of the various inputs and assumptions used in the valuation. The Office of Corporate Risk Oversight reports to the Vice President and Treasurer. The Entergy Wholesale Commodities Accounting group reports to the Chief Accounting Officer. The following tables set forth, by level within the fair value hierarchy, Entergy’s assets and liabilities that are accounted for at fair value on a recurring basis as of June 30, 2022 and December 31, 2021. The assessment of the significance of a particular input to a fair value measurement requires judgment and may affect its placement within the fair value hierarchy levels.
2022 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $514 |  |  | $— |  |  | $— |  |  | $514 |
Decommissioning trust funds (a): |  |  |  |  |  |  |  |
Equity securities |  | 18 |  |  | — |  |  | — |  |  | 18 |
Debt securities (b) |  | 598 |  |  | 1,095 |  |  | — |  |  | 1,693 |
Common trusts (c) |  |  |  |  |  |  |  | 2,379 |
Securitization recovery trust account |  | 28 |  |  | — |  |  | — |  |  | 28 |
Escrow accounts |  | 331 |  |  | — |  |  | — |  |  | 331 |
Gas hedge contracts |  | 37 |  |  | 9 |  |  | — |  |  | 46 |
Financial transmission rights |  | — |  |  | — |  |  | 12 |  |  | 12 |
|  | $1,526 |  |  | $1,104 |  |  | $12 |  |  | $5,021 |
2021 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $398 |  |  | $— |  |  | $— |  |  | $398 |
Decommissioning trust funds (a): |  |  |  |  |  |  |  |
Equity securities |  | 132 |  |  | — |  |  | — |  |  | 132 |
Debt securities (b) |  | 770 |  |  | 1,407 |  |  | — |  |  | 2,177 |
Common trusts (c) |  |  |  |  |  |  |  | 3,205 |
Securitization recovery trust account |  | 29 |  |  | — |  |  | — |  |  | 29 |
Escrow accounts |  | 49 |  |  | — |  |  | — |  |  | 49 |
Gas hedge contracts |  | 6 |  |  | 5 |  |  | — |  |  | 11 |
Financial transmission rights |  | — |  |  | — |  |  | 4 |  |  | 4 |
|  | $1,384 |  |  | $1,412 |  |  | $4 |  |  | $6,005 |
Liabilities: |  |  |  |  |  |  |  |
Gas hedge contracts |  | $7 |  |  | $— |  |  | $— |  |  | $7 |
(a)The decommissioning trust funds hold equity and fixed income securities. Equity securities are invested to approximate the returns of major market indices. Fixed income securities are held in various governmental and corporate securities. See Note 9 to the financial statements herein for additional information on the investment portfolios. (b)The decommissioning trust funds fair value presented herein does not include the recognition pursuant to ASU 2016-13 of a credit loss valuation allowance of $0.4 million as of December 31, 2021 on debt securities. See Note 9 to the financial statements herein for additional information on the allowance for expected credit losses. (c)Common trust funds are not publicly quoted and are valued by the fund administrators using net asset value as a practical expedient. Accordingly, these funds are not assigned a level in the fair value table. The fund administrator of these investments allows daily trading at the net asset value and trades settle at a later date. The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the three months ended June 30, 2022 and 2021:
|  | 2022 |  |  | 2021
|  |  | Financial transmission rights |  |  |  | Financial transmission rights
|  | (In Millions)
Balance as of April 1, |  |  | $1 |  |  |  |  | $4 |
Total gains (losses) for the period |  |  |  |  |  |  |
Included as a regulatory liability/asset |  |  | 32 |  |  |  |  | 15 |
Issuances of financial transmission rights |  |  | 16 |  |  |  |  | 12 |
Settlements |  |  | (37) |  |  |  |  | (16) |
Balance as of June 30, |  |  | $12 |  |  |  |  | $15 |
The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the six months ended June 30, 2022 and 2021:
|  |  | 2022 |  | 2021
|  |  | Financial transmission rights |  | Power Contracts |  | Financial transmission rights
|  |  | (In Millions)
Balance as of January 1, |  |  | $4 |  |  | $38 |  |  | $9 |
Total gains (losses) for the period |  |  |  |  |  |  |
Included in earnings |  |  | — |  |  | (2) |  |  | 3 |
Included in other comprehensive income |  |  | — |  |  | 2 |  |  | — |
Included as a regulatory liability/asset |  |  | 52 |  |  | — |  |  | 135 |
Issuances of financial transmission rights |  |  | 16 |  |  | — |  |  | 12 |
Settlements |  |  | (60) |  |  | (38) |  |  | (144) |
Balance as of June 30, |  |  | $12 |  |  | $— |  |  | $15 |
The fair values of the Level 3 financial transmission rights are based on unobservable inputs calculated internally and verified against historical pricing data published by MISO. The following table sets forth an analysis of each of the types of unobservable inputs impacting the fair value of items classified as Level 3 within the fair value hierarchy, and the sensitivity to changes to those inputs:
Significant Unobservable Input |  | Transaction Type |  | Position |  | Change to Input |  | Effect on Fair Value
Unit contingent discount |  | Electricity swaps |  | Sell |  | Increase (Decrease) |  | Decrease (Increase)
The following table sets forth, by level within the fair value hierarchy, the Registrant Subsidiaries’ assets and liabilities that are accounted for at fair value on a recurring basis as of June 30, 2022 and December 31, 2021. The assessment of the significance of a particular input to a fair value measurement requires judgment and may affect its placement within the fair value hierarchy levels. Entergy Arkansas
2022 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $58.2 |  |  | $— |  |  | $— |  |  | $58.2 |
Decommissioning trust funds (a): |  |  |  |  |  |  |  |
Equity securities |  | 4.1 |  |  | — |  |  | — |  |  | 4.1 |
Debt securities |  | 131.6 |  |  | 353.2 |  |  | — |  |  | 484.8 |
Common trusts (b) |  |  |  |  |  |  |  | 705.9 |
Financial transmission rights |  | — |  |  | — |  |  | 4.4 |  |  | 4.4 |
|  | $193.9 |  |  | $353.2 |  |  | $4.4 |  |  | $1,257.4 |
2021 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $4.8 |  |  | $— |  |  | $— |  |  | $4.8 |
Decommissioning trust funds (a): |  |  |  |  |  |  |  |
Equity securities |  | 16.7 |  |  | — |  |  | — |  |  | 16.7 |
Debt securities |  | 119.5 |  |  | 406.8 |  |  | — |  |  | 526.3 |
Common trusts (b) |  |  |  |  |  |  |  | 895.4 |
Financial transmission rights |  | — |  |  | — |  |  | 2.3 |  |  | 2.3 |
|  | $141.0 |  |  | $406.8 |  |  | $2.3 |  |  | $1,445.5 |
Entergy Louisiana
2022 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $65.7 |  |  | $— |  |  | $— |  |  | $65.7 |
Decommissioning trust funds (a): |  |  |  |  |  |  |  |
Equity securities |  | 12.6 |  |  | — |  |  | — |  |  | 12.6 |
Debt securities |  | 225.0 |  |  | 508.3 |  |  | — |  |  | 733.3 |
Common trusts (b) |  |  |  |  |  |  |  | 1,010.6 |
Escrow accounts |  | 290.1 |  |  | — |  |  | — |  |  | 290.1 |
Gas hedge contracts |  | 16.1 |  |  | 8.7 |  |  | — |  |  | 24.8 |
Financial transmission rights |  | — |  |  | — |  |  | 4.7 |  |  | 4.7 |
|  | $609.5 |  |  | $517.0 |  |  | $4.7 |  |  | $2,141.8 |
2021 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $18.4 |  |  | $— |  |  | $— |  |  | $18.4 |
Decommissioning trust funds (a): |  |  |  |  |  |  |  |
Equity securities |  | 20.2 |  |  | — |  |  | — |  |  | 20.2 |
Debt securities |  | 262.6 |  |  | 531.6 |  |  | — |  |  | 794.2 |
Common trusts (b) |  |  |  |  |  |  |  | 1,300.1 |
Gas hedge contracts |  | 5.7 |  |  | 5.3 |  |  | — |  |  | 11.0 |
Financial transmission rights |  | — |  |  | — |  |  | 0.6 |  |  | 0.6 |
|  | $306.9 |  |  | $536.9 |  |  | $0.6 |  |  | $2,144.5 |
Entergy Mississippi
2022 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $26.1 |  |  | $— |  |  | $— |  |  | $26.1 |
Escrow accounts |  | 41.1 |  |  | — |  |  | — |  |  | 41.1 |
Gas hedge contracts |  | 20.6 |  |  | — |  |  | — |  |  | 20.6 |
Financial transmission rights |  | — |  |  | — |  |  | 0.5 |  |  | 0.5 |
|  | $87.8 |  |  | $— |  |  | $0.5 |  |  | $88.3 |
2021 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $47.6 |  |  | $— |  |  | $— |  |  | $47.6 |
Escrow accounts |  | 48.9 |  |  | — |  |  | — |  |  | 48.9 |
Financial transmission rights |  | — |  |  | — |  |  | 0.3 |  |  | 0.3 |
|  | $96.5 |  |  | $— |  |  | $0.3 |  |  | $96.8 |
Liabilities: |  |  |  |  |  |  |  |
Gas hedge contracts |  | $6.7 |  |  | $— |  |  | $— |  |  | $6.7 |
Entergy New Orleans
2022 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $25.7 |  |  | $— |  |  | $— |  |  | $25.7 |
Securitization recovery trust account |  | 1.7 |  |  | — |  |  | — |  |  | 1.7 |
Financial transmission rights |  | — |  |  | — |  |  | 0.6 |  |  | 0.6 |
|  | $27.4 |  |  | $— |  |  | $0.6 |  |  | $28.0 |
Liabilities: |  |  |  |  |  |  |  |
Gas hedge contracts |  | $0.2 |  |  | $— |  |  | $— |  |  | $0.2 |
2021 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $42.8 |  |  | $— |  |  | $— |  |  | $42.8 |
Securitization recovery trust account |  | 2.0 |  |  | — |  |  | — |  |  | 2.0 |
Financial transmission rights |  | — |  |  | — |  |  | 0.1 |  |  | 0.1 |
|  | $44.8 |  |  | $— |  |  | $0.1 |  |  | $44.9 |
Liabilities: |  |  |  |  |  |  |  |
Gas hedge contracts |  | $0.5 |  |  | $— |  |  | $— |  |  | $0.5 |
Entergy Texas
2022 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $14.4 |  |  | $— |  |  | $— |  |  | $14.4 |
Securitization recovery trust account |  | 26.6 |  |  | — |  |  | — |  |  | 26.6 |
Financial transmission rights |  | — |  |  | — |  |  | 1.5 |  |  | 1.5 |
|  | $41.0 |  |  | $— |  |  | $1.5 |  |  | $42.5 |
2021 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Securitization recovery trust account |  | $26.6 |  |  | $— |  |  | $— |  |  | $26.6 |
Financial transmission rights |  | — |  |  | — |  |  | 0.8 |  |  | 0.8 |
|  | $26.6 |  |  | $— |  |  | $0.8 |  |  | $27.4 |
System Energy
2022 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $134.6 |  |  | $— |  |  | $— |  |  | $134.6 |
Decommissioning trust funds (a): |  |  |  |  |  |  |  |
Equity securities |  | 1.7 |  |  | — |  |  | — |  |  | 1.7 |
Debt Securities |  | 241.1 |  |  | 233.1 |  |  | — |  |  | 474.2 |
Common trusts (b) |  |  |  |  |  |  |  | 662.9 |
|  | $377.4 |  |  | $233.1 |  |  | $— |  |  | $1,273.4 |
2021 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $89.1 |  |  | $— |  |  | $— |  |  | $89.1 |
Decommissioning trust funds (a): |  |  |  |  |  |  |  |
Equity securities |  | 12.9 |  |  | — |  |  | — |  |  | 12.9 |
Debt securities |  | 273.0 |  |  | 251.5 |  |  | — |  |  | 524.5 |
Common trusts (b) |  |  |  |  |  |  |  | 847.9 |
|  | $375.0 |  |  | $251.5 |  |  | $— |  |  | $1,474.4 |
(a)The decommissioning trust funds hold equity and fixed income securities. Equity securities are invested to approximate the returns of major market indices. Fixed income securities are held in various governmental and corporate securities. See Note 9 to the financial statements herein for additional information on the investment portfolios. (b)Common trust funds are not publicly quoted and are valued by the fund administrators using net asset value as a practical expedient. Accordingly, these funds are not assigned a level in the fair value table. The fund administrator of these investments allows daily trading at the net asset value and trades settle at a later date. The following table sets forth a reconciliation of changes in the net assets for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the three months ended June 30, 2022.
| Entergy Arkansas |  | Entergy Louisiana |  | Entergy Mississippi |  | Entergy New Orleans |  | Entergy Texas
| (In Millions)
Balance as of April 1, | $0.4 |  |  | $0.3 |  |  | $0.2 |  |  | $0.1 |  |  | $0.5 |
Issuances of financial transmission rights | 5.4 |  |  | 5.3 |  |  | 0.8 |  |  | 0.8 |  |  | 3.9 |
Gains (losses) included as a regulatory liability/asset | 14.6 |  |  | 15.2 |  |  | 1.7 |  |  | 1.3 |  |  | (1.9) |
Settlements | (16.0) |  |  | (16.1) |  |  | (2.2) |  |  | (1.6) |  |  | (1.0) |
Balance as of June 30, | $4.4 |  |  | $4.7 |  |  | $0.5 |  |  | $0.6 |  |  | $1.5 |
The following table sets forth a reconciliation of changes in the net assets for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the three months ended June 30, 2021.
| Entergy Arkansas |  | Entergy Louisiana |  | Entergy Mississippi |  | Entergy New Orleans |  | Entergy Texas
| (In Millions)
Balance as of April 1, | $1.4 |  |  | $1.2 |  |  | $0.3 |  |  | $0.1 |  |  | $0.5 |
Issuances of financial transmission rights | 2.8 |  |  | 4.1 |  |  | 1.7 |  |  | 0.4 |  |  | 2.7 |
Gains (losses) included as a regulatory liability/asset | 3.0 |  |  | 5.4 |  |  | 0.8 |  |  | 0.9 |  |  | 5.4 |
Settlements | (3.4) |  |  | (5.9) |  |  | (0.7) |  |  | (0.8) |  |  | (4.8) |
Balance as of June 30, | $3.8 |  |  | $4.8 |  |  | $2.1 |  |  | $0.6 |  |  | $3.8 |
The following table sets forth a reconciliation of changes in the net assets for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the six months ended June 30, 2022.
| Entergy Arkansas |  | Entergy Louisiana |  | Entergy Mississippi |  | Entergy New Orleans |  | Entergy Texas
| (In Millions)
Balance as of January 1, | $2.3 |  |  | $0.6 |  |  | $0.3 |  |  | $0.1 |  |  | $0.8 |
Issuances of financial transmission rights | 5.4 |  |  | 5.3 |  |  | 0.8 |  |  | 0.8 |  |  | 3.9 |
Gains (losses) included as a regulatory liability/asset | 20.2 |  |  | 24.3 |  |  | 2.6 |  |  | 2.1 |  |  | 1.7 |
Settlements | (23.5) |  |  | (25.5) |  |  | (3.2) |  |  | (2.4) |  |  | (4.9) |
Balance as of June 30, | $4.4 |  |  | $4.7 |  |  | $0.5 |  |  | $0.6 |  |  | $1.5 |
The following table sets forth a reconciliation of changes in the net assets for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the six months ended June 30, 2021.
| Entergy Arkansas |  | Entergy Louisiana |  | Entergy Mississippi |  | Entergy New Orleans |  | Entergy Texas
| (In Millions)
Balance as of January 1, | $2.7 |  |  | $4.2 |  |  | $0.6 |  |  | $0.1 |  |  | $1.6 |
Issuances of financial transmission rights | 2.8 |  |  | 4.1 |  |  | 1.7 |  |  | 0.4 |  |  | 2.7 |
Gains (losses) included as a regulatory liability/asset | 27.8 |  |  | 14.7 |  |  | 7.7 |  |  | 2.1 |  |  | 82.2 |
Settlements | (29.5) |  |  | (18.2) |  |  | (7.9) |  |  | (2.0) |  |  | (82.7) |
Balance as of June 30, | $3.8 |  |  | $4.8 |  |  | $2.1 |  |  | $0.6 |  |  | $3.8 |
Entergy Texas [Member] |
Risk Management And Fair Values | RISK MANAGEMENT AND FAIR VALUES (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy) Market Risk In the normal course of business, Entergy is exposed to a number of market risks. Market risk is the potential loss that Entergy may incur as a result of changes in the market or fair value of a particular commodity or instrument. All financial and commodity-related instruments, including derivatives, are subject to market risk including commodity price risk, equity price, and interest rate risk. Entergy uses derivatives primarily to mitigate commodity price risk, particularly power price and fuel price risk. 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 derivative 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. As a wholesale generator, Entergy Wholesale Commodities’ core business was selling energy, measured in MWh, to its customers. Entergy Wholesale Commodities entered into forward contracts with its customers and also sold energy and capacity in the day ahead or spot markets. In addition to its forward physical power and gas contracts, Entergy Wholesale Commodities used a combination of financial contracts, including swaps, collars, and options, to mitigate commodity price risk. When the market price fell, the combination of financial contracts was expected to settle in gains that offset lower revenue from generation, which resulted in a more predictable cash flow. Consistent with management’s strategy to shut down and sell all plants in the Entergy Wholesale Commodities merchant fleet, the Entergy Wholesale Commodities portfolio of derivative instruments expired in April 2021, which was the settlement date for the last financial derivative contracts in the Entergy Wholesale Commodities portfolio. Entergy’s exposure to market risk is determined by a number of factors, including the size, term, composition, and diversification of positions held, as well as market volatility and liquidity. For instruments such as options, the time period during which the option may be exercised and the relationship between the current market price of the underlying instrument and the option’s contractual strike or exercise price also affects the level of market risk. A significant factor influencing the overall level of market risk to which Entergy is exposed is its use of hedging techniques to mitigate such risk. Hedging instruments and volumes are chosen based on ability to mitigate risk associated with future energy and capacity prices; however, other considerations are factored into hedge product and volume decisions including corporate liquidity, corporate credit ratings, counterparty credit risk, hedging costs, firm settlement risk, and product availability in the marketplace. Entergy manages market risk by actively monitoring compliance with stated risk management policies as well as monitoring the effectiveness of its hedging policies and strategies. Entergy’s risk management policies limit the amount of total net exposure and rolling net exposure during the stated periods. These policies, including related risk limits, are regularly assessed to ensure their appropriateness given Entergy’s objectives. Derivatives Some derivative instruments are classified as cash flow hedges due to their financial settlement provisions while others are classified as normal purchase/normal sale transactions due to their physical settlement provisions. Normal purchase/normal sale risk management tools include power purchase and sales agreements, fuel purchase agreements, capacity contracts, and tolling agreements. Financially-settled cash flow hedges can include natural gas and electricity swaps and options. Entergy may enter into financially-settled swap and option contracts to manage market risk that may or may not be designated as hedging instruments. Entergy entered into derivatives to manage natural risks inherent in its physical or financial assets or liabilities. Electricity over-the-counter instruments and futures contracts that financially settled against day-ahead power pool prices were used to manage price exposure for Entergy Wholesale Commodities generation. Entergy used standardized master netting agreements to help mitigate the credit risk of derivative instruments. These master agreements facilitated the netting of cash flows associated with a single counterparty and may have included collateral requirements. Cash, letters of credit, and parental/affiliate guarantees were obtained as security from counterparties in order to mitigate credit risk. The collateral agreements required a counterparty to post cash or letters of credit in the event an exposure exceeded an established threshold. The threshold represented an unsecured credit limit, which may have been supported by a parental/affiliate guarantee, as determined in accordance with Entergy’s credit policy. In addition, collateral agreements allowed for termination and liquidation of all positions in the event of a failure or inability to post collateral. Certain of the agreements to sell the power produced by Entergy Wholesale Commodities power plants contained provisions that required an Entergy subsidiary to provide credit support to secure its obligations depending on the mark-to-market values of the contracts. The primary form of credit support to satisfy these requirements was an Entergy Corporation guarantee. If the Entergy Corporation credit rating fell below investment grade, Entergy would have had to post collateral equal to the estimated outstanding liability under the contract at the applicable date. There were no outstanding derivative contracts held by Entergy Wholesale Commodities as of June 30, 2022 and December 31, 2021. As of June 30, 2022, $12 million in cash collateral was required to be posted by the Entergy subsidiary to its counterparties. As of December 31, 2021, $8 million in cash collateral was required to be posted by the Entergy subsidiary to its counterparties. Entergy manages fuel price volatility for its Louisiana jurisdictions (Entergy Louisiana and Entergy New Orleans) and Entergy Mississippi through the purchase of natural gas swaps and options that financially settle against either the average Henry Hub Gas Daily prices or the NYMEX Henry Hub. These swaps and options 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 and projected winter purchases for gas distribution at Entergy New Orleans. The maximum length of time over which Entergy has executed natural gas swaps and options as of June 30, 2022 is 1.75 years for Entergy Louisiana and the maximum length of time over which Entergy has executed natural gas swaps as of June 30, 2022 is 6 months, each, for Entergy Mississippi and Entergy New Orleans. The total volume of natural gas swaps and options outstanding as of June 30, 2022 is 27,681,400 MMBtu for Entergy, including 12,800,000 MMBtu for Entergy Louisiana, 14,771,300 MMBtu for Entergy Mississippi, and 110,100 MMBtu for Entergy New Orleans. Credit support for these natural gas swaps and options 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. During the second quarter 2022, Entergy participated in the annual financial transmission rights auction process for the MISO planning year of June 1, 2022 through May 31, 2023. Financial transmission rights are derivative instruments that represent economic hedges of future congestion charges that will be incurred in serving Entergy’s customer load. They are not designated as hedging instruments. Entergy initially records financial transmission rights at their estimated fair value and subsequently adjusts the carrying value to their estimated fair value at the end of each accounting period prior to settlement. Unrealized gains or losses on financial transmission rights held by Entergy Wholesale Commodities are included in operating revenues. The Utility operating companies recognize regulatory liabilities or assets for unrealized gains or losses on financial transmission rights. The total volume of financial transmission rights outstanding as of June 30, 2022 is 135,179 GWh for Entergy, including 30,477 GWh for Entergy Arkansas, 61,242 GWh for Entergy Louisiana, 14,621 GWh for Entergy Mississippi, 5,720 GWh for Entergy New Orleans, and 22,950 GWh for Entergy Texas. Credit support for financial transmission rights held by the Utility operating companies is covered by cash and/or letters of credit issued by each Utility operating company as required by MISO. Credit support for financial transmission rights held by Entergy Wholesale Commodities is covered by cash. No cash or letters of credit were required to be posted for financial transmission rights exposure for Entergy Wholesale Commodities as of June 30, 2022 and December 31, 2021. Letters of credit posted with MISO covered the financial transmission rights exposure for Entergy Mississippi and Entergy Texas as of June 30, 2022 and as of December 31, 2021. The fair values of Entergy’s derivative instruments in the consolidated balance sheet as of June 30, 2022 are shown in the table below. Certain investments, including those not designated as hedging instruments, are subject to master netting agreements and are presented in the balance sheet on a net basis in accordance with accounting guidance for derivatives and hedging.
Instrument |  | Balance Sheet Location |  | Gross Fair Value (a) |  | Offsetting Position (b) |  | Net Fair Value (c) (d) |  | Business
|  |  |  | (In Millions) |  |
Derivatives not designated as hedging instruments |  |  |  |  |  |  |  |  |  |
Assets: |  |  |  |  |  |  |  |  |  |
Natural gas swaps and options |  | Prepayments and other |  | $37 |  | $— |  | $37 |  | Utility
Natural gas swaps and options |  | Other deferred debits and other assets |  | $9 |  | $— |  | $9 |  | Utility
Financial transmission rights |  | Prepayments and other |  | $13 |  | ($1) |  | $12 |  | Utility and Entergy Wholesale Commodities
The fair values of Entergy’s derivative instruments in the consolidated balance sheet as of December 31, 2021 are shown in the table below.
Instrument |  | Balance Sheet Location |  | Gross Fair Value (a) |  | Offsetting Position (b) |  | Net Fair Value (c) (d) |  | Business
|  |  |  | (In Millions) |  |
Derivatives not designated as hedging instruments |  |  |  |  |  |  |  |  |  |
Assets: |  |  |  |  |  |  |  |  |  |
Natural gas swaps and options |  | Prepayments and other |  | $6 |  | $— |  | $6 |  | Utility
Natural gas swaps and options |  | Other deferred debits and other assets |  | $5 |  | $— |  | $5 |  | Utility
Financial transmission rights |  | Prepayments and other |  | $4 |  | $— |  | $4 |  | Utility and Entergy Wholesale Commodities
Liabilities: |  |  |  |  |  |  |  |  |  |
Natural gas swaps and options |  | Other current liabilities |  | $7 |  | $— |  | $7 |  | Utility
(a)Represents the gross amounts of recognized assets/liabilities (b)Represents the netting of fair value balances with the same counterparty (c)Represents the net amounts of assets/liabilities presented on the Entergy Corporation and Subsidiaries’ Consolidated Balance Sheet (d)Excludes cash collateral in the amount of $12 million posted as of June 30, 2022 and $8 million posted as of December 31, 2021. Also excludes letters of credit in the amount of $6 million posted as of June 30, 2022. As discussed above, the Entergy Wholesale Commodities portfolio of derivative instruments expired in April 2021, which was the settlement date for the last financial derivative contracts in the Entergy Wholesale Commodities portfolio. For the three months ended June 30, 2021, there were no effects resulting from Entergy’s derivative instruments designated as cash flow hedges on the consolidated statements of operations. The effects of Entergy’s derivative instruments designated as cash flow hedges on the consolidated statements of operations for the six months ended June 30, 2021 were as follows:
Instrument |  | Amount of gain (loss) recognized in other comprehensive income |  | Income Statement location |  | Amount of gain (loss) reclassified from accumulated other comprehensive income into income (a)
|  | (In Millions) |  |  |  | (In Millions)
Electricity swaps and options |  | $2 |  | Competitive businesses operating revenues |  | $40
(a) Before taxes of $8 million for the six months ended June 30, 2021 Prior to the expiration of the Entergy Wholesale Commodities portfolio of derivative instruments, Entergy may have effectively liquidated a cash flow hedge instrument by entering into a contract offsetting the original hedge, and then de-designating the original hedge in this situation. Gains or losses accumulated in other comprehensive income prior to de-designation would have continued to be deferred in other comprehensive income until they were included in income as the original hedged transaction occurred. From the point of de-designation, the gains or losses on the original hedge and the offsetting contract were recorded as assets or liabilities on the balance sheet and offset as they flowed through to earnings. The effects of Entergy’s derivative instruments not designated as hedging instruments on the consolidated statements of operations for the three months ended June 30, 2022 and 2021 were as follows:
Instrument |  | Income Statement location |  | Amount of gain (loss) recorded in the income statement
|  |  |  | (In Millions)
2022 |  |  |  |
Natural gas swaps |  | Fuel, fuel-related expenses, and gas purchased for resale | (a) | $23
Financial transmission rights |  | Purchased power expense | (b) | $37
2021 |  |  |  |
Natural gas swaps |  | Fuel, fuel-related expenses, and gas purchased for resale | (a) | $18
Financial transmission rights |  | Purchased power expense | (b) | $16
Electricity swaps and options (c) |  | Competitive business operating revenues |  | $—
The effects of Entergy’s derivative instruments not designated as hedging instruments on the consolidated statements of operations for the six months ended June 30, 2022 and 2021 were as follows:
Instrument |  | Income Statement location |  | Amount of gain (loss) recorded in the income statement
|  |  |  | (In Millions)
2022 |  |  |  |
Natural gas swaps and options |  | Fuel, fuel-related expenses, and gas purchased for resale | (a) | $78
Financial transmission rights |  | Purchased power | (b) | $60
2021 |  |  |  |
Natural gas swaps and options |  | Fuel, fuel-related expenses, and gas purchased for resale | (a) | $25
Financial transmission rights |  | Purchased power | (b) | $144
Electricity swaps and options (c) |  | Competitive business operating revenues |  | ($2)
(a)Due to regulatory treatment, the natural gas swaps and options are marked-to-market through fuel, fuel-related expenses, and gas purchased for resale and then such amounts are simultaneously reversed and recorded as an offsetting regulatory asset or liability. The gains or losses recorded as fuel expenses when the swaps and options are settled are recovered or refunded through fuel cost recovery mechanisms. (b)Due to regulatory treatment, the changes in the estimated fair value of financial transmission rights for the Utility operating companies are recorded through purchased power expense and then such amounts are simultaneously reversed and recorded as an offsetting regulatory asset or liability. The gains or losses recorded as purchased power expense when the financial transmission rights for the Utility operating companies are settled are recovered or refunded through fuel cost recovery mechanisms. (c)There were no gains (losses) recognized in accumulated other comprehensive income from electricity swaps and options prior to the expiration of the Entergy Wholesale Commodities portfolio of derivative instruments in April 2021. The fair values of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their balance sheets as of June 30, 2022 are shown in the table below. Certain investments, including those not designated as hedging instruments, are subject to master netting agreements and are presented in the balance sheet on a net basis in accordance with accounting guidance for derivatives and hedging.
Instrument |  | Balance Sheet Location |  | Gross Fair Value (a) |  | Offsetting Position (b) |  | Net Fair Value (c) (d) |  | Registrant
|  |  |  | (In Millions) |  |
Assets: |  |  |  |  |  |  |  |  |  |
Natural gas swaps and options |  | Prepayments and other |  | $16.1 |  | $— |  | $16.1 |  | Entergy Louisiana
Natural gas swaps and options |  | Other deferred debits and other assets |  | $8.7 |  | $— |  | $8.7 |  | Entergy Louisiana
Natural gas swaps |  | Prepayments and other |  | $20.6 |  | $— |  | $20.6 |  | Entergy Mississippi
Financial transmission rights |  | Prepayments and other |  | $4.5 |  | ($0.1) |  | $4.4 |  | Entergy Arkansas
Financial transmission rights |  | Prepayments and other |  | $5.3 |  | ($0.6) |  | $4.7 |  | Entergy Louisiana
Financial transmission rights |  | Prepayments and other |  | $0.5 |  | $— |  | $0.5 |  | Entergy Mississippi
Financial transmission rights |  | Prepayments and other |  | $0.6 |  | $— |  | $0.6 |  | Entergy New Orleans
Financial transmission rights |  | Prepayments and other |  | $1.7 |  | ($0.2) |  | $1.5 |  | Entergy Texas
Liabilities: |  |  |  |  |  |  |  |  |  |
Natural gas swaps |  | Other current liabilities |  | $0.2 |  | $— |  | $0.2 |  | Entergy New Orleans
The fair values of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their balance sheets as of December 31, 2021 were as follows:
Instrument |  | Balance Sheet Location |  | Gross Fair Value (a) |  | Offsetting Position (b) |  | Net Fair Value (c) (d) |  | Registrant
|  |  |  | (In Millions) |  |
Assets: |  |  |  |  |  |  |  |  |  |
Natural gas swaps and options |  | Prepayments and other |  | $5.7 |  | $— |  | $5.7 |  | Entergy Louisiana
Natural gas swaps and options |  | Other deferred debits and other assets |  | $5.3 |  | $— |  | $5.3 |  | Entergy Louisiana
Financial transmission rights |  | Prepayments and other |  | $2.3 |  | $— |  | $2.3 |  | Entergy Arkansas
Financial transmission rights |  | Prepayments and other |  | $0.6 |  | $— |  | $0.6 |  | Entergy Louisiana
Financial transmission rights |  | Prepayments and other |  | $0.3 |  | $— |  | $0.3 |  | Entergy Mississippi
Financial transmission rights |  | Prepayments and other |  | $0.1 |  | $— |  | $0.1 |  | Entergy New Orleans
Financial transmission rights |  | Prepayments and other |  | $0.8 |  | $— |  | $0.8 |  | Entergy Texas
Liabilities: |  |  |  |  |  |  |  |  |  |
Natural gas swaps |  | Other current liabilities |  | $6.7 |  | $— |  | $6.7 |  | Entergy Mississippi
Natural gas swaps |  | Other current liabilities |  | $0.5 |  | $— |  | $0.5 |  | Entergy New Orleans
(a)Represents the gross amounts of recognized assets/liabilities (b)Represents the netting of fair value balances with the same counterparty (c)Represents the net amounts of assets/liabilities presented on the Registrant Subsidiaries’ balance sheets (d)As of June 30, 2022, letters of credit posted with MISO covered financial transmission rights exposure of $0.4 million for Entergy Mississippi and $5.3 million for Entergy Texas. As of December 31, 2021, letters of credit posted with MISO covered financial transmission rights exposure of $0.2 million for Entergy Mississippi and $0.1 million for Entergy Texas. The effects of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their income statements for the three months ended June 30, 2022 and 2021 were as follows:
Instrument |  | Income Statement Location |  | Amount of gain (loss) recorded in the income statement |  | Registrant
|  |  |  | (In Millions) |  |
2022 |  |  |  |  |  |
Natural gas swaps and options |  | Fuel, fuel-related expenses, and gas purchased for resale |  | $8.7 | (a) | Entergy Louisiana
Natural gas swaps |  | Fuel, fuel-related expenses, and gas purchased for resale |  | $14.6 | (a) | Entergy Mississippi
Natural gas swaps |  | Fuel, fuel-related expenses, and gas purchased for resale |  | ($0.2) | (a) | Entergy New Orleans
Financial transmission rights |  | Purchased power expense |  | $16.0 | (b) | Entergy Arkansas
Financial transmission rights |  | Purchased power expense |  | $16.1 | (b) | Entergy Louisiana
Financial transmission rights |  | Purchased power expense |  | $2.2 | (b) | Entergy Mississippi
Financial transmission rights |  | Purchased power expense |  | $1.6 | (b) | Entergy New Orleans
Financial transmission rights |  | Purchased power expense |  | $1.0 | (b) | Entergy Texas
2021 |  |  |  |  |  |
Natural gas swaps and options |  | Fuel, fuel-related expenses, and gas purchased for resale |  | $4.9 | (a) | Entergy Louisiana
Natural gas swaps |  | Fuel, fuel-related expenses, and gas purchased for resale |  | $13.2 | (a) | Entergy Mississippi
Natural gas swaps |  | Fuel, fuel-related expenses, and gas purchased for resale |  | $0.1 | (a) | Entergy New Orleans
Financial transmission rights |  | Purchased power expense |  | $3.4 | (b) | Entergy Arkansas
Financial transmission rights |  | Purchased power expense |  | $5.9 | (b) | Entergy Louisiana
Financial transmission rights |  | Purchased power expense |  | $0.7 | (b) | Entergy Mississippi
Financial transmission rights |  | Purchased power expense |  | $0.8 | (b) | Entergy New Orleans
Financial transmission rights |  | Purchased power expense |  | $4.8 | (b) | Entergy Texas
The effects of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their income statements for the six months ended June 30, 2022 and 2021 were as follows:
Instrument |  | Income Statement Location |  | Amount of gain (loss) recorded in the income statement |  | Registrant
|  |  |  | (In Millions) |  |
2022 |  |  |  |  |  |
Natural gas swaps and options |  | Fuel, fuel-related expenses, and gas purchased for resale |  | $19.8 | (a) | Entergy Louisiana
Natural gas swaps |  | Fuel, fuel-related expenses, and gas purchased for resale |  | $57.4 | (a) | Entergy Mississippi
Natural gas swaps |  | Fuel, fuel-related expenses, and gas purchased for resale |  | $0.9 | (a) | Entergy New Orleans
Financial transmission rights |  | Purchased power |  | $23.5 | (b) | Entergy Arkansas
Financial transmission rights |  | Purchased power |  | $25.5 | (b) | Entergy Louisiana
Financial transmission rights |  | Purchased power |  | $3.2 | (b) | Entergy Mississippi
Financial transmission rights |  | Purchased power |  | $2.4 | (b) | Entergy New Orleans
Financial transmission rights |  | Purchased power |  | $4.9 | (b) | Entergy Texas
2021 |  |  |  |  |  |
Natural gas swaps and options |  | Fuel, fuel-related expenses, and gas purchased for resale |  | $6.7 | (a) | Entergy Louisiana
Natural gas swaps |  | Fuel, fuel-related expenses, and gas purchased for resale |  | $18.3 | (a) | Entergy Mississippi
Financial transmission rights |  | Purchased power |  | $29.5 | (b) | Entergy Arkansas
Financial transmission rights |  | Purchased power |  | $18.2 | (b) | Entergy Louisiana
Financial transmission rights |  | Purchased power |  | $7.9 | (b) | Entergy Mississippi
Financial transmission rights |  | Purchased power |  | $2.0 | (b) | Entergy New Orleans
Financial transmission rights |  | Purchased power |  | $82.7 | (b) | Entergy Texas
(a)Due to regulatory treatment, the natural gas swaps and options are marked-to-market through fuel, fuel-related expenses, and gas purchased for resale and then such amounts are simultaneously reversed and recorded as an offsetting regulatory asset or liability. The gains or losses recorded as fuel expenses when the swaps and options are settled are recovered or refunded through fuel cost recovery mechanisms. (b)Due to regulatory treatment, the changes in the estimated fair value of financial transmission rights for the Utility operating companies are recorded through purchased power expense and then such amounts are simultaneously reversed and recorded as an offsetting regulatory asset or liability. The gains or losses recorded as purchased power expense when the financial transmission rights for the Utility operating companies are settled are recovered or refunded through fuel cost recovery mechanisms. 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 are 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. Accounting standards define fair value as an exit price, or the price that would be received to sell an asset or the amount that would be paid to transfer a liability in an orderly transaction between knowledgeable market participants at the date of measurement. Entergy and the Registrant Subsidiaries use assumptions or market input data that market participants would use in pricing assets or liabilities at fair value. The inputs can be readily observable, corroborated by market data, or generally unobservable. Entergy and the Registrant Subsidiaries endeavor to use the best available information to determine fair value. Accounting standards establish a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy establishes the highest priority for unadjusted market quotes in an active market for the identical asset or liability and the lowest priority for unobservable inputs. The three levels of the fair value hierarchy are: •Level 1 - Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the entity has the ability to access at the measurement date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 primarily consists of individually owned common stocks, cash equivalents (temporary cash investments, securitization recovery trust account, and escrow accounts), debt instruments, and gas swaps traded on exchanges with active markets. Cash equivalents includes all unrestricted highly liquid debt instruments with an original or remaining maturity of three months or less at the date of purchase. •Level 2 - Level 2 inputs are inputs other than quoted prices included in Level 1 that are, either directly or indirectly, observable for the asset or liability at the measurement date. Assets are valued based on prices derived by independent third parties that use inputs such as benchmark yields, reported trades, broker/dealer quotes, and issuer spreads. Prices are reviewed and can be challenged with the independent parties and/or overridden by Entergy if it is believed such would be more reflective of fair value. Level 2 inputs include the following: –quoted prices for similar assets or liabilities in active markets; –quoted prices for identical assets or liabilities in inactive markets; –inputs other than quoted prices that are observable for the asset or liability; or –inputs that are derived principally from or corroborated by observable market data by correlation or other means. Level 2 consists primarily of individually-owned debt instruments and gas swaps and options valued using observable inputs. •Level 3 - Level 3 inputs are pricing inputs that are generally less observable or unobservable from objective sources. These inputs are used with internally developed methodologies to produce management’s best estimate of fair value for the asset or liability. Level 3 consists primarily of financial transmission rights and derivative power contracts used as cash flow hedges of power sales at merchant power plants. Consistent with management’s strategy to shut down and sell all plants in the Entergy Wholesale Commodities merchant fleet, the Entergy Wholesale Commodities portfolio of derivative instruments expired in April 2021, which was the settlement date for the last financial derivative contracts in the Entergy Wholesale Commodities portfolio. The values for power contract assets or liabilities prior to expiration in April 2021 were based on both observable inputs including public market prices and interest rates, and unobservable inputs such as implied volatilities, unit contingent discounts, expected basis differences, and credit adjusted counterparty interest rates. They were classified as Level 3 assets and liabilities. The valuations of these assets and liabilities were performed by the Office of Corporate Risk Oversight and the Entergy Wholesale Commodities Accounting group. The primary related functions of the Office of Corporate Risk Oversight included: gathering, validating and reporting market data, providing market risk analyses and valuations in support of Entergy Wholesale Commodities’ commercial transactions, developing and administering protocols for the management of market risks, and implementing and maintaining controls around changes to market data in the energy trading and risk management system. The Office of Corporate Risk Oversight was also responsible for managing the energy trading and risk management system, forecasting revenues, forward positions and analysis. The Entergy Wholesale Commodities Accounting group performed functions related to market and counterparty settlements, revenue reporting and analysis, and financial accounting. The Office of Corporate Risk Oversight reports to the Vice President and Treasurer while the Entergy Wholesale Commodities Accounting group reports to the Chief Accounting Officer. The amounts reflected as the fair value of electricity swaps were based on the estimated amount that the contracts were in-the-money at the balance sheet date (treated as an asset) or out-of-the-money at the balance sheet date (treated as a liability) and equaled the estimated amount receivable to or payable by Entergy if the contracts were settled at that date. These derivative contracts included cash flow hedges that swapped fixed for floating cash flows for sales of the output from the Entergy Wholesale Commodities business. The fair values were based on the mark-to-market comparison between the fixed contract prices and the floating prices determined each period from quoted forward power market prices. The differences between the fixed price in the swap contract and these market-related prices multiplied by the volume specified in the contract and discounted at the counterparties’ credit adjusted risk free rate were recorded as derivative contract assets or liabilities. For contracts that had unit contingent terms, a further discount was applied based on the historical relationship between contract and market prices for similar contract terms. The amounts reflected as the fair values of electricity options were valued based on a Black Scholes model, and were calculated at the end of each month for accounting purposes. Inputs to the valuation included end of day forward market prices for the period when the transactions settled, implied volatilities based on market volatilities provided by a third-party data aggregator, and U.S. Treasury rates for a risk-free return rate. As described further below, prices and implied volatilities were reviewed and could be adjusted if it was determined that there was a better representation of fair value. On a daily basis, the Office of Corporate Risk Oversight calculated the mark-to-market for electricity swaps and options. The Office of Corporate Risk Oversight also validated forward market prices by comparing them to other sources of forward market prices or to settlement prices of actual market transactions. Significant differences were analyzed and potentially adjusted based on these other sources of forward market prices or settlement prices of actual market transactions. Implied volatilities used to value options were also validated using actual counterparty quotes for Entergy Wholesale Commodities transactions when available and compared with other sources of market implied volatilities. Moreover, on a quarterly basis, the Office of Corporate Risk Oversight confirmed the mark-to-market calculations and prepared price scenarios and credit downgrade scenario analysis. The scenario analysis was communicated to senior management within Entergy and within Entergy Wholesale Commodities. Finally, for all proposed derivative transactions, an analysis was completed to assess the risk of adding the proposed derivative to Entergy Wholesale Commodities’ portfolio. In particular, the credit and liquidity effects were calculated for this analysis. This analysis was communicated to senior management within Entergy and Entergy Wholesale Commodities. The values of financial transmission rights are based on unobservable inputs, including estimates of congestion costs in MISO between applicable generation and load pricing nodes based on the 50th percentile of historical prices. They are classified as Level 3 assets and liabilities. The valuations of these assets and liabilities are performed by the Office of Corporate Risk Oversight. The values are calculated internally and verified against the data published by MISO. Entergy’s Entergy Wholesale Commodities Accounting group reviews these valuations for reasonableness, with the assistance of others within the organization with knowledge of the various inputs and assumptions used in the valuation. The Office of Corporate Risk Oversight reports to the Vice President and Treasurer. The Entergy Wholesale Commodities Accounting group reports to the Chief Accounting Officer. The following tables set forth, by level within the fair value hierarchy, Entergy’s assets and liabilities that are accounted for at fair value on a recurring basis as of June 30, 2022 and December 31, 2021. The assessment of the significance of a particular input to a fair value measurement requires judgment and may affect its placement within the fair value hierarchy levels.
2022 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $514 |  |  | $— |  |  | $— |  |  | $514 |
Decommissioning trust funds (a): |  |  |  |  |  |  |  |
Equity securities |  | 18 |  |  | — |  |  | — |  |  | 18 |
Debt securities (b) |  | 598 |  |  | 1,095 |  |  | — |  |  | 1,693 |
Common trusts (c) |  |  |  |  |  |  |  | 2,379 |
Securitization recovery trust account |  | 28 |  |  | — |  |  | — |  |  | 28 |
Escrow accounts |  | 331 |  |  | — |  |  | — |  |  | 331 |
Gas hedge contracts |  | 37 |  |  | 9 |  |  | — |  |  | 46 |
Financial transmission rights |  | — |  |  | — |  |  | 12 |  |  | 12 |
|  | $1,526 |  |  | $1,104 |  |  | $12 |  |  | $5,021 |
2021 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $398 |  |  | $— |  |  | $— |  |  | $398 |
Decommissioning trust funds (a): |  |  |  |  |  |  |  |
Equity securities |  | 132 |  |  | — |  |  | — |  |  | 132 |
Debt securities (b) |  | 770 |  |  | 1,407 |  |  | — |  |  | 2,177 |
Common trusts (c) |  |  |  |  |  |  |  | 3,205 |
Securitization recovery trust account |  | 29 |  |  | — |  |  | — |  |  | 29 |
Escrow accounts |  | 49 |  |  | — |  |  | — |  |  | 49 |
Gas hedge contracts |  | 6 |  |  | 5 |  |  | — |  |  | 11 |
Financial transmission rights |  | — |  |  | — |  |  | 4 |  |  | 4 |
|  | $1,384 |  |  | $1,412 |  |  | $4 |  |  | $6,005 |
Liabilities: |  |  |  |  |  |  |  |
Gas hedge contracts |  | $7 |  |  | $— |  |  | $— |  |  | $7 |
(a)The decommissioning trust funds hold equity and fixed income securities. Equity securities are invested to approximate the returns of major market indices. Fixed income securities are held in various governmental and corporate securities. See Note 9 to the financial statements herein for additional information on the investment portfolios. (b)The decommissioning trust funds fair value presented herein does not include the recognition pursuant to ASU 2016-13 of a credit loss valuation allowance of $0.4 million as of December 31, 2021 on debt securities. See Note 9 to the financial statements herein for additional information on the allowance for expected credit losses. (c)Common trust funds are not publicly quoted and are valued by the fund administrators using net asset value as a practical expedient. Accordingly, these funds are not assigned a level in the fair value table. The fund administrator of these investments allows daily trading at the net asset value and trades settle at a later date. The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the three months ended June 30, 2022 and 2021:
|  | 2022 |  |  | 2021
|  |  | Financial transmission rights |  |  |  | Financial transmission rights
|  | (In Millions)
Balance as of April 1, |  |  | $1 |  |  |  |  | $4 |
Total gains (losses) for the period |  |  |  |  |  |  |
Included as a regulatory liability/asset |  |  | 32 |  |  |  |  | 15 |
Issuances of financial transmission rights |  |  | 16 |  |  |  |  | 12 |
Settlements |  |  | (37) |  |  |  |  | (16) |
Balance as of June 30, |  |  | $12 |  |  |  |  | $15 |
The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the six months ended June 30, 2022 and 2021:
|  |  | 2022 |  | 2021
|  |  | Financial transmission rights |  | Power Contracts |  | Financial transmission rights
|  |  | (In Millions)
Balance as of January 1, |  |  | $4 |  |  | $38 |  |  | $9 |
Total gains (losses) for the period |  |  |  |  |  |  |
Included in earnings |  |  | — |  |  | (2) |  |  | 3 |
Included in other comprehensive income |  |  | — |  |  | 2 |  |  | — |
Included as a regulatory liability/asset |  |  | 52 |  |  | — |  |  | 135 |
Issuances of financial transmission rights |  |  | 16 |  |  | — |  |  | 12 |
Settlements |  |  | (60) |  |  | (38) |  |  | (144) |
Balance as of June 30, |  |  | $12 |  |  | $— |  |  | $15 |
The fair values of the Level 3 financial transmission rights are based on unobservable inputs calculated internally and verified against historical pricing data published by MISO. The following table sets forth an analysis of each of the types of unobservable inputs impacting the fair value of items classified as Level 3 within the fair value hierarchy, and the sensitivity to changes to those inputs:
Significant Unobservable Input |  | Transaction Type |  | Position |  | Change to Input |  | Effect on Fair Value
Unit contingent discount |  | Electricity swaps |  | Sell |  | Increase (Decrease) |  | Decrease (Increase)
The following table sets forth, by level within the fair value hierarchy, the Registrant Subsidiaries’ assets and liabilities that are accounted for at fair value on a recurring basis as of June 30, 2022 and December 31, 2021. The assessment of the significance of a particular input to a fair value measurement requires judgment and may affect its placement within the fair value hierarchy levels. Entergy Arkansas
2022 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $58.2 |  |  | $— |  |  | $— |  |  | $58.2 |
Decommissioning trust funds (a): |  |  |  |  |  |  |  |
Equity securities |  | 4.1 |  |  | — |  |  | — |  |  | 4.1 |
Debt securities |  | 131.6 |  |  | 353.2 |  |  | — |  |  | 484.8 |
Common trusts (b) |  |  |  |  |  |  |  | 705.9 |
Financial transmission rights |  | — |  |  | — |  |  | 4.4 |  |  | 4.4 |
|  | $193.9 |  |  | $353.2 |  |  | $4.4 |  |  | $1,257.4 |
2021 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $4.8 |  |  | $— |  |  | $— |  |  | $4.8 |
Decommissioning trust funds (a): |  |  |  |  |  |  |  |
Equity securities |  | 16.7 |  |  | — |  |  | — |  |  | 16.7 |
Debt securities |  | 119.5 |  |  | 406.8 |  |  | — |  |  | 526.3 |
Common trusts (b) |  |  |  |  |  |  |  | 895.4 |
Financial transmission rights |  | — |  |  | — |  |  | 2.3 |  |  | 2.3 |
|  | $141.0 |  |  | $406.8 |  |  | $2.3 |  |  | $1,445.5 |
Entergy Louisiana
2022 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $65.7 |  |  | $— |  |  | $— |  |  | $65.7 |
Decommissioning trust funds (a): |  |  |  |  |  |  |  |
Equity securities |  | 12.6 |  |  | — |  |  | — |  |  | 12.6 |
Debt securities |  | 225.0 |  |  | 508.3 |  |  | — |  |  | 733.3 |
Common trusts (b) |  |  |  |  |  |  |  | 1,010.6 |
Escrow accounts |  | 290.1 |  |  | — |  |  | — |  |  | 290.1 |
Gas hedge contracts |  | 16.1 |  |  | 8.7 |  |  | — |  |  | 24.8 |
Financial transmission rights |  | — |  |  | — |  |  | 4.7 |  |  | 4.7 |
|  | $609.5 |  |  | $517.0 |  |  | $4.7 |  |  | $2,141.8 |
2021 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $18.4 |  |  | $— |  |  | $— |  |  | $18.4 |
Decommissioning trust funds (a): |  |  |  |  |  |  |  |
Equity securities |  | 20.2 |  |  | — |  |  | — |  |  | 20.2 |
Debt securities |  | 262.6 |  |  | 531.6 |  |  | — |  |  | 794.2 |
Common trusts (b) |  |  |  |  |  |  |  | 1,300.1 |
Gas hedge contracts |  | 5.7 |  |  | 5.3 |  |  | — |  |  | 11.0 |
Financial transmission rights |  | — |  |  | — |  |  | 0.6 |  |  | 0.6 |
|  | $306.9 |  |  | $536.9 |  |  | $0.6 |  |  | $2,144.5 |
Entergy Mississippi
2022 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $26.1 |  |  | $— |  |  | $— |  |  | $26.1 |
Escrow accounts |  | 41.1 |  |  | — |  |  | — |  |  | 41.1 |
Gas hedge contracts |  | 20.6 |  |  | — |  |  | — |  |  | 20.6 |
Financial transmission rights |  | — |  |  | — |  |  | 0.5 |  |  | 0.5 |
|  | $87.8 |  |  | $— |  |  | $0.5 |  |  | $88.3 |
2021 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $47.6 |  |  | $— |  |  | $— |  |  | $47.6 |
Escrow accounts |  | 48.9 |  |  | — |  |  | — |  |  | 48.9 |
Financial transmission rights |  | — |  |  | — |  |  | 0.3 |  |  | 0.3 |
|  | $96.5 |  |  | $— |  |  | $0.3 |  |  | $96.8 |
Liabilities: |  |  |  |  |  |  |  |
Gas hedge contracts |  | $6.7 |  |  | $— |  |  | $— |  |  | $6.7 |
Entergy New Orleans
2022 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $25.7 |  |  | $— |  |  | $— |  |  | $25.7 |
Securitization recovery trust account |  | 1.7 |  |  | — |  |  | — |  |  | 1.7 |
Financial transmission rights |  | — |  |  | — |  |  | 0.6 |  |  | 0.6 |
|  | $27.4 |  |  | $— |  |  | $0.6 |  |  | $28.0 |
Liabilities: |  |  |  |  |  |  |  |
Gas hedge contracts |  | $0.2 |  |  | $— |  |  | $— |  |  | $0.2 |
2021 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $42.8 |  |  | $— |  |  | $— |  |  | $42.8 |
Securitization recovery trust account |  | 2.0 |  |  | — |  |  | — |  |  | 2.0 |
Financial transmission rights |  | — |  |  | — |  |  | 0.1 |  |  | 0.1 |
|  | $44.8 |  |  | $— |  |  | $0.1 |  |  | $44.9 |
Liabilities: |  |  |  |  |  |  |  |
Gas hedge contracts |  | $0.5 |  |  | $— |  |  | $— |  |  | $0.5 |
Entergy Texas
2022 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $14.4 |  |  | $— |  |  | $— |  |  | $14.4 |
Securitization recovery trust account |  | 26.6 |  |  | — |  |  | — |  |  | 26.6 |
Financial transmission rights |  | — |  |  | — |  |  | 1.5 |  |  | 1.5 |
|  | $41.0 |  |  | $— |  |  | $1.5 |  |  | $42.5 |
2021 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Securitization recovery trust account |  | $26.6 |  |  | $— |  |  | $— |  |  | $26.6 |
Financial transmission rights |  | — |  |  | — |  |  | 0.8 |  |  | 0.8 |
|  | $26.6 |  |  | $— |  |  | $0.8 |  |  | $27.4 |
System Energy
2022 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $134.6 |  |  | $— |  |  | $— |  |  | $134.6 |
Decommissioning trust funds (a): |  |  |  |  |  |  |  |
Equity securities |  | 1.7 |  |  | — |  |  | — |  |  | 1.7 |
Debt Securities |  | 241.1 |  |  | 233.1 |  |  | — |  |  | 474.2 |
Common trusts (b) |  |  |  |  |  |  |  | 662.9 |
|  | $377.4 |  |  | $233.1 |  |  | $— |  |  | $1,273.4 |
2021 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $89.1 |  |  | $— |  |  | $— |  |  | $89.1 |
Decommissioning trust funds (a): |  |  |  |  |  |  |  |
Equity securities |  | 12.9 |  |  | — |  |  | — |  |  | 12.9 |
Debt securities |  | 273.0 |  |  | 251.5 |  |  | — |  |  | 524.5 |
Common trusts (b) |  |  |  |  |  |  |  | 847.9 |
|  | $375.0 |  |  | $251.5 |  |  | $— |  |  | $1,474.4 |
(a)The decommissioning trust funds hold equity and fixed income securities. Equity securities are invested to approximate the returns of major market indices. Fixed income securities are held in various governmental and corporate securities. See Note 9 to the financial statements herein for additional information on the investment portfolios. (b)Common trust funds are not publicly quoted and are valued by the fund administrators using net asset value as a practical expedient. Accordingly, these funds are not assigned a level in the fair value table. The fund administrator of these investments allows daily trading at the net asset value and trades settle at a later date. The following table sets forth a reconciliation of changes in the net assets for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the three months ended June 30, 2022.
| Entergy Arkansas |  | Entergy Louisiana |  | Entergy Mississippi |  | Entergy New Orleans |  | Entergy Texas
| (In Millions)
Balance as of April 1, | $0.4 |  |  | $0.3 |  |  | $0.2 |  |  | $0.1 |  |  | $0.5 |
Issuances of financial transmission rights | 5.4 |  |  | 5.3 |  |  | 0.8 |  |  | 0.8 |  |  | 3.9 |
Gains (losses) included as a regulatory liability/asset | 14.6 |  |  | 15.2 |  |  | 1.7 |  |  | 1.3 |  |  | (1.9) |
Settlements | (16.0) |  |  | (16.1) |  |  | (2.2) |  |  | (1.6) |  |  | (1.0) |
Balance as of June 30, | $4.4 |  |  | $4.7 |  |  | $0.5 |  |  | $0.6 |  |  | $1.5 |
The following table sets forth a reconciliation of changes in the net assets for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the three months ended June 30, 2021.
| Entergy Arkansas |  | Entergy Louisiana |  | Entergy Mississippi |  | Entergy New Orleans |  | Entergy Texas
| (In Millions)
Balance as of April 1, | $1.4 |  |  | $1.2 |  |  | $0.3 |  |  | $0.1 |  |  | $0.5 |
Issuances of financial transmission rights | 2.8 |  |  | 4.1 |  |  | 1.7 |  |  | 0.4 |  |  | 2.7 |
Gains (losses) included as a regulatory liability/asset | 3.0 |  |  | 5.4 |  |  | 0.8 |  |  | 0.9 |  |  | 5.4 |
Settlements | (3.4) |  |  | (5.9) |  |  | (0.7) |  |  | (0.8) |  |  | (4.8) |
Balance as of June 30, | $3.8 |  |  | $4.8 |  |  | $2.1 |  |  | $0.6 |  |  | $3.8 |
The following table sets forth a reconciliation of changes in the net assets for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the six months ended June 30, 2022.
| Entergy Arkansas |  | Entergy Louisiana |  | Entergy Mississippi |  | Entergy New Orleans |  | Entergy Texas
| (In Millions)
Balance as of January 1, | $2.3 |  |  | $0.6 |  |  | $0.3 |  |  | $0.1 |  |  | $0.8 |
Issuances of financial transmission rights | 5.4 |  |  | 5.3 |  |  | 0.8 |  |  | 0.8 |  |  | 3.9 |
Gains (losses) included as a regulatory liability/asset | 20.2 |  |  | 24.3 |  |  | 2.6 |  |  | 2.1 |  |  | 1.7 |
Settlements | (23.5) |  |  | (25.5) |  |  | (3.2) |  |  | (2.4) |  |  | (4.9) |
Balance as of June 30, | $4.4 |  |  | $4.7 |  |  | $0.5 |  |  | $0.6 |  |  | $1.5 |
The following table sets forth a reconciliation of changes in the net assets for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the six months ended June 30, 2021.
| Entergy Arkansas |  | Entergy Louisiana |  | Entergy Mississippi |  | Entergy New Orleans |  | Entergy Texas
| (In Millions)
Balance as of January 1, | $2.7 |  |  | $4.2 |  |  | $0.6 |  |  | $0.1 |  |  | $1.6 |
Issuances of financial transmission rights | 2.8 |  |  | 4.1 |  |  | 1.7 |  |  | 0.4 |  |  | 2.7 |
Gains (losses) included as a regulatory liability/asset | 27.8 |  |  | 14.7 |  |  | 7.7 |  |  | 2.1 |  |  | 82.2 |
Settlements | (29.5) |  |  | (18.2) |  |  | (7.9) |  |  | (2.0) |  |  | (82.7) |
Balance as of June 30, | $3.8 |  |  | $4.8 |  |  | $2.1 |  |  | $0.6 |  |  | $3.8 |
System Energy [Member] |
Risk Management And Fair Values | RISK MANAGEMENT AND FAIR VALUES (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy) Market Risk In the normal course of business, Entergy is exposed to a number of market risks. Market risk is the potential loss that Entergy may incur as a result of changes in the market or fair value of a particular commodity or instrument. All financial and commodity-related instruments, including derivatives, are subject to market risk including commodity price risk, equity price, and interest rate risk. Entergy uses derivatives primarily to mitigate commodity price risk, particularly power price and fuel price risk. 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 derivative 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. As a wholesale generator, Entergy Wholesale Commodities’ core business was selling energy, measured in MWh, to its customers. Entergy Wholesale Commodities entered into forward contracts with its customers and also sold energy and capacity in the day ahead or spot markets. In addition to its forward physical power and gas contracts, Entergy Wholesale Commodities used a combination of financial contracts, including swaps, collars, and options, to mitigate commodity price risk. When the market price fell, the combination of financial contracts was expected to settle in gains that offset lower revenue from generation, which resulted in a more predictable cash flow. Consistent with management’s strategy to shut down and sell all plants in the Entergy Wholesale Commodities merchant fleet, the Entergy Wholesale Commodities portfolio of derivative instruments expired in April 2021, which was the settlement date for the last financial derivative contracts in the Entergy Wholesale Commodities portfolio. Entergy’s exposure to market risk is determined by a number of factors, including the size, term, composition, and diversification of positions held, as well as market volatility and liquidity. For instruments such as options, the time period during which the option may be exercised and the relationship between the current market price of the underlying instrument and the option’s contractual strike or exercise price also affects the level of market risk. A significant factor influencing the overall level of market risk to which Entergy is exposed is its use of hedging techniques to mitigate such risk. Hedging instruments and volumes are chosen based on ability to mitigate risk associated with future energy and capacity prices; however, other considerations are factored into hedge product and volume decisions including corporate liquidity, corporate credit ratings, counterparty credit risk, hedging costs, firm settlement risk, and product availability in the marketplace. Entergy manages market risk by actively monitoring compliance with stated risk management policies as well as monitoring the effectiveness of its hedging policies and strategies. Entergy’s risk management policies limit the amount of total net exposure and rolling net exposure during the stated periods. These policies, including related risk limits, are regularly assessed to ensure their appropriateness given Entergy’s objectives. Derivatives Some derivative instruments are classified as cash flow hedges due to their financial settlement provisions while others are classified as normal purchase/normal sale transactions due to their physical settlement provisions. Normal purchase/normal sale risk management tools include power purchase and sales agreements, fuel purchase agreements, capacity contracts, and tolling agreements. Financially-settled cash flow hedges can include natural gas and electricity swaps and options. Entergy may enter into financially-settled swap and option contracts to manage market risk that may or may not be designated as hedging instruments. Entergy entered into derivatives to manage natural risks inherent in its physical or financial assets or liabilities. Electricity over-the-counter instruments and futures contracts that financially settled against day-ahead power pool prices were used to manage price exposure for Entergy Wholesale Commodities generation. Entergy used standardized master netting agreements to help mitigate the credit risk of derivative instruments. These master agreements facilitated the netting of cash flows associated with a single counterparty and may have included collateral requirements. Cash, letters of credit, and parental/affiliate guarantees were obtained as security from counterparties in order to mitigate credit risk. The collateral agreements required a counterparty to post cash or letters of credit in the event an exposure exceeded an established threshold. The threshold represented an unsecured credit limit, which may have been supported by a parental/affiliate guarantee, as determined in accordance with Entergy’s credit policy. In addition, collateral agreements allowed for termination and liquidation of all positions in the event of a failure or inability to post collateral. Certain of the agreements to sell the power produced by Entergy Wholesale Commodities power plants contained provisions that required an Entergy subsidiary to provide credit support to secure its obligations depending on the mark-to-market values of the contracts. The primary form of credit support to satisfy these requirements was an Entergy Corporation guarantee. If the Entergy Corporation credit rating fell below investment grade, Entergy would have had to post collateral equal to the estimated outstanding liability under the contract at the applicable date. There were no outstanding derivative contracts held by Entergy Wholesale Commodities as of June 30, 2022 and December 31, 2021. As of June 30, 2022, $12 million in cash collateral was required to be posted by the Entergy subsidiary to its counterparties. As of December 31, 2021, $8 million in cash collateral was required to be posted by the Entergy subsidiary to its counterparties. Entergy manages fuel price volatility for its Louisiana jurisdictions (Entergy Louisiana and Entergy New Orleans) and Entergy Mississippi through the purchase of natural gas swaps and options that financially settle against either the average Henry Hub Gas Daily prices or the NYMEX Henry Hub. These swaps and options 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 and projected winter purchases for gas distribution at Entergy New Orleans. The maximum length of time over which Entergy has executed natural gas swaps and options as of June 30, 2022 is 1.75 years for Entergy Louisiana and the maximum length of time over which Entergy has executed natural gas swaps as of June 30, 2022 is 6 months, each, for Entergy Mississippi and Entergy New Orleans. The total volume of natural gas swaps and options outstanding as of June 30, 2022 is 27,681,400 MMBtu for Entergy, including 12,800,000 MMBtu for Entergy Louisiana, 14,771,300 MMBtu for Entergy Mississippi, and 110,100 MMBtu for Entergy New Orleans. Credit support for these natural gas swaps and options 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. During the second quarter 2022, Entergy participated in the annual financial transmission rights auction process for the MISO planning year of June 1, 2022 through May 31, 2023. Financial transmission rights are derivative instruments that represent economic hedges of future congestion charges that will be incurred in serving Entergy’s customer load. They are not designated as hedging instruments. Entergy initially records financial transmission rights at their estimated fair value and subsequently adjusts the carrying value to their estimated fair value at the end of each accounting period prior to settlement. Unrealized gains or losses on financial transmission rights held by Entergy Wholesale Commodities are included in operating revenues. The Utility operating companies recognize regulatory liabilities or assets for unrealized gains or losses on financial transmission rights. The total volume of financial transmission rights outstanding as of June 30, 2022 is 135,179 GWh for Entergy, including 30,477 GWh for Entergy Arkansas, 61,242 GWh for Entergy Louisiana, 14,621 GWh for Entergy Mississippi, 5,720 GWh for Entergy New Orleans, and 22,950 GWh for Entergy Texas. Credit support for financial transmission rights held by the Utility operating companies is covered by cash and/or letters of credit issued by each Utility operating company as required by MISO. Credit support for financial transmission rights held by Entergy Wholesale Commodities is covered by cash. No cash or letters of credit were required to be posted for financial transmission rights exposure for Entergy Wholesale Commodities as of June 30, 2022 and December 31, 2021. Letters of credit posted with MISO covered the financial transmission rights exposure for Entergy Mississippi and Entergy Texas as of June 30, 2022 and as of December 31, 2021. The fair values of Entergy’s derivative instruments in the consolidated balance sheet as of June 30, 2022 are shown in the table below. Certain investments, including those not designated as hedging instruments, are subject to master netting agreements and are presented in the balance sheet on a net basis in accordance with accounting guidance for derivatives and hedging.
Instrument |  | Balance Sheet Location |  | Gross Fair Value (a) |  | Offsetting Position (b) |  | Net Fair Value (c) (d) |  | Business
|  |  |  | (In Millions) |  |
Derivatives not designated as hedging instruments |  |  |  |  |  |  |  |  |  |
Assets: |  |  |  |  |  |  |  |  |  |
Natural gas swaps and options |  | Prepayments and other |  | $37 |  | $— |  | $37 |  | Utility
Natural gas swaps and options |  | Other deferred debits and other assets |  | $9 |  | $— |  | $9 |  | Utility
Financial transmission rights |  | Prepayments and other |  | $13 |  | ($1) |  | $12 |  | Utility and Entergy Wholesale Commodities
The fair values of Entergy’s derivative instruments in the consolidated balance sheet as of December 31, 2021 are shown in the table below.
Instrument |  | Balance Sheet Location |  | Gross Fair Value (a) |  | Offsetting Position (b) |  | Net Fair Value (c) (d) |  | Business
|  |  |  | (In Millions) |  |
Derivatives not designated as hedging instruments |  |  |  |  |  |  |  |  |  |
Assets: |  |  |  |  |  |  |  |  |  |
Natural gas swaps and options |  | Prepayments and other |  | $6 |  | $— |  | $6 |  | Utility
Natural gas swaps and options |  | Other deferred debits and other assets |  | $5 |  | $— |  | $5 |  | Utility
Financial transmission rights |  | Prepayments and other |  | $4 |  | $— |  | $4 |  | Utility and Entergy Wholesale Commodities
Liabilities: |  |  |  |  |  |  |  |  |  |
Natural gas swaps and options |  | Other current liabilities |  | $7 |  | $— |  | $7 |  | Utility
(a)Represents the gross amounts of recognized assets/liabilities (b)Represents the netting of fair value balances with the same counterparty (c)Represents the net amounts of assets/liabilities presented on the Entergy Corporation and Subsidiaries’ Consolidated Balance Sheet (d)Excludes cash collateral in the amount of $12 million posted as of June 30, 2022 and $8 million posted as of December 31, 2021. Also excludes letters of credit in the amount of $6 million posted as of June 30, 2022. As discussed above, the Entergy Wholesale Commodities portfolio of derivative instruments expired in April 2021, which was the settlement date for the last financial derivative contracts in the Entergy Wholesale Commodities portfolio. For the three months ended June 30, 2021, there were no effects resulting from Entergy’s derivative instruments designated as cash flow hedges on the consolidated statements of operations. The effects of Entergy’s derivative instruments designated as cash flow hedges on the consolidated statements of operations for the six months ended June 30, 2021 were as follows:
Instrument |  | Amount of gain (loss) recognized in other comprehensive income |  | Income Statement location |  | Amount of gain (loss) reclassified from accumulated other comprehensive income into income (a)
|  | (In Millions) |  |  |  | (In Millions)
Electricity swaps and options |  | $2 |  | Competitive businesses operating revenues |  | $40
(a) Before taxes of $8 million for the six months ended June 30, 2021 Prior to the expiration of the Entergy Wholesale Commodities portfolio of derivative instruments, Entergy may have effectively liquidated a cash flow hedge instrument by entering into a contract offsetting the original hedge, and then de-designating the original hedge in this situation. Gains or losses accumulated in other comprehensive income prior to de-designation would have continued to be deferred in other comprehensive income until they were included in income as the original hedged transaction occurred. From the point of de-designation, the gains or losses on the original hedge and the offsetting contract were recorded as assets or liabilities on the balance sheet and offset as they flowed through to earnings. The effects of Entergy’s derivative instruments not designated as hedging instruments on the consolidated statements of operations for the three months ended June 30, 2022 and 2021 were as follows:
Instrument |  | Income Statement location |  | Amount of gain (loss) recorded in the income statement
|  |  |  | (In Millions)
2022 |  |  |  |
Natural gas swaps |  | Fuel, fuel-related expenses, and gas purchased for resale | (a) | $23
Financial transmission rights |  | Purchased power expense | (b) | $37
2021 |  |  |  |
Natural gas swaps |  | Fuel, fuel-related expenses, and gas purchased for resale | (a) | $18
Financial transmission rights |  | Purchased power expense | (b) | $16
Electricity swaps and options (c) |  | Competitive business operating revenues |  | $—
The effects of Entergy’s derivative instruments not designated as hedging instruments on the consolidated statements of operations for the six months ended June 30, 2022 and 2021 were as follows:
Instrument |  | Income Statement location |  | Amount of gain (loss) recorded in the income statement
|  |  |  | (In Millions)
2022 |  |  |  |
Natural gas swaps and options |  | Fuel, fuel-related expenses, and gas purchased for resale | (a) | $78
Financial transmission rights |  | Purchased power | (b) | $60
2021 |  |  |  |
Natural gas swaps and options |  | Fuel, fuel-related expenses, and gas purchased for resale | (a) | $25
Financial transmission rights |  | Purchased power | (b) | $144
Electricity swaps and options (c) |  | Competitive business operating revenues |  | ($2)
(a)Due to regulatory treatment, the natural gas swaps and options are marked-to-market through fuel, fuel-related expenses, and gas purchased for resale and then such amounts are simultaneously reversed and recorded as an offsetting regulatory asset or liability. The gains or losses recorded as fuel expenses when the swaps and options are settled are recovered or refunded through fuel cost recovery mechanisms. (b)Due to regulatory treatment, the changes in the estimated fair value of financial transmission rights for the Utility operating companies are recorded through purchased power expense and then such amounts are simultaneously reversed and recorded as an offsetting regulatory asset or liability. The gains or losses recorded as purchased power expense when the financial transmission rights for the Utility operating companies are settled are recovered or refunded through fuel cost recovery mechanisms. (c)There were no gains (losses) recognized in accumulated other comprehensive income from electricity swaps and options prior to the expiration of the Entergy Wholesale Commodities portfolio of derivative instruments in April 2021. The fair values of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their balance sheets as of June 30, 2022 are shown in the table below. Certain investments, including those not designated as hedging instruments, are subject to master netting agreements and are presented in the balance sheet on a net basis in accordance with accounting guidance for derivatives and hedging.
Instrument |  | Balance Sheet Location |  | Gross Fair Value (a) |  | Offsetting Position (b) |  | Net Fair Value (c) (d) |  | Registrant
|  |  |  | (In Millions) |  |
Assets: |  |  |  |  |  |  |  |  |  |
Natural gas swaps and options |  | Prepayments and other |  | $16.1 |  | $— |  | $16.1 |  | Entergy Louisiana
Natural gas swaps and options |  | Other deferred debits and other assets |  | $8.7 |  | $— |  | $8.7 |  | Entergy Louisiana
Natural gas swaps |  | Prepayments and other |  | $20.6 |  | $— |  | $20.6 |  | Entergy Mississippi
Financial transmission rights |  | Prepayments and other |  | $4.5 |  | ($0.1) |  | $4.4 |  | Entergy Arkansas
Financial transmission rights |  | Prepayments and other |  | $5.3 |  | ($0.6) |  | $4.7 |  | Entergy Louisiana
Financial transmission rights |  | Prepayments and other |  | $0.5 |  | $— |  | $0.5 |  | Entergy Mississippi
Financial transmission rights |  | Prepayments and other |  | $0.6 |  | $— |  | $0.6 |  | Entergy New Orleans
Financial transmission rights |  | Prepayments and other |  | $1.7 |  | ($0.2) |  | $1.5 |  | Entergy Texas
Liabilities: |  |  |  |  |  |  |  |  |  |
Natural gas swaps |  | Other current liabilities |  | $0.2 |  | $— |  | $0.2 |  | Entergy New Orleans
The fair values of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their balance sheets as of December 31, 2021 were as follows:
Instrument |  | Balance Sheet Location |  | Gross Fair Value (a) |  | Offsetting Position (b) |  | Net Fair Value (c) (d) |  | Registrant
|  |  |  | (In Millions) |  |
Assets: |  |  |  |  |  |  |  |  |  |
Natural gas swaps and options |  | Prepayments and other |  | $5.7 |  | $— |  | $5.7 |  | Entergy Louisiana
Natural gas swaps and options |  | Other deferred debits and other assets |  | $5.3 |  | $— |  | $5.3 |  | Entergy Louisiana
Financial transmission rights |  | Prepayments and other |  | $2.3 |  | $— |  | $2.3 |  | Entergy Arkansas
Financial transmission rights |  | Prepayments and other |  | $0.6 |  | $— |  | $0.6 |  | Entergy Louisiana
Financial transmission rights |  | Prepayments and other |  | $0.3 |  | $— |  | $0.3 |  | Entergy Mississippi
Financial transmission rights |  | Prepayments and other |  | $0.1 |  | $— |  | $0.1 |  | Entergy New Orleans
Financial transmission rights |  | Prepayments and other |  | $0.8 |  | $— |  | $0.8 |  | Entergy Texas
Liabilities: |  |  |  |  |  |  |  |  |  |
Natural gas swaps |  | Other current liabilities |  | $6.7 |  | $— |  | $6.7 |  | Entergy Mississippi
Natural gas swaps |  | Other current liabilities |  | $0.5 |  | $— |  | $0.5 |  | Entergy New Orleans
(a)Represents the gross amounts of recognized assets/liabilities (b)Represents the netting of fair value balances with the same counterparty (c)Represents the net amounts of assets/liabilities presented on the Registrant Subsidiaries’ balance sheets (d)As of June 30, 2022, letters of credit posted with MISO covered financial transmission rights exposure of $0.4 million for Entergy Mississippi and $5.3 million for Entergy Texas. As of December 31, 2021, letters of credit posted with MISO covered financial transmission rights exposure of $0.2 million for Entergy Mississippi and $0.1 million for Entergy Texas. The effects of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their income statements for the three months ended June 30, 2022 and 2021 were as follows:
Instrument |  | Income Statement Location |  | Amount of gain (loss) recorded in the income statement |  | Registrant
|  |  |  | (In Millions) |  |
2022 |  |  |  |  |  |
Natural gas swaps and options |  | Fuel, fuel-related expenses, and gas purchased for resale |  | $8.7 | (a) | Entergy Louisiana
Natural gas swaps |  | Fuel, fuel-related expenses, and gas purchased for resale |  | $14.6 | (a) | Entergy Mississippi
Natural gas swaps |  | Fuel, fuel-related expenses, and gas purchased for resale |  | ($0.2) | (a) | Entergy New Orleans
Financial transmission rights |  | Purchased power expense |  | $16.0 | (b) | Entergy Arkansas
Financial transmission rights |  | Purchased power expense |  | $16.1 | (b) | Entergy Louisiana
Financial transmission rights |  | Purchased power expense |  | $2.2 | (b) | Entergy Mississippi
Financial transmission rights |  | Purchased power expense |  | $1.6 | (b) | Entergy New Orleans
Financial transmission rights |  | Purchased power expense |  | $1.0 | (b) | Entergy Texas
2021 |  |  |  |  |  |
Natural gas swaps and options |  | Fuel, fuel-related expenses, and gas purchased for resale |  | $4.9 | (a) | Entergy Louisiana
Natural gas swaps |  | Fuel, fuel-related expenses, and gas purchased for resale |  | $13.2 | (a) | Entergy Mississippi
Natural gas swaps |  | Fuel, fuel-related expenses, and gas purchased for resale |  | $0.1 | (a) | Entergy New Orleans
Financial transmission rights |  | Purchased power expense |  | $3.4 | (b) | Entergy Arkansas
Financial transmission rights |  | Purchased power expense |  | $5.9 | (b) | Entergy Louisiana
Financial transmission rights |  | Purchased power expense |  | $0.7 | (b) | Entergy Mississippi
Financial transmission rights |  | Purchased power expense |  | $0.8 | (b) | Entergy New Orleans
Financial transmission rights |  | Purchased power expense |  | $4.8 | (b) | Entergy Texas
The effects of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their income statements for the six months ended June 30, 2022 and 2021 were as follows:
Instrument |  | Income Statement Location |  | Amount of gain (loss) recorded in the income statement |  | Registrant
|  |  |  | (In Millions) |  |
2022 |  |  |  |  |  |
Natural gas swaps and options |  | Fuel, fuel-related expenses, and gas purchased for resale |  | $19.8 | (a) | Entergy Louisiana
Natural gas swaps |  | Fuel, fuel-related expenses, and gas purchased for resale |  | $57.4 | (a) | Entergy Mississippi
Natural gas swaps |  | Fuel, fuel-related expenses, and gas purchased for resale |  | $0.9 | (a) | Entergy New Orleans
Financial transmission rights |  | Purchased power |  | $23.5 | (b) | Entergy Arkansas
Financial transmission rights |  | Purchased power |  | $25.5 | (b) | Entergy Louisiana
Financial transmission rights |  | Purchased power |  | $3.2 | (b) | Entergy Mississippi
Financial transmission rights |  | Purchased power |  | $2.4 | (b) | Entergy New Orleans
Financial transmission rights |  | Purchased power |  | $4.9 | (b) | Entergy Texas
2021 |  |  |  |  |  |
Natural gas swaps and options |  | Fuel, fuel-related expenses, and gas purchased for resale |  | $6.7 | (a) | Entergy Louisiana
Natural gas swaps |  | Fuel, fuel-related expenses, and gas purchased for resale |  | $18.3 | (a) | Entergy Mississippi
Financial transmission rights |  | Purchased power |  | $29.5 | (b) | Entergy Arkansas
Financial transmission rights |  | Purchased power |  | $18.2 | (b) | Entergy Louisiana
Financial transmission rights |  | Purchased power |  | $7.9 | (b) | Entergy Mississippi
Financial transmission rights |  | Purchased power |  | $2.0 | (b) | Entergy New Orleans
Financial transmission rights |  | Purchased power |  | $82.7 | (b) | Entergy Texas
(a)Due to regulatory treatment, the natural gas swaps and options are marked-to-market through fuel, fuel-related expenses, and gas purchased for resale and then such amounts are simultaneously reversed and recorded as an offsetting regulatory asset or liability. The gains or losses recorded as fuel expenses when the swaps and options are settled are recovered or refunded through fuel cost recovery mechanisms. (b)Due to regulatory treatment, the changes in the estimated fair value of financial transmission rights for the Utility operating companies are recorded through purchased power expense and then such amounts are simultaneously reversed and recorded as an offsetting regulatory asset or liability. The gains or losses recorded as purchased power expense when the financial transmission rights for the Utility operating companies are settled are recovered or refunded through fuel cost recovery mechanisms. 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 are 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. Accounting standards define fair value as an exit price, or the price that would be received to sell an asset or the amount that would be paid to transfer a liability in an orderly transaction between knowledgeable market participants at the date of measurement. Entergy and the Registrant Subsidiaries use assumptions or market input data that market participants would use in pricing assets or liabilities at fair value. The inputs can be readily observable, corroborated by market data, or generally unobservable. Entergy and the Registrant Subsidiaries endeavor to use the best available information to determine fair value. Accounting standards establish a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy establishes the highest priority for unadjusted market quotes in an active market for the identical asset or liability and the lowest priority for unobservable inputs. The three levels of the fair value hierarchy are: •Level 1 - Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the entity has the ability to access at the measurement date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 primarily consists of individually owned common stocks, cash equivalents (temporary cash investments, securitization recovery trust account, and escrow accounts), debt instruments, and gas swaps traded on exchanges with active markets. Cash equivalents includes all unrestricted highly liquid debt instruments with an original or remaining maturity of three months or less at the date of purchase. •Level 2 - Level 2 inputs are inputs other than quoted prices included in Level 1 that are, either directly or indirectly, observable for the asset or liability at the measurement date. Assets are valued based on prices derived by independent third parties that use inputs such as benchmark yields, reported trades, broker/dealer quotes, and issuer spreads. Prices are reviewed and can be challenged with the independent parties and/or overridden by Entergy if it is believed such would be more reflective of fair value. Level 2 inputs include the following: –quoted prices for similar assets or liabilities in active markets; –quoted prices for identical assets or liabilities in inactive markets; –inputs other than quoted prices that are observable for the asset or liability; or –inputs that are derived principally from or corroborated by observable market data by correlation or other means. Level 2 consists primarily of individually-owned debt instruments and gas swaps and options valued using observable inputs. •Level 3 - Level 3 inputs are pricing inputs that are generally less observable or unobservable from objective sources. These inputs are used with internally developed methodologies to produce management’s best estimate of fair value for the asset or liability. Level 3 consists primarily of financial transmission rights and derivative power contracts used as cash flow hedges of power sales at merchant power plants. Consistent with management’s strategy to shut down and sell all plants in the Entergy Wholesale Commodities merchant fleet, the Entergy Wholesale Commodities portfolio of derivative instruments expired in April 2021, which was the settlement date for the last financial derivative contracts in the Entergy Wholesale Commodities portfolio. The values for power contract assets or liabilities prior to expiration in April 2021 were based on both observable inputs including public market prices and interest rates, and unobservable inputs such as implied volatilities, unit contingent discounts, expected basis differences, and credit adjusted counterparty interest rates. They were classified as Level 3 assets and liabilities. The valuations of these assets and liabilities were performed by the Office of Corporate Risk Oversight and the Entergy Wholesale Commodities Accounting group. The primary related functions of the Office of Corporate Risk Oversight included: gathering, validating and reporting market data, providing market risk analyses and valuations in support of Entergy Wholesale Commodities’ commercial transactions, developing and administering protocols for the management of market risks, and implementing and maintaining controls around changes to market data in the energy trading and risk management system. The Office of Corporate Risk Oversight was also responsible for managing the energy trading and risk management system, forecasting revenues, forward positions and analysis. The Entergy Wholesale Commodities Accounting group performed functions related to market and counterparty settlements, revenue reporting and analysis, and financial accounting. The Office of Corporate Risk Oversight reports to the Vice President and Treasurer while the Entergy Wholesale Commodities Accounting group reports to the Chief Accounting Officer. The amounts reflected as the fair value of electricity swaps were based on the estimated amount that the contracts were in-the-money at the balance sheet date (treated as an asset) or out-of-the-money at the balance sheet date (treated as a liability) and equaled the estimated amount receivable to or payable by Entergy if the contracts were settled at that date. These derivative contracts included cash flow hedges that swapped fixed for floating cash flows for sales of the output from the Entergy Wholesale Commodities business. The fair values were based on the mark-to-market comparison between the fixed contract prices and the floating prices determined each period from quoted forward power market prices. The differences between the fixed price in the swap contract and these market-related prices multiplied by the volume specified in the contract and discounted at the counterparties’ credit adjusted risk free rate were recorded as derivative contract assets or liabilities. For contracts that had unit contingent terms, a further discount was applied based on the historical relationship between contract and market prices for similar contract terms. The amounts reflected as the fair values of electricity options were valued based on a Black Scholes model, and were calculated at the end of each month for accounting purposes. Inputs to the valuation included end of day forward market prices for the period when the transactions settled, implied volatilities based on market volatilities provided by a third-party data aggregator, and U.S. Treasury rates for a risk-free return rate. As described further below, prices and implied volatilities were reviewed and could be adjusted if it was determined that there was a better representation of fair value. On a daily basis, the Office of Corporate Risk Oversight calculated the mark-to-market for electricity swaps and options. The Office of Corporate Risk Oversight also validated forward market prices by comparing them to other sources of forward market prices or to settlement prices of actual market transactions. Significant differences were analyzed and potentially adjusted based on these other sources of forward market prices or settlement prices of actual market transactions. Implied volatilities used to value options were also validated using actual counterparty quotes for Entergy Wholesale Commodities transactions when available and compared with other sources of market implied volatilities. Moreover, on a quarterly basis, the Office of Corporate Risk Oversight confirmed the mark-to-market calculations and prepared price scenarios and credit downgrade scenario analysis. The scenario analysis was communicated to senior management within Entergy and within Entergy Wholesale Commodities. Finally, for all proposed derivative transactions, an analysis was completed to assess the risk of adding the proposed derivative to Entergy Wholesale Commodities’ portfolio. In particular, the credit and liquidity effects were calculated for this analysis. This analysis was communicated to senior management within Entergy and Entergy Wholesale Commodities. The values of financial transmission rights are based on unobservable inputs, including estimates of congestion costs in MISO between applicable generation and load pricing nodes based on the 50th percentile of historical prices. They are classified as Level 3 assets and liabilities. The valuations of these assets and liabilities are performed by the Office of Corporate Risk Oversight. The values are calculated internally and verified against the data published by MISO. Entergy’s Entergy Wholesale Commodities Accounting group reviews these valuations for reasonableness, with the assistance of others within the organization with knowledge of the various inputs and assumptions used in the valuation. The Office of Corporate Risk Oversight reports to the Vice President and Treasurer. The Entergy Wholesale Commodities Accounting group reports to the Chief Accounting Officer. The following tables set forth, by level within the fair value hierarchy, Entergy’s assets and liabilities that are accounted for at fair value on a recurring basis as of June 30, 2022 and December 31, 2021. The assessment of the significance of a particular input to a fair value measurement requires judgment and may affect its placement within the fair value hierarchy levels.
2022 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $514 |  |  | $— |  |  | $— |  |  | $514 |
Decommissioning trust funds (a): |  |  |  |  |  |  |  |
Equity securities |  | 18 |  |  | — |  |  | — |  |  | 18 |
Debt securities (b) |  | 598 |  |  | 1,095 |  |  | — |  |  | 1,693 |
Common trusts (c) |  |  |  |  |  |  |  | 2,379 |
Securitization recovery trust account |  | 28 |  |  | — |  |  | — |  |  | 28 |
Escrow accounts |  | 331 |  |  | — |  |  | — |  |  | 331 |
Gas hedge contracts |  | 37 |  |  | 9 |  |  | — |  |  | 46 |
Financial transmission rights |  | — |  |  | — |  |  | 12 |  |  | 12 |
|  | $1,526 |  |  | $1,104 |  |  | $12 |  |  | $5,021 |
2021 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $398 |  |  | $— |  |  | $— |  |  | $398 |
Decommissioning trust funds (a): |  |  |  |  |  |  |  |
Equity securities |  | 132 |  |  | — |  |  | — |  |  | 132 |
Debt securities (b) |  | 770 |  |  | 1,407 |  |  | — |  |  | 2,177 |
Common trusts (c) |  |  |  |  |  |  |  | 3,205 |
Securitization recovery trust account |  | 29 |  |  | — |  |  | — |  |  | 29 |
Escrow accounts |  | 49 |  |  | — |  |  | — |  |  | 49 |
Gas hedge contracts |  | 6 |  |  | 5 |  |  | — |  |  | 11 |
Financial transmission rights |  | — |  |  | — |  |  | 4 |  |  | 4 |
|  | $1,384 |  |  | $1,412 |  |  | $4 |  |  | $6,005 |
Liabilities: |  |  |  |  |  |  |  |
Gas hedge contracts |  | $7 |  |  | $— |  |  | $— |  |  | $7 |
(a)The decommissioning trust funds hold equity and fixed income securities. Equity securities are invested to approximate the returns of major market indices. Fixed income securities are held in various governmental and corporate securities. See Note 9 to the financial statements herein for additional information on the investment portfolios. (b)The decommissioning trust funds fair value presented herein does not include the recognition pursuant to ASU 2016-13 of a credit loss valuation allowance of $0.4 million as of December 31, 2021 on debt securities. See Note 9 to the financial statements herein for additional information on the allowance for expected credit losses. (c)Common trust funds are not publicly quoted and are valued by the fund administrators using net asset value as a practical expedient. Accordingly, these funds are not assigned a level in the fair value table. The fund administrator of these investments allows daily trading at the net asset value and trades settle at a later date. The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the three months ended June 30, 2022 and 2021:
|  | 2022 |  |  | 2021
|  |  | Financial transmission rights |  |  |  | Financial transmission rights
|  | (In Millions)
Balance as of April 1, |  |  | $1 |  |  |  |  | $4 |
Total gains (losses) for the period |  |  |  |  |  |  |
Included as a regulatory liability/asset |  |  | 32 |  |  |  |  | 15 |
Issuances of financial transmission rights |  |  | 16 |  |  |  |  | 12 |
Settlements |  |  | (37) |  |  |  |  | (16) |
Balance as of June 30, |  |  | $12 |  |  |  |  | $15 |
The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the six months ended June 30, 2022 and 2021:
|  |  | 2022 |  | 2021
|  |  | Financial transmission rights |  | Power Contracts |  | Financial transmission rights
|  |  | (In Millions)
Balance as of January 1, |  |  | $4 |  |  | $38 |  |  | $9 |
Total gains (losses) for the period |  |  |  |  |  |  |
Included in earnings |  |  | — |  |  | (2) |  |  | 3 |
Included in other comprehensive income |  |  | — |  |  | 2 |  |  | — |
Included as a regulatory liability/asset |  |  | 52 |  |  | — |  |  | 135 |
Issuances of financial transmission rights |  |  | 16 |  |  | — |  |  | 12 |
Settlements |  |  | (60) |  |  | (38) |  |  | (144) |
Balance as of June 30, |  |  | $12 |  |  | $— |  |  | $15 |
The fair values of the Level 3 financial transmission rights are based on unobservable inputs calculated internally and verified against historical pricing data published by MISO. The following table sets forth an analysis of each of the types of unobservable inputs impacting the fair value of items classified as Level 3 within the fair value hierarchy, and the sensitivity to changes to those inputs:
Significant Unobservable Input |  | Transaction Type |  | Position |  | Change to Input |  | Effect on Fair Value
Unit contingent discount |  | Electricity swaps |  | Sell |  | Increase (Decrease) |  | Decrease (Increase)
The following table sets forth, by level within the fair value hierarchy, the Registrant Subsidiaries’ assets and liabilities that are accounted for at fair value on a recurring basis as of June 30, 2022 and December 31, 2021. The assessment of the significance of a particular input to a fair value measurement requires judgment and may affect its placement within the fair value hierarchy levels. Entergy Arkansas
2022 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $58.2 |  |  | $— |  |  | $— |  |  | $58.2 |
Decommissioning trust funds (a): |  |  |  |  |  |  |  |
Equity securities |  | 4.1 |  |  | — |  |  | — |  |  | 4.1 |
Debt securities |  | 131.6 |  |  | 353.2 |  |  | — |  |  | 484.8 |
Common trusts (b) |  |  |  |  |  |  |  | 705.9 |
Financial transmission rights |  | — |  |  | — |  |  | 4.4 |  |  | 4.4 |
|  | $193.9 |  |  | $353.2 |  |  | $4.4 |  |  | $1,257.4 |
2021 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $4.8 |  |  | $— |  |  | $— |  |  | $4.8 |
Decommissioning trust funds (a): |  |  |  |  |  |  |  |
Equity securities |  | 16.7 |  |  | — |  |  | — |  |  | 16.7 |
Debt securities |  | 119.5 |  |  | 406.8 |  |  | — |  |  | 526.3 |
Common trusts (b) |  |  |  |  |  |  |  | 895.4 |
Financial transmission rights |  | — |  |  | — |  |  | 2.3 |  |  | 2.3 |
|  | $141.0 |  |  | $406.8 |  |  | $2.3 |  |  | $1,445.5 |
Entergy Louisiana
2022 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $65.7 |  |  | $— |  |  | $— |  |  | $65.7 |
Decommissioning trust funds (a): |  |  |  |  |  |  |  |
Equity securities |  | 12.6 |  |  | — |  |  | — |  |  | 12.6 |
Debt securities |  | 225.0 |  |  | 508.3 |  |  | — |  |  | 733.3 |
Common trusts (b) |  |  |  |  |  |  |  | 1,010.6 |
Escrow accounts |  | 290.1 |  |  | — |  |  | — |  |  | 290.1 |
Gas hedge contracts |  | 16.1 |  |  | 8.7 |  |  | — |  |  | 24.8 |
Financial transmission rights |  | — |  |  | — |  |  | 4.7 |  |  | 4.7 |
|  | $609.5 |  |  | $517.0 |  |  | $4.7 |  |  | $2,141.8 |
2021 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $18.4 |  |  | $— |  |  | $— |  |  | $18.4 |
Decommissioning trust funds (a): |  |  |  |  |  |  |  |
Equity securities |  | 20.2 |  |  | — |  |  | — |  |  | 20.2 |
Debt securities |  | 262.6 |  |  | 531.6 |  |  | — |  |  | 794.2 |
Common trusts (b) |  |  |  |  |  |  |  | 1,300.1 |
Gas hedge contracts |  | 5.7 |  |  | 5.3 |  |  | — |  |  | 11.0 |
Financial transmission rights |  | — |  |  | — |  |  | 0.6 |  |  | 0.6 |
|  | $306.9 |  |  | $536.9 |  |  | $0.6 |  |  | $2,144.5 |
Entergy Mississippi
2022 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $26.1 |  |  | $— |  |  | $— |  |  | $26.1 |
Escrow accounts |  | 41.1 |  |  | — |  |  | — |  |  | 41.1 |
Gas hedge contracts |  | 20.6 |  |  | — |  |  | — |  |  | 20.6 |
Financial transmission rights |  | — |  |  | — |  |  | 0.5 |  |  | 0.5 |
|  | $87.8 |  |  | $— |  |  | $0.5 |  |  | $88.3 |
2021 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $47.6 |  |  | $— |  |  | $— |  |  | $47.6 |
Escrow accounts |  | 48.9 |  |  | — |  |  | — |  |  | 48.9 |
Financial transmission rights |  | — |  |  | — |  |  | 0.3 |  |  | 0.3 |
|  | $96.5 |  |  | $— |  |  | $0.3 |  |  | $96.8 |
Liabilities: |  |  |  |  |  |  |  |
Gas hedge contracts |  | $6.7 |  |  | $— |  |  | $— |  |  | $6.7 |
Entergy New Orleans
2022 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $25.7 |  |  | $— |  |  | $— |  |  | $25.7 |
Securitization recovery trust account |  | 1.7 |  |  | — |  |  | — |  |  | 1.7 |
Financial transmission rights |  | — |  |  | — |  |  | 0.6 |  |  | 0.6 |
|  | $27.4 |  |  | $— |  |  | $0.6 |  |  | $28.0 |
Liabilities: |  |  |  |  |  |  |  |
Gas hedge contracts |  | $0.2 |  |  | $— |  |  | $— |  |  | $0.2 |
2021 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $42.8 |  |  | $— |  |  | $— |  |  | $42.8 |
Securitization recovery trust account |  | 2.0 |  |  | — |  |  | — |  |  | 2.0 |
Financial transmission rights |  | — |  |  | — |  |  | 0.1 |  |  | 0.1 |
|  | $44.8 |  |  | $— |  |  | $0.1 |  |  | $44.9 |
Liabilities: |  |  |  |  |  |  |  |
Gas hedge contracts |  | $0.5 |  |  | $— |  |  | $— |  |  | $0.5 |
Entergy Texas
2022 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $14.4 |  |  | $— |  |  | $— |  |  | $14.4 |
Securitization recovery trust account |  | 26.6 |  |  | — |  |  | — |  |  | 26.6 |
Financial transmission rights |  | — |  |  | — |  |  | 1.5 |  |  | 1.5 |
|  | $41.0 |  |  | $— |  |  | $1.5 |  |  | $42.5 |
2021 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Securitization recovery trust account |  | $26.6 |  |  | $— |  |  | $— |  |  | $26.6 |
Financial transmission rights |  | — |  |  | — |  |  | 0.8 |  |  | 0.8 |
|  | $26.6 |  |  | $— |  |  | $0.8 |  |  | $27.4 |
System Energy
2022 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $134.6 |  |  | $— |  |  | $— |  |  | $134.6 |
Decommissioning trust funds (a): |  |  |  |  |  |  |  |
Equity securities |  | 1.7 |  |  | — |  |  | — |  |  | 1.7 |
Debt Securities |  | 241.1 |  |  | 233.1 |  |  | — |  |  | 474.2 |
Common trusts (b) |  |  |  |  |  |  |  | 662.9 |
|  | $377.4 |  |  | $233.1 |  |  | $— |  |  | $1,273.4 |
2021 |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
|  | (In Millions)
Assets: |  |  |  |  |  |  |  |
Temporary cash investments |  | $89.1 |  |  | $— |  |  | $— |  |  | $89.1 |
Decommissioning trust funds (a): |  |  |  |  |  |  |  |
Equity securities |  | 12.9 |  |  | — |  |  | — |  |  | 12.9 |
Debt securities |  | 273.0 |  |  | 251.5 |  |  | — |  |  | 524.5 |
Common trusts (b) |  |  |  |  |  |  |  | 847.9 |
|  | $375.0 |  |  | $251.5 |  |  | $— |  |  | $1,474.4 |
(a)The decommissioning trust funds hold equity and fixed income securities. Equity securities are invested to approximate the returns of major market indices. Fixed income securities are held in various governmental and corporate securities. See Note 9 to the financial statements herein for additional information on the investment portfolios. (b)Common trust funds are not publicly quoted and are valued by the fund administrators using net asset value as a practical expedient. Accordingly, these funds are not assigned a level in the fair value table. The fund administrator of these investments allows daily trading at the net asset value and trades settle at a later date. The following table sets forth a reconciliation of changes in the net assets for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the three months ended June 30, 2022.
| Entergy Arkansas |  | Entergy Louisiana |  | Entergy Mississippi |  | Entergy New Orleans |  | Entergy Texas
| (In Millions)
Balance as of April 1, | $0.4 |  |  | $0.3 |  |  | $0.2 |  |  | $0.1 |  |  | $0.5 |
Issuances of financial transmission rights | 5.4 |  |  | 5.3 |  |  | 0.8 |  |  | 0.8 |  |  | 3.9 |
Gains (losses) included as a regulatory liability/asset | 14.6 |  |  | 15.2 |  |  | 1.7 |  |  | 1.3 |  |  | (1.9) |
Settlements | (16.0) |  |  | (16.1) |  |  | (2.2) |  |  | (1.6) |  |  | (1.0) |
Balance as of June 30, | $4.4 |  |  | $4.7 |  |  | $0.5 |  |  | $0.6 |  |  | $1.5 |
The following table sets forth a reconciliation of changes in the net assets for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the three months ended June 30, 2021.
| Entergy Arkansas |  | Entergy Louisiana |  | Entergy Mississippi |  | Entergy New Orleans |  | Entergy Texas
| (In Millions)
Balance as of April 1, | $1.4 |  |  | $1.2 |  |  | $0.3 |  |  | $0.1 |  |  | $0.5 |
Issuances of financial transmission rights | 2.8 |  |  | 4.1 |  |  | 1.7 |  |  | 0.4 |  |  | 2.7 |
Gains (losses) included as a regulatory liability/asset | 3.0 |  |  | 5.4 |  |  | 0.8 |  |  | 0.9 |  |  | 5.4 |
Settlements | (3.4) |  |  | (5.9) |  |  | (0.7) |  |  | (0.8) |  |  | (4.8) |
Balance as of June 30, | $3.8 |  |  | $4.8 |  |  | $2.1 |  |  | $0.6 |  |  | $3.8 |
The following table sets forth a reconciliation of changes in the net assets for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the six months ended June 30, 2022.
| Entergy Arkansas |  | Entergy Louisiana |  | Entergy Mississippi |  | Entergy New Orleans |  | Entergy Texas
| (In Millions)
Balance as of January 1, | $2.3 |  |  | $0.6 |  |  | $0.3 |  |  | $0.1 |  |  | $0.8 |
Issuances of financial transmission rights | 5.4 |  |  | 5.3 |  |  | 0.8 |  |  | 0.8 |  |  | 3.9 |
Gains (losses) included as a regulatory liability/asset | 20.2 |  |  | 24.3 |  |  | 2.6 |  |  | 2.1 |  |  | 1.7 |
Settlements | (23.5) |  |  | (25.5) |  |  | (3.2) |  |  | (2.4) |  |  | (4.9) |
Balance as of June 30, | $4.4 |  |  | $4.7 |  |  | $0.5 |  |  | $0.6 |  |  | $1.5 |
The following table sets forth a reconciliation of changes in the net assets for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the six months ended June 30, 2021.
| Entergy Arkansas |  | Entergy Louisiana |  | Entergy Mississippi |  | Entergy New Orleans |  | Entergy Texas
| (In Millions)
Balance as of January 1, | $2.7 |  |  | $4.2 |  |  | $0.6 |  |  | $0.1 |  |  | $1.6 |
Issuances of financial transmission rights | 2.8 |  |  | 4.1 |  |  | 1.7 |  |  | 0.4 |  |  | 2.7 |
Gains (losses) included as a regulatory liability/asset | 27.8 |  |  | 14.7 |  |  | 7.7 |  |  | 2.1 |  |  | 82.2 |
Settlements | (29.5) |  |  | (18.2) |  |  | (7.9) |  |  | (2.0) |  |  | (82.7) |
Balance as of June 30, | $3.8 |  |  | $4.8 |  |  | $2.1 |  |  | $0.6 |  |  | $3.8 |

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- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI http://asc.fasb.org/topic&trid=2229140 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 40 -Section 50 -Paragraph 5 -Subparagraph (f) -URI http://asc.fasb.org/extlink&oid=123477628&loc=d3e90205-114008 + Details
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