Thank you all for being here today. Welcome to the Entergy Corporation Second Quarter 2020 Earnings Release and Teleconference. Currently, all participant lines are muted. After the presentation from our speakers, we will have a question-and-answer session. I will now turn the conference over to David Borde, Vice President of Investor Relations. Please proceed, David.

Thank you. Good morning and thank you for joining us. We will begin today with comments from Entergy’s Chairman and CEO, Leo Denault; and then, Drew Marsh, our CFO, will review results. In an effort to accommodate everyone who has questions, we request that each person ask no more than one question and one follow-up. In today’s call, management will make certain forward-looking statements. Actual results could differ materially from these forward-looking statements due to a number of factors, which are set forth in our earnings release, our slide presentation and our SEC filings. Entergy does not assume any obligation to update these forward-looking statements. Management will also discuss non-GAAP financial information. Reconciliations to the applicable GAAP measures are included in today’s press release and slide presentation, both of which can be found on the Investor Relations section of our website. And now, I will turn the call over to Leo.

Thank you, David, and good morning, everyone. Thank you for joining us. Today, we are reporting strong second quarter results of $1.37 adjusted earnings per share. Sales in the quarter were better than we expected. We are on track to achieve our $100 million O&M cost savings target for the year. And our capital plan is unchanged. With these results, we are affirming our full year guidance, our longer term outlooks and our dividend growth aspirations. As you all know, the COVID-19 pandemic has placed a burden on our customers, employees and communities. We believe, it is part of our mission, empowering life, to do all that we can to support our stakeholders as we all work to recover from its effects. Despite these extraordinary times, 2020 is on pace to be another year of significant accomplishments for Entergy. This quarter, we’ve made progress on multiple fronts, all of which will benefit our stakeholders. We completed Phase 2 of the Western Region economic transmission project. The New Orleans Power Station came online. The Public Utility Commission of Texas finalized its rulemaking for the generation rider. The Mississippi Public Service Commission approved Entergy Mississippi’s formula rate plan filing. Entergy Arkansas and Entergy Louisiana each filed their annual formula rate plans and requested extensions of these mechanisms. And Entergy Louisiana issued a request for proposal for up to 300 megawatts of new renewable resources. More importantly, we continue to successfully manage the effects of our investment on customer rates. According to an S&P Global Market Intelligence study published earlier this month, in 2019, Entergy provided power to retail customers at the second lowest average price among major investor-owned utilities in the United States, something we are very proud of. The COVID-19 pandemic continues to affect all of us across the country. As we discussed last quarter, we were well-prepared from the outset, and we continued to effectively manage our response. We are taking precautions for our employees and our customers. Those who can are working from home. And we have procedures in place to keep our employees in the plants and in the field safe. We are also creating innovative solutions to help our customers and our communities. For example, our social responsibility and automation employees worked together to develop a bot that proactively informs customers in need about the Low Income Home Energy Assistance Program or LIHEAP. This project also won second place in the global contest for innovative ways to reduce COVID-19’s impact on the economy and communities. Students and faculty at Southern University are using 3D printers in their Entergy-sponsored lab to make parts for reusable N95 masks for healthcare professionals. With our community partners, Entergy has helped to prepare more than 2 million meals, provided crisis grants for more than 5,000 households and delivered personal protection equipment to first responders, individuals, and families indeed. Through the first half of the year, Entergy has donated almost $9 million in charitable contributions to support our communities, including almost $3 million in COVID relief efforts and Entergy’s The Power to Care program, which helps customers who need financial assistance to pay their bills. In parallel to our COVID-19 relief efforts, we continued to execute on our major projects across our service area to modernize our utility infrastructure and enhance its efficiency and reliability for the benefit of our customers. We placed New Orleans Power Station in service in May, in time for the summer peak period and hurricane season. Since entering service, this highly flexible and efficient peaking unit is being dispatched frequently. We completed Phase 2 of the Western Region economic transmission project. This $115 million investment supports economic growth in Southeast Texas and enhances reliability for existing and future customers. The Public Utility Commission of Texas also approved our certificate for convenience and necessity for the Timberland transmission line, a $57 million project expected to be completed in 2022. We reached an important energy milestone with the 100th customer signing up for the ReNEWable Orleans Residential Rooftop Solar program. The program offers a cost-effective way for low-income customers to participate in the benefits of renewable energy without having to make an upfront capital investment. Entergy New Orleans installs, owns and maintains the rooftop solar systems, and customers receive a bill credit for their participation. ReNEWable Orleans is a good example of the innovative programs we are implementing to deliver renewable energy solutions to our customers. We will continue to engage with our regulators and stakeholders to expand the use of renewables under a framework that ensures we build the most economic system balancing reliability, cost and sustainability. In addition to providing meaningful customer benefits, our three-year capital plan has significant certainty. We’ve talked to you before about the 90-90 framework by which you should view the certainty of our capital plan; that our capital plan is 90% ready for execution from a regulatory approval standpoint, and that more than 90% will be recovered through timely mechanisms. Today, we’re adding a third 90 to further emphasize the strength of the plan. That 90% of the capital plan is based on the need for system modernization and not dependent on customer growth. These three statistics mean that our customer-centric capital plan is necessary, the majority will not require a special regulatory view, and we expect timely recovery. We benefit from constructive and progressive regulatory mechanisms that provide clarity to our plan and give us confidence in meeting our financial commitments. Recently, the Public Utility Commission of Texas finalized the generation rider, which will provide for full and timely recovery of capital costs associated with a new generation facility. We’re grateful for the Commission’s leadership in developing this new rule, which allows for more timely recovery to help us create value for our stakeholders in Texas and ensure that the communities we serve remain economically competitive. We plan to make a filing later this year, using this mechanism to request recovery of Montgomery County Power Station when it comes online in 2021. Entergy Mississippi received approval of its formula rate plan filing, and rates were implemented in April. Entergy Arkansas and Entergy Louisiana each submitted their annual FRP filings. Summaries of the requests are included in the appendix of our webcast presentation. Both of these operating companies are in the last year of their FRP cycles and are requesting extensions. Entergy Louisiana’s request includes a midpoint reset and a new distribution rider similar to the transmission rider that is currently in effect. In New Orleans, we continue to work with the City Council on the appropriate timing to begin the filing cycle for the recently approved three-year formula rate plan. At SERI, we filed our brief on exceptions to the ALJ’s initial decision issued in April. As you know, we disagree with the majority of the initial decision because it incorrectly seeks to resolve important policy issues that FERC ultimately must decide. The actions we’ve taken seek to create significant benefits for our customers who consistently experience some of the lowest rates in the country year after year. Our customers have not been harmed by our actions and in fact, stood to benefit greatly from them. Our tax planning practices have created more than $900 million in direct customer benefits, $550 million of which has already been credited to customer bills. The April initial decision, if affirmed by the FERC, would discourage utilities like ourselves from pursuing prudent, innovative strategies to lower customer bills. The sale leaseback arrangement also produced significant savings for our customers, and the ALJ’s recommendations would similarly discourage utilities from entering into such transactions. We feel strongly that our positions on the law and the facts are correct. To be very clear, we believe that our actions have been prudent and for the benefit of customers, and that there should be no refunds or disallowances, except for the small depreciation correction that we agreed to. While we will vigorously defend our position at the FERC, the timeframe for pursuing SERI’s uncertain tax position any further is lengthy, and the outcome is uncertain. This leaves us no choice but to mitigate risk for our owners. In the next few weeks, we will give up SERI’s uncertain tax position with the IRS. This will effectively cap the principle of any potential historical refunds, eliminate the basis for any reduction in SERI’s rate base going forward, and eliminate the basis for the $147 million excess ADIT customer credit raised in the July ALJ initial decision. Drew will provide additional thoughts on this matter, and I encourage you to review our brief on exceptions. At Entergy, we play a vital role in every region where we operate and our core values are reflected in our efforts on behalf of our stakeholders. Entergy is consistently recognized for its corporate citizenship, climate leadership and commitment as an employer of choice, which is a tremendous honor. For a fifth consecutive year, Entergy was named a 2020 honoree of the Civic 50 by Points of Light, the world’s largest organization dedicated to volunteer service. This award recognizes Entergy as one of the 50 most community-minded companies in the United States. Additionally, 3BL Media has named Entergy to its annual 100 Best Corporate Citizens ranking, which recognizes outstanding environmental, social and governance transparency and performance among the 1,000 largest U.S. public companies. This is the eighth year Entergy has been included in this prestigious ranking. We were also named the winner of a Bronze Stevie Award for our 2019 climate report, where we outline steps that we are taking to deliver cleaner energy solutions and promote a lower carbon future for all of our stakeholders. Finally, like many of you, I have been saddened and upset by recent events that have laid bare yet again the deep social inequalities and injustices that so many in our country continue to face. As our human rights statement outlines, Entergy respects the human rights of all individuals. With a workforce of close to 14,000, we leave no room in Entergy for racism, discrimination or intolerance, but rather seek to achieve our vision and mission through diversity and inclusion of all people and their unique ideas, backgrounds, and perspectives. We will continue to move forward in our mission, and you as owners, including our employees, who are a top 10 owner of the Company, have my and the entire Entergy leadership team’s commitment that we won’t retreat from our obligations, personally or professionally. We know that our actions towards creating real and meaningful change speak much louder than words. As I said at the outset, we delivered yet another strong quarter. Even though COVID-19 has had an impact, 2020 has already been a year of significant accomplishments that keep us on track to meet our strategic, operational and financial objectives. We are committed to those objectives and resolved to be the premier utility. The foundation of our business remains strong and sustainable. We have among the lowest retail rates in the country. Our capital plan remains on track and will modernize our system, benefit our customers and our local economies. We have constructive and progressive regulatory mechanisms. We are an industry leader in critical measures of sustainability. We have one of the cleanest large-scale power generation fleets. And while we have seen some slowdown in industrial activity, our industrial base is among the most economically advantaged in the world. We expect that they will lead the region’s recovery in their respective industries. We create innovative solutions to help our customers, and we’re prepared to overcome headwinds through a disciplined cost management program as evidenced in our response to both last year’s unfavorable weather and this year’s COVID-19 impacts. It should not surprise you that we are affirming our longer-term outlooks, given our commitment to create permanent cost savings through continuous improvement efforts. These efforts strengthen and when possible will improve our delivery of steady, predictable earnings growth, as we demonstrated on this call just last year. This is what makes Entergy a compelling long-term investment. This is the foundation on which we will grow, innovate and expand our investment profile to continue to deliver on our commitments tomorrow. Before I turn the call over to Drew, I want to confirm that our virtual Analyst Day will be held on September 24th. These are exciting times for Entergy, and we look forward to continuing the conversation with you then about what we’re doing to build the premier utility.

Thank you, Leo. Good morning, everyone. As Leo noted, our second quarter results were strong. Sales were better than we expected on our last call. We are well on track to achieve our cost savings for the year, and our capital plan remains unchanged. We’re affirming our guidance on longer-term outlooks as we stay focused on becoming the premier utility. Entergy adjusted earnings for the quarter were $1.37 and drivers were straightforward. Starting with utility on slide 6, we saw positive effects of regulatory actions associated with our customer-centric investments in Arkansas, Louisiana, Mississippi and Texas, including the Lake Charles Power Station, which came online a few months early. We experienced lower sales volume due to the impact from COVID-19 and unfavorable weather. Lower O&M reflected our cost reduction initiatives, as well as the timing and scope of non-nuclear generation outages and lower nuclear generation expenses. Depreciation and interest were higher as a result of our continued growth, and earnings per share also reflected a higher share count. At EWC, on slide 7, as-reported earnings were $0.55 higher than a year ago. The key driver was strong market performance for EWC’s nuclear decommissioning trust funds. The quarter’s results also reflected lower revenue and lower O&M, primarily due to the shutdown of Pilgrim and Indian Point 2. Slide 8 shows operating cash flow increased approximately $240 million. The main drivers were higher collections for fuel and purchase power costs and a $45 million reduction in the unprotected excess to ADIT returned to customers. The second quarter also benefited from lower nuclear refueling outage spending and lower severance and retention payments at EWC. Lower collections from utility customers partially offset the increase. Now, turning to slide 9, we are affirming our 2020 adjusted EPS guidance range of $5.45 to $5.75, and our 2021 and 2022 outlooks remain unchanged. As I mentioned in my introduction, our sales came in higher than we discussed last quarter, when we initially estimated the effects of COVID-19, and we’re well on track to achieve our cost savings for the year. Sales were better than expected in all classes and our overall 2020 expectation has improved slightly. For O&M, to date, we’ve achieved nearly 40% of our $100 million spending reduction, and remain on track to achieve the remainder by year-end. And while our year-to-date variance is very positive, a portion of that is due to planned projects that were shifted to the second half of the year in response to COVID-19. As a result, we expect the third and fourth quarters to reflect spending for these delayed projects as well as the balance of our identified cost savings initiatives. Our credit metrics and liquidity position are outlined on slide 10. Our parent debt to total debt was 22% and our FFO to debt was 14.6%. The FFO metric includes the effects of returning $189 million of unprotected excess ADIT to customers over the last 12 months. Excluding this giveback and certain items related to our exit of EWC, FFO to debt would have been 16%. As we noted last quarter, we remain committed to achieving FFO to debt at or above 15% by the fourth quarter of 2021. Our liquidity position remains strong. And you can see that as of June 30th, our net liquidity, including storm reserves, is $3.5 billion. Following up on Leo’s comments regarding SERI, we estimate that if the FERC were to agree with the conclusions in the ALJ’s initial decision without modification, the ongoing adjusted EPS impact could be $0.15 to $0.20. This includes approximately $0.06 for the sale leaseback issue, and the remainder is from financing refunds to customers. This also reflects that we will give up SERI’s uncertain tax position with the IRS to mitigate risks to our owners and it does not reflect any actions we would take elsewhere in the Company to mitigate the impact. This estimate should not be interpreted as an acknowledgment on our part of the merits of the initial decision, or our expectation of the potential outcome on this matter. As Leo mentioned, we disagreed with the initial decision; we clearly laid out in our filings in this case, and we don’t believe there should be any material impact to EPS. Before closing, our Analyst Day is scheduled for September 24th. We’ll share with you our longer-term growth strategy, including our customer-centric investments and continuous improvement efforts. We will provide five-year views of our EPS outlooks and credit expectations, as well as details on the key drivers that support our path to achieve our objectives. We’re excited to share our plans with you. We had a strong second quarter; we achieved a number of significant accomplishments, and we remain on track to meet our strategic, operational and financial objectives. We’re committed to these objectives as well as our goal to be the premier utility. And we look forward to continuing this conversation at Analysts Day. And now, the Entergy team is available to answer questions.

Our first question comes from James Thalacker from BMO Capital Markets. Your line is now open.

Just two quick questions. I think your previous guidance had projected a 2.5% decline for the full year 2020; now, you're at 2%. Can you provide a breakdown of how you're evaluating that for the remainder of the year? Also, do you believe there might be some conservatism accounted for on the industrial side as you assess the recovery for the rest of 2020?

Yes. James, this is Drew. Yes. So, we haven’t changed our outlook for sales actually for the third and fourth quarter from what we described in May, even though we did see a little bit better outcome in the second quarter than what we were anticipating. It is possible that we could do better. But, given the spike in cases around the country and our service territory, we thought we should just keep it about where it is for right now. We do continue to see the phased reopening, even though it’s paused in certain municipalities right now. So, there is opportunity perhaps over the balance of the year. But, for the time being, we’ve elected to keep our outlook for sales where we had it for the second half.

The improved outlook primarily stems from the second quarter and the sales observed so far this quarter.

That’s correct.

Okay. And then, the other question, I guess just comes back to sort of credit is, are you still comfortable with the equity guidance that you’ve given before where you’re looking, I think for the high end of the 5% to 10% of the planned CapEx? Is that still sort of how you’re looking at things, and do you still feel like you’re on target for the end of the year to get to 15% FFO to debt, which I think is where you guys were sort of targeting last time we spoke?

That’s right. We are still targeting that, we still expect to make that by fourth quarter next year. And our equity outlook is in that same range that we’ve talked about previously. We have continued to think about timing. And we think it’s probably the latter half of next year when the need will actually arise. We continue to think about the method in which we would deliver that. In the past, we’ve talked about block rate; that’s what we did a few years ago. So that’s still on the table. But we’ve also added other options to the table, including an ATM possibility and perhaps even preferred equity. Right now, we don’t have authorization for preferred equity within our charts. So, we would need a proxy vote to ensure that that would be shareholder friendly, but we’re considering that as well.

And just a follow-up on the preferred equity, I’m assuming that’d be like a mandatory convert.

Yes.

Is that from a rating agency standpoint? I know that you’ll get anywhere from 25% to 50% credit for something like that. Does that kind of limit I guess how much of the funding you can do through the convert, just considering it’s a little bit farther out and you don’t get as much equity credit as you would versus say a block sale or through an ATM?

So, that’s why the preferred equity gets you actually I think up to 100%. There are options around preferred debt, other versions of convertibles that will give you various credit depending on the rating agency. And we have authorization for all of those. What we don’t have authorization for is the preferred equity that would allow you to get 100% credit.

Our next question comes from the line of Shahriar Pourreza from Guggenheim Partners.

So, good to see that the $100 million cost savings program is on target. Is there any plans to hold recurring savings into ‘21? Any sort of rough numbers to think about, I mean, what could be recurring with the 2020 savings, anything perpetual? And I have a follow-up.

So, obviously, at this point in the year, we are also thinking about 2021 and what that might mean. We have started to think about opportunities for savings in 2021. So, that is actually well underway. Currently, we are monitoring everything that’s going on in the world and making sure that there aren’t any other risks that may be out there that we will need to apply those to. But that network that you’re referring to is well underway. But, we’re not prepared to talk about specific numbers at this point.

You mentioned that the year has gotten off to a strong start. Could you provide some insight on where you currently stand within your earnings expectations for 2020? It appears you might be nearing the higher end of your projections, especially if the third quarter weather plays out as expected. From a trend perspective, where do you see yourself within that range?

We’re still tracking towards the middle of the band. There are opportunities potentially out there for us. But, we continue to track towards the middle at this point.

Our next question comes from the line of Jonathan Arnold from Vertical Research.

Could you clarify where sales deviated, either positively or negatively, in the second quarter? The slide you presented and the Q1 deck seem to indicate this was against guidance rather than a year-over-year comparison. I noticed industrial sales were down 1% in Q2. Was that where the favorable performance was, or was it more on the residential side?

This is Rod. Good morning. I think, the storyline remains consistent with what we expected back in May, where the growth was driven by residential, because much of the shelter-in-place was showing up in our residential sector. You had some volatility in the commercial sector because you had many different levels of uncertainty with schools, churches, and restaurants and the like. And I think the clarity we had in the industrial sector sort of played out, although it was a little bit better than expected. So, the fundamentals have not changed dramatically when you think about this cross-sector contribution to growth. So, residential is really showing up for us and offsetting a large part, a lot of the volatility we’re seeing elsewhere.

And I’ll just add to that it pretty much was across all three quadrants where we were a little bit ahead of expectations. It wasn’t one or the other that completely dominated.

I want to follow up on the balance sheet; it seems your uncollectibles increased from around 7 million to approximately 43 million. Can you discuss what you are observing in that area? Is it peaking and stabilizing now, or is it on an upward trend? Additionally, how should we consider these variables moving forward?

Jonathan, that’s a good question. So, we are seeing more uncollectibles right now. We actually booked about $30 million of bad debt expense this quarter. That was offset by regulatory assets, given regulatory orders that we have in our retail jurisdictions. So, there’s not really any bottom line impact associated with that because we would expect to be able to recover those costs. Historically, we’ve experienced about bad debt expenses, about a third of our typical arrears. Typically, we have arrears in any given point of about $75 million, and we experienced about $25 million of bad debt expense. We are about $100 million higher on our arrears right now. And that’s why we booked the $30 million. So, it’s consistent with that ratio. We expect that there are some people that are able to pay that are just taking advantage of the current situation. But, we do expect that to grow a little bit more. We haven’t turned on our dunning programs. And we would expect that that balance would continue to grow through the summer, although we expect it to continue to be manageable. And that growth is reflected in our liquidity expectations, which continue to be strong. So, that is something that we’re closely monitoring. And it’s important for us to continue to work with our customers in order to help them through this.

Our next question comes from the line of Julien Dumoulin-Smith from Bank of America.

If I can, I first want to say that I appreciate the support.

Julien, we’re having trouble hearing you.

I apologize. Hey, guys, apologies. On the merits of your argument with SERI and just understanding just the financial implication, Drew, you specifically said that there were some mitigating factors, but didn’t quantify or specify what they were. Can you help walk through what they might be, be it from a reduction in financing needs or otherwise? Just help us understand what reserves you might have already taken and/or other mitigating circumstances?

Julien, I'll begin by discussing the mitigating circumstances, and then I'll let Drew finish. First and foremost, I expect that we will overcome any impact we face and still meet our expectations. This is our starting position from an organizational standpoint; we will continue to meet the objectives we've set for you, regardless of the impact. Regarding the SERI case, there are aspects we've discussed previously that could help mitigate, such as the interest costs related to the IRS and other similar factors. Additionally, there may be some financing strategies that fit into the plan Drew has. Ultimately, our main expectation is that we will be able to overcome whatever challenges arise.

Right. And I would say that the opportunity within our business is embedded within our continuous improvement program. And so, as you know, we’ve been working hard to continue to develop that. We feel like it’s continued to grow and mature. And that is where that opportunity would come from. So, not all of it clearly has been identified at this point. But, as we clearly just articulated, there is an expectation about how we would be expected to operate within the Company. And just like we have in the past, I have 100% confidence that the Company is going to figure out how to make that work.

And of course, Julien, our perspective is that there won’t be an impact because of our position in the case. So, I just want to make that clear too?

Absolutely, I appreciate the merits of the arguments there as well. They sound sound. But, if I can ask you to down on this, as you obviously have a $100 million in cost that you are well on track, at least for this year. When you say you’ll find ways to offset that, does that include leveraging or offsetting it with continuation of this $100 million in cost cuts? And maybe even more broadly, actually, I know the last quarter and at the outset of COVID, we’ve been talking about the sustainability of these cost reductions. How do you think about that now, given the plans for the back half of the year and how that might impact ‘21, and also considering potential timing in ‘21 of resolution to the sales basis when you say...

I’ll explain a bit more, Julien, and I’ll ask my colleagues to remind me if I miss anything important. I appreciate your question because there are a couple of factors at play here. The $100 million mainly relates to our flex program as we manage the effects of COVID and weather this year. We’ve faced negative weather impacts already, along with COVID's effects. Last year, we experienced similar weather challenges, and those intra-year funds are primarily what we discussed at the start of the year regarding our response to weather and the subsequent increase in flexibility due to COVID's impact on sales. Additionally, we have a continuous improvement program similar to what we did last year, where we identified lasting cost reductions, which allowed us to reinvest more capital into our system to enhance reliability, improve customer experience, and expand the business. This enabled us to contribute more to our charitable foundation and enhance employee benefits through the savings gained from continuous improvement. Looking ahead to next year, we’ll integrate both approaches. I should mention that we're discovering some cost impacts resulting from our COVID response that could fall under continuous improvement and may be permanent. We're currently assessing which adjustments are temporary and which will be ongoing. I’m sure many of you have noticed changes in how you operate that are more efficient and will likely continue. I hope that clarifies things. We are focusing on two main areas: the standard flexibility within the annual budget for each department and the ongoing pursuit of permanent improvements. You saw this last year in the second quarter when we adjusted our forecasts due to continuous improvements. This year, we are maintaining our forecasts because of the flexibility we have. Does that make sense?

Right. And that’s the offset, potentially the impact next year too?

Yes, yes. But, I would say, impact next year, depending on what it is, whether it is weather, whatever, it would be a flex sort of thing; we were just talking about SERI. That’d be more of a continuous improvement sort of thing.

Got it. All right. Excellent. Thanks for the clarity.

Thank you.

Thank you. Our next question comes from the line of Jeremy Tonet from JP Morgan. Your line is now open.

I was just wondering if you could speak a little bit more on the 90% of CapEx not dependent on customer growth. And is this kind of like a shift in planning and strategy or is it kind of just more reflective of current system investment levels that are needed?

That's an excellent question, Jeremy. This aligns with the capital plan we've maintained for the past decade. I thought it was important to introduce a metric that keeps this in everyone's minds because I believe it is essential to our plan. When you consider our activities in the generation sector over the last ten years, we are replacing outdated power generation with state-of-the-art facilities. The new plants have better heat rates, leading to significant cost savings, and their emissions are 40% lower than before, using less water. All these advancements mark the benefits of the new plants. We’ve been focused on adding new generation while retiring older facilities, which meets the system's needs with modern solutions rather than outdated ones. The same is true for our investments in the distribution network. For example, in advanced metering infrastructure, we are updating old meters, not necessarily adding new customers, although some new customers do receive new meters. The majority of this initiative is driven by technological improvements. Our distribution automation and asset management strategies are all centered on enhancing the level of service for our customers through investments that reduce costs or offer previously unavailable services. About 90% of our efforts have been based on the urgent need to modernize the system. The growth in our customer base has helped provide lower rates for everyone as we expand our revenue from these assets that support modernization, which has contributed to us historically having either the lowest or second lowest rates in the country. Given the economic impact of COVID-19, it’s crucial to highlight that our capital plan remains focused on modernizing the system, and COVID has not diminished this need. In fact, it has heightened the urgency for modernization, especially at the distribution level. While currently, 90% of our focus is on technological improvements, there’s potential for even more advancements if we find the capacity to implement them. I hope this clarifies your question.

That was very helpful. Thank you for that. One more if I could. Just wondering if you could talk a bit on how your position in MISO impacts Entergy’s renewable planning. And do you see opportunities here changing over the next five years from MISO level planning and changes?

Well, we do our resource planning obviously in conjunction with the resource adequacy that we need for MISO, but our resource planning is done at the state level. So, the resource plans that we have in the type of generation we need incorporate our participation in MISO. But, MISO is not driving what resources we pick.

Thank you. Our next question comes from the line of Steve Fleishman from Wolfe Research. Your line is now open.

One very brief clarification on the SERI, because of this change you’re going to make to the uncertain tax position. Does that cause the earnings impact to occur kind of temporarily until you get the final decision?

No, there shouldn’t be any real earnings impact associated with that, aside from the fact that we had an expectation of success, which would have lowered future rate base and subsequent earnings. However, that's not what we mean when we discuss maintaining our expectations. Any impact would need to come through other means.

Okay. Just the FRPs, the extensions, I think Louisiana, you filed and then, are you doing Arkansas?

Yes, both jurisdictions.

Yes. Just how much do we need to kind of worry about these as more like normal rate cases as opposed to these like annual reviews, like can you just explain the issues in the multi-year extensions versus the annual?

The primary question regarding the renewals is whether the FRP has met the objectives we established five years ago in Arkansas and three years ago in Louisiana. Considering how we’ve shaped our capital plan and communicated it to our regulators, the key issue is whether we can achieve these objectives. You've heard us discuss reliability, sustainability, and maintaining affordable, competitive rates. If we believe we can meet these goals based on our capital plan, and as outlined in our renewal filings, we anticipate that stakeholders will agree it makes sense to continue. This process hasn’t been seen, as we've discussed, as a typical rate case that reviews past spending; it's not expected to follow that traditional route. However, the regulator has the power to evaluate any aspect they choose. We believe our interests are aligned, and the FRPs have historically functioned in a way that matches what we conveyed five years ago in Arkansas. In Louisiana, we are looking at a series of three-year renewals, and with the direction of our capital plan, we’re not just renewing the FRP. For example, as Leo mentioned, we are directing more investment towards distribution, and this asset renewal will influence what we present to Louisiana's jurisdiction as part of a distribution rider. Therefore, we are engaging our stakeholders in these types of policy discussions rather than following a rate case review.

Yes. Steve, Rod mentioned that we need to look at its performance in Louisiana by reviewing the last renewal and the prior ones. While this is our first effort in Arkansas, it's clear that the Arkansas formula rate plan has functioned as intended. For example, in 2018, tax reform led to a different outcome than anticipated, yet we still achieved our allowed rate of return and refunded money to customers in the following formula rate plan filing. This has been very beneficial for customers. Louisiana has a long history of renewals, and this will be our first in Arkansas. However, it seems to be operating as all parties intended.

Thank you. Our next question comes from the line of Angie Storozynski from Seaport Global.

I wanted to revisit SERI. I appreciate your assessment of the downside case at $0.20 and your ability to mitigate that potential earnings impact. However, it seems that might represent only part of the overall effect. There is another situation regarding the ROE and the likely equity ratio for the asset, and I understand that the ALJ recommendation is not expected until February of next year. Could you elaborate on the negotiations related to that? We have the MISO ROE decision from FERC, along with proposed adjustments to the ROE calculation mechanism. How could these factors influence Grand Gulf's earnings potential?

This is Drew. We have maintained an expectation for return on equity and capital structure for about three years now. Our outlooks on these expectations are based on the developments of the current proceedings. So far, we don’t see any reason to alter these expectations based on the progress to date. Even if our outlooks aren't fully realized in terms of return on equity and capital structure, we believe any discrepancies can be managed within our current expectations.

Okay. Even if there were those overlapping impacts, right, with the reduction of the rate base and reduction of the ROE and the reduction in the equity layer?

That’s correct.

He was saying that we already reserved on the...

We have an expectation for that based on our outlooks. We don’t usually discuss that because we’re still in the proceeding. However, we are comfortable with where that stands in our outlooks right now.

Great. And just one follow-up. So, what should we expect then going into your Analyst Day? I mean, do you plan on making any announcements, for instance regarding more renewable power spending or is this just an additional cost cutting initiative? Again, I mean, just big picture expectations going into the Analyst Day?

Yes. Big picture, Angie, we will discuss our operations, our activities, and the details of our capital plan. The capital plan is quite solid as it stands. As you know, we have a significant amount of renewables planned for the future, particularly between 2022 and 2030. We expect considerable involvement in renewables through requests for proposals, ongoing projects, and those currently under construction. I believe our capital plan is in good condition. We will share more details and discuss our future, especially regarding customer solutions. We aim to provide insights into various aspects such as the capital plan, our path towards lower emissions, customer solutions, distribution, and our approach to continuous improvement.

Thank you. Our next question comes from the line of Sophie Karp from KeyBanc.

I wanted to revisit the volumes picture and break it down by class. It appears that the industrial sector is performing well, showing only a slight decline year-over-year on a weather-adjusted basis. The commercial sector is understandably facing more challenges, while the residential sector is seeing an increase. My question is whether you could provide more insight into the current situation. Is this a trend we should anticipate continuing? Additionally, with the changes in the mix, do the sensitivities we observed before COVID still apply in this new environment?

Yes. Sophie, regarding the industrial sector that you mentioned, we were anticipating solid growth this year, around 5% to 6% for industrial. The current decline of 1% is significant compared to our expectations of an increase. Looking ahead, we expect residential trends to start declining as more people return to work outside their homes. Meanwhile, we anticipate that commercial and government sectors will gradually improve, and industrial should also hopefully start to recover. This aligns with the expectations we outlined in May. We are still projecting that the phased reopening will lead to a slow but steady improvement in these figures.

And then, lastly, maybe if you could give us a little bit of a sneak peak into your Analyst Day. Things seem to go on track for the most part for your company. What topics or what areas do you plan to give us an update on?

As far as topics for the Analyst Day, probably just a little more depth and color around what’s in the capital plan, our trend to lower emissions and as well as continuous improvement structure and things like that will be subjects that we’ll talk about. We don’t want to talk too much about it today; we want you to tune in.

Thank you. Our last question comes from the line of Ryan Levine from Citi. Your line is now open.

What projects are in your capital plan that are most sensitive to load outlook that was incorporated within that 10% that was highlighted in the prepared remarks?

There are likely a few significant new customer connections in the distribution and transmission sectors. For instance, if there's a major industrial client in our service area, building a substation for them can be quite important. Additionally, we see regular line extensions in our distribution business whenever new homes are constructed or similar developments occur. Some of the transmission infrastructure may also fall into this category if we need to construct it in response to existing or new load growth. Ultimately, it’s more about reaching that final mile.

Thanks. And then, in terms of the industrial load assumption in your guidance, what are your conversations with customers suggesting for that outlook and are there any big lumpy customers that you have color as to their plans or timing upon some of that industrial load can return throughout the remaining portion of the year?

Hey Ryan, it’s Rod. We will discuss the details of our industrial engagement more thoroughly at the Analyst Day. Our confidence in growth observations comes from engaging directly with real customers, allowing us to quantify and identify existing projects. Currently, we are focusing not only on macroeconomic commodity spreads and other indicators but also on companies that have made final investment decisions. We can identify specific companies and relate them to specific projects within our outlook, whether they have delayed projects or are ramping back up. Additionally, we probability-weight not only the projects in our plan but also other projects in our economic development pipeline to determine if they should be included or excluded in the plan. We haven't seen significant changes in our existing plan regarding projects we previously identified that were canceled. There may have been one or two minor cancellations, but they had a low impact. Our confidence is anchored in linking them to actual projects that are still active.

Thank you. Our last question comes from the line of Durgesh Chopra from Evercore ISI.

I just want to quickly clarify, Drew, the $0.15 to $0.20. I’m trying to reconcile that with slide 26 where you show the rate base exposure. Am I correct in thinking that the $0.15 to $0.20 represents a worst-case scenario of losing the return on that over $400 million rate base? Is that the right way to think about it, or am I comparing unrelated items?

Yes. So, the $400 million plus the $100 million of interest that is part of the refund, because they are saying that we owe the money. And it’s not actually really rate base; it’s refund. So, the rate base doesn’t really change in that regard. It would only change if we were successful in our outcome with the IRS, because that would be a deferred tax, and the rate base would go down; the net rate base would go down. So, really what we’re talking about is the $510 million that you see there. That total amount is the requested refund. And so, we’ve had to finance that. And then, the lease payments that are about the $17 million a year on an ongoing basis.

Thank you. At this time, I’m showing no further questions. I would like to turn the call back over to David Borde for closing remarks.

Thank you, Gigi, and thank you to everyone for participating this morning. Our annual report on Form 10-Q is due to the SEC on August 10th and provides more details and disclosures about our financial statements. Events that occur prior to the date of our 10-Q filing that provide additional evidence of conditions that existed at the date of the balance sheet would be reflected in our financial statements in accordance with Generally Accepted Accounting Principles. Also, as a reminder, we maintain a webpage as part of Entergy’s Investor Relations website called Regulatory and Other Information, which provides key updates of regulatory proceedings and important milestones on our strategic execution. While some of this information may be considered material information, you should not rely exclusively on this page for all relevant Company information. And this concludes our call. Thank you very much.

This concludes today’s conference call. Thank you for participating. You may now disconnect.