安特吉 (ETR) 2009 Q3 法說會逐字稿

Good day, everyone and welcome to the Entergy Corporation third quarter 2009 earnings conference call. Today's call is being recorded. At this time for opening remarks and introductions I would like to turn the call over to Michele Lopiccolo of Investor Relations. Please go ahead, ma'am.

Good morning and thank you for joining us. We'll begin this morning with comments from our Chairman and CEO, Wayne Leonard, and then Leo Denault, our CFO, will review results. In an effort to accommodate everyone with questions this morning, we request that each person ask no more than two questions. After the Q&A session, I will close with the applicable legal statements. Wayne.

Thanks, Michele. Good morning. With the EEI financial conference rapidly approaching, our comments today will be limited to significant events occurring during the third quarter. Next week we have our regularly scheduled Board meeting which includes a review of the 2010 financial plans and how they align with other plans, strategies and aspirations. We'll have more to share with you on all of that at EEI. Today I'll begin with review of the regulatory developments at the utility since our last update.

An overarching objective at our utility operating companies is receiving authorized returns from our regulatory commissions at an appropriate level to attract capital and to maintain solid investment grade credit and then to actually earn those authorized returns, so we have two gaps to close. Generally, authorized returns have been below our view of a fair return and we haven't consistently earned even those. To address these issues, Entergy Arkansas, Entergy Mississippi initiated new regulatory filings during the quarter. Entergy Texas is preparing a new filing for late this year and Entergy Gulf States Louisiana and Entergy Louisiana entered contested settlements that improved their opportunities. You may recall that Entergy New Orleans obtained a constructive rate case settlement last April that implemented a three-year formula rate plan beginning with the 2009 test year. That's a good start.

Here is what is ahead. On September 4 Entergy Arkansas filed a rate case requesting a $223 million increase reflecting an 11.5% ROE and formula rate plan including mechanisms that provide Entergy Arkansas the ability to actually earn its allowed return. Those mechanisms include mid point ROE resets with rates changed on a perspective basis when earnings fall outside the prescribed plus or minus 25 basis-point bandwidth and provisions addressing timely recovery of commission approved expenditures for certain generation and transmission-related projects. In addition, the proposed FRP includes a recovery and incentive mechanism that aligns the shareholders' economic interest with successfully implementing the state's energy efficiency and conservation objectives.

Over the course of the past year the Arkansas commission has examined similar concepts in a series of dockets. The preliminary procedural schedule sets the case for hearings to begin next May with new rates effective in July. It's also noteworthy to point out that even with the proposed rate increase in July, Arkansas customers can expect lower bills because other expected reductions such as a significant reduction expected in the rough production cost equalization rider as a result of lower natural gas prices in 2009. On September 18, Entergy Mississippi filed modifications to its formula rate plan. The proposed modifications more closely align Entergy Mississippi's FRP with FRPs of other regulated Mississippi utilities which will allow for a more uniform and streamlined review process. These modifications will provide Entergy Mississippi the same earnings opportunities as the other Mississippi utilities it competes with for capital to serve its customers.

Modifications include resetting Entergy Mississippi's return to the middle of its bandwidth each year, broadening the current annual rate change limitation or cap and implementing a projected test year concept instead of a historical test year as a sole measure of determining just and reasonable rate levels. Given Entergy Mississippi's expected need to make significant transmission related capital expenditures, these changes are critical to provide a reasonable opportunity to earn a fair return. The proposed modifications are expected to be heard by the Mississippi commission at the same time it is considering rate making for southern companies Mississippi subsidiary.

Entergy Texas is also planning to file a new rate case at the end of the year. In addition to seeking appropriate rate and return levels, this filing will align Entergy Texas provisions contained in recent legislation that supports the timely recovery of a reasonable and necessary expenditures for transmission infrastructure improvements and recovery of wholesale transmission charges. In the interim, on September 18, Entergy Texas filed an application to implement a power cost recovery factor to timely recover purchase power capacity costs for a single-based load contract recently offered to the Entergy system and projected to save Texas customers $9.5 million to $16 million over three years. Entergy Texas requested this mechanism to recover the capacity costs until such time as the cost reflected which ever occurs first.

In Louisiana last week at its business and executive session commission approved uncontested settlements for formula rate plans for both Entergy Gulf States Louisiana and Entergy Louisiana. The settlements resolved outstanding test year issues related to previous formula rate filings resulting in a total refund of $16.6 million. The settlement also provided for new formula rate plans for the 2008, 2009 and 2010 test years retaining previous ROE ranges and incorporating a number of unique recovery provisions such as the continuation of capacity rider, pro forma treatment for the Waterford 4 Black Star project, making provisions to reflect wholesale contract expirations in Entergy Gulf States Louisiana retail wholesale allocation, and establishing a placeholder provision to request future cost recovery outside of the FRP for energy efficiency and environmental requirements.

Effective with November billing cycle, Entergy Gulf States Louisiana and Entergy Louisiana are permitted to reset their rates to achieve their allowed ROEs of 10.65% and 10.25% respectively. 2008 test year filings support cost of service increases in the amounts of $36.9 million for Entergy Gulf States Louisiana and $16.3 million for Entergy Louisiana. Rates are subject to refund pending review of the filings, of course.

Further, parties to the settlements committed to work together to attempt to develop a transmission cost recovery rider with a schedule to be set that provides for the LPSC to address this matter at its March 2010 session. A common objective you may have noted among all regulatory commissions is transmission upgrades and a common concern among all Entergy jurisdictions is timely cost recovery. The utility operating companies recognize that America is in the process of amending certain reliability planning standards and if approved by FERC, these amendments will result in more stringent planning criteria. These revised planning standards will result in significantly increased expenditures for the utility operating companies.

Also in recent weeks and months utility operating companies have engaged in ongoing discussions with FERC and retail regulators regarding its independent coordinator transmission arrangement which is authorized through November 2010. As the result of the transmission discussions, the retail regulators of the utility operating companies formed the Entergy Regional State Committee, what we call the ERSC, to consider these matters jointly in an advisory role, at least initially. Among other things, the ERSC will supervise the cost benefit analysis compared in the ICT arrangement with another alternative becoming part of the SVP RTO. The utility Company strongly supports the actions of its retail regulators to work collaboratively in order to develop consensus among themselves, to provide input on the appropriate direction and structure for the operating Company's transmission assets and for the guidance on other system-wide transition matters.

Another significant regulatory development during the quarter including resolution of the storm proceeding in Texas where settlements were achieved. Entergy Texas reached an unopposed black box settlement and storm cost recovery proceeding and subsequently reached a unanimous settlement in its financing order docket, both of which were approved by the Public Utility Commission of Texas. Pursuant to the settlements, Entergy Texas expects to securitize roughly $540 million including carrying costs of $43.5 million through a projected October 26 bond issue. Securitization proceeds are net of an estimated $70 million of projected insurance proceeds subject to true-up. Entergy Texas received $75.5 million in September following resolution of the Hurricane Ike claim which will be factored into the final carrying cost calculations when the bonds are sold.

In nuclear, operations continued at record-setting levels. At the utility Waterford 3 exceeded 400 days of continuous operations before shutting down in October for their scheduled refueling outage. This notable accomplishment ranks in the top decile of the industry for loss rates. The rare breaker to breaker run as they were forced to shut down about a year ago when Gustav came through. You might recall they were chasing the record set by Vermont Yankee and [ANO2] which previously had breaker to breaker runs. It's rare but at Entergy when they come out of an outage they always expect to go breaker to breaker before they go down again.

At Entergy nuclear our non-utility fleet did have a near perfect run this quarter with a capacity factor rounding to 100%. Moreover, Indian Point completed another major milestone during the quarter. Following the review final safety valuation report the advisory committee on reactor safeguards which reports directly to the NRC commissioners concluded that the renewal applications should be approved enabling this vital resource to operate for another 20 years. Next steps to official license extension include obtaining final supplemental environmental impact statement by February 2010.

In addition, significant progress was evident on the proposed spinoff with the ultimate resolution now clearly in our line of sight around the end of the year. As you are aware, an amended petition was filed in New York in August further enhancing the financial flexibility and strength of the [nexus], while at the same time preserving Entergy's financial objectives for pursuing the separation. Following the technical conference in the first half of September, the administrative law judges established a procedural schedule to move the proceeding to an orderly closure that could lead to a commission decision in December. The next date of interest is October 29 when initial comments on the amended petition are due from all parties.

In Vermont, a significant milestone was achieved when the department of public service entered into an agreement to settled all issues in the spinoff docket as documented in a memorandum of understanding. In the agreement, the Department of Public Service acknowledges that a nexus agreements and obligations and MOU will provide material benefits to Vermont and on that basis shall recommend to the Vermont Public Service Board that it approve the MOU and issue the final order for the spinoff. As a result and in view of the substantial passage of time since filing briefs, Entergy Vermont Yankee requested the Vermont Public Service Board expedite its final consideration of transaction and issue its decision in final order approving the transaction by mid November.

In other procedural matters, approved amended spinoff application filed in August and nexus also filed its fourth amendment to the Form 10 with the Securities and Exchange Commission and Entergy submitted a request for supplemental ruling to the Internal Revenue Service to reflect addition of the exchange trust agreement, among other things. Having said that, and having received approvals from FERC and the NRC, in order to move forward with the proposed spinoff we are awaiting approvals from Vermont and New York. If Vermont adopts the MOU as recommended by the Vermont Department of Public Service, that leaves open only the New York Public Service Commission and final approval by the Entergy Board of Directors.

Before closing, I want to acknowledge how thrilled Entergy was to announce the election of Dr. Stewart C. Myers to its Board of Directors since September. Dr. Myers is a legend in the field of finance and I expect many, if not all of you, consider yourself a student of his, or at least of his many works and highly regarded and sided research papers. Of course he's the co-author of the classic graduate level textbook "Principles of Corporate Finance" which is now in its ninth edition. As we enter a period which will undoubtedly be increasing complex with alternative strategies or investments to achieve cleaner energy and more efficient usage, as we consider and evaluate equally complex financing arrangements and structures to reach those objectives, Dr. Myers' expertise and experience will be valuable in providing guidance and oversight. He makes an already outstanding Board even better.

Finally, Entergy was proud to achieve a pair of awards demonstrating its long-standing commitment to integrate basic principles of sustainable development into all areas of its business. For the eighth consecutive year the Dow Jones sustainability index included Entergy on their exclusive world index. The Dow Jones sustainability index recognized Entergy as the only US utility on the world index in 2006, 2007 and 2008, and Entergy was only one of two US utilities selected to the world index in 2009. This year, Entergy performed highest or was ranked among the best in corporate governance, score cards and measurement systems, occupational health and safety, environmental policy and management systems, climate strategy and talent and retention. The carbon disclosure project also named Entergy to the carbon disclosure leadership index to the Company's approach to climate change. 2009 marks the sixth consecutive year Entergy has been commended for its corporate governance with respect to carbon disclosure practices.

Entergy was also honored to be named Business Week's best places to launch your career list. Entergy was the only energy Company included in the ranking. Personally, we think it is a pretty challenging and rewarding place to work. Every day we have customers to serve, communities to strengthen and investors to please. Although third quarter includes a lot of progress on all these fronts, we recognize we have much work ahead of us and it come down to the same way we think about safety. We can never be complacent, not even for a second, and I assure you we aren't and we won't be. More about that at EEI. Now, let me turn the call over to Leo.

Thank you, Wayne, and good morning, everyone. In my remarks today I will cover third quarter results and cash flow performance followed by an update on our share repurchase activity, and a recap of 2009 earnings guidance. I will close with a few thoughts on the utility and the nexus that we will be discussing with you further at the upcoming EEI conference. Starting with our financial results on slide two, third quarter earnings decreased compared to a year ago due to lower results at utility, parent and other, partially offset by non-nuclear wholesale assets business. On an operational basis, Entergy nuclear produced modestly higher earnings. Once again, operational results exclude two special items related to the spinoff. Third party expenses at utility parent and other that we began reporting in the second quarter of 2008 and incremental synergies reflected in Entergy nuclear results since the start of this year.

Looking closely at third quarter results we delivered a solid quarter aligned with expectations in our adjusted earnings guidance. As expected, quarter-over-quarter variances reflected several income tax adjustments recorded at all three business segments in 2008. The net effect of these income tax items on a consolidated basis provided around $0.40 per share benefit to the third quarter earnings last year. Both the utility and nuclear businesses delivered net revenue growth due primarily to the absence of hurricane activity in 2009 at the utility and strong operational performance of the non-utility nuclear plants resulting in a fleet-wide capacity factor of 100%. Slide three presents the factor that drove the quarter on quarter results in more detail.

Utility, parent and others operational earnings decline was due primarily of the absence of 2008 adjustment reducing income tax expense. This adjustment was associated with liquidation of a subsidiary. Higher operation and maintenance expense also contributed to lower current period earnings. Positives at utility, parent and other this quarter include higher net revenue and higher other income. Weather was not a major factor considering both billed and unbilled sale periods.

The second half of June saw some of the highest daily average temperatures throughout our service territory in 10 years and the related sales and weather effect were generally reflected in July billed sales. The revenue effect, however, hadn't been captured in unbilled revenue during second quarter. The most significant driver in utility net revenue was the absence of Hurricanes Gustav and Ike which reduced revenue in all customer classes in the third quarter 2008. Because of our billing cycles work, however, not all of the storm effects are captured in the billed KWH sales statistics in our earnings release. For residential and commercial sales customers, positive sales growth is largely due to the return to normal activity this year. However, for the most part, the hurricane effect was not reflected in the quarter-over-quarter change in industrial sales. Industrial customers are typically billed at the beginning of the month following usage. Therefore, lower billed industrial sales due to the hurricanes last year didn't generally show up until the fourth quarter of 2008.

The continued weak economy was the major driver in industrial sales. Overall industrial sales did decrease by 6.3% versus the third quarter of 2008. Still, month-to-month industrial sales trends have been generally positive over the last six months and September's industrial sales decline of only 2.1% versus the same month last year marked a significant improvement.

As we look to next quarter, the ramp of industrial expansions planned for the year as well as improving fundamentals in manufacturing and the overall economy are expected to positively impact the industrial segment. Utility net revenue in the third quarter also includes the charges for the Entergy Louisiana and Entergy Gulf States Louisiana rate refunds that Wayne mentioned earlier. Going forward, the extension of the formula rate plans and one-time ROE mid point reset provide a path for earning our allowed ROEs at these two companies.

Turning to Entergy nuclear, quarterly results were modestly higher than the period -- the prior year. The positive variances were due primarily to higher revenue from fewer planned and unplanned outages and increased other income. Two factors associated with decommissioning trust funds combined to produce the higher other income. First, third quarter 2008 results included an impairment on certain decommissioning investments. Additionally, third quarter 2009 reflected realized gains on sales in these decommissioning funds. With the stock market producing another quarter of 15% plus returns, a portion of the realized gain is attributed to the recovery of investment values above levels reflected in prior quarters impairments. Partially offsetting these positive items were higher operation and maintenance and income tax expenses. A Massachusetts state law change in 2008 reduced income tax expense at Entergy nuclear to a greater extent than last year -- greater extent than in 2009.

Finally, earnings for non-nuclear wholesale assets business improved this quarter due primarily to lower income taxes. Third quarter 2008 results reflected higher income tax expense driven primarily by the redemption of a previous investment in that business.

Slide four recaps our cash flow performance for the current quarter. Excluding the impact of nearly $1 billion of securitization proceeds received in the third quarter of 2008, operating cash flow was higher than the prior period. As you recall, the securitization financings at Entergy Louisiana and Entergy Gulf States Louisiana closed out recovery for Hurricanes Katrina and Rita. Securitization proceeds last year also included funds for future storms, which were drawn down shortly thereafter for Hurricanes Gustav and Ike.

Turning next to an update of our share repurchase programs on slide five. During the third quarter we completed roughly $600 million of share repurchases planned for 2009. We purchased a total of 7.7 million shares at an average price of $80 per share. Nearly all of the repurchases were made under the now complete $2 billion Board authorized programs. The balance was repurchased to offset the dilutive of stock option exercises. As a reminder, in early 2008 the Board granted incremental share repurchase authority for $500 million for opportunistic market repurchases in the event they become available before the spinoff takes place. During the third quarter we completed this incremental program utilizing cash generated by the Entergy nuclear business. Therefore, at spinoff $500 million of share repurchases made this quarter will be applied to Entergy's targeted share repurchases from spinoff proceeds.

Slide six details our 2009 earnings guidance that we are affirming today. On an operational basis earnings guidance ranges from $6.20 to $6.80 per share. As reported earning guidance of $6 to $6.60 per share reflects spinoff to synergies and transaction costs for the spinoff through June 2009. We adjusted our earnings guidance in July to reflect a steep decline in power prices on Entergy nuclear's open position since the start of the year and significant decommissioning trust fund investments. With three quarters now behind us we continue to see full-year 2009 performance in line with our adjusted earnings guidance range.

In closing, we continue to see the value creation opportunity through this spinoff. Post spin we are positioning in nexus with financial strength and flexibility to manage its business and act on opportunities. Regarding a nexus financing, you may recall that the senior secured revolver executed last December in the midst of the financial crisis included a condition to complete the spinoff by October 1. A few weeks ago a nexus obtained an amendment to this facility that increased the amount to $1.2 billion and extended the period to complete the spinoff by nine months to July 1, 2010. At the utility, we have opportunities to add value in the business through organic growth including load growth and ROE improvements, portfolio management including capital investment opportunities and the spinoff recapitalization made up of share repurchases and the split-off. We look forward to talking more about this with you at EEI where we also plan to initiate 2010 guidance. And now the Entergy senior team is available for your questions.

(Operator Instructions) We'll first hear from Greg Gordon with Morgan Stanley.

Thanks. Two quick questions. The first is with regard to power market fundamentals as you see them. We've observed over the last four to six weeks that power long end of the curve in terms of around the clock power prices has gotten demonstrably better in most markets including the New York and New England market. Are you seeing maybe $3 to $4 improvement anyway, are you seeing improvement in market fundamentals, is that just driven by the back end of the gas curve having gotten a little bit better? Can you give us some color on that?

Yes, Greg. We've seen the same thing in terms of recovery in those prices as you look at the gas market, the support that you've seen in the 2011, 2012, 2013 time frame has been a support for power prices in that time frame and certainly as you think about things like economic recovery in those regions, if you think about what is going on with gas prices, if you think about things around CO2 which we really don't think there is anything there yet in the market prices, those are all contributing to support for power prices and we have seen them move. We saw them hang in there a little bit better than obviously on the front end of the curve to begin with and they certainly continue to strengthen over the course of the last several months.

Do you think that that is primarily a function of gas and hasn't really factored in a substantive economic recovery or carbon?

I think that there is recovery in there, but probably not much for carbon and at the moment.

Second question is less specific. We've been focussed on your opportunity to execute the spinoff for a long time now as we're waiting on New York as the final uncertainty, but think about your management style, you guys have delivered value to shareholders a lot of different ways over the course of the 15 years that I've covered the company and you've always seemed to have a backup plan when one direction seems to become less executable. So can you talk about what your backup plan for shareholder value creation would be if New York does reject the spin?

Well, Greg, we'll probably save that discussion more for EEI. We're in the middle, obviously, of a comment period. We've came a long way in Vermont and New York and we prefer at this point to wait and see what the comments look like and let this play out, and we'll be in a better position to talk about what the backup plan is. But you're completely right, I mean, in terms of the way we think about the business, whether it's a backup plan or an exit strategy or whatever, if you go down the list of stuff that we've done over the years from selling EK to spinning the non-utility nuclear to putting ENOI into bankruptcy within a couple weeks after Katrina when most people said there is no way they would do it, to selling the turbines to turning the keys over on [dam heads], we try to do the rational economic thing and have some alternative in mind to achieve the value that we've committed to you all and this is a tough one. It's a tough one because of the optionality we put at such a high value on it in giving the shareholders two pieces of paper and two very different businesses. So this is really kind of a conversation for another day, but it's -- I know you're all interested in that and it's one that we continue to think about and particularly as the market evolves and I can't say that we'll have a specific answer at EEI, but we'll have a better one.

Thank you.

Next we'll hear from Leslie Rich from Columbia Management.

Hi. Leo, could you just review again what you said about the share repurchases? You said you finished as of September 30 and that that -- did you say that that was really accelerating the share repurchases that were planned post-spin proceeds?

Yes, we've -- we finished the share repurchases that we had baked into our initial and then revised guidance for the year as of September 30, and that was the completion of the $1.5 billion program that we had had from a couple of years ago. And then as you recall we had put in another $500 million worth of authorization from the Board last year when it looked like the spin was obviously not going to occur as quickly as we had desired it to do so. That authority really was a roll-forward or part of the original of 2.5 billion that we said would be repurchased from the spin. And, as you recall, we discussed that in relation to -- we were going to go out and do the financing associated with the spinoff, but given the fact we hadn't done that we had not done that, the distributions that would have occurred out of the nuclear business for example, interest costs and plus whatever capacity they would have had during 2009 to distribute capital was still there. Even though we owned the business, it just wasn't going to interest expense. So we utilized that cash for the repurchase authority.

Okay. Great. Thank you.

Next we'll hear from Steve Fleishman with Bank of America-Merrill Lynch.

Hi, guys. On your hedging for the nuclear business, I think you added some decent amount of hedges for 2010 and 2011 in this quarter. I think you added a decent amount in the last quarter. Couple of questions on that. First, what are you seeing as the unit contingent discounts in your markets? Are they the same as they used to be roughly when you're putting in these new hedges? Are they still like, what was it, used to be about 5% or something?

Well, we've always talked about them, Steve, in terms of ranging between 4% to 10%, and they've continued to be in that range when we -- when we're looking at them.

Okay. And then another question related to the fact that you're doing more hedging. In 2010 and 2011, is this -- should we view this as kind of your point of view that pricing could stay much weaker in 2010 and 2011 than maybe where it is now or should we view it as you wanting to just have more locked up for credit purposes at nexus? What is the reasoning for kind of doing more hedging than you had for several quarters before that?

Well, the driving factor behind it really is as part of Entergy we have certain limits that we place around what our open position can be and those are, as you said, based on credit. They're based on liquidity, they're based on point of view, a variety of factors that go into it and while we anticipate regulatory approval and that in 2010 nexus will be a stand-alone entity. Going back a little bit to what Greg mentioned in the world of planning, it is still owned by Entergy and so we still start with it is going to adhere to Entergy's credit policies, Entergy's hedging limits. So that's the basis for where we start. And then we look at what our point of view is, we look at credit, we look at liquidity and where we think Entergy would be if we continued to hold it and then we layer in there what are the nexus parameters that would drive liquidity, credit metrics. So, really, Steve, it is a combination of all of those factors and not to say that any one of them weighs greater than another, but the credit, the liquidity and ideas have to be overwhelmed by the point of view to get us outside of our bounds. There has to be an exception made to get outside the limits and we just haven't made that exception yet, particularly as it relates to the 2010.

Okay. Thank you.

And we'll hear from Jonathan Arnold with Deutsche Bank.

Good morning.

Good morning, John.

Just a quick question on Vermont and the ongoing negotiations we see commented on around a new contract. Do you see that as something which is a necessary precursor for the spin? Is it more part of the relicensing debate? And just any update or color on what's going on there.

Okay. Rick Smith will cover this.

Jonathan , it really has nothing to do with the spin. I mean, it's solely related to the certificate of public good as it relates to the relicensing of the plant, and the approval we have to get from Vermont legislature, and commission up there. So those activities continue to move forward and conversations continue to be progressing

Okay. And if I may, the second question, you mentioned an improving trends and recent months in sales that you utilities. Could you give us a little more color on where you're seeing that, which kinds of industries, and I think you were going as far as saying that there would be much better comp in the fourth quarter, just some more discussion around that area.

Sure, Jonathan, this is Gary Taylor. To build on what Leo was saying, first we talk about it and looked at each time and would be good to cover it. If you look at our sales information, we look at write-offs, arrears and disconnects. That continues to be is the same as our historical levels. We have not seen a growth in those class of customers. We're really seeing an improvement in manufacturing. I think that's where you really see much more for us in the chemical and refining area. The biggest hit we had seen was typically in things like woods and primary metals, but that tends to be a very, very small part of our industrial load. And so as a result of that, as I think we've seen the price of commodities come up like oil and things like that and decrease in the natural pricing, we've seen industrial rates. Leo said if you look at each quarter it improved. Last quarter we talked about the fact that we thought we saw a bottoming out probably in the spring timeframe. That trend continuing. We see that pretty much across all our classes of customers. Our unemployment tends for the most part appear to be below the national average, we see a good housing start permits which drives some of those industries as well. The weaker helps us as far as exports, and (inaudible) and we're seeing some improvements along those trends. The biggest thing for our industrial customers, they have seen this quarter, versus the quarter last year, close to about a 40% decrease in their rates and our customers overall have seen somewhere around a 20 to 25% decrease. So I think it is a number of things that have encouraged production in our area, and at the same time I think we are starting to see the impact of an economic recovery, and I think we're seeing that pretty much, as Leo said, September's month I think was a good indicator of what we have seen compared to last year and even with our residential and commercial, we would say that we have net with everything and the hurricane at least flat to last year.

In Q4?

In Q4 will actually continue to see some of that growth continue to go on. I mean, that trend seems to be moving back, as we have looked, it has been a pretty positive trend over the past several months.

Are you saying we can see up industrial sales in the fourth quarter versus last year?

No, I think you may see up industrial sales as we see in the trend, but I think you're still going to see those lagging even overall from last quarter, but I think you're going to see them start to recover.

Thanks a lot, Gary.

Next we'll hear from Michael Lapides with Goldman Sachs.

Just a question on storm cost recovery from Gustav and Ike. You're looking at over the next six to nine, six to 12 month, bringing in a significant amount of cash into the various subs impacted by the storms. Can you talk about plans for utilization of that cash? I mean, netting out storm reserves and that type of thing and rough number, around $1 billion or so, that's a pretty big number.

Michael, I think we'll, again, I hate to say it, again, but I think at EEI that will be a fairly rich piece of our presentation on what we plan to do, how much cash we think we'll have and what we plan to do with it. So we'll talk to the board next week about that and then we'll talk to you all in a couple of weeks, if that's okay.

All right. No problem. And this may be a Gary question, I had a question about Texas regulation. Specifically, what does the existing legislation around utility regulation in Texas allow you to do that could be a structural change in terms of being able to come closer to earning an authorized return on capital and reducing regulatory lag there? You all touched on it a little bit on the transmission side, but what about on the core distribution and regulated generation piece at Texas?

Yes, I think the biggest opportunity there is what was passed in the Senate bill 1492 which talked about transmission cost recovery. And structurally that is one of those that if you look at it has been a large investment for us over the years of both distribution and transmission but allows us to address the regulatory lag that that has created. So that is one of the fundamental components. And when you look at the rate case that Wayne was talking to, one of those you have to set a baseline as a result of that and we plan to do that and so for future transmission cost recovery. So I think that attacks clearly that structural piece of it.

And what about on -- for distribution and generation capital spend?

Well, I think as we try to -- as we're working through, as you've seen in our other file, our intents in this next filing is to address those pieces, like capacity cost which has been a drag on earnings in that business, and more timely recovery of generation assets. So as you've seen, it is kind of a plan for us to try to make that and really address the lag in that business. So legislatively you got the transmission piece, and in the filing, we will -- we intend to and try to address those other structural pieces.

Got it. Thank you, guys.

Thanks .

Next we'll hear from Andrew Levi with Incremental Capital.

Hi, guys. Just -- I don't know what you can tell us or whatever, but you mentioned a Board meeting and obviously you don't want to tell us what you actually are going to come out with and we don't know what the Board is going to say. Can you give us an idea of what topics may be discussed in a broad sense?

Well, I think -- I think the big -- one of the big things certainly that we're going to be discussing is longer term aspirations are. At the time we've been talking at the board level really for years about the non-utility fleet that we were building and the utility, and some of the structural problems at the utility in earning our returns and trying to fix those, and at this meeting really this is the normal meeting where we present our 2010 plans, but we will be with this spin I think relatively imminent here, will be going into more detail about what the aspirations will be and should be for Entergy in particular. I know a number of people have different points of view with regard to what the prospects are and we want to establish an agreement at the Board on how we're going to proceed going forward and what the expectations will be, and it does center around the issues of cash and how we use our cash, and so I think that's, there is always a lot of other things at the Board meeting to talk about in terms of longer-term plans. It takes -- transmission is a big issue obviously with changing, I like to mention, and we'll talk to the Board a lot about what that means to the company and what our plans are going forward there. But the aspirations and getting those straight, being in agreement will probably be the one of the most important things we'll talk about.

Yes, and actually that was kind of my next question, you know, you mentioned about transmission. But is there any more kind of detail that you can give us on what you're thinking there when you say transmission?

Well, the -- I guess to make a long story short, what we're thinking is that this is going to take longer than what we hoped. The favorable development certainly is the all of the states putting together an advisory committee to look at these issues and spending the time to understand what the new planning criteria might be and what the impacts of that might be and trying to come to some agreement with with regard to things like tariffs and structures, whether it is an RTO or enhanced ICT, whether it is cost allocation, across the jurisdiction who is going to stay, who is going to go? And the study I mentioned for STP is six to eight months out in terms of them coming up with an advisory opinion with regard to where we should be and that may or may not be unanimous in any event, so obviously you can't go very far in any direction if your regulators aren't on board and don't believe it's in the best interests of the customers in particular. So I can't share a lot with you because they're doing their study. The good news is that they are doing a study, they are involving themselves and they're trying to come to the right answer and that's a good thing. It should streamline the process in some respects, but there's a lot of issues, obviously involved also, but we are just breaking it down and we have to -- there is structural issues on how we should be organized whether it is RTO or enhanced ICTs, the tariff issues on what's the best way to upgrade your transmission, Secretary Salazar, I was in a meeting with him a couple of weeks ago, and he said it very, very clearly and plainly to a group that probably didn't want to hear it and he said he comes -- there was like four people in the White House working on this issue and he says it comes down should the people pay for it that create the costs or benefit or should it be paid for by all of society as a societal type of benefit? That is an issue our state regulators will also take up and we'll be asking them also to take up the issue the amount of capital we're talking about, given the credit issues at Entergy and other markets that are available, and other fancy vehicles, what is the cheapest way to source this capital in the deepest top possible markets when you have an obligation to serve. So it's, there is no answer there right now, but these -- the dialog has already been taking place and the process is set up to continue it.

Thank you.

Thanks.

And next one we'll hear from Paul Patterson with Glenrock Associates.

Good morning, guys.

Good morning, Paul.

Good morning.

I just want to do touch base again sort of on the nuclear side. Is there any possibility of having a settlement with the New York parties or are we still pretty much looking at a litigated process still?

Paul? I mean, there is always an opportunity to settle issues. I mean it is probably not right for that right now because we're so close to all of us filing our initial comments. Once everybody sees those comments, then there would be an opportunity, and then on November 12 we file reply comments. There is not a lot of time to kind of resolve some of those issues and maybe we can do one or two items and we would have an opportunity through our reply comments or other party's reply comments to do something, but it's going to move pretty quickly now.

Okay. So--

Paul, just you have to really kind of keep in mind we went through that process and we were -- we tried every way to expedite this, and we weren't playing around. We put our best offer on the table and we filed it. And there might be some ways in the discussion, something around the edges, but we've came a long way to try to meet the needs and we think we have. So if there is a settlement opportunity, we obviously listen to it, but we put a good faith offer on the table to meet what they said the objectives were. So we're hopeful that it works.

Okay. I got the picture. On the Vermont Yankee side and the contract and the extension of license, you guys mentioned I think in the last quarter there was a possibility of global settlement with that and with the nexus spin and it looks like the nexus spin was settled separately. I was wondering when we're looking at the Vermont legislature and everything that sort of has to happen here, is there sort of a time certain that you guys have to have some clarity on 2012 before you start to -- in other words, you can't wait I would assume until a month before the license expires. Could you just give us a little bit of flavor in terms of what the actual sort of deadline is here in terms of getting some clarity specifically with those remaining issues?

I mean, what we're targeting today is put something together that legislature can review starting next year, so our objective is to put something together and we're pushing hard on the PPA negotiations with the utility. We'll file that with the commission and then they'll make a recommendation to the legislature. And then the legislature comes back the first or second week in January. So I mean, that's really what we're pushing for, is to get something resolved early next year.

So it pretty much has to be finished by the beginning of next year or early next year? I mean, it can't go on indefinitely, I would assume. Correct? At what point do you have to sort of pull the plug and decide what you're going to do?

Well, if we don't get a certificate of public good out of the commission and the legislature, then we can't operate past 2012. So that's why for planning purposes we're trying to really get something accomplished in this next legislature because it's -- it will force us otherwise to make some pretty tough decisions around that plan. So, I mean, next legislative session is very critical.

Okay. And that's basically the spring of next year?

Yes.

Okay. Thanks a lot, guys.

Thank you.

We'll take our last question today from Kit Konolige from Soleil.

Good morning, guys. A lot of my questions have been answered. Just -- it struck me that there is still a pretty wide range in your guidance for the year. I know this is a little forward-looking, but can you give us some sense of with one quarter left why that range is still so wide?

Kit, we typically just don't move it around other than if there's some major, major item. Like what we had in July, what we were looking at the impairments on the decommissioning trust and the significant fall in the price of power, that prompted us to move the guidance range. But traditionally once we said that as long as we think we're in it, we leave it alone. The only thing I would mention to you, as I said in the script, we are in line with what we expected in terms of earnings and sales and things like that when we reset the guidance in July. So it's just not something that we've been doing in the last couple of years of moving the range around other than when there's some significant thing like what we saw this summer.

Fair enough. Can I -- if this isn't pushing too far in the same direction, can I just follow with if there -- if you were aware of being towards the higher end or lower end a lot of companies will say we're going to be at the higher end or lower end , would you be saying that, or if it is in the range you're just going to say that's the

We're just, right now, saying we're in the range, Kit.

Fair enough. Okay. Thanks.

And , ladies and gentlemen, that is all the time we have for questions today. I'll turn it back to our speakers for closing

Thanks to you all for participating this morning. Before we close, we remind you to refer to our release and website for Safe Harbor and Regulation G compliance statements. Our call was recorded and can be accessed for the next seven days by dialing 719-457-0820, replay code 4133911. This concludes our call. Thank you.

Ladies and gentlemen, that does conclude our conference for today. We thank you for your participation.