Entergy UTILITIES

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Our team of utility employees has been tested by storm and responded with courage and determination. Our utilities remain strong, capable and prepared.

During the first half of 2008, Entergy Utilities made solid progress against a diverse set of initiatives – continuing to transform the generation portfolio and pursuing constructive rate discussions with a number of regulators. The second half of 2008 brought unprecedented disruptions including two record-setting, back-to-back hurricanes and extreme turmoil in commodity and financial markets. The events of last year highlighted the importance of being prepared. Our utilities proved to be ready for the challenges they faced.

Record-Setting Storm Restoration

Hurricanes Gustav and Ike were among the most destructive storms we’ve ever experienced and presented unique challenges. For example, Hurricane Gustav severely damaged the transmission system, knocking 13 of the 14 transmission lines serving the New Orleans metropolitan area out of service and creating an island, with the area no longer electrically interconnected to the electricity grid. At its peak, 964,000 customers were without power after Gustav, second only to Hurricane Katrina for this measure. Hurricane Ike knocked out power to 705,000 customers at its peak, including 99 percent of Entergy Texas, Inc.’s customers – the most in its history.

Entergy’s utility employees executed a record-setting restoration. Most importantly, this was the safest restoration on record for Entergy. Safety measures improved in every category from those recorded following hurricanes Katrina and Rita.

It was an outstanding performance by a team of utility employees with a history of storm restoration leadership. Entergy has been recognized with the Edison Electric Institute’s Emergency Assistance Award and/or Emergency Recovery Award for 11 consecutive years, every year the awards have been given. This record of performance continued in 2009 with the restoration effort in northern Arkansas following a severe ice storm in January, rivaling the twin storms of 2000.

Restoration cost estimates for hurricanes Gustav and Ike are estimated to range up to $1.4 billion. Following the hurricane Katrina and Rita experience, precedents were established for innovative, constructive regulatory storm recovery. In lieu of requesting interim recovery, last fall Entergy Gulf States Louisiana, L.L.C., Entergy Louisiana, LLC and Entergy New Orleans, Inc. collectively accessed $229 million from funded storm reserves.

The Arkansas Public Service Commission also approved a process for Entergy Arkansas, Inc. to recover $22 million of the $26 million in extraordinary Continued next page

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storm damages incurred for hurricanes Gustav and Ike and other 2008 storms through a storm damage rider in 2009. Likewise, the APSC opened a docket for affected utilities to file storm cost recovery requests for the January 2009 ice storm. Pursuant to that docket, the APSC subsequently approved Entergy Arkansas’ request to defer for accounting purposes incremental storm recovery operations and maintenance expenses, subject to certain conditions. Further, legislation was introduced to establish storm reserve accounting for electric utilities and for storm securitization.

Entergy Gulf States Louisiana and Entergy Louisiana also received interim approval, without prejudice to ultimate resolution, from the Louisiana Public Service Commission to defer and accrue carrying costs on unrecovered storm expenditures while they seek regulatory recovery. Entergy Texas is pursuing approval in the 2009 Texas Legislative Session for securitization to recover storm restoration costs. New securitization legislation is not needed in Louisiana, as existing legislation extends to hurricanes Gustav and Ike. We expect to file for permanent recovery with the LPSC and the Public Utility Commission of Texas by spring 2009 and anticipate the process to be complete in early 2010. Entergy Mississippi, Inc. continues to evaluate its options for storm cost recovery, as does Entergy New Orleans.

Meeting The Challenge: Responding quickly and safely with a focus on what really matters

Even as we restored power more quickly and safely following the 2008 hurricanes, we were criticized by those who believe the design and operation of Entergy’s transmission system led to customer outages. We agree there are benefits to selectively harden and add more redundancy to Entergy’s transmission system beyond what is required under current reliability standards in order to mitigate the effect of future storms on the ports, refineries, factories and businesses in the Gulf Coast region. However, we believe the associated costs should be borne by all who benefit from the Gulf Coast energy infrastructure, ports and industries – not just our customers. We support the development of a Gulf Coast national infrastructure policy to address this issue, which is vital to the nation’s energy needs.

Flexible Long-Term Resource Planning

We have a 10-year history of productive generation and infrastructure investment designed to ensure our customers have access to affordable, clean and reliable power. In 2008, we continued to execute our point-of-view-driven portfolio transformation strategy. This strategy enables us to opportunistically acquire generation resources and invest in infrastructure to address a long-term short position in our Continued next page

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utility service territories of up to three gigawatts. Last year Entergy Arkansas completed its acquisition of the Ouachita Power Facility and Entergy Gulf States Louisiana completed its acquisition of the Calcasieu Generating Facility. Both are modern, efficient and flexible generation resources located in Louisiana.

As uncertainties in financial, economic and commodity markets grew in the second half of 2008, we temporarily suspended long-term resource procurement efforts under our portfolio transformation strategy (with the exception of the 2009 Western Region RFP). We believe these needs can be managed through shorter term procurements for some period of time.

In early 2009, Entergy also requested temporary suspension of federal regulatory reviews of its combined Construction and Operating License applications for new nuclear units at Grand Gulf Nuclear Station and River Bend Station. We took this step to gain more time to consider alternative reactor technologies to make sure we ultimately have the most cost efficient, highest quality generating resource for our customers. This action in no way reflects a change in our position on the importance of nuclear power.

Pursuing Constructive Regulatory Outcomes

Entergy’s utility operating companies worked with regulators at local, state and federal levels throughout 2008 in pursuit of constructive regulatory outcomes. Here is a summary of progress made in each of our service territories:

  • In Arkansas, we were pleased with the constructive action taken by the APSC on innovative ratemaking mechanisms including approval of a capacity rider for the Ouachita acquisition and a mechanism for recovery of 2008 extraordinary storm restoration costs, as well as the opening of a docket to study innovative regulatory alternatives. We were disappointed by the decision of the Arkansas State Court of Appeals, upholding almost all aspects of the 2007 order issued by the APSC on the general rate case brought by Entergy Arkansas. We have filed a petition for review of the Appeals Court decision by the Arkansas Supreme Court.
  • Entergy Louisiana received unanimous approval from the LPSC for the Waterford 3 steam generator replacement project, the second to last nuclear plant of its type to replace its steam generators due to careful maintenance. The LPSC also approved the capacity purchase of one-third of the Ouachita output owned by Entergy Arkansas, and we entered into other power contracts, securing regulatory pre-approval as part of our portfolio transformation strategy. Finally, we are interested in pursuing extensions of our Formula Rate Plans for Entergy Gulf States and Entergy Louisiana and have had preliminary discussions with LPSC Staff concerning this matter. Continued next page
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  • Mississippi enacted new baseload legislation that will facilitate development of new nuclear resources at Grand Gulf. Entergy Mississippi continues to work with the relatively new commissioners on the Mississippi Public Service Commission to respond to questions on fuel cost issues and claims raised by the Mississippi attorney general. Entergy Mississippi believes the attorney general’s claims are unfounded and filed to move the complaint to U.S. District Court, which we believe is the appropriate forum to resolve the federal matters raised. Entergy Mississippi also filed a counterclaim for declaratory and other relief.
  • As part of its rate case filed in July, Entergy New Orleans proposed to make permanent the voluntary base rate credit on electric bills that it introduced in early 2008. The rate case also seeks a gas rate increase and a further decrease in electric rates. Hearings are scheduled in April and a City Council decision is expected in May.
  • Entergy Texas completed its first year of stand-alone operations in 2008 and achieved a unanimous settlement in its base rate case. The $46.7 million base rate increase, approved by the PUCT in March 2009, represents the first base rate increase in 17 years. Updated analyses were also filed in the Qualified Power Region proceeding and Entergy Texas expects to submit its overall recommendation in an updated Transition to Competition report later this year.

Entergy Arkansas and Entergy Mississippi have both announced their intentions to withdraw from the System Agreement in 2013 and 2015, respectively. Given their announcements, Entergy’s utility operating companies are discussing with the staff and/or advisors of regulatory commissions a proposed framework for a successor arrangement to the System Agreement. The key objective of any such arrangement is to maintain the benefits of operating as a larger system, including the ability to call upon a larger pool of generating resources, while at the same time seek to eliminate the numerous issues that have arisen in the past.

The Entergy Utility Advantage

Our aspirations are designed to deliver what really matters to all of our stakeholders. Entergy Utilities aspire to provide customers with clean, reliable and affordable power generated and delivered safely. Performance excellence can only be achieved in a safe, accident-free workplace. More than 55 sites within our utility organization earned Star status under the Occupational Safety and Health Administration’s Voluntary Protection Program, which is the highest possible safety rating for an industrial work site.

Long-term financial aspirations through 2012 include 3 to 4 percent annual utility earnings growth. Our point-of-view-driven strategies, clean generating fleet, adaptable employees and an unrelenting focus on what really matters create a real, sustainable advantage for our utilities. We are well prepared to meet whatever challenges lie ahead.

* days after hurricane peak outages until power was restored to 85 percent of customers who could accept power

We strive to safely deliver what really matters to our customers – affordable, reliable and clean power. In 2008, our utilities delivered excellent customer service that included the fastest and safest storm restoration in company history.