EZT Entergy Texas Inc

SUMMARY OF RISK FACTORS

Set forth below is a summary of the material risk factors which you should consider before deciding whether to invest in the bonds. These risks can affect the timing or ultimate payment of the bonds and value of your security. A description of such risk factors in greater detail follows this summary.

Limited Source of Payment for the Bonds: The only source of funds for the bonds is the transition property and the other limited moneys held by the trustee. At the time of issuance of the bonds, we will have no other assets and the bonds are non-recourse to Entergy Texas. Therefore, the sources for repayment of the bonds are limited. You must rely for payment of the bonds solely upon the Financing Act, state and federal constitutional rights to enforcement of the provisions of the Financing Act, the irrevocable financing order, collections of the system restoration charges and funds on deposit in the related accounts held by the trustee.

Risks Associated with Potential Judicial, Legislative or Regulatory Actions: The transition property is an asset created under the Financing Act and through regulatory proceedings at the Texas commission. The Financing Act as well as the financing order may be challenged in court. The Texas legislature may attempt to amend the Financing Act, impairing the value of the transition property. Further, Entergy Texas may fail or be unsuccessful in challenging such actions. Neither we nor Entergy Texas will indemnify you for any changes of law, whether as a result of Constitutional amendment, legislative enactment or any judicial proceedings.

In addition, the Texas commission retains the power to adopt, revise or rescind rules or regulations affecting Entergy Texas and may attempt to take actions which could impair the value of the transition property. Also, true up adjustment filings made with the Texas commission may be challenged before the Texas commission or in court, resulting in delays in implementation of the true-up adjustment.

Also, municipalities may seek to acquire portions of Entergy Texas’ service territory, and may dispute their obligation to pay the system restoration charges, or even if obligated to do so, may fail to bill and remit the system restoration charges on a timely basis.

Servicing Risks; Natural Disaster Recovery Risks: The collection of system restoration charges on a timely and sufficient basis depend upon the ability of the servicer to accurately forecast customer usage. If the servicer inaccurately forecasts consumption or underestimates customer delinquencies for any reason, there could be a shortfall or material delay in fixed transition charge collections. Factors which might cause inaccurate projections of usage or customer delinquencies, include unanticipated weather conditions, rolling blackouts due to capacity constraints, cyber attacks on Entergy Texas, MISO or ERCOT infrastructure, general economic conditions or natural or man-made disasters, such as hurricanes, tropical storms, ice or snowstorms and floods, and the current pandemic caused by COVID-19. Entergy Texas’ ability to collect system restoration charges from customers may also be impacted by some of these same factors. In response to the COVID-19 pandemic, the Texas commission has taken actions which could impact the ability to collect the system restoration charges, including the cessation of Entergy Texas’ ability to disconnect service, the requirement to defer payments from customers and the suspension of the requirement for customer credit deposits. Any of these actions or any future actions by the Texas legislature or the Texas commission taken in response to COVID-19 or any future pandemic or other natural disaster may adversely affect the timing of system restoration charge collections, which could result in payments on the System Restoration Bonds to be delayed or reduced.

These same natural and man-made disasters may affect Entergy Texas’ ability to deliver energy. As the system restoration charge is a consumption-based charge, any unexpected failure to deliver electricity may impact the collection of system restoration charges. Entergy Texas’ operations could be impacted by hurricanes, tropical storms, ice or snowstorms and floods. Any disruption in Entergy Texas’ ability to deliver energy could cause a delay or reduction in system restoration charge collections, which could result in payments on the System Restoration Bonds to be delayed or reduced.

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Servicing of the system restoration charges may also be adversely affected by the introduction of competition to Entergy Texas’ service territory, in which case system restoration charges will be collected and remitted by retail electric providers. Failure of the retail electric providers to remit the system restoration charges might cause delays in payments on the System Restoration Bonds.

It may be difficult for us to find a replacement servicer should Entergy Texas default in its obligations. Assuming we can obtain a successor servicer, the successor servicer may be less effective in servicing the charges, potentially resulting in delay in collections, and will be more costly.

Risks Associated with the Unusual Nature of Transition Property: The unusual nature of the transition property makes it unlikely that, in the event of a default, the transition property could be sold. Although the bonds may be accelerated in the event of a default, as a practical matter, the system restoration charges would likely not be accelerated.

Risks Associated with the Potential Bankruptcy of the Seller, the Servicer and REPs: In the event of a bankruptcy by Entergy Texas, the investor may experience a delay in payment or a default on payment of the bonds due to various factors, including the comingling of system restoration charges with other Servicer revenue, a challenge to the characterization of the sale of the transition property as a financing transaction, an effort to consolidate our assets and liabilities with those of Entergy Texas, a characterization of system restoration charge payments to the bond trustee as preferential transfers, the treatment of our claims against the seller as unsecured claims, and a general limitation on the remedies available in a bankruptcy, including the risk of an automatic stay.

In addition, if retail competition is introduced to Entergy Texas’ service territory, the retail electric providers will collect the system restoration charges and commingle such collections with their other revenues. Any such system restoration charges collected may not be available to pay debt service on the bonds in the event of a REP bankruptcy.

Other Risks: Other risks associated with the purchase of the bonds include the inadequacy of any indemnification obligations provided by the seller, the impact of a change of ratings or the issuance of an unsolicited rating, the absence of a secondary market for the bonds, the issuance of additional system restoration bonds or similar instruments creating greater burdens on the same customers, regulatory actions affecting certain investors and losses on investments held by the trustee.

The System Restoration Bonds are not a charge on the full faith and credit or taxing power of the State of Texas or any governmental agency or instrumentality, nor will the System Restoration Bonds be insured or guaranteed by Entergy Texas, including in its capacity as the servicer, or by its parent, Entergy, any of their respective affiliates (other than us), the trustee or by any other person or entity. Thus, you must rely for payment of the System Restoration Bonds solely upon the Financing Act, state and federal constitutional rights to enforcement of the Financing Act, the irrevocable financing order, collections of the system restoration charges and funds on deposit in the related accounts held by the trustee. If these amounts are not sufficient to make payments or there are delays in recoveries, you may experience material payment delays or incur a loss on your investment in the System Restoration Bonds. Our organizational documents restrict our right to acquire other assets unrelated to the transactions described in this prospectus. Please read “Entergy Texas Restoration Funding II, LLC, The Issuing Entity” in this prospectus.

RISKS ASSOCIATED WITH POTENTIAL JUDICIAL, LEGISLATIVE

OR REGULATORY ACTIONS

We are not obligated to indemnify you for changes in law.

Neither we nor Entergy Texas will indemnify you for any changes in the law, including any federal preemption or repeal or amendment of the Public Utility Regulatory Act, that may affect the value of your System Restoration Bonds. Entergy Texas will agree in the sale agreement to institute any action or proceeding as may be reasonably necessary to block or overturn any attempts to cause a repeal, modification or amendment to PURA that would be materially adverse to us, the trustee or system restoration bondholders. Please read “The Sale Agreement—Covenants of the Seller” and “The Servicing Agreement—Servicing Standards and Covenants” in this prospectus. However, we cannot assure you that Entergy Texas would be able to take this action or that any such action would be successful. Although Entergy Texas or any successor seller might be required to indemnify us if legal action based on the law in effect at the time of the issuance of the bonds invalidates the transition property, such indemnification obligations do not apply for any changes in law after the date the bonds are issued, whether such changes in law are effected by means of any legislative enactment, any constitutional amendment or any final and non-appealable judicial decision. Please read “The Sale Agreement—Seller Representations and Warranties” and “The Servicing Agreement—Servicing Standards and Covenants” in this prospectus.

Future judicial action could reduce the value of your investment in the System Restoration Bonds.

The transition property securing the System Restoration Bonds is pursuant to the Financing Act and the financing order that has been issued by the Texas commission to Entergy Texas. There is uncertainty associated with investing in bonds payable from an asset that depends on legislation for its existence because there is limited judicial or regulatory experience implementing and interpreting the legislation. Because the transition property is a creation of the Financing Act, any judicial determination affecting the validity of or interpreting the Financing Act, the transition property or our ability to make payments on the System Restoration Bonds might have an adverse effect on the System Restoration Bonds. The Financing Act might be directly contested in courts or otherwise become the subject of litigation. In addition, the financing order or any provision thereof might be directly contested in courts or otherwise become the subject of litigation. In June 2001, the Supreme Court of the State of Texas upheld the constitutionality of certain securitization provisions of the Restructuring Amendments, which are incorporated by reference into the System Restoration Amendments. Notwithstanding that decision, a federal or state court could be asked in the future to determine whether the relevant provisions of the Financing Act are unlawful or invalid. If the Financing Act is invalidated, the financing order might also be invalidated.

Other states have passed laws permitting the securitization of electric utility costs similar to the Restructuring Amendments and the Financing Act. Some of the laws that are similar to the Restructuring Amendments have been challenged by judicial actions. To date, none of these challenges has succeeded, but

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future challenges might be made. An unfavorable decision regarding another state’s law would not automatically invalidate the Financing Act or the financing order, but it might provoke a challenge to the Financing Act, establish a legal precedent for a successful challenge to the Financing Act or heighten awareness of the political and other risks of the System Restoration Bonds, and in that way may limit the liquidity and value of the System Restoration Bonds. Therefore, legal activity in other states may indirectly affect the value of your investment in the System Restoration Bonds.

If an invalidation of any relevant underlying legislative provision or financing order provision were to result from such litigation, you might lose some or all of your investment or you might experience delays in recovering your investment.

Future state legislative action might attempt to reduce the value of your investment in the System Restoration Bonds.

Despite its pledge in the Financing Act not to take or permit certain actions that would impair the value of the transition property or the system restoration charges, the Texas legislature might attempt to repeal or amend the Financing Act in a manner that limits or alters the transition property so as to reduce its value. For a description of the State’s pledge, please read “The Financing Act—Entergy Texas and Other Utilities May Securitize Qualified Costs—State Pledge” in this prospectus. It might be possible for the Texas legislature to repeal or amend the Financing Act notwithstanding the State’s pledge if the legislature acts in order to serve a significant and legitimate public purpose. Any such action, as well as the costly and time-consuming litigation that likely would ensue, might adversely affect the price and liquidity, the dates of payment of interest and principal and the weighted average lives of the System Restoration Bonds. Moreover, the outcome of any litigation cannot be predicted. Accordingly, you might incur a loss on or delay in recovery of your investment in the System Restoration Bonds.

If an action of the Texas legislature adversely affecting the transition property or the ability to collect system restoration charges were considered a “taking” under the United States or Texas Constitutions, the State of Texas might be obligated to pay compensation for the taking. However, even in that event, there is no assurance that any amount provided as compensation would be sufficient for you to recover fully your investment in the System Restoration Bonds or to offset interest lost pending such recovery.

Unlike the citizens of some states, the citizens of the State of Texas currently do not have the constitutional right to adopt or revise state laws by initiative or referendum. Thus, absent an amendment of the Texas Constitution, the Public Utility Regulatory Act cannot be amended or repealed by direct action of the electorate of the State of Texas.

The enforcement of any rights against the State of Texas or the PUCT under the State’s pledge may be subject to the exercise of judicial discretion in appropriate cases and to the limitations on legal remedies against state and local governmental entities in Texas. These limitations might include, for example, the necessity to exhaust administrative remedies prior to bringing suit in a court, or limitations on type and locations of courts in which the State of Texas or the PUCT may be sued.

Moreover, while retail competition has not been introduced in Entergy Texas’ service territory, the State of Texas may amend existing law or the PUCT may provide for retail competition after certifying that Entergy Texas belongs to a qualified service area. Please read “The Depositor, Seller, Initial Servicer and Sponsor—Competition” in this prospectus.

The Texas commission might attempt to take actions that could reduce the value of your investment in the System Restoration Bonds.

The Financing Act provide that a financing order is irrevocable and that the Texas commission may not directly or indirectly, by any subsequent action, rescind or amend a financing order or reduce or impair the

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system restoration charges authorized under a financing order, except for the true-up adjustments to the system restoration charges. However, the Texas commission retains the power to adopt, revise or rescind rules or regulations affecting Entergy Texas. The Texas commission also retains the power to interpret the financing order granted to Entergy Texas, and in that capacity might be called upon to rule on the meanings of provisions of the order that might need further elaboration. Any new or amended regulations or orders from the Texas commission might attempt to affect the ability of the servicer to collect the system restoration charges in full and on a timely basis, the rating of the System Restoration Bonds or their price and, accordingly, the amortization of the System Restoration Bonds and their weighted average lives.

The servicer is required to file with the Texas commission, on our behalf, certain adjustments of the system restoration charges. Please read “Entergy Texas’ Financing Order—Statutory True-Ups—Credit Risk” and “The Servicing Agreement—True-Up Adjustment Process” in this prospectus. True-up adjustment procedures have been challenged in the past and may be challenged in the future. Challenges to or delays in the true-up process might adversely affect the market perception and valuation of the System Restoration Bonds. Also, any litigation, as well being costly and time-consuming, might materially delay system restoration charge collections due to delayed implementation of true-up adjustments and might result in missing payments or payment delays and lengthened weighted average life of the System Restoration Bonds.

A municipal entity might assert the right to acquire portions of Entergy Texas’ electric distribution facilities and avoid payment of the system restoration charges.

Texas law may authorize certain local municipalities to seek to acquire portions of Entergy Texas’ electric distribution facilities through the power of eminent domain for use as part of municipally-owned utility systems. Although there are no recorded cases in Texas indicating that the power of eminent domain has been used by municipalities in Texas in recent times to acquire electric distribution systems, there can be no assurance that one or more municipalities will not seek to acquire some or all of Entergy Texas’ electric distribution facilities while System Restoration Bonds remain outstanding. The Financing Act specifies that system restoration charges approved by a Texas commission order shall be collected by an electric utility as well as its “successors.” In the servicing agreement, Entergy Texas will covenant to assert in an appropriate forum that any municipality that acquires any portion of Entergy Texas’ electric distribution facilities must be treated as a successor to Entergy Texas under the Financing Act and the financing order and that retail customers in such municipalities remain responsible for payment of system restoration charges. However, the involved municipality might assert that it should not be treated as a successor to Entergy Texas for these purposes and that its distribution customers are not responsible for payment of system restoration charges. In any such cases, there can be no assurance that the system restoration charges will be collected from customers of municipally-owned utilities who were formerly customers of Entergy Texas. Any decrease in the retail electric customer base from which system restoration charges are collected might result in missing payments or payment delays and lengthened weighted average life of the System Restoration Bonds.

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SERVICING RISKS

Inaccurate consumption or collection forecasting might reduce scheduled payments on the System Restoration Bonds.

The system restoration charges are generally assessed based on forecasted customer usage, which includes both kilowatts demanded and kilowatt-hours of electricity consumed by retail customers. The amount and the rate of system restoration charge collections will depend in part on actual electricity usage and the amount of collections and write-offs for each customer class. If the servicer inaccurately forecasts either electricity consumption or customer delinquency or charge-offs when setting or adjusting the system restoration charges, there could be a shortfall or material delay in system restoration charge collections, which might result in missed or delayed payments of principal and interest and lengthened weighted average life of the System Restoration Bonds. Please read “Entergy Texas’ Financing Order—Statutory True-Ups—Credit Risk” and “The Servicing Agreement—True-Up Adjustment Process” in this prospectus.

Inaccurate forecasting of electricity consumption by the servicer might result from, among other things:

Inaccurate forecasting of delinquency or charge-off rates by the servicer might also result from, among other things:

Your investment in the System Restoration Bonds depends on Entergy Texas or its successor or assignee, acting as servicer of the transition property.

Entergy Texas, as servicer, will be responsible for, among other things, calculating, billing and collecting the system restoration charges from retail electric customers or, if competition is introduced in Entergy Texas’

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service territory, retail electric providers, submitting requests to the Texas commission to adjust these charges, monitoring the collateral for the System Restoration Bonds and taking certain actions in the event of non-payment by a retail electric customer, or retail electric provider, if applicable. The trustee’s receipt of collections in respect of the system restoration charges, which will be used to make payments on System Restoration Bonds, will depend in part on the skill and diligence of the servicer in performing these functions. The systems that the servicer has in place for system restoration charge billings and collections, together with the PUCT regulations governing retail electric providers, might, in particular circumstances, cause the servicer to experience difficulty in performing these functions in a timely and completely accurate manner. If the servicer fails to make collections for any reason, then the servicer’s payments to the trustee in respect of the system restoration charges might be delayed or reduced. In that event, our payments on the System Restoration Bonds might be delayed or reduced.

If we replace Entergy Texas as the servicer, we may experience difficulties finding and using a replacement servicer.

Under certain circumstances, Entergy Texas may resign as servicer, or the trustee, the PUCT or certain bondholders may remove Entergy Texas as servicer. Please read “The Servicing Agreement—Matters Regarding the Servicer” and “The Servicing Agreement—Rights Upon a Servicer Default” in this prospectus. Under the financing order, the appointment of a successor servicer and the annual servicing fee payable to a successor servicer require PUCT approval if it exceeds 0.60% of the initial principal balance of the System Restoration Bonds. In addition, the servicing fee for any replacement servicer may not exceed 0.60% of the initial principal balance of the System Restoration Bonds unless the PUCT consents and the rating agency condition is satisfied. Please read “The Servicing Agreement—Servicing Compensation” in this prospectus. Also, any successor servicer might have less experience and ability than Entergy Texas and might experience difficulties in collecting system restoration charges and determining appropriate adjustments to the system restoration charges, and billing and/or payment arrangements may change, resulting in delays or disruptions of collections. A successor servicer might charge fees that are substantially higher than the fees paid to Entergy Texas as servicer. In the event of the commencement of a case by or against the servicer under the United States Bankruptcy Code or similar laws, we and the trustee might be prevented from effecting a transfer of servicing due to operation of the Bankruptcy Code. Any of these factors and others might delay the timing of payments and may reduce the value of your investment.

Terrorist attacks, cyber attacks, system failures or data breaches of Entergy Texas’ or its suppliers’ technology systems could limit Entergy Texas’ ability to service the transition property.

Entergy Texas operates in a business that requires evolving information technology systems that include sophisticated data collection, processing systems, software, network infrastructure, and other technologies that are becoming more complex and may be subject to mandatory and prescriptive reliability and security standards. The functionality of Entergy Texas’ technology systems depends on its own and its suppliers’ and their contractors’ technology. Suppliers’ and their contractors’ technology systems to which Entergy Texas is connected directly or indirectly support a variety of business processes and activities to store sensitive data, including (i) intellectual property, (ii) proprietary business information, (iii) personally identifiable information of customers and employees, and (iv) data with respect to invoicing and the collection of payments, accounting, procurement, and supply chain activities. Any significant failure or malfunction of such information technology systems could result in loss of data or disruptions of operations.

There have been attacks and threats of attacks on energy infrastructure by cyber actors, including those associated with foreign governments. As an operator of critical infrastructure, Entergy Texas faces heightened risk of an act or threat of terrorism, cyber attacks, and data breaches, whether as a direct or indirect act against one of Entergy Texas’ generation, transmission or distribution facilities, operations centers, infrastructure, or information technology systems used to manage, monitor, and transport power to customers and perform day-to-day business functions. An actual act could affect Entergy Texas’ ability to operate, including its ability to operate the information technology systems and network infrastructure on which it relies to conduct business.

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Given the rapid technological advancements of existing and emerging threats, Entergy Texas’ technology systems remain inherently vulnerable despite implementations and enhancements of the multiple layers of security and controls. If Entergy Texas’ technology systems were compromised and unable to detect or recover in a timely fashion to a normal state of operations, Entergy Texas could be unable to perform critical business functions that are essential to the company’s well-being and could result in a loss of its confidential, sensitive, and proprietary information, including personal information of its customers, employees, suppliers, and others in Entergy Texas’ care.

Any such attacks, failures or data breaches could have a material effect on Entergy Texas’ business, financial condition, results of operations or reputation. Although Entergy Texas has insurance coverage for cyber-attacks or data breaches, such insurance may not be adequate to cover all losses that might arise in connection with these events. Such events may also expose Entergy to an increased risk of litigation (and associated damages and fines). Consequently, such attacks, failure or data breaches could impact Entergy Texas’ ability to service the transition property, including its ability to bill, collect and remit the system restoration charges and, therefore, might delay the timing of payments on the System Restoration Bonds and may reduce the value of your investment.

It may be difficult to collect system restoration charges from other parties who may bill retail customers in the future.

If retail competition is ever introduced into Entergy Texas’ service territory, then retail electric customers will pay the system restoration charges not to Entergy Texas, but to retail electric providers who supply them with electric power. The retail electric providers will be responsible for billing retail customers and will be obligated to remit to the servicer payments of the system restoration charges, less a specified percentage allowance for charge-offs of delinquent customer accounts, within 35 days of billing from the servicer, even if they do not collect the system restoration charges from retail electric customers. Please read “Future Retail Electric Providers” in this prospectus. Because the retail electric providers would bill most retail electric customers for the system restoration charges, we will have to rely on a relatively small number of entities for the collection of the bulk of the system restoration charges.

Failure by the retail electric providers, if any, to remit system restoration charges to the servicer might cause delays in payments on the System Restoration Bonds and adversely affect your investment in the System Restoration Bonds. The servicer will not pay any shortfalls resulting from the failure of any retail electric provider to forward system restoration charge collections.

Adjustments to the system restoration charges and any credit support provided by a retail electric provider, while available to compensate for a failure by a retail electric provider to pay the system restoration charges to the servicer, might not be sufficient to protect the value of your investment in the System Restoration Bonds. Please read “Entergy Texas’ Financing Order—Statutory True-Ups–Credit Risk” and “The Servicing Agreement—True-Up Adjustment Process” in this prospectus.

PURA provides for one or more retail electric providers in each area that is open to retail competition to be designated the “provider of last resort” for that area or for specified customer classes. The provider of last resort is required to offer basic electric service to retail customers in its designated area, regardless of the creditworthiness of the customer. The provider of last resort might face greater difficulty in bill collection than other retail electric providers and therefore the servicer may face greater difficulty in collecting system restoration charges from the provider of last resort.

Retail electric providers, if retail competition ever commences in Entergy Texas’ service territory, may issue a single bill to individual retail customers that includes all charges related to the purchase of electricity, without separately itemizing the system restoration charge component of the bill. A retail electric provider’s use of a consolidated bill might increase the risk that customers who have claims against the retail electric provider will

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attempt to offset those claims against system restoration charges or increase the risk that, in the event of a bankruptcy of a retail electric provider, a bankruptcy court would find that the retail electric provider has an interest in the transition property and would make it more difficult to terminate the services of a bankrupt retail electric provider or collect system restoration charges from its customers.

Competitive metering services might result in unexpected problems in receiving accurate metering data.

As part of the restructuring of the Texas electric industry, certain metering services can be provided on a competitive basis to commercial and industrial customers, and third parties are permitted to perform metering services and provide metering data to the servicer that the servicer will utilize in calculating and billing system restoration charges. The Texas commission has adopted a rule under which ERCOT, the entity designated by the Texas commission to administer the competitive retail market in Texas, establishes and periodically revises a list of qualifying competitive meters. The Texas commission’s rule also provides for testing of competitive meters, for data management, and for the use of meter data for billing by transmission and distribution utilities.

As retail competition has not been introduced into Entergy Texas’ service territory, competitive metering is not available to commercial and industrial customers in Entergy Texas’ service territory. However, it is possible it may be available in the future.

Since third parties may not have previously performed metering services in Entergy Texas’ service territory, there might be unforeseen problems in converting to the third-party’s metering system, in taking accurate meter readings and in collecting and processing accurate metering data following the conversion to competitive metering. Inaccurate metering data might lead to inaccuracies in the calculation and imposition of system restoration charges and might give rise to disputes between the servicer and REPs regarding payments resulting in missing or delayed payments of principal and interest and a lengthened weighted average life of the System Restoration Bonds.

Limits on rights to terminate service might make it more difficult to collect the system restoration charges.

The financing order expressly provides that we may authorize the servicer to disconnect service for nonpayment of system restoration charges to the same extent as an electric utility. Moreover, if the servicer is billing customers for system restoration charges, the servicer may terminate transmission and distribution service to the customer for non-payment of system restoration charges pursuant to the applicable rules of the Texas commission. Nonetheless, Texas statutory requirements and the rules and regulations of the Texas commission, which may change from time to time, regulate and control the right to disconnect service. For example, Entergy Texas generally may not terminate service to a retail customer on (1) a weekend day or holiday, (2) a day when the previous day’s high temperature did not exceed 32 degrees Fahrenheit and the temperature is predicted to remain at or below that level for the next 24 hours or (3) a day for which the National Weather Service issues a heat advisory for any county in Entergy Texas’ service territory, or when a heat advisory has been issued for either of the two prior calendar days. In addition, the Texas commission may provide for disconnection moratoria in connection with the ongoing COVID-19 pandemic, as it did in 2020, or in connection with other emergencies. To the extent these retail electric customers do not pay for their electric service, Entergy Texas will not be able to collect system restoration charges from these retail electric customers. Although retail electric providers would have to pay the servicer the system restoration charges on behalf of those customers (subject to any charge-off allowance and annual reconciliation rights), if retail competition commences in Entergy Texas’ service territory, continuing service to non-paying customers could affect the ability of retail electric providers to make such payment.

Future adjustments to system restoration charges by customer class might result in insufficient collections.

The customers who pay system restoration charges are divided into customer classes. System restoration charges will be allocated among customer classes and assessed in accordance with the formula specified in the financing order.

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A shortfall in collections of system restoration charges in one customer class may be corrected by making adjustments to the system restoration charges payable by that customer class and any other customer class. If enough customers in a class fail to pay system restoration charges or cease to be customers, the servicer might have to substantially increase the system restoration charges for the remaining customers in that customer class and for other customer classes. These increases could lead to further unanticipated failures by the remaining customers to pay system restoration charges, thereby increasing the risk of a shortfall in funds to pay the System Restoration Bonds.

RISKS ASSOCIATED WITH POTENTIAL BANKRUPTCY PROCEEDINGS OF THE SELLER OR THE SERVICER

For a more detailed discussion of the following bankruptcy risks, please read “How a Bankruptcy May Affect Your Investment” in this prospectus.

The servicer will commingle the system restoration charges with other revenues it collects, which might obstruct access to the system restoration charges in case of the servicer’s bankruptcy and reduce the value of your investment in the System Restoration Bonds.

The servicer will be required to remit estimated collections to the trustee within two business days of receipt. The servicer will not segregate the system restoration charges from the other funds it collects from retail electric customers or retail electric providers (if any) or its general funds. The system restoration charges will be segregated only when the servicer pays them to the trustee.

Despite this requirement, the servicer might fail to pay the full amount of the system restoration charges to the trustee or might fail to do so on a timely basis. This failure, whether voluntary or involuntary, might materially reduce the amount of system restoration charge collections available to make payments on the System Restoration Bonds.

The Financing Act provides that the priority of a lien and security interest perfected in transition property is not impaired by the commingling of the funds arising from system restoration charges with any other funds. In a bankruptcy of the servicer, however, a bankruptcy court might rule that federal bankruptcy law takes precedence over the Financing Act and might decline to recognize our right to collections of the system restoration charges that are commingled with other funds of the servicer as of the date of bankruptcy. If so, the collections of the system restoration charges held by the servicer as of the date of bankruptcy would not be available to pay amounts owing on the System Restoration Bonds. In this case, we would have only a general unsecured claim against the servicer for those amounts. This decision could cause material delays in payments of principal or interest, or losses, on your System Restoration Bonds and could materially reduce the value of your investment in the System Restoration Bonds, particularly if it occurred in the fifteenth year of the System Restoration Bonds after the completion of which no system restoration charges can be charged.

The bankruptcy of Entergy Texas or any successor seller might result in losses or delays in payments on the System Restoration Bonds.

The Financing Act and the financing order provide that as a matter of Texas state law:

These provisions are important to maintaining payments on the System Restoration Bonds in accordance with their terms during any bankruptcy of Entergy Texas. In addition, the transaction has been structured with the objective of keeping us legally separate from Entergy Texas and its affiliates in the event of a bankruptcy of Entergy Texas or any such affiliates.

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A bankruptcy court generally follows state property law on issues such as those addressed by the State law provisions described above. However, a bankruptcy court does not follow state law if it determines that the state law is contrary to a paramount federal bankruptcy policy or interest. If a bankruptcy court in an Entergy Texas bankruptcy refused to enforce one or more of the state property law provisions described above, the effect of this decision on you as a beneficial owner of the System Restoration Bonds might be similar to the treatment you would receive in an Entergy Texas bankruptcy if the System Restoration Bonds had been issued directly by Entergy Texas. A decision by the bankruptcy court that, despite our separateness from Entergy Texas, our assets and liabilities and those of Entergy Texas should be consolidated would have a similar effect on you as a bondholder.

We have taken steps together with Entergy Texas, as the seller, to reduce the risk that in the event the seller or an affiliate of the seller were to become the debtor in a bankruptcy case, a court would order that our assets and liabilities be substantively consolidated with those of Entergy Texas or an affiliate. Nonetheless, these steps might not be completely effective, and thus if Entergy Texas or an affiliate of the seller were to become a debtor in a bankruptcy case, a court might order that our assets and liabilities be consolidated with those of Entergy Texas or an affiliate of the seller. This might cause material delays in payment of, or losses on, your System Restoration Bonds and might materially reduce the value of your investment in the System Restoration Bonds. For example:

Furthermore, if Entergy Texas enters bankruptcy proceedings, it might be permitted to stop acting as servicer, and it may be difficult to find a third party to act as servicer. The failure of the servicer to perform its duties or the inability to find a successor servicer might cause payment delays or losses on your investment in the

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System Restoration Bonds. Also, the mere fact of a servicer or seller bankruptcy proceeding might have an adverse effect on the resale market for the System Restoration Bonds and on the value of the System Restoration Bonds.

The sale of the transition property might be construed as a financing and not a sale in a case of Entergy Texas’ bankruptcy which might delay or limit payments on the System Restoration Bonds.

The Financing Act provides that the characterization of a transfer of transition property as a sale or other absolute transfer will not be affected or impaired by treatment of the transfer as a financing for federal or state tax purposes or financial reporting purposes. We and Entergy Texas will treat the transaction as a sale under applicable law, although for financial reporting and income and franchise tax purposes the transaction is intended to be treated as a financing. In the event of a bankruptcy of Entergy Texas, a party in interest in the bankruptcy might assert that the sale of the transition property to us was a financing transaction and not a “sale or other absolute transfer” and that the treatment of the transaction for financial reporting and tax purposes as a financing and not a sale lends weight to that position. If a court were to characterize the transaction as a financing, we expect that we would, on behalf of ourselves and the trustee, be treated as a secured creditor of Entergy Texas in the bankruptcy proceedings, although a court might determine that we only have an unsecured claim against Entergy Texas. Even if we had a security interest in the transition property, we would not likely have access to the related system restoration charge collections during the bankruptcy and would be subject to the risks of a secured creditor in a bankruptcy case, including the possible bankruptcy risks described in the immediately preceding risk factor. As a result, repayment of the System Restoration Bonds might be significantly delayed and a plan of reorganization in the bankruptcy might permanently modify the amount and timing of payments to us of the related system restoration charge collections and therefore the amount and timing of funds available to us to pay system restoration bondholders.

If the servicer enters bankruptcy proceedings, the collections of the system restoration charges held by the servicer as of the date of bankruptcy might constitute preferences, which means these funds might be unavailable to pay amounts owing on the System Restoration Bonds.

In the event of a bankruptcy of the servicer, a party in interest might take the position that the remittance of funds prior to bankruptcy of the servicer, pursuant to the servicing agreement, constitutes a preference under bankruptcy law if the remittance of those funds was deemed to be paid on account of a preexisting debt. If a court were to hold that the remittance of funds constitutes a preference, any such remittance within 90 days of the filing of the bankruptcy petition could be avoidable, and the funds could be required to be returned to the bankruptcy estate of the servicer. To the extent that system restoration charges have been commingled with the general funds of the servicer, the risk that a court would hold that a remittance of funds was a preference would increase. Also, we or the servicer may be considered an “insider” with any retail electric provider that is affiliated with us or the servicer. If the servicer or we are considered to be an “insider” of any retail electric provider, any such remittance made within one year of the filing of the bankruptcy petition could be avoidable as well if the court were to hold that such remittance constitutes a preference. In either case, we or the trustee would merely be an unsecured creditor of the servicer. If any funds were required to be returned to the bankruptcy estate of the servicer, we would expect that the amount of any future system restoration charges would be increased through the statutory true-up mechanism to recover such amount.

Claims against Entergy Texas or any successor seller might be limited in the event of a bankruptcy of the seller.

If the seller were to become a debtor in a bankruptcy case, claims, including indemnity claims, by us against the seller under the sale agreement and the other documents executed in connection with the sale agreement would be unsecured claims and would be adjudicated in the bankruptcy case. In addition, the bankruptcy court might estimate any contingent claims that we have against the seller and, if it determines that the contingency giving rise to these claims is unlikely to occur, estimate the claims at a lower amount. A party in interest in the

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bankruptcy of the seller might challenge the enforceability of the indemnity provisions in a sale agreement. If a court were to hold that the indemnity provisions were unenforceable, we would be left with a claim for actual damages against the seller based on breach of contract principles, which would be subject to estimation and/or calculation by the court. We cannot give any assurance as to the result if any of the above-described actions or claims were made. Furthermore, we cannot give any assurance as to what percentage of their claims, if any, unsecured creditors would receive in any bankruptcy proceeding involving the seller.

The bankruptcy of Entergy Texas or any successor seller might limit the remedies available to the trustee.

Upon an event of default for the System Restoration Bonds under the indenture, the Financing Act permits the trustee to enforce the security interest in the related transition property in accordance with the terms of the indenture. In this capacity, the trustee is permitted to request the Texas commission or a Travis County, Texas district court to order the sequestration and payment to bondholders of all revenues arising with respect to the related transition property. There can be no assurance, however, that the Texas commission or the Travis County, Texas district court would issue this order after an Entergy Texas bankruptcy in light of the automatic stay provisions of Section 362 of the United States Bankruptcy Code. In that event, the trustee would be required to seek an order from the bankruptcy court lifting the automatic stay to permit this action by the Texas court, and an order requiring an accounting and segregation of the revenues arising from the transition property. There can be no assurance that a court would grant either order. Any failure to grant such order could result in losses or material delays in payment on the System Restoration Bonds and could materially reduce the value of your investment.

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RISKS ASSOCIATED WITH POTENTIAL BANKRUPTCY PROCEEDINGS OF

FUTURE RETAIL ELECTRIC PROVIDERS IF RETAIL COMPETITION IS

INTRODUCED

As described under “The Depositor, Seller, Initial Servicer and Sponsor—Competition”, if the provisions of PURA remain unchanged and Entergy Texas remains a member of MISO, as successor to Southeastern Electric Reliability Council, or SERC, it is possible, but not likely, that there will be any competing retail electric providers within the term that the System Restoration Bonds are outstanding. Nonetheless, it is possible that retail competition may be introduced into Entergy Texas’ service territory. If retail competition is introduced into Entergy Texas’ service territory, REPs, and not Entergy Texas, will collect the system restoration charges from customers. In such event, the following risks may arise. Please read “Future Retail Electric Providers“ in this prospectus.

If retail competition is introduced into Entergy Texas’ service territory, retail electric providers will collect the system restoration charges and may commingle such charges with other revenues they collect. This may cause losses on or reduce the value of your investment in the System Restoration Bonds in the event a retail electric provider enters bankruptcy proceedings.

If retail competition is introduced into Entergy Texas’ service territory, REPs, and not Entergy Texas, will collect the system restoration charges from customers. A retail electric provider is not required under Texas commission rules to segregate from its general funds the system restoration charges it collects, but is required to remit to the servicer amounts billed to it for system restoration charges, less an amount relating to expected customer charge-offs, within 35 days of the billing by the servicer. A retail electric provider nevertheless might fail to remit the full amount of the system restoration charges owed to the servicer or might fail to do so on a timely basis. This failure, whether voluntary or involuntary, might materially reduce the amount of system restoration charge collections available on the next payment date to make timely payments on the System Restoration Bonds.

The Financing Act provides that the priority of a perfected lien on transition property will not be impaired by the commingling of these funds with other funds. In a bankruptcy of a retail electric provider, however, a bankruptcy court might rule that federal bankruptcy law takes precedence over the Financing Act and does not recognize our right to receive the collected system restoration charges that are commingled with other funds of a retail electric provider as of the date of bankruptcy. If so, the collections of the system restoration charges held by a retail electric provider as of the date of bankruptcy would not be available to pay amounts owing on the System Restoration Bonds. In this case, we would have only a general unsecured claim against the retail electric provider for those amounts. This decision might cause material delays in payments of principal or interest or losses on your System Restoration Bonds and could materially reduce the value of your investment in the System Restoration Bonds, particularly if it occurred in the fifteenth year of the System Restoration Bonds after the completion of which no system restoration charges can be charged. Please read “How a Bankruptcy May Affect Your Investment” in this prospectus.

If a retail electric provider enters bankruptcy proceedings, any cash deposit of the retail electric provider held by the trustee might not be available to cover amounts owed by the retail electric provider.

If a retail electric provider does not have the credit rating required by the financing order, it may nevertheless qualify to act as a retail electric provider if, among other alternatives, it provides a cash deposit equal to two months’ maximum expected system restoration charge collections. Those cash deposits will be held by the trustee for the benefit of the bondholders. If the retail electric provider becomes bankrupt, the trustee would be stayed from applying that cash deposit to cover amounts owed by the retail electric provider absent relief from the court, and the trustee might be required to return that cash deposit to the retail electric provider’s bankruptcy estate if the bankruptcy court determines there is no valid right of set-off or recoupment. In that case, the issuing entity might only have an unsecured claim for any amounts owed by the retail electric provider in the retail electric provider’s bankruptcy proceedings.

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If a retail electric provider enters bankruptcy proceedings, system restoration charge payments made by that retail electric provider to the servicer might constitute preferences, and the servicer may be required to return such funds to the bankruptcy estate of the retail electric provider.

In the event of a bankruptcy of a retail electric provider, a party in interest might take the position that the remittance of funds by the retail electric provider to the servicer, pursuant to the financing order, prior to bankruptcy constitutes a preference under bankruptcy law if the remittance of those funds was deemed to be paid on account of a preexisting debt. If a court were to hold that the remittance of funds constitutes preferences, any remittance of such funds made within 90 days of the filing of the bankruptcy petition might be avoidable, and the funds might be required to be returned to the bankruptcy estate of the retail electric provider by us or the servicer. To the extent that system restoration charges have been commingled with the general funds of the retail electric provider, the risk that a court would hold that a remittance of funds was a preference would increase. Also, we or the servicer might be considered an “insider” with any retail electric provider that is affiliated with us or the servicer. If the servicer or we are considered to be an “insider” of the retail electric provider, any such remittance made within one year of the filing of the bankruptcy petition could be avoidable as well if the court were to hold that such remittance constitutes a preference. In either case, we or the servicer would merely be an unsecured creditor of the retail electric provider. If any funds were required to be returned to the bankruptcy estate of the retail electric provider, we would expect that the amount of any future system restoration charges would be increased through the true-up mechanism to recover the amount returned.

Furthermore, the mere fact of a retail electric provider bankruptcy proceeding could have an adverse effect on the resale market for the System Restoration Bonds and on the value of the System Restoration Bonds. Please read “How a Bankruptcy May Affect Your Investment” in this prospectus

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OTHER RISKS ASSOCIATED WITH AN INVESTMENT IN THE SYSTEM

RESTORATION BONDS

Entergy Texas’ indemnification obligations under the sale and servicing agreements are limited and might not be sufficient to protect your investment in the System Restoration Bonds.

Entergy Texas is obligated under the sale agreement to indemnify us and the trustee, for itself and on behalf of the system restoration bondholders, only in specified circumstances and will not be obligated to repurchase any transition property in the event of a breach of any of its representations, warranties or covenants regarding the transition property. Similarly, Entergy Texas is obligated under the servicing agreement to indemnify us and the trustee, for itself and on behalf of the system restoration bondholders, and the Texas commission only in specified circumstances. Please read “The Sale Agreement” and “The Servicing Agreement” in this prospectus.

Neither the trustee nor the system restoration bondholders will have the right to accelerate payments on the System Restoration Bonds as a result of a breach under the sale agreement or servicing agreement, absent an event of default under the indenture relating to the System Restoration Bonds as described in “Description of the System Restoration Bonds—Events of Default; Rights Upon Event of Default.” Furthermore, Entergy Texas might not have sufficient funds available to satisfy its indemnification obligations under these agreements, and the amount of any indemnification paid by Entergy Texas might not be sufficient for you to recover all of your investment in the System Restoration Bonds. In addition, if Entergy Texas becomes obligated to indemnify system restoration bondholders, the then-current ratings on the System Restoration Bonds will likely be downgraded as a result of the circumstances causing the breach and the fact that system restoration bondholders will be unsecured creditors of Entergy Texas with respect to any of these indemnification amounts. Entergy Texas will not indemnify any person for any loss, damages, liability, obligation, claim, action, suit or payment resulting solely from a downgrade in the ratings on the bonds, or for any consequential damages, including any loss of market value of the bonds resulting from a default or a downgrade of the ratings of the bonds. Please read “The Sale Agreement—Seller Representations and Warranties and “—Indemnification” in this prospectus.

The credit ratings are no indication of the expected rate of payment of principal on the System Restoration Bonds.

We expect the System Restoration Bonds will receive credit ratings from two nationally recognized statistical rating organizations (NRSRO). A rating is not a recommendation to buy, sell or hold the System Restoration Bonds. The ratings merely analyze the probability that we will repay the total principal amount of the System Restoration Bonds at the final maturity date (which is later than the scheduled final payment date) and will make timely interest payments. The ratings are not an indication that the rating agencies believe that principal payments are likely to be paid on time according to the expected sinking fund schedule.

Under Rule 17g-5 of the Exchange Act, NRSROs providing the sponsor with the requisite certification will have access to all information posted on a website by the sponsor for the purpose of determining the initial rating and monitoring the rating after the closing date in respect of the System Restoration Bonds. As a result, an NRSRO other than the NRSRO hired by the sponsor (the hired NRSRO) may issue ratings on the System Restoration Bonds (Unsolicited Ratings), which may be lower, and could be significantly lower, than the ratings assigned by the hired NRSROs. The Unsolicited Ratings may be issued prior to, or after, the closing date in respect of the System Restoration Bonds. Issuance of any Unsolicited Rating will not affect the issuance of the System Restoration Bonds. Issuance of an Unsolicited Rating lower than the ratings assigned by the hired NRSRO on the System Restoration Bonds might adversely affect the value of the System Restoration Bonds and, for regulated entities, could affect the status of the System Restoration Bonds as a legal investment or the capital treatment of the System Restoration Bonds. Investors in the System Restoration Bonds should consult with their legal counsel regarding the effect of the issuance of a rating by a non-hired NRSRO that is lower than the rating of a hired NRSRO. None of Entergy Texas, us, the underwriters or any of their affiliates will have any obligation to inform you of any Unsolicited Ratings assigned after the date of this prospectus. In addition, if we or Entergy

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Texas fail to make available to a non-hired NRSRO any information provided to any hired NRSRO for the purpose of assigning or monitoring the ratings on the System Restoration Bonds, a hired NRSRO could withdraw its ratings on the System Restoration Bonds, which could adversely affect the market value of your System Restoration Bonds and/or limit your ability to resell your System Restoration Bonds.

Alternatives to purchasing electricity through Entergy Texas’ distribution facilities may be more widely utilized by retail electric customers in the future.

Broader use of distributed generation by retail electric customers may result from customers’ changing perceptions of the merits of utilizing existing generation technology, tax or other economic incentives or from technological developments resulting in smaller-scale, more fuel efficient, more environmentally friendly and/or more cost effective distributed generation. Moreover, an increase in distributed generation may result if extreme weather conditions result in shortages of grid-supplied energy or if other factors cause grid-supplied energy to be less reliable. Electric customers within the Entergy Texas service territory whose load is served by an on-site power production facility with a rated capacity of 10 megawatts or less are not required to pay system restoration charges under the Financing Act except for system restoration charges associated with services actually provided by Entergy Texas. Therefore, more widespread use of distributed generation might allow greater numbers of retail customers to reduce or eliminate their payment of system restoration charges causing system restoration charges to remaining customers to increase, thereby increasing the risk of a shortfall in funds to pay the System Restoration Bonds.

The absence of a secondary market for the System Restoration Bonds might limit your ability to resell your System Restoration Bonds.

The underwriters for the System Restoration Bonds might assist in resales of the System Restoration Bonds, but they are not required to do so. A secondary market for the System Restoration Bonds might not develop, and we do not expect to list the System Restoration Bonds on any securities exchange. If a secondary market does develop, it might not continue or it might not be sufficiently liquid to allow you to resell any of your System Restoration Bonds. Please read “Plan of Distribution” in this prospectus.

You might receive principal payments for the System Restoration Bonds later than you expect.

The amount and the rate of collection of the system restoration charges for the System Restoration Bonds, together with the related system restoration charge adjustments, will generally determine whether there is a delay in the scheduled repayments of System Restoration Bond principal. If the servicer collects the system restoration charges at a slower rate than expected from any retail electric provider, it might have to request adjustments of the system restoration charges. If those adjustments are not timely and accurate, you might experience a delay in payments of principal and interest and a decrease in the value of your investment in the System Restoration Bonds.

Entergy Texas may cause the issuance of additional transition property or similar property through another affiliated entity.

Entergy Texas has previously sold property created pursuant to financing orders to other subsidiaries of Entergy Texas in connection with the issuance of System Restoration Bonds. Entergy Texas may in the future sell property similar to the transition property to one or more entities other than us in connection with the issuance of a new issuance of bonds similar to the Series 2009 Transition Bonds or System Restoration Bonds, or similarly authorized types of bonds in any such case without your prior review or approval. Any new issuance may include terms and provisions that would be unique to that particular issue. We may not issue additional transition bonds or System Restoration Bonds.

Entergy Texas has covenanted in the sale agreement not to sell property similar to the transition property to other entities issuing transition bonds or System Restoration Bonds if the issuance would result in the credit

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ratings on the System Restoration Bonds being reduced or withdrawn. In the event a customer does not pay in full all amounts owed under any bill, including system restoration charges, Entergy Texas, as servicer, is required to allocate any resulting shortfalls in system restoration charges ratably based on the amounts of system restoration charges owing in respect of the bonds, amounts owing to Texas Restoration LLC in respect of 2009 Transition Bonds issued by it, and any amounts owing to any subsequently created affiliate of Entergy Texas which issues System Restoration Bonds, transition bonds, or similar bonds. However, we cannot assure you that any new issuance would not cause reductions or delays in payment of your System Restoration Bonds.

Regulatory provisions affecting certain investors could adversely affect the liquidity of the System Restoration Bonds.

European Union (EU) legislation comprising Regulation (EU) 2017/2402 of 12 December 2017 (as amended, the EU Securitization Regulation) together with any guidance published in relation thereto by the European Banking Authority, the European Securities and Markets Authority, the European Insurance and Occupational Pensions Authority or the European Commission and any relevant regulatory and/or implementing technical standards adopted by the European Commission in relation thereto or to precedent legislation (together, the European Securitization Rules) imposes certain restrictions and obligations with regard to securitisations (as such term is defined for purposes of the EU Securitization Regulation). The European Securitization Rules are in force throughout the EU in respect of securitisations the securities of which were issued (or the securitisation positions of which were created) on or after January 1, 2019.

Pursuant to Article 5 of the European Securitization Rules, EU Institutional Investors, prior to investing in, (or otherwise holding an exposure to) a securitisation (as so defined) other than the originator, sponsor or original lender (each as defined in the EU Securitization Regulation), must, amongst other things, (a) where the originator or original lender is established in a third country (that is, not within the EU or the EEA), verify that the originator or original lender grants all the credits giving rise to the underlying exposures on the basis of sound and well-defined criteria and clearly established processes for approving, amending, renewing and financing those credits and has effective systems in place to apply those criteria and processes to ensure that credit-granting is based on a thorough assessment of the obligor’s creditworthiness, (b) verify that the originator, sponsor or original lender retains on an ongoing basis a material net economic interest which, in any event, shall not be less than 5% in the securitisation, determined in accordance with Article 6 of the EU Securitization Regulation, and discloses that risk retention to such EU Institutional Investors in accordance with Article 7 of the EU Securitization Regulation, and (c) verify that the originator, sponsor or relevant securitisation special purpose entity (SSPE) has, where applicable, made available information as required by Article 7 of the EU Securitization Regulation in accordance with the frequency and modalities provided for in that Article (which sets out transparency requirements for originators, sponsors and SSPEs), and (d) carry out a due-diligence assessment which enables the EU Institutional Investor (as defined below) to assess the risks involved, considering at least (i) the risk characteristics of the securitisation position and the underlying exposures, and (ii) all the structural features of the securitisation that can materially impact the performance of the securitisation position.

EU Institutional Investors include: (a) insurance undertakings and reinsurance undertakings as defined in Directive 2009/138/EC, as amended; (b) institutions for occupational retirement provision falling within the scope of Directive (EU) 2016/2341 (subject to certain exceptions), and certain investment managers and authorized entities appointed by such institutions; (c) alternative investment fund managers as defined in Directive 2011/61/EU which manage and/or market alternative investment funds in the EU; (d) certain internally-managed investment companies authorized in accordance with Directive 2009/65/EC, and managing companies as defined in that Directive; (e) credit institutions as defined in Regulation (EU) No 575/2013 (CRR) (and certain consolidated affiliates thereof); and (f) investment firms as defined in CRR (and certain consolidated affiliates thereof).

With respect to the United Kingdom (UK), relevant UK established or UK regulated persons (as described below) are subject to the restrictions and obligations of the EU Securitization Regulation directly applicable in

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the UK adopted as part of UK domestic law by operation of the European Union (Withdrawal) Act 2018 as amended by the European Union (Withdrawal) Act 2020 (as amended, the EUWA), and as amended by the Securitisation (Amendment) (EU Exit) Regulations 2019 (together with the EUWA, the EU Exit Regulations), (the UK Securitization Regulation) and as further amended from time to time.

The UK Securitization Regulation, together with (a) all applicable binding secondary legislation, technical standards or implementing technical standards made under the UK Securitization Regulation (in each case, as amended, varied or substituted from time to time), (b) any EU regulatory technical standards or implementing technical standards relating to the EU Securitization Regulation (including such regulatory technical standards or implementing technical standards) that are applicable and binding in the UK pursuant to EU Exit Regulations and subject to any transitional directions from the Financial Conduct Authority (the FCA), (c) all relevant guidance, policy statements or directions relating to the application of the UK Securitization Regulation (or any binding technical standards) published by the FCA, the Bank of England, the UK pensions regulator (the Pensions Regulator) and/or the Prudential Regulation Authority (the PRA) (or their successors), (d), any other transitional direction and any transitional relief of the FCA, the Bank of England, the PRA, the Pensions Regulator (or their successors) and (e) any other applicable laws, acts, statutory instruments, rules, guidance or policy statements published or enacted relating to the UK Securitization Regulation, in each case, as may be further amended, supplemented or replaced, from time to time, are referred to in this prospectus as the UK Securitization Rules.

Article 5 of the UK Securitization Regulation places certain conditions on investments in a “securitisation” (as defined in the UK Securitization Regulation) by a UK Institutional Investor. UK Institutional Investors include: (a) an insurance undertaking as defined in section 417(1) of the Financial Services And Markets Act 2000 (as amended, the FSMA); (b) a reinsurance undertaking as defined in section 417(1) of the FSMA; (c) an occupational pension scheme as defined in section 1(1) of the Pension Schemes Act 1993 that has its main administration in the UK, or a fund manager of such a scheme appointed under section 34(2) of the Pensions Act 1995 that, in respect of activity undertaken pursuant to that appointment, is authorized for the purposes of section 31 of the FSMA; (d) an alternative investment fund manager as defined in regulation 4(1) of the Alternative Investment Fund Managers Regulation 2013 that markets or manages alternative investments funds (as defined in regulation 3 of the Alternative Investment Fund Managers Regulation 2013) in the UK; (e) a management company as defined in section 237(2) of the FSMA; (f) an undertaking for collective investment in transferable securities as defined by section 236A of the FSMA, which is an authorized open ended investment company as defined in section 237(3) of the FSMA; and (g) a CRR firm as defined in Regulation (EU) No 575/2013, as it forms part of UK domestic law by virtue of the EU Exit Regulations (and certain consolidated affiliates thereof).

Prior to investing in (or otherwise holding an exposure to) a “securitisation position” (as defined in the UK Securitization Regulation), a UK Institutional Investor, other than the originator, sponsor or original lender (each as defined in the UK Securitization Regulation), must, among other things: (a) verify that, where the originator or original lender is established in a third country (i.e. not within the UK), the originator or original lender grants all the credits giving rise to the underlying exposures on the basis of sound and well-defined criteria and clearly established processes for approving, amending, renewing and financing those credits and has effective systems in place to apply those criteria and processes to ensure that credit-granting is based on a thorough assessment of the obligor’s creditworthiness; (b) verify that, if established in the third country (i.e. not within the UK), the originator, sponsor or original lender retains on an ongoing basis a material net economic interest that, in any event, shall not be less than 5%, determined in accordance with Article 6 of the UK Securitization Regulation, and discloses the risk retention to the affected UK Institutional Investors; (c) verify that, where established in a third country (i.e. not within the UK), the originator, sponsor or relevant securitisation special purpose entity, where applicable, made available information that is substantially the same as that which it would have made available under Article 7 of the UK Securitization Regulation (which sets out certain transparency requirements) if it had been established in the UK and has done so with such frequency and modalities as are substantially the same as those with which it would have made information available if it had been established in the UK; and (d) carry out a due-diligence assessment that enables the UK Institutional Investor to assess the risks involved, considering at least (i) the risk characteristics of the securitisation position and the underlying exposures and

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(ii) all the structural features of the securitisation that can materially impact the performance of the securitisation position.

The issuing entity and Entergy Texas do not believe that the bonds fall within the definition of a “securitisation” for purposes of the EU Securitization Regulation or the UK Securitization Regulation as there is no tranching of credit risk associated with exposures under the transactions described in this prospectus.

Therefore, the issuing entity and Entergy Texas believe such transactions are not subject to the European Securitization Rules or the UK Securitization Rules. As such, neither the issuing entity nor Entergy Texas, nor any other party to the transactions described in this prospectus, intend, or are required under the transaction documents, to retain a material net economic interest in respect of such transactions, or to take, or to refrain from taking, any other action, in a manner prescribed or contemplated by the European Securitization Rules or the UK Securitization Rules. In particular, no such person undertakes to take, or to refrain from taking, any action for purposes of compliance by any investor (or any other person) with any requirement of the European Securitization Rules or the UK Securitization Rules to which such investor (or other person) may be subject at any time. However, if a competent authority were to take a contrary view and determine that the transactions described in this prospectus do constitute a securitisation for purposes of the EU Securitization Regulation or the UK Securitization Regulation, then any failure by an EU Institutional Investor or a UK Institutional Investor (as applicable) to comply with any applicable European Securitization Rules or UK Securitization Rules (as applicable) with respect to an investment in the bonds may result in the imposition of a penalty regulatory capital charge on that investment or of other regulatory sanctions and remedial measures.

Consequently, the bonds may not be a suitable investment for EU Institutional Investors or UK Institutional Investors. As a result, the price and liquidity of the bonds in the secondary market may be adversely affected.

Prospective investors are responsible for analyzing their own legal and regulatory position and are advised to consult with their own advisors and any relevant regulator or other authority regarding the scope, applicability and compliance requirements of the European Securitization Rules and the UK Securitization Rules, and the suitability of the bonds for investment. Neither the issuing entity nor Entergy Texas, nor any other party to the transactions described in this prospectus, make any representation as to any such matter, or have any liability to any investor (or any other person) for any non-compliance by any such person with the European Securitization Rules, the UK Securitization Rules or any other applicable legal, regulatory or other requirements.

If the investment of collected system restoration charges and other funds held by the trustee in the collection account results in investment losses or the investments become illiquid, you may receive payment of principal and interest on the System Restoration Bonds later than you expect.

Funds held by the trustee in the collection account and cash collateral provided by retail electric providers will be invested in eligible investments at the written direction of the servicer. Eligible investments include money market funds having a rating from Moody’s and S&P of “Aaa” and “AAA,” respectively. Although investments in these money market funds have traditionally been viewed as highly liquid with a low probability of principal loss, illiquidity and principal losses have been experienced by investors in certain of these funds as a result of disruptions in the financial markets in recent years. If investment losses or illiquidity is experienced, you might experience a delay in payments of principal and interest and a decrease in the value of your investment in the System Restoration Bonds.

REVIEW OF TRANSITION PROPERTY

Pursuant to the rules of the SEC, Entergy Texas, as sponsor, has performed, as described below, a review of the transition property underlying the System Restoration Bonds. As required by these rules, the review was designed and effected to provide reasonable assurance that disclosure regarding the transition property is accurate in all material respects. Entergy Texas did not engage a third party in conducting its review.

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The System Restoration Bonds will be secured under the indenture by the indenture’s trust estate. The principal asset of the indenture’s trust estate is the transition property relating to the System Restoration Bonds. The transition property is a present property right authorized and created pursuant to the Financing Act and an irrevocable financing order. The transition property includes the irrevocable right to impose, collect and receive nonbypassable system restoration charges in amounts sufficient to pay scheduled principal and interest and other amounts and charges in connection with the System Restoration Bonds. System Restoration Charges are payable by all retail customers within Entergy Texas’ service territory who consume electricity that is delivered through the distribution system. Customers who switch to new on-site generation with a rated capacity of greater than 10 MW capable of being lawfully delivered to a site without use of Entergy Texas’ distribution or transmission facilities and which was not, on or before the date the financing order was issued, either (A) a fully operational facility, or (B) a project supported by substantially complete filings for all necessary site-specific environmental permits under the rules of the Texas Commission on Environmental Quality must also pay the system restoration charge. During the 12 months ended December 31, 2020, Entergy Texas’ total retail electric deliveries were approximately 32.9% residential, 23.4% commercial, 42.2% industrial, and 1.4% government and municipal. During the nine months ended September 30, 2021, Entergy Texas’ total retail electric deliveries were approximately 32.6% residential, 22.6% commercial, 43.6% industrial, and 1.3% government and municipal.

The transition property is not a static pool of receivables or assets. System restoration charges authorized in the financing order that relate to the transition property are irrevocable and not subject to reduction, impairment, or adjustment by further action of the PUCT except that system restoration charges are subject to annual and semi-annual and other interim true-up adjustments to correct overcollections or undercollections and to provide the expected recovery of amounts sufficient to timely provide all scheduled payments of debt service and other required amounts and charges in connection with the System Restoration Bonds. There is no “cap” on the level of system restoration charges that may be imposed on consumers of electricity in the Entergy Texas Central Division to meet scheduled principal of and interest on the System Restoration Bonds. All revenues and collections resulting from system restoration charges provided for in the financing order that relate to the System Restoration Bonds are part of the transition property. The transition property relating to the System Restoration Bonds is described in more detail under “Description of the Transition Property” in this prospectus.

In the financing order, the PUCT, among other things:

Please read “The Financing Act” and “Entergy Texas’ Financing Order” in this prospectus for more information.

The characteristics of transition property are unlike the characteristics of assets underlying mortgage and other commercial asset securitizations because transition property is a creature of statute and state regulatory commission proceedings. Because the nature and characteristics of the transition property and many elements of the System Restoration Bonds securitization are set forth and constrained by the Financing Act, Entergy Texas, as sponsor, does not select the assets to be securitized in ways common to many securitizations. Moreover, the System Restoration Bonds do not contain origination or underwriting elements similar to typical mortgage or other loan transactions involved in other forms of asset-backed securities. The Financing Act and the PUCT

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require the imposition on, and collection of system restoration charges from, existing and future retail electric customers located within the Entergy Texas service territory subject to limited exceptions. Since the system restoration charges are assessed against all such retail customers and the true-up adjustment mechanism adjusts for the impact of customer defaults, the collectability of the system restoration charges is not ultimately dependent upon the credit quality of particular Entergy Texas customers, as would be the case in the absence of the true-up adjustment mechanism.

The review by Entergy Texas of the transition property underlying the System Restoration Bonds has involved a number of discrete steps and elements as described in more detail below. First, Entergy Texas has analyzed and applied the Financing Act’s requirements for securitization of system restoration costs in seeking approval of the PUCT for the issuance of the financing order and in its proposal with respect to the characteristics of the transition property to be created pursuant to the financing order. In preparing this proposal, Entergy Texas analyzed the terms of the two previous securitizations it (or its predecessor) sponsored under the Financing Act and the practical experience gained in structuring, issuing and servicing the System Restoration Bonds issued in those prior securitizations. Entergy Texas worked with its counsel and its structuring agent in preparing the application for a financing order and with the PUCT on the terms of the financing order. Moreover, Entergy Texas worked with its counsel, its structuring agent and counsel to the underwriters in preparing the legal agreements that provide for the terms of the System Restoration Bonds and the security for the System Restoration Bonds. Entergy Texas has analyzed economic issues and practical issues for the scheduled payment of the System Restoration Bonds and reviewed its prior securitization experience in terms of impacts of economic factors, potentials for disruptions due to weather or catastrophic events and its own forecasts for customer growth as well as the historic accuracy of its prior forecasts.

In light of the unique nature of the transition property, Entergy Texas has taken (or prior to the offering of the System Restoration Bonds, will take) the following actions in connection with its review of the transition property and the preparation of the disclosure for inclusion in this prospectus describing the transition property, the System Restoration Bonds and the proposed securitization:

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In connection with the preparation of such models, Entergy Texas:

As a result of this review, Entergy Texas has concluded that:

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THE FINANCING ACT

The Financing Act and other provisions of PURA authorize utilities to recover hurricane and other weather-related costs through the issuance of bonds.

The Financing Act was enacted by the Texas legislature in April 2009 and became effective on April 16, 2009. The System Restoration Amendments amended the Public Utility Regulatory Act to, among other things, provide for recovery of system restoration costs incurred by electric utilities as a result of hurricanes, tropical storms, ice or snow storms, floods and other weather-related events and natural disasters occurring in calendar year 2008 or after, permit electric utilities to recover “qualified costs” through the issuance of system restoration bonds pursuant to and supported by an irrevocable financing order issued by the PUCT, and permit the PUCT to impose an irrevocable nonbypassable system restoration charge on all retail electric customers, subject to limited exceptions, within a utility’s certificated service territory for payment of system restoration bonds.

A Texas utility must apply to the Texas commission for a financing order under the Financing Act to authorize the issuance of System Restoration Bonds. Entergy Texas applied for a financing order under the Financing Act, which was issued by the Texas commission on January 14, 2022.

Entergy Texas and Other Utilities May Securitize Qualified Costs

We May Issue System Restoration Bonds to Recover Entergy Texas’ System Restoration Costs.

The Financing Act authorizes the Texas commission to issue financing orders approving the issuance of System Restoration Bonds in series to recover certain qualified costs of an electric utility, including system restoration costs and the cost of carrying system restoration costs. A utility, its successors or a third-party assignee of a utility may issue System Restoration Bonds. The Financing Act requires the proceeds of the System Restoration Bonds to be used only for the purpose of reducing the amount of recoverable system restoration costs, as determined by the Texas commission, through the refinancing or retirement of utility debt or equity and the payment of up-front qualified costs. The System Restoration Bonds are secured by and payable from transition property, which includes the right to impose, collect and receive system restoration charges. System Restoration Bonds may have a maximum maturity of 15 years. Under the Financing Act, system restoration costs are to be functionalized and allocated to customers in the same manner as the corresponding facilities and related expenses are functionalized and allocated in a utility’s current base rates. The system restoration charges may be based on the energy consumption, and for some classes, the energy demand of the customer classes. System restoration charges can be imposed only when and to the extent that system restoration bonds are issued.

The Financing Act contains a number of provisions designed to facilitate the securitization of qualified costs.

Creation of Transition Property.

Under the Financing Act, transition property is created when the rights and interests of an electric utility or successor under a financing order, including the right to impose, collect and receive system restoration charges authorized in the financing order, are first transferred to an assignee, such as us, or pledged in connection with the issuance of System Restoration Bonds.

A Financing Order is Irrevocable.

A financing order, once effective, together with the system restoration charges authorized in the financing order, is irrevocable and not subject to reduction, impairment, or adjustment by the Texas commission, except for adjustments pursuant to the Financing Act in order to correct overcollections or undercollections and to provide that sufficient funds are available to provide on a timely basis for payments of debt service and other required amounts in connection with the System Restoration Bonds. Although a financing order is irrevocable, the

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Financing Act allows for applicants to apply for one or more new financing orders to provide for retiring and refunding System Restoration Bonds if such retirement or refunding would result in lower system restoration charges.

State Pledge.

Under the Financing Act, the State of Texas has pledged, for the benefit and protection of system restoration bondholders and Entergy Texas, that it will not take or permit any action that would impair the value of the transition property, or, except for adjustments discussed in “Entergy Texas’ Financing Order—Statutory True-ups—Credit Risk” and “The Servicing Agreement—True-Up Adjustment Process,” reduce, alter, or impair the system restoration charges to be imposed, collected and remitted to system restoration bondholders until the principal, interest and premium, if any, and any other charges incurred and contracts to be performed in connection with the related System Restoration Bonds have been paid and performed in full. Please read “Risk Factors—Risks Associated with Potential Judicial, Legislative or Regulatory Actions” in this prospectus.

Constitutional Matters.

To date, no federal or Texas cases addressing the repeal or amendment of securitization provisions analogous to those contained in the Financing Act have been decided. There have been cases in which federal courts have applied the Contract Clause of the United States Constitution and Texas courts have applied the Contract Clause of the Texas Constitution to strike down legislation regarding similar matters, such as legislation reducing or eliminating taxes, public charges or other sources of revenues servicing other types of bonds issued by public instrumentalities or private issuers, or otherwise substantially impairing or eliminating the security for bonds or other indebtedness. Based upon this case law, Norton Rose Fulbright US LLP expects to deliver an opinion, prior to the closing of the offering of the System Restoration Bonds described in this prospectus, to the effect that a reviewing court of competent jurisdiction, in a properly prepared and presented case, would conclude that the State Pledge constitutes a contractual relationship with the bondholder and therefore the system restoration bondholders (or the trustee acting on their behalf) could, absent a demonstration that such action was necessary to serve a significant and legitimate public purpose, challenge successfully the constitutionality under the United States Constitution of any repeal or amendment of the Financing Law or other legislation passed by the State of Texas that becomes law or any action of the Texas commission exercising legislative powers that would limit, alter, impair or reduce the value of the transition property or the system restoration charges so as to substantially impair (i) the terms of the indenture or the System Restoration Bonds or (ii) the rights and remedies of the system restoration bondholders (or the trustee acting on their behalf) prior to the time that the System Restoration Bonds are fully paid and discharged. Based upon this case law, Duggins Wren Mann & Romero, LLP expects to deliver an opinion, prior to the closing of the offering of the System Restoration Bonds described in this prospectus to the effect that the pledge described above provides a basis upon which the bondholders (or the trustee acting on their behalf) could challenge successfully in the Texas state courts under the Contract Clause of the Texas Constitution the constitutionality of any legislation passed by the Texas Legislature that repeals the State Pledge or limits, alters, impairs or reduces the value of the transition property so as to cause a substantial impairment under the Contract Clause of the Texas Constitution of (i) the terms of the indenture or the System Restoration Bonds or (ii) the rights and remedies of the bondholders (or the trustee acting on their behalf) prior to the time the System Restoration Bonds are fully paid and discharged (other than a law passed by the Legislature in the valid exercise of the State’s police power necessary to safeguard the public safety and welfare). Such opinion is also expected to conclude that any such substantial impairment of a legislative character by the Texas commission would be treated in the same manner, and subject to the same qualifications, as such impairment legislation passed by the Texas Legislature.

In addition, any action of the Texas legislature adversely affecting the transition property or the ability to collect system restoration charges may be considered a “taking” under the United States or Texas Constitutions. Each of Norton Rose Fulbright US LLP and Duggins Wren Mann & Romero, LLP has advised us that they are not aware of any federal or Texas court cases, respectively, addressing the applicability of the Takings Clause of

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the United States or Texas Constitution in a situation analogous to that which would be involved in an amendment or repeal of the Financing Act. Assuming a Takings Clause analysis were applied under the United States Constitution, Norton Rose Fulbright US LLP expects to render an opinion, prior to the closing of the offering of the System Restoration Bonds described in this prospectus, to the effect that under existing case law, the State of Texas would be required under the United States Constitution to pay just compensation to the bondholders if the State were to repeal or amend the Financing Act, or if the Texas commission were to amend or revoke the financing order or take any other action in contravention of the State Pledge, in either case which (i) permanently appropriates a substantial property interest of the bondholders in the related transition property or denies all economically productive use of the related transition property; or (ii) destroys the related transition property, other than in response to emergency conditions; or (iii) substantially reduces, alters or impairs the value of the related transition property so as to unduly interfere with the bondholders’ reasonable expectations arising from their investments in the System Restoration Bonds. In determining what is an undue interference, a court would consider the nature of the governmental action and weigh the public purpose served thereby against the degree to which it interferes with the legitimate property interests and distinct investment-backed expectations of the bondholders. Assuming a Takings Clause analysis were applied under the Texas Constitution, Duggins Wren Mann & Romero, LLP expects to render an opinion, prior to the closing of the offering of the System Restoration Bonds described in this prospectus, to the effect that under existing case law, a Texas state court would find a compensable taking under the Takings Clause of the Texas Constitution if (a) it concludes that the related transition property is property of a type protected by the Takings Clause of the Texas Constitution and (b) the State of Texas (including the Texas commission) takes action that, without paying just compensation to the bondholders, (i) permanently appropriates the transition property or denies all economically productive use of the transition property; or (ii) destroys the transition property, other than in response to emergency conditions; or (iii) substantially reduces, alters or impairs the value of the transition property, if the action unduly interferes with the bondholders’ reasonable investment-backed expectations. In examining whether action of the Texas legislature amounts to a regulatory taking, both federal and state courts will consider the character of the governmental action and whether such action substantially advances the State’s legitimate governmental interests, the economic impact of the governmental action on the bondholders, and the extent to which the governmental action interferes with distinct investment-backed expectations.

In connection with the foregoing, each of Norton Rose Fulbright US LLP and Duggins Wren Mann & Romero, LLP has advised us that no reported controlling judicial precedents are directly on point on issues relating to the Contract and Takings Clauses of the United States and Texas Constitutions as applied to bondholder interests discussed in their opinions. Accordingly, their respective analyses are necessarily reasoned applications of judicial decisions involving similar or analogous circumstances. Consequently, there can be no assurance that a court will follow such firms’ respective reasoning or reach the conclusions that they believe current judicial precedent supports. The opinions described above also will be subject to the other qualifications included in them. The degree of impairment necessary to meet the standards for relief under a Takings Clause analysis or Contract Clause analysis could be substantially in excess of what a bondholder would consider material. There can be no assurance that any such award of just compensation would be sufficient to pay the full amount of principal of and interest on the System Restoration Bonds or would be sufficient for you to recover fully your investment in the System Restoration Bonds.

For a discussion of risks associated with potential judicial, legislative or regulatory actions, please read “Risk Factors—Risks Associated with Potential Judicial, Legislative or Regulatory Actions” in this prospectus.

The Texas Commission May Adjust System Restoration Charges.

The Financing Act requires the Texas commission to provide in all financing orders a mechanism requiring that system restoration charges be adjusted at least annually. The purposes of these adjustments are:

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System Restoration Charges Are Nonbypassable.

The Financing Act provides that the system restoration charges are nonbypassable subject to the terms of the financing order. “Nonbypassable” means that a utility collects these charges from all existing retail customers of a utility and all future retail customers located within the utility’s certificated service area as it existed on the date of the financing order. Retail customers with new on-site power generation facilities with rated capacities of 10 MW or less may avoid paying system restoration costs with respect to energy generated at such facilities. Customers who switch to new on-site generation with a rated capacity of greater than 10 MW capable of being lawfully delivered to a site without use of Entergy Texas’ distribution or transmission facilities and which was not, on or before the date the financing order was issued, either (A) a fully operational facility, or (B) a project supported by substantially complete filings for all necessary site-specific environmental permits under the rules of the Texas Commission on Environmental Quality may not avoid the system restoration charge.

The Financing Act Protects the Bondholders’ Lien on Transition Property.

The Financing Act provides that a valid and enforceable lien and security interest in transition property may be created only by a financing order and the execution and delivery of a security agreement in connection with the issuance of the System Restoration Bonds. The security interest automatically attaches from the time value is received by the issuer of the System Restoration Bonds and, on perfection through filing of a notice with the Secretary of State of Texas, such security interest will be a continuously perfected lien and security interest in the transition property.

Upon perfection, the statutorily created lien attaches both to transition property and to all proceeds of transition property, whether the related system restoration charges have accrued or not, and shall have priority in the order of filing and take precedence over any subsequent judicial or other lien creditor. The Financing Act provides that the transfer of an interest in transition property will be perfected against all third parties, including subsequent judicial or other lien creditors, when:

If the notice of the transfer is filed within 10 days after the delivery of transfer documentation, perfection is retroactive to the date value was received. Otherwise, the transfer is perfected against third parties as of the date the notice is filed. The Financing Act provides that priority of security interests in transition property will not be impaired by:

Please read “Risk Factors—Risks Associated with the Unusual Nature of the Transition Property” in this prospectus.

The Financing Act Characterizes the Transfer of Transition Property as a True Sale.

The Financing Act provides that an electric utility’s or an assignee’s transfer of transition property is a “true sale” under Texas law and is not a secured transaction and that legal and equitable title passes to the transferee, if the agreement governing that transfer expressly states that the transfer is a sale or other absolute transfer. Please read “The Sale Agreement” and “Risk Factors—Risks Associated with Potential Bankruptcy Proceedings of the Seller or the Servicer” in this prospectus.

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The Financing Act Provides a Tax Exemption.

The Financing Act provides that “transactions involving the transfer and ownership of transition property and the receipt of system restoration charges are exempt from state and local income, sales, franchise, gross receipts and other taxes or similar charges.”

ENTERGY TEXAS’ FINANCING ORDER

Determination of Entergy Texas’ System Restoration Costs to be Financed Through the System Restoration Bonds

On April 16, 2021, Entergy Texas filed an application to determine the system restoration costs related to Hurricanes Laura and Delta and Winter Storm Uri which it was entitled to recover under the Financing Act. The application also requested approval to securitize the projected balance of an existing regulatory asset consisting of Commission-approved system restoration costs related to Hurricane Harvey. On July 9, 2021, Entergy Texas filed an application with the Texas commission seeking authority to securitize and cause the issuance of System Restoration Bonds in the amount of $294.5 million of system restoration costs, plus costs of issuing the System Restoration Bonds.

On December 2, 2021, the Texas commission issued a cost recovery order determining that Entergy Texas was entitled to recover $242.9 million of system restoration costs, plus carrying costs on the system restoration costs through the issuance date of the System Restoration Bonds, plus $13.3 million relating to a system restoration regulatory asset, plus all other qualified costs, to be determined by the Texas commission in the securitization proceeding.

On November 18, 2021, Entergy Texas filed a unanimous settlement agreement resolving all issues relating to the securitization proceeding.

On January 14, 2022, the Texas commission issued its financing order which authorized Entergy Texas to securitize and cause to be issued System Restoration Bonds, with the aggregate principal consisting of: (i) $242.9 in system restoration costs, plus carrying costs on such amount to the issuance date of the System Restoration Bonds, plus (ii) $13.3 million relating to a system restoration regulatory asset, plus (iii) up-front qualified costs. The financing order requires Entergy Texas to update the up-front qualified costs in the issuance advice letter to reflect the actual issuance date and other more current information. The financing order authorizes Entergy Texas to cause System Restoration Bonds to be issued to securitize the updated aggregate principal amount reflected in the issuance advice letter in accordance with the terms of the financing order.

Pursuant to the financing order of the Texas commission relating to the System Restoration Bonds:

In addition, the indenture governing the System Restoration Bonds will require the servicer on our behalf to submit certain reports to the Texas commission.

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We have also agreed that certain reports concerning system restoration charge collections will be provided to the Texas commission.

In the financing order, the Texas commission guarantees that it will take specific actions pursuant to the irrevocable financing order as expressly authorized by the Financing Act to ensure that expected system restoration charge revenues are sufficient to pay on a timely basis scheduled principal and interest on the System Restoration Bonds and other costs, including fees and expenses, in connection with the System Restoration Bonds. Such financing order, pursuant to the provisions of the Financing Act, is irrevocable and is not subject to reduction, impairment or adjustment by further action of the Texas commission, except as contemplated by the periodic true-up adjustments. The financing order also provides that the true-up mechanism and all other obligations of the State of Texas and the Texas commission set forth in the irrevocable financing order are direct, explicit, irrevocable and unconditional upon issuance of the System Restoration Bonds, and are legally enforceable against the State of Texas and the Texas commission. Please read “Risk Factors—Risks Associated with Potential Judicial, Legislative or Regulatory Actions” in this prospectus.

Collection of System Restoration Charges

The financing order authorizes Entergy Texas to collect system restoration charges from retail electric consumers or, in the future if retail competition is ever introduced into Entergy Texas’ service territory, any retail electric providers serving retail electric customers, in Entergy Texas’ service territory in an amount sufficient to provide for timely recovery of Entergy Texas’ aggregate qualified costs which include principal and interest and certain ongoing fees and expenses associated with the System Restoration Bonds. There is no “cap” on the level of system restoration charges that may be imposed on consumers of electricity to pay on a timely basis scheduled principal and interest on the System Restoration Bonds. However, we may not charge system restoration charges for the System Restoration Bonds for electricity delivered after the fifteenth anniversary of the date of issuance of the System Restoration Bonds.

Issuance Advice Letter

Not later than the end of the first business day after the pricing of the System Restoration Bonds and prior to their issuance, Entergy Texas is required to file with the Texas commission an issuance advice letter, which will:

The issuance advice letter becomes effective on the date of issuance of the System Restoration Bonds unless the Texas commission issues an order, prior to noon on the fourth business day after the determination of the final terms of the System Restoration Bonds that the proposed issuance does not comply with the requirements of the Financing Act or the financing order. The Texas commission’s review of the issuance advice letter will be limited to confirming the arithmetic accuracy of the calculations and verifying compliance with the specific requirements contained in the issuance advice letter.

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Tariff

We are required, prior to the issuance of any System Restoration Bonds, to complete and file a tariff in the form attached to the financing order. The tariff establishes the initial system restoration charges. It also implements the minimum requirements for any future retail electric providers which collect system restoration charges, the procedures for periodic adjustments to the system restoration charges, the procedures for any future retail electric providers to remit system restoration charge payments and the annual procedures allowing retail electric providers to reconcile remittances with actual charge-offs. Please read “Description of the Transition Property—Tariff; System Restoration Charges” in this prospectus.

Statutory True-Ups

The Financing Act mandates that system restoration charges be adjusted at least annually to correct any overcollections or undercollections, due to any reason, in the preceding 12 months and to ensure the expected recovery of amounts sufficient to timely provide payment of all amounts due on the System Restoration Bonds. The servicer is also required under the financing order to timely make mandatory interim true-up adjustments semi-annually if the servicer forecasts that system restoration charge collections during the next 12-month period will be insufficient to timely make all scheduled payments of principal and interest on the system restoration bonds and any other amounts payable in respect of the system restoration bonds, including amounts required to replenish the capital subaccount to its required level. These required debt service payments and other amounts are sometimes referred to as the “periodic payment requirement.” If there are any system restoration bonds outstanding following the scheduled final payment date of the latest maturing tranche of the bonds, the servicer is also required under the financing order to make mandatory interim true-up adjustments quarterly, which adjustments will be calculated in a manner so that all bonds are expected to be paid on the Payment Date next following such quarterly true-up adjustment. True-up adjustments may also be made by the servicer under the financing order more frequently at any time, without limits as to frequency, in order to ensure the expected recovery of amounts sufficient to timely provide all payments of debt service and other required amounts and charges in connection with the system restoration bonds.

True-up adjustments will be based upon the cumulative differences between the periodic payment requirement and the amount of system restoration charge remittances to the trustee. In order to provide for adequate revenues from the system restoration charges, the servicer will calculate the adjusted system restoration charges using its most recent forecast of electric consumption and its most current estimates of ongoing transaction-related expenses (the “periodic billing requirement”). The calculation of the system restoration charges will also reflect both a projection of uncollectible system restoration charges and a projection of payment lags between the billing and collection of system restoration charges based upon Entergy Texas’ and the REPs’ most recent experience regarding collection of system restoration charges. Under the financing order, the servicer will (a) allocate the upcoming period’s periodic billing requirement based on the allocation factors approved in the financing order; (b) calculate undercollections or overcollections, including without limitation any caused by REP defaults, from the preceding period in each class by subtracting the previous period’s system restoration charge revenues collected from each class from the periodic billing requirement determined for that class for the same period; (c) sum the amounts allocated to each customer class in steps (a) and (b) to determine an adjusted periodic billing requirement for each system restoration charge customer class; and (d) divide the amount assigned to each customer class in step (c) above by the appropriate forecasted billing units to determine the system restoration charge rate by class for the upcoming period.

The Texas commission must be given at least 15 days’ notice prior to making either the annual true-up adjustment or an interim true-up adjustment. In the event any correction to a true-up adjustment due to mathematical errors in the calculation of the adjustment or otherwise is necessary, it will be made in a future true-up adjustment.

The financing order also provides for a non-standard true-up procedure if the forecasted billing units for one or more of the customer classes for an upcoming period decrease by more than 10% compared to the threshold

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billing units for such class set forth in the financing order. The purpose of the non-standard true-up is to reallocate the system restoration charges among the customer classes in order to avoid overburdening the remaining members of a customer class the size of which has decreased significantly. Please read “The Servicing Agreement—True-Up Adjustment Process” in this prospectus. For the non-standard true-up, the servicer will make a filing with the Texas commission at least 90 days before the date that the system restoration charges to be imposed in connection with such non-standard true-up are to go into effect. The servicer will issue appropriate notice of the filing and the Texas commission will conduct a contested case proceeding on the proposed non- standard true-up. The scope of the proceeding will be limited to determining whether the proposed adjustment complies with the financing order. The Texas commission will issue a final order by the proposed true-up adjustment date specified by the servicer in the non-standard true-up filing. If the Texas commission cannot issue an order by that date, the servicer may implement the proposed adjustments and any modifications subsequently ordered by the Texas commission will be made by the servicer in the next true-up filing.

There is no “cap” on the level of system restoration charges that may be imposed on retail electric customers as a result of the true-up process. Through the true-up mechanism, which adjusts for undercollections of system restoration charges due to any reason, retail electric customers share in the liabilities of all other retail electric customers for the payment of system restoration charges.

In the irrevocable financing order, the Texas commission guarantees that it will act under the financing order as expressly authorized by the Financing Act to ensure that expected system restoration charge revenues are sufficient to pay on a timely basis scheduled principal and interest on the system restoration bonds and other costs, including fees and expenses, in connection with the bonds.

Statutory True-Ups—Credit Risk

The State of Texas has pledged in the Financing Act that it will not take or permit any action that would impair the value of the transition property, or, except as permitted in connection with a true-up adjustment authorized by the Financing Act, reduce, alter or impair the system restoration charges until the principal, interest and premium, and any other charges incurred and contracts to be performed in connection with the System Restoration Bonds, have been paid and performed in full.

The broad-based true-up mechanism and the State Pledge described above, along with our bankruptcy remoteness from Entergy Texas and the collection account, will serve to minimize if not effectively eliminate, for all practical purposes and circumstances, any credit risk to the payment of the System Restoration Bonds (i.e., that sufficient system restoration charges will be assessed and collected to discharge all principal and interest obligations when due). The Texas commission has made a finding to such effect in the financing order. Please read “The Financing Act —Entergy Texas and Other Utilities May Securitize Qualified Costs”, “Risk Factors”, including among others, “—Risks Associated with Potential Judicial, Legislative or Regulatory Actions,” “—Servicing Risks”, and “—Risks Associated with Potential Bankruptcy Proceedings of the Seller or the Servicer” and please also read “Cautionary Statement Regarding Forward-Looking Information” in this prospectus.

Allocation

Under the terms of the Financing Act and the financing order, Entergy Texas will functionalize and allocate system restoration costs to customers in the same manner as the corresponding facilities and related expenses are functionalized and allocated in a utility’s current base rates. The percentages described below under “Description of the Transition Property—Tariff; System Restoration Charges” show the resulting allocation of cost responsibility based upon Entergy Texas’ current base rate case.

Adjustments to Allocation of System Restoration Charges

In the financing order, the Texas commission requires Entergy Texas and any successor servicer under certain circumstances to request adjustments to the allocation of the system restoration charges among various

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classes of customers as described under “Description of the Transition Property—Tariff; System Restoration Charges.”

Servicing Agreement

In the financing order, the Texas commission authorized Entergy Texas, as the servicer, to enter into the servicing agreement described under “The Servicing Agreement” in this prospectus.

Binding on Successors

The financing order, along with the system restoration charges authorized in the financing order, is binding on:

DESCRIPTION OF THE TRANSITION PROPERTY

Creation of Transition Property; Financing Order

The Financing Act defines transition property as the rights and interests of an electric utility or successor under a financing order, including the right to impose, collect and receive system restoration charges, which charges include amounts to be charged to recover system restoration costs, established in the financing order. Transition property becomes property at the time that it is first transferred to an assignee or pledged in connection with the issuance of system restoration bonds, such as the System Restoration Bonds. The System Restoration Bonds will be secured by transition property, as well as the other collateral described under “Security for the System Restoration Bonds.”

In addition to the right to impose, collect and receive system restoration charges, the financing order:

A form of issuance advice letter and a form of tariff is attached to the financing order. We will complete and file both documents with the Texas commission not later than the end of the first business day after the pricing of the System Restoration Bonds. The issuance advice letter confirms to the Texas commission the interest rate and expected sinking fund schedule for the System Restoration Bonds and sets forth the actual dollar amount of the

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initial system restoration charges as described above under “Entergy Texas’ Financing Order—Issuance Advice Letter.” The Texas commission’s review of the issuance advice letter will be limited to confirming the arithmetic accuracy of the calculations and to compliance with the specific requirements contained in the issuance advice letter.

Tariff; System Restoration Charges

The tariff establishes the initial system restoration charges. It also, in the event that retail competition is ever introduced into Entergy Texas’ service territory, provides the minimum requirements for REPs which collect system restoration charges, the procedures for periodic adjustments to the system restoration charges, the procedures for REPs to remit system restoration charge payments and the annual procedures allowing REPs to reconcile remittances with actual charge-offs. In no event will system restoration charges provided for in the tariff be assessed for services provided after 15 years from the issuance of the System Restoration Bonds

The system restoration charges will be payable by all existing and future retail customers located within Entergy Texas’ service territory who consume electricity that is delivered through the distribution system or who produce energy from certain new on-site generation. Please read “The Financing Act—System Restoration Charges Are Nonbypassable” in this prospectus. The defined classes of system restoration charge retail customers are

Because of differences in the tariff rate for each class of retail customers and the provisions of the Financing Act, the system restoration charges payable by each class of retail customers will differ. The Financing Act requires that system restoration charges be functionalized and allocated to Entergy Texas’ customers in the same manner as the corresponding facilities and related expenses are functionalized and allowed in Entergy Texas’ current base rates.

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Set forth below are the initial allocation percentages for the eight system restoration charge retail customer classes (system restoration charges for the Large Industrial Power Service – Distribution Only and Standby and Maintenance Service system restoration charge classes are derived from the Large Industrial Power Service allocation of system restoration costs), each of which was adopted in the financing order issued by the Texas commission.

The system restoration charges will be billed on a kilowatt-hour, non-demand metered basis, except for the Large Industrial Power Service class which is billed on a kilowatt, demand basis.. Each new retail electric customer will be assigned to the appropriate customer class.

The initial system restoration charge would represent approximately 1.75% of the total bill received by a 1,000 kWh residential customer of Entergy Texas in its service territory as of March 31, 2022. When combined with the system restoration charges related to the Series 2009 Transition Bonds, the cumulative system restoration charges would represent approximately 5.47% of the total bill.

Billing and Collection Terms and Conditions

System restoration charges will be assessed by the servicer, for our benefit as owner of the transition property, based on a retail customer’s actual consumption of electricity or electric demand from time to time. System restoration charges will be collected by the servicer directly from retail customers as part of its normal collection activities. If and when retail competition is introduced into Entergy Texas’ service territory, system restoration costs will be collected by the servicer from any REP that collects system restoration charges. Please read “Future Retail Electric Providers” in this prospectus. System restoration charges will be deposited by the servicer into the collection account under the terms of the indenture and the servicing agreement. The servicer will deposit in the collection account estimated payments of system restoration charges on each business day.

The obligation to pay system restoration charges is not subject to any right of set-off in connection with the bankruptcy of the seller or any other entity. System restoration charges are “nonbypassable” in accordance with the provisions set forth in the Financing Act and the financing order. If a retail customer pays only a portion of its bill, such partial payments will be first applied to any amounts due with respect to customer deposits. Next, the servicer will allocate the partial payment to all electric service charges of the servicer and system restoration charges pro rata based on the total amount billed, with amounts owed for system restoration charges allocated before amounts owed for late charges. Finally, any remaining moneys will be allocated to taxes and charges billed to customers. The portion owed in respect of system restoration charges may be further allocated as between different issuances of System Restoration Bonds, including amounts owed to other special-purpose subsidiaries of Entergy Texas who have issued or may in the future issue system restoration bonds under the Financing Act or Subchapter G of Chapter 39 of PURA. Such allocations shall be pro rata based upon the amount billed with respect to each such issuance. If a retail customer fails to pay all or any portion of the system restoration charges, the servicer or any future REP who is billing such customer may transfer billing and collection rights to the designated provider of last resort or POLR, if any, for such customer. The POLR may direct Entergy Texas or its successor transmission and distribution utility to terminate service to such non-paying customer in accordance with the financing order and Texas commission guidelines.

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THE DEPOSITOR, SELLER, INITIAL SERVICER AND SPONSOR

General

Entergy Texas, a Texas corporation, will be the depositor, seller and initial servicer of the transition property securing the System Restoration Bonds, and will be the sponsor of the securitization in which System Restoration Bonds covered by this prospectus are issued.

Entergy Texas is a public utility company engaged in the generation, transmission, distribution and sale of electric energy in the State of Texas. For the calendar year 2020 and the nine months ended September 30, 2021, respectively, Entergy Texas provided electric service to an average of 468,749 and 480,820 retail customers, respectively, in its service territory. The retail customer base includes a mix of residential, commercial and diversified industrial retail customers. During the twelve months ended December 31, 2020, Entergy Texas delivered approximately 18,677 billion kilowatt hours of electricity resulting in billed electric revenue of $1,446 million. During the nine months ended September 30, 2021, Entergy Texas delivered approximately 14,969 billion kilowatt hours of electricity resulting in billed electric revenue of $1,292 million.

Entergy Texas was formed as of December 31, 2007, upon the completion by Entergy Gulf States, Inc. of a jurisdictional separation into two vertically integrated utility companies, one operating under the sole retail jurisdiction of the PUCT, Entergy Texas, and the other operating under the sole jurisdiction of the Louisiana Public Service Commission, Entergy Gulf States Louisiana, LLC. As a result of such separation, Entergy Texas owns all of Entergy Gulf States, Inc.’s distribution and transmission assets located in Texas, together with certain generation assets. As described above in this prospectus under “The Financing Act,” Entergy Texas is also the sponsor, servicer and administrator for the Series 2009 Transition Bonds.

All of the common stock of Entergy Texas is owned by Entergy Corporation. The other major public utilities owned, directly or indirectly, by Entergy Corporation are Entergy Arkansas, LLC, Entergy Louisiana, LLC, Entergy Mississippi, LLC and Entergy New Orleans, LLC. Entergy Corporation also owns all of the common stock of System Energy Resources, Inc., the principal asset of which is its interest in the Grand Gulf Electric Generating Station, Entergy Operations, Inc., a nuclear management services company, and Entergy Services, LLC, an administrative services company.

To the extent authorized by governing legislation, Entergy Texas is subject to the original jurisdiction of the municipal authorities of a number of incorporated cities in Texas with appellate jurisdiction over such matters residing in the PUCT. Entergy Texas is also subject to regulation by the PUCT as to the following:

Entergy Texas is also subject to the jurisdiction of the Federal Energy Regulatory Commission or FERC under the Federal Power Act with respect to the sale of electricity for resale, transmission of electricity in interstate commerce, the issuance of securities, acquisitions and divestitures of utility assets, certain affiliate transactions and other matters.

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Where to Find Information About Entergy Texas

Entergy Texas files periodic reports with the SEC as required by the Exchange Act. Entergy Texas makes available at www.entergy.com: Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act, as soon as reasonably practicable after Entergy Texas electronically files such material with, or furnishes it to, the SEC. Such reports are also available on the SEC’s website at http://www.sec.gov. You may access a copy of Entergy Texas’ filings at http://www.entergy.com. No information contained on that website constitutes part of this prospectus.

acted as servicer for the senior secured transition bonds issued by Texas Restoration LLC in the original aggregate principal amount of $545,900,000 (the 2009 Transition Bonds). The Series 2007 Transition Bonds were retired on April 1, 2021. The final scheduled maturity of the Series 2009 Transition Bonds is August 1, 2022.

Since the date of issuance of each such series of transition bonds, Entergy Texas has filed on a timely basis all true-up filings required for the 2007 Transition Bonds and 2009 Transition Bonds and the issuing entities of the 2007 Transition Bonds and 2009 Transition Bonds have satisfied, on a timely basis, all interest payments and has made all principal payments on the 2007 Transition Bonds and 2009 Transition Bonds in accordance with their expected amortization schedule.

Entergy Texas services the 2009 Transition Bonds in accordance with servicing standards that are substantially similar to those set forth in Entergy Texas’ servicing agreement with us. Please read “Relationship to the Series 2009 Transition Bonds” in this prospectus.

Municipalization

Texas law may authorize certain local municipalities to seek to acquire portions of Entergy Texas’ electric distribution facilities through the power of eminent domain for use as part of municipally-owned utility systems. Although the power of eminent domain has not been used by municipalities in Texas in recent times to acquire electric distribution systems, there can be no assurance that one or more municipalities will not seek to acquire some or all of Entergy Texas’ electric distribution facilities while system restoration bonds remain outstanding. The Financing Act specifies that system restoration charges approved by a Texas commission order shall be collected by an electric utility as well as its “successors.” In the servicing agreement, Entergy Texas will covenant to assert in an appropriate forum that any municipality that acquires any portion of Entergy Texas’ electric distribution facilities must be treated as a successor to Entergy Texas under the Financing Act and the financing order and that retail customers in such municipalities remain responsible for payment of system restoration charges. However, the involved municipality might assert that it should not be treated as a successor to Entergy Texas for these purposes and that its distribution customers are not responsible for payment of system restoration charges. In any such cases, there can be no assurance that the system restoration charges will be collected from customers of municipally-owned utilities who were formerly customers of Entergy Texas.

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Percentage Concentration Within Entergy Texas’ Large Commercial Customers

For the year ended December 31, 2020 and for the nine months ended September 30, 2021, respectively, the ten largest electric customers in Entergy Texas’ service territory represented approximately 20% and 21% of Entergy Texas’ retail gigawatt-hour sales, respectively. All ten customers are industrial class accounts. There are no material concentrations in the residential and commercial classes.

Forecasting Electricity Consumption

The sales forecast is developed by revenue class – residential, commercial, industrial, and governmental – and by month for each calendar year. The process involves three main parts: 1) statistical modeling for residential, commercial, small industrial, and governmental sales, 2) estimates for specific large industrial customers and prospective customers, and 3) out-of-model adjustments. The sales forecasts are developed using historical sales and customer data, estimates and indices for economic activity and end-use consumption, weather for historical and future years, and information about specific customers.

For the statistical modeling, Entergy Texas gathers historical sales data by revenue class along with historical temperatures, economic data, estimates of effects of energy efficiency programs, and estimates of end-use consumption drivers and then inputs that data into Itron’s sales forecasting software called MetrixND^®. MetrixND^® is used to develop the sales forecasts by performing regression modeling, which calculates the statistical relationship between the above-mentioned input variables, “X”, and historical sales, “Y”, and then by applying those relationships by way of coefficients to forward-looking estimated values for those same input variables. In this process, Entergy Texas determines which “X” variables have a statistically significant correlation with historical sales by considering the results for variable-specific metrics such as p-values and by examining the results of overall model metrics such as R-squared and mean absolute percent error to develop models with good historical relationships to which forecasted input data can be applied to estimate future sales. These models calculate weather-normal monthly energy forecasts for residential, commercial, governmental, and small industrial customer classes.

The key input assumptions for the statistical models include historical billed sales by month, numerical levels of heating degree days (“HDDs”) and cooling degree days (“CDDs”) by month, the number of billing days anticipated in each billing cycle, economic data, and residential and commercial end-use statistics for electricity

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consumption. Also included is an assumption around future levels of energy efficiency. While the values for these input variables are updated between forecast iterations, these types of inputs have been used across multiple forecasts. Average temperature data are converted to HDDs and CDDs to measure the intensity and duration of temperatures above or below balance point temperature levels to then determine the relationships between actual average monthly temperatures and billed sales. The number of billing days in each monthly billing cycle is used to calculate billed volumes based on the consumption duration of each month for residential sales. Economic data such as population and employment rates from IHS-Markit are used to determine historical correlations of those items to kWh sales. Electric end-use statistics from the United States Energy Information Administration are used to reflect the historical electric kWh consumption from appliances, HVAC systems, lighting, and other electricity-consuming devices. The historical relationships between these items and sales are then applied to the future expectations for temperatures, population, and end-use to develop the sales forecast.

Forecasts for roughly 140 large industrial loads are developed individually. These forecasts are informed by communications between the individual customers and Entergy Texas’ customer account managers to assess the electricity usage levels and to consider reasonable changes in future usage based on factors such as customer outages, announced expansions or contractions, and/or economic trends affecting the customers’ industries. Forecasts are also developed for prospective new customers based on information about those customers’ sizes, operating levels, and expectations for the ramping of the energy over time. Of the approximately 140 Large Industrial accounts for Entergy Texas’ franchised utility area, 35 are located in Entergy Texas’ service territory.

Out-of-model adjustments are made to account for factors or events that either are not part of the historical data or are not a significant part of the historical data but that are expected to affect future consumption from the grid. Examples of these are the expected effects of the advanced metering infrastructure and related customer programs, future adoption of customer-owned (e.g., rooftop) solar and electric vehicles (“EVs”), and non-EV electrification.

Variances between actual sales and forecasted sales can be caused by a number of factors, though the primary drivers are unexpected extreme temperatures, which can cause actual sales volumes to be higher or unexpected mild temperatures, which can cause actual sales volumes to be lower. Separate from temperatures, Entergy Texas’ service area is also prone to hurricane activity which can cause outages for extended periods. For 2020, the primary driver of variances between the forecast and actual sales volumes is changes in behavior in response to COVID.

Payment responsibility for the System Restoration Bonds is determined and allocated to the retail customer classes. Variances between classes may differ from the numbers above, which shows total variances based on distribution voltage only.

Credit Policy; Billing Process; Collections Process; Termination of Service; COVID-19 Protections

Entergy Texas bills its retail customers in its service territory directly, and its current credit policies, billing process, and termination of service policies are described below. All information below pertains only to Entergy Texas’ service territory. In the future, retail competition may be introduced into Entergy Texas’ service territory, and retail electric providers, not Entergy Texas, will bill retail customers directly and thus collect the system restoration charges. Please read “Future Retail Electric Providers” in this prospectus.

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Credit Policy

Entergy Texas is required to provide electric utility service to applicants within its designated service territory once outstanding debts are cleared and any deposit requirements are met. Using information provided by the Customer Information System (CIS, Entergy’s legacy customer accounting system), Entergy Texas determines whether Entergy Texas has previously provided service to an applicant. Certain accounts are secured with deposits or guarantees as a precautionary measure. The amount of the deposit for residential customers is based upon the previous history of usage at the location and can be up to one-sixth (1/6) of the total estimated annual bill. The annual bill is based on the most recent 12 months with a default value of $150 where there is insufficient history.

Entergy Texas uses specific criteria for establishing credit. Entergy Texas uses a positive identification and consumer credit scoring service from a third-party provider (currently Experian) to determine creditworthiness of its new residential applicants. If a deposit is required to establish credit, residential applicants are billed a deposit equal to one-sixth (1/6) of the total estimated annual bill. As noted above, the annual bill amount is equivalent to the most recent 12 months with a default value of $150 where there is an insufficient history. PUCT rules require deposits to be returned when the customer has paid bills for service for 12 consecutive residential billings or for 24 consecutive non-residential billings without having service disconnected for nonpayment of a bill and without having more than two occasions in which a bill was delinquent, and when the customer is not delinquent in the payment of the current bills. PUCT rules require Entergy Texas to pay simple interest at a rate determined annually, and, as of January 1, 2022, at a rate of 0.06%, for any cash deposits held by Entergy Texas on a customer’s account. PUCT rules do not require interest to be refunded annually unless requested by the customer. A residential applicant may also have their deposit requirement satisfied by an existing residential customer in good standing acting as guarantor for the deposit or portion of deposit. Entergy Texas does not accept third party guarantors for commercial accounts.

Entergy Texas’ current business practices require industrial and commercial customers to provide deposits equal to two times the average monthly bill based on the location history.

Cash deposits are accounted for as an obligation, but are not required to be escrowed, and are available in working capital.

Billing Process

Entergy Texas bills its customers on average every 30 days. For the year ended December 31, 2020 and for the nine months ended September 30, 2021, Entergy Texas in its service territory mailed out an average of 8,423 bills and 14,661 bills, respectively, on each business day to its customers. For accounts with potential billing error exceptions, reports are generated for manual review. This review examines accounts that have abnormally high or low bills, potential meter-reading errors, possible meter malfunctions and/or unbilled accounts. The PUCT requires that the bill provided to customers shall include a payment due date that shall not be less than 16 days after issuance.

Collection, Termination of Service and Write-Off Policy

In 2020, Entergy Texas received approximately 21% of payments by mail, 8% were walk-in payments, and 71% were electronic payments (via bank draft, electronic funds transfer, website or mobile application). For the nine months ended September 30, 2021, Entergy Texas received approximately 19% of payments by mail, 6% were walk-in payments, and 75% were electronic payments (via bank draft, electronic funds transfer, website or mobile application).

Walk-in payments are handled by a third party and payment centers are located in each town in Entergy Texas’ service territory.

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Customers are sent a bill which is due and payable upon receipt and is considered past due if not paid within 16 calendar days from the mail date. If the bill is not paid on the last day to pay indicated on the statement, and the customer’s payment history makes the past due amount eligible for collection activity, a disconnect notice is mailed on the 4th business day after the past due date to ensure that consideration is given to any payment that may be en route by mail on the last day to pay. The disconnect notice gives the customer an additional 10 calendar days to pay the bill. On the last day to pay indicated on the disconnect notice, a courtesy call is attempted with a predictive dialer. If the bill is not paid or if the customer has not called for extended payment arrangements, a disconnect order will be generated on the next business day. Once the disconnect order has been generated, payment in full is required to stop the termination. If the customer is disconnected, payment in full is required. In addition, the customer may be subject to an additional deposit and/or a collection or reconnection fee. For non-residential customers, additional deposits are billed per PUCT rule based on usage at location and the full amount of twice the average bill is due prior to the reconnection.

Termination of service is subject to PUCT rules that forbid termination during certain weather conditions, such as freezing temperatures or “heat advisory” conditions. In addition, the PUCT has adopted rules forbidding termination of service to critical care, elderly customers and elderly, low-income customers.

Entergy Texas provides several payment options to help consumers manage their electric usage and payments. Entergy Texas customer service representatives as well as an automated Voice Response Unit (VRU) are available 24 hours a day, 365 days a year to assist customers with payment arrangements. Most customers can receive an extension on their scheduled disconnect date through the VRU or by talking with a customer service representative. Extensions are denied in some cases based on the payment history of the account. Programs such as Pick-A-Date, which allows the customer to choose a preferred due date and Levelized Billing Programs, which allow customers to pay an average bill each month while spreading the difference over the remaining months, are available to most residential customers. Automated draw draft and internet billing and payments are also available.

Unpaid final bills are written off after 120 days. Entergy Texas does mail a final bill to all customers. If not paid in 15 days, an in-house collection letter is mailed. A second letter is mailed approximately 15 days later. If not paid, a third letter is mailed 15 days later. The account is turned over to a third-party collection agency, on a contingency basis, at 60 days past the Final Bill date.

COVID-19 Protections

In March 2020 the PUCT authorized electric utilities to record as a regulatory asset expenses resulting from the effects of COVID-19. In future proceedings the PUCT will consider whether each utility’s request for recovery of these regulatory assets is reasonable and necessary, the appropriate period of recovery, and any amount of carrying costs thereon. In March 2020 the PUCT ordered a moratorium on disconnections for nonpayment for all customer classes, but, in April 2020, revised the disconnect moratorium to apply only to residential customers. The PUCT allowed the moratorium to expire on June 13, 2020, but on July 17, 2020, the PUCT re-established the disconnect moratorium for residential customers until August 31, 2020. In January 2021, Entergy Texas resumed disconnections for customers with past-due balances that have not made payment arrangements. As of September 30, 2021, Entergy Texas recorded a regulatory asset of $12.8 million for costs associated with the COVID-19 pandemic.

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FUTURE RETAIL ELECTRIC PROVIDERS

As part of the restructuring of the Texas electric industry, some retail customers began purchasing electricity and related services from REPs. There are no REPs currently operating in Entergy Texas’ service territory. Moreover, as described above under “The Depositor, Seller, Initial Servicer and Sponsor—Competition,” if the provisions of PURA remain unchanged and Entergy Texas remains a member of SERC (or its successor, MISO), it is possible, but not likely, that there will be any competing retail electric provider within the term that the System Restoration Bonds are outstanding. However, if any transition to competition plan is approved by the PUCT, REPs may in the future begin to operate in Entergy Texas’ service territory during the term in which the System Restoration Bonds are outstanding. In such event, the REP will bill and collect the system restoration charges under the conditions described below.

Neither Entergy Texas nor any successor servicer will pay any shortfalls resulting from the failure of any future REP to remit payments arising from the system restoration charges to the servicer. The annual true-up and interim true-up adjustment mechanisms for the system restoration charges, as well as the amounts deposited in the capital subaccount, are intended to mitigate the risk of shortfalls. Any shortfalls that occur may delay the distribution of interest on and principal of the System Restoration Bonds.

Credit Practices, Policies and Procedures of Retail Electric Providers

Pursuant to the financing order and the tariff, in the event REPs are in the future authorized to operate in Entergy Texas’ service territory, billing and collection standards will be imposed on any REPs operating in the service territory with respect to system restoration charges. The standards relate only to the billing and collection of system restoration charges authorized under the financing order, and do not apply to collection of any other nonbypassable charges or other charges. The standards apply to all REPs that bill and collect system restoration charges from retail electric customers. REPs may contract with other parties to bill and collect system restoration charges from retail customers, but such REPs will remain subject to the applicable billing and collection standards. If the Texas commission later determines that different standards are to be applied to REPs in particular areas (e.g., payment terms), then those new standards, with appropriate modifications to related provisions, may replace those specific items. Prior to adoption of any rule addressing modification of any of these billing and collection standards, the Texas commission will open a proceeding to investigate the need to modify the standards to conform to that rule, with the understanding that such modifications may not be implemented absent satisfaction of the rating agency condition.

The following subsections summarize the REP standards required under the financing order and tariff. These standards are the most stringent that the servicer can impose on REPs under the financing order. In the future, the Texas commission may determine that different standards should be applied to REPs in particular areas, such as payment terms. Any such standards may replace specific standards described above. The financing order provides, however, that any modifications to the foregoing standards may not be implemented absent satisfaction of the rating agency condition.

Rating, Deposit and Related Requirements.

Each REP must (1) have a long-term, unsecured credit rating of not less than “BBB-” and “Baa3” (or the equivalent) from S&P and Moody’s, respectively, or (2) provide (A) a deposit of two months’ maximum expected system restoration charge collections in the form of cash, (B) an affiliate guarantee, surety bond, or letter of credit providing for payment of such amount of system restoration charge collections in the event that the REP defaults in its payment obligations, or (C) a combination of any of the foregoing. The provider of any affiliate guarantee, surety bond, or letter of credit must have and maintain long-term, unsecured credit ratings of not less than“BBB-“ and “Baa3” (or the equivalent) from S&P and Moody’s, respectively. A REP that does not have or maintain the requisite long-term, unsecured credit rating may select which alternate form of deposit, credit support, or combination thereof it will utilize, in its sole discretion. The trustee will be the beneficiary of any affiliate guarantee or surety bond or letter of credit.

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Loss of Rating.

If the long-term, unsecured credit rating from either S&P or Moody’s of a REP that did not previously provide the alternate form of deposit, credit support, or combination thereof or of any provider of an affiliate guarantee, surety bond, or letter of credit is suspended, withdrawn, or downgraded below “BBB-” or “Baa3” (or the equivalent), the REP must provide the alternate form of deposit, credit support, or combination thereof, or new forms thereof, in each case from providers with the requisite ratings, within 10 business days following such suspension, withdrawal, or downgrade. A REP failing to make such provision is required to comply with the provisions set forth in the section below labeled “—Remedies Upon Default.”

Computation of Deposit, etc.

The computation of the size of a required deposit will be agreed upon by the servicer and the REP, and reviewed no more frequently than quarterly to ensure that the deposit accurately reflects two months’ maximum collections. Within 10 business days following such review (1) the REP will remit to the trustee the amount of any shortfall in such required deposit or (2) the servicer will instruct the trustee in writing to remit to the REP any amount in excess of such required deposit. A REP failing to so remit any such shortfall is required to comply with the provisions set forth below under “—Remedies Upon Default.” REP cash deposits will be held by the trustee in a REP deposit account and invested in eligible investments at the written direction of the servicer. The trustee shall not in any way be held liable for the selection of eligible investments for the REP deposit accounts or for investment losses incurred thereon. The trustee shall have no obligation to invest or reinvest any amounts held thereunder in the absence of timely and specific written investment direction from the servicer and appropriate documents from the applicable REP. Absent written direction from the servicer, amounts held thereunder will remain uninvested. Investment earnings on REP cash deposits will be considered part of such cash deposits so long as they remain on deposit with the trustee. Each depositing REP shall be responsible for the payment of income taxes with respect to such investments. At the instruction of the servicer, cash deposits will be remitted with investment earnings to the REP once all system restoration bonds have been retired unless otherwise utilized for the payment of the REP’s obligations. If at any time the deposit is no longer required, the servicer will promptly (but not later than 30 calendar days) instruct the trustee in writing to remit the applicable amounts in the REP deposit account to the REP.

Payment of System Restoration Charges.

Payments of system restoration charges will be due 35 calendar days following each billing by the servicer to the REP, less an agreed allowance for expected uncollectible amounts, without regard to whether or when the REP receives payment from its retail electric customers. The servicer will accept payment by electronic funds transfer, wire transfer, and/or check and payment will be considered received by the servicer on the date the electronic funds transfer or wire transfer is received by the servicer, or the date the check clears. A 5% penalty will be charged on amounts received after 35 calendar days; however, a 10 calendar-day grace period will be allowed before the REP is considered to be in default. A REP in default is required to comply with the provisions set forth below under “—Remedies Upon Default.” The 5% penalty will be a one-time assessment measured against the current amount overdue from the REP to the servicer. The “current amount” consists of the total unpaid system restoration charges existing on the 36th calendar day after the billing by the servicer. Any and all such penalty payments will be made to the trustee to be applied against system restoration charge obligations. A REP shall not be obligated to pay the overdue system restoration charges of another REP. If a REP agrees to assume the responsibility for the payment of overdue system restoration charges as a condition of receiving the customers of another REP that has decided to terminate service to those customers for any reason, the new REP will not be assessed the 5% penalty upon such system restoration charges; however, the prior REP will not be relieved of the previously-assessed penalties.

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Single Bill; Allocation Among Issuing Entities of Transition Bonds and System Restoration Bonds.

Each REP would deliver a combined bill to each retail electric customer for the electric power sold by it to the retail electric customer, for the related transmission and distribution service provided by the electric utility, for the system restoration charges, for the transition charges associated with the Series 2009 Transition Bonds and for other charges approved by the PUCT. Each REP would collect the combined amounts and then remit such amount to Entergy Texas, net of the amounts it is entitled to retain described above under “—Payment of System Restoration Charges.” If retail competition is introduced into Entergy Texas’ service territory, Entergy Texas would then allocate the appropriate amounts to itself, to the servicer, to the servicer of the Series 2009 Transition Bonds and to other parties, if any, entitled to receive a portion of such amounts. In the case of any shortfall, Entergy Texas would allocate that shortfall, first, ratably based on the amount owed to Entergy Texas or other parties (including those amounts associated with the bonds, the Series 2009 Transition Bonds and future transition bonds or system restoration bonds) and the amount owed for other fees and charges, other than late charges and, second, all remaining collections will be allocated to late charges. Please read “Risk Factors—Servicing Risks—It may be difficult to collect system restoration charges from other parties who may bill retail customers in the future” in this prospectus. The retail electric provider will have custody of the system restoration charges collected from its retail electric customers until remitted to the servicer and may commingle the system restoration charges with its other funds.

Remedies Upon Default.

After the 10 calendar-day grace period (the 45th calendar day after the billing date) referred to above under the heading “—Payment of System Restoration Charges,” the servicer will have the option to seek recourse against any cash deposit, affiliate guarantee, surety bond, letter of credit, or combination thereof provided by the REP, and avail itself of such legal remedies as may be appropriate to collect any remaining unpaid system restoration charges and associated penalties due the servicer after the application of the REP’s deposit or alternate form of credit support. In addition, a REP that is in default with respect to the requirements set forth above under “—Loss of Rating”, “—Computation of Deposit, etc.” or “—Payment of System Restoration Charges” will be required to select and implement one of the following options:

If a REP that is in default fails to immediately select and implement one of the foregoing options or, after so selecting one of the foregoing options, fails to adequately meet its responsibilities thereunder, then the servicer will, subject to limitations that may be imposed by applicable bankruptcy laws if the REP is a debtor in bankruptcy, immediately implement the first option listed above. Upon re-establishment of compliance with the requirements set forth below in “—Loss of Rating” and “—Computation of Deposit, etc.” and above under “—Payment of System Restoration Charges” and the payment of all past-due amounts and associated penalties, the REP will no longer be considered in default and will not be required to comply with this paragraph. Any agreement entered into between the servicer and a defaulting REP pursuant to the second bullet point above will be limited to the terms of the servicing agreement and must satisfy the rating agency condition.

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Billing by Providers of Last Resort.

Each provider of last resort appointed by the Texas commission must meet the minimum credit rating or deposit/credit support requirements applicable to other REPs in addition to any other standards that may be adopted by the Texas commission. If a provider of last resort defaults or is not eligible to provide such services, responsibility for billing and collection of system restoration charges will immediately be transferred to and assumed by the servicer until a new provider of last resort named by the Texas commission or the customer requests the services of another qualified REP. Retail electric customers cannot be re-billed by a successor REP for any system restoration charges they have previously paid (although future system restoration charges will be adjusted to reflect REP and other system-wide charge-offs). Additionally, if the amount of the penalty detailed in “—Payment of System Restoration Charges” is the sole remaining past-due amount after the 45th calendar day, the REP will not be required to comply with the provisions set forth under “—Remedies Upon Default” unless the penalty is not paid within an additional 30 calendar days.

Disputes.

In the event that a REP disputes any amount of billed system restoration charges, the REP will pay the disputed amount under protest according to the timelines detailed in “—Payment of System Restoration Charges.” In the event of a dispute, the REP and the servicer will first attempt to informally resolve the dispute, but if they fail to do so within 30 calendar days, either party may file a complaint with the Texas commission. If the REP is successful in the dispute process (informal or formal), the REP will be entitled to interest on the disputed amount paid to the servicer at the Texas commission-approved interest rate. Disputes about the date of receipt of system restoration charge payments (and penalties arising thereof) or the size of a required REP deposit will be handled in a like manner. Interest paid by the servicer on disputed amounts may not be recovered through system restoration charges if it is determined that the servicer’s claim to the funds is clearly unfounded. No interest will be paid by the servicer if it is determined that the servicer has received inaccurate metering data from another entity providing competitive metering services.

Metering Data.

If the servicer is providing metering service to the retail electric customer, metering data will be provided to the REP at the same time as the REP is billed. If the servicer is not providing metering service to the retail electric customer, the entity providing metering service will be responsible for complying with Texas commission rules and ensuring that the servicer and the REP receive timely and accurate metering data in order for the servicer to meet its obligations under the servicing agreement and the financing order with respect to billing and true-up adjustments.

Charge-Off Allowance.

The REP will be allowed to hold back an allowance for charge-offs in its payments to the servicer. Such charge-off rate will be recalculated each year in connection with the annual true-up procedure. On an annual basis in connection with the true-up process, the REP and the servicer will be responsible for reconciling the amounts held back with amounts actually written off as uncollectible in accordance with the terms agreed to by the REP and the servicer, provided that:

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Service Termination.

In the event that the servicer is billing customers for system restoration charges, the servicer will have the right to terminate transmission and distribution service to the end-use customer for non-payment by the customer pursuant to applicable Texas commission rules. In the event that a REP (including any POLR) is billing customers for system restoration charges, that REP will have the right to transfer the customer to the POLR (or to another certified REP) or to direct the servicer to terminate transmission and distribution service to the end-use customer for non-payment by the customer pursuant to applicable Texas commission rules.

Codification of REP Standards.

The Texas commission codified the standards for REPs regarding the billing and collection of system restoration charges in July 2000 as Substantive Rule 25.108. This Rule provides that:

ENTERGY TEXAS RESTORATION FUNDING II, LLC, THE ISSUING ENTITY

We are a special purpose limited liability company formed under the Delaware Limited Liability Company Act pursuant to a limited liability company agreement executed by our sole member or owner, Entergy Texas, and the filing of a certificate of formation with the Secretary of State of the State of Delaware. Our limited liability company agreement restricts us from engaging in activities other than those described in this section. We do not have any employees, but we will pay our member for administrative services in accordance with our limited liability company agreement. We have summarized selected provisions of our limited liability company agreement below, a copy of which has been filed as an exhibit to the registration statement of which this prospectus is a part. On the date of issuance of the System Restoration Bonds, our capital will be equal to 0.5% of the principal amount of the System Restoration Bonds issued or such other amount as may allow us to achieve the desired security rating and treat the System Restoration Bonds as debt under applicable IRS regulations.

As of the date of this prospectus, we have not carried on any business activities and have no operating history. We are not an agency or instrumentality of the State of Texas but are responsible to the State of Texas and the Texas commission as described below under the caption “—Our Relationship with the State of Texas and the Texas Commission.”

Our assets will consist of:

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The indenture provides that the transition property, as well as our other assets, other than any cash released to us by the trustee semi-annually from earnings on amounts in the capital subaccount and the rate of return received on the capital contribution of Entergy Texas, will be pledged by us to the trustee to secure our obligations in respect of the System Restoration Bonds. Pursuant to the indenture, the collected system restoration charges remitted to the trustee by the servicer must be used to pay principal and interest on the System Restoration Bonds and our other obligations specified in the indenture.

Restricted Purpose

We have been created for the sole purpose of:

Our limited liability company agreement does not permit us to engage in any activities not directly related to these purposes, including issuing securities (other than the System Restoration Bonds), borrowing money or making loans to other persons. We may not issue any other system restoration bonds other than the System Restoration Bonds offered by this prospectus. The list of permitted activities set forth in our limited liability company agreement may not be altered, amended or repealed without the affirmative vote of a majority of our managers, which vote must include the affirmative vote of all of our independent manager(s).

Our Relationship with Entergy Texas

On the issue date of the System Restoration Bonds, Entergy Texas will sell the transition property to us pursuant to the sale agreement between us and Entergy Texas. Entergy Texas will service the transition property pursuant to the servicing agreement between us and Entergy Texas. Please read “The Sale Agreement” and “The Servicing Agreement” in this prospectus.

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Our Relationship with the State of Texas and the Texas Commission

We are responsible to the State of Texas and the Texas commission. Specifically, pursuant to a financing order,

We have also agreed that certain reports concerning system restoration charge collections will be provided to the Texas commission.

The following is a list of our managers as of the date of this prospectus:

Manager Fees and Limitation on Liabilities

We have not paid any compensation to any manager since we were formed. We will not compensate our managers, other than the independent manager(s), for their services on our behalf. We will pay the independent manager(s) annual fees from our revenues and will reimburse them for their reasonable expenses. These expenses include the reasonable compensation, expenses and disbursements of the agents, representatives, experts and counsel that the independent manager(s) may employ in connection with the exercise and performance of their rights and duties under our limited liability company agreement, the indenture, the sale agreement and the servicing agreement. Our limited liability company agreement provides that to the extent permitted by law, the managers will not be personally liable for any of our debts, obligations or liabilities. Our limited liability company agreement further provides that, except as described below, to the fullest extent permitted by law, we will indemnify the managers against any liability incurred in connection with their services as managers for us if they acted in good faith and in a manner which they reasonably believed to be in or not opposed to our best interests. With respect to a criminal action, the managers will be indemnified unless they had reasonable cause to believe their conduct was unlawful. We will not indemnify (i) the manager (other than the independent manager(s)), for any judgment, penalty, fine or other expense directly caused by their fraud, gross negligence or willful misconduct, or (ii) the independent manager(s), for any judgment, penalty, fine or other expense if such judgment, penalty, fine or other expense directly caused by the independent manager(s)’ bad faith or willful misconduct. In addition, unless ordered by a court, we will not indemnify the managers if a final adjudication establishes that their acts or omissions involved intentional misconduct, fraud or a knowing violation of the law and were material to the cause of action. We will pay any indemnification amounts owed to the managers out of funds in the collection account, subject to the priority of payments described in “Security for the System Restoration Bonds—How Funds in the Collection Account Will Be Allocated.”

We Are a Separate and Distinct Legal Entity from Entergy Texas

Under our limited liability company agreement, we may not file a voluntary petition for relief under the Bankruptcy Code, without the affirmative vote of our member and the affirmative vote of all of our managers, including each independent manager. Our limited liability company agreement requires us, except for financial reporting purposes and for U.S. federal income tax purposes, and, to the extent consistent with applicable state law, state income and franchise tax purposes, to maintain our existence separate from Entergy Texas including:

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Administration Agreement

Entergy Texas will, pursuant to an administration agreement between Entergy Texas and us, provide administrative services to us, including services relating to the preparation of financial statements, required filings with the SEC, any tax returns we might be required to file under applicable law, qualifications to do business, and minutes of our managers’ meetings. We will pay Entergy Texas a fixed fee of $100,000 per annum, payable in installments of $50,000 on each payment date for performing these services, plus we will reimburse Entergy Texas for all costs and expenses for services performed by unaffiliated third parties and actually incurred by Entergy Texas in performing such services described above.

RELATIONSHIP TO THE SERIES 2009 TRANSITION BONDS

Entergy Texas’ Prior Securitizations

The bonds are the third series of bonds which Entergy Texas (including in its role as successor to an affiliate) has sponsored that are secured by transition property created under Texas statute.

Pursuant to a financing order issued by the Texas commission in April 2007 under the Texas statute, EGSI sold transition property to an affiliate, Entergy Gulf States Reconstruction Funding I, LLC. The affiliate, on June 29, 2007, issued the Series 2007 Transition Bonds. Following the issuance of the Series 2007 Transition Bonds, Entergy Texas succeeded EGSI in the role of sponsor, seller and servicer for the 2007 System Restoration Bonds. The proceeds of the Series 2007 System Restoration Bonds enabled EGSI to recover system restoration costs associated with Hurricane Rita which impacted Entergy Texas’ service territory in 2005. The Series 2007 Transition Bonds were retired on April 1, 2021.

Pursuant to a financing order issued by the Texas commission in September 2009 under the Texas statute, Entergy Texas sold transition property to an affiliate, Entergy Texas Restoration Funding, LLC. The affiliate, on November 6, 2009, issued $545,900,000 Senior Secured Transition Bonds or the Series 2009 Transition Bonds. The proceeds of the Series 2009 Transition Bonds enabled Entergy Texas to recover system restoration costs associated with Hurricanes Ike and Gustav which affected Entergy Texas’ service area in 2008.

Entergy Texas currently acts as servicer with respect to the Series 2009 Transition Bonds. The final scheduled maturity of the Series 2009 Transition Bonds is August 1, 2022.

Interest on and principal of each tranche of the Series 2007 Transition Bonds and Series 2009 Transition Bonds have been paid on a timely basis, with payments of principal made in accordance with their expected amortization schedules.

The transition property securitized in prior transactions also consisted of the right to impose and collect nonbypassable system restoration charges on retail customers in the Entergy Texas service area. Neither the system restoration charges which are authorized to be collected to repay the Series 2009 Transition Bonds, nor any other security held for the benefit of such bonds, constitute security for the System Restoration Bonds issued by us and offered by this prospectus.

Although the System Restoration Bonds issued by us will have its own transition property, system restoration charges relating to our System Restoration Bonds and system restoration charges relating to the Series

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2009 Transition Bonds will be collected through single bills to individual retail customers (and, if retail competition is ever introduced to the Entergy Texas service territory, single bills issued to any future associated retail electric providers). These bills will include all charges related to the purchase of electricity, without separately itemizing the system restoration charge component of the bill or charge components. In the event a customer does not pay in full all amounts owed under any bill including system restoration charges, Entergy Texas, as servicer, is required to allocate any resulting shortfalls in system restoration charges ratably based on the amounts of system restoration charges owing in respect of our System Restoration Bonds, amounts owing in respect to the Series 2009 Transition Bonds, and any amounts owing to any subsequently created affiliate of Entergy Texas which issues System Restoration Bonds. Please read “Description of the System Restoration Bonds—Relationship to 2009 Transition Bonds,” “The Depositor, Seller, Initial Servicer and Sponsor—Competition” and “The Servicing Agreement—Remittances to Collection Account” in this prospectus.

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