Entergy Corporation Company Profile 17,19,23
- Entergy Corporation became one of the nation's largest utility holding companies after its merger with GSU was completed on December 31, 1993. Even without GSU, based on the 1993 revenues of Louisiana-based companies from all industrial sectors, Entergy is the state's largest publicly held company, as it was in 1992.
- Headquartered in New Orleans, Entergy now serves more than 2.3 million retail customers in Arkansas, Louisiana, Mississippi, and Texas through its five operating subsidiaries consisting of Arkansas Power & Light Company (AP&L), Gulf States Utilities Company (GSU), Louisiana Power & Light Company (LP&L), Mississippi Power & Light Company (MP&L) and New Orleans Public Service Inc. (NOPSI). The area served in these four states encompasses about 112,000 square miles. Entergy is the leading electric energy supplier in Arkansas, Louisiana, and Mississippi. The company's principal address and telephone number is as follows:
225 Baronne Street
New Orleans, Louisiana 70112
- In Louisiana, the area served by Entergy subsidiaries GSU, LP&L, and
NOPSI includes the rural northern part of the state as well as the more populous,
industrialized southern part, including metropolitan New Orleans and Baton
Rouge. The area is shown on the map in Figure 6.
- The Entergy system's 1993 electricity sales (excluding GSU) by customer sector as a percentage of total system sales of 67,433 million KWH were 28.1% residential, 19.9% commercial, 36.9% industrial, and 15.1% other.
- The fuel sources for the power generated by the Entergy systems in 1993 were 26.5% gas, 6.4% oil, 50.3% nuclear, 16.4% coal and 0.4% hydro. Excluding GSU, Entergy's total system peak demand in 1993 occurred on August 19 and was 12,858 MW, up 7.8% from 1992. Net system capability at the time of the peak, excluding GSU, was 14,029 MW, for a capacity reserve margin of 8.3%. Had additional power been needed, it could have been obtained from sources outside the Entergy system.
- The Entergy system's major industrial customers are in the chemical processing, petroleum refining, paper products, and food products industries. For the past several years load growth has been relatively flat along with the economies of the region the company serves.
- Entergy also sells wholesale electricity to other utilities through its Entergy Power, Inc. subsidiary, and is aggressively pursuing business opportunities involving nonregulated power projects in other states and overseas. It also markets its energy expertise worldwide.
- Domestically, Entergy Power's domestic nonregulated ventures include 100% ownership of IPP generating facilities in Arkansas totalling 809 MW and 50% ownership of a 250 MW IPP plant in Virginia. Additional IPP investments are planned for 1994 and 1995.
- Internationally, in Argentina Entergy is a 6% owner of 1,250 MW of generating capacity, 5% owner of a distribution system serving 1.9 million customers, and 9.6% owner of 5,000 miles of high voltage transmissions lines. The company is exploring additional projects in Central and South America, China, and the Pacific Rim countries. Offices in Hong Kong and Buenos Aires are being opened in 1994.
- Entergy's overall business plan is twofold: improve its existing core utility business by implementing operational and financial strategies in order to decrease operating and capital costs ang increase revenues; and expand its core regulated utility business and nontegulated ventures related to its energy expertise. The company does not intend to expand into businesses unrelated to its energy expertise as some other utilities have done in other states with disastrous results.
- In order to avoid the ire of regulatory agencies, there is a strict line of demarcation separating Entergy's regulated utility business and its diversified, nonregulated businesses. Entergy's core utility business is structured along functional lines and is composed of three System groups: Operations (Fossil, and Transmission, Distribution, and Customer Service), Nuclear, and Entergy Business Support. The company's Enterprises group manages nonregulated domestic and foreign business ventures.
- Electric Generating Facilities 17,18
- After the merger with GSU, the Entergy system now has a diversified generating capability of 22,469 MW (including Entergy's share of jointly-owned plants) that includes 88 generating plants fueled by coal and gas or oil; and four nuclear plants. The generating capability primary fuel mix in 1993 was 70% gas, 20% nuclear, and 10% coal.
- The power generated by Entergy's system generating plants is centrally dispatched over 115,000 miles of transmission and distribution lines by its System Operations Center at Pine Bluff, Arkansas, with a view to realizing the greatest economy and reliability. Through its membership in the SPP the Entergy network is a link in NERC's intercontinental electrical grid that stretches from the Rocky Mountains to the East Coast and into Canada.
- The 1992 generating capability of Entergy's two Louisiana system operating
companies, LP&L and NOPSI, totalled 6,657 MW - all solely owned by the
two utilities. This is 50.6% of the total capability of the IOU's Louisiana
plants, 40.1% of the total capability of the state's utilities, and 34.7%
of the total capability of all generating sources within the state. The 1992
generating capability of each LP&L and NOPSI generating station according
to primary fuel type is shown in Table 3.
The location of each plant is plotted on the map in Figure 1.
- In 1992 the 20,400 million KWH produced by LP&L and NOPSI's generating
plants was 45.2% of all the power generated by the IOU's Louisiana plants.
This output was about 37% of the total produced by all of the state's utilities
and 27.6% of all power produced in Louisiana. The 1992 net generation of each
LP&L and NOPSI generating plant according to fuel type is shown in Table
- Entergy owns System Energy Resources, Inc., which has a 90% interest in the Grand Gulf 1 nuclear plant near Port Gibson, Mississippi. The South Mississippi Electric Power Association owns the remaining 10%. The plant began commercial operation in 1985. System Energy sells the capacity and energy of its 90% interest in Grand Gulf 1 at wholesale to its only customers, the Entergy electric utility system operating companies. The sales are in accordance with specified percentages as ordered by the FERC. The percentage shares are as follows: AP&L - 36%, LP&L - 14%, MP&L - 33%, and NOPSI - 17%. All of Entergy's nuclear plants are operated by Entergy Operations Inc., the company's nuclear operations subsidiary.
- Recent Developments
- Entergy plans to invest about $150 million a year in domestic and foreign nonregulated electric energy business ventures to reach a total of about $1 billion by 1998. The company is opening offices in Buenos Aires and Hong Kong in 1994.17,18
- In keeping with its business plan to expand its core utility business, Entergy completed its merger with GSU on December 31, 1993. GSU is now one of five Entergy electric utility operating subsidiaries. As part of the deal to gain approval from regulators, Entergy promised to cap base rates for GSU's customers for five years, and to pass on $1 billion in savings over 10 years, including $790 million in fuel savings. According to GSU, the fuel portion of a typical GSU customer's bill could be reduced by up to 9% in 10 years.30
- In late 1993 Entergy realigned its entire system electric utility operations into six regions. The past structure was created around the service areas of each subsidiary utility. The new structure breaks down these boundaries and is intended to realize some natural operating efficiencies by enhancing interaction among employees. It is expected that customer service will improve by facilitating smooth operations along functional lines rather than geographical lines.31
- Entergy plans to spend $10 million by early 1995 to expand a pilot demand-side management program that allows customers to monitor and possibly reduce their electricity usage through use of its fiber optics system. The system has been tested in 50 homes in Little Rock, Arkansas, a city served by Entergy subsidiary Arkansas Power & Light Company. At its own cost, Entergy plans to hook up 10,000 homes that are now located close to the system, which runs through its Louisiana subsidiary service area from New Orleans to Jackson, Miss., through Pine Bluff, Ark., and ends in Little Rock. The 10,000 customers can monitor their electricity usage and spend less for energy by switching consumption to a cheaper off-peak period.32
- On March 19, 1994, Entergy announced a three-year program to bring the GSU River Bend nuclear plant up to par with the company's other three nuclear generating stations. The performance of the plant has been under fire by the U.S. Nuclear Regulatory Commission (NRC) for some time.33
- On March 31, 1994, North Little Rock, Arkansas, awarded AP&L a wholesale electric contract which will provide estimated revenues of $347 million over its 11 year life. AP&L, which had been serving North Little Rock for over 40 years, was awarded the contract after intense bidding from SWEPCO, Oklahoma Gas & Electric Company, and a cogeneration partnership. Perhaps a harbinger of the newly competitive wholesale electricity market, the price per KWH was reduced 18%, retroactive to March 1, 1994, with provisions for price increases through the year 2004.19
- On April 12, 1994, the NRC fined Entergy Operations $100,000 for fire safety deficiencies at River Bend that go back to the plant's original construction by GSU.34
- On April 22, 1994, the NRC levied another fine of $112,500 on Entergy Operations for security violations at River Bend based on NRC inspections and investigations between April 1992 and August 1993, when GSU operated the plant.34
- Entergy Power won over nine other bidders to provide 40 MW annually for 15 years to the East Texas Cooperative. The power is now being provided by GSU under a contract that expires in December 1996. GSU, Cajun, and SWEPCO also submitted bids.35
- History 5,36
- Entergy's roots are in the telephone industry. In 1903 a 26-year old Arkansan named Harvey Couch was working at his job sorting mail for the St. Louis Railway when he noticed a crew stringing telephone poles in a small Arkansas town. While the telephone had been invented some 30 years before, it was slow in spreading into rural areas because the Bell system held patents on the technology and was concentrating on the more profitable metropolitan areas.
- Couch was intrigued by the telephone, and with $156 he saved and some borrowed wire be established a telephone line between the post office in McNeil, Arkansas, to the post office in Bienville, Louisiana. Thus was born the North Louisiana Telephone Company.
- By 1911 North Louisiana Telephone Company had constructed more than 1,500 miles of line servicing 50 exchanges in four states. However, because it was completely surrounded by Bell, it could not expand, so Couch sold the company to Bell, netting $1 million for himself in the deal.
- Couch then began looking at the electric industry. The conventional wisdom at the time was that development opportunities were limited in such poor states as Arkansas, Louisiana, and Mississippi. But Couch proved that assumption wrong with the successful telephone company he had just sold.
- Competition in the electrical industry was fierce and service was unreliable as companies came and went regularly. But that failed to deter Couch, and he bought two failed electric utilities in the neighboring Arkansas towns of Arkadelphia and Malvern. His generating source was cogenerated steam produced from the boiler system at Arkansas Land and Lumber Company in Malvern. This provided enough energy to power two 550-kilowatt turbines connected to a 22-mile, 22,000 volt line between the two towns. In 1913 he incorporated the Arkansas Power Company, one of the predecessors of Arkansas Power & Light Co.
- Shortly thereafter Couch wanted to expand his utility but was unable to get local financing. So he went to New York and got his money there. By 1915 he had attracted new investors and changed the name of his company to Arkansas Light & Power Company (AL&P). In 1917 he purchased a large utility in Pine Bluff, Arkansas, and moved the AL&P headquarters there. By the end of 1920, AL&P or its associated companies were serving 33 communities in Arkansas with electric power. The company name was changed to Arkansas Power & Light Company (AP&L) on October 2, 1926.
- In the 1920s oil and gas were discovered in southern Arkansas and northern Louisiana. Couch then began firing his steam generators with natural gas. In 1924 he built a dam on the Ouachita River in Arkansas and began generating electricity using hydro power. At the same time, he was buying up utilities in the neighboring states of Mississippi and Louisiana and eventually formed Mississippi Power and Light Company (MP&L) in 1923 and Louisiana Power Company in 1924.
- As his company expanded Couch encountered competition for new territory from much larger, financially able companies. He failed to acquire the Little Rock electric utility when the Electric Bond and Share Company, a subsidiary of the huge General Electric Company, beat him to it. Couch gave up the fight to stay independent, and in 1926 the two systems were consolidated into one large, interconnected system. The new system was called Electric Power and Light Corporation (EP&L), owned by Electric Bond and Share, and managed by Couch. This company was the forerunner of the corporation now known as Entergy.
- EP&L prospered despite formidable competition from goverment funded utilities such as the TVA and municipally-owned utilities. However, with the onset of the Depression a number of giant utility holding companies collapsed. Until then, the holding companies were acquiring utilities all over the country in such a frenzy that, in 1932, only eight holding companies controlled 73% of the investor-owned electric business. The public outcry that followed resulted in the 1935 Public Utility Holding Company Act (PUHCA), which broke up the multilevel holding companies and required utility holding companies to specialize in one service and relinquish their unrelated properties, such as city transit systems and natural gas production companies.
- Electric Bond and Share Company was one of the giants to be broken up. In 1949, its subsidiary, EP&L, was dissolved and Middle South Utilities, Inc. (MSU), was formed as a holding company for AP&L, MP&L, LP&L, and NOPSI.
- During the 1950s, 1960s, and 1970s MSU built generating plants fueled by natural gas in all three states to meet the growing demand for electricity. In 1963 AP&L began research into nuclear power. In 1968 the Atomic Energy Commission granted AP&L a construction permit for Arkansas Nuclear One near Russellville, Arkansas, the first nuclear power plant in the Southwest. In 1970 LP&L announced plans to build the Waterford 3 nuclear plant in St. Charles Parish, Louisiana. And in 1971 MP&L revealed plans to build the Grand Gulf Nuclear Station near Port Gibson, Mississippi.
- When the Arab oil embargo occurred in 1973, generating plant expansion came to an abrupt halt. Oil and gas prices shot up and natural gas supplies to certain industries were curtailed. Instead of relying on oil, gas, and hydroelectric power, the MSU system turned to coal and nuclear-fired plants. Arkansas Nuclear One went on line in 1974, and the first coal-fired unit, White Bluff Electric Station near Pine Bluff, Arkansas, went on line in 1980.
- But the high cost of electricity caused by the high cost of gas and oil depressed the demand for electricity so much that MSU cancelled plans for several additional plants. Those that were completed contributed to a capacity surplus that still exists today.
- By 1989 MSU was embroiled in a number of controversies over its Grand Gulf nuclear project. Finally, the company launched "Project Olive Branch" and absorbed one of the biggest losses ever incurred by a utility - $900 million invested in Grand Gulf 2 - in exchange for an end to a significant portion of the lawsuits and controversy surrounding the collection of FERC-approved rates for Grand Gulf 1. The settlement ended a decade of public controversy and regulatory conflict.
- Also in 1989, MSU changed its name to Entergy Corporation. A new corporate logo was also adopted. The name "Entergy" combined elements of enterprise, energy, and synergy-all factors the company feels are essential in meeting the demands of today's competitive electric marketplace. The word "Utilities" was purposely left out of the new name because the company resolved to no longer think like a tradition-bound, regulated monopoly. The name change was approved at the company's shareholder meeting on May 19, 1989, in Natchez, Mississippi. Clearly, 1989 marked the beginning of a change in Entergy's corporate culture from a traditional electric utility to a more entrepreneurial business.
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