Entergy 2002 Annual Report Download - page 7

ENTERGY CORPORATION AND SUBSIDIARIES 2002 5
As a result of Entergy’s decision, we’ll avoid
additional costs to complete development of
all 15 turbines, we’ll stem ongoing cash losses
on new U.S. power projects, and we’ll reduce
future expenses in power development.
The total cash improvement is more than
$1.5 billion over the next five years.
Our to-do list for 2003
As we look ahead, we remain focused on
execution. Specific 2003 objectives for the
utility, the nuclear business, and Entergy-Koch
can be found on page 20. Let us briefly review
near-term goals and challenges for the company
as a whole and for each of our businesses.
For Entergy, a key goal is obtaining an “A”
credit rating for the corporation and improved
ratings for the utilities. We continue to improve
our business position and demonstrate the
financial strength and performance to warrant
stronger credit ratings.
The evolution of U.S. power markets, and
new structures and rules for the U.S. electric
transmission system, create challenges and
opportunities for our company. We believe
markets should be independent and efficient.
Wholesale power markets are in disarray, but
retail customers should not be forced to pay
higher prices or relinquish access to critical
resources built to serve their needs, in order to
bail out independent generators. We will work
aggressively to help shape the rules so the
outcome allows the market and competition
to work as intended.
At the utility, as we continue to improve
reliability and service, we’re also working to
boost financial performance. We’re seeking a
fair return on the billion-dollar investment
we’ve made in the past four years – over and
above normal depreciation – to ensure that
service continues to improve even as the
infrastructure continues to age and the physical
deterioration from severe weather or other
events takes its toll. We’re also seeking to
improve the earned returns on our entire
investment in the utility. For example, we’re
proposing innovative rate mechanisms, such as
performance incentives, that align the economic
interests of customers and shareholders.
In a related matter, we’re working to reach a
settlement that will provide a rate increase at
Entergy New Orleans, which recorded a loss
in 2002. In mid-March 2003, we reached an
agreement in principle that if approved by the
New Orleans City Council would result in a
$30.2 million rate increase. An increase is
necessary so that we can recover a return on
and return of investments we’ve made to sustain
and improve service, and can attract capital to
continue to meet the needs of Entergy New
Orleans customers. Without a sufficient rate
increase, Entergy New Orleans faces a credit
downgrade from Moody’s Investor Services.
Our top-priority focus has not been seeking
rate increases. It has been improving customer
service. Regulators can see the results – they
received 79 percent fewer customer complaints
last year than in 1998 – and they’re now willing
to listen to arguments for improved returns for
our shareholders consistent with the improved
service levels we have achieved. In December,
Mississippi regulators significantly increased
our authorized rate of return, and Louisiana
regulators approved a settlement that resolved
almost all remaining rate issues at Entergy
Gulf States.
In the nuclear business, we have opportunities
to grow earnings through efficiency
improvements and power uprates – that is,
projects to increase the generating capacity of
our plants. Average costs at the plants we’ve
acquired are about $10 per megawatt higher
than costs in our legacy fleet. Closing that gap
(some of which has already been achieved)
could ultimately reduce costs by as much as
$300 million a year.
“Our top-priority
focus has not been
seeking rate
increases. It has
been improving
customer service.”