Entergy 2003 Annual Report Download - page 5

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Chairman
Robert v.d. Luft
and former Secretary
of Labor Alexis
Herman, who was
elected to Entergy’s
board in 2003.
Productivity Improvement
A critical near-term initiative is to reduce total annual operation and maintenance expense by
$145 million, and to reduce maintenance capital outlays by $350 million, by 2006. The increase in
productivity improvements, combined with planned uprates to expand the capacity of our nuclear
plants, will move us closer to achieving consistent 10 percent returns on total invested capital.
We took a significant step toward this operation and maintenance expense goal with the
completion of our Voluntary Severance Program in December 2003. The VSP was well designed,
targeting specific processes or functions where best practices or technology enhancements have
been proven. We are eliminating work, and the VSP aligns the workforce with the remaining
business needs. A total of 1,100 employees participated in the program. The long-term value of
effective and efficient processes will clearly exceed the initial costs, which resulted in an after-tax
charge of $123 million. The initiative will produce annual savings of about $70 million after tax,
resulting in a three-year net present value of $90 million.
In our benchmarking efforts, we’ve found that the safest, most reliable operations are also the
lowest cost over the long run, and we firmly believe these productivity increases are sustainable.
U.S. capital-intensive industries have achieved 5 percent productivity improvements year after year
for decades. That doesn’t mean that everybody can do it – high-performing companies break from
the pack. For example, ten years ago we honestly could not see how we could get nuclear costs
below $25/MWh. But at the same time we knew that if we didn’t, we’d face a huge competitive
disadvantage. Now we’re operating plants at $15/MWh, and we’ve identified more room for
reducing inefficiencies, without compromising safety and reliability standards.
Innovative Regulatory Initiatives
Over the coming year, we’ll continue to focus on advancing creative regulatory solutions that are
good for all our stakeholders.
This is what we did in our New Orleans rate case last year. Entergy New Orleans obtained a
$30 million base rate increase, but the customers’ retail bill was less as we implemented an
innovative plan to acquire generation supplies at the lowest cost, replacing more expensive power
purchases and less-reliable, less-efficient generation. In addition, we gained the opportunity to
earn a higher return on equity through a performance-based incentive plan.
ENTERGY CORPORATION AND SUBSIDIARIES 2003
Entergy was honored as the top performer in the Edison Electric Institute’s Index
of Shareholder-Owned Electric Utilities, with a total return of 110.7 percent for the
five-year period ended September 30, 2003.
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