Entergy Corp. Chairman and CEO Leo Denault said the parent of Entergy Arkansas is in “a great position” as the utility giant executes its strategy of transitioning from a hybrid power generator to a “pure-play” utility operator with subsidiaries in Arkansas, Texas, Louisiana and Mississippi.
“A pure play model is something that we’ve tried to do for a long time, but the market dynamics have just changed the execution,” Denault said at the company’s 68th annual shareholder meeting held Friday (May 5) in Little Rock.
In his 45-minute “state of the company” address, Denault offered a wide-ranging view of the New Orleans-based utility giant’s goal to transform the company by selling off its merchant power and making substantial investments in its core utility business, which includes Entergy Arkansas.
In introducing the company’s board of directors and senior management team, Denault took time to give special recognition to former U.S. Sen. Blanche Lincoln and Arkansas native Theo Bunting. Lincoln joined the Entergy board in 2011. Bunting, who serves as group president of Entergy’s utility operations, is retiring at the end of June.
“Under Theo’s leadership in the last five years, the company has developed and is executing a comprehensive utility growth strategy,” Denault said of the Hendrix College graduate. “Theo has made great contributions to our business and industry as a leader and adviser. His depth of knowledge, experience and intuitive understanding of the business, has positioned Entergy well to successfully capture growth opportunities.”
As part of the company’s executive succession planning process, Roderick West, executive vice president and chief administrative officer, will move into Bunting’s role at the end of the second quarter.
After Bunting’s tribute, Denault provided a detailed presentation about the company’s pivot to exit the merchant power business. That decision has included the shutdown and decommissioning of the Buchanan, N.Y.-based Indian Point and (Vernon) Vermont Yankee nuclear plants, as well as the planned sale of the James A. FitzPatrick Nuclear power plant to Exelon Generation in upstate New York State.
Entergy also has announced the sale of the Rhode Island State Energy Center natural gas-fired power plant, and the planned shutdowns of the Pilgrim nuclear plant in Massachusetts and the Palisades nuclear plant in Michigan as part of the company’s departure from the merchant power business to focus on its utility operations.
“We would have liked to have sold those plants, or what we tried to do and spin them off into another entity,” Denault explained. “But with the fall of power prices, hence our losing money, we can’t continue to afford to operate them and so we had to go toward shutdown and decommissioning them.”
Later, in speaking in more detail with reporters, Denault said regardless of what happens with the Trump administration and the EPA’s rollback of President Obama’s Clean Power Plan, Entergy will continue to improve its environmental footprint.
In September, the EPA regional office in Dallas announced it had completed the process to implement a Regional Haze plan to improve visibility in wilderness areas across Arkansas and Missouri. The EPA said the plan would cut about 68,500 tons of sulfur dioxide (SO2) emissions per year and 15,100 tons of nitrogen oxide (NOx) per year, which will better protect the parks and refuge areas from hazy conditions, while also providing health and environmental benefits.
“Certainly, there is a lot of uncertainty the EPA is going to come out on a variety of things, including the regional haze issue that affects the Arkansas coal plants. We continue to operate those plants and make sure we maintain them to be reliable. We just have to see where the environmental programs go,” Denault said of President Trump’s moves to cut the EPA budget and downplay climate change initiatives.
Entergy’s proposal to the EPA calls for the eventual shutdown of its coal-fired operations at the White Bluff Electric Station in Jefferson County, instead of a costlier plan to install scrubbers atop the smokestacks of the sprawling power plant near Redfield by 2021. Denault and Entergy Arkansas CEO Rick Riley said the proposed haze controls for the White Bluff power plant do not warrant an investment of more than $2 billion in scrubber technology at the plants. Under the Entergy Plan, the utility would cease all coal-fired operations at the two coal-fired units in 2027 and 2028.
“It would be much more efficient – from a reliability and cost standpoint, a capital standpoint, and an environmental standpoint – to replace them with natural gas if we got to the point where we had to install new systems,” Denault said.
The Entergy executive also said the low price of natural gas is leading the company to invest more capital into new gas-fired projects instead of coal-fired plants, which in some cases are over 50 years old.
“With the prices of natural gas being what it is, significantly more economic than coal is to begin with, and from an environmental (view) it has half the carbon that coal has,” Denault said. “So, regardless of the change in the (Trump) administration, our point of view around our environmental responsibility hasn’t changed.”
Denault said Entergy and its utilities in Arkansas, Louisiana, Texas and Mississippi came out against the Obama administration’s Clean Power Plan not because of the environmental regulations, but “just because it was an overstep of authority of the EPA and probably something that should have been left to the states. … Not because we had any issue with clean power.”
Denault said the strategy as a pure-play utility will evolve around the company’s investment in new-build power projects that come online on time and on budget. “Those are going to provide the opportunity to get some certainty around our ability to execute,” he said. “So that capital program is going to drive the growth of our company. And it is also going to drive the reduction of costs to our customers.”
Riley revealed that the $1.3 billion Big River Steel plant is already the largest industrial consumer of power only months after its March 1 grand opening in Osceola. The Northeast Arkansas steel plant began full production in January, pushing out over 63,000 tons of hot rolled steel in the first month. Riley said by the time the company’s second phase comes on line, the Big River Steel plant will likely be the largest commercial power user on Entergy’s entire system across four states.
“They already are the largest Arkansas customer,” Riley said of Entergy Arkansas’ 705,000 electric customers across 63 counties. “We are very pleased they are located in our service territory.”