ELECTRICITY

Entergy CEO sees economic development role as Gulf Coast booms

HOUSTON -- Electric companies should coordinate with government officials and regulators to maximize the benefits of an energy-fueled economic boom in the U.S. Gulf Coast region, Entergy Corp. CEO Leo Denault told an industry gathering here yesterday.

"What is at stake here is jobs," Denault said. "What is at stake here is the growth and prosperity of the states we serve. What is at stake here is the future of the communities that we all call home."

Denault, speaking at the Gulf Coast Power Association's spring conference, told a luncheon crowd of the advantages the region has because of the low price of natural gas compared with oil and gas in other parts of the world. He said Entergy's service territory is the target for more than $64 billion of possible manufacturing investment, potentially leading to almost 40,000 jobs and nearly 2,500 megawatts of new load.

"To help feed the industrial renaissance, we as utilities need to keep our costs and our prices competitive with the rest of the nation," he said. "We also need to support the efforts of our elected officials, government agencies in attracting new customers and in supporting the programs for business expansion and attraction."

New Orleans-based Entergy has utility operations in parts of Arkansas, Louisiana, Mississippi and Texas. If planned projects become a reality, Denault said, Entergy may see a load growth rate of 3 to 3.25 percent in the coming years, up from a possible 1 to 1.25 percent from its legacy business.

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Entergy seeks to promote "sustainable value," Denault said, which would benefit four major stakeholders -- owners, customers, employees and communities the company serves. He said those groups in the Gulf may be in a position to prosper in ways that others in the United States aren't. Still, he said, it won't "just happen to us."

Denault said capital needs will grow and planning will be necessary. Cost recoveries will need to occur or projects won't happen or financial strain will descend on utilities, he said. Denault called for regulations that allow aggressiveness and compensation for risks. He also cited the growing effects of energy efficiency and distributed generation on power companies around the country.

Denault said the rate structure in Arkansas is based on a traditional cost-of-service model that can create financial strains when growth occurs. In Texas, a traditional rate case model is slower than in Louisiana and Mississippi, though regulators in Texas have helped to improve the process, Denault said.

Entergy has sought to control its cost structure and the effects on its prices, Denault said. That included joining the Midcontinent Independent System Operator, which may lower costs to customers by $1.4 billion over 10 years, he said. Entergy also reorganized its company, including reducing some head count and recognizing economic development needs, he said.

"None of us wants to be the person who stood in the way of job creation, expanded local tax base or the improvement in the quality of life our communities could achieve from this industrial renaissance," he said.

It was nice to hear Denault's support of economic development, said Pat Wood III, a former chairman at the Federal Energy Regulatory Commission and the Public Utility Commission of Texas. Regulators also need to share that view, he said.

"If a regulator doesn't see his job or her job ... as being a big part of the economic development of your state and region, get a new job," said Wood, who is a principal at Wood3 Resources, an energy infrastructure firm, and chairman of Dynegy Inc., a power producer.

The industry should keep looking ahead, Denault said, as the current Gulf boom won't last forever because commodity markets run in cycles.

"While we're busy capturing this opportunity, we must begin to sow the seeds for whatever the next opportunity might be as companies, as government agencies and as communities," he said, citing workforce training and education as well as infrastructure.

Denault called for using "the benefits, whether they're profits or tax revenues, to prepare our organizations and our communities" for what lies ahead.

"If we don't take the opportunity to do that now, then when the next revolution occurs, it will be another region of the country that tells its story that we have to tell right now, right here, along the Gulf Coast," he said. But if successful, he said, "we truly can make the success here in the Gulf Coast sustainable."

Twitter: @edward_klump | Email: eklump@eenews.net

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