Entergy Corp. rate-regulated activity will drive growth in 2020, but it the company is eyeing its newly-formed customer-centric division as a longer-term driver, Entergy executives said on Feb. 19.
During Entergy's call on fourth-quarter 2019 results, Chairman and CEO Leo Denault said the utility's innovation arm KeyString Labs is working on various distribution and electrification solutions to meet customers' growing needs on low-cost clean energy. Denault and Entergy Executive Vice President and CFO Andrew Marsh said the work from this division, which was quietly formed in 2019, will be the biggest growth opportunity for the utility.
KeyString Labs has already initiated several projects through the utility's various subsidiaries: Entergy Texas Inc. installed a 1-MW generator at a grocery store in Texas that provides electricity during a power outage and at other times. The Mississippi Public Service Commission approved on Dec. 11, 2019, a natural gas-fueled backup generator pilot from Entergy Mississippi LLC to provide 20 generators throughout the state (Mississippi PSC Docket 2018-UN-133). The division has been working on other initiatives such as rooftop solar for low-income customers and backup generation for commercial and industrial customers, Denault said.
Not only will KeyString Labs contribute to meeting Entergy's sustainability goals, but the recently created division's work could provide electrification of non-utility sectors that rely heavily on fossil fuels, the chief executive said.
"This is an important pillar of our broader strategy to reduce societal carbon emissions beyond our own footprint," Denault told analysts. "This is a practical and environmentally responsible way to help customers in other industries meet their sustainability goals by relying on Entergy's grid power instead of higher-emitting fossil fuels."
Entergy could see additional investments in customer solutions in the future, as Denault believes there will be more financial clarity within five or 10 years.
"It's a little early for us to start to size it up. As the year goes on and we start to develop more, we will," he said. "But our view is that at the end of the day, the distribution side of the business and these customer solutions will be the fastest-growing part of our business."
Beyond customer solutions, Entergy's regulatory activities across the Southeast will continue to be a key element of the company's business strategy. Entergy's Mississippi and Louisiana units' rate activity from 2019 will contribute to its 2020 growth, along with Entergy Arkansas LLC's base rate increase that went into effect in January 2020, Marsh said. Entergy's Mississippi, Louisiana and New Orleans utilities will also make formula rate plan filings this year.
Rate recovery from power plants will also be crucial for the company. The Lake Charles Power Station is slated to go into service during the second quarter and Entergy will be able to recover rates the month after the 1,000-MW combined-cycle gas plant comes online, Marsh added.
"As a result of collaborative work with our regulators, 90% of our 3-year capital plan is expected to be recovered through timely, progressive regulatory mechanisms," Denault said.
Entergy Corp. on Feb. 19 booked fourth-quarter 2019 adjusted earnings of $137 million, or 68 cents per share, compared to $128 million, or 70 cents per share, in the same period of 2018.