2015 Material Issues and Strategic Imperatives
On an ongoing basis, we analyze material economic, environmental and social issues that impact our ability to create value for our stakeholders. We use stakeholder input to help identify the most material issues and guide our strategic imperatives. We engage in a variety of informal and formal communications with our key stakeholders and other important groups, including owners, lenders and other members of the financial community, regulators, suppliers, nongovernmental and nonprofit organizations and professionals in industry, government, labor and education. In 2015, we engaged a third party to assess our materiality process against five peer companies. Several strengths were identified, including the detailed description provided for each identified material issue and the clearly articulated link between material issues, Entergy’s strategic imperatives and the company’s enterprise risk management processes. Additionally, the assessment noted discussion topics that should be included in the company’s material issues. Examples of topics added are cybersecurity and climate resiliency.
Material economic issues are identified by monitoring developments in energy demand; energy supply, including generation technologies and fuels; as well as industry and general business regulation; and economic conditions. Local, state, regional, national and global economic conditions all impact our business, and we monitor these conditions. Our material economic issues for 2015 follow:
Why it Matters
Generating strong, competitive financial returns for our owners affords us ongoing access to capital needed to invest in our business and provide low-cost, reliable power for our customers, compensate employees and invest in our communities.
Promoting economic development generates energy demand growth and helps us strengthen our communities; maintain rate stability; fund investments to modernize our operations, increase efficiency, enhance reliability and serve new demand; and earn authorized returns.
Maintaining favorable power prices supports growing energy needs and attracts new economic development to our service areas. Low rates are particularly important in the states served by Entergy utilities where many customers live in poverty.
Meeting customers’ expectations for service to be available on demand requires robust supply solutions, up-to-date technologies and the ability to invest for the future.
Complying with local and state regulators’ requirements for Entergy to offer energy efficiency programs helps customers manage their bills and supports environmental goals. Select amounts of cost-effective energy efficiency can free up capital for other productive investment while keeping rates low. Our financial performance depends on the number of energy efficiency programs and on our ability to respond to the impact on load growth or obtain cost recovery mechanisms.
Balancing fuel diversity and other resource attributes supports price stability, energy affordability and reliability. Nuclear energy plays an important role in fuel diversity.
Meeting customers’ expectations for affordability, reliability and other needs, such as outage communications and storm restoration, is a key component of our mission and may affect approved rates of return and other regulations.
Maintaining continuous business operations depends on our ability to maintain the safety and security of all Entergy assets and operations.
Protecting data is critical to our stakeholders but goes beyond data privacy concerns of most enterprises. Entergy’s complex, interconnected network of generation, transmission, distribution, control and communication technologies is part of a national critical infrastructure, demanding even greater vigilance against cyberattacks.
Complying with existing regulations, encouraging development of constructive new regulations and advocating for wholesale market reform impact numerous operational and investment decisions, continued operation of nuclear plants and our financial results.
Commodity price risk
Delivering on financial performance objectives is impacted by our ability to accurately identify and quantify underlying commodity price risk in our business and mitigate it through effective hedging programs and strategies.
Material environmental issues are identified by monitoring developments in environmental legislation, regulation, case law, agency guidance, industry trends, best management practices and other actions. In addition, peer groups for air, water, waste and biodiversity facilitate the identification and transfer of information on material issues. Our material environmental issues for 2015 were:
Why it Matters
Identifying and mitigating climate change financial and physical risks guides operational and investment decision-making and helps to ensure more resilient customers and communities. These risks include increased operational costs due to carbon regulation, increased weather-driven volatility of business results and adaptation impacts to our facilities and to our customers.
Complying with increased federal and state regulation of various air pollutants continues to be a driver of business decisions regarding generation dispatch and design and the location, retirement, purchase, operation and construction of electric generating units.
Water quality and quantity
Complying with increased federal and state regulation of water pollutant discharges, cooling water intake structures for electric generating units and other water regulations, including the Waters of the United States rule, continues to be a driver of business decisions regarding generation dispatch, the design, location, purchase and construction of electric generating units, transmission and distribution projects and regional economic development. Identifying future water supply constraints also impacts these decisions.
Material social issues are identified by monitoring trends and developments such as those among our employees, owners, regulators, communities and markets, as well as from our own activities in operations, financial, legal, compliance and supply chain. Our material social issues for 2015 were:
Why it Matters
Safety and health
Ensuring strong operational safety and top-tier workforce safety practices are fundamental drivers of our business performance.
Human resource management
Relying on an aligned, engaged and capable employee culture is fundamental to meeting our company objectives. Diverse cultural backgrounds and perspectives of employees and supply chain partners provide us with a strategic advantage.
Sustaining business growth depends on healthy and vibrant communities. Entergy support of local communities through employment, tax base and community outreach is reciprocated by community support for ongoing Entergy operations. Community engagement in areas such as emergency planning is especially important where we have nuclear generating facilities.
Material economic, environmental and social issues are integrated into Entergy’s enterprise risk management processes. Our ERM processes identify, capture and mitigate risks that have the potential to impact Entergy’s ability to meet our objectives. More information on ERM is available in the Risk Management section of this report.
Each year we set clear areas of focus to align and empower our employees and inform other stakeholders. We use our analyses of material issues to define a limited number of strategic imperatives that we must accomplish, in addition to the fundamental daily operation of the business, in order to be successful over the long term. Our strategic imperatives are:
the Utility Business
- Control customer bills
- Make productive investments
- Earn reasonable returns
- Improve merchant fleet operations
- Manage risk
- Transition to smaller footprint
- Extend Indian Point Energy Center operation
- Decommission nuclear plants
- Improve our culture by leveraging organizational health and diversity
- Streamline and standardize work processes, reduce costs and improve efficiency and effectiveness
- Enable our workforce through enhanced talent and performance management