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New synergy at Entergy: AP&L's parent company takes the view that less is more.

The restructuring continues at Entergy Corp.

The parent company of Arkansas Power & Light Co. is still attempting to become leaner in preparation for an expected period of less regulation and more competitive markets for energy.

The lengthy restructuring effort has expanded the vocabulary of Entergy officials to include terms such as "right-sizing," "least-cost planning" and "out-placement."

In English, some of those terms translate to "layoffs."

Most of the staff reductions will come through attrition and early retirement, both voluntary and otherwise. To date, Entergy executives have whittled the corporate payroll by 600 employees.

Future reductions will mean that one of every nine Entergy employees who had a job in 1990 won't have one by the end of 1994.

The plan is to reduce the number of employees by 1,500 during a five-year period. The Entergy work force totals about 12,500 people.

What has been the impact at AP&L since the systemwide restructuring began?

"We don't have a target on the company level," says Entergy spokesman Patrick Sweeney.

The net effect in Pulaski County is 60 fewer Entergy/AP&L employees.

Statewide, 207 AP&L employees took voluntary early retirement, 188 transferred within Entergy and 52 were laid off.

Eight of those who were laid off later were rehired, and another 18 accepted forced early retirement.

About 80 employees left the company after AP&L sold its Missouri holdings for $72 million to Union Electric Co. of St. Louis. The assets were part of AP&L's 1981 acquisition of Arkmo Power & Light Co., which served parts of northeast Arkansas and southeast Missouri.

AP&L now has almost 3,000 employees.

Entergy officials hope the efficiencies are positioning the company for a new way of doing business in the 1990s and into the next century.

"Market forces are going to be more prominent than ever before as we move toward deregulation," Sweeney says. "We have to be a low-cost provider to maintain our position in the market, and that's what we aim to do."

Maintaining stable electric rates and delaying the need for additional capacity have become crucial in an industry that is experiencing massive change.

"Our goal is to go as long as we can without filing a general rate case," says AP&L spokesman Jerol Garrison. "All the money saved goes toward that goal."

Raising electric rates and taking on the cost of new generation facilities would be counterproductive in the face of competitive market forces.

Least-cost planning involves practices such as consolidated purchasing for the entire Entergy system.

"The biggest asset is the economies of scale that occur," Sweeney says.

For instance, buying transformers for all Entergy companies from three vendors rather than allowing operating companies to cut their own deals has resulted in an annual systemwide savings of $1.5 million.

Entergy officials are finding other areas in which to cut costs.

Advertising expenditures at Entergy fell by more than $1 million due to budget cuts, mix-and-match advertising spots that can run in three states and combined purchasing of printed materials.

AP&L realigned its construction and service crews, which were part of a 21-district organization, into a chain of command linked with three regional offices. The 21 districts were consolidated into 10 operating divisions to streamline customer service and reduce management requirements.

"We're being intelligently ambitious about the future of our company," Sweeney says. "... Ultimately, there will be a situation in which ratepayers determine who the supplier of their electricity is."

Branching Out

In addition to AP&L, Entergy subsidiaries include Louisiana Power & Light Co., Mississippi Power & Light Co. and New Orleans Public Service Inc.

Entergy has adopted a philosophy of less is more, but the philosophy isn't stopping the corporation from making acquisitions.

On June 8, Entergy officials announced they had reached a definitive agreement to buy a neighboring utility, Gulf States Utilities Co. of Beaumont, Texas. The $2.3 billion stock swap/cash purchase must undergo regulatory scrutiny during the next 12 to 18 months before final approval is granted.

GSU stockholders have the option of receiving $20 per share in Entergy stock or cash, not to exceed $250 million. Gulf States employs 4,800 people and had 1991 revenues of $1.7 billion.

GSU serves 579,000 customers in a 28,000 square mile area of south Louisiana and southeast Texas.

The company will become Entergy's fifth operating subsidiary.

AP&L provides electric service to 575,000 customers in 63 of the state's 75 counties.

LP&L provides electric service to 590,000 customers in 46 of the state's 64 parishes.

MP&L provides electric service to 350,000 customers in 45 of the state's 82 counties.

NOPSI provides electric service to 190,000 customers and natural gas service to 154,000 customers in New Orleans.

"At this stage of the game, it would be premature to say what the impact of the GSU merger will be," Sweeney says.

But once the deal is consummated, cost-saving measures will be instituted.

"We'll do business with that subsidiary just as we do with our other subsidiaries," Sweeney says.

Since the restructuring, Jerry Maulden has taken on new duties as chairman of Entergy's four operating companies and as president of Entergy's Distribution and Customer Service Group. Maulden now spends much of his time traveling between Little Rock, New Orleans and Jackson, Miss.

Prior to the changes, Maulden served as president and chief executive officer of AP&L. Drake Keith was named president and chief operating officer in January 1989, but Maulden retains the title of CEO.

Maulden became chairman of AP&L and senior vice president of Entergy's operations in Arkansas, Mississippi and Missouri in December 1988. Four months later, he added the positions of chairman and CEO of MP&L.

Industry observers are all but certain he is being groomed as the successor to Edwin Lupberger, chairman and CEO of Entergy.
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Title Annotation:Entergy Corp. restructuring; Arkansas Power and Light Co.
Author:Waldon, George
Publication:Arkansas Business
Article Type:Company Profile
Date:Jul 13, 1992
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