Welcome. We really appreciate all of you who've come out today to be with us here. It's a great venue. We haven't been here for a few years. There's been a lot of renovation done.
And so I hope while you're paying attention to everything, I'm
really not distracted too much by the fact that this is a beautiful room and a beautiful place. And for
those of us who have finance backgrounds, being here is always like being a data center. What probably got you into
the business in the first place was
at some point imagining yourself potentially involved in what's
going on just kind of curious. So it's
a nice venue for us. It's great to be here. We understand it's very convenient for a lot of you. So thank you very much. For those of you on the webcast,
I'm sorry you're not here. We appreciate you taking time to call around
What I'd like to do right now is just
walk you through the presentations of the
day and what we think is going to be exciting for you and we want to share the excitement that we have for the plan that is in front of us and what we're trying to accomplish.
We're going
to start with Rod coming up here and he's going to give you an indication of what we're doing as a capital plan. He's going to walk through not only what it's for and why we're
financial measures. So if you
think about what Rod's presentation is about, it's setting that clear direction about what we know the capital plan in front of us
to encompass for a bank basis and regulatory mechanism
that we put in place that allow that
to turn into growth for all of you.
Then we thought it would be very important for us to share with you how we're going to
get that done because of
the position we're in and
as long as we're explained the
nature of the state of the capital plan, the most important thing that we have to do from this point on is to execute all the myriad of projects we have all the time
on by the end
of the regulatory regime. So Paul Hittingkamp, our Chief Operating Officer is going to come up and he's going to give you an indication of why we're confident that we can continue to execute on the capital plan the way we have over the course of the last 5 years. That execution is extremely important as it relates to getting those projects through the pipeline so that we can get them in service for our customers and obviously through the regulatory approval process so they turn into earnings for you. That's where Drew comes in. He's going to come up and he's going to explain to you how we're able to do that, manage the financial impacts of all the capital, the balance sheet, our credit ratings, etcetera.
At the same point in time, how that turns into steady predictable earnings growth that allows us to meet our objective of also having steady predictable growth in our dividend. So that's what Drew is going to talk about. By then, you'll have a pretty good idea about why we believe Entergy is a good investment. My role at the end is I'm going to come up and tell you what we're working on today that prepares us for beyond the 5 year period for which we've outlined outlooks in the financial realm today. The things that we're working on today that will prepare us to continue to have the same sort of growth 2022 and beyond.
I know some of you may not have a time horizon that stretches out to 2,030, but most of us do. So it's a very exciting opportunity for us to share with you the things we're doing today to prepare ourselves for that. With that, I'm going to go ahead and get off the stage and turn it over to Rod and then he can explain to you where we're going, why we're going there and how it's going to benefit our customers. Thank you very much.
Good afternoon, everybody. Good afternoon, everybody.
Good afternoon.
I have the pleasure of kicking off the conversation today talking about the investment plan. I too agree we have a very compelling investment thesis and I get the opportunity to talk to you about it. We have been looking forward to having this conversation for quite some time. So excuse our enthusiasm if we seem a little bit more fired up than you would normally be on a Thursday afternoon. There we go.
All right. The conversation for us starts with the vision and the mission for the company, We Power Life. You've heard us say that before, but I need you to understand something. This is at the core of everything you will hear about for the rest of the day. We know every day we go to work, we exist to create sustainable value for our 4 key stakeholders.
Chief among them today is you. It's part of the DNA of the capital plan, the execution plan, the financial results and how we deliver value. So what is it? For the last 5 years, we sought to simplify the Entergy story. When we're asked the question as we often are, what is the Entergy utility strategy?
What it's been for the last 5 years and what we believe it will be for the next 5 is essentially this. We're investing in a more robust and modernized grid and fleet in response to evolving customer demands. And we're doing so with the support and engagement of our regulators and through efficient and timely progressive cost recovery mechanisms that allow us to create and return value for you. That strategy is the cornerstone that sets us up to achieve your objectives, the pure play utility objectives. More modern robust grid fleet, response to evolving customer demands, support of the regulators with efficient recovery mechanisms.
That's the game plan. We expect that you'll agree with us that there's clarity around that and we hope and expect that you'll also agree that we have confidence in our ability to execute not just what we've done in the last 5 years, but what's ahead. So how have we done over the course of the last 5 years and why should you share in our belief, our confidence that we can execute what's before us? Simply stated, we've done what we said we would do to simplify the Entergy story, to simplify the strategy. Over the last 5 years, we've invested $13,000,000,000 of capital, put capital to work.
You'll hear about the names of the major generation projects that take up so much time and attention, we've expanded the transmission footprint. We joined MISO in 2014, derisked the company in route to setting the stage to return over $1,000,000,000 of value to our customers, which certainly support what you see on the right hand side of the screen, the constructive regulatory recovery mechanisms that we've achieved working with our regulators. This didn't just happen. There are a lot of people in this room for every check you see on that graph, there are a lot of people in this room and employees who within the sound of our voice who have contributed mightily to the things that you see here. But that was just setting the stage for where we believe 5 years ago we'd be today, okay?
We don't get credit for what we did yesterday. So where is the plan going? For the next 5 years, what should you expect? We don't believe we've ever seen the type of clarity or ever had the type of clarity that we have today around what we are to do for the next 5 years for this plan. Dollars 4,800,000,000 in power generation, again you'll hear more about that.
Dollars 2,700,000,000 in our nuclear program, dollars 3,600,000,000 in transmission investments, dollars 6,600,000,000 over the next 5 years in distribution and utility support $17,700,000,000 in our 5 year plan from 2018 to 2022. But here's the thing, what makes this clear to us, 85% of our capital plan is ready for execution today from a regulatory perspective. 85% of our $17,700,000,000 capital plan is ready for execution today from a regulatory perspective. You might ask, well, okay, that's 85%. This is a tough crowd.
You want to know, well, what about the other 15% over the next 5 years? Well, there's a placeholder for generating assets that we believe we have a need for in Mississippi and there's some MISO projects that we have line of sight on that from regulatory process we still have some work to do. But 85% ready for execution gives us clarity on the road ahead. And what does that mean? It means that our success over the next 5 years from 2018 to 2022 of putting nearly $18,000,000,000 of capital to work is less dependent on the achievement of a strategic initiative and more dependent on our ability to operationally execute.
That's why we believe the plan ahead couldn't be clearer for us. A little deeper dive into the components of the plan, the $7,500,000,000 of generation capital, You see that power is delineated in each sector between nuclear, non nuclear baseline, the new generating assets, St. Charles, Lake Charles and renewables. You'll hear from Chris Bakken, who after Paul Henningkamp comes up, Chris Bakken will give you an update. He was here a couple of years ago to talk about the nuclear strategic plan.
Chris will talk about what we've done and what we plan to do to continue the progress we've made in returning and preserving those nuclear assets for our customers. But on the new build, where most of the public attention has been, names like St. Charles, Lake Charles, Montgomery County, Washington Paris, New Orleans Power Station, we're replacing aging assets with these more efficient names, creating benefits for customers. And of course, we've already established with our regulators the need for capacity and energy that these units represent. But in the areas where we serve, they're also the foundation for economic development in those states.
And for you and our ability to create return value to you, those plants are foundational to the capital plan and for our earnings trajectory. And so Paul will talk about in more detail each of these projects and our plan to deliver them on time and on budget consistent with our customers' and our regulators' expectations. There was a you saw it on the graph before. Entergy has long had a very progressive point of view around sustainability. We have been tracking over the years both the technological and price progression of renewables, particularly as they relate to our service territory.
The time is now for us to think in real terms about actually having renewables take up a greater and greater proportion of our integrated resource planning. And to that end, and our customers and regulators are aligned with us on this, we have line of sight on 1,000 Megawatts of renewable generation in various stages of development. The transmission aspect of the capital plan. We probably had the greatest growth in transmission of the last 5 to 7 years, at least during my career at Entergy. The transmission investment plan is driven predominantly by reliability needs.
NERC and SIP requirements are ongoing. Our entry into MISO gives us an opportunity to make economic transmission investments that pay for themselves that allow us to have lower price generation brought into our region to lower costs for customers. The transmission plan is stable, improves the reliability of the system and feeds our economic aspirations. But there's an aspect of the transmission capital plan that's managed a little differently than the larger big box generation assets that are fewer in number. We have almost 400 transmission projects, 75% of them are less than $20,000,000
That's a lot of projects. That's a lot of projects.
Paul will talk about how we manage that portfolio. For the 78 projects that are greater than $20,000,000 On the map, I'll note just for your interest, there's a preponderance of the dots on the map representing those larger greater than 20,000,000 dollars projects that are along the Southern Gulf Coast where the preponderance of our industrial base and our service territory that's driving the Entergy Growth story happens to sit. Beyond transmission, think about getting closer and closer to the customer as we talked about central station power, high voltage transmission transformed down to the distribution level where we can distribute it to our customers. The investment plan now is now focused on where the customers are. That's the distribution and utility support aspect of the capital plan.
That's the $6,600,000,000 that I made reference to. You can look at the graph. You can look at the numbers. What does this mean? Beyond the business of turning customers on and connecting them to our system and replacing poles and cross arms and transforms.
What this capital plan is actually representing is our deployment of AMI. And AMI, automated metering infrastructure for those who don't know, as the gateway for what we believe is the future of the utility or the utility reimagined as our tagline suggests. And so this capital plan is leading us to and through the deployment of AMI. Now when we talk about AMI, AMI is not just the deployment of meters. That's not where the value is.
And I will confess to you, we had much debate over is this the actual device that we're going to deploy in the system? Is this the actual meter that we're spending $1,000,000,000 plus and having all the fuss about? And I will confess to you there may not be it may not be visually compelling just looking at this device. But for the engineers among you and the closet geeks like many of us, this is 4th generation nirvana. This is the vanguard to the future because it's not so much this device where the value is created.
It's the meter data management system. It's the communication system that feed into it and flow from it is where the value exists for us and our customers. Our ability to communicate not only with our system, our devices in the field, not only the ability to communicate with customer back and forth to us and the system being able to talk to us, this system of distribution automation, outage management system, we can actually tell when a customer is out without having to go out into the field to confirm where problem is, the system is actually talking to us in real time. It's an exciting time for the company. And by the time we actually deploy the meters through the 2021 timeframe, we will have the backbone already in place.
So when the meters are deployed, the customers are actually benefiting from it. Our system, our operational efficiencies improve at the moment those meters are in. That's what makes us so excited about what grid mod represents for the future of the company and the products and services that we can provide. And that improved operational efficiency allows us to lower costs for customers, which is always, always a big issue for us. Why?
Entergy has enjoyed amongst the lowest customer rates in the United States of America. That is and has been a competitive advantage. Our aim is to maintain that advantage. That advantage helps us on the economic development front. It gives us headroom to make productive investments like we have in the capital plan.
But it's not just about rates. Our customers don't experience us through rates. They experience us through the management of their actual customer bills. They pay attention to what we charge for the services we provide and the value that they perceive. And from a bill standpoint, Entergy has amongst the lowest overall customer bills in the region amongst our peers.
And with the $17,700,000,000 capital plan in place, we expect that the CAGR, the yearly increase in customer bills stays at or below 2% over the investment period. And for those of you who under who've been in our business for a covered our business for a long time, you know that affordability. Affordability is a big component of our ability to get the support of our regulators and customers around the customer centric investment plan. So as we replace older generation with newer generation, that efficiency lowers our overall cost, creates savings. The beauty of AMI and all of the technological advancements we're making there gives customers choices and the ability to manage their own bills as well.
So it's not just us pulling the levers that you see on the right hand side to keep the customer bills low. We're giving customers options in the way that they manage their usage as well. And again, a competitive advantage for our region, not just for our ability to deploy capital for your benefit, but to bring customers in to spread the spread that kilowatt hours over a larger customer base. And so low rates managing customer bills is how we pay how the customers pay for this $17,700,000,000 capital plan without the bills being unduly onerous. But of course, at the end of that strategy that I talked about, investing in a more robust grid and fleet modernized grid and fleet, in response to evolving customer demands with the support of our regulators and recovery through efficient and timely cost recovery mechanisms.
We expect that 90%, 90% of the capital that is in our plan over the next 5 years to be recovered through either a formula rate plan or an automatic recovery rider, 90%. For us that's clarity. Again, we're not talking about it's easy or it's guaranteed, but we have clarity in what it is we have to do and how we expect to put that capital to work and return value to you. But of course, this is where the rubber meets the road, our ability to earn our allowed ROEs. We made the note in Arkansas because we knew that just given where the snapshot was that your first question would be, well, wait a minute.
Well, between the $71,000,000 rate adjustment we had in January in Arkansas and the lower tax expense from the recent tax reform, we expect Arkansas through 2018 to earn closer to its allowed ROE. You see the benefits in Louisiana of the renewal of the FRP, the benefits of the FRP mechanism, the forward looking features in Mississippi. In Texas, we are in the midst of a rate case today. We filed a rate case and so we're going through the rate case process. And we are putting on the table all the things that we believe we need to give Texas an opportunity to be as competitive from a regulatory construct perspective as the rest of the jurisdictions in our service territory.
This is why we're here today to talk to you about how that plan that I just described plays into the regulatory mechanisms to produce the returns that you expect for supporting us and our customers with your capital. So that's the capital plan. The benefits overall of how we sell it to the regulators is what you see before you enhanced reliability in the system, good paying jobs, production cost savings. These are all the things that we have in testimony and rate cases and when we're doing stakeholder engagement with our customers and our regulators about why they should be supportive of the customer centric investment plan that we have before you. At the end of the day, where we're going and you heard Leo allude to it and he will talk more about it at the end of the program.
Our excitement about the 5 years is where we're ultimately going, the long term vision, if you will, for the company. And that's the bottom right of the deck, enabling tomorrow's customer solutions. That's what we get to if we're here 5 years from now updating you on the plan. We'll be talking about what Leo will end the program with. And so to be clear, dollars 17,700,000,000 plan, 85% of it's ready for execution.
We enjoy a competitive advantage that we will work to maintain that we expect to maintain. And along with the engagement of our regulators, the production of earnings growth trajectory that Drew will talk about through constructive regulation. That's what we're excited about. We've never had a plan that was as clear for the next 5 years and why we believe that you should share in our confidence and our ability to execute. And so Paul will come behind me to begin the conversation on execution.
Thank you.
Good afternoon. So I'll be talking about our new generation and new transmission portfolio of work, which as Rod laid out, is a significant portion of the capital investment plan that we have laid out in front of us, and I'll be talking to you about how we are going about executing that successfully. As Rod indicated, 85% of this, all the new generation and most of the transmission is ready to go. He indicated that it's all on us to deliver those portfolios of projects. Although he tells me that all the time, the way he told it to you seemed a little bit nicer than how he tells it to me.
It's more like this look in his eye. You know, Paul, we've got all the regulatory approvals for these projects. You know, Paul, all you have to do is successfully execute these projects. And it's not just the tone of Rod's voice, it's his look in his eye that I can only think if me and my team don't deliver, it's that look that he has when he's ready to tee up the quarterback when he was at Notre Dame as a linebacker. Of course, it's not just Rod either, it's Leo.
And the visits I get with Leo are typically on a Friday morning when he stops in and asks, how's it going? And I never get to answer that question because in the second or 2 it takes me to process, is this the 5 minute version he wants or the 50 minute version he wants? He goes right to, you know, Paul, we have all the regulatory approvals for these projects. All you have to do is successfully execute those. And look what that will deliver for all of our stakeholders in terms of reliability, in terms of environmental footprint, in terms of lower production cost and in terms of the earnings growth.
And as he stands up to say, Paul, well, my answer to Leo, to Rod and others is we got this. We got this. And what I want to share with you is the foundation and why I have the confidence on behalf of my team and everyone else supporting us, why we got this and why we will deliver these projects with the cost and schedule certainty that we expect. A little over 5 years ago, Leo asked me to put together an organization, an organization that would focus solely on ensuring we successfully delivered large projects. By successfully delivering large projects, we mean execute those safely, execute those with high quality and meet the cost and schedule commitments that we have laid out.
We benchmark the very best, not only in our industry, across all industries, oil, gas and others, and as a result of that, put in place comprehensive project delivery system, a system that guides all of our large projects from conception all the way into execution and into operations. We now have a team that is over 100 strong of some of the best men and women whose sole focus in the organization is to ensure that we successfully execute these projects. That project delivery system is the foundation of what we do. The stage gate process, the approach that we take to the deep dive assessments on each of the projects, the risk management program that we have for the projects as well as the governance and oversight we have in terms of the leadership, in terms of the metrics, in terms of the reporting, in terms of the engagement that we have all makes up our project delivery system. The stage gate process itself was and remains a foundational change for us.
It is a defined process with defined stages and gates that projects cannot go through until they're ready to go through for either engineering scope or funding approval or into construction or into operations. A foundational change because we found that too often in the past, not just with us, with others in the benchmarking that we did, people too often want to run the construction, thinking all will be solved there, when in fact the highest chance that you have a success is making sure that the front end loading piece, all of the scope you do, the design you do, the engineering that you do, the capital projects group, there's an independent arm that goes and looks at the projects independently from the team that's executing that. And they do assessments to verify not only compliance with the stage gate process, but how are the projects doing? Are they reporting properly? And when necessary, we'll bring in a 3rd party to do a deeper dive, potentially a longer dive on a portfolio of projects to make sure that we're ready to execute.
The team within my capital projects group has done over 150 assessments on projects since we started this organization just a few years ago. The risk management is probably similar to what you may look at in terms of risk. As you look across companies, we have a process where each and every one of the projects must maintain a a risk register from the beginning of the project all the way into construction and into operations. Risks certainly change as you move through the life cycle of a project. We not only make sure we have those in the register, but we have those monetized in terms of probability and consequence.
And we have actions to eliminate where we can and mitigate where we can't. The reporting that we do, the governance and oversight that we do, we have executive steering committees, we have business unit leaderships. I have personal engagement in many of these projects and spend quite a time on many of these projects and some we bring all the way up to Leo and the Office of the Chief Executive to make sure that we are executing and meeting our commitments. We have a pretty comprehensive set of metrics that we look at. And this is just a snapshot of 1 page of a project of what it might look like.
I don't expect you to read that in detail. There might be 10 to 20 to 50 pages of detail for some of our larger projects behind this. But at a glance, I can see how we're doing in terms of safety. I can see how we're doing in terms of cost. I can see how we're doing in terms of schedule.
And since we rely so heavily on our engineering, procurement, construction partners, I have a snapshot as well where I can see where they stand and we stand ultimately on engineering, procurement, construction, where we stand with the risk management program. I get a book every month of every project with this level of detail. Most of these key projects, I don't need this book because I already am pretty familiar with where those projects stand with the level of engagement that I and my team have. But nonetheless, it just gives you an indication of the level of detail that we have. I brought in a 3rd party, KPMG, when we were ready to embark on this large new generation portfolio.
Building 5 large power plants a pretty significant undertaking. I wanted to make sure that my team was ready to execute this. KPMG came in 5 or so people over 2 months, did a deep dive on our readiness, our processes, our controls as well as our EPC partners, CB and I's processes and controls. One of their conclusions was that we had a top tier program. And that's how they look at us across their capital projects group, and that organization looks at projects globally.
The processes are important, critically important. But at the end of the day, it's people and people deliver. We have a comprehensive and rigorous project management and oversight program made up of some of the best in the business of men and women. And we have a detailed partnering program that we do with our EPC providers. Too often in our experience, it gets into a fight.
And successful projects, you don't want to have the fight. You want to create win win situations with your partners. We spent quite a bit of time with our partners at all levels of those organizations, making sure we're aligned on outcomes. Only the detailed projects we reviews that we do with these organizations, but the project controls team that we have that does independent assessments of where each of these projects stand, we don't rely on our EPC partner to tell us where we're at. We know where those projects are at as well as our partners do.
We know the schedules, the schedule ties, the productivity factors, how they're performing in the field. We know the cost and where it stands as well as our partners do. Some of our partners would call us intrusive, and that's fine by me. We are inextricably tied to them for our success, and we will be as intrusive as we need to be to ensure our success. Another takeaway from the KPM and G assessment on the power generation portfolio was that it's very rare in their experience for an owner to have this level of project delivery capability.
When we stood up this organization, we didn't just take people from within Entergy. We brought people in from outside of Entergy that had expertise in delivering projects, in project controls, and these men and women are paying dividends for us today with how well we are executing on these portfolios. This work is difficult work, it's demanding work and it's gratifying. And I put this slide up here because it's not just talk on my part. The team has been delivering, as Rod indicated, over the last four and a half years.
The Nine Mile 6 project, our first new power plant in over 30 years, we completed that 2 months ahead of schedule, under budget, and it was in rates the day after it was completed. And by the way, that power plant for our power generation fleet has been the best performer over the last three and a half years, the highest net capacity factor, the highest net generation in our power generation fleet, which is a testament to the quality of the work that was done. The transmission portfolio over 255 projects have been placed in service over the last four and a half years. Projects such as Big River Steel, such as Cameron LNG that were put into service well ahead of when of our customers' need dates were, Projects like the Nine Mile to Durbinik project in Metropolitan New Orleans that helped bring more power into the city of New Orleans was recognized by Platts as a finalist as a construction project of the year in 2016. The regulator can be a difficult critic when it comes to recovery, and I add this quote for your benefit coming out of the 9 Mile 6 proceedings.
Their takeaways are noted here that we acted prudently, which is nice. We would expect nothing less of ourselves. But at the end of that, put in place an extensive system for project oversight. That's the oversight system that KPMG was referring to. That's the oversight system that these folks saw.
That's the oversight system that we have in place today. So the 5 generation projects, a little bit of background and detail on where we stand here. The key takeaway, all are on budget and on schedule. You saw the slide that Rod showed. St.
Charles will be operational next year, June of 'nineteen Lake Charles, June of 'twenty Montgomery County, June of 'twenty one New Orleans, January of 2020 and the Washington Paris Energy Center, June '21. These projects and this portfolio is in very good shape. The strategy that we laid out for those first three, those first three are the largest. They're about 1,000 megawatts each, 3 gigawatts of new generation. That's about $2,700,000,000 Those are the big box projects that Rod talked about.
The strategy for executing those successfully started when it was very clear that we had to win the RFPs for each of these individually to even have the portfolio to build. You could imagine the conversations with Leo at that time. He would walk into my office that time and it would start the same way. How's it going, Paul? And I didn't get my answer out in time then either.
When he got to, you know, Paul, all we have to do is win these RFPs and look what that will bring for all of our stakeholders. Well, we did that. And that strategy that we laid out to win those is paying dividends today. That strategy involved 1 engineering procurement construction provider, the same equipment manufacturers for all the large equipment, the same design for all three of those plants and a schedule that was strategically sequenced and optimized all the way from manufacturing to engineering to craft labor to execution in the field and into operations for our organization. It's paying dividends today, I say, because Lake Charles, you might see it better if you have iPads, but you can see that picture, you can see it, that's from May.
It's already coming out of the ground. The foundation is already there. The engineering procurement are well ahead of schedule on that project, and that's directly tied to the strategy that we had laid out. This is just St. Charles and what it looked like a little over a year ago, maybe 15 months ago, you can see it's largely dirt.
There are some foundations coming up. And this is what it will look like, all three of them. This is St. Charles, Lake Charles, Montgomery County will look like when they're completed. And you may not be too familiar with power plants.
You can see each of the individual trains from right to left of the combustion turbines and then all the way over to the steam turbine, 1,000 megawatts. And 15 months ago, I thought I would show you this today, a recent drone footage from the St. Charles power station from just a week or 2 ago. You can see the amount of progress that has been made. That power plant is a big power plant for us, 1,000 megawatts.
That's as big or more than some of our nuclear plants. 35 men and women will operate that facility. It is one of the most efficient facilities that we will operate. The construction on that site, there's over 30 miles of pipe, there's over 50 miles of electrical conduit, there's over 300 miles of cable on that site. I had David out there.
What was it, David, maybe a year ago? I was there a couple of weeks ago, sitting on top of the heat recovery steam generator about 100 and 5 feet high or so. It's a great view. If any of you ever interested to see any of these projects, there's plenty going on. I'd be more than happy to host you.
The St. Charles project, we are already into commissioning. We've turned over systems from the construction team to the commissioning team already. And as I said, that power plant will be operational on or before June of next year. That's where we're at today.
And we do planning for our customers' long term needs on an ongoing basis. And what is very evident to us today is that additional investment will be required beyond 2022. We've talked to you through the years about portfolio transformation. And since 2,005, we have retired over 40 power plants, representing about 5,700 megawatts of generation, and we've acquired or built 16 power plants, representing about 6,400 megawatts of generation. Yet if you look at that pie on your left, assets prior to 1985, we still have over 25 assets representing 11 gigawatts of generation put into service before 1985 that will have to be replaced at some time in some manner.
The way we look at that today, Rod talked about the 1,000 megawatts of renewables that we have. As renewables continue to decline in cost and improve in performance, we'll continue to see we expect that portfolio grow for us. The local solutions, the evolving customer demands and expectations wants that we see are making their way into our long term plans. So this planning, while there's more to come on our development and what that will look like, there is more to come. It will be made up of traditional forms of generation, renewables and localized solutions.
We will do that all under the umbrella and the objective that we have of maintaining the solid position we have as a steward of the environment. We are one of
the cleanest
large generating fleets in the United States, and that started as far back as 2,001 when we were the 1st utility in the United States to commit voluntarily to stabilizing our CO2 emissions. We've extended that twice, most recently with our Environment 2020 commitment, which was our pledge to reduce our CO2 emissions to 20% below 2,000 levels through 2020. We are well on target to meet that. We will meet that. The 1,000 megawatts of renewables that we spoke to in the various stages of development and meeting our objectives through portfolio transformation, through the investments that we'll make in our nuclear fleet and in the new technologies and renewables all fit to ensure that we will maintain our position as a strong environmental steward and meet our objectives in that regard.
That takes us to transmission. Pretty difficult to go through approximately 400 projects for you. Suffice it to say that our approach to executing that portfolio of work is the same as the generation. We must have the right processes, the right controls, the right governance, the right people overseeing that work. I have 2 organizations, one responsible for the projects greater than $20,000,000 and the other organization responsible for those less than $20,000,000 there's a lot more projects under the less than $20,000,000 but those greater than $20,000,000 or a couple of $1,000,000,000 of spend.
Those are significant projects that are improving our improving the reliability of our system, relieving congestion on our system. And as you can see on the chart, the vast, vast majority of these projects are on schedule and on budget, and it's a testament to how we approach and execute our work. Similarly to the metrics I have for the generation portfolio, we have detailed metrics that we look at the big projects individually and the portfolio of projects as a portfolio. And again, at a glance, I can see where we stand from a cost schedule safety perspective. I can see where we stand from an operating company perspective.
We have deep dive reviews with the operating company presidents on where we stand on meeting the commitments from a financial perspective as well as with transmission on where we stand with meeting the objectives for the system. So the transmission portfolio in very, very good shape. These are some of the largest projects that we've ever executed. The Lake Charles transmission project that you may have heard on the earnings calls from LEO, dollars 187,000,000 project. That is nearing completion, significantly going to improve the reliability of the Lake Charles area, which is where we see a lot of industrial growth continuing to occur.
The portfolio today, there are a number of projects, 4 or 5 projects that are coming through that are greater than $100,000,000 We also have 5 to 6 or more projects to take care of more customers, additional customers that we're seeing come into our territory. So we'll continue to see growth in the transmission portfolio. But again, the takeaway for you, on schedule, on budget, we are meeting our commitments in this regard. So successful execution, we've demonstrated that over the last four and a half years. The large new generation projects are all on schedule, on budget.
And if we look at where we are today with the organization, the processes, the controls, the people, the men and women that we have across this organization making this portfolio happen are why I have the confidence to tell Leo, to tell Rod, to tell Drew that we got this. And so with that, thank you for your time, and Chris will give you an update on nuclear.
Good afternoon.
Let's go back one. So what I'd like to do this afternoon is spend a few minutes with you outlining the progress that we're making in terms of the execution of our plans to improve the performance of our nuclear fleet and also share with you some of the progress we've made and some of the accomplishments we've made to date in doing that work. This is what we refer to as our nuclear roadmap. It's a graphic that we use internally to communicate with our team and also with a number of our key external stakeholders. Fundamentally, what we're working on over this period is to improve our capability to safely, conservatively and deliberately operate our stations to see them operate more reliably and improve our performance.
The road that you see or the black line is intended to illustrate when we expect to see improvement in our high level performance metrics. So you can see from the graph, we really expect this to be a 5 year journey. We've said that all along. And really, it takes us about 2.5 to 3 years to start to see improvement in our high level metrics and really in the 3 to 5 year period where you start to see sustained performance improvement. So that's the journey that we're on.
It also illustrates that we've broken it down into some key steps. So in 2016 2017, we really were focused on building the foundation of our work to allow us to have the culture change that will drive us to excellence. That took really 2 key parts. So the first, which we've talked about from time to time, is the nuclear strategic plan. We mentioned that when I was here 2 years ago.
And really, that's what defines the scope of work that we're going to do in terms of equipment largely to improve our performance. And that's really where the 2 point $7,000,000,000 of investment that Rod talks about resides. So in the back half of twenty sixteen and the early part of 20 17, we did a very careful and thorough review of each of our assets, looked at things that had challenged our performance, looked at where we could improve the performance of our equipment and laid out a very careful and methodical investment plan and work plan that we would execute across our fleet. So that's the investment side of things and the physical asset work side of things. The second thing that we did was to develop our nuclear excellence model.
And what that entails, it entails the values, the principles and the tools and the methodology and the process and the procedures by which we would operate our fleet. We did an extensive amount of benchmarking across the industry, took feedback from our peers and developed a plan for Entergy that takes us to excellence. In the second half of twenty seventeen and the early part of this year, we spent a considerable amount of time training our employees on those values, the principles, the tools, processes and This year currently we're working on changing our behaviors. So the real focus now is to get our team to start to change behavior, start to change the culture. And then next year, we'll be looking at shared culture and processes.
And what that's really about is operating consistently as a fleet. In terms of things that you could observe to see how we're doing and performing, there were 2 key milestones that we've mentioned. So first, in 2018, we were expecting ANO to exit column 4, return to column 1, a normal oversight with the NRC and that was achieved. Next spring, we expect to achieve the same thing for Pilgrim where we expect Pilgrim to go from column 4 back to column 1 in the spring before we shut the unit down. So again, this is our roadmap.
It illustrates when we expect to see high level metric performance and the varying stages of which we planned. Our framework for the improvement is the same thing that I explained 2 years ago. It's based on people, plant and process. It's not unique to us. If you look at most of the efforts to improve nuclear fleet performance, they were based on the same things.
For us, in terms of the people initiatives, we have what we call the Be Professional initiative. What that's really about is having the right number of people with the right knowledge, skills, abilities and proficiencies to execute the work we need to do at the right time in the right place. Pretty straightforward. In terms of plant, we refer to it as fix the plant. It's really executing the new strategic plan that I talked about and improving the safety and the reliability margins of our plants.
And from a process perspective, we're very focused on operating as a fleet and gaining the synergies that we can, learning from our own issues, adopting common fixes and common platforms across our fleet so that we operate consistently and drive our fleet performance to excellence. So the framework is the same thing we discussed. So we've accomplished a few things along the way and there's a number of them which I'm quite proud. So first and foremost, ANO, Arkansas Nuclear 1 as expected, the plant returned to column 1. We were formally notified in a letter that was actually issued on Monday of this week from Chris Kennedy, the region for administrator that the plant had returned to column 1.
I also with a number of my executive team had the opportunity this week to meet with the NRC Commission where they discussed the performance of A and O, of Pilgrim and of our fleet in general and they had a lot of positive comments in terms of the performance improvements that we're making and the culture shift that we're making. But it's not enough. Our focus isn't just on regulatory compliance, it's on achieving operational excellence. So while I'm pleased to see Enel back in column 1, we still have a fair amount of work to do. The other thing we've been able to achieve is we've added 1200 nuclear professionals to our team.
We've done that in 2017 and the 1st part of this year. From a leadership perspective, we've added a number of strong leaders to our team. We've added people with experience from the United States Nuclear Regulatory Commission, from the Institute of Nuclear Power Operations, with a U. S. Navy background and from other successful fleet operators.
We've also been able to strengthen our corporate governance and oversight capabilities. So we've added resources to the corporate organization to find and fix our own problems. And when our plants get in trouble and have issues that they need to work on, we have the capability now to provide resources to assist them. Now you might imagine when you add 1200 people, you have a significant amount of training that needs to be done. Some of our colleagues can come in and within a matter of a week, they can add and contribute.
Some of them it takes 2 to 3 years of training before they can contribute. That's one of the reasons excuse me, I need
a drink.
Sorry, I'm losing my voice. Thanks. That's one of the reasons why when I showed the road map, we won't see improvement for the 3 to 5 year window because some of the people need to come into the organization to be trained and qualified and it takes that much time. We've also executed 11 successful extended refueling outages. We've taken additional time where we worked through improving the equipment performance.
When you look at our investment, we're looking at updating our technology and improving our reliability. I don't feel well. I'm not sure what it is. I'm not right.
We'll muster you back up when we get the opportunity. If you didn't hear me with the mic off, we'll take a short break right now. So thank you very much.
All right, folks. Can you all hear me? Can you get your seats? Get back to your seats. We're good.
Okay. So we're going to continue with the program. Leo is going to give you a little update on Chris, and then we'll move forward.
All
right. Thanks, David. I apologize for the disruption. Just to let you know, Chris is doing well. He went back, he sit back there, he wanted to come back out here.
But as you might guess, we're not going to let him come back out here. And we're going to let him go and have some medical folks take a look at him. Where's the gentleman who was helping him out back there? I want to thank you very much for taking care of him and keeping him seated and all that kind of stuff containing him. But anyway, I apologize for the disruption.
Chris is going to be fine. He's doing well. I'll tell you the crux of what he was going to tell you in the next couple of slides. I won't go through all the projects that he's working on, but I will tell you that his bottom line message is as it relates to what we're doing in the nuclear plan, as he outlined in our Analyst Day a couple of years ago, we are on track to be where we thought we would be. We've got significant number of new resources from people.
We've got a significant amount of training going on that has led to a much better performance level as it relates to what the operational expertise has. And the last piece of that is when that fix the plant method. And that's why he was getting ready to go through all of those capital projects that we're working on is because those capital projects are really key then to improved operations of the plants. You think about it as getting the better trained, more expertise in the workforce that has one level of expectation about what's going to happen to the plants. Then we get more resources and more eyes and ears on the plants, making sure that we get operational excellence that way, then the big thing is to not challenge people who run the plant with the equipment.
That's why we have such an extensive outage schedule, while all those outages that you mentioned have been extended outages as we improve the performance by replacing equipment that historically we would have been making mitigation measures by fixing equipment as opposed to wholesale replacement. So the bottom line is we're on track with the nuclear strategic plan. At this point in time, what I'm going to do is continue on with the program and I'm going to go ahead and introduce Drew, who's going to wrap it all up as it relates to the financial performance. Thank you.
Good afternoon. I'm going to bring you through the next part of our discussion on Utility Reimagine. And I'm going to start with where Rod talked about the solid investment plan that we have, where Paul and Chris talked about the risk management plans that we have, and I'm going to talk about how those things lead to strong financial growth. And as always, our strong financial growth begins with our financial objectives. And our first financial objective is steady, predictable earnings and dividend growth.
Rod gave you that foundation, the $17,700,000,000 of capital over the next 5 years. And then Rod talked about the second part of our financial objective, managing risk, when he was talking about how do we get cost recovery of those investments. Chris and Paul talked about the execution risk. They talked about the operational risk. I'm going to talk a little bit about EWC and how we're managing that risk to a successful conclusion.
And that starts with finishing strong. That's a phrase that was adopted at Vermont Yankee when we announced the shutdown in 2014. It's been adopted across EWC. And you can see a lot of evidence of that activity since we began under our definitive plan about 18 months ago. Starting with the sale of Fitzpatrick last year, we have a definitive plan to sell Vermont Yankee, which is in front of the Vermont Public Utility Commission and serves as the blueprint of future exits from the business.
Pilgrim is in its last year of operation. Indian Point 2 has completed its final refueling outage. Indian Point 3 would be the year after that and finally Palisades in 2022. So what you see is a very methodical approach to the shutdown of each of these plants, about a plant a year starting next year. And that gives us a way to manage the risk on an ongoing basis.
We'll go a little deeper into how we're managing the process in Vermont. As you know, it's a first of a kind transaction. And when we complete the transaction, it will be a terrific benefit for our communities because it will give them a way to decommission these assets much faster than they would be if Entergy continued to own them. It's also a benefit to our owners because it will firmly establish that there is a viable 3rd party market for decommissioning assets and liabilities. As we're going through the process, the Vermont Public Utility Commission and the NRC are taking close look at this because it is a first of a kind transaction, and they are assessing Northstar's technical and financial viability.
Their technical viability starts with their ability to or their ranking as the number 1 remediation and demolition company in the United States. And they've bolstered their nuclear capability through partnerships like the one they have with Arana, which is formerly part of Ariba and has tremendous nuclear capability and waste control specialists who have done quite a bit of management of spent or radioactive parts from previous decommissionings. From a financial perspective, it starts with the well funded decommissioning trust that we have, nearly $600,000,000 There's also $60,000,000 of restoration trusts that are available, site restoration funds. Those funds are enough to decommission Vermont Yankee on their own under Northstar's plan. But after that, there is a belt and suspenders approach, nearly $400,000,000 of performance bonds, $140,000,000 of guarantees from the North Star, dollars 175,000,000 of other assorted guarantees and performance characteristics that bring the total financial assurance package to approximately $1,400,000,000 well in excess of what would be required to decommission that asset.
And with that financial and technical capability and the processes that we see in Vermont and at the NRC, we would expect to be able to close this deal by the end of the year. Of course, there's a lot of stuff that's happening in EWC to manage risk that you don't see every day, stuff like our hedging strategy. So in the last 18 months, we've reduced our energy merchant risk by 80%. And as Chris was talking about, from an operational perspective, we've made tremendous strides in how do we manage the plant, the people and the processes. And in EWC, that's culminating with the expectation that we would get Pilgrim out of column 4 before it shuts down next year and into column 1.
Of course, a big piece of that is the people, and Chris was talking about the people. In EWC, it's a little more challenging because of where that business is today. But our people have been very resilient. We have engaged our unions. We've had collaborative discussions and negotiations with our unions.
We have retention agreements in place. And we've created job opportunities for our employees at our core utility back in the South if they're interested in going there. And finally, from a risk management perspective, we've done quite a bit on decommissioning. It starts with those well funded trusts. They performed very well over the long term, and they're in good position today.
We've also made good strides on the engineering front. From a spent fuel perspective, getting that spent fuel out of the plant and onto the pad faster and coming up with creative engineering ways to do that saves us tens of 1,000,000 of dollars at the plant level, 100 of 1,000,000 of dollars across the fleet. And that's driven by savings that we would get and the security and the monitoring of that plant while the fuel is still in it. All of these things help us reiterate what we said before, which is that we expect positive net cash flow to the parent through 2. I forget the question, what other drivers are in there?
There's a lot of things. I've listed them on the page for you. Some of them are still commercially sensitive like the expectations around inputs to the nuclear decommissioning trust. But the key point of all this remains that we expect to be positive net cash to our parent through 2022. And now I'll turn to the utility.
Rod talked about our customer centric investment plan, nearly $17,700,000,000 or $17,700,000,000 nearly $18,000,000,000 over the next 5 years. And as you can see, it's well in excess of the depreciation expense, which is going to indicate growth. A couple of things that Rod said are really important to keep in mind as you're looking at that $17,700,000,000 One is that 85% is ready for investment from a regulatory perspective today or doesn't require any special process from the retail regulators. That means that we can get that into rates or get that investment made with a high level of confidence. Of the 15%, about a third of that is associated with the Mississippi CCGT that Rod mentioned.
The other thing that he talked about was 90% of this investment is either going to be covered by formula rate plans or by riders, which means that we should have confidence that as we make these investments to benefit our customers that we can efficiently get them into rates. So of the 10% that's not there, about half of it is associated with the Montgomery County CCGT in Texas. And we're going to manage that through a rate case that's timed to happen right as that plant comes online to minimize the lag. So as you look at that $17,700,000,000 and you think about our high confidence and visibility associated with it, our ability to make those investments and our confidence to efficiently get them into rates, that gives us a lot of clarity on our rate base projections going forward. As you can see, we're expecting them to grow at 7% to 8%.
And if you look at 2020, you'll notice that it's about $1,500,000,000 higher than what we disclosed at EEI last fall. That $1,500,000,000 has $1,000,000,000 that you're pretty familiar with. That's the excess ADIT that we're returning to our customers mostly over the next 18 months. The other $500,000,000 is also tax related, and it has to do with lower deferred tax for a couple of reasons. One, there's just less of it from going from 35% to 21%.
And then the other piece of it is associated with a change in the depreciation regime. We were in a bonus depreciation situation, and of course now, in a maker's situation. And so if you take the $1,000,000,000 of excess ADIT that we return to our customers and the lower amount of ADIT that we expect to generate going forward, a combination of those things gives you about 1,500,000,000 rate base difference in 2020. One other thing that Rod said as you're looking at this particular slide, our rate base is growing at 7% to 8%, but our customer bills are expected to grow at less than 2%, which means as we are making these investments, these significant investments to benefit our customers to find enabling technologies to upgrade our aging systems to benefit our customers, the financial impact will be small. With the strong capital growth and the strong rate base growth gives us confidence that we can also see strong financial growth.
And our utility, parent and other earnings per share is expected to grow at 5% to 7% over the next 5 years. That's not new. Over the last few years, you've seen us grow at about 10%, a small blip in 2015 associated with a regulatory charge. Other than that, a very long period is expected of steady predictable earnings growth. And if you look at 2019 2020, you'll note that those are the same ranges that we gave you at our Analyst Day 2 years ago.
They're the same today. Of course, earnings are not the only thing that we're thinking about. We're also thinking about credit. In the last couple of years since our Analyst Day, we received upgrades from both Moody's and S and P. And Moody's does have us on negative outlook right now due to the effects associated with tax reform.
As we think about that, some of the key issues that we needed to address are how we manage this through our regulatory process. And as of today, we have successful outcomes in 4 out of our 5 jurisdictions on how we're going to deal with tax reform. So we made good progress there. And as you know, a couple of weeks ago, we issued $1,150,000,000 of equity, and Moody's wrote that, that was credit positive. And so we're making progress there.
But of course, we're not done. We have more work to do because we're still on negative outlook. And so our forecast will target some key credit metrics to help us maintain our credit rating. First of all, our parent debt to total debt ratio is expected to be at or below 25% and our FFO to debt ratio is expected to be at or above 15%. And notice that, that starts in 2020 after we've completed the return of excess ADIT to our customers.
Collectively, these things, we believe, give us a good argument to maintain that current credit rating going forward. And so this is probably the most boring slide in the whole deck. The team tried hard to find ways to spice it up. But we're talking about assumptions, so it's hard. It's hard.
And furthermore, you probably all put these numbers in your models last night when you got the deck, and so this is not even new news anymore. But there are a couple of things that I want to point out. The first is the utility book equity ratio. You'll notice that it's moving upwards. Historically, we've been 46% to 47%.
To improve our credit, we are expecting it to drive up to near 50% by the time we get out to 2022. And then down at the bottom, we are anticipating no equity issuances through 2020. That's a promise that we made to you all before the last equity issuance, and it's a promise we intend to keep. So it is still part of our assumptions. Beyond 2021, we have to talk about how we're going to finance this growth.
And it starts, as it always starts, with our operating cash flows. We expect our operating cash flows to cover about 80% of our investment opportunity in 2021 beyond. Our utility can support some additional debt as well. So as our rate base grows, about 50% of that could be covered by debt at the utility. And of course, there is a little bit of parent debt opportunity keeping in line with our targeted ratio of 25% parent debt to total debt, which leaves a small slice of equity.
As we look at our financial plan, if we successfully execute on all the things that we've been talking about, we should be able to make that minimum that equity requirement minimal. And we're also looking at how do we leverage technology to drive our costs down in the business to also help increase the cash flows. And we're looking at transactions similar to the Washington Parish transaction, which is a build on transfer to help us find ways to improve our credit on an ongoing basis. By the time we get out to 2021, if we still need some incremental equity, then we will follow the same principles that we have heretofore, namely that we would maintain our utility parent other earnings trajectory. And then secondly, we would go after driving our credit to a better spot on an ongoing basis, and that continues to be a
focus for us.
And finally, I want to talk a little bit about our dividend policy. Historically, it's been 65% to 75% of our utility parent other earnings. It's still the same ratio as it has been. But over the last few years, you've noted that we're a little bit above that targeted range, and we've been slowly growing into that as our earnings per share growth rate has outpaced our dividend growth rate. Over the next few years, we would anticipate that we would get into that range.
And as we come into that range, when our dividend growth rate starts to turn and match our earnings growth rate will depend on the investment opportunities that are available to us at that time and our ability to sustain that dividend growth rate over the long term. Because we are aiming for steady predictable earnings and dividend growth, we want to make sure that when we hit those new marks on the dividend growth that we can keep them there for you going forward. These are the things that give us the belief that we can maintain strong financial growth going forward. I talked about EWC finishing strong and our expectations there. Rod laid out for you the investment plan that is the foundation for our earnings per share growth at Utility, Parent and Other and the collective discussion about customer cost recovery, the operational and execution risk in the business and how we are managing EWC collectively and our focus on credit give you an expectation that we can focus on our balance sheet health and continue to improve it on an ongoing basis.
And as Paul said, we've got this. And with that, I will turn it over to David to take us into the break.
Okay. So we had in the schedule a break, so we're going to stick to the schedule. We're going to keep the break. So if you could all be back here around 2:15, that
would be great.
All right, folks. All right. You can all regain your seats. All right. So we're going to resume our session at this point.
Thanks.
Customers expect to be able to use and manage electricity according to their own preferences.
AMI and other projects are positioning us for grid modernization. What we're talking about here is trying to move past
shuffling data to really gaining insights from it through analytics.
To be a good investment, we need to be a good corporate citizen. To be able to make our customers satisfied, we have to take care of the environment and help them meet their sustainability goals. The disruptors of this world, they are out there. It is happening. It's happening at an ever changing and ever faster pace.
I am bought in to executing on the current plan that we have because it's a great plan. I'm bought into the idea that we take it a step further and try to execute that plan better than it looks today. But as part of this process, what we are trying to do is look around the corner. And as we look around the corner, we're trying to be the ones that disrupt us. Can you tell we're excited?
Now that's no dancing bear. I'll give you that. But it does outline a little bit of why we're excited for you to be here and what we're so excited about. What you've seen today already demonstrates why we are a good investment at Entergy. We've got a solid known and clear capital plan that's designed to meet our customer needs in a better, more efficient and lower cost way than we have in the past.
The majority of that plan is already ready for execution, has largely been approved from a go forward basis by our regulators. We've got an organization that's been designed specifically for the execution of the construction program to make sure that we're on time, on budget, as Paul outlined for you today. We've got a solid plan associated with how we're going to exit EWC. The capital plan we have goes into evolving regulatory constructs that were also designed for the type of investments that we're making. All of that supports what Drew mentioned in terms of our steady predictable utility segment growth and the ability for us to continue to maintain that growth in the dividend out through 2022 with significant confidence.
In addition to that, if that wasn't good enough for a good investment, given the discount that we trade out to the rest of the space, we got a significant dividend yield, at least for the time being, that is industry leading as it relates to where we are in that situation. So already everything that we've talked about demonstrates why Entergy is a good investment. What I get the pleasure to do is talk to you a little bit about what the things are that we're doing today to prepare us for what comes beyond 2022. Like everything else that we do, what we need to be able to do is focus on the near term and execute and you've got a good sense of how we can do that. But what we also have to do is make sure that we are looking around the corner and that we are preparing ourselves for what's going to happen in the future.
And today, as Rod mentioned, just like we always do, even though we have an evolution what's happening in the customer space and their expectation, even though we have an evolution about what's happening as it relates to technology, information and data analytics and the things that we can do, we're still driven by the same tenet of creating sustainable value for those 4 key stakeholders that we defined several years ago. The good news for us today is that now more than ever, certainly ever in my career, we see the objectives of those stakeholders lining up. We see a groundswell of investors wanting us to be a good corporate citizen, a groundswell of investors wanting us to protect the environment and be sustainable. That's why you see all these shareholder proposals around things like a 2% climate scenario. That's why you see different institutions stepping up and wanting us to make sure that we're not only interested in short term profits, but we're planning for the long term for our customers, for our communities and for our sustainability objectives.
I can tell you that when we talk to our customers, they all want the same thing. They don't only want it from us, they want us to help facilitate it for them. And as all you know, the employees of an organization can be very, very powerful in what they want you to do. That's the kind of place they want us to work. Community standpoint, because we're a utility and this is true across the entire space, we're the most local Fortune 500 companies that there are.
Our customers, the people who count on us, the communities that we support are our neighbors and our family. Every time something happens to our system, we hear about it. It's not uncommon for some of our major customers to text me immediately when there's a power outage. I have 4 children. They know when the power is out and they know my job and so they text me immediately.
So it's important to me that we provide a high level of service that we provide low cost sustainable service and help meet the objectives of our community. As utilities, we usually lead economic development efforts, for example, in all the states that we operate. Not just Entergy, but everyone gets to do that in the utility. If you line up what people are looking for in investments today as it relates to the combination of meeting the needs of their customers, their shareholders, the communities they serve and their employees, we line up very, very favorable in that regard as well. And the commitments that we continue to make and the commitments that we'll make out into the future are going to support that kind of investment.
As we look at the kind of investment we want to be, one of the things that you've heard a lot about is our customer focus. We started several years ago talking about customer centric investments. What we started talking about here recently is turning into customer solutions. In fact, being the customer solution provider to our customers of the future. And that's important because we've always valued our customer.
We've always looked at the same things reliability price. We've always been a good community citizen. But what's happening today is an ever evolving expectations on the part of our customers about what they expect from us. And what's happening today is a technological change, which I'll talk about some, that actually gives us an opportunity to be more impactful on our customers. So as a matter of fact, I just met this week with the CEO of a firm, global energy firm that owns several facilities on the Gulf Coast.
And he told me what we've been telling them for quite a while and is what he would like us to do is to move from power provider to partner. Because today, when a customer says, I don't want an interruption, they don't mean in their power service. For 100 years, anytime we thought about interruption, what we thought about was did the power go out. Today, when a manufacturer calls me and says he doesn't want interruption, what he doesn't want is interruption in his facility. They want to save money.
They want to be profitable. They want to protect the environment and have sustainability objectives. They want to have good public relations with the community that surrounds them. So when they talk to me, they aren't talking to me about our service. They're worried about the interruptions that they have.
Now to be sure, our service has a big impact on that. But our objective is to continue to get closer and closer to the customer and become a partner with them as opposed to just merely a supplier. The good news, as I mentioned, is today technology is changing in a lot of ways that allows us a better opportunity to do just that. For 100 years, we planned the system from our own point of view and every time we had to talk to a customer about interruptions, the only option that we had was in the substation or in the power line or in the tree trimming. Today, technologies are getting closer and closer to our capability to not only do things on our meter and also to do things around the system that are better able to provide them with the opportunity to meet their needs.
And when I say meet their needs, again, I'm not only talking about power providing, I'm talking about meeting their sustainability objectives, their community objectives, the way they want to be viewed by their employees. I'll give you some examples of that as we go on, but I've been talking about this a little bit since EEI and further and further down this road we get, the more important all of this becomes. Today, technology, information and analytics are going to be able to allow us to get closer to the customer to create that partnership that they all want. Historically, when we looked at customers, we put them in broad buckets. Those broad buckets again revolved around us.
We looked at what size the customer was. Did they take transmission level service? Did they take distribution level service? Is the bill really big or is the bill really small? Are they a commercial establishment with many locations or are they a residential customer with just one home?
We would look at it from that point of view. And for 100 years, again, that was as good as it gets because the technology was such that everything that we would do would have something to do with a power plant, transmission line or a distribution line or poles and wires, etcetera. Today, as we look at better information analytics and technology, we're able to get much more granular. Think about AMI. AMI, for example, gives us the opportunity to go from sending you a bill 15 days after the end of the month in which you used electricity to knowing what you used every 15 minutes of every day.
Now we don't intend to communicate with our customers every 15 minutes. We think we might become annoying at that point. But we do believe that we can develop products and services and analytics that will help them in their home, help them in their commercial establishment or as industrial customer. So the way we're thinking about it now is to go from those 3 classes of customers to 3,000,000 classes of customer. We'll be able to help each individual customer with better information, data, analytics and technology as we go forward.
And that's our objective. And it begins with the things that you heard about today. It begins with the $13,000,000,000 that we spent in the last 5 years and the nearly $18,000,000,000 that we'll spend in this 5 years to create a lower cost, more sustainable, more reliable, more efficient network for our customers. So today, those investments that you heard about from Rod and Paul and Drew and Chris are very, very vitally important to create the platform we need to be able to advance the game for our customers and to provide growth for us going forward. There's a significant amount of other stuff that we're looking at as we get out beyond 2022 that we've already started to tee up.
First of all, there's more grid infrastructure, similar to what we're doing today, but with more functionality, more information, more analytics that would allow us to have an ever increasing level of reliability. Some of it Paul talked about when he talked about not only renewables, but the existing generation that we have to retire that will continue to be replaced going forward. That's going to continue to be a part of our business out towards the end of the next decade. So we'll continue to be able to spend money there to make our customers better. And then it starts to get really interesting.
Enabling technologies, think of these as specialized smart meters, technology to communicate, grid sensing devices, communication that allows us to know what's going on in different portions of the grid, but also switching and reclosers and things like that that allow us 2 opportunities. 1, in situations where people have to physically go out and touch the grid, they'll now be far more efficient. They'll know where to go, when to go there. They'll go with the right equipment and they'll make the right choices. Today, currently, sometimes when there are power outages, people are driving around for a long time to find what the situation is.
Once they find it, then they look at it and say, oh, I don't have the right equipment, got to go back to the shop, get something else out and go back to it. The information that we have will be much more localized. We'll have a better feel for where issues are so that when they show up, oh, and by the way, with the telemetry in the truck, we'll be able to send the person who's closest, who has the right materials and the right expertise to the right spot to make that choice and to fix the problem that we have. Better yet, with automatic reclosers and switching and things like that, we'll have situations where today somebody is going out in a truck and driving around to find the problem. And when they do, they don't have the right capabilities or the right tools, we'll be able to fix those remotely without sending anybody out there at all.
The reason those are important because in addition to a higher level of reliability and service to our customers, it's going to help us lower our costs. And remember, lowering our costs and remaining competitive is something that Rod talked extensively about. So these enabling technologies will give us a whole new set of eyes and ears on the grid plus new hands on the grid. They just won't be human hands. They will also do one other thing and that is they'll provide the link that we need to distributed resources.
When we talk about distributed resources, we're talking about a whole range of different technologies. Those distributed resources, they include utility scale and rooftop solar, But at the same point in time, they include battery storage, they include EV charging stations and all the infrastructure plus the batteries inside the EVs themselves. They could have any kind of microprocessor driven device, which could be in your home, which could either be the thermostat in your home or some of the devices in your home, we'll be able to do all of these and these all these technologies are the we're leaping off of AMI to be able to do that. So the combination of the meter and the technologies and the communications that we have and our ability to do that and use those in big data analytics, we'll be able to do a number of things for our customers that today we can't do. We'll be able to get into their business and be able to solve their problems for them.
So if you think about it, once we put the meter in place, with the signature of the electric usage that we get from the customer, we'll actually be able to know what appliances are running. We know how well they're running. We know whether they're efficient. We know they need service and we'll be able to help instruct our customers in their ability to manage their lives going forward from a cost point of view particularly. And that will matter that will be important whether it's a residential customer all the way up to the biggest manufacturing customers that we have.
We'll be able to help them manage their devices in terms of if they're inefficient and not running well to provide them service to either facilitate that service level for them or for them to call upon us to dispatch service providers for them. A higher level of service, a lower cost to the customer and a better relationship towards being a partner. All of this technology involves or allows us to do that in ways we haven't done before. So when I talk about getting into the customers' minds and understanding their objectives, it's ripe today because here's a part of the technologies that we had didn't allow us to do that. So what does that all mean?
So I've talked about all these technology advances and everything that we're going to put in place. What that means is that we've already identified about $50,000,000,000 worth of technology that we can deploy on our system between 2022 and the end of the next decade. That $50,000,000,000 certainly will improve the service level that we provide to our customers. It will lower their cost. All of the technological improvements that we've been putting on the system over the last decade from investing in the nuclear plants to new power plants to joining MISO, all of that lowers the production cost of the system.
It helps offset that initial uptick in rates associated with the deployment of that capital. This $50,000,000,000 will get us closer and closer and closer to being able to reduce customer costs while we improve the level of service. For all of you, I'm sure you're interested in the fact that as we deploy that capital into the regulated business under those constructive regulatory constructs that Rod talked about, we'll be able to grow the business while we improve our customer service levels, improve our customer satisfaction, make our communities better off. For us, it will also provide a whole host of opportunities for the employees at the company to get into areas that they haven't been able to get into before. So this $50,000,000,000 will morph, will be informed as we begin down the process of deploying technology, what technologies work, new technology that is coming down the pike all the time that allow us to make that happen.
But it's a very real set of opportunities for us and we've already begun to identify what we could deploy to make this happen on our system. That change in mindset is very important as it relates to something else Rod talked about when we start to talk about how we deploy those devices into the integrated energy network and drive bills and rates lower. What our objective is when we get into that customer viewpoint is that we are trying to not push them towards conservation. What we're trying to push them towards is efficiency. Our objective is to be able to take these devices and allow our customers to be as productive as they can be to produce as much as they can to do as many things in their home life as they can.
We want them to up their game in what they do day in, day out. We're not asking them to conserve. We're asking them to do more. But our objective is to allow them to do more utilizing the fewest resources possible. So many of these devices, if we deploy them, our objective is to earn a fair allowed rate of return on that.
If that allows us to drive their consumption level lower, that'll be valuable to us because it'll be valuable to them. The other thing that we need to do in that partnership is to make sure that we get involved with our customers and the value proposition to them of deploying capital. And I'll get into some of that here in a little bit about how we can not only create an opportunity for us to invest and lower cost to customers for the value that they get, but allow us to do that in ways that we've never done before such that as we go forward, we're making those investments, our customers better off, we drive down their usage and we like it, which I know you don't hear that often, but that's one of the things we want to do. We want to continue to maintain that focus that Rod mentioned on customer bills and rates. It has a couple of different outcomes for us.
As we drive our customer bills down, certainly as we go into the regulatory process for more investment opportunities, we've got the capability to do that because rate levels are low, customer bills be. But not only will we be able to get that done, but it helps make us competitive in the economic development space. There's one thing that I want to make sure everybody understands in the economic development space. There's a lot that goes on in the Gulf South that makes us a great place to invest, particularly when you look at what's going on today in the world with commodity prices. The commodity price situation is very similar today to what it was in 2014, if you look at things like oil prices and natural gas prices and the ratio of oil to gas.
If you look at what's important in petrochemical industries, you look at what's important in refining, all of that continues to go really, really well. We have a great place to be and a lot of it has to do with the infrastructure of the states where we operate. Texas, Louisiana, Arkansas, Mississippi are all very business friendly states. If you look at the energy infrastructure along the Gulf Coast, access to the Gulf of Mexico, the port system that we have between Texas and Louisiana, it's really unmatched anywhere else in the country. It's teed up for the kinds of economy that we have going on at the moment that is really, really favorable.
One of the things that unique to us as well, because of our price point, a lot of industry that comes to our part of the country calls us to be their service provider. So if you look around the country, they may have similar types of industry show up, but when those industries show up, by and large, they cogenerate. In our situation, a lot of them choose not to. The reason we find that is because when we get closer to our customers, there's a couple of things that all customers have in common. One is they want to limit the hassle of dealing with us, just like I'm sure you have hassles dealing with your local utility as well.
They want to eliminate that as much as possible. You know what else they don't want to be? It's in the electric business. If you're an oil refinery, what do you want to be in? Oil refinery business.
If you're a core alkali business, what do you want to be in? The core alkali business. Make a PVC pipe, what do you want to do? You want to deploy your capital in those industries where you can gain the highest cost of capital. As we go to partner with them, what we're able to do is come in and take that burden off them.
You have no idea the number of CEOs of some of those major manufacturing customers have come to me after we sign an agreement to be their power supplier and they say this is the only place in the world where the electric utility is providing us power. That's $1,000,000,000 I did not have to spend on my facility and they're very, very pleased with that. We need to continue to get closer and closer given all the other infrastructure that's there. And we're still going to try and recruit them even if we aren't the ones that serve them. But when they do come, they call on us because of our price point.
So that's very, very important to us. As we look at these new technologies and getting closer to the customer, there's a reason why we are very excited because we think we're in a pretty unique position. And I've mentioned this to you all before, both in individual meetings and in venues like EEI. But there is a dynamic that's associated with our ability to focus on what is the optimal choice for the customer that we're talking about. So one of the big advantages we have or a big advantage that our customers have is the fact that we're a fully integrated regulated utility.
So under the watchful eye of our regulator, we can invest in any functional group that makes sense for our customers. So for example, if investing in our nuclear plants is very, very important to the baseload needs of major manufacturing business along the Gulf Coast, we can do that because we're allowed to invest in nuclear generation. If it means a new gas fired CCGT that provides a cleaner and more reliable set of generation for those manufacturing customers, we can do that because we can invest in gas fired generation. If it means battery storage at a substation to improve the reliability of the part of the grid, we can do that because we can invest in battery storage. If it means providing solar power for our customers either on their roofs or in the community, we can do that because we're allowed to be in the generation business.
If what it means is a transmission solution, we can do that. If the transmission solution is the cheapest, lowest cost, most efficient and highest reliable option for a customer, we can do that because we're also in the wireless business. If it's closer to their home and it's in the distribution space, we can do that because we're allowed to be in the distribution space. That's a pretty important thing as you start to think about trying to make your customers' lives better. We're agnostic to the technology choice because we get to make it across all of those different functions.
Another advantage that we have that has to do not only in the investing world, but it has to do in the customer world because as you know, it's not just utilities that are dealing with their investors, their communities and their own businesses wanting to be more sustainability. It's in major manufacturing as well. All of those people that we deal with, our ability to try and be clean with them is important. So the fact that we are one of the cleanest fleets with some of the highest level of non emitting generation in the country is very important to our customer base as we try to work with them on their ability to meet their sustainability objectives. Those low rates really help as it relates to the position that we're starting in.
All of those factors, low rates, constructive regulatory relationships, our environmental footprint and our ability to invest across the spectrum, give us an advantage as it relates to how we get inside our customers' hearts and minds and our ability to make them meet their objectives. So now Paul talked to you earlier about the organization that we put in place to execute on the plan that we're doing today. As he mentioned, 5 years ago, we came to him and said we need to put together a best in class project management operation because we're about to embark on the largest construction program that we've ever been in. So this will be really important when we talk about that $50,000,000,000 that I mentioned just a minute ago. It's important from another perspective too, because in addition to this supporting that, we've made several other recent organizational changes.
These organizational changes are meant for us to be able to prepare ourselves for that $50,000,000,000 investment in parallel to executing on the 5 year plan that we talked about today. So the first thing we did is we created a transformation organization. Pete Norjo, who's here runs the transformation organization. Pete reports to me. Pete's major role is that part of getting inside customer insights, customer solutions, the capability for us to be able to understand what it is that they're trying to achieve, ethnography as we call it to make sure that they use agile methods of ways to try to deliver products and services to customers in new ways that we haven't before to be able to understand what works and what doesn't for them.
So while Pete is doing that, we made some organizational changes just at the beginning of the week. Rick Riley, who's here, we put him in charge of all distribution operations. Now we did have people in charge of distribution operations prior to Monday, but they were split amongst the 5 operating companies. That's fine from a control standpoint and there's a lot of good reasons to be have it been done that way, particularly over the course of the last number of years. But as we look to change technology and deploy that large amount of capital, we want to bring together the day to day operations and planning of the system with the new technology that we're going to deploy and make sure that we get it done in a consistent way, particularly when it's going to be interacting with the transmission and generation fleet and on the other side of the customer meter.
In addition to putting Rick in that spot underneath Rick, we've put Lauren Kenny, who's also here today in the role of running grid modernization. What she'll be able to do running grid modernization is do a lot of the same things that Paul was talking about in those new technologies, evaluating new technologies, being able to understand how they're deployed and they will both be able to work with Pete in terms of how we take those to the next level to be able to bring those to the customer. So today, we've got an organization in place that's preparing us for dollars that we won't spend till 2023. But they're identifying ways to do it and we're already trying things out and certainly having those dialogues with the customers about what makes sense to them, both on their side of the fence and ours. So how are we doing that and what does that result in?
There's several things that we're doing today to pilot some of these things. Now these are things that may or may not come to fruition as businesses. They may or may not come to fruition as products. They may or may not come to fruition as real things of data that we give to customers, but we're working on them in a pilot basis today through those agile methods that I mentioned that Pete's directing. The reason they'll be important is because they're going to have a couple of different potential outcomes.
Some of those outcomes are going to be that they drive our customers' costs lower and make them more efficient. Some of those outcomes are that they'll provide us investment opportunities that allow them to do that. And some of that is an opportunity for us to create new revenue streams where before there weren't any. And they're all enabled by understanding the customer and their ethnography, but also understanding the technology that we deploy. So let me give you just a couple of generic examples.
As I said, I don't know what they'll turn into, but they are things that we're really doing today and we're working on. And I'm going to take 3 examples and they're going to be around something that's near and dear to everyone's heart this time of year, weather events. Now you don't think about it as much up here, although I think it's a growing concern in this part of the country. But obviously June 1 is an important date in the Gulf South because that's the beginning of hurricane season. That's one of the reasons we do this here in the summer instead of New Orleans to try not to disrupt your schedules too much.
But if you think about our customers, there's a world of data out there and information that they don't have access to when a storm is coming, when a storm is here and its aftermath. That information and data as those of you who sat here through Sandy, it's very, very important to know. They don't know things like what roads are open. They don't know things like where is the power on and where is it off? Where can I go to the grocery store?
Where are there going to be the services that I need? Is there a shelter nearby that has power where I can go and take my kids to be an air conditioned front? When is the power going to come back on? We are in a unique position because of the data and the information we have will be even better once we get AMI and other technologies deployed is that we actually have access to all of that information. We are in the emergency command centers of every jurisdiction that we're in during the storm.
We're an integral part of that. We're also the one with the most information because we're the ones who know when the power is on and when it's not. That's why they like us there. And those are important to communities every time they go through these events. I can give you an example is that post Katrina after we had evacuated, I was in Jackson, Mississippi.
That's where we're located because we didn't have access to our building. A couple of months after the storm, I got an unexpected call from the pastor of my church, which also ran the school my kids went to. And he called to tell me because he knew where I worked. He called to tell me that he had spent the last several months putting the school in the position where he could educate the children of the community. He wanted to know if Entergy would go get electricity not to the school because the kids could sweat in class, schools during the day, so they don't need lights.
He want us to get electricity to the grocery store and a gas station. Because until the grocery store and the gas station had electricity, nobody could live there. If nobody could live there, nobody could go to school. Nobody could go to school, all the work he had done to educate children would be wasted. So today, what we're doing is putting together a situation where we'll be able to tell people where there is and isn't electricity, where the roads are and are not clogged, what the evacuation routes look like.
We'll be able to have all of that palm of somebody's hand in an app working with the emergency management organizations to give our customers a level of knowledge, capability and comfort that they historically haven't had. The emergency management folks are very, very excited to work with on this. We're pilot trying to pilot it here pretty soon, but it's the kind of information that we can provide residential customers to make their lives better. It would provide us an opportunity for some minimal investment. But certainly, it's a way for us to up our game in our community relations.
So let's talk about that grocery store. So we're already working with some of our local commercial customers to be able to provide them with a situation where they will be on in a storm. So if you think about getting into the mind of a commercial customer what they want and let's take a grocery store for example, they have the same objectives that all of the rest of the businesses do. They want to make a profit. They don't want to lose any inventory.
They want to make sure that the community views them as a valued service and uses their services and comes to that grocery store. They want to make sure that their reputation is upheld. And so what we've been doing as we start to think about that, historically backup generation might be too expensive for them. It's a big cost. You have to maintain it.
You're not sure how often you're going to use it. And so as they try to look at meeting their needs of profits, raw materials in a storm, if you're a grocery store, all your frozen food and all the things that you have refrigerated, lot of spoilage associated with that, why you're not selling product. And your reputation isn't that great if people show up at the store and you're not open. And if they look at that value proposition and they look at a microgrid or some sort of backup generation, it becomes difficult for them to look at that expense. But if we partner with them and we're able to look at something where we say this backup generation is backup generation for you whenever you need it, it's a great resource for us whenever we need it.
Potentially, we can split that cost. The technology has been available, but the price points haven't made sense for decades. But as we look to the future, that technology is becoming available at the right cost. And if we combine that, we split the cost of that between the value that they have provided through being open and selling product by not having the spoilage because of the storm, by the public reputation as the store that you can turn to at any point in time. And we defray some of the costs because what we're doing is most of the time we have it available for us as a peaker.
And since we didn't have to pay the full cost of the peaker, it makes sense vis a vis other things that we might have done, makes the customer happy, makes community happy, lowers our cost and it's kind of thing where we could invest that capital on behalf of our customers, have it be rate base, earn a fair rate of return on it where we otherwise wouldn't have had that opportunity because the fixes that we might have come up to make the grid resilient for them might not have worked. If we take that same situation one step further and we look at what goes on in the industrial space, a lot of major manufacturing is part of our business, obviously, as we mentioned along the Gulf Coast. Today, whenever a customer comes to us and they talk about a disruption, if we look at it from our point of view, we immediately all, them and us, go to what does the substation look like? Can we stop flooding at the substation? Can we potentially build a new substation and get you a feed from somewhere else?
We come up with all these ways that we could add resiliency to the grid. It's not 100% foolproof. And when we do that, it becomes very, very expensive it doesn't necessarily benefit all customers enough to justify us doing the cost and certainly it's very, very expensive for them potentially against the value proposition that they have. But if we go in and ask them about their value proposition and what they talk about is profits, raw materials, same sort of thing, chemical process, Sometimes if they have a short power outage, they're freezing up product inside their pipeline system. So it may be a short outage, but they got a lot of work to do.
Not only do they have a lot of work to do when they've lost profits and they've got lost raw materials, they're also putting employees at a safety risk because now some employees got to go and take care of that. In addition to that, potentially an environmental system shutdown and if something's coming out of the stack, the local reporters of which we all are, are taking pictures of it with their cell phone, selling it to the news media. The news media is showing up and doing a press conference right outside the gate of the plant. Next thing you know, because that environmental system wasn't working, the EPA shows up. That's not a power issue.
That's their business issue. But if we start to look at their business issue, and we've already begun to have these types of conversations with our customers, one of the things that comes up, in addition to a different feed from a substation or raising the control house 8 to 10 feet, so it's above floodplain or something like that, one of the things that comes up is the biggest problem I had was I just didn't know it was going to happen. If you could have given me time, I could have avoided 90% of those problems. I'd still have lost profits because I wasn't making anything. But if I could do an orderly shutdown because I knew the problem was coming, then I would have been able to mitigate my circumstances.
I'll only find that out if I sit with the customer and talk to them about what their objectives are. Now some of the devices that we've looked at that we could deploy give us predictive analytics and information around weather events, about water levels, about monitoring substations and what's going on there, about monitoring lines and wind speeds, etcetera. So one of the things we might be able to do to give them time is use all that information and data to predict for them the probability of an outage. Then I could get in contact with the customer and say, we think there's a 40% probability that we might have an outage because of these various factors. You're free to decide what you want to do.
They may choose orderly shutdown. Some of our customers have given us probability levels at which they would make that decision based on the cost that it would have to their system and the value proposition inside their factory, not the value proposition of the electricity that we provide. And they give us various different levels of how much time they need. Some of them, it's 5 minutes. Some of them might be 24 hours.
Some of them might be a week. It's a major complicated process. But then as we get into more discussion about that, we start to talk to them about things like, are there critical components within your facility that if they were running not the whole facility, you could shut down in an orderly fashion if the power went out. And we start to uncover that there are. There's capabilities that if we could power a portion of the plant, that when we have potentially backup generation or battery storage or some other sort of device that buys them the time they need for that orderly shutdown of the plant.
If you think about the orderly shutdown of the plant, what happens then is, yes, they did lose some profit. They didn't lose any raw materials. No employees would put it as safe to risk. There was no roving reporter who took a picture of things spewing out of the stack and there was no EPA showing up or press conference outside. If we can deploy those types of assets on their behalf, it makes the customer better off.
We may be in a similar situation as that grocery store where we're splitting the cost associated with that to be able to provide them the opportunity to have the one thing that we weren't providing them and that is time. So time can come in a couple of ways. It can come in actual time or incoming devices that give you the same objective, the same outcome as time. Those are just a couple of things we're working on with customers today in real situations that could create a couple of outcomes. So if you think about the data and the information that comes from the devices that we're looking to deploy today, they'll do a couple of things.
They'll allow us the opportunity to drive our customers' costs down, but they also give us an indication of other things that we can deploy that make our customers better off that help us continue to grow that path of earnings and cash as we go out into the future. The technology improvement that we have going on today and what we're deploying and the information we get is what allows us to do this. So it's not that these things were possible for the last 100 years. The price point wasn't there. The ability to do it wasn't there.
The information wasn't there. The thing that we really have to make sure that we're focused on that's very, very important is that we're there with our customers. And so I know sometimes an organizational change where we put somebody in charge of that ethnography of what's going on with the customer doesn't sound all that exciting and interesting. But for us, that's a big deal because the more information we get about them, the more opportunity we have to partner, the more opportunity we have to partner, the more investments we will actually develop for to put on our system. Those things we're working on in parallel to what you heard from the rest of the folks today.
As I said, what Rod and Paul and Chris and Drew talked about, that's exciting enough. You heard the little vignette that was from our leadership conference actually that we had with our employees just a few months ago, where I made a comment about the next 5 year plan. As many of you know, 5 years makes me pretty old. I'm the oldest guy up here. So in 5 years, certainly, I could look at this plan with the $17,000,000,000 of expenditures with the regulatory constructs that are under it with the cash flow, the earnings growth and dividend capabilities that it provides us the improvement in customer service, reliability, our environmental footprint, all that.
This really is the most exciting 5 year plan that I've ever been involved in the last 36 years. And that would be enough. What really keeps us excited is the fact that we understand this is just the beginning and that that $50,000,000,000 that I talked about out there from $2,000,000,000 to $30,000,000,000 is real. There are real things that we can be doing with our customers. And I just wanted to make sure that you all know that we are putting in place an organization with the capability to do that.
And the reason we're doing it in parallel is to make sure that nothing distracts us from the next 5 years. Because 1st and foremost, what we all want you to make sure of is that what Paul said before is true is that we got this. We'll be able to continue to execute on this plan for the next 5 years. But what you also ought to know is that we're very, very excited and we want you to be excited too for what's going to continue on so that we believe that that 5% to 7% growth doesn't stop in 2022. Thank you very much.
I think we're going to take a short break and then we'll open it up for Q and A. Thank you.
Quick 5 minute break. If you can all just be back in your seats, we're going to set up the stage and then we'll proceed to the Q and A. Thanks. All right.
If you
could all get in your seats, let me get started with the Q and A. You guys need water? You got it? Do you want water? Rod, why don't you sit there?
Do you want water?
All right.
We're going to shift to the Q and A. Pretty sophisticated process. If you have a question, raise your hand. There's a couple of mics going around the room. We'll make sure that you
get them.
Here we go.
I'll start you out with an easy one.
Okay.
Thanks,
Brent. You show that utility nonfuel O and M is going to see 2% to 2.5% inflation over the planning period. So how do you think about managing O and M? And from where you are today, are there cost cutting opportunities? Or you just view it as you're growing too fast to really cut O and M on an absolute basis?
So there's a couple of things going on there. First of all, we're still investing in the nuclear business. We're still bringing some people on. And so the headcount is still growing there. We do have the new facilities that are going to have additional headcount in the power generation space.
We are shutting down a few as well, but a lot of those have some minimal staff at this point. We do have a little bit of O and M improvement built in from things like AMI, but there is potential for additional O and M improvement associated with technology as we go forward. But as we think about O and M, it's important for us to continue to find ways to drive that to a lower level because that creates space in the bill for the customers.
A lot of
times, the O and M improvements that we generate are going to be recaptured fairly quickly, especially since we have progressive rates that allow us to get investments in quickly. They also have the ability to eat up any O and M improvements very quickly. Not that that's a bad thing because we want our customers to have those benefits to create room for the investments that we're talking about. So there is the potential for some additional O and M improvements in our forecast, but and we haven't put them in there just yet.
Thank you for taking my question guys. A number of years ago, you all did a number of acquisitions of merchant power plants that were in the service territory that got folded into rate base and got folded in the kind of cost of service rate making. Just curious, there are a number of plants right at this moment in the market as we speak, where the owners or public sources have talked about those plants being openly for sale. When you look at your individual states and go around the system, which states do you think you have the greatest opportunity, not just in the plants you're building today, but when you think beyond that, where are the opportunities to lower the system average heat rate going forward?
I guess I didn't think that's where you were going with that question. The system average heat rate opportunities, I think the biggest opportunity is going to be associated with the new build construction that Paul was talking about. And as we look forward, there is opportunity for Renewables. I think Rod talked about over 1,000 megawatts of potential opportunities in some stage of development, and some of that's even online with the Stuttgart project, those, of course, have the lowest production costs available. And so I think if we're thinking about long term where do those production costs come out, I think it's going to be in those couple of areas.
Yes.
Hi. Just you guys always give a little bit of a wide range during these periods. So just maybe give a little color on how you're tracking within this range over the period and what the key variables are in terms of driving to the upside or to the low end that we should be tracking?
All right. So typically, we give an in year number. And this year, we're talking about 2018. We're still sort of tracking to the middle of that range. Beyond that, we haven't typically given a forecast update specifically.
But we are strong in these ranges. That's why we were able to put them out there. You can be assured that our legal team makes sure that we are comfortable with what we're doing. But we haven't said if we're at the high end or the low end or in the middle associated with that. But we are tracking in those ranges.
Just further on that, just the key drivers to that might be to the high end or
the low end as
we look at variables. Mean in the past it's been things like sales and maybe a little play and pension and are those still
the Those are still in there. Potential incremental capital opportunities are something that we would be looking for as well. Not all the renewable investments are in our plan at this point of that $1,000 that I mentioned. So there are other things that we are looking at that could help out, and the O and M piece could help out on a short term basis. But we would need to in order to really up our growth rate, we'd probably have to change the trajectory on the capital plan.
Even if you're talking about sales and pension, those are short term in any given period a driver. But over the 5 years, those would probably smooth out.
Thank you. Is there any update on the cost of the commissioning coming down over time and with new technology?
The cost of CTGTs? Nuclear decommissioning. Nuclear decommissioning, sorry. Yes, that is a real possibility. And I mentioned in my discussion that we've had some really good engineering around spent fuel, Getting the speed at which we can get out of the plant and onto the pad is a critical factor.
In Vermont Yankee's case, we were able to shave it down by a couple of years. And that translates to even bigger sanding in some of our places, particularly Indian Point. Also at Indian Point, the forecasts historically are built on individual plants decommissioning. And of course, we have 3 plants there. They're all going to decommission at basically the same time.
So there are real economies of scale opportunities there. And then collectively, as an industry, there will be more opportunities, unfortunately, to decommission these plants, and there will be a learning curve associated with that. And I expect it to be fairly steep. And so as we get into this, and it's not just us decommissioning but others, there will be quite a bit of learning that will take place and allow us to lower the overall cost.
And on Entergy Texas, are there any scenarios where you can see Entergy Texas not staying in the family?
Not staying in the family?
Yes.
Well, we wouldn't comment on anything like that. Obviously, we're always looking to create value and our objective is grow our utility business. We think there's real value in the Texas jurisdiction through the improvement in the regulatory regime and some of the things Rod talked about in terms of trying to do things a little bit differently in terms of what we can and cannot get recovery for. We'll work collaboratively with the commissioners, new commissioners in Texas today. But right now, our objective is to create as much value there as we possibly can.
And so our actions are going to be the same no matter what we are going to do with it ultimately long term. But we think Texas is an important part of the business.
Fair. Thank you.
Hey, guys. Hi, John.
Focus obviously on today in the future of the company's utility parent and other. My other businesses that might support and add to the growth rate? Any just high level thoughts outside of the base utilities?
From a diversification standpoint, if that's what you're talking about, we really don't have any designs on going away from focusing on the utility that we have today. The new technologies and things that I was talking about, in some instances, there may be opportunities for different revenue streams associated with those. And there are things I talked about 3 generic basic things that we're working on. There's a lot more of that that's going on. Some of the things that we're working on, they could potentially turn into something that is a business.
So that's a possibility. But most likely, what a lot of them turn into are ways for us to manage the operations that we have between us and our customers. And so to the extent it does become a revenue stream per se, one of the things it could do is allow us to drive costs down to our customers such that we recover dollars on the investment we made and it just becomes a lower cost way to earn our allowed rate of return. So there's the point being there is that if we ended up with anything that was outside of just the utility, it would be probably because all this turned out to be some sort of business for some reason that we can't anticipate at this point in time. So not really.
Yes. Just thinking about the kind of exit from EWC and toward the end of this period, you'll be largely done with that. Is there any further room when that happens to kind of have a different view of the risk profile of the company, example, the rating agencies or others? Like is there still effectively like a discount in how you're treated because that EWC is still there? And how do you think about that?
Well, there are representatives of Moody's and S and P in the room. I'm sure they could answer that. I will say that from a business risk profile perspective, I don't think we have achieved their highest business risk profile, which gives us a little more room, I would think, as we come out of EWC completely. And I think that would help our credit risk profile.
Just a follow-up, does that when you
look at the metrics you're targeting toward the end of the plan, do they incorporate that change? Or are you just kind of for now, just assuming you're just going to still
No. I can't assume that we're going to get a business risk profile change. But I do believe the metrics that we're targeting plus the actions that we have taken give us a strong case to maintain our current credit ratings.
What gives you more confidence in the 4Q for Vermont Yankee closing a transaction with the or decision from NRC? What gives you more confidence in that date or that time frame?
Well, the processes that they're following look to be ending in the Q4 at the NRC and the Vermont Public Utility Commission. So that's what we're primarily watching, are those particular processes. So and they seem to be tracking in that direction.
Leo, you mentioned your stock and you mentioned the fact that you trade differently than maybe what some of the more some of the other companies in the space that are predominantly regulated companies trade at. I don't know and I can't give you a quantify whether it's kind of the market looking at your regulated business or somehow the market putting a discount or something on EWC. But you all have been consistent about talking about EWC being a cash generator. And EWC has net cash on the books today. Is there anything keeping you from simply divesting EWC, a transaction that would simplify the Entergy story and truly make it not in 2022, but in an accelerated timeframe of purely regulated company?
So we're in the process, The Vermont Yankee discussion is about divesting of EWC in a unique and structured and obviously timed to the exit to the shutdowns of the plants. So it's that is a transaction. If you think about what would be involved to try to put together a transaction around nuclear power plants in markets that really don't support them that are scheduled for closure where you would require regulatory approval. I can't imagine a transaction that we should complete by 2022 that we get through all of that process. And in the meantime, I think it would be actually more of a distraction from the utilities growth story than what we have today.
What we're doing today, so we do still own the business. And to obviously, I'm not going to comment, Steve, on what the rating issues would say. But from our standpoint, what we've done is try to emulate exit from the business as much as possible while we're in it. So let's start at the back end 2022. The plant that we're operating until 2022 has a contract for all of its output to an investment grade utility.
It has a pretty solid balance sheet. It's in our merchant segment, but it's got the credit profile of A and O. I mean, that's no different than ANO. It's selling to a utility operating company or think of Siri, right? It's a company that sells all of its power to regulated utility outcome with FERC regulation.
It's no different. So from a real risk profile, Palisades looks a lot like our utility and that's the last one. So maybe back into 20 21. And then what we've done, as Drew pointed out, we've made a concerted effort to take the volatility out of the top line. So yes, sure, if by chance there was some wild polar vortex at some point in time between now and 2022, if we were open to position, we could clean up.
But I don't think that's what you want out of us is to be swinging for the fence of maybe a cold winter will drive really big profits in 1 year. I'm sure Drew would love the cash for that year, but Wouldn't love the risk. But you would love the risk, and so it's not worth it. So that hedging of the portfolio, the operational improves, everything that we're doing today is to make that look as much like a utility as it can. And with VY already shut down, with Pilgrim coming in less than 12 months, with Palisades being fully contracted, we're getting down to a pretty small operation as it relates to how much risk are we actually assessing there, particularly when you take away the top line risk by hedging as much of it as we can as far as we can the way we have and not structuring products to try to win.
We're not taking options risk and things like that. I think we used to do when there was a bigger portfolio and it meant more to the company. So we're trying to operate it as if it's kind of buttoned in a box as it is and all towards that objective that Drew lined out, I think over a year ago of trying to be cash neutral, which we've now worked to be cash positive.
And I would just add that, that business, if you were going to operate it for another 10 years, would not be cash positive. We are in the process of shutting those plants down. We're not making investments right now that have a 10 year projection on them. And so if you're going to run those plants another 10 years, you'd have to make a lot more investment in the plants. A lot of the strategy that Chris discussed, one of those on plant is about equipment replacement to make your plants more reliable and dependable.
And we're certainly making those investments to ensure that we get to the shutdown point, but we're not making the investments that are getting us past that. And so that's helping us in our cash flow today.
With so much new gas generation growth in your portfolio, do you perceive any value to taking an investment in a gas pipeline similar to what your peers have done?
We had an investment in a gas pipeline that actually served all of our facilities. At one point in time, Drew used to work there when we owned Entergy Coke. That's a different business than the one we're in, gas pipeline. Owning a gas pipeline that would be complementary to our generating fleet given the fact that our generating fleet, assuming that utility is actually problematic. It's not helpful, because you have to operate them as separate businesses.
There's a lot of affiliate rules and regulations associated with that that make it a problematic operational capability to do that doesn't really create synergies between the two businesses. So all that we'd be doing is getting more exposure to gas in that regard. And the only thing I'd add on that is we've got a lot of investment opportunities. So the one thing I think that should be evident based on the capital program that we have in the next 5 years and the things that we're identifying for what can come next, there isn't a day that any of us would walk into the office and there isn't somebody with another project. That isn't in the plan.
So we have a significant amount of organic growth opportunity within the company. And I think I can't speak for peers, but I know what I observe and what I'm told by industry participants who come to me is that a lot of situation and particularly the historical acquisitions that have occurred over the course of the last few years, not necessarily with what's happened with tax reform etcetera has been around trying to utilize balance sheets to find investment growth investment opportunities. We are utilizing our balance sheet with our growth investment opportunities at the company. So we really have this kind of once in a lifetime unique situation of opportunities to invest in the business that has these regulatory constructs and we've already got we get all this stuff approved on the front end in terms of its need and the way that process works, I think we want to take advantage of that as much as possible while we can. Hi, guys.
That kind of dovetails with my question. What are the prospects for the $46,000,000,000 capital opportunity materializing in the 5 year plan, particularly in the latter years? The things that I was talking about, I mean, I think that there's some potential for some of those things. And what happens is we find out more the more we investigate, the more we'll find out. And that's why we're I mentioned that we're doing it under a different process to make sure that we start to test things out faster and faster and faster as we go, not going all the way to the end.
Paul mentioned that before we put the capital project management team in place, what we did is people said, I got a project, let's go build it. And where we would fall apart is on the front end of understanding what is it that we're trying to do. And in that case, it has a lot to do with design and engineering and getting through those stage gates that he talked about. In the product development and new technology space, we're trying to deploy those agile methods to do the same thing. And that is, let's get that customer feedback as we go in kind of minimal viable project stage as opposed to we're going to go to the endgame and we're going to build the coolest thing they've ever seen.
You just wait and then we show up and do what they want. As we do that, what we're going to what we'll I'm sure we'll find is different ways and more things to deploy capital and some of it could come sooner or not. But we're not going to make any mistakes about Russian things. So I think if it did, it would be towards the back end of it, but most likely it's going to be outside of it.
On EWC, one of the ways that you guys say that it is a net cash flow provider is through parent NOLs. Can you just elaborate a little bit on how that works? And then also kind of what is the cash tax position of the company through the forecast?
Yes. So EWC is still paying taxes, and those taxes are falling up to the parent. We do have NOLs there, so they're stopping at that spot. And so that or not completely, but there are some of them are stopping at that spot. So that's part of the cash flow that's ending up at the parent.
It's a little harder to see if you're just looking at a normal income statement. Got you.
And then just do you expect to be a cash taxpayer in this forecast?
We expect some sort of minimal cash taxes. We still have I guess AMT is not exactly what it was, but there are things there where we'd still pay some sort of minimum tax. We have state tax. We make payments in sort of prepays to manage risk in our tax positions. So there would still be some taxes that are effectively paid out in that way.
We've talked about 10% or so in the past, and I think that'd probably be a reasonable place to start still. Got you. Thank you.
Hi. Just two quick questions. Just on the dividend policy, really after this year, the earnings should start to accelerate. So how should we think about the dividend policy, let's say, post 2019, post 2020? And whether we'll kind of see it start ramping up with the growth rate?
Well, the ultimate objective is to get it in line with the growth rate. The thing that we have to manage when we discuss it with the Board on a regular basis is all the things that we talked about. We want to be in our earnings growth path. We want to make sure we have the right balance sheet and that we're providing enough capital for the investments that we have. So those are the I mean, that's how we think about it as we go forward.
And then when we look at that, we look at it in the near term, but then we're also looking at sustainability. So one of the things that we're gearing towards is sustainability and the growth rate. So I think that's an important thing to think about too. So as Drew mentioned, it's not that we want to raise the dividend 10% and make sure we can sustain the 10% raise of the dividend. What we want to do is what we've been doing and that is we put in place a growth rate that is sustainable.
And so when we look at all those investment opportunities, we look at the balance sheet and we look at what that dividend growth rate looks like, those are the things that we're going to consider. Ultimately, our objective is to get it to sustain the growth rate of the dividend with the growth rate of earnings.
Right now, what's the articulated growth rate, is there one?
We haven't no, we're not articulate the growth rate, but it's been about 2.5% over the course, so like clockwork. So you might be able to peg on what it's been because it's been pretty much the same thing every year for the last 3 years.
And then I think I know the answer to this, but I'll ask it anyway. So the stock has done much better, especially on a relative basis. So your relative PE ratio has improved significantly, especially with utility plant and other. Obviously, the industry is consolidating. What are your thoughts?
You've done transactions in the past, not really M and A, but kind of breaking up stuff. What's your thinking just on M and A in general and opportunities for you now since you have better currency?
Well, it's the same thought process that we've always had around M and A. We've got again, we believe we have this unique and pretty exciting growth path organically. We want to make sure that anything we did helps that, makes it better. We want to make sure that anybody that we're involved in, we can get it done both from a relationship standpoint, but also from a regulatory point of view that it's a deal that can get regulatory approval and then we want to make sure that it doesn't distract us. So distraction comes in 2 flavors.
1 is distract us from doing what we're doing. So if something happened and this would be unlikely, but because of some transaction Paul's team couldn't work on in Montgomery County, that'd be problematic because that's an important part of the growth story for Texas. The other thing is we have to be considerate of too is that a lot of things that we do while we've gotten most everything approved by the regulator to go forward, we still have some rate cases and formula rate plans and things like that that we've got to do. We wouldn't want to distract them. For example, if you look at this year, we wouldn't have want to go to the Louisiana Commission and say, don't work on the Formula A plan extension, do this instead.
That would be a distraction that that'd be unfair to them to ask them to do that. So those are the 3 criteria that we continue to look at. And we investigate things all the time. Obviously, just like everybody else, we have a group of people who that's what they do, both from the asset transaction basis, but also on bigger things that we might be looking to do. But those are that's how we think about it.
Obviously, I can't comment on what we may or may not do.
Leo?
Yes. Wondering, you have a 5 year plan here, which obviously has a significant amount of rate based growth. I'm kind of wondering as you and given regulatory approvals as well as trackers and other rate mechanisms to basically put get that all into service. As we go forward towards the back end looking out, how would you characterize what you consider as core maintenance required capital to support the system versus growth capital going forward given that in the future, cost of capital, economy, various things can change such that perhaps growth capital may not be as readily might not be quite as attractive out in the future as it is today. So if we think about a gross capital program, what is the absolute base level that you will always have to do what you perceive in terms of basic planning?
I don't know if you have a base number. I mean a baseline capital?
I don't have any. I mean, if you took away the CCGTs, we can't do that, but I mean, it's because our system needs those assets to continue to function. But that's about $4,500,000,000 of the nearly 18,000,000,000 dollars I think that the transmission investment that we're making today, I think, for the next few years, may actually begin to trail off because we've made a significant amount of investment in the transmission space to improve the reliability and comply with NERC standards and things like that. We've made a lot of that investment or we will make a lot of that investment in that plan. But that's that is not or I should say, that will be taken up by a lot of that distribution investment that Leo talked about, Rod talked about.
I mean
when you when CCGTs are completed and the generation expenditures are all in service, Does that give you some headroom in terms of time before needing extra generation at that point, such that that capital expenditure can get reallocated somewhere else within the system or simply
So kind of to back up, as Paul mentioned, we still have a significant amount of generation that's older than 1985. And I guess I never would have thought years ago that I would think 1985 was a long time ago, but it was, right? And so you've got that 30 plus year generation footprint, some of which is obviously fired by gas, some of which is fired by coal. And so we're going to continue to have a need to replace that generation footprint as what Paul said. Now how we do that is going to evolve.
So today, we're doing predominantly CCGTs, and we would assume that given where price points are and the needs are and the type of capacity and everything that we need for the system that we'll continue to have a need for more of those. As we look at it, Paul also mentioned that the renewable side of things is going to become more and more competitive. And it depends there's a whole wide range of price points in renewables out there. I think it's an interesting dynamic to where if you look at a lot of consensus around what's going to happen to the cost of solar and battery storage, you get somehow next year it all stops becoming less expensive. I don't know how that happens.
I don't know what's magic about next year, but that's not necessarily what's going to happen. On the other side of the coin, they could continue to become more and more cost competitive. And as Paul mentioned, the performance levels of those get better. We should see more of that take a role. So we will continue to need to provide more generating resources.
It will be a combination of natural gas and renewables. At the same time, Paul was there was a slide in there and if you look at it, he thought I think it had alternative I can't remember when your 4 by there was localized solutions. So there's a situation where what we're finding and it would be on the list of other things that we're investigating of those three things that I talked about that have nothing to do with storms, but has to do with just reliability of small communities that are either at the end of the line in the Gulf Coast or somewhere in mountainous Arkansas, right? You've got a small community with a reliability issue that we need to meet, and there's no generation nearby. And so historically, what we've done is big transmission lines into those areas.
Where we might have a reliability issue, our historical way to do it would be okay, I'm going to go and I'm going to build big transmission line into that area or I'm going to beef that one up or whatever. What we're finding now is those prices come down is that microgrids might actually make sense in some of those areas as not an alternative to generation, but an alternative to transmission investment because of the price point. So all of those things will go into play. And I think as we go forward, I don't really see there being a situation where capital is difficult to come by for solid investments. And if we are meeting a customer need and we have the approval of the regulator, I don't know how capital becomes difficult for us to get.
And the majority of the capital that we need to get is generated by the list itself. If you look at the graph that Drew put together, the majority of what we burn every day is cash that we have coming in the door as opposed to the financing external financing that we have to do. But my experience over the last 36 years anyway has been good projects find capital. And our objective is to only have good projects.
Okay. We're probably up on time now. Maybe one last question quickly then, if you want to pass it over to Leslie. Leslie. We'll get you a mic Leslie shortly.
We'll do one last question.
Thank you. I just have a balance sheet question. So looking at your holding company, your parent debt maturities over this period, you have a number of maturities, but yet you don't forecast that your parent debt to total debt is going to decline. So should one assume that you would refinance those and that that drag from the interest expense that you have in parent and other of $1.50 a share would say relatively constant over that timeframe? Yes.
Adjusting for interest rate differentials, etcetera.
Yes. And we're actually probably anticipating some slight increases in that parent debt over time. And I think that's in the chart that I showed, we had some utility incremental utility debt. We had a small slice of incremental parent debt associated with that. So depending on where interest rates go, that would contribute to that parent and other piece.
Great. Thank you all very much. That concludes the business session portion of our Analyst Day. I encourage you to stick around. We're going to have Doctor.
Rice come out as our special guest speaker. She'll be taking questions. She'll do have some planned remarks, so it should be insightful and interesting. And there will be opportunities to take pictures with Doctor. Rice too.
So we'll get back shortly. We're going to rearrange the stage very quickly. And