The Most Important Customer By J. Wayne Leonard

Reprinted from

At Entergy we believe we have failed earnings growth exceeding the mar­ any time we have to disconnect a cus­ kets' expectations, average annual tomer who is unable to pay the utility earnings growth of 16 percent per year bill. And when we look at the costs of for four years, and 18 percent average providing electric service, the numbers annual shareholder return over that tell us that usually there are better period. That gives me confidence that business solutions than disconnecting we're on the right track in viewing and reconnecting the same customers profitability as an output of serving our over and over. If we don't help custom­ stakeholders well and not an input that ers find those better solutions, some constrains our day-to-day decisions desperate ones will attempt solutions that affect real people's lives. Eleven of with our wires that pose safety risks to themselves and potentially our em­ Why Act Aggressively for the thirty ... eight ployees. Since safety is Entergy's num­ Low-Income Customers? ber-one priority, this is an additional Entergy's perspective on low-income counties with reason for finding ways to keep the customers is grounded in reality-the power on in the first place. reality of the region in which we live child poverty This spring, I told Entergy's share­ and do business. holders that the most important cus­ We serve one of the most poverty­ rates higher tomers we have are the ones who don't stricken areas of the nation-the Mis­ have service. It doesn't matter whether sissippi River Delta. According to than even the it's due to failed equipment, a storm­ statistics released by the Children's De­ related event, or customers' inability to fense Fund, three of the nation's ten poorest u.s. pay their bills at this moment in time. counties with the highest child poverty I believe that no one in this country rates are in Louisiana and Mississippi, should have to worry about whether he states that Entergy serves. Eleven of the cities are rural can afford electricity for his home. To thirty-eight counties with child poverty live in the richest country in the world rates higher than even the poorest U.S. countzes In and sit idly by as if it isn't our problem cities are rural counties in Arkansas, that some families must choose be­ Louisiana, and Mississippi-all in Arkansas, tween food and heat is criminal. Entergy's service area. New Orleans, Our employees are setting a national Entergy's headquarters city, has the Louisiana, and standard by proving that a corpora­ third-highest child poverty rate in the tion-a utility-can serve all its cus­ nation. More than 40 percent of New Mississippi­ tomers (including those having diffi­ Orleans children (51 ,707 out of 127,566 CUlty paying their bills) with dignity, re­ persons under age 18) live in poverty. all in Entergy 's spect, and compassion and still earn a We have made it a priority to provide fair profit. Some people will tell you, solutions to our low-income custom­ erVlce area. "Your only responsibilities are to the ers because, quite simply, it's the right shareholder and to obeying the law. thing to do. It's also the smart thing. The law defines morality when it Right now, approximately 25 percent of comes to your obligations to the en­ Entergy's 2.6 million customers fall be­ vironment and the impoverished." low the poverty line. On a daily basis, These attitudes are widespread in this many of our customers worry about country, particularly in the corporate whether they will be able to provide world. basic necessities to their family. Some­ At Entergy, we don't accept this ei­ how, most of them manage to get by therlor approach to our responsibili­ and pay their utility bills on time, in ties. In fact, we've proven that whole full. So there is a simple business basis idea wrong. Growing returns to share­ for Entergy's low-income strategy­ holders have gone hand in hand with more than $631 million. That's what social responsibility and improved ser­ low-income customers and the work­ vice to customers. Since mid-1998, ing poor contribute annually to Entergy has had 16 straight quarters of Entergy's revenue.

48 E L E e T R I C PER S P Ee T I V E S S E I' I E M 8 E R / 0 C T 0 B E R 2 0 02 49 The overwhelm" ! ing majority of our low,income and working poor customers are no different from the rest of us. I They are good people, responsible citizens, and good credit risks .... 'There is one big difference.

Their "energy Social, Cultural, and Economic Myths needs have not diminished, and the Like the bumper sticker that says, truly needy still are making wrenching burden" is often "Question Authority," we need to ques­ decisions about whether to buy food or tion what we "know" about the poor. medicine or pay their utility bill. three or four times Over the past three years, Entergy • "Benefits are generous and widely did that kind of questioning by study­ available to deserving poor people." A what it is for ing our low-income customers. Though recent survey asking Americans how the research is far from complete, our much money they believe welfare re­ the middle"income current findings reveal that the whole cipients receive per month, showed debate about customers "at or below that most think benefits are stagger­ household. the federal poverty level" suffers from ingly higher than those actually paid. a series of myths and misconceptions In other words, Americans believe wel­ about the poor. fare recipients get enough taxpayer We all have heard the conventional money to live by standards most of us wisdoms: take for granted. As for being "deserv­ • "Welfare reform is working since the ing," I know of very few people who public assistance rolls are dropping." choose to be poor-and they are mem­ That notion is highly debatable. The bers of the clergy who took a vow of best that can be said, in my mind, is poverty. No one inherently "deserves" that welfare reform has transferred to be penniless, so it's hard for me to people off the welfare roles to the ranks think of any poor person as more "de­ of the working poor. In our area, the serving" than another.

50 E LEe T RI C PER S PEe T I V E S • "There are plenty of charities around come families that have tremendous Many working poor and elderly are among to help the poor." There are plenty that loads of consumer debt. Also, low-in­ the 31 million people in the United States at or want to help, but their resources are come customers, especially the elderly below the poverty level. For a family of four, stretched thin. Since September 11 and poor, tend to pay their bills on time that level is an annual income of $17,184. the downturn in the national economy, since so many of them live on fixed in­ many auxiliary sources of assistance comes and have life experience in by traditional communication chan­ have been drying up. Charities have managing money. nels. Many times even our own em­ had a harder time raising money and ployees were unaware of these policies. faced more demands on their services. Identifying Our Low-Income An example is the availability of fuel Many food pantries and homeless Customers' Needs fund payroll deductions, which were shelters across the nation are reporting Myths about the poor have justified not promoted until very recently. increased pleas for support. complacency about their needs. And With the launch of Entergy's low-in­ • "Most poor people are deadbeats for all the statistics that can be cited come initiative in 1999, we began who choose to live wastefully, squan­ about how society has turned its back questioning misconceptions about the der their money, and willfully refuse to on the less fortunate, our analysis poorer customers in our region, and pay their bills." Our research showed found that Entergy's historic track we moved to rebuild our customer ser­ just the opposite. As a class, poor cus­ record had not been much better. Even vice policies based on aU our custom­ tomers exhibit no worse credit behav­ though our company always has had ers' needs. ior than any other class. In fact, many policies to assist customers, they The overwhelming majority of our low-income customers are more reli­ often were unknown to the vast major­ low-income and working poor cus­ able when it comes to paying their ity of customers, especially those with tomers are no different from the rest of Entergy bills than those middle-in­ low incomes who were harder to reach us. They are good people, responsible

SEPTEMBER/OCTOBER 200 2 51 We decided to stop battling and start helping our low ... income li' ~ fi customers. We ~ ~-~~-""" !1i are leveraging our A resident of Tunica County, MS-part of • They are loyal customers, rarely com­ Entergy's territory-where 45 percent of the plain, and almost never call our phone corporate size population is below the poverty line. centers or seek special service or atten­ tion. They give us high customer satis­ and strength to citizens, and good credit risks. In fact, faction scores. most have never received a late-pay­ Customers like this would be an as­ become the ment notice or had a disconnection. set to any business. We want to keep They pay their bills, often as soon as them as customers, keep them satis­ nation's best ally they arrive in the mail. Unforeseen fied with excellent service, and help things sometimes happen in their lives them when they need it. We also don't of those who are as they do to us all. But, unlike those of want them to stay poor. Ifyou don't be­ us who are more fortunate, they have lieve in the logic of this business strat­ dedicated to little or no safety net to help them egy, take a look at the world's largest handle these crises. company-Wal-Mart-and tell me its he lping the poor. There are other realities about low­ balance sheet hasn't benefited from income people that need to be recog­ the goodwill and service it provides to nized: struggling people who want and need • Too many of them scrimp on food, to save money. drugs, and healthcare in order to keep But while our low-income and work­ the lights and gas on. ing poor customers are pretty much • They have jobs-often two of them like the rest of us, there is one big dif­ that both pay minimum wage. ference. As their advocates put it, their • They often are elderly, living on fixed "energy burden" is often three or four incomes in homes that are old, leaky, times what it is for the middle-income and substandard, with inefficient ap­ household. They have to spend as pliances and heating systems. much as 20 percent of their monthly • They don't have paid lobbyists to income on utilities, compared to 4 or 5 champion their cause or seek changes percent for the national average in laws to improve their lot. household. • They have big hearts. They try to help Imagine having to spend one-fifth of their neighbors. Despite poverty, they your entire income just to pay the en­ contribute to others. ergy bill. Then add to it the fact that so

52 E: L t:: C T RI C PER S PEe T I V E S many of these poor households must tra to help the needy. However, only 2 Entergy volunteers hand out educational goods. pay astronomical bills for healthcare percent of our customers contributed "Employees always want to be part 01 a com­ and medications (frequently without to the voluntary fuel funds in our four pany that does the right thing," says Leonard. insurance), feed their families, make states last year. If that quarter of resi­ rent or mortgage payments, and pay dential customers who think they al­ in New Orleans, bringing the company disproportionately high transportation ready are giving actually did so-by together with advocates for the poor, costs for driving older, clunker auto­ adding just a dollar apiece to their bill government agencies, private chari­ mobiles. each month-fuel funds in our service table groups, and national poverty ex­ Moreover, when people are living so areas would balloon from $1.4 million perts to help us better understand the close to the edge, they can be devas­ to $11 million. Such an increase would problem and develop concrete solu­ tated by energy price spikes and vola­ make a substantial, positive difference tions. That year we launched a multi­ tile changes in utility bills like those in many people's lives and relieve the point low-income strategy with three we've seen in the past couple of years. financial pressures borne by local key elements: agencies serving people faced with • customer programs that required no Other Customer Perceptions temporary bill payment crises. changes in laws or regulations, includ­ Entergy's research showed that almost Voluntary giving to fuel funds can ing credit policies, contributions, em­ a quarter of residential customers al­ make a big difference, but it won't ployee support, and fuel funds ready think they pay something in come close to meeting the need. There promotions; their rates to assist their neighbors in will never be enough to help all those • expanded advocacy for greater-and need. However, within the four states who qualify. I think our customers more eqUitable-government assis­ in which Entergy provides electricity, would be surprised to learn that the tance at the federal, state, and local only Texas requires that all customers four Entergy states received nearly levels; and pay even a modest amount in their $100 million in federal Low Income • education and communications pro­ utility rates to support low-income Home Energy Assistance Program grams to reach more low-income cus­ programs. Such programs are com­ (UHEAP) funding in 2001-and even tomers, using straight talk and monplace in many parts of the nation, more surprised to learn that that information channels they prefer and but not in the South. (Southerners tend amount is grossly inadequate. trust. to assist needy families in paying their So what is the answer? The first thing we had to do was re­ utility bills through contributions to view and evaluate our own treatment churches and other nonprofits.) ASleeping Giant of low-i ncome customers. We then Recent research indicates that many In 1999, Enterg)! hosted a novel "Low­ looked at how introducing flexibility customers are willing to pay a little ex­ Income Customer Assistance Summit" and fairness into existing policies, pro-

SEPTEM B E R / OC T O B ER 2002 53 THE PROGRAM PUSH cedures, and programs could produce mutual benefits to customers and the By Walter Nixon company. In doing so, we awakened a sleeping giant of employee interest and ithin Its politically conservative, resource-constrained service-area, Entergy is support. In my experience, employees advancing the business case for the establishment of permanent, ratepayer-funded always want to be a part of a company W sources of funding for energy efficiency, weatherization , and affordable energy as­ that does the right thing. sistance programs In addition to being the right thing to do, Entergy supports the programs We supported efforts by the Internal because it believes that customers who can pay their bills and live in safe, hea lth ful , and com­ Revenue Service to inform low-income fortable homes are more likely to accumulate assets that cement the ir parti ci pation in and con­ taxpayers about available tax credits tributions to the economy and soc iety. through bill inserts and by providing In November 2000, Entergy committed each of its five utility companies to seek the adop­ flyers and bulletin board posters to tion of a public benefits fund or its equivalent. Furthermore , CEO Wayne Leonard declared that 1,500 churches, senior centers, and the incentive compensation of Ent ergy's five utility company presidents would be based, nonprofit agencies in our utility areas. in part, on their success in achieving this goal Today, that goal has been partially met in each In 2000, at the second Low-Income of Entergy's states. Customer Assistance Summit in Jack­ • Texas passed legislation creating a ratepayer-funded System Benelit Fund in 1999. Its son, J"I S, we formed the Entergy Chari­ implementation in the Entergy Texas service area launched with the advent of retail competi­ table Foundation and committed $5 tion. million to help low-income customers • Last spring , Mississippi 's and advocates. In 2001, at the third legis lature nearly passed summit in Little Rock, AR, we recom­ Customer Energy Ass istance mitted $5 million to the same cause. Program (CEAP) legislation More than half the donations are tha t would have funded awarded in grants: In our latest round, weatherization and energy 68 percent of those grants went to or­ affordability programs. Coali­ ganizations providing benefits to low­ tion -building initiatives con­ income customers. tinue in Mississippi, and From the Foundation, we ear­ Entergy plans another effort to marked $500,000 to pay a matching pass asimi tar bill next year portion ofIndividual Development Ac­ • Low-income advoca tes in counts to help first-time, low-income Arkansas are partnering with homeowners find financing. Entergy to tead the effort to Following up on an idea given to us create a CEAP prima rily target­ by a consumer advocate, we used ing energy efficiency and Entergy Charitable Foundation funds weatherization to low-income to implement the Kalkstein \lVeather gas and etectric customers. Entergy employees volunteer to weatherize, but help also Model, which offers fair but realistic The Arkansas coalition hopes must come from yet-to-be-realized public benefits funds. formulas for defining when extreme to pass the bill in 2003. weather necessitates a temporary sus­ • The Louisiana Public Benefits Fund Coalition has worked for more than a year to gain the pension of utility shut-offs. support of the Louisiana Public Service Commiss io n for astatewide lund to provide energy efficiency, weatherization, and bill payment assistance services. There has also been legisla­ Advocacy and Relationship Building tive activity suppor tive of a fu nd during the spring sessions of the Louisiana tegistature. We came to the conclusion that, what­ .tn New Orteans, an Entergy proposat to the city counc il (which regutates Ente rgy's local ever our intentions, Entergy and other electric and gas subsidiary) has been incorpo ra ted into a ra te case proposal that was filed last utility companies had been making May Under the proposal , a New Orleans Board for Ene rgy Efficiency would be created and war on the poor. By launching our new funded. It would oversee the implementation of weatherization and energy efficiency serv ices strategy, we decided to stop battling available to all classes of customers in the city and administer a program of bill payment as ­ and start helping our low-income cus­ sistance lor low -income customers. Entergy New Orleans ' rate case proposal would create a tomers. We are leveraging our corpo­ permanent source of funding (over a period of four years) for such programs, beginning with rate size and strength to become the $6 million in 2003. One-sixth of the funds would go toward bill payment assistance; the re­ nation's best ally of those who are ded­ maining $5 million would be used for energy efficiency and weatherization programs icated to helping the poor. Waller Nixon is director 01 regulalory policy al Enlerg), We started by recognizing the people whom business too often con­

54 E L Ee T RIC P E R S PEe T I V E S Assistance for home cooling . . IS Just as siders its enemies-low-income advo­ Distributing a cool breeze for hot days. "We necessary to the cates-and asking them to sit with us know we have to put real budgets and real dol­ at the table. We then implemented a lars behind our words, " says Leonard . strategy of improving relationships health and safety with both our neighborhood low-in­ have to put real budgets and real dol­ come advocates and customers. We lars behind our words. of low ... income found that most advocates want to Entergy is providing the leadership work cooperatively to solve problems and employee support for creating persons as assis .... rather than go toe-to-toe with us, if we "Customer Energy Assistance Pro­ welcome them as partners. gram" initiatives in Louisiana, Missis­ tance for home Then we formed a corporate-wide sippi. Arkansas, and the city of New team called the Low Income Champi­ Orleans. (See the sidebar. "The Pro­ heating. ons, made up of Entergy employees in gram Push.") These are unique. util­ all our states. We chose Enterg)T profes­ ity-incubated. coalition-supported ini­ sionals who already knew-or who tiatives that, if adopted by regulators, came to know through our outreach would create permanent sources of efforts-the role and abilities of the ratepayer funding to help low-income low-income advocates and agencies people weatherize their homes and re­ that serve our customers and who re­ duce their energy bills. Such a program spected and appreciated their efforts. does not rely on scarce federal dollars Using the Champions. we began or complex changes in federal laws or building partnerships with those ad­ programs, but instead promotes old­ vocates to pursue common interests fashioned self-help. and consensus on issues like energy We also are working with Louisiana affordability and housing. These kinds Senator Mary Landrieu to change a of partnerships are valuable in achiev­ very inequitable policy of the U.S. De­ ing any business goal, but particularly partment of Housing and Urban De­ when there are mutual benefits to be velopment that discriminates against gained by everyone-not just the util­ warm-weather states by ignoring the ity, but customers and their advocates fact that hot temperatures can be as and the government agencies that deadly as cold. Assistance for home serve them. cooling is just as necessary to the With our financial grants, we are of­ health and safety of low-income per­ fering meaningful benefits to those in sons as assistance for home heating. need. They can see this is not a public Our state and federal lobbyists also relations exercise. And we know we are actively involved in promoting a

56 E LE e T RIC PER S PE e T I V E S fair formula for warm-weather states quirements to the Weatherization As­ aiding the poor, we are adopting new and increases in the levels of federal sistance Program. communications channels and meth­ funding for both LlHEAP and the Weath­ ods to reach low-income customers. erization Assistance Program. And we Education and Communications These new approaches include provid­ are alert and ready to fight the threat of After speaking with advocates from ing information through churches to any mandate for state matching re- nonprofit agencies that specialize in those congregants who seek aid, dis­ tributing training videos for simple VOLUNTEERS FIGHT THE WEATHER weatherization projects, and develop­ ing brochures with the U.S. Depart­ By Mary H Wagoner ment of Energy on energy saving measures that best fit low-income mployees and community volunteers throughout the Entergy service area have housing. teamed up to weatherize the homes of their elderly, handicapped, and low-income We also have shifted our message to Eneighbors Entergy's nonprofit agency partners vary from faith-based organizations, civiC encourage conservation. We want to groups, and government agencies do everything possible to help low-in­ Volunteers give their time, energy, and resources to help improve housing , reduce utility come customers pay their bills and costs and conserve energy in their hometowns. In add ition , Entergy provides tra ining and infor­ keep the power on. It just makes good mation to customers, along with educational materials , workshops, and presentations business sense for a customer to have • The Texas EntergyAssist low-income weatherization program has proven to be one of the a smaller bill he or she can afford, not most successful utility-sponsored weatherization programs in the Lone Star State. Thanks to a a higher bill that can't be paid. great working partnership with the Texas Depart­ Our employees have organized vol­ ment of Housing and Community untary home weatherization programs Affairs and local jurisdictional subgrantees, the across our system and will direct other entire $900,000 weatherization budget was used community outreach activities this for the third year in a row. summer to teach customers about eco­ • In the last year, Entergy has implemented a pilot nomical bill-reduction methods. (See weatherization program in the northern part of the sidebar, "Volunteers Fight the Louisiana. Working with the faith -based commu­ Weather.") nity, retirees, and nonprofit groups , volunteer teams successfully weatherized 80 homes. In ad­ If Not Us, Who? dition, retirees initiated their own programs to ad­ It's said that the war on terrorism has dress the needs of low-income housing south of made Americans more community fo­ the Monroe area. Over the summer, Entergy Louisiana offered employees an opportunity to ap­ cused and less selfish. I believe in gen­ ply for five $1,000 grants through its Low-Income Weatherization Partnersh ip Program to eral that's true, but it still is hard to dig weatherize homes. out from the stereotypes and myths • Through apartnership with local churches and community organizations, Entergy Arkansas we face when it comes to helping our employees and others were trained in weatherization techniques, resuting in the creation of a less fortunate neighbors. statewide database of trained advocates. They have weatherized 40 homes during the past year, For utilities, it's not just altruism. and more are scheduled for this fal l. Entergy Arkansas also is launching a pil ot program that Think of the revenue and earnings ev­ teaches weatherization and conservation skills to single-parent homeowners in the welfare-to­ ery utility company would experience work program. if low-income write-offs were reduced • Entergy New Orleans financed aweatherization demonstration to show customers who li ve in or eliminated. older homes how much money it can save. Aproject team of employees executed a pilot pro­ More important, think for a moment gram to weatherize eight traditional Single-story, wood-framed homes and two small commer­ of the benefits to our economy if we cia l businesses. Additiona lly, conservation tips were distributed through brochures at local stopped the cycle of poverty. And think agencies, conservation coloring and activity sheets for primary school students, and conserva­ of the benefits to our society if we tion lesson plans for etementary, middle, and high school students. stopped treating other people as un­ • Entergy Mississippi employees partnered with community action agencie s, faith-based orga ­ worthy of our concern or even of our nizations, and other local organizations to weatherize selected homes throughout the service basic respect. territory Entergy participates with its partners by purchasing materials for low-income agencies The philosopher Hillel once said, "If and th rough the volunteer efforts of its employees. The company's overall goal is to weatherize not now, when? If not us, who?" That's 100 homes by the end of the year the kind of question every company in Mary Wagoner is a business writer In Little Rock, AR the electricity business needs to start asking itself.•

58 ELE C T R I C P ERSP E C TI V E S