Buoyed by its renewables division, Avangrid reported a 40% increase in its first-quarter profits and a doubling of its income amid a “strong operating performance” during the Texas winter storm in February.
Avangrid CEO Dennis Arriola said during an earnings call Tuesday that its Gulf Coast wind farms in Texas met “delivery obligations and produced excess energy contributing to the solution during the crisis.”
The Connecticut-based subsidiary of Spanish energy giant Iberdrola reported earnings of $334 million ($1.08/share), up nearly $100 million from the same period in 2020 ($240 million; $0.78/share). Avangrid Renewables earned $108 million during the quarter, up from $52 million in January 2020. Avangrid Networks posted earnings of $225 million during the quarter, compared with $197 million in January 2020.
PMN Merger, NECEC, Vineyard Wind Talk
Arriola said Avangrid’s $8.3 billion acquisition of PMN Resources is on track to close in the second half of the year following FERC OKs Avangrid PNM Purchase.)
The remaining regulatory hurdles include approvals from regulators in Texas and New Mexico and the Nuclear Regulatory Commission. Support from the Texas PUC could come as early as May 6 with the item on the commission’s meeting agenda. Arriola said there has been “positive progress” toward a multiparty stipulation agreement in New Mexico, including public support from Gov. Michelle Lujan Grisham.
Construction of the $1 billion New England Clean Energy Connect (NECEC) transmission line with Central Maine Power began in January. NECEC spans 145 miles with the capacity to carry 1,200 MW of Canadian hydropower from the Maine-Québec border to Lewiston, Maine, where it will connect to the New England Control Area. The HVDC project includes upgrading 50 miles of existing AC transmission, a new converter station and substation and other upgrades. It has an in-service date of 2023.
Arriola said those opposed to the project are “running out of arguments.” Avangrid Deputy CEO Bob Kump added that the need for transmission “to achieve our goals around decarbonization is becoming very well known.”
Arriola said that the 800-MW Vineyard Wind, a joint venture between Avangrid and Copenhagen Infrastructure Partners off the coast of Martha’s Vineyard in Massachusetts, got a final environmental impact study from the U.S. Bureau of Ocean Energy Management in March and is slated to start construction in the second half of this year and begin commercial operation in 2024.
“The project is progressing well,” Arriola said. “We have all major construction contracts with suppliers and contractors secured, and we’re finalizing the evaluation of optimal financing structures, including tax equity and project financing.”
Parsing with PURA
Avangrid Networks CEO Catherine Stempien said the Connecticut Public Utilities Regulatory Authority has an “ambitious agenda.” But she said there is still room for negotiation after PURA last month rejected an agreement between the state and Avangrid subsidiary United Illuminating that would have provided a $46.5 million COVID-19 relief bill credit to decrease and stabilize electric rates into 2023. PURA’s draft decision also rejects a $5 million voluntary contribution from UI, which can immediately apply for an increase in rates.
PURA’s decision sunk an agreement that Gov. Ned Lamont and Attorney General William Tong announced in March that would fully offset a 5-8% increase in bills due to federally mandated transmission charges and costs of the power purchase agreement with the Millstone Nuclear Power Station. The settlement not only included the $5 million from UI but would have accelerated the return of $41.55 million of accumulated savings from federal tax cuts. In addition, UI agreed to not change base distribution rates until at least May 2023, which could have saved ratepayers a projected $20 million above and beyond the $46.5 million COVID credit.
Instead, PURA will spread the cost over 68 months, adding a variable 3.25% prime interest rate. PURA’s plan, according to Tong, provides marginal immediate relief to ratepayers while ultimately adding millions in future costs.
When pressed by an investor for specifics, Arriola said Avangrid would “rather not negotiate in public” but recognizes “that PURA may look at things slightly differently than we did.”
“Part of our job is to make sure that we can advocate for our customers and get them up to speed on why we feel strongly for the original settlement,” Arriola said.
On April 28, PURA issued a stinging assessment of UI’s power restoration efforts during Tropical Storm Isaias in August, with possible fines looming for an inadequate response that left 33% of UI customers in the dark for days. (See Conn. Utilities Found Deficient in Tropical Storm Isaias Response.)
PURA criticized UI for not meeting its obligations to clear blocked roads and ensure public safety. The ruling further requires enhancements to emergency response plans and a third-party management audit this summer. Regulators will also mandate a reduced rate of return on equity by 0.15% to link management and financial performance during future storm responses. Additionally, PURA will consider civil penalties for noncompliance with issues identified in the ruling and could reject any future requests for storm cost recovery.
Call transcript courtesy of Seeking Alpha.