We are proud to announce the initiation of the RTO Insider Top 30, the first in what will be a quarterly review of the top publicly traded companies (by market capitalization) with significant presence in the seven RTOs and ISOs in the U.S.

Any list is bound to provoke debate — and we trust this will be no exception. It’s a particular challenge in the ever-changing electric industry, as new technologies, environmental mandates and other factors force shifts in business models and regulatory rules.

The list includes both integrated utilities and independent power producers. It doesn’t include some companies such as out-of-the ashes Dynegy and EnerNOC, whose voices in policy matters outweigh their market capitalizations.

This new initiative also coincides with our expansion to CAISO and its expanding Energy Imbalance Market. So the list includes companies such as Pinnacle West Capital (parent of Arizona Public Service), Sempra Energy, Pacific Gas and Electric, Edison International (parent of Southern California Edison), about which we haven’t written much before. We’ve also included Berkshire Hathaway Energy, which reports its financials as if it were a standalone company although it trades as part of Warren Buffet’s Berkshire Hathaway holding company.

So, consider this a beta test and share your feedback with us. We expect to refine — and perhaps enlarge — this list in the future.

***Companies had not reported as of press time.

Mild Winter Cuts Revenues

It wasn’t a very good quarter for most of the companies in our grouping. Largely because of a mild winter and continued low natural gas prices, revenues dropped by a median of 7% and net income both fell by a median of 7% in the first quarter of 2016 versus a year earlier.

Total profits declined by 12%, falling to $7.5 billion for the 29 companies that have reported thus far, from $8.5 billion for the same group a year earlier.

Only three companies saw an increase in revenue in the quarter, led by WEC Energy Group, which was formed last June from Wisconsin Energy’s acquisition of Integrys Energy Group. The merger boosted its top line 58% to $2.2 billion (see details below). PG&E and Pinnacle West showed modest revenue gains.

Excluding the incremental $980 million in revenue WEC gained from Integrys, however, total revenues declined 8% to $75.6 billion.

Six companies saw an increase in net income: WEC, PG&E, FirstEnergy, Westar Energy, Xcel Energy and Avangrid, which was formed in December following Spanish conglomerate Iberdrola’s acquisition of UIL Holdings.

Avangrid’s net income for the quarter included a one-time gain of $17 million from the sale of its interest in the Iroquois Gas Transmission System.

All but one company was profitable for the quarter. Calpine showed a net loss of $198 million ($0.56/share), an increase from the $10 million loss ($0.03/share) reported a year earlier. The company’s revenues declined 2% to $1.62 billion. The company attributed the loss primarily to mark-to-market losses resulting from decreases in forward power and natural gas prices.

Below are some of the highlights from the first quarter.

– Rich Heidorn Jr.

Integrys Acquisition, Influx of New Customers Amplify WEC Q1 Earnings

WEC’s Integrys acquisition boosted first-quarter revenue, with earnings per share jumping 19 cents from $0.90 in 2015 to $1.09 in 2016.

“We are achieving the results we expected from the Integrys acquisition,” CEO Allen Leverett said in a conference call last week.

WEC recorded net income of $347 million, up from $196 million in the first quarter of 2015. The addition of Integrys boosted revenues by $980 million despite decreased demand over a mild winter.

Leverett said the company is serving 8,000 more electric customers and 11,000 more natural gas customers in Wisconsin compared to a year ago. Another 6,000 natural gas customers were added in the past year in Illinois, Michigan and Minnesota, and WEC gained 10,000 Minnesota natural gas customers from Alliant Energy in April 2015, Leverett reported.

On Monday, UBS Securities upgraded WEC to neutral from sell, citing the company’s projected 5 to 7% earnings-per-share growth rate.

– Amanda Durish Cook

PSEG: ‘New Urgency’ to Cost Cuts

Public Service Enterprise Group CEO Ralph Izzo blamed “the complete absence of a winter” in part for its 17% drop in revenues. Weather in PSEG’s service territory was 10% warmer than normal and the fifth warmest on record.

Izzo said low gas prices and stricter reliability requirements for capacity resources in PJM have “added new urgency to the company’s efforts to improve its cost structure and efficiency,” leading it to make what he called “judicious reductions” in its nuclear workforce.

The CEO also said the company “is working closely with the industry to identify additional means of reducing its cost structure” to keep its nuclear plants operating.

During an earnings call, Izzo was asked about the rationale for PSEG’s partnership with Indiana gas and electric utility Vectren to seek competitive transmission opportunities in MISO. “I think that there is a lot of value to be had by combining forces with someone who understands the local transmission grid and system with our expertise now having put over $2 billion to work on an annual basis for a good number of years in terms of cost and schedule management on transmission construction.”

Izzo said the company would continue to be judicious in its generation expansions. “We have demonstrated that we’re pretty bad at acquiring assets,” he said. “By that I mean we seem to have a more conservative view of where the market is going and are consistently outbid.”

– Rich Heidorn Jr.

Dominion Hoping Conn. Legislature will Help Millstone

Dominion Resources’ lackluster results — a 15% drop in revenue and net income down 2% — left CEO Thomas Farrell having to open his earnings call with analysts by boasting about the company’s No. 1 safety ranking among electric utilities in the Southeast. Occupational Safety and Health Administration “recordables for each of our business units were roughly one-half the level recorded last year, and last year had tied an all-time company record,” Farrell said.

He also took note of the beginning of commercial operations at Dominion’s 1,358-MW Brunswick County Power Station, “completed ahead of time and under budget.”

Farrell said the company is “much more interested” in solar than wind assets. “Wind is not a good asset in the territories where we do business for producing power reliably,” he said.

The CEO also said Connecticut lawmakers had ended their session without taking action on legislation that could aid the company’s Millstone nuclear plant. Farrell said he expects the Connecticut House to consider the bill, which cleared the Senate, when it reconvenes in January.

The bill could allow Millstone to sell up to half its power in a new market under long-term contracts.

“We’re following the legislation, obviously, closely,” Farrell said. “But I think it’s part of an overall dialogue that will take place over the next few months in New England generally about how to protect” Millstone and NextEra Energy’s Seabrook nuclear plant in New Hampshire.

– Rich Heidorn Jr.

CMS Energy Q1 Earnings Down on Record Warm Winter

CMS Energy attributed its first-quarter earnings decline to Michigan’s second-warmest winter on record.

John Russell, CMS’ outgoing CEO, said “weather was the primary factor” for why net income dropped 19% to $164 million. Mild temperatures undercut gas deliveries and electricity sales, while an upsurge in storm activity increased restoration-related expenses, Russell said during an April 28 call.

The Michigan-based company is the parent of Consumers Energy, which reduced its electric rates by $38 million annually (1%) effective with the April 15 retirement of its seven oldest coal plants. Consumers is using power from renewables and the recently acquired Jackson natural gas-fired plant to fill the gap.

“We retired seven coal plants totaling 950 MW, bringing our capacity mix to less than 25% coal,” Russell said.

Patti Poppe, senior vice president of distribution operations and incoming CEO, said CMS’ electric and gas distribution business can improve its per customer operation and maintenance cost, which is in the third quartile when compared with peer companies.

Russell, who retires July 1, also used the call to appeal for a change to a Michigan law that he said requires CMS customers to subsidize about 300 large customers by paying an extra 3 to 4% in their bills. “This is simply not fair,” he said.  He said Consumers staff are willing to work with legislators on a new energy plan.

– Amanda Durish Cook

NRG Beats Expectations with $82M Net Income

NRG Energy’s first-quarter earnings surpassed Wall Street expectations, validating the company’s “integrated competitive power platform,” CEO Mauricio Gutierrez said.

“We are off to a really good start for the year,” Gutierrez said during a conference call May 5. “We have turned the page on this period of uncertainty.”

The company reported first-quarter net income of $47 million after losing $136 million during the same period a year earlier. Earnings per share came in at 24 cents, after some analysts had predicted losses averaging 17 cents/share. NRG posted $3.23 billion in revenue for the quarter.

Gutierrez said the company has made “significant progress” in its goal of selling $500 million in assets this year, pointing to $138 million in sales during the quarter. NRG also announced the sale of its stake in the electric vehicle charging business, EVgo, to Vision Ridge Partners for total consideration of approximately $50 million, and the streamlining of its residential solar program in its retail business.

The company’s effort to transform coal plants to gas offers opportunities in the ERCOT market, Gutierrez said. “We’re optimistic … as we see up to 9 GW of coal generation at risk due to upcoming environmental regulations and strong growth,” he said, also noting revisions to the operating reserve demand curve will increase scarcity pricing. (See ERCOT: No Consensus on Operating Reserve Changes.)

– Tom Kleckner

Earnings call transcripts courtesy of Seeking Alpha.