By Amanda Durish Cook
While year-over-year net income climbed about $300 million thanks to its Integrys acquisition, WEC Energy Group’s fourth-quarter earnings call focused largely on the company’s natural gas initiatives.
WEC reported net income of $194.4 million ($0.61/share) for the fourth quarter of 2016 compared to $179.3 million ($0.57/share) in fourth quarter 2015. Net income for the year was $939 million ($2.96/share) compared with $638.5 million ($2.34/share) for 2015, CEO Allen Leverett said during a Feb. 1 conference call. (See WEC Energy Shows $183M Profit After Integrys Deal.)
Leverett would not say whether the company plans to file a rate case with the Wisconsin Public Service Commission this year, saying only that its 2017 strategy is to keep rates flat while managing costs.
WEC projects 2017 earnings per share of $3.06 to $3.12, assuming normal weather. The company plans to continue its focus on natural gas distribution systems and infrastructure improvements.
The company signed an agreement Jan. 30 to acquire Michigan-based Blue Water Gas Holdings for $230 million. Blue Water, which owns an underground natural gas storage facility in Michigan, could provide up to one-third of the storage needs of WEC’s three gas distribution companies in Wisconsin through long-term service agreements as a subsidiary.
Leverett said WEC would file with the Wisconsin PSC for approval of service agreements for the storage. Leverett said the company chose the service agreements structure so the commission would not have to approve an out-of-state acquisition and WEC’s state-regulated companies would not be directly involved in an interstate natural gas business.
“I believe this investment will bring very meaningful customer benefits,” Leverett said, adding that there “certainly is room” for WEC’s own storage projects in the future.
UMERC Seeks OK for 2 Generators
New subsidiary Upper Michigan Energy Resources Corp. (UMERC) filed with the Michigan Public Service Commission on Jan. 30 to build two natural gas generating stations in Michigan’s Upper Peninsula. (See Michigan Upper Peninsula Getting its Own Utility.)
UMERC plans to pay about $275 million to build 180 MW of natural gas generation in two Upper Peninsula counties. If approved by the Michigan commission and MISO, construction will begin late this year or early in 2018.
“We are targeting commercial operation in 2019. At that time or soon after, we expect to be in a position to retire our coal-fired Presque Isle power plant. This should give significant savings in operations and maintenance expenses as well as reduce carbon emissions,” Leverett said.
WEC’s five-year capital spending plan has increased from $9.2 billion to $9.7 billion with the spending on natural gas storage and Upper Michigan’s new gas generation. Leverett said the revised plan does not include $1.7 billion of capital investments in subsidiary American Transmission Co.
On Jan. 30, ATC’s development company and Arizona Electric Power Cooperative entered a joint operating agreement to create ATC Southwest. The new transmission company will develop transmission projects in Arizona, California and other parts of the Southwest. “The largest opportunities outside of the footprint are in the West,” Leverett said.
ATC’s return on equity is still in flux, Leverett reminded shareholders. In September, FERC approved a 10.32% base ROE for MISO transmission owners. (See FERC Cuts MISO Transmission Owners’ ROE to 10.32%.) ATC qualifies for a 50-basis-point adder and is currently recognizing a 10.82% ROE. However, in another pending docket, the same FERC administrative law judge who first lowered the return said MISO TOs’ ROE should be lowered further to 9.7% (EL15-45). With adder points, the decision could bring ATC’s ROE to 10.2%. Leverett said he expects an order by the end of June even with former FERC Chairman Norman Bay’s resignation and the current lack of a commission quorum.
