By Michael Kuser

Rate increases in New York and Connecticut helped Avangrid boost first quarter earnings by 13%.

The company, which benefited from increases for New York State Electric and Gas and Rochester Gas & Electric in New York, and United Illuminating in Connecticut, on Tuesday reported consolidated net income of $239 million ($0.77/share), compared with $212 million ($0.69/share) for the same period in 2016. Operating revenues were up 5.2% to $1.76 billion from $1.67 billion.

CEO James P. Torgerson told analysts on a conference call that the company is “on track” to meet its target of 8 to 10% compound annual earnings growth through 2020. Company officials also talked about prospects for the company’s renewable generation business and gave a status report on other federal and state regulatory issues.

The company has “no expectations” of seeking a rate increase in 2017 for Central Maine Power, Torgerson said. Gov. Paul LePage has said high electric rates are hindering business, even though the state has the lowest industrial and residential energy prices in New England as of February, according to the Energy Information Administration. LePage claims, however, that Maine competes not with other states in New England, but with states like Michigan and Alabama, which have lower rates.

New York

On the slow progress in securing approval of NYSEG and RG&E’s combined proposal for advanced metering infrastructure, Torgerson noted that the New York Public Service Commission has only two out of five commission seats filled. As part of the state’s Reforming the Energy Vision initiative, the utilities are starting their AMI work by installing 20,000 smart meters in Ithaca.

Settlement talks on a request by multiple intervenors seeking to compel the utilities to institute a “collaborative process” on AMI issues have been slowed by the investigation into RG&E’s response to a freak wind storm on March 8, which left more than 30,000 households without power for days.

RG&E’s $145 million R.E. Ginna retirement transmission alternative project went in operation in the first quarter. The project upgraded transformers and other equipment at two substations, increasing the capacity for one 115-kV and three 345-kV underground lines.

Connecticut

Torgerson also said “timing is getting critical right now” on a decision by Connecticut lawmakers on whether or not to pay subsidies to Dominion Energy’s Millstone nuclear plant in Waterford. S.B. 106, which is pending in the legislature now, “would put more cost back on to the customer,” Torgerson said. “I think Dominion would say [it will] lower the cost, but I think it actually raises a little.”

“There’s been really no detailed information provided to be able to make a determination as to whether that plant truly needs to get a subsidy or not to continue to run and what kind of profitability it has,” added CFO Rich Nicholas. “I think that’s the biggest rub right now that’s going on with Millstone and Connecticut.” (See Millstone No Dead Weight for Dominion, Says Opponents’ Study.)

ROE Move Now Up to FERC

Torgerson and Nicholas both commented on the D.C. Circuit Court of Appeals’ April 18 ruling overturning FERC’s 2014 order setting the base return on equity for Central Maine and other New England transmission owners at 10.57%. The court said the commission failed to meet its burden of proof in declaring the previous 11.14% rate unjust and unreasonable. (See Court Rejects FERC ROE Order for New England.)

“We all know that the 11.14% was in the range of reasonableness that FERC had set out, so we’re waiting to see what FERC will decide to do,” Torgerson said. “Then if they get over that, then we’ll have to determine if setting the base ROE at the midpoint of the upper half of the range of reasonableness is just and reasonable in and of itself.”

Nicholas looked for a more long-term resolution: “I think that the hope would be that maybe as we get new commissioners [at FERC] … that maybe they revisit the whole process and see if they can find a process whereby you avoid this pancaking where we now have four different complaints on the same issue.”

Renewables Unit Continues Growth

Avangrid Renewables’ contribution to earnings per share increased by 41% in the first quarter from Q1 2016, rising to 26% of adjusted EPS. The company is looking to keep the growth momentum going with future projects, including by bidding on offshore wind projects in Massachusetts.

On April 25, Avangrid participated in the bidders conference for clean energy proposals in Massachusetts. Torgerson said that he hoped to leverage parent company Iberdrola’s experience — the company has about 1.3 GW of offshore wind in operation or under construction — to win a contract to supply some of the 1,600 MW of offshore wind being solicited by Massachusetts.

The notice of intent to bid is due in early May, with proposals due at the end of July. The selection will probably come by the end of January 2018, Torgerson said.

“They are really encouraging proposals that would include generation able to commit to deliveries by the end of 2020,” he said. Torgerson said the Massachusetts clean energy projects “not only will benefit Massachusetts and help them reach some of their renewable targets but also … help consumers in Maine by lowering energy prices in Maine.”

In March, Avangrid Renewables won the Bureau of Ocean Energy Management’s auction for an offshore wind lease on 122,000 acres about 24 nautical miles off the coast of Kitty Hawk, N.C. It was one of the final accomplishments of Avangrid Renewables CEO Frank Burkhartsmeyer, who is resigning May 17 to become CFO of Oregon-based natural gas provider NW Natural. (See Avangrid Renewables CEO Steps Down to Take NW Natural Role.)