Fourth-quarter earnings of Northern Indiana Public Service Co. parent NiSource rose to $154.2 million ($0.49/share), up nearly 2% from $151.8 million ($0.48/share) a year ago. Fourth-quarter revenues rose 8% to $1.129 billion.
For all of 2014, net income was $530 million, down from $532 million in 2013 despite a 10% jump in revenues to $4.23 billion.
Highlights for the year included a record $2.2 billion capital investment program.
Pipeline Spinoff
Earlier this month NiSource completed the initial public offering of Columbia Pipeline Partners, the spinoff of its natural gas pipeline business.
NiSource remains on-track to complete the Columbia transition in mid-2015, said president and CEO Robert Skaggs Jr.
Columbia will issue its own long-term debt prior to the separation to fund a one-time cash distribution to NiSource, reducing the latter’s debt. NiSource shareholders will receive a one-time cash distribution in the form of a pro-rata dividend of shares in Columbia stock.
Because of the pending separation, NiSource did not provide full-year earnings guidance.
Electric Revenues Up 2%
NiSource’s electricity segment during the fourth quarter generated revenues of $392 million, compared with $386 million during the fourth quarter of 2013.
For the full year, electricity revenues were $1.68 billion, up from $1.56 billion in 2013. Increased environmental cost recovery and two transmission projects authorized by MISO boosted revenue by $5.1 million.
NIPSCO recently filed with the Indiana Utility Regulatory Commission an electric and natural gas capital expansion plan totaling $2 billion over seven years. Among the major projects in the plan is the 70-mile, 765-kV Greentown-Reynolds transmission line, to be completed by 2018.
Consolidated Edison reported lower fourth-quarter earnings for 2014, but its $0.58/share showing for ongoing operations beat analysts’ consensus by 2 cents.
The company said warm weather pinched its steam-delivery revenues service while operations and maintenance expenses were higher.
The New York City-based utility said earnings for the quarter were $81 million ($0.28/share) versus $234 million ($0.80/share) a year earlier. Earnings from ongoing operations — which exclude mark-to-market accounting for its competitive energy businesses among other items — were $171 million ($0.58/share), compared with $202 million ($0.69/share) for the final three months of 2013.
For all of 2014, earnings were $1.09 billion ($3.73/share) compared with $1.06 billion ($3.62/share) in 2013.
Ongoing operations for the year were $1.14 billion ($3.89/share) compared with $1.11 billion ($3.80/share) in 2013.
“We are preparing our energy grid to adopt many new technologies and new ways of delivering power, including more customer-sited generation resources,” CEO John McAvoy said in a statement accompanying the earnings. “This effort reinforces our commitment to the environment with our business operations, promoting renewable resources, oil-to-gas conversions and new energy efficiency solutions for homes and businesses.”
PJM set a new winter record for electricity use Friday, with demand hitting about 143,800 MW at 8 a.m., according to preliminary data.
Real-time prices peaked at 7 a.m., with prices hitting $564/MWh in the Dominion zone and almost $419/MWh RTO-wide.
The record came as at least two dozen cities in the RTO broke low temperature records, including D.C., Wilmington, Del., Detroit, Cleveland, Cincinnati and Pittsburgh.
PJM had forecast a morning peak of 144,330 MW at 7 a.m. with available economic capacity of 160,958 MW.
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The RTO noted that although it was able to meet the load about 12,000 MW of generation will retire this year “making high performance essential from the rest of the generation fleet.”
The previous peak was 141,846 MW on Jan. 7, 2014, (142,573 MW with demand response contributions added back in), when forced outages reached as high as 21%.
PJM CEO Terry Boston (Source: PJM Interconnection LLC)
By Suzanne Herel
PJM President and CEO Terry Boston announced Wednesday that he plans to retire effective Dec. 31 after seven years at the helm of the RTO.
“Thanks to the outstanding talent of PJM employees, I leave knowing that PJM today is a true leader in the industry — the gold standard for reliable electric service, fair and efficient markets and infrastructure planning,” Boston, who joined PJM in February 2008, said in a letter to the board.
“I am especially proud that the PJM team has successfully managed three ‘one-in-a-hundred-years’ weather events within the past four years,” said Boston, 64, who plans to use this year consolidating improvements PJM has made and serving as chairman of the ISO/RTO Council.
Board of Managers Chairman Howard Schneider, speaking for the board, praised the 43-year electric utility industry veteran for his “strong leadership and extraordinary vision.”
“Terry’s outstanding leadership has been important not only to PJM and the customers it serves but to the development of the grid and markets across the country,” Federal Energy Regulatory Commission Chairman Cheryl LaFleur said in a statement.
The announcement has been in the works for some time. PJM said in a press release that a “rigorous succession process by the PJM board has been underway.”
“Candidates to succeed Boston will be considered based on demonstrated leadership abilities, industry expertise and reputation, as well as commitment to electric system reliability and fair, efficient electricity markets,” PJM said.
Boston came to PJM after serving as executive vice president for the Tennessee Valley Authority.
PJM rejected most of the criticism of its Capacity Performance proposal in comments filed late Friday, but dropped its proposed change in the method for determining the capacity obligations of load-serving entities.
“Based on the comments received … PJM proposes instead to discuss that issue further with stakeholders and report back to the commission in one year on the results of those discussions,” PJM wrote in a filing with the Federal Energy Regulatory Commission (EL15-29). PJM noted that the allocation of LSEs’ capacity obligations does not need to be resolved before the May 2015 RPM Base Residual Auction.
PJM also conceded merit to an assertion by the PJM Utilities Coalition (American Electric Power, Dayton Power and Light Co. , FirstEnergy and East Kentucky Power Cooperative) that there is a problem with a “one-year price” for a multi-year investment in generation.
“PJM did not propose any Tariff changes in the Dec. 12 filing on this issue and does not propose any now. However, given the additional costs of serving as a Capacity Performance resource, the possibility for new environmental rules to require even more investment in existing generation facilities and the commission’s recent approval of an expansion for the new entry pricing available in ISO-New England, the time may be ripe to revisit this issue,” it said.
PJM asked FERC to respond to the coalition’s concerns by directing PJM to explore with stakeholders the subject of new entry pricing and multi-year pricing. PJM would report back to FERC on the issue no later than December.
More than 60 entities filed comments and protests in response to PJM’s proposal, which would increase the reliability expectations of capacity resources with a “no excuses” policy. It is expected to result in both larger capacity payments and higher penalties for non-performance. (See States, LSEs Skeptical, Utilities Split Over Capacity Performance.)
In their comments and protests, states and LSEs were skeptical about the need for a major overhaul, while generators were split over elements they liked and others they said must be changed.
PJM defended its changes to force majeure provisions, which some generators described as unduly punitive.
“Strong performance incentives are a vital part of the solution to poor resource performance,” it said.
“The governing principle of this new approach is very simple and very conducive to innovation and efficiency: resources that exceed expectations will receive higher compensation; those that fall short of expectations will relinquish revenue and face a threat of net payments.”
PJM noted that FERC received equally strong arguments that the proposed charge levels are too high and too low.
“As shown in the Dec. 12 filing, this part of PJM’s proposal closely tracks the structure, and much of the details, of the approach recently approved for ISO-New England,” it said.
PJM also responded to a number of public interest groups who said that renewable, energy efficiency and demand response resources would be disadvantaged in the new structure, saying “the actual suppliers of renewable and energy storage resources recognize that PJM’s proposal to permit intermittent storage, demand response and energy efficiency resources (‘Intermittent/Storage/DR/EE’) to combine their capabilities offers a workable pathway for these resources to qualify as Capacity Performance resources. Parties also recognize that the ability of these resources to receive revenues for superior performance provides a new revenue stream that does not exist under today’s capacity construct.”
As for those who objected to the proposal as a reaction only to last year’s polar vortex, PJM pointed to “deficiencies and disincentives” in the current Tariff relating to resource performance, including a “very weak” non-performance charge.
“The polar vortex provided a dramatic demonstration of these adverse effects. But the shortcomings in the current resource performance rules would still be there, and would still require correction, even if there had been no polar vortex,” it said.
PJM requested that FERC approve the changes by April 1.
American Electric Power reported fourth-quarter earnings of $191 million ($0.39/share), compared with $346 million ($0.71/share) for the same period last year. Full-year earnings were $1.634 billion ($3.34/share), compared with $1.48 billion ($3.04/share) in 2013.
The Columbus, Ohio-based company attributed the fourth-quarter drop to the termination of a long-term coal contract.
However, CEO Nicholas Akins said the company benefited from successful regulatory proceedings in several states.
“The reliable performance of our generation fleet during colder-than-normal temperatures in 2014 gave us the ability to advance spending from future years into 2014. Those shifts, combined with our initiatives to put in place sustainable process improvements, will help us manage the revenue challenges presented by the Ohio deregulation transition and the 2016-2017 PJM capacity market results,” Akins said.
Chief Financial Officer Brian Tierney referenced PJM’s Capacity Performance proposal, urging the Federal Energy Regulatory Commission to approve the changes quickly to stabilize PJM’s markets and ensure its reliability amid impending coal unit retirements.
“In regards to the challenges we face for 2015, I think you’re well aware of them — from the earnings shortfall from the PJM capacity pricing and the retail stability rider, the lower natural gas prices and power prices and their impact on our system sales,” he said. The rider was approved by the Public Utilities Commission of Ohio to help the company transition to a competitive market.
Tierney also confirmed that AEP has hired an investment bank to help evaluate the company’s alternatives regarding the disposition of its unregulated businesses.
Exelon reported fourth-quarter earnings Friday of $18 million ($0.02/share), compared with $495 million ($0.58/share) in 2013. For the year, the company reported earnings of $1.623 billion ($1.88/share) versus $1.719 billion ($2.00/share) in 2013.
The Chicago-based company attributed the depressed earnings in part to warmer-than-expected temperatures in the last three months of the year.
CEO Chris Crane touted the company’s investments in emerging technology, citing Bloom Energy, whose East Coast manufacturing facility is based in Delaware. Exelon announced last July it would provide equity financing for 21 MW of Bloom Energy fuel cell projects at 75 commercial facilities in California, Connecticut, New Jersey and New York.
He also noted progress in the discussion to improve the finances of its Illinois nuclear plants. A report released by Illinois officials last month underscores their reliability as well as economic and environmental benefits to the state, he said. (See Illinois Considering Carbon Tax, Cap-and-Trade to Save Exelon Nukes.)
Said Bill Von Hoene, chief strategy officer: “We are supportive of any of the options that reward all carbon-free resources equally, but doing nothing simply is not a viable economic option if we are to maintain the operations of those plants that are at risk. As we stated repeatedly, we do not seek a bailout.”
He noted recent approvals of the Pepco Holdings Inc. acquisition by New Jersey, FERC, Virginia and Delaware, saying he expects the deal to close in the second half of this year. (See Exelon-Pepco Deal Moves Forward in NJ, Del..)
“We are continuing the process of review in the remaining jurisdictions of Maryland and Washington, D.C.,” he said.
PPL will file a base distribution rate case this year for its Pennsylvania business, CEO William Spence said during the company’s fourth-quarter earnings call last week.
The company is also seeking rate increases for its regulated Kentucky operations, with the company asking for an additional $30 million annually from Louisville Gas & Electric customers and $150 million from Kentucky Utilities. Spence said he expects new rates, requested for infrastructure investments required for reliability and federal environmental regulations, to become effective July 1.
PPL reported earnings of $1.74 billion ($2.61/share) for the year versus $1.13 billion ($1.76/share) for 2013. The company’s fourth-quarter earnings in 2014 were $695 million ($1.04/share), compared to the loss of $98 million (-$0.16/share) it posted for the same period in 2013.
Spence said the improvement was due to high returns on transmission investments in Pennsylvania and plant environmental projects in Kentucky, as well as increased utility revenues from price increases in the U.K.
Earnings from ongoing operations, however, remained flat from 2013. Higher earnings from the company’s Pennsylvania and the U.K. segments were offset by lower than expected earnings in Kentucky. The company’s total electric sales in the U.S. decreased by 3,769 GWh, or 6.2%, from 2013. Spence said that slow residential growth in rural Virginia and Kentucky played a large role in the decrease.
Spence said he is optimistic about the PJM market. “We see market reforms, such as PJM’s proposed Capacity Performance product, the shift in the variable resource requirement curve and a recent increase in the offer cap, as constructive signals supporting the competitive power business in PJM for the future,” he said.
Spence said that PPL’s deal with Riverstone Holdings to spin off its generation supply business into Talen Energy was the company’s top priority for 2015, but the company said little about it last week, citing a “quiet period” as it awaits a response on its filing with the Securities and Exchange Commission.
The company expects the deal to close on time in the second quarter this year. It accepted the Federal Energy Regulatory Commission’s mitigation plan late last month and it expects approval with the Pennsylvania PUC and the Nuclear Regulatory Commission as it originally projected. (See PPL, Riverstone Accept FERC Mitigation Plan on Talen Spinoff.)
Wisconsin Energy Corp. profits fell 16% in the fourth quarter on warmer weather and $6 million in costs related to its proposed acquisition of Integrys Energy.
The Milwaukee-based gas and electric utility earned $121.4 million ($0.53/share) versus $144.3 million ($0.63/share) in the fourth quarter of 2013. Revenue rose to $1.23 billion from $1.18 billion during the same quarter last year.
For the year, earnings rose 2%, to $588.3 million, or $2.59 a share — dinged 6 cents due to Integrys acquisition costs.
Full-year results were buoyed by colder weather in early 2014 that increased demand for natural gas. The utility also cited cost controls and lower employee health care costs.
During a Feb. 11 conference call with analysts, Wisconsin Energy Chairman and CEO Gale Klappa pointed to a 1.3% growth in electricity sales to large commercial and industrial customers, excluding iron ore mines.
Including mines, electricity deliveries in the sector rose 3.8%. “That’s pretty strong industrial growth in 2014,” he said.
Given the large uptick in 2014, the utility is projecting flat growth in the key large commercial/industrial segment in 2015, he added.
Integrys Deal Progressing
Wisconsin Energy’s planned $9 billion acquisition of Chicago-based Integrys needs approval from regulators in Wisconsin, Michigan, Illinois and Minnesota.
The company cleared a big hurdle in January under a settlement with Michigan regulators, who dropped their objection to the acquisition.
Under the deal announced by Michigan Gov. Rick Snyder, Wisconsin Energy and Integry’s Wisconsin Public Service would sell their electric distribution assets serving 28,000 Upper Peninsula residents to Upper Peninsula Power Co. That includes the 400-MW coal-fired Presque Isle generating station, which is operating under a costly system support reliability agreement (SSR) to prevent its retirement. UPPCO said it would “step into” exiting rates and that the SSR would be eliminated this summer, saving U.P. ratepayers from an estimated $97 million in annual SSR costs.
Pressed by analysts for more guidance on the timing of the merger, Klappa said the latest expected decision is likely to come from Illinois Commerce Commission on or about July 6.
“We’re making very good progress on all regulatory fronts,” he said.
The acquisition will result in a company with 4.3 million customers served by seven electric and gas utilities. The resulting WEC Energy Group will also own the nation’s eighth-largest natural gas distribution operation.
Becoming a Bigger Transmission Player
The combined company also will own 60% of American Transmission Co., with Integrys currently holding 34% and Wisconsin Energy a 26% stake. ATC plans new investments between $3.3 billion and $3.9 billion through 2023.
Wisconsin Energy officials said they took an unspecified fourth-quarter reserve against an expected adjustment to return-on-equity rates for electric transmission operators in MISO.
Last June, the Federal Energy Regulatory Commission changed the way it sets ROE rates for electric utilities, tentatively setting the “zone of reasonableness” at 7.03 to 11.74%. Currently ATC has a base rate of 12.2%.
In addition to taking the fourth-quarter reserve, Wisconsin Energy has also embedded in its 2015 guidance slightly lower earnings in anticipation of an ROE ruling from FERC.
Company officials also provided stand-alone guidance for full-year 2015 earnings — excluding Integrys — at $2.67 to $2.77 a share. That assumes normal weather and excludes transmission-related costs.
Earnings for the first quarter of 2015 are projected by the company at 79 to 81 cents. That’s lower than the 91 cents for the quarter last year, which benefitted from higher sales due to the polar vortex.
Capital Spending Drive
Klappa said Wisconsin Energy plans capital spending of $3.3 billion to $3.5 billion for 2015-2019.
Also, a rolling, 10-year capital spending plan of $6.6 billion to $7.2 billion is about $100 million more than previously estimated, he said.
Projects include an 85-mile natural gas pipeline project in the western part of Wisconsin. Capital spending of about $700 million in 2014 will rise to about $770 million this year, compared to an estimated $600 million to $650 million in 2016 and 2017.
“You’ll see 2015 as being an outsized year for natural gas distribution spending,” Klappa said.
Some of that is to supply natural gas to sand-mining operations in the state, which have flourished due to demand for the material in fracking. Wisconsin has become the No. 1 supplier of fracking sand.
Over time that capital spending will shift more toward electric infrastructure, which is aging, Klappa said.
Dominion, a company that has made some dramatic shifts in direction in the past year, announced a significant drop in reported earnings for the fourth quarter of 2014.
Fourth-quarter earnings were about $243 million in 2014, compared to $431 million in 2013. Full-year earnings saw a similar dip at $1.31 billion ($2.24/share) compared to $1.7 billion ($2.93/share) for 2013.
According to Dominion’s earnings report and an analyst presentation made last week, much of the dip shows a company preparing for its future as it pushed a lot of costs into 2014. Its operating earnings were about twice its reported earnings for Q4 and about 50% higher for the year.
The results reflected its decision to pay down debt and take a number of charges in the year. Costs excluded from operating earnings included:
A $248 million charge associated with Virginia legislation enacted in April that permits Dominion Virginia Power to recover 70% of the costs previously deferred or capitalized through Dec. 31, 2013, for development of a third North Anna nuclear unit and offshore wind facilities as part of its 2013 and 2014 base rates;
A $193 million net charge from the termination of natural gas trading and some energy marketing activities;
A $74 million charge related to future ash pond closure costs; and
A $31 million goodwill write-off related to the company’s exit from the unregulated electric retail energy business (sold to NRG Energy).
While earnings took a hit, CEO Thomas F. Farrell II said it is investing in its future, and its leadership is betting on a bright one. “Our management team owns the highest percentage of stock [of] any … company in the sector,” he told analysts last week.
Dominion issued a successful IPO for its natural gas export business, Dominion Midstream. It gained the final permit from the Federal Energy Regulatory Commission for its Cove Point LNG export facility, and construction started the same day. The facility is expected to go into service in 2017, he said.
It bought a pipeline company, Carolina Gas Transmission, from Scana Corp. for $429.9 million, acquiring 1,500 miles of interstate natural gas pipeline in the deal.
Dominion is also a major partner in the Atlantic Coast Pipeline project, a planned 550-mile natural gas pipeline that would bring Marcellus and Utica shale gas to Virginia and North Carolina.
Farrell said the company plans to invest $700 million in solar in the coming years. And while the company has sliced its merchant generation fleet from about 11,000 MW three years ago down to 3,643 MW now, it is boosting its regulated generation fleet.
It put one new $1.1 billion gas-fired, combined-cycle plant, the 1,342-MW Warren plant, in operation in December. It is building a second, a 1,358-MW plant in Brunswick, representing another $1.2 billion investment. Farrell said on the call that the company is planning a third, which at 1,600 MW would be the largest gas-fired plant in the U.S. It would be built in Greenville County, Va., east of Brunswick.
Chief Financial Officer Mark McGettrick said the company plans a total of about $20 billion in capital investments over the next six years.
“2014 was a year of significant accomplishments for Dominion as we completed several major capital projects and made significant progress to advance the next round of infrastructure growth,” Farrell said.
