Regulated Utility Earnings Depend on Investments, Force Majeure

By Published On: November 14, 2010

The San Bruno gas explosion put a dent in Pacific Gas & Electric’s profits this quarter. Southern California Edison cruised on its massive capital investment plans. Sempra utilities, San Diego Gas & Electric and SoCal Gas, remained about the same as this time last year while their parent company was well down in profits. Southern California Edison--The utility’s parent, Edison International, posted $561 million in net income for the quarter, up from $367 million this time last year. The utility remains on an intense capital investment program. Officials said they plan to spend between $18 billion and $21.5 billion on improving infrastructure, meters, and other facilities in the next few years. The utility also promised to build 50 MW of Edison-owned solar projects every year to 2014. Pacific Gas & Electric--PG&E Corp. posted $261 million in net income this quarter, compared to $321 million for the same quarter last year. The utility’s share of that net income was $265 million, compared to $353 this time last year. The income from the parent company is usually reported lower than the utility. That’s because the parent company uses the utility income for its own operations. The explosion on the utility’s San Bruno natural gas transmission line is expected to cost the company between $220 million and $400 million, according to Kent Harvey, PG&E chief financial officer. These are legal liability estimates, according to the utility’s Securities & Exchange Commission filing. The National Transportation Safety Board has yet to complete its investigation of the San Bruno explosion (see sidebar). The utility’s investment in a wind farm, Manzana, is expected to reach $900 million by the end of the year, according to management. PG&E Corp. chief executive officer Peter Darbee aligned the company with the frugality of California’s governor-elect. Darbee said PG&E has an “affordable energy approach.” Sempra--The parent company of two utilities and several unregulated businesses reported $131 million for the third quarter 2010. That’s well down from $314 million noted this quarter last year. San Diego Gas & Electric profits were slightly down. In this quarter it reported profits of $106 million. Last year at this time it reported $108 million in profits. SoCal Gas posted $78 million in this quarter, compared to $74 million this time last year. For Sempra’s unregulated utilities, its Sempra Generation posted $56 million for the quarter, up from $43 million this quarter last year. Its pipeline company profit almost doubled, reaching $120 million this quarter, up from $64 million third quarter last year. Sempra LNG posted a gain. LNG reported a $5 million profit, versus a wash this time last year. The lower price of domestic natural gas continues to plague LNG’s bottom line, according to management. Natural gas is $2 less/MMBtu than the company predicted, officials said.

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