Utilities Maintain Post-Crisis Financial Gains

By Published On: November 6, 2004

State regulators? commitment to getting investor-owned utilities on solid financial ground is paying off. The utilities? quarterly earnings reports are beginning to sound much like they did prior to 2000. This week, Sempra?s earnings were up; Edison International?s earnings were higher, though earnings for its utility, Southern California Edison, declined; and Pacific Gas & Electric?s reports were mixed. <b>Sempra?</b>The parent company of two regulated utilities?San Diego Gas & Electric and Southern California Gas?reported third-quarter 2004 earnings of $231 million, up from $211 million this time last year. SDG&E?s net income for the quarter was half of what it was last year at this time?$60 million, compared with $120 million in 2003. The company said litigation charges are to blame for the lower income. SoCal Gas reported $68 million this quarter, compared with $53 million this time last year. SoCal gained $9 million from a property sale but charged $32 million from litigation. In unregulated businesses, Sempra Trading doubled its income to $44 million from $22 million this quarter last year. Sempra Resources posted $64 million, up from $33 million last year. Sempra International showed a $7 million income this quarter, compared with a loss of $32 million this time last year. Sempra LNG noted that it expects to spend $900 million to $1 billion on developing the Costa Azul terminal in Baja California. The amount is far higher than earlier reported, because, according to officials, it includes not just the terminal but a breakwater and significant spending on associated pipelines. Company officials said they are confident that local opposition to the terminal will wither away. <b>PG&E?</b>After high-flying earnings reported last quarter, Pacific Gas & Electric is a bit more down to earth in the third quarter this year. The utility?s parent company, PG&E Corp., reported net income of $228 million for the quarter, compared with last year?s $510 million. Of that, the utility contributed $252 million, compared with $174 million in the same quarter last year. Last quarter, PG&E trumpeted its exit from bankruptcy reorganization with the utility recording $307 million in earnings. PG&E expects to have $4.6 billion available to it, assuming that refinancing of the $2.2 billion phantom regulatory asset?known as the dedicated rate component?is cleared by the IRS and overcomes other final hurdles. Of that, $1.9 billion is planned this year for capital investments, leaving the rest to pay dividends, buy back stock, and fund other ?core utility business? investments. In last quarter?s statement to the financial community, PG&E officials said they were anxious to build new power plants. This quarter, the building plan went without remark?except that PG&E expects to be able to meet the California Public Utilities Commission?s accelerated resource-adequacy requirement by 2006 without difficulty, according to PG&E president Gordon Smith. Although not part of the earnings presentation, the utility put out a request for proposals for over 2,000 MW of new power plants to be built by third parties this week. <b>Edison?</b>Edison International, the utility?s parent company, reported $813 million in income for the quarter, up from $544 million this time last year. The corporation attributed much of the gain to asset sales. The utility reported $259 million in the third quarter, down from $329 million last year. The decline was blamed on the California Public Utilities Commission?s general rate case decision?which was significantly reduced from Edison?s request?as well as higher operating and maintenance costs. Also, the utility had to forgo $14 million for safety awards that were found to be in error. Edison is going from a ?period of recovery to a period of substantial growth,? John Bryson, Edison International chair, president, and chief executive officer, said. He lauded the CPUC?s decision to allow larger investments in infrastructure, particularly in the grid. Also noted was a drag on profits from increased operating expenses for the San Onofre Nuclear Generating Station.

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