Portland General Electric Company (NYSE:POR)
today reported net income of $31 million, or 40 cents per diluted share, for the third quarter of 2013. This compares with net income of $38 million, or 50 cents per diluted share, for the third quarter of 2012. The decrease in earnings is primarily the result of higher power costs due to plant outages and increased delivery system costs due to service restoration work and other planned expenses. The company is reducing its full-year 2013 earnings guidance from $1.25 - $1.40 per share to $1.20 - $1.30 per share.
“While the generating plant outages have been challenging this year, the balance of the company's operations have been very strong,” said Jim Piro, president and chief executive officer. “Our performance in distribution reliability and customer satisfaction is top quartile, we reached a reasonable settlement on all issues in our 2014 general rate case, and the construction of our new thermal and renewable resources is proceeding on time and on budget.”
- Board of directors update—Effective Oct. 31, Chairman Corbin McNeill has announced his retirement from PGE’s board of directors and Jack Davis has been elected as the new chairman. McNeill joined the board in 2004 and has made significant contributions to PGE during the past decade.
“Corbin has provided outstanding leadership, perspective and guidance during his tenure as chairman,” Piro said. “We appreciate his steadfast dedication and service to our customers, employees and shareholders.”
Davis has been a member of the PGE board of directors since June 2012. He has extensive knowledge of the utility industry with over 35 years of utility experience at Arizona Public Service Company, including management positions in generation, transmission, power operations and customer service, and six years as chief executive officer.
Third quarter operating results
- Generation projects—PGE is making progress on its three new generation projects. Construction is underway on Port Westward Unit 2, a 220 megawatt natural gas-fired capacity resource and on Tucannon River, a 267 MW wind farm. Engineering and design is underway for the Carty Generating Station, a 440 MW natural gas-fired energy resource, and construction is expected to begin in early 2014.
- General rate case—PGE filed a 2014 general rate case in February and has settled all items with the Oregon Public Utility Commission staff and interveners. Stipulating parties have settled on an allowed return on equity of 9.75 percent and an average rate base of $3.1 billion. The stipulated items, including a recent stipulation on pension expense, result in an expected increase of $67 million in annual revenue requirements. The company will provide a final update on power costs in November and awaits a final order from the OPUC in December.
- Generation plant outages—The Boardman and Colstrip coal-fired plants both tripped off-line on July 1 st due to equipment failures. Boardman came back online at the end of July and Colstrip is expected to come back online in the first quarter of 2014. Coyote Springs, one of PGE’s natural gas-fired plants, tripped off-line in late August due to cracks in the steam turbine rotor. Repairs to the plant are underway and Coyote Springs is expected to be online later this month. PGE’s share of repair costs for the coal plants - approximately $13 million - is expected to be covered by insurance, net of approximately $2 million in deductibles. Repair costs for Coyote Springs are estimated to be $2 million. All together, replacement power costs in 2013 for the three outages are expected to be $16 to $18 million.
- Transmission discussions with the Bonneville Power Administration—In late October, PGE and BPA agreed to discontinue discussions regarding PGE’s potential ownership of approximately 1,500 MW of BPA’s transmission capacity rights. PGE and BPA concluded that they would not be able to reach an agreement on financial terms that benefited both PGE and BPA customers. At this time, PGE has determined that transmission service offered under BPA’s open access transmission tariff is the best option for meeting its current transmission needs.
Total revenues decreased $15 million, or 3 percent, to $435 million in the third quarter of 2013 from $450 million in the third quarter of 2012 primarily due to the net effect of the following:
- An $11 million decrease resulting from lower average prices due primarily to the reduction in power costs as forecasted in the company’s 2013 annual power cost update tariff and a slightly larger portion of energy deliveries going to customers who purchase their energy from electricity service suppliers;
- A $7 million decrease related to the company’s power cost adjustment mechanism, as the estimated refund to customers related to the 2011 PCAM was reduced in the third quarter of 2012 as a result of the application of the regulated earnings test, with no estimated refund to or collection from customers recorded in the third quarter of 2013; and
- A $3 million decrease related to the decoupling mechanism, with a $1 million potential refund recorded in the third quarter of 2013 compared with a $2 million potential collection recorded in the third quarter of 2012; partially offset by
- $3 million, or 16 percent, increase in wholesale revenues consisting of a 57 percent increase in the average price of wholesale power and a 25 percent decrease in the volume sold; and
- A $2 million increase related to a 1 percent increase in the volume of retail energy delivered primarily due to the effects of weather. Residential energy deliveries were up 2 percent, while commercial and industrial deliveries were comparable to the third quarter of 2012.
Purchased power and fuel expense increased $8 million, or 4 percent, for the third quarter of 2013 compared to the third quarter of 2012. The increase consisted of $15 million related to a 9 percent increase in the average variable power cost, which is largely due to the unplanned plant outages, partially offset by $7 million related to a 4 percent decrease in total system load. During the third quarter of 2013, the company incurred approximately $11 million of incremental replacement power costs related to the unplanned plant outages.