CenterPoint Energy Inc., which filed its annual winter rate application with Arkansas regulators this week, reported Friday (Nov.4) that its profits had jumped nearly 23%, mainly on the strength of its growing six-state utility customer base and favorable rate case rulings from state regulators.
For the period ended Sept. 30, CenterPoint reported net income of $179 million, or 41 cents per share, for the third quarter of 2016, compared with a loss of $391 million loss or 91 cents a year ago. Third quarter revenue rose to 16.6% to $1.9 billion, compared to $1.63 billion in the same period a year ago.
The 2015 loss included pre-tax impairment charges totaling $862 million related to midstream investments. Excluding those one-time charges, the Texas energy operator’s third quarter 2015 net income would have been $146 million or 34 cents per share.
Wall Street had expected one of the nation’s fastest-growing natural gas distribution and utility companies to report third quarter earnings of 36 cents on sales of $1.87 billion, according to Thomson Reuters.
In the morning session on the New York Stock Exchange, the strong third quarter report had CenterPoint’s stock trading higher at $23.34, up 80 cents at $3.55%.
As a result of its strong utility performance and midstream natural gas investments, the Houston-based utility giant upped its yearly earnings outlook to the range of $1.16 to $1.20, a slight improvement from early forecast.
“Utility operations and midstream investments both performed well in the third quarter,” CenterPoint President and CEO Scott Prochazka said. “As a result, we are adjusting guidance to the higher end of the range for 2016.”
RATE HIKE IN STORE
On Tuesday, CenterPoint filed its annual winter rate notice with the Arkansas Public Service Commission, letting regulators know a typical customer gas bill would rise nearly 20%. To date, CenterPoint has not notified its nearly 430,000 customers in Arkansas their winter bills will be higher.
CenterPoint said in its PSC filing the winter rate hikes are due to higher natural gas prices, which have jumped nearly 75% in the past six months, according to the U.S. Energy Information Administration.
Last year, CenterPoint’s customers in Arkansas and other states saw lower winter heating bills when natural gas prices fell well below $2.40 per million British thermal units on the futures markets, then a three-year low.
In its recent short-term energy forecast, the EIA said average household expenditures for heating oil, propane and natural gas are 38%, 26% and 22% higher than last winter, respectively, because of higher expected heating demand and higher fuel prices.
U.S. Energy Department officials also expect the share of U.S. total utility-scale electricity generation from natural gas will average 35% this year, and the share from coal will average 30%. Last year, both fuels supplied about 33% of total U.S. electricity generation.
CenterPoint’s winter rate hike goes into effect immediately, according to state regulators, and will last through the end of March. Besides Arkansas, many of the company’s other nearly five million metered customers in Louisiana, Minnesota, Mississippi, Oklahoma and Texas will also see higher winter bills.
Other highlights of CenterPoint’s third quarter earnings report include:
- The electric transmission and distribution segment reported operating income of $257 million for the third quarter of 2016, consisting of $234 million from the regulated electric transmission and distribution utility operations (TDU) and $23 million related to securitization bonds. Operating income for the third quarter of 2015 was $244 million. Company officials said TDU benefited primarily from rate relief, customer growth and higher equity return, primarily related to true-up proceeds.
- CenterPoint’s natural gas distribution segment reported operating income of $22 million for the third quarter of 2016, compared with $11 million for the same period of 2015. Operating income benefited from rate relief, revenue from decoupling mechanisms, lower bad debt expense and lower sales and use tax.
- The Houston-based natural gas utility operator’s energy services segment reported operating income of $5 million for the third quarter of 2016 compared with $7 million for the same period in the prior year. Third quarter operating income for 2016 included a mark-to-market accounting loss of $2 million, compared to a gain of $5 million for the same period of the prior year. Excluding mark-to-market adjustments, operating income would have been $7 million in the third quarter of 2016 and $2 million in the third quarter of 2015.
- The midstream investments segment reported $73 million of equity income for the third quarter of 2016, compared with a $794 million loss in the third quarter of the prior year, which includes the impairment charges noted above. For the third quarter of 2015, the impairments were partially offset by equity earnings of $68 million.