Portland General Electric Reports 2013 Financial Results and Initiates 2014 Earnings Guidance General rate case filing seeks inclusion of two new power plants in customer prices, effective 2015
Portland General Electric Company (NYSE: POR) reported net income of $105 million, or $1.35 per diluted share, for the year ended Dec. 31, 2013. This compares with $141 million, or $1.87 per diluted share, for 2012. Net income was $47 million, or 59 cents per diluted share, for the fourth quarter of 2013 compared with $28 million, or 38 cents per diluted share, for the comparable period of 2012. The decrease in annual net income was largely due to the write-off of the Cascade Crossing Transmission Project and a customer billing refund in the second quarter of 2013 (49 cents per share) and incremental replacement power costs due to plant outages in the second half of 2013 (13 cents per share).
'In 2013, we completed two RFP processes, which resulted in the selection of three new long-term generation resources that will deliver value to our customers, and achieved a fair outcome in the 2014 general rate case,' said Jim Piro, president and chief executive officer. 'In 2014, we are focused on constructing the three new generation resources on time and on budget and continually emphasizing operational excellence.'
Construction is underway on all three generation projects selected last year through the competitive RFP processes and each of these projects continue to be on time and on budget. The majority of engines and generators are now on site for Port Westward Unit 2, a 220 megawatt natural gas-fired capacity resource. This plant is needed to help PGE integrate the variable output from wind and solar facilities and meet customer demand for power during peak events such as heat waves or cold fronts. Foundations are being poured and roads are being built at Tucannon River Wind Farm, a 267 megawatt wind farm in Southeastern Washington that will help PGE increase the amount of renewable power in its system and meet state renewable power standards. Construction on Carty Generating Station, a highly-efficient 440 megawatt natural gas-fired baseload plant, began in early January with ground clearing and site development.
General rate case filing
With Tucannon River and Port Westward Unit 2 expected to begin serving customers in the first half of 2015, PGE has initiated a comprehensive 10-month review and approval process with the Oregon Public Utility Commission in order to include these resources in prices when the plants go online. Late yesterday (Feb. 13) PGE filed a general rate case with a 2015 test year requesting an overall customer price increase of 4.6 percent effective early 2015. The rate case requests recovery of incremental costs to bring these two new plants into service and to provide safe, reliable and sustainable power to customers.
The request is based on a return on equity of 10 percent, a capital structure of 50 percent debt and 50 percent equity, and an average rate base of $3.9 billion. The specific impact on individual customers' bills will vary depending on usage and customer class. If the OPUC approves PGE's request as submitted, a typical residential customer using a monthly average of 840 kilowatt-hours of power would see their bill increase by about 5 dollars per month.
PGE expects the Commission to issue a final order with approved price changes before the end of 2014, with new customer prices expected to be effective in three stages. A price reduction for base business costs, resulting from amortization of several customer credits, is expected to be effective on Jan. 1, 2015, and price increases related to each of the two new generation facilities are expected to be effective when each facility is providing service to customers in the first half of 2015.
Fourth quarter operating results
Total revenues increased $36 million in the fourth quarter of 2013 compared with the fourth quarter of 2012, which was driven by a 6 percent increase in energy deliveries resulting from cooler weather. During the fourth quarter of 2013, heating degree-days (an indicator of the extent to which customers are likely to have used electricity for heating) were 26 percent higher than the fourth quarter of 2012. Residential energy deliveries increased 12 percent and commercial and industrial deliveries combined increased 2 percent. Adjusting for the effects of weather, total retail deliveries in the fourth quarter of 2013 were comparable to the fourth quarter of 2012.
Purchased power and fuel expense increased $26 million in the fourth quarter of 2013 compared with the fourth quarter of 2012, with $16 million related to an 8 percent increase in average variable power cost per MWh and $9 million related to a 5 percent increase in total system load. The increase in the average variable power cost per MWh was driven by the following:
- Less favorable regional hydro conditions in the fourth quarter of 2013 compared with the fourth quarter of 2012 contributing to an increase in the price per MWh of purchased power;
- An 11 percent decrease in energy received from PGE owned and contracted hydroelectric projects, which was replaced with purchased power; and
- Unplanned thermal plant outages. During the fourth quarter of 2013, the company's Coyote Springs natural gas-fired generating plant was offline until November 30, 2013 and Colstrip Unit 4 coal-fired generating facility was offline until January 23, 2014. As a result, the company replaced such power with purchased power, incurring $6 million of incremental replacement power costs.
Net variable power costs, which consists of purchased power and fuel expense net of wholesale revenues and is used in the company's power cost adjustment mechanism, increased $16 million in the fourth quarter of 2013 compared to the fourth quarter of 2012. The increase is largely due to the increase in the average variable power cost per MWh partially offset by a higher average price per MWh for wholesale sales.
Total production, distribution, administrative and other expenses (operating and maintenance expenses) were $117 million in the fourth quarter of 2013 compared with $114 million in the fourth quarter of 2012. The $3 million increase was largely due to higher benefits expense.
Income taxes decreased $10 million in the fourth quarter of 2013 compared with the fourth quarter of 2012, primarily due to an adjustment to increase the Company's net deferred income tax liability in 2012, which was driven by an increase in PGE's composite state tax rate, and changes related to production tax credits.
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Portland General Electric Company
121 SW Salmon St
United States, 97204