By Michael Kuser
Eversource Energy on Wednesday reported first-quarter earnings of $259.5 million ($0.82/share), up 6.3% from $244.2 million ($0.77/share) in the same period a year ago off increased investment in transmission.
CFO Phil Lembo said in a conference call with analysts Thursday that through March, Eversource has invested more than $146 million in 28 transmission projects comprising the Greater Boston and New Hampshire Solution, with work expected to be completed in 2019. The company also has invested more than $141 million in 27 small projects in Greater Hartford, all of which should be completed by next year.
Transmission earnings were up 11% from a year ago to $94.2 million, the company said. Electric distribution and generation earnings improved 5.26% year-on-year to $114.1 million, reflecting higher distribution revenues and lower property tax expense, which were partially offset by higher storm restoration costs and higher depreciation expense. Natural gas distribution contributed 19.6% of earnings with $50.8 million in the first quarter, a negligible decrease from last year.
The company reaffirmed its 2017 earnings-per-share guidance of $3.05 to $3.20 and its projected 5 to 7% long-term EPS growth rate.
Northern Pass Moving Toward 2018 Construction
Together with partner Hydro-Québec, Eversource will bid the Northern Pass transmission project into the request for clean energy proposals in Massachusetts to bring Canadian hydropower into New England. The RFP is for up to 9.45 TWh annually for up to 20 years; bids are due on July 27; and projects will be selected for negotiations by Jan. 25, 2018. Bay State Wind, a 50/50 partnership between Eversource and DONG Energy, also will bid into a separate RFP exclusively for wind projects south of Martha’s Vineyard.
The New Hampshire Site Evaluation Committee began hearings on Northern Pass in April. The company expects those to conclude, and the U.S. Department of Energy to have issued a final environmental impact statement, by Sept. 30. The Eversource timeline foresees a presidential permit in the fourth quarter and construction beginning in January 2018.
The Massachusetts Department of Public Utilities in June will begin hearings on the electric rate reviews Eversource filed in January for NSTAR Electric and Western Massachusetts Electric — which include a proposal to combine the two utilities.
“FERC approved that combination earlier this year,” Lembo said. “We expect to get a decision on the case around the end of November with new rates effective in January of 2018.”
In Connecticut, Eversource joined the Office of Consumer Counsel and the attorney general on April 18 in filing a motion to modify the merger agreement with Connecticut Light and Power that was approved by the Public Utilities Regulatory Authority in 2012. The motion jointly requested that PURA extend the deadline for implementing new rates to July 1, 2018, and it was approved on April 20.
The day of the conference call, PURA approved revised rates for residential and business customers of CL&P and Avangrid’s United Illuminating. According to PURA’s statement, effective July 1, 2017, Eversource’s residential generation rate will increase slightly from 7.87 cents/kWh to 8.01 cents/kWh. UI’s residential generation rate will decrease from 9.26 cents/kWh to 7.6 cents/kWh. The new rates will be in effect through the end of 2017.
Return on Equity
Lembo also commented on the D.C. Circuit Court of Appeals’ April 18 ruling overturning FERC’s 2014 order setting the base return on equity for Central Maine Power and other New England transmission owners at 10.57%. The court said the commission failed to meet its burden of proof in declaring the previous 11.14% rate unjust and unreasonable. (See Court Rejects FERC ROE Order for New England.)
“The court decision is still recent, and really, the New England transmission owners as a group need to decide what the next steps will be,” said Lembo, adding that the TOs in June need to file a proposed regional network service rate.
“One could say that the last approved ROE by FERC is the 11.14% … so in the [rate] request, we’re looking for a 10.5% ROE in the case, and the total rate increase is about $60 million at NSTAR Electric and about $36 million at Western Mass Electric,” he said. Lembo later in the call said that NSTAR at the end of 2016 “was probably a little shy of that number of 10.5% when you do all the calculations for Massachusetts, and Western Mass was closer to 9%, so not at the levels that we were looking for in this case.”
Eversource concluded its presentation to analysts by showing how natural gas pipeline projects lack funding or are delayed, trapping gas just west of New England. Pipeline capacity from the west (New York, Pennsylvania and Ontario) is 3 Bcfd, mostly contracted to local distribution companies, while New England LDC load on a cold winter day totals more than 4 Bcfd. Generators must rely on secondary capacity or imported LNG and Canadian offshore supplies to serve their needs, creating price/reliability issues. Meanwhile, offshore natural gas production in Eastern Canada is down more than 50% from its peak and continuing to decline.
Quotes based on the transcript provided by Seeking Alpha.