Las Vegas lights haven’t dimmed, thanks to NV Energy, but the Nevada generator isn’t rolling in money this year; profits slumped due to a mix of comparatively cool weather in July and a ruling on the utility’s energy efficiency program accounting.
The Nevada economy is stabilizing, NV Energy President and CEO Michael Yackira said in discussing the company’s second-quarter 2011 results, released today. But the recovery will be measured in “years not months,” and the company, smaller and more correlated with Nevada’a economy since the sale of its California operations completed in January 2011, will remain focused on cost control.
NV Energy earned most of its 2011 profit to date in the second quarter of 2011, reporting $12.9 in net income in the three months ending in June 30 and $15.2 million in net income for the entire first six months of the year. Those result markedly lagged the second quarter and first half profits of 2010, which were $36.9 million and $35.2 million respectively.
For more coverage of how electric utilities in the US are performing in the first half of 2012, see: Southern Credits Industrial Sector and Paying For The New Grid.
Barring a significant increase in temperatures in August and September, the third quarter, which is usually the most profitable for NV Energy as the homes and business in the state crank up their air conditioning, could fall short of last year’s results as well. Early indications for July show that it was one of the mildest mid-summer months in a decade, NV Energy CFO Dilek Samil said today while talking about NV Energy’s results.
Regulation Risk
The company’s results also suffered from a regulatory decision that ruled its accounting for its losses from energy efficiency and conservation programs had been too generous by $8.6 million. The firm made a pre-tax adjustment to the loss accounting following the May 2011 decision by the Public Utilities Commission of Nevada.
The firm is also facing drag on its financial results from an acute case of what executives at the company called “regulatory lag.” NV Energy put in service an additional unit at its Allen generating station near Las Vegas ahead of time and under its budget at $700 million, but is having trouble earning money on the asset until it receives a ruling on power sold from Allen – a decision that isn’t expected until the end of 2011 with the new prices going into effect at the start of 2012.
The new 484MW unit at Allen brings the total size of the natural-gas fired, air-cooled generating station to 628MW.
Doubling Down
Despite the regulator headwinds, NV Energy continues to invest in transmission projects and smart meter installations, with both projects scheduled to complete around the same time at the end of 2012. Roughly 400,000 smart meters have been installed already in southern Nevada, a project CEO Yackira says is “transforming the way we interact with our customers.”
The 500kv transmission line under construction will be the first to link the state’s two operating systems, and will connect at the newly expanded Allen generating station.
The combination of regulation and new investment completions will make 2012 a “pivotal year” for NV Energy, CFO Samil said today, and she expects both the company’s financial flexibility and its financial profile to improve.
