Pacificorp Says Earnings Will Fall Short
Portland-based PacifiCorp said Thursday that second-quarter earnings will fall 30 percent below expectations because of losses from trading electricity contracts in the eastern U.S. last week.
The company said quarterly earnings will be about 9 cents a share below the 30-cent average estimate of analysts surveyed by First Call Corp. Yearly and third-quarter earnings will also be lowered by an amount yet to be determined, PacifiCorp said.
Though its U.S. electric utilities are in the West, PacifiCorp trades electricity contracts in the East. The company’s trading unit placed bad bets on movements of eastern electricity prices, and had to purchase power at higher prices than the utility was selling it for under contract during last week’s heat wave.
“PacifiCorp got caught on the wrong side of a gamble,” said Dan Rudakas, an analyst at Everen Securities, who has a long-term “outperform” rating on PacifiCorp. The heat wave pushed temperatures well past 90 degrees Fahrenheit in many parts of the country at a time when many power plants were shut down for maintenance or repairs. As air conditioners were turned on high in states east of the Rockies, demand surged to record levels and power prices in some markets rose to $5,000 per megawatt-hour.
Prices typically range from $15 to $40 per megawatt-hour.
Avista Energy, a Washington Water Power Co. subsidiary that also trades power in the Midwest from an office in Houston, thrived on the heat, spokeswoman Susan Nielsen said.
“We met all our commitments,” she said, adding that the company was able to take advantage of the shortfalls and outages experienced by other providers.
While some of PacifiCorp’s losses will be reported in the second quarter, others will be reflected in third-quarter earnings. The company said it expects additional losses this year from its unregulated businesses, which include international and domestic energy development.
To limit further risk from trading power contracts, PacifiCorp said it has entered agreements to sell electricity that will offset contracts to buy.