National Fuel Rate Settlement Lowers Earnings
National Fuel Gas Co. announced last week that it has reached a
rate settlement agreement with the staff of the Department of
Public Service, the Consumer Protection Board and multiple other
interveners. The New York Public Service Commission approved the
agreement at its regular session on Oct. 11.
Under the three-year agreement, customers will receive a $17.6
million bill credit for the 12-month period starting Oct. 1, which
will include $7.6 million relating to customers' share of earnings
accumulated on the balance sheet from 1996 to 2000. After the
initial 12-month period, the credit will be reduced to $5 million
for the next two years, and subsequent years there after unless
National Fuel can establish that it is no longer justified. The
company can still file for rate increases, except during year one.
Due to this agreement, the company announced that it expects its
fiscal year 2001 earnings will be reduced by about 15 cents per
share. National Fuel said the agreement will also provoke
discussions to resume in the near future with other interested
parties to address the commission's competition initiatives,
including changes to customer choice transportation services.
In other National Fuel news, the company said its fiscal 2000
fourth quarter earnings will be lower than expected due to
derivative activity. After completing a full review of its
derivative positions, the company said it will report a $3.5
million after-tax gain from its derivative activity of its retail
marketing subsidiary, National Fuel Resources (NFR) for the fourth
quarter of fiscal 2000 that ended Sept. 30. The company also took a
$1.6 million after-tax loss due to the unhedged portion of fixed
priced sales contracts entered into by NFR for natural gas sales to
customers in fiscal year 2001.
"This review of the company's derivative positions which began
during July 2000 has been a very substantial, time-consuming
undertaking," said Philip C. Ackerman, president of National Fuel.
"We have taken the necessary steps to assure the appropriateness of
our risk management activities."
The company also said that it would be filing an amendment to
its third quarter report to reflect a $5.4 million decrease in
income reported due to the reclassification of "derivative
instruments from hedges to mark-to-market instruments." Net income
for the third quarter will now show $9,070,000 instead of the
previously reported $14,468,000.
National Fuel expects earnings per share for fiscal 2000 to be
between $3.20 to $3.30 per share, or $125 to $129 million. Fourth
quarter and fiscal 2000 earnings will be released on Oct. 25 after
the market closes the company said.
"While this fiscal year's results will be lower than our
expectations, we will nevertheless achieve record earnings in
Fiscal 2000," said Ackerman. "The fundamentals of National Fuel
remain strong, and we have a solid foundation to deliver better
results next year. We expect basic earnings per share for fiscal
year 2001 to be in the $4.25 to $4.35 range. Further, we have made
certain management changes at NFR and have put in place additional
controls to monitor the daily level and type of derivative
activity. We are now putting this matter behind us, and look
forward to concentrating on our new fiscal year."
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