NW Natural Blames Earnings Decline On Conservation

Portland, OR-based Northwest Natural Gas Co. said its first quarter earnings will be lower than expected, blaming the decline on rate increases last fall, which appeared to have sent a message to its 525,000 customers in Oregon and southwest Washington to conserve.

"Residential and commercial customers' consumptions per heating degree day were about 7% lower during the 2000-01 heating season than in the prior heating season," said CFO Bruce R. DeBolt. "We think much of the reduction was due to the rate increases we had to apply last fall to pass through our much higher cost of purchased gas."

DeBolt said the company estimates that its earnings for the quarter ending March 31 will be between $0.95 and $1.05 per share, compared to consensus estimates by analysts of $1.05 to $1.15 a share. DeBolt said that if the consumption pattern from the heating season continues through the year, the company may see reduced margins this year in the range of 25-35 cents a share. Analysts estimate the company will earn $1.85-$1.88 a share this year.

Because of normal seasonal variations in consumption, DeBolt said that about 5-10 cents a share of the potential exposure would be in the second quarter, which ends June 30, and about 10-15 cents a share would hit in the fourth quarter, ending Dec. 31.

The company is working with the Oregon Public Utility Commission on a mechanism to stabilize its revenues in the face of variable consumption patterns but also to improve the effectiveness of its conservation program. Northwest hopes to have the mechanism in place before the beginning of the next heating season, which begins in October 2001.

"We believe we will also be able to offset at least a part of the potential negative impact of reduced consumption during the rest of the year through continuing cost controls and incremental revenues from new services," said DeBolt.

Weather conditions in Northwest's service area through the first quarter were normal but 4.5% warmer than last year.

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