Spokane, WA-based Avista Corp. is sitting atop snowpack and water levels more than 150% of normal, setting up the prospect for abundant hydroelectric supplies and less-than-normal natural gas-fired electric generation for its combination utility Avista Utilities. As a result, revenues were up and fuel costs down for the first quarter, Avista reported in a quarterly earnings conference call last Friday.
Avista reported increased quarter-over-quarter net income with 1Q2011 profits of $41.9 million, or 73 cents/diluted share, compared with $28.8 million, or 52 cents/diluted share, for the same period last year. CEO Scott Morris said that the combination utility holding company is "off to a great start" for the year, riding the benefits of what he described as significantly wetter, colder weather in the Pacific Northwest where Avista operates in three states.
In response to a question from analysts on the abundant hydro pushing down the price of natural gas, Morris said demand for gas in the region right now is "much lower" than normal. "Certainly with the amount of snowpack and runoff that we expect this spring you are going to see most or all of the gas plants shut off so there is some definite supply-demand impact," he said.
Natural gas consumption at this time of year, however, is normally not significant, according to CFO Mark Thies. "Normally gas consumption picks up with the peaking [generation] in the summer," Thies said. "If this year's hydro is able to run longer into July, then you would see more of an impact on gas consumption. We don't typically have significant gas load at this time of year."
Avista's plentiful water supplies this year contrast with last year's winter quarter, which Morris called one of the warmest on record in its service territory.
The Avista senior executives cautioned that it is still early in the runoff season, and the utility operations need what they called a "reasonable melt" to the snowpack. "We have a lot of snow on the mountains, but it needs to melt reasonably slowly," said Thies, noting that otherwise there will be a lot of water spill without power being generated.
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