The gas and power marketing and trading business put in a poor financial performance in the first quarter compared to the extremely profitable first quarter of 2001, and gas and electric distribution utilities came in with only average results, according to a detailed analysis by Energy Performance Review (EPR), a Maryland-based information services firm. EPR examined aggregate first quarter results for 117 gas and power companies.

Thirty-six major gas and power generators and marketers, both independent companies and operating segments of larger, more diversified companies, reported earnings before special items totaling $2.3 billion, or 6 cents/Mcf, for the quarter, up more than one-half from $1.5 billion in 4Q2001, but off more than one-third from the $3.5 billion, or 14 cents/Mcf in the first quarter of 2001. Natural gas sales increased close to one-third and electricity sales rose more than two-thirds.

Generation, marketing and trading revenues for the 36 companies were off 10% from the prior quarter to $85 billion and off close to one-quarter from the prior-year quarter, reflecting a reduced sales realization. Five companies reported after-tax income greater than $100 million: Dominion Energy, Dynegy Marketing, PP&L Supply, PSE&G Generation and TXU U.S. Energy.

Special items reported for the quarter included two major charges: a $342 million asset impairment for El Paso Merchant, and a $344 million restructuring charge for Mirant Corp. The charge for Mirant was partly offset by another Mirant item, a $167 million gain on asset sales related to BEWAG, the German utility. Items for the 2001 period included two charges totaling a net negative $142 million. Including these items earnings for the group declined 47% from the 2001 quarter.

Natural gas sales for the companies that report volumes to the Securities and Exchange Commission increased close to one-third from the prior-year quarter. The greatest period-to-period gains were reported for American Electric Power, Cinergy Commodities, Dominion Energy and Mirant. Electricity sales for these same companies increased more than two-thirds for this period. The greatest gains were for WGL Energy Marketing, Allegheny Energy Supply, CMS Energy Marketing and NRG Energy.

EPR also compiled results from 39 major gas distribution companies, including independent distributors and divisions of larger gas and electric systems. The distributors reported earnings before special items totaling $2 billion, or $0.63/Mcf of total gas throughput, compared to $996 million or $0.40/Mcf for the prior quarter, and $2.1 billion or $0.63/Mcf for 1Q2001, reflecting reduced volumes sold and transported because of the warm winter and reduced prices and margins on sales and transportation. Revenues totaled $14.2 billion and were well above the prior-quarter level but down 37% from the prior-year quarter, reflecting reduced volumes and sales prices.

Total gas throughput was off 5% from 1Q2001. Average realization on sales was off a dramatic 32%, to $6.65/Mcf, reflecting record-high levels posted for the prior-year quarter. The average cost of gas was off 40%, but margins on gas sales declined to $2.37/Mcf. Unit revenues on natural gas transportation also declined, to $0.69/Mcf.

The most profitable distribution companies, measured by earnings relative to total throughput and reported pre-tax, were KeySpan at $1.72, Alabama Gas at $1.55, Energy East at $1.44, and Reliant Energy at $1.37. The most profitable reported net of tax were New Jersey Natural Gas at $1.32, Piedmont Natural Gas at $1.02, Washington Gas Light at $0.91, and Northwest Natural Gas at $0.88.

In the electric distribution business, 42 major companies reported earnings before special items totaling $3.5 billion, or 0.6 cents/kWh for the first quarter, compared to $3.1 billion or 0.6 cents/kWh for the fourth quarter and off 6% from the $3.7 billion, or $0.7 cents/kWh for 1Q2001. Revenues totaled $32 billion and were off 4% from the prior quarter and 10% from 1Q2001.

There was only one special item of consequence posted for the 2002 period: an $8.5 million special charge for Northeast Utilities. Items for the prior-year quarter totaled a net negative $635 million, primarily reflecting a $661 million charge for Southern California Edison related to energy supply. Including these and other items, first-quarter earnings of the 42 companies increased 13%.

Total electricity deliveries to final customers declined 2%, but wholesales were up almost half, and total deliveries increased 4%. Average realization on final sales was off 3% to 6.72 cents/kWh. Residential realization declined 1% to 7.98 cents. The most profitable electric companies measured by earnings relative to total deliveries (cents per kWh) and reported pre-tax were Energy East at 2.21 cents, Duke Energy at 1.97 cents, Reliant Energy at 1.82 cents, and Scana Corp. at 1.63 cents. The most profitable reported net of tax were MDU Electric at 1.03 cents, Constellation Energy at 1.01 cents, DQE at 0.9 cents, and TXU Energy Delivery at 0.88 cents.

Information about Energy Performance Review can be found at www.energyperformancereview.com.

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