Third-quarter financial and operating results for natural gas and power companies indicate a continued — but slowing — surge in income increases from non-regulated activities, compared to earlier in the year, according to a survey by Energy Performance Review (EPR). While 3Q earnings for natural gas and power marketing and power generation were up about 50% from the same period last year, nine-month earnings, led by first quarter results, were up closer to 75%. Natural gas distribution earnings showed a greater seasonal loss this third quarter, compared to last, while electricity distribution gained slightly over last year’s 3Q.

Thirty-seven major gas and power generators and marketers, both independent companies and operating segments of larger, more diversified companies, reported earnings before special items totaling $6.2 billion, or $0.16/Mcfe, for the third quarter of 2001, nearly 50% more than the $4.2 billion, or $0.17/Mcfe, posted for the third quarter of 2000, EPR said. The gains came on natural gas sales that increased by almost 50% and electricity sales that increased by almost 75%.

EPR, which has been gleaning financial data from Securities and Exchange Commission filings of energy companies for nearly 20 years, has been able to break out results this year from the new gas and power generation and marketing segment as companies increasingly have been dividing up their earnings according to line of business, EPR President John Gehman said. Reporting of “operating data on the regulated side are established. By contrast, data on the non-regulated side are only now taking shape.”

EPR also has begun compiling a list of top power sellers by volumes sold. While not required by the SEC, most companies include sales volumes along with their financial submissions. Leading the list in the third quarter, according to EPR, was Enron with 289,853 million kWh of wholesale sales. Other front-runners were PanCanadian, AEP, Reliant, Mirant, Dynegy, Duke North America, Aquila, Cinergy and Williams.

Revenues for the natural gas and power generation and marketing segments of the 37 companies totaled $150 billion in the third quarter, up significantly from the $102 billion posted for 3Q 2000, and about equal to revenues of this year’s second quarter.

Special items for the third quarter totaled a net negative $1.4 billion, including a $1.2 billion writedown posted by Edison Mission (UK plants) and a $268 million asset writedown for CMS Independent Power. There were no major items identified for the 2000 period. Including these items, earnings for the group increased 14% from the 2000 quarter, EPR said.

Nine-month results for the 37 companies were boosted by a very strong first quarter of the year. Nine-month earnings before special items totaled $14.2 billion, or $0.16 per Mcfe, close to 75% above 3Q 2000.

Natural gas sales for the companies that report these volumes increased 48% from the prior-year quarter. Electricity sales increased 72%. Nine-month sales gains were stronger, at 55% and 77% respectively.

In contrast, third quarter results for natural gas distributors were off significantly from 3Q last year. Thirty-nine major natural gas distributors, including independent distributors and elements of larger gas and electric systems, reported a seasonal loss before special items totaling $253 million, or $0.16 per Mcf of total gas throughput for the summer quarter, compared to a lesser loss of $182 million, or $0.12 per Mcf, posted for the prior-year quarter, despite moderately higher sales prices and a reduced cost of gas sold, EPR said. Earnings for the second quarter this year were $145 million, or $0.16 per Mcf.

Revenues totaling $5.3 billion were off about one-third from the prior quarter and down 2% from the third quarter of 2000, despite the higher sales prices, according to EPR.

Similar to gas and power marketing, gas distributors’ nine-month results were boosted by a strong first quarter. Earnings before special items were up close to 25%, to $1.9 billion, over the same period in 2000 on substantially higher volumes. Revenues were up more than half, to $35 billion, reflecting record prices.

The distributors’ total gas throughput for the third quarter of 2001 was flat from the prior-year quarter. Average realization on sales was up 5%, to a near-record $8.78 per Mcf, while the average cost of gas sold declined 10%, to $4.59 per Mcf. Unit revenues on gas transportation were also up 7%, to average $0.55 per Mcf.

Nine-month volumes, notably sales, rose substantially in 2001, and increased sales prices more than offset increased gas costs. Transportation realization also increased, to average $0.62 per Mcf.

Forty-two major electricity distributors, including independent companies and elements of larger systems, reported earnings before special items totaling $6.4 billion, or 1.08 cents per kWh sold for the third quarter of 2001, up 8% from $6 billion, or one cent per kWh, for the third quarter of 2000, reflecting higher price realization on sales to final customers, EPR said.

Electric distributors revenues totaling $41 billion were also up 8% from the prior-year quarter, again reflecting higher prices. Nine-month earnings before special items rose 6%, and revenues totaling $110 billion, rose 15%, reflecting higher realized prices.

Total electricity deliveries, including sales to other distributors, were about flat in the quarter, but average realization on final sales rose 3%, to 7.36 cents per kWh. Residential realization averaged 8.89 cents per kWh, also up 3%. Nine-month deliveries to final customers rose 2%. Average realization on these deliveries rose 5%, to 7.12 cents per kWh. Residential price realization averaged 8.28 cents, up 2%.

Energy Performance Review maintains a line-of-business financial and operating database featuring more than 200 companies and operations. Major lines of business include oil and gas exploration and production, oil products refining and marketing, coal production, gas and power generation and marketing, natural gas distribution and electricity distribution. Results are published quarterly and annually. Data are shown by individual company and combined to show line-of-business and regional trends. For additional information see www.energyperformancereview.com

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