Portland, OR-based NW Natural executives on Friday talked up prospects in the renewable natural gas (RNG) sector and the growth in the customer base, which has come despite depressed demand from Covid-19.
CEO David Anderson during the second quarter conference call said construction and conversions have led to adding more than 13,000 customers during the past 12 months, equating to an annual growth rate of 1.7%.
“While we can’t predict the full economic effect of the pandemic, we continue to see mitigating factors for our resilient business model,” Anderson said.
The company also is now able to produce, buy and distribute RNG following a regulatory decision last month, enabling “the next step in our state’s energy transition,” he said.
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NW Natural has been building internal capabilities to use more RNG, said Justin Palfreyman, vice president for strategy and business development. “We’re actively engaged in investigating opportunities to invest in specific RNG production projects.”
The utility is also working on an existing request for proposals (RFP) to purchase RNG supply. “We’re in the process of evaluating what is the best for customers over the long term,” Palfreyman said. “We hope to wind up with a mix of investment opportunities and long-term RNG supply contracts.”
Anderson said NW Natural’s top priority is to “get as much RNG product in our pipeline system as possible,” but he said it is a little too early to make estimates of what that means in volumes and dollars-and-cents.
In terms of the cost benefits compared to dry natural gas, Anderson said lawmakers and regulators have indicated higher RNG costs would be expected. “Cost-benefit analyses are really not part of the process laid out by the legislature,” he said. Palfreyman said there is a “real robust methodology for how we calculate the costs and avoided costs in our resource decisions.”
Senior Vice President Kimberly Heiting, who oversees operations and marketing, said management is optimistic “about the prospects of stepping into RNG in a way that protects customers and rates, and the supply potential is certainly out there.”
Regarding dealing with Covid-19, CFO Frank Burthartsmeyer said most of the cost reduction and efficiencies being targeted will be realized in the second half of the year. “There are some operational efficiencies we are putting in place, and we’re cutting our marketing expense significantly for this year, and we’ve frozen our hiring practices…
“The way I’m looking at it, the first half of the year we had a $4 million after-tax, $5 million pre-tax cost of Covid, and I don’t think that is unreasonable for the second half. But we have to keep a close eye on bad debt, and we have a rigorous process to work with our customers.”
Acquisition of water utilities has slowed with the pandemic, but to date this year, transactions have been completed in Idaho, Texas and Washington, collectively bringing total water investments to $110 million.
Net losses in 2Q2020 totaled $5.1 million (minus 17 cents/share), compared with net income of $2.1 million (7 cents) a year earlier.
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