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Consumers Lowered Heat, Utility's Earnings: Wisconsin Public Service Corp. Profits Fall 9% in First Quarter

Posted on: Friday, 5 May 2006, 03:07 CDT

By Thomas Content, Milwaukee Journal Sentinel

May 5--A move customers to conserve electricity and natural gas reduced earnings at the parent company of the Green Bay utility Wisconsin Public Service Corp.

WPS Resources Corp. said Thursday that first-quarter net income fell 9%, to $60.1 million, or $1.48 per diluted share, from $65.9 million, or $1.73, a year earlier.

Revenue rose 37%, to $2.04 billion from $1.49 billion. Utility income was down 41% in part because of customer conservation efforts stemming from high natural gas prices and rate increases, as well as winter weather that was 10% warmer than normal, WPS said.

Costs associated with the acquisition of a Michigan natural gas utility from Aquila Inc. also reduced earnings. But the company's WPS Energy Services unit, which sells natural gas and electricity in Canada and states that have opened up their power markets to competition, helped offset the declines, with that unit's net income up 32%, to $37.1 million.

Earnings from American Transmission Co., the Pewaukee-based transmission line utility that WPS co-owns, rose 71%, to $8.9 million. Despite the drop in earnings, the company increased its guidance for full-year results to between $3.54 and $3.98 a share.

"We're anticipating a fairly decent year, in spite of the downfall in sales at the utility in the first quarter," Larry Weyers, WPS' chairman, president and chief executive, said during a conference call with investment analysts.

After the announcement, WPS shares closed at $49.83, up 44 cents.

The company said earnings will be aided asset sales, including the recent sale of a one-third stake in the Guardian natural gas pipeline, and the sale of the Kimball natural gas storage field in Michigan. The non-regulated business is continuing to expand, with the company entering the Texas competitive electricity market this summer and making plans to expand in New England and other Midwest states at a later date, said Mark Radtke, president of WPS Energy Services.

The company said it expects customer conservation to continue this year, amid continuing rising prices.

The company raised rates $79.9 million, or 10%, on Jan. 1 and has proposed to raise electric rates another $125 million, or 14.4%, in 2007.

The higher rates will help fund construction of the $770 million coal-fired power plant WPS is building near Wausau and the $420 million high-voltage power line being built between Wausau and Duluth, Minn.

A small portion of the increase that went into effect in January could be returned to customers, Weyers said. The company has allocated $9 million for a credit that could appear on customers' bills between May and August. The credit is linked to the drop in the price of natural gas in recent months, which resulted in the utility collecting more money for fuel from ratepayers than it has spent.

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Copyright (c) 2006, Milwaukee Journal Sentinel

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NYSE:WPS, NYSE:ILA, Unknown:ATN,

Source: The Milwaukee Journal Sentinel

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