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Energy Sempra’s 1st quarter revenues soar to $3 billion

Nearly Half of Net Profit Comes From Sempra Energy Trading

As Sempra Energy released its first-quarter earnings last week, the news is good , for investors. But buried deep in the report is a notice that San Diego ratepayers may end up paying more for electricity.

The company was jubilant as it announced its earnings April 26.

“Simply stated, we met or exceeded every goal,” according to the company’s Web site.

Sempra had revenues of $3.3 billion in the first quarter of 2001 , compared against $1.4 billion in the first quarter of last year. That’s a 136 percent increase, said Doug Kline, a spokesman for Sempra.

Net income, meanwhile, increased 58 percent this quarter over the same time last year , from $113 million to $178 million. Earnings per share rose 80 percent , from 49 cents a share to 88 cents, he said. Based on these figures, earnings per share for 2001 are estimated to be $2.50 , about 21 percent more than the 2000 figure of $2.06 and double the 1998 figure of $1.24, according to the Sempra report.

When broken down by Sempra’s subsidiaries, almost half of Sempra’s net profit this quarter comes from a single source , Sempra Energy Trading.

This division of Sempra, a wholesale commodity trader which markets natural gas, electricity, crude oil and other products, saw an almost fivefold increase in profits this year. Profits jumped from $18 million in the first quarter of 2000 to $86 million in the first quarter of 2001, according to Sempra.

In addition, Sempra’s first-quarter earnings also benefited from a one-time gain from the sale of the company’s stake in retail energy-marketing firm Energy America for $56 million. The transaction closed Jan. 22, Kline said.

Meanwhile, Sempra’s two California utilities , Southern California Gas and San Diego Gas & Electric Co. , reported profits that are virtually unchanged from 2000 to 2001. SoCal Gas moved from $50 million to $51 million, while SDG & E; held at $52 million, according to Sempra.

Balancing Account

Kline pointed out SDG & E;’s profits are expected to remain stable under an agreement the utility reached with the California Department of Water Resources. The Water Resources Department will continue to purchase power for all of SDG & E;’s customers, who are paying 6.5 cents per kilowatt-hour for their electricity, he said.

This limits the growth of SDG & E;’s “balancing account,” or the difference between the amount of money the utility must pay for electricity and the amount of money its customers are charged for that power under the rate cap. The balancing account stands at $747 million as of March 31, Kline said.

SDG & E; will remain in good shape because unlike the other investor-owned utilities in the state, it is entitled to collect on that unpaid balance, he said.

In fact, SDG & E; currently has a request to increase its rates pending before the California Public Utilities Commission. This will help the utility recover the undercollected amount “in a more orderly and predictable manner,” Kline said.

Double-Digit Returns

Michael Shames, executive director of the San Diego-based consumer watchdog group Utility Consumers’ Action Network, said Sempra posted a fairly reasonable profit, when compared against companies in the electricity business.

“Compared to some of its brethren, who have been reaping triple-digit returns, it’s sort of nice to see a generator or an energy company making only double-digit returns,” he said.

That said, it’s clear from the report that Sempra is doing better than ever, he said. One of the reasons is the sale of Energy America, but Shames also noted Sempra Energy Trading has done well for itself as a commodity trader at a time when the state of California is hurting for electricity.

“There’s no question they’re continuing to make a tremendous amount of money, and while they won’t say it, it’s pretty much known throughout the industry that they’re making their money on the California market, like everybody else.”

As for the possibility of a rate increase, Shames noted that this isn’t new. A few months ago, SDG & E; sought a rate increase of 2.3 cents across the board, he said.

The CPUC has not ruled on the rate increase, but Shames called it “highly unlikely” that it will be approved. So SDG & E; is merely announcing that it hopes the CPUC will grant the rate increase application, he said.


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