Dive Brief:
- FirstEnergy reported earnings of $208 million for Q1 2014, up from $196 million for Q1 2013.
- The company said that the harsh weather's boost to its regulated utility businesses offset what it described as "challenging market conditions" in its competitive business.
- The continued deactivation of old coal-fired units also lowered the company's expenses, and that combined with the effect of a West Virginia asset swap and lower effective tax rates helped to recoup some of the higher operating expenses seen in its regulated distribution business. Most of the company's current investments are designed to enhance transmission and distribution.
Dive Insight:
FirstEnergy CEO Anthony Alexander said that increasing shale gas availability and increased distribution sales indicated a more "substantial recovery" from several years of stagnant electric sales growth.
However, the negative impact of this year's cold weather "illuminated the fact that current energy priorities are putting the reliability of our electric system in jeopardy and creating a far more volatile energy price and service environment for customers," Alexander said.
Of greatest concern for the utility, according to Alexander, is whether its generation capacity can meet customer needs. He predicted that as more generation units are retired or scaled back, and reliance on natural gas increases, the volatility of the markets will only get worse.
FirstEnergy retail business needs to "refine our strategy" said Alexander. "What level of retail sales can be supported by our generation, what is the appropriate level of retail sales to source in the market, if any, and where that mix is will depend much on what happens in retail markets to reflect the risk premiums that will need to be reflected as wholesale markets have far more volatile energy prices in them."
Indeed, the company has taken out additional outage insurance for the first time in 15 years to protect itself if the summer also sees unexpectedly high demand on the grid. FirstEnergy was hit hard by the volatile prices caused by this winter's hash weather—something its retail business tried to recoup via a surcharge.