PacifiCorp, parent company of Utah Power, reported second-quarter earnings Wednesday of $36 million or 12 cents per share, down 59.55 percent from the same period last year, which included $19 million or 6 cents per share from the company's telecommunications operations that were sold last December.
The electrical utility company said second quarter earnings were hurt by losses from unregulated electricity trading that totaled $32 million or 11 cents per share. PacifiCorp said the losses include charges for "known and probable" future electricity trading losses totaling $6 million or 2 cents per share."These losses are a result of extreme price volatility in (electrical) power markets in the eastern United States during the quarter," the company said in a release.
PacifiCorp said it recorded credit reserves because, like others in the business of trading electricity on the wholesale market, it faces increased risk that other entities with which it has contracts could default. It said one such, unnamed, trader failed to meet its agreement this month.
"We have begun a comprehensive review of this business, including strategy, structure, systems and policies," said Richard O'Brien, commenting on the losses from electricity trading and the need to establish credit reserves.
"We have known the risks associated with the wholesale energy business and have viewed trading as just one component of a new energy asset management and structured transactions business for PacifiCorp," said O'Brien. "The recent problems with this business are an obvious sign that changes need to be made."
PacifiCorp said it will not request any changes in customer prices and is proposing a new authorized rate of return on equity of 11.25 percent.
The company said it expects outside parties to propose to the Utah Public Service Commission price changes that "would result in a material reduction in customer prices."
Some of the proposed changes would be subject to legal review and appeal by PacifiCorp. Any lowering of power rates would be retroactive to February 1997.