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In a release on August 5, the Company noted its earnings were $25.9 million, or $0.99 per share, for the first six months of 2009, an increase of $8.0 million, or $0.28 per share, compared to the first six months of 2008.
"The decoupling of distribution revenues of our utility subsidiary, The United Illuminating Company (UI), provided the revenue stability the Department of Public Utility Control (DPUC) intended," stated James P. Torgerson, UIL's President and CEO. "The decoupling adjustment has been particularly important given the unseasonably cool summer weather experienced to date. We have also been successful in controlling our operating costs resulting in our distribution business having a reasonable opportunity to achieve its allowed return on equity this year. Now that our recent equity offering has been completed, we are ramping up the UI distribution and transmission capital programs."
In addition, the Company has recently completed a review of its capital expenditure program. Over the next ten years the current projection is $1.7 billion in capital projects with approximately 70 percent in distribution, 25 percent in transmission and the remaining 5 percent in GenConn, UI's 50-50 joint venture with NRG Energy, Inc., which is building new peaking generation plants in Connecticut.
Some of the favorable earnings variances in the second quarter and first six months of 2009, compared to the same periods in 2008 resulted from UI's distribution rate case final decision in February 2009. The decoupling adjustment reflects an accrual to true up actual revenues to DPUC allowed revenues in accordance with the decoupling mechanism as approved in the final decision. The relatively mild weather for the year to date contributed to a reduction of kWh usage below amounts assumed in rates. As a result, the decoupling adjustment provided $1.6 million of net income in the second quarter of 2009 and $2.4 million of net income on a year to date basis. The final decision also authorized the allocation of a portion of the uncollectible expense to the Generation Services Charges which contributed to a benefit of $1.0 million in the quarter and $2.0 million on a year to date basis to distribution earnings. In addition, the decision provides for recovery of the increase in pension and postretirement expense for 2009 either in rates or as a regulatory asset for future recovery. Finally, the allocation of customer service expense to transmission in accordance with a May 2008 Federal Energy Regulatory Commission order was favorable to distribution earnings by $0.4 million in the quarter and $1.7 million on a year to date basis.
Looking Forward
UIL is narrowing its consolidated earnings estimate for 2009 to $1.83 to $1.97 per share, compared to the previously reported estimate of $1.80 to $2.00 per share.
The estimate for total UI is also being narrowed, to $1.93 to $2.07 per share compared to the previous estimate of $1.90 to $2.10 per share. The components of this guidance within UI have also changed.
The revised estimate for Distribution, CTA & Other is $1.00 to $1.15 per share, compared to the previously reported estimate of $0.90 to $1.10 per share. The change reflects better than anticipated earnings performance mainly due to continued emphasis on cost controls partially offset by dilution from the equity issuance. Expected earnings are based upon the assumption that in 2009 distribution will earn close to its allowed return on equity.
The revised estimate for Transmission is $0.90 to $0.95 per share, compared to the previously reported estimate of $0.95 to $1.05 per share due to dilution from the equity issuance. The transmission business is still expected to experience growth in its rate base at approximately the same equity capitalization and allowed return on equity range of 12.3 percent to 12.5 percent as previously reported. The revised earnings estimate reflects the higher projected average shares outstanding resulting from the May 2009 equity issuance.
UIL Holdings Corp., headquartered in New Haven, Connecticut, is the holding company for The United Illuminating Company, a regulated utility providing electricity and energy related services to 324,000 customers in the Greater New Haven and Bridgeport areas
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