Abnormal weather this past winter and spring has put a major dent in US utilities’ earnings — an impact so severe that even a scorching summer likely won’t be enough to erase it.
One of the warmest winters on record delivered Atlanta-based Southern Co. its largest-ever weather-driven loss for the first half of the year. Midwest utility American Electric Power Co. fell the most since May after a second-quarter earnings miss that featured a $57 million hit from weather. North Carolina-based Duke Energy Corp. said an unusually cool May and June contributed to its worse-than-expected results.
The blow to utility’s earnings suggests that the industry is struggling to find its footing as climate change fuels extreme weather, triggering changes in energy demand that can be difficult to predict. And unless the blistering heat now blanketing large swaths of the country lingers well into the fall, the boost in electricity consumption won’t be enough to offset the impact of a balmy winter and chilly spring, executives and analysts said.
Read more: Ocean Temperatures Hit 90F Degrees, Fueling Weather Disasters (1)
“Weather variance in the first half was approaching 30 cents versus normal. That’s a very large hill to climb,” Brian Savoy, Duke Energy’s chief financial officer, said Tuesday in an interview. “It will take hot weather into the fall to put a serious dent in that.”
Though industry watchers anticipated that weather would be a headwind this year, warm winter conditions proved even more challenging than expected, said Travis Miller, a utilities analyst at Morningstar. The combined impact both year-over-year and versus normal “has been pretty large for almost all utilities in the US,” he said.
To help counterbalance the impact of weather, utilities including Duke — which agreed in June to sell its renewable energy unit for $2.8 billion — are highlighting cost-cutting measures and shifts in business strategy to boost their balance sheets.
“We undertook a number of business agility measures,” Savoy said. “We weren’t just going to sit and wait on the weather to turn around.”
