Duke Expects Lower Earnings from Retail Unit in 2012

Duke Energy Retail contributed about $67 million to adjusted earnings at parent Duke for the year 2011, executives reported yesterday.

Duke Energy Retail is expected to contribute about $27 million to adjusted earnings in 2012.

Duke's Commercial Power segment, which houses Duke Energy Retail as well as the competitive wholesale business, reported full-year 2011 adjusted segment EBIT of $305 million, compared to $398 million in 2010.

Results for the year were down due to the net effect of annualized customer switching in Ohio (which stabilized in the latter half of 2010) and exit fees related to the transfer from MISO to PJM.

Specifically, fiscal 2011 results were negatively impacted by $147 million due to lower volumes as a result of customer switching in Ohio, net of retention by Duke Energy Retail and additional wholesale margins. The decline was partially offset by improved Midwest gas asset results, a 2011 base generation rate increase in the former electric security plan, and higher coal and emission allowance sales.

Commercial Power recognized fourth-quarter 2011 adjusted segment EBIT of $6 million, compared to $54 million in the fourth quarter 2010. The effect of customer switching in Ohio, net of retention by Duke Energy Retail, negatively impacted fourth quarter EBIT by $19 million.

For 2012, Commercial Power segment results are expected to decline as the segment begins to recognize the financial impact of the new electric security plan in Ohio, which was effective January 1. Duke noted that the segment's Ohio generation will now dispatch into PJM and will receive an energy margin, as well as PJM capacity revenues. These amounts are less than what were collected under the prior electric security plan, which featured above-market rates. The negative impact is partially offset by an annual $110 million nonbypassable charge for Duke's capacity, which will be in place for three years.