WGL Retail Marketing Segment Reports Record Yearly Earnings, Sees Customer Churn During Q4

WGL Holdings' retail energy marketing segment recently reported non-GAAP operating earnings of $8.9 million for the quarter ended September 30, 2012 (fourth quarter of fiscal 2012), compared to non-GAAP operating earnings of $11.8 million for the same quarter of the prior fiscal year.

Non-GAAP operating earnings reflect lower realized electric and natural gas unit margins in the current quarter, partially offset by higher sales volumes. Operating expenses for the quarter were lower primarily due to lower marketing and employee compensation cost, while the effective tax rate was higher.

The retail energy marketing segment's GAAP net income for the quarter ended September 30, 2012 was $14.4 million, versus $6.0 million a year ago.

For the full fiscal year 2012, non-GAAP operating earnings for the retail energy marketing segment were a record $36.2 million, an increase of $1.9 million over non-GAAP operating earnings of $34.3 million for the prior fiscal year.

For the full fiscal year, primary drivers of the increase in operating earnings were higher electric gross margins, partially offset by lower natural gas margins.

On a full-year basis, both electric volumes and unit margins were higher compared to the prior year.

Electric sales volumes increased 9% in fiscal year 2012 versus the prior year, driven by increases in government contracts and the overall number of customer accounts.

Higher electric unit margins were primarily due to favorable pricing conditions in fiscal year 2012 compared to the prior year.

Fiscal 2012 natural gas volumes and unit margins were lower compared to the prior year. Natural gas sales volumes decreased 10% in fiscal year 2012 versus the prior year, primarily driven by the warmer weather, partially offset by higher wholesale activity. Natural gas unit margins were slightly lower in fiscal year 2012, due to lower unit margins on portfolio optimization activities.

Operating expenses for fiscal year 2012 were unchanged from the prior year, with increases in customer billing, bad debt expense, broker fees and inter-company charges offset by lower customer acquisition and compensation expenses.

In issuing guidance for fiscal 2012, WGL forecast a decrease in its energy marketing segment's electric margins, unchanged natural gas margins, and higher operating expenses for the energy marketing business.

Specifically, the forecast reflects Washington Gas Energy Services electric margins of $5.50/MWh – $6.50/MWh and natural gas margins of $0.50/Dth – $0.60/Dth.

As of September 30, 2012, Washington Gas Energy Services was serving 371,800 customers, versus 383,100 customers as of June 30, 2012 and 354,700 a year ago.

The loss of 11,300 customers from June 30, 2012 to September 30, 2012 compares with growth of 7,100 customers from March 31, 2012 to June 30, 2012.

WGES' electric customer count was 194,300 as of September 30, 2012, versus 202,200 as of June 30, 2012 and 182,500 a year ago.

WGES' natural gas customer count was 177,500 as of September 30, 2012, versus 180,900 as of June 30, 2012, and 172,200 a year ago.

Electric volumes at WGES for the quarter ending September 30, 2012 were 3,395 GWh, versus 3,048 GWh a year ago. Gas volumes at WGES were 81.3 million therms for the quarter, versus 68.2 million therms a year ago

WGES reported that in fiscal 2012 more customers took advantage of both its CleanSteps WindPower and CleanSteps Carbon Offsets programs for electricity and natural gas than in any other year.