Washington Gas Energy Services: Residential Market "More Challenging" During Q2

Washington Gas Energy Services continues to see challenging conditions in the residential electric market, but has been able to mitigate the impact with larger volumes of commercial and industrial sales.

For the quarter ended June 30, 2013, non-GAAP operating earnings for WGL Holdings' the retail energy-marketing segment were $6.2 million, compared to $9.0 million a year ago.

Non-GAAP operating earnings reflect lower realized electric margins due to higher supply charges at PJM, including load balancing costs and higher capacity charges. Operating expenses were higher as a result of costs associated with a change in benefits plans and an increase in customer acquisition costs.

On a GAAP basis, the retail energy-marketing segment reported a net loss of $4.2 million for the quarter ending June 30, 2013, compared to net income of $19.7 million a year ago.

As of June 30, 2013, WGES was serving 346,800 customers, versus 354,000 as of March 31, 2013 and 383,100 a year ago.

WGES electric customer count was 178,200 as of June 30, 2013, versus 183,000 as of March 31, 2013 and 202,200 a year ago.

WGES President Harry Warren said during an earnings call that the residential market is, "a little more challenging" right now, but the company has mitigated the impact of residential attrition with increased volumes from serving new large commercial customers.

Electric volumes were up at 3,012 GWh for the quarter, versus 2,991 GWh in the year-ago quarter. The addition of large commercial load in Pennsylvania has lifted electric sales despite the losses in customer count.

Additionally, after the close of the quarter in July, WGES saw a net growth in the number of residential electric customers for the first time this fiscal year, as accelerating sales efforts more than compensated for attrition. Still, residential attrition continues at higher-than-historical rates, and WGES had shifted sales efforts to focus on acquiring customers with the potential for higher retention rates.

WGES natural gas customer count was 168,600 as of June 30, 2013, versus 171,000 as of March 31, 2013 and 180,900 a year ago.

In the natural gas business, gross margins were virtually unchanged during the quarter. Unit margins were slightly lower, offset by slightly higher sales volumes.