Integrys Seeing Higher Retail Margins Post-Vortex, Offsetting Negative Impact for Year

Integrys Energy Services is seeing an increase in retail energy margins in the wake of the polar vortex, which is offsetting the negative impact from the vortex and led the company to affirm prior earnings guidance.

While higher ancillary costs had a negative impact on first quarter earnings at Integrys Energy Services, the company expects to still reach its projected earnings for 2014 due to several factors.

Most notably, Integrys Energy Services is seeing improved margins in the wake of the polar vortex.

Daniel Verbanac, President of Integrys Energy Services, told analysts that the company is about $2 million behind where it expected to be because of the first quarter weather impacts. However, Verbanac reported that Integrys Energy Services has seen more customers switching to its fixed price products versus its market-based product, and has seen some high margins there.

Overall, unit margins have increased since the cold weather and volatility, for renewal business and new business, Verbanac said.

A change in the product provided to the City of Chicago's electric aggregation contract also provides more predictability to margins.

Additionally, Integrys Energy Services has changed its practices to avoid the "pricing issues" which dragged earnings last summer. Cost management activities will also help achieve the previously forecast performance, executives said.

For the first quarter of 2014, Integrys Energy Services recorded an adjusted loss of $1.9 million, versus adjusted earnings of $9.9 million a year ago, due to weather impacts and lower margins, as well as increased operating costs due to expansion of the retail natural gas business.

Realized retail electric unit margins in the first quarter were $1.54/MWh, versus $5.53/MWh a year ago.

First quarter retail electric volumes were 6,356.9 GWh, versus 4,318.2 GWh a year ago.

Realized retail natural gas unit margins in the first quarter were $0.31/dekatherm, versus $0.37/dekatherm a year ago.

First quarter retail natural gas volumes were 87.6 bcf, versus 50.7 bcf a year ago.