U.S. Utilities Shrug Off Virus With Help From Residential Sales

(Bloomberg) -- U.S. utilities are mostly shrugging off the coronavirus even as stay-at-home orders hamstring demand for electricity.

The first power and natural gas suppliers to report quarterly earnings, including NextEra Energy Inc. and Southern Co., have maintained their forecasts and capital spending targets for the year, saying they remain well positioned to meet their goals.

The results underscore how power companies are more insulated than most businesses from the downturn that’s ravaging the global economy. While demand for electricity from factories and offices has all-but dried up, residential customers, who pay higher rates, need more power than ever as people spend their days at home hunched over laptops and watching Netflix.

“There’s an offsetting effect -- it’s still net negative, but our sense is it’s within the helm of our ability to adjust the expenses.” Southern Chief Executive Officer Thomas Fanning said in an interview.

To be clear, the virus is impacting utilities. Overall power use is down in most regions, and that’s hurting revenue.

Southern warned stay-at-home policies may drag down its annualized 2020 retail sales by up to 5%. Michigan-based DTE Energy Co. said it will have to trim operation and maintenance expenses to offset lower revenue. And CMS Energy Corp., which also serves Michigan, has seen industrial sales slump by as much as 25% and said it’s unclear when they’ll bounce back.

“At this point there is just too many unknowns,” CMS CEO Patricia Poppe said during a call with analysts. “We don’t feel that we know enough right now.”

By and large, however, utilities remain optimistic. Southern left its long-term outlook unchanged, saying it expected earnings per share to grow at a rate of 4% to 6%. DTE reaffirmed its 2020 operating earnings-per-share guidance of $6.47 to $6.75.

NextEra even managed to increase its first-quarter revenue by 13%, to $4.61 billion. “I have confidence in our ability to meet our financial expectations, even when accounting for a reasonable range of impacts and outcomes related to the current pandemic,” CEO James Robo said in a statement.

While soaring unemployment raises the specter that millions of residential customers may be left unable to pay their electric bills, many fully regulated utilities can recoup some of those losses from states.

“I don’t see anything that I’m worried about taking this off track,” FirstEnergy Corp. CEO Charles Jones said during a call with analysts. “That’s why we’re comfortable with being able to not only reaffirm our guidance for this year, but reaffirm our” compound annual growth rate.

Utilities are also bullish on their prospects to develop more clean energy projects.

Avangrid Inc., a subsidiary of Spanish utility giant Iberdrola SA, said there’s no slowdown in demand for clean energy. NextEra’s Robo said he’s “never been more confident” in the ability of his company, the largest U.S. wind developer, to meet its renewable goals.

“We believe the market opportunity for low-cost renewables has never been greater,” he said.

©2020 Bloomberg L.P.