PPL Corp. said its $17 million exposure to the California electricity market will not effect its 2000 earnings outlook, even if the company is not able to collect the money owed for energy sales to California.
Moreover, Allentown, Pa.-based PPL said that consistent with its risk management program, the company is now selling to California only when ordered to do so by the US Department of Energy.
Despite uncertainties that have arisen over the ability of California utilities to pay for wholesale electricity, PPL said it expects to exceed the Wall Street consensus earnings estimate of $3.03/share for 2000.
Concern regarding the credit quality of California's investor-owned utilities also has created uncertainty about suppliers abilities to collect receivables. Thursday, the California Public Utilities Commission approved a 90-day 7-15% rate increase for Southern California Edison Co. and Pacific Gas & Electric Co., almost half the amount the two companies said was necessary to pay for wholesale energy purchases to serve their retail customers. Late Thursday, Fitch Inc. and Standard & Poor's downgraded the bond ratings of the two investor-owned utilities.
The utilities say they have spent $11 billion more for wholesale power than they have been allowed to bill consumers as a result of a retail rate freeze they originally supported as a condition of deregulation in California.
Because PPL is a small supplier to California and because earnings forecasts are based on conservative assumptions, "we expect to exceed our earnings target for 2000," John R. Biggar, executive vice-president and chief financial officer, said in a statement. "We expect to see continued strong growth in earnings for 2001 and 2002.''
PPL owns power plants in Montana capable of providing electricity to the California market. While much of the generating capacity at PPL Montana is dedicated to supplying customers in Montana, the company sells excess electricity into the Western Systems Coordinating Council and to California.
Earlier, Duke Energy Corp. also sought to calm investor concerns about its California activities. The company said 90% of its available California generation is now sold forward, up from 70-80% reported Dec. 14.
The company said its forward sales are to a diversified portfolio of nonutility buyers with strong balance sheets and good credit ratings. In addition, credit limits and collateral agreements in place, Duke said.
While Duke also has some longer term contracts with regulated California utilities, the company said it "believes its credit practices in California have positioned it well in the event of credit failure there."
