For Edison International, it's been a long hot summer in more ways than one.
Last month's record-breaking heat wave strained the Rosemead-based energy giant's operations, exposing vulnerabilities in both the power grid of utility subsidiary Southern California Edison and its overall power supplies.
Now Edison is bracing for a storm of consumer backlash as the bills come in for the record power usage during the heat wave. The bills were high even before the heat struck, as Edison had implemented a 15 percent rate hike to offset the rising cost of natural gas. In an attempt to forestall further outrage, the company successfully postponed another rate increase from August to November.
The company is also watching intently in Sacramento as politicians negotiate the fate of a greenhouse gas emission reduction bill that could hit the company hard. Environmental pressure and regulations have already prompted Edison to junk its investment in a major coal-fired power plant in Nevada and ramp up its supplies of power from renewable resources.
Meanwhile, Edison subsidiary Mission Energy is grappling with problems of its own, including unplanned shutdowns of a major power plant in Pennsylvania. And all this comes amid a Public Utilities Commission investigation into the falsification of customer service records that could force Edison to pay a $100 million fine.
Through it all, Edison's financial and market performance has been lackluster, with second quarter earnings coming in slightly below expectations and a stock price that has yet to recover to its January highs.
Edison last week reported net income of $177 million (54 cents per share) in the second quarter, down 12 percent from $201 million (61 cents) in the second quarter of 2005. About $56 million in losses from the Edison Mission Group subsidiary were largely to blame. Mission is based in Irvine but operates plants all over.
However, Edison executives in the second quarter had warned of bumpy times, so analysts were not caught off guard by the drop in earnings from second quarter 2005.
Edison's stock price had already been in steady decline from a high of $47 a share in January, bottoming out at $38 in July. It has since rebounded to $42 as investors are convinced that the company's financial performance should improve in the second half of 2006.
"There are some signs that things are trending better for Edison than their original guidance," especially power prices, said Douglas Fischer, equity research analyst at A.G. Edwards & Sons Inc. in St. Louis.
For reprint and licensing requests for this article, CLICK HERE.
Stories You May Also Be Interested In
- Court Ruling on Edison Bailout Could Restore Utility's Health
- Edison, BP Planning Power Plant
- Plodding Back From the Brink, Edison CEO Finds Vindication
- POWER---Energy Disruptions Spurring Manufacturing Layoffs
- Customers Out More Than $1 Billion for Idle Nuclear Plant
- Edison, Idealab Team up on Solar Deal
- Edison Gets OK for Transmission Line
- Costs Hurt Earnings at Edison International