FirstEnergy is looking to trim up to 400 positions after its profit fell 19.8 percent in the third quarter. The electric utility blamed reduced sales margins from competitive operations, lower distribution deliveries and a higher effective income tax rate.
Using what are called “generally accepted accounting principles” or GAAP, the parent company of Ohio Edison said its net income for the third quarter was $425 million or $1.02 per share, down from net income during the same period a year ago of $530 million or $1.27 per share.
Financial statements included both generally accepted and nongenerally accepted measures. Using the non-GAAP figures, the company said its earnings were $1.11 per share, down from $1.39 per share a year ago.
The company also said it was narrowing its 2012 non-GAAP earnings guidance to the range of $3.30 to $3.40 per share, which is the lower end of the previous range of $3.30 to $3.60 per share. The company also said its 2013 non-GAAP earnings guidance would be $2.85 to $3.15 per share.
“We continue to be very pleased with the progress of our retail strategy and we remain confident that FirstEnergy will be well-positioned for growth when the economy eventually recovers,” FirstEnergy President and Chief Executive Officer Anthony J. Alexander said in a statement. “We are taking a number of actions to manage our expenses and ensure that we are operating as cost-effectively as possible in light of the continued weak sales environment and low market prices for power.”
The company last week said it had laid off 142 employees, including 56 in the Akron area as part of a previously disclosed organizational study announced in late September. The company said it was realigning its work force “to best meet the challenges of the continued weak economy.”
In the Akron area, the cuts were both at FirstEnergy headquarters downtown and at the White Pond Drive facility, which also houses FirstEnergy Solutions. The cuts were in shared services, also considered support services, such as communications, information technology and supply chain, said spokesman Mark Durbin. There were some management layoffs among the cuts, he said, but no line workers included.
The company said Thursday reductions in 2013 are still expected but instead of layoffs, some jobs will not be filled. The number of positions to be eliminated through attrition is expected to be 300 to 400.
FirstEnergy said its third-quarter earnings benefited from a reduction in operating costs, interest expense and depreciation expense, as well as lower gross receipts taxes.
The company said distribution deliveries decreased 4 percent in the quarter. Residential deliveries declined by 4 percent, primarily due to milder weather compared to the previous year. Commercial deliveries decreased 3 percent and industrial deliveries decreased 5 percent.
FirstEnergy’s competitive subsidiary, FirstEnergy Solutions, continues to successfully expand its business and customer base, the company said, but commodity margin has decreased.
The company continues to work on restoring power to its New Jersey customers in Jersey Central Power & Light, who lost electricity during the Hurricane Sandy aftermath, Durbin said. Power in the Cleveland area was restored as of Monday, he said. As of Wednesday, the company reported 2.1 million of its 2.3 customers across its six-state territory had power restored. However, the winter storm that hit the East Coast overnight caused some setbacks and may have resulted in some of those customers losing power again, he said.
“It is obviously challenging the process. It’s unfortunate, but we’re working through it as best as we can,” Durbin said.
In a conference call with analysts, Alexander said the company expects to spend more than $500 million on efforts to recover from the hurricane.
Also in the conference call, Mark T. Clark, executive vice president and chief financial officer, said the utility had reached a nonbinding memorandum of understanding with Columbus-based American Municipal Power Inc. (AMP) to build and operate a natural gas peaking facility on the grounds of FirstEnergy’s Eastlake plant. Peaking units are designed to be used during high-power demand periods.
Under the agreement, FirstEnergy would supervise construction of the four combustion turbine units that are capable of producing 873 megawatts of power. AMP will provide the construction financing and own 75 percent of the generation output upon completion and FirstEnergy will fund and own the remaining 25 percent of the output in 2016. Plans call for the facility to be operational in 2016.
The new generation is expected to reduce or extend the company’s need for some of the previously announced transmission projects “by alternatively addressing reliability concerns resulting from power plants being deactivated in the region due to new U.S. Environmental Protection Agency rules,” the company said.
Construction will begin in the latter half of 2014 and will bring up to 150 temporary construction jobs, the company said.
The Eastlake plant was selected for the new combustion turbines “due to its existing transmission system interconnections and the fact it is located in a region that could be impacted by the deactivation of older power plants,” said the company. Earlier this year, the company announced that nine older, coal-fired power plants, including Eastlake, would be deactivated as a result of the EPA’s new regulations. Part of the Eastlake plant has already closed and three units are scheduled to be deactivated by early 2015.