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Allegheny Energy Inc. (AYE) bagged approval from the Virginia State Corporation Commission to recover its cost of purchased power through rate hike. As per the approval, the company will be able to recover purchased power costs for the state of Virginia during the 12-month period ending Jun 30, 2010. However the regulatory body reduced the [...]

(AYE) Allegheny Energy Gets Regulatory Approval for Rate Hike

Allegheny Energy Inc. (AYE) bagged approval from the Virginia State Corporation Commission to recover its cost of purchased power through rate hike. As per the approval, the company will be able to recover purchased power costs for the state of Virginia during the 12-month period ending Jun 30, 2010. However the regulatory body reduced the utility's proposed rate increase of $19.4 million rate hike by $3.2 million. This is the second scaling down of Allegheny Energy’s proposed rate hike in Virginia . Earlier, in April 2009, the company had asked for $22.6 million rate hike, which was scaled down by $3.2 million to a $19.4 million. 

Allegheny Energy incurred purchased power costs, which increased $26.1 million and $77.7 million for the three and nine months ended September 30, 2009, respectively, to $134.2 million and $380.4 million, respectively. For a residential customer with a monthly consumption of 1,000 kilowatt-hours of power, Allegheny's original proposal would have increased the bill by $5.47 to $96. The scaled-down proposal would result in a monthly bill of $94. 

Headquartered in Greensburg , Pennsylvania , Allegheny Energy is an electric utility company with over $3 billion in annual revenues. The company is engaged in both regulated electricity and natural gas distribution utility operations as well as in the unregulated wholesale energy markets. It owns and operates generating facilities and serves electricity to approximately 1.6 million customers spread across the states of Pennsylvania , West Virginia , Maryland and Virginia . We reiterate our Neutral recommendation on the shares. 

Going forward, Allegheny Energy’s positive investment factors include higher generation rates in Pennsylvania and Maryland , higher residential usage and ongoing transmission projects. Looking ahead, we expect that the company’s regulated delivery utility business will provide steady earnings growth while the disposal of retail distribution operations in Virginia will infuse liquidity. However, the positives would be offset by lower industrial demand and higher emission and hedging costs. 

We reiterate our Neutral recommendation on the low dividend yield stock, which reflects our view that the shares will trade at par with the peer group of electric utility companies such as AES Corporation (AES) and TECO Energy Inc. (TE).
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Zacks Investment Research

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Allegheny Energy (AYE) has beaten the Zacks Consensus EPS estimate of 55 cents by four cents to clock earnings per share of 59 cents in the third quarter of fiscal 2009.

Allegheny Energy also crossed the year-ago EPS by five cents due to improved result from its Delivery & Services business. Earnings rose to $31.5 million from $4.3 million in the year-ago quarter. The improvement was due to increased cost recovery in Virginia , the elimination of an inter-company transfer payment and higher revenues from transmission expansion. These benefits were partially offset by lower retail electricity sales and higher income taxes, primarily due to an increase in pre-tax income.

However this was partially offset by lower earnings at the Generation and Marketing business. Here, earnings fell to $45.5 million from $84.7 million in the year-ago quarter due to a tepid economy and low power prices. Earnings were affected by lower generation volume and power prices, as well as the scrubber tie-in work at Hatfield’s Ferry and the elimination of an inter-company transfer payment, partially offset by higher generation rates in Pennsylvania , the benefit of hedging activity, lower fuel costs and lower income taxes.

Revenues waned 6.6% year-over-year to $793.7 million in the quarter due to dismal showing at its unregulated business covering the Generation & Marketing segment. However, this was partially offset by the regulated business comprising the Delivery and Services segment. Delivery and Services segment topline rose 13.1%. On the other hand, Generation & Marketing segment topline shrunk 23.6%. Allegheny Energy’s industrial volume sales fell 8.6% year-over-year. This was due to lower usage per customer, which dipped 9.6%.

Allegheny Energy reported cash and cash equivalents at the end of the reported quarter of $278.3 million, while long-term debt stood at $4.3 billion. We maintain our Neutral recommendation on the shares.
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Zacks Investment Research

Companies featured in this segment: Norfolk Southern Corporation’s (NYSE:NSC), CSX Corporation (NYSE:CSX), Northrop Grumman Corporation (NYSE:NOC), Allegheny Energy (NYSE:AYE), Ameren Services Company (NYSE:AEE), Vectren Corporation (NYSE:VVC), American Electric Power (NYSE:AEP), Duke Energy Corporation’s (NYSE:DUK), AREVA (EPA:CEI)

Companies featured in this segment: Dow Chemical Company (NYSE: DOW), Westlake Chemical (NYSE:WLK), ESG Biofuels (Live Oak) LLC, Energy Systems Group LLC, Vectren Corporation (NYSE:VVC), Allegheny Energy Incorporated (NYSE:AYE), Iberdrola SA (MCE:IBE), Siemens AG (NYSE:SI), SPX Corporation's (NYSE:SPW), Westinghouse Electric Company LLC, The Shaw Group Incorporated (NYSE:SGR), Progress Energy Incorporated (NYSE:PGN), China Petroleum and Chemical Corporation (NYSE:SNP), and PetrocChina Company Limited (NYSE:PTR).

Companies featured in this segment: Caterpillar Incorporated (NYSE:CAT), The Southwestern Electric Power Company of Shreveport, American Electric Power Company (NYSE:AEP), General Electric (NYSE:GE), Vattenfall AB, RWE Power, RWE Group (OTC:RWEOY), Florida Power & Light, FPL Group Incorporated (NYSE:FPL), Mitsubishi Heavy Industries (TYO:7011), Toshiba Plant Systems (TYO:1983), Surgutneftegas (MCX:SNGS), OAO Gazprom (OTC:OGZPY), and Allegheny Energy (NYSE:AYE).

Companies featured in this segment: ArcelorMittal (NYSE:MT), AK Steel Holding Corporation (NYSE:AKS), Severstal (MCX:CHMF), Weyerhaeuser Company (NYSE:WY), International Paper (NYSE:IP), Anadarko Petroleum Corporation (NYSE:APC), Barrick Gold Corporation (NYSE:ABX), Kinross Gold Corporation (NYSE:KGC), BG Group (LSE:BG), ENI S.p.A (NYSE:E), Egyptian National Gas Company (CAI:NATG), Total (NYSE:TOT), Shell (NYSE:RDS.A), Allegheny Energy (NYSE:AYE), and Alliance Resource Partners (NASQDAQ:ARLP)

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