The top executive of UniSource Energy Corp., the parent of Tucson Electric Power Co., told shareholders Friday that the utility was performing rather strongly considering the current economic conditions.
It was the first annual meeting for UniSource presided over by Paul J. Bonavia, who became the company's chairman, president and CEO on Jan. 1.
"Even in tough times, relative to the market and relative to our industry, we've done well," Bonavia said.
As part of his presentation to shareholders, Bonavia said TEP would stay committed to developing alternative energy sources and making power available to low-income customers while maintaining cash flow that will keep the business profitable.
When asked by a shareholder about the utility's plans for alternative energy, Bonavia didn't go into too much detail. But he did say it would comply with regulations adopted by the Arizona Corporation Commission that require utilities to generate 15 percent of their energy from renewable sources by 2025, with gradual increases each year.
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UniSource reported a net income of $5 million, or 14 cents per share, for the first quarter of 2009 in its earnings statement earlier this week. Comparably, the company reported a loss of $3 million, or 7 cents per share, during the first quarter of 2008.
Still, retail energy sales for TEP, UniSource's largest subsidiary, with about 400,000 customers in Southern Arizona, were 2.9 percent below the company's forecast.
Bonavia said earnings in 2009 should improve because of a new rate schedule that raised rates an average of 6 percent beginning Dec. 1. The changes also allow TEP to pass fuel surcharges on to its customers.
TEP reported a loss of $1 million during the first quarter, compared with a loss of $9 million the previous year.
Earnings dropped sharply in 2008 because the company was at the end of a nine-year rate freeze, and the company started losing money as energy costs increased.
UniSource said that for the first quarter of 2009, retail electric revenues, excluding pass-through surcharges, were down 3.2 percent — or $5 million — and retail kilowatt sales fell 4.8 percent year-over-year because of the weak economy and milder weather. However, TEP was able to increase its customer retail base by about 1 percent compared with last year.
The electric company had an increase in operating and maintenance costs as the company did work on major power plants. The work was scheduled for a time when energy demand is low, so the utility said its earnings will increase during the higher-demand second and third quarters. UniSource has maintained its earnings forecast for 2009 of between $2.55 and $2.90 per share.
Gary Yaquinto, president of the Arizona Investment Council, said he wasn't surprised that UniSource showed positive earnings overall for the first months of 2009.
"We knew the rate increase was going to boost their earnings, so it's not surprising they're in the positive territory," Yaquinto said.
Another subsidiary, UniSource Energy Services, which provides electric service to about 90,000 customers in Mohave and Santa Cruz counties, recently filed a request with state regulators to raise the typical home bill by $14.66 per month to cover increased costs.
But UniSource said the proposed increase in power delivery charges would be offset by an expected $22.12 decrease this summer in a monthly surcharge for purchased power and fuel.
The rate increase, which would not take effect until next year at the earliest, would not affect customers qualified for a low-income ratepayer program.