Duke Energy said Tuesday it plans to slash about $100 million in expenses to offset lower financial results from warm winter weather, a move that could result in job cuts.
The Charlotte-based utility did not disclose how many positions might be affected by the effort, which Duke said could involve other steps. Executives disclosed the plan as they reported that warm winter weather in the U.S. this year affected revenues in the quarter that ended March 31.
The initiative will provide Duke with “flexibility” to offset the financial impacts from the warmer weather, CEO Lynn Good told analysts on a conference call. Duke could rely on different options to wring out the costs, she said.
“It could be holding a vacancy,” Good said. “It could be working with a contractor differently. Things of that sort.”
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Duke reported a 3.2 percent increase in profit during the quarter, as last year’s acquisition of Piedmont Natural Gas helped the company’s results. Profit totaled $716 million, or $1.02 per share, in the period, compared with $694 million, or $1.01 per share, in last year’s first quarter.
Adjusted earnings per share were $1.04, down from $1.13 in the first quarter of 2016 and below the $1.06 expected by analysts polled by Zacks Investment Research. In addition to warm weather, Duke attributed the decline from a year ago largely to the sale of its international energy business in December.
Chief Financial Officer Steve Young noted that adjusted results for the company’s electric utilities and infrastructure segment, which posted lower income from a year earlier, came during the second-warmest February and sixth-warmest winter on record in the U.S.
Duke’s Carolinas and Midwest territories set new record-warm temperatures this past winter, he added.
“When we experience weaker weather, such as that in early 2017, we will look for flexibility in our cost-management practices,” Young said. The new “efficiency efforts” will be “sustainable cost reductions providing benefits for both our customers and shareholders for years to come,” he said.
Duke, which employs about 28,800 people across seven states, cited efficiency efforts in announcing job cuts last year affecting about 900 employees, most of them in the Carolinas. The vast majority of those departures were voluntary, Duke said at the time.
The company, which employs 8,300 in Mecklenburg County, did not provide the Observer with additional details about Tuesday’s cost-cutting plans. In a statement, spokeswoman Catherine Butler said it’s important that Duke demonstrate flexibility as a company.
“That is what we’re doing here,” Butler said. “We’re looking at our costs just like other businesses would, and we’re looking at ways to be more efficient, and we’ll continue to do so.”
Good also told analysts the new cost-cutting plans “are really consistent with actions that we’ve taken when you have variability around weather.”
Tuesday’s strategy marks the latest efficiency push by Duke. Under a previously announced plan, the company is seeking to keep operating and maintenance costs flat through 2020. Those are essentially the costs to run the company, such as labor.
“We’ve been very aggressive on cost-savings,” Good said. “We continue to focus on ways we can drive costs out of the business, and that is our job every day.”
As it seeks to trim costs, Duke is also investing in a project to modernize North Carolina’s electric system, a project Good touted Tuesday. Announced last month, the Power/Forward Carolinas plan calls for spending $13 billion over 10 years. Good said the project will allow Duke to reduce outages, among other benefits to customers.
Filing to raise rates coming
Also Tuesday, the company said it plans to file a request in late summer with North Carolina regulators to raise customer rates in a territory that includes Charlotte and much of the western half of the state.
Previously, Duke said the filing would come sometime during the second half of 2017.
That move will begin Duke’s efforts to pass $5 billion in coal ash cleanup costs to its North Carolina customers. Last week, the company moved forward with efforts to raise rates in a separate territory that includes central and eastern North Carolina, announcing a request will be filed with state regulators by June 1. Duke is expected to disclose the size of that request at that time.
One analyst Tuesday asked Good if she could detail how large Duke’s rate increases across the Carolinas might be. Good declined, saying more specifics will be provided when the requests are formally filed with regulators.