Progress Energy will cut its operating expenses and delay two planned nuclear reactors in Florida in the wake of a decision by regulators in that state last week to deny the electric utility a rate increase.
Raleigh-based Progress, which runs electric companies in Florida and the Carolinas, said it will provide more details next month, but warned Wall Street analysts on a conference call today that its Florida utility will not have sufficient money to maintain service quality.
The Florida Public Service Commission last week denied a $500 million rate increase beyond $132 million that had been previously received provisional approval. The regulators said that they couldn't justify raising customers' rates during a severe recession.
The Florida ruling has no direct effect on electricity rates in North Carolina, but it affects the company's overall financial performance and impacts all shareholders.
Progress announced this morning that it has reduced its profit forecast for the year and said it will cut spending throughout its operation.
CEO Bill Johnson said the nation's three rating agencies could reduce the company's credit rating, which would increase the cost of borrowing money for maintenance, upgrades and power plants.
The utility, which eliminated 300 Florida positions in 2008, is facing declining revenue in a state that was the epicenter of the real-estate meltdown that triggered the deep recession. Johnson said the company may be forced to try its luck again soon by filing for another rate request, possibly this year.
"The commission's decision does not cover the cost of reliably serving the customers today, or reliably providing for their future needs," Johnson said. "There was no consideration given to our declining revenues in a recession economy."
Johnson said the future of two planned reactors at the Levy nuclear site are now under review. "This certainly influences our thinking on the Levy project," he said. "At a minimum it will be on a slower schedule and on a much lower spending trajectory."
Per-share earnings for 2010 will be $2.85 to $3.05, Progress reported this morning. Wall Street analysts had expected $3.10, Bloomberg News reported.
Still, Wall Street investors may have been bracing for worse. Progress shares rose 25 cents to $39.18 in morning trading.
Progress plans to release its fourth-quarter and 2009 results on Feb. 11.
"There are projects that will have to be put on hold, just given the circumstances and environment," Johnson said.