As Oklahoma Natural Gas awaits a state supreme court ruling on its $1.4 billion securitization request because of the February 2021 winter storm, its parent company, ONE Gas, Inc. reported improved first quarter earnings of nearly $99 million in net income or $1.83 per diluted share.
In announcing the earnings, the company said it was waiting on the court ruling as well as similar decisions in Kansas and Texas.
ONE Gas reported the income of $98.9 million was better than its first quarter 2021 income of $95.6 million or $1.79 per diluted share. The company’s board of directors also declared a quarterly dividend of 62 cents a share or $2.48 a share on an annualized basis. It will be payable to shareholders of record at the close of business on May 16, 2022.
“In the first quarter, our maintenance and growth capital programs were both on track, underscoring the opportunities created by the location of our assets,” said Robert S. McAnnally, president and chief executive officer. “In the current environment, we remain focused on our long-term strategy, which includes a commitment to safely operating our assets, expanding service to new customers, and managing costs.”
The company’s operating income was $140.8 million in the first quarter 2022, compared with $130.3 million in the first quarter 2021, which primarily reflects:
- an increase of $15.1 million from new rates;
- a decrease of $2.4 million in bad debt expense; and
- an increase of $2.6 million in residential sales due to net customer growth.
ONE Gas said the increases were partially offset by a $3.7 million increase in outside service costs and a $2.2 million increase in employee-related costs.
Capital expenditures and asset removal costs were $122.9 million for the first quarter 2022 compared with $109.0 million in the same period last year. The increase was due primarily to expenditures for system integrity and extension of service to new areas.
In Oklahoma, the Oklahoma Development Finance Authority (ODFA) received a hearing before the Oklahoma Supreme Court on April 13, 2022, seeking validation of the bond issuance. If the Oklahoma Supreme Court issues a ruling that validates the bond issuance by the ODFA complies with the Oklahoma securitization statute and the laws of Oklahoma, the ODFA will continue the process to issue the securitized bonds associated with the Oklahoma Natural Gas financing order.
Pending a ruling from the Oklahoma Supreme Court, the financing order requests the ODFA to issue bonds and provide the net proceeds to Oklahoma Natural Gas as soon as feasible in 2022. At March 31, 2022, Oklahoma Natural Gas has deferred approximately $1.3 billion in extraordinary costs attributable to Winter Storm Uri.
In Kansas, on March 31, 2022, Kansas Gas Service submitted its application for a financing order to the Kansas Corporation Commission (KCC) as contemplated by the settlement reached on its financial plan. Kansas Gas Service has requested approval to issue securitized bonds to recover extraordinary costs resulting from Winter Storm Uri and flexibility to recover the costs over 5, 7, 10 or 12 years. The KCC has until Sept. 27, 2022, to review the application and issue a financing order if it deems the issuance of securitized bonds to be appropriate. If the KCC approves the financing order, the Company can begin the process to issue the securitized bonds. At March 31, 2022, Kansas Gas Service has deferred approximately $335.6 million in extraordinary costs, net of penalties billed, attributable to Winter Storm Uri.
In Texas, the Texas Public Finance Authority has begun the process to issue securitized bonds, which by statute, must be issued no later than Aug. 7, 2022. At March 31, 2022, Texas Gas Service has deferred approximately $248.3 million in extraordinary costs associated with Winter Storm Uri, which includes $50.7 million attributable to the West Texas service area. Pursuant to the approved settlement order, in January 2022, Texas Gas Service began collecting the extraordinary costs, including carrying costs, attributable to the West Texas service area from those customers over a three year period.
In March 2022, Oklahoma Natural Gas filed its first annual Performance-Based Rate Change (PBRC) application following the general rate case that was approved in November 2021. The filing is for a calendar year 2021 test year and includes a requested base rate increase of $19.7 million, energy efficiency program incentive of $2.3 million and an estimated $9.1 million credit associated with EDIT. If approved, new rates are expected to become effective in the third quarter 2022, and EDIT is expected to be credited to customers in 2023.
In February 2022, Texas Gas Service made Gas Reliability Infrastructure Program (GRIP) filings for all customers in the Central-Gulf Service Area, requesting a $9.1 million increase to be effective in June 2022.
In March 2022, Texas Gas Service made GRIP filings for all customers in the West Texas service area, requesting a $5.0 million increase to be effective in July 2022.
In April 2022, Texas Gas Service filed its annual Cost-of-Service Adjustment filing for the incorporated area of the Rio Grande Valley service area, requesting an increase of $2.9 million. If approved, new rates will become effective in August 2022.
ONE Gas affirmed its financial guidance issued on Jan. 18, 2022, with 2022 net income and earnings per share expected to be in the range of $215 million to $227 million, and $3.96 to $4.20 per diluted share. Capital expenditures, including asset removal costs, are expected to be approximately $650 million for 2022.
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