Analysts Predict Higher Earnings for Some U.S. Electric Utilities

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Some U.S. electric utilities may see second quarter profits rise because earnings from holdings abroad and cost-cutting will offset the effect of mild weather on U.S. sales.

Because demand for heating and air conditioning often are the biggest reasons whether electricity and natural gas sales rise or fall, weather is still the biggest factor in most U.S. utilities' earnings.

Mild weather reduced U.S. electricity production about 3 percent in the second quarter from the year-earlier period, according to the Edison Electric Institute, and utility earnings generally are expected to drop. Dominion Resources Inc., Edison International and American Electric Power Co. are among those likely to be exceptions. Some of the largest U.S. electric companies are finding that their foreign holdings and expansion into new businesses have insulated them from mild weather at home, said Michael Worms, an analyst with CS First Boston. "They're doing these things to find growth," he said. Although electricity production in the Southeast fell almost 6 percent from the year-ago period, Dominion Resources, parent of Virginia Power, is expected to have higher earnings. The company is expanding into power projects abroad and into real estate. Dominion Resources is expected to earn 60 cents a share, the average estimate of six analysts polled by IBES International Inc. In the year-earlier period, Dominion earned 53 cents a share. Dominion is starting to profit from its operations other than Virginia Power, which serves about 2 million homes and businesses. …