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Earnings preview: Duke earnings may rise on rates

NEW YORK (AP) — Duke Energy Corp. is expected to post a higher third quarter profit on higher electric customer rates despite milder summer weather that reduced demand for air conditioning.

Duke, the nation's largest electric utility by market value and number of customers, reports its third quarter earnings Wednesday morning.

Duke has received approval this year from regulators in North Carolina, South Carolina and Ohio to raise electric rates. By September, the last month of the quarter, all of those new rates had gone into effect, so the company is expected to see a boost in revenue. On an annual basis, the rates are expected to increase Duke revenue by $600 million.

But demand for electricity was almost certainly not very strong, especially compared with last year. According to the National Oceanic and Atmospheric Administration, temperatures in Duke's service territory from July through September were lower than normal. Last year during the same period, they were higher than normal. That means customers didn't need as much electricity to crank up air conditioners.

WHAT TO WATCH FOR: Duke has asked Ohio regulators to charge customers for $729 million in costs it has incurred in the state to keep power plants ready to supply electricity. Investors will be eager for an update on the request, because Duke's Ohio operations have dragged down results in recent years. The power plants Duke owns in Ohio and elsewhere in the Midwest have suffered in recent years because wholesale power prices have dropped along with the price of natural gas.

Investors will also look closely at power demand after the effects of weather have been removed. Duke CEO Lynn Good has warned in the past that electricity demand growth will likely be very modest in the coming years because of efficiency programs and a sluggish economy.

WHY IT MATTERS: Duke, based in Charlotte, N.C., serves 7.2 million customers in North Carolina, South Carolina, Florida, Indiana, Ohio and Kentucky. Because electricity demand rises with economic activity, the company's results can reflect changes in the broader economy.

WHAT'S EXPECTED: Analysts expect Duke to earn $1.51 per share, when adjusted to remove restructuring costs and other extraordinary items, according to FactSet. Revenue is expected to total $7.32 billion.

LAST YEAR'S QUARTER: Duke earned an adjusted $1.47 per share last year on $6.72 billion in revenue in the third quarter of 2012. Net income was $594 million.

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