Northwest Natural Gas Co. announced large bonuses for all of its employees after posting record earnings Friday of $75.1 million in 2009, or $2.83 per share.
The Portland-based utility, which also serves Southwest Washington, saw an 8 percent increase from its 2008 earnings of $69.5 million, or $2.61 per share.
The year-over-year earnings exceeded analyst estimates by 6 cents per share, said Jim Bellessa, a senior research analyst with D.A. Davidson and Co.
The boost was largely due to an unexpected dip in natural gas prices in the first quarter of 2009, said Bob Hess, director of investor relations with NW Natural. Strong performance of the utility’s natural gas storage and its core utility operations also contributed to earnings, he said.
Under NW Natural’s cost-sharing program, which kicks in when gas prices are higher or lower than company projections, those savings were spread to customers earlier this year in the form of a $36 million refund. NW Natural in November also lowered its residential rates by 16 percent in Oregon and 22 percent in Washington.
The majority of the company’s cost savings, then, benefited customers and shareholders.
But employees also share in good years. CEO Gregg Kantor received a $125,000 performance award as a result of the company’s earnings. And three other top executives received a total of $250,000. All of the company’s roughly 1,000 other employees earned a bonus equal to at least 2 percent of their salaries.
The company wouldn’t disclose the total amount it plans to spend on bonuses.
Such bonuses come out of shareholder earnings and don’t affect customers’ rates, said Bob Jenks, executive director of the Citizens Utility Board in Oregon.
“We’re OK with them earning off of that (cost-sharing) mechanism what seems like a lot of money because you want them to work as hard as they can to get lower costs,” Jenks said. “This was somewhat of a fluke caused by the severity of the recession… if that happens continually we need to look at the mechanism.”
The lower gas costs were partially offset, however, by higher pension and health care costs, bad debt write-offs, bonuses and severance costs from a staff reduction.
NW Natural cut 100 positions last year through natural attrition and voluntary severance, according to the company.
Growth in the number of new customers fell to 0.8 percent for the year, from 1.6 percent in December of 2008. As a result, NW Natural cut back on staff related to assisting new customers.
While the severance packages added to the company’s costs this year, it will save money in the long run and help the company maintain its profit margins, Hess said.
“We think we’re sized correctly now for the current economic conditions,” Hess said.
Warmer weather and conservation efforts also caused sales to residential and commercial customers to fall to 668 million therms of natural gas in 2009, compared to 694 million therms the previous year.
Earnings were down 5 percent for the quarter ending Dec. 31 at $31.4 million compared to $33.2 million in the fourth quarter of 2008.
