latest-news-headlines Market Intelligence /marketintelligence/en/news-insights/latest-news-headlines/inflation-rising-customer-bills-in-focus-as-gas-utilities-report-q3-22-earnings-72663362 content esgSubNav
In This List

Inflation, rising customer bills in focus as gas utilities report Q3'22 earnings


Despite turmoil, project finance remains keen on offshore wind

Case Study

An Energy Company Assesses Datacenter Demand for Renewable Energy


Japan M&A By the Numbers: Q4 2023


See the Big Picture: Energy Transition in 2024

Inflation, rising customer bills in focus as gas utilities report Q3'22 earnings

Gas utilities are poised to post another quarter of profit growth even as the industry grapples with inflation and high commodity prices.

Analysts expect six out of nine gas utilities selected by S&P Global Commodity Insights to report quarterly earnings that top profits in the year-ago period. Meanwhile, Wall Street projected that eight out of 15 multi-utilities would surpass year-ago earnings, according to S&P Capital IQ consensus EPS forecasts.

SNL Image

The forecasts show Atmos Energy Corp., One Gas Inc. and Chesapeake Utilities Corp. continuing a strong record of year-over-year earnings growth. Analysts see New Jersey Resources Corp. topping year-ago earnings for a second consecutive quarter. UGI Corp. and Southwest Gas Holdings Inc. are tipped to break a streak of year-over-year declines.

Meanwhile, Wall Street expects Spire Inc. to extend its earnings slump and anticipates a return to year-over-year profit declines at South Jersey Industries Inc. and Northwest Natural Holding Co. after both posted gains last quarter.

The group as a whole has fallen out of favor. An index of the nine stocks plunged 13.3% in the third quarter, underperforming the broader market. Rising interest rates undercut the investment case for the utilities sector, which had grown expensive during a period of outperformance.

SNL Image

The third quarter marks the second half of the shoulder season, when natural gas demand for heating falls with rising temperatures. Heading into the winter, inflation remains stubbornly high and gas prices threaten to create sticker shock for American households.

"Inflation will continue to be the big story through the rest of 2022 and into 2023," Morningstar Research Services energy and utilities strategist Travis Miller told Commodity Insights. "We'll start to see management working inflation into their 2023 expectations, and that might disappoint some people out there."

Some gas utility operators issued profit warnings during the previous quarter, while others outlined plans for managing through inflation, supply chain constraints and worker shortages.

SNL Image* Access more details on energy and utilities news. 
* Access more details on ongoing rate cases at gas utilities. 
* Follow the latest news on earnings.

Retail gas prices also remain a headwind. The U.S. Energy Information Administration forecast U.S. homes that heat with gas will spend an average of $931 on heating this winter, up $206 from last year.

The cost of gas will account for 48% of electric and gas utility bills in 2022, up from 37% in 2021, according to the American Gas Association. The trade group forecast U.S. gas utility customers will pay 12% to 62% more for gas this winter.

SNL Image

Gas utility costs have been rising at nearly double the pace of the electricity component of the consumer price index, Scotiabank analyst Andrew Weisel noted. However, monthly gas bills are typically roughly half the cost of electric bills, Weisel said in an Oct. 24 research note.

While gas utilities pass on commodity costs directly to ratepayers, rising customer bills can leave regulators wary of increasing rates to pay for capital projects.

"The customer bill is going to be a big point of discussion not just for this year, but probably for the next decade," Morningstar's Miller said.

S&P Global Commodity Insights produces content for distribution on S&P Capital IQ Pro.