Eversource Energy Balances Growth Plans With FERC Headwinds

Eversource Energy ((ES)) has held its Q1 earnings call. Read on for the main highlights of the call.

Eversource Energy’s latest earnings call struck a cautious but constructive tone. Management highlighted strong operations, EPS growth excluding regulatory charges, and solid financing, yet acknowledged that an adverse federal transmission ruling and ongoing legal battles could weigh on returns and inject volatility into the earnings path.

Resilient Operations in a Major Winter Storm

Eversource emphasized its response to a February nor’easter that dumped more than 40 inches of snow and produced wind gusts above 70 miles per hour across its territory. The utility restored power to over 500,000 customers and managed more than 2,000 safety-related events, and most surveyed customers reported satisfaction with the speed of restoration.

Earnings Growth Backed by Gas and Transmission

The company reported GAAP EPS of $1.61 versus $1.50 a year earlier, a 7.3% increase despite a sizable regulatory charge. Excluding the FERC-related hit, non-GAAP EPS climbed to $1.73, up 15.3%, driven largely by higher gas earnings from rate base growth and a successful Yankee Gas rate case, plus improved electric transmission and distribution margins.

Balance Sheet and Credit Metrics Remain Solid

Eversource underscored its balance sheet strength, noting it issued $1.5 billion of junior subordinated notes in February that were more than five times oversubscribed and are trading at or above par. Funds-from-operations-to-debt ratios of 14.2% to 14.5% sit more than 100 basis points above downgrade trigger levels, and Standard & Poor’s reaffirmed the company’s ratings and stable outlook even after the FERC ruling.

Executing on a $26.5 Billion Capital Plan

Management reiterated a five-year capital investment plan totaling $26.5 billion through 2030, focused on regulated utility infrastructure. Through March, the company had already deployed nearly $800 million, representing about 15.7% of its $5.1 billion 2026 capital forecast, signaling that projects are ramping in line with expectations.

Clear Pathway to Recover Storm Costs

To address substantial deferred storm expenses, Eversource expects securitizations in Connecticut and New Hampshire to recover roughly $2 billion of storm costs and carrying charges over the next 12 to 18 months. In New Hampshire alone, securitization is anticipated to cover about $400 million to $470 million with completion targeted by late 2027, helping to de-risk the balance sheet and smooth cash flows.

Regulatory Counteroffensive to Protect Returns

In response to the FERC decision, the company filed a Section 205 proposal based on updated market data that supports an 11.39% base transmission return on equity, with a cap at 12.89%. Eversource also pursued motions for a stay, an extension of refund deadlines, and rehearing, and signaled that a revised rate could be implemented toward year-end, though subject to refund.

Constructive State-Level Developments

State regulators provided some offsetting positives, with the Connecticut authority approving the planned sale of Aquarion and issuing a revenue adjustment mechanism decision that establishes a $100 million storm reserve. That ruling also allows the use of forecast data in setting certain rates, which should modestly lower customer bills while stabilizing the company’s cash flows.

FERC ROE Cut Triggers Charges and Earnings Hit

The most significant negative development was FERC’s move to reduce Eversource’s base transmission ROE from 10.57% to 9.57%, a one percentage point cut. The utility recorded an after-tax charge of $43.9 million, about $0.12 per share, to cover refunds for a 15-month complaint period and estimated that the lower ROE will trim 2026 after-tax earnings by roughly $70 million.

Revised 2026 EPS Guidance Highlights Uncertainty

Reflecting the FERC outcome and associated transaction dynamics, Eversource reset its 2026 non-GAAP EPS guidance to a range of $4.57 to $4.72 per share, implying more modest growth than previously projected. Management acknowledged heightened near-term earnings uncertainty, even as it continues to pursue appeals and rate filings to soften the blow from lower allowed returns.

Aquarion Deal Still Faces Transaction Risk

Although regulators signed off on the Aquarion sale, investors were reminded that an appeal window extends into mid-June, leaving closure risk on the table. If the transaction fails to consummate, Eversource plans to seek an $88 million distribution rate increase via a new case and may have to explore alternative financing to replace the anticipated sale proceeds.

Refund Exposure and Legal Overhang

The FERC order includes a 15-month refund period already accrued in first-quarter results but leaves open questions on broader retroactive refund exposure. Management warned that appeals and litigation across multiple jurisdictions could drag on and potentially influence future transmission economics, which in turn could affect investor sentiment toward the sector.

Rising Parent Costs Pressure the Bottom Line

Higher costs at the corporate level modestly weighed on earnings, reducing EPS by around $0.05 in the quarter. The drag reflected a higher effective tax rate and increased interest expense, underscoring that financing costs are rising just as regulatory outcomes turn more challenging.

Regulatory Risk Could Reshape Transmission Investments

Eversource signaled that the FERC ruling may force a reassessment of transmission capital plans if returns remain under pressure. Management cautioned that sustained regulatory uncertainty could make it harder to attract capital at reasonable terms, potentially leading to adjustments in both future transmission spending and related financing strategies.

Guidance and Long-Term Outlook

Looking ahead, Eversource framed its revised 2026 EPS range of $4.57 to $4.72 as the new base for long-term growth, reiterating a 5% to 7% annual earnings growth target and aiming for the upper half by 2028. The company plans $26.5 billion of CapEx through 2030, expects equity needs of $800 million to $1.1 billion over five years, and is leaning on strong FFO-to-debt metrics and successful debt issuance, while storm securitizations and the Aquarion outcome remain key swing factors.

Eversource’s earnings call painted a picture of a well-run utility navigating a tougher regulatory climate with a mix of operational strength and financial discipline. Investors will be watching the FERC appeals, Aquarion resolution, and storm-cost securitizations closely, as these will determine whether the company can deliver on its growth targets despite the headwinds now facing its transmission franchise.