NiSource: Return on equity
Let’s discuss NiSource’s (NI) return on equity (or ROE) in this part. NiSource’s consolidated ROE currently stands below the industry average because of the legacy goodwill it capitalized during the Columbia Gas acquisition. The spin-off of its pipeline business last year also negatively impacted its ROE.
NiSource’s average authorized ROE, however, is slightly above 10%, matching US utilities’ average ROE. The authorized ROE is the only part of the revenue requirement that utilities keep for themselves as profit.
Peer CenterPoint Energy’s (CNP) ROE stabilized in the last couple of quarters after some volatility due to Enable Midstream Partners’ (ENBL) earnings drop. It was close to 12% in 2Q16. Californian utilities Edison International (EIX) and Pacific Gas and Electric (PCG) earn returns on equity of ~10.5%.