10-Q: Eversource Q1 Earnings Rise Amid FERC ROE Dispute

Eversource Energy reported increased first-quarter earnings and revenue, but faces significant financial implications from a recent FERC decision on transmission return on equity and ongoing uncertainty regarding its Aquarion water business sale.

Summary

• Net Income Attributable to Common Shareholders increased to $606.8 million ($1.61 per share) in Q1 2026, up from $550.8 million ($1.50 per share) in Q1 2025.
• Operating Revenues rose to $4,504.4 million in Q1 2026, compared to $4,118.4 million in Q1 2025.
• Q1 2026 results include an after-tax charge of $43.9 million ($0.12 per share) due to a March 19, 2026 FERC decision on transmission Return on Equity (ROE).
• Excluding the FERC charge, non-GAAP earnings were $650.7 million, or $1.73 per share, in Q1 2026.
• Cash flows provided by operating activities increased to $1.32 billion in Q1 2026 from $1.04 billion in Q1 2025.
• Investments in property, plant and equipment remained stable at $1.01 billion in Q1 2026.
• The Aquarion water business sale was approved by PURA on March 25, 2026, but remains subject to appeals and other closing conditions, preventing its classification as 'held for sale' as of March 31, 2026.
• The offshore wind contingent liability decreased to $298.2 million as of March 31, 2026, from $448.2 million at December 31, 2025, due to payments for Revolution Wind cost overruns.
• Eversource issued $1.50 billion in new long-term debt and repaid $250 million of long-term debt in Q1 2026.
• The Greater Cambridge Energy Program, an underground transmission substation project, has an estimated total cost of $1.84 billion, with $231.6 million spent as of March 31, 2026.

Sentiment

Score: 4

Explanation: StockSavvy.ai views this filing with a cautious sentiment. While operational earnings and cash flow show strength, the significant negative impact and ongoing uncertainty from the FERC ROE decision, coupled with the protracted Aquarion sale process, introduce material financial and regulatory risks that temper positive performance.

Positives

• Net Income Attributable to Common Shareholders increased by $56.0 million, or $0.11 per share, year-over-year.
• Operating Revenues grew by $386.0 million, reflecting strong performance across segments.
• Operating Income increased by $149.7 million, demonstrating improved operational efficiency.
• Cash flows provided by operating activities saw a significant increase of $283.7 million, enhancing liquidity.
• Base distribution rate increases at NSTAR Electric (effective January 1, 2026) and PSNH (effective August 1, 2025) contributed to higher electric distribution earnings.
• Natural gas distribution segment earnings increased by $76.9 million due to base rate increases and capital tracking mechanisms.
• The Aquarion water business sale received PURA approval, a key step towards divestiture, with an aggregate enterprise value of approximately $2.4 billion.
• The offshore wind contingent liability decreased by $150.0 million due to payments, reducing a potential future burden.
• Successful issuance of $1.50 billion in new long-term debt indicates continued access to capital markets.

Negatives

• A significant after-tax charge of $43.9 million ($0.12 per share) was recorded in Q1 2026 due to the FERC ROE decision.
• The FERC decision prospectively reduces the allowed base ROE from 10.57% to 9.57%, expected to lower future annual after-tax earnings by approximately $70 million.
• The potential range of pre-tax losses from the FERC ROE complaints is estimated between $60.4 million and $932 million, with the higher end reflecting a substantial retroactive refund period.
• The Aquarion sale, despite PURA approval, faces legal opposition and potential appeals, introducing significant uncertainty regarding its timing and consummation.
• Interest Expense increased by $64.5 million, partly due to interest accrued on the FERC ROE regulatory liability ($28.8 million).
• CL&P's earnings decreased by $16.9 million, primarily due to the FERC ROE charge and higher net interest expense on regulatory deferrals.
• NSTAR Electric's earnings decreased by $1.2 million, also impacted by the FERC ROE charge and higher operations and maintenance expenses.
• The Massachusetts 2026 Winter Bill Relief Program resulted in delayed cash collections from customers, impacting the timing of cash flows.

Risks

• The ultimate outcome of the FERC ROE complaint proceedings, including potential appeals and rehearing requests, could result in losses significantly higher than the currently accrued $60.4 million.
• Inability to secure acceptable ROEs in future FERC proceedings could adversely affect financial performance.
• Legal opposition and potential appeals introduce significant uncertainty regarding the ultimate timing and consummation of the Aquarion sale.
• Additional cost overruns, construction delays, or lower-than-assumed federal investment tax credits for the Revolution Wind project could increase the offshore wind contingent liability.
• Cyber events or breaches affecting systems or third-party systems could lead to unauthorized access and misappropriation of confidential information.
• Extreme weather events due to climate change could damage infrastructure and disrupt operations, leading to increased costs.
• Actions or inaction of local, state, and federal regulatory bodies, including changes in laws or regulatory policy, may impact compliance costs and strategic initiatives.
• Breakdown, failure, or damage to operating equipment, IT systems, or transmission/distribution systems could disrupt service.
• Limits on access to, or increases in, the cost of capital, including disruptions in capital markets, could make necessary capital more difficult or costly to obtain.
• Changes in economic conditions, including interest rates, tax policies, tariffs, and customer demand/payment ability, could impact financial results.
• Environmental remediation costs, particularly for former Manufactured Gas Plant (MGP) sites, are subjective and could require reassessment with new information.

Future Outlook

Eversource revised its 2026 non-GAAP earnings guidance to a range of $4.57 to $4.72 per share, reflecting the prospective reduction in transmission ROE from the FERC order and the potential Aquarion sale. The company anticipates a cumulative long-term earnings per share growth rate of 5% to 7% through 2030, using the adjusted 2026 non-GAAP earnings guidance mid-point of $4.65 per share as the base year, with annual earnings growth expected towards the upper half of this guidance by 2028.

Management Comments

• We earned $606.8 million, or $1.61 per share, in the first quarter of 2026, compared with $550.8 million, or $1.50 per share, in the first quarter of 2025.
• Our first quarter 2026 results include an after-tax charge of $43.9 million, or $0.12 per share, resulting from FERC's March 19, 2026 order in the NETO ROE complaint proceedings.
• Excluding this charge, our non-GAAP earnings were $650.7 million, or $1.73 per share in the first quarter of 2026.
• We revised 2026 non-GAAP earnings guidance to be in the range of $4.57 per share and $4.72 per share taking into account the impact of the prospective reduction to the transmission ROE resulting from the March 19, 2026 FERC order and the potential Aquarion sale.
• We expect that our cumulative long-term earnings per share growth rate will be within the range of 5 to 7 percent through 2030, using the adjusted 2026 non-GAAP earnings guidance mid-point of $4.65 per share as the base year.
• We expect annual earnings growth towards the upper half of the long-term guidance by 2028.
• We expect the future operating cash flows of Eversource, CL&P, NSTAR Electric and PSNH, along with our existing borrowing availability and access to both debt and equity markets, will be sufficient to meet any working capital and future operating requirements, and capital investment forecasted opportunities.
• We continue to challenge the March 19, 2026 FERC decision, but cannot predict the ultimate outcome of these proceedings.

Industry Context

StockSavvy.ai notes that the utility sector, particularly regulated entities like Eversource, often faces complex regulatory environments that significantly impact financial performance. The FERC ROE decision highlights the ongoing tension between regulators seeking to control consumer costs and utilities needing adequate returns to fund infrastructure investments. The push for clean energy, as evidenced by Massachusetts' Executive Order No. 654, indicates a broader industry trend towards decarbonization and grid modernization, requiring substantial capital expenditures. The securitization of storm costs in New Hampshire reflects a growing trend among states to find alternative financing mechanisms for increasingly frequent and severe weather-related infrastructure damage, aiming to mitigate immediate ratepayer impact.

Comparison to Industry Standards

• The FERC's reduction of the base ROE from 10.57% to 9.57% for New England Transmission Owners (NETOs) places Eversource's allowed return below the average authorized ROE for transmission utilities, which typically ranges from 9.5% to 10.5% in recent FERC decisions, potentially impacting its competitive position for future transmission investments compared to peers like National Grid or Avangrid.
• Eversource's long-term EPS growth rate guidance of 5% to 7% through 2030 is generally in line with or slightly above the average for large-cap regulated utilities, which often target 4% to 6% growth, indicating a commitment to shareholder value despite regulatory headwinds.
• The Greater Cambridge Energy Program's estimated cost of $1.84 billion for an underground transmission substation and associated lines is a substantial investment, comparable in scale to major urban infrastructure projects undertaken by other large utilities in dense metropolitan areas, reflecting the high cost of modernizing and expanding urban grids.

Legal Proceedings

• Four separate FERC ROE complaints were filed against New England Transmission Owners (NETOs) dating back to 2011, challenging the base ROE.
• On March 19, 2026, FERC issued Opinion No. 594, finding the NETOs' base ROE of 11.14% unjust and unreasonable, setting a replacement base ROE of 9.57% with an incentive cap of 12.09% for the first complaint period (Oct 1, 2011 Dec 31, 2012) and prospectively from Oct 16, 2014.
• FERC directed NETOs to issue refunds with interest for applicable periods, with a deadline extended to May 20, 2027.
• The second, third, and fourth NETO ROE complaints were dismissed as part of the decision.
• NETOs submitted a request for rehearing of Opinion No. 594 to FERC on April 20, 2026, citing deficiencies including the retroactive refund period.
• Eversource and Avangrid filed a joint motion requesting a stay of the retroactive refund obligation with the D.C. Circuit Court on April 14, 2026.
• The Yankee Companies filed Phase V lawsuits against the DOE in March 2021, seeking damages for failure to accept spent nuclear fuel, with a $145 million settlement agreement in principle approved in November 2024, but an appeal filed by the Department of Justice in January 2025.
• On March 31, 2026, the Yankee Companies filed Phase VI lawsuits against the DOE, seeking monetary damages for the years 2022 to 2025 for continued failure to accept spent nuclear fuel.
• CL&P is subject to a PURA prudency review proceeding established March 28, 2024, to evaluate $978 million in storm costs incurred between 2018 and 2023, with a final decision expected July 29, 2026.

Related Party Transactions

• Eversource parent provides loans to its subsidiaries (CL&P and PSNH) to meet short-term borrowing needs, charging interest at the same weighted-average rate as its commercial paper program.
• As of March 31, 2026, intercompany loans from Eversource parent to PSNH totaled $79.4 million, and to CL&P totaled $39.0 million.
• Yankee Gas, NSTAR Gas, and EGMA purchase natural gas transmission services from an Enbridge, Inc. natural gas pipeline project, totaling $77.7 million annually.

Stakeholder Impact

• Shareholders: Experienced increased EPS in Q1 2026, but face potential future earnings reduction and significant financial uncertainty due to the FERC ROE decision. A common share dividend of $0.7875 per share was approved.
• Customers: Will be impacted by the FERC ROE decision through potential refunds for past periods and adjusted rates going forward. Massachusetts residential electric and natural gas customers received bill reductions through a winter relief program. Rate cases and storm cost recovery mechanisms will influence future bills.
• Employees: Covered by defined benefit retirement plans (Pension, SERP, PBOP Plans).
• Creditors: The company issued $1.50 billion in new long-term debt, and its junior subordinated debt received new ratings from S&P (BBB-), Moody's (Baa3), and Fitch (BB+).
• Regulators: Actively involved in multiple proceedings, including the FERC ROE complaints, Aquarion sale approval, and various state-level rate cases and storm cost prudency reviews.

Next Steps

• NETOs will pursue a rehearing request with FERC regarding Opinion No. 594.
• Eversource and Avangrid will continue to seek a stay of the retroactive refund obligation from the D.C. Circuit Court.
• FERC will review the NETOs' Federal Power Act Section 205 filing proposing a new ROE of 11.39% (cap 12.89%), with a decision expected within 60 days or after a five-month suspension.
• CL&P's storm prudency review proceeding for 2018-2023 costs is expected to have a final decision on or about July 29, 2026.
• PURA will consider the issuance of rate reduction bonds for the securitization of approved storm costs for CL&P.
• Aquarion Water Company of Connecticut's 2026 rate case will proceed with proposed and final decisions expected from PURA on November 17, 2026, and December 23, 2026, respectively.
• The Greater Cambridge Energy Program's initial in-service date for the transmission portion is June 2029, with distribution circuits following through 2031.
• Eversource will continue to monitor developments and evaluate potential exposures related to the offshore wind contingent liability and revise estimates as new information becomes available.
• Oral arguments for the Yankee Companies' Phase V damages appeal are expected in 2026.

Key Dates

Recommendation

The filing presents a mixed financial picture. While Eversource demonstrated solid operational performance with increased earnings and strong cash flow in Q1 2026, the significant after-tax charge and prospective earnings reduction from the FERC ROE decision introduce considerable uncertainty and downside risk to future profitability. The ongoing legal challenges and appeals surrounding the Aquarion sale also add to this uncertainty. The company's continued capital investments in infrastructure and long-term growth guidance are positive, but the immediate regulatory headwinds warrant a cautious 'hold' stance. Investors should await clearer outcomes on the FERC ROE appeals and the Aquarion sale before making more aggressive investment decisions.

Keywords

Eversource Energy, Utility, Electric Distribution, Natural Gas Distribution, Electric Transmission, Water Distribution, SEC Filing, 10-Q, Quarterly Report, Earnings, EPS, FERC ROE, Regulatory Liability, Aquarion Sale, Offshore Wind, Revolution Wind, Capital Expenditures, Debt Issuance, Connecticut Light and Power, NSTAR Electric, Public Service Company of New Hampshire, Utility Regulation, Energy Policy