WRAPUP 1-Smaller power cos' results hurt by low energy prices

* Calpine posts surprise qtrly loss

* RRI lags Street

* AEP, PSEG profit drops

* AEP, PSEG, Calpine back FY earnings view

By Arup Roychoudhury

BANGALORE, July 30 (Reuters) - Lower commodity and energy prices took their toll on smaller power producers' margins as Calpine Corp (CPN.N), RRI Energy Inc RRI.N and Public Service Enterprise Group (PEG.N) posted weak quarterly results.

It was a reversal to the bigger power companies' results earlier this week.

Top players Southern Co (SO.N) and Dominion Resources Inc (D.N) posted estimate-topping quarterly results and indicated that they expect demand generated by favorable weather and an economic recovery to continue. [ID:nSGE66R0J8]

While Calpine and RRI's results did not match up to Wall Street expectations, PSEG experienced a drop in second-quarter profit from the year-ago period.

"Our results continue to be affected by weak economic conditions and low energy prices," PSEG Chief Executive Ralph Izzo said in a statement.

The company reported net income from continuing operations of $224 million, or 44 cents a share, compared with $311 million, or 61 cents a share, a year earlier. Operating earnings were 65 cents a share.

Analysts on average were expecting PSEG to earn 64 cents a share, according to Thomson Reuters I/B/E/S.

The company's biggest segment, PSEG Power, reported a 6 percent drop in earnings due to lower realized pricing.

For the full year, however, PSEG backed its profit outlook of $3.00 to $3.25 per share.

"With the implementation of an increase in electric and gas rates at the start of the summer and extremely warm weather conditions, we are reaffirming our operating earnings guidance," Izzo said.

Calpine, which posted a surprise second-quarter loss, and larger peer American Electric Power Co Inc (AEP.N) too backed their full-year earnings outlook, with the former tightening its forecast range for earnings before interests, taxes, depreciation and amortization. [ID:nSGE66S0ME]

While Calpine posted a wider quarterly loss, which surprised analysts, AEP's net profit fell 57 percent hurt by charges related to previously announced job cuts. [ID:nN30160326]

"We have seen improvement in the industrial sector from the lows of 2009, but demand in other sectors is essentially flat," AEP CEO Michael Morris said.

The company reaffirmed its ongoing earnings guidance range for 2010 of between $2.80 and $3.20 per share.

Smaller power producer RRI Energy fell short of market expectations due to weaker commodity prices and said its merger with Mirant Corp MIR.N is expected to close by year end.

"We continue to see relatively few issues with respect to RRI's proposed merger with MIR later this year. We remain eager to see the financing completed on the $1.9 billion associated with the deal," analysts at UBS wrote in a note to clients.

In April, RRI Energy agreed to be acquired by larger rival Mirant to create one of the largest U.S. independent power producers, GenOn Energy, a new company with a value of about $3 billion. [ID:nN11158137]

Shares of AEP were flat at $36.10, while those of Calpine were down a percent at $13.52 Friday morning on the New York Stock Exchange.

RRI shares were up 1.5 percent at $4, while PSEG shares were at $32.94, down 3 percent. (Reporting by Arup Roychoudhury in Bangalore; Editing by Maju Samuel)