The summer heat is giving me a burning desire for electric utilities companies. Before I invest, however, I want to make sure that my investment will keep my portfolio warm and cozy for many years ahead. That's why I've taken a look at the demand for electricity in the areas where these three firms operate, as well as the firms' regulatory relations, before deciding whether to purchase a stake in these stocks.
Calpine Corporation (NYSE:CPN) is in the right place at the right time, and I'd buy this stock today if I had room in my portfolio of the best companies. As a major operator in Texas, the firm is in the middle of a period of increased demand for its power. Staggeringly hot summer temperatures have many people in Texas scrambling to cool themselves with air conditioners, and that increased demand can't be accommodated all the time. This is the second year that the demand has exceeded the supply in Texas. That creates a massive amount of business and potential growth for Calpine Corporation (NYSE:CPN) .
The firm's Texas operations account for about 30% of the company's generating capacity. Furthermore, regulators in the state aren't as steadfastly opposed to rate increases as they are in other states. That means more potential profits for Calpine Corporation (NYSE:CPN), and increased returns for investors. The company also looks to be undervalued, as it went through a bankruptcy debacle due to the Enron Creditors Recovery Corp. scandal. It is once again public and ready to make use of its efficient power fleet. The gas-fired plants at Calpine Corporation (NYSE:CPN) are likely to experience even greater demand -- particularly in Texas and California -- because of nuclear plant closures.
Edison has strong relations with regulators
Consolidated Edison, Inc. (NYSE:ED) crossed its 200-day moving average on July 11 as the company's stock sold for as much as $58.61 per share. That could give an indication that the firm is fairly priced. As a long-term investor, however, I don't pay a lot of attention to charts in my value assessments. Instead, I look at the fundamentals that can set these companies apart from the rest.
Consolidated Edison, Inc. (NYSE:ED), for example, has a basic strategy that is easily understood by regulators and this helps it to attain deregulation better than many of its industry counterparts. While there are significant upgrades expected at the company, the firm will bask in the fruit of that labor in the years ahead. I would keep an eye on this stock, and make a purchase as some of its projects near completion. If you do decide to invest in Consolidated Edison, Inc. (NYSE:ED) now, however, you will realize dividend yields of about 4%. Furthermore, the company has increased dividend yields every year for nearly 40 years.