Apple’s (NASDAQ: AAPL) iPhone loses market share in China, based on Gartner data. (Reuters)

Improved odds of a Greek bailout lift markets. (Reuters)

The U.S. Consumer Financial Protection Bureau to target consumer collection agencies. (Reuters)

Chinese search company Baidu (NASDAQ: BIDU) will pursue mobile applications for growth. (Reuters)

Ally may be sold because its IPO plans have faced difficulty. (Reuters)

Alibaba says it will not work on foreign M&A in the future. (Reuters)

Google (NASDAQ: GOOG) used tracking software to take private information on people who use the Apple mobile OS. (WSJ)

UBS (NYSE: UBS) traders establish schemes to set interest rates around the world. (WSJ)

EU-based banks find stability in U.S. consumer operations. (WSJ)

European Central Bank and German plans to aid Greece probably will allow the southern European nation to finally get its bailout. (WSJ)

The Export-Import Bank may match financing set by countries like China to help U.S. exporters. (WSJ)

Twitter launches a program to attract small advertisers. (WSJ)

The International Monetary Fund will offer austerity rules in Greece that will spread the effects over many years. (WSJ)

Clearwire (NASDAQ: CLWR) says it may need to raise more capital. (WSJ)

The EU airline emissions fee faces challenges from a number of quarters. (WSJ)

Duke Energy (NYSE: DUK) to pursue its $13.7 billion bailout of Progress Energy (NYSE: PGN). (WSJ)

Large investor Blackrock (NYSE: BLK) may determine the fate of the Xstrata and Glencore International merger. (WSJ)

Congress wants to auction TV airwaves to raise money to help improve the deficit. (NYT)

Positive comments from investigators examining Apple supplier Foxconn may be premature. (NYT)

U.S. taxpayers will help support a deal on mortgages set between the federal government and five banks. (FT)

Germany wants one voice from EU ministers set to rescue Greece, which would include approval of an ECB debt swap. (Bloomberg)

Douglas A. McIntyre

Some of the more recent dividend hikes in the utility sector have been in shares of Duke Energy Corporation (NYSE: DUK), American Water Works Company, Inc. (NYSE: AWK), American States Water Company (NYSE: AWR), Xcel Energy Inc. (NYSE: XEL), and DTE Energy Co. (NYSE: DTE).  What we are trying to show you is that the trend of dividend hikes is not without precedent in utilities.

24/7 Wall St. is looking for utility dividend hike candidates after some recent hikes in the sector.  We have evaluated 9 large-cap or mid-cap dividend producing utility stocks for investors where you can expect a dividend hike in the coming months.  These include, in alphabetic order: American Electric Power Co., Inc. (NYSE: AEP), Constellation Energy Group, Inc. (NYSE: CEG), Dominion Resources, Inc. (NYSE: D), Entergy Corporation (NYSE: ETR), FirstEnergy Corp. (NYSE: FE), NextEra Energy, Inc. (NYSE: NEE), Pinnacle West Capital Corporation (NYSE: PNW), PPL Corporation (NYSE: PPL), and Progress Energy Inc. (NYSE: PGN).

Now that the Supreme Court has rejected some carbon-cutting measures, some additional drag has been removed from this sector that might have otherwise been victim to higher ten-year Treasury yields.  We would also like to note that we have tried to consider mergers in our analysis as this sector continues to consolidate.  Our basis is more of a standalone merger basis rather than solely due to mergers  into consideration here because we are looking for the companies which can grow their dividends based solely upon their own metrics.

American Electric Power Co., Inc. (NYSE: AEP) is perhaps our favorite utility and it was named as one of our ten stocks to own for the next decade.  Its shares recently traded at $38.18 and has a current dividend yield of 4.9%.  Its 52-week trading range is $30.34 to $38.99.  Thomson Reuters has estimates of $3.13 EPS for 2011 and $3.22 EPS for 2012.  AEP has had three straight quarters of a $0.46 dividend and this is likely to be grown in the months ahead.  The prior $0.42 quarterly dividend was only in place for two quarters before being raised.  The current pace comes to $1.84 per year.  Our take, look for $0.48 per quarter.  We are not looking for an equal hike this time around as earnings growth is only expected to be almost 3% next year.

Constellation Energy Group, Inc. (NYSE: CEG) is often treated as a controversial stock in the world of utilities.  While we said we are not taking M&A into consideration, it is in a pending deal with Excelon and we are still evaluating this on a standalone basis.  It recently traded at $37.70 and has a current dividend yield of 2.55%.  Its 52-week trading range is $27.24 to $37.87.  Thomson Reuters has estimates of $3.20 EPS for 2011 and $2.46 EPS for 2012.  Its dividend used to be far higher and has been $0.24 per quarter for about ten quarters in a row.  It is hard to know about the “when” but the “if” seems a shoe-in if it somehow is not merged.

Dominion Resources, Inc. (NYSE: D) recently traded at $48.61 and has a current dividend yield of almost 4.1%.  Its 52-week trading range is $36.98 to $49.07.  Thomson Reuters has estimates of $3.14 EPS for 2011 and $3.25 EPS for 2012.  The company has been in the habit of hiking payouts more than once a year if the last hike was a sign.  If no dividend hike is made in the fall, it could be announced late this year.  The current payout is $1.97 per year, leaving well more than $1.00 per share for operations ahead.

Our daily “Dividend Watch” does not always look for the highest dividends on an absolute basis, but we look for either the most stable dividends or those which can be raised easily through time and we generally look for the companies large enough with a core market that can stand better through time than smaller peers.  What we like about the electric utilities today is that these offer high income and they are defensive stocks in nature.  Simultaneously, they do offer some growth, yet also offer value investors plenty of value. Another worry might be the build-out of the power grid that has continually been an argument, but that and the commodity worry must be a combined non-starter… Many utility shares are hitting 52-week highs.

American Electric Power Co., Inc. (NYSE: AEP) trades around $37.00 and its 52-week trading range is $28.26 to $37.94.  It has a market cap of almost $18 billion and pays investors right at 5.0% in dividend yields.  We would warn against expecting another immediate dividend hike as it raised its $0.41 dividend that had been static from November-2007 to February-2010, but then it raised it to $0.42 for two quarters and then to $0.46 for the last two.  AEP has been diversifying its portfolio of electric power sources with more renewables to its 5+ million customers in 11 states.  The current annualized payout of $1.84 compares to Thomson Reuters estimates of $3.13 EPS for 2011 and $3.24 EPS for 2012.  Based upon this, we’d expect that dividend raise to go to $0.47 or $0.48 per quarter at the next dividend hike.  Analysts have a consensus price target objective here of $38.75, although we would expect some to lift targets if that is achieved.

Duke Energy Corporation (NYSE: DUK) is one which many investors had looked the other way on after its 2007 spin-off of Spectra.  What is interesting is that it raised its dividend through the recession and its $0.245 payout may be up for being raised again soon. Shares just hit a new 52-week high of $19.00 today and it has a market cap of about $25 billion.  It also pays investors close to a 5.2% yield.  The company just reported a 15% rise in net income and it is in the midst of the merger with Progress Energy, Inc. (NYSE: PGN).  This deal is going to transform Duke, but Progress also has a yield of close to 5.2%.  The company claims to only be spending $90 million for the first integration, which means that a profit boost may be able to flow immediately to the bottom line.

FirstEnergy Corporation (NYSE: FE) is in the news this morning because of a blowout earnings report, or at least on guidance.  Shares are up 5% at $41.65 but the stock hit a new 52-week high of $41.77 against a low of $33.57.  It also has a market cap of about $12.7 billion and it pays investors about 5.3% in dividend yields even at the highs today.  What makes First Energy so interesting is that it is only about half of its pre-recession share price peak and its $0.55 per quarter dividend has been static since early 2008.  The company earned only $0.15 for the quarter, but that would have been $0.69 EPS had it not been for the shares issued for the acquisition of Allegheny and due to higher operation and maintenance costs.  This $2.20 payout compares to raised guidance of adjusted earnings per share of $3.20 to $3.50 for 2011 through 2013. We are not looking for a big dividend increase immediately, but 5.3% should entice investors looking for ‘coupon income’ in stocks.

For those who want to smooth out the noise of individual companies and still get a handsome dividend, there is always the Utilities Select Sector SPDR (NYSE: XLU).  We evaluate this because the rise in commodities would be punishing it if there was going to be a blow-up in the utility sector’s earnings.  Shares are at $33.52 and it hit a new 52-week high of $33.56 today.  As this is a fund (ETF), it has a variable quarterly payout but the average of the payouts comes to a yield of roughly 4.0% for investors.

If you want to know just how committed utilities are to dividends, American Electric Power and Duke are in a consortium called Defend My Dividend, which aims to lobby Congress not to boost the dividend tax all over again as it did in the past.

You are invited to join our free daily email distribution list to hear more about analyst upgrades and downgrades, top day trader and active trader alerts, dividend trends, news on Buffett and other investment gurus, IPOs, secondary offerings, private equity, and more.

JON C. OGG

David Lochbaum of the Union of Concerned Scientists, one of the most respected observers of the industry, this week released a report with this startling statistic:  “The NRC reported on 14 near‐misses at reactors last year. 12 near‐misses involved safety problems while 2 near‐misses were for security problems.”  A near miss is a serious incident at a plant which required the attention of federal regulators.

One operator, Progress Energy (NYSE: PGN), was especially troublesome to Lochbaum.    The Raleigh, North Carolina-based company owns five plants.  Three of the reactors (Brunswick 1,  Brunswick 2 and Robinson 2 ) are currently subject to enhanced scrutiny by the NRC.    A third Progress reactor, Crystal River 3, is shut because workers broke the containment wall.  In Lochbaum’s opinion, that’s unacceptable.

“There are 104 nuclear power reactors operating in the US and Progress Energy only owns 5 of them,” he writes.  “Progress Energy had more
than its share of near‐misses last year. Why? Was the company merely unlucky? Or did the corporate hand play a role in these safety problems?”

In response,  Raleigh, North Carolina-based Progress Energy is promising that it will do better.   Spokesman Mike Hughes writes in an email that the company continuously works to improve safety.

” We have taken specific actions to address each of the events last year that led to special inspections,” Hughes says. ” In addition, we continue to strengthen corporate policies and oversight to ensure we sustain a culture of questioning and safe, conservative operation.”

Lochbaum’s report underscored problems at other plants.  Entergy Corp. (NYSE: ETR), for instance, has taken grief from activists for years for its Vermont Yankee plant at the Indian Point plant near New York City.

In 2009,  Vermont Yankee disclosed to the Vermont Department of Public Health that radioactive tritium into the groundwater. The Vermont Department of Health says as of February 10 approximately 325,000 gallons of tritium-contaminated groundwater has been pumped out of the ground.   At first, an executive denied that there were underground pipes that could leak. Debate is raging in Vermont over its relicensing in the wake of the tragedy in Japan because the reactor has the same design as the ones facing meltdowns over there. There was also a turbine fire and collapse of a cooling tower.

Inexplicably, the NRC is leaning toward renewing the plant’s license.

“But NRC’s rubberstamp of this old and leaking nuclear reactor says more about the Commission and its deference to the nuclear industry than it does about the battle over Vermont’s energy future,” writes Jim Riccio of Greenpeace, in a recent blog post.

Indian Point has aroused concerns of activists and public officials who fear that its proximity to New York City makes it a tempting target for terrorists.   The Japan crisis has only heightened these concerns.    However, Lochbaum’s report uncovered the disturbing finding that “during every refueling outage since 1993 at Indian Point Unit 2 (New York), radioactively contaminated water has been leaking into containment at rates between two and ten gallons per minute.”

According to Riccio, the plant is at a terrible location, adding in an interview that it could be “compromised by a traffic helicopter. “

Ohio is facing a firestorm of controversy in its efforts to extend to 2037.  Beyond Nuclear says the Ohio plant has the worst safety record of any plant in the country.    The NRC says the reactor has been the location of two of the worst nuclear incidents since 1979.   In 2002,  workers at the plant found a corrosion hole at the top of the reactor.   The plant was closed for two years and FirstEnergy was criminally prosecuted.    According to the Akron Beacon-Journal,  “cracks in the nozzles of the reactor head” were recently discovered at the plant though FirstEnergy says the problems are not serious.

Critics have complained for years that the NRC is too easy on the industry.   For instance, investigators in 2007 found evidence that security guards at the Peach Bottom plant in Pennsylvania were sleeping on the job. The NRC fined Chicago-based Exelon Corp.  (NYSE: EXC) $65,000 for the incident, a pittance for the company whose market cap exceeds $26 billion.

“The industry complains the NRC is too strict. The intervenors
complain the NRC is not strict enough. Sounds like the NRC may have the
balance correct,” writes Dr.  Paul Turinsky, chairman of the Department of Nuclear Engineering at North Carolina State University,  in an email to 24/7 Wall St. “Some technical issue appears and either it is not fully recognized or a sufficient root cause analysis of the problem to fully address the underlying cause is not completed. Due to years of operating the plants, one would expect the number of technical issues would decrease as these issue are effectively addressed, so if there is a trend [don't know whether there is] of a higher ratio of management to technical issues, this may explain it.”

The Japan crisis could not have come at a worst time for the nuclear power industry.   President Obama has made the sector a cornerstone of America’s policy to ween itself off its dependence on oil from the politically unstable Middle East.   Earlier this week, Energy Secretary Steven Chu said the Administration wants to add $36 billion to an already-existing $18.5 billion loan guarantee program for new reactors.   These projects are politically popular because they create good paying jobs both in the plant’s construction and its operation.

In the decades since Three Mile Island,  there has not be an accident in the U.S. of a similar magnitude.   The Nuclear Energy Institute, an industry trade group argues that reactors are among the safest industrial facilities in the country.   Indeed, nuclear power will remain an integral part of the energy mix of the United States for decades  to come regardless of the outcome of the situation in Japan.  There is little other choice given the potential downsides to all forms of energy production. Folks on Waynesboro, Georgia,  the site of the Southern Co.’s (NYSE: SO) Alvin  W. Vogtle plant,  where an $18.7 billion  new reactor is planned,  are not too worried about the crisis in Japan, according to USA Today.

“We have a lot of confidence in the Southern Co.,”  Waynesboro Mayor George DeLoach told the newspaper. “The plant is over 20 years old. It’s been operating since the late ’80s and we haven’t had a serious accident or complaint out there. They do a great job.”

While that may be true,  the industry got plenty of help.   During the late 1990s,  states deregulated their electricity markets and allowed utilities to refinance the debts at their plants at lower interest rates.   It saved them a fortune.   Suddenly, operators of aging reactors were asking the NRC to extend their licenses instead of mothballing them.   The ranks of nuclear engineering graduates, which had been in decline for years, began to swell.   However, the Union of Concerned Scientists argues that without government subsidies, the industry would not be economically viable.

“While nuclear power has some beneficial attributes (low operating costs, economies of scale, and low carbon emissions  per unit of energy delivered), pricing transparency on all of its attributes most likely would have dampened past investment in nuclear power and shifted resources to alternative technologies,”  the non-profit group says.

The crisis in Japan may make it much harder for new reactors to be built and existing ones to expand.

–Jonathan Berr

To show just how bad the market has been even to utilities, the leading ETF is the Utilities Select Sector SPDR (NYSE: XLU) and its shares have fallen 4.6% since Friday closing Wednesday at $30.99 with a 52-week range of $25.76 to $32.89.  We did of course not cover every single utility with nuclear power, but our coverage below accounts for a combined market capitalization rate of more than $100 billion.  Our review focused on Ameren Corporation (NYSE: AEE), Constellation Energy Group, Inc. (NYSE: CEG), Entergy Corporation (NYSE: ETR), Exelon Corporation (NYSE: EXC), FirstEnergy Corp. (NYSE: FE), Progress Energy Inc. (NYSE: PGN) and Southern Company (NYSE: SO).

We broke out how much each of the partial US nuclear energy complex has fallen since Friday, what the 52-week range is, what the market caps are, and which are some of the listed nuclear properties which we took from the U.S. Nuclear Energy Institute.

Ameren Corporation (NYSE: AEE) is down only about 3.5% since Friday with shares at $26.79; 52-week range is $23.09 to $29.89 and its market cap is $6.4 billion. Nuclear properties include Callaway.

Constellation Energy Group, Inc. (NYSE: CEG) is down about 6% since Friday with shares at $30.30; 52-week trading range is $27.64 to $38.73 and its market cap is roughly $6 billion.  Nuclear properties include Calvert Cliffs, Ginna, and Nine Mile Point.

Entergy Corporation (NYSE: ETR) is down almost 9.5% since Friday with shares at $66.65; its 52-week trading range is $66.31 (hit today) to $84.33 and its market cap is about $12 billion.  Nuclear properties include Arkansas Nuke 1 & 2, Grand Gulf, Indian Point, James A. Fitzpatrick, Palisades, and River Bend.

Exelon Corporation (NYSE: EXC) is down almost 7% since Friday with shares at $39.95; its 52-week trading range is $16.78 to $45.56 and its market cap is $26.5 billion. Nuclear properties include Braidwood, Bryon, Clinton, Dresden, La Salle, Limerick, Oyster Creek, Peach Bottom, Quad Cities, Salem, and Three Mile Island.

FirstEnergy Corp. (NYSE: FE) down almost 6% since Friday with shares at $36.59; 52-week range is $33.57 to $40.80 and its market cap is $11.2 billion.  Nuclear properties include Beaver Valley and Perry.

Progress Energy Inc. (NYSE: PGN) is down ‘only’ almost 4% since Friday with shares at $44.55; 52-week trading range is $37.13 to $46.83 and the market cap is about $13.1 billion.  Nuclear properties include Brunswick, Crystal River, H.B. Robinson, and Shearon Harris.

Southern Company (NYSE: SO) is down close to 4% since Friday with shares at $36.80; 52-week range is $32.04 to $38.79 and its market cap is close to $31 billion.  Nuclear properties include E.I. Hatch, J.M. Farley and Vogtle.

Many of these plants have switch-over capabilities, but there is one thing to consider here.  Despite these plants being old, shutting these plants down in any short order is just not likely in the cards barring maintenance or other disasters.  Switching to fossil fuels is also a much more costly initiative for consumers.

What seems to be at issue is that newer regulations would come with a higher cost of securing and operating “safe nukes” if there is such a real term.  Our take is that nuclear expenses will rise as a result, but the future demand damage of uranium may make the fuel cheaper ahead and any higher regulatory and security costs that the plants take on will probably be passed down to Joe America.

JON C. OGG

On Friday afternoon came federal approval for the pending FirstEnergy Corp. (NYSE: FE) and Allegheny Energy Inc. (NYSE: AYE) merger.  The firms still have to go through state approvals to secure the merger.  FirstEnergy’s $4.7 billion deal comes to paying $27.65 per share to Allegheny holders.

Progress is valued at $13.7 billion or $46.48 per share, but this is a stock-for-stock deal.  Progress Energy holders will receive 2.6125 shares of common stock of Duke Energy per Progress share.  Duke Energy will assume over $12 billion in Progress Energy net debt.

Duke Energy holders will own about 63% and Progress about 37% of the new company.  Duke also expects to effect a reverse stock split before the merger and the exchange ratio will be adjusted.

Another pending deal in the world of utilities is Dynegy Inc. (NYSE: DYN), where Carl Icahn’s Icahn Enterprises, L.P. (NYSE: IEP) is in a deal to acquire the company if a go-shop provision does not generate a higher buyout price.  Dynegy’s buyout is a tender offer that will follow with a formal merger that pays Dynegy shareholders $5.50 per share in cash.

There is also the pending Northeast Utilities (NYSE: NU) merger with NSTAR (NYSE: NST) announced back in October.  The components inside the Utilities Select Sector SPDR (NYSE: XLU) appear to be getting fewer and fewer.

Duke shares are down 1.6% at $17.50 against a 52-week range of $15.47 to $18.60 with a 5.5% dividend yield; Progress shares are down 1.6% at $43.98 against a 52-week range of $37.04 to $45.61 with a near 5.5% dividend yield.

Duke and Progress highlighted the premiums here, but shareholders may want more leverage other than just larger scale.

American Electric Power Co., Inc. (NYSE: AEP) is so far not in the merger mania.  It was recently voted as one of our top ten stocks to hold for the next decade.

You can join our free daily email distribution list to hear more about analyst upgrades and downgrades, top day trader and active trader alerts, dividend trends, news on Buffett and other investment gurus, IPOs, secondary offerings, private equity, and more.

JON C. OGG

We have provided the expected events, added in background and price data, added in color on each where applicable, and more.

Alcoa, Inc. (NYSE: AA) kicks off earnings Monday after the close and Thomson Reuters has earnings estimates of $0.19 EPS on $5.68 billion in revenues.  Be advised that at $16.42 its 52-week range is $9.81 to $17.60 and also know that this was around $12.00 before its October earnings.

Apollo Group Inc. (NASDAQ: APOL) is also due to report earnings Monday after the close.  It finds itself between the days of former growth and regulation out the (you know what)… It cannot be a value stock even if the numbers today suggest so.  The  regulation affecting forward business throws too many variables into the mix.  Thomson Reuters has estimates of $1.35 EPS and $1.26 billion in revenues.  At $37.98, its 52-week trading range is $33,75 to $66.69.

Duke Energy Corporation (NYSE: DUK) with a $23.5+ billion market cap is reported by the WSJ to be acquiring Progress Energy Inc. (NYSE: PGN) with its $13.1 billion market cap.  The WSJ homepage notes: “Duke Energy is close to a deal to buy Progress Energy in an all-stock merger that would value its smaller rival at more than $13 billion.”

Endo Pharmaceuticals (NASDAQ: ENDP) announced late Friday night that it received a complete response letter from the FDA on the application of its new formulation of OPANA® ER designed to be crush resistant.  Endo noted that this does NOT need those additional clinical studies be conducted for approval of the NDA, but noted that it currently anticipates responding to the FDA by mid-2011 and would expect a six-month review cycle once its response is filed.  The new formulation of OPANA ER is for moderate to severe pain in patients requiring continuous, around-the-clock opioid treatment for an extended period of time.

Ameren Corporation (NYSE: AEE) Cut to Underperform at BofA/ML.
Archer Daniels Midland Company (NYSE: ADM) Started as Hold at Jefferies.
Bank of America Corporation (NYSE: BAC) Cut to Market Perform at KBW.
Charter Communications, Inc. (NASDAQ: CHTR) Started as Sector Perform at RBC.
Comerica Incorporated (NYSE: CMA) Started as Outperform at Wells Fargo; Cut to Market Perform at KBW; Cut to Hold at S&P Equity Research late-Wednesday.
Progress Energy Inc. (NYSE: PGN) Cut to Neutral at BofA/ML.
Randgold Resources Ltd. (NASDAQ: GOLD) Raised to Strong Buy at S&P Equity Research (late Wednesday call).
Raytheon Co. (NYSE: RTN) Cut to Market Perform at FBR.
Regions Financial Corp. (NYSE: RF) Raised to Buy at S&P Equity Research (late Wednesday call).
The St. Joe Company (NYSE: JOE) Raised to Outperform at KBW.
Starwood Hotels & Resorts Worldwide Inc. (NYSE: HOT) Raised to Neutral at Baird.
The Talbots Inc. (NYSE: TLB) Started as Outperform at Oppenheimer.
Tyson Foods Inc. (NYSE: TSN) Started as Buy at Jefferies.
Verisign Inc. (NASDAQ: VRSN) Cut to Perform at Oppenheimer.
Wynn Resorts Ltd. (NASDAQ: WYNN) Raised to Overweight at JPMorgan.

You can join our free daily email distribution list to hear more about dividend trends, analyst upgrades and downgrades, top day trader and active trader alerts, news on Buffett and other investment gurus, IPOs, secondary offerings, private equity, and more.

JON C. OGG

A variety of utilities and companies have received federal grants to implement various pieces of the smart grid. Constellation Energy Inc. (NYSE:CEG), CenterPoint Energy (NYSE:CNP), Duke Energy (NYSE:DUK), NextEra Energy (NYSE:NEE), Progress Energy (NYSE:PGN), and Exelon (NYSE:EXC) have all been awarded the maximum $200 million stimulus grants. Honeywell International (NYSE:HON), Consolidated Edison (NYSE:ED), and Whirlpool Corp. (NYSE:WHR) have been awarded grants for projects related to customer systems, electric distribution systems, and equipment manufacturing, respectively. General Electric Co. (NYSE:GE) also recently announced a $200 million investment in smart grid. Two other companies, Echelon (NASDAQ:ELON) and MasTec (NYSE:MTZ) have been working on partnerships in smart metering and energy management (Echelon) and building out transmission and distribution lines (MasTec). There’s even an ETF play available, the First Trust NASDAQ Clean Edge Smart Grid Infrastructure Index ETF (NASDAQ:GRID).

The concept of the smart grid is to open a two-way, real-time communications path between utilities and consumers. The current grid is not able to handle real-time events, such as lower prices at certain times of the day when electricity rates are in less demand and therefore lower. Smart meters, sophisticated and scalable demand response systems, and meter data management all need to be able to communicate with one another as well as with utility companies and customers over all kinds of networks.

By comparison with today’s grid, the smart grid is a supercomputer replacing an abacus. Utility companies now get monthly meter readings and batch them up before sending them to the billing system. Under a smart grid system, the utility company will be able to handle millions of data transactions every day.

One research firm estimates that for every million smart meters a utility company’s smart metering operations must support every day over 2,000 meter sways, more than 1,000 customer moves, 10,000 missing reads, 20 meter failures, and more than 97 million meter reads. This is a sea change on an order of magnitude that utility companies have never faced before.

So let’s assume that the smart grid is in place. What are the benefits, both the utility and to the customer? The chief gain to a utility will come from its ability better to balance supply and demand, and to provide greater reliability by making their power purchases more rational. From a strategic perspective, better use of assets such as generating plants and other infrastructure will help utilities make better investment decisions. Operationally, load factors will improve and system losses and outages will decline. As a result, costs should fall.

For consumers get new tools that will help them see how much electricity they are using, when they are using, and how much it costs at exactly the time they use it. Savvy consumers will have far more control over their use of electricity, and once the initial cost of the smart meters and appliances is amortized, consumers will save money.

An almost forgotten benefit of the smart grid is the reduction in CO2 emissions. Because supply will be better fitted to demand, fewer new generating plants will need to be built. Electricity will be more efficiently used and, thus, less will be required. The federal government has targeted a 5%-8% improvement in energy efficiency by 2020 to go along with a 12%-15% renewable energy generation target.

Renewable generation projects using solar PV cost about $396/MWh, solar thermal projects cost about $257/MWh, and onshore wind projects cost about $149/MWh. Energy efficiency projects cost about $50/MWh. And energy efficiency is the goal of the push for a smart grid.

The US Energy Information Administration estimates that an investment of $520 billion in the smart grid will return $1.2 trillion in gross savings by 2020. No other technology even comes close to that kind of return.

Over the next four or five years investment in the smart grid could reach $215 billion, according to an analyst at the Bank of America. The total investment needed to revamp the US electricity grid could be into the trillions of dollars, according to the American Society of Civil Engineers.

The takeaway here is that smart grid technologies boost energy efficiency, which the most cost-effective way we have to reduce energy consumption and CO2 emissions. Nothing else comes close.

Paul Ausick

We wanted to take a look at Select Sector SPDR Trust (NYSE: XLU), Southern Company (NYSE: SO), Dominion Resources, Inc. (NYSE: D), Duke Energy Corporation (NYSE: DUK), FPL Group, Inc. (NYSE: FPL), American Electric Power Company (NYSE: AEP), Entergy Corporation (NYSE: ETR), FirstEnergy Corporation (NYSE: FE), Edison International (NYSE: EIX), Progress Energy Inc. (NYSE: PGN), PP&L Corporation (NYSE: PPL), Xcel Energy Inc. (NYSE: XEL), DTE Energy Company (NYSE: DTE) and more.

There may actually be some time for them to shine in the near future. Despite the rally market of the last month, almost none of these stocks are within 5% of their 52-week highs.  We showed the dividend yields implied here, although as with all ‘yields’ there is often some distortion.  What we did not show was a P/E ratio because of the lagging effect of that, but we did show was the closing price for March 31 as the quarter closed and compared that to the 52-week trading range and compared it to the average consensus price target from Wall Street analysts per Thomson Reuters.

So why is this sector in the spotlight?  The dividend yields should be attractive enough.  Most are 4% and higher.  This offers defensive stock positioning, dividend yields, and the hope for some upside.  Of course, some are barren of a dividend due to issues and turnarounds. That keeps investors from having to go out to REITs and take on all the risks there associated with land values and trends.  Historically, utilities have been largely considered defensive stocks in hard times.  Morningstar noted in its quarterly wrap-up, “Utility stocks were hurt in the quarter by falling commodity and energy prices, bearish earnings outlooks as firms reported earnings, and a generally negative view of the future of electricity demand.”  The problem with that call is that energy demand is not dropping any longer and some larger companies are starting to increase their power usage again.