• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • TheStreet Smarts
  1. Home
  2. / Investing
  3. / Utilities

ConEd May Find Sandy's Silver Lining

The utility, its customers and shareholders could benefit greatly from changes wrought by the storm's destruction.
By GLENN WILLIAMS Nov 16, 2012 | 04:30 PM EST
Stocks quotes in this article: ED, DUK, SCG, SO

Hurricane Sandy changed everything for Consolidated Edison (ED). While power has been restored to most of ConEd's service territory, many customers connected to the utility continue to have challenges restoring water-soaked motors, electrical systems and equipment. Nevertheless, Sandy provided new lessons for customers and regulators. It also provided a framework to rethink ConEd's power-distribution system.

The public is more keenly aware of how dependent it is on the reliable delivery of electric power. Reliability is now at the forefront of most consumers' minds as policymakers assess options to prevent a repeat of the massive power outage. One option is to consider building a more robust power-distribution system.

If all stakeholders agree, ConEd will undertake large-scale reliability improvement projects. The utility is in a position to be one of the first to develop and implement a state-of-the-art power grid. The investments will likely be significant, but all stakeholders are motivated to absorb prudently incurred costs.

ConEd will likely invest heavily in smart-grid technologies. The objective will be to increase reliability through redundancy, isolation, switching and electronic reporting. This means ConEd will likely invest in new distribution systems that will attempt to automatically self-heal. In cases where self-healing fails, the system will attempt to isolate trouble spots to small areas, provide rapid reporting and offer managers control at the meter.

Upgrading ConEd's system will be expensive, but it will provide new growth opportunities. Regulated utilities normally receive prudent returns on investment from state regulators. ConEd and New York are no exception. Investors should benefit from additional investments, as well. Not only will ConEd implement new micro-grid technologies, it will likely beef up infrastructure with new capital spending plans. Utility investors can expect prudent returns on most of those investments.

With an enterprise value of approximately $27 billion and a market capitalization of $16 billion, ConEd is one of the nation's ten largest utilities (though it is not the largest). It is, however, the nation's largest electric-distribution company. Unlike traditional utilities, it is not saddled with money-losing power plants. It does not need to be concerned about the price of fuel, electricity or other commodities. Most important, it is not burdened by proposed rules from the Environmental Protection Agency.

Despite its size, ConEd is investor-friendly. As Jim Cramer has previously pointed out, ConEd's dividends have a long history of stability and growth. Currently, the dividend yield is 4.4% and it has a healthy payout ratio. With new capital investments, the dividend looks solid.

Like Duke Energy (DUK), SCANA (SCG) and Southern (SO), ConEd is mostly regulated. While it owns some unregulated subsidiaries, the largest assets are local distribution utilities in New York, New Jersey and Pennsylvania. Consolidated Edison Co. of New York is the most familiar, which delivers electricity, natural gas and steam to customers in New York City and Westchester County. Rockland Electric Co. and Pike County Light & Power Co. deliver energy to customers in seven New York counties, northern New Jersey and parts of Pennsylvania. Because they are regulated, most investments are placed in the state's rate base and they provide investors with reliable returns.

ConEd's growth so far has been limited by geography. Before Hurricane Sandy, the communities the utility served had to grow for ConEd to grow. As such, there seemed to be a practical limit to growth, particularly with a national economy in the doldrums. Hurricane Sandy extended that limit as new opportunities suddenly appear. And growth helps shareholders.

It is hard to find anything good out of a terrible event like a hurricane. But there will be opportunities to build something better, which can provide consumers with safer and more reliable sources of electric power.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Williams had no positions in the stocks mentioned.

TAGS: Investing | U.S. Equity | Utilities

More from Utilities

National Fuel Gas Sends Bullish Signals Ahead of Earnings

Bruce Kamich
Aug 4, 2022 7:54 AM EDT

The charts of the diversified energy company tell a positive tale in advance of its fiscal third-quarter results.

American Water Works Appears 'Head and Shoulders' Above Other Charts

Bruce Kamich
Aug 3, 2022 1:05 PM EDT

Let's check the anatomy of this compelling chart that reveals why AWK is poised for an upside breakout.

These 3 High-Dividend Canadian Stocks Are Worth a Look

Bob Ciura
Jun 11, 2022 12:00 PM EDT

We like Canadian stocks for their relatively low valuations compared to US peers.

Constellation Energy Could Power 20% Higher From Here

Bruce Kamich
May 20, 2022 7:34 AM EDT

Shares of the clean energy power generator have rallied since going public in January.

American Electric Power Could Correct Lower

Bruce Kamich
May 10, 2022 8:07 AM EDT

Let's see what the charts and indicators look like.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 02:23 PM EDT STEPHEN GUILFOYLE

    We're Cleaning Out This Retailer From the Bullpen

    Check out the latest moves in TheStreet's Stocks U...
  • 10:24 AM EDT JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    To Improve Your Trading and Investing, Spend More ...
  • 08:44 AM EDT PETER TCHIR

    CPI Beats Expectations, But Maybe Not the 'Whisper'?

    Slightly better-than-expected inflation across the...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2022 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login