Allegheny Revises Rate Hike

Allegheny Energy Inc. (AYE - Analyst Report) yesterday scaled down its proposed rate hike in Virginia . Earlier, in April 2009, the company had asked for $22.6 million rate hike, which it has now scaled down by $3.2 million to a $19.4 million. Allegheny has proposed the hike before the Virginia State Corporation Commission to recover its cost of purchased power. 

For a residential customer with a monthly consumption of 1,000 kilowatt-hours of power, Allegheny's original proposal would have increased the bill by $5.47 to $96. The scaled-down proposal would result in a monthly bill of $94. Headquartered in Greensburg , Pennsylvania , Allegheny Energy is an electric utility company with over $3 billion in annual revenues. 

The company is engaged in both regulated electricity and natural gas distribution utility operations as well as in unregulated wholesale energy markets. It owns and operates generating facilities and serves electricity to approximately 1.6 million customers spread across the states of Pennsylvania , West Virginia , Maryland and Virginia . 

Going forward, Allegheny Energy’s positive investment factors include higher generation rates in Pennsylvania and Maryland , higher residential usage and ongoing transmission projects. Looking ahead, we expect that the company’s regulated delivery utility business will provide steady earnings growth while the disposal of retail distribution operations in Virginia will infuse liquidity. 

However, the positives would be offset by lower industrial demand and higher emission and hedging costs. We reiterate our Neutral recommendation on the low dividend yield stock, which reflects our view that the stock will trade at par with the peer group of electric utility companies such as AES Corporation (AES - Snapshot Report) and TECO Energy Inc. (TE - Snapshot Report).