Duke Energy Corporation ( DUK - Analyst Report ) has filed for an electric and natural gas rate increase with the Public Utilities Commission of Ohio (“PUCO”). The new rates, if approved by the PUCO, will increase the average monthly bill of a residential customer using 1,000 kilowatts-hours of power in a month by 6.6% to $116. Similarly, average monthly bill of a residential customer using 70 Centum Cubic Feet of natural gas in a month will increase by 9% to $75. The new rates, if approved, will become effective from 2013.

Over the last couple of years, Duke Energy has invested a substantial amount to replace certain types of risers used for connecting gas service lines to gas meters and to improve the natural gas delivery system by replacing cast iron and bare steel mains. This is expected to improve efficiency, reduce fuel consumption and thereby, cost of operations for the company.

It is a normal practice for the regulated utility providers to recover their invested funds through rate hikes. Duke Energy’s previous electric and natural gas rate hikes were implemented in 2009 and 2008, respectively, to manage wind storm recovery expenses and costs related to safety standard improvements.

Utility providers frequently invest in infrastructural development, for implementation of new technologies related to electricity generation, transmission and distribution and for meeting fuel expenses. All these ensure uninterrupted, smooth and hassle-free power and gas supply to the end consumer.

We view Duke Energy as a well managed and high-quality energy provider in high-growth areas. We expect the company’s earnings growth to come from its high quality electric services, continued investments in infrastructure, increasing pipeline-integration investments, and strong customer service.

But, at the same time, we are skeptical about the company’s low natural gas and electricity prices, and the chances of customers switching toward alternate energy sources.

Duke Energy Corporation currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.

Based in Charlotte, North Carolina, Duke Energy Corporation is a diversified energy company with a portfolio of domestic and international, natural gas and electric, regulated and unregulated businesses. These businesses supply, deliver, and process energy for customers in North America and selected international markets. The company competes with Unitil Corporation ( UTL - Snapshot Report ) .