NorthWestern Energy (NWE - Free Report) has filed for an electric rate increase with the Montana Public Service Commission, which if approved, will lead to an increase in the bill of a typical residential customer by 7.4% or $6.37 per month.
The company has been investing consistently to improve the quality of services via strengthening its transmission and distribution lines. This is the first electric rate revision filing by the company in Montana since 2009.
Rate Hike and Investments
NorthWestern Energy’s electric and natural gas operations are entirely regulated, supplying a major portion of electricity or 56% from hydro and wind sources. The company has maintained a disciplined capital investment program to ensure reliability and safety of operations.
Undoubtedly, the rate hikes definitely impact the monthly budget of customers. However, the same is necessary to get essential services 24x7. At present, the electricity rates charged by the company from its residential customers are lower than the national average.
It plans to invest nearly $1.6 billion within the 2018-2022 time period and fund the same from cash flows and long-term debt issuances. The rate increase will definitely help the company to achieve its long-term investment plan.
Strong Customer Growth
Unemployment rate in the three states in which the company supplies electricity and natural gas is in line or lower than the national average, which definitely has a positive impact on demand for the same, leading to an increase in customer base.
Moreover, over the past decade, NorthWestern Energy’s electric and natural gas customer addition is better than the national average.
Focus on Renewables
The rate hike will allow NorthWestern Energy to carry on with investment to generate clean energy for customers. In 2017, 60% of the electricity generation was carbon free. New investments will further help to lower emission levels, going ahead.
Per the U.S. Energy Information Administration (“EIA”), as of February 2018, renewables accounted for 22% of the total U.S. electricity generation capacity. The percentage of renewables in the total generation mix is expected to rise, in turn curbing the share of fossil fuel generation.
Despite efforts of the new administration to revive usage of coal in different industries, we notice that large utilities like NextEra Energy (NEE - Free Report) and Dominion Energy (D - Free Report) are increasingly investing in renewables, and lowering emission.
The company has gained 11% compared with its industry’s rally of 1.6% over the past six months.
Zacks Rank & A Stock to Consider
NorthWestern Energy currently has a Zacks Rank #3 (Hold). A better-ranked stock from the same industry is IDACORP Inc. (IDA - Free Report) , which carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
IDACORP’s earnings estimates have moved up 1.4% to $4.28 in the past 60 days. Its long-term earnings growth is pegged at 2.8%.
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