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Public Service (PEG) Arm Files for Residential Rate Decrease

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Public Service Enterprise Group Inc. (PEG - Free Report) announced that its subsidiary Public Service Electric and Gas Company has filed an agreement with an administrative law judge and on approval of the same, the residential customer bills will be stabilized and reach a level, which is 30% below the bill paid by customers in 2008.

The company made its last petition submission in June 2018 for reducing residential gas bills with the New Jersey Board of Public Utilities (BPU). The BPU approved the same in September on a provisional basis effective Oct 1. The typical residential customer, who uses 165 therms in a winter month and 1,010 therms annually, will see annual savings of about $12 or an average of $1 per month.

Details of the Rate Case/ Customers Benefit

Per the agreement filed by the company, the annual revenues will decrease by $13 million after considering the effect of federal tax reform and other tax effects. The company’s top line will increase by an amount of $212 million on account of storm costs, which have been deferred as of now. However, it would be paying back $225 million in tax saving on account of tax reforms to its customers.

With the rate decline, the combined residential electric and gas customer bill is expected to dip 0.1% or around $2 per year. However, commercial and industrial electric customers’ bill will remain flat while gas customers’ bill will witness an average savings of 1-2%.

The rate cut is delivered by the company to its customers, majorly on account of lower taxes and cost-control programs. Going forward, the company expects to keep its customer bills essentially flat and at levels, nearly 30% lower than what was a decade ago, and more than 40% less post adjustment for inflation.

Utility Stocks Filing for Rate Decline

We believe that this drop in rates is possible on the back of the ongoing emphasis across the United States on enhance energy efficiency, lower electricity generation expenses and helping consumers minimize usage.

In September 2018, Duke Energy Corp.’s (DUK - Free Report) unit, Duke Energy Indiana, submitted a proposal to the Indiana Utility Regulatory Commission for lowering electricity rates pertaining to customers. If approved, bills of Indiana customers will be moderated by 0.5% till the next base rate review.

Also, in July, Avista Corporation (AVA - Free Report) has made a filing to Idaho Public Utilities Commission (IPUC) for approving its annual fixed cost adjustment (FCA) in Idaho. If lent with a nod, the overall annual electric and natural gas revenues in the region will be trimmed by $7.2 million (2.9%) and $2.7 million (4.5%), respectively.

Price Movement

In a year’s time, shares of Public Service Enterprise have gained 9.8% versus the industry’s decline of 4.8%.

Zacks Rank & Key Pick

Public Service Enterprise currently has a Zacks Rank #3 (Hold). A better-ranked stock in the same space is Ameren Corporation (AEE - Free Report) , carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Ameren pulled off an average positive surprise of 9.76% in all the trailing four quarters. The Zacks Consensus Estimate for 2018 EPS has moved 1.3% north over the past 30 days to $3.25 per share.

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