New Hampshire local natural gas distribution utility of Unitil Corporation (UTL - Free Report) has made a request for an increase in natural gas distribution base rates. The request is made to New Hampshire Public Utilities Commission (NHPUC). It also includes an appeal to get the rates temporarily effective from Jul 1, 2013.
The request calls for an increase of $5.2 million in base revenue or an increase of approximately 9.4% over current operating revenue. The company expects to receive a final decision in mid-2014.
Over the next several years, Unitil Corporation intends to make operational and safety-related improvements and upgrades in its gas distribution system in New Hampshire. These rate requests, if approved, would help the company in recovering the costs incurred in making these improvements.
At the beginning of April, the company placed a request with Maine Public Utilities Commission for a $4.6 million hike on its base revenue or an increase of roughly 6.3% over the current operating revenue in its Maine division. This request closely followed the recovery of costs that were invested earlier for the improvisation of operational and safety arrangements.
Unitil Corporation invests in infrastructural development, and implementation of new technologies related to utilities generation, transmission and distribution. Meanwhile, natural gas prices have plummeted to approximately half the cost of oil, thereby increasing the demand for gas. With demand rising from low nat gas prices, upgrades in infrastructure are essential for uninterrupted supply to customers.
Unitil Corporation is engaged in the distribution of electricity and natural gas in the United States. It distributes electricity in the southeastern seacoast and state capital regions of New Hampshire, and the greater Fitchburg area of north central Massachusetts; and distributes natural gas in southeastern New Hampshire, portions of southern Maine to the Lewiston-Auburn area, and in the greater Fitchburg area of north central Massachusetts.
We believe that strong natural gas fundamentals will fuel Unitil Corporation’s financial performance in the future, not only for its pricing but also for its environmental benefits and emission-free nature. All the more, rate base increase followed by a low natural gas price does not keep the customers away from taking the cost advantage of low prices.
However, we are concerned about the pending regulatory cases and uncertainty with respect to natural gas prices. The company presently retains a short-term Zacks Rank #4 (Sell).
Other stocks worth considering are Huaneng Power International, Inc. (HNP - Free Report) , Pike Electric Corporation , and Ameren Corporation (AEE - Free Report) . While Huaneng Power and Pike Electric carry a Zacks Rank #1 (Strong Buy), Ameren Corporation holds a Zacks Rank #2 (Buy).