Utility Stocks Surprisingly Pleased With SCOTUS Decision

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http://blogs.wsj.com/energy/2007/04/02/utility-stocks-surprisingly-pleased-with-scotus-decision/

Utility Stocks Surprisingly Pleased With SCOTUS Decision

Earlier, Energy Roundup noted that Bloomberg and venture capitalist Paul Kedrosky warned the Supreme Court’s ruling in Massachusetts vs. EPA would be bad news for utilities with coal-fired plants, as it seemed to make federal regulation of greenhouse-gas emissions more likely.

Somebody forgot to give the message to investors of utilities with coal-fired plants. Shares of American Electric Power and Southern are each up more than 1% today. Shares of Duke Energy, which lost in another Supreme Court environmental case today, are up 2%.

So what gives? Stanford Group analyst Christine Tezak says the ruling will, in fact, have no effect on utilities. “While this is an important moral victory for proponents of greenhouse-gas regulation, we do not believe it has meaningfully changed the pace of legislative resolution that will be needed to craft a national program, which will eventually cap and later reduce greenhouse-gas emissions from utilities, the transportation sector and industrial sources,” she writes in a note to clients.

And Sanford Bernstein analyst Hugh Wynne points out that new regulations forcing utilities to offset or cut greenhouse-gas emissions could be, at worst, neutral for regulated utilities such as Duke, AEP and Southern because they are allowed to pass such costs directly to the consumer. They’re also allowed to get a return on their invested capital — including environmental upgrades to their plants — so their earnings can actually rise as a result of regulations. Wynne owns Duke shares, and Sanford Bernstein owns shares of AEP.

– Mark Gongloff

Into their business plans and are not so easily spooked as they might be had they been holding out hope that Bushian madness on the topic had any future at all.