Thursday, April 17, 2008

Sizing Up the Utilities, if Carbon Caps Take Hold (DYN; ETR; EXC; FPL; NRG; PGC)

From the New York Times:

FUEL prices and dividends are usually big drivers of the share prices of utilities. Now there is a new variable to consider: how much carbon their power plants emit....

...Companies like the Exelon Corporation, the Constellation Energy Group and the Entergy Corporation, which operate nuclear power plants, would benefit from cap-and-trade plans under consideration, like the Lieberman-Warner Climate Security Act, which is pending in Congress, Mr. Chin said.

“They all potentially get a very large benefit from higher power prices being pushed up by carbon,” he said.

If emission credits are auctioned in a cap-and-trade system, there may be particular problems for coal-fired generators of electricity in markets where natural gas is a major fuel. Burning natural gas generally emits 40 percent less carbon dioxide than coal, and coal-fired plants in gas markets might have a hard time passing along the costs of carbon credits to consumers, some analysts say. NRG Energy, Reliant Energy and Dynegy could feel the sting, Mr. Wynne of Sanford C. Bernstein said.

...Innovest rates companies on management of carbon emissions. It gives its highest rating to three utilities — including the FPL Group, which, it says, has a strategy to reduce greenhouse gas emissions and make huge investments in wind power; and PG&E, for developing energy efficiency initiatives and renewable power. The third company in the group, Consolidated Edison, got the highest rating for taking measures to reduce emissions. Innovest’s lowest rating goes to four companies that it says have done relatively little in this area, Allegheny Energy, the Southern Company, the Ameren Corporation and the Scana Corporation....