Public Utilities Sector

Public Utilities in the US – Information and Listings on the Stock Market

Defining Utilities:

This category describes companies which provide essential services to heat and brighten up homes and commercial establishments.  Utility company stocks can be any which supply gas, electricity and water to customers. There are several which fall under the heading of integrated providers.

Why these companies are important:

Utility companies require a lot of investment because of the infrastructure needed to supply services. These firms have large debt burdens and are sensitive to interest rate changes.  High interest rates means higher payments to clear off debt. The utility sector usually performs best when interest rates are low.

Changes in the landscape:

At one time, utility stocks were considered safe to invest in.  Many of the companies are facing challenges due to changes in regulations by the EPA and other bodies.  Of course, fluctuation in demand based on weather, competition and price fluctuations have an impact on the value of stocks.

Not too long ago, large monopolies provided power and dictated terms to the market. With the break up in structures and the entry of companies with new and clean technologies, the short term forecast looks a bit risky. 

Since de-regulation in 1996, authorities are loath to let the market dictate prices and other terms as far as Utility companies are concerned.  The methods currently used to electric power and gas are always a hot debated subject and controversial.  Public interest groups and regulators are pushing for investments in clean and renewable sources. 

The balance of power is tilting in favor of buyers. For instance, the gas and electricity supplied by companies is all the same, services are treated like commodities and customers are in a position to dictate terms.