It used to be that electric utility stocks were big, safe, boring, and environmentally unattractive. You bought them for the income they generated and could stash them away for decades without worry about their financial soundness. That all changed with deregulation and the ensuing implosions of numerous utilities.
Puget Energy (PSD — NYSE) isn’t exactly a throwback to the old days. It is a mid-size, slightly risky, and environmentally preferable utility. It derives most of its revenues from its regulated Puget Sound Energy (PSE) gas and electric utility. The balance comes from its unregulated utility construction engineering business (InfraStrux). Approximately 15% of Puget Sound’s electricity generation is coal-fired, and another 5% each come from hydropower and oil/gas. The majority is purchased from outside sources, primarily hydro. But this year the company signed agreements to purchase up to 380 megawatts of newly constructed wind power, making wind a significant component of the company’s generating capacity. Utilities that depend on hydropower are always a bit risky because they depend on rainfall for their power supply. Puget also carries above-average levels of debt.
In addition to the new wind power, Puget offers a green energy program to customers, and is committed to increasing its purchases of renewable power. The company also just signed a relicensing agreement for its biggest hydro dam that purports to enhance fish and wildlife habitat, improve recreational facilities for the public, enhance flood mitigation in the Skagit River Valley, and protect Native American cultural resources. The agreement was hammered out over five years with Indian tribes, fisheries interests, environmental groups, and government representatives.