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Entergy to Hike Residential Electric Rate

Zacks Equity Research

Entergy Corporation (ETR) has received an approval from the Mississippi Public Service Commission (:MPSC) to increase monthly rates of residential electricity. The revised rate is expected to be applicable from Sep 2013. Since 2009, this is the first rate-hike, which comes under the company’s Formula Rate Plan.

Currently, the average residential electricity customer, using 1,000 kilowatt-hours (kWh) per month, pays $100.12 per month. Per the rate revision, the average residential customers will pay $102.83, up 2.7% from earlier amount.

Entergy intends to increase its residential electricity bill in order to fund the costs incurred to upgrade and install transmission lines, set up new substations and add advanced technologies in its service territories.

We note that it is a regular practice of the utility providers to file for rate hike to recoup the investment made to develop infrastructure or to recover cost to make new purchases.

Previously, the MPSC approved Entergy’s appeal to increase the electricity rate for recovering the company’s investment and purchase a share of Entergy Arkansas’ Grand Gulf nuclear plant. Further, the approval will enable Entergy to finance the purchase of a power plant in Jackson and manage a rise in natural gas costs.

Like most of the utility providers, Entergy has made considerable investments over the last couple of years to upgrade existing infrastructure, construct high-efficiency natural gas-fired energy power plants, and acquire as well as develop nuclear power set ups.

The rate-hike approval by the commission encourages Entergy to invest more for developing the utility infrastructure. In 2013, the company intends to invest an additional $96 million for the improvement of reliability and clearance vegetation. These initiatives will subsequently enable Entergy to provide reliable uninterrupted services to its customers at a lower cost.

New Orleans, La.-based Entergy Corporation and its subsidiaries are engaged in the electric production and retail distribution operations.

Entergy currently has a Zacks Rank #3 (Hold). However, other stocks in the industry that are worth considering include Huaneng Power International, Inc. (HNP) with a Zacks Rank #1 (Strong Buy), and Alliant Energy Corporation (LNT) and IdaCorp, Inc. (IDA), each with a Zacks Rank #2 (Buy).

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