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Exelon Lowers Rates, Users Gain from Efficient Energy Use

Zacks Equity Research

Exelon Corporation EXC was able to lower electricity rates for its customers, thanks to efficient electricity usage and drop in commodity prices.  Customers of PECO Electric , Exelon’s subsidiary, experienced nearly a 30% drop in rates from 2011 levels, while Baltimore Gas and Electric Company (BGE) customers saw a 25% drop in winter bills from two years ago.

Why This Drop in Rates?

The slump in bills—a welcome change for the users— is a result of a combination of certain factors. Primarily, lower commodity prices, reduced usage due to milder winter and participation in energy efficiency programs helped to cut down the rates.

Customers who have participated in programs like PECO Smart Energy Choice and BGE Smart Energy Savers Program are reaping the benefits of lower costs.

Overall Scenario

The average retail price of electricity continued to drop in 2016. As per a U.S. Energy Information Administration (EIA) release, combined average retail price of electricity (cents per kilowatt hours) dropped 1.25% year over year for all sectors.

According to EIA, the prices of electricity in residential, commercial, industrial and transportation sectors dropped 0.8%, 2.5%, 2.3% and 6.0%, respectively, in 2016. The slump in rates was primarily due to cheap natural gas price and lower demand for power.

Long Term Plans
 
The cut down in electricity rates is not stopping Exelon from moving forward with its long term plans. These include investing nearly $20 billion over the 2017–2020 time period, for improvement in reliability of its operations. Such systematic investments in regulated assets will drive earnings growth in the range of 6–8% and rate base growth of 6.5% during this time frame.

Price Movement

Exelon Corporation’ a Zacks Rank #3 (Hold) stock gained 1.9% over the last one year, compared with the Utility-Electric Power industry loss of 0.4%.



The company has reported positive earnings surprise in three of the last four earnings releases, with an average positive surprise of 9.96%. Exelon is expected to generate free cash flow of nearly $7.0 billion in the 2017–2020 time period through business activities. The company intends to utilize the free cash flow to lower existing debt levels, fund its capital program and pay dividends to shareholders to maximize their value.

Stocks to Consider

Some better-ranked operators in the Utility–Electric Power industry are NextEra Energy NEE, Entergy Corporation ETR and CenterPoint Energy Inc. CNP.

All the above-mentioned companies carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

NextEra Energy surpassed earnings estimates in three out of the last four quarters, with an average positive surprise of 4.32%. Its 2017 Zacks Consensus Estimate moved by 1.1% to $6.66 per share in the last 60 days.

Entergy Corporation surpassed earnings estimates in the last four quarters, with an average positive surprise of 104.4%. Its 2017 Zacks Consensus Estimate moved by 9.1% to $5.02 per share in the last 60 days.

CenterPoint Energy Inc. surpassed earnings estimates in two out of the last four quarters, with an average positive surprise of 0.4%. Its 2017 Zacks Consensus Estimate moved by 1.6% to $1.29 per share in the last 60 days.

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CenterPoint Energy, Inc. (CNP): Free Stock Analysis Report
 
Exelon Corporation (EXC): Free Stock Analysis Report
 
NextEra Energy, Inc. (NEE): Free Stock Analysis Report
 
Entergy Corporation (ETR): Free Stock Analysis Report
 
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