COC 2011_1_28_Watts_Happening.pdf

INDUSTRY |COMMENT
JANUARY 28, 2011
Watt's Happening?
Notable Utility Events on the Horizon
Earnings Continue
In our coverage,TE and UTL report next week. Relevant uncovered
names reporting next week include CEG, LVS and WEC.
TE Earnings Thoughts
•Based on NEE's results, we don't expect much movement in FL sentiment.
We look to see if TE was able to capture any of the 4Q10 coal price spikes
in Central App. Although 2012 prices went as high as $85, we don't believe
that much coal was actually contracted at this level. Positive weather
impacts create upside to our estimate at both the electric and gas utilities.
•We expect TE to issue guidance. We expect $1.37 for 2011 EPS based on
lower revenue from the Guatemalan divestiture and normalized weather
relative to 2010, offset by higher coal pricing and modest consumption
growth.
UTL Earnings Thoughts
•Weather impacts - slightly colder weather likely offset by higher O&M with
snowstorms in the Northeast. We look for regulatory updates regarding
UTL's pending case in NH and recently filed cases in MA.
Key Regulatory Items
•The stipulation deadline for PNM’s NM rate case is February 3. This is a
major potential catalyst for PNM and a reasonable result in the rate case
should complete the restoration of investor confidence in the NM regulatory
environment. Settlement outcomes minimize rate case overhang and
generally produce favorabe results for utilities. If the other parties do not
agree on the terms reached by PNM/Staff/AG, we would still expect to see a
stipulation, but the hearing process may get a bit noisier.
•Briefs are due in NVE’s energy efficiency proceeding on January 31. The
company requested $83M in program cost recovery and $42M in lost
revenue incentives. Although only an intermediary step in the approval
process, the legislative intent of the energy efficiency legislation is at issue.
Considering the precedent at stake for NVE, this matter warrants close
attention.
Recent Filings of Note
•In the cost approval proceedings for DUK’s Edwardsport IGCC plant, the
company filed a motion on January 25 requesting a revised procedural
schedule that would push back hearings from March until June. In the end,
we still expect a manageable outcome for DUK, but delays prolong the
negative overhang on the stock.
Priced as of prior trading day's market close, EST (unless otherwise noted).
All values in USD unless otherwise noted.
RBC Capital Markets, LLC
Emily Christy (Analyst)
[phone]; [e-mail]
Lasan Johong (Analyst)
[phone]; [e-mail]
Ella Vuernick (Associate)
[phone]; [e-mail]
(Company, Ticker, Rating, 1/27/11 Price,
Price Target, Risk Qualifier)
O=Outperform; SP=Sector Perform; U= Underperform
AVG=Average Risk
Source: RBC Capital Markets
For Required Conflicts Disclosures, see Page 4.
2
Exhibit 1: Earnings for the Week of January 30 – February 5

Ticker
Report
Date Estimates 4Q10E 2010E 2011E Dial-In
UTL 2/3/11 RBC Estimate:$0.61 $1.02 $1.37 2/3/2011 - 2:00pm
Consensus Estimate:$0.68 $1.10 $1.42 Phone: [phone]
UTL Guidance: NA NA NA Passcode: 85827916
TE 2/4/11 RBC Estimate:$0.21 $1.33 $1.37 2/4/2011 - 9:00am
Consensus Estimate:$0.25 $1.31 $1.40 Phone: [phone]
TE Guidance: $0.13-$0.23 $1.25-$1.35 NA Passcode: 36886021
Source: Factset, RBC Capital Markets estimates
Relevant Uncovered Companies Reporting
2/2/2011: WEC
2/3/2011: LVS (Read-through on Las Vegas fundamentals for NVE)
2/4/2011: CEG
Regulatory Happenings
PNM Stipulation Deadline for NM Rate Case on February 3
Background: PNM applied for a $165M rate increase in NM in June 2010. The rate case uses a forward test year for the first time in
NM as a result of legislative changes. Requested an ROE of 11.75%. PNM received ~69% of its last rate case in NM in 2009 for an
increase of $77M. PNM has reached an agreement with Staff and the NM Attorney General (AG) but extended the deadline in order to
include other parties in the settlement.
Thoughts: This is a major potential catalyst for PNM and a reasonable result in the rate case should complete the restoration of
investor confidence in NM. Settlement outcomes minimize rate case overhang and generally produce favorable results for utilities. If
the other parties do not agree on the terms reached by PNM/Staff/AG, we would still expect to see a stipulation, but the hearing
process may get a bit noisier.
Filings Due in NVE’s Energy Efficiency Incentives Proposal on January 31
Background: In October 2010, NVE filed for recovery of energy efficiency program costs ($83M) and lost revenues ($42M) per
newly enacted NV legislation. In its filings, Staff disagreed with the timeframe for the lost revenue incentives. Staff’s view would
bring the $42M request down to ~$10M. Briefs are now due on January 31 from both parties pertaining to the legislative intent behind
the filing.
Thoughts: We expected bumps along the way for this first approval process, but we thought that most issues related to forecasting
and incentive windows, not the actual legislative interpretation of incentives. Although it is still early in the proceedings, we believe
that close monitoring is warranted due to the energy efficiency precedents being considered. Furthermore, results of this proceeding
may influence the requested revenue in the upcoming rate case filing.
Other Upcoming Regulatory Activity
Next week, we expect SO to file the monthly cost update for Plant Ratcliffe, the IGCC plant being built in Mississippi. Through
November 2010, the project was on budget for $2.4B with $181M incurred to date and 42% of the costs confirmed.

Watt Happened Last Week
No DUK Settlement Reached on Edwardsport IGCC; Proceedings Likely Prolonged
Happening: DUK filed a motion on January 25 requesting a revised procedural schedule that would push back the cost approval
hearings from March until June. The company further requested that: 1) parameters regarding discovery requests be limited to the cost
increase from $2.25-$2.88B; 2) 6-month progress report approvals remain on schedule for March hearings, and 3) any discussion
alleging fraud, concealment or gross mismanagement be relegated to a separate proceeding.
Watt's Happening?January 28, 2011
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Thoughts: We expected a bumpy road in Indiana and here it is. Interveners are taking their shots at DUK. In the end, we still expect a
manageable outcome for DUK, but delays undoubtedly prolong the negative overhang on the stock.

Earnings Read-Throughs
Results were mostly as expected for NEE and SO. NEE affirmed weakness in power prices and the associated challenges with wind
development. SO highlighted the need for clarity with respect to EPA regulations with its broad three-year capex range.
For more details, please see our notes on NEE published on January 25, 2011 and on SO published on January 26, 2011.
Metrics That Matter
In this section, we highlight certain economic and industry metrics recently updated that impact our coverage universe.

Y-o-Y % Change
Oct-10 Nov-10 Dec-10 Oct-10 Nov-10 Dec-10 2010 Companies Impacted
Chicago Fed Midwest Manufacturing Index 80.9 81.2 81.5 8.6% 8.0% 8.4% 8.1%CMS, DTE, DUK
S&P/Case-Shiller Home Price Indices¹
US National 137.6 137.6 NA 0.3%0.3%
Las Vegas 101.0 100.6 NA -3.6%-3.5%NVE
Miami 144.0 143.8 NA -3.4% -3.5%NEE
Tampa 135.2 134.1 NA -3.6%-4.0%TE
Las Vegas Tourism Statistics²(2010 YTD)
Occupancy Metric³86.8 73.0 NA 5.5%0.6%1.9%NVE
Normal 12/16/10 12/30/10 1/7/11 1/20/11 1/27/11
Brownlee Dam River Flows (maf)6.30 6.75 6.78 7.23 6.87 6.72 IDA
% normal 107%108%115%109%107%
(1) December S&P/Case-Shiller index to be published in February 22nd
(2) December Las Vegas Tourism Statistics expected to be published in February
(3) City Hotel Occupancy multiplied by Average Daily Room Rate
Source: Federal Reserve Bank of Chicago, U.S. Census Bureau, Factset, S&P, Las Vegas Visitors Bureau, National Weather Service, RBC Capital Markets
Construction Corner
Updates on notable construction projects in our coverage universe.
Project
Capacity
(MW)
Date of
Progress
Costs
Incurred
Projected
Cost
Certified
Cost
% Costs
Confirmed
Expected
Online
SO Nuclear Plant Vogtle 3&4 1005(1)12/31/2010 $1,337 $6,092 $6,113 2016/2017
SO IGCC Plant Ratcliffe 582 11/30/2010 $181 $2,395 $2,395 42% May-2014
IDA Langley Gulch CCGT plant 300 10/31/2010 $157 $427 $397(2)Jul-2012
DUK Edwardsport IGCC plant 618 9/30/2010 $2,045 $2,880 $2,880 Aug-2012
(1) Represents SO's 45.7% share of the 2200MW plant
(2) The Commission only provided "regulatory assurance" of cost recovery of $397M, but the project cost estimates were $427M at the start.
Source: Mississippi Public Service Commission, Georgia Public Service Commission, Indiana Utility Regulatory Commission, Idaho Public Utilities Commission
Watt's Happening?January 28, 2011
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RBC Capital Markets, Equity Research
Investment Banking
Serv./Past 12 Mos.
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HOLD[SP] 617 45.30 134 21.72
SELL[U] 61 4.50 7 11.48
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Watt's Happening?January 28, 2011
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Watt's Happening?January 28, 2011