COC 2011_1_21_Watts_Happening.pdf

INDUSTRY |COMMENT
JANUARY 21, 2011
Watt's Happening?
Notable Utility Events on the Horizon
In this publication, we identify noteworthy upcoming events and potential
catalysts relevant to our coverage universe. We also highlight the outcome of
previously mentioned catalysts, but the focus of the piece is forward-looking.
Heading into next week, the focus turns to earnings.
In our coverage,SO and NEE report next week. Uncovered names reporting
next week include AEP, D, NST and XEL.
NEE Earnings Thoughts:
Weather impacts on the utility and merchant plants should be neutral to
slightly positive. We’re looking for sentiment on renewable development in
the U.S. Guidance is likely to remain flat as FL sentiment hasn't moved much
in the quarter. Read-throughs on FL economy for TE, on wind development
climate for DUK.
SO Earnings Thoughts:
Heating Degree Days were 10-15% higher than normal in GA and AL for
slightly positive expected EPS impact. We are looking for updates on major
construction projects: Vogtle 3&4; and Kemper County IGCC. We also
expect SO to issue 2011 guidance. We expect SO to earn $2.47 in 2011,
reflecting higher rates in GA and AFUDC from Vogtle 3&4, offset by
normalized weather relative to 2010. Read-throughs on the Southeast
economy for DUK and TE, and on capex trends for the industry.
Key Regulatory Items:
The settlement deadline in DUK’s Edwardsport IGCC cost approval
proceeding is 1/25. Given the high level of public scrutiny surrounding this
issue, we expect this proceeding to go through the traditional, public litigated
process as opposed to a settlement behind closed doors.
Key Economic Items:
Chicago Fed Midwest Manufacturing Index will release December results on
1/27. In our space, this data provides a useful read-through for DTE,DUK
and CMS in terms of general trending as well as 4Q industrial consumption
implications.
S&P Case-Schiller November home price index will be released on 1/25.
Housing starts data at the state-level is released on 1/27. We pay particular
attention to the NV and FL housing markets with respect to TE,NEE and
NVE.
Other Items of Interest:
The National Weather Service is expected to issue an updated river flow
forecast for the Northwest on 1/27. This data primarily affects IDA in our
space but can also be impactful for the California hydrology picture.
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]
Companies Under Coverage:
(Company, Ticker, Rating, 1/20/11 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 1/23-1/29

Ticker
Report
Date Estimates 4Q10E 2010E 2011E Dial-In
NEE 1/25/11 RBC Estimate:$0.83 $4.32 $4.45 1/25/2011 - 9:00am
Consensus Estimate:$0.89 $4.35 $4.46 Phone: [phone] (US)
NEE Guidance: $4.25-$4.65 $4.25-$4.55 Passcode: 4294778
Thoughts & Read-Throughs
-Weather impacts on the utility and merchant plants should be neutral to slightly positive.€
-Looking for sentiment on renewable development in the U.S. as it relates to PPA strength
-Guidance likely to remain flat as FL sentiment hasn't moved much in the quarter.
-Read-throughs on FL economy for TE, on wind development climate for DUK
SO 1/26/11 RBC Estimate:$0.20 $2.36 $2.47 1/26/2011 - 1:00pm
Consensus Estimate:$0.18 $2.37 $2.53 Phone: [phone] (US)
SO Guidance: $0.16 $2.30-$2.36 NA Passcode: 35350389
Thoughts & Read-Throughs
-Heating Degree Days up 8% in GA, but flat in AL relative to 4Q09 for minimal expected EPS impact
-Looking for updates on major construction projects - Vogtle 3&4, Kemper County IGCC
-Read-throughs on Southeast economy for DUK, TE, and on capex trends for the industry
-We expect SO to issue 2011 Guidance. Our 2011 estimate includes higher rates in GA and higher AFUDC, offset by
normal weather relative to 2010

Source: RBC Capital Markets, Company reports
Uncovered Companies Reporting:
1/27/2011: XEL
1/28/2011: AEP, D, NST
Regulatory Happenings:
1/25/2011: Settlement deadline in DUK’s Edwardsport IGCC cost approval proceeding
Background: In light of the public scrutiny of DUK’s hiring practices in Indiana and resulting investigations, the previous
Edwardsport settlement agreement was scratched. Parties have restarted negotiations with a “clean slate” approach. For more details
on the previous settlement agreement and Indiana investigation, please see our DUK note published on 1/10/11, “Moving Past the
Distractions.”
Thoughts: At this stage, we view a settlement as unlikely. Given the public scrutiny surrounding this issue, we expect the matter to
proceed through the public litigation process. Although DUK may get clipped a bit on this outcome as compared to the original
settlement, we believe that the prior negotiation process, not the actual settlement terms, was the subject of contention.
If no settlement is reached, the intervener filing deadline is 2/1/11 and hearings would begin on 3/25/11.
1/25/11: TE is on the FPSC agenda for approval of its Peoples Gas overearnings stipulation
Background: Peoples Gas operates within an ROE band of 10.75%-11.75%. Due to extreme weather during 2010, the company
projects to earn above the allowed ROE ceiling. To address this, TE and the Office of Public Counsel (OPC) reached a stipulation
whereby TE will refund $3M to customers in March 2011. Overearnings above $3M are to be applied to Peoples’ depreciation
reserve. On January 12, FPSC Staff recommended approval of the stipulation.
Watt's Happening?January 21, 2011
3
Thoughts: Given the support of the OPC and Staff and the FPSC’s recent comments encouraging more stipulations amongst parties,
we do not anticipate any significant challenges to this proposal. TE has deferred its overearnings thus far and there will be no EPS
impact from the March refund if the stipulation is approved.
Economic Happenings:
• Chicago Fed Midwest Manufacturing Index (CFMMI) will release December results on 1/27. In our space, this data provides a
useful read-through for DTE, DUK and CMS in terms of general trending as well as 4Q industrial consumption implications.
• S&P Case-Schiller November home price index will be released on 1/25. Housing starts data at the state-level is released on 1/27.
We pay particular attention to the NV and FL housing markets with respect to TE, NEE and NVE.
Exhibits 2 & 3: CFMMI and Case-Schiller Indices
Chicago Fed Midwest Manufacturing Index
60
70
80
90
100
110
120
20
0
0
20
0
0
20
0
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0
'91 '93 '95 '97 '99 '01 '03 '05 '07 '09
0
100
200
300
Case-Schiller Indices Price (Indexed to 100)
US National CS Index Tampa CS Index
Miami CS Index Las Vegas CS Index

Source: Chicago Federal Reserve, FactSet, RBC Capital Markets
Other Happenings:
National Weather Service Northwest River Flow Forecast on 1/27
Background: Since IDA derives approximately 50% of its power from hydroelectric generation, river flows have a significant impact
on the utility. Pertinent flows are measured from the Brownlee Dam along the Snake River in ID. The prior release from 1/7/11
forecasted 7.2 Million-Acre-Feet (maf) for April – July, compared to the 30-year average of 6.3 maf. Although this forecast has
varied from the actual flows by as much as 2.4 maf in recent years, this is the highest starting January forecast in the past five years.
Forecasts are updated three times per month based on precipitation observations.
Thoughts and Impact: Higher river flows create more hydroelectric generation and reduce the cost of electricity in ID. If flow
projections remain favorable, IDA would require less power supply revenue from customers. This may create a more favorable cost
environment for a potential base rate increase request. We expect IDA to file a rate case this year as its previous rate settlement will
expire at year-end 2011.
Watt's Happening?January 21, 2011
4
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RBC Capital Markets, Equity Research
Investment Banking
Serv./Past 12 Mos.
Rating Count Percent Count Percent
BUY[TP/O] 683 50.20 196 28.70
HOLD[SP] 613 45.00 131 21.37
SELL[U] 65 4.80 9 13.85
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Watt's Happening?January 21, 2011
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Watt's Happening?January 21, 2011