UTILITY111512-post EEI Update.pdf.pdf

Please see page 13 for rating definitions, important disclosures
and required analyst certifications
All estimates/forecasts are as of 11/16/12 unless otherwise stated.
Wells Fargo Securities, LLC does and seeks to do business with companies
covered in its research reports. As a result, investors should be aware that
the firm may have a conflict of interest that could affect the objectivity of the
report and investors should consider this report as only a single factor in
making their investment decision.

November 16, 2012
Equity Research
Post-EEI Utility Update
Industry Themes And Company Takeaways

Sector Rating: Diversified Electric Utilities, Market Weight
Sector Rating: Integrated Electric & Gas, Market Weight
Sector Rating: Regulated Electric Utilities, Market Weight
FY EPS Valuation Range Chg. Price Chg. Chg.
Ticker Rating Y/N 11/15/12 2012E Y/N 2013E Y/N Curr Prior
Diversified Electric Utilities ET 1 $63.00 $5.50 $5.00 $70-71 $74-76
F 1 41.16 3.35 2.95 $45-46 $48-49
NE 1 66.49 4.55 4.90 $73-74 $75-76
PEG 2 29.28 2.35 2.35 $30-31 $33-34
Integrated Electric & Gas
CNP 1 19.13 1.18 1.25 $20-21 $22-23 OG 1 55.58 3.50 3.65 $60-62 $61-63 V 2 27.62 1.85 1.97 $29-30 $31-32Regulated Electric Utilities EP 1 40.96 3.05 3.10 $46-47 $47-48 CNL 1 38.76 2.43 2.50 $45-46 $47-48 CMS 1 22.79 1.55 1.62 $26-27 $27-28
ED 2 54.43 3.75 3.88 $56-58 $60-62
DU 2 59.87 4.30 4.35 $62-63 $64-65
EI 1 43.79 3.40 3.30 $49-50 $52-53
GXP 2 20.16 1.30 1.60 $21-22 $22-23 IDA 1 40.75 3.35 3.23 $44-45 $47-49
IT 1 75.63 4.13 4.90 $97-99 N NU 1 37.86 2.30 2.55 $42-43 $43-44 NW 1 33.43 2.40 2.55 $37-38 $39-40 NV 2 17.50 1.35 1.30 $18-19 $20-21
POM 2 18.87 1.18 1.20 $20-21 $21-22
PCG 2 40.17 3.13 2.85 $41-42 $45-46
PNW 2 49.16 3.42 3.55 $51-53 $52-54
PO 2 25.17 1.95 1.95 $27-28 $28-29
SCG 1 45.51 3.12 3.33 $49-50 $52-53 SO 2 42.54 2.65 2.80 $45-46 $48-49 1 27.52 1.98 2.00 $30-31 $32-33 E 2 36.12 2.32 2.35 $37-38 $41-42 XEL 1 26.03 1.80 1.90 $29-30 $31-32
Source: Company data and Wells Fargo Securities, LLC estimates 1= Outperform, 2 = Market Perform, 3 = Underperform, V = Volatile
= Company is on the Priority Stock List NA = Not Available, NC = No Change, NE = No Estimate, NM = Not Meaningful

• On November 11-13, we attended the 47th Edison Electric Institute (EEI)
Financial Conference in Phoenix, Arizona. In this note we outline industry
themes and company-specific takeaways from our discussions with over 25 utility
management teams. Hot topics include: (1) Sales Growth and the impact of
Energy Efficiency (EE)--s it really different this time? (2) ROE Pressure--Allowed
ROEs generally holding up well but 10% psychological barrier is not as strong as it
used to be; (3) Cost Controls; (4) Dividend Taxes--most utility executives remain
cautiously optimistic that parity between dividend and capital gains tax rates will
remain; and (5) Climate Change--not sensing meaningful carbon regulation
anytime soon but don’t rule out support for renewables. Unlike past conferences,
M&A chatter was noticeably absent. Adjusting estimates for CNP, GXP, PNW and
WR and adjusting valuation ranges for all companies except ITC.

Neil Kalton, CFA, Senior Analyst
[phone] /
[e-mail] Akers, CFA, Senior Analyst(314) 875-2040 /
[e-mail]
Jonathan Reeder, Associate Analyst
[phone] /
[e-mail]
Glen F. Pruitt, Associate Analyst
[phone] /
[e-mail]
WELLS FARGO SECURITIES, LLC
Utilities EQUITY RESEARCH DEPARTMENT

2

On November 11-13, we attended the 47th Edison Electric Institute (EEI) Financial Conference
in Phoenix, Arizona. Below we outline industry themes that came to the surface in discussions
with over twenty-five utility management teams followed by comments on company-specific
takeaways.

Industry Themes

SALES GROWTH
As a carryover from third quarter earnings calls, investors were interested in the impact of energy efficiency
(EE) and conservation on electric sales growth. Most utility management teams agree that the old mantra of
sales growth at 0.6-0.7 times GDP growth no longer holds, though the impact appears to vary by region. For
example, Southern Company does not appear to be experiencing the same level of demand destruction in the
Southeast, and CenterPoint Energy continues to be encouraged by sales trends in Texas. Further, several
Northwest utilities, including Portland General Electric and IDACORP, highlighted that EE/conservation is not
a new phenomenon in their territories so the impact is less incremental relative to peers in the Midwest, for
example. In addition to regional discrepancies, other factors, such as extreme weather and lingering economic
weakness, make it difficult to isolate the impact of energy efficiency on sales.

ROE PRESSURE
Not surprisingly, management teams are keenly aware of the downward pressure on allowed ROEs in the
current interest rate environment. Several companies cited ROE risk as a factor in determining rate case
timing. While many states continue to support ROEs north of 10%, others have already breached the 10%
threshold--once thought of as a bit of a psychological barrier. A handful of companies that we met with fear
that their state’s allowed ROEs may slip further and in some cases into the upper-9% range. However, we
stress allowed ROEs are only one piece of the regulatory puzzle (i.e. allowed equity ratio, forward test year,
tracking mechanisms, etc.) and we continue to advocate that investors focus on earned ROEs when evaluating
regulatory outcomes/environments.
COST CONTROLS
Given the aforementioned pressure on allowed ROEs and sales, companies are nearly unanimously focusing on
cost initiatives to maintain reasonable earned ROEs and help limit/push back rate relief requests. Headcount
reductions (largely through attrition) appear to be leading the way, along with systemwide improvements
(sourcing, financial systems, etc.).

DIVIDEND TAXES
Companies do not yet appear to be panicking about the looming expiration of the 2003 dividend tax cuts
(though we may not be able to say the same for investors given recent share price performance). Most
management teams remain cautiously optimistic that parity between dividend and capital gains tax rates will
remain. We did not sense that utilities are likely to material alter dividend policies in response to changing tax
treatment.

CARBON
We did not sense that utility companies expect meaningful carbon regulation anytime soon in light of the
current state of the economy. Several management teams characterized carbon as a “tough sell.” We continue
to believe that economic initiatives (namely jobs) will take precedent over climate change, but we would not be
surprised if carbon is back in play in the latter portion of President Obama’s term assuming unemployment
returns to a more acceptable level.

CLIMATE CHANGE REGULATION?
We did not sense that utility executives expect meaningful carbon regulation anytime soon in light of the
economy and the fact that the Republicans still control the House of Representatives. We continue to believe
that economic initiatives (namely jobs) will take precedent over climate change, but we would not be surprised
if carbon is back in play in the latter portion of President Obama’s term should unemployment return to a
more acceptable level. In the nearer term, one possible end around for the Democrats that is likely more
politically palatable than a carbon tax is a stronger emphasis on renewables (tax credit extensions or perhaps
the re-emergence of a federal renewable standard).

NOT SO HOT TOPIC: M&A Unlike past EEI conferences, chatter around potential M&A was noticeably absent. We suspect the longer-
than-expected proceedings related to DUK/PGN and NU/NST play may be taking a toll on deal prospects in
the utility industry.

WELLS FARGO SECURITIES, LLC
Post-EEI Utility Update EQUITY RESEARCH DEPARTMENT

3

Neil Kalton’s company-specific takeaways are listed below followed by Sarah Akers’ coverage.

Neil Kalton’s Company-Specific Takeaways

American Electric Power (AEP/Outperform) (Kalton)

• Our meeting with AEP was in a refreshingly stark contrast to the last few meetings at EEI as the
management shifts from defense to offense. While we have to wait for the “i’s” to be dotted and “t’s”
to be crossed on the Electric Security Plan (ESP) in Ohio before the company can provide 2013 EPS
guidance (our estimate remains $3.10), we think the longer-term outlook is coming into better focus.
On the regulated side, management emphasized cost controls, capital discipline and FERC-regulated
transmission as the key growth engine. The transmission EPS contribution is expected to grow from
$0.12 in 2012 to $0.35 by 2015 driven primarily by a healthy portfolio of smaller projects at the
Transcos.

On the merchant side, AEP restated the desire to lock up as much of their 9,000 MW portfolio as
possible under long-term contracts with municipalities and electric cooperatives--however, pursuit of
these contracts must wait until the pooling arrangement, etc. is sorted out over the next 12-18
months.
CLECO (CNL/Outperform) (Kalton)

• We were impressed with CNL’s well thought out strategy regarding a number of key items and
initiatives (expiration of rate plan in 2014, wholesale contract opportunities). Notably, CNL provided
additional information around the size and timing of incremental municipal and electric cooperative
wholesale contract opportunities in its region. The goal is to achieve an approximate 25% market
share--if accomplished the math indicates a need for an additional regulated combined cycle facility
by 2015-16 (new contracts + organic load growth).
CMS Energy (CMS/Outperform) (Kalton)

• CMS provided a 2013-17 CapEx plan of $6.5-7.3B vs. $6.5B for 2012-16 and a 2018-22 CapEx plan of
$8.0B. While a lot can change over the course of ten years, we believe the guidance displays a key
differentiating factor between CMS and the majority of other regulated utilities--namely, we believe
the rate base growth percentage for the sector will begin to trend down in 2014 whereas CMS appears
to have a much longer runway.

Separately, we gained further clarity on CMS’s plan to potentially develop a new regulated natural
gas-fired plant in the 5-year planning horizon. We previously wondered whether CMS’s unregulated
DIG plant could be moved into regulated rate base rather than building a new facility. However, there
appears to be a fairly strong bias in Michigan against such affiliate transactions. Why is this
significant? Arguably, CMS’s equity valuation does not reflect much, if any, value for DIG in our view,
which we conservatively value at $1.00/share. By keeping DIG as an unregulated facility, CMS not
only preserves the optionality around the plant but also does not eat into regulated investment
opportunities in our view.

Duke Energy (DUK/Market Perform) (Kalton)

• DUK’s management was understandably limited in what they could say regarding the ongoing North
Carolina Utilities Commission (NCUC) investigation into the CEO change that immediately followed
the closing of the merger with Progress Energy. That being said, based on our meeting at EEI and our
constructive viewpoint of the NCUC we remain of the opinion that the likely tension caused by the
merger will be dealt with in the investigation and not carry over into the utilities’ general rate cases.

Management elaborated on their optimism that the IURC approves the Edwardsport settlement
agreement by year-end. The logic seems reasonable as all major parties have signed on and setting a
hard cap prior to the latest cost increase for the IGCC plant would enhance the value of the settlement
to Indiana constituents.

WELLS FARGO SECURITIES, LLC
Utilities EQUITY RESEARCH DEPARTMENT

4

The decision on Crystal River 3 focuses on DUK developing a high degree of confidence in the scope
of the repair. While NEIL recovery is important for cost recovery, it is not a major factor in the repair
decision. We got the sense a decision on CR3 is still many months away and that management would
likely err on the side of conservatism when making its ultimate decision.

Edison International (EIX/Outperform) (Kalton)
• A decision on Edison Mission Energy (EME) draws increasingly closer. On November 15, EME failed
to make scheduled interest payments of $97 million of unsecured debt. The company has a 30-day
grace period to make the payments. In essence, if EIX is not able to reach an agreement with the
bondholders in the next 30 days then EME would be in default and the company would likely file for
bankruptcy protection.

We spent a healthy amount of time at EEI with Chairman and CEO Ted Craver discussing the dual
platform strategy (regulated and unregulated operations) in the event EIX walks away from EME.
Consistent with prior communications, Mr. Craver expressed a strong preference for having a dual
platform given the potentially sweeping technological changes that the industry could experience over
the next decade. While Mr. Craver sensibly would like to keep EIX’s options open, we sensed one area
of particular interest as being the provision of energy services to commercial and industrial customers
on a national basis (distributed generation, etc.). We did not sense a keen interest in developing
another merchant generation business.

On the dividend front, EIX targets a 45-55% payout ratio of SCE’s earnings. Depending upon the final
outcome in the GRC proceeding and the pending cost of capital proceeding, management indicated
that the dividend could be increased at a higher level than the 1-2% annual increases in recent years.
Importantly, it does not appear that the SONGS proceeding would impact the timing of near-term
dividend decisions. The current annual dividend of $1.30 represents a 39% payout ratio on our SCE
and parent 2013E EPS of $3.30. However, we do not expect the board to achieve the targeted payout
ratio with one large increase.

Entergy (ETR/Outperform) (Kalton)

• The key topic of conversation was the pending spin-off of the company’s transmission assets to ITC
Holdings. With MISO approvals in hand from all of the jurisdictions, attention now shifts to the
change in control filings to transition the assets from Entergy’s utilities to ITC. While neither ETR
nor ITC would definitively state that the MISO approvals have positive implications for the change in
control proceedings, we sensed a belief from both managements that it might. We also sensed a
strong belief from both companies that they would be able to make a highly compelling case to state
regulators as to why ITC ownership of the assets is in the long-term interest of customers. We
continue to believe that the transaction will gain the necessary approvals through a negotiated process
--with an emphasis on “negotiated.”

On the Genco front (Entergy Wholesale Commodities), ETR is hunkering down and trying to
maximize the value of existing assets while keeping an eye on potential transactions such as the
Rhode Island State Energy Center to complement the fleet. Management continues to believe that it
would be optimal to separate Genco from the Utility but acknowledges that the Indian Point
uncertainty greatly complicates matters.

FirstEnergy (FE/Outperform) (Kalton)

• FE emphasized margin over market share for FirstEnergy Solutions. The company also downplayed
recent comments made by competitors suggesting meaningful pressure on 2013 retail margins.
Management highlighted the company’s competitive advantage by emphasizing the attractive profile
of their unregulated generation fleet. While we remain concerned by the muted long-term outlook for
power prices, we continue to believe FE remains relatively attractive as compared to the power
market leveraged peers. Features include a path towards EPS growth over the next few years driven
by higher scheduled capacity prices and a dividend that is fully supported by the regulated utility
operations.

WELLS FARGO SECURITIES, LLC
Post-EEI Utility Update EQUITY RESEARCH DEPARTMENT

5

ITC Holdings (ITC/Outperform) (Kalton)

• ITC provided initial 2013 EPS guidance of $4.80-5.00 and a CapEx range of $760-860 million, which
is consistent with our EPS and CapEx estimates of $4.90 and $831 million. As expected, ITC has
elected not to refresh the 5-year CapEx outlook while the Entergy transaction is pending. We do not
believe this should be interpreted as having negative implications for the growth outlook for the
stand-alone business. In our view, because the Entergy transaction is so transformational--doubles
the size of the rate base--it makes sense to us to view the next five years on a holistic basis. We think
it is conceivable that the needs of the Entergy system could theoretically impact capital decisions in
other jurisdictions. In addition, we think the recent announcement of the ITC Great Plains Project
and, separately, our constructive discussion at EEI regarding potential partnership opportunities
indicates the development pipeline remains robust. Based on management’s comments, it sounds
like there is increasing receptivity by other utilities to partner with ITC. Management cited the
Entergy deal as helping to improve ITC’s visibility and credibility, but we also think key personnel
additions over the last few years have helped.

NextEra (NEE/Outperform) (Kalton)

• Our Outperform rating is predicated on a constructive outcome for FPL’s rate case and a “backlog
only” scenario for NextEra Energy Resources. Post-EEI, we remain comfortable with these
assumptions.

From a more macro-perspective, President Obama’s re-election was generally viewed as being
positive for renewables. In the near term, NEE believes that a one-year extension to the wind PTC is
likely and important in the sense that it keeps tax credits in the game. However, such an extension is unlikely to have a meaningful impact on wind development as a number of projects were pulled
forward into 2012 and a one-year extension would not be a sufficient signal for the industry from a
longer-term perspective. That being said, given the President’s post-election comments around the
need to address climate change, it is quite possible that renewables may be viewed as a more palatable
solution than a carbon tax from a policy perspective--and NEE would not rule out the possibility that
a federal renewable standard could come back into the discussion.

Northeast Utilities (NU/Outperform) (Kalton)

• Given NU recently held an analyst day in Boston that provided an initial and thorough overview of the
merged entity, there was not much new to discuss at EEI. Importantly, NU’s operating utilities
performed very well in response to Hurricane Sandy. This is particularly significant in Connecticut as
last year CL&P faced stinging criticism following the utility’s 2011 response to Tropical Storm Irene
and the October 29 snowstorm. We think the merged entity, which includes some upper
management changes, is off to a good start in Connecticut--as evidenced by the constructive rate plan
--and it is important that the improving regulatory relationship not get immediately derailed.
Separately, we could have some news on the $1.2 billion Northern Pass transmission project shortly.
NU has been wrapping up procurement on the rights of way and it sounds like the company may soon
be able to enter the next phases (routing/siting). We continue to be of the impression that regional
support for the project remains strong despite vocal opposition from isolated environmental groups.

NorthWestern (NWE/Outperform) (Kalton)

• NWE’s EPS drivers for 2013 reflect a $0.10 increase relative to 2012 EPS guidance of $2.30-2.40,
which suggests a range of $2.40-2.50. Recall, NWE excludes the $0.12 related to the FERC dispute
involving cost recovery for the Dave Gates Generating Station (DGGS) in the 2012 EPS guidance. Our
2013 estimate of $2.55 includes the $0.12. We believe our estimate is a better representation of
NWE’s ongoing EPS power given our continued belief that the company will ultimately be allowed to
substantially recover the full costs of DGGS (either via FERC customers or state customers). Bottom
line--we believe NWE’s 2013 EPS drivers are highly supportive of our DGGS-adjusted 2013 estimate.

WELLS FARGO SECURITIES, LLC
Utilities EQUITY RESEARCH DEPARTMENT

6

Separately, on 11/15, the Montana PSC approved NWE’s acquisition of the Battle Creek natural gas
reserves. At EEI, NWE indicated that in the event of a positive MPSC decision the company’s
projected natural gas reserves investment of $100-200 million during the period 2012-14 would move
to “high probability” from “high to medium probability.” Our outlook assumes $100 million in
addition to the $32 million already announced.

Pepco Holdings (POM/Market Perform) (Kalton)

• Our key takeaway from EEI: recent data points suggest that there is some positive regulatory
momentum in Maryland and in our view management’s body language seemed to reinforce this
notion. First, the Governor’s recent Grid Resiliency Task Force report included a recommendation
that the Maryland PSC consider an accelerated CapEx program that included a tracking mechanism
for such CapEx. Second, the chairman of the Maryland PSC has indicated that he plans to issue an
order in the Derecho proceeding by year-end that would address some of the Task Force
recommendations. Third, POM’s response to Hurricane Sandy was good throughout their service
territories. In fact, Pepco’s response in Maryland compared very favorably with others in the state.
While we are encouraged by these data points, we think POM still faces a lot of heavy lifting to bring
earned ROEs up to adequate levels. That being said, should POM be able to execute on planned
regulated CapEx and materially reduce the operating utilities’ regulatory lag, we believe annual EPS
growth could be in the 8-10% range versus peers at 4-6%.

PG&E Corp. (PCG/Market Perform) (Kalton)

• We got the impression that reaching a global settlement by year-end could prove challenging.
Settlement remains the preferred path however the other parties prefer to negotiate without a
mediator--something PG&E feels would greatly facilitate the process. Should the CPSD not
recommend extending negotiations, hearings are set to resume on November 26. Management
indicated that it may be necessary for hearings to resume so as not to unduly delay the overall
resolution process. Under this scenario, settlement talks would continue, thus it would not preclude
PG&E’s from striking a settlement. Management believes the ALJ proposed decision on PG&E’s
Pipeline Safety and Enhancement Plan provides a reasonable starting point for settlement
negotiations. Should a unanimous settlement be reached, PG&E expects the CPUC would act quickly.

The proposed decision in the pending cost-of-capital proceeding is due November 19. Both PCG and
EIX management expect timely resolution in the proceeding despite the fact that nearly all other
major CPUC dockets have extended beyond the original procedural schedule. Recall, the DRA
recommended an 8.75% allowed ROE versus utility requests of 11%+.

On November 15, PG&E filed its 2014 General Rate Case application requesting 2014-16 revenue
increases of $1.3 billion, $0.5 billion and $0.5 billion, respectively. Roughly two-thirds of the case
appears CapEx driven with the biggest percentage increase focusing on gas distribution. While
management indicated that the opportunity to accelerate infrastructure investment is vast, it is
ultimately a matter of what the regulators want done.

Public Service Enterprise Group (PEG/Market Perform) (Kalton)

• We viewed our meeting with PEG as quite positive. PSE&G’s response to Hurricane Sandy appears to
have been viewed by the state as being as good as could have been reasonably expected given the
magnitude of the storm. At this point, given the constructive feedback from Governor Christie and
the NJ BPU we believe storm-cost recovery should be fairly straightforward. Longer term, it is
possible that PSE&G could end up deploying additional capital to further harden the system. Based
on recent precedent and PSE&G’s constructive relationship with the BPU, we would expect there
would be some type of tracking mechanism for such CapEx. On the merchant side, management
continues to employ a prudently conservative approach by basing their strategic and financial
decisions on the forward power curves.

WELLS FARGO SECURITIES, LLC
Post-EEI Utility Update EQUITY RESEARCH DEPARTMENT

7

SCANA (SCG/Outperform) (Kalton)

• Based on our discussion with management at EEI, we remain comfortable with our 2013 EPS estimate
of $3.33. We walked away with the impression that settlement discussions in SCE&G’s electric rate
case remain constructive and ongoing--a settlement needs to be reached by November 19 given the
Public Service Commission of South Carolina’s desire to have settlement agreements in hand one
week prior to hearings in order to provide sufficient time for consideration.

On the nuclear front, SCG modestly revised the timing of CapEx related to minor delays in module
deliveries. The delays are not expected to have any impact on the 2017 and 2018 in-service dates for
the two units. Separately, the $283 million nuclear cost update filing was unanimously approved by
the PSC.

Southern Company (SO/Market Perform) (Kalton)

• We spent a considerable amount of time with Chairman and CEO Tom Fanning discussing his
thoughts on federal policies following the 2012 election. On the energy front, Mr. Fanning does not
think there is much appetite in Washington for any type of carbon legislation (straight tax or cap and
trade) but rather expects the EPA to continue to drive environmental/carbon policy. Separately, Mr.
Fanning thinks the utility industry (along with other groups) has done an effective job of
communicating the need to keep the dividend tax rate in parity with the capital gains rate.

Our discussion on these topics with SO is another healthy reminder as to why we consistently have
had a positive bias toward the company. Not only does SO stay in front of issues on a state-level but
also on a national level. This allows the company to not only have a say in policies that might impact
the company and its customers, but also better understand the direction of policies in order to
mitigate the impact on customers. Our Market Perform rating reflects valuation considerations.

Wisconsin Energy (WEC/Market Perform) (Kalton)

• Chairman and CEO Gale Klappa clearly articulated why he believes that WEC’s projected 4-6% EPS
CAGR is on more solid footing than the sector. Specifically, WEC’s EPS growth target is predicated on
realistic load growth assumptions while much of the rest of the industry is still coming to terms with
the notion that usage trends may be structurally changing.

On the capital investment front, we think the biggest opportunity not in the company’s 5-year CapEx
forecast remains the potential acquisition of some of Wisconsin’s state-owned steam generating units.
Sale of the environmentally challenged units remains contingent on legislation. With Governor
Walker firmly in-place and the 2012 election in the rear view mirror, WEC believes there may be a
real opportunity for such legislation to pass in 2013. We came away with the impression that if it does
not pass in 2013, it is unlikely to ever pass. WEC’s rough investment opportunity is $300-400 million
split evenly between the purchase price and incremental environmental investment needs.

Last, WEC made it clear that the 60% dividend payout goal by 2014 was not necessarily a stopping
point and that the dividend payout could move higher post-2014.

Xcel Energy (XEL/Outperform) (Kalton)

• One of the major discussion points in our meeting with XEL was Northern States Power’s pending
Electric rate case in Minnesota, which was filed on November 2. While XEL decided to file a
traditional rate case versus a multi-year plan, this was communicated as technically necessary in
order to implement interim rates in the near term. Importantly, it remains conceivable that XEL
could end up successfully negotiating a multi-year rate plan as part of the current rate process. That
being said, it often takes regulators some time to adapt to major ratemaking changes and therefore we
would not be surprised if it takes another cycle before a multi-year plan gains approval. While we
would prefer a multi-year plan given our belief that it provides XEL with a better ability to reduce
regulatory lag, our EPS estimates and Outperform rating are not predicated on it.

WELLS FARGO SECURITIES, LLC
Utilities EQUITY RESEARCH DEPARTMENT

8

Sarah Akers’ Company-Specific Takeaways:

CenterPoint Energy (CNP/Outperform) (Akers)

• Much of our time with CNP was spent on the growth outlook in light of the company’s $500-600MM
remaining cash balance and comments on the third quarter call regarding the use of cash. President
and CEO David McClanahan remains confident in the opportunity set at Field Services, but producers
are not moving forward as quickly as originally thought. Regarding the Bakken opportunity, CNP
plans to finalize cost estimates at year-end and make a decision in early 2013. Other targeted areas
include western Oklahoma, Mississippi Lime, Tuscaloosa Marine and Northeast Texas (mid-continent
shale plays in liquids-rich areas).

Mr. McClanahan clarified that the targeted 4-6% growth rate does embed new opportunities at Field
Services. While management acknowledged that success at Field Services could drive growth at the
top end of the range, we viewed the comments as incrementally negative as we thought the base
business could sustain mid-single-digit annual EPS growth over the next 3-5 years and viewed new
midstream opportunities as upside potential. We are revising our 2012-14E EPS to $1.18, $1.25 and
$1.32 from $1.18, $1.29 and $1.36, respectively. Our estimates continue to exclude the impact of new
Field Services investments, which we value separately. We are sticking with our Outperform rating,
but we recognize that the upside potential is dependent on successful execution of new midstream
projects in an increasingly challenging environment.

CNP continues to view the potential formation of a Master Limited Partnership (MLP) as a financing
vehicle should capital investment opportunities require external equity funding. Further, the
company targets at least $200-300MM of visible midstream growth in order to make an MLP viable.
Management does not believe this level of growth requires a rebound in gas prices as the company is
pursuing growth beyond Field Services’ native dry gas footprint.

Consolidated Edison (ED/Market Perform) (Akers)

• Management did not have many answers to Sandy-related questions at the EEI conference and, as
evidenced by the recent 8-K announcing plans to defer planned rate cases until “a more appropriate
time,” as the situation remains fluid. Preliminary cost estimates approximate $350-450MM CECONY
and $75-100MM O&R. We expect ED will defer operating costs and seek recovery of capital above
levels set in the rate plan in future proceedings. The only near-term bottom line impact appears to be
lost steam sales, which we don’t expect to be material.

While we do not expect meaningful cost disallowances at this point, we remain modestly concerned
that the CECONY Electric rate case could be more politicized in nature, which could make it more
challenging to reach a settlement. In the meantime, the longer ED waits to file in New York, the
greater the potential for regulatory lag (electric plan covers 3-year period through 3/31/13 and rate cases take 11 months). We were encouraged to hear that when the company does file in NY, CECONY
will likely file for a capital structure consistent with CECONY Electric’s actual regulatory equity ratio,
which we expect will be above the current 48%--that could help offset the impact of a likely lower
allowed ROE.

Separately, ED remains open to new solar investment (beyond the $350MM of projects announced in
July and $200MM announced in October) that meet the company’s risk profile and return targets
(mid-teen levered internal rates of return). Such investments could add to the earnings growth
outlook.

Great Plains (GXP/Market Perform) (Akers)

• President and CEO Terry Bassham sought to ensure investors that GXP is working on cost solutions to
address the potential 50-100 bps of incremental regulatory lag discussed on the Q3 call. While we
may not have clarity on specific initiatives until early next year, management is maintaining the target
of 50 bps of lag in year one of new base rates. We also walked through the drastic decline in third
quarter weather-normalized retail electric sales (-4.2% in Q3 2012, which compares to the year-to-
date number of -1.6%). While it is difficult to parse out the drivers of the steep decline in Q3, the
company pointed to the following factors: (1) weather-normalization methodology (looking deeper
for accuracy issues), (2) customer response to higher bills as a result of hot summer weather, (3)
lingering economic weakness, and (4) energy efficiency measures, including lighting and air
WELLS FARGO SECURITIES, LLC
Post-EEI Utility Update EQUITY RESEARCH DEPARTMENT

9

conditioning upgrades. Shifting to the pending rate cases, management appeared pleased with
progress thus far, but noted that ROE and capital structure remain key outstanding issues. The next
round of rate cases will likely be initiated in early 2015 (at the earliest) and driven by La Cygne.

IDACORP (IDA/Outperform) (Akers)
• IDACORP discussed potential options to fill the 2016-2018 resource gap (Boardman-to-Hemingway
expected to be online no earlier than 2018) including a new gas peaker at Langley Gulch, upping
imports via line re-ratings, and demand response, among other options. We would view a new peaker
at Langley favorably given seemingly modest rate base growth opportunities in the 2014-2015 time
frame. Solutions are expected to be outlined in IDA’s Integrated Resource Plan (IRP) in mid-2013,
though management may be able to share initial findings in early 2013. Regarding Boardman-to-
Hemingway, the company expressed confidence in the project highlighting that it is designed to serve
native load and taps into existing resources.

Management emphasized that while weather and tax benefits have helped year-to-date results, the
base business has performed well. IDA executives appeared optimistic about sales growth given
recent economic activity and highlighted that Idaho has been at the forefront of energy efficiency
initiatives (been doing for 5-7 years) so the impact is less incremental relative to many other
companies--plus IDA has a fixed cost adjustment mechanism.

NV Energy (NVE/Market Perform) (Akers)

• President and CEO Michael Yackira and EVP and CFO Jonathan Halkyard both expressed confidence
the economic outlook in the company’s Nevada service territory. The company is seeing evidence of a
housing recovery, and, as highlighted on the Q3 call, is also encouraged by underlying customer and
usage trends. While the sales growth environment is promising, management believes it is pre-
mature to meaningfully alter the sales outlook and retains a laser focus on costs. Through full
deployment of sourcing programs, NV Energize, and other measures, Mr. Halkyard believes that
realizing 100% operating leverage on a 1% increase in sales growth is achievable. As this was our first
opportunity to meet Mr. Halkyard in person after he joined NVE from the casino industry in July
2012, we were impressed by his command over the business and seemingly thoughtful approach.

OGE Energy (OGE/Outperform) (Akers)

• It was clear from our meeting that Enogex remains in growth mode, and management is focused on
proving out investments and growing EBITDA. While OGE will likely continue to bulk up Enogex to
be more self-sustaining, CFO Sean Trauschke believes recent increases in operating expenses could
provide some operating leverage in the near term. Separately, while a shift toward oil has resulted in
slightly lower gas gathering volumes, condensate volumes are benefitting from the trend and
management remains generally bullish on development in Enogex’s footprint. We think the potential
shift from liquids to oil is worth monitoring, but we are not overly concerned at this point. Enogex
remains well-positioned for continued growth, in our view.

Shifting to the regulated realm, OGE would like to alleviate potential equity financing needs, as well
as regulatory and ratepayer pushback, by pursuing the least costly environmental solutions over an
extended period of time. If OG&E is allowed to proceed with lower cost environmental solutions,
then the company would likely seek recovery via single item rate case(s). If scrubbers are required,
however, there would likely be a need for more regulatory support, such as pre-approval and rider
recovery. In Arkansas, management remains focused on reducing regulatory lag and is considering
creative solutions such as single item rate cases, in addition to reduced investment in the state. While
there is a clear frustration with the returns in Arkansas, the state could prove strategic from a
transmission standpoint longer term.

Lastly, when asked about the potential to form an MLP, Mr. Trauschke expressed a clear openness to
the idea, but stressed that it would need to be under the right circumstances. This includes the
appropriate growth phase (right now may be too early in the growth cycle but also not appealing to
wait until the growth phase is over) and at the appropriate size ($400-500MM in EBITDA; this
compares to our 2012E EBITDA of $305MM and our 2014E EBITDA of $370MM, which we believe
could prove conservative). The focus right now is on getting bigger.

WELLS FARGO SECURITIES, LLC
Utilities EQUITY RESEARCH DEPARTMENT

10

Pinnacle West (PNW/Market Perform) (Akers)

• While we did not meet with PNW at EEI, we spent time with management at the company’s 11/9
Analyst Day and dinner. We viewed the event constructively. While 2013 EPS guidance was a hair
below our expectations and management continues to target annual EPS growth below the 6% rate
base growth clip (2011-2015E), we believe those expectations could prove conservative. We see
upside potential should (1) sales growth outpace the company’s 2012-2015 expectations for flat net
sales and/or (2) the company delay a rate case filing (current plan includes mid-2015 filing, but
management appears eager to delay if APS can sustain reasonable earned ROEs through better than
expected sales and/or cost controls). Delays in filing the rate case would also push off dilution from
an equity issuance needed to true-up the capital structure. Based on model updates and new
disclosures, we are revising our 2012E and 2013E EPS to $3.42 and $3.55 from $3.34 and $3.50.

Portland General Electric (POR/Market Perform) (Akers)

• As we will not have clarity on RFP outcomes until early 2013, our meeting with SVP, CFO and
Treasurer Maria Pope centered around regulatory strategy and sales growth. POR made a filing in
August to improve recovery of rising pension expense. Separately, the company plans to seek
additional improvements to the company’s power cost adjustment mechanism (PCAM) in the next
rate case. The focus will likely be on the asymmetry (currently downside risk is greater than upside
potential in our view). We would consider movement on these two items favorably as it relates to (1)
the company’s ability to consistently earn closer to the allowed ROE (still 100 bps structural lag) and
(2) the Oregon regulatory environment.

Shifting to sales growth, while weakness in commercial load negatively impacted Q3 sales, Ms. Pope
expressed optimism and highlighted the following factors: (1) power prices below the national
average, (2) a relatively young, reliable system, (3) well developed high tech infrastructure including
fiber optic cables, (4) Oregon has been promoting energy efficiency for many years so the incremental
impact is not as meaningful--plus POR has decoupling mechanisms currently approved through
12/31/13.

Vectren Corp. (VVC/Market Perform) (Akers)

• We walked away from our VVC meeting with greater optimism around Vectren Fuels’ post-2013 Coal
Mining outlook. Management believes the ramp in coal volumes will address the negative EPS drag.
While we still do not have certainty on pricing, the company confirmed that they use EPS as a guiding
metric rather than cash costs per ton (as many other coal companies do). We were encouraged by the
commentary and believe there could be upside potential to our 2014E EPS of $2.10, which assumes a
modest EPS drag from Coal Mining. In terms of demand, management pointed to gas prices as a key
driver and indicated that coal plants in their region compete very well when gas is above $3/mcf.

The company’s tone on Infrastructure Services and Utility operations remains constructive.
Management continues to believe favorable demand trends are part of a very long cycle for both
distribution (bare steel/cast iron, gas modernization, etc.) and transmission (shale-related
infrastructure needs) construction. Sandy-related destruction/rebuilding could also lead to opportunities (either directly or through reduced competition elsewhere). On the utility front, even
with the higher 2012 utility EPS base, VVC continues to target a 3% annual growth rate over the next
several years. Additional spend could be driven by gas modernization projects and the acceleration of
bare steel/cast iron replacement programs pending regulatory clarity.

Westar Energy (WR/Outperform) (Akers)

• Our meeting with Westar underscored our confidence in management’s ability to effectively navigate
the company through the next few years in a potentially challenging environment. The timing of the
next rate case will be driven by La Cygne, which likely means a filing in early-to-mid-2015. If sales
growth does not recover beforehand, management is committed to living within its means rather than seek relief earlier. Further, equity issuance will likely also be largely tied to the rate case (an early
2015 filing would require equity around mid-2015 to true up the capital structure). While the
company is expected to continue to be opportunistic and maintain the balance sheet, we now
anticipate a more modest level of equity in early-to-mid 2014 (we previously thought WR would
achieve the desired equity layer through two similar-sized offerings in early 2014 and mid-2015).
Based on Q3 disclosures and our recent meeting, we revised our 2012-14E EPS to $1.98, $2.00 and
$2.15 vs. $1.95, $2.05 and $2.15, previously. We lowered our 2013E to better reflect a lower
WELLS FARGO SECURITIES, LLC
Post-EEI Utility Update EQUITY RESEARCH DEPARTMENT

11

normalized 2012 base (company estimates that weather added $0.17-0.18 to 2012 year to date), but
no change to our 2014E EPS based on lower 2014 assumed equity issuance and slightly greater cost
controls.

Valuation Range Information:
ETR Basis and Risks: Our $70-71/sh valuation range is based on a sum-of-the-parts analysis ($47/sh for
Regulated & Parent, $22 for the transmission assets, and $1-2/sh for ETR's merchant assets. Risks to our
valuation range include commodity price sensitivity, nuclear relicensing and operational risks, regulatory risks
and failure to close the transmission transaction.

FE Basis and Risks: Our $45-46/sh valuation reflects a comparison, sum-of-the-parts ($35/sh Regulated &
Parent and $10-11 per share Merchant) and residual income analyses. Risks include commodity price
sensitivity, merger integration, and operational risks.

NEE Basis and Risks: Our $73-74/sh valuation reflects a comparison, sum-of-the-parts ($50/sh Regulated
& Parent and $23-24 per share Merchant) and residual income analyses. Risks include the ability to deliver on
wind development plans, FL economic and regulatory concerns and commodity price risk.

PEG Basis and Risks: Our $30-31/sh valuation range is based on a sum-of-the-parts (we value Utility,
Parent & Energy Holdings at $20/share - 15X our 14E EPS - and Power at $10-11/share - 6X our 14E EBITDA)
and residual income analysis. Risks to our valuation include earnings sensitivity to commodity prices,
operational risks and unfavorable regulatory/political developments.

CNP Basis and Risks: Our valuation range is based on a P/E (14.7X on our 14E EPS), sum-of-the-parts,
dividend discount and residual income analyses. We add $1/share for assumed incremental investment
totaling $350 million. Risks include execution risk related to new growth opportunities, negative regulatory
developments, and unfavorable moves in commodity prices.

OGE Basis and Risks: Our valuation is based on a sum-of-the-parts analysis (14.25X OG&E/Parent 14E of
$3.00 and 8.2X Enogex 14E EBITDA). Risks include negative regulatory developments, commodity exposure
and weaker than expected electric sales.
VVC Basis and Risks: Our valuation range is based on a sum-of-the-parts ($25/share for Utility Holdings
and $4 for Non-Utility), dividend discount and residual income analyses. Risks include economic weakness,
lower than expected coal sales, and Non-Utility exposure to commodity prices.

AEP Basis and Risks: Our $46-47/sh valuation range is supported by our P/E multiple (14.0x to 14.5X our
2012E EPS), dividend discount and residual income methodologies. Risks include potential regulatory
pushback related to environmental spend/costs, economic risks and increasing sensitivity to power/capacity
prices.

CNL Basis and Risks: Our valuation is based on a P/E multiple comparison, residual income and dividend
discount analyses. We apply a 14.7X P/E multiple to our 15E EPS of $3.10. Risks include economic weakness
and potential difficulties extracting value from Coughlin.

CMS Basis and Risks: Our $26-27/sh valuation range is based on a P/E multiple (apply a 15X multiple - a
5-10% premium to the 2013 Regulated Electric peer group median of 14X - to our 14E of $1.70 and add $1/sh
for the DIG power plant) and dividend discount model analysis. Key risks include regulatory risk, Michigan
economic risk and a comparatively weak balance sheet at the parent level.

ED Basis and Risks: We value ED under P/E multiple (apply 14.5x to our 2014E EPS of $3.95) and dividend
discount analysis. Risks to our valuation include regulatory-related risks related to CECONY Electric's
upcoming rate case, higher than expected O&M expense and interest rate sensitivity.

DUK Basis and Risks: Our $62-63/sh valuation range reflects a P/E multiple (apply a 5% discount to the
regulated electric median of 14X to our 14E), a dividend discount model and a residual income analysis. We
believe a modest discount is warranted given merger execution risk, heightened regulatory risk & uncertainties
related to Crystal River 3 and Edwardsport (both cost recovery and in-service dates). Risks relate to merger
execution, regulatory orders, international ops and unregulated coal fleet margins.

WELLS FARGO SECURITIES, LLC
Utilities EQUITY RESEARCH DEPARTMENT

12

EIX Basis and Risks: Our 12-18 month valuation range is primarily based on a sum-of-the-parts analysis
and dividend discount model. We apply the 13E regulated electric group median multiple of 14X to our $3.50
14E EPS for SCE & Parent resulting in a forward price of roughly $49-50 per share. We ascribe no value for
EMG. Key risks include a potential deterioration in CA regulation and risks around Edison Mission (distraction
to management, legal challenges in the event EME defaults, etc.)
GXP Basis and Risks: Our valuation range is primarily based on a P/E multiple analysis (13.5X our 13E
EPS). Key risks include unfavorable rate case outcomes, cost pressures and lower than expected sales.

IDA Basis and Risks: We value IDA under P/E multiple (13-13.5X multiple on our 14E EPS of $3.35) and
dividend discount analysis. Risks to our valuation include project delays/cancellations, negative regulatory
developments and economic weakness.

ITC Basis and Risks: Our valuation range is based on P/E and residual income analyses. We apply a 15.5-
16.0x multiple to our 16E of $7.50 and then discount this value back 2-yrs by 9% annually. The 15.5-16.0x
multiple represents a reasonable 11-14% premium relative to the 13E regulated electric group median of 14x.
Our forward-looking valuation range is also well supported by our residual income model. Risks to our
valuation include adverse changes in the FERC's transmission policies, project delays or cancellations and
failure to close the ETR Mid-South transaction.

NU Basis and Risks: Our $42-43/sh valuation range is premised on a roughly 10% premium to 13E
regulated P/E multiple of 14X to our 14E EPS of $2.75. Risks to our valuation include project
delays/cancellations related to Northern Pass and regulatory risks.

NWE Basis and Risks: Our $37-38/sh valuation range is based on a P/E multiple (apply the 13E regulated
electric group median multiple of 14X to our 14E EPS) and dividend discount model. Chief risks include
regulatory, project timing and interest rate risks.

NVE Basis and Risks: Our valuation range is supported by our P/E (13.5-14X on our 14E EPS of $1.35),
dividend discount and residual income analyses. Key risks include negative economic developments, higher
than expected O&M, and unsupportive regulatory decisions.

POM Basis and Risks: Our valuation range is based on a combo of our P/E multiple comparison (apply the
13E regulated electric group median multiple to our 14E EPS of $1.45), dividend discount and residual income
methodologies. Risks include regulatory risks associated with pending and upcoming rate filings and interest
rate sensitivity.

PCG Basis and Risks: Our $41-42/sh valuation range is based on a P/E multiple (apply a ~10% discount to
the 13E regulated electric median multiple of 14X to our 14E of $3.30) and dividend discount model. Key risks
include unfavorable regulatory outcomes and higher than expected unrecoverable San Bruno pipeline
explosion costs.

PNW Basis and Risks: Our valuation range is primarily based on P/E multiple (14X our 14E EPS), dividend
discount and residual income analyses. Key risks include unfavorable regulatory developments, weaker than
expected customer growth and cost inflation.
POR Basis and Risks: Our valuation range is supported by our P/E (13X on our 14E EPS), dividend
discount and residual income analyses. Risks include operating cost increases, a protracted economic
downturn, and adverse RFP and regulatory outcomes.

SCG Basis and Risks: Our 12-18 month valuation range is based on a P/E multiple (apply '13E mid cap
group median of 14X to our '14E of $3.50) and dividend discount analysis. Risks to SCG shares, in our view,
include regulatory risk, construction risk and a slower-than-expected Southeastern economy.

SO Basis and Risks: Our 12-18 month valuation range is based on a P/E multiple (apply a roughly 10%
premium to the regulated '13E median multiple of 14X to our 2014E of $2.95) and dividend discount model
analyses. In our view, risks include regulatory risk, construction risk and potential exposure to adverse federal
energy legislation.

WR Basis and Risks: Our valuation range is based on a P/E multiple (apply a 14X multiple to our 14E EPS
of $2.15) analysis. Risks to our valuation include customer and regulatory pushback to rising costs, lower than
expected sales growth and higher than expected cost inflation.

WELLS FARGO SECURITIES, LLC
Post-EEI Utility Update EQUITY RESEARCH DEPARTMENT

13

WEC Basis and Risks: Our $37-38/sh valuation range is based on a P/E multiple (apply a 15.5X multiple - a
5-10% premium to the 2013 Regulated Electric peer group median of 14X - to our 14E of $2.45) and dividend
discount model. Risks to our valuation include regulatory risk and the impact of a protracted recession on sales
and costs.

XEL Basis and Risks: Our $29-30/sh valuation range is based on a P/E multiple (apply a 15.0X multiple - a 5-10% premium to the 2013 Regulated Electric peer group median of 14X - to our 14E of $2.00) and dividend
discount model. Risks include regulatory risks related to pending and upcoming rate cases, a weaker than
expected rebound in sales and cost pressures.

Required Disclosures
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I certify that:
1) All views expressed in this research report accurately reflect my personal views about any and all of the subject securities or
issuers discussed; and
2) No part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed
by me in this research report.

WELLS FARGO SECURITIES, LLC
Utilities EQUITY RESEARCH DEPARTMENT

14

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Post-EEI Utility Update EQUITY RESEARCH DEPARTMENT

15

Corp., Xcel Energy, Inc. within the past 12 months.
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STOCK RATING
1=Outperform: The stock appears attractively valued, and we believe the stock's total return will exceed that of the market over the
next 12 months. BUY 2=Market Perform: The stock appears appropriately valued, and we believe the stock's total return will be in line with the market
over the next 12 months. HOLD
3=Underperform: The stock appears overvalued, and we believe the stock's total return will be below the market over the next 12
months. SELL
AEP: Risks include potential regulatory pushback related to environmental spend/costs, economic risks and increasing sensitivity
to power/capacity prices.
CMS: Key risks include regulatory risk, Michigan economic risk and a comparatively weak balance sheet at the parent level.
CNL: Risks include economic weakness and potential difficulties extracting value from Coughlin.
CNP: Risks include execution risk related to new growth opportunities, negative regulatory developments, and unfavorable moves
in commodity prices.
DUK: Risks relate to merger execution, regulatory orders, international ops and unregulated coal fleet margins.
ED: Risks to our valuation include regulatory-related risks related to CECONY Electric's upcoming rate case, higher than expected
O&M expense and interest rate sensitivity.
EIX: Key risks include a potential deterioration in CA regulation and risks around Edison Mission (distraction to management,
legal challenges in the event EME defaults, etc.)
ETR: Risks to our valuation range include commodity price sensitivity, nuclear relicensing and operational risks, regulatory risks
and failure to close the transmission transaction.
FE: Risks include commodity price sensitivity, merger integration, and operational risks.
GXP: Key risks include unfavorable rate case outcomes, cost pressures and lower than expected sales.
IDA: Risks to our valuation include project delays/cancellations, negative regulatory developments and economic weakness.
ITC: Risks to our valuation include adverse changes in the FERC's transmission policies, project delays or cancellations and failure
to close the ETR Mid-South transaction.
NEE: Risks include the ability to deliver on wind development plans, FL economic and regulatory concerns and commodity price
risk.
NU: Risks to our valuation include project delays/cancellations related to Northern Pass and regulatory risks.
NVE: Key risks include negative economic developments, higher than expected O&M, and unsupportive regulatory decisions.
NWE: Chief risks include regulatory, project timing and interest rate risks.
OGE: Risks include negative regulatory developments, commodity exposure and weaker than expected electric sales.
PCG: Key risks include unfavorable regulatory outcomes and higher than expected unrecoverable San Bruno pipeline explosion
costs.
PEG: Risks to our valuation include earnings sensitivity to commodity prices, operational risks and unfavorable
regulatory/political developments.
PNW: Key risks include unfavorable regulatory developments, weaker than expected customer growth and cost inflation.
POM: Risks include regulatory risks associated with pending and upcoming rate filings and interest rate sensitivity.
POR: Risks include operating cost increases, a protracted economic downturn, and adverse RFP and regulatory outcomes.
SCG: Risks to SCG shares, in our view, include regulatory risk, construction risk and a slower-than-expected Southeastern
economy.
SO: In our view, risks include regulatory risk, construction risk and potential exposure to adverse federal energy legislation.
VVC: Risks include economic weakness, lower than expected coal sales, and Non-Utility exposure to commodity prices.
WEC: Risks to our valuation include regulatory risk and the impact of a protracted recession on sales and costs.
WR: Risks to our valuation include customer and regulatory pushback to rising costs, lower than expected sales growth and higher
than expected cost inflation.
XEL: Risks include regulatory risks related to pending and upcoming rate cases, a weaker than expected rebound in sales and cost
pressures.
WELLS FARGO SECURITIES, LLC
Utilities EQUITY RESEARCH DEPARTMENT

16

SECTOR RATING
O=Overweight: Industry expected to outperform the relevant broad market benchmark over the next 12 months.
M=Market Weight: Industry expected to perform in-line with the relevant broad market benchmark over the next 12 months.
U=Underweight: Industry expected to underperform the relevant broad market benchmark over the next 12 months.
VOLATILITY RATING
V = A stock is defined as volatile if the stock price has fluctuated by +/-20% or greater in at least 8 of the past 24 months or if the
analyst expects significant volatility. All IPO stocks are automatically rated volatile within the first 24 months of trading.

As of: November 15, 2012
49% of companies covered by Wells Fargo Securities, LLC
Equity Research are rated Outperform.
Wells Fargo Securities, LLC has provided investment banking
services for 42% of its Equity Research Outperform-rated
companies.
49% of companies covered by Wells Fargo Securities, LLC
Equity Research are rated Market Perform.
Wells Fargo Securities, LLC has provided investment banking
services for 35% of its Equity Research Market Perform-rated
companies.
2% of companies covered by Wells Fargo Securities, LLC
Equity Research are rated Underperform.
Wells Fargo Securities, LLC has provided investment banking
services for 21% of its Equity Research Underperform-rated
companies.

Important Information for Non-U.S. Recipients
EEA – The securities and related financial instruments described herein may not be eligible for sale in all jurisdictions or to certain
categories of investors. For recipients in the EEA, this report is distributed by Wells Fargo Securities International Limited
(“WFSIL”). WFSIL is a U.K. incorporated investment firm authorized and regulated by the Financial Services Authority. For the
purposes of Section 21 of the UK Financial Services and Markets Act 2000 (“the Act”), the content of this report has been approved
by WFSIL a regulated person under the Act. WFSIL does not deal with retail clients as defined in the Markets in Financial
Instruments Directive 2007. The FSA rules made under the Financial Services and Markets Act 2000 for the protection of retail
clients will therefore not apply, nor will the Financial Services Compensation Scheme be available. This report is not intended for,
and should not be relied upon by, retail clients.
WELLS FARGO SECURITIES, LLC
Post-EEI Utility Update EQUITY RESEARCH DEPARTMENT

17

Australia – Wells Fargo Securities, LLC is exempt from the requirements to hold an Australian financial services license in respect
of the financial services it provides to wholesale clients in Australia. Wells Fargo Securities, LLC is regulated under U.S. laws which
differ from Australian laws. Any offer or documentation provided to Australian recipients by Wells Fargo Securities, LLC in the
course of providing the financial services will be prepared in accordance with the laws of the United States and not Australian laws.
Hong Kong – This report is issued and distributed in Hong Kong by Wells Fargo Securities Asia Limited (“WFSAL”), a Hong Kong
incorporated investment firm licensed and regulated by the Securities and Futures Commission to carry on types 1, 4, 6 and 9
regulated activities (as defined in the Securities and Futures Ordinance, “the SFO”). This report is not intended for, and should not
be relied on by, any person other than professional investors (as defined in the SFO). Any securities and related financial
instruments described herein are not intended for sale, nor will be sold, to any person other than professional investors (as defined
in the SFO).
Japan – This report is distributed in Japan by Wells Fargo Securities (Japan) Co., Ltd, registered with the Kanto Local Finance
Bureau to conduct broking and dealing of type 1 and type 2 financial instruments and agency or intermediary service for entry into
investment advisory or discretionary investment contracts. This report is intended for distribution only to professional investors
(Tokutei Toushika) and is not intended for, and should not be relied upon by, ordinary customers (Ippan Toushika).
The ratings stated on the document are not provided by rating agencies registered with the Financial Services Agency of Japan
(JFSA) but by group companies of JFSA-registered rating agencies. These group companies may include Moody’s Investors Services
Inc, Standard & Poor’s Rating Services and/or Fitch Ratings. Any decisions to invest in securities or transactions should be made
after reviewing policies and methodologies used for assigning credit ratings and assumptions, significance and limitations of the
credit ratings stated on the respective rating agencies’ websites.
About Wells Fargo Securities, LLC
Wells Fargo Securities, LLC is a U.S. broker-dealer registered with the U.S. Securities and Exchange Commission and a member of
the New York Stock Exchange, the Financial Industry Regulatory Authority and the Securities Investor Protection Corp.
This report is for your information only and is not an offer to sell, or a solicitation of an offer to buy, the securities or instruments
named or described in this report. Interested parties are advised to contact the entity with which they deal, or the entity that
provided this report to them, if they desire further information. The information in this report has been obtained or derived from
sources believed by Wells Fargo Securities, LLC, to be reliable, but Wells Fargo Securities, LLC, does not represent that this
information is accurate or complete. Any opinions or estimates contained in this report represent the judgment of
Wells Fargo Securities, LLC, at this time, and are subject to change without notice. For the purposes of the U.K. Financial Services
Authority's rules, this report constitutes impartial investment research. Each of Wells Fargo Securities, LLC, and
Wells Fargo Securities International Limited is a separate legal entity and distinct from affiliated banks. Copyright © 2012
Wells Fargo Securities, LLC.

SECURITIES: NOT FDIC-INSURED/NOT BANK-GUARANTEED/MAY LOSE VALUE