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In the current market environment where Covid-19 related costs are likely to be material, we look favorably on utilities that have the most advantageous regulatory mechanisms to allow them to recover costs and lost revenue expeditiously.
We expect companies with new ‘full decoupling mechanisms’ to have more resilient revenue in 2020 and 2021.
We see ES and EXC with a combination of favorable regulatory mechanisms and tepid earnings expectations relative to the 2008-2009 recession – we expect them to outperform market expectations. We forecast higher risks for AEP and XEL given less favorable regulatory mechanisms combined with rosy market expectations for revenue.
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