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Utility service providers continue to reap benefits from a number of positive variables, including increased electricity tariffs, accretive acquisitions, cost reductions and the deployment of energy-efficiency initiatives. The power business also gains from continuous efforts to make electric infrastructure more resilient to adverse weather conditions and the ongoing switch to affordable, renewable energy sources for electricity production.
Utility companies in the United States are taking measures to further strengthen their infrastructure, which includes the generation, transmission, distribution, storage and sale of electricity to customers.
Utilities are all set to take advantage of the growing demand from data centers. Per the Department of Energy’s report, a significant surge in U.S. electricity demand, particularly from data centers, with projections indicating a near tripling of power use by 2028, driven by AI and cloud computing, potentially reaching 6.7% to 12% of total U.S. electricity consumption.
Utilities also need a steady stream of funding for both new asset acquisitions and infrastructure improvements, due to their capital-intensive nature. Since September 2024, the Fed has already lowered its fund rate by one percentage point. In 2025, more interest rate reductions are anticipated. Capital-intensive utilities should have improved chances as a result of the rate drop. This is because their margins and profitability will rise as a result of lower capital servicing expenses.
Utility service providers generally enjoy consistent revenue growth and profitability. Due to their capacity to create cash flows and manage returns, utilities can enhance shareholder value via regular dividend payments.
The U.S. electric power sector is gradually moving toward cleaner sources of energy to produce electricity. Per a U.S. Energy Information Administration (“EIA”) report, the annual share of U.S. electricity generation from renewable energy sources will be 25% in 2025 and 27% in 2026. EIA also expects the U.S. sales of electricity to ultimate customers in the first quarter of 2025 will total 991 billion kilowatt-hours (kWh) compared with a previous forecast of 972 billion kWh.
We have run a comparative analysis on two Zacks Utility — Electric Power companies — NiSource NI and CenterPoint Energy CNP — to decide which one is a better pick for your portfolio.
Both companies carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
NiSource has a market capitalization of $18.55 billion, while CenterPoint Energy has $23.16 billion.
