The North Dakota Industrial Commission predicts that its state's electricity demand will jump 88% between 2012 and 2017, and it's not because its 700,000 citizens are all buying hot tubs. Making energy costs energy, and oil and natural gas booms are pushing up electricity demand at key junctures across the nation. Let's take a look at three dividend-dealing utilities capitalizing on the bonanza.
It's not the next Michigan, but North Dakota's industrial sector is taking off due to increased oil and natural gas production. A report from the Energy Information Administration shows that industrial electricity demand has increased 50% in the last six years, with significant upticks (no doubt partially due to spillover effects) in commercial and residential use as well.
The North Dakota Industrial Commission points to new oil and natural gas wells, increased production infrastructure, and growing population and employment as the main drivers behind this state's soaring demand.
Xcel Energy (NYSE: XEL ) operates a regulated utility in North Dakota, and also owns a natural gas utility that transports, stores, and distributes natural gas across the Midwest. Q1 EPS for its North Dakota-based utility increased 31% over 2012's first quarter, primarily as a result of interim electric rate increases. Xcel didn't quite achieve the requested 10.6% ROE it initially sought, but the interim rate increase means more bang for its buck in a state with an increasing amount of bucks around.
You don't have to travel to North Dakota to dive into dividends. Entergy (NYSE: ETR ) recently announced that it won a contract with Sempra Energy (NYSE: SRE ) to provide electricity for its proposed LNG export facility.
Entergy already serves as the electricity provider for Sempra's existing LNG receipt terminal at the same Hackberry, La., facility, but this newest agreement flips Sempra's business model on its head and significantly increases electricity demand.
Sempra expects to begin construction on the export facility in 2014, with full operation capabilities by 2018. For Entergy, that means up to 200 MW of additional power needed. The two companies have already signed a 10-year contract, and expect to extend their agreement for another 20 years thereafter.
Energize your earnings
For natural gas bulls, it's easy enough to get carried away with pure plays like Chesapeake Energy or Devon Energy, but utilities can offer substantial stability with significant growth prospects. For utilities poised in the right economies and geographies, sales could see major boosts as the U.S. reorients its energy supply toward cheaper, cleaner sources.
As the nation moves increasingly toward clean energy, Exelon is perfectly positioned to capitalize on having the largest nuclear fleet in North America. This strength, combined with an increased focus on balance sheet health and its recent merger with Constellation, places Exelon and its resized dividend on a short list of the top utilities. To determine if Exelon is a good long-term fit for your portfolio, you're invited to check out The Motley Fool's premium research report on the company. Simply click here now for instant access.