2 D.C.-Area Utilties Battle for Power

by Marc Bastow | July 3, 2012 5:45 am

Those of you not familiar with Maryland and Virginia might not be acquainted with the little rivalry between the two states.

So you’re hearing it here: They’re pretty fierce rivals.

Comparisons between the two states are endless, and the passion brought forth by the citizens can get pretty intense across a variety of “better or worse” categories, including schools, food, colleges, home prices, sports teams, traffic, drivers … you get the idea.

We also argue about who has the better utility provider (or conversely, who has the worse one).

The competition and conversation will ramp up in earnest this week, as Maryland’s Pepco Holdings (NYSE:POM[1]), or just Pepco, goes head-to-head with Dominion Resources (NYSE:D[2]) — sometimes referred to by its former name, “VEPCO” — in a race to see who can return power to their customers faster after a huge storm — a derecho, in fact[3] — almost wiped the area off the map last Friday night.

Let’s take a quick look at the combatants:

Pepco is one of the largest energy delivery companies in the mid-Atlantic region, serving Delaware, the District of Columbia, Maryland and New Jersey. Pepco maintains around 788,000 customers in Maryland and the District of Columbia, and at the moment, about 385,000 of those customers have no power.

The company has taken a beating during the past few years, as outages resulting from summer and winter storms left thousands of residents without power for days on end. Politicians grumbled, Pepco did some dancing and pruned thousands of trees they blamed for the outages, and in truth neither side was any happier, and even less so today.

Pepco’s stock has taken a dive over that same period, losing nearly 35% of its value during the past five years while the dividend has risen exactly 1 cent per share over the same time period. POM’s yield is appetizing at just more than 5%, but that’s because the share price remains stubbornly below $20 per share.

I recently unloaded my shares in the company, and it appears perhaps just in time. Pepco recently applied for an increase in its rates, and its performance during this most recent outage might go a long way toward how the Maryland Public Service Commission responds to the request.

Virginia’s entry into the fray is Dominion Resources, a producer and transporter of energy operating in 15 states. Dominion’s operations are conducted through various subsidiaries, including Virginia Electric and Power Company (VEPCO), which serves approximately 2.4 million residential, commercial, industrial and governmental customers in Virginia and North Carolina — of which, at this point, around 270,000 are without power in Virginia, particularly in the Northern Virginia suburbs.

Unlike its Maryland neighbor, Dominion is enjoying a stellar run, as the stock is trading around multiyear highs above $54. And because it truly has expanded beyond just power and electricity, into newer markets like the transportation of natural gas, Dominion is now looking toward dramatic growth, hoping to cut a swath across the entire Eastern seaboard.

Dominion’s stock price has provided investors with a five-year return of just over 25%, and its dividend has increased almost the same amount — from 43 cents to 53 cents quarterly — in the same period.

Of course, VEPCO has taken its share of lumps over the same period as PEPCO, as summer storms and winter blizzards pretty much affect everyone in the region — and let’s face it, when your power goes out, you have to blame someone.

So we shall see who gets the job done over the coming week on the ground, and what it says for each company’s public relations — and, perhaps, their stock prices.

For now, I would have to give the nod to Vepco, at least as a holding. But I am sure I will get at least a few Marylanders to argue that point. It’s what we do here.

Marc Bastow is an Assistant Editor of InvestorPlace. As of this writing, he did not hold a position in any of the aforementioned securities.

  1. POM: http://studio-5.financialcontent.com/investplace/quote?Symbol=POM
  2. D: http://studio-5.financialcontent.com/investplace/quote?Symbol=D
  3. a derecho, in fact: http://en.wikipedia.org/wiki/Derecho

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