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4 Utilities Positioned Well for Biden's Infrastructure Overhaul

Here's how regulation can dictate their growth and valuation.

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As the Biden administration pushes its $2.3 trillion American Jobs Plan and clean energy agenda, utilities will be cast in a leading role. This means investors must keep a close eye on each utility’s regulatory outlook. Utilities in constructive regulatory environments with timely cost recovery and attractive returns on investment have a big growth opportunity under President Joe Biden’s ambitious plans. For utilities in less constructive regulatory environments, more investment could constrain cash flow and become a liability.

Most regulators understand that long periods of poor rate regulation and shareholder value destruction are detrimental to a utility’s ability to raise capital and maintain system reliability. However, regulators also face direct or indirect political pressure from ratepayers in the jurisdiction they serve. This conflict makes it essential for investors to understand the regulatory dynamics for each utility.

Andrew Bischof does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.