Electric & Multi-Utilities covers regulated electric and combined electric-and-gas utilities. MoatScope covers 67 companies here. One has a wide moat, 47 a narrow moat and 19 none, so nearly three quarters of the industry is moat-rated.
How the industry makes money
A regulated utility earns an allowed return on the capital it invests in power plants, transmission lines and distribution networks. Regulators set the rates customers pay, so growth comes mainly from investing more in the grid and getting that investment approved. NextEra combines Florida Power & Light, the largest regulated electric utility in the United States, with a large renewable-energy development business.
Where the moats are
Efficient scale appears in 40 of the 48 moat-rated companies: a territory only needs one set of wires, so a second network would never pay for itself. Intangible assets appear in 36, in the form of franchises and regulatory licenses that grant the right to serve an area.
- NextEra Energy: a large regulated utility in a fast-growing state, combined with cost advantages in developing renewable generation.
The narrow-moat group includes Southern, Duke Energy, American Electric Power, Dominion, Sempra, Entergy, Xcel Energy and National Grid. Companies without a moat include Algonquin Power & Utilities, Korea Electric Power and Kenon, with weaker regulatory positions or balance sheets.
What wears moats down
The moat is only as good as the relationship with regulators: a poor rate decision can cut returns for years. Wildfire and storm liabilities can overwhelm a utility's finances, rising interest rates make the debt that funds grid investment more expensive, and rooftop solar and batteries let some customers draw less power from the grid.
What the quality scores say
NextEra scores 59 on MoatScope's quality scale and the industry averages 36. Moderate scores are typical of utilities: regulation caps their returns and grid investment requires heavy borrowing, even where the market position is secure.
What to watch
- Rate-case decisions and allowed returns.
- Electricity demand growth from data centers, factories and electrification.
- Capital spending plans and how they are financed.
- Wildfire and storm exposure.
Moat ratings and quality scores on this page update as companies report. Price versus fair value for every company in the industry is in the screener.