There's perhaps no better example of how much the world has changed since the fall of the Berlin Wall 20 years ago and the end of the Cold Ware shortly thereafter, than the following: an American flips a switch to turn on a light in his or her home and the power came from where?

The Soviet Union.

That's right: from the Soviet Union. Unknown to many Americans, about 10% of the electricity in the United States is generated by fuel from dismantled nuclear bombs, including Soviet-era ones, The New York Times reported. Today, 45% of the fuel in American nuclear reactors stems from former Russian bomb material.

Southern Co.'s (NYSE: SO) stock has meandered over the past four months, but rare is the day one should sell an electric power generation play.

Hence, I'm reiterating my Buy rating for SO, first recommended on June 19, 2009 at a price of $30.61.

Quanta Services (NYSE: PWR) is in that rare category called 'broken stock, not broken company.'

Perhaps due to concern that regulatory hurdles that might hinder the upgrade of the nation's electric transmission and distribution grid -- a key business area for Quanta -- the stock has exhibited sideways action since the June 11, 2009 Buy recommendation at a price of $24.76.

Rare is the day that one should sell an electric power generation play. And the reasons are compelling:

Electricity via wind, solar, and nuclear generation is likely to play a larger role in energy as climate change reduction, then elimination, becomes a societal goal. Electricity also remains a potential propulsion source for cars, given that oil has apparently resumed its climb to uncomfortable levels.

Hence, I'm Reiterating my Buy rating for electric utility Allegheny Energy, Inc. (NYSE: AYE), first recommended on May 30, 2009 at a price of $25.00.

The latest trend in the utilities sector could deliver an unpleasant 'jolt' (pun intended) to electric power generation companies, if it continues.

U.S. electricity consumption unexpectedly dropped in Q2 and Q3, on a year-over-year basis, The Wall Street Journal reported Friday (subscription required), although The Journal cautioned that the data is early and incomplete.

Major electric power suppliers Xcel Energy (NYSE: XEL), Duke Energy (NYSE: DUK) and American Electric Power (NYSE: AEP) all reported declines in residential electricity use in recent quarters, compared to the previous year, The Journal reported.

An electric puzzle

Economist David H. Wang told BloggingStocks Friday electricity demand is a function of more factors than one might assume. The economic cycle, seasons, weather extremes, demographics, household formation, increased efficiency, technological change, and even popular culture trends are among the major factors affecting electricity demand.

Wang believes the major factor in the recent dip is the current U.S. recession. "I will defer to more-comprehensive U.S. Energy Department and power association data later, but I think without question the economic downturn is a major factor. When people lose jobs, many tend to give up housing and live with roommates or relatives. This decreases electricity use. Also, home foreclosures result in empty homes, which obviously use less energy than occupied homes."

Wind and solar, two renewable energy sources with a promising future, nevertheless face a bottleneck of sorts in the United States: the electric power grid. The existing grid can not handle the new demands, The New York Times reported Wednesday, forcing renewable wind and solar sites to shut down, even when conditions are right to generate and sell power.

An infrastructure-challenged U.S.

Economist Glen Langan says there's a theme that keeps popping up in the U.S. economy in the early 21st century: inadequate infrastructure. "We're a nation of inadequate infrastructures: the power grid, air travel/air traffic control, railways, highways... pick an infrastructure and you'll see a network that can't handle present demands, let alone an expanded national economy in 2020 or 2030," Langan said.

The power grid bottleneck is particularly frustrating and damaging because both wind and solar power generation systems are mushrooming, and could, with an adequate grid, account for more than 20% of the nation's power needs, Langan said, adding that some economic models put renewable energy's potential contribution even higher, at 25% or more.

"Imagine T. Boone Pickens building his massive, multi-billion dollar wind mill farm and having it sit idle because the grid cannot tolerate and transmit the increased power? Pretty sad," Langan said.

That the developing and developed world will need considerably more electricity in the decades ahead would not surprise most investors / readers.

That both economic zones can achieve this goal while adding a minimal amount of soot to the atmosphere, however, would.

And the technology that will undoubtedly serve as a key energy-generation component in emerging markets' 21st century power grid? You guessed it: nuclear power -- the power generation form that has lagged in the United States for more than 20 years, due to environmental regulations.

China, India push forward with plant plans

China and India are two emerging market nations that recognize that nuclear power is an essential part of meeting future electricity demand. Nuclear power will account for more than 5% of China's power output by 2020, Bloomberg News reported Monday. Meanwhile, India will start three nuclear reactors this year.

Economist Glen Langan said that while nuclear power is not, strictly speaking, a renewable energy, it has to be considered as part of the next-generation energy mix [along with wind and solar power] to meet the U.S.'s growing demand for electricity.

Readers of this space know that the investment bias is toward large-cap companies with demonstrated business models and who have a competitive advantage in established markets, preferably with a favorable global trend as a support. And with the above in mind, Emerson Electric is worth a review.

Emerson Electric Co. (NYSE: EMR) is an industrial conglomerate that operates more than 60 diverse businesses in five business segments: process management, industrial automation, network power, climate technologies, and appliance/tools.

In general, analysts expect Emerson's FY 2008 revenue to increase 10-12% on solid performances from its network power and process management segments.

A year or so ago, a 10% total annual return on equity would have been unsatisfactory for many investors.

My, how the U.S. financial landscape has changed from April 2007! A 10% return today doesn't look so bad, and a company that can achieve that and more is utility NRG Energy.

NRG Energy Inc. (NYSE: NRG) is a wholesale power generating company that owns and operates power plants with a net capacity of 22,880 megawatts.

The majority of NRG's revenue is from base load power. The significance? A stable cash flow. Further NRG's power source is largely natural gas-based, which is preferred, given likely additional regulations moving forward for coal-fired plants, as nations address climate change. NRG's power source mix is 45% natural gas, 34% coal, 16% oil, 5% nuclear. NRG's stable includes 175 power generation units at 49 power plants.

With the markets still in a choppy/consolidation mode (or perhaps worse), it's best to consider including a few defensive stocks in your portfolio, and with the above in mind Duke Energy is worth an evaluation.

If you're looking for a balanced, longer-term utilities play, consider Duke Energy (NYSE: DUK).

Duke is that rare type of utility that offers investors an ample amount of safety, an adequate dividend, and the potential for capital gain upside via growth.

In general, analysts expect DUK to register solid revenue results in 2008-2009. Duke has exited several higher-risk businesses, and what's left is impressive, particularly in a choppy, uncertain stock environment: 3.9 million utilities customers in the South and Midwest, 8,700 MW of unregulated generating capacity in the U.S., 4,200 MW of generating capacity in Latin America, and 500,000 natural gas customers. Further, given current population projections in the South, the long-term trends look good for a considerable portion of Duke's operations.

Other positives: Look for Duke to better-utilize its Midwest gas-fired plants and maintain cost-control discipline, in the years ahead. Finally, DUK's 88 cent annual dividend adds to the mix. The Reuters F2008/F2009 EPS consensus estimates for DUK are $1.27/$1.35.

The risks? Duke's revenue could be hurt if a generally-favorable regulatory stance in its regions changes. An unusually cool summer could also keep revenue below analysts' expectations. Don't look for a major upside revenue surprise with Duke, but everything else, from a utilities investment standpoint, lines up.

The First Call mean rating for DUK is: Hold. [18 firms.] Mean 2008 target: $20 [high: $23, low: $18.]

Stock Analysis: Duke Energy is a moderate-risk stock not suitable for low-risk investors. Consider buying Duke's shares if your portfolio does not contain a utilities stock. Investors with an investment horizon longer than 2 years should be rewarded from DUK's shares. Sell / Stop Loss if you were to purchase shares in this company: $13.

Disclosure: Lazzaro has no positions in stocks. In addition to private real estate holdings, he owns corporate and municipal bonds, and cash certificates of deposit.

General Electric and Vestas Wind Systems are reaping the benefits as U.S. utilities assertively add generating capacity from renewable/alternative energy sources, Bloomberg News reported Wednesday.

For example, XCel Energy (NYSE: XEL), the U.S.'s largest provider of wind power, is buying 67 General Electric (NYSE: GE) turbines for a Minnesota wind farm, and GE expects its turbine sales to increase 25% to $6 billion this year, Bloomberg News reported. GE was the largest supplier of wind turbines in 2007, with a 45% market share. Siemens AG (NYSE: SI) and Vestas are two other major global manufacturers of wind turbines that should continue to benefit as wind power usage increases: each is opening manufacturing plants in the U.S. to accommodate increased wind energy-related sales.

GE's shares gained 89 cents to $34.29, while Siemens AG rose 20 cents to $128.20 in Wednesday afternoon trading.

Readers of this space know that the investment bias is toward large-cap companies with demonstrated business models and who have a competitive advantage in established markets, preferably with a favorable global trend as a support. But every once in while an exception is made for a non-conforming but innovative/promising company, and along this line EnerNOC is worth a review.

EnerNOC, Inc. (Nasdaq: ENOC) develops and provides clean power solutions to commercial, institutional, and industrial customers, as well as to electric power grid operators and utilities.

Analysts really like ENOC's next-generation, technology-based business model. The company uses its network operations center to remotely manage electricity consumption across a network of end-use customer sites and to make electric capacity and energy available on demand to grid operators and utilities.

Most investors are aware that China's surging growth and increasing energy use have helped push oil to +$90 per barrel near-record highs. But what many probably don't know is that China's double-digit GDP growth is forcing up the price of another major energy source: coal.

The price of coal -- the most plentiful energy resource -- is rising at an alarming rate: Asia prices are up more than 30% this year, The Wall Street Journal reported Tuesday (subscription required), due mostly to China's net importer status. China had been a net exporter of coal, but in mid-2007 it imported coal for the first time. Coal is trading above $125 per metric ton. In 2003 it traded at about $25 per metric ton. Since January 2007 alone, coal is up more than 140%.

U.S. coal suppliers have benefited from the run-up: Arch Coal (NYSE: ACI) is up about 90% since August 2007; ACI was down about $1.50 to $53.32 in Tuesday afternoon trading. Meanwhile, Peabody Energy (NYSE: BTU) is up about 45% since August 2007; BTU fell 40 cents to $56.12 on Tuesday afternoon.

When the market displays erratic behavior continually, go with the known. Think established companies. In industrial sectors. Think: Precision Cast Parts.

Precision Castparts Corp. (NYSE: PCP) is a leading manufacturer of investment castings used in aerospace and power generation applications, with products that include jet engine parts, fluid management valves, and deep hole boring tools.

Analysts like PCP's strong position in the jet engine and power generation markets, cost controls, and margins.

The market's choppy / consolidating pattern continues, suggesting the need for an additional defensive play or two (or perhaps more). Further, the utilities sector fits the bill, and in this category Exelon Corp. is worth an evaluation.

Via subsidiaries, Exelon Corporation (NYSE: EXC) distributes electricity to 5.4 million customers in Northern Illinois (including Chicago) and southeastern Pennsylvania (including Philadelphia). EXC has 25.5 million megawatts of generating capacity and is also involved in wholesale energy sales/marketing. The company also has 480,000 natural gas customers.

Further, analysts really like Exelon's non-regulated utility operations, which should boost revenue performance in the immediate years ahead. A rate compromise agreement passed by the State of Illinois also removes a potential cloud from the company's revenue picture. The Reuters FY 2007/FY 2008 EPS consensus estimates for EXC are $4.32 to $4.40.