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In addition to old standbys like consumer staples, utility stocks are a proven favorite during times when your portfolio needs a defensive touch. Among utilities, Virginia-based Dominion Resources (NYSE: D) stands out for its solid price action, its exposure to natural gas, and its heavy potential for future upgrades.

While natural gas might not seem terribly thrilling, many analysts expect it to be a hot commodity in the coming years. It's a plentiful resource in North America, and no less an energy tycoon than T. Boone Pickens is banking on a natural-gas boom. With 1.1 trillion cubic feet of oil and natural gas reserves, Dominion looks poised to capitalize on a shift toward this source of energy.

The utility firm already seems to be thriving, in fact. In its October 30 earnings report, the company exceeded analysts' profit expectations by 4 cents per share, and offered upbeat guidance for fiscal 2008 and 2009.

For value investors, though, the third-quarter report contained even more good news. Thomas Farrell II, Dominion's president, chairman, and CEO, stated, "Given its confidence in the strength of our company's earnings and business model, the board of directors recently declared our fourth-quarter dividend and reconfirmed our dividend policy to sustain increases in 2009 and 2010 that will allow us to reach our targeted 2010 payout ratio of 55%."

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."

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.