A new “smart grid” industry is coming about and First Trust/Clean Edge Smart Grid ETF (NasdaqGM: GRID) aims to be the first to target the emerging sector, according to Maureen Brody for Ignites. GRID seeks to reflect the NASDAQ OMX Clean Edge Smart Grid Infrastructure Index, which includes companies engaged in all components of the smart grid. (More plays for Obama’s energy plan).

The fund will have a higher weighting, around 80%, for companies that are smart grid “pure plays” and a lower weighting, about 20%, for big companies that only have a smaller vested interest in the smart grid enterprise.

The ETF is made up of 29 companies. Companies are required to have a minimum float-adjusted market capitalization of $100 million and a three-month average daily trading volume of $500K.

The top 10 holdings include: SMA Solar Technology AG, 11.6%; Schneider Electric S.A., 9.0%; NGK Insulators, 7.4%; ITC Holdings Corp. (NYSE: ITC), 7.3%; Quanta Services Inc. (NYSE: PWR), 7.2%; Itron Inc. (NasdaqGS: ITRI), 4.3%; Echelon Corporation (NasdaqGM: ELON), 3.9%; EnerNOC, Inc. (NasdaqGM: ENOC), 3.8%; American Superconductor Corporation (NasdaqGS: AMSC), 3.6%; Power-One Inc. (NasdaqGM: PWER), 3.6%. (“Smart Grid” plans power up tech sector).

For more information on utilities, visit our utilities category. The evolution of the smart grid can also be played with other utility ETFs, including:

• iShares Dow Jones U.S. Utilities (NYSEArca: IDU): up 4.2% year-to-date

• Vanguard Utilities ETF (NYSEArca: VPU): up 3.4% year-to-date

• iShares S&P Global Utilities (JXI): up 2.0% year-to-date

Max Chen contributed to this article.

Among the utilities banding together include New Jersey’s Public Service Enterprise Group (NYSE: PEG), FPL (NYSE: FPL) and PNM Resources (NYSE: PNM). On top of that, some retailers have joined in, including The Gap (NYSE: GPS); Apple (Nasdaq: AAPL) and PG&E (NYSE: PCG) left the Chamber and Nike (NYSE: NKE) has quit the board.

Cassandra Sweet for The Wall Street Journal reports that the new group is formed by utility companies across the United States. The goal is for Congress to enact a strong climate-change  legislation, and as one CEO puts it, it’s not about just a few associations saying “stop this.” (10 ways to play Obama’s energy plan).

Today, 10 of the 12 Democrats on the Senate Environment and Public Works Committee supported the measure to reduce U.S. greenhouse emissions through a cap-and-trade bill. Simon Lomax for Bloomberg reports that Senate Democrats won approval over Republicans, who feel the plan is being rushed.

For more stories about utilities, visit our utility category.

• iShares Dow Jones U.S. Utilities (NYSEArca: IDU): up 2% year-to-date;  PEG 3.6%; FPL 4.5%; PCG 3.6%

• Vanguard Utilities ETF (NYSEArca: VPU): up 0.9% year-to-date; FPL 5.2%; PCG 3.5%

• iShares S&P Global Utilities (JXI): down 1% year-to-date; FPL 2.3% FPL; PCG 1.7%

• PowerShares Dynamic Utilities (NYSEArca: PUI): down 4.9% year-to-date; FPL 4.6%

• iShares S&P Global Nuclear Energy Index (NYSEArca: NUCL): up 30.6% year-to-date; FPL 5%

• PowerShares Dynamic Retail (NYSEArca: PMR): up 20.8% year-to-date; GPS 5.7%

The Obama Administration has announced that it’s investing $3.4 billion in order to fund this project. Through the plan, 100 private companies, utilities, cities and manufacturers will receive grants ranging from $400,000 to $200 million in order to build a smart energy grid, reports Lynn Sweet for The Chicago Sun-Times. So far, these awards are the largest Recovery Act awards ever made on one day. (Nine things that could affect alternative energy).

Analysis shows that by getting smart grid technology off the ground, it could reduce electricity use by at least 4% by 2030. This would result in savings of $20.4 billion for both businesses and consumers. (Does this mean alternative energy is not so alternative anymore?)

The Senate environment committee also released details of its climate change legislation, which includes the share of “emissions allowances,” which is revenue that comes from regulation of a cap-and-trade system – once it’s in place. The Senate has nearly tripled the share of allowances set aside by the House for transit, inter-city rail, and other efforts to trim transport-based emissions. Elana Schor for Streetsblog reports that the Senate measure would set aside more than 3% of allowances in the first two years of the cap-and-trade system for limiting pollution from the transportation sector.

For more stories about clean energy, visit our alternative energy category.

• First Trust NASDAQ Clean Edge Green Energy (Nasdaq: QCLN)
• iShares Dow Jones U.S. Utilities (NYSEArca: IDU)
• iShares S&P Global Infrastructure (NYSEArca: IGF)
• iShares S&P Global Clean Energy (NYSEArca: ICLN)
• PowerShares WilderHill Clean Energy (NYSEArca: PBW)
  
• PowerShares Global Clean Energy (NYSEArca: PBD)
• PowerShares Cleantech (NYSEArca: PZD)
• PowerShares Dynamic Utilities (NYSEArca: PUI)
• Utilities Select Sector (NYSEArca: XLU)
• Vanguard Utilities (NYSEArca: VPU)
• SPDR FTSE/Macquarie Global Infrastructure 100 (NYSEArca: GII)

Often, investors who want to play energy would simply look at energy shares or ETFs. But the institutional approach is to look around for the cheapest way to get this exposure. For example, explains Steven M. Sears for Barron’s, if they’re looking to buy energy, they’d check out commodities, bonds, stocks, options and even credit default swaps.

This is why, if you’re looking at an energy play, Sears says you might consider a utility sector ETF such as the Utilities Select Sector SPDR (NYSEArca: XLU) because it offers a cost-effective way to get your portfolio in place if an increase in natural gas prices comes along.

Why? Utilities are increasingly using coal and natural gas to generate power, and electricity prices are set on the basis of consumer demand as well as the supply of natural gas and coal. Therefore, Sears says, XLU is showing a higher correlation to energy prices.

The biggest risk to utility ETFs and shares is the government legislation on greenhouse gases, which could increase their costs over time. Such legislation could force utilities to purchase CO2 pollution allowances, which could cut into earnings, says The Motley Fool. (Read more about what climate change legislation means for utilities).

Utility stocks typically lag during strong bull markets as investors chase higher growth prospects, but they do not tend to decline much during a bear market, Fool notes. Be sure to approach your investments with a strategy in place, such as by using the 200 day-moving-average. (Read about trend following here).

For more stores about utilities, visit our utility category.

• iShares Dow Jones U.S. Utilities (NYSEArca: IDU): up 3.5% year-to-date

• Select Sector SPDR Utilities (NYSEArca: XLU): up 2.3% yer-to-date

The Environmental Protection Agency (EPA) and state groups are criticizing the standards on smog control put in place by the Bush Administration. On the flip side, however, big business claims they are already too tough.

Environmental Leader reports under the 2008 rule, the acceptable ozone limit in the air was 75 parts per billion, down from the previous limit of 84 ppb. According to the EPA, limits of no more than 70 ppb are recommended. Scientist say that going even lower is better.

Smog regulations and limits may extend beyond the utility companies and affect big corporations, as well.

Could the cost of these changes weigh on the utility sector in the long run, or will they find a way to prevail?

• Vanguard Utilities (NYSEArca: VPU): up 5.3% year-to-date

• Utilities Select Sector SPDR (NYSEArca: XLU): up 5.1% year-to-date

• iShares Dow Jones US Utilities Sector (NYSEArca: IDU): up 6.3% year-to-date

For more stories about utilities, visit our utilities category.

Remember, though, that while forecasts are informative, unforeseen events could cause the reality to play out differently. While you keep these predictions in mind, have an entry and exit strategy if you’re thinking of investing in energy ETFs.

• U.S. Crude Oil. Crude oil prices are going to remain volatile, while the WTI spot price is projected to rise slowly as economic conditions improve, to an average of about $72 per barrel in 2010. Expect crude prices to hover around $70 per barrel for the fourth quarter. United States Oil (USO) is up 15.7% year-to-date

• Gasoline. The average price for regular-grade gasoline, which reached a summer peak of $2.69 per gallon in EIA’s June 22 weekly survey, fell by more than 20 cents per gallon in  the four weeks following the drop in crude oil prices. Now, however, they’re bouncing back. EIA expects the annual average regular-grade gasoline retail price in 2009 to be $2.34 per gallon.  Higher projected crude oil prices next year are expected to increase the average price to $2.66 per gallon in 2010. United States Gasoline (UGA) is up 82.2% year-to-date

• Natural Gas. Natural gas inventories are expected to set a new record high at the end of this year’s injection season (Oct. 31). Natural gas production is projected to remain flat this year, then fall by 2.8% in 2010. United States Natural Gas (UNG) is down 49.6% year-to-date

• Coal. Coal consumption in the electric power sector has declined 6.4%, but it’s expected to climb 1.3% in 2010. Coal production is projected to drop off by 8% this year, thanks to lower consumption, fewer exports and higher inventories. That trend is predicted to continue into 2010. Market Vectors Coal (KOL) is up 94.4% year-to-date

• Electricity Total retail sales of electricity are projected to decline by 2.7% throughout the United States during 2009.  Sales in the industrial sector are projected to decrease by about 10% this year because of the weak economy. For 2010, a 0.8% rise is expected. iShares Dow Jones U.S. Utility Index (IDU) up 5.7% year-to-date

For more stories about commodities, visit our commodity category.

The few utility companies that managed to beat expectations did so by cutting costs and raising rates, explains Melinda Peer for Forbes. Many executives also delivered a dire warning for the sector: pricing weakness will continue and no meaningful improvement will be evident until 2011, at the earliest.

Recessionary conditions have forced corporations to limit production and cut costs, resulting in lower electricity demand. Industrial retail demand for electricity is down around 12%; another 2% decline is expected this year.

The utility sector is the second-worst performer in this rally, after telecommunications. With earnings season close to a finish, 74% of the S&P 500 has beaten earnings estimates this season, while only 58% of utilities can make the same claim, explains Ariel Nelson and Adam Daniele for CNBC.

What will it take? Many companies are waiting for an industrial turnaround, which will trigger demand for the utility companies.

• Utilities Select Sector SPDR (XLU): dowm 0.1% year-to-date

• iShares Dow Jones U.S. Utilities (IDU): up 1.1% year-to-date

For more stories about utilities, visit our utility category.

There are four utility companies that have been selected to receive $18.5 billion in federal financing over the next few years to build the next generation of nuclear reactors. The first steps are set to begin in 2011, and the plants could be online by 2015. Rebecca Smith for The Wall Street Journal reports that UniStar Nuclear Energy, NRG Energy Inc. (NRG), Scana Corp. (SCG) and Southern Co. (SO) are expected to share a set of loan guarantees to be awarded by the Energy Department.

The companies have selected sites for the reactors and are at the forefront the receive licenses to build and operate them. Bear in mind, the government hasn’t formally announced its picks, but energy company officials and reactor vendors have identified the likely winners.

Nuclear power is an Energy Agency  priority, and reduced emissions of carbon dioxide are likely to cut down on greenhouse gas problems. The plants are facing opposition, because of technical, regulatory and profitability issues.

The electrical industry stands to play a role in the development, and the first companies that can build new nuclear reactors will have a big leg up in delivering electricity with low carbon emissions. That could give them a major financial advantage if Congress passes legislation that caps emissions of carbon dioxide.

• Market Vectors Nuclear Energy ETF (NLR): up 14.6% year-to-date

• PowerShares Global Nuclear energy (PKN): up 15% year-to-date

• iShares S&P Global Nuclear Energy Index (NUCL): up 23.2% over three months

• iShares Dow Jones U.S. Utilities (IDU): down 1.9% year to-date; SO is 6.1%

For more stories on nuclear energy, visit our nuclear category.

A major confidence-raising act from business or government has not yet been seen, so the possibility of a bear market rally or a market bottom is still just that – a possibility. Gary Gordon for ETF Expert says that in a world where confidence is everything, if the Securities and Exchange Commission (SEC) and Financial Accounting Standards Board (FASB) can convince the subcommittee to take action, therein lies a catalyst to stabilize the most beleaguered and beaten segment – the financial segment.

By all means, financial stocks are certainly not suggested as a long-term investment at this point, but if there’s any kind of rally in the markets, financials stand to outperform if only because they’ve been so slapped around. SPDR Financial (XLF) is nowhere near either its long- or short-term trend lines, though.

Another observation is that the utility sector was bet on by an unknown institutional player placed the largest ever option trade in the history of trading XLU options; 142,000 call options were purchased at an April strike price of 25, reports Gordon. The implication? Someone is either covering short positions or expecting new legislation to send the utilities market dramatically higher in a short period of time.

Patience is the key here. We’re not seeing strong uptrends in these sectors, so watch the 200-day and 50-day lines for the moment and see what develops.

• iShares Dow Jones Utilities (IDU): down 21% year-to-date

• SPDR Financial (XLF): down 42.6% for three months

Three of California’s largest utility companies are proposing a change in surcharge to be directed away from business customers and be given to residential customers instead.

Southern California Gas Co., San Diego Gas & Electric Co. and Pacific Gas & Electric Co. want to shift $90 million in fees paid each year onto residences, with the fees mostly going toward low-income people heating their homes, reports David Lazarus for The LA Times. The utilities serve more than 10 million natural gas consumers.

These fees are shared equally among businesses and private household residences as of now, and it is making it too costly to conduct business in California for some companies. The goal is to keep the companies domiciled here in California, instead of packing up and moving to another state where it is less expensive to do business.

The proposal is still just that, and it will go before the California Public Utilities Commission next month.

• Utilities Select Sector SPDR Fund (XLU), down 30.1% year-to-date; PG&E Corp. 4.1%; Edison 3.6%

• iShares Dow Jones U.S. Utilities Sector (IDU), down 33% year-to-date; PG&E Corp. 3%; Edison 2.5%