Eversource Energy (ET): Riding Regulatory Waves to Grid Modernization Profits

The energy transition is no longer a distant ideal—it’s a regulatory imperative. For investors seeking exposure to utilities capitalizing on state mandates for grid modernization and renewable integration, Eversource Energy (ET) stands out as a premier play. With its $5 billion+ 2025 capital expenditure (capex) plan and a 4.5% dividend yield, ET is uniquely positioned to profit from regulatory tailwinds that are reshaping the utility sector. Let’s dissect why now is the time to act.

Regulatory Tailwinds: The Engine of Earnings Growth

State-level policies in Eversource’s core service areas—Massachusetts and Connecticut—are driving a $5.5 billion investment boom in grid modernization and clean energy enablement. Massachusetts’ Electric Sector Modernization Plan (ESMP), approved in 2024, mandates upgrades to support 2.5 million electric vehicles (EVs) and 1 million heat pumps by 2034, while Connecticut’s Non-Residential Renewable Energy Solutions (NRES) program is accelerating solar adoption through competitive bidding. These policies are not just guidelines—they’re enforceable contracts requiring utilities to modernize or face penalties.

The result? Eversource’s rate base growth is set to hit 8% annually, far outpacing peers like Dominion Energy (D) or PPL Corporation (PPL), which lack similarly aggressive state mandates. By contrast, New Hampshire’s regulatory environment, while less prescriptive, still benefits from Eversource’s proactive investments in storm resilience and equity-focused grid upgrades, ensuring cross-state synergies.

The $5B Capex Play: Building Resilience, Capturing Profits

Eversource’s 2025 capex plan isn’t just about wires and substations—it’s a strategic offensive to monetize regulatory compliance. Key priorities include:
1. Advanced Metering Infrastructure (AMI): Deploying smart meters to empower customer energy management, reducing outages, and unlocking data-driven rate designs.
2. Solar Hosting Capacity: Expanding to 5.8 GW by 2034, exceeding Massachusetts’ 2040 goals and creating a platform for distributed energy revenue streams.
3. Equity-Driven Grid Upgrades: Prioritizing environmental justice communities, which not only satisfies state mandates but also reduces operational risks tied to public opposition.

Crucially, these investments are backed by ratepayer guarantees. In Massachusetts, the Department of Public Utilities (DPU) has already greenlit Eversource’s ESMP, ensuring recovery of approved costs plus a regulated return. This contrasts sharply with peers in deregulated markets, where capital projects hinge on uncertain ROI.

Why ET Outshines Peers: Dividend + Underpenetrated Rate Base

While Eversource’s 4.5% dividend yield may seem modest compared to some utilities, it’s sustainably funded by its 55% earnings retention ratio—a stark contrast to peers like NextEra Energy (NEE), which retains only 30%. Moreover, Eversource’s rate base growth is underappreciated by the market.

Consider this: Eversource’s Massachusetts and Connecticut operations have rate base penetration of just 60% relative to long-term targets. Each dollar invested in grid upgrades translates to a 1.2x multiplier in rate base growth, directly boosting earnings. Meanwhile, peers in less regulated states face headwinds like flat demand or political pushback, making ET’s regulatory tailwinds a rare asymmetric opportunity.

The Call to Action: Buy Now Before Rates Catch Up

Eversource’s stock is trading at 9.5x 2025E EPS, a discount to its 10-year average of 11.2x. This valuation gap ignores two critical catalysts:
1. 2025 Rate Reviews: Eversource’s pending requests in New Hampshire and Connecticut could unlock $200 million+ in incremental annual revenue by 2026.
2. Equity Incentive Unlocks: Its Community Engagement Stakeholder Advisory Group (CESAG) is reducing regulatory risk, paving the way for faster approvals of high-margin projects like substation upgrades.

Investors should act before Q3 2025, when Eversource is expected to report its first full-year results under the ESMP. With a low beta of 0.75 and a 4.5% yield cushion, ET offers downside protection while capitalizing on the energy transition’s most predictable profit engine.

Final Take: Regulatory Winners Take All

The energy transition isn’t optional—it’s enforced by law. Eversource’s alignment with state mandates positions it as the utility sector’s compliance champion, with a $5B capex plan converting regulatory risk into shareholder returns. With a dividend yield that’s both secure and growing, and rate base upside that’s underpriced, ET is a rare blend of safety and growth. This is no time to wait—act now before the market catches on.

Investors: The grid of the future is being built today. Own a piece of it.