NextEra Energy (NEE) operates in 26 states across the US and in four Canadian provinces through its two principal subsidiaries, Florida Power & Light Company, or FPL, and NextEra Energy Resources, or NEER.
FPL’s operations are limited to the state of Florida, but NEER operates in many US states and certain Canadian provinces, as you can see in the chart below.
NextEra Energy benefits from its monopolistic operations in the state of Florida. More than 70% of NextEra’s revenue is derived from electricity sales in Florida, the largest regulated electricity market in the US in terms of sales.
Regulated markets in the US are characterized by stable earnings and regional monopolies among power producers.
Apart from NextEra, Duke Energy (DUK) also operates in Florida. Both companies have mutually exclusive service areas within the state—essentially monopolistic operations. NextEra Energy and Duke are part of the Select Sector Utilities Select Sector SPDR Fund (XLU).
NEER’s regional diversity
NextEra runs its unregulated business segment through its subsidiary, NEER. The unregulated segment is considered riskier than the regulated segment because profitability depends on market factors such as demand and supply.
Power companies such as NRG Energy (NRG) and Dynegy (DYN) lower the risks associated with unregulated operations by operating in diverse markets. With the exceptions of the Southeast and the Rocky Mountains, NEER operates in most other parts of the US. It also has operations in Canada’s two most populated provinces, Ontario and Quebec, as well as Alberta and Nova Scotia.
Regional diversity helps to protect NextEra’s unregulated power portfolio from regional swings in electricity prices and fuel supply constraints.