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Big Movers Among Utility Funds

Utility funds had an excellent week. The average utility sector fund we track climbed 1.90% for the five trading days ending Thursday, April 17. Favorable weather and new North American natural gas finds may have been contributing factors.

More likely, the gains are traced to the deregulated, independent power-generation companies like NRG Energy (NRG), Reliant Energy (RRI) and Mirant (MIR), which charge for wholesale electricity at what the market will bear. These prices are set from the more-expensive natural gas-generated electricity. They then produce as much cheaper coal- or nuclear-based electricity as they can in order to profit from the cost difference.

The best-performing utility fund this week is the Ultra Utilities ProShares (UPW), gaining 6.96%. The fund is 200% leveraged to the Dow Jones U.S. Utilities Index. The second-place ProFunds Utilities UltraSector ProFund (UTPSX) tracks the same index, but at 150% leverage. The four largest holdings are Exelon (EXC), Southern Union (SUG), Dominion Resources (D) and FPL Group (FPL).

The Fidelity Select Utilities Growth Fund (FSUTX) ranks third on our best-performer list. This fund has rebounded from last month's lows but is still down over the last 12 months. One of the fund's holdings, Public Service Enterprise Group (PEG), surged on news of approval from the Federal Energy Regulatory Commission for higher incentive profits for building a $1 billion power line from Pennsylvania to New Jersey.

Best Performing Utility Funds for the Week Ending Thursday April 17
Fund Ticker Rating Fund Type 1 Week Total Return
Ultra Utilities ProShares UPW E- ETF 6.96%
ProFunds Utilities UltraSector Profund UTPSX C+ Open-End 4.88%
Fidelity Select Utilities Growth Portfolio FSUTX A+ Open-End 3.93%
Fidelity Advisor Utilities Fund FAUFX A+ Open-End 3.68%
PowerShares Dynamic Utilities Portfolio PUI D ETF 3.54%
PowerShares FTSE RAFI Utilities Sector Portfolio PRFU D+ ETF 3.46%
Utilities Select Sector SPDR Fund XLU B ETF 3.39%
Vanguard Utilities ETF VPU B+ ETF 3.37%
Utilities HOLDRs Trust UTH B+ ETF 3.30%
Vanguard Utilities Index Fund VUIAX A Open-End 3.27%
Source: Bloomberg & TheStreet.com Ratings

This week, the worst-performing utility fund is the UltraShort Utilities ProShares (SDP), which sank 6.62% for the five trading days. This fund tracks the Dow Jones U.S. Utilities Index with double negative leverage. The index members gaining the most this week include: NRG Energy Inc, up 7.03%; Aquila (ILA), up 6.38%; Public Service Enterprise Group Inc, up 6.18%; Mirant (MIR), up 5.98%; and Equitable Resources (EQT), up 5.88%.

Making its second consecutive appearance as the second-worst-performing utility is the Evergreen Utilities and High Income Fund (ERH), slipping 1.35%. Eight of this fund's 10 underperforming positions are in the telecommunications sector.

Returns of negative 5.29% from BT Group (BT), negative 3.51% from Rogers Communications (RCI), negative 1.85% from Telus (TU) and negative 1.65% from AT&T (T) offset the positive water and electric utility stock returns.

BT was likely hurt by expectations that certain mobile-phone fees are expected to decline.

Plus, AT&T is cutting 4,650 workers to trim overlapping costs after several large acquisitions. Employees servicing the home phone-line business are to bear the brunt of the job losses after 1.6 million AT&T residential-line customers disconnected in favor of cable and wireless mobile phones.

Worst Performing Utility Funds for the Week Ending Thursday April 17
Fund Ticker Rating Fund Type 1 Week Total Return
UltraShort Utilities ProShares SDP B- ETF -6.62%
Evergreen Utilities and High Income Fund ERH B- Closed-End -1.35%
DTF Tax-Free Income Inc DTF C Closed-End -0.08%
Duff & Phelps Utility and Corporate Bond Trust DUC C Closed-End -0.05%
Gabelli Utility Trust GUT C+ Closed-End 0.01%
WisdomTree International Utilities Sector Fund DBU B ETF 0.09%
ICON Telecommunications & Utilities Fund ICTUX B Open-End 0.26%
Nationwide Global Utilities Fund GGUAX B+ Open-End 0.31%
RiverSource Dividend Opportunity Fund INUTX C Open-End 0.36%
Reaves Utility Income Fund UTG B- Closed-End 0.44%
Source: Bloomberg & TheStreet.com Ratings

In the near future, in a thought just in time for Earth Day, electric utilities will have to plan for increased nighttime kilowatt-hour usage as residents charge up their plug-in electric car batteries and top off their home-storage batteries.

For an explanation of our ratings, click here.

Kevin Baker became the senior financial analyst for TSC Ratings upon the August 2006 acquisition of Weiss Ratings by TheStreet.com, covering mutual funds. He joined the Weiss Group in 1997 as a banking and brokerage analyst. In 1999, he created the Weiss Group's first ratings to gauge the level of risk in U.S. equities. Baker received a B.S. degree in management from Rensselaer Polytechnic Institute and an M.B.A. with a finance specialization from Nova Southeastern University.

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