Sector Snap: Baird Upgrades 4 Utilities

"We believe an argument can be made that regulated utilities could play an important role near term, supporting infrastructure investment during this economic downturn," he said.

Declining commodity costs and improved availability of skilled workers could reduce the cost of new infrastructure, he said.

Parker also believes there are investment opportunities as the industry — fueled by the economic stimulus package and lower costs for renewable energy — develops renewable energy resources and smart grid technology with investment picking up in the second half of the year. Also, he is looking for utilities to develop a more efficient generating fleet as older resources are retired.

Merchant power companies should get a boost by midyear on in the third quarter as the economy picks up along with energy commodity prices.