By Jesse Berst

Younger investors enamored by Internet plays like Google and Amazon or tech stocks like Apple may not realize utilities were once a sizzling investment category in their own right.

Ask an old-timer about utility stocks and you might hear a story about the radical new concept in electricity pricing that was pioneered by Samuel Insull in the early part of the century. Suddenly utilities became a hot, novel category and adventurous investors jumped on the bandwagon. (There's a reason utilities are included on the Monopoly board.)

Along came the Depression and other problems that brought Insull crashing down. But interest in utilities revived after the war. The sector went through a golden age from around 1945 to 1965 as the build-and-grow model reached its zenith. During that period utility stocks outpaced the market at large.

That came grinding to a halt when utilities finally hit the limits of building ever bigger power plants and went into a long stagnation.

But as the recent economic downturn sent investors scurrying for stability and steady dividends, utility stocks were suddenly back on the radar, as James Hofman pointed out earlier this month in his Seeking Alpha commentary Electrify Your Portfolio with Utilities.

Comfort level may be one reason investors like utilities. But Smart Money suggests others are focused on the sector's building boom and rising profits as utilities replace aging infrastructure and expand into renewable energy. It's an interesting read with call-outs on Wisconsin Energy, CMS Energy in Michigan and San Diego based Sempra in the U.S. and fast-growing foreign utilities that are feeding the demand for electricity in emerging countries.

But I see at least two other reasons utilities could do well on Wall Street.

First are the increasing mandates such as RPS. Utilities won't be able to hit those targets without more money. As we've seen before, the first step will be to order a utility to hit a mandate. The second step will come a few years later when regulators give it more money to enable it to do so.

Second is if state or national regulations change to give utilities incentives for investing in efficiency. Decoupling, already in place in about a dozen states, is a step in that direction.

Don't think it couldn't happen. Many experts believe the "traditional" utility business model is overdue for change. Even "progressive" groups such as NRDC are saying that utilities could and should lead the transition to clean energy (as I mentioned earlier when I explained why U.S. utilities will always be rinky-dink).

Maybe I'm overly optimistic -- and I hope you'll use the Talk Back comment form below to tell me what you think – but a serious overhaul could make utilities winners when it comes to stock prices (and maybe your next Monopoly game too). In doing so, it would unleash a new world of opportunities.

Jesse Berst is founding editor and chief analyst at Smart Grid News.

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