Duke Energy Corporation (DUK) signed an agreement with Cisco Systems Inc. (CSCO) to develop a smart grid-enabled home energy management solution. Duke Energy plans to use the tool to help its residential customers reduce the amount of energy wasted in their homes.

Duke Energy caters to a population of 11 million in central and western North Carolina, western South Carolina, southwestern Ohio, central, north central and southern Indiana, and northern Kentucky. Internal generation usually falls short of demand and the company has to purchase power for its customers due to generating plant outages, extreme weather conditions, seasonal demand growth, and price volatility. In fiscal 2009 cost of fuel and purchased power rose by $29 million year-over-year to $3.2 billion.

Duke Energy is testing the Cisco Home Energy Management Solution with its customers in Charlotte, North Carolina, and in Cincinnati, Ohio, where the company has installed digital smart grid technologies. Through these year-long tests, Duke Energy and Cisco will fine tune the system for use in its entire service area.

In addition to home energy management, Duke Energy and Cisco is planning to develop together energy efficient household products like appliances, electrical outlets, air conditioners, water heaters and plug-in electric vehicles to create an ecosystem of products that connect with the Cisco Home Energy Management Solution.

Cisco Systems is an Internet protocol-based networking company, which also offers other products, technologies and related services to communications and information technology service providers, companies, commercial users and individuals.

Duke Energy is one of the largest electric power holding companies in the United States. During the first-quarter call, the company reaffirmed its fiscal 2010 adjusted earnings range of $1.25 – $1.30 per share. This is in line with the Zacks Consensus Estimate of $1.29.

Presently we have a Neutral recommendation on the shares of Zacks Rank #3 (hold), Duke Energy. In the near-term we would advise investors to focus on its Zacks Rank #1 (strong buy) peers like Companhia Paranaense de Energia (ELP).
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