Thanks to a recent court ruling, earnings for green-energy utilities may soon be on the rise.

In late August, a major obstruction to greater sales of renewable energy was lifted when a court upheld an order issued by the Federal Energy Regulatory Commission (FERC).

The rule–known as Order 1000–mandates states and utilities to consider regional green-energy policies when building out the electrical grid network.

We see the recent court ruling as part of a continuing trend of state and federal regulation that favors those utilities that are investing in clean technologies and developing new business strategies for the changing energy landscape.

This is also clearly good news for the renewables industry in general, especially since more markets–both regulated and unregulated–will be more fully open to renewables.

The ruling not only calls for the expansion of the electrical grid superhighway, but will build off-ramps into regulated markets, which means potentially new renewables customers in those states.

At the same time, this drives yet another nail into the coffin for coal-heavy utilities, as analysts predict such policies will force utilities to shutter plants. In fact, regulated utilities were the entities most opposed to Order 1000 before it was upheld.

Not only does the order force utilities to consider renewables in their transmission planning, but they must also pay for such expansions according to a new method for cost allocation among beneficiaries.

These regulated utilities’ chief concern–as it has been for their unregulated peers–is that plants that were built recently could become uneconomic due to greater competition from other energy resources.

These firms have argued that they’re essentially being forced to open their service territories to markets that could disrupt their investments. But that seems the way of the world these days.

As we have seen in unregulated markets over the past year, companies such as Exelon Corp (NYSE: EXC), which boasts the largest fleet of nuclear power plants in the US, have suffered an erosion in margins as a result of competition from firms that shifted to generation from cheap natural gas and renewables.

And it stands to reason that this could also happen in the regulated arena, though most analysts agree that renewables’ penetration of these markets will occur much more slowly, even with an expanded grid, than it has in unregulated markets.

Nevertheless, we view Order 1000 as the least of these utilities’ worries. With the Environmental Protection Agency (EPA) getting ready to issue a final rule next summer on how it will regulate carbon, the industry is already rapidly preparing for the reality of this new carbon-emissions regime.

Many in the industry predict that a massive wave of coal plant closures in the next few years is all but certain, as new carbon-emissions rules will render many coal plants uneconomic.

That’s why investors should be focused on utilities that are making the changes to their business model now, including taking the lead in offering renewables, actively upgrading their networks to accommodate renewables and other services, and preparing for the next stage of the industry’s transformation.

Winning on Green

What will the utility of the future look like?

Jon Wellinghoff, a former chairman of the FERC, summed it up best in the forward of a recent report issued by Ceres, a non-profit that advocates for environmental sustainability. The utility of the future will be able to help consumers “manage their energy bills and obtain targeted energy services in the quantity, quality, and locations that they desire.”

For Wellinghoff, this means a utility that can deliver real-time pricing so consumers can choose how much electricity they use between peak- and off-peak hours, known in the industry as demand-response service.

This also means, according to Wellinghoff, that utilities can help consumers generate electricity on site–such as with solar photovoltaic systems–as well as integrate more efficient end-use technologies such as LED lighting. Finally, the utility of the future will have developed the “smart infrastructure” required to integrate and optimize all these services.

And for those wondering which present-day utilities are coming closest to this ideal, Ceres recently launched a ranking of the 32 largest US investor-owned utilities based on energy efficiency and renewable energy sales.

The Best and Worst Clean-Energy Utilities

According to the Ceres ranking, NV Energy Inc, which was acquired late last year by Warren Buffett’s MidAmerican Energy Holdings Co, Xcel Energy Inc (NYSE: XEL), PG&E Corp (NYSE: PCG), Sempra Energy (NYSE: SRE) and Edison International (NYSE: EIX) ranked the highest for renewable energy sales. Renewable resources accounted for roughly 17 percent to 21 percent of their retail electricity sales in 2012.

SCANA Corp (NYSE: SCG), Southern Co (NYSE: SO), Dominion Resources Inc (NYSE: D), AES Corp (NYSR: AES) and Entergy Corp (NYSE: ETR) ranked at the bottom, with renewable energy sales accounting for less than 1 percent of each of their total retail electricity sales.

Certainly, according to Ceres, state policies were found to be the greatest driver in clean-energy investment. And as noted above, new EPA policies on carbon emissions as well as the FERC’s Order 1000 will provide additional incentives for states to improve clean-energy performance among utilities.