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From CBS.MarketWatch.com, online at:http://aolpf5.marketwatch.com/news/story.asp?siteID=aolpf&guid={2B94A9E8-D298-4858-AB83-E8367AED9C8F} 

	 Avoiding the shock in utility stocks  	
	 By Myra P. Saefong, CBS.MarketWatch.com  1:00 AM ET May 31, 2001 Newswatch More Headlines  	
	 	
SAN FRANCISCO (CBS.MW) -- Fund manager Greg Phelps has just the right weapon to stave off the short circuit in utility stocks: an investment strategy that helps him see the future.  When choosing utility stocks for the $225 million John Hancock Patriot Select Dividend Trust [DIV ], Phelps takes a look at three key issues: dividend yield and sustainability, management and regulatory environment.  His strategy has helped the 11-year old, closed-end fund see a net asset value return of 17.21 percent year-to-date and 4.51 percent on a 3-year annualized basis, according to Lipper. The Philadelphia Utility Index [$UTY ] has risen about 20 percent over the past year.  Phelps' investment preferences have also kept him away from investing in California's cash-starved utilities, Edison International [EIX ] and PG&E Corp. [PCG ].  It's been years since the Select Dividend Trust Fund has been exposed to any California utility, Phelps said.   "I never felt comfortable with the regulatory environment in California," he said, emphasizing his nervousness over the fact that Edison and PG&E agreed to have their rates capped and could not pass on the higher cost of electricity to their customers.   Phelps believes Florida provides a good regulatory environment for utilities because its high temperatures and above average population growth means it will have to build out its electric utility infrastructure and transmission distribution system and create new generating capacity.   Since electricity is such an integral part of the state's economy, Florida has typically treated its utilities very well, he said, giving them reasonable allowed return on equity and the ability to pass through costs.  Using this outlook on the electric industry, Phelps believes Alliant Energy Corp. [LNT ] is a great pick. It has an attractive dividend yield. It's also in a favorable regulatory environment mostly in Wisconsin and Iowa and is a probable consolidation candidate. The stock closed Wednesday at $30.15, off one penny.  Phelps' second pick would be TECO Energy [TE ] because it has a "great track record" of increasing its dividends -- at least 10-straight years -- and its located in Florida. It also has a profitable and growing coal mining and transportation operation as a unregulated subsidiary, he added, noting that coal is a big part of President Bush's energy plan. Shares of the company closed at $31.73, up 15 cents on Wednesday.  Finally, Kansas City Power and Light [KLT ] boasts a higher-than-average dividend yield, much like Alliant Energy. It's also located very close to where Warren Buffet's main utility operations are so it could potentially be on his "shopping list." The company has earnings growth potential with its new generating plants coming on line for this summer. Phelps also likes the company's move to build out its fiber optic subsidiary. On Wednesday, shares closed at $25.09, up 14 cents. Myra P. Saefong is a reporter for CBS.MarketWatch.com in San Francisco.