Dive Brief:
- Major ratings agencies and equity research firms agree that there will be varying degrees of financial impact for states, utilities, merchant generators, and coal producers from the Clean Power Plan. All agree the impacts -- good or bad -- will not soon come to fruition, and certainly not before the rule takes effect in 2022, SNL reports.
- Moody's forecast the biggest benefit for yieldcos — unregulated generators with renewable energy businesses. It also predicted lower cash flow for public electric utilities, generation and transmission co-ops, and merchant generators who rely on coal.
- Moody's expects regulated investor-owned utilities to benefit from the rule, with compliance costs creating major earnings opportunities for the industry.
Dive Insight:
The long-awaited Clean Power Plan is finally here, but it will still take awhile for stakeholders to feel the impact. And the impact is not as bad as many thought it might be. Despite some opposition to the rule -- particularly in coal-reliant red states -- many utilities stand to benefit from the compliance measures they will need to put into place. Last week, Morgan Stanley estimated about $50 billion in capital expenditures is needed across the Southeast to meet the proposed emissions reduction targets.
"Within the regulated universe, the utilities with coal dominant portfolios could see the most adverse impact, since increased cost of compliance would ultimately flow through to consumers as higher rates for electricity," according to Fitch analyst Shalini Mahajan. "However, those utilities with constructive regulatory regimes, ability to recover federally mandated environmental costs either through riders or pre-approval of environmental CapEx, and a manageable glide path for rate increases could ultimately benefit through higher rate based growth, in Fitch's view."