Moody's: Low interest rates, fuel costs, will support competitive public power rates in 2018
- Moody's Investors Service yesterday said it is maintaining its stable outlook on the United States' public power sector for 2018. The decision reflects the ratings agency's expectation of timely cost recovery and lower capital spending requirements for the sector.
- Low fuel costs and interest rates are expected to help public power utilities, along with excess regional capacity and better plant efficiency.
- Moody's anticipates the public power sector will issue less debt to fund new generation, as utilities are shifting toward using regional energy markets and less capital-intensive resources.
What's good for one sector may not be for another, Moody's reminds the energy sector. Last month, the ratings agency issued a pair of reports, with one including a negative outlook for the unregulated power sector because of weak demand and oversupplied markets.
Those same factors have been a boon to the public power sector, and helped maintain Moody's stable outlook.
"Fuel and interest cost trends, demand projections, and the pace of environmental regulation all indicate stable finances for the sector in 2018," said Dan Aschenbach, a senior vice president at Moody's. "We expect public power utilities will continue to evaluate their rate structures to ensure adequate recovery and maintain their competitive positions."
According to Moody's, excess generation capacity "will also keep rates down as public power utilities turn to regional energy markets for their customers while running owned generation less often."
Carbon emission policy may have slowed at the federal level, with the Trump Administration's rollback of the Clean Power Plan and other rules. But Moody's said it expects many states and municipalities to maintain the pace of their existing renewable energy standards, which could pose challenges to some public power utilities.
"The cost of renewables continues to decline, which mitigates some carbon transition risk," Aschenbach said. "But differing customer preferences are also affecting procurement decisions and creating regional differences."
Moody's report also predicts growth in capital investment for protection against cybersecurity risks, as the industry's development is driven by technological advancements and connections.
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