NEW YORK--(BUSINESS WIRE)--The 2014 outlook for U.S. public power and electric cooperatives is stable, according to Fitch Ratings. In spite of challenging environmental regulations, the sector continues to be supported by a solid fiscal foundation and other favorable factors including autonomous rate-setting, the essential nature of electric service, and reliable cash flow.
'New EPA carbon regulations could mean higher compliance costs for public utilities and cooperatives down the road, especially if forced to prematurely retire coal-based plants or if existing regulations are aggressively pursued,' said Dennis Pidherny, Managing Director.
Aggressive environmental regulation, persistent rate pressures and lower sales growth due to lower consumption are long-term challenges that could exert negative ratings pressure.
Reduced retail electricity consumption and sales growth will continue to pressure margins as energy efficiency, demand side management programs and distributed generation gain popularity. While many issuers have historically demonstrated the willingness and ability to raise rates to preserve financial margins, the sector's stable outlook relies on issuers' ability to reverse recent margin declines and erosion of debt service coverage.
Fitch also expects that budgetary challenges will persist for many local governments in 2014, maintaining pressure on electric utilities to support local governments or other city enterprise funds.
The continuance of low natural gas prices should support financial performance and moderate power costs in 2014. Although Fitch recently raised its U.S. natural gas price deck 2013 base case price to $3.75 per thousand cubic feet (mcf) from $3.50/mcf, its 2014 and long-term natural gas prices remain unchanged at $4.00/mcf and $4.50/mcf, respectively.
Fitch will host a conference call to discuss its 2014 Public Power Outlook on Dec. 18 at 2:00 PM eastern.
Dial-in Numbers:
U.S. Participants: +1-877-467-8597
International
Participants: +1-706-643-6296
Date: Wednesday, Dec. 18, 2013
Time:
2:00pm EST
Conference and Replay ID: 23939760
Replay will be
available for 30 days:
U.S. Replay: +1-855-859-2056
International
Replay: +1-404-537-3406
The full report titled '2014 Outlook: U.S. Public Power and Electric Cooperative Sector' is available on the Fitch Ratings web site at www.fitchratings.com.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research: 2014 Outlook: U.S. Public Power and Electric Cooperative Sector (Calm Under Pressure)
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=725447
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