Fitch: U.S. Public Power Still Faces Long-Term Carbon Pressures

NEW YORK--(BUSINESS WIRE)-- Link to Fitch Ratings' Report: 2017 Outlook: U.S. Public Power and Electric Cooperative Sector

https://www.fitchratings.com/site/re/891054

Despite increased uncertainty over the future of the Clean Power Plan (CPP) in light of Donald Trump's election, U.S. public power utilities still face long-term pressures to reduce carbon dioxide emissions, according to Fitch Ratings' 2017 Outlook for U.S. Public Power and Electric Cooperatives. Both the rating and sector outlooks remain stable for 2017.

"Independent rate-setting authority, the essentiality of electric service and reliable cash flows should support the public power and electric cooperative sector's fiscal foundation in the year ahead, despite the uncertainty surrounding the incoming administration," says Dennis Pidherny, Managing Director and Head of Public Power.

Alternative EPA regulation, policies to reduce investment in coal-fired utilities, and state-level renewable energy mandates are factors that could keep the spotlight on carbon emissions in the coming years and affect utilities' resource planning, whether the CPP is repealed or not.

Rising household income continues to boost affordability and ease rate pressures for public power issuers. Moreover, historically low natural gas prices, and brisk refunding activity driven by low interest rates, have further reduced revenue requirements. Expectations of higher interest rates and fuel prices do not pose a significant risk, but rising costs may limit the headroom for rate increases, which could pressure ratings over time.

Capital investment throughout the sector should continue to slow over the near term as electric consumption growth slows and ample alternative generating capacity delays new construction.

While not a key rating driver in the near term, Fitch also notes that distributed renewable generation presents an increasing longer-term threat to the traditional utility model as attractive tax subsidies, the falling cost of solar panels and customer preferences increase penetration. Constructive rate design will be a key to minimizing revenue loss as renewables gain traction.

Fitch Ratings will hold a conference call to discuss its 2017 Outlook for U.S. Public Power and U.S. Water and Sewer on Wednesday, Jan. 18, 2017 at 2:00pm ET. To receive dial-in details for this call, please register here: http://dpregister.com/10097564

The full report, "2017 Outlook: U.S. Public Lower and Electric Cooperative Sector," is available at www.fitchratings.com

Additional information is available at 'www.fitchratings.com'.

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View source version on businesswire.com: http://www.businesswire.com/news/home/20161215006298/en/

Fitch Ratings
Dennis Pidherny
Managing Director
+1-212 908 0738
Fitch Ratings, Inc.
33 Whitehall Street
or
Media Relations:
Alyssa Castelli, +1-212-908-0540
[email protected]

Source: Fitch Ratings

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