Fitch EEI Wrap-Up Report: Clean Power & the Grid Evolving

The 50th Annual Edison Electric Institute (EEI) financial conference was a relatively subdued affair, primarily focusing on secular concerns regarding renewables, climate change and their impact on the utility business model, according to Fitch Ratings. These challenges contrast with current constructive macroeconomic trends and a relatively supportive U.S. regulatory compact.

The U.S. Environmental Protection Agency's (EPA's) clean power plan (CPP), finalized August 2015, was a big topic at the convention and Fitch's 27th Annual Global Power Breakfast held Nov. 9th. Industry participants see opportunity and challenges across the supply chain including transmission, distribution and generation. The grid, driven by policy and economics, is widely expected include a significantly greater proportion of intermittent and distributed resources at the expense of coal-fired generation. These developments are likely to require significant investment and meaningful change in the current utility business model.

As discussed at Fitch's 2015 breakfast presentation, investor-owned utilities (IOU) are working to formulate plans to meet CPP targets. Fitch unveiled its initial methodology evaluating the magnitude of the CPP impacts across state jurisdictions based on carbon intensity, availability of renewables and state regulatory compacts, among other factors.

Electric utilities continue to benefit from historically low interest rates, subdued natural gas prices and a generally benign regulatory environment. Fitch expects flat to modestly higher weather-normalized kWh sales growth for the regulated utility segment, as DG along with energy efficiency are likely to create significant headwinds for utility sales growth.

Fitch expects the outlook for regulated utilities to be stable in 2016 and credit metrics consistent with current median ratings of 'BBB+' for utility holding companies and 'A-' for operating utility subsidiaries.

The full 'EEI Wrap-Up Report' is available at 'www.fitchratings.com' or by clicking on the link.

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

EEI 2015 Wrap-Up: Clean Power and the Grid Evolving

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=873889

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