Fitch: Public Power Outlook Stable Despite Challenges from Carbon Regulations & Renewable Energy
Municipal power utilities and electric cooperatives are well positioned
to cope with near-term challenges including recently enacted carbon
regulations, persistent rate pressures and long-term threats to the
traditional utility model, according to Fitch Ratings' 2016 Outlook
The Environmental Protection Agency's final rules mandating the
reduction of carbon dioxide emissions will present long-term challenges
to the sector. Although mandated reduction goals do not take effect
until 2022, limiting the near-term effect on utilities, the rules are
expected to influence strategic decision much earlier as utilities
consider the expanded reliance on natural gas-fired generation,
development of new renewable energy resources and application of
demand-side energy efficiency necessary to comply.
Low and stable fuel prices should continue to support the sector
Outlook. Fitch's 2016 projection for natural gas prices was lowered to
$3.25/mcf during 2015, with our long-term price falling to $4.00/mcf,
reflecting increasingly efficient production and lagging demand growth.
Declining cost curves for renewable energy resources also present
significant opportunities for public power and electric cooperative
utilities, as well as significant risks. While lower costs should allow
utilities to more economically meet renewable energy mandates and
carbon-reduction goals, declining costs related to residential
photo-voltaic systems and battery storage could dampen consumption,
pressure unit costs and challenge the traditional utility model
Overall, public power utilities and electric cooperatives should
continue to benefit from favorable economic and market conditions, as
well as robust access to capital markets. The Outlook for the sector and
its ratings are Stable.
Additional information is available at 'www.fitchratings.com'.
2016 Outlook: U.S. Public Power and Electric Cooperative Sector
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Copyright Business Wire 2015
Source: Business Wire
(December 9, 2015 - 4:24 PM EST)
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