Dive Brief:
- New research from Fitch Ratings finds public power utilities and electric cooperatives are well positioned to cope with near-term challenges, including impending environmental regulation, persistent rate pressures and increased energy efficiency.
- The 2015 outlook notes low natural gas prices will help utilities manage the Mercury and Air Toxic Standards which are set to go into effect next year, ReNew Grid reports.
- Fitch's long-term natural gas price projection remains at $4.50/Mcf, with commodity prices remaining low due increased shale production.
Dive Insight:
The outlook for the public power and electric cooperative sector remains stable, Fitch Ratings said, and will likely "continue to benefit from favorable economic and market conditions, as well as robust access to capital markets."
The U.S. Environmental Protection Agency's MATS rule will go into effect in 2015, but Fitch said the rules and related cost of compliance appear manageable due to more favorable economics of gas-fired generation and certain renewable sources. In addition, Fitch said compliance with MATS should help minimize the impact of CO2 reduction targets in the EPA's Clean Power Plan, "as utilities will already be reducing reliance on coal-fired generation."
Low and stable fuel prices are also expected to support the sector outlook, Fitch said. Long-term projections for natural gas prices remain at $4.50/Mcf, with Fitch's base case also remaining at $4.00/Mcf due the combination of increased supply from shale production and steady demand.
"Improvements in energy efficiency and the expansion of demand-side management and distributed generation are expected to dampen electricity demand growth going forward, particularly for residential consumers, which represent the largest customer segment for public power and cooperative utilities," Fitch said. "Although this trend is a near-term challenge, risks should be offset by the sector's flexible rate-setting arrangements."
