Dive Brief:

• Fitch has updated its list of states which are likely to find Clean Power Plan compliance the most challenging, and under the final rule now says those are: Kansas, Missouri, Nebraska, Tennessee and West Virginia. The least challenged to maintain low cost energy for consumers while complying include: Washington, Oregon, Virginia, Maine and Illinois.
• The ratings agency also warned compliance would be especially challenging for power cooperatives and public power utilities, and that for these entities compliance will likely mean passing along costs to the end consumer.
• While compliance costs remain an issue of debate, Fitch said they could "soar" if the government's assumptions on renewable power and efficiency wind up overly aggressive. 

Dive Insight:

Fitch Ratings' revised assessment of CPP impacts has churned out a very different list of states which will find compliance a challenge. Based on the draft rule, the ratings agency had previously determined that that using its Carbon Cost Reduction Index, Arkansas, Arizona, Florida, Mississippi and West Virginia would be most challenged to preserve credit quality. But after examining the final rule issued in August, only one of the original states remains atop the challenged list.

"States with high electricity costs, sizable mandated carbon-reduction goals and high carbon-reduction costs remain the most challenged by the Clean Power Plan," Dennis Pidherny, managing director of Fitch's public power group, said in a statement.

"For individual public power and cooperative utilities, the ability and willingness to pass along compliance costs to consumers via higher rates or new charges is still key for credit quality," he added.

While the final rule appeared to ease the road to compliance, allowing an additional two years for interim reductions, Fitch believes compliance will remain a challenge.

Cost estimates remain uncertain and estimates vary widely, the agency said, but it believes "EPA's assumptions related to energy efficiency, renewable penetration and cost are aggressive," providing a contrast to much of the initial reaction to the finalized rule and its draft proposal before it.

"If their assumptions and the economics of gas-fired generation prove overly optimistic, compliance costs could soar," Fitch warned.