Fitch: Public power and cooperatives can handle near-term challenges

December 10, 2014 05:26 PM Eastern Standard Time

NEW YORK--(BUSINESS WIRE)--U.S. 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, according to Fitch Ratings' 2015 Outlook.

As regulatory deadlines for complying with the Environmental Protection Agency's Mercury and Air Toxic Standards (MATS) approach in 2015, the rules and related cost of compliance appear manageable due to more favorable economics of gas-fired generation and certain renewable sources. In addition, compliance with MATS should help minimize the impact of CO2 reduction targets in the EPA's Clean Power Plan, announced earlier this year, 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's 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. Although this trend is a near-term challenge, risks should be offset by the sector's flexible rate-setting arrangements.

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.

Fitch will host a conference call to discuss its 2015 Public Power and Water & Sewer Outlooks on Dec. 12 at 11:00 AM eastern.

Dial-in Numbers: U.S. Participants: +1-877-467-8597 International Participants: +1-706-643-6296 Date: Friday Dec. 12, 2014 Time: 11:00am EST Conference and Replay ID: 31478308

Replay will be available for 30 days: U.S. Replay: +1-855-859-2056 International Replay: +1-404-537-3406

The full report titled '2015 Outlook: U.S. Public Power and Electric Cooperative Sector' is available on the Fitch Ratings web site at www.fitchratings.com.

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