Moody’s studies OGE Energy
Bond rating firm Moody’s Investor Service puts negative outlook on OGE Energy Corp.
Citing a recent rate case and delays in getting decisions from Oklahoma regulators, bond rating firm Moody’s Investors Service put a negative outlook on OGE Energy Corp. and its utility, Oklahoma Gas and Electric Co.
The negative outlook doesn’t change any of the firm’s top-tier ratings on OGE Energy’s bonds, but it does signal that it could become more expensive for the company to service its debt under a downgrade. That in turn could mean higher costs passed on to customers.
“The negative outlook reflects the potential for a decline in financial metrics amidst some uncertainty over cost recovery and earned returns in Oklahoma,” Ryan Wobbrock, Moody’s vice president and senior analyst, said in a research note.
Moody’s negative outlook came a week after Fitch Ratings kept its outlook for OGE Energy and OG&E at stable. However, Fitch also discussed the regulatory environment in Oklahoma.
“In Fitch’s view, Oklahoma Corporation Commission’s regulation is overall supportive but showing signs of deterioration,” the firm said in a June 22 research note.
Fitch said it was concerned with the commission’s 21-month review of OG&E’s case for installing scrubbers on two coal units at the Sooner plant near Red Rock. It also said OG&E’s last rate case took 15 months.
The three-member Corporation Commission approved an $8.8 million rate increase in March, down from the $92.5 million requested by OG&E. The utility filed the case in December 2015.
OG&E plans to file a rate case in the fourth quarter related to the $425 million project to modernize its Mustang natural gas plant in far west Oklahoma City. The utility also plans a rate case by the end of 2018 to recover costs for its $547.5 million coal scrubber project at the Sooner plant.
“OGE and OG&E’s long-term rating stability depends on timely regulatory support for their environmental control and modernization projects,” Fitch said in the research note.
OG&E spokesman Brian Alford said the utility’s bond ratings have been positive. Another ratings firm, Standard & Poor’s, hasn’t made any recent comments on the utility’s bonds.
“What we’re seeing is two of the ratings agencies have made comments and raised their concerns,” Alford said. “Of course, should they take further action that would downgrade our credit rating, that would increase the cost of borrowing and fall ultimately on our customers.”
Utility case delays at the Corporation Commission have attracted attention from the Legislature. House Bill 1377, which set up a task force to study the processes at the Corporation Commission, was pulled in the final weeks of the session after Gov. Mary Fallin’s office signaled it could accomplish the same thing in an executive order. That executive order is being drafted and could be issued later this month.