Utility projects may be delayed

Moody’s report: Customers ability to pay key factor in speed with which upgrades move forward

Analysts with one of the nation’s leading credit rating agencies say how regulators in Connecticut and other states respond to the difficulty consumers face in paying rapidly increasing electric and natural gas bills in the coming months could impact the timing of major capital projects at utilities.

Analysts with Moody’s Investors Service said in reports issued earlier this month that as utility regulators extend the amount of time consumers have to pay their energy bills, electric distribution utilities like Eversource Energy and The United Illuminating Co. will be forced to make difficult decisions about major projects they have planned. Typically, the utilities are able to recover those costs over a 12month period, according to Moody’s officials.

“More regulators are likely to extend (cost) recovery periods to between 18 and 36 months ... to ease the impact on customer electricity rates,” the Moody’s reports said in part.

As repayment periods are extended, electric distribution utilities will need to take steps in order to improve cash flow, according to Ryan Wobbrock, a Moody’s analyst who follows Avangrid, the corporate parent of The United Illuminating Co. and its sister natural gas companies.

“It’s a public policy decision: If the regulators dictate that bills can only increase so much, some of these utilities’ projects are going to get pushed out to extra years,” said. “Maybe it’s a renewable energy project or maybe its a storm hardening project.”

Certain large capital projects are unlikely to be delayed as the utility companies look to improve their cash flow, said Jillian Cardona, a Moody’s analyst who focuses on energy infrastructure.

“Spending on (grid) resiliency and safety measures are likely continue,” Cardona said. “But

some capital spending will be moved from near term.”

Mitch Gross, a spokesman for Eversource Energy, said one of the Moody’s reports “focuses on utilities that own natural gas generation but that does not apply to us.” Eversource sold most of its generation capability more than two decade ago as part of Connecticut’s utility deregulation process.

“We purchase electricity in the three states we serve — Connecticut, Massachusetts and New Hampshire — for our customers who choose not to contract with a third party for their electricity supplies,” Gross said. “We charge those customers what the suppliers are charging us — there’s no markup and no profit. The Moody’s report underscores why recovering those costs on a timely basis is important to maintaining strong credit ratings, which help keep costs down for customers.”

Gage Frank, a spokesman for Avangrid , said the Orange-based company “is reviewing the Moody’s report and its conclusions, but is confident in the credit worthiness of UI, SCG, and CNG. AVANGRID’s Connecticut companies.”

“(We) stand ready to work with PURA to effectuate programs to alleviate the energy burden of its customer during this time of challenging market forces,” Frank said.

Some of the decisions about which projects to delay will vary from state-to-state depending upon public policy goals, she said.

Connecticut is focused on reducing green house gasses like carbon dioxide. Part of its reduction effort involves procuring more renewable energy to run the state’s homes and businesses.

“Most generation investments are focused on renewables,” Cardona said. Any delays in renewable energy projects backed by electric utilities might result in states missing deadlines for green house gas reductions, she said.

Both Cardona and Wobbrock said the possibility of cash flow difficulties associated with extending the amount of time customers have to pay their bills wouldn’t put any of the electric and natural gas distribution companies in danger of serious financial problems.

“We’re talking about a strong sector, an investment grade sector,” Wobbrock said. “We’re not talking about any financial harm.”

Cardona said Moody’s officials still expect that utilities will have adequate access to the capital needed for projects.

“The rise in interest rates is the real challenge for these companies,” she said.