Moody’s assigns first-time A2 issuer rating to CleanPowerSF, with stable rating outlook
December 9, 2020
by Paul Ciampoli
APPA News Director
December 9, 2020
Moody’s Investors Service on Dec. 9 assigned a first-time A2 issuer rating to California community choice aggregator (CCA) CleanPowerSF. The rating outlook is stable.
CleanPowerSF is a not-for-profit, single jurisdiction community choice aggregator and a component unit of the City and County of San Francisco’s Public Utilities Commission (SFPUC), which has an extensive history of operations, Moody’s noted.
Moody’s said the A2 issuer rating for CleanPowerSF is underpinned by, among other things, the strength of its service area, the SFPUC’s long-standing experience operating large utility enterprises with energy procurement, a common pool of experienced employees, as well as access to the unrestricted portion of the city’s general fund liquidity pool in the case of an emergency.
The rating agency noted that CleanPowerSF is a single jurisdiction CCA, rather than a joint power agency (JPA) CCA.
“In many respects, a city-operated CCA is similar to CCAs operated by JPAs in expanding clean energy choices,” Moody’s said.
Strengths of city-operated CCAs include governance and ownership by the city, linkage to the city’s oversight, with city councils having authority over the unregulated rate-setting process, and experience managing other services such as water and sewer, the rating agency said.
Moody’s said a key strength for CleanPowerSF’s credit quality and liquidity profile is its access to the City of San Francisco’s Treasury pool, which provides additional liquidity to CleanPowerSF.
As of the first quarter of 2020, the City’s pool was made up of approximately $11.2 billion in unrestricted cash, of which $1.2 billion is reserved for the benefit of SFPUC enterprise funds (including $98.3 million for CleanPowerSF).
The stable outlook reflects expectations that CleanPowerSF will maintain an adequate liquidity profile through Fiscal Year 2021 “despite load demand decline given some flexibility built-into its supply contract positions, while temporarily compressing its discount to PG&E rates.”
In addition, the stable outlook incorporates the rating agency’s expectation the CleanPowerSF’s economic service territory will remain strong and supportive of a clean energy value proposition offered by CleanPowerSF through the CCA model for customers in San Francisco, Moody’s said.
“Today’s announcement of an issuer rating of “A2” by Moody’s is a significant next step in the development of CleanPowerSF as San Francisco’s clean electricity provider serving more than 380,000 residents and businesses,” said SFPUC Chief Financial Officer Eric Sandler. “The rating confirms that CleanPowerSF is a high-grade utility enterprise, which will allow us to provide our services on a more cost-effective basis while continuing to meet San Francisco’s ambitious climate action goals.”
The American Public Power Association has initiated a new category of membership for community choice aggregation programs.
Calif. CCA Central Coast Community Energy receives “A” issuer credit rating
October 22, 2020
by Paul Ciampoli
APPA News Director
October 22, 2020
Central Coast Community Energy on Oct. 16 received an “A” issuer credit rating from Standard & Poor’s, which Central Coast Community Energy said is the highest rating received by a California community choice aggregator (CCA).
S&P’s issuer credit rating and “stable” outlook is an independent assessment of the CCA’s operational and financial strategies over the long term, “confirming the agency’s economic stability and footing for future success,” Central Coast Community Energy said in a news release.
Central Coast Community Energy “is proud to receive the first ‘A’ investment grade credit rating among California CCAs. This is a testament to the hard work and forward thinking” the CCA’s staff and leadership have demonstrated since launching in 2018, said Central Coast Community Energy Policy Board Chair and Santa Cruz County Supervisor Bruce McPherson.
“In that short time this agency has set a very high bar in terms of financial strength, operational responsibility, innovative energy procurement and energy programs, not to mention extending CCA benefits to the entire Central Coast,” he said.
The rating will allow the CCA “to embark on an even more impactful path towards reducing greenhouse gas emissions through local energy programs and energy procurement,” and it helps to ensure the “longevity and continued success” of the CCA on behalf of its communities.
Central Coast Community Energy said that the rating recognizes the CCA’s stability within the California CCA market and the strong socio-economic conditions of its growing service area.
Central Coast Community Energy serves more than 400,000 customers throughout the Central Coast, including agriculture, commercial and residential customers in communities located within Monterey, San Benito, San Luis Obispo, Santa Barbara and Santa Cruz counties.
S&P’s rating action emphasized the CCA’s strong economic fundamentals, comprehensive governance structure, robust energy risk management policy, and experienced executive leadership as contributing factors to its being the first CCA to receive an ‘A’ rating and “stable” outlook.
The rating enables the CCA to continue providing electric service and innovative energy programs at competitive rates to its 33 member agencies and over 400,000 agriculture, commercial, and residential customers, Central Coast Community Energy said.
In addition, the rating will aid in increasing the number of counterparties competing for Central Coast Community Energy wholesale contracts, lower transaction costs, and make innovative financing structures accessible to help the CCA continue to develop solutions to California’s greatest energy challenges, Central Coast Community Energy said.
The American Public Power Association has initiated a new category of membership for community choice aggregation programs.
Colorado Springs Utilities Receives Positive Ratings News From Moody’s, S&P
July 23, 2020
by Paul Ciampoli
APPA News Director
Posted July 23, 2020
Public power utility Colorado Springs Utilities recently received positive ratings news from Moody’s Investors Service and S&P Global Ratings.
Moody’s Investors Service has assigned an Aa2 rating to the Colorado Springs (City of) CO Combined Utility Enterprise’s proposed $195 million of senior lien Utilities System Refunding Revenue Bonds, Series 2020A and $51 million of Series 2020B (Private Activity), and approximately $85 million of new Utilities System Improvement Revenue Bonds, Series 2020C for a combined total of $331 million in debt issuance.
The rating outlook is stable.
The assigned Aa2 rating reflects the utility’s “above average service area characterized by a large regional military presence; the history of sound rate setting and board policies to ensure stable financial metrics and strong liquidity,” Moody’s said.
To date, Colorado Springs Utilities operating income has not been significantly impacted by coronavirus’ related shutdowns as the 7% revenue decline has been offset by a similar reduction in operating expenses, the rating agency noted.
Total electricity load for May year to date has declined by around 1%, with residential load increasing by 5.3% and small and medium commercial load declining by around 4%. At Fiscal Year 2019, sales to residential customers represented around 33% of total electric demand, while commercial and industrial represented around 60% and military and other customers accounting for around 7%.
Through May 2020, year-to-date the utility’s operating revenue decreased by $25.9 million year-over-year, but was offset by a corresponding $26.1 million decrease on the expense side through May 2020 year-to-date — including a $17.4 million decrease in purchased power, gas, and water for resale expense, a $7.9 million decrease in production and treatment expense, and $2.0 million decrease in maintenance expense, the rating agency noted.
While it is still early to assess the full impact that the COVID-19 pandemic may have on the utility’s 2020 financial performance, the rating action “considers the long-term resiliency and essentiality of the utility system which along with its liquidity” should enable Colorado Springs Utilities to manage through the impact of the coronavirus including the potential for a slow economic recovery over the next eighteen months, Moody’s said.
Capital plan
The rating agency noted that the utility has adjusted its five-year (2020-2024) capital plan upwards by around $400 million, given a recently approved Energy Integrated Resource Plan that calls for the retirement of Units 6 and 7 at Drake no later than 2023 and the retirement of Unit 1 at Nixon no later than 2030, in addition to other projects including advanced metering infrastructure and water treatment related projects, among others.
It is anticipated that replacement generation would include a combination of natural gas, non-carbon resources, storage, and energy efficiency initiatives.
With the planned retirement of Drake and Nixon units, the utility will be in a good position to meet current and future regulatory requirements, Moody’s said.
Although the capital program is sizeable, the utility “has demonstrated its ability to manage significant capital projects in the recent past, continues to maintain competitive rates, along with an adequate liquidity profile.”
Colorado Springs Utilities continues to manage its variable rate debt exposure, and since September 2019, it has zero unhedged exposure, Moody’s said.
S&P
Meanwhile, S&P Global Ratings assigned its ‘AA+’ rating to the city of Colorado Springs, Colo.’s utilities system revenue refunding bonds series 2020A and 2020B, and its utilities system improvement revenue bonds series 2020C.
At the same time, S&P Global Ratings affirmed its ‘AA+’, ‘AA+/A-1+’, and ‘AA+/A-1’ ratings on the system’s parity debt outstanding. The outlook is stable.
The rating reflects S&P’s view of the utility’s extremely strong fixed-charge coverage (FCC), diverse customer base, and its decision to eliminate its coal exposure by closing Drake Units 6 and 7 by 2023 and its Nixon Unit 1 by 2030.
“In our opinion, the system’s robust liquidity and coverage metrics provide flexibility and a cushion to mitigate potential short-term disruptions as a result of COVID-19 and the related recession.”
As of fiscal 2019, the system had more than 298 days’ cash on hand, “which we imagine will likely provide a sufficient cushion in the event of short-term disruptions. Management indicates that the system has experienced minimal load loss to date because of stay-at-home orders and social-distancing measures,” S&P said.
The rating also reflects S&P’s opinion of the system’s very strong enterprise and extremely strong financial risk profiles.
S&P said the enterprise risk profile reflects its view of the system’s:
* Very strong service area economic fundamentals, reflecting its large, primarily residential, and diverse customer base;
* Strong market position, based on the utility’s weighted-average electric system rate that is about 2% above the state average;
* Very strong operational and management assessment, as its diverse power supply relative to that of the region indicates. “We consider the utility’s financial policies and practices very strong. These include regularly updated strategic plans, multiyear capital planning and financial forecasts, and an automatic power cost adjustment mechanism;” and
* Extremely strong industry risk relative to other industries and sectors.
Moody’s Affirms Ratings for CMEEC, Transmission Entity; Outlook Remains Stable
July 14, 2020
by Paul Ciampoli
APPA News Director
Posted July 14, 2020
Moody’s Investor Services recently affirmed the Aa3 ratings for the Connecticut Municipal Electric Energy Cooperative’s (CMEEC) outstanding 2012 series A transmission services revenue bonds, and 2013 series A power supply system revenue bonds, as well as the outstanding 2012 series A transmission system revenue bonds of its sister organization, the Connecticut Transmission Municipal Electric Energy Cooperative.
The outlook remains stable.
Moody’s also assigned the Aa3 rating to the forward delivery refunding bonds that were priced by CMEEC and the Connecticut Transmission Municipal Electric Energy Cooperative in late April, which will be used to refund existing debt and will result in more than $9 million in net present value savings on interest payments over the life of the debt, and will also have a positive impact on transmission revenues.
The Connecticut Transmission Municipal Electric Energy Cooperative was created by CMEEC in 2009. As a separate joint action agency, it acquired local transmission assets in order to provide transmission services required by CMEEC for its members and customers. It is governed by the same body as CMEEC. The management and staff of CMEEC operate the Connecticut Transmission Municipal Electric Energy Cooperative and oversee its operations.
In its review, Moody’s noted that CMEEC “benefits from its ability to provide reliable power supply and transmission services under reasonably competitive rates in comparison to similar service providers in the region. These credit supportive traits remain intact as CMEEC transitions under the leadership of a new CEO appointed in December 2019 which further distances itself from [previous] credit negative governance related issues.”
CMEEC and the Connecticut Transmission Municipal Electric Energy Cooperative were also given a rating outlook of stable, which “reflects the smooth transition to a new CEO and effective strategies implemented to cope with [recent] shifts in supply responsibilities.”
Kevin Barber, Chairperson of the CMEEC Board of Directors, said that “this is another affirmation of the positive steps the CMEEC Board has recently taken to strengthen corporate governance and controls,” and that he is “pleased with this ratings affirmation by Moody’s.”
Dave Meisinger, CMEEC Chief Executive Officer, added that “this helps to ensure that CMEEC and its member municipal electric utilities will have competitive access to financial markets, which further positions the CMEEC members to maintain their low retail electric rates.”
Fitch Ratings in May upgraded the CMEEC Issuer Default Rating from “A+” to “AA-“. Fitch also upgraded the ratings of the outstanding bonds of CMEEC and its sister organization, the Connecticut Transmission Municipal Electric Energy Cooperative, from ‘A+’ to ‘AA-’. In addition, Fitch assigned the “AA-“ rating to the forward delivery refunding bonds
CMEEC’s member municipal electric utilities include the Jewett City Department of Public Utilities, Norwich Public Utilities, Groton Utilities, Bozrah Light & Power, Third Taxing District of the City of Norwalk and South Norwalk Electric and Water.
Senate Bill Would Reinstate Taxable Direct Payment Bonds
July 9, 2020
by Paul Ciampoli
APPA News Director
Posted July 9, 2020
Sens. Roger Wicker, R-Miss., and Michael Bennet, D-Colo., on July 8 unveiled the introduction of S. 4303, the American Infrastructure Bonds Act, which would allow the issuance of taxable direct payment bonds, akin to a Build America Bond.
The American Public Power Association, which has included reinstatement of the issuance of direct payments bonds as part of its bond modernization agenda, said that it was pleased to see the bill’s introduction.
The credit rate for bonds would be 35 percent for bonds issued before January 1, 2026, and 28 percent for bonds issued after December 31, 2025.
The legislation, which was introduced on July 2, includes a provision to hold credit payments harmless to budget sequestration.
“American Infrastructure Bonds” could be issued for any purpose that would also qualify for purposes of issuing a tax-exempt municipal bond. The legislation would also allow the issuance of such bonds for qualified facility private activity bonds.
Bipartisan Senate bill would reinstate ability to issue tax-exempt advance refunding bonds
In other recent bond-related news, a bipartisan group of senators on July 1 introduced the Lifting Our Communities through Advance Liquidity for Infrastructure (LOCAL Infrastructure) Act, which would reinstate the ability to issue tax-exempt advance refunding bonds.
The lead co-sponsors of the bill are Wicker and Debbie Stabenow, D-Mich.
Additional original cosponsors include Senators John Barrasso, R-Wyoming, Shelly Moore Capito, R-W.Va., Michael Bennet, D-Colo., Tom Carper, D-Del., Bob Menendez, D-N.J., and Jerry Moran, R-Kans.
The bill is a companion to H.R. 2772, the Investing in Our Communities Act, and is identical in effect, but is drafted quite differently.
APPA supports both of these bills.
House Bill Supported By APPA Makes Energy Tax Credits Available To Public Power
June 26, 2020
by Paul Ciampoli
APPA News Director
Posted June 26, 2020
House Subcommittee on Select Revenues Chairman Mike Thompson, D-Calif., on June 25 introduced legislation that will allow public power utilities to directly benefit from energy tax incentives.
The American Public Power Association is one of more than 20 organizations that have voiced support for Thompson’s bill, the Growing Renewable Energy and Efficiency Now (GREEN) Act (H.R. 7330).
“APPA applauds Representative Thompson’s leadership in helping to level the energy tax incentive playing field by ensuring that all utilities can benefit from incentives intended to encourage critical energy investments,” said Joy Ditto, President and CEO of APPA, on June 26.
In a June 19 letter to Thompson, Ditto noted that the GREEN Act “would mean that all – not just some – utilities can directly benefit from energy tax incentives. This will make these incentives fairer and more effective.”
Federal tax expenditures are the primary tool Congress uses to incentivize energy-related investments. However, such incentives do not work for tax-exempt entities — including public power utilities, Ditto pointed out in the letter.
“That means public power utilities are effectively locked out of owning such facilities – and explains why 80 percent of the nation’s (non-hydropower) renewable energy generating capacity is owned by merchant generators,” Ditto said in the letter.
The GREEN Act “addresses this inequity by allowing for the direct payment of energy production and investment tax credits and carbon capture tax credits to any entity that owns the project. This would remove the financial disincentive for public power utilities to own such facilities and would allow the full value of these credits to pay for additional investment or be passed on to our 49 million customers,” she said.
A summary of the bill is available here.
House Bill Includes Several Items of Importance To Public Power
June 19, 2020
by Paul Ciampoli
APPA News Director
Posted June 19, 2020
House Speaker Nancy Pelosi, D-CA, on Jun 18 announced additional details on Democrats’ comprehensive infrastructure package, the Moving America Forward Act, which includes several items of importance to public power.
The House Transportation and Infrastructure Committee recently completed consideration of the Investing in a New Vision for the Environment and Surface Transportation in America (INVEST in America) Act, a five-year surface transportation bill that would authorize $494 billion for transit, highways, and rail. On the evening of Thursday, June 18, the House Transportation and Infrastructure Committee approved the INVEST in America Act.
This will serve as the basis for the Moving America Forward Act, which will add several significant provisions, including on clean energy, tax, healthcare, drinking water, and broadband.
The Moving America Forward Act includes the following sections of importance to public power:
* $70 billion for clean energy infrastructure, including energy efficiency, grid modernization, and the development of an electric vehicle (EV) charging network;
* Reinstatement of the ability to issue direct payment bonds;
* Reinstatement of the ability to issue tax-exempt advance refunding bonds; and
* An increase in the small issuer exemption from $10 million to $30 million.
Pelosi said the House will take up the Moving America Forward Act before July 4.