The outlook for the public power and electric cooperative sector is stable through 2012, but there is considerable uncertainty when it comes to emissions regulations, according to a Dec. 7 report from Fitch Ratings.
The report estimates that some 83 GW of coal-fired capacity is at risk of retirements as a result of new rules from the U.S. Environmental Protection Agency. Those rules could push costs up significantly, but utilities may be reluctant to raise rates to cover increased costs, the report said. If this trend becomes a broad one, it could change the sector’s outlook from stable to negative, Fitch said.
The report said it expects wholesale power prices to remain at depressed levels through 2012 for several reasons, including low natural gas prices, high capacity reserve margins, and weaker demand.
So far, public power issuers “have managed the political pressure to meet general fund transfer requirements reasonably well, as evidenced by the stable ratio of transfers to utility revenues,” Fitch said. But local economies and municipal budgets are expected to be very tight through 2012, putting additional pressure on utilities to supplement weakened revenue streams with increased transfers or in-kind services.
In the nuclear sector, operating costs are expected to increase, but most of the 12 Near-Term Task Force recommendations seem to be manageable, Fitch said. Increased regulatory scrutiny of nuclear power plants and recommendations for enhancing reactor safety following the Fukushima Dai-ichi nuclear accident in Japan “have not materially affected the U.S. nuclear industry,” Fitch said. However, expansion of the domestic fleet depends on the U.S. Nuclear Regulatory Commission’s decision on the combined operating licenses for the planned Vogtle and Summer nuclear units. Additional units beyond these three projects in the near future appears unlikely, the report said.
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