Throughout the 1990s, investor-owned utilities have redefined the way they do business to position themselves for competition better. The downside of these efforts is higher rates for small...
S&P Revamps Public Power Rating Scale
Standard & Poor's has revised its business profile scale for public power agencies to give investors more details to figure out each rated utility's ability to compete in a deregulated market.
It expanded its five-point scale to a 10-point scale, similar to the rating system used for investor-owned utilities. A "1" rating is the "most capable of competing," so that investors can better gauge a public power's ability to meet competitive challenges and market developments, such as separation of generation and transmission facilities.
Utilities that score between 5 and 8 are likely to face formidable challenges. "It is these utilities' costs structures and wholesale and retail rates that show the greatest disparities with expected market rates," according to S&P.
The most favorable business profile scores run from 1 to 4. The wires business is expected to lead these companies.
The greatest concentration of risk for retail systems is at the 4 rate, which reflects the risks inherent in ownership of generating facilities, but indicates a relatively strong capacity to compete. Among public power's retail utilities, nine received profiles of 5, the highest level of risk assigned to any of the retail utilities. Among the wholesale agencies, six had profiles as high as 6, and one reached 7. That rating is below the 8 ranking assigned to a few IOUs.
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