Investor-owned utilities serving the Southeast U.S. are well-positioned to face increasing competition, but the region's municipal joint power agencies and electric co-ops may face serious losses.
That's the finding of a Moody's Investors Service regional study, the fourth in a series.
The "Southeast Electric Break-Even Analysis" estimates $24 billion in stranded costs for the region, with cooperatives and JPAs holding a disproportionately high portion of the per-kilowatt costs.
Moody's found the 12 IOUs and several major municipal electrics to have relatively low stranded costs, resulting in higher bond ratings. The ratings ranged from 'Aa2' to 'A2' for the IOUs. The average U.S. electric utility industry as a whole is rated 'A3.' Four IOUs (em Duke Energy, Alabama Power, Savannah Electric and Mississippi Power (em face no stranded costs. The state-owned South Carolina Public Service Authority is rated 'Aa2' and has minimal stranded costs while two major munis, Orlando Utilities Commission and Jacksonville Electric Authority, both rated 'Aa1,' also have moderate stranded cost exposure.
Tennessee Valley Authority may face some stranded costs should it be privatized, but Moody's believes privatization is unlikely anytime soon. TVA maintains its 'Aaa' rating because it is a government-owned agency and because it's likely Congress would support its debt should it be privatized.
Moody's reserved its bad news for two North Carolina municipals: North Carolina Eastern Municipal Power Agency, rated 'Baa1,' and North Carolina Municipal Power Agency No 1, rated 'A3.' Moody's found that while the two agencies' potential stranded costs may not be the largest, they add up to more than $1,000 per kilowatt.
The study examines generation's relative costs based on a model for the electric industry developed by Moody's in 1994. The model distinguishes what a utility must charge for energy (em its actual power, measured in kilowatt-hours that customers use (em and what it charges for capacity (em the uninterrupted availability of energy in kilowatts. Break-even is the minimum price a utility must sell electric capacity to cover fixed production costs.
The average break-even price for JPAs is much higher than for those of Southeastern IOUs and munis. North Carolina Eastern Municipal Power Agency has the highest break-even price for installed generation in the region: $363 per kW of capacity; Duke Energy has the lowest break-even price for installed generation, minus $2 per kW. (em LAB
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