Moody's thinks U.S. utilities are doing (slightly) better than Greece and Spain

By Jesse Berst

Fresh off downgrades of debt from Greece and Spain, the Moody's ratings bureau has released two reports that paint a middling to mediocre view of utility futures. In its report on U.S. regulated electric and gas utilities, the agency claims the sector is stable despite negative headlines. They warn that utilities face a sustained need to finance large capital projects; but they believe that regulators will remain supportive and capital markets will remain welcoming.

The picture is not so rosy for unregulated power companies, according to Moody's. The agency proclaimed a negative outlook for the sector, predicting sales would remain flat while costs would climb. On the plus side, natural gas prices are expected to remain low for a long time. However, Moody's expects increasingly stringent environmental mandates and an increase in political intervention.

Fitch gets gloomy

But Fitch Ratings has a gloomier outlook, even for regulated utilities. It believes the demand for electricity will drop due to several factors:

·         The growing number of state and federal efficiency programs designed to get users to reduce usage

·         The low levels of new household formations during slow economic times

·         The growing number of -- and sophistication of -- building energy management programs for commercial users

Utilities in high-consumption, high-priced states are at greatest risk.

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Jesse Berst is the founder and chief analyst of Smart Grid News.com. He consults to smart grid companies seeking market entry advice and M&A advisory. A frequent keynoter at industry events in the US and abroad, he also serves on the Advisory Council of Pacific Northwest National Laboratory's Energy & Environment directorate.

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