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Sustained Lower Natural Gas Prices Are Unlikely To Change U.S. Electric Utilities' Credit Quality May 10
Standard & Poors, May 2010
Abstract
Many U.S. regulated electric utilities switched to burning gas rather than coal in 2009. According to some industry estimates, the big switch caused utilities to use an additional 1.5 billion to 2.5 billion cubic feet per day. The underlying reason for this fuel switch was the sharp decline of 'dark spreads'--the theoretical gross margin for coal-fired power plants--due to reduced electricity demand from the recession and shifting gas and coal prices. Recently, Standard & Poor's U.S. economic forecast indicated that the recession has bottomed, U.S. gross domestic product should slowly grow at about 3% annually, and unemployment will gradually go below 8% by 2013 (see 'U.S. Risks To The Forecast: What is Normal?,' published March 18, 2010). In addition, Standard...
Standard and Poors RatingsXpress Credit Research provides in-depth coverage of international corporates, financial institutions, insurance companies, utilities, sovereigns and structured finance programs. RatingsXpress Credit Research lets users determine the credit rating of holdings and identify key factors underlying an issuer's creditworthiness, distinguishes the different risk exposures for new and existing deals, and provides an understanding of how their analysts interpret key regulatory, political and environmental events and their economic impact.
Research Type: Commentary
Criteria articles describe the thought process and methodology Standard & Poor's analysts use in determining ratings. These commentary pieces discuss both the quantitative (economic and financial) and qualitative (business analysis and caliber of management) aspects of the analysis, as well as legal issues.
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