San Antonio’s CPS Energy suffered a second bond rating downgrade in the aftermath of a February winter storm and cold snap that discombobulated the Texas energy market.
S&P Global Ratings lowered the city-owned power utility’s senior-lien credit to AA-minus from AA, leaving the outlook negative.
CPS, which was required to buy power from the Electric Reliability Council of Texas during peak demand at astronomical rates during the week of Feb. 14, estimated the unbudgeted cost at about $1 billion.
“The supply and demand imbalance resulted in negative financial implications for the utility, given its reliance on market purchases of gas and electricity and its inadequately hedged position during portions of the severe weather event," said S&P analyst Scott Sagen.
Fitch
CPS plans to use its commercial paper and floating rate revolving note programs, in addition to its unrestricted cash and a recently board-approved line of credit, to address the utility's short-term liquidity needs, Fitch noted. The utility then plans to convert short-term liquidity loans and CP into long-term debt.
The downgrade comes as the Texas Legislature considers lowering $16 billion of overcharges by ERCOT to $3.2 billion, the amount an independent consultant says is the correct figure.
Public Utility Commission of Texas Chairman Arthur D’Andrea told the House State Affairs Committee Thursday that he would need legislative backing to lower the $16 billion cost that was passed on to utilities on the grid.
D’Andrea said the Independent Market Monitor, an outside group of economists that the PUC uses for financial monitoring, calculated what it considered a more accurate cost for the power at $3.2 billion.
All but four of Texas’ 32 state senators signed a letter to the Gov. Greg Abbott and Lt. Gov. Dan Patrick calling for the PUC to reverse the overcharges.
Brazos Electric Power Cooperative, one of the state’s largest power providers,
“We now recognize more clearly the winners and losers affected by repricing,” House Speaker Dade Phelan, R-Beaumont, said after the hearing.
CPS said its suspension of disconnections announced a year ago is still in effect and that the high cost of the power in February will not be passed on.
"We are assuring customers that their February bills are accurate and do not currently include any extreme weather-related fuel & purchased power expenses,” said CPS chief executive Paula Gold-Williams. “While we must and will pay all justified and legitimate business costs, our CPS Energy team will continue to fight to maintain our commitment to affordability."
