CONNECTICUT, USA — It's a grim forecast for utility companies in Connecticut as more downgrades to credit ratings may put a financial burden on customers.
Utility companies like Eversource and Avangrid warn of a negative impact on customers after S&P Global and Moody’s downgraded their credit ratings within two weeks.
Moody's reduced Avangrid subsidiaries, Connecticut Natural Gas (CNG), and Southern Connecticut Gas' ratings by a notch. CNG's rating was lowered from an A2 to an A3, while SGC's rating was lowered from A3 to BAA1.
That downgrade comes after S & P Global reduced ratings just over a week ago for Eversource and Avangrid.
Associate accounting professor James Mohs at the University of New Haven offered insight into the situation.
“What happens is: When any debt holder is downgraded – they’re a utility, they’re a capital-intense industry, they’re always borrowing - there’s this concept of risk. The interest that they pay on these loans is a function of the risk," said Mohs.
These new, lower ratings hinder the utility companies' ability to borrow money at lower interest rates. The utilities have said that the downgrade means customers will face higher bills.
Experts agree.
"As inflation increases prices, that decreases [the company's] profits, which increases the risk. So, that leaves the utilities in a position where in order not to default on their loans, their new adjusted interest rates, for what they call a rate case, public utility rate authority will ask for a rate increase," Mohs explained.
The credit firms claim that Connecticut's Public Utilities Regulatory Authority (PURA) has been inconsistent in its decisions and attributed the downgrades to the regulatory environment.
However, many state officials have supported PURA's attempts to stop frequent rate hikes.
In a statement, CNG and SCG President and CEO Frank Reynolds said in a statement:
Moody’s, S&P, and every other rating agency has attributed CNG and SCG’s downgrades exclusively to the regulatory environment in Connecticut. Unless and until that environment improves, we should expect this trend to continue. The costs will be lower-quality service, less reliability, higher energy costs, and diminished confidence in the health and safety of critical investments.
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Kaelee Collins is a multimedia journalist for FOX61 News. She can be reached at kcollins@fox61.com. Follow her on X, and Instagram.
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