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Rapid rise in state RPS programs poses utility credit concerns 

The rapid increase over the last five years in the number of states approving renewable portfolio standards has raised key credit rating concerns for electric utilities, Standard & Poor’s Director Anne Selting said on Tuesday.

Twenty-nine states and the District of Columbia, now have renewable standards in place, although five are voluntary, she said. RPS targets vary, but many states are requiring utilities to obtain between 15% and 25% of their power supply from renewable resources by between 2020 and 2025.

Selting said this “aggressive” move toward RPS may not be achievable and absorbing the costs into retail rates could affect credit ratings, according to Selting, at S&P’s 15th Annual Utilities Conference – The Credit Cost of Going Green.

“We are concerned that the costs of RPS compliance have often not been quantified and that absorbing the full cost of RPS in retail rates could have credit implications for some companies,” Selting added in an article that appears in the latest issue of S&P’s CreditWeek. “In addition, not all utilities will be able to achieve RPS requirements on the schedule required, which could lead to penalties for utilities and create an impression that power companies are not receptive to green policy goals,” Selting wrote.

Renewables currently account for 2.5% of US generation and while the public perception is that the amount of renewable energy has been growing rapidly, Selting told the conference that growth in fact has been largely stagnant over the past 15 years, hampered by a range of constraints, including the lack of transmission capacity to move wind power from remote locations to demand centers.

The attention that renewables has recently attracted has created the perception that the industry “is just going gangbusters,” Selting said, but “we are really right where we were in 1993.”

Selting also said the cost ramifications of making renewables a significant portion of a utility’s portfolio have not yet been fully explained to customers. “We need an honest public conversation with customers about costs,” she said. She also said the costs have been poorly quantified or, in some cases, not made transparent by some utilities that are increasing their renewable portfolios.

“While it is possible that RPS will prove to be feasible, economic, and successful in every state, there is no compelling evidence that suggest this will be the case,” she added in her CreditWatch article. “We instead suspect that the green marathon will be a difficult race for utilities to run, with possibly painful results for credit quality.”

Gail Roberts


18 March 2008

This article is the work of the source indicated. Any opinions expressed in it are not necessarily those of National Wind Watch.

The copyright of this article resides with the author or publisher indicated. As part of its noncommercial educational effort to present the environmental, social, scientific, and economic issues of large-scale wind power development to a global audience seeking such information, National Wind Watch endeavors to observe “fair use” as provided for in section 107 of U.S. Copyright Law and similar “fair dealing” provisions of the copyright laws of other nations. Send requests to excerpt, general inquiries, and comments via e-mail.

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