CPS Energy's credit rating downgraded due to $1 billion in debt due to winter storm
SAN ANTONIO - CPS Energy's credit rating took a hit on Monday.
Moody's Investors Services downgraded CPS Energy's credit rating due to about $1 billion in outstanding debt due to the fuel charges from last year's historic winter storm.
Moody's downgraded the rating because of the debt CPS Energy racked up from fuel charges.
Plus, it found Texas still hasn't made meaningful improvements to the grid.
It was not a surprise to CPS Energy and its interim CEO says it did come with some encouraging news.
"They dropped us down a notch, but they changed our outlook from negative to stable. And that was primarily a result of the fact that we did get a rate increase passed through what they know are difficult circumstances," said Interim CPS Energy CEO, Rudy Garza.
That increase to the rates you pay will bring the utility an additional $73 million a year.
CPS Energy will use the money to improve technology and hire more staff.
This comes just two weeks after CPS Energy secured its first rate increase in eight years. The analysts also said CPS Energy may still be on the hook for some or all of the $587 million that it is currently disputing in court for the fuel costs it incurred during the winter storm.
"We expect CPS Energy's adjusted debt ratio, including Moody's adjusted net pension liability (ANPL), will move closer to 80% over the next three years and potentially exceed that level if CPS Energy ends up paying a portion or all of the disputed charges," said the analysts in the recent report.
The report also notes that the meaningful reliability improvements have yet to be implemented and they question the state's energy supply chain.
Despite the downgrade, Moody's Investors Services revised CPS Energy's rating outlook from negative to stable.
In an 8 to 3 vote on Jan. 14, City Council approved a 3.85% rate crease for CPS Energy customers. According to the head of CPS Energy, this rate increase will add $73 million a year to the utility which they will use to improve technology and hire more staff.
The report says that downgraded credit rating and the stable rating outlook reflect the steps that CPS Energy has take to prepare for another extreme weather season, including plans to fund additional resiliency enhancements with the recent base rate increase.
Moody is one of the three major credit rating agencies that measure the risk associated with lending to an entity such as CPS Energy. These ratings help determine interest rates on the utility’s debt.
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