California’s first community choice aggregator – an agency that allows utility customers to choose renewable power as an alternative – is now also the first to be rated by a credit agency.
Moody’s Investor Services assigned Marin County-based MCE a Baa2 rating and a stable outlook. The rating reflects the strength of the business model created in California in 2002 to advance the use of renewable energy throughout the state, according to the May 16 report.
The rating is a big milestone for MCE, formerly known as Marin Clean Energy, which began providing service in 2010, said David McNeil, finance manager for the non-profit.
“We’ve been wanting a credit rating for quite some time,” he said. “We’re happy to have finally crossed the finish line.”
California created the Community Choice Aggregation program in 2002 at a time when the state was going through an energy crisis. It allowed local governments to create joint power agencies that offer customers alternative energy like solar and wind at lower prices.
MCE customers get from 50% to 100% of their electricity from solar, wind, hydroelectric, geothermal and bioenergy sources in California, Oregon and Washington that the agency buys power from. It has about 450,000 customers in Marin, Napa and Contra Costa counties.
While MCE has no bond issuance plans at this time, it will reap the benefits of a credit rating in other ways, McNeil said.
Some investors in renewable energy projects require energy buyers like MCE to have an investment-grade credit rating, he said. The rating is expected to spur greater competition among investors to participate in MCE projects and lower costs for its customers as a result, McNeil said.
In its report, Moody’s lauded MCE’s track record of operations, consistently growing financial performance and the economic strengths of its growing service area. But it also faces challenges including power procurement amid uncertainty regarding the availability of power resources and the future market structure.
“The rating outlook is stable incorporating a view that the CCA business model will remain intact including the statutory and municipal ordinances that permit full cost recovery, that CCAs will continue to enjoy independent local retail rate-setting authority, that MCE will be able to manage power procurement risk and reach and maintain appropriate liquidity targets that support its growth,” the report stated.
McNeil said the rating was a fair assessment. He said it should make it easier for other community choice aggregators to get rated and give customers confidence they will be around for a long time.
“CCAs are really going to be the growth engine for renewables in California as the state moves towards CCAs en masse,” he said. “It’s very important to have an important rating agency like Moody’s validate the business model.”