DALLAS – Investor-owned power utilities in Texas should be able to recover their costs of restoration in the wake of Hurricane Harvey, according to Moody’s Investors Service.

“Additionally, we expect the credit quality of the regulated electric utilities serving this region to remain intact,” analysts said.

A pump jack oil well is seen immersed in floodwaters from Hurricane Harvey in this aerial photograph taken above West Columbia, Texas, U.S., on Aug. 30.
A pump jack oil well is seen immersed in floodwaters from Hurricane Harvey in this aerial photograph taken above West Columbia, Texas, U.S., on Aug. 30. Bloomberg News

While investor-owned utilities regulated by the state do not commonly issue municipal bonds, their business operations have a large impact on municipalities, school districts, hospitals, ports, factories and corporations that operate in the region. With their participation in the Electric Reliability Council of Texas power grid, they interact with publicly owned utilities that buy and sell power.

During the storm, all four major Texas electric utilities in the region -- AEP Texas, Inc. (Baa1 stable), CenterPoint Energy Houston Electric, LLC (CEHE, A3 stable), Entergy Texas, Inc. (Baa3 stable) and Texas- New Mexico Power Company (TNMP, A3 stable) -- experienced power outages, affecting 23% of their 4.3 million customers.

By Aug. 31, however, power for the majority of customers had been restored.

In addition to costs related to infrastructure damages, the utilities’ revenue is at risk of declining because of the power outages, analysts said.

“It is too early for estimates of the total cost of damages related to the storm, but Texas provides a transparent storm-cost recovery for regulated utilities, a credit positive,” Moody’s said.

In a separate report, Moody’s called the widespread shutdown of Gulf Coast refining capacity credit-negative for the area’s petroleum refining industry.

The Texas/Louisiana Gulf Coast is home to about 45% of the nation’s 18.55 million barrels per day of refining capacity.

“Companies risk property damage, disrupted logistics, and a lack of power because of significant flooding,” analysts said. “Flooding – in particular – caused many companies to shut down or curtail operations, and can delay the restart of production for several weeks or even longer. However, the diversified nature of most companies’ operations and widening refining margins in response to reduced product output will largely offset the credit-negative effects.”

The combination of lower refining capacity, production, and transportation through pipelines has the possibility of significantly disrupting the supply of oil and gas in the region and even as far away as New England, according to Texas economist Ray Perryman.

“The price of gasoline is rising, with some analysts expecting an increase of up to 25 cents per gallon in the coming weeks,” Perryman said. “However, the price is not likely to remain elevated for an extended period once facilities come back online.”

Fear that supplies would become hard to find led to a run on the fuel pumps as far away as Dallas, where some ran dry.

Texas Comptroller Glenn Hegar said Tuesday that his office is working with the office of the Governor and the Texas Department of Motor Vehicles to temporarily suspend certain requirements for motor vehicles engaged in interstate disaster relief.

“We hope the suspension of these requirements makes it easier to get needed fuel and relief supplies into the state so that Texans can receive the help they need as soon as possible,” Hegar said.

To respond to the natural disaster and speed up the delivery of fuel into Texas from Sept. 1 through Sept. 30, the Comptroller’s office will issue expedited licenses to motor fuel distributors, importers, and transporters to import fuel. The Comptroller’s office will waive the bond requirement for these distributors and importers. There is no bond requirement for transporters.

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