DALLAS – Debt service coverage in 2016 improved for wholesale and retail power systems across nearly all rating categories, according to Fitch Ratings’ 2017 U.S. Public Power Peer Study published Monday.
Despite conflicts between promoters of renewable energy and traditional sources such as coal, the public power sector remains financially stable, analysts found.
"The latest peer study once again shows that lower ratios of capital investment to depreciation, as well as the retention and redeployment of excess cash flow are driving the financial performance throughout the sector," said Dennis Pidherny, managing director for U.S. Public Finance at Fitch.
The study showed that cash on hand medians for ‘A’ rated retail and wholesale systems continued to improve and are at the highest levels observed this decade.
“Although medians for ‘AA’ rated retail systems declined slightly, the level is well above historical medians,” Pidherny noted. “This trend and the lower capital investment rates likely reflect slower demand growth and the deferral of certain capex.”
In a separate study, Bloomberg New Energy Finance found that more than half of the nation’s nuclear reactors are losing money at the rate of about $2.9 billion a year.
Nuclear power plants are getting paid $20 to $30 a megawatt-hour for their electricity, Nicholas Steckler, an analyst at Bloomberg New Energy Finance. However, it costs them an average of $35 a megawatt-hour to run. That puts 34 of the nation’s 61 plants out of the money.
Steckler called the declining prospects of nuclear power “a real threat to carbon-emission reductions.”
“How regulators confront this widespread challenge has massive implications,” he said.
Another key factor in carbon emissions is President Trump’s plan to generate more power from coal-fired power plants to improve job prospects in states that voted for him in 2016. Trump also withdrew from the Paris Accord to reduce global warming through carbon reductions.
However, the BNEF reported that estimated solar already rivals the cost of new coal power plants in Germany and the U.S. and by 2021 will do so in quick-growing markets such as China and India.
The outlook suggests green energy is taking root more quickly than most experts expected. It would mean that global carbon dioxide pollution from fossil fuels may decline after 2026, a contrast with the International Energy Agency's expectation that emissions will be rising for decades.
Another Trump initiative calls for the sale of assets of the federal power marketing administrations. The plan, included in Trump’s budget and opposed by key members of Congress, would sell the transmission assets of the Bonneville Power Administration, Southeastern Power Administration, Southwestern Power Administration and Western Area Power Administration to private investors for an estimated $5.5 billion over a decade.
Power marketing is one of the few federal programs that pays for itself, according to supporters of the government program. The operations also improve the government’s balance sheet and support flood control, navigation, irrigation and other critical services at federal dams, they say.
The American Public Power Association, which is holding its annual conference in Orlando, Fla., through Wednesday, has also opposed the sale.
“The PMAs provide millions of Americans served by not-for-profit public power and rural cooperative electric utilities with cost-based hydroelectric power produced at federal dams,” the association said. “Selling the PMA transmission assets would threaten the ability of the PMAs to provide reliable, cost-based power to the approximately 1,200 public power systems and rural electric cooperatives in 33 states and the millions of customers they serve. The Association urges Congress to reject this misguided proposal.”