NEW YORK - A double whammy of economic and regulatory risks is bearing down on U.S. public utilities. In a report released Thursday, Standard & Poor's Ratings Services said it believes that in the next 12 months, credit quality will remain solid and ratings will stay stable, due in large part to public power's rate-setting autonomy and lack of competition for retail customers.

"However, we believe the long-term picture is less than clear, with potential problems for some utilities that do not respond effectively to rising costs," said Standard & Poor's credit analyst Jeffrey Panger in the report.

Standard & Poor's believes utilities are deciding how to best handle the challenge. Some are postponing plans until regulation becomes clearer, demand rebounds, and natural gas prices become less attractive. Others are switching to forms of energy that result in less carbon emission or are currently cheap (such as natural gas). How utilities manage and implement these plans could ultimately hurt their business and financial risk profiles.

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