Eversource & Avangrid Warn of Higher Prices After Their Credit Ratings Take a Hit

Utility companies in Connecticut are warning customers that bills are likely to go up again. Eversource, Connecticut Natural Gas (CNG), and Southern Connecticut Gas (SCG) all had their credit ratings lowered in the last week from a rating in the A range down to a BBB+.

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A company’s credit rating is similar to an individual’s credit score. The lower a company’s rating, the less a bank trusts that that company will pay them back, so banks will charge more to lend them money. The companies say ratepayers will end up paying for the extra interest costs.

“It’s important that that’s managed such that you know you don’t get to a situation where no one, no debt investor, wants to put their money forward,” said Justin Lagasse, Avangrid CFO.

“So really the challenge we have is trying to deliver our service at the most cost-effective rates and the most affordable way possible, and steps like this just make it that much harder to do because these impacts will be long lasting. It will result in higher costs for literally decades,” said Doug Horton, Eversource VP of Distribution Rates.

The company that sets the ratings, S&P, says part of the reason to lower the credit ratings is because of what happened on November 18th. That’s when Connecticut’s regulatory agency, PURA, denied CNG’s and SCG’s rate increase and instead ordered the companies to decrease prices for customers.

The S&P decision cites “adverse regulatory developments” have “increased business risk for Eversource Energy and its Connecticut based subsidies”

“The impetus for the downgrade is specifically and squarely on the Connecticut regulatory environment, and it starts and it ends there,” said Horton.

Eversource reports it was planning to borrow $3 billion over the next five years. Now that the company has been downgraded from an A- to a BBB+, Eversource estimates borrowing that same $3 billion will cost an additional $270 million in interest costs alone.

The I-Team asked Horton why those costs get passed through to customers instead of investors making less money.

“If our rates don’t reflect our cost, that means that we will not be able or they don’t have confidence that we’ll be able to make timely repayments on our debt. That is fundamentally the problem that creates risk,” said Horton.

Any rate increase would have to be approved by PURA, the same regulatory agency that the companies blame for the downgrade. The I-Team asked pura to comment on all of this, and they told us to contact the Office of the Consumer Council. PURA did not directly respond to our questions.

Connecticut Consumer Counsel Claire Coleman released the below statement:

“The attempt to blame today’s credit ratings downgrade solely on the regulatory environment here in Connecticut obscures the full picture: the capital markets reviewed Eversource’s parent company financial reports, and, in large part as a result of offshore wind losses that cost $2.6 billion from the company’s coffers, aligned the company’s credit rating with the company’s financial reality. This downgrade was made at the parent company level, with several Eversource operating distribution entities across multiple states – including but not limited to CL&P – also impacted. While credit downgrades are not something we’d ever seek or celebrate, the impact on customers here in Connecticut are far more remote and tangential than has been described. We should all stay focused on providing quality, reliable and affordable service to Connecticut customers, rather than emphasizing potential losses felt by Eversource shareholders.”