Moody�s won�t downgrade ratings on California utilities yet

Moody�s Investors Service weighed in on the controversy surrounding the creditworthiness of PG&E Corp and Edison International. These utility holding companies accumulated over $8 billion in debt from unrecovered purchased power expenses in California. The investor owned utility holding companies were also under a threat last week that Standard & Poor�s would downgrade their ratings to �junk� bond status pending action by the California Public Utility Commission.


Moody�s Investors Service weighed in on the credit ratings controversy of PG&E Corp and Edison International. The companies have accumulated over $8 billion in debt in unrecovered power expenses in California. The investor owned utility holding companies were also under a threat last week that Standard & Poor�s would downgrade their ratings to �junk� bond status pending action by the California Public Utility Commission.

But a meeting of the CPUC on Dec. 21 resulted in regulators setting the stage for a retail rate increase early next year and the ability for utilities to recover past and future wholesale power expenses. This language quieted the fears of both ratings agencies for the moment. They decided to hold off on any severe ratings changes until after the next CPUC meeting on Jan. 4, 2001.

Moody�s suggested that regulators could do nothing less than:

� Give utilities an immediate right to raise rates by a �significant� amount.

� Obtain the unquestioned ability to recover past and future purchased power costs.

Both agencies are now in a holding pattern to see what regulators actually do on a Jan. 4, 2001 meeting. Moody�s said that regulators must respond �constructively and promptly� to these two issues. If not, the utilities ratings could very well be downgraded to below investment grade.

Moody�s also noted that comments by politicians such as Gov. Gray Davis and other legislators suggest an understanding of the necessity to keep investment grade status.

The ability of the utilities to maintain investment grade status is critical to their ability to fund upcoming and future undercollected wholesale power costs, Moody�s said in a release.

Gov. Davis met with Federal Reserve System Chairman Alan Greenspan on Tuesday about the crisis in California and the credit ratings problems of the utilities. Gov. Davis didn�t request any intervention just counsel and advice from the FED chairman.

While details of the meeting were not released, Gov. Davis did release a statement late Tuesday.

�Deregulation has been a colossal failure. The generators have a strong vested interest in seeing California through this transitional period. If deregulation fails in California, it is dead in America.�

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