Eversource and Avangrid warn of higher prices after their credit ratings fall

Conn. (WFSB) – Utilities in Connecticut are warning customers that bills are likely to rise again. Eversource, Connecticut Natural Gas (CNG) and Southern Connecticut Gas (SCG) had their credit ratings downgraded from an A rating to BBB+ last week.

READ THE FULL REPORT HERE.

A business’s credit score is similar to an individual’s credit score. The lower a company’s rating, the less trust the bank has that the company will pay back their money, so banks charge more to lend them money. The companies say ratepayers will ultimately have to pay the additional interest costs.

“It’s important that this is handled in a way that makes sure you don’t end up in a situation where no one, no debt investor, wants to put their money up,” said Justin Lagasse, CFO of Avangrid.

“So the real challenge for us is to provide our service at the most cost-effective prices and in the most affordable way, and moves like this just make it more difficult because these impacts will last long term. “It’s literally going to be higher costs for decades “said Doug Horton, Eversource VP of Distribution Rates.

The company that sets the ratings, S&P, says part of the reason for the credit downgrade lies in the events of November 18th. At that time, Connecticut regulator PURA rejected CNG and SCG’s rate increases and instead directed the companies to lower prices for customers.

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

“The impetus for the downgrade lies specifically and clearly in Connecticut’s regulatory environment, and it begins and ends there,” Horton said.

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

The I-Team asked Horton why these costs are passed on to customers instead of investors making less money.

“If our interest rates do not reflect our costs, it means we are unable or confident that we can repay our debts in a timely manner. That’s basically the problem that creates risk,” Horton said.

Any tariff increase would have to be approved by PURA, the same regulator that the companies blame for the downgrade. The I-Team reached out to Pura for comment on all of this and asked us to contact the Consumer Council office. PURA did not respond directly to our questions.

Connecticut Consumer Attorney Claire Coleman released the following statement:

“Attempting to attribute today’s credit rating downgrade solely to the regulatory environment here in Connecticut obscures the bigger picture: Capital markets were scrutinizing Eversource’s parent company’s financial statements, in large part due to offshore wind losses that totaled $2.6 billion. Dollars cost The company’s credit rating was adjusted to match that of the company

financial reality. This downgrade occurred at the parent company level, with multiple Eversource sales units in multiple states – including but not limited to CL&P – also impacted. While we would never seek or celebrate a credit downgrade, the impact on customers here in Connecticut is far smaller and more tangential than described. We should all remain focused on providing high-quality, reliable and affordable service to Connecticut customers rather than highlighting the potential losses felt by Eversource shareholders.”

The I-Team has previously looked at Eversource’s offshore wind losses. You can find this reporting HERE.

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