U.S. utility customers may catch a break as more than $6 billion in proposed rate hikes are thrown into limbo now that regulators must decide whether to raise bills during a pandemic.
The pending increases requested by Duke Energy Corp., Dominion Energy Inc. and others would drive up costs in more than a dozen states. They may be delayed or face higher scrutiny as political pressure mounts to not burden homes and businesses while unemployment is already soaring.
“Kicking the can down the road is going to happen broadly,” Ryan Wobbrock, a credit analyst at Moody’s Investors Service, said in an interview.
While that would be good news in the short-term for customers struggling to pay electric and gas bills, there may a trade off. Delaying or reducing rate increases would crimp utilities’ cash flow and slow their efforts to recoup investments for big capital projects. That could hurt their credit, drive up borrowing costs and ultimately lead to higher customer bills.
Already, New York Governor Andrew Cuomo has ordered regulators to suspend pending rate hikes. In Massachusetts, Attorney General Maura Healey has asked to delay them. “This pandemic has caused financial struggles and record unemployment numbers – Massachusetts families can’t afford any additional costs right now,” Healey said in a statement.
Utilities including Eversource Energy, NiSource Inc.’s Columbia Gas and National Grid Plc have opposed Healey’s request. In a filing, they argued it could jeopardize their cash flow just as an increasing number of customers are falling behind on bills, creating a “perfect storm” that would drive up their costs to raise capital and in the end hurt consumers.
“Although at first glance the attorney general’s recommendation appears to be in the interest of customers, it is not,” the utilities said in their filing. “The attorney general’s well-intentioned but ill-advised proposal will only create additional financial stress for customers.”
In total, U.S. utilities have at least $6.4 billion in pending rate hikes, according to Moody’s. Not all are opposed to delaying them. In fact, several utilities have proactively asked to regulators to postpone rulings in light of the pandemic.
In New York, the outbreak’s global epicenter, Avangrid Inc., New York State Electric & Gas Corp. and Rochester Gas & Electric Corp. have asked to suspend their rate cases through mid-September. Dominion requested a delay in South Carolina.
Analysts for Moody’s called the moves prudent. “Over the long-term, these actions often enhance financial strategy, risk management and customer relations,” the analysts said in a statement.