(Host) Vermont’s largest utility faces a financial squeeze because of a recent downgrade in its credit rating. Standard and Poor’s has lowered the corporate credit rating for Central Vermont Public Service Corporation to below investment grade.
That means the company will have to pay more to borrow money, and will have to put up cash collateral to buy power.
VPR’s John Dillon reports:
(Dillon) The credit rating downgrade came several months after state regulators ordered CVPS to reduce rates and refund $6 million to customers.
Standard and Poor’s said the board’s ruling – quote – “undermines the company’s already pressured financial situation.”
Company spokesman, Steve Costello, says the utility has adequate cash on hand in the short term.
(Costello) “But this definitely puts a crimp on our flexibility and particularly with power supplies, and will require us to lay out more money for borrowing. And this is a very capital intensive business.”
(Host) Costello says CVPS has cut investments in its wind power subsidiary and may also have to file for a rate increase.
(Costello) “We’re looking at a lot of different options in the near term, and that’s one of them.”
(Dillon) Back in April, regulators ordered the company to cut rates because it found that CVPS had significantly miscalculated its earnings for three years ending in 2003.
David O’Brien is the state’s Public Service Commissioner, whose department represents utility customers. He says the board based its ruling on legal precedence and evidence – just as it does in any other utility case.
But O’Brien says he recognizes the impact of the Standard and Poor’s action. He says he’ll be in touch with S and P analysts, because he doesn’t think the utility deserved the low credit rate.
(O’Brien) “We want to play our part if we can to help them see some of the real strengths of our utilities and the relevant risks that we have here.”
(Dillon) O’Brien says the rating firm still is counting the utility’s contract to import power from Hydro-Quebec as a liability.
He says that should change, given that rising energy prices in general make the Hydro-Quebec contract look like a better deal than it was in the past.
And O’Brien is leery of a possible new rate increase for CVPS.
(O’Brien) “We would really need to be convinced – and we’ve already had some conversations with the company- that we would really need to be convinced that these basic assumptions that were in the rate case just a few months ago are already outdated. We would need to have a comfort level about that.”
(Dillon) O’Brien says the utility can sustain service for its customers under the rates now in effect.
For Vermont Public Radio, I’m John Dillon in Montpelier.