California greenhouse gas standards should be manageable for state's public power utilities, Fitch says
Originally published November 4, 2013
California's plan to reduce greenhouse gas emissions by 25 percent by 2020 will likely be manageable for the state's public power utilities as they have gradually been adding renewable resources for a number of years, Fitch Ratings said Nov. 1. Additionally, implementation of the full requirement is set on a reasonable timeline and most public power utilities in California could exercise rate flexibility to absorb the additional cost of compliance, the credit rating company said.
California's diversified power supply market and generally low dependence on coal will make complying with these regulations manageable statewide, Fitch said. Natural gas is the most common fuel used by the state's utilities, accounting for 37 percent of statewide power production in 2011. Nuclear was the second most common at 16 percent and large hydroelectric was third at 13 percent. National consumption is more concentrated in coal and much less diversified, Fitch said.
Public power utilities in the state that have a greater reliance on coal-fired generation will face greater challenges in repositioning their power supply portfolios to meet requirements of the legislation, Fitch said. Although more challenging, Fitch said it expects those utilities to manage plans for investing in new gas-fired generation resources, adding renewable generation, and raising rates to retail customers over time to recover the costs associated with the state's environmental agenda.
Regulations similar to those evolving in California are being considered in other states and on the federal level, Fitch said. Utilities outside the state, with less financial flexibility, lower access to renewable resources, and high dependence on coal may be challenged to comply, the credit rating company said.
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