U.S. public power and electric cooperative capital spending continues to accelerate, driven by load growth, higher interest rates, and rising prices, Fitch Ratings said in a report released in September.
The report was written by Fitch analysts Patrick Goggins, Kathy Masterson, Dennis Pidherny and Mahidah Shahzad.
“About three-quarters of Fitch-rated public power issuers expect to spend more from 2026 to 2029 than they spent from 2022 to 2025. Timely and disciplined rate setting has broadly supported higher spending to date and, together with rising electric sales, remains key to preserving credit quality,” Goggins said.
Among Fitch-rated issuers, median annual capex projections indicate growth of about 16% in 2026, a trend that is expected to continue, the report said.
Compared to projections Fitch collected a year ago, the capex peak has shifted from 2026 to 2027 and is expected to reach higher levels across the projection window.
“While increased spending and related borrowing are expected to weigh on financial metrics, widespread negative rating actions are not expected,” it said.
Fitch’s 2026 U.S. Public Power Peer Credit Analysis shows that full obligations coverage ratios remain historically strong and that issuer leverage is generally lower than in prior years.
“Higher capex is reflected in improved capex-to-depreciation ratios, and issuers have broadly absorbed higher capex without diminishing credit quality thus far. Median leverage has remained steady due to increases in net revenues that have kept pace with capex and related debt costs,” the report said. “However, unanticipated cost increases and inadequate rate relief, constrained by affordability concerns, are the most acute risks to credit quality. Continued prudent fiscal management is essential to sustain ratings headroom through the current capital cycle.”
Midwest Leads Regions in Pace of Growth
Capex growth is broad-based across regions, although the Midwest shows the largest increase, with projected 2026-2029 spending more than 120% above 2022-2025 levels, the rating agency noted.
“Increased planning reserve margins and investments to meet load growth account for much of this increase. Manufacturing and agriculture-related business expansions are contributing to this demand. Smaller issuers are experiencing the highest growth rates, which may result in higher rate affordability pressures for these utilities.”
Capital spending is increasing across the sector, and an analysis of a subset of over 130 Fitch-rated issuers’ ongoing disclosures, capital improvement plans, and public budgets, indicates that this trend will continue over the next two years, the report said.
About three-quarters of this set of issuers expect to spend more during the upcoming four-year period (2026-2029) than they spent in the previous four years (2022-2025).
On an aggregate basis, issuers expect a 59% increase in spending for this period. Most of these issuers expect spending to peak in 2027. “However, individual capital spending will tend to extend into subsequent years, meaning a discrete peak in a single future year is unlikely. Based on recent trends, we expect capex will continue to increase annually through 2030,” Fitch said.
Fitch-rated issuers project average annual capex growth of about 24% in 2026, 7% in 2027, and a decline of 5% in 2028.
“While Fitch expects continued robust spending, we believe issuer projections overstate likely spending in the early years,” it said.
A year ago, issuer projections for 2025 capex indicated YoY growth of 30% compared to the actual growth of 20%.
“Issuer projections continue to reflect a bell-shaped spending distribution, with a sharp near-term capex increase followed by elevated but decreasing spending in the out years of a five-year projection window. Lower spending growth in 2026 likely reflects some flexibility in the timing of planned capex as well as challenges inherent in procuring required components for projects, given the lengthy lead times in the sector,” the report said.
Fitch said its 2026 U.S. Public Power Peer Credit Analysis indicates that financial metrics remain strong by historical standards, with median coverage of full obligations at decade-high levels, generally lower leverage, and continued robust liquidity and cash on hand.
Higher capex translated into improved capex-to-depreciation ratios, with median wholesale ratios above 140% and retail systems at nearly 200%.
Rating Outlooks for the sector remain overwhelmingly Stable, indicating that issuers have generally absorbed growth in capex through volume growth in energy sales and targeted rate increases that mitigate upward trends in debt-funded capital spending, the rating agency said.
"However, emerging affordability concerns could constrain needed rate increases to support higher capital spending, which may reduce ratings headroom absent offsetting prudent financial management."
