Fitch Ratings has upgraded bonds issued by the Massachusetts Clean Energy Cooperative Corporation (MCECC) from A+ to AA-, the Massachusetts Municipal Wholesale Electric Company (MMWEC) reported on July 16.
MCECC is a municipal light plant cooperative, formed in 2013, consisting of MMWEC and Holyoke Gas & Electric (HG&E), a public power utility based in Holyoke, Mass. and a MMWEC member utility.
According to Fitch Ratings, the rating upgrade on the $42.7 million fixed-rate revenue bonds series 2013 reflects the credit quality of HG&E, whose payments ultimately flow through the financing structure to repay the MCECC bonds.
HG&E’s payments are made pursuant to a power purchase agreement with MMWEC, while corresponding payments from MMWEC to MCECC are made pursuant to a separate power sales contract.
The rating outlook is stable.
MCECC was formed to finance upgrades at the Hadley Falls hydroelectric station, on behalf of the Holyoke utility, which owns the facility. In 2015, upgrades to Hadley Falls Station Unit 1 were completed, including an increase in generating capacity, a new substation and upgraded fish passage facilities.
Fitch has deemed the operating risk of the bonds AA, which is driven by the low operating cost associated with the purchase of Hadley Falls Unit 1 capacity, and the strategic importance of the resource.
“HG&E’s hydroelectric generating resources play an important role in the utility’s mission to expand carbon-free generation, a mission shared by MMWEC, the utility’s joint action agency, and support public policies to decrease carbon emissions in the state and the region,” MMWEC said in a news release.
More than 65% of electricity sold by HG&E is produced from local renewable resources and over 90% of electricity sold is carbon-free.
In its ratings upgrade, Fitch cited HG&E’s very competitive rates and affordable services. Electric rates at HG&E are among the lowest in the state: approximately 74% of the state average in 2017, and 65% of average residential rates, MMWEC said, noting that the competitiveness of its rates is largely driven by HG&E’s low-cost hydroelectric resources.
Earlier this month, MMWEC said it had retired all the bonds related to its ownership interests in several New England generating facilities, allowing its 28 municipal utility project participants to enjoy years of debt-free ownership in their generating asset entitlements.
MMWEC is a non-profit, public corporation and political subdivision of the Commonwealth of Massachusetts, created by an Act of the General Assembly in 1975 and authorized to issue debt to finance a wide range of energy facilities.
MMWEC provides a variety of power supply, financial, risk management and other services to the state’s consumer-owned municipal utilities.