Moody's Investors Service recently issued a pair of reports on the unregulated and regulated power sectors.
Regarding the unregulated power sector, Moody’s had a generally negative outlook, as a combination of low natural gas prices, stagnant demand, and oversupply have lead to sustained low wholesale market prices.
"Power prices are showing a similar trend to natural gas prices, rising slightly from lows in early 2016 but with forward projections looking relatively flat," says Laura Schumacher, a vice president at Moody's.
Moody’s noted that potential market interventions, such as nuclear power credits in New York and Illinois could bolster certain economically challenged plants, and that the Department of Energy’s proposed reforms related to grid resilience are likely to accelerate energy pricing reform.
"This type of reform may lead to increased revenues for nuclear and coal-fired generation," says Schumacher. "However, this would likely delay the shutdown of uneconomic plants, which could prolong the oversupply situation."
Meanwhile, regulated utilities’ financial condition is healthy, and they are increasing their operating cash flows with investments in plant and equipment while cutting costs. Those actions have served to offset flat power demand and lower allowed equity returns. However, there are some signs of regulatory push back, especially in states with large failed projects such as Mississippi Power’s Kemper project and South Carolina Electric & Gas’ V.C. Summer nuclear project.