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December 10, 2024

S&P downgrades 4 CT utility companies’ credit ratings, citing ‘regulatory’ issues

HBJ PHOTO | BRIAN AMBROSE United Illuminating President and CEO Frank Reynolds stands outside a Connecticut Natural Gas operations center in East Hartford after an interview with the Hartford Business Journal in November 2023.
By Andrew Larson

Credit-rating agency Standard & Poor (S&P) has downgraded the credit rating of four Connecticut utilities, saying that the state’s “regulatory construct … will increase the utilities' cash flow volatility, decrease the stability of their financial performances and weaken their ability to consistently manage regulatory risk.”

On Friday, the agency downgraded the credit rating of Connecticut Natural Gas (CNG) by two notches to BBB+, and the credit rating of Southern Connecticut Gas (SCG) by one notch to BBB. Both utilities are subsidiaries of Orange-based Avangrid Inc.

The downgrade follows significant rate cuts by the Public Utilities Regulatory Authority (PURA) in both companies’ recent rate cases.

Further, on Monday, S&P lowered the credit rating of Eversource subsidiaries Connecticut Light and Power Co. to A- from A and Yankee Gas Services Co. to BBB from A-.

Eversource said the downgrades were due to “the continuing pattern of adverse regulatory developments for investor-owned utilities operating in Connecticut.”

Frank Reynolds, president and CEO of CNG and SCG, said the downgrade reflects “the continued, hastening erosion of investor confidence in Connecticut’s utility companies.”

Utility companies in Connecticut have been embroiled in a highly publicized dispute with PURA over their ability to recover capital expenditures.

In November, PURA imposed revenue reductions totalling $35 million for CNG and SCG.

Reynolds said those cuts “will profoundly challenge our ability to provide the high-quality service our customers depend on, as well as repay the investors whose loans have supported critical investments in our infrastructure.”

Meantime, Eversource’s natural gas utility, Yankee Gas, has requested a $209 million rate hike, effective Nov. 1, 2025, in an application filed with PURA in October.

Eversource said, in response to S&P’s downgrade, that credit downgrades have “a long-lasting negative impact for any company, and once a downgrade occurs, it takes many years to turn around.”

“Providing essential utility services is an extremely capital-intensive process and a higher cost of capital will cost customers more across the board to maintain the system,” said Douglas Horton, vice president of distribution rates and regulatory requirements for Eversource.

In January, Fitch Ratings also downgraded Eversource’s long-term issuer default rating a notch from BBB+ to BBB, citing uncertainty about the future of offshore wind.

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