Moody's: U.S. electric utility industry sees clouds ahead

Moody's Investors Service said in a report that the U.S. electric utility industry has a stable outlook but faces longer-term business and operating risks that could eventually lead to negative rating pressure.

"Conceivably, the combination of rising costs, higher infrastructure investment needs and larger or more frequent requests for rate relief could create pressure for future incremental rate relief from state regulators, or at a minimum raise the uncertainty level associated with expected recoveries," Moody's vice president and senior credit officer Jim Hempstead, one of the report authors, said in a written statement. "This would directly affect one of our primary rating drivers."

"Moody's believes most utility management teams maintain a reasonably constructive relationship with their regulators, and that most regulators prefer to regulate reasonably healthy utilities. The likelihood for continuous rate relief on a timely basis, whether it is for operating expenses or recovery of investments into the rate base infrastructure is a key element underpinning the currently stable outlook."

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