A combination of rising natural gas prices, the stumbling residential housing market and general economic weakness has led to above-average increases in past-due payments at many local distribution companies (LDC), particularly in the eastern United States, according to Moody’s Investors Service.
That may be ominous news for the 2008-2009 heating season, which begins in October, but LDCs appear well positioned to handle the rising stress. In a Moody’s survey of 31 LDCs, all respondents reported adequate liquidity and gas supply through the last heating season.
“While increasing late payments are a concern, most LDCs have mechanisms to pass bad-debt expense through to their customer base,” Moody’s said. “Regulators have generally been supportive of LDCs, and Moody’s currently has a stable outlook on the sector.” Only two LDCs reported requests for credit line increases and two others had to renew credit facilities.
Things could get tougher for LDCs if regulators slow the rate of recovery of bad debt expense, Moody’s said.
Of the 31 LDCs responding to the survey, 21 of them — most operating in the East — reported an increase in late payments last winter. The average increase of past-due receivables was 9% last winter, Moody’s said. Almost all respondents have some version of a pass-through mechanism for bad debt expenses in their rate designs.
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