The financing arm of the municipal electric utility in Roseville, CA, received a negative outlook from Standard & Poor’s Ratings Services (S&P) on a $209.35 million tax-exempt bond to finance a 20-year, 46 Bcf natural gas pre-pay deal with Merrill Lynch & Co. because of recent financial disclosures by Merrill. S&P also gave an “AA-” rating to Roseville Natural Gas Financing Authority, the fuel financing unit of the muni in Roseville, a suburb east of Sacramento. S&P said the rating reflects a recent outlook revision for Merrill Lynch & Co. Inc., which provides guarantees to the financing authority’s gas supplier and interest rate swap counterparty. The outlook downgrade followed Merrill’s announcement that it expects to record a material loss in the third quarter caused by a more significant exposure to leveraged loan commitments, subprime mortgages, etc. S&P’s previous outlook assumed less exposure for Merrill. The Roseville gas financing arm is a state-chartered joint powers authority and a nonprofit public financing entity in California. The public financing arm used the proceeds from the $209.35 million to fund prepayment for a long-term gas supply deal from Merrill Lynch Commodities Inc. The gas is set for Roseville’s electric power generation system, priced at a first-of-the-month index from the Pacific Gas and Electric Co. citygate delivery point, minus a specific discount, according to S&P.
Municipal
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LADWP Board OKs Half-Billion-Dollar Yearly Gas Budget
The oversight board at the nation’s largest municipal utility earlier in September approved annual budgets for the utility natural gas purchases exceeding $500 million annually in the 2008-2009 fiscal year before tapering off significantly through 2016-2017 with the advent of renewables and a more diversified generation portfolio.
Industry Brief
The natural gas financing unit for the Sacramento Municipal Utility District (SMUD) received a credit rating upgrade (“AA-” from “A+”) from Standard & Poor’s Ratings Services (S&P) Thursday covering more than $750 million in fixed- and indexed-rate bonds. S&P set the outlook at “stable” for the Northern California Gas Authority, a special purpose vehicle for financing long-term gas purchases for SMUD’s power generation needs. The gas authority was created to issue bonds, the proceeds of which fund prepayment for 146 Bcf of gas scheduled for delivery over the next 20 years. The authority sells the gas supplies to SMUD at first-of-the-month index price, minus a predetermined discount. In turn, the gas authority’s floating index-based revenues from SMUD are exchanged through a commodity swap with the Royal Bank of Canada (RBC) for fixed amounts needed to pay interest and principal on the bonds. S&P said the upgrade reflects a July 30 upgrade of Morgan Stanley (AA-/Stable/A-1+), which guarantees the obligation of the gas authority’s supplier, Morgan Stanley Capital Group. Two other counterparties to the deals figured in the ratings change, S&P said: Royal Bank of Canada (RBC: AA-/Positive/A-1+) and MBIA Insurance Corp. (AAA/Stable). “The outlook could be revised to negative if the outlook on Morgan Stanley or the Canadian bank is revised to negative, and the ratings could be lowered if the ratings on Morgan Stanley, RBC, or MBIA are lowered to below ‘AA-‘,” said S&P analyst Kenneth Farer.
SMUD Cites 60% Gas Cost Increase, Seeks 7% Power Rate Hike
Citing a 60% rise in its wholesale natural gas costs over the past five years, the Sacramento Municipal Utility District (SMUD) said it will seek a 7% retail rate increase for its 585,000 residential and business customers, effective Jan. 1, 2008. A public hearing and decision on the proposal by the seven-member elected SMUD oversight board is expected to take place in early June.
SMUD Cites 60% Gas Cost Hike, Seeks 7% Power Rate Hike
Citing a 60% rise in its wholesale natural gas costs over the past five years, the Sacramento Municipal Utility District (SMUD) announced Tuesday it will seek a 7% retail rate increase for its 585,000 residential and business customers, effective Jan. 1, 2008. A public hearing and decision on the proposal by the seven-member elected SMUD oversight board is expected to take place in early June.
PG&E, San Francisco Bury Hatchet, Pursue Joint Energy Program
Often at odds in the past when utility takeover measures regularly appeared on the municipal ballot, Pacific Gas and Electric Co. and the City/County of San Francisco Tuesday continued their newfound lovefest, joining hands in a new collaborative effort to deliver energy savings/efficiency programs to residential and commercial customers in the utility’s headquarters city. Running through next year, the three-year San Francisco Energy Watch effort will spend up to $11.5 million to achieve millions more dollars in savings, the utility said.
LADWP Still Seeking Group Gas Pre-Pay Deal, Muni Official Says
The nation’s largest municipal utility and a major purchaser of wholesale natural gas supplies in the West, Los Angeles Department of Water and Power (LADWP), is still considering taking the lion’s share of a massive 20-year gas supply pre-pay deal that a consortium of public sector utilities in Southern California hopes to have Goldman Sachs structure for them, according to a LADWP executive who talked with NGI Wednesday.
Municipals Attack Pipes’ Campaign to Reverse Key ROE Ruling
A municipal gas distributor group has called on FERC to disregard the “extra-record fusillade” from interstate pipelines seeking to persuade the agency to overturn a controversial decision recommending a significantly lower return on equity (ROE) for Kern River Gas Transmission, a ruling that pipes fear could signal a trend.
Municipals Attack Pipes’ Campaign to Reverse Key ROE Ruling
A municipal gas distributor group has called on FERC to disregard the “extra-record fusillade” from interstate pipelines seeking to persuade the agency to overturn a controversial decision recommending a significantly lower return on equity (ROE) for Kern River Gas Transmission, a ruling that pipes fear could point to a trend.
More Protections Sought for Storage Customers in Final Rule
A group of natural gas producers, municipal gas distributors and industrial customers has called on FERC to revise its final rule reforming the agency’s storage pricing policies to include more protections for customers. Separately the American Gas Association (AGA), which represents local distribution companies (LDCs), asked the agency to consider a less liberal storage policy in the rule.
