NEW YORK--(BUSINESS WIRE)--Transformative changes in economic growth, energy efficiency, technology and capital funding will require rural electric cooperatives to adapt to a changing landscape in order to maintain strong and stable credit quality, according to Fitch Ratings. As electric coops face slowing growth and changing usage patterns, the adoption of new business strategies and improved technology programs have the potential to improve load profile, reduce exposure to market risk and lower customer costs.
Coops have been pushed into the era of the consumer-centric utility as advances in technology have surfaced, including the Smart Grid, web-connected home systems, renewable energy solutions, installed advanced metering (AMI), and coop participation in the National Information Solutions Cooperative.
'What's becoming increasingly clear is that more informed and technology-savvy consumers are impacting the traditional cooperative/member relationship,' says Alan Spen, Senior Director and lead author of the report. 'Systems that don't embrace this idea could be at increased risk of customer dissatisfaction.'
While new technologies have increased energy efficiency and consumer satisfaction, they also pose an increased risk of data theft, intrusion and service disruption. As a result, security measures are also now part of the new normal.
In addition, many coops have decoupled their revenue from customer usage as efficiency increases, instead choosing to rely on flat rates to ensure they cover the cost of service. 'The hallmark of the electric cooperative sector has been its financial strength and stability,' said Dennis Pidherny, Managing Director and Head of Public Power.
'Previously overlooked tools like rate design will become increasingly important as technology impacts the bottom line.'
Despite the evolving landscape, Fitch continues to believe the electric cooperative sector retains strong credit quality. Ratings typically remain in the 'A' or 'AA' range, and are supported by coops' largely autonomous rate-making authority, the essential nature of electric service, mandates to serve exclusive defined areas, and high concentrations of residential customers. In addition, the availability of supplemental lenders like the National Rural Utilities Cooperative Finance Corporation, CoBank, ACB and other funding support the sector's access to capital.
The full report, 'Electric Cooperatives - Distribution Systems Prepare for Change,' is available at www.fitchratings.com.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research: Electric Cooperatives (Distribution Systems Prepare for Change)