The improving financial health of the Lodi Electric Utility has convinced Standard & Poor's Ratings Services to boost its rating of the utility's bonds to A-, returning the utility's credit quality to a level not seen since 2002.
The upgrade from BBB+ has the potential to save the utility's ratepayers a significant amount in interest payments and other borrowing costs related to an anticipated refinancing of outstanding Electric Utility bonds this summer. The proposed refinancing would convert the outstanding debt to a fixed rate and eliminate risk to ratepayers related to the current bond insurer's financial troubles.
"We're pleased Standard & Poor's recognizes the steps Lodi has taken to strengthen its community-owned utility," Lodi City Manager Blair King said. "A-grade credit will lower the interest rate on future bonds, which will amount to real savings for utility customers."
S&P noted the Electric Utility's improved fund reserves and other steps taken to insulate the utility from short-term fluctuations in energy markets. In a related upgrade, S&P also boosted the rating of bonds issued by the Northern California Power Agency to A-. The NCPA is a consortium of public agency utilities, including Lodi.
"The raised rating reflects the many improvements in Lodi's credit quality, which are the result of reduced market exposure and an improved financial position, both in the current year and five-year forecast period," S&P credit analyst Ian Carroll said in a company press release. "The system also benefits from a stable economic base and positive relationships with large customers."
Lodi Electric Utility debt was downgraded by S&P from A- to BBB+ in 2002. Fitch Ratings, another major rating agency, last year upgraded utility bonds to BBB from BBB-, and changed the bonds' outlook to "positive."