Fitch upgrades LIPA to A+ bond rating, citing debt reduction
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A LIPA smart meter installed at a Suffolk County home is seen on May 24, 2022. Credit: Newsday/John Paraskevas
Fitch Ratings has upgraded LIPA’s bond rating to A+, citing the authority’s "very strong service area" and a long-term policy to gradually reduce debt.
Fitch also cited "a concern" in the recent departure of "several members of the authority's senior management team, including LIPA's chief executive," Tom Falcone. But Fitch said the authority "has indicated its intent to preserve its strategic objectives and policies on fiscal sustainability."
Newsday has reported that in addition to Falcone, the authority in recent months has seen the departure of its chief financial officer and chief operating officer/chief technology officer, and expects to see several high-level retirements in coming months. But it has also named an interim chief executive in John Rhodes and a permanent chief financial officer in Donna Mongiardo.
S & P Global Ratings in a June alert said the high-level departures "create uncertainty about future strategy [and] stability" at LIPA. Rhodes in response said, "While the recent changes in LIPA's senior leadership have garnered attention, it is important to emphasize the strong continuity and resilience within our organization."
The Fitch upgrade comes as LIPA prepares to issue more than $1 billion in new electric system general revenue bonds, to pay for system improvements and refinance existing bonds.
Fitch said the higher rating reflects its expectation that LIPA will continue a "gradual but consistent" trend toward financing system upgrades and related expenses from current revenue rather than through increasing amounts of long-term debt. LIPA has been accumulating larger levels of cash to fund what it terms a higher fixed-obligation coverage ratio.
Fitch said it expects LIPA performance to "continue to benefit" from mechanisms that cover costs as they arise, including "modest but consistent rate increases . .."
Fitch noted that the State Legislature’s plan to transition LIPA to a fully public power utility "appears to have stalled," and LIPA expects to continue to outsource grid management to an outside entity. Newsday has reported that the effort effectively ended with the conclusion of the 2024 legislative session in June, after more than a year of intense lobbying by PSEG and other interest groups. LIPA earlier this year issued a request for proposals as it seeks bids from outside entities to run the grid because PSEG’s contract expires at the end of 2025.
PSEG, which is expected to bid for the new the contract, maintains that the current public-private model of operating LIPA is the best for customers. Bill sponsor Assemb Fred Thiele (D-Sag Harbor) said history has shown that it has failed customers repeatedly. A fully public LIPA would have saved customers between $50 million and $80 million a year, LIPA has said, and public power utilities generally have better operating records than investor-owned utilities.
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'I'm going to try to avoid it' A trip to the emergency room in a Long Island hospital now averages nearly 4 hours, data shows. NewsdayTV's Virginia Huie reports.
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'I'm going to try to avoid it' A trip to the emergency room in a Long Island hospital now averages nearly 4 hours, data shows. NewsdayTV's Virginia Huie reports.