S&P places Texas-based rural electric co-op on credit watch negative

S&P Global Ratings on Feb. 22 has placed Rayburn Country Electric Cooperative Inc.'s A- issuer credit rating on CreditWatch with negative implications.

The move reflects the Texas-based generation and transmission rural electric cooperative's revised estimates of the costs of procuring electricity and natural gas during the week of Feb. 14, when the historic cold snap caused widespread blackouts in the state.

The cooperative's management said that it has fully drawn on its $250 million syndicated line of credit, and has also entered a one-year, $300 million bilateral line of credit with National Rural Utilities Cooperative Finance Corp.

Rayburn Country Electric's management also reported that they were short on energy and purchasing market power when real-time wholesale locational marginal prices reached $9,000/MWh during many hours of the day over several days beginning on Feb. 14. Pre-storm wholesale prices were more typically in the range of $30/MWh to $50/MWh.

"Texas public power and electric cooperative utilities are now learning the costs of procuring power at sustained stratospheric prices over several days, costs exacerbating the operational challenges the state's utilities faced in procuring and producing electricity during this past week's extremely cold temperatures," Ratings analyst Scott Sagen said.

Rayburn Country Electric had $290 million in total debt outstanding as of Dec. 31, 2019, including $120 million in short-term debt. The cooperative is not a Rural Utilities Service borrower and its long-term debt is placed with various lenders.

Texas is already bracing for an exodus of electric retail customers from smaller competitive suppliers to the state's biggest power companies.

Citing the potential collapse of distressed retail providers, the Public Utility Commission of Texas on Feb. 19 set a Feb. 22 deadline for large service providers to apply for designation as "volunteer retail electric providers," making them "providers of last resort" to customers whose retail electricity suppliers may no longer be viable.

This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings. Descriptions in this news article were not prepared by S&P Global Ratings.