Moody's on Dec. 20 downgraded Avista Corp.'s issuer rating to Baa2 from Baa1, with a stable outlook.
The rating agency also downgraded the company's senior secured and first mortgage bonds ratings to A3 from A2, and the trust preferred securities rating at Avista Corp. Capital II to Baa3 from Baa2. Approximately $1.1 billion of securities were affected by the downgrade.
"Avista's cash flow is lower primarily due to tax reform, resulting in financial metrics in the mid-teens range," said Moody's analyst Nana Hamilton. "In addition, Moody's sees less predictability with the regulatory outcomes in Washington and room for the company to better manage its relationship with the commission."
Moody's cited the August ruling by the Washington Court of Appeals that rate base attrition adjustments, considered credit positive, were against the state's used and useful law. The decision was part of an ongoing review of Avista's 2015 Washington rate case.
In April, Washington state regulators rejected Avista Utilities' three-year rate plan and instead approved a 2.2% increase in electric rates and a 2.4% decrease in natural gas rates for one year.
Most recently, on Dec. 5, the Washington Utilities and Transportation Commission rejected Hydro One Ltd.'s $5.3 billion takeover of Avista in a decision that concluded the deal does not serve the public interest.
Moody's stable outlook on Avista "incorporates a view that the proposed acquisition by [Hydro One] is unlikely to be completed and that unregulated operations will remain below 15% of consolidated earnings and cash flow."