Deregulation of the electric industry has led to an increased reliance on long-term contracts with third parties that create increased credit risk. We provide economic consulting and litigation support on the increased risk associated with entering into power purchase agreements and in using risk management instruments.
In connection with a contract dispute, members of The Brattle Group analyzed the impact of a disputed purchase power contract on a utility’s credit ratios and credit worthiness. The utility’s cash flow was modeled with and without the contract under several different scenarios and the impact on credit ratios was assessed.
We evaluated the impact of accounting fraud on an energy company’s credit ratios and assessed the company’s credit rating “but for” the fraud. We determined the date at which the company’s credit ratios would have dropped below typical investment grade ratios absent the fraud.
On behalf of several electric utilities, The Brattle Group analyzed the impact that signing long-term power purchase agreements would have on their credit ratios and credit rating. We estimated the risk associated with such contracts and calculated the additional dollar amount per MW that the utility should be allowed to recover in rates to compensate the utility for the additional risk.