The DTE Electric Securitization Funding II, Series 2023A is expected to issue $601.6 million in asset-backed securities, funded by a pool of charges levied on customers within DTE Electric's service territory.
Those fees will be used to recover a similar amount of costs associated with retiring the Trenton Channel and St. Clair power generation sites, which are coal plants, in 2022, according to ratings analysts at Moody's Investors Service. An irrevocable financing order, the 2000 Public Act 142 underpins DTE Electric's ability to levy charges on customers in its service area, the rating agency said, adding that this counts as one of its credit strengths.
DTE Electric Securitization, 2023A will issue notes to investors through two class A tranches, according to Moody's. The classes are identical in certain characteristics, such as their 'Aaa' ratings, and their $300.8 million principal amounts.
Where they differ, however, is in their legal final maturity dates—March 1, 2033 for the class A1 notes and Sept. 1, 2038 for the class A2 notes, according to Moody's. Also, the coupons have yet to be determined, the rating agency said.
Another credit plus is that the financing order authorizes uncapped, true-up adjustment mechanisms.
"Additionally, the financing order authorizes the servicer to make true-up adjustments to the charge semi-annually and more frequently," if necessary, the rating agency said. DTE is the servicer on the deal, and because it is strong in this area, this also works in its favor, Moody's said.
The securitization charge starts off from a low point, representing around 0.98% of the total monthly electricity bill, another potential credit strength, the rating agency said.
While the credit supports outnumber the potential challenges, including challenges to the state legislative and regulatory actions. They could weaken the strength of the financing order, the security property and the bonds, according to the rating agency.
Another potential credit drawback is that collections from the securitization property could fall short of sufficient levels for a number of reasons, including damage from storms and natural disasters, unanticipated consumer delinquencies and defaults, population migration or self-generation.
