Numerous securitizations by utility companies in New Jersey may be stalled while the State Supreme Court readies a hearing, but overall consolidation in the utility industry should not affect any outstanding stranded-cost securitizations.
A proposed merger between New Jersey-based GPU Inc. and Ohio-based FirstEnergy Corp. should not have any effect on securitization opportunities currently being explored by GPU. "We don't anticipate the FirstEnergy situation is going to really impact the timing of the securitization at all," said Richard Cortright, an analyst at Standard & Poor's Corporate Ratings Group.
The most likely hold-up, he said, is the pending hearing in the New Jersey State Supreme Court against Public Service Electric & Gas Co. brought about by New Jersey Business Users, a consumer advocate group, who claims that there were technical irregularities in the passage of the deregulation law in that state. The Court has scheduled the hearing for Nov. 8, and until a decision is made - which could take a month or longer - any stranded-cost securitizations in New Jersey appear unlikely.
"Nothing is happening in New Jersey until PSE&G gets out of the way," Cortright said. "Until that happens, New Jersey is just completely stalled."
If all goes well, securitizations from Conectiv (formerly Atlantic City Electric Co.), and Jersey Central Power & Light Co. (a unit of GPU) could come out of the pipeline.
However, with utility consolidation in many of the states that currently authorize companies to securitize, there is little need for concern.
"The tariff in the securitization is based upon the amount of energy that flows through the wires into your homes and that shouldn't be affected by who is supplying the electricity," said Bruce Fabrikant, an analyst at Moody's Investors Service.
"If [costs have] been determined to be stranded, they are stranded regardless of who comes in to take over the company," added Cortright.
One possible effect of mergers in the industry is that the companies may have to agree to more concessions to gain approval, mostly in the amount of stranded costs the merged company could recover. But, that would only affect future transactions, rather than ones that have already closed.
