Rate relief charges on Texas customers utility bills will secure a $3.5 billion ratepayer-backed bond deal from the pending Texas Natural Gas Securitization Finance transaction.
Jefferies is the lead underwriter on the transaction, according to Fitch Ratings' pre-sale report. While Texas Natural Gas Securitization will issue the notes to the market, about nine other participating utility entities will act as collection agents to the trust. Each participating utility will collect the fees from its respective customers and forward them to the trust, essentially fulfilling the role of servicer, Fitch suggests.
Atmos Energy Corp., CenterPoint Energy Resources Corp., and Texas Gas Service Company are among the participating utilities and collection agents, according to Fitch. United Professionals is the central servicer on the deal, according to Kroll Bond Rating Agency.
In any case, the security driving the revenue to the ratepayer-backed bonds is fairly stable. It's the participating utilities' irrevocable right to impose, bill and collect consumption-based customer rate relief charges (CRRCs) for natural gas service. Initially Fitch expects that charge to be an average of $4.70 per residential customer, or 6.06% of the average monthly residential customer bill, based on December 2022 rate schedules and projected consumption.
In what Fitch considers to be a potentially positive sign for the notes' credit, and noted several. For one, the tariff is less than 10%, which is in line with the "U.S. Utility Tariff/Stranded Cost Bonds Rating Criteria," which Fitch suggests should be manageable. The peak customer rate relief charge is actually $7.19 on average per residential customer, in fact, which is 11.16% of the average monthly residential customer bill based on December 2022 rate schedules and expected consumption.
The transaction will issue two tranches of notes, and both rating agencies expect to assign 'AAA' ratings to both classes of fixed-rate notes. The class A-1 notes have a legal final maturity of April 2035, while the A-2 notes have a legal final maturity of April 2041.
