Deregulation Brings Moody's Down

Citing credit uncertainties stemming from impending deregulation, Moody's Investors Service has posted negative ratings outlooks for the U.S. electric, telecommunications, and natural gas industries (with the exception of the pipeline segment). Moody's acknowledges, however, that the impact of deregulation will depend on market maturity, relative cost structure, degree of integration, and regulatory flexibility. According to Douglas Watson, Moody's managing director of regulated utilities, the electric industry faces the highest risk because of its maturity, limited domestic growth opportunities, heavy integration, and high average costs. Watson adds that the industry likely will bear most of the estimated $200 billion in transition costs.