Standard & Poor's Rating Services held LIPA ratings at A-minus with a negative outlook while Moody's held its rating with a stable outlook as the authority prepares to issue nearly $800 million in new debt.
In a report to investors Monday, S & P said LIPA's "stable revenue stream" and a recently unveiled plan to collect more from customers to improve its financial standing were tempered by "substantial" fixed costs, swelling debt and pressure to increase rates. LIPA's debt and fixed long-term contracts for power plants exceed $10 billion.
The agency expressed concern that Gov. Andrew M. Cuomo's 2013 LIPA reform act allowed the authority to refinance $2 billion of its more than $7 billion in debt, yet the transaction didn't lower rates or the overall debt amount. That, the agency said, "could perpetuate customers' and politicians' rancor regarding the utility's rates and potentially constrain financial flexibility."
In addition, LIPA's plan next month to issue $799 million in new debt "could place upward pressure on rates or erode financial margins."
The S & P report also raised questions about whether LIPA's move to PSEG as operator of the Long Island system will improve performance.
"It remains uncertain whether the transition from National Grid USA's operational oversight will improve politicians' and ratepayers' negative perceptions of high rates," S & P said.
Moody's said its stable outlook for LIPA reflects the expectation that LIPA will extend and expand its current available credit lines; customer satisfaction with PSEG "will continue to increase"; and that the 2016-18 rate filing with the Department of Public Service will be timely and "maintain or improve financial metrics."
A LIPA spokesman didn't immediately respond to a request for comment.