New York (Platts)--18Mar2008

The rapid increase over the last five years in the number of states
approving renewable portfolio standards has raised key credit rating concerns
for electric utilities, Standard & Poor's Director Anne Selting said on
Tuesday.

Twenty-nine states and the District of Columbia, now have renewable
standards in place, although five are voluntary, she said. RPS targets vary,
but many states are requiring utilities to obtain between 15% and 25% of their
power supply from renewable resources by between 2020 and 2025.

Selting said this "aggressive" move toward RPS may not be achievable and
absorbing the costs into retail rates could affect credit ratings, according
to Selting, at S&P's 15th Annual Utilities Conference -- The Credit Cost of
Going Green.

"We are concerned that the costs of RPS compliance have often not been
quantified and that absorbing the full cost of RPS in retail rates could have
credit implications for some companies," Selting added in an article that
appears in the latest issue of S&P's CreditWeek. "In addition, not all
utilities will be able to achieve RPS requirements on the schedule required,
which could lead to penalties for utilities and create an impression that
power companies are not receptive to green policy goals," Selting wrote.

Renewables currently account for 2.5% of US generation and while the
public perception is that the amount of renewable energy has been growing
rapidly, Selting told the conference that growth in fact has been largely
stagnant over the past 15 years, hampered by a range of constraints, including
the lack of transmission capacity to move wind power from remote locations to
demand centers.

The attention that renewables has recently attracted has created the
perception that the industry "is just going gangbusters," Selting said, but
"we are really right where we were in 1993."

Selting also said the cost ramifications of making renewables a
significant portion of a utility's portfolio have not yet been fully explained
to customers. "We need an honest public conversation with customers about
costs," she said. She also said the costs have been poorly quantified or, in
some cases, not made transparent by some utilities that are increasing their
renewable portfolios.

"While it is possible that RPS will prove to be feasible, economic, and
successful in every state, there is no compelling evidence that suggest this
will be the case," she added in her CreditWatch article. "We instead suspect
that the green marathon will be a difficult race for utilities to run, with
possibly painful results for credit quality."

--Gail Roberts, gail_roberts@platts.com