--Issuer Default Rating (IDR) at 'A+';
--2013 secured revenue refunding bonds at 'AA-'.
The Rating Outlook is Stable. Approximately
In addition, Fitch Ratings has withdrawn its ratings for the
KEY RATING DRIVERS
--CAISO's ability to adjust rates quarterly without regulator or board approval;
--The integral role played by the CAISO in achieving state and federal energy policy goals with regard to reliability, competition, renewable energy and environmental issues;
--The company's first priority lien on market collections;
--Constructive federal regulatory oversight;
--The solid credit profile of California's three largest investor-owned utilities (IOUs);
--Geographic and membership concentration, and the voluntary nature of CAISO participation
CAISO's ratings and Stable Outlook reflect the stable revenues and cash flows derived from its
Addition of New Members: CAISO is expanding its real time energy market to other balancing authorities in the western U.S. under an initiative known as the Energy Imbalance Market (EIM). In
Assured Cost Recovery: Fitch's confidence in CAISO's ability to consistently and fully recover its costs is a function of the company's ability to adjust rates quarterly without prior approvals. The ratings also consider CAISO's first-priority lien on market collections, a constructive regulatory environment at the FERC, and the strong credit profile of California's three largest IOUs.
The successful implementation of the new energy market (also known as the market redesign and technology upgrade [MRTU]) has significantly enhanced market volumes and collections, supporting CAISO's creditworthiness and enhancing its strategic role in implementing California's energy policies.
Fitch notes that the ratings of CAISO's 2013 series bonds reflect the collateral pledge of CAISO's headquarters in
Creditworthy Members: The three largest IOUs in
First-Priority Lien on Market Collections: Importantly, CAISO's tariff provides a first-priority lien on collections for market participants if there is a shortfall in GMC collections. With the implementation of the MRTU, there is now a greater breadth of market revenues to backstop GMC payments in the unlikely event of the default of large participants.
In 2013, CAISO recorded approximately
GMC Revenue Requirement: CAISO budgets into its annual GMC revenue requirement 1.25x debt service coverage and 15% operating expense reserves. The operating reserve account is fully funded at all times. Any over-collections above the 15% reserve are used to offset future-year GMC revenue requirements. Additionally, CAISO is authorized to adjust rates quarterly if there is a 2% deviation or
Liquidity: Fitch deems CAISO's liquidity position to be adequate, despite the absence of credit lines. The company relies largely on cash balances for working capital needs and has substantial investments, some of which could be readily liquidated in a funding emergency.
Severe Drought; Reliability Unaffected: Significantly lower than normal hydrologic conditions in
Finally, CAISO will play a key role in
Rating concerns primarily relate to CAISO's membership and geographic concentration, moderately high operating costs, as well as the voluntary nature of CAISO participation.
Positive Rating Action: No credit rating upgrades are expected at this time.
Negative Rating Action: A substantive adverse change to regulatory oversight or a broad energy policy change at the federal and/or state levels;
-A large contingent of members departing or a cybersecurity event.
Additional information is available at 'www.fitchratings.com'.
--'Rating U.S. Utilities, Power and Gas Companies,
--'Corporate Rating Methodology',
--'Parent and Subsidiary Rating Linkage',
Parent and Subsidiary Rating Linkage Fitch's Approach to Rating Entities within a Corporate Group Structure
Corporate Rating Methodology - Including Short-Term Ratings and Parent and Subsidiary Linkage
Rating U.S. Utilities, Power and Gas Companies (Sector Credit Factors)
Group Head and Senior Director
Source: Fitch Ratings
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