Joseph Krist

Publisher

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NEW YORK UTILITIES DIMMING CREDIT OUTLOOK

Over recent months, National Grid has been engaged in a serious fight over its efforts to secure permits for natural gas pipeline expansion. In an effort to generate pressure on state politicians and regulators, National Grid decided to stop new natural gas connections in and around the New York metropolitan area. This is generating significant pressure from developers and potential business operators.

The state and the Governor in particular have maintained their opposition to the pipeline project. Now in the face of a continued moratorium on hookups, the governor has significantly raised the ante in the dispute. He has suggested that the franchise from the state under which National Grid is permitted to operate its gas facilities could be revoked.

The next step is not clear but at least one rating agency has weighed in on the impact of the Governor’s move. Moody’s has issued a warning that all the utilities operating under state franchises are now at risk of revocation. That is indeed technically true. It is also true that the risk of revocation is significantly higher for National Grid relative to the other utilities. Moody’s referenced a perception by the New York governor that NG did not look at finding alternative (short and medium term) measures to manage the supply constraints, absent the pipeline, such that the moratorium could be lifted; and its poor handling of the moratorium with its customers.

While the method may be different now, the state can arguably be said to be doing something it has done before. In many cases, the regulatory ratemaking process accomplished sufficient pressure as to lead to the eventual dismantling of the Long Island Lighting Company. It was succeeded by the public agency, the Long island Power Authority. We do not believe that the state’s ultimate goal is to revoke the franchise but it is a bold escalation of the conflict. Moody’s views political intervention as a material credit negative, especially when the intervention emanates from a governor’s or attorney general’s office.

AUTONOMOUS VEHICLES

The National Transportation Safety Board called upon federal regulators Tuesday to create a review process before allowing automated test vehicles to operate on public roads, based upon the agency’s investigation of a fatal collision between an Uber automated test vehicle and a pedestrian. The March 18, 2018, nighttime fatal collision between an Uber automated test vehicle and a pedestrian has focused much attention on both the technology but more importantly on the approach taken by the AV industry towards government’s role in managing its streets. The NTSB said an Uber Technologies Inc. division’s “inadequate safety culture” contributed to the crash.

The NTSB determined that the immediate cause of the collision was the failure of the Uber ATG operator to closely monitor the road and the operation of the automated driving system because the operator was visually distracted throughout the trip by a personal cell phone. Contributing to the crash was Uber ATG’s inadequate safety risk assessment procedures, ineffective oversight of the vehicle operators and a lack of adequate mechanisms for addressing operators’ automation complacency – all consequences of the division’s inadequate safety culture. “The collision was the last link of a long chain of actions and decisions made by an organization that unfortunately did not make safety the top priority.”

The really sad/annoying part of this is that the attitude towards safety takes us back over half a century to the days of the rear engine Corvairs and the arguments against seat belts. We are asked time and time again by companies like Uber to trust them or to learn how to think of things in different ways or to think outside of the box. So when you see the NTSB conclusions you can see why these companies whether they be AV producers or ride share companies cannot be trusted.

“The Uber ATG automated driving system detected the pedestrian 5.6 seconds before impact. Although the system continued to track the pedestrian until the crash, it never accurately identified the object crossing the road as a pedestrian — or predicted its path. Had the vehicle operator been attentive, the operator would likely have had enough time to detect and react to the crossing pedestrian to avoid the crash or mitigate the impact. While Uber ATG managers had the ability to retroactively monitor the behavior of vehicle operators, they rarely did so. The company’s ineffective oversight was exacerbated by its decision to remove a second operator from the vehicle during testing of the automated driving system.

SOUND TRANSIT

Sound Transit will continue to collect car-tab taxes Sound Transit will continue to collect car-tab taxes even after the success of Initiative 976, approved by voters statewide this month. Cities and counties, including Seattle, have already sued to challenge I-976, claiming it’s a “poorly drafted hodgepodge that violates multiple provisions of the Constitution,” including a ban on multiple-subject initiatives.

They’ve sought an injunction to block I-976 before Dec. 5, when much of the initiative is expected to go into effect. it would cut state funding  for multimodal projects, ferries and state troopers; revoke city car-tab fees such as the $80 in Seattle for added bus service and roadwork; and remove 11% of Sound Transit’s roughly $2 billion yearly income. Sound Transit has pledged tax proceeds to the repayment of debt issued to finance the capital needs of the regional district which serves the greater Seattle metropolitan area.

Does it mean bondholders are at risk? Previous efforts to cut funding for Sound Transit through initiatives have succeeded at the ballot box but have not been able to stop tax collections related to bonds. The state Supreme Court agreed bond contracts signed in 1999 allowed the agency to collect the taxes until 2028 when those bonds expired.

Without court intervention, drivers whose vehicle registrations renew on or after Dec. 5 will see a tax cut —. They don’t have to pay city transportation-benefit district fees ranging from $20 to $80, such as Seattle’s voter-approved charges for extra bus service. Contrary to the image many have of Seattle as a progressive bastion, support for the car taxes in the metro area is far from unanimous. Unlike King County voters, majorities in both Snohomish and Pierce counties supported the initiative.

PUERTO RICO FACES DAUNTING CHALLENGE

The American Society of Civil Engineers (ASCE) Committee on America’s Infrastructure, made up of expert civil engineers, assigns grades using the following criteria: capacity, condition, funding, future need, operation and maintenance, public safety, resilience and innovation. It has also included Puerto Rico in its assessment and the results of its study show the scale of the capital finance challenges facing the Commonwealth.

The ASCE Puerto Rico Section announced a near failing grade of a ‘D-‘ for the island’s infrastructure. The Report Card graded eight categories of infrastructure: bridges (D+), dams (D+), drinking water (D), energy (F), ports (D), roads (D-), solid waste (D-), and wastewater (D+). None of this is a surprise in the aftermath of Hurricane Maria. Energy received the lowest grade of ‘F,’ meaning the system’s infrastructure is in unacceptable condition and has widespread advanced signs of deterioration.

The Puerto Rico Electric Power Authority (PREPA) proposed a $20 billion plan to renovate the energy grid on the island. How to finance and fund the needs is a different story. According to ASCE, “If the island wants to rebuild and modernize its infrastructure, it must increase received investment by $1.23 billion to $2.3 billion annually—or $13 to $23 billion over 10 years. However, when considering deferred maintenance and hurricane-related recovery projects, the investment gap is even larger. There is a dire need for the island to rebuild smarter by building to adequate codes and standards, acquiring funding from all levels of government, and incorporating resilience into infrastructure plans by using climate-resilient materials.”

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