S&P puts Pinnacle West on watch

S&P said it placed its ratings for Pinnacle West Capital Corp. and Arizona Public Service Co. on CreditWatch with negative implications.

The CreditWatch placement follows the Arizona Corporation Commission voting to adopt an amendment to lower the companies’ authorized return on equity (ROE) to 8.7% from its currently authorized 10%, the agency said.

“The CreditWatch placement reflects the increased probability of a downgrade within the next three months. The ACC's vote on an 8.7% authorized ROE is lower than the administrative law judge's recommended 9.16% and will likely lead to weaker financial measures that are consistently lower than our downgrade threshold of funds from operations to debt below 18%,” S&P said in a press release.

The agency said it aims to resolve the negative watch in the coming months once the commission issues its final rate case order and S&P completes its assessment of the order’s overall effect on credit quality.

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