For the third time since August 2007, Lodi Electric Utility's debt has received an upgrade in its bond grading from Fitch Rating. Lodi Utility received an A- rating, up from BBB+. Lodi Electric Utility was rated A- from July 1999 to October 2002 before it received a series of downgrades during the state's energy crisis.
The financial industry grades bonds on a letter scale with A ratings at the top and B and C grades lower. Standard & Poor's and Moody's have also recently given the utility an A rating.
The utility's bond rating fell to BBB- in June of 2006 because agencies noticed the city didn't have policies in place to protect itself from risk, city spokesperson Jeff Hood said.
"For years, the utility was buying large amounts of power on the spot market," Hood said. "It had worked well until the energy crisis came."
When the crisis came, suppliers raised their rates and the utility was forced to purchase power at a higher rate. Hood said the city had one contract with the now-defunct Enron that charged more than 17 cents per kilowatt-hour. Earlier this week, the utility purchased power for roughly 5 cents per kilowatt-hour, Hood said.
The ratings for the utility started improving with former City Manager Blair King making changes, Hood said. He urged the city to "ladder" or purchase power years ahead of time. The City of Lodi has purchased enough power to supply it through the end of 2012, Hood said. The city also has all of its debt on fixed interest rates, instead of adjustable.
With Fitch Ratings' grade, all City of Lodi debt now has an A rating. The city's general fund and water utility are rated AA-, while the city's wastewater utility is rated A+.
A ratings can lead lower borrowing costs or help suppliers feel more secure in entering long-term deals with the city, Hood said. Fitch Ratings is an independent agency that provides ratings and opinions on the world's credit markets.
Contact reporter Jordan Guinn at firstname.lastname@example.org.