In its annual U.S. Public Power Peer Study, Fitch Ratings said the public power sector remained financially sound through fiscal year 2008 despite the economic downturn. Utility management navigated through the pressures of slowing electric sales, increased volatility in fuel prices and the frozen capital markets while maintaining healthy but tightened financial margins. Public power utilities continue to look to implement long-term capital expansion programs driven by continued load growth, the need to replace aging infrastructure and increasing environmental compliance goals.

"Public power utilities have consistently demonstrated flexibility in spite of the economic strains of the financial and commodity markets," said Karl Pfeil, managing director at Fitch Ratings. 'The sector remains stable and as public power utilities implement their exit strategies from auction-rate securities and variable-rate demand obligations, we believe they are well-positioned in the short-term to absorb increased interest costs associated with current market conditions.'

In its analysis, Fitch observed that debt-service coverage has been stable for both wholesale and retail systems between 2004 and 2008. Operating leverage, as measured by debt to funds available for debt service (FADS), continued the slow decline in 2008 that it has exhibited over the past five years. Liquidity ratios such as days operating cash on hand and days liquidity on hand have tightened. With limited access to capital markets, many public power issuers funded planned capital expenditures from reserves or short-term debt such as bond anticipation notes.

Fitch's 2009 edition of its annual 'U.S. Public Power Peer Study' is available on the company's web site at www.fitchratings.com.