Connecticut Light&Power Co.

The negative outlook on CL&P reflects our view of weaker management of regulatory risk and reduced financial cushion from the downgrade threshold. We expect the company's stand-alone FFO to debt to be 16%-19% over the next two years. We could downgrade CL&P over the next 24 months if: The company's management of regulatory risk deteriorates further; or Its stand-alone FFO to debt consistently falls to below 16%. We could affirm our ratings on CL&P and revise the outlook to stable over the next 24 months if: The company maintains FFO to debt consistently above 16%; and Its ability to effectively manage regulatory risk does not weaken. Continued use of existing regulatory mechanisms in Connecticut for distribution rates, such as periodic

...The company benefits from numerous regulatory mechanisms under the Connecticut and Federal Energy Regulatory Commission (FERC) regulatory environments. However, given that a large proportion of operations are within Connecticut, the company is somewhat dependent on Connecticut regulators to sustain its credit quality. The regulatory framework in which a regulated utility operates and its ability to effectively manage regulatory risk are key components to our analysis. Over the past year, several incidents in our view weakened CL&P's management of regulatory risk. In July 2020, CL&P was ordered to reverse a previously approved and implemented rate increase, pending an investigation into its rate-setting mechanisms. In addition, since late 2020 the company was investigated for its restoration efforts following Tropical Storm Isaias in August 2020. As a result, PURA plans to lower CL&P's authorized ROE by 90 basis points. The commission also left open the possibility for storm cost disallowances...

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