Panoche Energy Center LLC (PEC) is a special-purpose, bankruptcy-remote operating company formed to own and operate a 400-megawatt (MW) natural gas peaker plant in California that has a power purchase agreement(PPA) with Pacific Gas&Electric Co. (PG&E). We downgraded the rating on PEC's senior debt to 'BB' from 'BBB-' because we expect that PEC will be fully exposed to the cost of carbon compliance starting in 2018. We estimate the total compliance cost through 2028 to be around $40 million, leading each year to lower debt service coverage that is inconsistent with the prior rating. The outlook is stable. We assigned a recovery rating of '2', indicating our expectation of substantial (70%-90%; rounded estimate 75%) recovery in the event
