Standard&Poor's Ratings Services has affirmed its 'AA-' underlying rating (SPUR) on Southern California Public Power Authority's hydroelectric power project revenue bonds (Hoover Uprating). The outlook is stable. In our opinion, the rating reflects: The credit strengths of participating cities and the take-or-pay power sales contracts, which unconditionally require the cities to pay operations and debt service on the project from operational expenses; The take-or-pay contracts' unlimited step-up nature, although this obligation is discharged through a budgetary mechanism and not through a direct increase in participants' costs; and The very low-cost power that the project provides the participants. In our view, tempering these strengths is a rate covenant requiring only 1x coverage of debt service charges, including operational expenses
