OREANDA-NEWS. Fitch Ratings has published a dashboard covering operating and maintenance (O&M) expense trends for the U.S. Utilities, Power & Gas sector.

Fitch expects non-fuel O&M growth to remain within the 0%-2% range in the near term as U.S. electric and gas utilities continue their focus on cost control. Although O&M expense increased at a 2.9% compound annual growth rate (CAGR) over the past five years, the pace of increase has gradually decelerated, with O&M rising 1.2% in 2015 and 1.6% in 2014, compared with an average CAGR of nearly 4% over 2011-2013.

In light of persistently sluggish electric sales, utilities have tightened O&M budgets and implemented aggressive cost control to minimize the magnitude of rate increase requests or stay out of rate cases. Fitch believes energy efficiency and distributed generation will continue to suppress electricity sales in the long term, driving further pressure on utilities to generate cost savings. Large utilities, including Duke Energy, Exelon, and FirstEnergy, are targeting flat to modestly lower O&M in the near term and Fitch believes successful execution of a slew of M&A deals should provide additional cost advantages through merger synergies.

O&M trends are largely neutral to utilities' ratings profiles. Our rating assumptions for most utilities already reflect their ability to largely manage O&M cost increases within a 0%-2% growth range. Fitch expects prudent O&M expenses will continue to be recoverable through the regulatory process.