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WaPo's McCartney: D.C.'s Bond Rating and Pepco's Performance During Irene

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Washington Post columnist Robert McCartney gives an analysis of some of this week's top news including a possible downgrade in the District's bond rating and Pepco's performance during Hurricane Irene.

The District's bond rating is at risk of a downgrade

According to McCartney, there are many indications that the Wall Street credit agencies will take some formal action this fall or winter that would have the effect of lowering the District's overall credit rating on more than a third of the city's bonds.

He says they'll likely put the bonds on what they call negative outlook, which means they think an actual downgrade will happen.

"This is happening mainly because the city's fund balance, which is a kind of cash reserve, dropped so much," he says. "The politicians have been draining it for a number of a years to help balance their budget. It's down from $1.6 billion six years ago, to less than half of that, around $750 million now. The city was formally warned in early 2010 not to let it drop that far, but it has dropped."

He says another important factor is the prospect of federal spending cuts. The District government, as well as the rest of the Washington region, is particularly vulnerable to federal spending cuts.

McCartney says he thinks it think it's possible for the District to stave this off, but it would be difficult.

"They would have to raise taxes or make some painful cuts in spending in order to keep Wall Street happy, and avoid this. They've already made cuts on spending. And I think the appetite in doing that has pretty much worn out. The city has a built in excuse right now for any downgrade, and that's the federal government's budget problem. The federal government just got downgraded, so if the nation got downgraded, it doesn't look so bad."

Pepco had better performance than usual during Hurricane Irene

"No body is happier from the storm than Pepco," says McCartney. "They were really in the spotlight because they've had such bad performance in previous storms, but they considerably fewer outages than the other two companies."

McCartney says Pepco was lucky because the storm was not as heavy in the geographical footprint that it occupies.

Pepco's service area is mostly in the District and in the western Maryland suburbs, and the storm was to the east. So Pepco didn't experience as strong of winds as the other electric companies did.

"Despite that, we have to give Pepco credit for their effort," says McCartney. "They brought in extra workers from out of state ahead of time, some from as far away as Ohio. They were also really proactive about communicating with customers."

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