Our outlook for North American Utility companies (Utilities) in 2026 is neutral.

Key highlights include the following:

-- We expect major utilities in the U.S. and Canada to continue to invest heavily in increasing reliable grid capacity to cater to the surge in electricity demand from artificial intelligence, data centers, industrialization, as well as broader electrification trends.
-- This could pressure credit metrics and leverage ratios could be elevated in the near to medium term for some of the issuers in our rated universe.
-- We expect rate base growth, favorable regulatory framework, stable and predictable cash flows, and demonstrated access to debt markets to continue to underpin the credit ratings in the utilities sector.

"This shift from North American utilities' traditional defensive role to a growth-oriented approach will need access to nontraditional sources of capital, a favorable regulatory regime, and a thorough and efficient multipronged approach to load growth and demand management." said Vikas Munjal, Vice President of Energy and Natural Resources Ratings at Morningstar DBRS. "We generally expect utilities in our rated universe to fund their capex needs in a prudent manner and leverage ratios to improve once assets are placed in service."

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