Tougher green rules coupled with the economic downturn could dim the currently stable outlook of U.S. public power electric utilities, Moody's Investors Service said in a report on Tuesday.

President Barack Obama favors more stringent curbs on pollutants and the new report from Moody's pointed to the costs of any tougher rules amid the still stressed condition of credit markets.

Legislative or regulatory intervention, mismanaged liquidity, and a more severe economic downturn than expected could negatively impact credit quality, said Credit Analyst Dan Aschenbach, who wrote the report on public utilities.

(Reporting by Joan Gralla; Editing by Theodore d'Afflisio)