A report released in August by the bond rating agency Standard and Poor’s said the U.S. drought’s credit impact on most municipally owned water utilities has been limited so far. Dry As A Bone: The Drought Spurs Municipally-Owned Utilities To Rethink Their Long-Term Plans And Funding found that nearly every state has plans to deal with drought and that planning truly has been “indispensable.” The drought, which has afflicted more than half the land mass in 48 states, placed fresh emphasis on the sector’s needs and long-term challenges, the S&P analysts said.
Noting that water systems in different cities and regions respond differently to water supply issues caused by drought, the report cited the case of AMWA-member San Antonio Water System, saying it “has had for decades conservation-oriented rates and constant public education about the need for conservation. It successfully reduced demand on the Edwards Aquifer, and still maintained good debt service coverage and strong liquidity even throughout the 2011 drought.”
The S&P analysts said they expect to see some utilities’ revenues fall short of targets in cases of extreme water restrictions, but added: “Generally, a one-time revenue anomaly attributed to weather is not a cause for a rating change, all other things being equal.”
The report also looked at common characteristics of various state’s water and/or drought management plans, long-term challenges (particularly water supply, treatment capacity expansions and distribution system rehabilitation), and funding options to address the challenges.