LOS ANGELES — California's successful water conservation efforts are a credit positive for the state's water utilities, outweighing concerns about reduced revenues, Moody's Investors Service said.
Californians surpassed Gov. Jerry Brown's 25% conservation mandate for two months in a row hitting a 31.3% decline in water use for July despite the season's typically warm and dry conditions, which usually result in increased water use for irrigation, according to the Aug. 29 report from the state's Water Resources Control Board.
The conservation efforts are positive because they slow reduction of the state's water supplies amid a four-year drought, said analyst Michael Wertz in his Sept. 3 report.
"The positive factors outweigh the negative credit effect of lower sales revenues for water utilities resulting from conservation, because the sector as a whole entered the fiscal year in strong financial shape," he wrote.
The state's reservoirs are filled to only 41.5% of their historical average. The combination of the depleted reservoirs and lack of snowpack in the Sierra Nevada mountains prompted Brown to set the mandates in April.
"The conservation results are also a credit positive, because they will forestall the state from considering, additional, more severe restrictions," Wertz said.
More stringent reductions would have applied greater pressure on water agencies, further reducing revenues and increasing their exposure to the potential for non-compliance fines, he said. Instead, the state remains on track to achieve the goal of saving 1.2 million acre-feet of water by February.
During the first two years of the drought, Wertz said revenues for the water enterprises increased and they were able to maintain debt reserves at two times required coverage levels. The water utilities are also expected to raise rates to counteract conservation efforts, he said.
