LOS ANGELES — California Gov. Jerry Brown's extension of water conservation mandates will have minimal impact in the short term, but could present mid-to-long term risks for water utilities, Fitch Ratings said in a report Wednesday.
"Utilities that fail to act quickly could face downward rating pressure," Fitch analysts said.
The governor's executive order issued Friday will extend the 25% conservation mandate enacted in May from its original expiration in February to Oct. 31, 2016 if drought conditions persist.
The restrictions are likely to remain in place through the next fall since the drought isn't expected to end despite rainfall anticipated from the El Nino Pacific weather pattern, according to Fitch.
Ratings should remain stable in the short-term, Fitch said because of rate adjustments already proposed, though most don't take effect until fiscal 2017.
Lower water consumption could continue even after the drought ends.
"Utilities with effective outreach programs to educate users about the need to increase rates, and which have more closely aligned fixed costs with fixed charges will likely garner more public support," Fitch said. "However, increasing rates combined with decreasing water consumption could test rate flexibility."
