Moody's Investors Service said it upgraded the California Department of Water Resources (CA DWR) power supply revenue bond rating to Aa2 from Aa3, impacting approximately $6.6 billion of outstanding debt.
The rating outlook is stable.
The upgrade to Aa2 from Aa3 reflects the improved risk profile of the CA DWR power supply revenue bonds in light of substantially reduced operations coupled with a long history of California Public Utility Commission (CPUC) support of full and timely cost recovery in compliance with the rate agreement that requires the CPUC to annually calculate, revise and impose bond and power charges to ensure adequate funds are available to pay all operating and debt service costs.
The Aa2 rating reflects the strong history of proven cost recovery and reserve replenishment procedures, including an annual true up mechanism; irrevocable bond security protections offered by the state legislation and the bond indenture; the healthy liquidity levels supported by the rate agreement between DWR and CPUC, which provides for timely reserve replenishment if any draws or deficiencies are identified; a large, diverse customer base; and limited remaining operating risk. CA DWR (Power) has operating reserves sized to meet the forecasted contract costs until the last two contracts either expire or are novated to an investor owned utility.
