DALLAS - The three states that rely on the Colorado River for their water supplies will not face federal rationing in 2016, a fact that is credit positive for bond issuers in the region, according to Moody's Investors Service.
Given projected conditions, the lower basin states of California, Arizona and Nevada will receive their full allocation of Colorado River water in 2016 as determined by the various laws and agreements that govern the management of the river, the U.S. Bureau of Reclamation has confirmed.
"This is a credit positive for municipal water enterprises in these states, which are suffering from extreme drought conditions," Moody's analyst William Oh said.
Under normal conditions, the lower basin states receive at least 7.5 million acre-feet of water from the Colorado River. In 2016, the lower basin states will receive 8.23 million acre-feet of water, based on projected water elevations at Lake Powell and Lake Mead, with an additional 770,000 acre-feet possibly to be released in April.
A shortage allocation would take effect if the USBR projects the water elevation of Lake Mead to fall below 1,075 feet as of Jan. 1. The lake impounded by Hoover Dam is currently projected to be at 1,084 feet on that date.
So far in the lake's history, shortage conditions have never been implemented, though persistent drought conditions over the past 15 years have significantly reduced reservoir levels, Oh noted.
"Water managers throughout the West and particularly in Arizona, Nevada and California have long recognized the challenge of securing water supplies in dry regions," Oh wrote. "This is reflected in state and local capital actions that have increased stored water levels, improved infrastructure, and strengthened policies to manage consumption. These approaches have enabled these states to be well-positioned from a resource standpoint to manage the most probable water shortage conditions."