Fitch Ratings said in a report this week that the credit quality of California’s water agencies is expected to remain strong amid challenges.

The rating agency said the strength of the state’s water utilities will be supported by higher rates and reserves despite falling demand for water, a weak economy, and regulatory and environmental issues.

Fitch said most bond issuers managed their financial problems over the last two years by raising rates.

“Revenue raising flexibility, and the willingness to use it, continues to be the most important credit strength,” the report said. “Water utilities will need to continue to adapt to low consumption patterns as California advances towards its 2020 goal of a 20% decrease in water consumption.”

Fitch analysts said overall water consumption has decreased between 20% and 30% since 2008.

The report said state regulations and environmental initiatives, as well as the difficulty of moving water over long distances, add to already high costs.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.