Drought affecting Texas water utilities' revenues

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Texas' public water and sewer utilities continue to face challenges presented by the current drought, according Fitch Ratings.

The Texas Drought: This boat is sitting in the middle of what is normally a branch of Lake Travis, part of the Colorado River. Credit: Erik A. Ellison/Wikimedia Commons

"With reservoir levels again dropping this year, we expect water conservation efforts to date to result in reduced usage and, therefore, sales revenue in this year's financial results," said Doug Scott, Fitch managing director. "In addition, meteorological models predict the drought to persist or worsen in many areas of Texas over the coming months. Retailers' ability to offset declining revenues will be key to maintaining financial flexibility."

With most utilities capturing 80 percent or more of revenues from volume charges, one option is to increase base charges, Fitch says.

Since April 2013, Fitch downgraded the city of Fort Worth's water and sewer bonds, the first directly correlated to the drought, and placed two other systems on negative outlook, including water and sewer revenue bonds issued by the city of Garland and the San Patricio Municipal Water District.

While the Texas drought will continue to be an issue for public water utilities, varying supply levels, precipitation and financial cushion will impact individual utilities and their ratings differently.

For more:
- see this report

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