U.S. water and sewer utilities are facing increased pressure to the bottom line from rising costs and lower sales, according to Fitch Ratings' 2016 outlook report. Despite the challenge, Fitch's Ratings and Sector Outlooks for municipal water and sewer utilities are stable. The sector's strong fundamentals, supported by the essential services it provides, monopolistic business nature and local rate-setting ability, insulate it from potentially challenging operating environments or economic cycles.
Water supply variability will continue to be an issue to watch in 2016, particularly for utilities in far western states like California, which are still contending with a 25% state-wide mandatory conservation requirement. As a result, development of alternative water sources will continue to garner attention and action.
"Drinking water projects like saltwater desalination and recycled water that would have been inconceivable a decade or so ago are starting to become a reality as traditional sources have come under severe pressure," says Doug Scott, Managing Director.