Goodbye 2014: Water Utilities Faced Big Challenges

A new report by financial services firm Fitch Ratings shows that 2014 was a mixed bag for water utilities.

The good news is that utilities started breaking-even more frequently than in the past five years.

"Municipal water utilities broke-even for the first time in five years, with annual income improving enough this year to fully cover bills and maintain existing infrastructure," according to Fitch.

But this has meant cutting back on important infrastructure initiatives.

"While this has been supported by low capital spending, it has also contributed to an increase in the average age of utilities' infrastructure," Fitch reported.

Fitch predicted that capital spending will rise next year.

However, "it will remain far below levels seen during and before the recession. Regionally, the Midwest led other regions in capital spending this year, and therefore saw a drop in the average age of facilities," the company said.

The report notes that the drought is hurting water utilities in the West.

"The Southwest saw slower revenue growth this year due to the drought, which pressured financial results. The Southeast posted the strongest financial results despite grappling with the high cost of water service for consumers," Fitch noted.

Douglas Scott, managing director at Fitch Ratings, explained the challenges this industry faces.

"Aging water infrastructure is an ongoing issue, particularly in the largest cities," he said. "While infrastructure renewal to keep our water utilities up and running properly can be expensive, it's also essential to maintaining existing service levels."

The U.S. received a "D" as a letter grade for its drinking water infrastructure in a report card by the American Society of Civil Engineers.

"There are an estimated 240,000 water main breaks per year in the United States. Assuming every pipe would need to be replaced, the cost over the coming decades could reach more than $1 trillion," the group said, citing the American Water Works Association.

Sewer infrastructure faces major challenges, as well.

"As many as 75,000 yearly sanitary sewer overflows discharge three to ten billion gallons of untreated wastewater, leading to some 5,500 illnesses due to exposures to contaminated recreational waters," according to the EPA.