Governor Extends California Water Cuts

California Governor Jerry Brown has issued an order that will likely extend deep cuts in water use beyond the original February end date and well into next fall.

In a new executive order, “the governor said that if the drought continues through January, mandatory water cuts will remain in effect until October. Brown's original order, issued in April, was effective only until February,” the Los Angeles Times reported.

Since the drought is not expected to abate anytime soon, it is nearly certain the extension will become effective. What does it mean for water utilities?

Conservation tends to present challenges to water companies because it reduces revenue. Nevertheless, many utilities have responded to the mandatory cuts in ways that could insulate them from harm as Brown extends the policy.

Analysts at Fitch Ratings weighed in: “Fitch expects water utility ratings to be stable in the short-term due to the actions issuers have taken so far, most notably upward rate adjustments and/or changes to rate structures to raise overall rates. Many of these tactics are in process and are expected to take effect by fiscal 2017.”

Still, some utilities could see negative impacts. “Utilities that fail to act quickly could face downward rating pressure,” the analysts said.

Officials revealed in December that California residents did not meet their most recent water conservation goal.

“Californians posted a 22 percent savings in water use in October, marking the first month residents have missed the state's mandatory 25 percent conservation target since enforcement of the cutbacks began in June,” KCRA reported.

The governor’s new order states:

If drought conditions persist through January 2016, the Water Board shall extend until October 31, 2016, restrictions to achieve a statewide reduction in urban potable water usage. The Water Board shall consider modifying its existing restrictions to address uses of potable and non-potable water, as well as to incorporate insights gained from existing restrictions. The California Public Utilities Commission is requested to take similar action with respect to investor-owned utilities providing water services.

For more stories about Western drought and its ramifications, visit Water Online’s Water Scarcity Solutions Center.