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Water Bills To Rise As Supply Shrinks

Water Bills Rising

First Posted: 04/19/2012 8:56 pm Updated: 04/20/2012 9:14 am


* Water utilities' $330 billion in debt likely to rise

* Water shortages to become more common, even in the East

By Tiziana Barghini

LAS VEGAS, April 19 (Reuters) - The Bellagio fountains, one of the most iconic of the Las Vegas water-based attractions, is said to contain 22 million gallons of water. It may look like a waste for a city in the middle of the Mojave desert, but for the moment there is no shortage of water in Nevada.

However, the abundance of water, in Las Vegas as elsewhere in the United States, is unlikely to last, according to a panel of experts at a forum of National Federation of Municipal Analysts held in the city, famous for its casinos.

Water rates will be slowly but constantly creeping up, and water utilities across the nation are likely to issue more debt to renew and expand their pipelines, analysts agreed.

The Southern Nevada Water Authority, which plans to issue a $360 million bond in July to upgrade old facilities and build new ones, is a good example.

"We already raised tariffs twice, $2 each year in 2010 and 2011 for residential customers," said William Fox, chief financial officer at the Las Vegas Valley Water District, adding that he does not anticipate further rate hikes until 2014.

Other utilities, which might have not yet done so, will have to follow suit.

"With federal and state assistance limited we believe utility managers will likely ask more of their customers, especially in the form of rate adjustments," a recent special report on water scarcity by Standard and Poor's predicted.

In general, well-managed water utilities are expected to tap funds in the coming months. S&P rates 1,270 revenue bonds in the sector and says its sector common rating is A+ with a generally stable outlook.

According to an analyst with MMD, a unit of Thomson Reuters, water utilities have outstanding debt of around $330 billion, nearly 10 percent of the $3.7 trillion municipal bond market. Issues in the sector have been around $11 billion in the first quarter of 2012.

"Despite all the bond issuances of the past two years, we believe the sector still has infrastucture needs to fund in 2012 and beyond," the S&P report said.

No immediate pressure is seen as managers have shown great ability to control their rates, but long-term worries are starting to emerge, said Geoffrey Buswik, an analyst with S&P attending the forum on Wednesday.

Water shortages could become worse in the coming years.

"The U.S. is not immune to water shortages, and not just in the arid West," said Betsy Otto, director of Aqueduct, a project studying water issues.

"Parts of the Southeast and even New England have been concerned about meeting water demand during dry periods."

"This will only continue as populations and local economies put more strain on existing supplies, and as climate change brings more extreme weather patterns with the potential for more severe droughts," Otto said.

With public tap-water prices ranging from a low of $3.73 per 1,000 gallons in Chicago to a high of $23.42 in Atlanta, the cost of tap water has often been subsidized, another water expert said.

"We priced water at a highly subsidized level, because it was what people wanted and because it was necessary to settle the West in the first instance," said Grady Gammage of the Morrison Institute for Public Policy. "We still continue to price water at highly subsidized levels".

As much of this water goes to landscaping, its cost and scarcity are likely to soon become a political issue, Gammage predicted.

(Reporting By Tiziana Barghini; editing by Todd Eastham)

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