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Federal Drinking Water Act Seen Favorable to IOUs

Fortnightly Magazine - November 15 1996

According to Standard & Poor's (S&P), the recently reauthorized federal Safe Drinking Water Act should have a favorable, long-term credit impact on investor-owned water utilities.

The new act requires the Environmental Protection Agency to give states the flexibility to modify testing and monitoring requirements based on a local water system's actual health-risk exposure. The act will also form a state revolving fund program, which will assist small water systems in complying with regulations and in conducting other drinking water projects. But according to S&P, the modest $7.6-billion, eight-year fund will not be not enough to help small, private, and municipal water systems finance the total cost of complying with water-quality standards and upgrading deteriorating water infrastructure.

S&P believes that given the limited financial and technical resources typically found in small, private, and municipal water systems, investor-owned water utilities are uniquely positioned to help the systems meet existing and future compliance, and will benefit by leveraging assets to assist small water utilities.

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