Fitch Ratings says 2023 will bring a series of challenges that U.S. water and sewer utilities have not experienced in over a decade, according to Fitch Ratings’ 2023 outlook for the sector.
Fitch Ratings’ 2023 sector outlook for U.S. water and sewer utilities is ‘Deteriorating’ and largely driven by rising inflation and a slowing U.S. economy, with Fitch economists calling for a mild recession around mid-2023. Next year will likely mark a second straight year of cost and capital pressures for water and sewer utilities, according to Senior Director and U.S. Water and Sewer Sector Head Audra Dickinson.
“General inflationary pressures, notably higher chemical, labor and power costs, and weaker economic growth are likely to weaken financial performance for water and sewer utilities,” said Dickinson. “Though next year’s operating budgets are already reflecting higher costs, financial performance could further erode if utilities are unable to generate revenue to counter rising costs.”
Helping to offset budgetary pressures to some extent for water and sewer utilities are their strong cash balances and ability to institute cost-saving measures.
Related – Stiffer Inflation Test Awaits U.S. Water & Wastewater Utilities in 2023
Other factors to watch in 2023 are the prospects for increased cyberattacks. According to Dickinson, “Cyberattacks that halt service or requires ransomware payments could negatively affect utility financial performance and could result in widespread public and private sector shutdowns.”
Additionally, “Increasingly worsening extreme weather events will continue to be a threat to the sector as utilities work to expand and improve resiliency of water supply and contend with unforeseen expenses that can arise in the aftermath of severe weather events.”
Fitch’s “U.S. Water and Sewer Outlook 2023” report is available at fitchratings.com.
