Stiffer Inflation Test Awaits U.S. Water and Sewer Utilities in 2023

By Dennis Pidherny & Audra Dickinson

U.S. water utilities fared remarkably well during the coronavirus pandemic and appear to be withstanding the effects of inflation on operations and capital spending thus far. This is not to say the sector hasn't struggled.

Operating costs are up across the board following a decline in fiscal 2020, but year-over-year operating revenue growth has largely kept pace. Capital spending has also increased as a percentage of depreciation for retail and wholesale issuers in recent years, likely as a result of greater needs and higher pricing for labor and materials. The five-year average median ratios for retail systems are above 150 percent for the third year in a row, whereas the ratio for wholesale systems totaled 170 percent last year.