S&P; Raises State Water Department’s Rating

The California Department of Water Resources, which in 2002 raised funds to buy electricity for the state with the largest-ever municipal bond sale, had the rating on $11 billion of the debt raised by Standard & Poor’s on Monday.

The rating was raised one level to A-minus, S&P; said in a statement. The credit rating company made the change partly because of the department’s plan to seek a 19% increase in its rates next year, which would boost its revenue by $738 million and offset hikes in natural gas costs.

“The rate increase is important to credit quality because it represents the first time that [the department] has raised rates in order to recover higher natural gas costs from customers,” Standard & Poor’s said.

It is the first time that the rating company has raised its assessment of the bonds since they were sold to finance the state’s purchases of electricity because of the shortages and soaring prices that gripped the state. The rating change was made in advance of the department’s planned sale of $2.59 billion in bonds, the proceeds of which will be used to refinance a portion of its debt.