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KBRA Affirms AA Rating, Stable Outlook for the Department of Water and Power of the City of Los Angeles Water System Revenue Bonds

6 May 2026   |   New York

Contacts

KBRA affirms the long-term rating of AA with a Stable Outlook for the Department of Water and Power of the City of Los Angeles (LADWP) Water System Revenue Bonds.

Key Credit Considerations

The rating was affirmed because of the following key credit considerations:

Credit Positives

  • Established water system serving one of the nation’s largest metropolitan areas, with a generally wealthy, primarily residential customer base.
  • Rate structure incorporates several pass-through adjustments that effectively decouple revenue generation from changes in customer demand.
  • Although Water System liquidity has declined in recent years, it remains sound and provides an important cushion against enterprise risks.

Credit Challenges

  • Strict liability standards imposed by California's inverse condemnation law subject the Department to contingent liability risks relating to the 2025 wildfire and future wildfires.
  • Legal challenges relating to Proposition 218 may constrain the implementation of future water rate increases, although the Department expects to continue to establish water rates sufficient to meet the rate covenant of the Master Resolution and Board adopted financial policy criteria (1.7x DSC).
  • A large share of the $7.7 billion Water System Capital Plan includes federal and state-mandated water-quality compliance projects with hard, legally enforceable deadlines and little scheduling discretion.

Rating Sensitivities

For Upgrade

  • Favorable resolution of current and any future inverse condemnation claims or the Department’s ability to address such claims without significant negative impacts to leverage, liquidity and rate affordability.
  • Sustained reduction in Water System leverage and maintenance of solid DSC throughout the Capital Plan period.

For Downgrade

  • Potential adverse litigation outcomes relating to the 2025 wildfire or to future wildfires which pressure the Department’s ability to meet the related liability exposure.
  • Inadequate or delayed rate recovery that causes a sustained decline in DSC below existing Board established metrics and historical averages.

To access ratings and relevant documents, click here.

Methodology

Disclosures

A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.

Information on the meaning of each rating category can be located here.

Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

About KBRA

Kroll Bond Rating Agency, LLC (KBRA), one of the major credit rating agencies (CRA), is a full-service CRA registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority. In addition, KBRA is designated as a Designated Rating Organization (DRO) by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized as a Qualified Rating Agency by Taiwan’s Financial Supervisory Commission and is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider (CRP) in the U.S.

Doc ID: 1014821