Local water bills might not be going up quite as sharply next year as expected.

The County Water Authority’s board tentatively shrank a proposed rate hike for wholesale water from 18 percent to 14 percent on Thursday — despite concerns the move could hurt the water authority’s credit rating.

An increase in wholesale rates will force nearly every local water agency to pass on the extra costs to its customers, but just how much gets passed on could vary widely.

Some agencies buy less wholesale water than others, especially those with groundwater basin storage or other local water supplies.

The board delayed a final vote on the proposed 2025 increase to its July 25 meeting, but a coalition led by the city of San Diego had enough support Thursday to reduce the increase to 14 percent.

It would be part of a three-year set of rate hikes that would cumulatively raise rates by more than 40 percent when compounded — if the board also follows through on a 16.4 percent increase in 2026 and a 5.7 percent increase in 2027.

While the 14 percent hike wasn’t finalized Thursday, a resolution approved by the board used the language “up to 14 percent” for the 2025 rate hike and said the number could be lowered if finances improve this fall.

The move to shrink the increases comes two weeks after concerns about the water authority’s finances prompted S&P Global to shift its outlook for the authority from stable to negative.

Because of conservation and other factors, water sales — the authority’s main source of revenue — are down in both the short and long term and don’t appear poised to substantially bounce back.

Water authority officials say the fundamental problem is that they borrowed money to build and maintain a significantly larger water storage and delivery system than they now need.

Other problems include high costs for desalination at a Carlsbad plant the authority operates and the recent departure from the authority of water agencies serving Fallbrook and Rainbow, which opted to get water from nearby Riverside County instead.

In addition, the Metropolitan Water District of Southern California has approved rate hikes of 8.5 percent each for 2025 and 2026 that get passed on to the authority.

In the report earlier this month where it indicated it might downgrade the authority’s rating, S&P pointed to the proposed 18 percent increases as a positive sign the authority was on the right track.

“We believe management is taking important steps to mitigate this changing cost profile, including consideration of a proposed rate adjustment of 18 percent in 2025,” the report said.

Critics of the move to shrink the increases to 14 percent said it would jeopardize the authority’s credit rating even more.

A lower credit rating would cost the authority nearly $4 million a year by raising borrowing costs on its roughly $2 billion in debt.

The leader of the board’s city of San Diego coalition said after Thursday’s meeting that the possibility of a credit downgrade is a legitimate concern. But he also said the authority must find ways to solve its financial problems other than giant rate hikes.

“We’re not going to be taking increases of 18 percent or 19 percent to ratepayers,” said Nick Serrano, an aide to Mayor Todd Gloria and the board’s vice chair.

Serrano said finding new buyers for the authority’s water, cutting expenses and other efforts should be aggressively pursued, criticizing the authority for relying too much on rate hikes as a solution.

He said the city coalition agreed to the one-month delay in finalizing the rate hike because some members of the board asked for more time to think it through or let the authority explore other options.

“Our position will remain unchanged,” he said of the July vote. “We’re going to continue to push for this 14 percent.”

San Diego controls 10 of the board’s 36 seats.

San Diego Councilmember Stephen Whitburn, another board member, said the larger hikes would be unacceptable when so many San Diegans are coping with inflation, high rent and other rising expenses.

He said it is particularly frustrating that water conservation by local residents is cited as the primary reason for the proposed hikes.

“The solution can’t be to punish San Diegans who save water by charging more,” he said. “That is completely unfair to them.”

San Diego would suffer more than most water agencies from a large rate hike because it buys about 90 percent of its water from the authority.

Supporters of cutting the proposed rate increase to 14 percent noted that water authority staff had already announced a plan to reduce the hike from 18 percent to 15.4 percent last week when they got a $19.4 million federal grant.

The grant from the U.S. Department of the Interior is for an intake pipe at the Carlsbad desalination plant.

But authority staff said shrinking the 15.4 percent increase further to 14 percent would jeopardize the agency’s cash flow and notably worsen its position with credit rating agencies.

“S&P is just the beginning,” said Lisa Marie Harris, the authority’s finance director. “The other two will start taking a much harder look because we are already at the bare minimum of all the criteria.”

She was referring to Moody’s and Fitch’s, the other two leading rating agencies. The authority has a triple-A rating with S&P and double-A ratings with Moody’s and Fitch.

Some board members said a 15.4 percent hike next year makes more sense than 14 percent.

“I think this type of decision will have repercussions,” said Eric Heidemann, who represents Poway.

Serrano said the report from S&P also mentioned affordability for customers should be a factor in rate hikes.

“Maintaining robust projected all-in coverage and liquidity levels will be a delicate balance of imposing sufficient rate increases while not burdening affordability,” the report said.

Some local residents spoke against large rate hikes Thursday.

“It is not the responsibility of ratepayers to fix this substantial business practice failure,” said Suzanne Till of Santee.

“The proposed rate hikes will be very harmful to those of us that live out here in the East County,” said Kim Dudzik Hales of Alpine, noting that many residents in her area have livestock that need water.