Moody's Investors Service assigned on Wednesday its 'Aa3' rating to $1 billion of California Department of Water Resources bonds scheduled for sale next week to help the department replace variable-rate debt.

The rating is Moody's fourth highest for long-term debt and reflects the agency's view the bonds are high quality.

Proceeds from the sale of power supply revenue bonds will be used to refund up to $947 million of outstanding variable rate bonds and portions of outstanding fixed-rate bonds, a plan Moody's applauded.

"Post the current sale, DWR's debt profile will be nearly 100 percent fixed rate, fully amortizing, and maturing in 2022," Moody's said in a statement.

"Given the elimination of some to all variable rate bonds post the current sale, future debt costs will be fully predictable, further decreasing the credit risk profile of DWR," Moody's said.

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