Water resources provide multiple critical services to the electrical grid through hydropower technologies, from generation to regulation of the electric grid (frequency, capacity reserve). Water resources can also represent vulnerabilities to the electric grid, as hydropower and thermo-electric facilities require water for operations. In the Western U.S., hydropower and thermo-electric plants that rely on fresh surface water represent 67% of the generating capacity. Prior studies have looked at the impact of change in water availability under future climate conditions on expected generating capacity in the Western U.S., but have not evaluated operational risks or changes resulting from climate. In this study, we systematically assess the impact of change in water availability and air temperatures on power operations, i.e. we take into account the different grid services that water resources can provide to the electric grid (generation, regulation) in the system-level context of inter-regional coordination through the electric transmission network. We leverage the Coupled Model Intercomparison Project Phase 5 (CMIP5) hydrology simulations under historical and future climate conditions, and force the large scale river routing- water management model MOSART-WM along with 2010-level sectoral water demands. Changes in monthly hydropower potential generation (including generation and reserves), as well as monthly generation capacity of thermo-electric plants are derived for each power plant in the Western U.S. electric grid. We then utilize the PLEXOS electricity production cost model to optimize power system dispatch and cost decisions for the 2010 infrastructure under 100 years of historical and future (2050 horizon) hydroclimate conditions. We use economic metrics as well as operational metrics such as generation portfolio, emissions, and reserve margins to assess the changes in power system operations between historical and future normal and extreme water availability conditions. We provide insight on how this information can be used to support resource adequacy and grid expansion studies over the Western U.S. in the context of inter-annual variability and climate change.