Breaking News: American Water Works Company Settles New Jersey Rate Case Resulting in $79.5 Million Annual Revenue Increase
American Water Works Company, Inc. (NYSE: AWK) has finalized a settlement in a New Jersey rate case, leading to a substantial $79.5 million boost in water and wastewater revenues annually. The agreement, disclosed on Tuesday, was reached with the New Jersey Board of Public Utilities and the New Jersey Division of Rate Counsel.
The settlement, dated August 12, 2024, follows a request for a rate increase filed by New Jersey American Water, a subsidiary of American Water Works, on January 19, 2024, seeking an additional $161.7 million in yearly revenues.
The compromise allows for a lower increase than originally sought, with a return on equity of 9.6% and an authorized rate base of $5.05 billion. The agreement also includes an equity ratio of 55% and a debt ratio of 45%, with slight adjustments from previous ratios. Moreover, New Jersey American Water will defer pension expenses and other post-employment benefits as a regulatory asset or liability until the next rate case.
An Initial Decision by the Administrative Law Judge, issued on August 15, has adopted the settlement without modifications. The final approval of the settlement is expected at the New Jersey Board of Public Utilities public meeting on September 4, 2024, with the new rates set to take effect from September 15, 2024.
In recent financial updates, American Water Works Company showcased a strong performance in the second quarter and first half of 2024, despite a slight dip in quarterly earnings per share (EPS) compared to the same period in 2023. The company has raised its EPS guidance for 2024 to $5.25-$5.30, signaling a positive financial outlook. Investments in capital projects have reached $1.4 billion year-to-date, with 43,000 new customers added through acquisitions and organic growth.
While facing legal challenges in Pennsylvania that could impact acquisition benefits, American Water has secured $266 million in annualized new revenues and rates, with total annualized revenue requests pending at $546 million. The company maintains its long-term targets, including a 7%-9% earnings and dividend growth over the next five years.
In conclusion, American Water Works Company's settlement in the New Jersey rate case signifies a significant revenue increase, coupled with a positive financial outlook for the company. The approval of the settlement and the subsequent rate adjustments can impact the company's earnings, dividends, and overall financial performance in the future. Stay tuned for further updates on this developing story.
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