8-KRegulation FD

American Water Works Company, Inc. 8-K Report, Regulation FD Disclosure (Jan 21, 2015)

Filed January 21, 2015For Securities:AWK

Summary

American Water Works Company, Inc. (AWK) filed an 8-K on January 21, 2015, to report a significant development concerning its California utility subsidiary, California-American Water Company (CAWC). CAWC, along with three other major California water utilities, has reached an agreement with the California Public Utilities Commission (CPUC) to defer its next Cost of Capital filing by one year, to March 31, 2016. This deferral means CAWC's current authorized cost of capital of 8.41% will remain in effect through December 31, 2016. This extension provides a degree of rate stability for CAWC in California for the upcoming year and avoids potential adjustments that could have impacted its earnings. Investors should note that this agreement comes with the condition that these four water companies will forgo any cost of capital adjustments in 2016. This filing is primarily a Regulation FD disclosure, and while it provides insights into regulatory interactions, it does not include detailed financial results.

Key Highlights

  • 1California-American Water Company (CAWC), a subsidiary of AWK, has agreed to extend its Cost of Capital filing with the California Public Utilities Commission (CPUC) by one year.
  • 2The next Cost of Capital application for CAWC is now scheduled for March 31, 2016.
  • 3CAWC's current authorized cost of capital of 8.41% will remain in effect through December 31, 2016.
  • 4This agreement was reached with the CPUC Executive Director and involves three other Class A water companies in California.
  • 5As a condition of the approval, the participating water companies agreed to forgo any cost of capital adjustment in 2016.
  • 6This filing is made under Item 7.01 (Regulation FD Disclosure).

Frequently Asked Questions

The main purpose of this 8-K filing is to disclose a regulatory agreement between American Water Works Company's subsidiary, California-American Water Company (CAWC), and the California Public Utilities Commission (CPUC). Specifically, it announces a one-year extension of CAWC's Cost of Capital filing deadline.

By deferring the Cost of Capital filing and agreeing not to seek adjustments in 2016, CAWC's authorized cost of capital of 8.41% will remain fixed through December 31, 2016. This provides a predictable rate environment for the utility in California for the upcoming year, avoiding potential short-term fluctuations in its authorized return on equity.

No, this 8-K filing is made under Regulation FD (Item 7.01) and serves solely to announce the regulatory agreement. It does not contain any new financial results, performance metrics, or forward-looking financial guidance from American Water Works Company, Inc.

This means that during 2016, CAWC and the other participating water companies will not request or receive any changes to their authorized rate of return on investment, even if market conditions or other factors might typically allow for such adjustments. Their rate of return will be fixed at the current level (8.41% for CAWC) for the entire year.