8-KOther EventsExhibits & Filings

American Water Works Company, Inc. 8-K Report, Corporate Update (Oct 29, 2018)

Filed October 29, 2018For Securities:AWK

Summary

This 8-K filing announces a significant development for American Water Works Company, Inc. (AWK), specifically concerning its New Jersey subsidiary, New Jersey-American Water Company (NJAWC). The New Jersey Board of Public Utilities (NJBPU) has approved a stipulation and settlement for NJAWC's general rate case, allowing for an annual increase in water and wastewater revenues of $40 million, effective retroactively from June 15, 2018. This decision is crucial as it impacts the revenue streams and profitability of a key operating segment for AWK. The approved rate increase is based on revised regulatory parameters, including a slightly lower authorized return on equity (9.6% vs. 9.75% previously) but a larger rate base ($2.95 billion vs. $2.39 billion). The settlement also incorporates $35 million in distribution system improvement charges into base rates, reflecting ongoing infrastructure investments. While the settlement brings clarity on revenue, a separate proceeding regarding acquisition adjustments is remanded and expected in early 2019, which could introduce further financial implications. Customers will receive refunds for overcollected provisional rates.

Key Highlights

  • 1New Jersey-American Water Company (NJAWC) secured approval for a $40 million annual increase in water and wastewater revenues.
  • 2The revenue increase is effective retroactively as of June 15, 2018.
  • 3The authorized return on equity (ROE) was set at 9.6%, a slight decrease from the previous 9.75%.
  • 4The authorized rate base for NJAWC has increased significantly to $2.95 billion, up from $2.39 billion.
  • 5The settlement includes $35 million for distribution system improvement charges (DSICs) within base rates.
  • 6A separate proceeding regarding the regulatory treatment of acquisition adjustments has been remanded, with an expected resolution in Q1 2019.
  • 7Customers will receive refunds for provisional rates collected that exceed the final approved increase.

Frequently Asked Questions

The approved settlement allows New Jersey-American Water Company (NJAWC), a subsidiary of American Water Works Company (AWK), to increase its annual water and wastewater revenues by $40 million. This is a significant boost to the revenue generated from its New Jersey operations.

The New Jersey Board of Public Utilities approved an authorized ROE of 9.6% for NJAWC. This is a slight decrease compared to the 9.75% authorized in the previous rate case from 2015.

The authorized rate base has increased substantially to $2.95 billion from $2.39 billion. This indicates that regulatory bodies are allowing NJAWC to earn a return on a larger base of invested capital, reflecting ongoing infrastructure investments and system upgrades.

Yes, customers will receive refunds for any provisional rates collected since June 15, 2018, that exceed the final approved rate increase. This is a standard practice when rates are adjusted retroactively.