8-KOther EventsExhibits & Filings

American Water Works Company, Inc. 8-K Report, Corporate Update (Oct 28, 2020)

Filed October 28, 2020For Securities:AWK

Summary

American Water Works Company, Inc. (AWK), through its subsidiary New Jersey-American Water Company, Inc. (NJAWC), has received approval from the New Jersey Board of Public Utilities (NJBPU) for a general rate case settlement and a settlement related to the Tax Cuts and Jobs Act (TCJA). The general rate case settlement will result in an annual increase of $39 million in water and wastewater revenues, effective November 1, 2020. This increase is based on an updated authorized rate base of $3.57 billion, reflecting investments in the company's infrastructure and operations in New Jersey. The TCJA settlement addresses the impact of the corporate tax rate reduction on NJAWC's deferred income taxes. A significant portion of these deferred taxes, amounting to $132.6 million, will be returned to customers over 15 years, while another $187.9 million will be returned according to the average rate assumption method. Additionally, $52.9 million will be returned through base rates and $32.5 million via customer bill credits over ten months, beginning November 1, 2020. These settlements provide clarity on revenue streams and the treatment of tax-related adjustments for NJAWC.

Key Highlights

  • 1NJAWC received NJBPU approval for a general rate case settlement, leading to a $39 million annual revenue increase effective November 1, 2020.
  • 2The authorized rate base for NJAWC has increased to $3.57 billion, up from $2.95 billion in the previous rate case.
  • 3The authorized return on equity (ROE) remains at 9.6%.
  • 4A separate TCJA settlement resolves the accounting and rate treatment of excess accumulated deferred income taxes (EADIT).
  • 5Approximately $132.6 million of unprotected EADIT will be amortized and returned to customers over 15 years.
  • 6$32.5 million in customer bill credits will be issued over a ten-month period starting November 1, 2020.
  • 7The settlement provides regulatory certainty for NJAWC's operations in New Jersey.

Frequently Asked Questions

The general rate case settlement approved by the NJBPU allows New Jersey-American Water Company, Inc. (NJAWC), a subsidiary of AWK, to implement an annual increase of $39 million in water and wastewater revenues, effective November 1, 2020. This increase reflects investments in the company's infrastructure and services.

The TCJA settlement will result in the return of $132.6 million of unprotected excess accumulated deferred income taxes (EADIT) to customers over 15 years. Additionally, $52.9 million will be returned through base rates and $32.5 million via customer bill credits over ten months starting November 1, 2020. This addresses the impact of the federal corporate income tax rate reduction.

The NJBPU has approved an authorized rate base of $3.57 billion for NJAWC, an increase from the previous $2.95 billion. The authorized return on equity (ROE) remains at 9.6%.

The $39 million annual revenue increase from the general rate case settlement is effective November 1, 2020. The customer bill credits totaling $32.5 million will begin on November 1, 2020, and will be distributed over a ten-month period.