8-KOther EventsExhibits & Filings

American Water Works Company, Inc. 8-K Report, Corporate Update (Jun 30, 2023)

Filed June 30, 2023For Securities:AWK

Summary

American Water Works Company, Inc. (AWK) announced two significant regulatory events impacting its subsidiaries. In California, the Public Utilities Commission (CPUC) has authorized a return on equity (ROE) of 8.98% for California-American Water Company (Cal Am) for the 2022-2024 period, with a potential increase to 9.50% for the remainder of 2023 and 2024 through a Water Cost of Capital Mechanism (WCCM). This decision, while not retroactive, provides a framework for future ROE adjustments based on market rates. Additionally, Kentucky-American Water Company has filed a rate adjustment request with the Kentucky Public Service Commission (KPSC) seeking $26.1 million in annualized incremental revenue. This request is based on a proposed ROE of 10.75% and a capital structure with a 52.45% equity component. The outcome of this filing is expected by the end of the first quarter of 2024. These developments are crucial for investors to understand as they directly impact the revenue and profitability of key operating subsidiaries.

Key Highlights

  • 1California Public Utilities Commission (CPUC) authorized California-American Water Company (Cal Am) an ROE of 8.98% for 2022-2024.
  • 2Cal Am may see its ROE increase to 9.50% for the remainder of 2023 and 2024 via a Water Cost of Capital Mechanism (WCCM).
  • 3The CPUC decision is effective from the order date through the end of 2024 and is not retroactive.
  • 4Kentucky-American Water Company filed for a rate adjustment request seeking $26.1 million in annualized incremental revenue.
  • 5The Kentucky rate request includes a proposed ROE of 10.75% and a 52.45% equity component in its capital structure.
  • 6The Kentucky rate adjustment proceeding is expected to conclude by the end of Q1 2024.
  • 7Exhibit 99.1 contains the press release from Kentucky American Water regarding its rate adjustment filing.

Frequently Asked Questions

The CPUC decision for California-American Water Company (Cal Am), a subsidiary of AWK, sets an authorized ROE of 8.98% for 2022-2024. Furthermore, a Water Cost of Capital Mechanism (WCCM) allows for a potential ROE increase to 9.50% for the remainder of 2023 and 2024, which is a positive development for AWK's earnings potential in California.

The rate adjustment request filed by Kentucky-American Water Company is subject to approval by the Kentucky Public Service Commission (KPSC). The proceeding is expected to be completed by the end of the first quarter of 2024, at which point new rates, if approved, would become effective.

Kentucky-American Water Company is seeking aggregate annualized incremental revenue of $26.1 million. This amount excludes an additional $9.8 million related to a qualified infrastructure program.

The WCCM allows Cal Am to adjust its ROE upwards based on prevailing capital market rates for the remainder of 2023 and 2024. Cal Am has already filed to increase its ROE by 52 basis points to 9.50% for 2023, pending a 30-day review and approval process by the CPUC staff.