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American Water Works Company, Inc.’s (AWK - Snapshot Report) subsidiary West Virginia American Water has received an approval from the Public Service Commission of West Virginia (PSC) to increase the monthly water and sewer bills of the residential customers. The revised rate will be applicable from Oct 11, 2013.

Currently, the residential customers, consuming 3,315 gallons of water per month, pay a monthly bill of $39.11. As per the commission’s approval, the new rate will be $41.88, up 7.1% from the previous rate. The average monthly residential sewer bill will increase by 14.4% from the previous rate to $40.92 for the Fayetteville residents.

Per the agreement, West Virginia American Water will not be allowed another base rate increase for water or wastewater prior to Jan 1, 2015. The base rate hike will boost the company’s water and wastewater revenues by $8.4 million and $0.1 million, respectively.

The main objective of the current rate hike is to recover the funds that West Virginia American invested since 2009 for the improvement of the water distribution systems and water treatment facilities, while upgrading its pumping stations, storage tanks and computer systems.

Initially West Virginia American Water has filed for a rate hike request to the commission on Dec 14, 2012. The company has requested to increase the water bill of the residential customers, using 3,315 gallons of water per month, by $8.13.

Upgrading of the existing infrastructure and addition of new assets will help American Water to strengthen its system capacity and provide nonstop water supply to its customers. These factors will subsequently improve reliability, consumer confidence and public safety. We believe that the rate hike approval will further encourage American Water to invest substantially for upgrading the infrastructure.

American Water currently has a Zacks Rank # 3 (Hold). However, other water utilities that are worth considering include Connecticut Water Service Inc. (CTWS - Snapshot Report) with a Zacks Rank #1 (Strong Buy), and Consolidated Water Co. Ltd. (CWCO - Snapshot Report) and SJW Corp. (SJW - Snapshot Report), each with a Zacks Rank #2 (Buy).

Voorhees, N.J.-based American Water was founded in 1886. The company serves around 14 million people with water and water-related services.

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