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SJW Group (SJW) Unit Files for Rate Hike to Recoup $265M Spending

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SJW Group (SJW - Free Report) announced that its unit, Connecticut Water Company has filed an appeal to the Connecticut Public Utilities Regulatory Authority to revise customer rates. The company has invested nearly $265 million since 2010 to improve its water infrastructure and provide reliable potable water services to customers.

This rate hike will allow the company to recoup the amount invested and carry on with future infrastructure spending. If the rate is approved by the commission without any changes, it will increase the monthly residential bill of a customer using 3,780 gallons of water per month by 35 cents per day or $10.50 per month. This rate hike will increase Connecticut Water Company’s annual revenues by $20.2 million.

Rate Hikes Aid in Recouping Investment

The U.S. water and wastewater infrastructure is aging and nearing the end of effective life. As a consequence, thousands of pipeline breaks are being registered in the United States, in turn resulting in the loss of millions of gallons of potable water. The pipeline breaks also increase the possibility of potable water contamination.

Per the Water and Wastewater Equipment Manufacturers Association, an estimated $750 billion investment is necessary to maintain and expand the drinking water and wastewater service to meet demand over the next 20 years. So, it is quite essential to make regular investment to upgrade the aging water infrastructure and recoup the expenses from rate hikes.

American Water Works (AWK - Free Report) continues to make investments in its infrastructure to upgrade, enhance and maintain the same. The company has plans to invest $8.8-$9.4 billion in the 2020-2024 time period and $20-$22 billion in the next decade. In addition to American Water, California Water Service Group (CWT - Free Report) has plans to invest $839 million in its water infrastructure in the 2019-2021 time period. Essential Utilities (WTRG - Free Report) is also making regular investments to upgrade the existing water and wastewater systems. Its long-term plan is to invest $2.8 billion in the 2020-2022 time period to rehabilitate, and strengthen water as well as natural gas pipeline systems.

From time to time, all the above water utilities file for rate hikes to the commissions in their service territories to recoup investments and generate essential funds to continue with their future planned renewal or expansion projects.

Price Performance

Shares of have SJW Group have underperformed the industry in the past six months.



Zacks Rank

SJW Group currently has a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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