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American Water Works' (AWK) Kentucky Arm Files Rate Hike

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American Water Works Co., Inc.’s (AWK - Free Report) subsidiary, Kentucky American Water, recently filed a rate adjustment request with the Kentucky Public Service Commission in order to reflect $330 million in water system investments since its previous rate case order, which was issued in 2019. The new rates are approved and would take effect in 2024.

This rate approval will increase water service revenues by $26 million, net of Qualified Infrastructure Program revenues. The program will help the company to quickly repair the deteriorating water supply infrastructure.

Impact on Customers

The monthly bill for a typical residential customer using 3,800 gallons would increase by nearly $9.00 per month.

In order to control customer bills, Kentucky American Water provides budget billing, payment plans and the Help to Others (H2O) customer support program. The H2O program is for residential water and wastewater customers who find it difficult to meet their utility bills.

Utilities Benefiting from Rate Increase

American Water has been benefiting from rate increases. The new rates, effective Jan 1, 2023, will add $339 million to annual revenues. The pending rate case, if approved, will further increase the top line by $130 million.

Apart from AWK, other utilities benefiting from rate hikes are: Essential Utilities Inc. (WTRG - Free Report) , York Water Co. (YORW - Free Report) and SJW Group (SJW - Free Report) .

Essential Utilities’ regulated water segment has pending water rates, which on completion, are expected to increase annual revenues by $44.7 million. The pending natural gas rate cases will increase annualized revenues by $1.5 million when completed.

WTRG’s long-term (three to five year) earnings growth rate is pegged at 5.6%. The Zacks Consensus Estimate for 2023 earnings per share (EPS) indicates an increase of 5.1%.

The York Water Co.’s rate approval effective Jan, 2023, will increase the annual combined water and wastewater revenue by $13.5 million.

The Zacks Consensus Estimate for York Water’s 2023 EPS indicates an increase of 7.9%. YORW’s stock price has gained 0.4% in the last year.

SJW Group’s subsidiaries have filed multiple rate cases over the years. The Maine Water Co. general rate case effective Jan 1, 2023, will increase annualized revenues by $0.692 million. The Connecticut Water Co. rate case is planned for fourth-quarter 2023.

The consensus estimate for SJW Group’s 2023 EPS indicates an increase of 2.1%. SJW’s stock price has gained 8.3% in the last year.

Price Performance

Over the past three months, shares of AWK have lost 3%, compared with the industry’s 39.3% decline.

Zacks Investment Research
Image Source: Zacks Investment Research

Zacks Rank

American Water 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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