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California Water's Arm Gets Rate Hike Approval to Boost Stroh's System
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Key Takeaways
Washington Water gained UTC approval to boost annual revenues by $178K for the Stroh's system.
The hike will be phased in over two years, with the first half effective immediately and the rest in 2026.
Revenue hike will help recover the investment made in improving the Stroh's system.
California Water Service Group’s (CWT - Free Report) subsidiary Washington Water Service received approval from the Washington Utilities and Transportation Commission (“UTC”) to increase annual revenues by nearly $178,000 in its Stroh’s water system and adjust water rates accordingly.
Key Details of the Rate Approval
To mitigate the impact on consumers, this increase in yearly revenues will be phased in over two years. Rates will reflect half of the hike starting now, with the other half anticipated to take effect in the second quarter of 2026.
This shift is the result of both higher operating costs and improvements made to the water system infrastructure since Washington Water acquired the Stroh's system in late 2022. Significant investments have been made in the Stroh's service area, including the replacement of two booster pumps to help improve pressure reliability, a motor, and a well pump. A new water quality sampling station is being installed. Safety improvements were made to water storage tanks, and two wellhead meters designed to accurately record production data for the Department of Ecology and Department of Health were replaced.
Rationale Behind Rate Hike
Water utilities are allowed to set rates that provide a fair return on their capital investment and cover their operating costs. Rate hikes can assist utilities in compensating for increased operational costs and infrastructure maintenance expenditures. Rate hikes provide utilities with steady revenue streams that enable them to manage their financial commitments and make long-term investment plans.
According to a report by the Environmental Protection Agency, nearly $1.25 trillion in investments will be needed over the next 20 years to maintain and expand water services. The replacement of deteriorating pumps, pipes, and other infrastructure necessary for reliable water service can be financed by rate hikes. Upgrades to storage facilities, treatment plants, and other systems that improve the efficiency and quality of water can be funded by new tariffs.
Rate Approvals Continue to Benefit Water Utilities
The rate approvals allow utilities to increase revenues, which can be used to address critical needs like infrastructure upgrades, equipment replacements, and the implementation of new water efficiency programs. Several U.S. utility companies have recently had new water service rates approved, as mentioned below:
On May 7, 2025, American Water Works Company, Inc.’s (AWK - Free Report) unit, Missouri American Water, was granted new water and wastewater rates by the Missouri Public Service Commission. This rate hike is likely to increase the company’s annual revenues by approximately $79.5 million. The rate increase was primarily due to approximately $1.1 billion in infrastructure investments. The approved rates represent a total annualized revenue increase of $63 million and were effective from May 31, 2025.
AWK’s long-term (three to five years) earnings growth rate is 7.4%. The Zacks Consensus Estimate for 2025 earnings per share (EPS) implies year-over-year growth of 6.1%.
On April 23, 2025, Global Water Resources, Inc. (GWRS - Free Report) received approval from the Arizona Corporation Commission to establish new water rates for its Global Water - Farmers Water Company, Inc. (GW-Farmers) utility located in Pima County, AZ. The approved new rates are expected to result in a nearly $1.1 million increase in annual revenues. GW-Farmers will implement the rate increase in three stages: 50% on May 1, 2025, 25% on Nov. 1, 2025, and the remaining 25% on May 1, 2026.
GWRS’ long-term earnings growth rate is 15%. The Zacks Consensus Estimate for 2025 sales implies year-over-year growth of 6.2%.
American States Water Company’s (AWR - Free Report) unit, Golden State Water Company, had received a final decision from the California Public Utilities Commission (“CPUC”) regarding its general rate case proceeding. The CPUC approved Golden State Water’s request to continue the existing mechanism for certain water utility operations, which essentially approved the 2025 rate increases. These new rates went into effect on Feb. 1, 2025.
AWR’s long-term earnings growth rate is 5.65%. The Zacks Consensus Estimate for 2025 EPS implies year-over-year growth of 3.5%.
CWT’s Share Price Performance
In the past three months, shares of the company have lost 2.2% against the industry’s 6.1% growth.
Image: Bigstock
California Water's Arm Gets Rate Hike Approval to Boost Stroh's System
Key Takeaways
California Water Service Group’s (CWT - Free Report) subsidiary Washington Water Service received approval from the Washington Utilities and Transportation Commission (“UTC”) to increase annual revenues by nearly $178,000 in its Stroh’s water system and adjust water rates accordingly.
Key Details of the Rate Approval
To mitigate the impact on consumers, this increase in yearly revenues will be phased in over two years. Rates will reflect half of the hike starting now, with the other half anticipated to take effect in the second quarter of 2026.
This shift is the result of both higher operating costs and improvements made to the water system infrastructure since Washington Water acquired the Stroh's system in late 2022. Significant investments have been made in the Stroh's service area, including the replacement of two booster pumps to help improve pressure reliability, a motor, and a well pump. A new water quality sampling station is being installed. Safety improvements were made to water storage tanks, and two wellhead meters designed to accurately record production data for the Department of Ecology and Department of Health were replaced.
Rationale Behind Rate Hike
Water utilities are allowed to set rates that provide a fair return on their capital investment and cover their operating costs. Rate hikes can assist utilities in compensating for increased operational costs and infrastructure maintenance expenditures. Rate hikes provide utilities with steady revenue streams that enable them to manage their financial commitments and make long-term investment plans.
According to a report by the Environmental Protection Agency, nearly $1.25 trillion in investments will be needed over the next 20 years to maintain and expand water services. The replacement of deteriorating pumps, pipes, and other infrastructure necessary for reliable water service can be financed by rate hikes. Upgrades to storage facilities, treatment plants, and other systems that improve the efficiency and quality of water can be funded by new tariffs.
Rate Approvals Continue to Benefit Water Utilities
The rate approvals allow utilities to increase revenues, which can be used to address critical needs like infrastructure upgrades, equipment replacements, and the implementation of new water efficiency programs. Several U.S. utility companies have recently had new water service rates approved, as mentioned below:
On May 7, 2025, American Water Works Company, Inc.’s (AWK - Free Report) unit, Missouri American Water, was granted new water and wastewater rates by the Missouri Public Service Commission. This rate hike is likely to increase the company’s annual revenues by approximately $79.5 million. The rate increase was primarily due to approximately $1.1 billion in infrastructure investments. The approved rates represent a total annualized revenue increase of $63 million and were effective from May 31, 2025.
AWK’s long-term (three to five years) earnings growth rate is 7.4%. The Zacks Consensus Estimate for 2025 earnings per share (EPS) implies year-over-year growth of 6.1%.
On April 23, 2025, Global Water Resources, Inc. (GWRS - Free Report) received approval from the Arizona Corporation Commission to establish new water rates for its Global Water - Farmers Water Company, Inc. (GW-Farmers) utility located in Pima County, AZ. The approved new rates are expected to result in a nearly $1.1 million increase in annual revenues. GW-Farmers will implement the rate increase in three stages: 50% on May 1, 2025, 25% on Nov. 1, 2025, and the remaining 25% on May 1, 2026.
GWRS’ long-term earnings growth rate is 15%. The Zacks Consensus Estimate for 2025 sales implies year-over-year growth of 6.2%.
American States Water Company’s (AWR - Free Report) unit, Golden State Water Company, had received a final decision from the California Public Utilities Commission (“CPUC”) regarding its general rate case proceeding. The CPUC approved Golden State Water’s request to continue the existing mechanism for certain water utility operations, which essentially approved the 2025 rate increases. These new rates went into effect on Feb. 1, 2025.
AWR’s long-term earnings growth rate is 5.65%. The Zacks Consensus Estimate for 2025 EPS implies year-over-year growth of 3.5%.
CWT’s Share Price Performance
In the past three months, shares of the company have lost 2.2% against the industry’s 6.1% growth.
Image Source: Zacks Investment Research
CWT’s Zacks Rank
California Water currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.