Connecticut Water Services Inc. (CTWS - Free Report) announced that its subsidiary The Maine Water Company received approval from the Maine Public Utilities Commission (“MPUC”) to increase water rates. The rate hike approval will impact 16,500 customers residing in Biddeford, Saco, Old Orchard Beach and Scarborough. The new water rates became effective with customer bills issued on or after Dec 1, 2017.
Rationale Behind the Hike
The hike was essential to recoup $5 million in water system upgrades and increased operating costs already borne by The Maine Water Company. The approval will increase annual revenues of Connecticut Water Services’ unit by $1.56 million.
The existing waster system and infrastructure are getting old and the company needs to invest regularly to upgrade and replace the existing old pipelines. The water rate hikes at regular intervals will help the water utilities to continue with infrastructure upgrade spending and provide uninterrupted services to its consumers.
Regular Investment – A Must in Water Space
The U.S. water infrastructure in getting old and some of the water mains are nearly a century old and require immediate replacement. Investment of billions of dollars is required to improve the water infrastructure.
Connecticut Water Services has spent $66.3 million on capital projects, a little higher than its initial investment plan of $65.9 million. Its capital expenditure budget for 2017 is $56 million to fund improvements in water treatment plants and increase spending to boost its infrastructure. Management has already approved a plan to invest $66.2 million in capital projects in 2018.
Aqua America Inc. (WTR - Free Report) , a water utility, has plans to make capital investments of more than $450 million in 2017 as part of an ambitious investment target of more than $1.2 billion in the 2017-2019 period.
Another water utility, American Water Works Company, Inc. (AWK - Free Report) , is planning to invest $8 billion to $8.6 billion in the 2018-2022 period, out of which $7.2 billion will be regulated investments.
Zacks Rank & Stock to Consider
Connecticut Water Services currently carries Zacks Rank #4 (Sell). A better-ranked stock in the industry is Global Water Resources Inc. (GWRS - Free Report) having a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Global Water Resources reported a positive earnings surprise of 50% in the previous quarter. Its 2017 Zacks Consensus Estimate moved up 28.6% to 9 cents in the last 60 days.
Connecticut Water Services stock has gained 3.1% in the last 12 months, underperforming the the Zacks Utility Water Supply industry's rally of 20.2%
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