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Aqua America (WTR) Unit Files for Rate Hike After 7 Years

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Aqua America Inc. announced that its unit Aqua Pennsylvania has filed an application with Pennsylvania Public Utility Commission, requesting an increase in water and wastewater rates for customers. The requested increase in annual revenues is $71.8 million.

The primary objective of the filing is to recoup $2.2 billion invested in infrastructure in the last seven years, including upgrades to its distribution and treatment systems to improve drinking-water quality and service reliability throughout its water and wastewater operations.

Aqua Pennsylvania replaced more than 800 miles of aging water mains, as well as valves, service lines and more than 19,000 fire hydrants throughout its 5,800-mile distribution system.  Improvement in wastewater operations include collection system replacement and renewal, treatment plant rehabilitation to ensure reliability and high quality of the treated water that is returned to the environment.

Aqua Pennsylvania’s request, if approved, would increase the residential water bill for a typical customer using 4,080 gallons per month from $59.85 to $69.07, reflecting an increase of $9.22 a month. The company is seeking various rate increases for wastewater customers.

Need for Water Investment

The U.S. water infrastructure is quite old, and massive investment is required to fix the existing water and wastewater systems. Some of the water mains are nearly a century old and require immediate replacement. Per American Water Works Association, the U.S. water systems need  about $1 trillion investment over the next two decades for its aging infrastructure. All the regulated water utilities are investing to strengthen operation and recoup the same through rate hikes.

Aqua America aims to make capital investments in excess of $500 million in 2018, which is part of its investment target of more than $1.4 billion in the 2018-2020 time period.

American Water Works (AWK - Free Report) plans to invest $1.9-$2.1 billion in 2018 for capital expenditures and consolidations. The company aims at pumping $8.4-$9 billion into the mending activity from 2018 through 2022, which will help drive the company’s earnings by 7-10% in the said period from a 2016 base.

Also, Middlesex Water (MSEX - Free Report) announced its plans to invest nearly $267 million during the 2018-2020 time period for installing and relocating water mains, service lines, wastewater collection systems and setting up a new storage tank.

Price Movement

In a year’s time, shares of Aqua America have gained 11.7% compared with the industry’s growth of 3.1%.

Zacks Rank & A Key Pick

Currently, Aqua America has a Zacks Rank #3 (Hold). A better-ranked stock in the same space  is Global Water Resources, Inc. (GWRS - Free Report) , carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Global Water Resources delivered a positive earnings surprise of 83.33% in the last four quarters. The Zacks Consensus Estimate for 2018 has moved up 11.8% to 19 cents in the past 30 days.

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