California Water Service Group (CWT - Free Report) announced that its unit, Washington Water Service (Washington Water), has received a water rate hike approval from Washington Utilities and Transportation Commission, effective Dec 1, 2018.
Per the approval, the average residential water customer using 854 cubic feet of water a month will pay $5.52 more, for an average monthly bill of $59.27. The previous rate hike was approved in 2015.
The rate revision will increase annual revenues of the company by $1.14 million. This rate revision will help the company to recoup the expenditures made in new pumping equipment and water mains, water treatment facilities, wells as well as storage tanks. All the investments were directed to improve the quality of service to customers and ensure firefighters’ emergency resources.
Investment Essential in Water Space
The aging water and wastewater infrastructure of the United States needs investment of billions of dollars for proper maintenance and upgradation. A study from Utah State University showed that overall water main break over the past 6-year period has gone up 27% in the United States and Canada.
The primary reasons behind water main failure are the aging water infrastructure and higher failure rates of smaller water utilities compared with larger ones. The water utilities are heavily investing to strengthen the existing infrastructure but they also need support of the commission via approval of reasonable rate hikes. These rate revisions provide essential funds to the water utilities for carrying out infrastructure strengthening work.
Water utilities like American Water Works (AWK - Free Report) and Aqua America (WTR - Free Report) , among others, make regular investments to improve the existing water infrastructure.
Zacks Rank and A Key Pick
Currently, California Water Service has a Zacks Rank #3 (Hold). A better-ranked stock from the same industry is Middlesex Water Company (MSEX - Free Report) , sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Middlesex Water delivered average positive earnings surprise of 16.9% in the trailing four quarters. Earnings estimates of the company have moved up 6.5% to $1.96 in the past 30 days.
Shares of both California Water Service and Middlesex Water have outperformed the industry in the past six months.
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