York Water Company (YORW - Free Report) recently announced that the Pennsylvania Public Utility Commission (PPUC) has approved its rate increase application for water and wastewater services that the company filed on May 30, 2018. The approval will support the utility to recover nearly $77 million invested for system improvements and infrastructure replacements.
Details of the Rate Hike
Per the settlement, the average residential water bill for customers using 4,001 gallons will increase by $1.12 to $43.93 per month. The monthly average wastewater bill will increase 25% for the customers in each of the Asbury Pointe Subdivision, East Prospect Borough and Lower Windsor Area as well as West York Borough.
Though the approval indicates a long-term increase of 2.6% in monthly water bills effective from Mar 1, 2019, customers will enjoy tax benefits for the first year. In particular, lower tax rates due to reduced federal income taxes from the 2017 Tax Act, along with tax benefits that York Water gained in 2018 and the first two months of 2019, customer bills will be reduced by 4.29%.
Overall, including the rate hike and the tax benefit, customer bills will be reduced by 80 cents per month, for the first year. The settlement will generate approximately $3.65 million annual revenues for the company.
Importance of Rate Hike
Water utility companies require funds for maintenance and upgrade. Replacement of existing or aging infrastructure with new set-ups is necessary to maintain efficient water services. Rate hikes enable the companies to make such investments.
Rate hikes increase the monthly budgets of the customers. However, it enables the companies to recover the cost of investments as well as sustain the continuity of water and wastewater services. The commission continues to support regulated water utilities with justifiable rate hikes, which assists the utilities to carry on with their infrastructure strengthening work.
Notably, for the first nine months ended Sep 30, 2018, York Water invested $10.7 million in construction expenditures for routine items and the completion of a raw water pumping station along with various replacements and improvements to infrastructure. Following the similar trend, other water utilities like American Water Works (AWK - Free Report) , California Water Service Group (CWT - Free Report) and Aqua America (WTR - Free Report) also make regular investments to improve the existing water infrastructure.
Zacks Rank & Price Performance
York Water Company carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
In the past 12 months, York Water’s shares have inched up 0.6% compared with the industry’s rise of 7.2%.
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