American States Water Company (AWR - Free Report) recently announced that its regulated utility subsidiary — Golden State Water Company (“GSWC”) — has received the general rate case approval from the California Public Utilities Commission (CPUC) to determine new rates for 2019-2021. The rates will be affective from Jan 1, 2019.
Based on the final decision, GSWC is required to invest approximately $334.5 million for infrastructure. This includes $20.4 million of capital projects to be filed for revenue recovery through advice letters after the fulfillment of those projects. The new rates approved by the commission will increase the water gross margin for 2019 by nearly $7.1 million.
Rate Raise in Water Utility
Mostly regulated water utility companies make consistent investments to strengthen their aging infrastructures by replacing soiled pipelines. To recover investments related upgrade or installation of the distribution systems, regulated companies file for rate hikes. Also, the hikes enable the companies to undertake further investments.
Investments for Water Infrastructure
The aging U.S. water infrastructure requires huge investments to maintain as well as upgrade the existing water and wastewater systems. Some of the water mains are nearly a century old and require immediate replacement. To provide clean and reliable water service, consistent investments is essential for the industry.
American States Water has invested $38.2 million for capital work in GSWC in 2018 and expects to invest $115-$125 million in 2019.
Other water utilities are also planning to invest on long-term basis. American Water Works (AWK - Free Report) aims to invest $8-$8.6 billion from 2019 through 2023. Aqua America Inc aims to invest in excess of $555 million as part of its ambitious investment target of more than $1.4 billion in the 2019-2021 time period. Companhia de Saneamento Basico do Estado de Sao Paulo plans to increase capital expenditure annually in the 2019-2023 time period, with R$3.5 billion planned for 2019.
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