American Water's (AWK) Unit Files for Rate Hike in Bel-Air - Analyst Blog

A business unit of American Water Works Company, Inc. (AWK), Maryland American Water, filed a request with the Maryland Public Service Commission asking for a hike in water rates for customers in its Bel Air system.

The request for rate increase was made to recoup investments made by the company to upgrade and replace outmoded water infrastructure. It also takes into account the costs related to water purchase and disposal and facility maintenance that have gone up over the past five years.

Maryland American Water has made an investment of roughly $3.6 million in this time span. The expenditure was incurred to replace aging water infrastructure and the restoration and repainting of the 250,000-gallon water storage tank.

The company is also requesting for reimbursing investments of $0.5 million made for development of new information systems for enhancing operational efficiency, productivity and customer service.

Upon approval, the quarterly residential bill for customers consuming 11,600 gallons of water in every quarter will increase from the current rate of $113.55 to $136.31. This will come to a water cost of $1.49 per day for Maryland American Water's residential customers.

Though the rate hike request has been made to be effective from Jan 2015, owing to the delay in investigation and analysis, American Water expects the approval to come by Jun 2015. Maryland American Water is targeting an increase of $0.81 million in annual revenues.

In the third quarter, American Water spent $314 million in improving pumps, plants and pipes that deliver water and water services. The company aims to invest a total of $1 billion in its infrastructural programs by the end of this year. These initiatives will enable the company to deliver reliable services to its customers, while maintaining government regulations and public safety.

Apart from American Water, other water utilities like Aqua America Inc. (WTR) and Connecticut Water Service Inc. (CTWS) are also investing substantially in strengthening their infrastructure.

American Water Works currently has a Zacks Rank #3 (Hold). A better-ranked stock in the same industry is American States Water Company (AWR) currently carrying a Zacks Rank #2 (Buy).

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