Business Context and Reporting Period
This Form 8-K was filed by American Water Works Company, Inc. on August 17, 2022. The report details a regulatory event concerning New Jersey-American Water Company, Inc. (NJAWC), a wholly owned subsidiary, regarding the approval of a general rate case by the New Jersey Board of Public Utilities (NJBPU).
Key Financial Metrics and Regulatory Approval
- Revenue Impact: The NJBPU approved a $45.5 million annualized increase in water and wastewater revenues, effective September 1, 2022. This is a reduction from the originally requested $94.7 million.
- Rate Base: The authorized rate base was set at $4.15 billion, an increase from the $3.57 billion approved in the 2020 rate case.
- Capital Structure: The order maintains an authorized return on equity (ROE) of 9.6%, a common equity ratio of 54.6%, and a long-term debt ratio of 45.4%.
- Cost Components: The approved rates incorporate updated estimates for production costs, including chemicals, fuel, and power.
Material Changes and Regulatory Adjustments
- Revenue Reduction: The approved revenue increase ($45.5 million) is significantly lower than the initial request ($94.7 million) filed in January 2022.
- Pension and OPEB Deferral: Beginning January 1, 2023, NJAWC will defer the difference between pension and other post-employment benefits (OPEB) expense included in base rates as a regulatory asset or liability. This deferral will last for two years or until the conclusion of the next general rate case, whichever is earlier.
- COVID-19 Asset Recovery: NJAWC withdrew its request to recover existing authorized COVID-19-related regulatory assets within this general rate case. Recovery will be sought in a separate proceeding under the NJBPU's generic COVID-19 process.
Outlook and Management Commentary
The filing indicates that the settlement was entered into among NJAWC, the NJBPU staff, the New Jersey Division of Rate Counsel, and several intervenors. The approved order provides a clear path for revenue recovery starting September 1, 2022, while deferring specific benefit cost adjustments to a future period. The filing does not provide broader corporate guidance or commentary beyond the specifics of this New Jersey rate case.
Investor Verification Checklist
- Verify the effective date of the $45.5 million revenue increase (September 1, 2022) and its impact on the full-year 2022 financial results.
- Monitor the separate proceeding for the recovery of COVID-19-related regulatory assets to understand the timeline for that specific revenue stream.
- Track the deferral of pension and OPEB expenses starting January 1, 2023, to assess future regulatory asset/liability balances.
- Review the press release filed as Exhibit 99.1 for additional details on the settlement terms not explicitly detailed in the 8-K text.