Business Context and Reporting Period
This Form 8-K, dated October 29, 2018, reports on American Water Works Company, Inc. and its wholly owned subsidiary, New Jersey-American Water Company, Inc. (NJAWC). The filing details the approval of a general rate case settlement by the New Jersey Board of Public Utilities (NJBPU).
Key Financial Metrics
- Revenue Impact: The order approves a $40 million annual increase in water and wastewater revenues, effective June 15, 2018.
- Rate Base: The authorized rate base is set at $2.95 billion.
- Return on Equity (ROE): The authorized ROE is 9.6%.
- Capital Structure: The approved common equity ratio is 54%, and the long-term debt ratio is 46%.
- System Improvements: The order includes $35 million in distribution system improvement charges in base rates.
Material Changes Versus Prior Period
Compared to the 2015 general rate case, the following changes were approved:
- ROE: Decreased from 9.75% to 9.6%.
- Rate Base: Increased from $2.39 billion to $2.95 billion.
- Equity Ratio: Increased from 52% to 54%.
- Debt Ratio: Decreased from 48% to 46%.
Outlook, Risks, and Unusual Items
Refunds: NJAWC customers will receive refunds for provisional rates collected since June 15, 2018, that exceed the final approved rate increase.
Remanded Issues: The regulatory treatment of acquisition adjustments was remanded to the NJBPU's Office of Administrative Law for a separate proceeding. NJAWC anticipates this will conclude in the first quarter of 2019.
Risks: The filing includes standard forward-looking statement disclaimers, noting that actual results may differ due to risks outlined in the Company's Form 10-K and other SEC filings.
Investor Verification Checklist
- Verify the timing and amount of customer refunds related to provisional rates.
- Monitor the status of the remanded acquisition adjustments proceeding expected to conclude in Q1 2019.
- Review the impact of the $40 million revenue increase on consolidated financial statements in subsequent quarterly reports.
- Confirm the implementation of the $35 million distribution system improvement charges.