American States Water Company Announces Proposed Decision Adopting Settlement Agreement In Its Electric Utility General Rate Case

Rhea-AI Summary

American States Water Company (NYSE:AWR) received a proposed decision from the California Public Utilities Commission (CPUC) regarding its electric utility subsidiary, Bear Valley Electric Service (BVES). The decision, scheduled for vote on January 16, 2025, adopts a settlement agreement for new electric rates from 2023-2026. Key points include: $75.6 million authorized for capital infrastructure investment, a 10.0% return on equity, 5.51% cost of debt, and a 57% equity/43% debt capital structure. The new rates will be retroactive to January 1, 2023, with the impact expected to be reflected in Q4 2024 results. The agreement also approves recovery of capital expenditures and operating costs related to wildfire mitigation plans.

Positive

• Authorization for $75.6 million in capital infrastructure investment over 2023-2026
• Approved 10.0% return on equity
• Recovery approval for wildfire mitigation plan expenses
• Retroactive rate implementation from January 1, 2023

Negative

• None.

Insights

Utility Regulatory Expert

The proposed CPUC decision marks a pivotal regulatory milestone for Bear Valley Electric Service. The approved settlement includes several important elements that will positively impact AWR's financial outlook:

• A retroactive rate implementation to January 2023, creating a significant one-time revenue recognition in Q4 2024
• Authorization for $75.6 million in capital infrastructure investments, with $23.1 million eligible for advice letter recovery
• A favorable 10.0% return on equity with a balanced 57/43 equity-debt structure

The inclusion of wildfire mitigation cost recovery is particularly noteworthy in California's current regulatory environment, providing essential risk mitigation and financial stability. The multi-year rate visibility through 2026 strengthens AWR's investment thesis, especially considering the retroactive revenue boost expected in Q4 2024.

Financial Analyst

This regulatory outcome presents substantial financial implications for AWR. The retroactive rate implementation will create a significant one-time earnings boost in Q4 2024, encompassing nearly two years of rate adjustments. The approved capital expenditure program of $75.6 million provides clear visibility on growth opportunities, while the 10.0% ROE approval ensures healthy returns on these investments. The 57/43 equity-debt structure maintains financial flexibility while optimizing the cost of capital. For investors, this represents a strong regulatory outcome that supports both near-term earnings growth through retroactive collections and long-term value creation through authorized infrastructure investments.

SAN DIMAS, Calif.--(BUSINESS WIRE)-- American States Water Company (NYSE:AWR) announced that on December 12, 2024, its regulated electric utility subsidiary, Bear Valley Electric Service, Inc. (“BVES”), received a proposed decision from the assigned administrative law judge at the California Public Utilities Commission (“CPUC”) in connection with the pending general rate case proceeding that will determine new electric rates for the years 2023 – 2026. The proposed decision is scheduled to be voted on by the CPUC on January 16, 2025. When a final decision is issued by the CPUC, the new rates will be effective and retroactive to January 1, 2023. As a result, the impact from retroactive rates for the full year of 2023 and from the second-year rate increases through the nine months ended September 30, 2024 are expected at this time to be reflected in the 2024 fourth quarter results. We are in the process of reviewing the proposed decision to finalize all of the impact that may be reported in our 2024 fourth quarter earnings release and included in the 2024 Form 10-K that will be filed with the Securities and Exchange Commission.

On November 1, 2024, BVES, the Public Advocates Office at the CPUC and the other intervenor in the proceeding filed a joint motion to adopt a settlement agreement between the parties resolving all issues in connection with the general rate case proceeding. The proposed decision approves and adopts the settlement agreement in its entirety. Among other things, the settlement agreement (i) adopts the revenue requirements for each of the four years 2023 through 2026, (ii) authorizes BVES to invest approximately $75.6 million in capital infrastructure over the four-year rate cycle, which includes $23.1 million of projects (plus an allowance for funds used during construction or AFUDC) to be filed for revenue recovery through advice letters when the projects are completed, (iii) adopts a 10.0% return on equity, a 5.51% cost of debt and a capital structure of 57% equity and 43% debt, and (iv) approves for recovery the requested capital expenditures and other incremental operating costs already incurred in connection with BVES’s wildfire mitigation plans that are currently not included in customer rates.

“We are pleased to have received a proposed decision in our electric general rate case,” said Robert J. Sprowls, President and CEO of American States Water Company. “The settlement agreement reached with the Public Advocates Office at the CPUC and the other intervenor that is approved in the proposed decision allows BVES to continue investing in the utility infrastructure all of which is dedicated to improving the system safety and reliability for the community we serve, and is consistent with BVES’s wildfire mitigation plans.”

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can often be identified by words such as “anticipate,” “estimate,” “expect,” “intend,” “may,” “should” and similar phrases and expressions, and variations or negatives of these words. They are not guarantees or assurances of any outcomes, financial results, levels of activity, performance or achievements, and readers are cautioned not to place undue reliance upon them. The forward-looking statements are subject to a number of estimates and assumptions, and known and unknown risks, uncertainties and other factors, including those described in greater detail in the Company’s filings with the SEC, particularly those described in the Company’s Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. Readers are encouraged to review the Company’s filings with the SEC for a more complete discussion of risks and other factors that could affect any forward looking statements. The statements made herein speak only as of the date of this press release and except as required by law, the Company does not undertake any obligation to publicly update or revise any forward-looking statement.

About American States Water Company

American States Water Company is the parent of Golden State Water Company, Bear Valley Electric Service, Inc. and American States Utility Services, Inc., serving over one million people in ten states. Through its water utility subsidiary, Golden State Water Company, the company provides water service to approximately 264,600 customer connections located within more than 80 communities in Northern, Coastal and Southern California. Through its electric utility subsidiary, Bear Valley Electric Service, Inc., the company distributes electricity to approximately 24,800 customer connections in the City of Big Bear Lake and surrounding areas in San Bernardino County, California. Through its contracted services subsidiary, American States Utility Services, Inc., the company provides operations, maintenance and construction management services for water distribution, wastewater collection, and treatment facilities located on twelve military bases throughout the country under 50-year privatization contracts with the U.S. government and one military base under a 15-year contract.

AWR has paid common dividends every year since 1931, and has increased the dividends received by shareholders each calendar year for 70 consecutive years, which places it in an exclusive group of companies on the New York Stock Exchange that have achieved that result. The company has grown its quarterly dividend rate at a compound annual growth rate (“CAGR”) of 8.8% over the last five years through 2024 and is on pace to achieve a 10-year CAGR of 8.0% in its calendar year dividend payments through 2024. AWR's current policy is to achieve a CAGR in the dividend of more than 7% over the long-term.

View source version on businesswire.com: https://www.businesswire.com/news/home/20241216587033/en/

Eva G. Tang

Senior Vice President-Finance, Chief Financial Officer,

Corporate Secretary and Treasurer

Telephone: (909) 394-3600, ext. 707

Source: American States Water Company

FAQ

What is the capital investment amount approved for AWR's Bear Valley Electric Service in the 2023-2026 rate case?

The CPUC proposed decision approves $75.6 million in capital infrastructure investment for BVES over the four-year rate cycle from 2023 to 2026.

When will AWR's new electric rates become effective according to the CPUC decision?

The new rates will be retroactive to January 1, 2023, with the financial impact expected to be reflected in Q4 2024 results.

What return on equity was approved for AWR's Bear Valley Electric Service?

The settlement agreement approved a 10.0% return on equity for BVES.

What is the capital structure approved for AWR's Bear Valley Electric Service in the rate case?

The approved capital structure consists of 57% equity and 43% debt, with a 5.51% cost of debt.

When will the CPUC vote on AWR's proposed electric rate decision?

The CPUC is scheduled to vote on the proposed decision on January 16, 2025.