York Water Files for Rate Hike - Analyst Blog

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Water and wastewater management company The York Water Company ( YORW ) filed for a rate hike with the Pennsylvania Public Utility Commission (PPUC). The filing is for an annual increase in the water rate by $7.1 million and a general increase in wastewater rates for the Asbury Pointe Subdivision to $27,960 per year.

The filing for higher rates aims to recover the $49 million invested by York Water Company in York and Adams counties since its 2010 rate filing.

If the new rates are approved entirely a typical residential water customer would pay an additional $5.69 per month, a typical commercial water customer would pay an additional $ 20.90 per month and the typical industrial water customer would pay an additional $142.71 per month. An Asbury Pointe Subdivision wastewater customer would pay an additional $10.00 per month.

If the rates are granted immediately, it would come into effect from Aug 1, 2013. Even with the new rates, the average cost of 1,000 gallons of water would continue to remain below a penny per gallon. However, the PPUC can delay the implementation of the rates till Mar 14. The federal body can also conduct an investigation and can partially approve the rate hike.

The rate hike will provide the necessary funds to the company to reinforce and replace aging water mains. York Water Company also plans to expand and improve the water and wastewater treatment plants and other facilities.

This improvement will allow it to meet current and upcoming water regulation. On implementation of the new rates, the company will replace over 30 miles of aging pipeline, comprising nearly 3% of its total pipeline. This replacement will increase the efficiency and reliability of its service.

Water utilities in general are facing a funding crunch, as the investments in infrastructure improvement are presently lower than the required amount. This funding gap has widened since the economic slowdown.  As per American Water Works Association, the maintenance and replacement of outdated water systems in the U.S. will cost at least $1 trillion over the next 25 years.

Water utilities are investing in the repair and improvement of water infrastructure. A unit of American Water Works Company ( AWK ) has invested about $330 million in water and wastewater system improvements across Illinois in the 2009 to 2013 period.

The 2013 capital budget of the water utility Connecticut Water Service Inc. ( CTWS ) includes $31.3 million for infrastructure investment. Even these investments appear negligible in comparison to the total requirement. However, the consistent outlay of funds will gradually bridge the funding gap.

The York Water Company currently has a Zacks Rank #2 (Buy). Another water utility Aqua America Inc. ( WTR ) is also performing well with a comparable Zacks Rank #2 (Buy).



AMER WATER WORK (AWK): Free Stock Analysis Report

CONN WATER SVC (CTWS): Free Stock Analysis Report

AQUA AMER INC (WTR): Free Stock Analysis Report

YORK WATER CO (YORW): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: AWK , CTWS , WTR , YORW

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