American Water Unit to Invest in Infrastructure Programs - Analyst Blog

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A subsidiary of American Water Works Company, Inc.AWK , California American Water, has received the approval of the California Public Utilities Commission ("CPUC") for statewide implementation of new rates.

The fresh rates will increase the company's revenue by 1.2% in 2015 and about 2% each for the next two years. The new rates will have different impacts. While the rates for some customers will increase, a few others may witness their water rates going down.

The new rates will gradually be implemented and the customers will receive district specific communications regarding the same. The rates will also include other outstanding costs for changes to water production costs, purchased water and energy costs and deferred revenue.

The approval requires California American Water to undertake infrastructure spending of more than $126 million over the next three years for replacements and improvement projects.

Some of the key projects are enlargement of critical piping to allow more efficient water transmission in Sacramento District, replacement of over 20,000 feet of aging water mains in Monterey, refurbishment of the Potrero water storage reservoir in the Ventura District and combining domestic and irrigation systems in Los Angeles.

The CPUC decision also authorizes spending of around $6 million for a host of conservation programs and rebates through the next three years. Programs include free offering of low-flow showerhead and hose nozzles, sink aerators, leak detection kits and other types of water-saving devices to all customers.

Apart from the reliability investment, California American Water also provides a free water use survey for home or business. Through this facility the company sends a conservation specialist to the site to locate leaks and advise on other areas of water savings. The customers can cut down on their water usage and hence the water bill through this survey.

Zacks Rank

American Water Works currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the water utility space are The York Water Company YORW , American States Water Company AWR and California Water Service Group CWT . While The York Water and American States Water sport a Zacks Rank #1 (Strong Buy), California Water carries a Zacks Rank #2 (Buy).

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YORK WATER CO (YORW): Free Stock Analysis Report

AMER WATER WORK (AWK): Free Stock Analysis Report

CALIF WATER SVC (CWT): Free Stock Analysis Report

AMER STATES WTR (AWR): 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 Nasdaq, Inc.

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

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