California Public Utilities Commission Adopts Cost of Capital Proposed Decision Setting California Water Service’s Return on Equity
03 Julho 2023 - 9:45AM
(NYSE: CWT) -- The California Public Utilities Commission has
approved the proposed decision issued in the cost of capital
application for California Water Service (Cal Water) and three
other utilities from July 2023 through the end of 2024. The
decision originally established a 9.05% return on equity and 4.23%
cost of debt for Cal Water, with a capital structure of 53.40%
common equity and 46.60% long-term debt, and an authorized rate of
return of 6.80%, effective July 31, 2023.
However, the decision affirms and retains the Water Cost of
Capital Mechanism (WCCM), which automatically adjusts the rate of
return when the Moody’s Utilities Bond Index (Index) fluctuates
between cost of capital applications. Because the Index changed in
2022, triggering the WCCM, Cal Water intends to file for and—if
approved—implement new rates based on an authorized 9.57% return on
equity, with a 4.23% cost of debt and an authorized rate of return
of 7.08%. Cal Water’s previous return on equity was 9.20%, with a
cost of debt of 5.51% and authorized rate of return of 7.48% for
the period of January 2018 to July 30, 2023.
The 40 basis-point reduction from Cal Water’s current rate of
return of 7.48% is expected to decrease annual operating revenue by
approximately $7 million, or less than 1%. This estimate may be
impacted once the 2021 General Rate Case is finalized. It is the
net impact of an approximately $11 million decrease driven by the
utility’s lower cost of debt (which is a pass-through cost),
partially offset by an approximately $4 million increase for the
return on equity.
“We appreciate the CPUC’s work to finalize our cost of capital
proceeding,” said Martin A. Kropelnicki, President and CEO. “While
we believe it’s important to move us closer to the return afforded
to California energy utilities, so that we can attract the capital
needed to keep our water systems safe and reliable, we are pleased
that this decision will help provide certainty for investors and
enable us to support not only our stockholders but also our
customers and communities.”
About California Water Service and California Water
Service GroupCalifornia Water Service provides
high-quality, reliable water and/or wastewater services to about 2
million people statewide through 496,400 service connections. It is
the biggest subsidiary of California Water Service Group (NYSE:
CWT), the largest regulated water utility in the western United
States. In total, Group serves more than 2 million people in
California, Hawaii, New Mexico, Washington, and Texas through its
regulated subsidiaries, California Water Service, Hawaii Water
Service, New Mexico Water Service, and Washington Water Service,
and its utility holding company, Texas Water Service.
What sets Cal Water and Group apart is their commitment to
enhancing the quality of life for their customers, communities,
employees, and stockholders. Guided daily by their promise to
provide quality, service, and value, the company’s employees lead
the way in working to protect the planet, care for people, and
operate with the utmost integrity. Integral to their strategy
is investing responsibly in water and wastewater infrastructure,
sustainability initiatives, and community well-being. The
company has been named one of “America’s Most Responsible
Companies” and “America’s Most Trustworthy Companies” by Newsweek
and a Great Place to Work®, and is No. 1 in Customer Satisfaction
Among Large Water Utilities in the West Region* by J.D.
Power. More information is available at www.calwater.com
and www.calwatergroup.com.
*California Water Service received the highest score in the West
Large segment of the J.D. Power 2023 U.S. Water Utility Residential
Customer Satisfaction Study of customers’ satisfaction nationally
among water customers in the US. Visit jdpower.com/awards for more
details.
This news release contains forward-looking statements within the
meaning established by the Private Securities Litigation Reform Act
of 1995 ("Act"). The forward-looking statements are intended to
qualify under provisions of the federal securities laws for "safe
harbor" treatment established by the Act. Forward-looking
statements are based on currently available information,
expectations, estimates, assumptions and projections, and
management's judgment about the Company, the water utility industry
and general economic conditions. Such words as will, would, seek,
expects, intends, plans, believes, estimates, assumes, anticipates,
projects, predicts, forecasts or variations of such words or
similar expressions are intended to identify forward-looking
statements. The forward-looking statements are not guarantees of
future performance. They are subject to uncertainty and changes in
circumstances. Actual results may vary materially from what is
contained in a forward-looking statement. Factors that may cause a
result different than expected or anticipated include, but are not
limited to: natural disasters, public health crises, pandemics,
epidemics or outbreaks of a contagious disease, such as the
outbreak of coronavirus (or COVID‐19); governmental and regulatory
commissions' decisions, including decisions on proper disposition
of property; consequences of eminent domain actions relating to our
water systems; changes in regulatory commissions' policies and
procedures; the timeliness of regulatory commissions' actions
concerning rate relief and other actions; changes in water quality
standards; changes in environmental compliance and water quality
requirements; electric power interruptions; housing and customer
growth trends; the impact of opposition to rate increases; our
ability to recover costs; availability of water supplies; issues
with the implementation, maintenance or security of our information
technology systems; civil disturbances or terrorist threats or
acts; the adequacy of our efforts to mitigate physical and cyber
security risks and threats; the ability of our enterprise risk
management processes to identify or address risks adequately; labor
relations matters as we negotiate with unions; changes in customer
water use patterns and the effects of conservation; the impact of
weather, climate, natural disasters, and diseases on water quality,
water availability, water sales and operating results, and the
adequacy of our emergency preparedness; and, other risks and
unforeseen events. When considering forward-looking statements, you
should keep in mind the cautionary statements included in this
paragraph, as well as the annual 10-K, Quarterly 10-Q, and other
reports filed from time-to-time with the Securities and Exchange
Commission (SEC). The Company assumes no obligation to provide
public updates of forward-looking statements.
Contact: Yvonne Kingman, 310-257-1434
California Water Service (NYSE:CWT)
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