American States Water announces settlement agreement in general rate case

American States Water announced that its regulated water utility subsidiary, Golden State Water Company, or GSWC, and the Public Advocates Office at the California Public Utilities Commission, or CPUC, filed a joint motion to adopt a settlement agreement between GSWC and Cal Advocates in connection with the water utility general rate case. GSWC had filed a general rate case application in August 2023 for all of its water regions and the general office to determine new rates for the years 2025 – 2027. The CPUC is scheduled to issue a decision in the water general rate case by the end of 2024 with the new rates expected to become effective January 1, 2025. The proposed settlement agreement, if approved by the CPUC, resolves most of the issues related to the calculation of the 2025 annual revenue requirement in the general rate case application leaving only two unresolved issues discussed later. Among other things, the settlement authorizes GSWC to invest approximately $573.1M in capital infrastructure over the three-year capital cycle in order to continue to provide safe and reliable water utility service to its customers. The $573.1M of infrastructure investment, as settled, includes $17.7M of advice letter capital investments to be filed for revenue recovery during the second and third year attrition increases when those projects are completed. In addition, the settlement agreement approves $58.2M of advice letter capital investments already under construction beginning in 2023 also to be filed for revenue recovery during the second and third year attrition increases when those projects are completed. For all of the advice letter projects, GSWC will be allowed to accrue interest during construction at the adopted cost of debt and recover the full rate of return and all applicable components of the revenue requirement after the assets are placed in service up until the assets are placed in customer rates. Excluding revenues for all of the advice letter capital projects discussed above, under the terms of the settlement agreement GSWC’s adopted operating revenues less water supply costs for 2025 are projected to increase by approximately $23M as compared to the 2024 adopted RLWSC, and there are potential additional revenue increases of approximately $20M for each of the years 2026 and 2027 based on inflation factors used at the time of the application filing in August 2023. The increases in 2026 and 2027 are subject to the results of an earnings test and changes to the forecasted inflationary index values. Actual increases for 2026 and 2027 will be determined when the CPUC approves the filings to implement the new rate increases, using inflationary index values applicable at that time. The two remaining unresolved 2025 revenue requirement issues relate to the sales forecast and supply mix. In addition, four items related to GSWC’s request for certain regulatory mechanisms will be litigated and they include a sales and revenue decoupling mechanism, a sales reconciliation mechanism, a supply mix adjustment mechanism, and a request to modify the existing per- and polyfluoroalkyl substances, or PFAS, memorandum account to track carrying costs on capital investments needed to comply with the new PFAS maximum contaminant levels established by the Environmental Protection Agency. With regards to all of these unresolved issues, GSWC and Cal Advocates will file briefs with the CPUC by the end of July. When the administrative law judge in the proceeding issues a proposed decision, it will address the unresolved issues along with the settlement agreement filed by GSWC and Cal Advocates.