For investors in San Dimas-based American States Water Co., it’s been a largely upbeat year, both across its three main lines of business and with the shares themselves.
Final decisions are expected within the next 90 days involving rate cases for both the company’s Golden State Water utility – by far the largest business segment – and the smaller Bear Valley Electric utility serving the Big Bear Lake area in the San Bernardino Mountains, ending years of uncertainty for ratepayers and investors alike.
Golden State Water is awaiting final approval on a settlement with the California Public Utilities Commission’s public advocacy office that raises rates a cumulative 32% over the next three years and allows the utility to spend $573 on capital investments during that period. That approval from the commission could come as early as this week.
And Bear Valley Electric just reached its own settlement over electric rates with the same public advocacy office last month that would authorize a cumulative rate increase of 29% over four years. Assuming this agreement is approved by the full commission, it will result in a retroactive rate increase going back two years to Jan. 2023.
Meanwhile, American States Water’s other business unit, an unregulated segment that provides water and wastewater services to military bases across the United States, added two more bases to its resume earlier in the year.
Dividend King
As if all this weren’t enough, investors in American States Water received another long-expected dose of good news in August as their quarterly share dividend payouts rose for the 70th consecutive year to 47 cents from 43 cents.
According to several websites that follow dividend-paying stocks, American States Water is the first publicly traded company in United States history to achieve this milestone of 70 consecutive annual dividend increases, ahead of much more familiar “dividend kings” like Procter & Gamble Co., 3M Co. and Coca Cola Co.
Company officials were reluctant to claim that status, saying only that the achievement “places the company in an exclusive group of companies on the New York Stock Exchange.” Regardless, Robert Sprowls, chief executive of American States Water, expressed satisfaction with the achievement.
“Our board and management team are proud of the fact that the company has increased the dividends received by shareholders each calendar year for 70 consecutive years and it is a strong indication of the sustainability of the company’s operations and overall strategy,” Sprowls said.
Despite 70 years of increases, American States’ dividend is still somewhat modest. Last week, Thousand Oaks-based pharma giant Amgen Inc. increased its quarterly dividend payout to $2.38 a share, five times the level of American States Water.
As for the share price itself, the close on Dec. 11 of $82.71 was 17% above the level of six months ago, though up only 3% on the year.
Golden State Water rate case set to wrap
Golden State Water provides water services to approximately 264,600 customer connections located within more than 80 communities in Northern, Coastal and Southern California. Much of the infrastructure, including pipelines, reservoirs, water tanks and other facilities, is decades old and must be maintained and upgraded regularly.
The California Public Utilities Commission is set to rule on Golden State Water’s rate case at its next meeting on Dec. 19 in San Francisco. The rate package hammered out in negotiations this past summer with the commission’s public advocate office calls for a cumulative 23% increase in rates next year, followed by increases of roughly 4.5% for both 2026 and 2027.
The settlement also allows Golden State Water to spend $573 million in capital investments over those three years.
“If approved, the proposed settlement resolves most of the issues related to the 2025 annual revenue requirement,” Sprowls said in his comments to analysts on American States Water’s most recent quarterly earnings conference call.
Sprowls said some issues were still outstanding. Among these was a measure proposed by Golden State Water to “decouple” sales and revenue.
In electric utility parlance, there’s a distinction between sales and revenue. Sales refers strictly to the price paid for a volume of water. But revenue refers to the sum total of water sales and fixed service charges that are used to pay for pipeline maintenance and other infrastructure costs.
By implementing what’s called decoupling, utilities can in a billing cycle balance out drops in water consumption – often brought about by implementation of water conservation measures during a worsening drought – with a surcharge for the fixed costs. The goal is to consistently maintain the total revenue amount authorized by the California Public Utilities Commission. Otherwise, the utility must seek separate permission from the commission before it can implement a fixed cost surcharge.
In his remarks to analysts in the conference call, Sprowls said this issue, among others, will be litigated, though he did not specify a timeline.
Settlement reached in electric utility rate case
American States Water’s electric utility, Bear Valley Electric Service, reached a settlement Nov. 1 with the California Public Utility Commission’s ratepayer advocate office that the parties say resolved all outstanding issues in the utility’s rate case.
Bear Valley Electric distributes electricity to over 24,000 customer connections in the city of Big Bear Lake and surrounding areas in the San Bernardino Mountains in San Bernardino County.
The settlement authorizes Bear Valley Electric to invest up to $75.6 million in capital infrastructure projects, including a maximum of $23 million that can be obtained through separate revenue recovery motions after projects are completed. Separately, the settlement authorizes Bear Valley Electric to recover costs for wildfire mitigation measures, such as covering wires to prevent sparking or removal of vegetation encroaching on wires or other infrastructure.
Bear Valley Electric had originally sought a cumulative increase of $17.56 million in revenue spread out over the four years covered by the rate case (2023 through 2026), amounting to a cumulative rate hike of just under 40%. The settlement authorizes a total of $12.8 million increase in revenue over the four years, which translates into a cumulative rate hike of 29% spread out over those four years.
The settlement came very late in the process, after nearly two years covered by the multi-year rate case had already passed. As a result, it authorizes Bear Valley Electric to implement the new electric rates retroactively to Jan. 2023. This is accomplished through surcharges on customer bills.
The full California Public Utilities Commission is expected to take up the settlement agreement early next year.
Contracted services segment adds two military bases
American States Water’s unregulated business segment – known as American State Utility Services – provides operations, maintenance and construction management services for water and wastewater systems located on military bases throughout the country.
On April 25, the company announced American States Utility Services had begun operations at two additional military bases, bringing the total to 13.
According to the announcement, operations began at Naval Air Station Patuxent River in Maryland on April 1. The value of the contract was estimated at approximately $349 million over a 50-year period, subject to an inventory adjustment and annual economic price adjustments.
Operations began two weeks later at Joint Base Cape Cod in Massachusetts, under a 15-year contract with a maximum value of $75 million. Unlike all the other contracts, which have a duration of 50 years, this one is set to last 15 years. And it also is structured differently, with annual task orders to be awarded. The orders could total less than $75 million, but cannot exceed that cap.
“We are very pleased to begin operations on the two new bases,” Sprowls said at the time “We look forward to supporting both installations and consider it a privilege to leverage our broad utility expertise to make significant contributions to the military and their respective missions at these locations.”
