American Water Works (AWK) Q2 FY26 earnings call: guidance and Q&A

Can the benefits of Missouri's new fully forecasted future test year legislation be quantified, specifically how the requested rate increase compares to a historical filing?

Management stated they have not quantified the specific benefits but suggested looking at prior cases for a general idea, noting it wouldn't be a perfect comparison.

“We have not quantified it. I mean in practical purposes, I think one way you can do it is if you go back and look at our prior cases and what that filed increase would be. I mean it's not a complete apples-to-apples but that could give you an idea.”

asked by Paul Zimbardo · answered by David Bowler

What are the company's thoughts on Indiana's affordability process, given its focus on electric, and the impact of recent legislation on chemical cost recovery?

Management remains positive on Indiana, noting that affordability concerns are primarily focused on electric utilities, and their water rates are affordable. They view recent legislation for incremental recovery on chemical costs as beneficial, though not materially impactful overall.

“Paul, I'd say we still feel good about Indiana from everything we're seeing in the state, it's focused on the electric affordability story there. Our rates are very affordable in Indiana and continue to be in our forecast to be there. So we feel good as far as the legislation yet. I mean, it's beneficial to us. I mean, it's not overall material from a American Water standpoint, but it's certainly a little wins like that help.”

asked by Paul Zimbardo · answered by David Bowler

Has the Pennsylvania PUC's commentary on rate case frequency changed the company's regulatory strategy in the state, or is the 25 basis points ROE for less regulatory lag an acceptable trade-off?

The company's strategy in Pennsylvania is driven by capital investment for service provision. They are exploring broadening the DSIC mechanism for interim recovery and smoothing increases, acknowledging that water mechanisms are behind electric. They seek the most constructive form of capital recovery.

“With regards to our strategy in Pennsylvania, our real focus and what underpins our rate cases in the state is the capital investment that we make. They're really investment-driven rate cases. As we look to recover we can continue to do that under general rate cases. Another area that we're exploring is a broadening of our DSIC mechanism, which could be useful in a couple of ways, giving us interim recovery in between rate cases, which also has the benefit of smoothing in increases over time, which is helpful from an affordability perspective.”

asked by Unknown Analyst · answered by John Griffith

Does the affordability noise and Governor Shapiro's intervention in the Peoples Gas case impact the approval of the Essential merger in Pennsylvania?

The merger approval in Pennsylvania is based on demonstrating 'substantial affirmative public benefit.' While affordability is a theme, the company believes its testimony supports this standard and is engaged in settlement discussions.

“Well approval for the merger is really just under a standard in the state. Each state has their own standard. In the case of Pennsylvania, it is substantial affirmative public benefit that can come in a variety of ways. Certainly, affordability is a theme across the state and other states. But our job with respect to the merger is to be able to demonstrate substantial affirmative public benefit, which we think that we've done in our testimony. So we're in settlement discussions there.”

asked by Unknown Analyst · answered by John Griffith

What percentage of CapEx currently qualifies for DSIC recovery in Pennsylvania, and what would be required to expand this?

Approximately 40% of capital in PA falls under the DSIC mechanism. Expanding the types of CapEx that qualify (e.g., treatment, PFAS, storage tanks) and increasing the cap would require legislative amendment, though some regulatory adjustments might be possible around the edges.

“Angie, thanks for that question. It's -- currently, it's about 40%, give or take, depending on the year, but you can roughly think 40% of our capital and PA falls under the DSIC mechanism. ... Yes. Under the current legislation that allows DSIC would we need to amend that to include additional capital to fall under that mechanism.”

asked by Agnieszka Storozynski · answered by David Bowler

Will the Essential Utilities merger lead to economies of scale that allow the combined company to stay out of rate cases longer in Pennsylvania?

While economies of scale will emerge over time, in the near term, both companies still need to invest significant capital. Since capital investment drives the timing of rate cases for recovery, the need for rate cases will likely continue.

“There certainly will be economies associated with the merger over time. I will say, in the near term, as we begin to go through our integration planning. There is -- both companies have -- and together as one company, we'll have a need really for the people, by and large, that we have today. Both companies individually and together still have the need to invest all of the capital that we're investing. And it's that capital investment that really drives timing of rate cases for capital recovery.”

asked by Agnieszka Storozynski · answered by John Griffith