American Water Works: Affordability Takes Center Stage in PAWC Rate Case

Research evidence excerpt

American Water Works: Affordability Takes Center Stage in PAWC Rate Case

Final Order Below PAWC's Request

Pennsylvania American Water (PAWC) received a mixed outcome in its Pennsylvania base

rate case (Dockets R-2025-3057983 & 3058051). The company had initially sought a

revised $159.6 million annual revenue increase (13.7%) and a 10.95% ROE, citing more

than $1 billion of planned infrastructure investment, including PFAS treatment, lead

service line replacement, and broader system upgrades. However, after an extensive

proceeding involving seven parties, twelve public input hearings, more than 200

witnesses, and over 730 complaints, the Pennsylvania PUC concluded that the request

was too large given customer affordability concerns and the company's reduced

regulatory risk profile. Commissioners repeatedly highlighted that this was PAWC's

fourth base rate case in six years, noting that frequent filings, use of a fully projected

future test year, and DSIC (Distribution System Improvement Charge) recovery

mechanisms reduce regulatory lag and business risk relative to many utilities.

The Commission ultimately approved a rate increase of approximately $74.9 million,

44% below the company's original request, and established a 9.55% ROE. Chairman

DeFrank's proposal, which became the final outcome, started with the ALJ/I&E

recommended 9.70% ROE, applied a 25 bps reduction to reflect PAWC's lower risk from

frequent rate filings, and then added 10 bps in recognition of the company's successful

acquisition and rehabilitation of troubled water systems such as East Dunkard and Rock

Spring, as well as its efforts to provide safe drinking water to Dimock residents. While

commissioners acknowledged PAWC's constructive investments, operational