- San Jose Water return on equity set at 8.80%.
- Water Cost of Capital Mechanism continued and increases return
on equity to 9.31%.
- Customers will benefit from a modest rate reduction.
The California Public Utilities Commission (CPUC) has adopted
the proposed decision in the cost of capital proceeding for San
Jose Water for the years 2022 through 2024.
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The final decision established an 8.80% return on equity, a
5.46% cost of debt, and a capital structure of 54.55% equity and
45.45% debt resulting in an overall rate of return of 7.28%. San
Jose Water was previously authorized for a return on equity of
8.90%, a 6.20% cost of debt, and a capital structure of 53.28%
equity and 46.72% debt — resulting in an overall rate of return of
7.64%.
“We appreciate the commission’s thoroughness in the review of
our application and its balanced outcome,” said San Jose Water Vice
President of Regulatory Affairs and Customer Service John B. Tang.
“We look forward to continuing to invest in our water system and
delivering on our public health mission to customers and
communities.”
Water Cost of Capital Mechanism
The CPUC also authorized continuation of the Water Cost of
Capital Mechanism (WCCM). The WCCM provides for an adjustment in
San Jose Water’s return on equity and cost of debt if the average
Moody’s Aa utility bond index rate between Oct. 1, 2021, and Sept.
30, 2022, varies by more than 100 basis points when compared to the
same period from the prior years. The index rate in that period
increased 103 basis points, thereby reaching the WCCM
threshold.
San Jose Water filed a Tier 2 Advice Letter to trigger the WCCM
on June 30, 2023. On July 31, 2023, the company expects to file a
Tier 1 Advice Letter to implement new rates. The new rates would be
effective on the date of the filing and will reflect the
WCCM-adjusted return on equity of 9.31%, a cost of debt of 5.26%,
and an overall rate of return of 7.47%.
Customer Rate Reduction
Had the WCCM-adjusted rate of return of 7.47% been in effect on
Jan. 1, 2023, it would have lowered the revenue requirement by
$400,000. Therefore, customer rates will be reduced to reflect the
applicable portion of the $400,000 prospectively as of July 31,
2023.
About San Jose Water
San Jose Water is the largest subsidiary of SJW Group (NYSE:
SJW). Founded in 1866, San Jose Water is an investor-owned public
utility and is one of the largest and most technically
sophisticated urban water systems in the United States. Serving
over 1 million people in the greater San Jose metropolitan area,
San Jose Water also provides services to other utilities, including
operations and maintenance, billing, and backflow testing. To learn
more about San Jose Water, visit www.sjwater.com.
About SJW Group
SJW Group is among the largest investor-owned pure-play water
and wastewater utilities in the United States, providing
life-sustaining and high-quality water service to nearly 1.5
million people. SJW Group’s locally led and operated water
utilities - San Jose Water Company in California, The Connecticut
Water Company in Connecticut, The Maine Water Company in Maine, and
SJWTX, Inc. (dba The Texas Water Company) in Texas - possess the
financial strength, operational expertise, and technological
innovation to safeguard the environment, deliver outstanding
service to customers, and provide opportunities to employees. SJW
Group remains focused on investing in its operations, remaining
actively engaged in its local communities, and delivering continued
sustainable value to its stockholders. For more information about
SJW Group, please visit www.sjwgroup.com.
Forward-Looking Statements
This release contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995, as
amended. Some of these forward-looking statements can be identified
by the use of forward-looking words such as “believes,” “expects,”
“estimates,” “anticipates,” “intends,” “seeks,” “approximately,”
“plans,” “projects,” “may,” “should,” “will,” or the negative of
those words or other comparable terminology". These forward looking
statements are only predictions and are subject to risks,
uncertainties, and assumptions that are difficult to predict.
These forward-looking statements involve a number of risks,
uncertainties and assumptions including, but not limited to, the
following factors: (1) the effect of water, utility, environmental
and other governmental policies and regulations, including
regulatory actions concerning rates, authorized return on equity,
authorized capital structures, capital expenditures and other
decisions; (2) changes in demand for water and other services; (3)
unanticipated weather conditions and changes in seasonality
including those affecting water supply and customer usage; (4) the
effect of the impact of climate change; (5) unexpected costs,
charges or expenses; (6) our ability to successfully evaluate
investments in new business and growth initiatives; (7)
contamination of our water supplies and damage or failure of our
water equipment and infrastructure; (8) the risk of work stoppages,
strikes and other labor-related actions; (9) catastrophic events
such as fires, earthquakes, explosions, floods, ice storms,
tornadoes, hurricanes, terrorist acts, physical attacks,
cyber-attacks, epidemic, or similar occurrences; (10) changes in
general economic, political, business and financial market
conditions; (11) the ability to obtain financing on favorable
terms, which can be affected by various factors, including credit
ratings, changes in interest rates, compliance with regulatory
requirements, compliance with the terms and conditions of our
outstanding indebtedness, and general market and economic
conditions; and (12) legislative, and general market and economic
developments. The risks, uncertainties and other factors may cause
the actual results, performance or achievements of SJW Group to be
materially different from any future results, performance or
achievements expressed or implied by such forward-looking
statements.
Results for a quarter are not indicative of results for a full
year due to seasonality and other factors. Other factors that may
cause actual results, performance or achievements to materially
differ are described in SJW Group’s most recent Annual Report on
Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on
Form 8-K filed with the SEC. Forward-looking statements are not
guarantees of performance, and speak only as of the date made. SJW
Group undertakes no obligation to publicly update or revise any
forward-looking statement, whether as a result of new information,
future events or otherwise.
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San Jose Water Contacts: John B. Tang, P.E. Vice
President of Regulatory Affairs and Customer Service 408-279-7933
John.Tang@sjwater.com
SJW Group Contacts: Andrew F. Walters Chief Financial
Officer and Treasurer 408-279-7818 Andrew.Walters@sjwater.com
Daniel J. Meaney, APR Director of Corporate and External
Communications 860-664-6016 Daniel.Meaney@ctwater.com
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