West Virginia American Water Files Infrastructure Replacement Program Application

Proposed program would accelerate company’s infrastructure
investments to enhance water service reliability

CHARLESTON, W.Va.–(BUSINESS WIRE)–#infrastructure–West Virginia American Water filed an application today with the Public
Service Commission of West Virginia (PSC) seeking approval of an
Infrastructure Replacement Program (IRP). The purpose of an IRP is to
address the national challenge of aging infrastructure by directing
additional investment to areas where improvements are needed.

The company seeks cost recovery on $32.5 million of its planned $107
million of capital investments in 2016 and 2017 through the proposed IRP
with a separate charge on customers’ bills effective Jan. 1, 2017. If
granted, the charge would be calculated as a percentage of the total
monthly bill, representing an increase of 1.9 percent or 89 cents per
month for the typical residential customer using 3,204 gallons.

The IRP application is modeled after a statute enacted by the West
Virginia Legislature in 2015, which authorized the PSC to approve
expedited cost recovery of natural gas utility infrastructure projects
deemed just, reasonable and in the public interest. This type of
investment recovery mechanism will allow West Virginia American Water to
accelerate its water main replacement program.

“Pre-approved infrastructure replacement programs are recommended
regulatory practices for water utilities by the National Association of
Regulatory Commissioners and are currently in place in numerous states,
including here in West Virginia for gas utilities,” said West Virginia
American Water president Jeffrey McIntyre. “We believe the accelerated
infrastructure investment proposed in the IRP will strengthen our water
system and, over time, create real operational efficiencies and reduce
costs long-term for our customers.”

The scope of the proposed program is structured around seven categories
of facilities, including water mains, meters, valves, hydrants, and
certain plant, tank and booster station investments. The purpose is to
prudently invest in reinforcing, strengthening and providing resilience
to the transmission and distribution system. A detailed list of
individual infrastructure replacement projects organized by district is
included in the filing and outlines the specifics of the company’s plan
to invest $16.5 million. The planned upgrades will replace more than 22
miles of water main this year, along with hydrants, valves, manholes,
services and other qualifying projects.

The proposal includes multiple consumer protections, such as annual
reconciliations, annual caps, cumulative caps and earnings limits.
Charges stemming from this program would be calculated annually until
rolled into the company’s rates in a future rate case, at which time the
IRP charge would reset to “zero.”

“The true benefit of an IRP to our customers is the elimination of
large, cyclical rate increases that reflect cost recovery of multiple
years of company investments all at one time,” McIntyre said. “An IRP
also allows for an up-front regulatory review of our proposed
infrastructure replacement projects each year, and then provides a way
for customers who benefit from these investments to make very small
payments each month toward these investments.”

In its February 2016 rate order, the PSC acknowledged that its previous
use of a historic test year inadequately supported the company’s rate
base due to a combination of circumstances unique to West Virginia
American Water. To address the problem, the PSC authorized a rate
adjustment to account for the $150 million the company invested between
its last rate case and the date new rates went into effect. The order
also invited the company to seek an IRP in a separate filing as a way to
recover investments in a timely manner moving forward, with the goal of
positioning the company to continue to maintain and replace facilities,
maintain and improve service and secure the capital necessary to carry
out its public service mission.

West Virginia American Water recognizes that some families face economic
challenges and offers two assistance programs for customers who are
struggling to pay their bills. The company helps fund the West Virginia
Utility Assistance Program Dollar Energy Fund, through which eligible
customers may receive one grant per year, per household applied directly
to their water bill. The company also offers a Special Reduced Rate
Residential Service (SRRRS) program, which provides a 20 percent
discount on residential water rates year round for low-income customers
determined eligible by the West Virginia Department of Health & Human
Resources.

The PSC will conduct a review of West Virginia American Water’s IRP
application, and the company has requested that an order be issued
within a six-month period. If approved, the company anticipates filing
its annual IRP plan by July 1 of each year.

West Virginia American Water, a subsidiary of American Water (NYSE:
AWK), is the largest water utility in the state, providing high-quality
and reliable water services to approximately 550,000 people. Founded in
1886, American Water is the largest publicly traded U.S. water and
wastewater utility company. Marking its 130th anniversary this year, the
company employs more than 6,700 dedicated professionals who provide
regulated and market-based drinking water, wastewater and other related
services to an estimated 15 million people in 47 states and Ontario,
Canada. More information can be found at www.westvirginiaamwater.com.

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Contacts

West Virginia American Water
Laura Jordan, External Affairs Manager
Office:
304-340-2089
Mobile: 304-932-7158
Laura.Jordan@amwater.com
www.westvirginiaamwater.com

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