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Middlesex Water Files for Rate Hike to Recover Expenses

Zacks

Middlesex Water Company MSEX filed an application with the New Jersey Board of Public Utilities ("NJBPU") to increase water rates in its services areas. Through this rate filing, the company intends to recoup expenses made in its water and wastewater infrastructure since 2015.

The rate approved in 2015 increased annual revenues of the company by $5 million. Since the last rate filing, the company has invested nearly $92 million to upgrade and strengthen drinking water infrastructure in its service territories.

Rate Hike Keeps Investment Rolling

Rate hikes no doubt increase the monthly budgets of a household. However, to keep the essential supplies like water and wastewater services running 24×7, we need to make provisions for the expenses involved in smooth running of the operation.

If the rates are approved by the NJBPU without any alteration, the average residential customer using 17,000 gallons of water per quarter would increase 38 cents per day or $11.40 per month.

Last month, another water utility American Water Works AWK, a Zacks Rank #3 (Hold) stock filed a rate hike application with NJBPU seeking total revenue increase of $129.3 million. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Investment Holds the Key

The U.S. water infrastructure in getting old and regular investment is required to upgrade the existing water and wastewater systems. Some of the water mains are nearly a century old and require immediate replacement. Investment of billions of dollars is required to improve the water infrastructure.

Aqua America Inc. WTR, a water utility, has plans to make capital investments of more than $450 million in 2017 as part of an ambitious investment target of more than $1.2 billion in the 2017-2019 period. Connecticut Water Service Inc. CTWS aims to invest more than $150 million in the 2017-2019 period to strengthen its existing infrastructure.

So if the commission continues to support the regulated water utilities with justifiable rate hikes, it will assist the utilities to carry on with their infrastructure strengthening work.

Initiative to Improve Water Quality

The water utilities are trying to implement different methods and systems to improve the quality of drinking water. Middlesex Water Company has started ‘Water for Tomorrow’ initiative to enhance service quality, reliability and resiliency of water system for its increasing customer base.

This initiative of the company will include a supplemental water transmission pipeline, utilization of ozone to the surface water treatment process to improve water quality and additional elevated storage tanks to provide round the clock supply of potable water to its customers.

Price Movement

In last 12 months, Middlesex Water Company's stock has gained 27%, outperforming the 17% rally of the industry it belongs to.



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