Rate Case Process

The rates in communities served by investor-owned utilities are closely regulated by public utility commissions.  They are the subject of a long, open and transparent process and in the end, the rates are set by the regulator.  This formal process for hearing rate requests includes informing the public; intervention by interested parties; presentation of evidence and hearings, testimony and rebuttal; orders from administrative law judges and rights to appeal.

Water utilities provide detailed information to the commission so there is a clear understanding of the actual cost of the service provided and of the investments needed to provide reliable water services.

The commission allows for rate increases only if the company can demonstrate that the capital invested was necessary and that the company is operating in an efficient manner.

A main driver of increasing rates is capital investment, or the money water providers need to repair and upgrade the water supply infrastructure.

Replacing aging infrastructure is a challenge the whole water industry faces. The Environmental Protection Agency (EPA) estimates that approximately $335 billion of capital spending will be necessary between 2007 and 2026 to replace aging infrastructure and to comply with quality standards to ensure quality water systems across the United States. In addition, another $300 to $400 billion will be required for wastewater.

American Water is committed to consistently providing customers with high-quality drinking water and reliable water and wastewater services.  For the foreseeable future, we estimate we will invest nearly a billion dollars annually to replace aging infrastructure.

Even though there is a significant cost to bring water to customer's taps, water is typically the cheapest commodity in the American household. To put this in perspective, in most of the states American Water serves, the water costs about or is less than one penny per gallon. Compared with other utilities or bottled water, it is a great value.

Download the Rate Case Process and Regulatory Compact PDF