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What changed in American Water Works's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of American Water Works's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+627 added−652 removedSource: 10-K (2025-02-19) vs 10-K (2024-02-14)

Top changes in American Water Works's 2024 10-K

627 paragraphs added · 652 removed · 430 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

113 edited+50 added−79 removed91 unchanged
Biggest changePresented in the table below is a geographic summary of the Regulated Businesses’ operating revenues and the number of customers the Company serves, by type of service, for and as of the year ended December 31, 2023: Operating Revenues (in millions) Number of Customers (in thousands) Water (a) Wastewater Total % of Total Water Wastewater Total % of Total Pennsylvania $ 810 $ 155 $ 965 24.6 % 683 98 781 22.4 % New Jersey 908 57 965 24.6 % 668 64 732 21.0 % Missouri 430 20 450 11.5 % 483 24 507 14.5 % Illinois 366 61 427 10.9 % 299 72 371 10.6 % California 300 4 304 7.8 % 190 3 193 5.5 % Total—Top Five States (b) 2,814 297 3,111 79.4 % 2,323 261 2,584 74.1 % Other (c) 779 30 809 20.6 % 865 37 902 25.9 % Total Regulated Businesses $ 3,593 $ 327 $ 3,920 100.0 % 3,188 298 3,486 100.0 % (a) Includes other operating revenues consisting primarily of miscellaneous utility charges, fees and rents.
Biggest changePresented in the table below is a geographic summary of the Regulated Businesses’ operating revenues and the number of customers the Company serves, by type of service, for and as of the year ended December 31, 2024: Operating Revenues (in millions) Number of Customers (in thousands) Water (a) Wastewater Total % of Total Water Wastewater Total % of Total New Jersey $ 990 $ 61 $ 1,051 24.5 % 672 70 742 20.9 % Pennsylvania 872 167 1,039 24.2 % 688 115 803 22.6 % Missouri 487 21 508 11.8 % 485 24 509 14.4 % Illinois 359 73 432 10.1 % 300 77 377 10.6 % California 342 4 346 8.1 % 191 3 194 5.5 % Total—Top Five States (b) 3,050 326 3,376 78.6 % 2,336 289 2,625 74.0 % Other (c) 883 37 920 21.4 % 881 40 921 26.0 % Total Regulated Businesses $ 3,933 $ 363 $ 4,296 100.0 % 3,217 329 3,546 100.0 % (a) Includes other operating revenues consisting primarily of miscellaneous utility charges, fees and rents.
The Company believes that continued R&D activities are critical for providing safe, reliable and affordable services, as well as maintaining its leadership position in the industry, which provides the Company with a competitive advantage as it seeks business and operational growth.
The Company believes that continued R&D activities are critical for providing safe, clean, reliable and affordable services, as well as maintaining its leadership position in the industry, which provides the Company with a competitive advantage as it seeks business and operational growth.
The Corporate Governance Guidelines and the charters for each of the standing committees of the Board of Directors, together with the American Water Code of Ethics and additional information regarding the Company’s corporate governance, are available on the Company’s Investor Relations website , and will be made available, without charge, in print to any shareholder who requests such documents from the Company’s Investor Relations Department in writing by mail at American Water Works Company, Inc., 1 Water Street, Camden, NJ, 08102. 21 Table of Contents
The Corporate Governance Guidelines and the charters for each of the standing committees of the Board of Directors, together with the American Water Code of Ethics and additional information regarding the Company’s corporate governance, are available on the Company’s Investor Relations website , and will be made available, without charge, in print to any shareholder who requests such documents from the Company’s Investor Relations Department in writing by mail at American Water Works Company, Inc., 1 Water Street, Camden, NJ, 08102. 20 Table of Contents
Specific authority might differ from state to state, but in most states, PUCs review and approve rates charged to customers, accounting treatments, long-term financing programs and cost of capital, operation and maintenance (“O&M”) expenses, capital expenditures, taxes, affiliated transactions and relationships, reorganizations, mergers and acquisitions, and dispositions, along with imposing certain penalties or granting certain incentives.
Specific authority might differ from state to state, but in most states, PUCs review and approve rates charged to customers, accounting treatments, long-term financing applications and cost of capital, operation and maintenance (“O&M”) expenses, capital expenditures, taxes, affiliated transactions and relationships, reorganizations, mergers and acquisitions, and dispositions, along with imposing certain penalties or granting certain incentives.
The remaining 14 contracts with the U.S. government are subject to annual price adjustments under a mechanism called “Economic Price Adjustment.” All 18 contracts could be terminated, in whole or in part, prior to the end of the 50-year term for convenience of the U.S. government, or as a result of default or non-performance by the MSG subsidiary performing the contract.
The remaining 15 contracts with the U.S. government are subject to annual price adjustments under a mechanism called “Economic Price Adjustment.” All 18 contracts could be terminated, in whole or in part, prior to the end of the 50-year term for convenience of the U.S. government, or as a result of default or non-performance by the MSG subsidiary performing the contract.
The prioritization of LSL removal is dependent on several factors, including the Company’s planned water main and service line renewal projects, adjacent projects by municipalities or other utilities, LCR compliance monitoring results, and cooperation with its customers with respect to replacing the customer-owned portion of the LSL as necessary.
The prioritization of LSL removal is dependent on several factors, including the Company’s planned water main and service line renewal projects, adjacent projects by municipalities or other utilities, LCRI compliance monitoring results, and cooperation with its customers with respect to replacing the customer-owned portion of the LSL as necessary.
National Drinking Water Advisory Council, the Lead Service Line Replacement Collaborative, and the American Water Works Association, the Company’s preferred approach is to replace the entire external LSL if lead is found on either the Company or customer portion of the service line; full LSL replacement is also consistent with the LCRR and proposed LCRI.
National Drinking Water Advisory Council, the Lead Service Line Replacement Collaborative, and the American Water Works Association, the Company’s preferred approach is to replace the entire external LSL if lead is found on either the Company or customer portion of the service line; full LSL replacement is also consistent with the LCRR and final LCRI.
Examples of the Company’s efforts include: • monitoring impacts of environmental pathogen loads and removal through wastewater systems; • characterizing factors that contribute to the formation of potentially carcinogenic disinfection by-products to define best practices for their mitigation; 14 Table of Contents • advancing the science on holistic management strategies to improve distribution system water quality further; • using its research findings to communicate information to its customers regarding potential actions to limit occurrences of Legionella in their buildings; in this regard, the Centers for Disease Control and Prevention statistics indicate that water-associated disease from Legionella is on the rise, with exposure typically associated with customer-owned plumbing systems in large buildings; • defining a framework to support management or possible future regulation of opportunistic pathogens; • developing expanded monitoring methods for short-chain and fluorinated replacement PFAS; • systematically investigating PFAS removal from a variety of water matrices using established and emerging treatment technologies; • leading a PFAS risk communication strategy for the water sector; • using innovative technologies (e.g., satellite imagery) for early detection and response to algal blooms to manage public health impacts and prevent taste and odor events before cyanotoxins get into the water treatment plant; • monitoring of taste and odor issues that impact customer satisfaction using expanded analytical methods to detect compounds, and evaluating and recommending treatment practices; • implementing water source assessment tools, including sensors and data analytics, to evaluate and track chemical storage and aid in the identification of source water contamination events; • developing methodology and advanced measurement techniques for contaminants of emerging concern to investigate transport, occurrence and treatment; and • implementing activated carbon, biofiltration and ion exchange treatment to seek to control contaminants of emerging concern.
Examples of the Company’s efforts include: • monitoring impacts of environmental pathogen loads and removal through wastewater systems; • characterizing factors that contribute to the formation of potentially carcinogenic disinfection by-products to define best practices for their mitigation; • advancing the science on holistic management strategies to improve distribution system water quality further; • using its research findings to communicate information to its customers regarding potential actions to limit occurrences of Legionella in their buildings; in this regard, the Centers for Disease Control and Prevention statistics indicate that water-associated disease from Legionella is on the rise, with exposure typically associated with customer-owned plumbing systems in large buildings; • defining a framework to support management or possible future regulation of opportunistic pathogens; • developing expanded monitoring methods for short-chain and fluorinated replacement PFAS; • systematically investigating PFAS removal from a variety of water matrices using established and emerging treatment technologies; • leading a PFAS risk communication strategy for the water sector and sharing utility perspectives with external stakeholders through regional, national and international conferences; • using innovative technologies (e.g., satellite imagery) for early detection and response to algal blooms to manage public health impacts and prevent taste and odor events before cyanotoxins get into the water treatment plant; 14 Table of Contents • monitoring of taste and odor issues that impact customer satisfaction using expanded analytical methods to detect compounds, and evaluating and recommending treatment practices; • implementing water source assessment tools, including sensors and data analytics, to evaluate and track chemical storage and aid in the identification of source water contamination events; • developing methodology and advanced measurement techniques for contaminants of emerging concern to investigate transport, occurrence and treatment; and • implementing activated carbon, biofiltration and ion exchange treatment to seek to control contaminants of emerging concern.
However, the Company’s Regulated Businesses do face increasing competition from governmental agencies, other investor-owned utilities, large industrial customers with the ability to provide their own water supply/treatment process and strategic buyers that are entering new markets and/or making strategic acquisitions.
However, the Company’s Regulated Businesses face competition from governmental agencies, other investor-owned utilities, large industrial customers with the ability to provide their own water supply/treatment process and strategic buyers that are entering new markets and/or making strategic acquisitions.
It is also the Company’s strategy to expand the use of these mechanisms in areas where they may not currently apply and enhance certain mechanisms where they already exist. 6 Table of Contents Acquisitions and Strategic Growth The U.S. water and wastewater industries include investor-owned systems as well as municipal systems that are owned and operated by local governments or governmental subdivisions.
It is also the Company’s strategy to expand the use of these mechanisms in areas where they may not currently apply and enhance certain mechanisms where they already exist. Acquisitions and Strategic Growth The U.S. water and wastewater industries include investor-owned systems as well as municipal systems that are owned and operated by local governments or governmental subdivisions.
For more than three decades from its inception, American Water’s R&D program has evolved into an industry-leading effort and has achieved numerous advancements in the science of drinking water, wastewater, and desalination.
For more than four decades from its inception, American Water’s R&D program has evolved into an industry-leading effort and has achieved numerous advancements in the science of drinking water, wastewater, and desalination.
A holding company originally incorporated in Delaware in 1936, the Company employs approximately 6,500 professionals who provide drinking water, wastewater and other related services to over 14 million people in 24 states.
A holding company originally incorporated in Delaware in 1936, the Company employs approximately 6,700 professionals who provide drinking water, wastewater and other related services to over 14 million people in 24 states.
Through laboratory and industry resources and the team’s expertise, efforts are focused on contaminants of emerging concern, including but not limited to PFAS, Legionella, cyanotoxin-forming algal blooms, a variety of pathogens (for example, COVID-19, Cryptosporidium, Giardia, enteric viruses, and various bacteria), microbial indicators and disinfection byproducts.
Through laboratory and industry resources and the team’s expertise, efforts are focused on contaminants of emerging concern, including but not limited to PFAS, Legionella, cyanotoxin-forming algal blooms, a variety of pathogens (for example, Cryptosporidium, Giardia, viruses, and various bacteria), microbial indicators and disinfection byproducts.
In California, where the state has recently experienced a multi-year drought, the Company utilizes multiple water supply options including numerous ground water wells in multiple aquifers as well as various long-term purchase water agreements with regional water suppliers to optimize supplies while assuring resiliency during dry years.
In California, where the state recently experienced a multi-year drought, the Company utilizes multiple water supply options including numerous ground water wells in multiple aquifers as well as various long-term purchase water agreements with regional water suppliers to optimize supplies while seeking resiliency during dry years.
Four of MSG’s current contracts require such capital project financing, which the Company is currently addressing through internal sources of liquidity. 10 Table of Contents The contract price for four of MSG’s contracts with the U.S. government is subject to redetermination two years after commencement of operations, and every three years thereafter.
Four of MSG’s current contracts require such capital project financing, which the Company is currently addressing through internal sources of liquidity. The contract price for three of MSG’s contracts with the U.S. government is subject to redetermination two years after commencement of operations, and every three years thereafter.
For more information, see Item 3—Legal Proceedings—Alternative Water Supply in Lieu of Carmel River Diversions and Note 16—Commitments and Contingencies—Contingencies—Alternative Water Supply in Lieu of Carmel River Diversions, in the Notes to the Consolidated Financial Statements. Wastewater services involve the collection of wastewater from customers’ premises through sewer lines.
For more information, see Item 3—Legal Proceedings—Alternative Water Supply in Lieu of Carmel River Diversions and Note 16—Commitments and Contingencies—Contingencies—Alternative Water Supply in Lieu of Carmel River Diversions, in the Notes to the Consolidated Financial Statements. 6 Table of Contents Wastewater services involve the collection of wastewater from customers’ premises through sewer lines.
The Company believes that its operations are materially in compliance with, and in many cases surpass, minimum standards required by applicable environmental laws and regulations. 11 Table of Contents The Company’s operations also involve the use, storage and disposal of hazardous substances and wastes.
The Company believes that its operations are materially in compliance with, and in many cases surpass, minimum standards required by applicable environmental laws and regulations. The Company’s operations also involve the use, storage and disposal of hazardous substances and wastes.
Typically, the Company does not own the water, which is held in public trust and is allocated to the Company through contracts, permits and allocation rights granted by federal and state or multi-state agencies or through the ownership of water rights pursuant to local law.
Typically, the Company does not own the water. The water the Company treats and delivers is held in public trust and is allocated to the Company through contracts, permits and allocation rights granted by federal and state or multi-state agencies or through the ownership of water rights pursuant to local law.
Contaminants of Emerging Concern Contaminants of emerging concern include numerous chemicals such as PFAS, pharmaceuticals, personal care products, pesticides, herbicides, antibiotic resistant bacteria (ARB), antibiotic resistant genes (ARG), endocrine disrupting compounds, microplastics and industrial chemicals, as well as certain naturally occurring microbes, such as bacteria, viruses and parasites, which have been detected in drinking water supplies, for which the risk to the public’s health is not fully understood and/or has not been assessed.
Contaminants of Emerging Concern Contaminants of emerging concern include numerous chemicals such as PFAS, pharmaceuticals, personal care products, pesticides, herbicides, antibiotic resistant bacteria, antibiotic resistant genes, endocrine disrupting compounds, microplastics and industrial chemicals, as well as certain naturally occurring microbes, such as bacteria, viruses and parasites, which may be detected in drinking water supplies, for which the risk to the public’s health is not fully understood and/or has not been assessed.
Total Rewards In order to attract, retain and motivate a skilled, high-performing and diverse workforce, American Water provides a comprehensive and highly competitive Total Rewards program, including base pay, APP, long-term performance plan compensation for certain leadership positions, and a wide range of benefits consisting of, among others: medical, prescription, dental, vision, life and disability insurance coverage, a retirement savings plan, an employee stock purchase plan, educational assistance, paid time off through holidays and vacation and sick time.
Total Rewards In order to attract, retain and motivate a skilled and high-performing workforce, American Water provides a comprehensive and highly competitive Total Rewards program, including base pay, Annual Performance Plan (“APP”) for all employees, long-term performance plan compensation for certain leadership positions, and a wide range of benefits consisting of, among others, medical, prescription, dental, vision, life and disability insurance coverage, a retirement savings plan, an employee stock purchase plan, educational assistance, paid time off through holidays and vacation and sick time.
Regulated Businesses The Company’s primary business involves the ownership of utilities that provide water and wastewater services to residential, commercial, industrial, public authority, fire service and sale for resale customers. The Company’s utilities operate in approximately 1,700 communities in 14 states in the United States, with 3.5 million active customers in its water and wastewater networks.
Regulated Businesses The Company’s primary business involves the ownership of utilities that provide water and wastewater services to residential, commercial, industrial, public authority, fire service and sale for resale customers. The Company’s utilities operate in 14 states in the United States, with 3.5 million active customers in its water and wastewater networks.
In addition, from 2024 to 2028, the Company’s capital investment in treatment plants, storage tanks and other key, above-ground facilities is expected to increase, further seeking to address infrastructure renewal, resiliency, water quality, operational efficiency, technology and innovation, and emerging regulatory compliance needs.
In addition, from 2025 to 2029, the Company’s capital investment in treatment plants, storage tanks and other key, above-ground facilities is expected to increase, further seeking to address infrastructure renewal, resiliency, water quality, operational efficiency, technology and innovation, and emerging regulatory compliance needs.
Prior to joining the Company, since 2014, Mr. Griffith served as Managing Director, Mergers and Acquisitions, for Bank of America Securities’ Global Regulated Utilities and Renewable Energy practice. Prior to joining Bank of America Securities, from 2008 to 2014, Mr.
Griffith served as Managing Director, Mergers and Acquisitions, for Bank of America Securities’ Global Regulated Utilities and Renewable Energy practice. Prior to joining Bank of America Securities, from 2008 to 2014, Mr.
In addition to succession planning for executive and senior leadership roles, in 2023, the Company conducted local and enterprise-wide talent reviews, identifying top and emerging talent with a focus on diversity, strengths, gaps and development needs against the critical skills needed for certain roles.
In addition to succession planning for executive and senior leadership roles, during 2024, the Company conducted local and enterprise-wide talent reviews, identifying top and emerging talent with a focus on strengths, gaps and development needs against the critical skills needed for certain roles.
For 2023, the Company’s employee turnover rate, which the Company defines as the ratio of the number of separated employees to the 12-month average headcount during 2023, was 11.5%, down from 12.3% in 2022. American Water seeks to reduce regrettable employee turnover by assessing the effectiveness of weCARE and through its efforts to foster the Company’s employee experience.
For 2024, the Company’s annualized employee turnover rate, which the Company defines as the ratio of the number of separated employees to the 12-month average headcount during 2024, was 10.5%, down from 11.5% in 2023. American Water seeks to reduce regrettable employee turnover by assessing the effectiveness of weCARE and through its efforts to foster the Company’s employee experience.
As part of its ongoing water main replacement and service line renewal projects, and in accordance with applicable state regulations and anticipation of updated federal regulation, the Company has been replacing lead service lines (“LSLs”) for many years in accordance with current scientific guidance.
As part of its ongoing water main replacement and service line renewal projects, and in accordance with applicable state regulations and anticipation of updated federal regulation, the Company has been replacing LSLs for many years in accordance with current scientific guidance.
Board of Directors Oversight The Board of Directors oversees the Company’s strategy and performance related to sustainability through four standing committees: • The Safety, Environmental, Technology and Operations Committee has oversight and responsibility with respect to, among other things: water quality and emerging contaminants; operational matters and functions; environmental and climate-related matters; and physical security and cybersecurity . • The Audit, Finance and Risk Committee has oversight and responsibility of, among other things: the Company’s risk assessment and enterprise risk management; the Company’s financial statements and accounting; the independent auditor; internal audit and controls; and ethics and compliance matters . • The Executive Development and Compensation Committee oversees, among other things: the Company’s human capital management and ID&E programs; culture and related engagement with employees; and executive development, succession and compensation. • The Nominating/Corporate Governance Committee has oversight and responsibility with respect to, among other things: corporate governance; Board and committee membership, leadership and composition; director nominations and succession; and director education.
Board of Directors Oversight The Board of Directors oversees the Company’s strategy and performance related to sustainability through its four standing committees: • The Safety, Environmental, Technology and Operations Committee (the “SETO Committee”) has oversight and responsibility with respect to, among other things: water quality and emerging contaminants; operational matters and functions; environmental and climate-related matters; and physical security and cybersecurity . • The Audit, Finance and Risk Committee has oversight and responsibility with respect to, among other things: the Company’s risk assessment and enterprise risk management; the Company’s financial statements and accounting; the Company’s independent auditor; internal audit and controls; and ethics and compliance matters . • The Executive Development and Compensation Committee (“ED&CC”) oversees, among other things: the Company’s human capital management; culture and related engagement with employees; and executive development, succession and compensation. • The Nominating/Corporate Governance Committee (the “Nominating Committee”) has oversight and responsibility with respect to, among other things: corporate governance; Board and committee membership, leadership and composition; director independence, nominations and succession; and director education.
Inclusion, Diversity and Equity The Company believes that employees are at their best when they can bring their full selves to work every day. This belief is the central component of the Company’s “Beautifully Different” philosophy, which recognizes, embraces and celebrates the uniqueness of its employees.
The Company believes that employees are at their best when they can bring their authentic selves to work every day. This belief is the central component of the Company’s “Beautifully Different” philosophy, which recognizes, embraces and celebrates the uniqueness of its employees.
Increasingly stringent environmental, health and safety, cybersecurity and water quality and water accountability regulations, the amount of infrastructure in need of significant capital investment, financial challenges and industry legislation are several elements, among others, that may drive more municipalities to consider selling their water and wastewater assets. Sale of New York American Water Company, Inc.
Increasingly stringent environmental, health and safety, cybersecurity and water quality and water accountability regulations, the amount of infrastructure in need of significant capital investment, financial challenges and industry legislation are several elements, among others, that may drive more municipalities to consider selling their water and wastewater assets.
For example, the Company’s water and wastewater treatment facilities store and use gaseous chlorine as well as other chemicals that generate wastes that require proper handling and disposal under applicable environmental requirements. The Company also could incur remedial costs in connection with any contamination relating to its operations or facilities or its off-site disposal of waste.
For example, the Company’s water and wastewater treatment facilities store and use a variety of chemicals, including, for example, gaseous chlorine, that generate waste and require proper handling and disposal under applicable environmental requirements. The Company also could incur remedial costs in connection with any contamination relating to its operations or facilities or its off-site disposal of waste.
The EPA also estimates, as of 2017, that there are over 50,000 community water systems and over 15,000 community wastewater systems in the United States, with approximately 80% of the community water systems serving a population of 3,000 or less.
The EPA also estimates, as of 2024, that there are over 50,000 community water systems and, as of 2022, over 17,000 community wastewater systems in the United States, with approximately 80% of the community water systems serving a population of approximately 3,000 or less.
During 2024, 21 of the Company’s collective bargaining agreements will expire in accordance with their terms and the Company expects to be able to negotiate these agreements during the year.
During 2025, 25 of the Company’s collective bargaining agreements will expire in accordance with their terms and the Company expects to be able to negotiate these agreements during the year.
The Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (“CERCLA”), authorizes the EPA, and comparable state laws authorize state environmental authorities, to issue orders and bring enforcement actions to compel responsible parties to investigate and take remedial actions at any site that is determined to present an actual or potential threat to human health or the environment because of an actual or threatened release of one or more hazardous substances.
CERCLA authorizes the EPA, and comparable state laws authorize state environmental authorities, to issue orders and bring enforcement actions to compel responsible parties to investigate and take remedial actions at any site that is determined to present an actual or potential threat to human health or the environment because of an actual or threatened release of one or more hazardous substances.
Environmental, Health and Safety, Water Quality and Other Regulation The Company’s water and wastewater operations, including the services provided by its Regulated Businesses, MSG and CSG, are subject to extensive federal, state and local laws and regulations governing the protection of the environment, health and safety, the provision of water and wastewater services, particularly with respect to the quality of water the Company delivers to its customers, and the manner in which it collects, treats, discharges, recycles and disposes of wastewater.
Competition MSG faces competition primarily from American States Water Company. 10 Table of Contents Environmental, Health and Safety, Water Quality and Other Regulation The Company’s water and wastewater operations, including the services provided by its Regulated Businesses, MSG and CSG, are subject to extensive federal, state and local laws and regulations governing the protection of the environment, health and safety, the provision of water and wastewater services, particularly with respect to the quality of water the Company delivers to its customers, and the manner in which it collects, treats, discharges, recycles and disposes of wastewater.
The Company reports the results of the services provided by its utilities in the Regulated Businesses segment. Operating revenues for the Regulated Businesses were $3,920 million for 2023, $3,505 million for 2022 and $3,384 million for 2021, accounting for 93%, 92% and 86%, respectively, of the Company’s total operating revenues for the same periods.
The Company reports the results of the services provided by its utilities in the Regulated Businesses segment. Operating revenues for the Regulated Businesses were $4,296 million for 2024, $3,920 million for 2023 and $3,505 million for 2022, accounting for 92%, 93% and 92%, respectively, of the Company’s total operating revenues for the same periods.
The Company’s Total Rewards offerings also include a health and wellness program and a menu of additional voluntary benefits. 18 Table of Contents All the Company’s employees, including those who are union-represented, participate in the APP to promote alignment between performance-based compensation and the achievement of the Company’s short-term performance goals.
The Company’s Total Rewards offerings also include a health and wellness program, paid family leave benefit and a menu of additional voluntary benefits. 17 Table of Contents All the Company’s employees, including those who are union-represented, participate in the APP to promote the alignment of performance-based compensation with the achievement of the Company’s short-term performance goals.
The Company has proactively improved its pipe renewal rate from a 250-year replacement cycle in 2009 to an approximate 125-year replacement cycle by 2028, which it anticipates will enable the Company to replace nearly 2,000 miles of mains and collection pipes between 2024 and 2028.
The Company is proactively improving its pipe renewal rate from a 250-year replacement cycle in 2009 to an approximate 125-year replacement cycle by 2029, which it anticipates will enable the Company to replace nearly 2,000 miles of mains and collection pipes between 2025 and 2029.
According to the most recent study by the U.S. Environmental Protection Agency (“EPA”), as of 2017, approximately 84% of the water market is served by municipal systems and approximately 98% of the country’s wastewater systems are government owned.
According to the U.S. Environmental Protection Agency (“EPA”), as of 2024, approximately 84% of the water market is served by municipal systems and, as of 2022, approximately 98% of the country’s wastewater systems are government owned.
Hardwick also served as Interim Chief Executive Officer. Prior to joining the Company, Ms. Hardwick served as the Executive Vice President and Chief Financial Officer of Vectren Corporation, which was sold to CenterPoint Energy, Inc., an electric and natural gas utility, on February 1, 2019. Ms.
Hardwick served as the Executive Vice President and Chief Financial Officer of Vectren Corporation (“Vectren”), which was sold to CenterPoint Energy, Inc., an electric and natural gas utility (“CenterPoint”), on February 1, 2019. Ms.
In order to ensure that the Company has adequate water supply, it uses long-term planning processes and maintains contingency plans to minimize the potential impact on service caused by climate variability and a wide range of weather fluctuations. The Company reviews current climate science and global models related to temperature, precipitation and sea level rise on an ongoing basis.
To support the maintenance of adequate water supplies, the Company uses long-term planning processes and maintains contingency plans to minimize the potential impact on service caused by climate variability and a wide range of weather fluctuations. The Company reviews current climate science and global models related to temperature, precipitation and sea level rise on an ongoing basis.
The Company estimates that it will make capital expenditures of approximately $900 million over the next five years, and $200 million in 2024, to address water quality issues; most of which are focused on compliance with environmental laws and regulations.
The Company estimates that it will make capital expenditures of approximately $1.4 billion over the next five years, and $275 million in 2025, to address water quality issues; most of which are focused on compliance with environmental laws and regulations.
Two of the Company’s jurisdictions, California and Illinois, have adopted revenue stability mechanisms which permit the Company to collect state PUC-authorized revenue for a given period that is not tied to the volume of water sold during that period, thereby lessening the impact of weather variability. See —Regulation and Rate Making for additional information regarding revenue stability mechanisms.
Two of the Company’s jurisdictions, California and Illinois, have adopted revenue stability mechanisms which permit the Company to collect a portion or all of state PUC-authorized revenue for a given period that is not tied to the volume of water sold during that period, thereby lessening the impact of weather variability.
Hardwick joined Vectren Corporation in January 2000 and served in a variety of positions, including: Vice President, Controller and Assistant Treasurer; Senior Vice President, Finance; Senior Vice President, Chief Financial Officer; and Executive Vice President and Chief Financial Officer. Prior to joining Vectren, Ms. Hardwick was Assistant Corporate Comptroller at Cinergy Corp.
Hardwick joined Vectren in January 2000 and served in a variety of positions, including: Vice President, Controller and Assistant Treasurer; Senior Vice President, Finance; Senior Vice President, Chief Financial Officer; and Executive Vice President and Chief Financial Officer. Prior to joining Vectren, Ms. Hardwick was Assistant Corporate Comptroller at Cinergy Corp. She began her career with Arthur Andersen & Co.
Through these talent review processes, business leaders identified a pool of high-potential employees, which will assist the Company in supporting their career goals and aspirations and promote more effective employee experience and talent retention efforts.
Through these talent review processes, business leaders identified a pool of high-potential employees to allow the Company to support their career goals and aspirations, and to promote more effective employee experience and talent retention efforts.
As of December 31, 2023, approximately 47% of the Company’s workforce was represented under 73 collective bargaining agreements with 14 different unions. In 2023, the Company renegotiated 21 collective bargaining agreements that were set to expire during the year.
As of December 31, 2024, approximately 46% of the Company’s workforce was represented under 75 collective bargaining agreements with 14 different unions. In 2024, the Company renegotiated 26 collective bargaining agreements that were set to expire during the year.
Presented in the table below is a breakout of the Company’s Regulated Businesses’ operating revenue by class of customer, for the years ended December 31, 2023, 2022 and 2021: 2023 2022 2021 (In millions) Revenue Percentage of Revenue Revenue Percentage of Revenue Revenue Percentage of Revenue Water services: Residential $ 2,143 55 % $ 1,941 55 % $ 1,935 57 % Commercial 798 20 % 710 20 % 676 20 % Fire service 158 4 % 147 4 % 151 5 % Industrial 167 4 % 153 4 % 141 4 % Public and other water (a) 284 7 % 267 8 % 239 7 % Wastewater 327 8 % 242 7 % 208 6 % Other (b) 43 2 % 45 2 % 34 1 % Total $ 3,920 100 % $ 3,505 100 % $ 3,384 100 % (a) Includes water revenues from public authorities and other utilities, community water systems under bulk contracts and alternative revenue programs.
Presented in the table below is a breakout of the Company’s Regulated Businesses’ operating revenue by class of customer, for the years ended December 31, 2024, 2023 and 2022: 2024 2023 2022 (In millions) Revenue Percentage of Revenue Revenue Percentage of Revenue Revenue Percentage of Revenue Water services: Residential $ 2,349 55 % $ 2,143 55 % $ 1,941 55 % Commercial 885 21 % 798 20 % 710 20 % Fire service 164 4 % 158 4 % 147 4 % Industrial 184 4 % 167 4 % 153 4 % Public and other water (a) 301 7 % 284 7 % 267 8 % Wastewater 363 8 % 327 8 % 242 7 % Other (b) 50 1 % 43 2 % 45 2 % Total $ 4,296 100 % $ 3,920 100 % $ 3,505 100 % (a) Includes water revenues from public authorities and other utilities, community water systems under bulk contracts and alternative revenue programs.
Information contained on the Company’s website and its Investor Relations website, including its Sustainability Report, its Inclusion, Diversity & Equity Annual Report, and other reports or documents, and the information and data on the Company’s diversity website, https://Diversityataw.com , shall not be deemed incorporated into, or to be a part of, this report, and any website references included herein are not intended to be made through active hyperlinks.
Information contained on the Company’s websites, including its Sustainability Report and other reports or documents, shall not be deemed incorporated into, or to be a part of, this report, and any website references included herein are not intended to be made through active hyperlinks.
In connection with supply planning for most surface or groundwater sources, the Company employs models to determine safe yields under different rainfall and drought conditions. Surface and ground water levels are routinely monitored so that supply capacity deficits may, to the extent possible, be predicted and mitigated through demand management and additional supply development.
In connection with supply planning for most surface or groundwater sources, the Company employs models to determine safe yields under different rainfall and drought conditions. Surface and ground water levels are routinely monitored in an effort to predict and mitigate supply capacity deficits through demand management and additional supply development.
Hardwick has served on the Board of Directors of New Jersey Resources Corporation, a diversified energy services company, where she is currently serving a three-year term expiring in 2024, and since January 1, 2021, she has served as a member of its Audit Committee. Ms.
Ms. Hardwick is a Certified Public Accountant. Since September 2020, Ms. Hardwick has served on the Board of Directors of New Jersey Resources Corporation, a diversified energy services company, where she is currently serving a three-year term expiring in 2027, and since January 1, 2021, she has served as a member of its Audit Committee. John C. Griffith 58 President.
Hardwick has served as President and Chief Executive Officer of the Company since February 2, 2022. She joined the Company in June 2019 as the Company's Executive Vice President—Finance and served as the Company's Chief Financial Officer from July 2019 until May 16, 2022. From December 7, 2021 until January 31, 2022, Ms.
She joined the Company in June 2019 as the Company’s Executive Vice President—Finance and served as the Company’s Chief Financial Officer from July 2019 until May 16, 2022. From December 7, 2021 until January 31, 2022, Ms. Hardwick also served as Interim Chief Executive Officer. Prior to joining the Company, Ms.
Griffith served as the Chief Executive Officer of HighWave Energy, a renewable fuels start-up company, and from 1995 to 2008, he served in various capacities of increasing responsibility with Merrill Lynch & Co. Melanie M. Kennedy 50 Executive Vice President, Chief Human Resources Officer. Ms.
Griffith served as the Chief Executive Officer of HighWave Energy, a renewable fuels start-up company, and from 1995 to 2008, he served in various capacities of increasing responsibility with Merrill Lynch & Co. David M. Bowler 46 Executive Vice President and Chief Financial Officer. Mr.
Although it is difficult to project the ultimate costs of complying with the above or other pending or future requirements, the Company expects current cost requirements under the Safe Drinking Water Act and other similar laws to be recoverable through the regulatory process and therefore compliance costs are not expected to have a material impact on its operations or financial condition.
The Company does not anticipate that any such regulations, if enacted, will require implementation in 2025. 11 Table of Contents Although it is difficult to project the ultimate costs of complying with the above or other pending or future requirements, the Company expects current cost requirements under the Safe Drinking Water Act and other similar laws to be recoverable through the regulatory process and therefore compliance costs are not expected to have a material impact on its operations or financial condition.
Presented in the table below is the number of water and wastewater customers the Company’s Regulated Businesses’ served by class of customer as of December 31, 2023, 2022 and 2021, which represents approximately 14 million people served as of December 31, 2023: 2023 2022 2021 (In thousands) Water Wastewater Water Wastewater Water Wastewater Residential 2,893 279 2,870 270 2,972 245 Commercial 221 18 219 17 225 15 Fire service 4 — 51 — 52 — Industrial 52 — 4 — 4 — Public and other (a) 18 1 17 1 16 1 Total (b) 3,188 298 3,161 288 3,269 261 (a) Includes public authorities and other utilities and community water and wastewater systems under bulk contracts.
Presented in the table below is the number of water and wastewater customers the Company’s Regulated Businesses served by class of customer as of December 31, 2024, 2023 and 2022, which represents approximately 13 million people served as of December 31, 2024: 2024 2023 2022 (In thousands) Water Wastewater Water Wastewater Water Wastewater Residential 2,920 307 2,893 279 2,870 270 Commercial 222 21 221 18 219 17 Fire service 53 — 52 — 51 — Industrial 4 — 4 — 4 — Public and other (a) 18 1 18 1 17 1 Total 3,217 329 3,188 298 3,161 288 (a) Includes public authorities and other utilities and community water and wastewater systems under bulk contracts.
The Company’s regulated subsidiaries in New Jersey, Indiana, and Missouri have versions of water quality or safety accountability acts which require operational or safety and security standards for water and wastewater utilities serving a certain number of customers.
Efforts to advance these legislative priorities will continue in 2025. The Company’s regulated subsidiaries in New Jersey, Indiana and Missouri have versions of water quality or safety accountability acts that require operational or safety and security standards for water and wastewater utilities serving a certain number of customers.
The function involves the direct involvement and participation by many of its business units, including without limitation, its executive leadership team, as well as environmental, health and safety, human resources, legal, finance, accounting and investor relations teams (which includes the Company’s ESG reporting function).
The Company’s management function around sustainability involves the direct involvement and participation by a number of its business units, including without limitation, its executive leadership team, as well as environmental, health and safety, human resources, legal, finance, accounting and investor relations.
The Company’s ultimate goal is to achieve zero incidents, injuries and fatalities for the Company’s employees and contractors, all of whom deserve to return home from work in the same, or better, condition than when they arrived. The Company’s commitment to employee health and safety includes, in addition to physical safety, both emotional safety and overall wellbeing.
The Company’s goal is to achieve zero incidents, injuries and fatalities for its employees and contractors. 16 Table of Contents American Water believes all employees and contractors deserve to return home from work in the same, or better, condition than when they arrived. The Company’s commitment to employee health and safety includes physical safety, emotional safety and overall well-being.
The Company also collaborates with union leadership on topics such as safety, customer, technology and employee benefits in forums such as the Joint Healthcare Committee, National Labor Management Committee and the annual Labor Management Conference.
The Company also collaborates with unions on topics such as safety, customer, technology and employee benefits in forums such as the Joint Healthcare Committee, National Safety Council, Tools Committee and local Labor-Management Committees.
In 2023, the Company initiated a joint effort with certain of these labor unions and the Federal Mediation and Conciliation Service to host local discussions among management and union leaders with the goal of supporting and enhancing constructive relationships with these unions.
The Company continues to work with several local labor unions and the Federal Mediation and Conciliation Service to host discussions among management and union leaders with the goal of supporting and enhancing constructive relationships with these unions.
In addition, the Water Supply Project also includes Cal Am’s purchase of water from a groundwater replenishment project (the “GWR Project”) between Monterey One Water (formerly known as the Monterey Regional Water Pollution Control Agency) and the MPWMD.
In addition, the Water Supply Project also includes Cal Am’s purchase of water from a groundwater replenishment project (the “GWR Project”) between Monterey One Water (formerly known as the Monterey Regional Water Pollution Control Agency) and the Monterey Peninsula Water Management District (the “MPWMD”), as well as an expanded aquifer storage and recovery program.
Risk assessments are conducted periodically to evaluate the effectiveness of existing security controls and serve as the basis for additional safeguards, security controls and measures. For additional information concerning this team and the Company’s cybersecurity program, see Item 1C—Cybersecurity.
Risk assessments are conducted periodically to evaluate the effectiveness of existing security controls and serve as the basis for additional safeguards, security controls and measures. For additional information concerning this team and the Company’s cybersecurity program, see Item 1C—Cybersecurity. Sustainability The Company considers environmental, social responsibility and governance principles fundamental to its corporate sustainability strategy and values.
Fair market value assessment of water and wastewater systems is an alternative to the traditional depreciated original cost method of valuation, which allows the Company to offer municipalities a purchase price for their system assets that is reflective of the assets’ fair market value, while providing the Company with increased opportunity to recover the purchase price over the life of the purchased system assets, subject to PUC approval.
Fair market value assessment of water and wastewater systems is an alternative to the traditional depreciated original cost method of valuation, and allows the Company to offer municipalities a purchase price for their system assets that is reflective of the assets’ fair market value, while providing the Company with increased opportunity to recover the purchase price over the life of the purchased system assets, subject to PUC approval. 8 Table of Contents Consolidated tariffs use a unified rate structure for systems owned and operated by a single utility, which may or may not be physically interconnected.
Before entering new regulated markets, the Company will evaluate the business and regulatory climates to ensure that it will have the opportunity to achieve an appropriate rate of return on its investment while maintaining its high standards for providing safe, reliable and affordable services to its customers.
Before entering new regulatory jurisdictions (states), the Company will evaluate the regulatory, legislative and business climates for the opportunity to achieve an appropriate rate of return on its investment while maintaining its high standards of services to customers.
Employees are empowered to demonstrate safety leadership by utilizing a number of safety practices embedded in the Company’s culture, such as the use of (i) daily and pre-meeting safety messages, (ii) “Stop Work Authority” (the power to stop working immediately and mitigate a hazard whenever an employee believes a task is unsafe), and (iii) a peer-to-peer program in which employees observe and coach each other to encourage safe work.
Employees are empowered to demonstrate safety leadership by utilizing a number of safety procedures embedded in the Company’s culture, such as the use of (i) daily and pre-meeting safety messages, (ii) “Stop Work Authority” (the power to stop working immediately and mitigate a hazard whenever an employee believes a task is unsafe) and (iii) pre-job briefings to proactively identify hazards that may be encountered.
The Company supports sound policies and compliance with the NPDWR by all water utilities, while protecting customers and communities from the costly burden of monitoring and mitigating PFAS contamination in water systems.
The equipment and services provided through the contract will aid the Company in treating drinking water to assist in complying with the NPDWR for PFAS. The Company supports sound policies and compliance with the NPDWR for PFAS by all water utilities, while protecting customers and communities from the costly burden of monitoring and mitigating PFAS contamination in water systems.
Furthermore, the law in certain jurisdictions in which the Regulated Businesses operate provides for eminent domain rights allowing private property owners to file a lawsuit to seek just compensation against a public utility, if a public utility’s infrastructure has been determined to be a substantial cause of damage to that property.
For more information on this matter, see Item 3—Legal Proceedings—Proposed Acquisition of Monterey System Assets — Potential Condemnation. 9 Table of Contents Furthermore, the law in certain jurisdictions in which the Regulated Businesses operate provides for eminent domain rights allowing private property owners to file a lawsuit to seek just compensation against a public utility, if a public utility’s infrastructure has been determined to be a substantial cause of damage to that property.
An example of the Company’s use of long-term planning to ensure that it has adequate water supply is its involvement in the Monterey Peninsula Water Supply Project (the “Water Supply Project”) in California.
An example of the Company’s use of long-term planning intended to ensure an adequate water supply is Cal Am’s development and support of the Monterey Peninsula Water Supply Project (the “Water Supply Project”) in California.
Kennedy served as the Company's Vice President, Human Resources, and from August 2012 to August 2014, she served as Director, Human Resources in the Company’s Northeast Division. Ms. Kennedy initially joined the Company in 2007, and before that time, she practiced law for nine years. Cheryl Norton 59 Executive Vice President and Chief Operating Officer. Ms.
Kennedy served as the Company’s Vice President, Human Resources, and from August 2012 to August 2014, she served as Director, Human Resources in the Company’s Northeast Division. Ms. Kennedy initially joined the Company in 2007, and before that time, she practiced law for nine years. 19 Table of Contents Name Age Office and Experience Stacy A.
As indicated previously, capital expenditures and operating costs to comply with environmental mandates have been traditionally recognized by PUCs as appropriate for inclusion in establishing rates. As a result, the Company expects to recover the operating and capital costs resulting from any new requirements in these areas.
As indicated previously, capital expenditures and operating costs to comply with environmental mandates have been traditionally recognized by PUCs as appropriate for inclusion in establishing rates.
Surface water sources typically require significant treatment, while groundwater sources often require chemical treatment only. 8 Table of Contents Presented in the table below are the percentages of water supply by source type for the Company’s Top Five States individually and the Regulated Businesses collectively for the year ended December 31, 2023: Surface Water Ground Water Purchased Water New Jersey 74% 20% 6% Pennsylvania 91% 7% 2% Missouri 84% 15% 1% Illinois 55% 35% 10% California —% 67% 33% Regulated Businesses 71% 22% 7% The Company’s ability to meet the existing and future water demands of its customers depends on an adequate water supply.
Presented in the table below are the percentages of water supply by source type for the Company’s Top Five States individually and the Regulated Businesses collectively for the year ended December 31, 2024: Surface Water Ground Water Purchased Water New Jersey 74% 22% 4% Pennsylvania 91% 7% 2% Missouri 83% 16% 1% Illinois 53% 35% 12% California —% 64% 36% Regulated Businesses 70% 23% 7% The Company’s ability to meet the existing and future water demands of its customers depends on an adequate water supply.
When pursuing acquisitions, the Company’s largest investor-owned competitors, based on a comparison of operating revenues and population served, include Essential Utilities, Inc., American States Water Company and California Water Service Group.
When pursuing acquisitions, the Company’s largest investor-owned competitors, based on a comparison of operating revenues and population served, include Essential Utilities, Inc., American States Water Company and California Water Service Group. From time to time, the Company also faces competition from infrastructure funds, multi-utility companies and others, such as Algonquin Power and Utilities Corp. and Nexus Water Group.
CA, IL Consolidated tariffs Use of a unified rate structure for water systems owned and operated by a single utility, which may or may not be physically interconnected.
In California, the ratemaking tool provides partial revenue recovery with a focus on promotion of conservation signals in the pricing structure. CA, IL Consolidated tariffs Use of a unified rate structure for water systems owned and operated by a single utility, which may or may not be physically interconnected.
The wastewater is then transported through a sewer network to a treatment facility, where it is treated to meet required regulatory standards for wastewater before being returned to the environment.
The wastewater is then transported through a sewer network to a treatment facility, where it is treated to meet required regulatory standards for wastewater before being returned to the environment. The solid waste by-product of the treatment process is disposed of or recycled in accordance with applicable standards and regulations.
The Contract Services Group (“CSG”), also included in Other, has three contracts with municipal customers to operate and manage water and wastewater facilities and provide other related services.
Other Other primarily includes the MSG business, which enters into long-term contracts with the U.S. government to provide water and wastewater services on military installations. The Contract Services Group (“CSG”), also included in Other, has three contracts with municipal customers to operate and manage water and wastewater facilities and provide other related services.
The Company’s security team, through Service Company, provides oversight and policy guidance on physical, cyber and information security, as well as business continuity, throughout the Company’s operations. The security team is responsible for designing, implementing, monitoring and supporting effective physical and technical security controls for the Company’s physical assets, business systems and operational technologies.
The Company’s security team, through Service Company, provides oversight and policy guidance on physical, cyber and information security, as well as business continuity, throughout the Company’s operations.
Research and Development The Company’s Research and Development Program The Company maintains an industry-leading research and development (“R&D”) program that is designed to enhance its services, support its compliance activities, improve service quality and operational effectiveness, and provide environmental leadership.
As a result, the Company expects to recover the operating and capital costs resulting from any new requirements in these areas. 13 Table of Contents Research and Development The Company’s Research and Development Program The Company maintains an industry-leading research and development (“R&D”) program that is designed to enhance its services, support its compliance activities, improve service quality and operational effectiveness, and provide environmental leadership.
Further, the EPA is actively considering development of a new regulation for perchlorate and updates to the current microbial and disinfection byproduct regulations. The Company does not anticipate that any such regulations, if enacted, will require implementation in 2024.
Further, the EPA is actively considering development of a new regulation for perchlorate and updates to the current microbial and disinfection byproduct regulations.
The Company has an opportunity to make a positive, sustainable impact in thousands of communities by serving them with diverse and skilled employees and maintaining the governance and diligence to meet or exceed service expectations. 15 Table of Contents Demonstrated ESG Leadership The Company’s values and actions have achieved prestigious recognition by firms devoted to recognizing companies that demonstrate ESG leadership.
The Company has an opportunity to make a positive, sustainable impact in thousands of communities by serving them with skilled employees and maintaining the governance and diligence to meet or exceed service expectations.
The Company recognizes its websites as key channels of distribution to reach public investors and as a means of disclosing information to comply with SEC Regulation FD.
The Company recognizes its websites as key channels of distribution to reach public investors and as a means of disclosing information to comply with SEC Regulation FD. The Company is subject to the reporting requirements of the Exchange Act. The Company files or furnishes annual, quarterly and current reports, proxy statements and other information with the SEC.
In addition, as part of its commitment to providing an inclusive and equitable culture for all employees, the Company regularly reviews its success in achieving pay equity, whereby pay decisions would be based on the responsibilities, talents and skills of its employees, rather than unrelated factors such as gender, race or ethnicity.
In addition, the Company regularly reviews its success in achieving fair compensation practices, whereby pay decisions would be based on the responsibilities, talents and skills of its employees, rather than unrelated factors such as gender, race or ethnicity. All employees who average 30 hours or more per week are eligible for full-time benefits.
Weather that is warmer and/or drier than average generally increases operating revenues, whereas, weather that is cooler and/or wetter than average generally suppresses customer water demand and can reduce water operating revenues.
As such, the Company typically expects its operating revenues to be the highest in the third quarter of each year. Weather that is warmer and/or drier than average generally increases operating revenues, whereas, weather that is cooler and/or wetter than average generally suppresses customer water demand and can reduce water operating revenues.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeWe cannot guarantee that such protections will be completely successful to prevent or mitigate a cyber attack. 29 Table of Contents If, despite our security measures, a significant physical attack or cyber breach occurred, our operations could be disrupted, property damaged, and customer and other confidential information lost or stolen; we could experience substantial loss of revenues, response costs and other financial loss; we could suffer a loss or redirection of management time, attention and resources from our regular business operations; we may be subject to increased regulatory requirements; and we may experience litigation and damage to our reputation, any of which could have a negative impact on our business, results of operations and cash flows.
Biggest changeSee Item 3—Legal Proceedings—Cybersecurity Incident Class Action Lawsuits. 28 Table of Contents Future cybersecurity events could cause our operations to be disrupted, property to be damaged, and customer and other confidential information to be lost or stolen; we could experience substantial loss of revenues, response costs and other financial loss; we would likely suffer a loss or redirection of management time, attention and resources from our regular business operations; we may be subject to increased regulatory requirements; our ability to comply with environmental standards and to continue to provide reliable service to our customers may be impacted; we would likely experience litigation and other claims against us; and we may suffer damage to our reputation, any of which could have a negative impact on our business, financial condition, results of operations and cash flows.
Despite these efforts to prevent misconduct, it is possible for employees or contractors to engage in intentional misconduct and violate laws and regulations through, among other things, theft, fraud, misappropriation, bribery, corruption and engaging in conflicts of interest or related person transactions, or otherwise committing serious breaches of our Code of Ethics and our policies, practices and procedures.
Despite these efforts to prevent misconduct, it is possible for employees or contractors to engage in intentional or other misconduct and violate laws and regulations through, among other things, theft, fraud, misappropriation, bribery, corruption and engaging in conflicts of interest or related person transactions, or otherwise committing serious breaches of our Code of Ethics and our policies, practices and procedures.
Some state PUCs are empowered to impose financial penalties, fines and other sanctions for non-compliance with applicable rules and regulations. Although we believe that each utility subsidiary has obtained or sought renewal of the material permits, approvals and certificates necessary for its existing operations, we are unable to predict the impact that future regulatory activities may have on our business.
Some PUCs are empowered to impose financial penalties, fines and other sanctions for non-compliance with applicable rules and regulations. Although we believe that each utility subsidiary has obtained or sought renewal of the material permits, approvals and certificates necessary for its existing operations, we are unable to predict the impact that future regulatory activities may have on our business.
While these and other failures that we have experienced have not to date had a material adverse effect on our operations, there can be no assurance that efforts to address performance failures or other issues we may experience with water meters or other implemented technology will be successful in the future and that these or future failures of water meters or other technological issues will not have a material adverse effect on us.
While any failures that we have experienced have not to date had a material adverse effect on our operations, there can be no assurance that efforts to address performance failures or other issues we may experience with implemented technology will be successful in the future and that these or future failures of water meters or other technological issues will not have a material adverse effect on us.
Generally, the state PUCs authorize us to charge rates that they determine are sufficient to recover our prudently incurred operating expenses, including, but not limited to, operating and maintenance costs, depreciation, financing costs and taxes, and provide us with the opportunity to earn an appropriate rate of return on invested capital.
Generally, PUCs authorize us to charge rates that they determine are sufficient to recover our prudently incurred operating expenses, including, but not limited to, operating and maintenance costs, depreciation, financing costs and taxes, and provide us with the opportunity to earn an appropriate rate of return on invested capital.
Risks Related to Our Industry and Business Operations Our Regulated Businesses are subject to extensive regulation by state PUCs and other regulatory agencies, which significantly affects our business, financial condition, results of operations and cash flows. Our Regulated Businesses also may be subject to fines, penalties and other sanctions for an inability to meet these regulatory requirements.
Risks Related to Our Industry and Business Operations Our Regulated Businesses are subject to extensive regulation by PUCs and other regulatory agencies, which significantly affects our business, financial condition, results of operations and cash flows. Our Regulated Businesses also may be subject to fines, penalties and other sanctions for an inability to meet these regulatory requirements.
Our operating subsidiaries distribute water and collect wastewater through an extensive network of pipes, water mains and storage systems located across the United States. A failure of major pipes, mains or reservoirs could result in injuries, property and other damage for which we may be liable.
Our operating subsidiaries distribute water and collect wastewater through an extensive network of pipes, water and wastewater collection mains and storage systems located across the United States. A failure of major pipes, mains or reservoirs could result in injuries, property and other damage for which we may be liable.
Such failures and shutdowns may limit our ability to supply water in sufficient quantities to our customers and to meet the water and wastewater delivery requirements prescribed by government regulators, including state PUCs with jurisdiction over our operations, and adversely affect our financial condition, results of operations, cash flows, liquidity and reputation.
Such failures and shutdowns may limit our ability to supply water in sufficient quantities to our customers and to meet the water and wastewater delivery requirements prescribed by government regulators, including PUCs with jurisdiction over our operations, and adversely affect our financial condition, results of operations, cash flows, liquidity and reputation.
In any of these cases, our business, financial condition, results of operations, cash flows and liquidity may be adversely affected. Even if the rates approved are sufficient, we face the risk that we will not achieve the rates of return on equity permitted by state PUCs.
In any of these cases, our business, financial condition, results of operations, cash flows and liquidity may be adversely affected. Even if the rates approved are sufficient, we face the risk that we will not achieve the rates of return on equity permitted by PUCs.
Although some or all potential expenditures and costs associated with the impact of climate variability and related laws and regulations on our Regulated Businesses could be recovered through rates, infrastructure replacement surcharges or other regulatory mechanisms, there can be no assurance that state PUCs would authorize rate increases to enable us to recover such expenditures and costs, in whole or in part. 24 Table of Contents The current regulatory rate setting process may result in a significant delay, also known as “regulatory lag,” from the time that we invest in infrastructure improvements, incur increased operating expenses as a result of inflation or other factors, incur increased cost of capital, including as a result of increasing short- and long-term interest rates, or experience declining water usage, to the time at which we can seek to address these events in general rate cases; our inability to mitigate or minimize regulatory lag or the impacts thereof could adversely affect our business.
Although some or all potential expenditures and costs associated with the impact of climate variability and related laws and regulations on our Regulated Businesses could be recovered through rates, infrastructure replacement surcharges or other regulatory mechanisms, there can be no assurance that PUCs would authorize rate increases to enable us to recover such expenditures and costs, in whole or in part. 23 Table of Contents The current regulatory rate setting process may result in a significant delay, also known as “regulatory lag,” from the time that we invest in infrastructure improvements, incur increased operating expenses as a result of inflation or other factors, incur increased cost of capital, including as a result of increasing short- and long-term interest rates, or experience declining water usage, to the time at which we can seek to address these events in general rate cases; our inability to mitigate or minimize regulatory lag or the impacts thereof could adversely affect our business.
If we fail to maintain safe work sites, we may experience workforce or customer injuries or loss of life, and be exposed to financial losses, including penalties and other liabilities. Safety is a core value and a strategy at American Water.
If we fail to maintain safe work sites, we may experience workforce or customer injuries or loss of life, and be exposed to financial losses, including penalties and other liabilities. Safety is a core value at American Water.
Our Regulated Businesses provide water and wastewater services to our customers through subsidiaries that are subject to regulation by state PUCs. This regulation affects the rates we charge our customers and has a significant impact on our business and operations.
Our Regulated Businesses provide water and wastewater services to our customers through subsidiaries that are subject to regulation by PUCs. This regulation affects the rates we charge our customers and has a significant impact on our business and operations.
Our ability to successfully implement our business plan and strategy depends on the rates authorized by the various state PUCs. We periodically file rate increase applications with state PUCs. The ensuing administrative process may be lengthy and costly.
Our ability to successfully implement our business plan and strategy depends on the rates authorized by the various PUCs. We periodically file rate increase applications with PUCs. The ensuing administrative process may be lengthy and costly.
Moreover, entering into contracts with the U.S. government subjects us to a number of operational and compliance risks, including dependence on the level of government spending and compliance with and changes in governmental procurement and security regulations.
Moreover, entering into contracts with the U.S. government subjects us to a number of operational and compliance risks, including dependence on the level of government spending and compliance with and changes in governmental procurement and security (including cybersecurity) regulations.
Our indebtedness could have important consequences, including: • limiting our ability to obtain additional financing to fund future working capital requirements or capital expenditures; 32 Table of Contents • exposing us to interest rate risk with respect to the portion of our indebtedness that bears interest at variable rates; • limiting our ability to pay dividends on our common stock or make payments in connection with our other obligations; • impairing our access to the capital markets for debt and equity; • requiring that an increasing portion of our cash flows from operations be dedicated to the payment of the principal and interest on our debt, thereby reducing funds available for future operations, dividends on our common stock or capital expenditures; • limiting our ability to take advantage of significant business opportunities, such as acquisition opportunities, and to react to changes in market or industry conditions; and • placing us at a competitive disadvantage compared to those of our competitors that have less debt.
Our indebtedness could have important consequences, including: • limiting our ability to obtain additional financing to fund future working capital requirements or capital expenditures; • exposing us to interest rate risk with respect to the portion of our indebtedness that bears interest at variable rates; • limiting our ability to pay dividends on our common stock or make payments in connection with our other obligations; • impairing our access to the capital markets for debt and equity; • requiring that an increasing portion of our cash flows from operations be dedicated to the payment of the principal and interest on our debt, thereby reducing funds available for future operations, dividends on our common stock or capital expenditures; • limiting our ability to take advantage of significant business opportunities, such as acquisition opportunities, and to react to changes in market or industry conditions; and • placing us at a competitive disadvantage compared to those of our competitors that have less debt.
The SEC, the Financial Accounting Standards Board or other authoritative bodies or governmental entities may issue new pronouncements or new interpretations of existing accounting standards that may require us to change our accounting policies or critical accounting estimates.
The SEC, the Financial Accounting Standards Board and other authoritative bodies or governmental entities may issue new pronouncements or new interpretations of existing accounting standards that may require us to change our accounting policies or critical accounting estimates.
New laws or regulations, new interpretations of existing laws or regulations, changes in agency policy, including those made in response to shifts in public opinion, or conditions imposed during the regulatory hearing process could have the following consequences, among others: • making it more difficult for us to increase our rates and, as a consequence, to recover our costs or earn our expected rates of return; • changing the determination of the costs, or the amount of costs, that would be considered recoverable in rate cases and other regulatory proceedings; • restricting our ability to terminate our services to customers who owe us money for services previously provided or limiting our bill collection efforts; • requiring us to provide water or wastewater services at reduced rates to certain customers; • limiting or restricting our ability to acquire water or wastewater systems, purchase or dispose of assets, or issue long-term debt or equity, or making it less cost-effective for us to do so; • negatively impacting, among other things: (i) tax rates or positions or the deductibility of expenses under federal or state tax laws, (ii) the availability or amount of, or our ability to comply with the terms and conditions of, tax credits or tax 25 Table of Contents abatement benefit, (iii) the amount of taxes owed or paid, including as a result of the Corporate Alternative Minimum Tax provisions, (iv) the timing of tax effects on rates or (v) the ability to utilize our net operating loss carryforwards; • increasing the associated costs of, and/or of difficulty complying with, environmental, health, safety, consumer privacy, water quality, and water quality accountability laws and regulations to which our operations are subject; • changing or placing additional limitations on change in control requirements relating to any concentration of ownership of our common stock; • making it easier for governmental entities to convert our assets to public ownership via condemnation, eminent domain or other similar process, or for governmental agencies or private plaintiffs to assess liability against us for damages under these or similar processes; • increasing the costs and/or difficulty of complying with proposed changes to federal contractor affirmative action audits; • placing limitations, prohibitions or other requirements with respect to the sharing of information and participation in transactions by or between a regulated subsidiary and us or our other affiliates, including Service Company and any of our other subsidiaries; • restricting or prohibiting our extraction of water from rivers, streams, reservoirs or aquifers; and • revoking or altering the terms of a CPCN issued to us by a state PUC or other governmental authority.
New laws or regulations, new interpretations of existing laws or regulations, changes in agency policy, including those made in response to shifts in public opinion, or conditions imposed during the regulatory hearing process could have the following consequences, among others: • making it more difficult for us to increase our rates and, as a consequence, to recover our costs or earn our expected rates of return; • changing the determination of the costs, or the amount of costs, that would be considered recoverable in rate cases and other regulatory proceedings; • restricting our ability to terminate our services to customers who owe us money for services previously provided or limiting our bill collection efforts; • requiring us to provide water or wastewater services at reduced rates to certain customers; • limiting or restricting our ability to acquire water or wastewater systems, purchase or dispose of assets, or issue long-term debt or equity, or making it less cost-effective for us to do so; • negatively impacting, among other things: (i) tax rates or positions or the deductibility of expenses under federal or state tax laws, (ii) the availability or amount of, or our ability to comply with the terms and conditions of, tax credits or tax abatement benefits, (iii) the amount of taxes owed or paid, including as a result of the CAMT provisions, (iv) the timing of tax effects on rates or (v) the ability to utilize our net operating loss carryforwards; • increasing the associated costs of, and/or of difficulty complying with, environmental, health, safety, consumer privacy, water quality, and water quality accountability laws and regulations to which our operations are subject; • changing or placing additional limitations on change in control requirements relating to any concentration of ownership of our common stock; • making it easier for governmental entities to convert our assets to public ownership via condemnation, eminent domain or other similar process, or for governmental agencies or private plaintiffs to assess liability against us for damages under these or similar processes; • increasing the costs and/or difficulty of complying with proposed changes to federal contractor affirmative action audits; 24 Table of Contents • placing limitations, prohibitions or other requirements with respect to the sharing of information and participation in transactions by or between a regulated subsidiary and us or our other affiliates, including Service Company and any of our other subsidiaries; • restricting or prohibiting our extraction of water from rivers, streams, reservoirs or aquifers; and • revoking or altering the terms of a CPCN issued to us by a PUC or other governmental authority.
We are subject to potential government investigations of our business practices and compliance with government procurement and security regulations, which are complex, and compliance with these regulations can be expensive and burdensome.
We are subject to potential government investigations of our business practices and compliance with government procurement, security and cybersecurity regulations, which are complex, and compliance with these regulations can be expensive and burdensome.
These include, among other things, storms, freezing conditions, high wind conditions, hurricanes, tornadoes, earthquakes, landslides, drought, wildfires, coastal and intercoastal floods or high water conditions, including those in or near designated flood plains, pandemics and epidemics, severe electrical storms, sinkholes, solar flares and chemical spills or other contamination causing temporary unavailability of our source water supplies.
These include, among other things, storms, ice or freezing conditions, high rainfall and wind conditions, hurricanes, tornadoes, earthquakes, landslides, drought, wildfires, coastal and intercoastal floods or high water conditions, including those in or near designated flood plains, pandemics and epidemics, severe electrical storms, sinkholes, solar flares and chemical spills or other contamination causing temporary unavailability of our source water supplies.
These types of events, and their resulting impacts, either to our facilities or assets, those of third parties, or the industry in general, could also cause us to incur additional security and insurance related costs. In addition, in the ordinary course of business, we collect and retain sensitive information, including personally identifiable information, about our customers and employees.
These types of events, and their resulting impacts, either to our facilities or assets, those of third parties, or the industry in general, may also cause us to incur additional security and insurance related costs. In addition, in the ordinary course of business, we collect and retain sensitive information, including personally identifiable information, about our customers and employees.
Although we do not believe that the technology we have implemented or may in the future implement is at a materially greater risk of failure than that used by other similar organizations, our technology and operations that use or rely on technology remain vulnerable to damage or interruption from, among other things: failure or interruption of the technology or its related systems; loss or failure of power, internet, telecommunications or data network systems; and operator error or improper operation by, the negligent or improper supervision of, or the intentional acts of, employees, contractors and other third parties.
Although we do not believe that the technology we have implemented or may in the future implement is at a materially greater risk of failure than that used by other similar organizations, our technology and operations that use or rely on technology, including cloud-based systems, remain vulnerable to damage or interruption from, among other things: failure or interruption of the technology or its related systems; loss or failure of power, internet, telecommunications or data network systems; and operator error or improper operation by, the negligent or improper supervision of, or the intentional acts of, employees, contractors and other third parties.
Approval by the PUCs is also required in connection with other aspects of our Regulated Businesses, which are required to have numerous permits, approvals and certificates from the PUCs that regulate their businesses and authorize acquisitions, dispositions, debt and/or equity financing, and, in certain cases, affiliated transactions.
Approval by the PUCs is also required in connection with other aspects of our Regulated Businesses, which are required to have numerous permits, approvals and CPCNs from the PUCs that regulate their businesses and authorize acquisitions, dispositions, debt and/or equity financing, and, in certain cases, affiliated transactions.
The presence of these commitments may adversely affect our financial condition and make it more difficult for us to secure financing on attractive terms. 35 Table of Contents MSG’s operations are subject to various risks associated with doing business with the U.S. government.
The presence of these commitments may adversely affect our financial condition and make it more difficult for us to secure financing on attractive terms. 34 Table of Contents MSG’s operations are subject to various risks associated with doing business with the U.S. government.
During 2023, we utilized existing sources of liquidity, such as our current cash balances, cash flows from operations and borrowings under our commercial paper program, to meet our short-term liquidity requirements. We believe that existing sources of liquidity will be sufficient to meet our cash requirements for the foreseeable future.
During 2024, we utilized existing sources of liquidity, such as our current cash balances, cash flows from operations and borrowings under our commercial paper program, to meet our short-term liquidity requirements. We believe that existing sources of liquidity will be sufficient to meet our cash requirements for the foreseeable future.
Recognition of impairments of goodwill and changes in fair value of certain of our other assets would result in a charge to income in the period in which the impairment or change occurred, which may negatively affect our financial condition, results of operations and total capitalization.
Recognition of impairments of goodwill and any changes in fair value of other assets would result in a charge to income in the period in which the impairment or change occurred, which may negatively affect our financial condition, results of operations and total capitalization.
The properties of our Regulated Businesses segment include 74 dams, the majority of which are earthen dams. The failure of any of these dams could result in personal injury and property damage, including without limitation downstream property damage, for which we may be liable.
The properties of our Regulated Businesses segment include 75 dams, the majority of which are earthen dams. The failure of any of these dams could result in personal injury and property damage, including without limitation downstream property damage, for which we may be liable.
Even if we are able to comply with this or other covenants, the limitations on our operational and financial flexibility could harm our business by, among other things, limiting our ability to incur 33 Table of Contents indebtedness or reduce equity in connection with financings or other corporate opportunities that we may believe would be in our best interests or the interests of our shareholders to complete.
Even if we are able to comply with this or other covenants, the limitations on our operational and financial flexibility could harm our business by, among other things, limiting our ability to incur indebtedness or reduce equity in connection with financings or other corporate opportunities that we may believe would be in our best interests or the interests of our shareholders to complete.
The conditional exchange feature of the Exchangeable Senior Notes due 2026, if triggered, may adversely effect our liquidity and financial condition and may dilute the ownership interest of our shareholders or may otherwise depress the price of parent company’s common stock.
The conditional exchange feature of the Exchangeable Senior Notes due 2026, if triggered, may adversely affect our liquidity and financial condition and may dilute the ownership interest of our shareholders or may otherwise depress the price of parent company’s common stock.
Given the nature of our business which, in part, involves 22 Table of Contents providing water service for human consumption, any potential non-compliance with, or violation of, environmental, water quality and health and safety laws or regulations would likely pose a more significant risk to us than to a company not similarly involved in the water and wastewater industry.
Given the nature of our business which, in part, involves providing water service for human consumption, any potential non-compliance with, or violation of, environmental, water quality and health and safety laws or regulations would likely pose a more significant risk to us than to a company not similarly involved in the water and wastewater industry.
Additional Risks Related to Other Businesses Parent company provides performance guarantees with respect to certain of the obligations of our Other businesses, including financial guarantees or deposits, which may adversely affect parent company if the guarantees are successfully enforced.
Additional Risks Related to Other Businesses Parent company provides performance guarantees with respect to certain of the obligations of our Other businesses (primarily MSG), including financial guarantees or deposits, which may adversely affect parent company if the guarantees are successfully enforced.
Intentional misconduct by employees or contractors could result in substantial liability, higher costs, increased regulatory scrutiny and significant reputational harm, any of which could have a material adverse effect on our financial condition, results of operations and cash flows. 36 Table of Contents ITEM 1B. UNRESOLVED STAFF COMMENTS None.
Intentional or other misconduct by employees or contractors could result in substantial liability, higher costs, increased regulatory scrutiny and significant reputational harm, any of which could have a material adverse effect on our financial condition, results of operations and cash flows. 35 Table of Contents ITEM 1B. UNRESOLVED STAFF COMMENTS None.
Such claims could relate to, among other things, personal injury, loss of life, business interruption, property damage, pollution, and environmental damage and may be brought by our customers or third parties. Litigation and regulatory proceedings are subject to inherent uncertainties and unfavorable rulings can and do occur.
Such claims could relate to, among other things, personal injury, loss of life, business interruption and expenses related thereto, property damage, pollution, and environmental damage and may be brought by our customers or third parties. Litigation and regulatory proceedings are subject to inherent uncertainties and unfavorable rulings can and do occur.
Adverse publicity and negative consumer sentiment arising out of our operations may render legislatures and other governing bodies, state PUCs and other regulatory authorities, and government officials less likely to view us in a favorable light, and may cause us to be susceptible to less 27 Table of Contents favorable legislative, regulatory and economic outcomes, as well as increased regulatory investigations or other oversight and more stringent regulatory or economic requirements.
Adverse publicity and negative consumer sentiment arising out of our operations may render legislatures and other governing bodies, PUCs and other regulatory authorities, and government officials less likely to view us in a favorable light, and may cause us to be susceptible to less favorable legislative, regulatory and economic outcomes, as well as increased regulatory investigations or other oversight and more stringent regulatory or economic requirements.
Our ability to serve our customers and operate our business in compliance with regulatory requirements is dependent upon purchasing or securing necessary goods and services from our suppliers and vendors. These items include but are not limited to 31 Table of Contents contracted services, chemicals, pipe, valves, hydrants, fittings, equipment (including personal protective equipment), water, and power and other fuel.
Our ability to serve our customers and operate our business in compliance with regulatory requirements is dependent upon purchasing or securing necessary goods and services from our suppliers and vendors. These items include but are not limited to contracted services, chemicals, pipe, valves, hydrants, fittings, equipment (including personal protective equipment), water, and power and other fuel.
For example, we have made and plan to continue to make significant investments in developing, deploying, integrating, enhancing and maintaining customer-facing technologies, applications to support field service and customer service operations, water source sensor and evaluation technologies, meter data management and analytics, and intelligent automation technologies.
For example, we have made and plan to continue to make significant investments in developing, deploying, integrating, enhancing and maintaining customer-facing technologies, applications to support field service and customer service operations, water source monitoring technologies, meter data management and analytics, and intelligent automation technologies.
The water supplies that flow into our treatment plants or are delivered through our distribution system, or the water service that is provided to our customers, may be subject to contamination, including, among other items, contamination from naturally-occurring compounds, chemicals in groundwater systems, pollution resulting from manufactured sources (such as perchlorate, perfluorinated and polyfluorinated compounds, methyl tertiary butyl ether, 1,4-dioxane, lead and other materials, or chemical spills or other incidents that result in contaminants entering the water source), and possible terrorist attacks or other similar incidents.
The water supplies that flow into our treatment plants or are delivered through our distribution system, or the water service that is provided to our customers, may be subject to contamination, including, among other types, contamination from naturally-occurring compounds, chemicals in groundwater systems, pollution resulting from manufactured sources (such as perchlorate, perfluorinated and polyfluorinated compounds, methyl tertiary butyl ether, 1,4-dioxane, lead and other materials, or chemical spills or other incidents that result in contaminants entering the water source), and contamination resulting from new and emerging contaminants as well as cyber attacks, possible terrorist attacks or other similar incidents.
Our internal controls, accounting policies and practices and internal information systems are designed to enable us to capture and process transactions and information in a timely and accurate manner in compliance with GAAP, taxation requirements, federal securities laws and regulations and other laws and regulations applicable to us.
Our internal controls, accounting policies and practices and internal information systems are designed to enable us to capture and process transactions and information in a timely and accurate manner in compliance with GAAP, requirements of applicable tax laws and regulations, federal securities laws and regulations and other laws and regulations applicable to us.
In addition to cash from operations, during 2023, we relied on a $2.75 billion revolving credit facility, a $2.60 billion commercial paper program, and the debt and equity capital markets, to satisfy our liquidity needs.
In addition to cash from operations, during 2024, we relied on a $2.75 billion revolving credit facility, a $2.60 billion commercial paper program, and the debt capital markets, to satisfy our liquidity needs.
We invest significant amounts of capital to add, replace and maintain property, plant and equipment, and to improve aging infrastructure. In 2023, we invested $2.6 billion in net Company-funded capital improvements. The level of capital expenditures necessary to maintain the integrity of our systems will continue into the future and, we believe, will increase.
We invest significant amounts of capital to add, replace and maintain property, plant and equipment, and to improve aging infrastructure. In 2024, we invested $2.8 billion in net Company-funded capital improvements. The level of capital expenditures necessary to maintain the integrity of our systems will continue into the future and, we believe, will increase.
Our assets as of December 31, 2023, included $1.1 billion of goodwill and $236 million of total assets measured and recorded at fair value on a recurring basis. The goodwill is primarily associated with the acquisition of American Water by an affiliate of our previous owner in 2003.
Our assets as of December 31, 2024, included $1.1 billion of goodwill and $218 million of total assets measured and recorded at fair value on a recurring basis. The goodwill is primarily associated with the acquisition of American Water by an affiliate of our previous owner in 2003.
The aggregate amount of remaining performance commitments is likely to increase as the number of military bases served by MSG increases.
The aggregate amount of remaining performance commitments is likely to increase as the number of military installations served by MSG increases.
These collective bargaining agreements, 21 of which are scheduled to expire during 2024, are subject to periodic renewal and renegotiation. We may not be able to successfully renew or renegotiate these labor contracts, or enter into new agreements, on terms that are acceptable to us.
These collective bargaining agreements, 25 of which are scheduled to expire during 2025, are subject to periodic renewal and renegotiation. We may not be able to successfully renew or renegotiate these labor contracts, or enter into new agreements, on terms that are acceptable to us.
In the future, adequate insurance may not be available at rates that we believe are reasonable, and the costs of responding to and recovering from a physical attack, cyber attack or security breach incident may not be covered by insurance or recoverable in rates.
However, adequate insurance may not be available at rates that we believe are reasonable, and the costs of responding to and recovering from a physical attack, cyber attack or security breach incident may not, in whole or in part, be covered by insurance or recoverable in rates.
The failure of a dam would also adversely affect our ability to supply water in sufficient quantities to our customers and could adversely affect our financial condition and results of operations.
The failure of a dam would also adversely affect our ability to supply water in sufficient quantities to our 26 Table of Contents customers and could adversely affect our financial condition and results of operations.
As a result, we may sustain losses that exceed or that are excluded from our insurance coverage, or for which we are self-insured and must therefore utilize our own financial resources to cover such losses.
As a result, we may sustain losses that 29 Table of Contents exceed or that are excluded from our insurance coverage, or for which we are self-insured and must therefore utilize our own financial resources to cover such losses.
Work stoppages and other labor relations matters could adversely affect our results of operations and the ability to serve our customers. As of December 31, 2023, approximately 47% of our workforce was represented by unions, and we had 73 collective bargaining agreements in place with 14 different unions representing our unionized employees.
Work stoppages and other labor relations matters could adversely affect our results of operations and the ability to serve our customers. As of December 31, 2024, approximately 46% of our workforce was represented by unions, and we had 75 collective bargaining agreements in place with 14 different unions representing our unionized employees.
In the most serious cases, regulators could reduce requested rate increases or force us to discontinue operations and sell our operating assets to another utility or to a municipality.
In the most serious cases, regulators could reduce requested rate increases or force us 21 Table of Contents to discontinue operations and sell our operating assets to another utility or to a municipality.
Technology is an integral part of our business and operations, and any failure or disruption of the technology or related systems we implement could significantly limit our ability to manage and operate our business effectively and efficiently, which, in turn, could cause our business and competitive position to suffer and adversely affect our results of operations.
Technology is an integral part of our business and operations, and any failure or disruption of the technology or related systems we implement, including as a result of a cyber incident, could significantly limit our ability to manage and operate our business effectively and efficiently, which, in turn, could cause our business and competitive position to suffer and adversely affect our results of operations.
For example, in our Monterey County, California operations, we are seeking to augment our sources of water supply, principally to comply with the cease and desist orders issued by the SWRCB in July 1995 and October 2009 (the “1995 Order,” the “2009 Order” and, as amended in July 2016, the “2016 Order” and, collectively, the “Orders”) that require Cal Am to significantly decrease its diversions from the Carmel River in accordance with a reduction schedule that terminated on December 31, 2021.
For example, in our Monterey County, California operations, we are seeking to augment our sources of water supply, principally to comply with the cease and desist orders issued by the SWRCB in July 1995 and October 2009 (the “1995 Order,” the “2009 Order” and, as amended in July 2016, the “2016 Order” and, collectively, the “Orders”) that require Cal Am to significantly decrease its diversions from the Carmel River.
If the water or wastewater services we provide to our customers do not comply with regulatory standards, or otherwise violate environmental laws, regulations or permits, or other health and safety and water quality regulations, we could incur substantial fines, penalties or other sanctions or costs, as well as damage to our reputation.
If the water or wastewater services we provide to our customers do not comply with regulatory standards, or otherwise violate environmental laws, regulations or permits, or other health and safety and water quality regulations, we could incur substantial fines, penalties or other sanctions or costs, as well as damage to our reputation, as a result of governmental proceedings and private litigation.
Any theft, loss or fraudulent use of customer, employee or proprietary data as a result of a cyber attack on us or a vendor could also subject us to significant litigation, liability and costs, as well as adversely impact our reputation with customers and regulators, among others.
Any theft, loss or fraudulent use of customer, employee or proprietary data as a result of a cyber attack on us or a vendor, supplier, contractor or other third-party business partner could also subject us to significant litigation, liability and costs, as well as adversely impact our reputation with customers and regulators, among others.
As of December 31, 2023, our aggregate long-term and short-term debt balance (including preferred stock with mandatory redemption requirements) was $12.4 billion, and our working capital (defined as current assets less current liabilities) was in a deficit position.
As of December 31, 2024, our aggregate long-term and short-term debt balance (including preferred stock with mandatory redemption requirements) was $14.0 billion, and our working capital (defined as current assets less current liabilities) was in a deficit position.
Any failure or perceived failure by us to comply with current or future federal, state, or local data or consumer privacy or security laws, regulations, policies, guidance, industry standards, or legal obligations, or any incident resulting in unauthorized access to, or the acquisition, release, or transfer of, personally identifiable information or other data relating to our customers, employees and others, may result in private or governmental enforcement actions, litigation or other claims against us, fines and penalties, or adverse perception or publicity about us and our businesses.
Any failure or perceived failure by us to comply with current or future federal, state, or local data or consumer privacy or security laws, regulations, policies, guidance, industry standards, or legal obligations, or any incident resulting in unauthorized access to, or the acquisition, release, or transfer of, personally identifiable information or other data relating to our customers, employees and others, may result in private or governmental enforcement actions, litigation, including, for example, from putative class action lawsuits filed in connection with our recent cybersecurity incident, or other claims against us, fines and penalties, or adverse perception or publicity about us and our businesses.
At December 31, 2023, we had remaining performance commitments, as measured by remaining contract revenue, and primarily related to MSG’s contracts, totaling approximately $7.8 billion, of which $1.2 billion are guaranteed by parent company and the remainder is guaranteed by certain subsidiaries in Other.
At December 31, 2024, we had remaining performance commitments, as measured by remaining contract revenue, and primarily related to MSG’s contracts, totaling approximately $8.1 billion, of which $1.2 billion are guaranteed by parent company and the remainder is guaranteed by certain wholly owned subsidiaries of parent company.
We have also implemented corporate governance, internal control and accounting policies and procedures in connection with the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) and relevant SEC rules, as well as other applicable regulations.
We have also implemented corporate governance, internal control and accounting policies and procedures designed to comply with the requirements of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) and relevant SEC rules, as well as other applicable regulations.
Although we may seek to recover ongoing compliance costs in our Regulated Businesses through customer rates, there can be no guarantee that the various state PUCs or similar regulatory bodies that govern our Regulated Businesses would approve rate increases that would enable us to recover such costs or that such costs will not materially and adversely affect our financial condition, results of operations, cash flows and liquidity.
Although we may seek to recover ongoing compliance costs in our Regulated Businesses through customer rates, and certain jurisdictions in which our Regulated Businesses operate have passed laws authorizing recovery of such costs, there can be no guarantee that the various other regulatory PUCs or similar regulatory bodies that govern our Regulated Businesses would approve rate increases that would enable us to recover such costs or that such costs will not materially and adversely affect our financial condition, results of operations, cash flows and liquidity.
Moreover, additional borrowings may be required to repay or refinance outstanding indebtedness. Debt maturities and sinking fund payments in 2024, 2025 and 2026 will be $475 million, $619 million and $1,478 million, respectively.
Moreover, additional borrowings may be required to repay or refinance outstanding indebtedness. Debt maturities and sinking fund payments in 2025, 2026 and 2027 will be $637 million, $1,478 million and $686 million, respectively.
Future acquisitions by us could result in, among other things: • unanticipated capital expenditures; • unanticipated acquisition-related expenses; • incurrence or assumption of debt, contingent liabilities and environmental liabilities and obligations, including liabilities that were unknown or undisclosed at the time of acquisition; 28 Table of Contents • failure to recover acquisition adjustments or premiums due to unfavorable decisions by PUCs and other governmental authorities; • failure to maintain effective internal control over financial reporting; • recording goodwill and other intangible assets at values that ultimately may be subject to impairment charges; • fluctuations in quarterly and/or annual results; • failure to realize anticipated or perceived benefits and synergies, such as desired return on equity or profitability, cost savings and revenue enhancements; and • difficulties in integrating or assimilating acquired systems’ operations, personnel, benefits, services and systems and water quality, cybersecurity and infrastructure protection measures.
Future acquisitions by us could result in, among other things: • unanticipated capital expenditures; • unanticipated acquisition-related expenses; • incurrence or assumption of debt, contingent liabilities and environmental liabilities and obligations, including liabilities that were unknown or undisclosed at the time of acquisition; • failure to sufficiently utilize or apply new or existing fair market value legislation or recover acquisition adjustments or premiums due to unfavorable decisions or interpretations by PUCs, courts and other governmental authorities; • failure to maintain effective internal control over financial reporting; • recording goodwill and other intangible assets at values that ultimately may be subject to impairment charges; • fluctuations in quarterly and/or annual results; • failure to realize anticipated or perceived benefits and synergies, such as desired return on equity or profitability, cost savings and revenue enhancements; and • difficulties in integrating or assimilating acquired systems’ operations, personnel, benefits, services and systems and water quality, cybersecurity and infrastructure protection measures. 27 Table of Contents Some or all of these items could have a material adverse effect on our business.
Treasury lock agreements. See Item 7A—Quantitative and Qualitative Disclosures About Market Risk. However, these efforts may not be effective to fully mitigate interest rate risk, and may expose us to other risks and uncertainties, including quarterly “mark to market” valuation risk associated with these instruments, that could negatively and materially affect our financial condition, results of operations and cash flows.
However, these efforts may not be effective to fully mitigate interest rate risk, and may expose us to other risks and uncertainties, including quarterly “mark to market” valuation risk associated with these instruments, that could negatively and materially affect our financial condition, results of operations and cash flows.
These events could also require us to change our business practices, and the events or such changes may result in significant diversions of resources, distract management and divert the focus and attention of our security and technical personnel from other critical activities.
See Item 3—Legal Proceedings—Cybersecurity Incident Class Action Lawsuits. These events could also require us to change our business practices, and the events or such changes may result in significant diversions of resources, distract management and divert the focus and attention of our security and technical personnel from other critical activities.
Any negotiations or dispute resolution processes undertaken in connection with our labor contracts could be delayed or affected by labor actions or work stoppages.
Any negotiations or dispute resolution processes undertaken in connection with our labor contracts could be delayed or affected by labor actions or work stoppages and by external political, economic and social factors.
As of December 31, 2023, there were no outstanding borrowings under the revolving credit facility, $180 million of commercial paper outstanding and $75 million in outstanding letters of credit.
As of December 31, 2024, there were no outstanding borrowings under the revolving credit facility, $880 million of commercial paper outstanding and $82 million in outstanding letters of credit.
We use technology systems to, among other things, bill customers, process orders, provide customer service, manage certain plant operations and construction projects, create and manage our financial records and other operational data, track assets, remotely monitor our plants and facilities, and manage human resources, supply chain, inventory, and accounts receivable collections.
We use technology systems to, among other things, obtain meter readings, bill customers, process orders, provide customer service, and manage certain plant operations and construction projects, including systems to support environmental compliance, provide for the safety of the water distributed to customers, create and manage our financial records and other operational data, track assets, remotely monitor our plants and facilities, and manage human resources, supply chain, inventory, and accounts receivable collections.
These laws and regulations and their enforcement, have become more stringent over time, and new or stricter requirements, such as the anticipated EPA drinking water regulations for PFAS, the LCRR and the proposed LCRI, could increase our costs.
These laws and regulations and their enforcement, have become more stringent over time, and new or stricter requirements, such as the final EPA drinking water regulations for PFAS, the LCRR and the recently implemented LCRI, are expected to increase our costs.
Although we intend to continue our efforts to seek state PUC approval of constructive regulatory practices to mitigate or reduce regulatory lag, our efforts may not be successful, or even if partially successful, our business, financial condition, results of operations, cash flows and liquidity may be materially and adversely affected.
Although we intend to continue to seek regulatory PUC approval of practices or mechanisms to mitigate or reduce regulatory lag, our efforts may not be successful in whole or in part, and even to the extent successful, our business, financial condition, results of operations, cash flows and liquidity may be materially and adversely affected by regulatory lag.
We may also incur liabilities if, under environmental laws and regulations, we are required to investigate and clean up environmental contamination, including potential releases of hazardous chemicals, such as gaseous chlorine, which we use to treat water, or at off-site locations where we have disposed of residual waste or caused an adverse environmental impact.
We may also incur liabilities if, under environmental laws and regulations, we are required to investigate and clean up environmental contamination, including potential releases of certain hazardous chemicals, which are used in our treatment processes, or at off-site locations where we have disposed of residual waste or caused an adverse environmental impact.
In June 2023, AWCC issued $1,035.0 million aggregate principal amount of its 3.625% Exchangeable Senior Notes due 2026 (the “Notes”). See Note 11—Long-Term Debt in the Notes to the Consolidated Financial Statements for a description of the Notes.
In June 2023, American Water Capital Corp., our wholly owned finance subsidiary (“AWCC”), issued $1,035 million aggregate principal amount of its 3.625% Exchangeable Senior Notes due 2026 (the “Notes”). See Note 11—Long-Term Debt in the Notes to the Consolidated Financial Statements for a description of the Notes.
Furthermore, PUCs may fail to adopt new surcharges and existing mechanisms may not continue in their current form, or at all, or we may be unable or become ineligible to continue to utilize certain of these mechanisms in the future.
Furthermore, PUCs may fail to adopt new surcharges or those permitted by applicable law, and existing practices and mechanisms may not continue in their current form, or at all, and we may be unable or become ineligible to continue to utilize them in the future.
Two of our jurisdictions, California and Illinois, currently have revenue stability mechanisms that permit us to recover the revenues authorized in a general rate case, regardless of sales volume. Revenue stability mechanisms are designed to recognize declining sales resulting from reduced consumption, while providing an incentive for customers to use water more efficiently.
Two of our regulated jurisdictions 25 Table of Contents currently have a revenue stability mechanism that permit us to recover a portion or all of our authorized revenues in a general rate case, regardless of volumetric consumption. These mechanisms are designed to recognize declining sales resulting from reduced consumption, while providing an incentive for customers to use water more efficiently.
We have risks associated with aging infrastructure, including water and sewer mains, pumping stations and water and wastewater treatment facilities. Additionally, we may have limited information regarding buried and newly acquired assets, which 26 Table of Contents could challenge our ability to conduct efficient asset management and maintenance practices.
We have risks associated with aging infrastructure, including water and sewer mains, pumping stations and water and wastewater treatment facilities. Additionally, we may have limited information regarding buried and newly-acquired assets, which could challenge our ability to conduct efficient asset management and maintenance practices. Assets that have aged beyond their expected useful lives may experience a higher rate of failure.
Government restrictions on water use may also result in decreased use of water services, even if our water supplies are sufficient to serve our customers, which may adversely affect our financial condition, results of operations and cash flows. Seasonal and other drought conditions that may impact our water services are possible across all of our service areas.
Government restrictions on water use may also result in decreased use of water and wastewater services, even if our water supplies are sufficient to serve our customers, which may adversely affect our financial condition, results of operations and cash flows.
While these mechanisms have mitigated or reduced regulatory lag in several of our regulated states, we continue to seek approval of regulatory practices to mitigate or reduce regulatory lag in those jurisdictions that have not approved them.
While these practices and mechanisms may serve to mitigate or reduce regulatory lag in certain of our regulated jurisdictions, we continue to seek approval of regulatory practices and mechanisms to mitigate or reduce regulatory lag in other jurisdictions that have not approved them.
Although in the past we have been generally able to obtain insurance coverage related to our business, there can be no assurance that we can secure all necessary or appropriate insurance in the future, or that such insurance can be economically secured.
Although in the past we have been generally able to obtain insurance coverage related to our business, there can be no assurance that we can secure all necessary or appropriate insurance in the future, or that such insurance can be economically secured. For example, catastrophic events can result in decreased coverage limits, more limited coverage, increased premium costs or deductibles.
Our Code of Ethics requires employees and contractors to make decisions ethically and in compliance with applicable law and regulatory requirements, and our Code of Ethics and its underlying policies, practices and procedures.
Our business may be adversely affected by the intentional or other misconduct of our employees and contractors. Our Code of Ethics requires employees and contractors to make decisions ethically and in compliance with applicable law and regulatory requirements, and our Code of Ethics and its underlying policies, practices and procedures.
Our inability to mitigate or reduce regulatory lag or the impacts thereof could have an adverse effect on our financial condition, results of operations, cash flows and liquidity. We endeavor to mitigate or reduce regulatory lag by pursuing constructive regulatory practices.
Our inability to mitigate or reduce regulatory lag or the impacts thereof could have an adverse effect on our financial condition, results of operations, cash flows and liquidity. We endeavor to mitigate or reduce regulatory lag by pursuing constructive regulatory practices and certain regulatory mechanisms. See Item 1—Business—Regulated Businesses—Regulation and Rate Making for a discussion of these practices and mechanisms.
There can be no assurance that we will be able to continue to access this commercial paper program or revolving credit facility, when, as and if desired, or that the amount of capital available thereunder will be sufficient to meet all of our liquidity needs at a reasonable, or any, cost.
There can be no assurance that we will be able to continue to access this commercial paper program or revolving credit facility, when, as and if desired, or that the amount of capital available thereunder will be sufficient to meet all of our liquidity needs at a reasonable, or any, cost. 32 Table of Contents Our ability to comply with covenants in our revolving credit facility and our other consolidated indebtedness is subject to various risks and uncertainties, including events beyond our control.
While the Company cannot currently predict the likelihood or result of any adverse outcome associated with these matters, further attempts to comply with the Orders may result in material additional costs or obligations, including fines and penalties against Cal Am in the event of noncompliance with the Orders, which could have a material adverse effect upon us and our business, results of operations and cash flows. 23 Table of Contents Service disruptions caused by severe weather conditions, climate variability patterns or natural or other disasters may disrupt our operations or reduce the demand for our water services, which could adversely affect our financial condition, results of operations, cash flows and liquidity.
While the Company cannot currently predict the likelihood or result of any adverse outcome associated with these matters, further attempts to comply with the Orders may result in material additional costs or obligations, including fines and penalties against Cal Am in the event of noncompliance with the Orders, which 22 Table of Contents could have a material adverse effect upon us and our business, results of operations and cash flows.
Further, third parties, including vendors, suppliers and contractors, who perform certain services for us or administer and maintain our sensitive information, could also be targets of cyber attacks and unauthorized access to their operational or technology systems.
Further, third parties, including vendors, suppliers and contractors, who perform certain services for us or administer and maintain our networks and sensitive information, have been, and may in the future be, targets of cyber attacks and unauthorized access to their operational or information technology systems, and any cyber incident affecting our third-party business partners could significantly disrupt our operations.
Assets that have aged beyond their expected useful lives may experience a higher rate of failure. Failure of aging infrastructure could result in increased capital expenditures and O&M expenses and other costs. In addition, failure of aging infrastructure may result in property damage, and in safety, environmental and public health impacts.
Failure of aging infrastructure could result in increased capital expenditures and O&M expenses and other costs. In addition, failure of aging infrastructure may result in property damage, and in safety, environmental and public health impacts.
Moreover, we could be subject to claims for damages arising from government enforcement actions or toxic tort or other lawsuits arising out of an interruption of service or human exposure to hazardous substances in our drinking water and water supplies. See Item 3—Legal Proceedings for information on certain pending lawsuits related to interruptions of water service.
Moreover, we could be subject to claims for damages arising from government enforcement actions or toxic tort or other lawsuits, including class action lawsuits brought by affected parties, arising out of an interruption of service or human exposure to hazardous substances in our drinking water and water supplies.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThe Company’s security team provides oversight and policy guidance on physical, cyber and information security, as well as business continuity, throughout the Company’s operations. It is responsible for designing, implementing, monitoring and supporting effective physical and technical security controls for the Company’s physical assets, business systems and operational technologies.
Biggest changeThe CISO reports directly to the Company’s Chief Technology and Information Officer, who is responsible for the Company’s information technology program. The Company’s security team provides oversight and policy guidance on physical, cyber and information security, as well as business continuity, throughout the Company’s operations.
In considering the materiality of an event, related attacks, whether in terms of quantity or impact, are reviewed individually and in the aggregate to determine whether they may have a significant impact on the Company’s financial condition, results of operations or business strategy, either quantitatively or qualitatively. 38 Table of Contents Cybersecurity Governance The Board of Directors is responsible for oversight of the Company’s cybersecurity program and the Company’s responses to cybersecurity risk.
In considering the materiality of an event, related attacks, whether in terms of quantity or impact, are reviewed individually and in the aggregate to determine whether they may have a significant impact on the Company’s financial condition, results of operations or business strategy, either quantitatively or qualitatively. 37 Table of Contents Cybersecurity Governance The Board of Directors is responsible for oversight of the Company’s cybersecurity program and the Company’s responses to cybersecurity risk.
The CIO serves on the Water Sector Coordinating Council (“WSCC”), an advisory body comprised of representatives from various U.S. water and wastewater organizations, which serves as a policy, strategy and coordination mechanism for the water sector on critical infrastructure security and resilience issues.
The CISO serves on the Water Sector Coordinating Council (“WSCC”), an advisory body comprised of representatives from various U.S. water and wastewater organizations, which serves as a policy, strategy and coordination mechanism for the water sector on critical infrastructure security and resilience issues.
In that role, the CIO partners with representatives from the Department of Homeland Security and the EPA on U.S. water and wastewater sector initiatives. The CIO is also the former Chair of the WSCC, the National Association of Water Companies’ Safety and Security Committee, and the ASIS Utility Security Council.
In that role, the CISO partners with representatives from the Department of Homeland Security and the EPA on U.S. water and wastewater sector initiatives. The CISO is also the former Chair of the WSCC, the National Association of Water Companies’ Safety and Security Committee, and the ASIS Utility Security Council.
To oversee cybersecurity risk management, the Company employs a dedicated unit, led by the Company’s Chief Security Officer (“CSO”), to implement cybersecurity controls, assess and report on cybersecurity risks and consult with the Company’s internal Enterprise Risk Management Committee, a decision-making body which supports and oversees the identification, assessment, prioritization, and mitigation strategies for enterprise-level risks, including cybersecurity risks.
To oversee cybersecurity risk management, the Company employs a dedicated unit, led by the Company’s Chief Information Security Officer (“CISO”), to implement cybersecurity controls, assess and report on cybersecurity risks and consult with the Company’s internal Enterprise Risk Management Committee, a decision-making body which supports and oversees the identification, assessment, prioritization, and mitigation strategies for enterprise-level risks, including cybersecurity risks.
Although the Company has implemented measures that it believes are reasonable to safeguard its operational and technology systems and has sought to establish a culture of continuous monitoring and improvement, the evolving nature of cybersecurity attacks and vulnerabilities means that these protections may not always be effective.
Although the Company has implemented measures that it believes are reasonable to safeguard its operational and information technology systems and has sought to establish a culture of continuous monitoring and improvement, the evolving and increasingly complex nature of cybersecurity attacks and vulnerabilities means that these protections may not always be effective.
The Company has also implemented a vulnerability assessment program that is conducted at least annually and more frequently, depending on the nature of the risk. This process serves as a guiding enterprise-wide framework to outline the scope and procedures of the Company’s cybersecurity risk management processes.
The Company has also implemented a vulnerability assessment program that is reviewed at least annually and more frequently, depending on changes to the risk environment. This process serves as a guiding enterprise-wide framework to outline the scope and procedures of the Company’s cybersecurity risk management processes.
The CIO has over 25 years of work experience in the information technology, physical security and cybersecurity fields, including previously serving as the Company’s CSO, and holds the Certified Protection Professional, Professional Certified Investigator and Physical Security Professional certifications from ASIS International.
The CISO has over 25 years of work experience in the information technology, physical security and cybersecurity fields, including previously serving as the Company’s Chief Security Officer, and holds the Certified Protection Professional, Professional Certified Investigator and Physical Security Professional certifications from ASIS International.
For additional information concerning cybersecurity-related risks, see Item 1A—Risk Factors—We may be subject to physical and cyber attacks, and —We may sustain losses that exceed or are excluded from our insurance coverage or for which we are self-insured. 37 Table of Contents Cybersecurity Risk Management and Strategy The Company has established an enterprise-wide cybersecurity program designed to prevent disruption to critical information systems, minimize the loss or manipulation of sensitive information, and to timely identify, escalate and promptly remediate and recover from cybersecurity incidents and facilitate compliance with regulatory and disclosure requirements.
For additional information concerning the October 3, 2024, cybersecurity incident, and cybersecurity-related risks, see Item 1A—Risk Factors—Risks Related to Our Industry and Business Operations—We are, and may in the future be, subject to physical and cyber attacks, and —We may sustain losses that exceed or are excluded from our insurance coverage or for which we are self-insured; and Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Other Matters—Cybersecurity Incident. 36 Table of Contents Cybersecurity Risk Management and Strategy The Company has established an enterprise-wide cybersecurity program designed to prevent disruption to critical information systems, minimize the loss or manipulation of sensitive information, and to timely identify, escalate and promptly remediate and recover from cybersecurity incidents and facilitate compliance with regulatory and disclosure requirements.
If a cybersecurity incident were to occur, the Company would establish a cross-functional incident response team to respond to the specific cybersecurity incident. The incident response team would consist of a subset of members from the standing crisis response team, including personnel with the most relevant experience related to the specific incident.
When a cybersecurity incident occurs, the Company establishes a cross-functional incident response team to respond to the specific cybersecurity incident. The incident response team consists of a subset of members from the standing crisis response team, including personnel with the most relevant experience related to the specific incident.
To date, management has determined that no cybersecurity incident experienced by the Company has resulted in a material impact on its financial condition, results of operations or business strategy.
To date, the Company has determined that it has not experienced a cybersecurity incident that has resulted in a material impact to the Company’s financial condition, results of operations, cash flows, or business strategy.
The SETO Committee coordinates with the Audit, Finance and Risk Committee of the Board of Directors, as appropriate, on matters related to cybersecurity risk.
In addition, the SETO Committee and the Board of Directors receive reports of periodic external assessments and internal testing of the effectiveness of the Company’s cybersecurity program. The SETO Committee coordinates with the Audit, Finance and Risk Committee, as appropriate, on matters related to cybersecurity risk.
The Board of Directors has delegated to the Safety, Environmental, Technology and Operations (“SETO”) Committee of the Board of Directors responsibility for the oversight and review of technology policy, strategy and governance, and cybersecurity issues that could impact the Company’s operational performance or risk profile.
The Board of Directors has delegated to its SETO Committee responsibility for the oversight and review of technology policy, strategy and governance, and cybersecurity issues that could impact the Company’s operational performance or risk profile. The SETO Committee meets at least quarterly and receives reports related to cybersecurity threats, trends and risks, and related mitigation activities.
The Company’s security team also conducts annual and ongoing cybersecurity awareness training and education for the Company’s employees. In 2023, 100% of the Company’s active workforce completed mandatory cybersecurity training. By equipping employees with knowledge and skills, the Company strives to cultivate and maintain a cybersecurity-conscious culture within its workforce.
By equipping employees with knowledge and skills, the Company strives to cultivate and maintain a cybersecurity-conscious culture within its workforce.
Cybersecurity Risks The Company believes that its current preventative actions and response activities provide reasonable measures of protection against security breaches and serve generally to reduce the Company’s overall cybersecurity risk. However, cybersecurity threats are constantly evolving and have and will continue to become more frequent and sophisticated.
Cybersecurity Risks Cybersecurity threats are constantly evolving and have and will continue to become more frequent and sophisticated.
Removed
In addition, the Company has obtained insurance to provide coverage for a portion of the losses and damages that may result from a cyber attack or a security breach, but such insurance is subject to exclusions, limitations and exceptions, and may not cover the total loss or damage caused by an attack or breach.
Added
By way of example, as previously disclosed, on October 3, 2024, the Company identified unauthorized activity within its information technology computer networks and systems, which was determined to be the result of a cybersecurity incident.
Removed
The Company’s CSO has 23 years of work experience in the cybersecurity field throughout various industries, including the utility sector, and has obtained several professional certifications, including from the International Information System Security Certification Consortium. The CSO reports directly to the Company's Chief Information Officer (“CIO”), who is responsible for the Company’s information technology program.
Added
It is responsible for designing, implementing, monitoring and supporting effective physical and technical security controls for the Company’s physical assets, business systems and operational technologies. The Company’s security team also conducts annual and ongoing cybersecurity awareness training and education for the Company’s employees. In 2024, 100% of the Company’s active workforce completed mandatory cybersecurity training.
Removed
The SETO Committee meets at least quarterly and receives reports from the CIO and CSO related to cybersecurity threats, trends and risks, and related mitigation activities. In addition, the SETO Committee and the Board of Directors receive reports of periodic external assessments and internal testing of the effectiveness of the Company’s cybersecurity program.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe properties of the Company’s Regulated Businesses consist mainly of approximately: • 80 surface water treatment plants; • 540 groundwater treatment plants; • 175 wastewater treatment plants; • 53,700 miles of transmission, distribution and collection mains and pipes; • 1,200 groundwater wells; • 1,700 water and wastewater pumping stations; • 1,100 treated water storage facilities; and • 74 dams.
Biggest changeThe properties of the Company’s Regulated Businesses consist mainly of approximately: • 80 surface water treatment plants; • 520 groundwater treatment plants; • 190 wastewater treatment plants; • 54,500 miles of transmission, distribution and collection mains and pipes; • 1,200 groundwater wells; • 1,800 water and wastewater pumping stations; • 1,100 treated water storage facilities; and • 75 dams.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeWest Virginia-American Water Company was filed in West Virginia Circuit Court in Kanawha County seeking damages under theories of trespass, negligence and implied indemnity. The damages being sought related to the incident include, among other things, repair and response costs incurred by Mountaineer Gas and attorneys’ fees and expenses incurred by Mountaineer Gas.
Biggest changeThe damages being sought related to the incident include, among other things, repair and response costs incurred by Mountaineer Gas and attorneys’ fees and expenses incurred by Mountaineer Gas. On December 14, 2023, Mountaineer Gas filed a motion with the Supreme Court of West Virginia to transfer this case to the West Virginia Business Court.
In 2016, the CPUC unanimously approved a final decision to authorize Cal Am to enter into a water purchase agreement for the GWR Project and to construct a pipeline and pump station facilities and recover up to the incurred $50 million in associated costs plus AFUDC, subject to meeting certain criteria.
In 2016, the CPUC unanimously approved a final decision to authorize Cal Am to enter into a water purchase agreement for the GWR Project and to construct a pipeline and pump station facilities and recover up to $50 million in associated incurred costs plus AFUDC, subject to meeting certain criteria.
On December 30, 2022, Cal Am filed with the CPUC an application for rehearing of the CPUC’s December 5, 2022 final decision. On March 30, 2023, the CPUC issued a decision denying Cal Am’s application for rehearing but adopting its proposed AFUDC for already incurred and future costs.
On December 30, 2022, Cal Am filed with the CPUC an application for rehearing of the CPUC’s December 5, 2022 final decision, and on March 30, 2023, the CPUC issued a decision denying Cal Am’s application for rehearing but adopting its proposed AFUDC for already incurred and future costs.
On November 10, 2023, a break was reported in a low-pressure natural gas main located near the affected WVAWC water main break, and an inflow of water into the natural gas main and associated delivery pipelines occurred.
On November 10, 2023, a break was reported in a low-pressure natural gas main located near the affected WVAWC water main, and an inflow of water into the natural gas main and associated delivery pipelines occurred.
Continued compliance with the diversion limitations in 2024, and future years may be impacted by a number of factors, including without limitation potential recurrence of drought conditions in California and the reduction or exhaustion of water supply reserves, and will require successful development of alternate water supply sources sufficient to meet customer demand.
Continued compliance with the diversion limitations in 2025, and future years may be impacted by a number of factors, including without limitation potential recurrence of drought conditions in California and the reduction or exhaustion of water supply reserves, and will require successful development of alternate water supply sources sufficient to meet customer demand.
On December 5, 2022, the CPUC issued a final decision that authorizes Cal Am to enter into the amended water purchase agreement, and specifically to increase pumping capacity and reliability of groundwater extraction from the Seaside Groundwater Basin. The final decision sets the cost cap for the proposed facilities at approximately $62 million.
On December 5, 2022, the CPUC issued a final decision that authorized Cal Am to enter into the amended water purchase agreement, and specifically to increase pumping capacity and reliability of groundwater extraction from the Seaside Groundwater Basin. The final decision sets the cost cap for the proposed facilities at approximately $62 million.
The decision also provides Cal Am the opportunity to serve supplemental testimony to increase its cost cap for certain of the Water Supply Project’s extraction wells. The amended water purchase agreement and a memorandum of understanding to negotiate certain milestones related to the expansion of the GWR Project have been signed by the relevant parties.
The decision also provided Cal Am the opportunity to serve supplemental testimony to increase its cost cap for certain of the Water Supply Project’s extraction wells. The amended water purchase agreement and a memorandum of understanding to negotiate certain milestones related to the expansion of the GWR Project have been signed by the relevant parties.
On December 20, 2023, Mountaineer Gas filed answers to each of the first three lawsuits, which included cross-claims against WVAWC alleging that Mountaineer Gas is without fault for the claims and damages alleged in the lawsuits and WVAWC should be required to indemnify Mountaineer Gas for any damages and for attorneys’ fees and expenses incurred by Mountaineer Gas in the lawsuits.
On December 20, 2023, Mountaineer Gas filed answers to each of the first three class action lawsuits, which included cross-claims against WVAWC alleging that Mountaineer Gas is without fault for the claims and damages alleged in the lawsuits and WVAWC should be required to indemnify Mountaineer Gas for any damages and for attorneys’ fees and expenses incurred by Mountaineer Gas in the lawsuits.
After Coastal Commission staff issued reports recommending denial of the Original Jurisdiction Application, noting potential impacts on environmentally sensitive habitat areas and wetlands and possible disproportionate impacts to communities of concern, in September 2020, Cal Am withdrew the Original Jurisdiction Application in order to address the staff’s environmental justice concerns.
After Coastal Commission staff issued reports recommending denial of the Original Jurisdiction Application, noting potential impacts on environmentally sensitive habitat areas and wetlands and possible disproportionate impacts to communities of concern, in September 2020, Cal Am withdrew the Original Jurisdiction Application in order to address the staff’s environmental justice concerns. In November 2020, Cal Am refiled the Original Jurisdiction Application.
Cal Am continues to seek the remaining permits necessary to construct the Water Supply Project. 41 Table of Contents In December 2022, the City, Marina Coast Water District (“MCWD”), MCWD’s groundwater sustainability agency (“GSA”), and the MPWMD jointly filed a petition for writ of mandate in Monterey County Superior Court against the Coastal Commission, alleging that the Coastal Commission violated the California Coastal Act and the California Environmental Quality Act in issuing a coastal development permit to Cal Am for construction of the MPWSP slant wells.
Cal Am continues to seek the remaining permits necessary to construct the Water Supply Project. 40 Table of Contents In December 2022, the City, Marina Coast Water District (“MCWD”), MCWD’s groundwater sustainability agency (“GSA”), and the MPWMD jointly filed a petition for writ of mandate in Monterey County Superior Court against the Coastal Commission, alleging that the Coastal Commission violated the California Coastal Act and the California Environmental Quality Act in issuing a coastal development permit to Cal Am for construction of slant wells for the Water Supply Project.
However, there can be no assurance that the Water Supply Project in its current configuration will be completed on a timely basis, if ever. For the year ended December 31, 2023, Cal Am has complied with the diversion limitations contained in the 2016 Order.
However, there can be no assurance that the Water Supply Project in its current configuration will be completed on a timely basis, if ever. For the year ended December 31, 2024, Cal Am has complied with the diversion limitations contained in the 2016 Order.
Because Cal Am may use the test slant well as one of the slant wells for the Water Supply Project, Cal Am sought and obtained from the Coastal Commission permit amendments to allow the test slant well to remain in place and be maintained until February 28, 2025.
Because Cal Am may use the test slant well as one of the slant wells for the Water Supply Project, Cal Am sought and obtained from the Coastal Commission permit amendments to allow the test slant well to remain in place and be maintained until February 28, 2026.
The resulting inflow of water into the natural gas main and related pipelines resulted in a loss of natural gas service to approximately 1,100 Mountaineer Gas customers, as well as water entering customer service lines and certain natural gas appliances owned or used by some of the affected Mountaineer Gas customers.
The resulting inflow of water into the natural gas main and related pipelines resulted in a loss of natural gas service to approximately 1,500 Mountaineer Gas customers, as well as water entering customer service lines and certain natural gas appliances owned or used by some of the affected Mountaineer Gas customers.
Mountaineer Gas Company and West Virginia-American Water Company was filed in West Virginia Circuit Court in Kanawha County on behalf of an alleged class of Mountaineer Gas residential and business customers and other households and businesses supplied with natural gas in Kanawha County, which lost natural gas service on November 10, 2023, as a result of these events.
Mountaineer Gas Company and West Virginia-American Water Company was filed in West Virginia Circuit Court in Kanawha 45 Table of Contents County on behalf of an alleged class of Mountaineer Gas residential and business customers and other households and businesses supplied with natural gas in Kanawha County, which lost natural gas service on November 10, 2023, as a result of these events.
In accordance with the SEC’s disclosure rules, the Company has elected to disclose environmental proceedings involving the Company and a governmental authority if the amount of potential monetary sanctions, exclusive of interest and costs, that the Company reasonably believes will result from such proceeding is $1 million or more . 39 Table of Contents Alternative Water Supply in Lieu of Carmel River Diversions Compliance with SWRCB Orders to Reduce Carmel River Diversions Under the 2009 Order, Cal Am is required, among other things, to decrease significantly its yearly diversions of water from the Carmel River according to a set reduction schedule.
In accordance with the SEC’s disclosure rules, the Company has elected to disclose environmental proceedings involving the Company and a governmental authority if the amount of potential monetary sanctions, exclusive of interest and costs, that the Company reasonably believes will result from such proceeding is $1 million or more . 38 Table of Contents Alternative Water Supply in Lieu of Carmel River Diversions Compliance with SWRCB Orders to Reduce Carmel River Diversions Under the 2009 Order, Cal Am is required to decrease significantly its yearly diversions of water from the Carmel River according to a set reduction schedule.
West Virginia-American Water Company and Mountaineer Gas Company , was filed in West Virginia Circuit Court in Kanawha County asserting similar allegations as those included in the Ruffin , Toliver and Dodson lawsuits (the “first three lawsuits”), with the addition of counts alleging unjust enrichment and violations of the West Virginia Human Rights Act and the West Virginia Consumer Credit and Protection Act.
West Virginia-American Water Company and Mountaineer Gas Company , was filed in West Virginia Circuit Court in Kanawha County asserting similar allegations as those included in the Ruffin , Toliver and Dodson lawsuits, with the addition of counts alleging unjust enrichment and violations of the West Virginia Human Rights Act and the West Virginia Consumer Credit and Protection Act.
TAWC repaired the main by early morning on September 14, 2019, and restored full water service by the afternoon of September 15, 2019, with the boil water notice lifted for all customers on September 16, 2019. 45 Table of Contents On September 17, 2019, a complaint captioned Bruce, et al. v.
TAWC repaired the main by early morning on September 14, 2019, and restored full water service by the afternoon of September 15, 2019, with the boil water notice lifted for all customers on September 16, 2019. On September 17, 2019, a complaint captioned Bruce, et al. v.
Following issuance by the Coastal Commission in November 2022, of a coastal development permit, as described below, Cal Am continues to work constructively with all appropriate agencies to obtain the remaining required permits for the Water Supply Project.
Following issuance by the California Coastal Commission (the “Coastal Commission”) in November 2022, of a coastal development permit, as described below, Cal Am continues to work constructively with all appropriate agencies to obtain the remaining required permits for the Water Supply Project.
On January 30, 2024, a motion was filed with the West Virginia Supreme Court on behalf of the Toliver plaintiff to refer the four class action complaints and the Mountaineer Gas complaint to the West Virginia Mass Litigation Panel. On February 7, 2024, WVAWC filed a motion joining in that referral request. These motions remain pending.
On January 30, 2024, a motion was filed with the West Virginia Supreme Court on behalf of the Toliver plaintiff to refer the four class action complaints and the Mountaineer Gas complaint to the West Virginia Mass Litigation Panel. On February 7, 2024, WVAWC filed a motion joining in that referral request.
ITEM 3. LEGAL PROCEEDINGS Set forth below is information related to the Company’s material pending legal proceedings as of February 14, 2024, other than ordinary routine litigation incidental to the business, required to be disclosed in this Annual Report on Form 10-K.
ITEM 3. LEGAL PROCEEDINGS Set forth below is information related to the Company’s material pending legal proceedings as of February 19, 2025, other than ordinary routine litigation incidental to the business, required to be disclosed in this Annual Report on Form 10-K.
In 2020, the MPWMD certified a final environmental impact report, analyzing the environmental impacts of the MPWMD’s project to (1) acquire the Monterey system assets through the power of eminent domain, if necessary, and (2) expand its geographic boundaries to include all parts of this system.
In 2020, the MPWMD certified a final environmental impact report, analyzing the environmental impacts of the MPWMD’s project to (i) acquire the Monterey system assets through the power of eminent domain, if necessary, and (ii) expand its geographic boundaries to include all parts of this system.
On January 12, 2023, after hearing oral argument, the court issued an oral ruling denying the Tennessee Plaintiffs’ motion for class certification. On February 9, 2023, the Tennessee Plaintiffs sought reconsideration of the ruling by the court, and any final ruling is appealable to the Tennessee Court of Appeals, as allowed under Tennessee law.
In January 2023, after hearing oral argument, the court issued an oral ruling denying the Tennessee Plaintiffs’ motion for class certification. In February 2023, the Tennessee Plaintiffs sought reconsideration of the ruling by the court, and any final ruling is appealable to the Tennessee Court of Appeals, as allowed under Tennessee law.
In 2019, the MPWMD issued a preliminary valuation and cost of service analysis report, finding in part that (1) an estimate of the Monterey system assets’ total value plus adjustments would be approximately $513 million, (2) the cost of service modeling results indicate significant annual reductions in revenue requirements and projected monthly water bills, and (3) the acquisition of the Monterey system assets by the MPWMD would be economically feasible.
In 2019, the MPWMD issued a preliminary valuation and cost of service analysis report, finding in part that (i) an estimate of the Monterey system assets’ total value plus adjustments would be approximately $513 million, (ii) the cost of service modeling results indicate significant annual reductions in revenue requirements and projected monthly water bills, and (iii) the acquisition of the Monterey system assets by the MPWMD would be economically feasible.
The Company and WVAWC believe that WVAWC has meritorious defenses to the claims raised in this class action complaint and WVAWC will continue to vigorously defend itself against these allegations.
The Company and TAWC believe that TAWC has valid, meritorious defenses to the claims raised in this class action complaint, and TAWC will continue to vigorously defend itself against these allegations.
On February 8, 2024, and February 9, 2024, each of Cal Am and LAFCO, respectively, filed a notice of appeal with the California Court of Appeals regarding the Monterey County Superior Court’s decision to issue the writ of mandate.
On February 8, 2024, and February 9, 2024, respectively, each of Cal Am and LAFCO filed a notice of appeal with the California Court of Appeal regarding the Monterey County Superior Court’s decision to issue the writ of mandate. The MPWMD filed a notice of cross-appeal on February 15, 2024.
The Company and WVAWC believe that the causes of action and other claims asserted against WVAWC in the class action complaints and the lawsuit filed by Mountaineer Gas are without merit and that WVAWC has meritorious defenses to such claims, and WVAWC is defending itself vigorously in these litigation proceedings.
The Company and WVAWC believe that the causes of action and other claims asserted against WVAWC in the class action complaints and the lawsuit filed by Mountaineer Gas are without merit and that WVAWC has valid, meritorious defenses to such claims. WVAWC continues to defend itself vigorously in these litigation proceedings.
WVAWC has filed a partial motion to dismiss certain claims in the Ruffin, Toliver, Dodson and Thomas lawsuits and a motion to dismiss the cross-claims asserted against WVAWC therein by Mountaineer Gas.
WVAWC has filed a partial motion to dismiss certain claims in the Ruffin, Toliver, Dodson and Thomas lawsuits and a motion to dismiss the cross-claims asserted against WVAWC therein by Mountaineer Gas. Mountaineer Gas subsequently voluntarily dismissed its cross-claims.
Proposed Zoning Changes at CEMEX Site for Slant Wells In August 2018, the City circulated a public review draft of proposed amendments to its local coastal program and zoning ordinance, and placed the matter for consideration on the Planning Commission’s agenda for its September 2018 meeting.
Site for Slant Wells In August 2018, the City circulated a public review draft of proposed amendments to its local coastal program and zoning ordinance, and placed the matter for consideration on the Planning Commission’s agenda for its September 2018 meeting. The proposed amendments would change zoning at a site owned by CEMEX, Inc.
Cal Am has incurred $241 million in aggregate costs as of December 31, 2023, related to the Water Supply Project, which includes $72 million in AFUDC. 40 Table of Contents In September 2021, Cal Am, Monterey One Water and the MPWMD reached an agreement on Cal Am’s purchase of additional water from an expansion to the GWR Project, which is not expected to produce additional water until 2024 at the earliest.
Cal Am has incurred $281 million in aggregate costs as of December 31, 2024, related to the Water Supply Project, which includes $88 million in AFUDC. 39 Table of Contents In September 2021, Cal Am, Monterey One Water and the MPWMD reached an agreement on Cal Am’s purchase of additional water from an expansion to the GWR Project, which is not expected to produce additional water until late 2025 at the earliest.
In May 2020, the City filed a lawsuit in Monterey County Superior Court, naming Cal Am and CEMEX as defendants, and MCWRA and MCWD as real parties in interest.
In May 2020, the City filed a lawsuit in Monterey County Superior Court, naming Cal Am and CEMEX as defendants, and Monterey County Water Resources Agency (“MCWRA”) and MCWD as real parties in interest.
The proposed amendments would change zoning at the CEMEX site to open space and restrict future uses, including with respect to Cal Am’s planned use of the site for the slant wells for the Water Supply Project. Any change to the City’s local coastal program must ultimately be approved by the Coastal Commission.
(“CEMEX”) to open space and restrict future uses, including with respect to Cal Am’s planned use of the site for the slant wells for the Water Supply Project. Any change to the City’s local coastal program must ultimately be approved by the Coastal Commission. Cal Am, CEMEX and the Coastal Commission each submitted letters opposing the proposed amendments.
In August 2020, MCWD filed a cross-complaint in the May 2020 lawsuit against Cal Am, CEMEX and MCWRA, alleging claims for specific performance of certain provisions of the 1996 annexation agreement related to the property owned by CEMEX on which intake wells for the Water Supply Project will be located, as well as claims of water rights, nuisance and unreasonable water use, and seeking additional declaratory relief.
In November 2020, Cal Am, CEMEX and MCWRA filed demurrers, which were overruled by the court at a hearing held in February 2021. 41 Table of Contents In August 2020, MCWD filed a cross-complaint in the May 2020 lawsuit against Cal Am, CEMEX and MCWRA, alleging claims for specific performance of certain provisions of the 1996 annexation agreement related to the property owned by CEMEX on which intake wells for the Water Supply Project will be located, as well as claims of water rights, nuisance and unreasonable water use, and seeking additional declaratory relief.
Subject to the impact or resolution of this litigation, construction of the desalination plant is expected to begin in 2025 and the desalination plant is estimated to be in-service by the end of 2027.
Subject to the impact or resolution of this litigation, construction of the desalination plant is expected to begin in 2025 and the desalination plant is estimated to be in-service by the end of 2027. Proposed Zoning Changes at CEMEX, Inc.
In July 2020, the Circuit Court entered an order granting the Jeffries plaintiffs’ motion for certification of a class regarding certain liability issues but denying certification of a class to determine a punitive damages multiplier.
In July 2020, the Circuit Court entered an order granting the Jeffries plaintiffs’ motion for certification of a class regarding certain liability issues but denying certification of a class to determine a punitive damages multiplier. Trial in this matter had been scheduled for January 2025.
On September 21, 2023, the court upheld its prior ruling but gave the Tennessee Plaintiffs the option to file an amended class definition. On October 12, 2023, the Tennessee Plaintiffs filed an amended class definition seeking certification of a business customer-only class. On December 1, 2023, TAWC filed a memorandum in opposition to the amended class definition.
In September 2023, the court upheld its prior ruling but gave the Tennessee Plaintiffs the option to file an amended class definition. In October 2023, the Tennessee Plaintiffs filed an amended class definition seeking certification of a business customer-only class.
SDWR accepted Monterey County’s filing in December 2019, and now lists Monterey County as the exclusive GSA for the site. 43 Table of Contents In December 2019, the City filed a lawsuit in Monterey County Superior Court challenging Monterey County’s filing, and SDWR’s acceptance of the filing, as the exclusive GSA for the CEMEX site.
In December 2019, the City filed a lawsuit in Monterey County Superior Court challenging Monterey County’s filing, and SDWR’s acceptance of the filing, as the exclusive GSA for the CEMEX site.
West Virginia American Water and Mountaineer Gas Company was filed in West Virginia Circuit Court in Kanawha County on behalf of an alleged class of all West Virginia citizens living between Pennsylvania Avenue south of Washington Street, and Iowa Street, who are customers of Mountaineer Gas.
On November 16, 2023, a complaint captioned Dodson et al. v. West Virginia American Water and Mountaineer Gas Company was filed in West Virginia Circuit Court in Kanawha County on behalf of an alleged class of all West Virginia citizens living between Pennsylvania Avenue south of Washington Street, and Iowa Street, who are customers of Mountaineer Gas.
A required lease obtained from the California State Lands Commission, as amended, expires on December 16, 2027. 42 Table of Contents Water Supply Project Land Acquisition and Slant Well Site Use In July 2017, the Coastal Commission adopted a consent agreement and cease and desist order requiring sand mining operations on the property owned by CEMEX on which intake wells for the Water Supply Project will be located, to cease by the end of 2020 and the property to be sold to either a non-profit or governmental entity.
Water Supply Project Land Acquisition and Slant Well Site Use In July 2017, the Coastal Commission adopted a consent agreement and cease and desist order requiring sand mining operations on the property owned by CEMEX on which intake wells for the Water Supply Project will be located, to cease by the end of 2020 and the property to be sold to either a non-profit or governmental entity.
In December 2019, the County of Monterey filed its own notice to become the exclusive GSA at the CEMEX site in order to resolve the overlap, which is permitted under SGMA.
In December 2019, the County of Monterey filed its own notice to become the exclusive GSA at the CEMEX site in order to resolve the overlap, which is permitted under SGMA. SDWR accepted Monterey County’s filing in December 2019, and now lists Monterey County as the exclusive GSA for the site.
Cal Am, CEMEX and the Coastal Commission each submitted letters opposing the proposed amendments. At its November 2018 meeting, the Planning Commission adopted a resolution recommending that the Marina City Council consider approving the amendments. In December 2018, the Marina City Council considered the proposed amendments.
At its November 2018 meeting, the Planning Commission adopted a resolution recommending that the Marina City Council consider approving the amendments. In December 2018, the Marina City Council considered the proposed amendments.
On December 6, 2023, WVAWC initiated a process whereby Mountaineer Gas customers could file claims with WVAWC and seek payment from WVAWC of up to $2,000 per affected household for the inconvenience arising from a loss of use of their appliances and documented out-of-pocket expenses as a result of the natural gas outage.
The Kanawha County Circuit Court has set a trial date of February 2, 2026, for the class action complaints. 46 Table of Contents On December 6, 2023, WVAWC initiated a process whereby Mountaineer Gas customers could file claims with WVAWC and seek payment from WVAWC of up to $2,000 in damages per affected household for the inconvenience arising from a loss of use of their appliances and documented out-of-pocket expenses as a result of the natural gas outage.
In February 2021, the City filed a separate but related in rem reverse validation complaint challenging the adoption by Monterey County of a GSP for the CEMEX site. On May 3, 2023, the City filed a second reverse validation complaint, challenging the adoption of amendments to the GSP for the 180/400 subbasin.
In February 2021, the City filed a separate but related in rem reverse validation complaint challenging the adoption by Monterey County of a GSP for the CEMEX site.
After a hearing, in August 2021, the court denied the claims brought by the City and granted Monterey County’s cross-claims, finding that the City’s GSA notice was untimely, the Monterey County GSA was the exclusive GSA for the CEMEX site, and the SVBGSA’s GSP was properly adopted for the entire 180/400 subbasin, including the CEMEX site.
On May 3, 2023, the City filed a second reverse validation complaint, challenging the adoption of amendments to the GSP for the 180/400 Subbasin. 42 Table of Contents After a hearing, in August 2021, the court denied the claims brought by the City and granted Monterey County’s cross-claims, finding that the City’s GSA notice was untimely, the Monterey County GSA was the exclusive GSA for the CEMEX site, and the SVBGSA’s GSP was properly adopted for the entire 180/400 Subbasin, including the CEMEX site.
While the Company cannot currently predict the outcome of this lawsuit, the Company believes that, given existing legal precedent related to similar attempts by public agencies in California to take over water systems and its other defenses, Cal Am should be able to defend itself successfully against the MPWMD’s eminent domain lawsuit.
While the Company cannot currently predict the outcome of this lawsuit, the Company believes that, given existing legal authorities and its other defenses, Cal Am should be able to defend itself successfully against the MPWMD’s eminent domain lawsuit.
Water service was fully restored on July 1, 2015, to all customers affected by this event. On June 2, 2017, a complaint captioned Jeffries, et al. v.
The system was reconfigured to maintain service to all but approximately 3,000 customers while a final repair was being completed safely on June 30, 2015. Water service was fully restored by July 1, 2015, to all customers affected by this event. On June 2, 2017, a complaint captioned Jeffries, et al. v.
Dunbar, West Virginia Water Main Break Class Action Litigation On the evening of June 23, 2015, a 36-inch pre-stressed concrete transmission water main, installed in the early 1970s, failed.
Dunbar, West Virginia Class Action Litigation On the evening of June 23, 2015, a 36-inch pre-stressed concrete transmission water main, installed in the early 1970s, failed. The water main is part of the West Relay pumping station located in the City of Dunbar, West Virginia and owned by West Virginia-American Water Company, the Company’s West Virginia subsidiary (“WVAWC”).
On December 11, 2023, the Monterey County Superior Court issued a writ of mandate directing LAFCO to vacate and set aside its original denial of the MPWMD’s application to serve as a retail water provider (in conjunction with its effort to acquire the Monterey water system assets) and allowing the MPWMD to seek further LAFCO review of its application in compliance with all applicable law.
In December 2022, the court sustained in part, and denied in part, demurrers that had been filed by LAFCO seeking to dismiss the MPWMD’s lawsuit. 43 Table of Contents On December 11, 2023, the Monterey County Superior Court issued a writ of mandate directing LAFCO to vacate and set aside its original denial of the MPWMD’s application to serve as a retail water provider (in conjunction with its effort to acquire the Monterey system assets) and, if requested, to re-hear the application in compliance with all applicable law.
The desalination plant and slant wells originally approved by the CPUC would produce up to 6.4 million gallons of desalinated water per day.
In October 2022, Cal Am announced a phasing plan for the proposed desalination plant component of the Water Supply Project. The desalination plant and slant wells originally approved by the CPUC would produce up to 6.4 million gallons of desalinated water per day.
In June 2022, the court granted, with conditions, a motion by Cal Am to intervene in the MPWMD’s lawsuit against LAFCO. In December 2022, the court sustained in part, and denied in part, demurrers that had been filed by LAFCO seeking to dismiss the MPWMD’s lawsuit.
In June 2022, the court granted, with conditions, a motion by Cal Am to intervene in the MPWMD’s lawsuit against LAFCO.
On December 15, 2023, the MPWMD filed a lawsuit in Monterey County Superior Court seeking to condemn the Monterey system assets.
On December 15, 2023, the MPWMD filed a lawsuit against Cal Am in Monterey County Superior Court seeking to condemn the Monterey system assets. On February 26, 2024, Cal Am filed a motion requesting the Monterey County Superior Court dismiss the MPWMD’s eminent domain lawsuit seeking to condemn Cal Am’s Monterey system assets.
In the early morning hours of June 25, 2015, crews completed a repair, but that same day, the repair developed a leak. On June 26, 2015, a second repair was completed and service was restored that day to approximately 80% of the impacted customers, and to the remaining approximately 20% by the next morning.
On June 26, 2015, a second repair was completed and service was restored that day to approximately 80% of the impacted customers, and to the remaining approximately 20% by the next morning. The second repair showed signs of leaking but the water main was usable until June 29, 2015, to allow tanks to refill.
The complaint alleges against Mountaineer Gas and WVAWC, among other things, negligence, nuisance, trespass and strict liability, as well as breach of contract against Mountaineer Gas.
The complaint alleges against Mountaineer Gas and WVAWC, among other things, negligence, nuisance, trespass and strict liability, as well as breach of contract against Mountaineer Gas. The complaint seeks class-wide damages against Mountaineer Gas and WVAWC for property damage, loss of use and enjoyment of property, annoyance and inconvenience and business losses, as well as punitive damages.
Cal Am is evaluating potential additional actions to contest the writ of mandate and to seek to uphold LAFCO’s denial of the MPWMD’s application, including filing other challenges and/or making suitable presentations at a subsequent LAFCO rehearing. 44 Table of Contents Potential Condemnation Actions by MPWMD Separate from the proceedings related to the MPWMD’s application with LAFCO, by letter dated October 3, 2022, the MPWMD notified Cal Am of a decision to appraise the Monterey system assets and requesting access to a number of Cal Am’s properties and documents to assist the MPWMD with such an appraisal.
MPWMD Condemnation Action Separate from the proceedings related to the MPWMD’s application with LAFCO, by letter dated October 3, 2022, the MPWMD notified Cal Am of a decision to appraise the Monterey system assets and requested access to a number of Cal Am’s properties and documents to assist the MPWMD with such an appraisal.
On December 14, 2023, Mountaineer Gas filed a motion with the Supreme Court of West Virginia to transfer this case to the West Virginia Business Court. On December 29, 2023, WVAWC filed a joinder in the motion to transfer the case. WVAWC has also filed a partial motion to dismiss this lawsuit. These motions remain pending.
On December 29, 2023, WVAWC filed a joinder in the motion to transfer the case. WVAWC has also filed a partial motion to dismiss this lawsuit. On March 6, 2024, the motion to transfer this complaint to the West Virginia Business Court was granted and trial and resolution judges were assigned.
On November 13, 2023, the California Court of Appeal affirmed the trial court's decision. On December 22, 2023, the City filed a petition for review with the California Supreme Court.
On November 13, 2023, the California Court of Appeal affirmed the trial court's decision. On December 22, 2023, the City filed a petition for review with the California Supreme Court, which was denied on February 24, 2024. On October 31, 2024, the parties entered into an agreement settling the stayed validation complaints and all claims for attorneys’ fees and costs.
Given the current stage of these proceedings and the general investigation, the Company and WVAWC are currently unable to predict the outcome of any of the proceedings described above.
Given the current stage of these proceedings and the general investigation, the Company and WVAWC are currently unable to predict the outcome of any of the proceedings described above. PFAS Multi-District Litigation Several of the Company’s utility subsidiaries are parties to a multi-district litigation (the “MDL”) lawsuit, which commenced on December 7, 2018, in U.S.
Further evidentiary hearings in this proceeding have been scheduled for March 2024.
Further evidentiary hearings in this proceeding were held in March 2024. This matter remains pending.
As of January 31, 2024, a total of 412 Mountaineer Gas customers completed this claims process and were paid by WVAWC an average of approximately $1,500 each. In return, these customers were required to execute a partial release of liability in favor of WVAWC.
In light of the diminishing number of new claims that had been filed, the claims process was concluded on March 8, 2024. As of December 31, 2024, a total of 594 Mountaineer Gas customers completed this claims process and each of those customers has been paid by WVAWC an average of approximately $1,500.
On January 29, 2024, the Consumer Advocate Division of the WVPSC filed a motion to intervene in the WVAWC general investigation. WVAWC is cooperating with its general investigation. Both general investigations remain pending.
On January 29, 2024, the Consumer Advocate Division of the WVPSC filed a motion to intervene in the WVAWC general investigation. On April 24, 2024, the staff issued a final joint memorandum in the Mountaineer Gas general investigation stating its view that Mountaineer Gas responded appropriately, reasonably and according to Mountaineer Gas’s written procedures.
On November 17, 2023, the Ruffin plaintiff filed a motion to consolidate the first three lawsuits before a single judge in Kanawha County Circuit Court. That motion remains pending. On December 5, 2023, a complaint captioned Mountaineer Gas Company v.
On November 17, 2023, the Ruffin plaintiff filed a motion to consolidate the class action lawsuits before a single judge in Kanawha County Circuit Court. On June 14, 2024, the judge in the Ruffin case partially granted the motion by transferring all of the four class action lawsuits to her court but deferring as premature consolidation of the cases.
Cal Am is named as a real party in interest. On November 14, 2023, the court set an initial trial date of May 1, 2024. This matter remains pending.
Cal Am is named as a real party in interest. On April 24, 2024, the court granted defendants’ motion for judgment on the pleadings and dismissed one of MCWD’s causes of action in its petition. A trial commenced on December 9, 2024, and further proceedings continued in January 2025. This matter remains pending.
In August 2023, a potential class action settlement involving defendants The Chemours Company, Corteva, Inc. and DuPont de Nemours, Inc. to resolve claims brought in the MDL against them by public water systems, and a similar class action settlement with defendant 3M Company, received preliminary approval from the MDL court.
Settlements with several defendants in the MDL proceeding have received final approval by the MDL court. In the third quarter of 2024, the Company timely submitted to the MDL court its Phase One claims forms under settlement agreements with defendants 3M Company, The Chemours Company, Corteva, Inc. and DuPont de Nemours, Inc.
The water main is part of the West Relay pumping station located in the City of Dunbar, West Virginia and owned by West Virginia-American Water Company, the Company’s West Virginia subsidiary (“WVAWC”). The failure of the main caused water outages and low pressure for up to approximately 25,000 WVAWC customers.
The failure of the main caused water outages and low pressure for up to approximately 25,000 WVAWC customers. In the early morning hours of June 25, 2015, crews completed a repair, but that same day, the repair developed a leak.
Removed
The withdrawal of the Original Jurisdiction Application did not impact Cal Am’s appeal of the City’s denial of the Marina Application, which remains pending before the Coastal Commission. In November 2020, Cal Am refiled the Original Jurisdiction Application. In October 2022, Cal Am announced a phasing plan for the proposed desalination plant component of the Water Supply Project.
Added
A required lease obtained from the California State Lands Commission, as amended, expires on December 16, 2027.
Removed
Desalination Plant Development Permit The proposed desalination plant for the Water Supply Project is to be located in an unincorporated portion of Monterey County, California, on a site owned by CEMEX, Inc. (“CEMEX”), and requires a combined development permit from Monterey County prior to commencement of construction. In April 2019, Monterey County’s Planning Commission voted to approve the permit.
Added
On September 19, 2024, the SWRCB administrative hearing officer sent a letter to the court advising that the full draft report of the SWRCB advisory opinion addressing the questions referred by the court would not be received until at least November 1, 2024.
Removed
In July 2019, the Board of Supervisors heard appeals filed by MCWD and a public advocacy group, at which time it denied the appeals and approved the permit.
Added
On November 22, 2024, the administrative hearing officer sent a second letter to the court advising that the draft report would be considered for approval at a public meeting of the SWRCB to be held in the first quarter of 2025.
Removed
In August 2019, MCWD filed a petition in Monterey County Superior Court challenging Monterey County’s approval of Cal Am’s combined development permit application and seeking injunctive relief to enjoin Monterey County and Cal Am from commencing construction of the desalination plant.
Added
On December 31, 2024, an initial draft report was circulated by the SWRCB to the parties for review and comment. Regional Water Quality Control Board Approval of NPDES Permit Amendment A requirement of the desalination plant that is a key component of the Water Supply Project is the discharge of brine through Monterey One Water’s outfall.
Removed
In October 2019, after a hearing, the court denied, without prejudice, MCWD’s motion for a preliminary injunction, but issued a stay of Monterey County’s approval of the combined development permit, precluding commencement of physical construction of the desalination plant, but allowing Cal Am to continue to obtain permits needed for the desalination plant’s construction.
Added
As a condition to Cal Am’s coastal development permit, an amendment of a NPDES permit must be obtained by Monterey One Water as the outfall owner from the Regional Water Quality Control Board (the “RWQCB”). The RWQCB must also determine that the proposed brine discharge complies with the desalination facility requirements under the California Ocean Plan.
Removed
In January 2021, the court issued its decision granting in part and denying in part MCWD’s petition. The court found that Monterey County did not completely comply with all of the requirements necessary to approve the combined development permit and set aside its approval so that Monterey County could come into compliance. The court denied all of MCWD’s other claims.
Added
Working in cooperation with Monterey One Water staff and consultants, Cal Am prepared an application for submission to the RWQCB, which application and submission were approved by Monterey One Water's Board on September 30, 2024.
Removed
The court also lifted its stay on physical construction at the plant site. In May 2021, Cal Am filed a notice of appeal as to the Monterey County Superior Court’s January 2021 decision, seeking to challenge the court’s decision on Monterey County’s statement of overriding considerations.
Added
The validation complaints were subsequently dismissed. Cal Am’s Action for Damages Following Termination of Regional Desalination Project (“RDP”) In 2010, the CPUC had approved the RDP, which was a precursor to the current Water Supply Project and called for the construction of a desalination facility in the City of Marina.
Removed
Monterey County filed a notice of appeal as to the same issue in May 2021. In June 2021, MCWD filed cross-appeals on its claims that had been denied by the court.
Added
The RDP was to be implemented through a Water Purchase Agreement and ancillary agreements (collectively, the “Agreements”) among MCWD, Cal Am and MCWRA. In 2011, due to a conflict of interest concerning a former member of MCWRA’s Board of Directors, MCWRA stated that the Agreements were void, and, as a result, Cal Am terminated the Agreements.
Removed
On September 8, 2023, the court of appeal issued its opinion reversing the trial court’s determination in favor of MCWD as to the statement of overriding considerations and rejecting MCWD’s appeals on all of its claims that the Monterey County Superior Court had denied.

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Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 48 Part II Item 5. Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 49 Item 6. [Reserved] 49 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 50 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 75 Item 8.
Biggest changeItem 4. Mine Safety Disclosures 48 Part II Item 5. Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 49 Item 6. [Reserved] 49 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 50 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 74 Item 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Since April 23, 2008, the Company’s common stock has traded on the New York Stock Exchange (“NYSE”) under the symbol “AWK.” As of February 6, 2024, there were 194,755,320 shares of common stock outstanding held by approximately 2,101 record holders.
Biggest changeITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Since April 23, 2008, the Company’s common stock has traded on the New York Stock Exchange (“NYSE”) under the symbol “AWK.” As of February 10, 2025, there were 194,947,313 shares of common stock outstanding held by approximately 1,922 record holders.
From April 1, 2015, the date repurchases under the anti-dilutive stock repurchase program commenced, through December 31, 2023, the Company repurchased an aggregate of 4,860,000 shares of its common stock under the program, leaving an aggregate of 5,140,000 shares available for repurchase under this program. There were no repurchases of common stock in 2023.
From April 1, 2015, the date repurchases under the anti-dilutive stock repurchase program commenced, through December 31, 2024, the Company repurchased an aggregate of 4,860,000 shares of its common stock under the program, leaving an aggregate of 5,140,000 shares available for repurchase under this program. There were no repurchases of common stock in 2024.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeFor the Years Ended December 31, 2023 2022 2021 (Gallons in millions) Billed water services volumes: Residential 160,921 162,105 173,644 Commercial 78,404 77,627 77,476 Industrial 36,404 37,265 35,738 Fire service, public and other 54,236 51,966 51,957 Total billed water services volumes 329,965 328,963 338,815 59 Table of Contents In 2023, as compared to 2022, operating revenues increased $415 million, primarily due to: (i) a $350 million increase from authorized rate increases, including infrastructure surcharges, principally to fund infrastructure investment in various states; (ii) a $32 million increase from water and wastewater acquisitions and organic growth in existing systems; (iii) a $19 million estimated net increase primarily due to drier than normal weather in 2023, mainly driven by drought conditions in our Missouri service territory; (iv) a $23 million net increase as a result of reduced amortization of EADIT, primarily in the Company’s Pennsylvania subsidiary; and (v) partially offset by a $12 million decrease due to changes in customer demand.
Biggest changeFor the Years Ended December 31, (Gallons in millions) 2024 2023 2022 Billed water services volumes: Residential 163,583 160,921 162,105 Commercial 80,385 78,404 77,627 Industrial 37,217 36,404 37,265 Fire service, public and other 54,700 54,236 51,966 Total billed water services volumes 335,885 329,965 328,963 In 2024, as compared to 2023, operating revenues increased $376 million, primarily due to: (i) a $288 million increase from authorized rate increases, including infrastructure surcharges, principally to recover infrastructure investment in various states; (ii) a $41 million increase from water and wastewater acquisitions and organic growth in existing systems; (iii) a $26 million increase from changes in customer demand; and (iv) a $17 million net increase as a result of reduced amortization of EADIT, primarily in the Company’s Missouri subsidiary. 59 Table of Contents Operation and Maintenance Presented in the table below is information regarding the main components of the Regulated Businesses’ operating and maintenance expense: For the Years Ended December 31, (In millions) 2024 2023 2022 Employee-related costs $ 543 $ 513 $ 505 Production costs 458 438 387 Operating supplies and services 274 255 242 Maintenance materials and supplies 97 102 96 Customer billing and accounting 72 65 59 Other 73 68 56 Total operation and maintenance expense $ 1,517 $ 1,441 $ 1,345 Employee-Related Costs For the Years Ended December 31, (In millions) 2024 2023 2022 Salaries and wages $ 434 $ 413 $ 395 Group insurance 69 60 59 Pensions 7 9 21 Other benefits 33 31 30 Total employee-related costs $ 543 $ 513 $ 505 In 2024, as compared to 2023, employee-related costs increased $30 million primarily due to an increase in salaries and wages due to merit increases, which was partially offset by higher capitalized labor and overhead rates.
These projected returns reduce the net benefit costs the Company records currently. • Rate of Compensation Increase—Management projects employees’ pay increases, which are used to project employees’ pension benefits at retirement. • Health Care Cost Trend Rate—Management projects the expected increases in the cost of health care. • Mortality— Management adopted the Society of Actuaries Pri-2012 mortality base table, the most recent table developed from private pension plan experience, which provides rates of mortality in 2012 and adopted the new MP-2021 mortality improvement scale to gradually adjust future mortality rates downward due to increased longevity in each year after 2012.
These projected returns reduce the net benefit costs the Company records currently. • Rate of Compensation Increase—Management projects employees’ pay increases, which are used to project employees’ pension benefits at retirement. • Health Care Cost Trend Rate—Management projects the expected increases in the cost of health care. • Mortality— Management adopted the Society of Actuaries Pri-2012 base mortality table, the most recent table developed from private pension plan experience, which provides rates of mortality in 2012 and adopted the MP-2021 mortality improvement scale to gradually adjust future mortality rates downward due to increased longevity in each year after 2012.
To determine if a company is considered an applicable corporation subject to CAMT, the company’s average adjusted financial statement income (“AFSI”) for the three consecutive years preceding the tax year must exceed $1 billion. An applicable corporation must make several adjustments to net income when determining AFSI.
To determine if a company is considered an applicable corporation subject to CAMT, the company’s average adjusted financial statement income (“AFSI”) for the three consecutive years preceding the tax year must exceed $1.0 billion. An applicable corporation must make several adjustments to net income when determining AFSI.
As of December 31, 2023, the Company concluded that the operations of its utilities met the criteria. Application of this authoritative guidance has a further effect on the Company’s financial statements as it pertains to allowable costs used in the ratemaking process. The Company makes significant assumptions and estimates to quantify amounts recorded as regulatory assets and liabilities.
As of December 31, 2024, the Company concluded that the operations of its utilities met the criteria. Application of this authoritative guidance has a further effect on the Company’s financial statements as it pertains to allowable costs used in the ratemaking process. The Company makes significant assumptions and estimates to quantify amounts recorded as regulatory assets and liabilities.
See Note 14—Income Taxes in the Notes to Consolidated Financial Statements for additional information regarding income taxes. Accounting for Pension and Postretirement Benefits The Company maintains noncontributory defined benefit pension plans covering eligible employees of its regulated utility and shared service operations. The Company also maintains other postretirement benefit plans providing medical and life insurance to eligible retirees.
See Note 14—Income Taxes in the Notes to Consolidated Financial Statements for additional information regarding income taxes. Accounting for Pension and Postretirement Benefits The Company maintains noncontributory defined benefit pension plans covering eligible employees of its regulated utility and shared services operations. The Company also maintains other postretirement benefit plans providing medical and life insurance to eligible retirees.
Overview American Water is the largest and most geographically diverse, publicly-traded water and wastewater utility company in the United States, as measured by both operating revenues and population served. The Company employs approximately 6,500 professionals who provide drinking water, wastewater and other related services to over 14 million people in 24 states.
Overview American Water is the largest and most geographically diverse, publicly-traded water and wastewater utility company in the United States, as measured by both operating revenues and population served. The Company employs approximately 6,700 professionals who provide drinking water, wastewater and other related services to over 14 million people in 24 states.
The trustee for the Company’s defined benefit pension and postretirement welfare plans uses an independent valuation firm to calculate the fair value of plan assets. In selecting a rate of compensation increase, the Company considers past experience in light of movements in inflation rates. The Company’s rate of compensation increase was 3.51% for 2023, 2022 and 2021.
The trustee for the Company’s defined benefit pension and postretirement welfare plans uses an independent valuation firm to calculate the fair value of plan assets. In selecting a rate of compensation increase, the Company considers past experience in light of movements in inflation rates. The Company’s rate of compensation increase was 3.51% for 2024, 2023 and 2022.
The objective in selecting the discount rate is to measure the single amount that, if invested at the measurement date in a portfolio of high-quality debt instruments, would provide the necessary future cash flows to pay the accumulated benefits when due. • Expected Return on Plan Assets (“EROA”)—Management projects the future return on plan assets considering prior performance, but primarily based upon the plans’ mix of assets and expectations for the long-term returns on those asset classes.
The objective in selecting the discount rate is to measure the single amount that, if invested at the measurement date in a portfolio of high-quality debt instruments, would provide the necessary future cash flows to pay the accumulated benefits when due. 71 Table of Contents • Expected Return on Plan Assets (“EROA”)—Management projects the future return on plan assets considering prior performance, but primarily based upon the plans’ mix of assets and expectations for the long-term returns on those asset classes.
The resulting tax balances as of December 31, 2023 and 2022, are appropriately accounted for in accordance with the applicable authoritative guidance; however, the ultimate outcome of tax matters could result in favorable or unfavorable adjustments to the Consolidated Financial Statements and such adjustments could be material.
The resulting tax balances as of December 31, 2024 and 2023, are appropriately accounted for in accordance with the applicable authoritative guidance; however, the ultimate outcome of tax matters could result in favorable or unfavorable adjustments to the Consolidated Financial Statements and such adjustments could be material.
The Company does not expect to post any collateral which will have a material adverse impact on the Company’s results of operations, financial position or cash flows. Access to the capital markets, including the commercial paper market, and respective financing costs in those markets, may be directly affected by the Company’s securities ratings.
The Company does not expect to post any collateral which will have a material adverse impact on the Company’s results of operations, financial position or cash flows. 69 Table of Contents Access to the capital markets, including the commercial paper market, and respective financing costs in those markets, may be directly affected by the Company’s securities ratings.
The Company’s infrastructure investment plan consists of both infrastructure renewal programs, where the Company replaces mains, services, meters, hydrants and valves, as needed, and major capital investment projects, where the Company constructs new water and wastewater treatment and delivery facilities to meet new customer growth and water quality regulations.
The Company’s infrastructure investment plan consists of both infrastructure renewal programs, where the Company replaces mains, services, meters, hydrants and valves, as needed, and major capital investment projects, where the Company constructs new water and wastewater treatment and delivery facilities to meet new customer growth, and meet new or updated environmental and water quality regulations.
The Company’s primary business involves the ownership of utilities that provide water and wastewater services to residential, commercial, industrial, public authority, fire service and sale for resale customers, collectively presented as the “Regulated Businesses.” The Company’s utilities operate in approximately 1,700 communities in 14 states in the United States, with 3.5 million active customers with services provided by its water and wastewater networks.
The Company’s primary business involves the ownership of utilities that provide water and wastewater services to residential, commercial, industrial, public authority, fire service and sale for resale customers, collectively presented as the “Regulated Businesses.” The Company’s utilities operate in 14 states in the United States, with 3.5 million active customers with services provided by its water and wastewater networks.
Details of each component can be found on the Consolidated Statements of Cash Flows. (b) Changes in working capital include changes to receivables and unbilled revenues, income tax receivable, accounts payable and accrued liabilities, accrued taxes and other current assets and liabilities, net. Details of each component can be found on the Consolidated Statements of Cash Flows.
Details of each component can be found on the Consolidated Statements of Cash Flows. (b) Changes in assets and liabilities include changes to receivables and unbilled revenues, income tax receivable, accounts payable, accrued liabilities, accrued taxes and other assets and liabilities, net.
On March 2, 2021, an administrative law judge (“ALJ”) in the Office of Administrative Law of New Jersey filed an initial decision with the New Jersey Board of Public Utilities (“NJBPU”) that recommended denial of a petition filed by the Company’s New Jersey subsidiary, which sought approval of acquisition adjustments in rate base of $29 million associated with the acquisitions of Shorelands Water Company, Inc. in 2017 and the Borough of Haddonfield’s water and wastewater systems in 2015.
On March 2, 2021, an administrative law judge (“ALJ”) in the Office of Administrative Law of New Jersey filed an initial decision with the NJBPU that recommended denial of a petition filed by the Company’s New Jersey subsidiary, which sought approval of acquisition adjustments in rate base of $29 million associated with the acquisitions of Shorelands Water Company, Inc. in 2017 and the Borough of Haddonfield’s water and wastewater systems in 2015.
For a discussion and analysis of the Company’s financial statements for fiscal 2022 compared to fiscal 2021, please refer to Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 15, 2023.
For a discussion and analysis of the Company’s financial statements for fiscal 2023 compared to fiscal 2022, please refer to Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 14, 2024.
For a discussion and analysis of the Company’s financial statements for fiscal 2022 compared to fiscal 2021, please refer to Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 15, 2023.
For a discussion and analysis of the Company’s financial statements for fiscal 2023 compared to fiscal 2022, please refer to Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 14, 2024.
Growth Through Capital Investment in Infrastructure and Regulated Acquisitions The Company continues to grow its businesses, with the substantial majority of its growth to be achieved in the Regulated Businesses through (i) continued capital investment in the Company’s infrastructure to provide safe, clean, reliable and affordable water and wastewater services to its customers, and (ii) regulated acquisitions to expand the Company’s services to new customers.
Growth Through Capital Investment in Infrastructure and Regulated Acquisitions The Company continues to grow its businesses, with the substantial majority of its growth to be achieved in the Regulated Businesses through (i) continued capital investment in the Company’s infrastructure to provide safe, clean, reliable and affordable water and wastewater services to its customers, (ii) regulated acquisitions to expand the Company’s services to new customers and (iii) organic growth in existing systems.
In addition, changes in the timing of meter reading schedules and the number and type of customers scheduled for each meter reading date would also have an effect on the unbilled revenue calculation. Unbilled revenue for the Company’s regulated utilities as of December 31, 2023 and 2022 was $193 million and $178 million, respectively.
In addition, changes in the timing of meter reading schedules and the number and type of customers scheduled for each meter reading date would also have an effect on the unbilled revenue calculation. Unbilled revenue for the Company’s regulated utilities as of December 31, 2024 and 2023 was $219 million and $193 million, respectively.
Credit Facilities and Short-Term Debt Interest rates on advances under the AWCC revolving credit facility are based on a credit spread to the Secured Overnight Financing Rate (“SOFR”) rate (or applicable market replacement rate) or base rate, each determined in accordance with Moody Investors Service’s and S&P Global Ratings’ then applicable credit rating on AWCC’s senior unsecured, non-credit enhanced debt.
Credit Facilities and Short-Term Debt Interest rates on advances under the AWCC revolving credit facility are based on a credit spread to the Secured Overnight Financing Rate (“SOFR”) rate (or applicable market replacement rate) or base rate, each determined in accordance with Moody’s Ratings and S&P Global Ratings’ then applicable credit rating on AWCC’s senior unsecured, non-credit enhanced debt.
Parent company’s borrowings are not a source of capital for the Regulated Businesses, therefore, parent company is not able to recover the interest charges on its debt through regulated water and wastewater rates. As of December 31, 2023, AWCC has made long-term fixed rate loans to the Regulated Businesses amounting to $7.6 billion.
Parent company’s borrowings are not a source of capital for the Regulated Businesses, therefore, parent company is not able to recover the interest charges on its debt through regulated water and wastewater rates. As of December 31, 2024, AWCC has made long-term fixed rate loans and short-term loans to the Regulated Businesses amounting to $9.6 billion.
The Company’s 2023 pension and postretirement total net benefit credit was $6 million and the 2022 pension and postretirement total net benefit credit was $47 million. The Company expects to make pension contributions to the plan trusts of $44 million in 2024; however, the actual amounts contributed could change materially from this estimate.
The Company’s 2024 pension and postretirement total net benefit credit was $3 million and the 2023 pension and postretirement total net benefit credit was $6 million. The Company expects to make pension contributions to the plan trusts of $44 million in 2025; however, the actual amounts contributed could change materially from this estimate.
Changes in contract performance and related estimated contract profitability may result in revisions to costs and revenues and are recognized in the period in which revisions are determined. Unbilled revenue within Other as of December 31, 2023 and 2022, was $109 million and $97 million, respectively.
Changes in contract performance and related estimated contract profitability may result in revisions to costs and revenues and are recognized in the period in which revisions are determined. Unbilled revenue within Other as of December 31, 2024 and 2023, was $96 million and $109 million, respectively.
Under GAAP, specifically ASC 740, Income Taxes , the tax effects of changes in tax laws must be recognized in the period in which the law is enacted. ASC 740 also requires deferred tax assets and liabilities to be measured at the enacted tax rate expected to apply when temporary differences are to be realized or settled.
Under GAAP, specifically Accounting Standards Codification (“ASC 740”), Income Taxes , the tax effects of changes in tax laws must be recognized in the period in which the law is enacted. ASC 740 also requires deferred tax assets and liabilities to be measured at the enacted tax rate expected to apply when temporary differences are to be realized or settled.
For each plan, the discount rate was developed as the level equivalent rate that would yield the same present value as using spot rates aligned with the projected benefit payments. The weighted-average discount rate assumption for determining pension benefit obligations was 5.18%, 5.58% and 2.94% at December 31, 2023, 2022 and 2021, respectively.
For each plan, the discount rate was developed as the level equivalent rate that would yield the same present value as using spot rates aligned with the projected benefit payments. The weighted-average discount rate assumption for determining pension benefit obligations was 5.70%, 5.18% and 5.58% at December 31, 2024, 2023 and 2022, respectively.
The weighted-average discount rate assumption for determining other postretirement benefit obligations was 5.22%, 5.60% and 2.90% at December 31, 2023, 2022 and 2021, respectively. In selecting an EROA, the Company considered tax implications, past performance and economic forecasts for the types of investments held by the plans.
The weighted-average discount rate assumption for determining other postretirement benefit obligations was 5.69%, 5.22% and 5.60% at December 31, 2024, 2023 and 2022, respectively. In selecting an EROA, the Company considered tax implications, past performance and economic forecasts for the types of investments held by the plans.
Accounting for Income Taxes Significant management judgment is required in determining the provision for income taxes, primarily due to the uncertainty related to tax positions taken, as well as deferred tax assets and liabilities, valuation allowances and the utilization of NOL carryforwards.
Accounting for Income Taxes Significant management judgment is required in determining the provision for income taxes, primarily due to the uncertainty related to tax positions taken, as well as deferred tax assets and liabilities, valuation allowances and the utilization of net operating loss carryforwards.
Additionally, the Company will use a weighted-average discount rate and EROA of 5.22% and 5.00%, respectively, for estimating its 2024 other postretirement benefit costs. A decrease in the discount rate or the EROA would increase the Company’s pension expense.
Additionally, the Company will use a weighted-average discount rate and EROA of 5.69% and 5.00%, respectively, for estimating its 2025 other postretirement benefit costs. A decrease in the discount rate or the EROA would increase the Company’s pension expense.
In selecting health care cost trend rates, the Company considers past performance and forecasts of increases in health care costs. As of January 1, 2023 , the Company’s health care cost trend rate assumption used to calculate the periodic benefit cost was 7.00% in 2023 gradually declining to 5.00% in 2031 and thereafter.
In selecting health care cost trend rates, the Company considers past performance and forecasts of increases in health care costs. As of January 1, 2024 , the Company’s health care cost trend rate assumption used to calculate the periodic benefit cost was 6.75% in 2024 gradually declining to 5.00% in 2031 and thereafter.
The shelf registration statement will expire in February 2024. During 2022 and 2021, $800 million, and $1.10 billion, respectively, of debt securities were issued under this registration statement. During 2023 under this registration statement, parent company issued 12,650,000 shares of its common stock for aggregate net proceeds of approximately $1,688 million.
The shelf registration statement will expire in February 2027. During 2024 and 2022, $1.4 billion and $800 million, respectively, of debt securities were issued under this and a predecessor registration statement. During 2023, under the predecessor registration statement, parent company issued 12,650,000 shares of its common stock for aggregate net proceeds of approximately $1,688 million.
Revenues recognized during the period in excess of billings on construction contracts are recorded as unbilled revenues, with billings in excess of revenues recorded as other current liabilities until the recognition criteria are met.
Revenues recognized during the period in excess of billings on construction contracts are recorded as unbilled revenues or other long-term assets, with billings in excess of revenues recorded as other current or long-term liabilities until the recognition criteria are met.
Legislation was signed by the Governor and became effective on January 12, 2024. Liquidity and Capital Resources The Company uses its capital resources, including cash, primarily to (i) fund operating and capital requirements, (ii) pay interest and meet debt maturities, (iii) pay dividends, (iv) fund acquisitions, (v) fund pension and postretirement benefit obligations, and (vi) to pay federal income taxes.
Legislation was signed by the Governor on September 27, 2024, and became effective January 1, 2025. 62 Table of Contents Liquidity and Capital Resources The Company uses its capital resources, including cash, primarily to (i) fund operating and capital requirements, (ii) pay interest and meet debt maturities, (iii) pay dividends, (iv) fund acquisitions, (v) fund pension and postretirement benefit obligations, and (vi) to pay federal income taxes.
Infrastructure Surcharges A number of states have authorized the use of regulatory mechanisms that permit rates to be adjusted outside of a general rate case for certain costs and investments, such as infrastructure surcharge mechanisms that permit recovery of capital investments to replace aging infrastructure.
The stipulation of settlement remains subject to SCC review and approval. Infrastructure Surcharges A number of states have authorized the use of regulatory mechanisms that permit rates to be adjusted outside of a general rate case for certain costs and investments, such as infrastructure surcharge mechanisms that permit recovery of capital investments to replace aging infrastructure.
As previously noted, over the next five years the Company expects to invest between $16 billion to $17 billion, with $14.5 billion to $15 billion for infrastructure improvements in the Regulated Businesses, and the Company expects to invest between $34 billion to $38 billion over the next 10 years.
As previously noted, over the next five years the Company expects to invest between $17 billion to $18 billion, with $15.5 billion to $16 billion for infrastructure improvements in the Regulated Businesses, and the Company expects to invest between $40 billion to $42 billion over the next 10 years.
For the Years Ended December 31, (In millions, except per share data) 2023 2022 2021 2020 2019 Statement of Operations data: Operating revenues $ 4,234 $ 3,792 $ 3,930 $ 3,777 $ 3,610 Net income attributable to common shareholders 944 820 1,263 709 621 Net income attributable to common shareholders per basic common share 4.90 4.51 6.96 3.91 3.44 Net income attributable to common shareholders per diluted common share 4.90 4.51 6.95 3.91 3.43 Balance Sheet data: Total assets $ 30,298 $ 27,787 $ 26,075 $ 24,766 $ 22,682 Long-term debt and redeemable preferred stock at redemption value 11,718 10,929 10,344 9,333 8,644 Other data: Cash dividends declared per common share $ 2.83 $ 2.62 $ 2.41 $ 2.20 $ 2.00 Net cash provided by operating activities 1,874 1,108 1,441 1,426 1,383 Net cash used in investing activities (2,815) (2,127) (1,536) (2,061) (1,945) Net cash provided by (used in) financing activities 1,188 1,000 (345) 1,120 494 Capital expenditures included in net cash used in investing activities (2,575) (2,297) (1,764) (1,822) (1,654) 50 Table of Contents Financial Results For the years ended December 31, 2023, 2022 and 2021, diluted earnings per share (GAAP) were $4.90, $4.51 and $6.95, respectively.
For the Years Ended December 31, (In millions, except per share data) 2024 2023 2022 2021 2020 Statement of Operations data: Operating revenues $ 4,684 $ 4,234 $ 3,792 $ 3,930 $ 3,777 Net income attributable to common shareholders 1,051 944 820 1,263 709 Net income attributable to common shareholders per basic common share 5.39 4.90 4.51 6.96 3.91 Net income attributable to common shareholders per diluted common share 5.39 4.90 4.51 6.95 3.91 Balance Sheet data: Total assets $ 32,830 $ 30,298 $ 27,787 $ 26,075 $ 24,766 Long-term debt and redeemable preferred stock at redemption value 12,521 11,718 10,929 10,344 9,333 Other data: Cash dividends declared per common share $ 3.06 $ 2.83 $ 2.62 $ 2.41 $ 2.20 Net cash provided by operating activities 2,045 1,874 1,108 1,441 1,426 Net cash used in investing activities (3,379) (2,815) (2,127) (1,536) (2,061) Net cash provided by (used in) financing activities 1,110 1,188 1,000 (345) 1,120 Capital expenditures included in net cash used in investing activities (2,856) (2,575) (2,297) (1,764) (1,822) 50 Table of Contents Financial Results For the years ended December 31, 2024, 2023 and 2022, diluted earnings per share (GAAP) were $5.39, $4.90 and $4.51, respectively.
The Company estimates the expected capital investment for infrastructure improvements in its Regulated Businesses over the next ten years will be allocated to the following purposes: infrastructure renewal 68-70%, resiliency 9-11%, water quality, including capital expenditures for the EPA proposed regulations on PFAS 6-8%, operational efficiency, technology and innovation 5-7%, system expansion 4-6%, other 3-5%.
The Company estimates the expected capital investment for infrastructure improvements in its Regulated Businesses over the next ten years will be allocated to the following purposes: infrastructure renewal 68%; resiliency 10%; water quality, including capital expenditures related to PFAS 8%; operational efficiency, technology and innovation 6%; system expansion 5%; other 3%.
On December 15, 2023, the Company’s California subsidiary submitted a request to delay by one year its cost of capital filing and maintain its current authorized cost of capital through 2025.
The Iowa subsidiary now expects resolution of this proceeding by May 2025. On December 15, 2023, the Company’s California subsidiary submitted a request to delay by one year its cost of capital filing and maintain its current authorized cost of capital through 2025.
The Company’s expected future investments include: • capital investment for infrastructure improvements in the Regulated Businesses between $14.5 billion to $15 billion over the next five years, and between $30 billion to $33 billion over the next 10 years; and 51 Table of Contents • growth from acquisitions in the Regulated Businesses to expand the Company’s water and wastewater customer base of between $1.5 billion to $2 billion over the next five years, and between $4 billion to $5 billion over the next 10 years.
The Company’s expected future investments include: • capital investment for infrastructure improvements and replacements in the Regulated Businesses of between $15.5 billion to $16 billion over the next five years, and between $36 billion to $37 billion over the next 10 years; and • growth from acquisitions in the Regulated Businesses to expand the Company’s water and wastewater customer base of between $1.5 billion to $2 billion over the next five years, and between $4 billion to $5 billion over the next 10 years.
Presented in the table below are annualized incremental revenues, assuming a constant sales volume and customer count, resulting from infrastructure surcharge authorizations that became effective on or after January 1, 2024: (In millions) Effective Date Amount Infrastructure surcharge filings by state: Missouri January 20, 2024 $ 26 Illinois January 1, 2024 5 Total infrastructure surcharge filings $ 31 Pending Infrastructure Surcharge Filings On January 31, 2024, the Company’s Iowa subsidiary filed an infrastructure surcharge proceeding requesting $1 million in additional annualized revenues. 56 Table of Contents Other Regulatory Matters In September 2020, the CPUC released a decision under its Low-Income Rate Payer Assistance program rulemaking that required the Company’s California subsidiary to file a proposal to alter its water revenue adjustment mechanism in its next general rate case filing in 2022, which would have become effective upon receiving an order in the current pending rate case.
Presented in the table below are annualized incremental revenues, assuming a constant sales volume and customer count, resulting from infrastructure surcharge authorizations that became effective on or after January 1, 2025: (In millions) Effective Date Amount Infrastructure surcharge filings by state: Missouri February 7, 2025 $ 17 Kentucky January 1, 2025 2 West Virginia January 1, 2025 4 Total infrastructure surcharge filings $ 23 56 Table of Contents Other Regulatory Matters In September 2020, the CPUC released a decision under its Low-Income Rate Payer Assistance program rulemaking that required the Company’s California subsidiary to file a proposal to alter its water revenue adjustment mechanism in its next general rate case filing in 2022, which would have become effective upon receiving an order in the rate case.
Failure to meet the criteria of this authoritative guidance could materially impact the Company’s Consolidated Financial Statements. As of December 31, 2023 and 2022, the Company’s regulatory asset balance was $1.1 billion and $1.0 billion, respectively, and its regulatory liability balance was $1.5 billion and $1.6 billion, respectively.
Failure to meet the criteria of this authoritative guidance could materially impact the Company’s Consolidated Financial Statements. 70 Table of Contents As of December 31, 2024 and 2023, the Company’s regulatory asset balance was $1.2 billion and $1.1 billion, respectively, and its regulatory liability balance was $1.4 billion and $1.5 billion, respectively.
As of December 31, 2023, AWCC had no outstanding borrowings and $75 million of outstanding letters of credit under its revolving credit facility, with $2.50 billion available to fulfill its short-term liquidity needs and to issue letters of credit.
As of December 31, 2024, AWCC had no outstanding borrowings and $82 million of outstanding letters of credit under its revolving credit facility, with $1.8 billion available to fulfill its short-term liquidity needs and to issue letters of credit.
For the Company’s regulated entities, the change in deferred taxes are recorded as either an offset to a regulatory asset or a regulatory liability and may be subject to refund to customers.
For the Company’s regulated entities, the change in deferred taxes are recorded as either an offset to a regulatory asset or a regulatory liability and may be subject to refund to customers. For the Company’s unregulated operations, the change in deferred taxes are recorded as a non-cash re-measurement adjustment to earnings.
As of December 31, 2023, the Company projects that medical inflation will be 6.75% in 2024 gradually declining to 5.00% in 2031 and thereafter. The Company will use a weighted-average discount rate and EROA of 5.18% and 6.79%, respectively, for estimating its 2024 pension costs.
As of December 31, 2024, the Company projects that medical inflation will be 6.50% in 2025 gradually declining to 5.00% in 2031 and thereafter. 72 Table of Contents The Company will use a weighted-average discount rate and EROA of 5.70% and 6.63%, respectively, for estimating its 2025 pension costs.
For the Company’s unregulated operations, the change in deferred taxes are recorded as a non-cash re-measurement adjustment to earnings. 71 Table of Contents Actual income taxes could vary from estimated amounts due to the future impacts of various items, including changes in income tax laws, the Company’s forecasted financial condition and results of operations, failure to successfully implement tax planning strategies and recovery of taxes through the regulatory process for the Regulated Businesses, as well as results of audits and examinations of filed tax returns by taxing authorities.
Actual income taxes could vary from estimated amounts due to the future impacts of various items, including changes in income tax laws, the Company’s forecasted financial condition and results of operations, failure to successfully implement tax planning strategies and recovery of taxes through the regulatory process for the Regulated Businesses, as well as results of audits and examinations of filed tax returns by taxing authorities.
See Note 5—Acquisitions and Divestitures in the Notes to Consolidated Financial Statements for additional information. Tax Matters On August 16, 2022, the Inflation Reduction Act of 2022 (the “IRA”) was signed into law. The IRA contains a Corporate Alternative Minimum Tax (“CAMT”) provision, effective January 1, 2023.
See Note 5—Acquisitions and Divestitures—Sale of Homeowner Services Group, in the Notes to Consolidated Financial Statements for additional information. Tax Matters On August 16, 2022, the Inflation Reduction Act of 2022 (the “IRA”) was signed into law. The IRA contains a 15% CAMT provision on applicable corporations effective January 1, 2023.
Presented in the tables below are the aggregate credit facility commitments, commercial paper limit and letter of credit availability under the revolving credit facility, as well as the available capacity for each, as of December 31: 2023 Commercial Paper Limit Letters of Credit Total (a) (In millions) Total availability $ 2,600 $ 150 $ 2,750 Outstanding debt (180) (75) (255) Remaining availability as of December 31, 2023 $ 2,420 $ 75 $ 2,495 (a) Total remaining availability of $2.50 billion as of December 31, 2023, was accessible through revolver draws. 68 Table of Contents 2022 Commercial Paper Limit Letters of Credit Total (a) (In millions) Total availability $ 2,600 $ 150 $ 2,750 Outstanding debt (1,177) (78) (1,255) Remaining availability as of December 31, 2022 $ 1,423 $ 72 $ 1,495 (a) Total remaining availability of $1.50 billion as of December 31, 2022, was accessible through revolver draws.
Presented in the tables below are the aggregate credit facility commitments, commercial paper limit and letter of credit availability under the revolving credit facility, as well as the available capacity for each, as of December 31: 2024 (In millions) Commercial Paper Limit Letters of Credit Total (a) Total availability $ 2,600 $ 150 $ 2,750 Outstanding debt (880) (82) (962) Remaining availability as of December 31, 2024 $ 1,720 $ 68 $ 1,788 (a) Total remaining availability of $1.8 billion as of December 31, 2024, was accessible through revolver draws. 2023 (In millions) Commercial Paper Limit Letters of Credit Total (a) Total availability $ 2,600 $ 150 $ 2,750 Outstanding debt (180) (75) (255) Remaining availability as of December 31, 2023 $ 2,420 $ 75 $ 2,495 (a) Total remaining availability of $2.5 billion as of December 31, 2023, was accessible through revolver draws.
Covenants in certain long-term notes and the revolving credit facility require the Company to maintain a ratio of consolidated debt to consolidated capitalization (as defined in the relevant documents) of not more than 0.70 to 1.00.
Covenants in certain long-term notes and the revolving credit facility require the Company to maintain a ratio of consolidated debt to consolidated capitalization (as defined in the relevant documents) of not more than 0.70 to 1.00. On December 31, 2024, the Company’s ratio was 0.58 to 1.00 and therefore the Company was in compliance with the covenants.
Actual amounts realized upon settlement or other resolution of loss contingencies may be different than amounts recorded and disclosed and could have a significant impact on the liabilities, revenue and expenses recorded on the Consolidated Financial Statements. See Note 16—Commitments and Contingencies in the Notes to Consolidated Financial Statements for additional information regarding contingencies.
Actual amounts realized upon settlement or other resolution of loss contingencies may be different than amounts recorded and disclosed and could have a significant impact on the liabilities, revenue and expenses recorded on the Consolidated Financial Statements.
In February 2021, parent company and AWCC filed with the SEC a universal shelf registration statement that enables the Company to meet its capital needs through the offer and sale to the public from time to time of an unlimited amount of various types of securities, including American Water common stock, preferred stock, and other equity and hybrid securities, and AWCC debt securities, all subject to market conditions and demand, general economic conditions, and as applicable, rating status.
No ineffectiveness was recognized on hedging instruments for the years ended December 31, 2024, 2023 or 2022. 66 Table of Contents In February 2024, parent company and AWCC filed with the SEC a universal shelf registration statement that enables the Company to meet its capital needs through the offer and sale to the public from time to time of an unlimited amount of various types of securities, including American Water common stock, preferred stock, and other equity and hybrid securities, and AWCC debt securities, all subject to market conditions and demand, general economic conditions, and as applicable, rating status.
Based on the needs of the Regulated Businesses and the Company, AWCC may borrow funds or issue its debt in the capital markets and then, through intercompany loans, provide those borrowings to the Regulated Businesses and parent company.
These activities included the issuance of long-term and short-term debt, primarily through AWCC and equity issuances from parent company. Based on the needs of the Regulated Businesses and the Company, AWCC may borrow funds or issue its debt in the capital markets and then, through intercompany loans, provide those borrowings to the Regulated Businesses and parent company.
Other Presented in the table below is information for Other: For the Years Ended December 31, 2023 2022 2021 (In millions) Operating revenues $ 314 $ 287 $ 546 Operation and maintenance 279 244 452 Depreciation and amortization 11 16 35 General taxes 19 17 20 Interest expense (96) (119) (113) Interest income 45 50 3 Gain on sale of businesses — 19 748 Other income 12 6 2 (Benefit from) provision for income taxes (7) — 205 Net (loss) income attributable to common shareholders $ (27) $ (34) $ 474 Operating Revenues In 2023, as compared to 2022, operating revenues increased $27 million from an increase in capital projects in MSG, primarily at the United States Military Academy at West Point, New York and revenue for Naval Station Mayport.
Other Presented in the table below is information for Other: For the Years Ended December 31, (In millions) 2024 2023 2022 Operating revenues $ 388 $ 314 $ 287 Operation and maintenance 341 279 244 Depreciation and amortization 16 11 16 General taxes 19 19 17 Interest expense (107) (96) (119) Interest income 77 45 50 Gain on sale of businesses — — 19 Other income 10 12 6 Provision for (benefit from) income taxes 6 (7) — Net loss attributable to common shareholders $ (14) $ (27) $ (34) Operating Revenues In 2024, as compared to 2023, operating revenues increased $74 million from an increase in capital projects in MSG, primarily at Naval Station Mayport, and an increase in capital projects in CSG.
During 2023, the Company paid $81 million to fund acquisitions, including deposits for pending acquisitions. The Company closed on 23 acquisitions of various regulated water and wastewater systems during 2023, which added approximately 18,100 water and wastewater customers.
During 2024, the Company paid $417 million to fund acquisitions, including deposits for pending acquisitions. The Company closed on 13 acquisitions of various regulated water and wastewater systems during 2024, which added approximately 69,500 water and wastewater customers.
Presented in the table below are the issuances of long-term debt in 2023: Company Type Rate Weighted Average Rate Maturity Amount (in millions) AWCC (a) Senior notes—fixed rate 3.63% 3.63% 2026 $ 1,035 AWCC (a) Private activity bonds and government funded debt—fixed rate 3.70%-3.88% 3.80% 2028 86 Other American Water subsidiaries Private activity bonds and government funded debt—fixed rate 0.00%-3.75% 2.88% 2025-2041 143 Total issuances $ 1,264 (a) This indebtedness is considered “debt” for purposes of a support agreement between parent company and AWCC, which serves as a functional equivalent of a full and unconditional guarantee by parent company of AWCC’s payment obligations under such indebtedness.
Presented in the table below are the issuances of long-term debt in 2024: Company Type Rate Weighted Average Rate Maturity Amount (in millions) AWCC (a) Senior notes—fixed rate 5.15%-5.45% 5.30% 2034-2054 $ 1,400 Other American Water subsidiaries Private activity bonds and government funded debt—fixed rate 0.00%-1.75% 0.01% 2025-2061 46 Total issuances $ 1,446 (a) This indebtedness is considered “debt” for purposes of a support agreement between parent company and AWCC, which serves as a functional equivalent of a full and unconditional guarantee by parent company of AWCC’s payment obligations under such indebtedness.
Segment results for the year ended December 31, 2021, have been adjusted retrospectively to reflect this change. 58 Table of Contents Regulated Businesses Segment Presented in the table below is financial information for the Regulated Businesses: For the Years Ended December 31, 2023 2022 2021 (In millions) Operating revenues $ 3,920 $ 3,505 $ 3,384 Operation and maintenance 1,441 1,345 1,325 Depreciation and amortization 693 633 601 General taxes 288 264 301 Other operating (income) expense (1) — 1 Other income (expense) (269) (220) (195) Provision for income taxes 259 188 172 Net income attributable to common shareholders $ 971 $ 854 $ 789 Operating Revenues Presented in the tables below is information regarding the main components of the Regulated Businesses’ operating revenues: For the Years Ended December 31, 2023 2022 2021 (In millions) Water services: Residential $ 2,143 $ 1,941 $ 1,935 Commercial 798 710 676 Fire service 158 147 151 Industrial 167 153 141 Public and other 284 267 239 Total water services 3,550 3,218 3,142 Wastewater services: Residential 228 174 151 Commercial 62 45 37 Industrial 8 4 4 Public and other 29 19 16 Total wastewater services 327 242 208 Other (a) 43 45 34 Total operating revenues $ 3,920 $ 3,505 $ 3,384 (a) Includes other operating revenues consisting primarily of miscellaneous utility charges, fees and rents.
Regulated Businesses Segment Presented in the table below is financial information for the Regulated Businesses: For the Years Ended December 31, (In millions) 2024 2023 2022 Operating revenues $ 4,296 $ 3,920 $ 3,505 Operation and maintenance 1,517 1,441 1,345 Depreciation and amortization 772 693 633 General taxes 301 288 264 Other operating (income) expense — (1) — Other income (expense) (339) (269) (220) Provision for income taxes 302 259 188 Net income attributable to common shareholders $ 1,065 $ 971 $ 854 58 Table of Contents Operating Revenues Presented in the tables below is information regarding the main components of the Regulated Businesses’ operating revenues: For the Years Ended December 31, (In millions) 2024 2023 2022 Water services: Residential $ 2,349 $ 2,143 $ 1,941 Commercial 885 798 710 Fire service 164 158 147 Industrial 184 167 153 Public and other 301 284 267 Total water services 3,883 3,550 3,218 Wastewater services: Residential 245 228 174 Commercial 70 62 45 Industrial 12 8 4 Public and other 36 29 19 Total wastewater services 363 327 242 Other (a) 50 43 45 Total operating revenues $ 4,296 $ 3,920 $ 3,505 (a) Includes other operating revenues consisting primarily of miscellaneous utility charges, fees and rents.
On December 31, 2023, the Company’s ratio was 0.56 to 1.00 and therefore the Company was in compliance with the covenants. 69 Table of Contents Security Ratings Presented in the table below are long-term and short-term credit ratings and rating outlooks as of February 14, 2024, as issued by Moody’s Investors Service on January 29, 2024, and S&P Global Ratings on February 6, 2023: Securities Moody’s Investors Service S&P Global Ratings Rating outlook Stable Stable Senior unsecured debt Baa1 A Commercial paper P-2 A-1 A security rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time by the assigning rating agency, and each rating should be evaluated independently of any other rating.
Security Ratings Presented in the table below are long-term and short-term credit ratings and rating outlooks as of February 19, 2025, as issued by Moody’s Ratings on January 23, 2025, and S&P Global Ratings on March 4, 2024: Securities Moody’s Ratings S&P Global Ratings Rating outlook Stable Stable Senior unsecured debt Baa1 A Commercial paper P-2 A-1 A security rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time by the assigning rating agency, and each rating should be evaluated independently of any other rating.
Presented in the table below is a summary of the major items affecting the Company’s cash flows from operating activities: For the Years Ended December 31, (In millions) 2023 2022 2021 Net income $ 944 $ 820 $ 1,263 Add (less): Depreciation and amortization 704 649 636 Deferred income taxes and amortization of investment tax credits 208 80 230 Other non-cash activities (a) (9) (16) (27) Changes in working capital (b) 76 (355) 126 Pension and non-pension postretirement benefit contributions (49) (51) (40) Gain on sale of businesses — (19) (747) Net cash provided by operating activities $ 1,874 $ 1,108 $ 1,441 (a) Includes provision for losses on accounts receivable, pension and non-pension postretirement benefits and other non-cash, net.
The Company addresses cash timing differences primarily through its short-term liquidity funding mechanisms. 63 Table of Contents Presented in the table below is a summary of the major items affecting the Company’s cash flows from operating activities: For the Years Ended December 31, (In millions) 2024 2023 2022 Net income $ 1,051 $ 944 $ 820 Add (less): Depreciation and amortization 788 704 649 Deferred income taxes and amortization of investment tax credits 156 208 80 Other non-cash activities (a) 62 (9) (16) Changes in assets and liabilities (b) 40 76 (355) Pension and non-pension postretirement benefit contributions (52) (49) (51) Gain on sale of businesses — — (19) Net cash provided by operating activities $ 2,045 $ 1,874 $ 1,108 (a) Includes provision for losses on accounts receivable, pension and non-pension postretirement benefits and other non-cash, net.
Cash Flows from Investing Activities Presented in the table below is a summary of the major items affecting the Company’s cash flows from investing activities: For the Years Ended December 31, (In millions) 2023 2022 2021 Capital expenditures $ (2,575) $ (2,297) $ (1,764) Acquisitions, net of cash acquired (81) (315) (135) Proceeds from sale of assets, net of cash on hand — 608 472 Removal costs from property, plant and equipment retirements, net (159) (123) (109) Net cash used in investing activities $ (2,815) $ (2,127) $ (1,536) In 2023, cash flows used in investing activities increased $688 million as a result of increased payments for capital expenditures, as well as no assets sales in 2023 whereas 2022 had $608 million of proceeds from the sale of the Company’s New York operations.
Cash Flows from Investing Activities Presented in the table below is a summary of the major items affecting the Company’s cash flows from investing activities: For the Years Ended December 31, (In millions) 2024 2023 2022 Capital expenditures $ (2,856) $ (2,575) $ (2,297) Acquisitions, net of cash acquired (417) (81) (315) Proceeds from sale of assets, net of cash on hand — — 608 Removal costs from property, plant and equipment retirements, net (152) (159) (123) Purchases of available-for-sale fixed-income securities (135) — — Proceeds from sales and maturities of available-for-sale fixed-income securities 181 — — Net cash used in investing activities $ (3,379) $ (2,815) $ (2,127) In 2024, cash flows used in investing activities increased $564 million as a result of increased payments for capital expenditures and acquisitions in 2024.
As of December 31, 2023, the Company had entered into 25 agreements with a total aggregate purchase price of $589 million for pending acquisitions in the Regulated Businesses, including the agreements discussed above, to add approximately 88,300 additional customers.
As of December 31, 2024, the Company had entered into 17 agreements with a total aggregate purchase price of $105 million for pending acquisitions in the Regulated Businesses to add approximately 24,200 additional customers.
Advances from customers were deferred until the performance obligation was satisfied. 74 Table of Contents Accounting for Contingencies The Company records loss contingencies when management determines that the outcome of future events is probable of occurring and when the amount of the loss or a range of losses can be reasonably estimated.
Accounting for Contingencies The Company records loss contingencies when management determines that the outcome of future events is probable of occurring and when the amount of the loss or a range of losses can be reasonably estimated.
Consolidated Results of Operations Presented in the table below are the Company’s consolidated results of operations: For the Years Ended December 31, 2023 2022 2021 (In millions) Operating revenues $ 4,234 $ 3,792 $ 3,930 Operating expenses: Operation and maintenance 1,720 1,589 1,777 Depreciation and amortization 704 649 636 General taxes 307 281 321 Other (1) — — Total operating expenses, net 2,730 2,519 2,734 Operating income 1,504 1,273 1,196 Other income (expense): Interest expense (460) (433) (403) Interest Income 73 52 4 Non-operating benefit costs, net 32 77 78 Gain on sale of businesses — 19 747 Other, net 47 20 18 Total other income (expense) (308) (265) 444 Income before income taxes 1,196 1,008 1,640 Provision for income taxes 252 188 377 Net income attributable to common shareholders $ 944 $ 820 $ 1,263 57 Table of Contents Segment Results of Operations The Company’s operating segments are comprised of its businesses which generate revenue, incur expense and have separate financial information which is regularly used by management to make operating decisions, assess performance and allocate resources.
There is no financial impact to the Company as a result of the NJBPU’s order and resulting appeal decision, since the acquisition adjustments are currently recorded as goodwill on the Consolidated Balance Sheets. 57 Table of Contents Consolidated Results of Operations Presented in the table below are the Company’s consolidated results of operations: For the Years Ended December 31, (In millions) 2024 2023 2022 Operating revenues $ 4,684 $ 4,234 $ 3,792 Operating expenses: Operation and maintenance 1,858 1,720 1,589 Depreciation and amortization 788 704 649 General taxes 320 307 281 Other — (1) — Total operating expenses, net 2,966 2,730 2,519 Operating income 1,718 1,504 1,273 Other income (expense): Interest expense (523) (460) (433) Interest Income 94 73 52 Non-operating benefit costs, net 28 32 77 Gain on sale of businesses — — 19 Other, net 42 47 20 Total other income (expense) (359) (308) (265) Income before income taxes 1,359 1,196 1,008 Provision for income taxes 308 252 188 Net income attributable to common shareholders $ 1,051 $ 944 $ 820 Segment Results of Operations The Company’s operating segments are comprised of its businesses which generate revenue, incur expense and have separate financial information which is regularly used by the chief operating decision maker to make operating decisions, assess performance and allocate resources.
The Company supports sound policies and compliance with the NPDWR by all water utilities, while protecting customers and communities from the costly burden of monitoring and mitigating PFAS contamination in water systems.
The equipment and services provided through the contract will aid the Company in treating drinking water to assist in complying with the NPDWR for PFAS. The Company supports sound policies and compliance with the NPDWR for PFAS by all water utilities, while protecting customers and communities from the costly burden of monitoring and mitigating PFAS contamination in water systems.
The general rate case order approved a $67 million annualized increase in water and wastewater system revenues, excluding previously recovered infrastructure surcharges of $18 million, effective January 1, 2023, based on an authorized return on equity of 9.78%, authorized rate base of $1.64 billion, a common equity ratio of 49.0% and a debt ratio of 51.0%.
The general rate case order approved a $66 million annualized increase in water and wastewater system revenues, excluding previously recovered infrastructure surcharges, based on an authorized return on equity of 9.65%, authorized rate base of $1.8 billion, a common equity ratio of 56.15% and a debt ratio of 43.85%.
Presented in the table below is a summary of the Company’s capital expenditures by category: For the Years Ended December 31, (In millions) 2023 2022 2021 Transmission and distribution $ 922 $ 901 $ 749 Treatment and pumping 322 190 197 Services, meter and fire hydrants 652 546 366 General structure and equipment 333 380 251 Sources of supply 88 95 64 Wastewater 258 185 137 Total capital expenditures $ 2,575 $ 2,297 $ 1,764 In 2023, the Company’s capital expenditures increased $278 million due to an increase across most infrastructure categories.
The Company’s projected capital expenditures and other investments are subject to periodic review and revision to reflect changes in economic conditions and other factors. 64 Table of Contents Presented in the table below is a summary of the Company’s capital expenditures by category: For the Years Ended December 31, (In millions) 2024 2023 2022 Transmission and distribution $ 882 $ 922 $ 901 Treatment and pumping 305 322 190 Services, meter and fire hydrants 805 652 546 General structure and equipment 425 333 380 Sources of supply 163 88 95 Wastewater 276 258 185 Total capital expenditures $ 2,856 $ 2,575 $ 2,297 In 2024, the Company’s capital expenditures increased $281 million due to an increase across most infrastructure categories.
However, insurance coverage may not be adequate or available to cover unanticipated losses or claims. Additionally, annual policy renewals can be impacted by claims experience which in turn can impact coverage terms and conditions on a going-forward basis. The Company is self-insured to the extent that losses are within the policy deductible or exceed the amount of insurance maintained.
However, insurance coverage may not be adequate or available to cover unanticipated losses or claims. Additionally, annual policy renewals can be impacted by claims experience or adverse insurance market trends which in turn can impact coverage terms and conditions on a going-forward basis.
These treasury lock agreements terminate in September 2024, and have an average fixed rate of 4.24%. The Company designated these treasury lock agreements as cash flow hedges, with their fair value recorded in accumulated other comprehensive gain or loss.
These treasury lock agreements terminate in March 2025 and have an average fixed interest rate of 4.60%. The Company designated these treasury lock agreements as cash flow hedges, with their fair value recorded in accumulated other comprehensive gain or loss. The Company had entered into 15 treasury lock agreements through February 2024, with notional amounts totaling $825 million.
The Naval Station Mayport contract was awarded on June 30, 2022, with the performance start date for operation on March 1, 2023. 61 Table of Contents Operation and Maintenance Presented in the table below is information regarding the main components of Other’s operating and maintenance expense: For the Years Ended December 31, 2023 2022 2021 (In millions) Operating supplies and services $ 150 $ 120 $ 191 Maintenance materials and supplies 29 35 123 Employee-related costs 85 73 109 Production costs 9 10 7 Other 6 6 22 Total operation and maintenance expense $ 279 $ 244 $ 452 Operating Supplies and Services In 2023, as compared to 2022, operating supplies and services increased $30 million primarily due to costs associated with the increased capital projects in MSG.
Operation and Maintenance Presented in the table below is information regarding the main components of Other’s operating and maintenance expense: For the Years Ended December 31, (In millions) 2024 2023 2022 Operating supplies and services $ 195 $ 150 $ 120 Maintenance materials and supplies 27 29 35 Employee-related costs 101 85 73 Production costs 10 9 10 Other 8 6 6 Total operation and maintenance expense $ 341 $ 279 $ 244 Operating Supplies and Services In 2024, as compared to 2023, operating supplies and services increased $45 million primarily due to costs associated with the increased capital projects in MSG.
Recent Accounting Standards See Note 2—Significant Accounting Policies in the Notes to Consolidated Financial Statements for a description of recent accounting standards.
See Note 16—Commitments and Contingencies in the Notes to Consolidated Financial Statements for additional information regarding contingencies. 73 Table of Contents Recent Accounting Standards See Note 2—Significant Accounting Policies in the Notes to Consolidated Financial Statements for a description of recent accounting standards.
The Company expects to invest between $16 billion to $17 billion over the next five years, and between $34 billion to $38 billion over the next 10 years, including $3.1 billion in 2024.
The Company expects to invest between $17 billion to $18 billion over the next five years, and between $40 billion to $42 billion over the next 10 years, including $3.3 billion in 2025.
Revenues include amounts billed to customers on a cycle basis, and unbilled amounts calculated based on estimated usage from the date of the meter reading associated with the latest customer bill, to the end of the accounting period.
Revenues are recognized over time, as services are provided. There are generally no significant financing components or variable consideration. Revenues include amounts billed to customers on a cycle basis, and unbilled amounts calculated based on estimated usage from the date of the meter reading associated with the latest customer bill, to the end of the accounting period.
On January 19, 2024, the Company’s New Jersey subsidiary filed a general rate case requesting approximately $162 million in additional annualized revenues, whic h is based on a proposed return on equity of 10.75% and a capital structure with an equity component of 56.30% and a debt component of 43.70%.
On May 1, 2024, the Company’s Iowa subsidiary filed a general rate case requesting approximately $21 million in additional annualized revenues, which is based on a proposed return on equity of 10.75% and a capital structure with an equity component of 52.57% and debt component of 47.43%.
On July 29, 2021, the NJBPU issued an order adopting the ALJ’s initial decision without modification. The Company’s New Jersey subsidiary filed a Notice of Appeal with the New Jersey Appellate Division on September 10, 2021. The Company’s New Jersey subsidiary filed its brief in support of the appeal on March 4, 2022.
On July 29, 2021, the NJBPU issued an order adopting the ALJ’s initial decision without modification. The Company’s New Jersey subsidiary filed a Notice of Appeal with the New Jersey Appellate Division on September 10, 2021. On December 30, 2024, the New Jersey Appellate Division of the New Jersey Superior Court affirmed the NJBPU decision rejecting the acquisition adjustments.
Additional discussion regarding these critical accounting policies and their application can be found in Note 2—Significant Accounting Policies in the Notes to Consolidated Financial Statements. 70 Table of Contents Regulation and Regulatory Accounting The Company’s regulated utilities are subject to regulation by PUCs and, as such, the Company follows the authoritative accounting principles required for rate regulated utilities, which requires the Company to reflect the effects of rate regulation in its Consolidated Financial Statements.
Regulation and Regulatory Accounting The Company’s regulated utilities are subject to regulation by PUCs and, as such, the Company follows the authoritative accounting principles required for rate regulated utilities, which requires the Company to reflect the effects of rate regulation in its Consolidated Financial Statements.
The requested increase is driven by approximately $110 million in capital investments between May 2023 and April 2025. The request also proposed a revenue decoupling mechanism and seeks deferral of certain production cost adjustments. Interim rates will be effective May 1, 2024, with the difference between interim and final approved rates subject to refund.
The request also proposed a revenue decoupling mechanism and seeks deferral of certain production cost adjustments. Interim rates became effective May 1, 2024, with the difference between interim and final approved rates subject to refund.
In 2024, the Company expects to invest $3.1 billion, consisting of infrastructure improvements and acquisitions in the Regulated Businesses. 65 Table of Contents Cash Flows from Financing Activities Presented in the table below is a summary of the major items affecting the Company’s cash flows from financing activities: For the Years Ended December 31, 2023 2022 2021 (In millions) Proceeds from long-term debt $ 1,264 $ 822 $ 1,118 Repayments of long-term debt (282) (15) (372) (Repayments of) proceeds from term loan — — (500) Net proceeds from common stock financing 1,688 — — Net short-term (repayments) borrowings with maturities less than three months (996) 591 (198) Dividends paid (532) (467) (428) Other financing activities, net (a) 46 69 35 Net cash provided by (used in) financing activities $ 1,188 $ 1,000 $ (345) (a) Includes proceeds from issuances of common stock under various employee stock plans and the Company’s dividend reinvestment plan, net of taxes paid, advances and contributions in aid of construction, net of refunds, and debt issuance costs and make-whole premiums on early debt redemption.
Cash Flows from Financing Activities Presented in the table below is a summary of the major items affecting the Company’s cash flows from financing activities: For the Years Ended December 31, (In millions) 2024 2023 2022 Proceeds from long-term debt $ 1,437 $ 1,264 $ 822 Repayments of long-term debt (475) (282) (15) Net proceeds from common stock financing — 1,688 — Net short-term borrowings (repayments) with maturities less than three months 700 (996) 591 Debt issuance costs (14) (16) (7) Dividends paid (585) (532) (467) Other financing activities, net (a) 47 62 76 Net cash provided by financing activities $ 1,110 $ 1,188 $ 1,000 (a) Includes proceeds from issuances of common stock under various employee stock plans and the Company’s dividend reinvestment and direct stock purchase plan, net of taxes paid, and advances and contributions in aid of construction, net of refunds.
In response to the legislation, on January 27, 2023, the Company’s California subsidiary filed an updated application requesting the CPUC to consider a Water Resources Sustainability Plan decoupling mechanism in its pending 2022 general rate case, which, if adopted, will become effective upon receiving an order in the current pending rate case.
Legislation was signed by the Governor on September 30, 2022, and became effective on January 1, 2023. In response to the legislation, on January 27, 2023, the Company’s California subsidiary filed an updated application requesting the CPUC to consider a Water Resources Sustainability Plan decoupling mechanism in its 2022 general rate case.
The Company’s revolving credit facility provides $2.75 billion in aggregate total commitments from a diversified group of financial institutions. AWCC’s revolving credit facility is used principally to support its commercial paper program, to provide additional liquidity support, and to provide a sub-limit for the issuance of up to $150 million in letters of credit.
AWCC’s revolving credit facility is used principally to support its commercial paper program, to provide additional liquidity support, and to provide a sub-limit for the issuance of up to $150 million in letters of credit. The maximum aggregate principal amount of short-term borrowings authorized for issuance under AWCC’s commercial paper program is $2.60 billion.
The Company designated these treasury lock agreements as cash flow hedges, with their fair value recorded in accumulated other comprehensive gain or loss. In June 2023, the Company terminated the treasury lock agreements realizing a net gain of $3 million included in Other, net in the accompanying Consolidated Statements of Operations.
The Company designated these treasury lock agreements as cash flow hedges, with their fair value recorded in accumulated other comprehensive gain or loss.
Disruptions in the credit markets may discourage lenders from extending the terms of such commitments or agreeing to new commitments.
Disruptions in the credit markets may discourage lenders from extending the terms of such commitments or agreeing to new commitments. Market disruptions may also limit the Company’s ability to issue debt and equity securities in the capital markets.
The weighted-average EROA assumption used in calculating pension cost was 6.79% for 2023, 6.50% for 2022 and 6.50% for 2021.
The weighted-average EROA assumption used in calculating pension cost was 6.73% for 2024, 6.79% for 2023 and 6.50% for 2022. The weighted-average EROA assumption used in calculating other postretirement benefit costs was 5.00% for 2024, 5.00% for 2023 and 3.60% for 2022.
Market disruptions may also limit the Company’s ability to issue debt and equity securities in the capital markets. 63 Table of Contents If these unfavorable business, market, financial and other conditions deteriorate to the extent that the Company is no longer able to access the commercial paper and/or capital markets on reasonable terms, AWCC has access to an unsecured revolving credit facility.
If these unfavorable business, market, financial and other conditions deteriorate to the extent that the Company is no longer able to access the commercial paper and/or capital markets on reasonable terms, AWCC has access to an unsecured revolving credit facility. The Company’s revolving credit facility provides $2.75 billion in aggregate total commitments from a diversified group of financial institutions.
Management has reviewed the critical accounting polices described below with the Company’s Audit, Finance and Risk Committee, including the estimates, assumptions and judgments used in their application.
Management has reviewed the critical accounting polices described below with the Company’s Audit, Finance and Risk Committee, including the estimates, assumptions and judgments used in their application. Additional discussion regarding these critical accounting policies and their application can be found in Note 2—Significant Accounting Policies in the Notes to Consolidated Financial Statements.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThe Company is also exposed to a potential national economic recession or deterioration in local economic conditions in the markets in which it operates. The credit quality of the Company’s customer accounts receivable is dependent on the economy and the ability of its customers to manage through unfavorable economic cycles and other market changes.
Biggest changeThe Company also expects its risk to be reduced through its ability to recover pension and other benefit costs through rates. 74 Table of Contents The Company is also exposed to a potential national economic recession or deterioration in local economic conditions in the markets in which it operates.
This volatility may make it difficult for the Company to access the capital markets in the future through additional offerings of its common stock or other equity securities, regardless of its financial performance, and such difficulty may preclude the Company from being able to take advantage of certain business opportunities or meet business obligations. 75 Table of Contents The Company is exposed to credit risk through its water, wastewater and related services.
This volatility may make it difficult for the Company to access the capital markets in the future through additional offerings of its common stock or other equity securities, regardless of its financial performance, and such difficulty may preclude the Company from being able to take advantage of certain business opportunities or meet business obligations.
As of December 31, 2023, the Company had six treasury lock agreements, each with a term of 10 years, with notional amounts totaling $225 million, to reduce interest rate exposure on debt expected to be issued in 2024. These treasury lock agreements terminate in September 2024, and have an average fixed rate of 4.24%.
As of December 31, 2024, the Company had eight treasury lock agreements, each with a term of 10 years or 30 years, with notional amounts totaling $355 million, to reduce interest rate exposure on debt expected to be issued in 2025. These treasury lock agreements terminate in June 2025 and December 2025 and have an average fixed rate of 4.03%.
In addition, there can be no assurances that regulators will grant sufficient rate authorizations. Therefore, the Company’s ability to fully recover operating expense, recover its investment and provide an appropriate return on invested capital made in the Regulated Businesses may be adversely impacted. 76 Table of Contents
Therefore, the Company’s ability to fully recover operating expense, recover its investment and provide an appropriate return on invested capital made in the Regulated Businesses may be adversely impacted. 75 Table of Contents
That way, if interest rates fall and liabilities increase, the Company expects that the fixed-income assets in its retirement trust will also increase in value. The Company also expects its risk to be reduced through its ability to recover pension and other benefit costs through rates.
That way, if interest rates fall and liabilities increase, the Company expects that the fixed-income assets in its retirement trust will also increase in value.
The fair value of the treasury locks at December 31, 2023, was in a loss position of $8 million. A hypothetical 1% adverse change in interest rates would result in a decrease in the fair value of the treasury locks to a loss position of approximately $26 million at December 31, 2023.
The fair value of the treasury locks at December 31, 2024, was in a gain position of $24 million. A hypothetical 1% favorable change in interest rates would result in an increase in the fair value of the treasury locks to a gain position of approximately $60 million at December 31, 2024.
Treasury lock agreements to manage and mitigate interest rate risk exposure. As of December 31, 2023, a hypothetical increase of interest rates by 1% associated with the Company’s short-term borrowings would result in a $3 million increase in short-term interest expense.
Treasury lock agreements to manage and mitigate interest rate risk exposure. As of December 31, 2024, a hypothetical 1% increase in average interest rates applied to the Company’s short-term borrowing balances throughout 2024 would result in an increased annual interest expense of approximately $2 million.
The Company’s Regulated Businesses serve residential, commercial, industrial and other customers, while the businesses within Other engage in business activities with government entities and other customers. The Company’s primary credit risk is exposure to customer default on contractual obligations and the associated loss that may be incurred due to the non-payment of customer accounts receivable balances.
The Company’s primary credit risk is exposure to customer default on contractual obligations and the associated loss that may be incurred due to the non-payment of customer accounts receivable balances.
Added
The Company is exposed to credit risk through its water, wastewater and related services. The Company’s Regulated Businesses serve residential, commercial, industrial and other customers, while the businesses within Other engage in business activities with government entities and other customers.
Added
The credit quality of the Company’s customer accounts receivable is dependent on the economy and the ability of its customers to manage through unfavorable economic cycles and other market changes. In addition, there can be no assurances that regulators will grant sufficient rate authorizations.

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