SJW Group Postpones Cost of Capital Filing to 2026, Impacts Water Rates

SJW Group Delays Cost of Capital Filing to May 2026

SJW Group has made a significant move by postponing its upcoming filing for the Cost of Capital (COC) to May 1, 2026. This decision aligns with its subsidiary, San Jose Water Company, and three other California water utilities as part of a broader agreement with the California Public Utilities Commission (CPUC).

Key Details of the Deferral

The decision comes in response to a letter received from the CPUC, permitting the delay in their scheduled 2025 COC filings. Originally expected by May 2025, the postponement extends the timeline, pushing the effective date for any changes to January 1, 2027. This extra year is seen as a beneficial adjustment that will ease administrative workloads and associated costs for both SJW Group and the regulatory body.

The Current Return on Equity

SJW Group currently maintains a return on equity at 9.81%. This retains the previously authorized rate of 10.01%, which will slightly adjust with a 20 basis point reduction reflecting the impacts of the Water Conservation Memorandum Account (WCMA). This mechanism is pivotal for ensuring the continuity of service during periods of reduced water availability.

Impact of Water Cost of Capital Mechanism

The Water Cost of Capital Mechanism (WCCM) will remain active until January 1, 2027. This framework allows the adjustment of the return on equity based on fluctuations in the Moody’s Aa Utility Bond Index. Such mechanisms help stabilize customer rates in the face of market changes.

Reasons Behind the Deferral

The delay is attributed to several factors, primarily linked to regulatory and operational efficiencies. Seeking an initial deferment in December 2024 was a strategic move to mitigate the workload for CPUC staff and streamline processes. The last determination made by the CPUC regarding COC was on June 29, 2023, and the group is committed to maintaining timely compliance while ensuring operational fidelity.

San Jose Water Company’s Operational Challenges

Additionally, there have been operational challenges, such as a voluntary 15% reduction request from San Jose Water's wholesaler due to ongoing seismic dam improvement projects. This request has prompted the CPUC to instate the WCMA as a necessary protective measure, offering temporary relief to revenue streams.

About SJW Group

SJW Group stands as a leader in the water utility sector in the U.S., offering vital services to nearly 1.6 million residents. The company operates several localized utilities, including the San Jose Water Company in California, The Connecticut Water Company, The Maine Water Company, and SJWTX, Inc. located in Texas. SJW Group is dedicated to employing financial strength, operational expertise, and innovative technologies to provide quality water services while nurturing environmentally sustainable practices and supporting local communities.

Commitment to Stakeholders

Overall, SJW Group exemplifies a commitment to sustained investment in operations and meaningful engagement with communities. Their ongoing efforts ensure reliable service and create long-term value for stakeholders. By delaying the filing, the company not only navigates current operational demands but also positions itself favorably for future growth.

Frequently Asked Questions

What is SJW Group’s current return on equity?

SJW Group currently maintains a return on equity of 9.81%, which is slightly down from the previously authorized 10.01% due to recent adjustments.

Why was the cost of capital filing postponed?

The filing for the Cost of Capital was postponed to streamline administrative processes and reduce costs for both SJW Group and the CPUC.

How does the Water Cost of Capital Mechanism affect customers?

The Water Cost of Capital Mechanism allows the return on equity to adjust based on fluctuations in the Moody’s Aa Utility Bond Index, helping to stabilize customers' water rates.

What challenges is San Jose Water Company currently facing?

San Jose Water Company is dealing with a voluntary 15% water reduction request from its wholesaler due to infrastructural upgrades, requiring temporary revenue protections.

What is SJW Group’s focus going forward?

SJW Group remains focused on sustainable investments in operations and actively engaging with the communities it serves to ensure reliable water services and long-term value for shareholders.

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