Can American Water's rate increases keep up with what its pipes cost?

American Water raises outside money to rebuild and expand water networks, then waits for regulators to let bills repay it. In the third quarter of 2026 revenue rose, but higher costs and more shares left earnings per share flat.

What the company does

Turning on a kitchen tap in New Jersey, Pennsylvania, Missouri or California may bring you water that travelled through American Water's pipes. The company runs local water and wastewater utilities in states from California and Hawaii to Virginia. Each state's utility commission, a public regulator, sets its prices. American Water builds pipes and treatment plants and buys local systems. The commissions then let customers' bills repay that investment plus a return (a profit allowed on the money invested).

How it earns

Households and businesses pay for safe, reliable water and sewage service. The regulated utilities bring in almost all the revenue and profit. What remains depends on timing. Networks must keep being replaced, so investment never stops. Each new asset adds depreciation, an accounting charge that spreads its cost over its life. Because outside money funds much of the work, it also adds interest. The matching price increase arrives only when a commission rules on a rate case, a formal request to raise prices. Picture, hypothetically, a landlord who renovates a flat in January but can raise the rent only a year later. Several states shorten that wait. Some let bills rise between cases to recover pipe replacement, and others set prices on projected figures.

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Legal Notes and Methodology

Producer and publisher: Francesco Monterosso · ReasyPort
Financial information reference: 2026-03-31
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American Water Works (AWK) - Stock report

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American Water Works