Cheryl Norton
Executive Vice President and Chief Operating Officer at American Water Works
Thanks, Susan, and good morning everyone. Let me start by turning to Slide 9, where these graphs illustrate that our continued successful execution of our capital investment plan is succeeding in growing regulated rate base consistent with our long-term rate of 8% to 9%. Rate-based growth, of course, will drive earnings growth. We believe the high degree of visibility to our capital investment plan, combined with the low-risk nature of the plan, uniquely positions American Water in the utility sector and is fundamental to our investment thesis.
Turning to Slide 10, I'll cover the latest regulatory activity in our states, beginning with our most recently filed cases. In Pennsylvania, we filed the general rate case in November and are seeking recovery of $1 billion of investments. The case is proceeding as planned, including testimony and evidentiary hearings that are scheduled for February and March with rates still expected to be effective in August. As a reminder, Pennsylvania uses a forward test year for rate-making purposes.
In New Jersey, we filed a general rate case in January and are seeking recovery of over $1.3 billion of investments through December 2024. This case includes, for example, infrastructure improvement projects at all seven of our surface water treatment plants in the state. We expect the New Jersey case to be completed sometime later this fall.
We also filed a general rate case last month in Illinois, where we have invested over $550 million since our last case. Our general rate cases in California, West Virginia, and Virginia are all progressing well, and as expected. In California, we reached a partial settlement in the case in November related to the revenue request. We will prepare to implement the new rates retroactively to January 1, 2024, upon receiving the CPUC's decision on the settlement agreement and outstanding topics related to rate design and revenue stabilization mechanisms. Our request for a one-year extension on the cost of capital was also granted, pushing the next filing out to May of 2025.
In Indiana, we received a final order just yesterday, and it looks very constructive. We are currently evaluating it and will share key takeaways in the next day or two, but overall we're generally pleased.
And finally, in Kentucky, we expect to receive a final order very soon. As a reminder, we expect to file general rate cases about every two years in our larger jurisdictions because we make prudent investments and have skilled and dedicated employees working on these cases, we're very confident in obtaining constructive outcomes again in 2024 as we did in 2023.
On the legislative front in New Jersey, new legislation supporting capital investment was passed and was signed by the Governor in January. The resiliency and environmental system investment charge, or RESIC for short, establishes a new regulatory mechanism that will enable water and wastewater utilities to recover in a more timely manner capital spending related to investments in resiliency, environmental compliance, safety, and public health. This includes capital related to PFAS remediation. In fact, most of our states where PFAS is present, there are either existing environmental mechanisms that we believe PFAS investments will fit under, or we're proactively advocating for such mechanisms.
To show the magnitude of our regulatory execution efforts you can see on Slide 11 that we have $390 million in annualized new revenues and rates since January of 2023. This includes $273 million from general rate cases and step increases and $117 million from infrastructure surcharges. We also have $670 million of total annualized revenue requests pending. As a reminder, American Water recovers about 75% of our overall capital spend through infrastructure mechanisms or forward test years, which greatly reduces regulatory lag. Alongside all of the investments we're making, we remain extremely focused on customer affordability and operating efficiently. We are continuing to evolve our strategies around rate design and programs to assist our customers who are challenged with affordability. We are also continuing our focus on technology, efficiencies of scale, and cost management to deliver on customer affordability, especially as the regulatory demands, such as the proposed PFAS rule and lead and copper rule improvements, drive increases in on our capital program.
On Slide 12, I'd like to cover our recent announcements regarding the US EPA's proposed lead and copper rule improvements. Like PFAS, we think clear rules are important and should be enforced for all providers. American Water consistently meets water quality standards related to the lead and copper rules across our footprint and believes removing the risk of lead service lines over time is the right thing to do for the health and safety of our customers. But also like PFAS, we believe all stakeholders must understand the costs associated with the proposed improvements to the lead and copper rule and that the EPA estimates are likely understated.
The cost to identify the material of all unknown service lines and replace all lead service lines, including the customer-owned lines and galvanized lines where needed by 2037, will require significant investment for all water systems. We are currently developing preliminary estimates based on the proposed rule. Unlike PFAS, though, the expected timeline for complying with the lead and copper rule improvements is much longer, so the impact on capital spend will be more gradual.
Providing safe, reliable, and affordable water is American Water's business. We continue to work with the EPA, Congress, regulators, and policymakers to ensure that the implementation of any final standards protects customers, communities, and the general public.
As I close on Slide 13, you can see that our five-year capital plan, which is unchanged from November, has $1 billion for PFAS and approximately $500 million for lead service line replacements. We have been proactively investing about $100 million per year to replace lead service lines for several years now and expect to continue that level at least through 2030 or beyond. Depending on the EPA's requirements in the final lead and copper rule improvements, such as for customer-owned service lines, our annual investment level may need to be revised and likely over a longer period of time.
Also, we are still awaiting a final rule from the US EPA on PFAS. We continue to expect that there will be no material changes to the proposed rule and we have not changed any of our announced plans or estimates last November related to PFAS compliance. We continue to treat for PFAS in compliance with state regulations and we continue to prepare for full compliance with the new federal rule once released.
Previously, we have disclosed that we are a party to the multidistrict litigation or MDL lawsuit in US District Court for the District of South Carolina against manufacturers of certain PFAS, like 3M and DuPont for damages. In early December, there were deadlines to decide whether or not to remain party to the two potential settlements with manufacturers, and we did remain a party to both settlements. We believe this is the optimal path to recouping the most dollars possible from PFAS manufacturers in an expedient manner for our customers. On February 8th, the MDL court issued its final approval of the DuPont settlement. We will now begin the process of perfecting our claims under this settlement within the time period provided by the MDL. A fairness hearing on the 3M settlement was held on February 2. This matter remains pending.
In closing, it's important for investors to understand that the ever-changing regulatory environment is leading to significant industry challenges, including those related to lead and PFAS, but also with issues like cybersecurity, for example. Each change on its own is significant, but the layering effect of all these changes is even more dramatic. The expertise we bring to the table to solve these challenges is well-recognized across the states where we operate and sets us apart from others. It's a privilege and a great responsibility to deliver safe, clean, reliable, and affordable services to our customers and communities.
With that, I'll hand it over to John to cover our financial results and plans in further detail. John?
