Amid the COVID-19 public health emergency, investor-owned water utilities continue planned infrastructure projects to maintain water and wastewater treatment facilities and distribution networks. The nation's largest water utility, American Water Works Co. Inc., issued news releases from its Illinois, New Jersey, Pennsylvania and West Virginia subsidiaries stating that operations are considered part of the U.S. Department of Homeland Security's "critical infrastructure sector," and the company will continue planned infrastructure projects to provide reliable water and wastewater services to its customers.
Middlesex Water Co. has similarly stated that guidelines issues by New Jersey and Delaware governors "do not curtain construction activities." Notably, the company is proceeding with its $70 million upgrade of the Carl J. Olsen water treatment plant in Edison, N.J., which started in October 2019 and is anticipated to be completed in mid-2021.
Mark Lucca, president of Essential Utilities Inc.'s largest subsidiary, Aqua Pennsylvania Inc., said in a news release April 6 that the utility is making some changes to its pipe replacement projects as a result of the pandemic. "Ordinarily once we install a new main and complete disinfection, we complete all of the customer service transfers to the new main as well as fire hydrants and tie-ins that connect the new main to existing mains on side streets. However, due to the COVID-19 pandemic, we are delaying the transfer of customer services and final connections that we cannot complete in less than 30 minutes until further notice because we understand that access to water is crucial to maintaining good health during this COVID-19 crisis."
Typically, two-thirds of water utility capital expenditures are allocated to distribution pipe replacement. Larger, multi-state water utilities are able to reallocate their capital spending across their operating footprint and could reprioritize projects based on the easing of state stay-at-home restrictions. Capital spending tied to customer growth would be at greatest risk during a prolonged recession. Approximately $18 million of Artesian Resources Corp.'s $63 million 2020 capex forecast is associated with extending transmission and distribution facilities to address service needs in growth areas.
A discussion of the impact COVID-19 has had on forecast 2020 capital spending is expected during first-quarter earnings conference calls in late April and early May.
2020 capital expenditure spending forecasts
Total water utility sector capital expenditures grew 6.9% in 2019 and are forecast to increase by 15.4% in 2020. The large uptick in 2020 capex growth is driven by Essential Utilities' acquisition of Peoples Gas and the inclusion of Connecticut Water in SJW Group's forecast. 2020 marks the first year that the seven other water utilities, in aggregate, will outspend the sector's largest investor-owned water utility, American Water.
American Water, which represented over 55% of the sector's 2019 capex, experienced year-over-year spending growth of 4.3%. During 2020 through 2024, the company anticipates spending approximately $8.2 billion on regulated capex, which is expected to fuel 5% to 7% earnings growth.
As shown in the graph, capital spending by the smallest utilities can meaningfully swing from year to year due to individual projects.
Regulatory Research Associates is an offering of S&P Global Market Intelligence.
Learn more about Market IntelligenceRequest Demo
Learn more about Energy
Utility Case Timelines Not Immune To Effects Of COVID-19; Uncertainty Abounds
States Hit Pause On State, Federal Primary Elections Amid Coronavirus Outbreak