American States Water Company (AWR): Business Model Canvas [11-2024 Updated]

Discover how American States Water Company (AWR) navigates the complex landscape of the utility industry through its innovative Business Model Canvas. From forging strategic partnerships with government entities to ensuring sustainable water management, AWR's approach highlights its commitment to reliability and community engagement. Dive deeper to explore the key components that drive AWR's success in delivering essential services to its diverse customer base.

American States Water Company (AWR) - Business Model: Key Partnerships

Collaborations with U.S. government for military base services

American States Water Company (AWR) engages in significant collaborations with the U.S. government, particularly through its subsidiary, ASUS. This partnership involves operating and maintaining water and wastewater systems at various military bases. For the nine months ended September 30, 2024, revenues from contracted services, primarily from these military contracts, amounted to $97.7 million, an increase of $3.7 million from the previous year. The company anticipates continued contract modifications and new agreements, which are vital for sustaining revenue growth in this sector.

Partnerships with local municipalities for water supply

AWR maintains partnerships with local municipalities to provide water supply services. The company operates under regulatory frameworks established by the California Public Utilities Commission (CPUC) and relies on municipal contracts to ensure the delivery of essential water services. For the nine months ended September 30, 2024, AWR’s water segment generated operating revenues of $324.7 million, which reflects a decrease of $21.1 million from the same period in 2023. This revenue decline is attributed to the impact of retroactive rates and cost adjustments resulting from CPUC decisions. However, the company continues to invest in infrastructure improvements, with capital additions in the water segment reaching $147.1 million.

Engagements with construction firms for infrastructure projects

AWR collaborates with various construction firms to facilitate infrastructure projects that enhance its service delivery capabilities. These engagements are critical for maintaining and upgrading water and wastewater systems. In the nine months ended September 30, 2024, the company reported total capital expenditures of $173.5 million, which includes investments in construction projects. The partnerships with construction firms not only support current operational needs but also position AWR for future growth opportunities in infrastructure development.

Partnership Type	Revenue (in millions)	Capital Additions (in millions)	Notes
U.S. Government (Military)	97.7	N/A	Increase of 3.7 million from previous year
Local Municipalities	324.7	147.1	Decrease due to retroactive rate impacts
Construction Firms	N/A	173.5	Investments in infrastructure projects

American States Water Company (AWR) - Business Model: Key Activities

Water distribution and management services

American States Water Company (AWR) provides comprehensive water distribution services primarily through its subsidiary, Golden State Water Company (GSWC). For the nine months ended September 30, 2024, GSWC reported operating revenues of $324.7 million from water operations, a decline of 6.1% compared to $345.9 million for the same period in 2023. The decrease in revenues was attributed to various factors, including regulatory rate adjustments and changes in customer demand.

As of September 30, 2024, GSWC's total net property, plant, and equipment amounted to $1.861 billion, reflecting the capital-intensive nature of water distribution infrastructure. In addition, the company implemented surcharges in October 2023 to recover cumulative retroactive rate differences over a 36-month period.

Item	Amount (in thousands)
Operating Revenues (Water)	$324,732
Net Property, Plant, and Equipment	$1,861,431
Capital Additions	$147,093
Water Supply Costs	$55,788

Contracted services for military base operations

AWR's subsidiary, ASUS, specializes in providing contracted services for operation and maintenance at military bases. For the three months ended September 30, 2024, revenues from contracted services amounted to $28.7 million, an increase of 8.6% from $26.5 million during the same period in 2023. This growth was driven by management fee adjustments and new projects initiated at military bases.

The revenue from contracted services represents a significant portion of AWR's overall operational strategy, diversifying its revenue streams beyond traditional water distribution. The company expects to continue entering into new contracts with the U.S. government, which may enhance future revenue potential.

Item	Amount (in thousands)
Revenues from Contracted Services	$28,699
Increase from Previous Year	$2,190
Management Fee Adjustments	Variable based on contracts

Regulatory compliance and rate case applications

Regulatory compliance is critical to AWR's operations, particularly for GSWC. The California Public Utilities Commission (CPUC) plays a significant role in approving rate increases to recover operating expenses and ensure a fair return on investment. For the nine months ended September 30, 2024, GSWC's operating income was reported at $116.6 million, reflecting the impact of recent regulatory decisions.

The company has engaged in multiple rate case applications, with the most recent adjustments approved retroactively to January 1, 2022. As of September 30, 2024, there was an aggregate cumulative amount of $41.7 million recorded as regulatory assets for retroactive water revenues. Compliance with environmental regulations and water quality standards also influences operational costs, which accounted for approximately 35.7% of total operating expenses.

Item	Amount (in thousands)
Operating Income	$116,578
Regulatory Assets for Retroactive Revenues	$41,656
Total Operating Expenses	$306,571
Percentage of Supply Costs	35.7%

American States Water Company (AWR) - Business Model: Key Resources

Extensive network of water supply infrastructure

AWR operates a comprehensive network of water supply systems, which includes:

• Total net property, plant, and equipment as of September 30, 2024: $2,040,589,000.
• Capital additions for the nine months ended September 30, 2024: $173,477,000.
• Operating revenues from water services for the nine months ended September 30, 2024: $324,732,000.

This infrastructure is crucial for ensuring reliable water delivery and maintaining compliance with regulatory standards.

Skilled workforce for operational management

AWR employs a skilled workforce essential for the management and operation of its utilities. This includes:

• Workforce expenses, including salaries and benefits, increased due to overall labor costs and employee-related benefits.
• Investment in training and development programs to enhance workforce capabilities.

The effectiveness of AWR's operations is largely dependent on the expertise and efficiency of its workforce.

Strong financial position with access to capital markets

AWR maintains a robust financial position, allowing access to capital markets for funding its operations and growth:

• Consolidated net income for the nine months ended September 30, 2024: $90,833,000.
• Net cash provided by financing activities for the nine months ended September 30, 2024: $41,000,000.
• Interest expense for the nine months ended September 30, 2024: $39,217,000.
• Common shares sold through an ATM offering program, net proceeds: $59,300,000.

This financial stability supports AWR's ongoing capital investment program and operational expenditures.

Key Financial Metrics	As of September 30, 2024
Total Net Property, Plant, and Equipment	$2,040,589,000
Operating Revenues (Water Services)	$324,732,000
Capital Additions	$173,477,000
Net Income	$90,833,000
Net Cash from Financing Activities	$41,000,000
Interest Expense	$39,217,000
Common Shares Sold (ATM Program)	$59,300,000

American States Water Company (AWR) - Business Model: Value Propositions

Reliable water and electric utility services

For the three months ended September 30, 2024, American States Water Company (AWR) reported operating revenues from water services of $124.0 million, an increase of $7.8 million compared to the same period in 2023. This growth is attributed to rate increases implemented on January 1, 2024, and an increase in the authorized rate of return on the rate base for 2024.

Billed water consumption increased by approximately 8.6% compared to the third quarter of 2023, driven by a summer heat wave in California.

In the electric segment, revenues for the same quarter were $9.0 million, a slight increase of $0.1 million. Electric usage rose by 5.7% year-over-year.

Commitment to sustainability and environmental stewardship

AWR has invested significantly in sustainability initiatives. As of September 30, 2024, the company’s capital additions totaled $147.1 million, reflecting ongoing investments in infrastructure and sustainable practices. The company’s water supply costs accounted for approximately 35.7% of total operating expenses for the three months ended September 30, 2024.

Moreover, AWR’s long-term commitment to environmental stewardship is evident in its regulatory compliance efforts and its proactive approach to managing water resources.

Long-standing history of consistent dividend payments

AWR has maintained a strong dividend policy, having paid dividends every year since 1931. The company recently declared a fourth-quarter dividend of $0.4655 per share, payable on December 2, 2024. The compound annual growth rate (CAGR) of dividends over the past five years stands at 8.8%, with an expected 10-year CAGR of 8.0%.

As of September 30, 2024, AWR's effective dividend payout ratio was well-managed, allowing for continued reinvestment while rewarding shareholders.

Key Financial Metrics	Q3 2024	Q3 2023	Change ($)	Change (%)
Water Operating Revenues	$124.0 million	$116.2 million	$7.8 million	6.7%
Electric Operating Revenues	$9.0 million	$8.96 million	$0.1 million	1.1%
Capital Additions	$147.1 million	$113.9 million	$33.2 million	29.1%
Dividend per Share	$0.4655	$0.43 (approx.)	$0.0355	8.3%

American States Water Company (AWR) - Business Model: Customer Relationships

Focus on customer service and community engagement

American States Water Company (AWR) emphasizes strong customer service and community engagement as essential components of its business model. The company operates with a customer-centric approach, ensuring effective communication and support systems are in place. As of September 30, 2024, AWR reported a net income of $90.8 million, reflecting a decrease from $104.5 million in the same period of 2023. This decline highlights the importance of maintaining customer loyalty amidst fluctuating financial performance.

AWR’s commitment to service is evident through various community initiatives and educational programs aimed at promoting water conservation and sustainability. The company engages with customers via multiple channels, including social media, customer service hotlines, and community events, fostering a strong relationship with its customer base.

Regular communication regarding rates and services

AWR maintains transparency in its operations by regularly communicating with customers about changes in rates and services. The California Public Utilities Commission (CPUC) has approved multiple rate increases, with the latest effective January 1, 2024. These increases have resulted in a water operating revenue of $124 million for the third quarter of 2024, up from $116.2 million in the same quarter of 2023.

Regular notifications regarding rate adjustments are crucial for customer understanding and acceptance. AWR utilizes bill inserts, newsletters, and online platforms to inform customers about new rates, ensuring they are aware of how these changes impact their bills.

Support programs for low-income customers

To assist low-income customers, AWR has implemented several support programs, including the Low-Income Rate Assistance (LIRA) program. As of September 30, 2024, the balancing account for low-income rate assistance was recorded at $8.2 million, an increase from $5.8 million in the previous year. This program is designed to provide financial relief to eligible customers, helping to mitigate the impact of rate increases on vulnerable populations.

Additionally, AWR received $3.5 million in COVID-19 relief funds from the state of California to support customers struggling with delinquent water bills. Such initiatives reflect AWR's dedication to social responsibility and community support, enhancing customer relationships and fostering goodwill.

Program	Description	Funding Amount (as of 9/30/2024)
Low-Income Rate Assistance (LIRA)	Financial assistance for low-income customers to help reduce their water bills.	$8.2 million
COVID-19 Relief Fund	Funds to assist customers with delinquent water bills due to the pandemic.	$3.5 million
Community Engagement Programs	Educational initiatives promoting water conservation and sustainability.	Not specified

American States Water Company (AWR) - Business Model: Channels

Direct billing and online payment platforms

AWR utilizes various direct billing methods to facilitate customer payments. The company reported operating revenues of $452.4 million for the nine months ended September 30, 2024, with water operations contributing $324.7 million. This was a decrease of $21.1 million compared to the same period in 2023, primarily due to retroactive rates from a general rate case decision.

Online payment platforms have been integrated to enhance customer experience. As of the latest update, approximately 70% of customer payments were processed through online channels, reflecting a growing trend towards digital transactions within the utility sector.

Customer service centers for inquiries and support

AWR operates several customer service centers aimed at handling inquiries and providing support. The company reported an increase in customer service interactions by 12% year-over-year, with approximately 1.5 million calls handled in 2024. These centers are crucial in managing customer satisfaction and addressing billing issues, especially during peak usage seasons.

In addition, AWR maintains a customer satisfaction rating of 85%, which is above the industry average of 78%. This rating is supported by regular training programs for customer service representatives and the implementation of feedback systems that allow customers to rate their service experience.

Community outreach programs to educate customers

AWR conducts community outreach programs aimed at educating customers about water conservation and utility services. In 2024, the company invested approximately $1.2 million in these initiatives, which included workshops, school programs, and informational campaigns. The outreach efforts successfully reached over 100,000 individuals, contributing to a reported 5% decrease in average water consumption per household.

The company also collaborates with local governments to promote water-saving technologies, resulting in a 15% increase in participation in rebate programs for water-efficient appliances.

Channel Type	Description	Impact (2024)
Direct Billing	Utilization of online payment platforms and traditional billing methods.	$324.7 million in water revenues
Customer Service Centers	Support for inquiries and billing issues.	1.5 million calls handled; 85% customer satisfaction rating
Community Outreach	Education on water conservation and utility services.	$1.2 million invested; reached 100,000 individuals

American States Water Company (AWR) - Business Model: Customer Segments

Residential customers in California

American States Water Company (AWR) primarily serves residential customers in California through its subsidiary, Golden State Water Company (GSWC). The residential segment accounts for a significant portion of the company's revenue, with operating revenues from water services reported as $324.7 million for the nine months ended September 30, 2024. The company has implemented rate increases as part of its water general rate case, which became effective retroactively from January 1, 2022, impacting residential customers' billing.

Commercial businesses requiring utility services

AWR also caters to commercial businesses that require utility services, which include water and electric services. For the nine months ended September 30, 2024, the company reported operating revenues from electric services of $29.9 million. The contracted services segment, which includes various utility services to businesses, generated revenues of $97.7 million during the same period. This segment is crucial for AWR as it diversifies its customer base beyond residential consumers and stabilizes revenue streams.

U.S. government and military bases

The company has established contracts with U.S. government entities and military bases, providing utility services under long-term agreements. As of September 30, 2024, receivables from the U.S. government amounted to $83.3 million, showcasing the significance of this customer segment. The contracted services revenue from government contracts contributed to the overall revenues, which totaled $97.7 million for the nine months ended September 30, 2024.

Customer Segment	Operating Revenues (9 months ended September 30, 2024)	Key Details
Residential Customers	$324.7 million	Rate increases effective January 1, 2022
Commercial Businesses	$29.9 million (Electric)	Contracted services revenue of $97.7 million
U.S. Government and Military Bases	$83.3 million (Receivables)	Long-term utility contracts established

American States Water Company (AWR) - Business Model: Cost Structure

Operating costs primarily from water supply and infrastructure maintenance

The operating costs for American States Water Company (AWR) are significantly influenced by water supply expenses, which accounted for approximately 35.7% of total operating expenses for the three months ended September 30, 2024. These costs include:

• Water purchased: $24.1 million for Q3 2024, up from $23.2 million in Q3 2023
• Power purchased for pumping: $4.996 million for Q3 2024
• Groundwater production assessment: $6.971 million for Q3 2024
• Total water supply costs: $86.842 million for the nine months ended September 30, 2024, down from $96.492 million in the same period in 2023.

Administrative expenses for regulatory compliance

Administrative expenses have increased due to regulatory compliance requirements and other operational necessities. The breakdown for administrative and general expenses is as follows:

Period	Administrative and General Expenses (in thousands)
Q3 2024	$24,200
Q3 2023	$20,982
YTD 2024	$73,034
YTD 2023	$66,032

This reflects a 15.3% increase in administrative costs from Q3 2023 to Q3 2024.

Capital expenditures for infrastructure upgrades

AWR has made significant capital expenditures aimed at upgrading infrastructure. The capital additions for AWR are detailed below:

Type of Expenditure	Q3 2024 (in thousands)	Q3 2023 (in thousands)
Water	$51,466	$37,349
Electric	$11,862	$9,947
Contracted Services	$851	$186
Total Capital Additions	$64,179	$47,482

These capital expenditures represent a strategic investment in maintaining and enhancing service delivery capabilities.

American States Water Company (AWR) - Business Model: Revenue Streams

Water service fees and electric utility charges

For the nine months ended September 30, 2024, American States Water Company (AWR) reported water operating revenues totaling $324.7 million, a decrease from $345.9 million in the same period of 2023. This decrease is primarily attributed to the impact of retroactive rates related to the full year of 2022, which amounted to approximately $32 million. Billed water consumption was higher by 5.5% compared to the previous year, driven by lower seasonal precipitation and higher summer temperatures.

Electric utility revenues for the same period were reported at $29.9 million, down from $30.7 million in 2023, largely due to waiting on new rate approvals.

Revenue Source	2024 (YTD)	2023 (YTD)	Change
Water Operating Revenues	$324.7 million	$345.9 million	($21.2 million)
Electric Utility Revenues	$29.9 million	$30.7 million	($0.8 million)

Contracted services revenues from military base operations

In the third quarter of 2024, revenues from contracted services increased to $28.7 million compared to $26.5 million in the same quarter of 2023, reflecting a rise of 8.3%. This growth was largely due to increased management fees stemming from economic price adjustments and the commencement of operations at new military bases.

Contracted Services Revenue	2024 (Q3)	2023 (Q3)	Change
Contracted Services Total	$28.7 million	$26.5 million	$2.2 million

Contributions and advances for construction projects

AWR's construction revenues, which include contributions and advances, are a significant aspect of its revenue streams. For the nine months ended September 30, 2024, AWR reported construction revenues of $97.7 million, an increase from $94.0 million in the same period of 2023.

Construction Revenue	2024 (YTD)	2023 (YTD)	Change
Construction Revenues	$97.7 million	$94.0 million	$3.7 million

Updated on 16 Nov 2024

Resources:

1. American States Water Company (AWR) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of American States Water Company (AWR)' financial performance, including balance sheets, income statements, and cash flow statements.
2. SEC Filings – View American States Water Company (AWR)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.