Cheryl Norton
Executive Vice President and Chief Operating Officer at American Water Works
Thanks, John, and good morning, everyone.
On Slide 16, I want to start by acknowledging that our entire company did an excellent job of safely executing on our accelerated capital plan, and safely performing our day-to-day work in 2022. While we didn't reach our ultimate goal of zero injuries, we did record our best year ever in terms of safety performance. That's quite an achievement since 2022 was also a record year of total investment in American Water, and we experienced some extreme weather conditions.
We slightly exceeded our $2.5 billion goal for the year by making prudent investment decisions across our footprint, and by acquiring many new systems, which John spoke about earlier. Looking ahead to 2023, and as we told you in November, we increased our investment plan this time to $2.9 billion overall and roughly $2.5 billion for capital expenditures. This will likely be our new annual threshold for the next few years. Coupled with detailed project plans, we expect this pace of investment to drive improvements in water quality and reliability for the benefit of our customers. These investments also generate significant economic benefit to the local and regional economies, while improving the environmental compliance of the systems in these communities. These investments should also favorably impact our pipe replacement cycles, which are much better than the industry average. Taken together, these actions demonstrate how the values of ESG are integrated into our everyday work.
Turning to Slide 17. I won't spend much time here, but this graph simply illustrates the result of our continued execution on capital investments. The combination of infrastructure projects and acquisitions is succeeding in growing our rate base, at a long-term rate of 8% to 9%. Rate base growth, of course, will drive earnings growth as we make prudent investments in our systems with constructive regulatory outcomes.
Let's move to Slide 18 and review the major components of our 10-year capital investment expenditure plan. Our focus continues to be infrastructure renewal at 68% to 70% of the plan through 2032. These investments are primarily for pipe replacement and upgrading water and wastewater treatment facilities. We also expect to allocate 10% to 12% of our capital expenditures to resiliency in order to harden our systems, improve cyber and physical security, and address climate variability. This allocation has increased over where we've been historically. Our resiliency has been tested over the past few months, with floods in California, and the bitter cold temperatures in many of our service territories over this past holiday season. As Susan said earlier, our systems and our teams did a great job of weathering the storms, and preventing any major service disruptions during these recent events. It shouldn't be lost on our investors or other stakeholders that our employees in the field have the best skills, training, and expertise in the industry, which leads to these great results when we're tested.
Our commitment to make needed investments to enhance water quality remains very strong, including steps we're taking to improve our comprehensive source water protection programs, and upgrade our treatment facilities. Every water provider must be prepared to address a broader range of contaminants, and be ready to meet more stringent regulations. Finally, we'll continue to invest in new technologies to enhance our customer experience, and enable our employees to drive efficiencies. Overall, our capital plan is very much aligned with our environmental goals, and other ESG-related values that we prioritize as a company.
Let's go to Slide 19 and cover the latest regulatory activity in our states. Shown on this slide is a summary of pending or recently completed general rate cases, with some key facts for each. In the appendix, you'll also find some details related to infrastructure surcharges, as well as a snapshot of the key outcomes from the most recent general rate case in our Top 10 states. As Susan alluded to in her comments earlier, for us, the ability to execute on our regulatory strategies is a critical success factor, for continuing to grow our business every year. However, we know that customer affordability is especially online as many utility investors and analysts heading into 2023, a topic I'll speak more about in a few minutes. Because of these concerns, we believe our constructive rate case outcomes in 2022 should be tangible evidence of the support we have from regulators, for needed infrastructure investments, to deliver high-quality service to our customers.
The common thread in all of these general rate cases is the focus on recovery of infrastructure investments, made since the last round of cases, totaling over $4 billion, and in some states, the rolling of acquisitions. As we said, though, there are infrastructure mechanisms in several of our states that are reducing the lag of regulatory recovery. This works alongside our time frame between general rate cases of about two years in our bigger states.
Turning briefly to active rate cases. Our cases in California and Missouri were filed in July and are progressing as expected so far. In January of 2023, we filed an update in Missouri for costs and other needed elements of the case, with hearings to be held this month. We expect the case to reach conclusion by the end of the second quarter of 2023. In California, we recently applied for a Water Resources Sustainability Plan, which is an update to the general rate case. This plan requests the continuation of a decoupling mechanism, that stems from legislation the governor recently signed, that allows the California Public Utilities Commission to consider a decoupling mechanism.
We believe decoupling is a ratemaking strategy that's good for both our customers, and for the environment, because it rewards customers for conserving water as we make investments to renew and improve our drinking water infrastructure. The filing has also been updated with more timely customer demand estimates, and to reflect present rates approved by the commission, effective January 1, 2023. The application itself includes infrastructure renewals, wildfire mitigation, climate resiliency efforts, and strengthening affordability programs in addition to the new Water Resources Sustainability Plan. And in Virginia, we have a settlement on file, and expect a final decision in the first quarter of 2023.
On the regulatory front, outside of general rate cases, there were a few notable developments since our third quarter call. Staying in California and relating to the Monterey Water Supply Project, in November, the Coastal Commission approved our desalination coastal development permit application, after many years of community discussion, and in light of some additional commitments from us to the community. Then, in December, the California Public Utilities Commission issued its decision that authorizes us to enter into an amended water purchase agreement, and addressed rate recovery for the associated facilities. Subsequently, we filed an application for rehearing, requesting inclusion of all infrastructure costs in the cost cap for the groundwater replenishment project expansion, and requested AFUDC that was not included in the decision. We are awaiting a ruling on our application.
American Water is committed to being a solutions provider to the communities in Monterey County, both through the advances in the water supply project, and through maintaining our current level of operations in the area. Just last month, several communities in Monterey were impacted by evacuations due to flooding that occurred there. Because of our amazing employees and reliable assets, California American Water maintained normal service to its customers during this challenging time. Finally, in California, we're still awaiting a ruling from the commission on the pending cost of capital case.
Switching gears to Pennsylvania. Last month, the Department of Environmental Protection issued a maximum contaminant standard for two PFAS chemicals. Based on our proactive testing, we've identified one American Water location in Pennsylvania that requires action based on the new regulations. The treatment upgrade for that facility was already in process, and is anticipated to be online later this year. In the meantime, we've taken the contaminated well out of service temporarily, to manage PFAS levels in the water provided to our customers, and ensure early compliance with the new regulations.
We are still awaiting the new U.S. EPA standards, which we anticipate will be delivered later this year. We've already performed significant testing and analysis across our systems in compliance with state level guidance, and have been acknowledged for that work, which will help inform our action plans when the EPA issues its standards.
For example, our Short Hills Station project in New Jersey was completed to meet New Jersey state regulations and was recognized with the Governor's Environmental Excellence Award in 2020 for its leadership in water treatment related to PFAS removal. Broadly, we believe we are the leaders in the industry on this topic, as evidenced by our work with the Water Research Foundation on PFAS communications and other projects. Our research scientists are frequently invited by the EPA, [Indecipherable], AWWA, and the Water Research Foundation to speaking engagements that inform stakeholders and colleagues in the water industry.
Finally, we were honored to be the only private utility invited to a recent event at the White House, focusing on reducing lead exposure, replacing both the companies' and customers' portions of lead service lines, is a part of our current capital plan. Our goal is to replace a significant majority of known lead service lines in our service areas by the year 2030. To show the magnitude of our regulatory execution efforts, you can see on Slide 20 that we have $416 million in annualized new revenues and rates since January of 2022. This includes $308 million from general rate cases and step increases, and $108 million from infrastructure surcharges. We have $181 million of total annualized revenue request pending, which includes two infrastructure surcharge proceedings.
Throughout the remainder of the year, we expect to file additional general rate cases to cover infrastructure investments and acquisitions since the last cases. As always, execution on these regulatory priorities is key to our plan for growth in the business. Because we make prudent investments and have skilled and dedicated employees working on these cases, we're very confident in obtaining constructive outcomes, as we did in 2022.
On Slide 21, as I mentioned earlier, customer affordability is front and center in the utility industry in 2023. One of the most difficult challenges we face in the water and wastewater industry is balancing customer affordability, with the magnitude of the system investments that are needed. Thankfully, as we now have another full year's data to reflect on, our company is still in a very good relative position in terms of affordability, or wallet share at less than 1% of median household income. We continue to believe that our affordability proposition is an important differentiator.
And finally, on Slide 22, I'd like to highlight an ESG story that is a bit different than others -- than the others we have shared this past year. We're proud to say that American Water earns the SAFETY Act Designation from the Department of Homeland Security in 2022, the first water and wastewater company to do so. Not only is this great recognition of the work we do every day to keep our employees and communities safe, but it also gives us the opportunity to strengthen our processes, and increase knowledge sharing with the U.S. government.
So with that, I'll turn it back over to the operator and begin Q&A and take any questions you may have.
