Cheryl D. Norton
Executive Vice President & Chief Operating Officer at American Water Works
Thanks, John, and good morning, everyone. slide 13 shows that our state and corporate leaders and their teams did a great job in the first quarter, executing on our increased capital plan. It required significant effort to safely and efficiently deliver the dozens of projects that improved our systems and drove capital investment higher by nearly $100 million in the quarter compared to the same period last year. This result keeps us on pace to hit our goal of approximately $2.9 billion of capital investment spending in 2023. To show the magnitude of our regulatory execution efforts and timely recovery of these investments, you can see on slide 14 that we already have $279 million in annualized new revenues in rates since January of 2023. This includes $229 million from general rate cases and step increases and $50 million from infrastructure surcharges. We also have $144 million of total annualized revenue request pending, including two infrastructure surcharge proceedings. Moving on to our regulatory strategy on slide 15. Our theme here is around timely, consistent recovery of investments and operating costs. We have consistently engaged with policymakers and regulators to find the best ways to invest in water and wastewater infrastructure and achieve timely recovery. When we achieve timely and consistent recovery, it levels out bill increases to our customers, making those bills more manageable. The pie chart on the right side of the page also speaks to timely recovery of our investments across our footprint. Through capital recovery mechanisms and forward test years, we can reduce regulatory lag and lessen the reliance on general rate cases. This enables us not only to earn our lab return but also to mitigate the size of general rate increases for our customers.
We expect about 75% of capital investments over the next five years to be recoverable through infrastructure mechanisms and through the use of forward test years, which is the key to unlocking a more consistent annual earnings growth pattern for the long term. The ability to execute our regulatory strategies is a critical success factor for continuing to grow our business each year. As water and wastewater industry challenges grow, we'll continue to focus on constructive, regulatory and legislative outcomes to help us work through those challenges. Let's go to slide 16 and cover the latest regulatory activity in our states. Shown on the slide is a summary of our pending general rate cases with some key facts for each. In the appendix, you'll also find some details related to infrastructure charges as well as a snapshot of the key outcomes from the most recent general rate cases in our top 10 states. At the end of March, we filed a general rate case in Indiana, reflecting $875 million in water and wastewater system investments to be made through 2025 to continue providing safe and reliable service. The revenue request also includes an increase in the cost of chemicals and other operating costs that we continue to see. We are seeking to increase revenues over a phased 3-step process through May 2025 that would result in $87 million of additional annual revenue when fully implemented. In California, our case was filed in July of last year and is progressing as expected so far. We're seeking increased revenues of approximately $95 million over a phased 3-step process with rate changes expected to be effective in 2024, 2025 and 2026. We're also still awaiting a ruling from the commission on the pending cost of capital case. In Missouri, on March 3, we were pleased to file a settlement agreement with the Missouri Public Service Commission. The settlement reflects an increase of $95 million in annualized revenues, including $51 million for previously approved infrastructure surcharges. A final decision on this matter is expected in the second quarter of 2023. And finally, earlier this week, the Virginia State Corporation Commission approved the settlement of our rate request, authorizing a total annualized revenue increase of approximately $11 million. Outside of general rate cases, there were a few notable developments since our fourth quarter 2022 call.
In California, related to the Monterey Water Supply Project we signed the Pure Water Monterey Expansion agreement following an order issued by the CPUC. We are now allowed to standard ratemaking treatment for the construction funding of the pumps and pipes that were built to support the expansion. Together with the desalination and water reuse projects in process and Aqua for storage and recovery online, we believe that a secure water future for the Monterey Peninsula is now possible once the approval process is complete. On the legislative front, in Indiana, Senate Bill 180 passed the State House and Senate with bipartisan support and is awaiting the Governor's signature where it will become effective immediately. This bill allows for consolidated rates in wastewater systems through Indiana's Service Enhancement Improvement Recovery Mechanism. Turning to PFAS, I'll expand on Susan's earlier comments on EPA's proposed rule making. While American Water has long been anticipating and preparing for the rule making, our initial analyses were primarily based on a federal PFAS standard that would be more in line with the higher treatment limits set by several states. We are carefully reviewing the EPA's proposed drinking water regulation to assess the four parts per trillion limits for PFOA and PFOS and the application of the hazard index approach for several other chemicals.
Our review will assess impacts to our capital and operating expense plan as well as our needed financing. It's logical to assume that the significantly lower treatment level, the numbers -- the number of facilities that will require treatment will be larger as will the cost. One of our early concerns is that EPA's cost estimates are materially understated. Our analysis continues and upon completion of our preliminary assessment, we'll submit comments on the proposal to the EPA by May 30. As the EPA develops its final rule, which is expected by the end of 2023, we'll have more information to share based upon further review and analysis. To be very clear though, American Water joins other water organizations in support of the EPA, Congress and other decision-makers in implementing reasonable policies aimed at keeping harmful PFAS out of drinking water supplies and communities. In addition to the comments we intend to provide on the proposed rule itself. We also expect to provide comments to the EPA and others on many related issues, including the following: We'll ask for an exemption of water and wastewater systems from financial liability for PFAS under circa. We'll also ask to ensure all water and wastewater utility providers regardless of ownership, have equal access to any and all federal and/or state funding related to treating PFAS. In addition, we'll request permanent federal funding for a water and wastewater low-income customer assistance program. Providing safe, reliable and affordable water is American Water's business. We'll continue to work productively with the EPA, Congress, regulators and policymakers to ensure that the implementation of any final standards protects customers, communities and the general public.
So with that, I'll turn it back over to our operator to begin Q&A and take any questions you might have.
