Why did shares of Bryn Mawr-based private water systems operator Aqua America fall nearly $2, instead of rising, after the company reported record per-share earnings last week?
Maybe because the regulated utility is reporting too much profit for its own good, suggested Ryan M. Connors, veteran utility analyst at Philadelphia's Janney Capital Markets, who quizzed Aqua boss Nicholas DeBenedictis about the potential squeeze between its "frozen" Pennsylvania water rates, low capital spending, and lower recent state tax rates, in the investor conference call after reading through Aqua's second-quarter numbers:
"You've talked in the past about the fact that you're on a several-hundred-year replacement cycle for your infrastructure, and you need to accelerate that," Connors reminded DeBenedictis. "Presumably that, over time, requires higher rates. So, my question is, is there any risk in your mind that instituting a 'rate freeze' for any period of time sort of conditions the rate payer and the consumer advocate to believe that that's a new rate reality, and maybe that makes it tougher to get the rate increases that presumably you'll ultimately need down the road?"
Not a problem, insisted DeBenedictis -- because he's not promising flat charges for Aqua's customers will continue past this year.