Ladies and gentlemen, thank you for standing by. Today is March 11, 2011. Welcome to the American States Water Company Conference Call discussing 4th Quarter 2010 Results. If you have not received a copy of this morning's news release announcing earnings for the quarter, please call
909-394-3600,
extension 651 and one will be faxed or emailed to you. If you would like to listen to a replay of this call, it will begin this afternoon at approximately 2 pm
pm
As a reminder, this call is being recorded and will be limited to no more than 1 hour. At this time, I would like to turn the conference call over to Eva Tang, Chief Financial Officer of American States Water Company. Ma'am, please go ahead.
Okay. Thank you. Thank you all for joining us today with me Bob Broughs, Preston's CEO. Before I start the quarterly results discussion, I would like to remind you that certain matters discussed during this conference call may be forward looking statements intended to qualify for the Safe Harbor and uncertainties in our most recent Form 10 ks and Form 10Q on file with the Securities and Exchange Commission. All forward looking statements are made as of today.
The company is under no obligation to update such statements. With that, I would like to discuss our financial results. Basic and fully diluted earnings for the Q4 of 2010 were $0.48 per share as compared to basic and fully diluted earnings of $0.18 per share for the Q4 of 2019. In 2010, we have income from continuing operations and discontinued operations related to Chaparral City Water Company due to the pending sale. I'll begin with the earnings from continuing operations for the quarter.
Basic and fully diluted earnings from continuing operations for the Q4 of 2010 were $0.44 per share as compared to basic and fully diluted earnings from continuing operations of $0.16 per share for the Q4 of 2019. There were 2 nonrecurring items that significantly impacted the result of the Q4 of 2010. The first item related to the long awaited decision issued by the California Public Utilities Commission or the CPUC on November 19, 2010, approving rate increases in Golden State Water Company's region 2 and 3 customer service areas and to recover general office expenses at the corporate headquarters. The new rates were retroactive to $9,400,000 of pre tax income or
20
I want to point out that 20 10 was the first test year of the Region II and Region 3 rate case. Rate increases in the first test year are usually more significant than the remaining 2 years in a case cycle. The second nonrecurring item related to a pretax charge of $7,600,000 or $0.23 per share at Golden State Water Company for the impairment of assets and loss contingencies resulted from new developments in regulatory matters. Bob will talk about that a little bit later on the call. Excluding the effect of these two items, adjusted diluted earnings per share, which is a non GAAP financial measure from continuing operations, would be $0.37 per share for the Q4 of 2010.
That is a $0.21 per share increase over 2,009. I will now discuss the items that resulted in the $0.21 per share increase. First, the water margin at Golden State Water increased by $3,100,000 or $0.10 per share for the 3 months ended December 31, 2010, as compared to the same period of 2009. The increase is due primarily to high water rates authorized by the CPUC in November 2010 decision. 2nd, the electric gross margin of Golden State Water increased by $1,400,000 or $0.04 per share during the Q4 of 2010 due to increases in electric rates approved by the CPUC effective November 2009 January 2010.
3rd, excluding the supply costs, which was part of the gross margin discussion, operating expenses for our related for our regulated businesses decreased by CAD2.9 million or CAD0.09 per share, due primarily to a CAD3.8 million pre tax charge during the Q4 of 2019 related to legal and settlement costs in connection with the agreement reached between the company and 2 former officers, which did not recur in 2010. A decrease in pension expense of $800,000 due to the implementation of a two way balancing account and lower maintenance and other operating expenses of $1,100,000 These decreases were partially offset by increase in labor other related employee benefits and depreciation expense as a result of higher depreciation rates approved in November 20 10 depreciation and higher seawhip close to plant. 4th, pretax operating income at American States Utility Services decreased by $2,900,000 or $0.09 per share during the Q4 of 2010 as compared to the same period in 2,009. Due to a RMB1.2 $1,200,000 decrease in the allocation in the allocation of costs from the corporate headquarters to SUS as a result of the CTUC's November 2010 decision and a $1,600,000 downward adjustment to construction revenues due to higher than anticipated costs related to certain capital projects.
S U. S. Has filed contract modifications with the U. S. Government to recover these additional costs.
$1,400,000 or $0.04 per share during the Q4 of 2010 as compared to the same period of 2,009, primarily due to a proposed settlement reached with IRS related to the company's refund claims associated with the tax method change. Finally, a decrease in effective income tax rate favorably impacting earnings by $0.03 per share in 20 10 Q4, resulting from changes between books and taxable income that are treated as a flow through adjustment in accordance with regulatory requirements. I briefly discuss the quarterly results from discontinued operations related to Shabra City Water Company. Diluted Water Company. Diluted earnings from discontinued operations for the quarter of 2010 were $818,000 or $0.04 per share compared to $362,000 or $0.02 per share for the same period in 2,009.
The increase in earnings is due to rate increases effective October 2009 and a decrease in operating expenses compared to the same period in 2,009. The Chaparral sale require regulatory approval by the Arizona Corporation Commission, which is anticipated to be received in 2011. Therefore, no gain or disposal of Xiaoprao has been recorded pending the approval. Had the transaction closed as of December 31, 2010, the company would have recognized a pretax gain on disposal of approximately $5,800,000 net of transaction costs. Now on to a summary of the 2010 results.
Basic and fully diluted earnings per share for the year ended December 31, 2010 were $1.78 and $1.77 respectively, compared to $1.63 and $1.62 per share on a basic and diluted basis for 2,009. For 2010, diluted earnings per share from continuing operation were $1.66 compared to $1.61 for the same period in 2,009. Earnings for 20 10 were largely impacted by 2 significant items. The first item is a pre tax charge of $16,600,000 or $0.55 per share for the impairment of assets and loss contingencies, resulting from new developments in regulatory matters. The second item is an increase to pretax income of $6,100,000 or $0.19 per share during the Q1 of 2010, reflecting approval from the U.
S. Government of request of equitable adjustments for managing more infrastructure than originally estimated at 4 Bragg and 4 Blitt military bases. Excluding the effect of these two items, adjusted diluted earnings from continuing operations would be $2.02 per share for 2010. This represents a CAD0.41 per share increase as compared to 2,009. Q2, an increase in water margin of $60,000,000 or $0.51 per share from higher water rates approved by the CPUC as discussed in the quarterly results, an increase in electric margin of $6,800,000 or 0 pretax operating charge of $3,800,000 or $0.12 per share recorded in 2,009 related to legal and settlement costs, which did not recurred in 2010.
And an increase in interest income net of interest expense of $1,300,000 or 0 point proposed settlement reached with IRS related to the company's refund claim associated with a tax method change. These increases were partially offset by an increase in operating expenses other than supply costs of $10,100,000 or $0.32 per share at the company's water and property and other taxes and an increase in indebtedness, depreciation and amortization expenses. A decrease 0.02 dollars per share in American States Utility Services pretax operating income due to higher allocated costs from corporate headquarters and lower profit margins on certain capital projects at Fort Bragg and the military bases in Virginia due to highly expected construction costs. A decrease in other income of 6 $84,000 or 0 point 0.02 dollars per share due
to a loss on an investment accounted for under the equity method. The increase in income
tax expense due to a a higher effective income tax rate for the year 2010, which out favorably impacted earnings by $0.02 per share and a decrease of $0.04 per share due to the issuance of $1,150,000 of AWR's common stock in a public offering in 2,009. For 20 10, income from continued operation decreased by $1,900,000 or $0.10 per share. Let me start again for the discontinued operation. For 2010, income from discontinued operations increased by $1,900,000 or $0.10 per share as compared to 2,009. The improved performance at Chaparral was primarily due to rate increases in October 2009 and a decrease in depreciation and maintenance expenses, partially offset by direct transaction costs associated with the pending sale.
In accordance with the accounting standard related to assets held for sale, we ceased recording depreciation expense for Xia Pro as of June 2010. A more detailed discussion of our results for the quarter the year is included in our earnings release issued this morning and will be provided in our Form 10 ks, which will be filed today. Moving on to our capital expenditure program. For the year 20 RMB74.6 million for the same period in 'nine. Capital expenditure for 2011 are expected to be in the $75,000,000 to $80,000,000 range.
Consolidated net cash provided by operating activities was $53,800,000 for 20.10 as compared to 72 Region 2, 3 and the general office rate case. Due to the implementation of water revenue adjustment mechanism or REM, reduction in consumption doesn't impact the company's earnings. We currently have surcharge charges in place to collect the 2,009 and 20.10 rand balances. Golden State Water anticipates issuing $62,000,000 of long term debt during the Q2 of 2011. The net proceeds insurance will be used to pay down short term borrowings and to retire certain long term debt, which has a higher coupon rate.
We don't anticipate an equity issuance in 2011 due to the proceeds from the potential sale of Chaparral. With that, I will now turn the call over to Bob.
Thank you, Eva. Hello, everyone, and thank you for joining us today. I'm pleased that the company has grown its revenues to almost 400 $1,000,000 in 20.10, not counting revenues from Chaparral City Water. It's an annual compounded growth rate of more than 12% since 2004 when I joined the company. In 2010, we received final decisions on rate cases for all three of Golden State Water Company's service areas and saw American States Utility Services post another strong year.
We continued building on our foundation of ongoing infrastructure improvements and outstanding customer service. I'd like to take a brief moment to address the water supply conditions in California. Based on a recent California Department of Water Resources report, as of March 1, at 110% of average. Every year, the California Department of Water Resources or DWR establishes the state water project allocation for water deliveries to the state water contractors, such as the Metropolitan Water District of Southern California. The DWR generally establishes a percentage allocation of delivery requests based on a number of factors, including weather patterns, snowpack levels and reservoir levels.
In January 2011, DWR increased the allocation on the State Water project from 50% of delivery requests in 2010 to 60% in 2011. Due to the implementation of the increasing rate design, water rationing in certain areas and the media attention encouraging Californians to conserve, Golden State Water Company's water sales in 2010 were more than 15% lower than water sales in 2,008. We believe that conservation is the most cost effective way of addressing some of the water supply challenges in the Southwest part of the country. As Eva mentioned, the water revenue adjustment mechanism or WRAM keeps Golden State Water Company whole for the decline in sales. Now I will discuss the status of key regulatory filings and other matters for the company.
During 2010, Golden State Water filed advice letters with the California Public Utility Commission for recovery of the 2,009 under collected balances of 20,400,000 in WRAM net of the modified cost balancing accounts for all its water regions. Surch charges are currently in place to recover the balance. As of December 31, 2010, we have collected $6,100,000 on this balance. Please note that the implementation of the surcharges increases the company's cash flow and does not impact earnings. Going forward, Golden State Water will seek recovery of the net balance of these accounts on an annual basis.
In March 2011, additional surcharges for recovery of the 2010 RAM balances, net of the modified cost balancing accounts of approximately 19,600,000 dollars Based on the CPUC's guidelines, recovery periods related to the 20 10 balances will range between 12 36 months. In September 2010, Golden 20 less. A decision is expected in 2011. As of December 31, 20 10, Golden State Water has a net aggregated regulatory asset of $30,900,000 related to the WRAM and the modified cost balancing accounts, which includes a component for unbilled revenue. As previously discussed by EVA, on November 19, 2010, the California Public Utility Commission approved rate increases for the Region 2 and Region 3 service areas and to recover general office expenses at the corporate headquarters.
Based on this decision, the approved revenue increases for 2010 totaled approximately $33,000,000 as compared to 2,009 adopted revenues, including an increase of 14 $33,000,000 revenue increase included approximately $12,200,000 already collected as of the issuance of the decision through a supply cost offset surcharge in effect since 2,009. Among other things, the decision authorized Golden State Water to establish a two way pension balancing account effective January 1, 2010 for its water regions in the general office to track differences between the forecasted annual pension expenses adopted in rates for 20 10, the $1,000,000 in 20.10, dollars 6,600,000 in 20 Based on the PUC decision, in the Q4 of 2010, Golden State Water included a 1 $800,000 under collection in the two way pension balancing account, which favorably impacted Golden State Water's pretax operating income. In December 2010, the California Public Utility Commission issued a final decision in the rate case related to the 7 customer service areas in Region 1, approving rate increases for 20112012. On a year to year basis, the increase in 2011 revenues represents an increase of approximately $1,900,000 over 20.10 adopted revenues. The The PUC has also authorized approximately $18,500,000 of capital projects to be filed for revenue recovery with advice letters when these projects are completed.
Majority of these projects are expected to be completed over a 2 year period. The decision also allows us to recover the cost of debt and equity used to finance these capital projects prior to their inclusion in rates. In addition to the $33,000,000 rate increase implemented for Regions 2 and 3 and the general office implemented in 20 $1,600,000 for Region 2 and approximately $2,400,000 for Region 3 as compared to 20 10 adopted revenues. These estimates of additional revenues are based upon normalized sales levels approved by the California Public Utility Commission effective January 1, 2011, combined with increases in rate base and updated expenses including pension costs. In January 2011, the PUC approved rate increases for Bear Valley Electric Service effective January 1, 2011.
The authorized rate increases are expected to provide Golden State Water Company with additional annual revenues of approximately $209,000 for Bear Valley Electric.
In
20 separate from the general rate case applications with the PUC. On May 1, 2011, Golden State Water Company, along cost of capital. When finalized, the rate of return authorized by the commission will be implemented into rates on resulted in a pre resulted in a pre tax charge of $16,600,000 or 10 in projects. In addition, on February 15, 2007, the CPUC issued a subpoena to Golden State Water Company in connection with an investigation of certain work orders and charges paid to a specific contractor for numerous construction projects estimated to total $24,000,000 completed over a period of 14 years and ending in 2,003. The CPUC's investigation focuses on whether Golden State Water was overcharged for these construction projects and whether these overcharges, if any, were included in customer rates.
The construction projects completed by this specific contractor related primarily work on water treatment and pumping plants, which have been placed in service and are used and useful. Should the CPUC investigation result in a disallowance of certain previously capitalized costs. Such costs and potentially any return earned on such costs may be required to be refunded to customers resulting in a charge to operating income. In addition to the disallowance of previously capitalized costs and the return earned on such costs, the CPUC also has the authority to assess fines and penalties. The staff of the CPUC has indicated to The staff of the CPUC has indicated to the company that it intends to seek such remedies, including possibly a fine and penalty.
The company does not believe that disallowance is required or that a penalty is justified and intends to vigorously defend the matter. However, proceedings such as this are difficult to predict and a a final outcome is unknown. While reserving all rights, management believes it's prudent to reserve for a probable loss related to this matter. The reserve estimates for this matter are subject to change as additional information becomes known. However, at this point, management does not expect increases in its recorded estimated reserve.
As a result of management's of management's assessment of the CPUC subpoena and the CPUC's final decision in the Region 2, Region 3 and general office rate case, registered recorded a pre tax charge for the impairment of assets and loss contingencies totaling $16,600,000 in 20 10. Let's turn our discussion to the company's military subsidiaries under American States Utility Services or ASUS. ASUS has continued to record positive earnings, contributing the year, despite an increase in allocation of costs from the corporate headquarters to ASUS as a result of the PUC's decision in the Region 2, Region 3 and general office rate case. During 2010, ASUS's efforts in pursuing Bragg in North Carolina added $6,100,000 in Bragg in North Carolina added $6,100,000 in pre tax income for the year. I'd like to briefly discuss ASUS' 4th quarter results.
ASUS had a pre tax operating loss of $1,100,000 for the Q4. As Eva mentioned earlier, during the Q4 of 2010, ASUS recorded a 1 point $2,000,000 increase in allocations of costs from the corporate headquarters to ASUS as a result of the CPUC's decision in the Region 2, II, 2 a certain capital projects due to site conditions encountered for certain projects. ASUS has filed contracts modifications with the U. S. Government to recover these additional costs.
We believe successful price redeterminations and requests for equitable adjustment or REA filings will provide added revenues respectively to help offset increased costs and provide ASUS the opportunity to consistently generate positive operating income at its subsidiaries that serve military bases. We are still working to finalize prospective price redeterminations and request for equitable adjustment at various basis, which include adjustments to reflect inflation and costs and changes in operating conditions and infrastructure levels from that assumed at the time of the execution of the contracts. The timing of the conclusion of such filings is somewhat unpredictable. To summarize, I will quickly talk about the status of each of a contract modification in February 2011, resolving the operation and maintenance portion of the first price 2,008. 2nd, we are currently in negotiations with the U.
S. Government on the first price redetermination for Andrews Air Force Base. Pending resolution, the government has approved a retroactive adjustment of 1,000,000 dollars resulting in the recording in the Q3 of 20 10 of $700,000 in additional revenues and pre tax operating income and $300,000 for payment of work performed and previously recognized as construction revenues. A prospective 18.9% increase in the contract rates is also in effect on an interim basis. 3rd, in April 2009 December 2010, ASUS filed REAs at Fort Bragg with the government in connection with costs associated with initial capital work.
Resolution of this request is expected in 2011. The 1st price redetermination for this contract is expected to be filed in the Q2 of 20 11. An interim increase of 3.6% is currently in effect. 4th, ASUS filed an REA at Fort Jackson in connection with the substandard condition of the inventory assumed as compared to what was presented in the government's RFP. Resolution of this request for equitable adjustment is expected in 20 11.
An interim increase of 3.4% is currently in effect. Lastly, ASUS reached an inventory settlement at Fort Bliss with the U. S. Government in January 2010. Fort Bliss, the subsidiary that serves Fort Bliss and the government agreed to waive the first and second price redeterminations under the original 50 year contract.
And the 3rd redetermination period filing will be in 2012. Before I turn the conference over to the operator to entertain questions, I would like to first thank you again for your continued support and interest in the company. Okay, I'll turn it over to the operator.
And our first question comes from Garik Shmois from Longbow Research.
Just have a question on the contracted services business. We're certainly hearing about potential increase in project lettings there. Just wondering how you view your opportunities to pick up some incremental business in contracted services in your long run position in the business?
Well, we are responding to additional military based solicitations. Additionally, we're at this point, we're on depending upon how you count them, as many as 10 different bases throughout the country. And as work special work comes up, we're there to not only do the work on the assets that we manage, but to do additional work. So, we think the future is bright with regard to additional work to be done both at new bases and at the bases in which we continue to operate.
Okay. And just looking towards the upcoming rate case, the 2013 to 2015 that you'll be filing in July, Is it possible to give us some direction as far as the size that you're going to be looking for in that rate case in the next couple of months?
I don't think we know that number right now because we're still putting the materials together.
Right. It's a pretty intensive process and engineering to doing the planning and make sure our capital projects in the rate base. So going to take a while before we come out with the final increases request to the commission.
Okay. I thought I'd take a shot
and give them a note for
a couple of months.
I know you would, Gary.
And then just lastly on DD and A, it picked up on the quarter. It was the 4th quarter run rate a good one to use, just what your outlook for 2011?
Well, of course, in the Q4, we had some charges there that were something we wouldn't expect to see in the future. As long as you sort of carve those things out, I think it's probably a pretty fair run rate. But we had the loss contingencies that we booked in the Q4. Additionally, we picked been, but that was because of some adjustments we had to make and including the allocation of the general office year to ASUS for the quarter. Additionally, we made some accounting adjustments because of conditions at a couple of the bases that we had in effect booked some higher revenues previously under our percentage of completion method and the expense side of things was higher than we anticipated.
So we, in effect, had to reduce our revenue somewhat for that.
But would you expect the run rate to more closely reflect the Q3, I think it was about $8,400,000 Would that seem more reasonable?
Well, in the K that we're going to file pretty soon, we have a summary of each quarter's impact as a result of this retroactive revenue because everything we received we recorded in the 4th quarter. So we kind of break down each quarter's impact to give you a better run rate on the quarterly basis, at least for the Golden State Water. So look for that 10 ks pages in there. That will give you a better idea about regulated Golden State Water at least.
Okay. I think that's a nice addition, Eva, to the 10 ks. It will really give a little more transparency to the analysts because we unfortunately, the Region 2, Region 3 rate case was 11 months late in having a decision. And so it makes it difficult, I know, for you folks to analyze the company. But we tried to put table in there that will help you analyze the company and what should be in what quarters.
Okay, great. We'll look for it. Thanks a lot.
Okay. And our next question comes from Heikki Heikki. Please go ahead with your question.
I'm wondering if you can talk a little bit about the increased seasonality and if we'll be seeing that going forward. We know some of the California companies have talked about the new rate structure. And can you talk about how we should think about that going seasonality.
We have been recording our WRAM and seasonality. We have been recording our WRAM and modified cost balancing account with seasonality all alone. So whatever we recorded is reflected in our results.
Okay. So if we look at the 2010 revenue, the way you add back the rates had they hit when they should have, whatever that seasonality is of revenue breakout, we can expect to be similar year over year 2011 to 2010?
I think so. Okay, great.
I think, Eva, isn't the adopted sales level sort of on
a Annual basis. Okay.
Yes. But it's the adopted is, I mean, allocated to the quarters appropriately. Right.
And we use when we file adopted, we use 5 year historical seasonality to come up with the forecast. So we use the same methodology to record our revenue.
And we do have a question. This comes from Christopher Perto from Janney.
Hi. Good afternoon. Hello, Bob. Hello, Eva.
Hi, Sergey.
Just kind of a housekeeping question. Can you break out supply costs that flowed through for the 4th quarter? I know, K, but just trying to get a sense for water, power, groundwater and then kind of the change in the supply cost balancing account because of the rates coming in?
I don't have the 4th quarter.
Full year would
work? Full year.
Yes. For the full year, it's in the K, but I think I can mention that to you. For the full year 2010, water purchase is $46,900,000 and power purchase for pumping is $9,100,000, strong water production is 11.5 and we also have a power purchase for resale that's usually the electricity that's $13,100,000 and we also do you have a different number, Bob?
No, I just on this page we break out the supply cost balancing account between electric and
Okay. And in consolidated, I think we also have a supply cost balancing account, which is $20,600,000
CJ. Okay.
Perfect. And CJ, in the 10 ks of course we do break out what's due to the electric business and what's due to the water business. So you can get right to the heart of the supply costs for each business.
Yes, the one I just quote to you is for both water and electric.
Okay, great. And all right, that's good. The impairments that you booked in the 3rd Q4 that flowed through general and administrative, correct?
That's right.
And if we were to ex those out, I guess, specifically for the Q4, if we were to ex out that impairment, is that kind of a fair number to use through 2011 in terms of run rate?
Are you asking is the 4th quarter a run rate a good run rate to use or?
Yes, it's the 4th quarter G and A ex impairments kind of a fair assessment of overall quarterly G and A.
I think Q4 you need to take away the $9,600,000 we talked about, dollars 9,600,000 I mean $7,600,000 impairment. You also we have some retroactive impact from the rate increases in the Q4. So in the news release on the first page of the news release, we have increasing depreciation of 2,600,000 that's the cumulative impact for 3 quarters. We also have a in pension expense and other operating expenses about $600,000 So I think you those out. Those are the 9 months impact in the Q4 when we received the decision.
Okay. All right, great.
Yes, I mean, he was I think you're asking about G and A, so
So in G and A is the pension. Yes, it would be the
pension. Right.
Yes, it will be the pension.
Right. So it's just the impairment and just the pension. Everything else kind of flows through on different line items and I can do that. But it's just pension and impairment. Okay.
Perfect. Thank you.
Allocation is
I'd say it's U. S, yes.
Yes. Our next question comes from Jonathan Reeder from Wells Fargo.
Hi, Jonathan. Hey, Jonathan.
Hey, how are you all doing? Just a quick question. It sounds like it's probably going to be in the queue, but can you help just reconcile the 4 quarters of the year to the $2.02 annual number?
Okay.
So you wanted the impairments.
Yes, the adjusted ongoing quarter by quarter is kind of what I'm looking for.
For Golden State water only?
No, for the entire company.
Yes, I mean, I think to get to the 202, we have the benefit of having the 4 quarter table in front of us that you'll see later today, but that hasn't been adjusted for, I would suggest you take out the contingent losses and possibly then the REAs at Fort Bragg and Fort Bliss.
Right.
So the Bragg and Bliss will be an adjustment to the Q1. The impairment losses will be adjustments to the 3rd quarter.
3rd and the 4th quarter. We have 9,000,000 in the 3rd quarter we booked and 7,600,000 in the 4th quarter we booked for the impairment loss. So we need to adjust that for each quarter.
Okay. So $0.19 for the REAs?
Yes, it's about $0.20, yes. You said? $0.19 And of course, the Q4, the retroactive revenues that needs to be adjusted throughout the
year. Right. Why we can't.
Okay. Why don't we just Read something
for you. Yes. Okay.
It's in the K. We have it in front of us, but that doesn't add that.
Well, I mean, we've got
Okay.
I think we can. Okay. For the Q1, dollars 0.48 for the Q2, dollars 0.58 the 3rd quarter, dollars 0.45 and the 4th quarter, dollars 0.14 So to get by the 202.
And in the 4th quarter, you need to add back the $7,600,000 which is $0.23 in the 4th quarter. And in the 3rd quarter, we booked 9,000,000 dollars so that's And then in the Q1, there's REAs in there, it's about $0.19, dollars 0.20 that you need to do the business.
Yes. So there's still I mean there's still is the adjustments you're going to have to make Jonathan.
Yes, those are the number Bob just read to you was really the impact of the retroactive active revenues.
Right. Okay. Well, that's helpful. And definitely look at the K. And then I was just hoping, could you guys comment any more in-depth on your interactions thus far with the new Sure.
With regard to the new
Sure. With regard to the new commissioners are very interesting. We haven't really had a lot of interface with them. They're just getting their feet on the ground. And we're expecting them to be good commissioners going forward.
In terms of cost of capital, one of the issues that will be talked about is whether the RAM is going to result in any sort of reduction in ROE. Mean, we're going to vigorously fight a reduction in the ROE because for the RAM, we think we've got some pretty good arguments to make with regard to that. So I think we can hold our own on that. But it will be interesting process like it was the last time. Last time we had 3 companies in, this time we'll have 4 and cost of capital is always an interesting discussion.
Each of us has different capital structures.
Do. That's true. And actually different in theory different risks.
And what do you believe is the appropriate time frame for resolving the cost of capital? I mean is it going to be a length similar to the first time around or might we have something by the end of the year?
Well, even I were talking about that before we as we were getting ready for the call, I think it's really hard to predict at this point how that's going to play out. We may have something by year end, but we may not. I don't know what you're hearing
from other
companies, Jonathan, but Last
than we thought.
Yes, than we thought it was going to take and still short 1 commission or 2. So I don't know how that will play in.
Right. That actually leads me into the last question and I'll let you go. Do you know of any plans to fill the 5th spot or I know there was some earlier speculation that Governor Brown may name a new President. Do you believe Peasley will be the President going forward and when might we see if this commissioner appointed?
Well, I can just sort of tell you what I've heard and I don't know how much credibility it has, but I've heard that there was a great push to get 2 commissioners' names so that they could conduct business. And then given that Brown's got Governor Brown's got so many other things to take care of, it may be a while before the 5th Commissioner comes on board. I mean the signals I'm getting is that PV is going to stay around for a while. I doubt that he's going to stay through the end of his term, because he's I don't know that he wants to, but I'm expecting him to be there the entire 2011 from what I know, but I don't really have any better information than anyone else has to be quite honest.
All right. I appreciate the additional comments.
And this will be our last call for questions. And at this time, I'm showing no additional questions. I would like to turn the conference call back over to management for any closing remarks.
Yes, I just want to thank everyone for their participation today and for their continued interest and investment in American States Water Company. Thanks everyone. Have a good weekend.
Thank you.
That concludes today's American States Water Company conference call. As a reminder, the call will be archived on our website and can