American States Water Company
Q4 2008 Earnings Call Transcript

Published: 13 Mar 2009

[Operator:]

Ladies and gentlemen, thank you for standing by. Today is March 12, 2009. Welcome to the American States Water Company conference call discussing fourth quarter 2008 and year end results. If you have not received a copy of this morning's news release announcing the earnings for the quarter, please dial 909-394-3600, Extension 651 and someone will fax or e-mail the printout to you. If you would like to listen to the replay of this call, it will begin this afternoon at approximately 1

[Eva Tang:]

Thank you, Tina. Good morning or good afternoon, everyone. I want to thank each of you for joining us today and for your continued interest in American States Water Company. Bob Sprowls, President and CEO, is also with me today. Following the conclusion of our prepared remarks the call will be opened up for questions. I would like to remind you that certain matters discussed in this conference call are forward-looking statements intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. I ask that you review the forward-looking information disclosure in our Form 10-K and Form 10-Qs on file with the SEC. The factors underlying the company's forward-looking statements are dynamic and subject to change, therefore the forward-looking statements speak only as of the date they are given. The company is under no obligation to update them; however, we may choose from time to time to update them. If we do so, we will disseminate the updates to the investing public. During our presentation today Bob and I may refer to American States Water Company as AWR, Golden State Water Company as GSWC, and American States Utility Services as ASUS. I will begin with the results for the quarter. Basic and diluted earnings as reported for the quarter ended December 31, 2008 were $0.16 per share as compared to basic and diluted earnings of $0.36 and $0.35 per share, respectively, for the same period ended December 31, 2007. The decrease of $0.19 in diluted earnings was the result of three one-time non-cash items that affected the comparability between the two periods. We believe that when analyzing our fourth quarter results the items should be excluded because they were either triggered principally by market factors that were largely out of the control of management or were one-time in nature and did not reflect the day-to-day operations of the company. Those one-time and non-cash items are as follows

[Bob Sprowls:]

Thank you, Eva, and once again, good morning or good afternoon, ladies and gentlemen. As discussed by Eva, I'm pleased to say that ASUS had a good fourth quarter due to increases in construction revenues at military bases in Texas and Virginia. We also received interim price increases for Fort Bliss in October 2008, adding about $100,000 a month to the O&M revenues. During our third quarter conference call we mentioned that we incurred higher-than-anticipated costs and emergency construction costs at the Carolina bases that were not anticipated in the contracts due to the age and pre-existing condition of the infrastructure. As a company, we have determined that if the scope of the contracted services changes in the future, ASUS would first seek contract modification approval from the government before any work begins in order to minimize loss on these firm, fixed-price contracts unless it is emergency related work. I believe this practice has helped ASUS's earnings in the fourth quarter. I will now discuss the status of key regulatory filings for the company. As Eva mentioned earlier, earnings were negatively impacted in the first nine months of the year due to statewide customer water conservation efforts. On November 25th we implemented a water revenue adjustment mechanism  WRAM - to decouple sales from revenues and a modified cost balancing account that allows recovery of supply costs that deviate from those costs included in rates authorized by the California Public Utility Commission. As a result, our earnings were favorably impacted by $0.03 per share in the fourth quarter that would have previously been lost due to conservation. Prior to implementing increasing block rates to encourage conservation, we undertook customer education initiatives, including providing customers with conservation rate notices as a bill insert which explain the impact of conservation rates on customer bills. In addition, in a separate proceeding the California Public Utility Commission also approved an advice letter filing to allow Golden State Water Company to create and implement a water conservation memorandum account to track the extraordinary expenses and revenue shortfall associated with the conservation measures in conjunction with the declared drought in California. The water conservation memorandum account was effective August 18, 2008 and has been used to track the revenue shortfall until the WRAM and modified supply cost balancing account were implemented on November 25, 2008. In January 2009, Golden State Water Company filed an advice letter seeing authorization to recover about $1.9 million of the revenue shortfall from August 18th to November 25th. While the water conservation memorandum account to track the revenue shortfall has been replaced by the WRAM after November 25, 2008, the conservation memorandum account will still be tracking extraordinary expenses associated with the drought in California. However, unlike the WRAM, which is probable for recovery according to the August 21st CPUC decision, the recovery of the water conservation memorandum account is not certain and will not be recorded on our financial statements until approved by the CPUC. This is why the decrease in consumption during the first nine months of 2008 negatively impacted earnings. If the $1.9 million is approved as filed, Golden State Water Company will then record a regulatory asset and an increased income. For 2009 the following regulatory proceedings at AWR's regulated utilities are expected to impact earnings

[Operator:]

(Operator Instructions) Your first question comes from Debra Coy - Janney Montgomery Scott LLC.

[Debra Coy:]

On ASUS, it's great to see that contributing in the fourth quarter and I'm wondering what you can tell us about how things are shaping up for 2009 - number one, where you stand on any additional rate increases or adjustments there, and number two, what the prospects are for additional construction work or whether the construction work you were doing on the East Coast bases was wrapped up in the fourth quarter?

[Bob Sprowls:]

Okay, let's talk about prospective financial information. We typically haven't provided that for ASUS.

[Debra Coy:]

No, I know, but just generally directionally.

[Bob Sprowls:]

Well, that business has been volatile and, as you said, fourth quarter was improved performance there and we're glad to see that. It's one of these things where we don't know whether we're out of the woods at this point and don't want to say that we are before we are, so we're going to be conservative in terms of saying where we are there. Regarding the major construction projects, we still have, I think, a little bit to go there in terms of a couple of these major projects that we're doing on the East Coast, but I'll tell you, there's a number of construction projects that need to be done at Fort Bragg and it's just the timing of that we're a little bit unclear. So we're going to continue to do these construction projects and it's going to probably vary base to base. Regarding the price redeterminations, we've done filings for price redeterminations on our East Coast bases and so that has to run its course. We have a request for equitable adjustment in at Fort Bliss. Once that gets completed we feel we can then go in and file a request for price redetermination there. So really we've asked for price increases everywhere we can except Fort Bliss and that's because we've got to resolve this inventory issue first.

[Debra Coy:]

Just to back up, if you can explain the inventory issue? You mentioned that you did get a $100,000 a month increase at Fort Bliss starting in October, so that's an interim partial increase? What exactly is the situation at Fort Bliss?

[Bob Sprowls:]

Yes, that's an interim increase and so we're waiting for a final decision there that will deal with where we head prospectively as well as I believe there's some consideration of whether of this is retroactive. But as you know, the situation there is we've taken over significantly more assets at Fort Bliss than we were led to believe in the RFP that was sent out, and so it's a goal to try to get that run to ground here and moving forward. And then that will affect the price redetermination at Fort Bliss.

[Debra Coy:]

That's the inventory issue you referred to, the inventory of assets?

[Bob Sprowls:]

Yes, that's right.

[Eva Tang:]

The losses for '08, the majority of it comes from the new bases, the two bases in Carolina. And we have made policy that we will seek contract modification approval from the government before any work begins unless it is emergency related work, so I think that will definitely help us going forward. That's just something I would like to add here.

[Debra Coy:]

Okay. So the additional work that you were doing that was resulting in operating losses, you won't do that any more unless you get preapproval?

[Eva Tang:]

Yes, unless it's emergency work.

[Bob Sprowls:]

Admittedly, some of the work and work action was emergency related and it's just the situation there was so difficult we didn't feel like we could not fix the sewer system there. So we've now filed a request for equitable adjustment for those dollars and hope to receive them in 2009.

[Eva Tang:]

That's right.

[Debra Coy:]

And on Golden State, our understanding on the 10.2% ROE, you mentioned that that decision is being held until March 26th. What does that mean?

[Eva Tang:]

It's supposed to be on the agenda today. It got postponed to the next day. So I think the commissioners are discussing the issues. I don't know what exactly will come out of that, but the PD's out there.

[Bob Sprowls:]

But, Eva, there's no guarantee that it will be dealt with on March 26th?

[Eva Tang:]

No. For now they've postponed it to March 26th.

[Debra Coy:]

So it could be postponed further, so that's still a matter of debate is the fair conclusion that we can take from that?

[Bob Sprowls:]

I think that's right, but they know that everyone is waiting for them. They're trying to move it along is what I've heard, but there's no guarantee that March 26th we'll get a final there.

[Debra Coy:]

And then just as a reminder in terms of how to calibrate it, if we were to get the 10.2% that's in the proposed decision, what sort of adjustments would that mean for you across your jurisdictions? I can't recall exactly where your current allowed ROEs are.

[Bob Sprowls:]

Yes. Region 3 is at 9.8%, Region 2 is actually at 10.2%, and Region 1 is at 10.1%.

[Debra Coy:]

So it would be a net benefit for you?

[Bob Sprowls:]

Yes, net benefit because it would not be a takeaway in any of those areas. Now, of course, Region 2 and 3 are our biggest regions, so Region 2 will be a wash, Region 3 there'll be some pretty good upside between 9.8% and 10.2%, and then Region 1, a smaller area for us, 10.1% is our current ROE there.

[Debra Coy:]

So when that's finalized that would take effect presumably at this point perhaps some time in the second quarter?

[Eva Tang:]

Yes.

[Bob Sprowls:]

Yes, it'll be a prospective - there won't be any retroactive back to January 1st.

[Debra Coy:]

And on Arizona, we knew that you had the rate case there that had been dragging on and on, and you mentioned both the economy and the regulatory situation as the cause for the goodwill writedown. Which of those two pieces is the bigger and how should we - Arizona's been small, but how should we think about that going forward?

[Bob Sprowls:]

Well, I think the economy is a pretty good impacter to that impairment analysis. You know, we have to do this impairment analysis every year, and I don't want to give you the impression the regulatory situation over there is not all that favorable. I don't want to give you the impression that it's gotten considerably worse, because it really hasn't.

[Debra Coy:]

We hope it's gotten better, actually, with some of the changes.

[Bob Sprowls:]

Yes. The hope is that it has gotten better, but you still have an elected commission, you still have a historical test year. And, you know, with each year that passes it's really getting more difficult for us to prove that it is improving. But, you know, during 2008 our remand proceeding didn't work out very well for us, so we had to factor that into the impairment analysis. We spent quite a bit of time analyzing whether there's been an impairment and this is what we've concluded.

[Debra Coy:]

Can you say at this point what your rate base is in Arizona?

[Eva Tang:]

I think about $24 to $25 million.

[Debra Coy:]

And we can assume that you're significantly underearning what even is your - what's your current allowed ROE in Arizona?

[Bob Sprowls:]

Well, that's a confusing question because under original cost rate base the ROE there is 9.3%. Now when we filed a remand to get fair value treatment for our rate base, the commission came in and basically gave us the fair value rate base, but reduced the ROE to basically compensate for the difference in rate base. So at the end of the day we can out with I think a $12,000 increase in annual revenues. So that was, what, 7 -

[Eva Tang:]

7.4, I think.

[Bob Sprowls:]

Yes, somewhere in the neighborhood of 7.2 to 7.4 was the allowed ROE on fair value rate base.

[Debra Coy:]

So the delta would be, whatever the final decision is, if you can do some catch up there?

[Bob Sprowls:]

Yes, I'd focus on 9.3% on original cost rate base. The number Eva gave was the original cost number, not the fair value.

[Debra Coy:]

So the fair value rate base is higher?

[Bob Sprowls:]

Yes.

[Debra Coy:]

For what you've put into it since then?

[Bob Sprowls:]

Yes.

[Eva Tang:]

It's an historical ratemaking area over there, so you always have a regulatory lag in the state. By the time they authorize a rate of return, which is kind of low - even lower than California, ROE  it's already a year and a half later than the time you spent the money. So there's always a lag in Chaparral City Water Company. That's something we evaluate as well when we're forecasting.

[Bob Sprowls:]

So, Eva, this rate case we filed in '07 is using a test year of '06?

[Eva Tang:]

Right.

[Debra Coy:]

And it still hasn't been determined?

[Bob Sprowls:]

Yes, we still haven't got -

[Debra Coy:]

So you're way behind, right?

[Bob Sprowls:]

Yes. I mean, that's the trouble with historical test year states. And I had the opportunity to go over there and testify about that, but it didn't seem like they said oh, you're right, we're should change. It really is a state that - a difficult regulatory environment.

[Debra Coy:]

It raises the question of why we have those assets at all, but I guess we can leave that for another time. My last question is you mentioned higher labor and employee cost expense. Is that partly pension related and can you comment on where your current pension expense is and will be? That's been a topic that has come up as all of our companies have been reporting this time around.

[Bob Sprowls:]

Yes. The higher employee cost is, you know, we've added people to staff at American States Utility Service just because that business is growing, and then we have some wage increases. Eva, I don't think pension costs were a big driver for 2008?

[Eva Tang:]

Yes. It's not for '08, but will be for '09.

[Bob Sprowls:]

Why don't you talk a little bit about pension?

[Eva Tang:]

Okay. Well, Debra, as you know, for our company we're supposed to recover our FAS 87 expenses and due to the market downturn our [inaudible] assets at the end of the year, like everyone else, has a loss. And the discount rate to calculate the present value of the projected benefit obligation's also lower, resulting in higher PDO balances. So both of those factors increase our funded status and they reflect an increased accrued liability on pension costs. They are more detailed discussion in our 10K, which will be issued tomorrow, I believe. Note 11 talks in depth on those kind of discussions. The thing I wanted to talk about, 2009 pension costs, that [inaudible] was from a decision issued back in 2007 because, as you know, our new decision won't come out until 2010. So none of us anticipated the market downturn back then. What I can say is that our '09 FAS 87 expenses will most likely be higher than what's authorized in the rate. That's probably facing a lot of utility companies these days. But the good news is early this month we filed an advice letter requesting to establish a pension costs memorandum account. If that is approved, we'll track the difference between the cost authorized by the CPUC and our actual costs.

[Debra Coy:]

So we shouldn't actually see the impact, then, in earnings because you'll just be tracking it in the memorandum account and recovering it at some point?

[Eva Tang:]

Yes, we'll be tracking, but until we receive the recovery from the CPUC I think earnings will see a significant impact by the increasing pension account. Because, you know, the difference between the memorandum account and the balancing account is the balancing account is more assurance. [Inaudible] a memorandum accounts is tracking mechanism for the spend that your costs in that account become bigger. Then you can go in to file for recovery. So until we receive the recovery, we will probably impact earnings by this increase in pension costs.

[Operator:]

Your next question comes from Michael Gaugler - Breann Murray, Carret & Co.

[Michael Gaugler:]

Regarding the acquisition pipeline, I'm wondering if the current economic environment has brought more opportunities to the table for you.

[Bob Sprowls:]

Are you asking about small companies, big companies or just generally?

[Michael Gaugler:]

Just generally.

[Bob Sprowls:]

Generally? Well, we've seen sort of smaller, I guess, water district type companies that are in some cases having some trouble meeting their CapEx requirements, so troubled systems. I think what we'll see is potentially more opportunities there. And our company's position on that is we'd like to get comfort that the PUC is going to allow us to go in there and invest the kind of dollars we need to right those systems before we go and start buying those systems. As part of the water action plan at the commission there is a component to the water action plan that allows us to do that, but it's one of those things you've got to do your missionary work with PUC staff before you go and do that. So we are seeing a little bit of that. There's, I don't know, other potential acquisitions on the forefront, but it's still starting to materialize, I guess.

[Operator:]

Your next question comes from Timothy Winter - Jesup & Lamont Securities Corporation.

[Timothy Winter:]

I'm just trying to fully understand the military privatization contracts a little better. What specifically was the construction activity in the fourth quarter that was the big surprise and how do you determine the difference between like what's an emergency construction that doesn't fall into the contract and what goes into cost plus? If you can answer that, then I'll follow up with how would you characterize your contentment with this business and the military with you guys and opportunities for expanding to other bases, are they still out there? Is the military coming to you because you're doing so well that they want you to do some more bases? If you can just talk a little bit more about that whole business, I'd appreciate it.

[Bob Sprowls:]

Okay. Well, one of the construction projects was the combat aviation brigade project at Fort Bliss. There's work, my understanding is, to relocate an airfield there, and with that you've got to be making adjustments to water and wastewater systems around that. And so that's been a project that we've been working on in 2008. Also there's a project at Fort Lee in Virginia that we've been working on. And then these special projects come up from time to time as the government sees a need to do these special projects. In some cases they're outside the realm of the contract that we have signed with them, so we have to get a contract modification. So that's what those projects were. I'm trying to think through the other questions. One was are we happy with this business to date? We're not happy with the financial performance of that business. We're happy that we are moving up the learning curve on that business and I think we have some competitive intelligence as to how to operate that business after having operated it since October of 2004. So we have focused on improving our performance there. I know that in 2008 we struggled in terms of the bottom line at ASUS. One bright spot was we did a much better job of cash collection with the government, and that contributed, actually, in the fourth quarter to our reducing our allowance for doubtful accounts. So we're learning the business and it's taken us awhile to do that. In terms of additional base activity, we are still bidding on additional bases at this point; I don't have a sense, though, that the government has stepped up the letting of these bases. But we are bidding on some and that's just going to have to run its course. I think more of our focus in 2009 will be to make these bases that we have profitable.

[Eva Tang:]

And one discipline, Tim, we try to aim for is to review the contract scope and get modification before we start work if we think the cost will be over what our original contract would be, so that's something we are aiming for. For the emergencies, those are the things we have to do, otherwise it's a liability issue, so for that we track it and we ask for recovery later. But for things we can foresee, we make a target that we will ask for recovery first before we start work. So that's something we are trying to achieve for the coming year.

[Timothy Winter:]

If you look at your whole portfolio of contracts, are there some of them that are very profitable and some that you've experienced some challenges that bring down the whole portfolio?

[Bob Sprowls:]

Yes. Actually, the two new bases - Fort Bragg in North Carolina, Fort Jackson in South Carolina  those two new bases have really been a drag on the performance in 2008, Fort Jackson in particular because we expended a significant amount of dollars in our sewer repair activities really in the third quarter that hurt that business somewhat. Fort Bliss, I think we're making some progress there financial performance-wise. The Virginia bases have been pretty good performers, as well as Andrews Air Force Base in Maryland. I think working through the price redetermination process the first time is real important because it's clear from our interaction with the government that this is not a streamlined process from their end, and so we're all kind of learning this together. At Fort Bliss we're dealing directly with them on the price redetermination; the East Coast bases in Virginia and Maryland, we are dealing with the Defense Energy Support Center and making progress there. So I think 2009 will be a pretty key year for us in the price redetermination process. It'll be a good understanding of what this business can do for us.

[Timothy Winter:]

Were there any major construction projects in the military bases that you're aware of currently that might be material to earnings?

[Bob Sprowls:]

Going forward?

[Timothy Winter:]

Yes, in 2009.

[Bob Sprowls:]

Well, the projects that existed in 2008 - let's go back to 2007; we had a significant wastewater expansion project there, $21 million. In 2008 we had these two much smaller projects, one at Fort Bliss and one at Fort Lee. I guess there's no project like the 2007 project, that we're aware of at least. The smaller projects do come up from time to time, but I don't know that, Eva, we've stated publicly whether there are any of these smaller projects. I think to the degree we get a large project, we'll tell the market about it when we get. We haven't put anything out there.

[Operator:]

(Operator Instructions) Your next question comes from Jonathan Reeder - Wachovia.

[Jonathan Reeder:]

Could you discuss a little bit about the equity offering timing and how it stands there? I know you guys just got the senior notes issues, which I guess probably buys a little more time, and I guess where the credit line, the $150 million credit line, what the capacity is left on that.

[Eva Tang:]

I think we are [in] position ourselves to issue equity in 2009. It depends on the market situation; it's very volatile there. That's still our timeline to issue equity in 2009.

[Bob Sprowls:]

Eva, at 12/31/08 our borrowings under our revolver were - we still had some -

[Eva Tang:]

Still had room left.

[Bob Sprowls:]

$25 to $30 million worth of room under our revolver.

[Eva Tang:]

That's right.

[Bob Sprowls:]

And then we just brought an additional $40 million in through the private loan. When we talked to the rating agencies in December one of the things they wanted us to do or what they want companies to do is prove up their liquidity in terms of their ability to finance the business going forward. We're very focused on not having to cut back our CapEx program because our systems need and it's a good way to grow the company. And so we went out and got this loan to prove up our liquidity and we've done that, and now we have a little bit of breathing room. So we do need to issue some equity just from a capital structure standpoint and so we'll look for an opportune time to do that, but we consider things like where the stock price is and how much of a hit we take with doing an equity offering. Some companies saw their stock price go down a bit because of an equity offering overhang and we're trying to avoid that, to be honest.

[Jonathan Reeder:]

Where's the consolidated equity ratio at the end of 2008 and if you could just discuss what your target is? I don't think that you're in the same situation as maybe some other companies, not necessarily in the water industry, but where they have to issue equity almost regardless. I believe you guys can be pretty patient, but if you could just discuss the equity ratio year end and where you want it to be.

[Eva Tang:]

Jonathan, I think the equity ratio at the Golden State Water we always target at 50/50% - 50% debt, 50% equity - and that's what we aim for. As for American States Water Company, it depends on the situation, I think. It's a little bit toward more of the debt than equity. We will issue the K tomorrow and that will have more detailed information. And if you have a question, then give me a call after you see the 10-K tomorrow.

[Jonathan Reeder:]

So I figured the end of the third quarter you're around 49% consolidated equity ratio. It's not materially different from there? Is that fair to say?

[Eva Tang:]

Yes.

[Jonathan Reeder:]

And then that would be well within your range?

[Bob Sprowls:]

Jonathan, I think it's a little bit of a function of - I think our cap ratio expectations are a function of what we get recovery of through the commission and that's where this cost of capital hearing impacts that. I think what we filed for, Eva, under our cost of capital hearing was 53% equity at Golden State, if I'm not mistaken.

[Eva Tang:]

Right, but the PD is a little bit different.

[Bob Sprowls:]

Right, the PD came back with 51%.

[Eva Tang:]

51%.

[Bob Sprowls:]

So if our regulators are saying 51% is what we have to live with, that's what we'll live with. And then from an AWR standpoint, I think we could be in that 49% to 50% equity ratio. I think we are focused on doing an equity offering in 2009. It's just we're not going to do it at all costs, I can tell you that.

[Jonathan Reeder:]

And then just a clarification, I guess, on the $77 million or so in CapEx that you did in '08. Was that all company funded or what was the company funded portion?

[Eva Tang:]

That's not all company funded; a portion of it is from developers.

[Bob Sprowls:]

But it's, what, $5 million roughly?

[Eva Tang:]

Roughly.

[Bob Sprowls:]

That's provided by developers?

[Eva Tang:]

Right. And the cash flow of the 10-K will have that information.

[Jonathan Reeder:]

Is there any update or have you received any feedback on the $50 million consolidated rate case application you had with the CPUC or has that essentially taken a back seat while the cost of capital's being worked through?

[Bob Sprowls:]

We're just kind of getting started on that, to be honest, meeting with staff on issues, etc. We have to have a decision there really by 12/31/09, so we're just going through that process now. There's not much we can share there, Eva, unless you know of anything?

[Eva Tang:]

Yes, that's pretty much the case. I think we're doing the negotiation process with the departmental ratepayer advocate, talking about a few issues, and we'll have a meeting with them. To the extent there are unresolved issues, we'll take it on to a hearing.

[Bob Sprowls:]

You understand the process there - meet with DRA, see what issues you can reach agreement then and then basically go to hearing on the rest.

[Jonathan Reeder:]

Can you remind me, your last few rate cases, they've all gone to a full commission decision, they haven't been settled, have they?

[Bob Sprowls:]

Certain issues go to hearing pretty much every time for us, and I would guess that's the case here. I would guess we're going to go to hearings on certain issues. I can't say which ones. We don't generally agree with them on a lot of things, to be honest. It's just what you can live with, that sort of thing.

[Jonathan Reeder:]

And then on the cost of capital, the one region where you have the 9.8%, I don't remember if the commission specifically gave you a 20 basis point penalty, but that essentially will wipe the slate clean on that cost of capital?

[Bob Sprowls:]

Yes. I think it was a 10 basis point penalty but, yes, that should be behind us if this proposed decision is approved at 10.2%. We'll just move forward.

[Operator:]

(Operator Instructions) Your next question comes from Debra Coy - Janney Montgomery Scott LLC.

[Debra Coy:]

On the memorandum account for conservation, the $1.9 million that you mentioned that you have accrued there waiting for approval, if you receive approval for that - well, I guess, number one, if you have any idea when there might be a decision on that, and, number two, if it was approved, would that be recognized all at one time or how would you recognize that?

[Eva Tang:]

The timeline, we're not sure - your first question, Debra. If it got approved, we will record $1.9 million at the time in its entirety. So we will, I guess, debit a regulatory asset and book this income at that point.

[Bob Sprowls:]

Unless the decision on this has got something that we are not sure of where we'd have to spread it out, but usually you can book these things when you get approval.

[Eva Tang:]

Yes, it's become a reg asset.

[Debra Coy:]

So it would be similar to the nine months retroactive that you've booked in the fourth quarter of 2007?

[Bob Sprowls:]

Yes.

[Operator:]

And we have no further questions at this time. Do you have any closing remarks?

[Bob Sprowls:]

I do. I just want to thank you all for your participation today and for your continued interest and investment in American States Water Company.

[Operator:]

Ladies and gentlemen, this concludes today's American States Water Company conference call. As a reminder, this call will be available for replay beginning at approximately 1