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Policy Influence

Why It Matters

As a regulated utility, we are committed to industry leadership and establishing non-partisan partnerships with federal, state and local agencies to support effective environmental, health and safety and water quality standards and regulations. Additionally, we are committed to contributing positively and transparently to public policy. We engage with governments to provide thought leadership, political support that aligns with our business drivers and ethical standards and support of our customers’ rights to clean water and sanitation.

The stakes are high—if regulators or politicians misunderstand optimal solutions to addressing water infrastructure needs, they might impose ineffective or costly regulation. It is our role to partner with these policy makers and advocate for solutions that are best for our customers.

Our leadership position and public policy efforts enable us to give communities more options to address their water and wastewater challenges. We will continue to work with our colleagues in the water sector, regulators at the state and federal levels and Congress to advocate for responsible federal and state policies.

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Our Approach

Policies

Our Code of Ethics includes guidelines for interactions with government officials and maintaining ethical government relations, including lobbying, political contributions and bribery and corruption.

The Board of Directors approved our Political Contribution Policy, which provides Board oversight of our political contributions and requires public disclosures of our political expenditures on our website. For more details on our political contribution activity, please read the Political Contributions section of this report.

Responsibility

The Safety, Environmental, Technology & Operations Committee reviews policies and practices that affect environmental and business operations and objectives, while the Nominating/Corporate Governance Committee establishes the policies, practices, principles and procedures for Board oversight. The Senior Vice President of Business Development and Government Affairs oversees regulatory relationships and engagements on a nationwide basis and works with regulated utility presidents to oversee policy measures and external affairs teams in their states. In recent years, we have focused on legislation that increases options for utilities to address water and wastewater challenges for our customers, as well as on legislation that requires accountability regarding water quality. For more information on this, please see our Water Quality & Emerging Contaminants section.

Collaboration & Engagement

To maximize positive impact, we work closely with the U.S. Environmental Protection Agency (EPA), Centers for Disease Control (CDC), state Departments of Environmental Protection (DEPs) and other agencies to lead the science-based research efforts and establish effective environmental, health and safety and water quality standards and regulations. Our participation on panels with industry associations and government agencies allows us to draw on the past, analyze the present and illuminate the future to inform our expertise in the entire water cycle and identify how we can best contribute. Please see our Water Quality & Emerging Contaminants section for more information.

To promote better legislation on behalf of our customers, we prioritize our influence engagements based on opportunities that support solutions to water and wastewater challenges. We seek to share regulatory best practices with states that have the opportunity to introduce measures encouraging needed, cost-efficient water and wastewater infrastructure investment. It is also about giving communities more options when it comes to finding viable solutions to water and wastewater challenges.

By continuing to actively engage with public officials and contribute thoughtful insights that positively impact water policies, American Water, our customers and communities will benefit.

Legislative Updates

In 2017 and 2018, we supported legislation at the state and federal level.

State Legistlative Update
Indiana Act 362: Ensuring the Long-Term Viability of Water and Wastewater Utilities
New Jersey Water Quality Accountability Act
Pennsylvania

Act 120: Allows Recovery for Customer Side Lead Water Service Lines

Act 58: Allows Alternative Rate Making Mechanisms

Act 12: Fair Market Value Constructively Clarified

Illinois Extension & Expansion of Fair Market Value from Five Years to 10 Years
Missouri

Allows Revenue Stabilization Mechanism (RSM)

Asset Sale Option for More Than 500 Small Towns

Maryland Fair Market Value
Iowa

Future Test Year Approach in Rate Cases

Fair Market Value

California

Bill 2179: Cities May Sell Systems With Majority Vote

Bill 2339: Certain Cities May Sell Systems With No Election

Bill 1577: Sale of System to Public Water Companies Through an RFP Process

Virginia

Water Rate Consolidation

Wastewater Rate Consolidation

Federal America’s Water Infrastructure Act
Checking water quality

Water Quality Accountability Act

American Water NJ Website Rendering On July 21, 2017, we were excited that Governor Chris Christie signed the Water Quality Accountability Act (WQAA) into law in New Jersey. The WQAA sets new operational standards for water utilities across New Jersey and imposes new requirements in areas such as cybersecurity, asset management, water quality reporting, Notice of Violation remediation and hydrant and valve maintenance.

For more information, please visit New Jersey American Water.

Water Infrastructure Act of 2018

America’s Water Infrastructure Act of 2018 became law in September 2018. We believe this legislation sets a course for greater compliance and improved management of water systems across the country. Importantly, the legislation helps ensure that all water providers, including both private water providers and regulated water utilities, remain an option for communities that need assistance in meeting new compliance and management expectations. We continue to work with our colleagues in the water sector, regulators at the state and federal levels and with our friends in Congress to advocate for responsible federal policies.

Pipes

Political Contributions

As a company whose regulated operations are significantly impacted by public policies, we are firmly committed to participating responsibly in the political process and making reasonable political contributions, in a non-partisan manner, consistent with all applicable laws and reporting requirements. Our Political Contribution Policy, adopted by the Board of Directors in December 2018, outlines acceptable practices for political contributions.

Our political contributions must be made only by the American Water Works Company, Inc. Employee Federal PAC (the “Employee Federal PAC”), or through a subsidiary or line-of-business PAC (a “Subsidiary PAC”). Our employees have the opportunity to make political contributions in their individual capacity. Our employee’s political contributions, including their contributions to PACs, are not subject to this Policy.

As part of the company’s commitment to good governance principles and transparency, and in accordance with our Board-approved Political Contribution Policy, we publicly disclose on our website information related to the company’s political contributions and certain payments made to tax exempt organizations and trade associations exceeding $50,000 (each as described in the Policy) within 180 days after the end of the fiscal year.

We made our first annual disclosure required under this Policy on our website in April 2019.

Commitments/Goals

We strive to maintain consistent and meaningful engagement with industry associations and regulators through active involvement with industry and trade associations, as well as regulatory relationship building and engagement. We will continue to share and discuss best practices throughout the water and wastewater industry. Through our involvement in such organizations we will help implement best practices, and inform regulations, to ensure safe and reliable water and wastewater services to every customer.

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Our Performance

In accordance with our Political Contribution Policy, American Water disclosed the following contributions in 2018.

2018
Direct Political Contributions Made by an American Water Entity $54,300
Political Contributions Made by the Employee Federal PAC or a Subsidiary PAC $366,040
Third-Party Payments to Trade Associations and Tax-Exempt Organizations1 $2,161,399

1Third-Party Payments to a tax-exempt organization or trade association during a fiscal year where the aggregate amount
of all payments made by the company or any subsidiary exceeds $50,000 in that fiscal year, and the third-party informs the company in writing that a portion of any such payment was used for lobbying expenditures or political contributions that are considered non-deductible under Internal Revenue Code of 1986.

As a company whose regulated operations are significantly impacted by public policies, we are firmly committed to participating responsibly in the political process and making reasonable political contributions, in a non-partisan manner, consistent with all applicable laws and reporting requirements.

Worker

Revenue Legislation Enables Greater Infrastructure Investment

After starting in only one state in 1997, Fair Market Value (FMV) legislation expanded to 10 states nationwide and eight of our regulated states. We support FMV legislation to give communities more options to address water and wastewater challenges. Historically, acquisition prices for water and wastewater systems were calculated at book value, which considerably undervalues the assets as it fails to account for capital investments made. FMV legislation establishes a transparent process for independent valuation experts to calculate a reasonable and fair value for water and wastewater assets. FMV legislation allows communities to leverage our compliance expertise, purchasing power and operational efficiencies to benefit their local systems’ infrastructure and service.

Revenue Stabilization Mechanisms

A Revenue Stabilization Mechanism (RSM) is an innovative regulatory tool we are allowed to use in California, Illinois and New York. In 2018, legislation was passed in Missouri allowing our State utility company to request an RSM in future base rate case filings. Rather than implicitly encouraging water use and penalizing a water utility for encouraging conservation, an RSM adjusts rates periodically to ensure that a utility’s revenue will be sufficient to cover its fixed costs regardless of throughput, while providing an incentive for customers to use water more efficiently. American Water is supportive of this ratemaking policy, speaks to the benefits of RSMs at external stakeholder events and encourages the use of RSMs across the states where we operate.