Good morning ladies and gentlemen and welcome to American Water’s 2008 second quarter earnings conference call. (Operator Instructions) Participating on today’s call are Donald Correll, President and Chief Executive Officer, Ellen Wolf, Senior Vice President and Chief Financial Officer, and Edward Vallejo, Vice President Investor Relations. I would like to introduce your host for today’s call, Edward Vallejo; please go ahead.

Good morning and welcome to American Water’s 2008 second quarter earnings conference call. If you did not receive a copy of the earnings release you can find it by visiting American Water’s Investor Relations page of the company’s website at www.amwater.com. The slides used in this morning’s conference call will also be available to download following the call. Before we begin let me remind you that in accordance with the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995, the company notes certain matters to be discussed by members of management during this call may constitute forward-looking statements. Such statements are subject to numerous risks, uncertainties and other factors that may cause the actual performance of American Water to be materially different from the performance indicated or implied by such statements. Such risk factors are set forth in the company’s SEC filings. Today, American Water’s President and Chief Executive Officer, Donald Correll, and Ellen Wolf, American Water’s Senior Vice President and Chief Financial Officer, will be discussing our second quarter and year to day results. Following their presentation we will be accepting questions. Now I’d like to turn the call over to Donald Correll.

Thank you Edward, good morning everyone. Today we will be commenting on our second quarter as well as our year to day results, reviewing some of the highlights and how they all relate to our business strategies. Ellen will go into further detail regarding our second quarter, but first I’d like to give a brief overview of our key financial results. For the quarter the company reported an operating revenue increase of 5.5% to approximately $589.4 million. Net income was $45.5 million compared with $49.2 million in the second quarter of 2007. Ellen will detail the changes in net income during her portion of the call. The substantial increase in operating revenues is a result of our successful rate cases. Earning an appropriate rate of return is a core strategy for American Water, and a critical competency of any regulated utility. In the second three months of 2008 we received authorizations for additional annualized revenues from general rate cases of $19.2 million which brings the total for the first half of the year to $47.2 million. At present, we have 11 rate cases pending across the country. A main driver of increasing rates is our capital investment. Company-wide year-to-date, American Water has invested approximately $426 million on infrastructure improvements. This prudent investment, also a core strategy, is needed to ensure the reliability of our services and is on target with our anticipated annual capital investment plan. We expect to invest in the billion dollar range per year for the foreseeable future. These investments include both infrastructure renewal programs and construction to meet new customer growth and help to ensure our continued compliance with water quality standards. American Water takes great pride in meeting our surpassing water quality standards and in fact during this past quarter we earned nine more Director’s…

Thank you very much Donald and good morning everyone. American Water’s second quarter results continued to show our commitment to investing appropriately in our infrastructure, applying for and receiving rates of return on that investment and addressing our customer requirements. For the second quarter ended June 30, 2008 American Water reported net income of $45.5 million or $0.28 earnings per share compared with $49.2 million or $0.31 earnings per share for the comparable quarter of 2007. Included in our second quarter results are incremental employee expenses related to job reclassifications and awards granted in relationship to the initial public offering. A [cap] amounting to approximately $5 million on a pre-tax basis. In addition the second quarter results for 2007 included a one-time gain on sale of property of approximately $6 million on a pre-tax basis. For the six month period we reported a net loss of $687 million or $4.29 earnings per share. After taking into account a net after-tax impairment charge in the first quarter of 2008 of $738.5 million net income for the six months ended June 30, 2008 was $51.5 million or $0.32 earnings per share compared to $51.8 million or $0.32 earnings per share for the six months ended June 30, 2007. A key contributor to our net income for the second quarter was our growth in revenue. For the second quarter of 2008 American Water reported an increase in revenue of 5.5% to $589 million from $559 million reported in the second quarter of 2007 or a $30.6 million increase. This increase was driven by an increase in our regulated revenues of $17.6 million and $11.6 million increase in revenues from the non-regulated business. As I just mentioned for our regulated businesses revenues from customers increased by approximately $7.6 million. This is mainly due to…

(Operator Instructions) Your first question comes from the line of Elizabeth Parrella – Merrill Lynch

On the non-regulated businesses, your press release mentions that revenues were up $11.6 million and expenses were up $16 million in the quarter, can you talk about whether there were any unusual items in the expenses or any timing mismatches between revenues and expenses?

There were no unusual items or mismatches. We had really three things sort of driving it; first in homeowner services because of the unique weather we had more frequency of breaks and therefore having to fix those breaks so the expenses were up a little bit there. Second on some of our contracts we were seeing startup costs related to the military contracts and then third we did start a DBO in [Fillmore] and that has a lower margin on it on the DB part because it’s really more a pass-through. So again nothing unusual there.

You mention on the reclassification of certain employee costs that’s in this $4.7 million, just based on your comments on the compensation piece, is the right way to think about it is that the employee cost is about $3 million out of the $4.7 million and the other is maybe $1.5 million or so?

That’s correct.

Does that $3 million cost, is there any benefit to you either later in the year or down the road? Does any of that come back to you or should we view that as sort of a one-time cost?

It should be deemed as a one-time cost.

On the regulatory side, can you provide any update on the New Jersey case in terms of how that’s going and also the Trenton acquisition proceeding?

We are proceeding as planned. We are—our testimony has been in for some time. We’re doing the discovery now for the intervener’s testimony. Hearings are scheduled for this fall. We are still on track for both the rate case and the acquisition to get a decision by the end of the year or worst case, the very beginning of 2009. We are always optimistic and hopeful, the possibility of trying to reach some kind of a settlement in advance but there’s been no activity on that front at the moment and I think its safe to say that we’re still on target to have this done at or about the end of the year.

Your next question comes from the line of Maria Karahalis - Goldman Sachs

I wanted to ask a question regarding the broader economic environment, and if you could comment on the environment for tuck-in acquisitions, I know you’ve talked about a couple of them during the quarter whether you’ve seen a greater willingness or more optimism about the ability to conclude those in the second half of this year and into next, without being specific. And I guess the economic environment [inaudible] the other way, are you seeing more push-back then usual on your proposed rate increases?

We are indeed seeing more recent activity by more openness by municipal officials across sectors of our business to at least consider either the sale or some type of public private partnership, particularly for communities like the ones that I alluded to earlier and Fayetteville, West Virginia, being a great example of that. I think communities of that size are beginning to accept that perhaps they may not have the critical mass necessary to be able to support the financial investments, to be able to have the technical and managerial capabilities to run the systems and invest in the systems and we’re seeing more of a willingness particularly throughout the Midwest and to some extent here in the northeast to have these municipalities think about some options other than just doing it the way they’ve always done it. So we are seeing that as a result of the economic downturn, the continued pressure on the municipal budgets, the continued pressure on state budgets and the lack of funding coming from both the states and the federal government that more of the municipalities are at least having a dialogue now. Now as far as trying to close some of them by the end of the year, it does take a while to bring these things from the discussion stage until closing so I wouldn’t necessarily expect the floodgates to open between now and the end of the year but its certainly is a positive sign that we’re beginning to see some of them entering the frontend of the pipeline.

In terms of the rates, let’s start with the recently announced decision by Illinois where we did get a 10.35 return on equity and acknowledgement of all of the infrastructure and costs that we’ve put into this system. As with anything I think when you continually file rates everyone will react, but again we’re watching that very closely. We’re making sure that we are communicating both with the public as to the quality of our investment as well as with the regulators as to the necessity of that investment and the push-back we’re seeing I think is no different then we see with any normal rate case that’s filed right now.

Your next question comes from the line of Ryan Conners - Boenning & Scattergood

Regarding the rate cases coming up, with all the inflationary pressures that we’re seeing in the electric and gas spaces, we guess that some of the regulators are a little bit overwhelmed. If this was true then it seems like it would have some impact on water utilities in that their request would either be fast tracked or alternatively swept under the rug, increasing lead times, etc. Can you provide some color on whether and how you see this affecting water utilities and more specifically American Water’s ability to get rate increases?

I have to admit that we haven’t seen that nor have we heard that on the ground. It is unfortunate that that—there may be more activity in front of the public utility commissions across the country as a result of inflationary pressures and the like, but we have not certainly New Jersey being a good example, we’ve not seen any indication that we’re being swept under the rug or we’re getting second billing. I think all of the commissions that we’ve dealt with across the country take their responsibilities very seriously. They do what they need to do to meet their regulatory and legislative mandates to process cases in as timely a fashion as possible. So the fact that we’re getting a tick up in some expenses or some electric companies filing again now that they’re [stay off] periods have ended we really haven’t experienced that kind of push-back or delays in any of the commissions we’re dealing with.

Based on trends in July and August, do you expect weather issues that hurt volumes in the second quarter to normalize in third quarter?

I think it’s fair to say we’ve not seen any floods in July like we saw in May and June. But beyond that it’s really premature to make any comment about what the weather is going to be or what normalization might be.

We saw that depreciation was down year-over-year, and given the heightened level of CapEx we I guess would have thought that depreciation would have been a little higher. Can you provide some color on that?

Remember depreciation is always a function of the type of assets that we’re putting in and the life of those assets and a lot of money we are spending on infrastructure; pipes in the ground, etc. which have a very long depreciable asset as granted to us by the regulators. We do work with the regulators over the composite life of any assets. I think what you’re seeing is a slight mix on how we’re spending the dollars and therefore on longer lived assets.

Your next question comes from the line of Heike Doerr – Janney Montgomery Scott

You mentioned that the industrial consumption was down 2.8%, can you quantify how much of that is weather and how much of that is an economic slowdown impact?

We generally don’t have that kind of breakdown but I can tell you we are not seeing in any of our areas right now any of the industries going out of business. We’re not seeing any impact where we’ve lost major customers along those lines right now.

Can you refresh our memory how the Trenton approval is tied into the rate case and should the Commission come back and say that the $100 million I believe you requested in rate base is too high? How does that process go if you go back to Trenton and renegotiate that? Can you walk us through some of those scenarios?

To some extent we’ll be speculating but I think that the fundamental thing to remember is that our contract with the City of Trenton is that we—the $100 million is the purchase price to be included in rate base. If the PUC would decide for whatever reason that $100 million was not the appropriate price our contract with the City of Trenton is that we will only pay them what is included in our rate base. So how it would work mechanically I’d be speculating about somewhat but practically, if the PUC were to say that we’re going to approve something less, our obligation is to only pay what they’re including in the rate base and that’s what we would pay for the asset assuming Trenton was prepared to accept that.

The only other thing is that the $125 million that we did apply for as a rate increase did include in it the capital invested in Trenton. So if we pay less, we might see that $125 million adjusted accordingly to reflect the amount that’s in rate base.

Your next question comes from the line of Timothy Winter - Smith, Moore & Co.

There have been a number of positive developments in the California regulatory environment with revenue stabilization, expense stabilization, and streamlining of rate cases, where is your California subsidiary on the rate case front and implementation of these mechanisms?

In terms of revenue stabilization, we’ve just done or are about to do our initial filing in that area. We have filed our general rate case and we have filed for an overall return on equity to be applied to all of our rates and I would have to check, but I don’t believe that its until 2010 that that’s when our total three year cycle begins for all of our rate cases so we are not this coming year, but probably the year after; 2010 or 2011 and I would have to get back to you on that.

In Pennsylvania, I know you got a rate increase in late last year, but what kind of rate case cycle are you on? Is it like Aqua Pennsylvania, a two year cycle and the reason I’m asking is because of the constructive decision with the higher allotted ROE that your neighbor just got, will you be filing sometime later this year or early next?

I would first remind you that we do have the [disk] in Pennsylvania and that [disk] allows us to spend up to 7.5% of revenue or to get an increased rate to 7.5% of revenue, and we would time our rate cases accordingly to match when we feel our expenses have gone—increased enough to go in for a rate case or we’re not recovering enough of our capital under the [disk] program. We’re really governed by our own expenses and making sure our services are appropriate rather then necessarily by what others are doing in the industry.

Your next question comes from the line of Faisel Khan - Citigroup

In your prepared remarks you mentioned that your production costs were up but generally aren’t those production costs captured in your rates?

It depends on the state and they’re regulatory environment. In some states for example California purchase water increases we get to treat through a balancing account. We also get to do that in a couple of our other states. Fuel and power though as they go up, that’s part of the concept of the regulatory lag. So unless we have it covered in rates, if they go up above what we have in rates there is a lag between that and when we apply for new rates.

The production costs that you mentioned in the second quarter are those kind of ongoing higher production costs then you’d modeled in the past or are they—or is that more of a regulatory lag that’s taking place?

That is a little bit, a combination of both. One is just regulatory lag and then second we are seeing a slight increase in purchased water because of the cost of electricity to our provider and we are seeing an increase in chemicals and I believe everyone is seeing the increase in fuel.

To the extent that we have as both Ellen and I noted in multiple rate cases pending we have had and continue to have the opportunity to update some of those costs during the pending regulatory cycle so for instance, in New Jersey where we filed the early part of this year we have the opportunity to update our costs in the case to try to capture some of these higher costs prospectively. But given that we have to absorb them now, and we haven’t had a rate case decision in New Jersey for a year-and-a-half we are essentially eating those costs right now. But the fact that they are going up while the case is pending as opposed to just having settled the case recently, we do have the opportunity to try to capture them in these current filings.

In terms of the year-over-year volume decline, I understand a lot of that is related to weather, but is there any way for you to quantify how much of that could be also related to conservation?

At this point a lot of what is related to conservation generally we find is offset by to a great extent by organic growth. So we would feel the majority of this decline is really weather related.

Is there any update on RWE’s ownership position in your company and the timing of when they might monetize that position?

No, the last official statement that they’ve made that we continue to repeat is that their expectation is to be below 50% before the end of this year. So we would expect that there would be a second tranche sometime this year but there are no further details or announcements with regard to size or timing on that.

There are no further questions at this time; I will now turn the conference over to Donald Correll for closing remarks.

Thank you very much for everyone’s attention. This does conclude today’s call. I want to thank all of you for joining us and if you do have any more questions, please feel free to contact the Investor Relations directly.