Good morning and welcome to American Water's 2008 Third Quarter Earnings Conference Call. As a remainder, this call is being recorded and also being webcast with companying slide presentation through the company's website www.amwater.com. Following the earnings call, an audio archive of the call will be available at 11:00 AM Eastern Time today, by dialing 1-800-475-6701 for within the United States or Canada and 320-365-3844 from outside the U.S. or Canada. The pass code for replay participants is 955087. The call replay and online archive of the webcast will be available through November 7, 2008 by accessing the Investor Relations page of the company's website located at www.amwater.com. At this time, all participants have been placed in a listen-only mode. Following managements prepared remarks we will then open the call for question. [Operator Instructions]. Today's call is scheduled for one hour and including the question-and-answer session. Participating on today's call from American Water are Donald L. Correll, President and Chief Executive Officer, Ellen C. Wolf, Senior Vice President and Chief Financial Officer and Edward Vallejo, Vice President of Investor Relations. I would now like to introduce your host for today's call, Ed Vallejo, Vice President of Investor Relations. Mr. Vallejo, you may begin.

Thank you. Good morning and welcome to American Water's 2008 third quarter earnings conference call. If you did not receive a copy of the earnings press release, you can find it by visiting our website at www.amwater.com. Before we begin, let me remind you that in accordance with the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995, we are advising you that 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 company's SEC filing. Today American Water's President and Chief Executive Officer Don Correll and Ellen Wolf, our Senior Vice President and Chief Financial Officer will be discussing our third quarter and year-to-date results. Following the presentation, we'll have our question-and answer-session. Now I'd like to turn the call over to Don Correll.

Thank you Ed and good morning everyone. Today we are going to be commenting on our third quarter as well as our year-to-date results reviewing some of the highlights and discussing important news for the quarter. Before I begin with an overview of our key financial results, I'd like to address the recent market conditions. Although the country has seen fallout from the continuing economic downturn and resulting credit and investment scarcity, water utility like American Waters still need to provide a critical and basic service, while continuing to invest capital in the nation's water infrastructure. As such, American Water continuously monitors the availability of capital in the financial markets, maintains an open dialogue with our banking advisors and regulators and is prepared to implement alternatives should credit scarcity or higher capital cost issues persist. I'd also point out that as many municipalities across the country face amounting pressures also, forced to choose between funding for education, and safety and other local priorities or replacing water and waste water infrastructure. American Water may realize opportunities to assist them continuing to grow through tuck-in acquisitions or public/private partnerships as the capital market stabilize. When you consider our size our national put print and the success we've had in the past helping communities, this is a relevant time for American Water to offer our expertise and experience to municipalities facing huge financial and infrastructure challenges. Although Ellen will cover this in greater detail, I want to reiterate that we have adequate credit facilities in place today to continue to prudently invest in our infrastructure. That our credit ratings are stable and that our geographic diversity gives us the flexibility to plan prudent capital spending programs that enable us to deliver quality service to our customers and grow as the country works to…

Thank you very much Don and good morning everyone. Before I begin, I'd first like to take a moment to acknowledge Don for recently being named a 2008 Trendsetter by Public Works Magazine. He was recognized for his many accomplishments leading up to one of the largest initial public offerings in 2008 when he efficiently took American Water Public. Congratulations, Don. Moving on to the quarter, American Water's strategy to divest... to invest prudently in our infrastructure, a five, four and received appropriate rates of return of and on that investments and to make continuous improvement in all areas of customer service with the key drivers in our results for third quarter. In addition, as we saw in the second quarter, very wet weather continued to be a factor in limiting our revenue growth. For the third quarter ended on September 30th, 2008 American Water reported net income of $88.2 million or $0.55 earnings per share compared with a loss of $160.1 million or $1 loss per common share for comparable quarter of 2007. Excluding the goodwill impairment charge, the third quarter 2007 earnings would have been $79.5 million or $0.50 per share, representing an earnings per share growth of 10% quarter-over-quarter. For the nine month period, we reported a loss of $598.8 million or $3.74 per common share, compared to net loss of $108.3 million or $0.68 per common share in the first nine months of 2007. After adjusting for the goodwill impairment charge in 2008 and 2007, net income for the nine months ended September '08 was $139.6 million versus $131.4 million in the same period in '07, resulting in an approximate 6.3% increase in net income or a 6.1% growth in earnings per share. Factors contributing to net income growth for the third quarter after adjusting for…

[Operator Instructions]. And our first question comes from the line of Ryan Connors with Boenning and Scattergood. Please go ahead. Ryan M. Connors - Boenning & Scattergood, Inc.: Hey, good morning and thanks for the prepared remarks. They're very thorough.

You're welcome.

Thank you. Ryan M. Connors - Boenning & Scattergood, Inc.: I had a question on current economic situation. Obviously to a large extent, things are still evolving but I'm just curious, what you expect the reactions of the regulators to be in terms of rate awards? I mean it seems reasonable to expect that the consumer advocates [ph] would get, a little bit more aggressive and say, hey, consumers are under enough stress right now, they don't need a rate hike for water as well. So, in your interactions with the regulators and with the regulatory process, and now you're just coming off a major industry event, are you seeing any evidence of that and in if so, to what extent do you think regulators would be receptive to those arguments and how would that, how might that impact to your business?

Well thank you for the question and you're right, we did just have a... an industry conference with all of the investor owned companies and with more than a handful, we had quite a representation of regulators and staff from across the country. To your first point, there weren't a large number of advocate types if you will, at the meeting. But there were a fair amount of regulators and whether it was the regulator, the commissioners or the staff [ph], I think there was a clear balancing that they recognized that their responsibility to make sure that we have the capacity to continue to provide the service to make sure that we have the financial profile and the flexibility to fund our infrastructure to cover our cost and that we have access to the capital markets and I think to that point they all recognized that the market is what it is. There was a fair amount of discussion about the increase in interest cost at the moment and that there was probably a corresponding increase in the cost of equity. They recognized it, they recognized their responsibilities. They also, they understand their responsibility to balance between the investors and the consumers. But I didn't sense any overwhelming sentiment that they suddenly needed to shift in one direction or other. They understand the need for the deal with customers that suddenly find themselves with an increased difficulty to pay their bills and they understand we have policies, procedures and practices in place to deal with a lot of those things. But as it relates to the financial markets and our ability to continue to serve and they're willingness or ability to give us the necessary rates to cover our capital cost, I didn't sense any hesitation on their part to continue to understand the nature of our business and that we need to invest for the long term. Ryan M. Connors - Boenning & Scattergood, Inc.: Okay. And Don you have been in this business a long time. Is that consistent with what you have seen in the past whether in past recessions and economic downturns is not a real change in how regulators treat these rate cases.

Well I appreciate you reminding everyone that I have been in the business for a long time. I think in the... I can recall the rate shock that we were all dealing with as an industry in the late 70s and early 80s. Both when we had very high inflation and high interest rates and at that point high on top of that a whole out of new regulations that were coming out of the then the relatively new EPA requiring filtration for a lot of the water companies across the country. That was a triple hammer. And there was a bit more apprehension and push-back back then. I think if anything our industry has done a credible job in the last decade or two in explaining this to the regulators because back then we were the step child and we really didn't have the same kind of air time that the electric companies, the gas companies and then back then the telephone companies had. And we've done I think a better job in explaining to the regulators the need for continuous investments in our infrastructure and the need for us to have the financial flexibility to be able to deal with this. So I can't compare this to what we were seeing back in the 1980s and I think there is a general reception and a general understanding of the need to maintain the financial flexibility and the financial profile that all of us in the industry need to have. Ryan M. Connors - Boenning & Scattergood, Inc.: Okay. And you mentioned in your prepared remarks that these capital market condition were to persist and obviously that's not necessarily your or any one else's base case but if these conditions did persist, what would be the alternatives. I know that normally you like to operate and then most your peers like to operate around the 50-50 somewhere near 50-50 debt equity split. I mean if you have flexibility to stray from that and if so would that be the way the route that you would go or would you have to sort of dial back your plans in terms of the magnitude of your capital spending?

I'll let Ellen speak more in a minute about our capital structure. I mean we have some flexibility but we've also set some targets and I think it's our goal to maintain those targets we set at the time of the IPO that we want to have a 45% to 50% equity ratio. We acknowledged that we're on the low end of that, we'd like to bring that up but we also acknowledged that if in the short run we needed to for variety of a reasons go a little bit below that, we could do that also but that's not a long-term sustainable proposition and its not one that we would really want to get ourselves into. I think what we did immediately following the market crash so to speak couple of months ago, the credit market ceasing, we promptly looked at a number of scenarios of how we might be financing, when we would be financing, how much capital we would be spending and that's part of what I think any prudent organization, any organization that prudently manages itself, but I would be doing, I'm sure a lot of other did the same thing. So we have a number of alternatives that we will pursue but at the moment we're not planning to alter our long-term deal that we're going to continue to invest in our infrastructure for the long-term and we're all watching closely and we're managing slightly differently than we were two months ago and we're all hopeful that the credit markets begin to come back as they appear to be doing now. Ryan M. Connors - Boenning & Scattergood, Inc.: Okay, well that's great thanks. Thanks for your time and congratulations to you and all your employees on a great performance.

Thank you.

Great. Thanks, and your next question comes from the line of Debra Coy with Janney. Please go ahead.

Good morning Don and Ellen.

Good morning.

Good morning.

Looking at continuing on the kind of the rate outlook discussion and where you are on your elaborate turns. Ellen you mentioned that a lot of returns that coming in 10, 10.5 we're actually seeing some rate cases coming in more like 11 that does seem that the regulators are better understanding the need to attract capital into this industry. Can you tell us first of all about where you are on your actual returns? Obviously we have to back out the portion of goodwill that's not covered in rate base if there was of course for charging the first quarter. But on a normalized net income basis for this year where you would say you are in terms of the natural earned ROE? Somewhere around 5.5 may be?

Yes and Debra I think let me talk a couple of things. We have seen our return on equities as high as 10.8. Most of our rate cases that we have gotten have been prior couple small and prior to what we're seeing in economic downturn right now. Although the ones we just we recently got us still staying within that range. And I guess I've only seen one that's come in at 11% and so far but again I am feeling confident that regulators are acknowledging and starting to understand what's happening in the market as Don mentioned earlier. We are seeing a slight improvement on our return on equity which I have to say we have to offset that against what we're seeing in the way revenue decreased because of the weather. And so if you put that into the calculation, we are seeing a slight increase on that return on equity. As we've mentioned before, we expect that increase to get up to the normal coloration is three or four year process because we're putting a lot of new capital in today and need to get that into rates as well. But we are beginning to see an increase taking into account the fact that we've had some lower revenue because of the weather.

Is my back of the envelope calculation of where you are currently in 5%, 5.5% range is that right?

I would say, we're probably a little bit higher than that, again taking into account the unusual item.

Okay. And then lastly your comments on the weather, leaves me to my second question. We doesn't seem that you've had more dramatic weather swings likely, I don't know it's climate change or what but it does seem to have become a bigger issue across the country. Obviously they are moving forward with the decoupling mechanism in California, what is your general thought that we are seeing conservation and weather impacts having a bigger impact across the rest of our territories in terms of pursuing potential adjustment... mechanisms in other states?

The largest area we're seeing it right now as you mentioned is California and very much the Western states. And in those states, our goal is to work with the regulators on the decoupling mechanism, so that conservation... we still have to recover the appropriate return on and off our capital. And regulators recognize that and are willing to work with us to find the right decoupling mechanism. So that we are not punished for conservation and also we want to encourage conservation as well from our customers. We're not seeing that as much of an issue here in the East, although occasionally a regulator may talk to us about doing some sort of trail on decoupling to see what its impact would be. Decoupling as you know it's a long way away for the water industry, we're slow to move. We recognized the issue but there will be a lot of thought and discussion around how to appropriate reflect it in our rates.

Okay. Because it certainly does seem that those issues are not having impact on earned ROEs in the interim. My last question is, you mentioned industrial use being down significantly relative to residential and commercial. Does that seem like an economic factor to you rather than a weather or some other extraneous factor? And then leading to the broader question of how are you seeing economic slowdown either in the industrial sector or elsewhere impacting your business now and over the next few quarters?

Sure. The industrial customer decrease in usage is mainly due to weather. There is some but very few of our businesses that we're seeing our industrial customers are going out of this, as we have not seen that in any of the service territories that we have. Where we are seeing a slight impact as I mentioned earlier of what's happening in the economy, is along the lines of our bad debt and the way we have approached that is by moving up on our time frame to do shutoffs and notifications all within regulatory rules as it relates to that but trying to ahead of the game for people who are in foreclosure... maybe in foreclosure or who have moved trying to find them before they move to pay the bills. So we are accelerating and looking a lot harder at our collections policies and as you saw, we did see some impact in the third quarter and again part of that is our trying to get ahead of the curve on that.

Alright. Thanks.

Great, thank you. And our next question then comes from the line of Maria Karahalis with Goldman Sachs. Please go ahead.

Good morning this is Debra Basin [ph] for Maria.

Good morning.

Good morning.

My main question stands from your tuck-in acquisitions and the opportunities you have there. You've been very successful in acquiring small water systems despite this current economic environment. But I was wondering whether because of this economic environment you have actually seen an increase for municipalities to present through out by their systems? And are you being more aggressive and trying to search for these opportunities?

Its fair to say that we have compared to where we were at the company three or four years that over the last two to three years we've ramp up our efforts aggressive's probably too strong a term. But we've ramped up our efforts and the way we have been organizes the people we have on the ground, to make sure that the market place knew to with the municipalities that we were in business and that we had this as one of our priorities once again. So I think it took a little while for us to get the word out that in fact it was an option for municipalities cause frankly we had dropped the ball about five years ago on that regard and it wasn't a priority and it is a natural thing that we should be doing and it was something that we had done through out American Water's history and so we have gotten back out into the marketplace. We have had some successes. You've seen some of the statistics compared to where we were from 2003 to 2005. We've increased the last three years successfully and successively in the number of acquisitions and tuck-ins that we have done. And I think it's fair to say that as a result of our advancing marketing efforts that a lot more municipalities know today that they do have some choices rather than just the way they had always done it. I can say that in the last six months, we have certainly seen far more interest in that. Even before the recent crises in the financial markets. And I think that was both a recognition of the fact that they knew they had choices, that we were there educating them of their choices. And that fact that…

Okay. And to kind of follow-up on that question, are you seeing increased competition some other larger water utilities especially in the overlapping regions that you guys are in?

No.

Okay. Thank you very much.

Thanks. And our next question then comes from the line of Bill Apichally [ph] with Citigroup. Please go ahead.

Hi, good morning.

Good morning.

Going back to the point that Ryan brought up earlier about kind of financing your continuing growth, the CapEx number we've kind of got working here is part of $850 to $870 million for next year, is that still in the ballpark? I mean have you guys looked to cut that back at all or is that still that the working number?

As Don mentioned what we've done is a working number and as Don mentioned we've done I am sure as every other utility out there scenario planning around the economic markets, the financial markets. So that we are prepared for whatever may happen here in terms of cash flow. But right now our working assumption is that we are continuing to spend as we've talked about and that again is based off as Don mentioned the regulators... really acknowledging and recognizing that, we need to continue to invest in the infrastructure.

Okay. So any time, like you'll willing to maintain that level, may be issue more debt and a little of equity in the near term and as conditions may be improved down the road and may be if you need to issue equity kind of in 2010 or just more down there... may be provide an opportunity to do that then?

We don't want to harm, one, the infrastructure of this company and what we're investing for the customers and two, the value of this company and we need to make sure we continue to position ourselves for the future and we will watch the capital markets and raise either debt or equity, as is most appropriate.

Okay. So basically, those options are still on the table then?

Yes, they are still on the table, but again, we're going to do what's right in terms of... in the short term but as Don mentioned our long-term balance is always around the 45% equity ratio.

Okay. Alright thank you.

Thanks. And we do have a question then from the line of Heike Doerr [ph] with Janney. Please go ahead

Good morning. Wanted to follow-up on Don's comments about Trenton. We have seen an article back in mid-October that headquarter Trenton official is saying that the deal was all by dead. I was wondering if you could comment on what the status of this approval is from the commission. And if this falls into 2009 and doesn't get completed here at the end of 2008, does that throw off the timing of your pending New Jersey rate case?

I think there were four questions there. But you gave a rapid succession. So let me see if... I'll deal with Trenton first. To paraphrase some one the reports of something that was a bit premature or the report of someone's early demise. We have had opposition voiced by a variety of people to whether or not these systems should be sold by the city Trenton going back to before the time when Trenton actually put them on the market. So there are always accounts of opposition and I think there was a report that you are referring to that one of the officials said that perhaps it was dead or perhaps it had hit some snag and that is an unfortunate quote that was out there because our petition is still alive and well and we are still having discussions and it is still active before the commission and with all of the interveners actively engaged. We... working regularly with the commissions, I think it's fair to say that we are a bit more tuned into the process than perhaps someone who is going before a PUC for the first time may be and it is a process that you have to go through and you have to take all of the interveners opinions and suggestions and that's why we built some of the protections that we did into the contract for us that we knew that this hinged on what the ultimate rate recovery allowance would be by the regulators and what the rate base would be allowed. And we fully expected and had spoken with the Trenton officials also that was... there could potentially be some give and take in some of this and other opinions besides those that they and we had. So we're working through that process. We have it coupled to our rate case, but we are able to decouple it not to confuse it with Debra's earlier discussion of decoupling. But it is not something that necessarily has to impact our rate decision and we're working then both on parallel tracks and hope that we can conclude them simultaneously but we're prepared to go in separate directions with them. I'd also say that it was always our plan and our hope that we could resolve them simultaneously and that we would be able to finish them both by the end of the year. We're still optimistic in that regard but if the Trenton acquisition tends to linger a little bit longer, we will be coupled then as appropriate and if we're able to finalize that acquisition early next year, that's not terribly inconsistent with what we've always said about the timing.

So there is a effective date for increased rates in New Jersey, does January 1st still make sense?

Generally, Heike [ph] what we find in New Jersey is it takes 11 to 12 months for a rate case to be settled and we did file this in January of '08.

Okay. That's helpful. Thanks.

Thank you. And this does conclude the question-and-answer portion of the call. I'd now like to turn the call back to Don Correll for any closing remarks.

Well thank you everyone for your questions. Thank you for your attention and thank you for your continued interest in American Water. As Ellen and I both said we're exited about our future. We are pleased with the results that we've been able to achieve for this third quarter. And we look forward to your continued interest and look forward to talking to you on our next call. Thank you.

Great, and thank you. And this does conclude today's conference call and webcast. You may now disconnect. .