American Water Works AWK announced that its unit New Jersey American Water has filed an application to the New Jersey Board of Public Utilities to set new rates for water and wastewater customers in New Jersey. Since the last rate approval, New Jersey American Water has invested $985 million to upgrade and expand its infrastructure.Through the rate filing, American Water’s unit will try to recoup the investment made to upgrade the aging infrastructure, which was essential to provide quality services to nearly 2.8 million in New Jersey. If the application is approved by the board, the monthly water bill for the average residential customer using 5,520 gallons per month will increase $6.78 per month or 23 cents per day. The average monthly residential sewer bill would increase between 26 cents and $16.69, depending on the service area.Aging Infrastructure Needs FundingThe U.S. water and wastewater infrastructure is aging and gradually nearing the end of its effective service life. Per the findings of the American Society of Civil Engineers, water main breaks occur every two minutes in the United States due to the aging of the existing water infrastructure. Pipeline breaks result in the wastage of 6 billion gallons of potable water each day and add to the loss of water utility operators.Per the U.S. Environmental Protection Agency, a $473 billion investment is necessary to maintain and expand drinking water pipelines and $271 billion for wastewater pipelines to meet the demand over the next 20 years.The U.S. government has plans to invest billions to upgrade water and wastewater infrastructure. Investor-owned regulated water utilities are also making investments to upgrade the facilities and infrastructure.Water utilities like Essential Utilities WTRG and California Water Service Group CWT, among others, have well-chalked-out capital investment plans to strengthen their infrastructure. Essential Utilities aims to invest $3 billion through 2023 to strengthen water and natural gas operations. The Zacks Consensus Estimate for WTRG’s 2022 estimates indicates year-over-year growth of 4.4%. WTRG delivered an average surprise of 1.45% in the last four quarters.The Zacks Consensus Estimate for CWT’s 2022 earnings has moved up 3.2% in the past 90 days. The midpoint of CWT’s capital expenditure planned for 2022, 2023 and 2024 is $355 million, $360 million and $365 million, respectively.Rate Hikes Help in Fund GenerationThe increase in utility rates might cause financial difficulties to customers. Still, rate hikes at regular intervals are quite essential for regulated water utilities and aid utility service providers to generate funds so that they can carry on with long-term infrastructure upgrade work.American Water Works plans to invest $13-$14 billion in the 2022-2026 period and $28-$32 billion between 2022 and 2031 to upgrade and strengthen the existing water and wastewater infrastructure. Hence, the rates hikes will ensure a continuous increase in funds and allow American Water to continue with infrastructure upgrades.Price PerformanceShares of American Water have gained 2.4% in the past one year compared with the industry’s 3.8% rally.Image Source: Zacks Investment ResearchZacks Rank and Key PickAmerican Water Works currently has a Zacks Rank #4 (Sell).A better-ranked stock in the same industry is American States Water AWR, currently having a Zacks Rank#2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.The current dividend yield of AWR is 1.47%. AWR pulled off an earnings surprise of 1.56% in the last four quarters, on average. The Zacks Consensus Estimate for AWR’s 2022 earnings indicates year-over-year growth of 4.8%. Infrastructure Stock Boom to Sweep America A massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made. The only question is “Will you get into the right stocks early when their growth potential is greatest?” Zacks has released a Special Report to help you do just that, and today it’s free. Discover 7 special companies that look to gain the most from construction and repair to roads, bridges, and buildings, plus cargo hauling and energy transformation on an almost unimaginable scale.Download FREE: How to Profit from Trillions on Spending for Infrastructure >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report American Water Works Company, Inc. (AWK): Free Stock Analysis Report California Water Service Group (CWT): Free Stock Analysis Report American States Water Company (AWR): Free Stock Analysis Report Essential Utilities Inc. (WTRG): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research