CALIFORNIA WATER SERVICE GROUP

Previous wording

This quarterly report, including all documents incorporated by reference, contains forward-looking statements within the meaning established by the Private Securities Litigation Reform Act of 1995 (the PSLRA). The forward-looking statements are intended to qualify under provisions of the federal securities laws for “safe harbor” treatment established by the PSLRA. Forward-looking statements in this quarterly report are based on currently available information, expectations, estimates, assumptions and projections, and our management’s beliefs, assumptions, judgments and expectations about us, the water utility industry and general economic conditions. These statements are not statements of historical fact. When used in our documents, statements that are not historical in nature, including words like “will,” “would,” “expects,” “intends,” “plans,” “believes,” “may,” “could,” “estimates,” “assumes,” “anticipates,” “projects,” “progress,” “predicts,” “hopes,” “targets,” “forecasts,” “should,” “seeks,” “indicates,” or variations of these words or similar expressions are intended to identify forward-looking statements. Examples of forward-looking statements in this quarterly report include, but are not limited to, statements describing our intention, indication or expectation regarding dividends or targeted payout ratio, our expectations, anticipations or beliefs regarding governmental, legislative, judicial, administrative or regulatory timelines, regulatory compliance, decisions, approvals, authorizations, requirements or other actions, including Cal Water’s general rate case (GRC) filed on July 8, 2024 (2024 GRC), rate amounts, cost recovery or refunds, certain per- and polyfluoroalkyl substances (PFAS) regulations, and associated impacts, such as our expected or estimated revenue, our intentions regarding recovery billing, our expectations regarding regulatory asset and operating revenue recognition, sources of funding or capital requirements, estimates of, or expectations regarding, capital expenditures, funding needs or other capital requirements, obligations, contingencies or commitments, our expectations regarding water sources, our beliefs regarding adequacy of water supplies, estimates relating to our significant accounting policies, such as deferred revenue or assets or refund of advances, our expectations regarding stock-based compensation and estimated contributions to our pension plans and other postretirement benefit plans, our estimated annual effective tax rate and expectations regarding tax benefits, our expectations regarding funds received from the Extended Program, our intentions regarding use of net proceeds from any future equity or debt issuances or borrowings or our intentions or anticipations regarding our sources of funding, capital structure or capital allocation plans. The forward-looking statements are not guarantees of future performance. They are based on numerous assumptions that we believe are reasonable, but they are …

Excerpt shortened here; the source contains the full paragraph.

Current wording

This quarterly report, including all documents incorporated by reference, contains forward-looking statements within the meaning established by the Private Securities Litigation Reform Act of 1995 (the PSLRA). The forward-looking statements are intended to qualify under provisions of the federal securities laws for “safe harbor” treatment established by the PSLRA. Forward-looking statements in this quarterly report are based on currently available information, expectations, estimates, assumptions and projections, and our management’s beliefs, assumptions, judgments and expectations about us, the water utility industry and general economic conditions. These statements are not statements of historical fact. When used in our documents, statements that are not historical in nature, including words like “will,” “would,” “expects,” “intends,” “plans,” “believes,” “may,” “could,” “estimates,” “assumes,” “anticipates,” “projects,” “progress,” “predicts,” “hopes,” “targets,” “forecasts,” “should,” “seeks,” “indicates,” or variations of these words or similar expressions are intended to identify forward-looking statements. Examples of forward-looking statements in this quarterly report include, but are not limited to, statements describing our intention, indication or expectation regarding dividends or targeted payout ratio, our expectations, anticipations or beliefs regarding governmental, legislative, judicial, administrative or regulatory timelines, regulatory compliance, decisions, approvals, authorizations, requirements or other actions, including California Water Service Company’s (Cal Water) general rate case (GRC) filed on July 8, 2024 (2024 GRC), rate amounts, cost recovery or refunds, certain per- and polyfluoroalkyl substances (PFAS) regulations, and associated impacts, such as our expected or estimated revenue, our intentions regarding recovery billing, our expectations regarding regulatory asset and operating revenue recognition, sources of funding or capital requirements, estimates of, or expectations regarding, capital expenditures, funding needs or other capital requirements, obligations, contingencies or commitments, our expectations regarding water sources, our beliefs regarding adequacy of water supplies, estimates relating to our significant accounting policies, such as deferred revenue or assets or refund of advances, our expectations regarding stock-based compensation and estimated contributions to our pension plans and other postretirement benefit plans, our estimated annual effective tax rate and expectations regarding tax benefits, our expectations regarding funds received from the Extended Program, our intentions regarding use of net proceeds from any future equity or debt issuances or borrowings or our intentions or anticipations regarding our sources of funding, capital structure or capital allocation plans. The forward-looking statements are not guarantees of future performance. They are based on numerous assumptions that we be…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

•increased risk of inverse condemnation losses as a result of climate change and drought;

Current wording

•increased risk of inverse condemnation losses as a result of climate change, drought, and land movement;

Previous wording

•the impact of stagnating or worsening business and economic conditions, including inflationary pressures, general economic slowdown or a recession, increasing interest rates, instability of certain financial institutions, changes in monetary policy, adverse capital markets activity or macroeconomic conditions as a result of geopolitical conflicts, and the prospect of a shutdown of the U.S. federal government;

Current wording

•the impact of stagnating or worsening business and economic conditions, including inflationary pressures, general economic slowdown or a recession, the interest rate environment, instability of certain financial institutions, changes in monetary policy, adverse capital markets activity or macroeconomic conditions as a result of geopolitical conflicts, and the prospect of a shutdown of the U.S. federal government;

Previous wording

•the impact of weather and timing of meter reads on our accrued unbilled revenue;

Current wording

•the impact of weather and timing of meter reads on our accrued and unbilled revenue;

Previous wording

For the six months ended June 30, 2024, besides the change noted below there were no other changes in the methodology for computing critical accounting estimates, no additional accounting estimates met the standards for critical accounting policies, and there were no material changes to the important assumptions underlying the critical accounting estimates.

Current wording

For the nine months ended September 30, 2024, besides the change noted below there were no other changes in the methodology for computing critical accounting estimates, no additional accounting estimates met the standards for critical accounting policies, and there were no material changes to the important assumptions underlying the critical accounting estimates.

Previous wording

As a result of Cal Water’s 2021 GRC decision that was issued in March of 2024, SERP expenses were disallowed to be recovered from customers. At this time, we believe it is not probable that future SERP costs will be recovered in future rates for the three-year period in which the 2021 GRC is in effect. As a result, as of March 31, 2024, we have reclassified our SERP regulatory asset for Cal Water to accumulated other comprehensive loss in accordance with generally accepted accounting principles.

Current wording

As a result of Cal Water’s 2021 GRC decision that was issued in March of 2024, SERP expenses were disallowed to be recovered from our customers. At this time, we believe it is not probable that SERP costs will be recovered in rates for the three-year period in which the 2021 GRC is in effect. As a result, we have reclassified our SERP regulatory asset, net of associated deferred income taxes, for Cal Water to other comprehensive loss in accordance with generally accepted accounting principles.

Previous wording

In 2023, the Extended Program was established and extended the relief period to include arrearages accrued from June 16, 2021 to December 31, 2022. In response to the Extended Program, Cal Water submitted an application for $82.0 million in eligible customer arrearages and $1.0 million in program administrative costs which was approved by the Water Board. Cal Water received the funds in April of 2024 and applied $57.5 million of the funds to eligible past due customer balances during the second quarter of 2024. The remaining balance is expected to be returned to the Water Board in the fourth quarter of 2024.

Current wording

In 2023, the Extended Program was established and extended the relief period to include arrearages accrued from June 16, 2021 to December 31, 2022. In response to the Extended Program, Cal Water submitted an application for $82.0 million in eligible customer arrearages and $1.0 million in program administrative costs which was approved by the Water Board. Cal Water received the funds in April of 2024 and applied $57.5 million of the funds to eligible past due customer balances during the second quarter of 2024. The remaining balance was returned to the Water Board in the third quarter of 2024.

Previous wording

Net income attributable to California Water Service Group for the three months ended June 30, 2024 was $40.6 million or $0.70 earnings per diluted common share, compared to net income of $9.6 million or $0.17 earnings per diluted common share for the three months ended June 30, 2023. The $31.0 million increase in net income was primarily due to an increase in operating revenue of $50.3 million primarily due to rate increases and an increase in accrued unbilled revenue. Accrued unbilled revenue increased due to an increase in rates and an increase in unbilled days. The revenue increase was partially offset by an increase in total operating expenses of $18.0 million. The total operating expense increase was primarily due to an increase in water production costs of $6.8 million, depreciation and amortization expenses of $3.1 million, and income tax expense of $8.4 million.

Current wording

Net income attributable to California Water Service Group for the three months ended September 30, 2024 was $60.7 million or $1.03 earnings per diluted common share, compared to net income of $34.4 million or $0.60 earnings per diluted common share for the three months ended September 30, 2023. The $26.2 million increase in net income was primarily due to an increase in operating revenue of $44.6 million primarily due to rate increases, new customers and consumption increases. The revenue increase was partially offset by an increase in total operating expenses of $21.3 million. The total operating expense increase was primarily due to an increase in water production costs of $2.7 million, depreciation and amortization expenses of $3.2 million, and income tax expense of $11.5 million. Additionally, net other income increased by $3.8 million.

Previous wording

Net income attributable to California Water Service Group for the six months ended June 30, 2024 was $110.5 million or $1.90 earnings per diluted common share, compared to net loss of $12.7 million or $0.23 loss per diluted common share for the six months ended June 30, 2023. The $123.1 million increase in net income was primarily due to an increase in operating revenue of $189.9 million primarily as a result of the cumulative adjustment for the impacts of the 2021 GRC, retroactive to January 1, 2023. The revenue increase was partially offset by an increase in total operating expenses of $62.3 million. The total operating expense increase was primarily due to an increase in water production costs of $16.0 million, increases in other operations expenses of $10.1 million, an increase in income tax expense of $29.5 million, and an increase in depreciation and amortization expenses of $6.1 million.

Current wording

Net income attributable to California Water Service Group for the nine months ended September 30, 2024 was $171.1 million or $2.93 earnings per diluted common share, compared to net income of $21.8 million or $0.38 earnings per diluted common share for the nine months ended September 30, 2023. The $149.4 million increase in net income was primarily due to an increase in operating revenue of $234.5 million primarily as a result of the cumulative adjustment for the impacts of the 2021 GRC, retroactive to January 1, 2023. The revenue increase was partially offset by an increase in total operating expenses of $83.6 million. The total operating expense increase was primarily due to an increase in water production costs of $18.7 million, increases in other operations expenses of $11.4 million, an increase in income tax expense of $41.1 million, and an increase in depreciation and amortization expenses of $9.3 million. Additionally net other income increased by $3.5 million while net interest expense increased by $5.2 million.

Previous wording

For the three months ended June 30, 2024, operating revenue increased $50.3 million, or 25.9%, to $244.3 million as compared to the three months ended June 30, 2023.

Current wording

For the three months ended September 30, 2024, operating revenue increased $44.6 million, or 17.5%, to $299.6 million as compared to the three months ended September 30, 2023.

Previous wording

For the six months ended June 30, 2024, operating revenue increased $189.9 million, or 58.4%, to $515.0 million as compared to the six months ended June 30, 2023.

Current wording

For the nine months ended September 30, 2024, operating revenue increased $234.5 million, or 40.4%, to $814.6 million as compared to the nine months ended September 30, 2023.

Previous wording

The net change due to rate changes, usage, and other for the three months ended June 30, 2024 was primarily due to rate increases of $19.3 million and an increase in accrued unbilled revenue of $10.4 million due to increases in rates and unbilled days. For the six months ended June 30, 2024, the net change due to rate changes, usage, and other was primarily driven by rate increases of $31.6 million, an increase in accrued unbilled revenue of $5.8 million due to increases in rates and unbilled days, and a 2% increase in customer usage.

Current wording

The net change due to rate changes, usage, and other for the three months ended September 30, 2024 was primarily due to rate increases of $42.2 million and an increase in consumption and new customers of $9.6 million. For the nine months ended September 30, 2024, the net change due to rate changes, usage, and other was primarily driven by rate increases of $74.1 million, an increase in consumption and new customers of $14.1 million, and an increase in accrued and unbilled revenue of $6.7 million due to increases in rates and unbilled days.

Previous wording

Due to the delay in the resolution of the 2021 GRC, the CPUC authorized Cal Water to track in an IRMA the variances between actual customer billings and those that would have been billed assuming the 2021 GRC had been effective January 1, 2023. Such variances are recorded as regulatory balancing account revenue. The 2021 GRC was approved in March of 2024 and final rates for the 2021 GRC were implemented on May 31, 2024. As a result, Cal Water recorded IRMA revenue of $7.9 million for the three months ended June 30, 2024. For the six months ended June 30, 2024, Cal Water recorded IRMA revenue of $88.6 million of which $67.6 million is attributable to 2023, including $17.3 million and $28.4 million that was attributable to the three and six months ended June 30, 2023.

Current wording

Due to the delay in the resolution of the 2021 GRC, the CPUC authorized Cal Water to track in an IRMA the variances between actual customer billings and those that would have been billed assuming the 2021 GRC had been effective January 1, 2023. Such variances are recorded as regulatory balancing account revenue. The 2021 GRC was approved in March of 2024 and final rates for the 2021 GRC were implemented on May 31, 2024. Cal Water recorded IRMA revenue of $88.6 million for the nine months ended September 30, 2024, of which $67.6 million is attributable to 2023, including $25.2 million and $53.7 million that was attributable to the three and nine months ended September 30, 2023, respectively.

Previous wording

MWRAM revenue is the variance between actual metered sales billed through the tiered volumetric rate and the revenue that would have been received with the same actual metered sales if a uniform rate had been in effect. In March of 2024, Cal Water received approval of the 2021 GRC which authorized the use of the MWRAM effective January 1, 2023. As a result, Cal Water recorded MWRAM revenue of $8.2 million for the three months ended June 30, 2024. For the six months ended June 30, 2024, Cal Water recorded MWRAM revenue of $39.3 million of which $17.4 million is attributable to 2023, including $7.4 million and $18.0 million that was attributable to the three and six months ended June 30, 2023.

Current wording

MWRAM revenue is the variance between actual metered sales billed through the tiered volumetric rate and the revenue that would have been received with the same actual metered sales if a uniform rate had been in effect. In March of 2024, Cal Water received approval of the 2021 GRC which authorized the use of the MWRAM effective January 1, 2023. As a result, Cal Water recorded a reduction to MWRAM revenue of $9.4 million for the three months ended September 30, 2024. For the nine months ended September 30, 2024, Cal Water recorded MWRAM revenue of $29.8 million of which $17.4 million is attributable to 2023, including a $6.1 million reduction to MWRAM revenue and a $11.7 million increase to MWRAM revenue that was attributable to the three and nine months ended September 30, 2023, respectively.

Previous wording

Deferred revenue consists of amounts that are expected to be collected from customers beyond 24 months following the end of the accounting period in which the sales transaction has already occurred. Deferred revenue for the three months ended June 30, 2024 decreased due to a decrease in the amount expected to be collected beyond 24 months. Deferred revenue for the six months ended June 30, 2024 decreased as we applied $46.0 million from the Extended Program against certain eligible WRAM receivables during the first six months of 2024.

Current wording

Deferred revenue consists of amounts that are expected to be collected from customers beyond 24 months following the end of the accounting period in which the sales transaction has already occurred. Deferred revenue for the nine months ended September 30, 2024 decreased as we applied $46.0 million from the Extended Program against certain eligible WRAM receivables during the first nine months of 2024.

Previous wording

For the three months ended June 30, 2024, total operating expenses increased $18.0 million, or 10.1%, to $196.1 million, as compared to $178.1 million for the three months ended June 30, 2023. The increase was primarily due to increases in water production costs, depreciation and amortization, and income tax expense.

Current wording

For the three months ended September 30, 2024, total operating expenses increased $21.3 million, or 10.1%, to $232.8 million, as compared to $211.5 million for the three months ended September 30, 2023. The increase was primarily due to increases in water production costs, depreciation and amortization, and income tax expense.

Previous wording

For the six months ended June 30, 2024, total operating expenses increased $62.3 million, or 19.1%, to $389.0 million, as compared to $326.7 million for the six months ended June 30, 2023. The increase was primarily due to increases in water production costs, other operations, depreciation and amortization, and income tax expense.

Current wording

For the nine months ended September 30, 2024, total operating expenses increased $83.6 million, or 15.5%, to $621.8 million, as compared to $538.2 million for the nine months ended September 30, 2023. The increase was primarily due to increases in water production costs, other operations, depreciation and amortization, and income tax expense.

Previous wording

Water production costs increased $6.8 million, or 9.6%, for the three months ended June 30, 2024 as compared to the same period last year primarily due to an increase in wholesale rates and higher customer usage.

Current wording

Water production costs increased $2.7 million, or 3.0%, for the three months ended September 30, 2024 as compared to the same period last year primarily due to an increase in wholesale rates and higher customer usage.

Previous wording

Water production costs increased $16.0 million, or 12.7%, for the six months ended June 30, 2024 as compared to the same period last year primarily due recording a cumulative adjustment of $9.2 million for the impacts of the 2021 GRC and increases in wholesale rates and customer usage. For the six months ended June 30, 2024, we recorded $6.5 million of water production costs for the Incremental Cost Balancing Accounts (ICBA) attributable to fiscal year 2023, including $1.7 million and $2.9 million, respectively, attributable to water production costs during the three and six months ended June 30, 2023.

Current wording

Water production costs increased $18.7 million, or 8.6%, for the nine months ended September 30, 2024 as compared to the same period last year primarily due to increases in wholesale rates and customer usage. For the nine months ended September 30, 2024, we recorded $6.5 million of water production costs for the Incremental Cost Balancing Accounts (ICBA) attributable to fiscal year 2023, including $0.5 million and $3.4 million, respectively, attributable to water production costs during the three and nine months ended September 30, 2023.

Previous wording

Other operations expenses increased $10.1 million, or 23.9%, for the six months ended June 30, 2024 as compared to the same period in 2023. The increase was primarily due to the recognition of $13.6 million of costs associated with recognized deferred WRAM revenue, which was partially offset by a $4.2 million decrease in bad debt expense as a result of applying arrearage funds to eligible, previously written-off accounts.

Current wording

Other operations expenses increased $11.4 million, or 15.3%, for the nine months ended September 30, 2024 as compared to the same period in 2023. The increase was primarily due to the recognition of $13.1 million of costs associated with recognized deferred WRAM revenue, which was partially offset by a $3.2 million decrease in bad debt expense as a result of applying arrearage funds to eligible, previously written-off accounts.

Previous wording

Depreciation and amortization expense increased $3.2 million and $6.1 million for the three and six months ended June 30, 2024, respectively, as compared to the same periods in 2023. The increases were primarily due to utility plant placed in service in 2023.

Current wording

Depreciation and amortization expense increased $3.2 million and $9.3 million for the three and nine months ended September 30, 2024, respectively, as compared to the same periods in 2023. The increases were primarily due to utility plant placed in service in 2023.

Previous wording

Income tax expense increased $8.4 million and $29.5 million for the three and six months ended June 30, 2024, respectively as compared to the same periods in 2023. The increases in income tax expense were primarily due to an increase in pre-tax operating income for the three and six months ended June 30, 2024 compared to the same period in 2023 attributable to the recognition of income related to the 2021 GRC decision in 2024.

Current wording

Income tax expense increased $11.5 million and $41.1 million for the three and nine months ended September 30, 2024, respectively, as compared to the same periods in 2023. The increases in income tax expense were primarily due to an increase in pre-tax operating income for the three and nine months ended September 30, 2024 compared to the same periods in 2023 attributable to the recognition of income related to the 2021 GRC decision in 2024.

Previous wording

On July 8, 2024, Cal Water submitted Infrastructure Improvement Plans for its California districts from 2025-2027 in its 2024 GRC application with the CPUC. The application also proposes a Low-Use Water Equity Program, that would, if approved as filed, decouple revenue from water sales, to assist low-water-using, lower-income customers.

Current wording

On July 8, 2024, Cal Water submitted Infrastructure Improvement Plans (the Plans) for its California districts from 2025-2027 in its 2024 GRC application with the CPUC. The application also proposes a Low-Use Water Equity Program, that would, if approved as filed, decouple revenue from water sales, to assist low-water-using, lower-income customers.

Previous wording

The required, triennial filing begins an approximately 18-month review process by the CPUC, which will analyze the Infrastructure Improvement Plans, operating budget proposals, and a Low-Use Water Equity Program to establish water rates for 2026-2028 that reflect the actual cost of providing safe, reliable water service. Associated rates set by the CPUC would become effective no sooner than January 2026.

Current wording

The required, triennial filing begins an approximately 18-month review process by the CPUC, which will analyze the Plans, operating budget proposals, and the Low-Use Water Equity Program to establish water rates for 2026-2028 that reflect the actual cost of providing safe, reliable water service. Associated rates set by the CPUC would become effective no sooner than January 2026. Cal Water has concluded an initial pre-hearing conference and an administrative law judge and Commissioner have been assigned to the case.

Previous wording

In the plans, Cal Water proposes to invest more than $1.6 billion in its districts from 2025-2027, including approximately $1.3 billion of newly proposed capital investments. About 46% of the proposed new infrastructure improvements are to replace aging water pipelines, which such improvements are designed to enhance water supply reliability to support customers’ and firefighters’ everyday and emergency needs. The plans also include, among other projects:

Current wording

In the Plans, Cal Water proposes to invest more than $1.6 billion in its districts from 2025 to 2027, including approximately $1.3 billion of newly proposed capital investments. About 46% of the proposed new infrastructure improvements are to replace aging water pipelines. Such improvements are designed to enhance water supply reliability to support customers’ and firefighters’ everyday and emergency needs. The Plans also include, among other projects:

Previous wording

•Equipment such as generators to help withstand power outages and shutoffs, and solar installation projects to help reduce Cal Water’s dependency on the electric power grid and lessen its environmental footprint.

Current wording

•Equipment such as generators to help withstand power outages and shutoffs, and solar installation projects to help reduce Cal Water’s dependency on the electric power grid and lessen our environmental footprint.

Previous wording

The CPUC approved a decision on March 7, 2024 on the 2021 GRC. The decision marked the end of an extensive review of Cal Water’s water system improvement plans, costs, and rates. The decision as issued adopts a revised version of the alternate proposed decision issued January 24, 2024, and increases adopted revenues, after corrections, for 2023 by approximately $41.5 million retroactive to January 1, 2023. It also potentially increases revenues by up to approximately $30.0 million for 2024 and $30.6 million for 2025, subject to the CPUC’s earnings test and inflationary adjustments.

Current wording

The CPUC approved a decision on March 7, 2024 on the 2021 GRC. The decision marked the end of an extensive review of Cal Water’s water system improvement plans, costs, and rates. The decision as issued adopted a revised version of the alternate proposed decision issued January 24, 2024, and increases adopted revenues, after corrections, for 2023 by approximately $41.5 million retroactive to January 1, 2023. It also potentially increases revenues by up to approximately $30.0 million for 2024 and $30.6 million for 2025, subject to the CPUC’s earnings test and inflationary adjustments.

Previous wording

On March 15, 2024, Cal Water submitted a request for expedited corrections in the March 7th decision. The decision and its appendices contain certain language, numbers, and calculations that are inconsistent or do not fully reflect the substantive outcomes described in the approved decision. On April 23, 2024, the executive director of the CPUC issued a decision approving the corrections.

Current wording

On March 15, 2024, Cal Water submitted a request for expedited corrections in the March 7th decision. The decision and its appendices contained certain language, numbers, and calculations that were inconsistent or did not fully reflect the substantive outcomes described in the approved decision. On April 23, 2024, the executive director of the CPUC issued a decision approving the corrections.

Previous wording

The 2021 GRC was approved in March of 2024 and final rates for the 2021 GRC were implemented on May 31, 2024; as a result, Cal Water calculated and recorded a regulatory asset of $88.6 million and a corresponding increase to revenue for the difference between final rates and interim rates for all of 2023 and the first five months of 2024. Cal Water also recorded a regulatory liability of $8.0 million and a corresponding increase to regulatory assets for Customer Assistance Program (CAP) and Rate Support Fund (RSF) program credits that would have been given to customers had the rate case been approved on time. Cal Water expects to file an advice letter to recover/refund these balances in the third quarter of 2024 with the recovery/refund rates expected to be implemented in the fourth quarter of 2024.

Current wording

The 2021 GRC was approved in March of 2024 and final rates for the 2021 GRC were implemented on May 31, 2024; as a result, Cal Water calculated and recorded an IRMA regulatory asset of $88.6 million and a corresponding increase to revenue for the difference between final rates and interim rates for all of 2023 and the first five months of 2024. The IRMA regulatory asset was reduced by $2.5 million for Rate Support Fund (RSF) Credits that would have been given to customers had the rate case been approved on time with an associated increase to regulatory assets for the RSF program. Cal Water also recorded an IRMA regulatory liability of $5.6 million with a corresponding increase to regulatory assets for Customer Assistance Program (CAP) credits that would have been given to customers had the rate case been approved on time. Finally, Cal Water recorded an IRMA regulatory asset of $0.4 million with a corresponding decrease to regulatory asset for the CAP and RSF for surcharges that would have been billed to fire protection customers had the rate case been approved on time. During the third quarter of 2024, Cal Water was approved to recover and refund the recorded IRMA regulatory assets and liabilities in the form of either 12-month, 24-month, or longer surcharges or 12-month surcredits. The new rates were implemented on October 1, 2024.

Previous wording

The CPUC issued a decision effective August 27, 2020 requiring that Class A water utilities submitting GRC filings after the effective date be precluded from proposing the use of a full decoupling WRAM in their next GRCs. In September 2020, Cal Water filed an Application for Rehearing at the CPUC seeking to reverse the August 27, 2020 CPUC decision. In September 2021, the CPUC denied the Application for Rehearing. On or about October 27, 2021, Cal Water along with four other Class A California water utilities filed Petitions for a Writ of Review with the California Supreme Court (Court). On May 18, 2022, the Court issued writs granting review and ordered the CPUC and other filing parties to submit additional pleadings to the Court. The final pleadings were submitted on January 13, 2023. Oral arguments were made on May 8, 2024 and, on July 8, 2024, the Court issued a unanimous decision voiding the WRAM provisions in the August 27, 2020 CPUC decision. As a result, Cal Water and other Class A water utilities submitting GRC filings are no longer precluded from proposing the use of a full decoupling WRAM in their GRCs, as reflected in the 2024 GRC filing.

Current wording

The CPUC issued a decision effective August 27, 2020 requiring that Class A water utilities submitting GRC filings after the effective date be precluded from proposing the use of a full decoupling WRAM in their next GRCs. In September 2020, Cal Water filed an Application for Rehearing at the CPUC seeking to reverse the August 27, 2020 CPUC decision. In September 2021, the CPUC denied the Application for Rehearing. On or about October 27, 2021, Cal Water along with four other Class A California water utilities filed Petitions for a Writ of Review with the California Supreme Court (Court). On May 18, 2022, the Court issued writs granting review and ordered the CPUC and other filing parties to submit additional pleadings to the Court. The final pleadings were submitted on January 13, 2023. Oral arguments were held on May 8, 2024 and, on July 8, 2024, the Court issued a unanimous decision voiding the WRAM provisions in the August 27, 2020 CPUC decision. As a result, Cal Water and other Class A water utilities submitting GRC filings are no longer precluded from proposing the use of a full decoupling WRAM in their GRCs, as reflected in the 2024 GRC filing.

Previous wording

During the six months ended June 30, 2024, we generated cash flow from operations of $120.9 million compared to $37.5 million for the same period in 2023. The increase in the first six months of 2024 as compared to the same period in 2023 is primarily due to the receipt of $83.0 million from the Extended Program, as discussed above. Cash generated by operations varies during the year due to customer billings, and timing of collections and contributions to our benefit plans.

Current wording

During the nine months ended September 30, 2024, we generated cash flow from operations of $222.8 million compared to $143.5 million for the same period in 2023. The increase in the first nine months of 2024 as compared to the same period in 2023 is primarily due to the net receipt of $57.9 million from the Extended Program, as discussed above. Cash generated by operations varies during the year due to customer billings, and timing of collections and contributions to our benefit plans.

Previous wording

The increase in net income for the six months ended June 30, 2024 as compared to the same period from prior year was primarily due to the recording of $127.9 million of operating revenue for the MWRAM and IRMA during the first six months of 2024 due to the resolution of the 2021 GRC. There was an associated increase to regulatory assets related to MWRAM and IRMA operating revenue. The Company intends to begin billing for the recovery of these regulatory assets in the fourth quarter of 2024.

Current wording

The increase in net income for the nine months ended September 30, 2024 as compared to the same period from prior year was primarily due to the recording of $118.4 million of operating revenue for the MWRAM and IRMA during the first nine months of 2024 due to the resolution of the 2021 GRC. There was an associated increase to regulatory assets related to MWRAM and IRMA operating revenue. The Company has started billing for the recovery of these regulatory assets in the fourth quarter of 2024.

Previous wording

During the six months ended June 30, 2024, we made cash contributions of $0.2 million to our employee pension plan and did not make any cash contribution to our other postretirement benefit plans. During the six months ended June 30, 2023, we made cash contributions of $2.9 million and $0.2 million, respectively, to our pension plans and to our other postretirement benefit plans. The 2024 estimated cash contribution to the pension plans and other postretirement benefits plans are expected to be approximately $0.7 million and $0.2 million, respectively.

Current wording

During the nine months ended September 30, 2024, we made cash contributions of $0.4 million to our employee pension plan and did not make any cash contribution to our other postretirement benefit plans. During the nine months ended September 30, 2023, we made cash contributions of $2.9 million and $0.2 million, respectively, to our pension plans and to our other postretirement benefit plans. The 2024 estimated cash contribution to the pension plans and other postretirement benefits plans are expected to be approximately $0.7 million and $0.2 million, respectively.

Previous wording

The water business is seasonal. Billed revenue is lower in the cool, wet winter months when less water is used compared to the warm, dry summer months when water use is highest. This seasonality results in the possible need for short-term borrowings under the bank lines of credit in the event cash is not sufficient to cover operating costs during the winter period. The increase in cash flow during the summer allows for a pay down of short-term borrowings. Customer water usage can be lower than normal in years when more than normal precipitation falls in our service areas or temperatures are lower than normal, especially in the summer months. The reduction in water usage reduces cash flow from operations and increases the need for short-term bank borrowings.

Current wording

The water business is seasonal. Billed revenue is lower in the cool, wet winter months when less water is used compared to the warm, dry summer months when water use is highest. This seasonality results in the possible need for short-term borrowings under our bank lines of credit in the event cash is not sufficient to cover operating costs during the winter period. The increase in cash flow during the summer allows for a pay down of short-term borrowings. Customer water usage can be lower than normal in years when more than normal precipitation falls in our service areas or temperatures are lower than normal, especially in the summer months. The reduction in water usage reduces cash flow from operations and increases the need for short-term bank borrowings.

Previous wording

During the six months ended June 30, 2024 and 2023, we used $214.4 million and $177.2 million, respectively, of cash for Company-funded and developer-funded utility capital expenditures. Cash used in investing activities fluctuates each year largely due to the availability of construction resources and our ability to obtain construction permits in a timely manner. For 2024, our utility capital expenditures are estimated to be $365.0 million, which excludes an estimated $20.0 million of developer-funded capital expenditures.

Current wording

During the nine months ended September 30, 2024 and 2023, we used $332.2 million and $274.1 million, respectively, of cash for Company-funded and developer-funded utility capital expenditures. Cash used in investing activities fluctuates each year largely due to the availability of construction resources and our ability to obtain construction permits in a timely manner. For 2024, our utility capital expenditures are estimated to be $365.0 million, which excludes an estimated $20.0 million of developer-funded capital expenditures.

Previous wording

Net cash provided by financing activities for the six months ended June 30, 2024 was $91.1 million compared to $144.4 million for the same period in 2023. For 2024, this includes our issuance of $52.0 million of Company common stock through our at-the-market equity program and $1.4 million through our employee stock purchase plan. For 2023, this includes our issuance of $112.7 million of Company common stock through our at-the-market equity program and $1.2 million through our employee stock purchase plan.

Current wording

Net cash provided by financing activities for the nine months ended September 30, 2024 was $132.3 million compared to $120.1 million for the same period in 2023. For 2024, this includes issuance of $86.5 million of Company common stock through our at-the-market equity program and $1.9 million through our employee stock purchase plan. For 2023, this includes issuance of $112.7 million of Company common stock through our at-the-market equity program and $1.8 million through our employee stock purchase plan.

Previous wording

During the six months ended June 30, 2024 and 2023, we borrowed $295.0 million and $150.0 million, respectively, on our unsecured revolving credit facilities. We made repayments on our unsecured revolving credit facilities of $230.0 million and $90.0 million during the six months ended June 30, 2024 and 2023, respectively. During the six months ended June 30, 2023, we also paid $1.6 million in issuance costs for the Company and Cal Water facilities entered into on March 31, 2023.

Current wording

During the nine months ended September 30, 2024 and 2023, we borrowed $370.0 million and $165.0 million, respectively, on our unsecured revolving credit facilities. We made repayments on our unsecured revolving credit facilities of $290.0 million and $120.0 million during the nine months ended September 30, 2024 and 2023, respectively. During the nine months ended September 30, 2023, we also paid $1.6 million in issuance costs for the Company and Cal Water facilities entered into on March 31, 2023.

Previous wording

The net IRMA, MWRAM, WRAM and Modified Cost Balancing Account receivable balances were $134.2 million and $91.6 million as of June 30, 2024 and 2023, respectively. The receivable balances were primarily financed by Cal Water using short-term and long-term financing arrangements to meet operational cash requirements. Interest on the receivable balances, which represents the interest recoverable from customers, is limited to the then-current 90-day commercial paper rates, which typically are significantly lower than Cal Water’s short and long-term financing rates.

Current wording

The net IRMA, MWRAM, WRAM and Modified Cost Balancing Account receivable balances were $116.7 million and $75.2 million as of September 30, 2024 and 2023, respectively. The receivable balances were primarily financed by Cal Water using short-term financing arrangements to meet operational cash requirements. Interest on the receivable balances, which represents the interest recoverable from customers, is limited to the then-current 90-day commercial paper rates, which typically are significantly lower than Cal Water’s short-term financing rates.

Previous wording

During the six months ended June 30, 2024, we utilized cash generated from operations and temporary borrowings on our previous unsecured revolving credit facilities to fund operations and capital investments.

Current wording

During the nine months ended September 30, 2024, we utilized cash generated from operations and temporary borrowings on our unsecured revolving credit facilities to fund operations and capital investments.

Previous wording

As of June 30, 2024 and December 31, 2023, short-term borrowings of $245.0 million and $180.0 million, respectively, were outstanding on the Company and Cal Water facilities.

Current wording

As of September 30, 2024 and December 31, 2023, short-term borrowings of $260.0 million and $180.0 million, respectively, were outstanding on the Company and Cal Water facilities.