AMERICAN STATES WATER CO

Previous wording

AWR uses earnings per share by business segment as an important measure in evaluating its operating results and believes it provides investors with clarity surrounding the performance of its segments. AWR reviews this measurement regularly and compares it to historical periods and to its operating budget. A reconciliation to AWR’s consolidated diluted earnings per share prepared in accordance with GAAP is included in the discussion under the section titled“Summary of First Quarter Results by Segment.”

Current wording

AWR uses earnings per share by business segment as an important measure in evaluating its operating results and believes it provides investors with clarity surrounding the performance of its segments. AWR reviews this measurement regularly and compares it to historical periods and to its operating budget. A reconciliation to AWR’s consolidated diluted earnings per share prepared in accordance with GAAP is included in the discussion under the section titled“Summary of Second Quarter Results by Segment.”

Previous wording

The U.S. government has recently announced a comprehensive set of tariffs. The U.S. government has paused the implementation of certain of these tariffs, and the timing and scope of such tariffs is currently uncertain. Such tariffs could impact our results of operations by increasing the costs of various goods, including construction materials. The impact of such tariffs is subject to uncertainties regarding the timing of their implementation, the magnitude of such tariffs and possible exemption for certain goods, among other uncertainties.

Current wording

The U.S. government announced a comprehensive set of tariffs in the second quarter. Since then, the U.S. government has paused implementation for some of these tariffs. Although certain tariffs have gone into effect, the timing and scope of other tariffs is still currently uncertain. Such tariffs could impact our results of operations by increasing the costs of various goods, including construction materials. The impact of such tariffs is subject to uncertainties regarding the timing of their implementation, the magnitude of such tariffs and possible exemption for certain goods, among other unknowns.

Previous wording

On January 30, 2025, the CPUC issued a final decision in GSWC’s general rate case application for all its water regions and the general office, which determines new water rates for the years 2025 - 2027. Among other things, the approved settlement authorizes GSWC to invest approximately $573.1 million in capital infrastructure over the three-year capital cycle. The $573.1 million of infrastructure investment includes $17.7 million of advice letter capital investments to be filed for revenue recovery during the second and third year attrition increases when those projects are completed. In addition, the approved settlement agreement includes $58.2 million of advice letter capital investments that began construction in 2023 that we expect to file for revenue recovery during the second and third year attrition increases when those projects are completed. For all of the advice letter projects, GSWC will be allowed to accrue interest during construction at the adopted cost of debt and recover the full rate of return, including all applicable components of the revenue requirement after the assets are placed in service up until the assets are placed in customer rates. Excluding revenues for all of the advice letter capital projects discussed above, under the terms of the settlement agreement GSWC’s adopted operating revenues less water supply costs for 2025 are projected to increase by approximately $23 million as compared to the 2024 adopted operating revenues less water supply costs.

Current wording

On January 30, 2025, the CPUC issued a final decision in GSWC’s general rate case application for all its water regions and the general office, which determines new water rates for the years 2025 - 2027. Among other things, the approved settlement authorizes GSWC to invest approximately $573.1 million in capital infrastructure over the three-year capital cycle. The $573.1 million of infrastructure investment includes $17.7 million of advice letter capital investments to be filed for revenue recovery during the second and third year attrition increases when those projects are completed. In addition, the approved settlement agreement includes $58.2 million of advice letter capital investments that began construction in 2023 that we expect to file for revenue recovery during the second and third year attrition increases when those projects are completed. For all of the advice letter projects, GSWC will be allowed to accrue interest during construction at the adopted cost of debt and recover the full rate of return, including all applicable components of the revenue requirement after the assets are placed in service up until the assets are formally included in customer rate calculations. Excluding revenues for all of the advice letter capital projects discussed above, under the terms of the settlement agreement GSWC’s adopted operating revenues less water supply costs for 2025 are projected to increase by approximately $23 million as compared to the 2024 adopted operating revenues less water supply costs.

Previous wording

The final decision also addressed GSWC’s request for various regulatory mechanisms that were litigated during the proceeding. Among other things, the final decision rejected GSWC’s request for the continuation of a full sales and revenue decoupling mechanism such as the WRAM and a full cost balancing account for water supply such as the MCBA, and instead orders GSWC to transition to a modified rate adjustment mechanism (a Monterey-style WRAM or “M-WRAM”) and an incremental cost balancing account (“ICBA”) for supply costs. The final decision also adopted GSWC’s M-WRAM rate design proposal, authorizing GSWC to increase the revenue requirement in its fixed service charges to between 45-48% of the revenue requirement depending on the ratemaking area representing approximately 65% of GSWC’s fixed costs in aggregate. The M-WRAM tracks the difference between the revenue based on actual metered sales through a tiered volumetric rate and the revenue that would have been received with the same actual metered sales if a blended tier standard quantity rate had been in effect. The ICBA for supply costs tracks differences between the authorized per-unit prices of water production costs and actual per-unit prices of water production costs. The M-WRAM and ICBA were effective January 1, 2025. GSWC will not be able to recognize under-collections of revenue caused by fluctuations in consumption or changes in water supply cost mix beginning in 2025. However, the final decision did approve GSWC’s request for the continuation of a sales reconciliation mechanism, which would allow GSWC to adjust its sales forecast throughout the general rate case cycle to address significant fluctuations in consumption.

Current wording

The final decision also addressed GSWC’s request for various regulatory mechanisms that were litigated during the proceeding. Among other things, the final decision rejected GSWC’s request for the continuation of a full sales and revenue decoupling mechanism such as the WRAM and a full cost balancing account for water supply such as the MCBA, and instead orders GSWC to transition to a modified rate adjustment mechanism (a Monterey-style WRAM or “M-WRAM”) and an incremental cost balancing account (“ICBA”) for supply costs. The final decision also adopted GSWC’s M-WRAM rate design proposal, authorizing GSWC to increase the revenue requirement in its fixed service charges to between 45-48% of the revenue requirement depending on the ratemaking area representing approximately 65% of GSWC’s fixed costs in aggregate. The M-WRAM tracks the difference between the revenue based on actual metered sales through a tiered volumetric rate and the revenue that would have been received with the same actual metered sales if a standard quantity rate had been in effect. The ICBA for supply costs tracks differences between the authorized per-unit prices of water production costs and actual per-unit prices of water production costs. The M-WRAM and ICBA were effective January 1, 2025. GSWC will not be able to recognize under-collections of revenue caused by fluctuations in consumption or changes in water supply cost mix beginning in 2025. However, the final decision did approve GSWC’s request for the continuation of a sales reconciliation mechanism, which would allow GSWC to adjust its sales forecast throughout the general rate case cycle to address significant fluctuations in consumption.

Previous wording

On March 5, 2025, GSWC filed an application for rehearing of the CPUC’s decision in the 2025-2027 general rate case, asserting that the final decision’s denial of GSWC’s revenue decoupling proposal was not supported by the record. At this time, management cannot predict the outcome of this matter.

Current wording

On March 5, 2025, GSWC filed an application for rehearing of the CPUC’s decision in the 2025-2027 general rate case, asserting that the final decision’s denial of GSWC’s revenue decoupling proposal was not supported by the record. On May 16, 2025, the CPUC issued a decision denying GSWC’s application for rehearing. However, GSWC, along with four other water investor-owned utilities in California, are supporting Senate Bill (“SB”) 473, which has been authored by one of California’s state senators and is being sponsored by the California Water Association. SB 473 seeks to align the regulated water utilities with the regulated electric utilities by making revenue decoupling mandatory and not at the discretion of the CPUC. SB 473 is still progressing through the legislative process and, at this time, management cannot predict the final outcome of this matter.

Previous wording

The new 2025 rates and the implementation of the new M-WRAM and ICBA regulatory mechanisms approved in the final decision have been reflected in GSWC’s earnings for the three months ended March 31, 2025 that resulted in an increase in recorded revenues of $11.7 million largely from the new rates and an increase in recorded water supply costs of $4.0 million, which combined is an increase of $7.7 million, compared to the same period in 2024. GSWC’s earnings during the first quarter of 2025 were favorably impacted by an actual water supply source mix that included less purchased water than what was authorized in the general rate case and included in the revenue requirement. Generally, the variable cost of producing water from wells is less than the cost of water purchased from wholesale suppliers. GSWC obtains its water supplies from a variety of sources, which vary among its water systems and will fluctuate depending on the available source. Furthermore, the demand for water varies by season. For instance, water consumption tends to be higher during the third quarter of each year when weather in California is hotter and dryer. During cooler periods, such as the first quarter, GSWC’s customers generally use less water, and as a result, GSWC’s pumped water sources are capable of meeting a greater portion of customer demand. Therefore, the favorable water supply source mix experienced during the first quarter may or may not continue during the remainder of the 2025 year, and without a full cost balancing account for water supply, GSWC’s earnings will be subject to future volatility as a result of favorable and unfavorable changes in the water supply source mix compared to the adopted mix incorporated in the revenue requirement.

Current wording

The new 2025 rates and the implementation of the new M-WRAM and ICBA regulatory mechanisms approved in the final decision have been reflected in GSWC’s earnings for the six months ended June 30, 2025 that resulted in an increase in recorded revenues of $21.0 million largely from the new rates and an increase in recorded water supply costs of $8.2 million, which combined is an increase of $12.8 million, compared to the same period in 2024. GSWC’s earnings during the six months of 2025 were favorably impacted by an actual water supply source mix that included less purchased water than what was authorized in the general rate case and included in the revenue requirement. Generally, the variable cost of producing water from wells is less than the cost of water purchased from wholesale suppliers. GSWC obtains its water supplies from a variety of sources, which vary among its water systems and will fluctuate depending on the available source. Furthermore, the demand for water varies by season. For instance, water consumption tends to be higher during the third quarter of each year when weather in California is hotter and dryer. During cooler periods, such as the first six months, GSWC’s customers generally use less water, and as a result, GSWC’s pumped water sources are capable of meeting a greater portion of customer demand. Therefore, the favorable water supply source mix experienced during the first six months may or may not continue during the remainder of the 2025 year, and without a full cost balancing account for water supply, GSWC’s earnings will be subject to future volatility as a result of favorable and unfavorable changes in the water supply source mix compared to the adopted mix incorporated in the revenue requirement.

Previous wording

Investor-owned water utilities serving California are required to file their cost of capital applications on a triennial basis. After receiving an extension in February 2024, GSWC’s next cost of capital application was scheduled to be filed on May 1, 2025 effective for the years 2026 - 2028. On January 14, 2025, the CPUC approved a request to defer the cost of capital application by another year. In December 2024, GSWC, along with three other investor-owned California water utilities, requested a further extension of the date by which each of them must file their cost of capital applications. The CPUC’s approval postponed this filing date by one year until May 1, 2026, with a corresponding effective date of January 1, 2027. The CPUC also approved the joint parties’ request to leave the current WCCM in place through the one-year deferral period. GSWC’s current authorized rate of return on rate base is 7.93%, based on its weighted cost of capital, which will continue in effect through December 31, 2026. The 7.93% return on rate base includes a return on equity of 10.06%, an embedded cost of debt of 5.1%, and a capital structure with 57% equity and 43% debt.

Current wording

Investor-owned water utilities serving California are required to file their cost of capital applications on a triennial basis. In December 2024, GSWC, along with three other investor-owned California water utilities, requested a further extension of the date by which each of them must file their cost of capital applications. On January 14, 2025, the CPUC approved the request to defer the cost of capital application by another year. The CPUC’s approval postponed this filing date by one year until May 1, 2026, with a corresponding effective date of January 1, 2027. The CPUC also approved the joint parties’ request to leave the current WCCM in place through the one-year deferral period. GSWC’s current authorized rate of return on rate base is 7.93%, based on its weighted cost of capital, which will continue in effect through December 31, 2026. The 7.93% return on rate base includes a return on equity of 10.06%, an embedded cost of debt of 5.1%, and a capital structure with 57% equity and 43% debt.

Previous wording

The new electric rates were implemented on March 1, 2025. BVES was also authorized by the CPUC to establish a general rate case memorandum account that made the new rates retroactive to January 1, 2023. Due to the delay in finalizing the electric general rate case, billed electric revenues for the years 2023 and 2024, were based on 2022 adopted rates. The general rate case memorandum account tracks the revenue differences between the 2022 adopted rates and the 2023 and 2024 new rates authorized by the CPUC for future recovery. As of March 31, 2025, the aggregate cumulative under-collection in retroactive revenues related to the full year of 2023 and 2024 amounted to $10.0 million. On April 1, 2025, BVES implemented surcharges to recover the retroactive amounts accumulated related to the new rates, as well as recovery of incremental operating costs incurred prior to 2023 in connection with BVES’s wildfire mitigation plans that were being tracked in memorandum accounts prior to the new rate cycle.

Current wording

The new electric rates were implemented on March 1, 2025. BVES was also authorized by the CPUC to establish a general rate case memorandum account that made the new rates retroactive to January 1, 2023. Due to the delay in finalizing the electric general rate case, billed electric revenues for the years 2023 and 2024, were based on 2022 adopted rates. The general rate case memorandum account tracks the revenue differences between the 2022 adopted rates and the 2023 and 2024 new rates authorized by the CPUC for future recovery. As of June 30, 2025, the aggregate cumulative under-collection in retroactive revenues related to the full year of 2023 and 2024 amounted to $9.6 million. On April 1, 2025, BVES implemented surcharges to recover the retroactive amounts accumulated related to the new rates, as well as recovery of incremental operating costs incurred prior to 2023 in connection with BVES’s wildfire mitigation plans that were being tracked in memorandum accounts prior to the new rate cycle.

Previous wording

The final decision will also provide for an increase in adopted operating revenues of $2.2 million for 2025 and $3.3 million in 2026. The rate increases for 2024 - 2026 are not subject to an earnings test. Furthermore, the previously mentioned advice letter projects of at least $23.1 million are expected to generate additional annual operating revenues of approximately $3 million when the respective projects are completed, placed in service, and filed for recovery in customer rates. These projects also accrue AFUDC during construction that will further increase the revenue requirement. In the settlement agreement, the parties agreed to remove portions of the requested capital budgets from rates until they were completed and placed in service. For all of the advice letter projects, BVES will be allowed to accrue AFUDC during the construction period at the adopted rate of return, which will be added to the cost of the assets and recovered in customer rates when the assets are placed in service. On April 1, 2025, BVES implemented new base rates to recover the revenue requirement associated with $11.6 million of capital projects approved for recovery through advice letters.

Current wording

The final decision provides for an increase in adopted operating revenues of $2.2 million for 2025 and $3.3 million in 2026. The rate increases for 2024 - 2026 are not subject to an earnings test. Furthermore, the previously mentioned advice letter projects of at least $23.1 million are expected to generate additional annual operating revenues of approximately $3 million when the respective projects are completed, placed in service, and filed for recovery in customer rates. These projects also accrue AFUDC during construction that will further increase the revenue requirement. In the settlement agreement, the parties agreed to remove portions of the requested capital budgets from rates until they were completed and placed in service. For all of the advice letter projects, BVES will be allowed to accrue AFUDC during the construction period at the adopted rate of return, which will be added to the cost of the assets and recovered in customer rates when the assets are placed in service. Thus far, on April 1, 2025, BVES implemented new base rates to recover the revenue requirement associated with $11.6 million of capital projects approved for recovery through advice letters.

Previous wording

The table below sets forth the first quarter diluted earnings per share by business segment and for the parent company:

Current wording

The table below sets forth the second quarter diluted earnings per share by business segment and for the parent company:

Previous wording

For the three months ended March 31, 2025, AWR’s recorded consolidated diluted earnings were $0.70 per share, as compared to $0.62 per share for the same period in 2024, an increase of $0.08 per share, primarily generated from higher earnings at the water and electric utility segments. Included in AWR’s consolidated results during the first quarter of 2025 were losses of $0.6 million, or $0.01 per share, generated on investments held to fund one of the Company’s retirement plans as compared to gains of $2.1 million, or $0.04 per share, recorded during the same period in 2024, a net unfavorable variance of $0.05 per share due to financial market conditions. In addition, AWR’s consolidated diluted earnings for the first quarter of 2025 were negatively impacted by approximately $0.02 per share due to the dilutive effects from the issuance of equity under AWR’s at-the-market (“ATM”) offering program.

Current wording

For the three months ended June 30, 2025, AWR’s recorded consolidated diluted earnings were $0.87 per share, as compared to $0.85 per share for the same period in 2024, an increase of $0.02 per share, primarily generated from higher earnings at the water and electric utility segments, partially offset by timing differences in construction activities that resulted in lower earnings at the contracted services segment. Included in AWR’s consolidated results during the second quarter of 2025 were gains of $2.7 million, or $0.05 per share, generated on investments held to fund one of the Company’s retirement plans as compared to gains of $1.0 million, or $0.02 per share, recorded during the same period in 2024, a net favorable variance of $0.03 per share due to financial market conditions. In addition, AWR’s consolidated diluted earnings for the second quarter of 2025 were negatively impacted by approximately $0.03 per share due to the continued dilutive effects from the issuance of equity under AWR’s at-the-market (“ATM”) offering program.

Previous wording

•An increase in water supply costs of $4.0 million, which consist of purchased water, purchased power for pumping, groundwater production assessments and changes in the water supply cost balancing accounts. The increase in water supply costs compared to the same period in 2024 is primarily related to an increase in customer water usage and higher overall water per-unit water supply costs. As a result of transitioning from a full cost balancing account for water supply to the ICBA, GSWC’s earnings during the first quarter of 2025 were favorably impacted by an actual water supply source mix that included less purchased water than what was authorized in the general rate case and included in the revenue requirement. During the first quarter, GSWC’s pumped water sources, which cost less than purchased water, were capable of meeting a greater portion of customer demand when compared to a higher purchased water mix being recovered in the new adopted rates. GSWC’s earnings will be subject to future volatility as a result of favorable and unfavorable changes in the water supply source mix compared to the adopted mix incorporated in the revenue requirement.

Current wording

•An increase in water supply costs of $4.2 million, which consist of purchased water, purchased power for pumping, groundwater production assessments and changes in the water supply cost balancing accounts. The increase in water supply costs compared to the same period in 2024 is largely due to an increase in the overall per-unit water supply costs. As a result of transitioning from a full cost balancing account for water supply to the ICBA, GSWC’s earnings during the second quarter of 2025 were favorably impacted by an actual water supply source mix that included less purchased water than what was authorized in the general rate case and included in the revenue requirement. During the second quarter, GSWC’s pumped water sources, which cost less than purchased water, were capable of meeting a greater portion of customer demand when compared to a higher purchased water mix being recovered in the new adopted rates. However, the favorable water supply source mix experienced during the second quarter may or may not continue during the remainder of the 2025 year, and without a full cost balancing account for water supply, GSWC’s earnings will be subject to future volatility as a result of favorable and unfavorable changes in the water supply source mix compared to the adopted mix incorporated in the revenue requirement.

Previous wording

•An overall decrease in other income (net of other expense) of $2.7 million due largely to losses totaling $0.6 million generated on investments held to fund one of the company’s retirement plans during the three months ended March 31, 2025, as compared to gains on investments of $2.1 million recorded during the same period in 2024 due to financial market conditions.

Current wording

•An overall increase in other income (net of other expense) of $1.7 million due largely to gains totaling $2.7 million generated on investments held to fund one of the company’s retirement plans during the three months ended June 30, 2025, as compared to gains on investments of $1.0 million recorded during the same period in 2024 due to financial market conditions.

Previous wording

Diluted earnings from the electric utility segment increased $0.02 per share for the first quarter of 2025 as compared to the same period in 2024 largely resulting from an increase in revenues from third-year electric rate increases implemented in 2025 as a result of receiving a final decision from the CPUC in connection with BVES’s general rate case proceeding that set new rates for 2023 - 2026 (retroactive to January 1, 2023), as compared to 2022 rates used to record revenue during the same period of 2024. The new rates resulted in an increase in electric revenues that supports, among other things, the growth in rate base and higher operating costs related to BVES’s wildfire mitigation plans that were previously not included in customer rates and not expensed during the first quarter of 2024 because they were being tracked in memorandum accounts. Therefore, the increase in revenues was partially offset by overall increases in operating expenses due, in large part, to higher expenses recorded in connection with BVES’s vegetation management and other wildfire mitigation plans, as well as an increase in outside services related to various regulatory filings.

Current wording

The new rates resulted in an increase in electric revenues that supports, among other things, the growth in rate base and higher operating costs related to BVES’s wildfire mitigation plans that were previously not included in customer rates and not expensed during the second quarter of 2024 because they were being tracked in memorandum accounts. Therefore, the increase in revenues was partially offset by overall increases in operating expenses due, in large part, to higher expenses recorded in connection with BVES’s vegetation management and other wildfire mitigation activities, as well as an increase in outside services related to various regulatory filings.

Previous wording

For the three months ended March 31, 2025, diluted losses from AWR (parent) decreased by $0.01 per share when compared to the same period in 2024 due largely to a decrease in interest expense resulting from lower average interest rates and lower borrowing levels under AWR’s credit facility.

Current wording

For the three months ended June 30, 2025, diluted losses from AWR (parent) decreased by $0.01 per share when compared to the same period in 2024 due largely to a decrease in interest expense resulting from lower average interest rates, partially offset by higher borrowing levels under AWR’s credit facility.

Previous wording

For the three months ended March 31, 2025, recorded diluted earnings from the water utility segment were $0.52 per share, as compared to $0.48 per share for the same period in 2024, an increase of $0.04 per share. The discussion below presents the major variances in earnings for the two periods, which resulted in a net overall increase in earnings at the water segment of $0.04 per share for the first quarter of 2025.

Current wording

For the six months ended June 30, 2025, recorded diluted earnings from the water utility segment were $1.25 per share, as compared to $1.15 per share for the same period in 2024, an increase of $0.10 per share. The discussion below presents the major variances in earnings for the two periods, which resulted in a net overall increase in earnings at the water segment of $0.10 per share for the six months ended June 30, 2025.

Previous wording

•An increase in water operating revenues of $11.7 million largely as a result of the CPUC-approved new rate increases effective January 1, 2025 in connection with the recently approved general rate case. Billed water consumption for the first quarter of 2025 approximated consumption levels adopted in the new 2025 rates and, therefore, GSWC’s transition from a full revenue decoupling mechanism to the M-WRAM did not have a material impact to revenues recorded during the first quarter. GSWC’s revenues and earnings will be subject to future volatility as a result of significant fluctuations in customer consumption compared to adopted levels.

Current wording

•An increase in water operating revenues of approximately $21.0 million largely as a result of the CPUC-authorized new rate increases effective January 1, 2025 in connection with the approved general rate case. GSWC transitioned from a full revenue decoupling mechanism to the M-WRAM effective January 1, 2025. As a result, GSWC’s revenues and earnings may be subject to future volatility as a result of significant fluctuations in customer consumption compared to adopted levels.

Previous wording

•An overall increase in operating expenses of $2.1 million (excluding supply costs) due primarily to increases in (i) overall labor costs and other employee-related benefits, (ii) administrative and general expenses resulting largely from higher regulatory costs related to various regulatory filings, and an increase in insurance-related costs, (iii) maintenance expense, (iv) depreciation and amortization expenses, which is impacted by the increasing capital expenditures and are reflected and recovered in customer rates, and (v) property and other non-income taxes.

Current wording

•An overall increase in operating expenses of $5.2 million (excluding supply costs) mainly due to increases in (i) overall labor costs and other employee-related benefits, (ii) other operation-related costs largely from an increase in chemicals and water treatment costs, (iii) maintenance expense, (iv) administrative and general expenses resulting largely from higher insurance-related costs, (v) depreciation and amortization expenses, which are impacted by increasing capital additions placed in service and are reflected and recovered in customer rates, and (vi) property and other non-income taxes.

Previous wording

Diluted earnings from the contracted services segment were consistent for the quarter when compared to the same period in 2024. The increase in management fee revenues resulting from the commencement of operations in April 2024 at the new bases (Naval Air Station Patuxent River and Joint Base Cape Cod) and the resolution of various economic price adjustments at the legacy bases, was offset by a decrease in construction activity and higher overall operating expenses (excluding construction expenses). During the first quarter of 2025, construction activities were negatively impacted by unfavorable weather conditions, which were less impactful to construction activities during the same period in 2024. The contracted services segment is expected to contribute $0.59 to $0.63 per share for the full 2025 year.

Current wording

Diluted earnings from the contracted services segment decreased $0.06 per share for the six months ended June 30, 2025 as compared to the same period in 2024, largely due to a decrease in construction activity and higher overall operating expenses (excluding construction expenses), partially offset by (i) an increase in management fee revenue resulting from the commencement of operations in April 2024 at the new bases (Naval Air Station Patuxent River and Joint Base Cape Cod) and the resolution of various economic price adjustments, and (ii) lower interest expense from lower borrowing levels. During the six months ended June 30, 2025, construction activities were negatively impacted by unfavorable weather conditions and timing, which were less impactful to construction activities during the same period of 2024. Furthermore, there was a decrease in earnings of approximately $0.01 per share due to the dilutive effects from the issuance of equity under AWR’s ATM offering program previously discussed. However, the contracted services segment is still expected to contribute $0.59 to $0.63 per share for the full 2025 year.

Previous wording

The following discussion and analysis for the three months ended March 31, 2025 and 2024 provide information on AWR’s consolidated operations and assets and, where necessary, includes specific references to AWR’s individual segments and subsidiaries: GSWC, BVES and ASUS and its subsidiaries.

Current wording

The following discussion and analysis for the three and six months ended June 30, 2025 and 2024 provides information on AWR’s consolidated operations and, where necessary, includes specific references to AWR’s individual segments and subsidiaries: GSWC, BVES, and ASUS and its subsidiaries.

Previous wording

For the three months ended March 31, 2025, revenues from water operations increased by $11.7 million to $102.0 million as compared to the same period in 2024. The increase in water revenues during the first quarter of 2025 is primarily a result of the CPUC-approved new 2025 rate increases effective January 1, 2025 in connection with the recently approved general rate case, as well as an increase in water consumption compared to the same period in 2024. Billed water consumption for thefirst quarter of 2025 washigher by 12.0% as compared to the same period in 2024 due to lower amounts of seasonal precipitation as compared tofirst quarter of 2024. Billed water consumption for the first quarter of 2025 approximated consumption levels adopted in the new 2025 rates and, therefore, GSWC’s transition from a full revenue decoupling mechanism to the M-WRAM did not have a material impact to revenues recorded during the first quarter. GSWC’s revenues and earnings will be subject to future volatility as a result of significant fluctuations in customer consumption compared to adopted levels.

Current wording

For the three months ended June 30, 2025, revenues from water operations increased by $9.3 million to $119.7 million as compared to the same period in 2024. The increase in water revenues during the second quarter of 2025 is primarily a result of the CPUC-approved new 2025 rate increases effective January 1, 2025 in connection with the recently approved general rate case, as well as an increase in water consumption compared to the same period in 2024. Billed water consumption for thesecond quarter of 2025 washigher by 8.5% as compared to the same period in 2024 due to lower amounts of seasonal precipitation as compared tosecond quarter of 2024. Without having a full revenue decoupling mechanism, GSWC’s revenues and earnings will be subject to future volatility as a result of significant fluctuations in customer consumption compared to adopted levels.

Previous wording

Electric revenues for the three months ended March 31, 2025 increased by $2.8 million to $15.0 million largely resulting from an increase in revenues from third-year electric rate increases implemented in 2025, as compared to 2022 rates used to record revenue during the same period of 2024. A final decision from the CPUC issued in January 2025 in connection with BVES’s general rate case proceeding set new rates for 2023 - 2026 (retroactive to January 1, 2023).

Current wording

Electric revenues for the three months ended June 30, 2025 increased by $4.2 million to $12.9 million largely resulting from an increase in revenues from third-year electric rate increases implemented in 2025, as compared to 2022 rates used to record revenue during the same period of 2024. A final decision from the CPUC issued in January 2025 in connection with BVES’s general rate case proceeding set new rates for 2023 - 2026 (retroactive to January 1, 2023).

Previous wording

Electric usage for thefirst quarter of 2025 was 0.7% higher than the same period in 2024. Due to the CPUC-approved Base Revenue Requirement Adjustment Mechanism, which adjusts certain revenues to adopted levels authorized by the CPUC, changes in usage do not have a significant impact on earnings.

Current wording

Electric usage for thesecond quarter of 2025 was 2.6% lower than the same period in 2024. Due to the CPUC-approved Base Revenue Requirement Adjustment Mechanism, which adjusts certain revenues to adopted levels authorized by the CPUC, changes in usage do not have a significant impact on earnings.

Previous wording

Total supply costs at the regulated utilities comprise the largest portion of total consolidated operating expenses. Supply costs accounted for approximately 28.8% and 26.1% of total operating expenses for the three months ended March 31, 2025 and 2024, respectively.

Current wording

Total supply costs at the regulated utilities comprise the largest portion of total consolidated operating expenses. Supply costs accounted for approximately 32.9% and 31.1% of total operating expenses for the three months ended June 30, 2025 and 2024, respectively.

Previous wording

Two of the principal factors affecting water supply costs are the amount of water produced and the source of the water. Generally, the variable cost of producing water from wells is less than the cost of water purchased from wholesale suppliers. The overall actual percentages of purchased water for the three months ended March 31, 2025 and 2024 were 39.6% and 40.5%, respectively.

Current wording

Two of the principal factors affecting water supply costs are the amount of water produced and the source of the water. Generally, the variable cost of producing water from wells is less than the cost of water purchased from wholesale suppliers. The overall actual percentages of purchased water for the three months ended June 30, 2025 and 2024 were 43.2% and 40.9%, respectively.

Previous wording

Since its implementation in 2008, the previously CPUC-approved MCBA, GSWC was able to track adopted and actual expense levels for purchased water, power purchased for pumping and pump taxes. GSWC recorded the variances (which include the effects of changes in both rate and volume) between adopted and actual purchased water, purchased power and pump tax expenses as a regulatory asset or liability. GSWC recovered from, or refunded to, customers the amount of such variances. Without the MCBA mechanism in place beginning in 2025, there may be volatility to Registrant’s earnings as a result of changes in water supply source mix. The MCBA has been replaced with an incremental supply cost balancing account that will not include the impact from changes in water supply source mix compared to the adopted mix incorporated in the revenue requirement, but allows GSWC to track differences between the authorized per-unit prices of water production costs and actual per-unit prices of water production costs.

Current wording

Since the implementation in 2008 of the previously CPUC-approved MCBA, GSWC was able to track adopted and actual expense levels for purchased water, power purchased for pumping and pump taxes. GSWC recorded the variances (which include the effects of changes in both rate and volume) between adopted and actual purchased water, purchased power and pump tax expenses as a regulatory asset or liability. GSWC recovered from, or refunded to, customers the amount of such variances. Without the MCBA mechanism in place, beginning in 2025, there may be volatility to Registrant’s earnings as a result of changes in water supply source mix. The MCBA has been replaced with an incremental supply cost balancing account that will not include the impact from changes in water supply source mix compared to the adopted mix incorporated in the revenue requirement, but allows GSWC to track differences between the authorized per-unit prices of water production costs and actual per-unit prices of water production costs.

Previous wording

Purchased water costs for the first quarter of 2025 increased to $16.3 million as compared to $13.8 million for the same period in 2024 primarily due to an increase in wholesale water costs. There was also an overall increase in well production costs compared to the same period in 2024 due to an increase in customer water usage, which increases power purchased for pumping and groundwater production assessments, and higher overall per-unit water supply costs. The increases to water production costs were also a result of increases in electricity provider rates and increases in pump tax rates.

Current wording

Purchased water costs for the second quarter of 2025 increased to $23.9 million as compared to $18.0 million for the same period in 2024 primarily due to an increase in wholesale water costs. There was also an overall increase in well production costs compared to the same period in 2024 due to an increase in customer water usage, which increases power purchased for pumping and groundwater production assessments, and higher overall per-unit water supply costs. The increases to water production costs were also a result of increases in electricity provider rates and increases in pump tax rates.

Previous wording

For the three months ended March 31, 2025, the cost of power purchased for resale to BVES’s electric customers increased by $1.7 million to $6.1 million as compared to $4.3 million during the same period in 2024 due to higher overall average prices per megawatt-hour that include all fixed costs. The change in the electric supply cost balancing account in 2025 when compared to 2024 is also due to increases in energy prices.

Current wording

For the three months ended June 30, 2025, the cost of power purchased for resale to BVES’s electric customers increased by $2.0 million to $3.5 million as compared to $1.5 million during the same period in 2024 due to higher overall average prices per megawatt-hour that include all fixed costs. The change in the electric supply cost balancing account in 2025 when compared to 2024 is also due to increases in energy prices.

Previous wording

Administrative and general expenses increased at the electric segment due primarily to higher outside-services costs incurred related to BVES’s wildfire mitigation plans and various other regulatory filings. Higher expenses of $0.3 million related to the wildfire mitigation plans are reflected and recovered in the new customer rates implemented in 2025. As previously mentioned, costs to support BVES’s wildfire mitigation plan were not included in customer rates and not expensed during the first quarter of 2024 because they were being tracked in memorandum accounts prior to receiving the approved general rate case decision in January 2025.

Current wording

Administrative and general expenses increased at the electric segment due primarily to higher outside-services costs incurred related to BVES’s wildfire mitigation activities and various regulatory filings. Higher expenses related to the wildfire mitigation activities are reflected and recovered in the new customer rates implemented in 2025. As previously mentioned, costs to support BVES’s wildfire mitigation plans were not included in customer rates and not expensed during the second quarter of 2024 because they were being tracked in memorandum accounts prior to receiving the approved general rate case decision in January 2025. In addition, there was an increase of $0.6 million in billed surcharges to recover previously incurred costs that had been tracked in CPUC-authorized memorandum accounts. Increases in revenues from billed surcharges have a corresponding and offsetting increase in administrative and general expenses, resulting in no impact to earnings.

Previous wording

Depreciation and amortization expense increased at the water and contracted services segments due largely to capital additions to utility plant and other fixed assets.

Current wording

Depreciation and amortization expense increased at the water and contracted services segments due largely to capital additions to utility plant and other fixed assets placed in service.

Previous wording

Overall depreciation and amortization expense is consistent at the electric segment due to additions to utility plant and other fixed assets that was largely offset by an overall lower composite depreciation rate supported by the latest depreciation study adopted in the final decision in the electric general rate case. The lower adopted depreciation expense levels from the updated study is also reflected in the new revenue requirements, resulting in no significant impact to earnings.

Current wording

Overall depreciation and amortization expense is consistent at the electric segment due to additions to utility plant and other fixed assets placed in service that were largely offset by an overall lower composite depreciation rate supported by the latest depreciation study adopted in the final decision in the electric general rate case. The lower adopted depreciation expense levels from the updated study is also reflected in the new revenue requirements, resulting in no significant impact to earnings.

Previous wording

Overall maintenance expense increased at the water and contracted services segments due to higher planned and unplanned maintenance costs as compared to the same period in 2024 due to timing differences.

Current wording

Overall maintenance expense increased at the water and contracted services segments due to higher maintenance-related activities as compared to the same period in 2024 due to timing.

Previous wording

At the electric segment, higher vegetation management costs contributed to the majority of the increase compared to the same period in 2024. Higher expenses of $0.7 million related to vegetation management costs are reflected and recovered in the new customer rates implemented in 2025. As discussed, vegetation management costs were not previously included in customer rates and not expensed during the first quarter of 2024 because they were being tracked in memorandum accounts prior to receiving the approved general rate case decision in January 2025.

Current wording

At the electric segment, higher vegetation management costs contributed to the majority of the increase compared to the same period in 2024. Higher expenses related to vegetation management costs are reflected and recovered in the new customer rates implemented in 2025. As discussed, vegetation management costs were not previously included in customer rates and not expensed during the second quarter of 2024 because they were being tracked in memorandum accounts prior to receiving the approved general rate case decision in January 2025. In addition, there was an increase of $0.8 million in billed surcharges to recover previously incurred costs that had been tracked in CPUC-authorized memorandum accounts. Increases in revenues from billed surcharges have a corresponding and offsetting increase in maintenance expenses, resulting in no impact to earnings.

Previous wording

For the three months ended March 31, 2025, construction expenses for contracted services were $12.9 million, a decrease of $2.8 million compared to the same period in 2024, primarily resulting from a decrease in construction activity as compared to the same period of 2024 due to timing and weather delays.

Current wording

For the three months ended June 30, 2025, construction expenses for contracted services were $12.9 million, a decrease of $3.3 million compared to the same period in 2024, primarily resulting from a decrease in construction activity as compared to the same period of 2024 due to timing.

Previous wording

AWR’s borrowings consist of revolving credit facilities, while GSWC and BVES borrowings consist of revolving credit facilities and long-term debt issuances. Interest expenses at the regulated utilities decreased as compared to the same period in 2024 resulting primarily from a decrease in interest rates, partially offset by an increase in total borrowing levels to support, among other things, the capital expenditures programs at the regulated utilities. In addition, the decrease in the water segment’s interest expense was also attributed to the CPUC-approved capital memorandum account that allows GSWC to defer the cost of debt related to certain advice letter projects into a memorandum account, which only occurred in 2025. Lastly, there was an overall decrease in average interest rates, which also contributed to the decreases of interest expense at the contracted services segment and AWR parent when compared to the same period in 2024. The overall combined average interest rates were 5.14% and 5.45% for the three months ended March 31, 2025 and 2024, respectively.

Current wording

AWR’s borrowings consist of revolving credit facilities, while GSWC and BVES borrowings consist of revolving credit facilities and long-term debt issuances. Interest expenses at the regulated utilities decreased as compared to the same period in 2024 resulting primarily from a decrease in interest rates, partially offset by an increase in total borrowing levels to support, among other things, the capital expenditures programs at the regulated utilities. In addition, the decrease in the water segment’s interest expense was also attributed to the impact of capitalizing debt costs related to certain advice letter projects approved by the CPUC in the latest general rate case effective January 1, 2025. Lastly, there was an overall decrease in average interest rates, which also contributed to the decreases of interest expense at the contracted services segment and AWR parent when compared to the same period in 2024. The overall combined average interest rates were 5.10% and 5.45% for the three months ended June 30, 2025 and 2024, respectively.

Previous wording

For the three months ended March 31, 2025, interest income decreased at the water segment when compared to the same period in 2024 due primarily to a decrease in interest income earned on regulatory assets. Regulatory asset balances will decrease as surcharges are approved. There was an increase in interest income in the electric segment due primarily to higher levels of regulatory asset balances.

Current wording

For the three months ended June 30, 2025, interest income decreased at the water segment when compared to the same period in 2024 due primarily to a decrease in interest income earned on regulatory assets. Regulatory asset balances will decrease as surcharges are approved and implemented.

Previous wording

For the three months ended March 31, 2025, other expense (net of other income) increased largely because of losses of $0.6 million recorded on investments held to fund one of the Company’s retirement plans in 2025, compared to gains of $2.1 million recorded in 2024. The increase in other income for the electric segment is due primarily to AFUDC earned on certain CPUC-approved advice letter projects.

Current wording

For the three months ended June 30, 2025, other income (net of other expense) increased largely because of gains of $2.7 million recorded on investments held to fund one of the Company’s retirement plans in 2025, compared to gains of $1.0 million recorded in 2024. The increase in other income for the electric segment is due primarily to AFUDC earned on certain CPUC-approved advice letter projects. The increase in other income for AWR (parent) is due primarily to an increase in non-regulated-related activities.

Previous wording

Revenues from contracted services are composed of construction revenues (including renewal and replacements) and management fees for operating and maintaining water and/or wastewater systems at various military bases. For the three months ended March 31, 2025, revenues from contracted services decreased by $1.8 million to $31.0 million as compared to $32.8 million for the same period in 2024. There was a decrease in construction activities largely due to timing and weather delays, partially offset by an increase in management fees from economic price adjustments and the new operations at Joint Base Cape Cod and Naval Air Station Patuxent River.

Current wording

Revenues from contracted services are composed of construction revenues (including renewal and replacements) and management fees for operating and maintaining the water and/or wastewater systems at various military bases. For the six months ended June 30, 2025, revenues from contracted services decreased by $7.5 million to $61.4 million as compared to $69.0 million for the same period in 2024. There was a decrease in construction activities largely due to timing and weather delays, partially offset by an increase in management fee revenue from annual economic price adjustments and the new operations at Joint Base Cape Cod and Naval Air Station Patuxent River.

Previous wording

The increase in other operation expenses at the electric segment was primarily due to higher outside-services costs and an increase in bad debt expense. The increase at the contracted services segment was due primarily to the new operations at Joint Base Cape Cod and Naval Air Station Patuxent River.

Current wording

For the six months ended June 30, 2025, the increase in other operation expenses at the water segment was due primarily to an increase in chemicals and water treatment costs. In addition, there was an increase of $0.7 million in billed surcharges to recover previously incurred costs that had been tracked in CPUC-authorized memorandum accounts. Increases in revenues from billed surcharges have a corresponding and offsetting increase in other operation expenses, resulting in no impact to earnings. The increase at the electric segment was due primarily due to higher labor costs and an increase in bad debt expense. The increase at the contracted services segment was due primarily to the new operations at Joint Base Cape Cod and Naval Air Station Patuxent.

Previous wording

Administrative and general expenses increased at the water segment due primarily to an increase in outside-services costs largely related to the various regulatory filings, labor costs and employee-related benefits, and insurance costs.

Current wording

Administrative and general expenses increased at the water segment due primarily to an increase in labor costs and employee-related benefits, and insurance costs.