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 Third Quarter Results by Segment.”

Current wording

AWR uses earnings per share by business segment and AWR (parent) as an important measure in evaluating its operating results and believes it provides investors with clarity surrounding the performance of its business segments and the parent company. 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.”

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 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.

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, to be filed for revenue recovery during the second and third year attrition increases when those projects are completed. All of the advice letter projects were allowed to accrue in a memorandum account (i) interest during the construction period at GSWC’s adopted cost of debt until the assets are in service, and (ii) the full rate of return that includes a debt and equity component and all applicable components of the revenue requirement for the projects from the period the assets are in service until the date of the attrition filings.

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 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 ordered 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 recovery 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, and approved GSWC’s request for the continuation of a sales reconciliation mechanism that would allow GSWC to adjust its sales forecast throughout the general rate case cycle to address significant fluctuations in consumption. 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 single quantity rate had been in effect. The ICBA for supply costs tracks differences between the authorized per-unit prices and actual per-unit prices for each supply cost (purchased water, pump tax, and purchased power). The M-WRAM and ICBA were effective January 1, 2025.

Previous wording

Electric General Rate Case for the years 2023–2026

Current wording

Electric General Rate Cases:

Previous wording

General Rate Case Filings and Other Matters:

Current wording

General Rate Case for the Years 2023–2026

Previous wording

On January 16, 2025, the CPUC adopted a final decision in BVES’s general rate case proceeding that set new electric rates retroactive to January 1, 2023 and approves the settlement agreement reached between BVES, Cal Advocates and another intervenor in its entirety. Among other things, the settlement agreement, (i) settles and adopts the revenue requirements for each of the four years 2023 through 2026, (ii) authorizes BVES to invest approximately $52.5 million in capital infrastructure included in base rates over the four-year rate cycle and at least an additional $23.1 million (plus an allowance for funds used during construction, or “AFUDC”) to be filed for revenue recovery through advice letters when the projects are completed; (iii) adopts a cost of capital that increases BVES’s adopted return on equity from 9.6% to 10.0%, lowers the cost of debt from 6.6% to 5.51%, and maintains the capital structure of 57% equity and 43% debt, and (iv) approves for recovery the requested capital expenditures and other incremental operating costs already incurred in connection with BVES’s wildfire mitigation plans that were previously not included in customer rates.

Current wording

On January 16, 2025, the CPUC adopted a final decision in BVES’s general rate case proceeding that set new electric rates retroactive to January 1, 2023 and approved the settlement agreement reached between BVES, Cal Advocates and another intervenor in its entirety. Among other things, the settlement agreement, (i) settled and adopted the revenue requirements for each of the four years 2023 through 2026, and the rate increases for 2024 through 2026 are not subject to an earnings test, (ii) authorized BVES to invest approximately $52.5 million in capital infrastructure included in base rates over the four-year rate cycle and at least an additional $23.1 million (plus an allowance for funds used during construction, or “AFUDC”) to be filed for revenue recovery through advice letters when the projects are completed; (iii) adopted a cost of capital that increased BVES’s adopted return on equity from 9.6% to 10.0%, lowered the cost of debt from 6.6% to 5.51%, and maintained the capital structure of 57% equity and 43% debt, and (iv) approved for recovery the requested capital expenditures and other incremental operating costs already incurred prior to 2023 in connection with BVES’s wildfire mitigation plans that were previously not included in customer rates.

Previous 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. 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 $3.3 million in 2026. In addition, the 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 accrued AFUDC during construction that further increases the revenue requirement. In 2025, BVES implemented new base rates to recover the revenue requirement associated with $23.8 million (including AFUDC) of capital projects approved for recovery through advice letters that were completed and placed in service.

Previous wording

ASUS’s revenues, operating income and cash flows are earned by providing water and/or wastewater services, including operation and maintenance services and construction of facilities for the water and/or wastewater systems at various military installations, pursuant to an initial 50-year, firm-fixed-price contract, additional firm-fixed-price contracts, task order agreements and subcontracts with third party prime contractors on military bases. Currently, ASUS has one subsidiary that has entered into a task order agreement with the U.S. government that has a term of 15 years. The contract prices for each of the contracts and recurring task order agreements are subject to annual economic price adjustments. Additional revenues generated by contract operations are primarily dependent on annual economic price adjustments, and new construction activities under contract modifications with the U.S. government or agreements with other third-party prime contractors. During the nine months ended September 30, 2025, ASUS was awarded approximately $28.7 million in new construction projects, which are expected to be completed beginning in 2025 through 2028. ASUS’s subsidiaries expect to continue to enter into U.S. government-awarded contract modifications and agreements with third-party prime contractors for new construction projects at the military bases served.

Current wording

ASUS’s revenues, operating income and cash flows are earned by providing water and/or wastewater services, including operation and maintenance services and construction of facilities for the water and/or wastewater systems at various military installations, pursuant to an initial 50-year, firm-fixed-price contract, additional firm-fixed-price contracts, task order agreements and subcontracts with third party prime contractors on military bases. Currently, ASUS has one subsidiary that has entered into a task order agreement with the U.S. government that has a term of 15 years. The contract prices for each of the contracts and recurring task order agreements are subject to annual economic price adjustments. Additional revenues generated by contract operations are primarily dependent on annual economic price adjustments, and new construction activities under contract modifications with the U.S. government or agreements with other third-party prime contractors. ASUS’s subsidiaries expect to continue to enter into U.S. government-awarded contract modifications and agreements with third-party prime contractors for new construction projects at the military bases served.

Previous wording

Effective October 1, 2025, the U.S. government announced its shutdown. Amid the current U.S. government shutdown, the subsidiaries of ASUS have not experienced and are not expected to experience any earnings impact to their existing operations and maintenance and renewal and replacement services, as utility privatization contracts are an “excepted service.” Management expects that any future impact on ASUS and its operations through its subsidiaries will likely be limited to (a) the timing of funding to pay for services rendered, (b) delays in the processing of EPAs and/or REAs, (c) the timing of the issuance of contract modifications for new construction work not already funded by the U.S. government, (d) the timing of construction work associated with delays in receiving construction permits from furloughs at government agencies, and/or (e) delays in solicitation for and/or awarding of new contracts under the Department of Defense contracting programs. In the event the U.S. government shutdown extends for an unprecedented and much longer period, ASUS’s liquidity and earnings could be impacted.

Current wording

Early in 2026, the U.S. government experienced partial shutdowns affecting mainly the Department of Homeland Security and other federal departments. Amid the recent U.S. government shutdown, the subsidiaries of ASUS have not experienced and are not expected to experience any earnings impact to their existing operations and maintenance and renewal and replacement services, as utility privatization contracts are an “excepted service.” Management expects that any future impact on ASUS and its operations through its subsidiaries will likely be limited to (a) the timing of funding to pay for services rendered, (b) delays in the processing of economic price adjustments (“EPAs”) and/or requests for equitable adjustments (“REAs”), (c) the timing of the issuance of contract modifications for new construction work not already funded by the U.S. government, (d) the timing of construction work associated with delays in receiving construction permits from furloughs at government agencies, and/or (e) delays in solicitation for and/or awarding of new contracts under the Department of Defense contracting programs. In the event the U.S. government shutdown extends for an unprecedented and much longer period, ASUS’s liquidity and earnings could be impacted.

Previous wording

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

Current wording

The table below sets forth a comparison of the first quarter of 2026 diluted earnings per share contribution reported by business segment and for the parent company with amounts reported during the same period in 2025.

Previous wording

For the three months ended September 30, 2025, AWR’s recorded consolidated diluted earnings were $1.06 per share, as compared to $0.95 per share for the same period in 2024, an increase of $0.11 per share, primarily generated from higher construction activities that resulted in higher earnings at the contracted services segment, and higher earnings at the water and electric utility segments resulting from the implementation of new customer rates. AWR’s consolidated diluted earnings for the third 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.

Current wording

For the three months ended March 31, 2026, AWR’s recorded consolidated diluted earnings were $0.76 per share, as compared to $0.70 per share for the same period in 2025, an increase of $0.06 per share or 8.6%, primarily generated from higher earnings at the water and electric utility segments resulting from the implementation of new customer rate increases approved by the CPUC, and higher construction activities that resulted in higher earnings at the contracted services segment. AWR’s consolidated diluted earnings for the first quarter of 2026 were negatively impacted by $0.02 per share from the higher number of dilutive shares in the first quarter of 2026 compared to the same period 2025 due to the continued dilutive effects from the issuance of equity under AWR’s at-the-market (“ATM”) offering program.

Previous wording

For the three months ended September 30, 2025, recorded diluted earnings from the water utility segment were $0.86 per share, as compared to $0.84 per share for the same period in 2024, an increase of $0.02 per share. The discussion below presents the major variances in earnings for the two periods.

Current wording

For the three months ended March 31, 2026, recorded diluted earnings from the water utility segment were $0.55 per share, as compared to $0.52 per share for the same period in 2025, an increase of $0.03 per share. The discussion below presents the major variances in earnings for the two periods.

Previous wording

•An increase in water operating revenues of approximately $29.3 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 from significant fluctuations in customer consumption compared to adopted levels.

Current wording

•An increase in water operating revenues of $11.1 million was largely as a result of the CPUC-authorized second-year rate increases and additional revenues for capital projects approved in advice letter filings, both of which were effective January 1, 2026. Water consumption for the three months ended March 31, 2026 was consistent with the same period in 2025 and adopted levels. However, as a result of transitioning from a full revenue decoupling mechanism to the M-WRAM effective January 1, 2025, GSWC’s revenues and earnings will continue to be subject to future volatility from significant fluctuations in customer consumption.

Previous wording

•An increase in water supply costs of $3.5 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 purchased water costs covered in customer rates. As a result of transitioning from a full cost balancing account for water supply to the ICBA, GSWC’s earnings will be subject to future volatility from 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 $4.8 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 2025 is largely because of (i) an overall increase in the per-unit purchased water costs that are covered in current rates resulting in no impact to net earnings, and (ii) an increase in purchased water volume compared to the same period in 2025 resulting from certain wells being temporarily offline in a few customer service areas. As a result, GSWC’s earnings for the three months ended March 31, 2026 were impacted by an actual water supply source mix that included more purchased water than in the same period of 2025. Due to transitioning from a full cost balancing account for water supply to the ICBA effective January 1, 2025, GSWC’s earnings have been and will be subject to future volatility from favorable and unfavorable changes in the water supply source mix compared to the adopted mix incorporated in the revenue requirement.

Previous wording

•An overall increase in operating expenses of $2.2 million (excluding supply costs) due primarily to increases in (i) overall labor costs, (ii) maintenance expense, (iii) depreciation and amortization expenses, which is impacted by increases in capital additions placed in service and are reflected and recovered in customer rates, and (iv) property and other non-income taxes; partially offset by a decrease in administrative and general expenses (excluding labor) primarily due to lower outside services costs, insurance reserves, and other employee-related benefits as compared to the same period in 2024.

Current wording

•An overall increase in operating expenses of $2.4 million (excluding supply costs) due primarily to increases in (i) overall labor costs and other employee-related benefits, (ii) overall operation-related costs including lab fees for water quality testing and conservation spending, (iii) depreciation and amortization expenses, which are impacted by increasing capital additions placed in service and are reflected and recovered in customer rates, and (iv) property and other non-income taxes.

Previous wording

•An overall decrease in interest expense (net of interest income) of $0.3 million resulting largely from an overall decrease in average borrowing levels and interest rates as well as 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; partially offset by a decrease in interest income earned on regulatory assets due to decreasing regulatory balances as GSWC recovers the amounts through surcharges.

Current wording

•An overall increase in interest expense (net of interest income) of $0.9 million resulting largely from (i) 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, as previously discussed, that was recorded in 2025 with no similar item in 2026, and (ii) a decrease in interest income earned on regulatory assets due to decreasing regulatory balances as GSWC recovers the amounts through surcharges; partially offset by decreases in overall borrowing levels and average interest rates. The advice letter projects discussed are now included in adopted rate base and are part of the rate increases effective January 1, 2026.

Previous wording

•An overall increase in other income (net of other expense) of $0.5 million due largely to gains totaling $2.5 million generated on investments held to fund one of the company’s retirement plans during the three months ended September 30, 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 expense (net of other income) of $0.2 million due largely to losses totaling $1.3 million generated on investments held to fund one of the company’s retirement plans during the three months ended March 31, 2026, as compared to losses on investments of $0.6 million recorded during the same period in 2025 due to financial market conditions; partially offset by a decrease in the non-service cost components related to GSWC’s benefit plans resulting from changes in actuarial assumptions. However, as a result of GSWC’s two-way pension balancing accounts authorized by the CPUC, changes in total net periodic benefits costs related to the pension plan have no material impact to earnings.

Previous wording

•A decrease in earnings of approximately $0.02 per share due to the dilutive effects from the issuance of equity under AWR’s ATM offering program beginning in February 2024. Under the ATM offering program, AWR may offer and sell its Common Shares, with an aggregate gross offering price of up to $200 million, from time to time at its sole discretion, with $68 million currently remaining available for sale. Through September 30, 2025, AWR has sold 1,680,979 Common Shares through this ATM offering program.

Current wording

•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 beginning in February 2024. Under the ATM offering program, AWR may offer and sell its Common Shares, with an aggregate gross offering price of up to $200 million, from time to time at its sole discretion, with $34.3 million currently remaining available for sale. Through March 31, 2026, AWR has sold 2,133,225 Common Shares through this ATM offering program.

Previous wording

Diluted earnings from the contracted services segment increased $0.08 per share for the third quarter of 2025 when compared to the same period in 2024 largely resulting from an increase in (i) construction activities, from timing of when work is performed, (ii) management fee revenues resulting from the resolution of various economic price adjustments, and (iii) lower interest expense from lower borrowing levels, partially offset by higher overall operating expenses (excluding construction expenses). 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 increased $0.02 per share for the first quarter of 2026 when compared to the same period in 2025 largely resulting from (i) an increase in construction activities, (ii) an increase in management fee revenues resulting from the resolution of various economic price adjustments, and (iii) a decrease in interest expense (net of interest income) due to lower average borrowing levels and average interest rates. These favorable variances were partially offset by an increase in overall operating expenses (excluding construction expenses). The contracted services segment is expected to contribute $0.63 to $0.67 per share for the full year of 2026.

Previous wording

Electric revenues for the three months ended September 30, 2025 increased by $4.3 million to $13.3 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 revenues 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 March 31, 2026 increased by $3.7 million to $18.7 million largely resulting from an increase in revenues from fourth-year electric rate increases implemented in 2026 as compared to the same period of 2025, and an increase in additional revenues from the approval of certain advice letter projects that were implemented after the first quarter of 2025.

Previous wording

Electric usage for thethird quarter of 2025 was 3.1% 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.

Current wording

Electric usage for thefirst quarter of 2026 was 5.0% lower than the same period in 2025. Due to the CPUC-approved Base Revenue Requirement Adjustment Mechanism, which adjusts certain revenues to adopted levels authorized by the CPUC, changes in electric usage do not have a significant impact on earnings.

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 September 30, 2025, revenues from contracted services increased by $8.4 million to $37.1 million as compared to $28.7 million for the same period in 2024. The increase was primarily due to an increase in construction activities largely due to timing and an increase in management fees from economic price adjustments.

Current 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, 2026, revenues from contracted services increased by $6.4 million to $37.4 million as compared to $31.0 million for the same period in 2025. The increase was primarily due to an increase in construction activities and an increase in management fees from economic price adjustments.

Previous wording

Total supply costs at the regulated utilities comprise the largest portion of total consolidated operating expenses. Supply costs accounted for 34.8% and 35.7% of total operating expenses for the three months ended September 30, 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 29.4% and 28.8% of total operating expenses for the three months ended March 31, 2026 and 2025, 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 September 30, 2025 and 2024 were 44.2% and 43.2%, 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.

Previous 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.

Current wording

Prior to 2025, GSWC was able to track in the CPUC-approved MCBA the differences in 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 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. As of March 31, 2026, the balances recorded in the ICBA were not significant.

Previous wording

For the three months ended September 30, 2025, the cost of power purchased for resale to BVES’s electric customers increased by $0.8 million to $3.3 million as compared to $2.5 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.

Current wording

For the three months ended March 31, 2026, the cost of power purchased for resale to BVES’s electric customers decreased by $1.3 million to $4.8 million as compared to $6.1 million during the same period in 2025 due to lower customer usage, partially offset by higher overall average prices per megawatt-hour that include all fixed costs. The change in the electric supply cost balancing account in 2026 when compared to 2025 is also due to increases in energy prices.

Previous wording

The increase in other operation expenses at the electric segment was primarily due to higher operation-related labor costs and an increase in bad debt expense.

Current wording

The increase in other operation expenses at the electric segment was primarily due to higher operation-related outside service costs.

Previous wording

The increase at the contracted services segment was due to higher labor costs and an increase in chemical and water treatment costs.

Current wording

The increase at the contracted services segment was due to higher labor costs.

Previous wording

The increase in other operation expenses at the water segment was primarily due to an increase of $0.6 million in billed surcharges to recover previously incurred costs that had been tracked in CPUC-authorized memorandum accounts, partially offset by lower chemical and water treatment costs. Increases in revenues from billed surcharges have a corresponding and offsetting increase in other operation expenses, resulting in no impact to earnings. Excluding the impact of an increase in billed surcharges, administrative and general expenses at the water segment decreased $0.4 million due to lower chemical and water treatment costs incurred as compared to the same period in 2024.

Current wording

Administrative and general expenses increased at the electric segment due primarily to an increase of $0.7 million in billed surcharges to recover previously incurred costs that had been tracked in CPUC-authorized memorandum accounts, partially offset by lower outside-service costs. 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

Administrative and general expenses increased at the contracted services segment due to higher labor costs, employee-related benefits, and insurance costs at the legacy bases, and from the new operations at Joint Base Cape Cod and Naval Air Station Patuxent River, partially offset by lower overall legal costs.

Current wording

Administrative and general expenses increased at the contracted services segment due to higher labor costs, employee-related benefits, and legal costs.

Previous wording

Property and other taxes increased at the water and electric segments due largely to an increase in franchise fees from higher revenues and property taxes from capital additions.

Current wording

Property and other taxes increased at both the water and electric segments were due mainly to higher property taxes from capital additions.

Previous wording

For the three months ended September 30, 2025, construction expenses for contracted services were $16.5 million, an increase of $4.8 million compared to the same period in 2024, primarily resulting from an increase in construction activity as compared to the same period of 2024 due to timing.

Current wording

For the three months ended March 31, 2026, construction expenses for contracted services were $17.3 million, an increase of $4.4 million compared to the same period in 2025, primarily resulting from an increase in new construction activities as compared to the same period of 2025.

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 expense at the regulated utilities and contracted services segment decreased as compared to the same period in 2024 resulting primarily from an overall decrease in interest rates and lower total average borrowing levels at the water and contracted services segments. 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, the increase in interest expense at AWR (parent) was attributed to higher average net borrowings on its credit facility compared to the same period in 2024, partially offset by lower average interest rates when compared to the same period in 2024. The overall combined average interest rates were 5.06% and 5.36% for the three months ended September 30, 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 expense at the water segment increased as compared to the same period in 2025 due primarily to the impact of capitalizing debt costs in 2025 related to certain advice letter projects approved in the latest water general rate case, with no similar item in 2026; partially offset by decreases in overall borrowing levels and average interest rates. Interest expense at the electric services segment increased as compared to the same period in 2025 resulting primarily from overall higher average borrowing levels. The interest expense at the contracted services segment decreased as compared to the same period in 2025 resulting primarily from lower average borrowing levels and lower interest rates. The overall combined average interest rates were 5.04% and 5.14% for the three months ended March 31, 2026 and 2025, respectively.

Previous wording

For the three months ended September 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. Interest income increased at the electric segment when compared to the same period in 2024 primarily due to higher levels of regulatory asset balances earning interest.

Current wording

For the three months ended March 31, 2026, interest income decreased at both the water and electric segments when compared to the same period in 2025 largely due to decreases in interest income earned on regulatory assets. Regulatory asset balances will decrease as surcharges are approved and implemented. As a result of receiving final CPUC decisions in early 2025 for both the water and electric general rate cases, surcharges were implemented during 2025 to recover balances previously tracked in CPUC-authorized balancing and memorandum accounts.

Previous wording

For the three months ended September 30, 2025, other income (net of other expense) increased largely because of gains of $2.5 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 (equity) earned on certain CPUC-approved advice letter projects while under construction. The increase in other income for AWR (parent) is due primarily to an increase in non-regulated-related activities.

Current wording

The decrease in other income for the electric segment is due primarily to a decrease in AFUDC (equity) earned on certain CPUC-approved advice letter projects while under construction compared to same period in 2025 as projects were completed and placed into service.

Previous wording

AWR’s ETR was 23.9% and 21.9% for the three months ended September 30, 2025 and 2024, respectively. GSWC’s ETR was 24.6% and 22.6% for each of the periods ended September 30, 2025 and 2024, respectively. The increase in the ETRs during the three months ended September 30, 2025 was primarily due to changes in certain flowed-through income taxes at the regulated utilities.

Current wording

AWR’s ETR was 24.8% and 24.0% for the three months ended March 31, 2026 and 2025, respectively. GSWC’s ETR was 25.9% and 24.7% for each of the periods ended March 31, 2026 and 2025, respectively. The increase in the ETRs during the three months ended March 31, 2026 was primarily due to changes in certain flowed-through income taxes at the regulated utilities.

Previous wording

AWR funds its operating expenses and pays dividends on its outstanding Common Shares primarily through dividends from its wholly owned subsidiaries. The ability of GSWC and BVES to pay dividends to AWR is restricted by California law. Under these restrictions, approximately $901.9 million was available for GSWC to pay dividends to AWR on September 30, 2025. Approximately $107.6 million was available for BVES to pay dividends to AWR as of September 30, 2025. ASUS’s ability to pay dividends to AWR is dependent upon state laws in which each ASUS subsidiary operates, as well as ASUS’s ability to pay dividends under California law.

Current wording

AWR funds its operating expenses and pays dividends on its outstanding Common Shares primarily through dividends from its wholly owned subsidiaries. The ability of GSWC and BVES to pay dividends to AWR is restricted by California law. Under these restrictions, approximately $937.6 million was available for GSWC to pay dividends to AWR on March 31, 2026. Approximately $121.0 million was available for BVES to pay dividends to AWR as of March 31, 2026. ASUS’s ability to pay dividends to AWR is dependent upon state laws in which each ASUS subsidiary operates, as well as ASUS’s ability to pay dividends under California law.

Previous wording

On February 27, 2024, AWR entered into an Equity Distribution Agreement with third-party sales agents, under which AWR may offer and sell Common Shares, from time to time at its sole discretion, through an ATM offering program having an aggregate gross offering price of up to $200 million over a three-year period and pursuant to AWR’s effective shelf registration statement on Form S-3. AWR intends to use the net proceeds from these sales, after deducting commissions on such sales and offering expenses, for general corporate purposes, including, but not limited to, repayment of debt and making equity contributions to its subsidiaries. During the nine months ended September 30, 2025, AWR sold 535,760 Common Shares through this ATM offering program and raised net proceeds of $40.2 million, bringing the total raised through September 30, 2025 to $130.0 million, net of $2.0 million of commissions paid under the terms of the Equity Distribution Agreement. As of September 30, 2025, approximately $68.0 million remained available for sale under the ATM offering program.

Current wording

In February 2024, AWR entered into an Equity Distribution Agreement with third-party sales agents, under which AWR may offer and sell Common Shares, from time to time at its sole discretion, through an ATM offering program having an aggregate gross offering price of up to $200 million over a three-year period and pursuant to AWR’s effective shelf registration statement on Form S-3. AWR has used the net proceeds from these sales, after deducting commissions on such sales and offering expenses, for general corporate purposes, including, but not limited to, repayment of debt and making equity contributions to its subsidiaries. During the three months ended March 31, 2026, AWR sold 84,237 Common Shares through this ATM offering program and raised net proceeds of $6.2 million, bringing the total raised through March 31, 2026 to $165.7 million, net of $2.5 million of commissions paid under the terms of the Equity Distribution Agreement. As of March 31, 2026, approximately $34.3 million remained available for sale under the ATM offering program.

Previous wording

In June 2023, AWR and GSWC each entered into credit agreements with an original term of five years provided by a syndicate of banks and financial institutions. Both credit agreements, as amended, are now scheduled to mature in June 2029. As of September 30, 2025, the credit agreements, as amended, provide AWR and GSWC unsecured revolving credit facilities with borrowing capacities of $195.0 million and $200.0 million, respectively. Under the terms of the credit agreements, as of September 30, 2025, the borrowing capacities for AWR and GSWC may be expanded up to an additional $30.0 million and $75.0 million, respectively, subject to the lenders’ approval. AWR’s credit facility primarily provides support to AWR (parent) and ASUS, while GSWC’s credit agreement provides support to its water operations and capital expenditures. As of September 30, 2025, AWR’s outstanding borrowings under its credit facility of $119.0 million have been classified as non-current liabilities on AWR’s Consolidated Balance Sheet. As of September 30, 2025, there were no outstanding borrowings under GSWC’s facility.

Current wording

In June 2023, AWR and GSWC each entered into credit agreements with an original term of five years provided by a syndicate of banks and financial institutions. Both credit agreements, as amended, are now scheduled to mature in June 2029. As of March 31, 2026, the credit agreements provide AWR and GSWC unsecured revolving credit facilities with borrowing capacities of $195.0 million and $200.0 million, respectively. Under the terms of the credit agreements, as of March 31, 2026, the borrowing capacities for AWR and GSWC may be expanded up to an additional $30.0 million and $75.0 million, respectively, subject to the lenders’ approval. AWR’s credit facility primarily provides support to AWR (parent) and ASUS, while GSWC’s credit agreement provides support to its water operations and capital expenditures. As of March 31, 2026, AWR’s outstanding borrowings under its credit facility of $110.0 million have been classified as non-current liabilities on AWR’s Consolidated Balance Sheet. The CPUC requires GSWC to completely pay off all borrowings under its revolving credit facility within a 24-month period after which GSWC may again borrow under its facility. GSWC’s pay-off period for its credit facility currently ends in November 2027. As of March 31, 2026, there were $22.0 million of outstanding borrowings under GSWC’s facility and have been classified as non-current liabilities in both AWR’s Consolidated Balance Sheet and GSWC’s Balance Sheet.

Previous wording

Our primary sources of liquidity to fund operations continue to be from the recovery of costs charged to customers at our regulated utilities and the collection of payments from the U.S government. We believe that capital investment costs associated with our capital programs at our regulated utilities will continue to be recovered through water and electric rates charged to customers, as well as funds from credit facilities from our regulated utilities. In addition, AWR’s credit facility will continue to be used to support ASUS’s operations and AWR (parent). The long-term capital-intensive nature of our regulated utilities have required us to continually seek future financing opportunities beyond the short-term. Future long-term financing at GSWC and BVES is expected to consist of both long-term debt and equity issuances in order to manage to the CPUC-authorized capital structure. Under the current financing applications authorized by the CPUC, GSWC and BVES have $600.0 million and $88.0 million, respectively, remaining and available under each utility’s authorized applications that provide for long-term financing and which are expected to be used over the next 2-6 years to pay down outstanding borrowings under their respective credit facilities and support operations.

Current wording

Our primary sources of liquidity to fund operations continue to be from the recovery of costs charged to customers at our regulated utilities and the collection of payments from the U.S government. We believe that capital investment costs associated with our capital programs at our regulated utilities will continue to be recovered through water and electric rates charged to customers, as well as funds from credit facilities from our regulated utilities. In addition, AWR’s credit facility will continue to be used to support ASUS’s operations and AWR (parent). The long-term capital-intensive nature of our regulated utilities have required us to continually seek future financing opportunities beyond the short-term. Future long-term financing at GSWC and BVES is expected to consist of both long-term debt and equity issuances in order to manage to the CPUC-authorized capital structure. Under the current financing applications authorized by the CPUC, GSWC and BVES have $588.0 million and $82.0 million, respectively, remaining and available under each utility’s authorized applications that provide for long-term financing and which are expected to be used over the next 1-6 years to pay down outstanding borrowings under their respective credit facilities and support operations.