AMERICAN STATES WATER CO

Previous wording

The following discussion and analysis provides information on AWR’s consolidated operations and assets, and includes specific references to (i) GSWC, AWR’s regulated water utility segment, (ii) BVES, AWR’s regulated electric utility segment, (iii) ASUS and its subsidiaries, collectively, AWR’s contracted services segment, and (iv) AWR (parent) where applicable.

Current wording

The following discussion and analysis provides information on AWR’s consolidated operations, and includes specific references to (i) GSWC, AWR’s regulated water utility segment, (ii) BVES, AWR’s regulated electric utility segment, (iii) ASUS and its subsidiaries, collectively, AWR’s contracted services segment, and (iv) AWR (parent) where applicable.

Previous wording

Included in the following analysis is a discussion of Registrant’s operations in terms of earnings per share by business segment and AWR (parent), which equals each business segment’s earnings divided by AWR’s weighted average number of diluted Common Shares. All of the measures discussed are derived from consolidated financial information of Registrant, but are not presented in our financial statements that are prepared in accordance with Generally Accepted Accounting Principles in the United States (“GAAP”). These items constitute “non-GAAP financial measures” under Securities and Exchange Commission rules, which supplement our GAAP disclosures but should not be considered as an alternative to the respective GAAP measures. Furthermore, the non-GAAP financial measures may not be comparable to similarly titled non-GAAP financial measures of other registrants.

Current wording

All of the measures discussed are derived from consolidated financial information of Registrant, but are not presented in our financial statements that are prepared in accordance with Generally Accepted Accounting Principles in the United States (“GAAP”). These items constitute “non-GAAP financial measures” under Securities and Exchange Commission rules, which supplement our GAAP disclosures but should not be considered as an alternative to the respective GAAP measures. Furthermore, the non-GAAP financial measures may not be comparable to similarly titled non-GAAP financial measures of other registrants.

Previous 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 discussions under the sections titled“Summary of Second Quarter Results by Segment”and “Summary of Year-to-Date 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 discussions under the sections titled“Summary of Third Quarter Results by Segment”and “Summary of Year-to-Date Results by Segment.”

Previous wording

Factors affecting our financial performance are summarized under“Risk Factors” in our Form 10-K for the period ended December 31, 2025 filed with the SEC.

Current wording

Factors affecting our financial performance are summarized under“Risk Factors” in our Form 10-K for the year ended December 31, 2025 filed with the SEC.

Previous wording

Although Registrant operates solely in the U.S., geopolitical developments abroad, such as the ongoing U.S. military operation in Iran, could indirectly affect our business through volatility in commodity prices, inflationary pressures, supply chain and operating cost impacts, and potential disruptions in banking systems and capital markets. Management is actively engaged with vendors and business partners to monitor and mitigate financial risks of global uncertainties; however, the scope and duration of any impacts remain uncertain. As of the date of this filing, geopolitical developments during the first half of 2026 have not had a material impact on the Company.

Current wording

Although Registrant operates solely in the U.S., geopolitical developments abroad, such as the ongoing U.S. military operation in Iran, could indirectly affect our business through volatility in commodity prices, inflationary pressures, supply chain and operating cost impacts, and potential disruptions in banking systems and capital markets. Management is actively engaged with vendors and business partners to monitor and mitigate financial risks of global uncertainties; however, the scope and duration of any impacts remain uncertain. As of the date of this filing, geopolitical developments during 2026 have not had a material impact on the company.

Previous wording

The new 2026 rates have been reflected in GSWC’s earnings for the six months ended June 30, 2026 resulting in an increase in recorded revenues of $22.5 million largely from the second-year rates and advice letter filings, and an increase in recorded water supply costs of $5.6 million, which combined is a net increase of $16.9 million, compared to the same period in 2025. Due to transitioning from the WRAM to the M-WRAM and from the MCBA to the ICBA effective January 1, 2025, GSWC’s earnings have been and will be subject to future volatility from significant fluctuations in customer consumption, as well as from favorable and unfavorable changes in the water supply source mix compared to the adopted mix. Significant changes in customer consumption are primarily driven by weather conditions, including from such events known as El Niño or La Niña that can result in above average or below average annual precipitation, which significantly impacts outdoor water usage. Water supply mix changes can occur due to various circumstances, including but not limited to, unforeseen changes in groundwater quality and operating conditions of groundwater basins and associated pumping facilities.

Current wording

The new 2026 rates have been reflected in GSWC’s earnings for the nine months ended September 30, 2026 resulting in an increase in recorded revenues of $30.1 million largely from the second-year rates and advice letter filings, and an increase in recorded water supply costs of $5.8 million, which combined is a net increase of $24.3 million, compared to the same period in 2025. Due to transitioning from the WRAM to the M-WRAM and from the MCBA to the ICBA effective January 1, 2025, GSWC’s earnings have been and will be subject to future volatility from significant fluctuations in customer consumption, as well as from favorable and unfavorable changes in the water supply source mix compared to the adopted mix. Significant changes in customer consumption are primarily driven by weather conditions, including from such events known as El Niño or La Niña that can result in above average or below average annual precipitation, which significantly impacts outdoor water usage. Water supply mix changes can occur due to various circumstances, including but not limited to, unforeseen changes in groundwater quality and operating conditions of groundwater basins and associated pumping facilities.

Previous wording

On July 1, 2026, GSWC filed a general rate case application for all its water regions and the general office. This general rate case will determine new water rates for the years 2028 – 2030. Among other things, GSWC requested capital budgets of approximately $1 billion for the three-year rate cycle. GSWC also requested to reinstate the WRAM and MCBA regulatory mechanisms. In an August 2020 decision, the CPUC discontinued the use of WRAM and the MCBA for water utilities, which GSWC implemented in 2008, but was discontinued for GSWC after 2024 as discussed above. A decision in the water general rate case is expected in the fourth quarter of 2027, with new rates to become effective January 1, 2028.

Current wording

On July 1, 2026, GSWC filed a general rate case application for all its water regions and the general office. This general rate case will determine new water rates for the years 2028 – 2030. Among other things, GSWC requested capital budgets of approximately $1 billion for the three-year rate cycle. GSWC also requested to reinstate the WRAM and MCBA regulatory mechanisms. In an August 2020 decision, the CPUC discontinued the use of the WRAM and the MCBA for water utilities. GSWC originally implemented the WRAM and MCBA in 2008, and their use by GSWC was discontinued after 2024, as discussed above. A decision in the water general rate case is scheduled for the fourth quarter of 2027, with new rates to become effective January 1, 2028.

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 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.

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, with the rate increases for 2024 through 2026 not being 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 incurred prior to 2023 in connection with BVES’s wildfire mitigation plans that were previously not included in customer rates.

Previous wording

On January 30, 2026, BVES filed a new general rate case application that will determine new electric rates for the years 2027 through 2030. Among other things, BVES requested (i) capital budgets of approximately $133 million for the four-year rate cycle, and another approximately $17 million, plus AFUDC, for capital projects to be filed for revenue recovery through advice letters when the projects are completed, and (ii) a capital structure for BVES of 60% equity and 40% debt, a return on equity of 11.30%, an embedded cost of debt of 5.92%, and a return on rate base of 9.15%.

Current wording

On January 30, 2026, BVES filed a new general rate case application that will determine new electric rates for the years 2027 through 2030. Among other things, BVES requested (i) capital budgets of approximately $133 million for the four-year rate cycle, and another approximately $17 million, plus AFUDC, for capital projects to be filed for revenue recovery through advice letters when the projects are completed, and (ii) a capital structure for BVES of 60% equity and 40% debt, a return on equity of 11.30%, an embedded cost of debt of 5.92%, and a return on rate base of 9.15%. A decision in the electric general rate case is scheduled for the first quarter of 2027 with the new rates retroactive to January 1, 2027.

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. 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. During the nine months ended September 30, 2026, ASUS has been awarded approximately $31 million in new construction projects, which are expected to be completed beginning in 2026 through 2029. 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

Early in 2026, the U.S. government experienced partial shutdowns affecting mainly the Department of Homeland Security and other federal departments. Amid the U.S. government shutdowns, 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 impact of any future government shutdowns 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 a U.S. government shutdown extends for an unprecedented and much longer period than that experienced in early 2026, 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 U.S. government shutdowns, the subsidiaries of ASUS did not experience 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 impact of any future government shutdowns 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 a U.S. government shutdown extends for an unprecedented and much longer period than that experienced in early 2026, ASUS’s liquidity and earnings could be impacted.

Previous wording

The table below sets forth a comparison of the second 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.

Current wording

The table below sets forth a comparison of the third 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

On June 12, 2026, AWR successfully completed its at-the-market (“ATM”) offering program, which was originally established on February 27, 2024. AWR reached the maximum aggregate offering capacity of $200 million in gross proceeds raised that resulted in the total sale of 2,575,947 Common Shares through this ATM offering program. No further sales of Common Shares will be made under this program, and AWR has no plans to issue additional equity through, at least, the end of 2029 to support its current operations.

Current wording

On June 12, 2026, AWR successfully completed its ATM offering program and no Common Shares were sold under this program during the third quarter of 2026. In June 2026, AWR reached the maximum aggregate offering capacity of $200 million in gross proceeds raised that resulted in the total sale of 2,575,947 Common Shares through this ATM offering program, which was originally established on February 27, 2024. No further sales of Common Shares will be made under this program, and AWR has no plans to issue additional equity through, at least, the end of 2029 to support its current operations.

Previous wording

The following discussion analyzes the primary variances in the water segment’s earnings between the two periods.

Current wording

For the three months ended September 30, 2026, recorded diluted earnings from AWR’s water utility segment, GSWC, were $0.85 per share, as compared to $0.86 per share for the same period in 2025, a decrease of $0.01 per share. As discussed previously, our financial results were impacted by an unfavorable period-over-period change in investment results driven by volatile market conditions. This unfavorable variance negatively impacted diluted earnings per share by $0.05, which is recorded at the water utility segment. Excluding the gains and losses on investments from both periods, adjusted diluted earnings at the water segment for the third quarter of 2026 remained at $0.85 per share, as compared to adjusted diluted earnings of $0.81 per share for the same period in 2025, an increase of $0.04 per share in adjusted earnings. The following discussion analyzes the other primary variances in the water segment’s earnings between the two periods.

Previous wording

•An increase in water operating revenues of $11.4 million was largely a result of (i) the CPUC-authorized second-year rate increases effective January 1, 2026, (ii) additional revenues for the recovery of capital projects approved in various advice letter filings effective January 1, 2026, (iii) additional revenues for increases in the per-unit water supply costs incurred, which, as noted below, result in no net impact to earnings, and (iv) an increase in water consumption for the three months ended June 30, 2026 of approximately 4% favorably impacting net earnings when compared to the same period in 2025. These increases were partially offset by a decrease of $1.6 million in billed surcharges. CPUC-approved surcharges are billed to customers to recover previously incurred costs. Changes in billed surcharge revenues are offset by equal changes in operating expenses, resulting in no net impact to earnings.

Current wording

•An increase in water operating revenues of $7.6 million was largely a result of (i) the CPUC-authorized second-year rate increases effective January 1, 2026, (ii) additional revenues for the recovery of capital projects approved in various advice letter filings effective January 1, 2026, (iii) additional revenues for increases in the per-unit water supply costs incurred, which result in no net impact to earnings, and (iv) an increase in water consumption for the three months ended September 30, 2026 of approximately 1% favorably impacting net earnings when compared to the same period in 2025. As a result of transitioning to a modified revenue decoupling mechanism (M-WRAM) effective January 1, 2025, GSWC’s earnings have been and will continue to be impacted by consumption fluctuations. Consumption changes depend on factors like climate change, conservation, and weather conditions. For example, El Niño or La Niña weather events could cause fluctuating precipitation that shifts outdoor water use. Any of these factors could directly impact GSWC’s future net earnings. These increases to revenues were partially offset by a decrease of $1.9 million in billed surcharges. CPUC-approved surcharges are billed to customers to recover previously incurred costs. Changes in billed surcharge revenues are offset by equal changes in operating expenses, resulting in no net impact to earnings.

Previous wording

•An increase in water supply costs of $0.7 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 was largely because of (i) an overall increase in per-unit water supply costs that are covered in current rates, as noted above, resulting in no net impact to earnings, and (ii) an increase in the production of water resulting from higher customer consumption. These increases were partially offset by the impact of an actual water supply source mix that included less purchased water during the second quarter of 2026 as compared to the same period in 2025 due primarily to wells being brought back online in certain customer service areas.

Current wording

•An increase in water supply costs of $0.2 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 2025 was mostly because of (i) an overall increase in per-unit water supply costs that are covered in current rates, as noted above, resulting in no net impact to earnings, and (ii) an increase in the production of water resulting from higher customer consumption. These increases were partially offset by the impact of an actual water supply source mix that included less purchased water during the third quarter of 2026 as compared to the same period in 2025 due primarily to wells being brought back online in certain customer service areas. As a result of transitioning to an incremental water supply cost balancing account (ICBA) effective January 1, 2025, GSWC’s earnings have been and will continue to be impacted by water supply mix changes. Water supply mix changes can occur due to unforeseen changes in groundwater quality and operating conditions of groundwater basins and associated pumping facilities. Any of these factors could directly impact GSWC’s future net earnings.

Previous wording

•An overall increase in operating expenses of $0.2 million (excluding supply costs) due largely to increases in (i) overall labor costs, (ii) depreciation and amortization expenses, which are impacted by increasing capital additions placed in service and are reflected and recovered in customer rates, and (iii) property and other non-income taxes; partially offset by a decrease in surcharges of $1.6 million. As noted above, changes in billed surcharge revenues are offset by equal changes in operating expenses, resulting in no net impact to earnings.

Current wording

•An overall increase in operating expenses of $1.8 million (excluding supply costs) due largely to increases in (i) overall labor costs and other employee-related benefits, (ii) other operation expenses related to water treatment and chemical costs, and conservation spending, (iii) regulatory expenses related to various regulatory filings, (iv) depreciation and amortization expenses, which are impacted by increasing capital additions placed in service and are reflected and recovered in customer rates, (v) maintenance expense, and (vi) property and other non-income taxes; partially offset by a decrease in surcharges of $1.9 million. As noted above, changes in billed surcharge revenues are offset by equal changes in operating expenses, resulting in no net impact to earnings.

Previous 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 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. The advice letter projects discussed are now included in adopted rate base and are part of the rate increases effective January 1, 2026.

Current wording

•An overall increase in interest expense (net of interest income) of $1.3 million resulting primarily 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 that was recorded in 2025 with no similar item in 2026, (ii) higher average borrowing levels, and (iii) a decrease in interest income earned on regulatory assets due to decreasing regulatory balances as GSWC recovers the amounts through surcharges. 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 $2.0 million due largely to gains totaling $4.3 million generated on investments held to fund one of the Company’s retirement plans during the three months ended June 30, 2026, as compared to gains on investments of $2.7 million recorded during the same period in 2025 due to financial market conditions, and 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.

Current wording

•Excluding the gains and losses on investments previously discussed, an overall increase in other income (net of other expense) of $0.4 million was due largely to 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

•Changes in certain flowed-through income taxes and permanent items included in GSWC’s income tax expense for the three months ended June 30, 2026 as compared to the same period in 2025 unfavorably impacted the water segment’s earnings. As a regulated utility, GSWC treats certain temporary differences as being flowed-through in computing its income tax expense consistent with the income tax method used in its CPUC-jurisdiction rate making. Changes in the magnitude of flowed-through items either increase or decrease tax expense, thereby affecting diluted earnings per share.

Current wording

•Changes in certain flowed-through income taxes included in GSWC’s income tax expense for the three months ended September 30, 2026 as compared to the same period in 2025 unfavorably impacted the water segment’s earnings. As a regulated utility, GSWC treats certain temporary differences as being flowed-through in computing its income tax expense consistent with the income tax method used in its CPUC-jurisdiction rate making. Changes in the magnitude of flowed-through items either increase or decrease tax expense, thereby affecting diluted earnings per share.

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 as previously discussed.

Current 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.

Previous wording

Diluted earnings from the electric utility segment increased $0.01 per share for the second quarter of 2026 as compared to the same period in 2025 largely resulting from an increase of $0.7 million in electric revenues due to the CPUC-authorized fourth-year rate increases in 2026 and additional revenues approved largely after the second quarter of 2025 to recover the cost plus AFUDC of certain advice letter capital projects. This increase was partially offset by a decrease in billed surcharges of $0.4 million. As previously discussed, changes in billed surcharge revenues are offset by equal changes in operating expenses, resulting in no net impact to earnings.

Current wording

Diluted earnings from the electric utility segment increased $0.01 per share for the third quarter of 2026 as compared to the same period in 2025, principally resulting from an increase of $1.6 million in electric revenues due to the CPUC-authorized fourth-year rate increases in 2026 and additional revenues approved largely after the second quarter of 2025 to recover the cost plus AFUDC of certain advice letter capital projects. The increase in revenues was partially offset by an increase in electric supply costs, which consist of power purchased for resale costs and changes in the electric supply cost balancing account.

Previous wording

The net increase in electric revenues discussed above was partially offset by an overall increase in operating expenses and interest expense (net of interest and other income), partially offset by a decrease in surcharges as discussed above.

Current wording

The increase in revenues less the increase in supply costs discussed above was partially offset by an overall increase in operating expenses, interest expense (net of interest and other income), and changes in certain flowed-through income taxes included in the electric segment’s income tax expense that unfavorably impacted net earnings.

Previous wording

Diluted earnings from the contracted services segment increased $0.03 per share for the second 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.

Current wording

Diluted earnings from the contracted services segment decreased $0.02 per share for the third quarter of 2026 when compared to the same period in 2025 primarily as a result of higher overall operating and construction expenses, partially offset by an increase in total revenues recognized. The contracted services segment is expected to contribute $0.63 to $0.67 per share for the full year of 2026.

Previous wording

For the six months ended June 30, 2026, AWR’s recorded consolidated diluted earnings were $1.86 per share, as compared to $1.57 per share recorded for the same period in 2025, an increase of $0.29 per share or 18.5%, primarily generated from higher earnings at the water utility segment resulting from, among other factors, the implementation of new customer rate increases approved by the CPUC. In addition, there was an increase in construction activities that resulted in higher earnings at the contracted services segment. AWR’s consolidated diluted earnings for the six months ended June 30, 2026 were negatively impacted by approximately $0.04 per share due to the continued dilutive effects from the issuance of equity under AWR’s ATM offering program. On June 12, 2026, AWR successfully completed the ATM offering program, reaching the maximum aggregate offering capacity of $200 million in gross proceeds raised, and no further sales of Common Shares will be made under this program.

Current wording

For the nine months ended September 30, 2026, AWR’s recorded consolidated diluted earnings were $2.92 per share, as compared to $2.63 per share recorded for the same period in 2025, an increase of $0.29 per share or 11.0%. AWR’s consolidated diluted earnings for the nine months ended September 30, 2026 were negatively impacted by approximately $0.07 per share due to the continued dilutive effects from the issuance of equity under AWR’s ATM offering program. On June 12, 2026, AWR successfully completed the ATM offering program, reaching the maximum aggregate offering capacity of $200 million in gross proceeds raised, and no further sales of Common Shares will be made under this program.

Previous wording

For the three months ended June 30, 2026, AWR’s recorded consolidated diluted earnings were $1.09 per share, as compared to $0.87 per share for the same period in 2025, an increase of $0.22 per share or 25.3%, primarily generated from higher earnings at the water utility segment resulting largely from, among other factors, the implementation of new customer rate increases approved by the CPUC. In addition, there was an increase in construction activities that resulted in higher earnings at the contracted services segment.

Current wording

As discussed previously, our financial results were impacted by an unfavorable period-over-period change in investment results, reflecting volatile market conditions. Specifically, for the year-to-date 2026, gains of $3.0 million, or $0.06 per share, were recognized on investments held to fund one of the company’s retirement plans, as compared to gains of $4.6 million, or $0.09 per share, recognized during the same period in 2025, an unfavorable period-over-period change of $0.03 per share. Removing the effects of the gains on investments from both periods, adjusted consolidated diluted earnings for the year-to-date 2026 would have been $2.86 per share, as compared to adjusted diluted earnings of $2.54 per share for the same period in 2025, an increase of $0.32 per share in adjusted earnings, or 12.6%. The increase in recorded and adjusted net earnings was primarily generated from higher earnings at the water and electric utility segments resulting from, among other factors, the implementation of new customer rate increases approved by the CPUC. In addition, there was an increase in construction activities that resulted in higher earnings at the contracted services segment.

Previous wording

The following is a computation and reconciliation of diluted earnings per share from the measure of net income (loss) by business segment and for the parent company (as disclosed in Note 10 to the Unaudited Consolidated Financial Statements) to AWR’s consolidated fully diluted earnings per Common Share, for the six months ended June 30, 2026 and 2025:

Current wording

The following is a computation and reconciliation of diluted earnings per share from the measure of net income (loss) by business segment and for the parent company (as disclosed in Note 10 to the Unaudited Consolidated Financial Statements) to AWR’s consolidated fully diluted earnings per Common Share, for the nine months ended September 30, 2026 and 2025:

Previous wording

•An increase in water operating revenues of approximately $22.5 million largely as a result of (i) the CPUC-authorized second-year rate increases effective January 1, 2026, (ii) additional revenues for the recovery of capital projects approved in various advice letter filings effective January 1, 2026, (iii) additional revenues for increases in the per-unit water supply costs incurred, which, as noted below, result in no net impact to earnings, and (iv) an increase in water consumption for the six months ended June 30, 2026 of 2.2% when compared to the same period in 2025. As a result of transitioning to the M-WRAM effective January 1, 2025, GSWC’s revenues and earnings will continue to be subject to future volatility from fluctuations in customer consumption. These increases were partially offset by a decrease in billed surcharges of $2.0 million. As previously discussed, changes in billed surcharge revenues are offset by equal changes in operating expenses, resulting in no net impact to earnings.

Current wording

•An increase in water operating revenues of approximately $30.1 million largely as a result of (i) the CPUC-authorized second-year rate increases effective January 1, 2026, (ii) additional revenues for the recovery of capital projects approved in various advice letter filings effective January 1, 2026, (iii) additional revenues for increases in the per-unit water supply costs incurred, which, as noted below, result in no net impact to earnings, and (iv) an increase in water consumption for the nine months ended September 30, 2026 of 1.6% when compared to the same period in 2025. As a result of transitioning to the M-WRAM effective January 1, 2025, GSWC’s revenues and earnings will continue to be subject to future volatility from fluctuations in customer consumption. These increases were partially offset by a decrease in billed surcharges of $3.8 million. As previously discussed, changes in billed surcharge revenues are offset by equal changes in operating expenses, resulting in no net impact to earnings.

Previous wording

•An increase in water supply costs of $5.6 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 was largely because of (i) an overall increase in the per-unit water supply costs that are covered in current rates, as noted above, resulting in no net impact to earnings, (ii) an increase in overall water volume compared to the same period in 2025 resulting from higher customer consumption, and (iii) the impact of an actual water supply source mix that included more purchased water during the six months ended June 30, 2026 compared to the same period in 2025 as a result of certain wells being temporarily offline in a few customer service areas during the first quarter of 2026. Due to transitioning 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.

Current wording

•An increase in water supply costs of $5.8 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 was largely because of (i) an overall increase in the per-unit water supply costs that are covered in current rates, as noted above, resulting in no net impact to earnings, and (ii) an increase in overall water volume compared to the same period in 2025 resulting from higher customer consumption. The increases were partially offset by the impact of an actual water supply source mix that included less purchased water during the nine months ended September 30, 2026 compared to the same period in 2025 due primarily to wells being brought back online in certain service areas. Due to transitioning 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 $2.6 million (excluding supply costs) mainly due to increases in (i) overall labor costs and other employee-related benefits, (ii) other operation and maintenance expenses, (iii) regulatory costs, (iv) depreciation and amortization expenses, which are impacted by increasing capital additions placed in service and are reflected and recovered in customer rates, and (v) property and other non-income taxes; partially offset by a decrease in surcharges of $2.0 million. As noted above, changes in revenues from billed surcharges are offset by equal changes in operating expenses, resulting in no net impact to earnings.

Current wording

•An overall increase in operating expenses of $4.4 million (excluding supply costs) mainly due to increases in (i) overall labor costs and other employee-related benefits, (ii) other operation and maintenance expenses, (iii) regulatory costs, (iv) depreciation and amortization expenses, which are impacted by increasing capital additions placed in service and are reflected and recovered in customer rates, and (v) property and other non-income taxes; partially offset by a decrease in surcharges of $3.8 million. As noted above, changes in revenues from billed surcharges are offset by equal changes in operating expenses, resulting in no net impact to earnings.

Previous wording

•An overall increase in interest expense (net of interest income) of $1.7 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 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 overall lower average borrowing levels and 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.

Current wording

•An overall increase in interest expense (net of interest income) of $3.0 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 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 overall lower average borrowing levels. 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 expenses) of $1.7 million due primarily to gains of $3.1 million generated on investments held to fund one of the Company’s retirement plans as compared to gains of $2.2 million recorded during the same period in 2025, due to financial market conditions and 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.

Current wording

•Excluding the gains and losses on investments previously discussed, an overall increase in other income (net of other expenses) of $1.2 million was due primarily to 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

•Changes in certain flowed-through income taxes and permanent items included in GSWC’s income tax expense for the six months ended June 30, 2026 as compared to the same period in 2025 unfavorably impacted the water segment’s earnings as previously discussed in the quarterly results.

Current wording

•Changes in certain flowed-through income taxes included in GSWC’s income tax expense for the nine months ended September 30, 2026 as compared to the same period in 2025 unfavorably impacted the water segment’s earnings as previously discussed in the quarterly results.

Previous wording

•A decrease in earnings of approximately $0.03 per share due to the dilutive effects from the issuance of equity under AWR’s ATM offering program previously discussed.

Current wording

•A decrease in earnings of approximately $0.05 per share due to the dilutive effects from the issuance of equity under AWR’s ATM offering program previously discussed.

Previous wording

Diluted earnings from the electric utility segment increased $0.02 per share for the six months ended June 30, 2026 as compared to the same period in 2025, largely resulting from an increase of $4.4 million in electric revenues due largely to the CPUC-authorized fourth-year rate increases in 2026, additional revenues approved to recover the cost plus AFUDC of certain advice letter capital projects that were effective during the second quarter of 2025, and an increase in billed surcharges of $1.2 million. As previously discussed, changes in billed surcharge revenues are offset by equal changes in operating expenses, resulting in no net impact to earnings.

Current wording

Diluted earnings from the electric utility segment increased $0.04 per share for the nine months ended September 30, 2026 as compared to the same period in 2025, principally resulting from an increase of $5.9 million in electric revenues due largely to the CPUC-authorized fourth-year rate increases in 2026, additional revenues approved to recover the cost plus AFUDC of certain advice letter capital projects that were effective during the second quarter of 2025, and an increase in billed surcharges of $1.2 million. Changes in billed surcharge revenues are offset by equal changes in operating expenses, resulting in no net impact to earnings. The increase in revenues was partially offset by an increase in electric supply costs, which consist of power purchased for resale and changes in the electric supply cost balancing account.

Previous wording

The increase in electric revenues discussed above was partially offset by (i) an overall increase in operating expenses of $2.1 million, mostly from an increase in surcharges of $1.2 million discussed above, other operation and maintenance-related activities, and depreciation and amortization expenses, which are impacted by increasing capital additions placed in service and are reflected and recovered in customer rates, and (ii) an increase in interest expense (net of interest and other income) of $0.8 million compared to the same period in 2025. The increase in interest expense at the electric segment between periods is primarily due to lower AFUDC recognized in 2026 related to certain advice letter projects approved by the CPUC in the latest general rate case, together with lower interest income earned on regulatory assets, and an increase in interest expense from higher average borrowing levels. The advice letter projects discussed are now included in adopted rate base and are part of the increase in 2026 revenues.

Current wording

The increase in electric revenues less electric supply costs discussed above was partially offset by (i) an overall increase in operating expenses of $2.5 million, due, in large part, to an increase in surcharges of $1.2 million discussed above, and other items including other operation and maintenance-related activities, depreciation and amortization expenses, which are impacted by increasing capital additions placed in service and are reflected and recovered in customer rates, and property and other non-income taxes, and (ii) an increase in interest expense (net of interest and other income) of $1.0 million compared to the same period in 2025. The increase in interest expense at the electric segment between periods is primarily due to lower AFUDC recognized in 2026 related to certain advice letter projects approved by the CPUC in the latest general rate case and higher average borrowing levels, together with lower interest income earned on regulatory assets. The advice letter projects discussed are now included in adopted rate base and are part of the increase in 2026 revenues.

Previous wording

Diluted earnings from the contracted services segment increased $0.05 per share for the six months ended June 30, 2026 as compared to the same period in 2025, largely due to (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). Furthermore, there was a decrease in contracted services earnings of approximately $0.01 per share due to the dilutive effects from the issuance of equity under AWR’s ATM offering program that was previously discussed. The contracted services segment is expected to contribute $0.63 to $0.67 per share for the full year of 2026.

Current wording

Diluted earnings from the contracted services segment increased $0.02 per share for the nine months ended September 30, 2026 as compared to the same period in 2025, primarily due to (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). Furthermore, there was a decrease in contracted services earnings of approximately $0.01 per share due to the dilutive effects from the issuance of equity under AWR’s ATM offering program that was previously discussed. The contracted services segment is expected to contribute $0.63 to $0.67 per share for the full year of 2026.

Previous wording

The following discussion and analysis for the three and six months ended June 30, 2026 and 2025 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.

Current wording

The following discussion and analysis for the three and nine months ended September 30, 2026 and 2025 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 June 30, 2026, revenues from water operations increased by $11.4 million to $131.1 million as compared to the same period in 2025. The increase in water revenues during the second quarter of 2026 is primarily a result of (i) the CPUC-approved second-year rate increases effective January 1, 2026, (ii) additional revenues approved to recover the advice letter capital projects that were added to adopted rate base for inclusion in the revenue requirement effective January 1, 2026, (iii) additional revenues for increases in the per-unit water supply costs incurred, which result in no net impact to earnings, and (iv) an increase in water consumption as further described below. These increases were partially offset by a decrease in billed surcharges of $1.6 million compared to the same period in 2025. CPUC-approved surcharges are billed to customers to recover previously incurred costs. Changes in billed surcharge revenues are offset by equal changes in operation expenses, resulting in no impact to earnings.

Current wording

For the three months ended September 30, 2026, revenues from water operations increased by $7.6 million to $139.9 million as compared to the same period in 2025. The increase in water revenues during the third quarter of 2026 is primarily a result of (i) the CPUC-approved second-year rate increases effective January 1, 2026, (ii) additional revenues approved to recover the advice letter capital projects that were added to adopted rate base for inclusion in the revenue requirement effective January 1, 2026, (iii) additional revenues for increases in the per-unit water supply costs incurred, which result in no net impact to earnings, and (iv) an increase in water consumption as further described below. These increases were partially offset by a decrease in billed surcharges of $1.9 million compared to the same period in 2025. CPUC-approved surcharges are billed to customers to recover previously incurred costs. Changes in billed surcharge revenues are offset by equal changes in operating expenses, resulting in no impact to earnings.

Previous wording

Water consumption for the three months ended June 30, 2026 was higher by approximately 4% as compared to the same period in 2025. Prior to 2025, changes in consumption did not have a significant impact on recorded revenues due to the CPUC-approved full revenue decoupling mechanism, known as the WRAM, which adjusted volumetric revenues to adopted levels authorized by the CPUC. As previously discussed, the final decision in the latest general rate case rejected GSWC’s request for the continuation of the WRAM, and instead ordered GSWC to transition to a modified rate adjustment mechanism (a Monterey-style WRAM or “M-WRAM”). Without having a full revenue decoupling mechanism, GSWC’s revenues and earnings will be subject to future volatility as a result of fluctuations in customer consumption.

Current wording

Water consumption for the three months ended September 30, 2026 was higher by approximately 1% as compared to the same period in 2025. As previously discussed, the final decision in the latest general rate case rejected GSWC’s request for the continuation of the WRAM, and instead ordered GSWC to transition to a modified rate adjustment mechanism (a Monterey-style WRAM or “M-WRAM”) effective January 1, 2025. Without having a full revenue decoupling mechanism, GSWC’s revenues and earnings will be subject to future volatility as a result of fluctuations in customer consumption.