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What changed in AMERICAN STATES WATER CO's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of AMERICAN STATES WATER CO's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+570 added−583 removedSource: 10-K (2024-02-21) vs 10-K (2023-03-01)

Top changes in AMERICAN STATES WATER CO's 2023 10-K

570 paragraphs added · 583 removed · 415 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

149 edited+34 added−39 removed136 unchanged
Biggest changeWe are also subject to other business risks typical of our business, including: • Security risks, data protection and cyber-attacks that could disrupt our operations, increase our expenses, result in liabilities to third parties and damage to our reputation; • Failure to attract, train, develop and transition key employees with the necessary skills to replace employees who are retiring or otherwise terminate employment or to fill new positions needed to respond to the increase in public utility and environmental regulations; • Failure to make accurate estimates about financing and accounting matters, and in filing requests for rate increases with the CPUC or requests for price adjustments with the U.S. government or in bids on military privatization contracts; • Our ability to finance the significant capital expenditures required by our businesses, which could be adversely impacted by general economic and market conditions; • Changes in accounting, public utility, environmental and tax laws and regulations impacting our business; • Our inability to comply with debt covenants in our debt agreements; and • Final determination of our income tax liability by the federal and applicable state governments.
Biggest changeWe are also subject to other business risks typical of our business, including: • Cybersecurity incidents and physical security risks of our infrastructure and data could disrupt our operations and critical systems, increase our expenses, result in liabilities to third parties and damage to our reputation; • Failure to attract, train, develop and transition key employees with the necessary skills to replace employees who are retiring or otherwise terminate employment or to fill new positions needed to respond to the increase in public utility and environmental regulations; • Failure to make accurate estimates about financing and accounting matters, and in filing requests for rate increases with the CPUC or requests for price adjustments with the U.S. government or in bids on military base contracts or obtain new task orders from the U.S. government; • Our ability to finance significant capital expenditures required by our businesses, which could be adversely impacted by general economic and market conditions, delays in receiving decisions from the CPUC on our general rate cases or delays in receiving payment from the U.S. government; 12 Table of Contents • Volatility in economic conditions such as changes to inflation, short-term interest rate volatility, and other market conditions may adversely impact our financial performance; • Changes in accounting, public utility, environmental and tax laws and regulations impacting our business; • Our inability to comply with debt covenants in our debt agreements; and • Final determination of our income tax liability by the federal and applicable state governments.
Water Quality Regulatory Risks Our costs involved in maintaining water quality and complying with environmental regulation have increased and are expected to continue to increase Our capital and operating costs at GSWC may increase substantially as a result of increases in environmental regulation arising from increases in the cost of upgrading and building new water treatment plants, disposing of residuals from our water treatment plants, handling and storing hazardous chemicals, compliance-monitoring activities and securing alternative supplies when necessary.
Water Quality Regulatory Risks Our costs involved in maintaining water quality and complying with environmental regulation have increased and are expected to continue to increase Capital and operating costs at GSWC may increase substantially as a result of increases in environmental regulation arising from increases in the cost of upgrading and building new water treatment plants, disposing of residuals from our water treatment plants, handling and storing hazardous chemicals, compliance-monitoring activities and securing alternative supplies when necessary.
Further, changes in demographics, such as increases in life expectancy assumptions may also increase the funding requirements of our obligations related to the pension and other post-retirement benefit plans. Market conditions also affect the values of the assets that are held in trusts to satisfy significant future obligations under our pension and other post-retirement benefit plans.
Further, changes in demographics, such as increases in life expectancy assumptions may also increase the funding requirements of our obligations related to our pension and other post-retirement benefit plans. Market conditions also affect the values of the assets that are held in trusts to satisfy significant future obligations under our pension and other post-retirement benefit plans.
We make certain estimates and judgments in preparing our financial statements regarding, among others: • timing of recovering WRAM and MCBA regulatory assets; • amounts to set aside for uncollectible accounts receivable, inventory obsolescence and uninsured losses; • our legal exposure and the appropriate accrual for claims, including general liability and workers’ compensation claims; • future costs and assumptions for pensions and other post-retirement benefits; • regulatory recovery of deferred items; and • possible tax uncertainties.
We make certain estimates and judgments in preparing our financial statements regarding, among others: • timing of recovering WRAM, MCBA and BRRAM regulatory assets; • amounts to set aside for uncollectible accounts receivable, inventory obsolescence and uninsured losses; • our legal exposure and the appropriate accrual for claims, including general liability and workers’ compensation claims; • future costs and assumptions for pensions and other post-retirement benefits; • regulatory recovery of deferred items; and • possible tax uncertainties.
A loss which is not insured or not fully insured or cannot be recovered in customer rates could materially affect our financial condition and results of operations. We operate in areas subject to natural disasters We operate in areas that are prone to earthquakes, fires, mudslides, hurricanes, tornadoes, high winds, flooding or other natural disasters.
A loss which is not insured or not fully insured or cannot be recovered in customer rates could materially affect our financial condition and results of operations. We operate in areas subject to natural disasters We operate in areas that are prone to earthquakes, fires, mudslides, hurricanes, tornadoes, high winds, storms, flooding or other natural disasters.
Human Capital Management and Supply Risks Failure to attract, retain, train, motivate, develop and transition key employees could adversely affect our business In order to be successful, we must attract, retain, train, motivate, and develop key employees, including those in managerial, operational, financial, regulatory, business-development and information-technology support positions. Our regulated business and contracted services operations are complex.
Human Capital Management Risks Failure to attract, retain, train, motivate, develop and transition key employees could adversely affect our business In order to be successful, we must attract, retain, train, motivate, and develop key employees, including those in managerial, operational, financial, regulatory, business-development and information-technology support positions. Our regulated business and contracted services operations are complex.
Water shortages at GSWC may: • adversely affect our supply mix, for instance, by causing increased reliance upon more expensive water sources; • adversely affect our operating costs, for instance, by increasing the cost of producing water from more highly contaminated aquifers or requiring us to transport water over longer distances, truck water to water systems or adopt other emergency measures to enable us to continue to provide water service to our customers; • result in an increase in our capital expenditures over the long term, for example, by requiring future construction of pipelines to connect to alternative sources of supply, new wells to replace those that are no longer in service or are otherwise inadequate to meet the needs of our customers, and other facilities to conserve or reclaim water; • adversely affect the volume of water sold as a result of such factors as mandatory or voluntary conservation efforts by customers, changes in customer conservation patterns, recycling of water by customers and imposition of new regulations impacting such things as landscaping and irrigation patterns; • adversely affect aesthetic water quality if we are unable to flush our water systems as frequently due to water shortages or drought restrictions; and • result in customer dissatisfaction and harm to our reputation if water service is reduced, interrupted or otherwise adversely affected as a result of drought, water contamination or other causes.
Water shortages at GSWC may: • adversely affect our supply mix, for instance, by causing increased reliance upon more expensive water sources; • adversely affect our operating costs, for instance, by increasing the cost of producing water from more highly contaminated aquifers or requiring us to transport water over longer distances, truck water to water systems or adopt other emergency measures to enable us to continue to provide water service to our customers; • result in an increase in our capital expenditures over the long term, for example, by requiring future construction of pipelines to connect to alternative sources of supply, new wells to replace those that are no longer in service or are otherwise inadequate to meet the needs of our customers, and other facilities to conserve or reclaim water; • adversely affect the volume of water sold as a result of such factors as mandatory or voluntary conservation efforts by customers, changes in customer conservation patterns, recycling of water by customers and imposition of new regulations impacting such things as landscaping and irrigation patterns; 18 Table of Contents • adversely affect aesthetic water quality if we are unable to flush our water systems as frequently due to water shortages or drought restrictions; and • result in customer dissatisfaction and harm to our reputation if water service is reduced, interrupted or otherwise adversely affected as a result of drought, water contamination or other causes.
Additionally, the U.S. government periodically reviews the cost and overall effectiveness of the military privatization program. Should these reviews prompt a decision to curtail or eliminate the issuance of solicitations for future military privatization contract awards, the potential for growth in this segment could be negatively impacted.
Additionally, the U.S. government periodically reviews the cost and overall effectiveness of the military privatization program. Should these reviews prompt a decision to curtail or eliminate the issuance of solicitations for future military base contract awards, the potential for growth in this segment could be negatively impacted.
Regulatory agencies may also disallow recovery of certain costs if they determine they may no longer be recovered in rates, or if audit findings determine that we have failed to comply with our policies and procedures for procurement or other practices.
Regulatory agencies may disallow recovery of certain costs if they determine they may no longer be recovered in rates, or if audit findings determine that we have failed to comply with our policies and procedures for procurement or other practices.
Risks Associated with Regulated Public Utility and Contracted Services Operations Our businesses are heavily regulated and, as a result, decisions by regulatory agencies or the U.S. government can significantly affect our businesses GSWC’s and BVESI’s revenues depend substantially on the rates and fees they charge their customers and their ability to recover costs on a timely basis as authorized by the CPUC, including the ability to recover the costs of purchased water, groundwater assessments, electricity, natural gas, chemicals, water treatment, security at water facilities and preventative maintenance and emergency repairs.
Risks Associated with Regulated Public Utility and Contracted Services Operations Our businesses are heavily regulated and, as a result, decisions by regulatory agencies or the U.S. government can significantly affect our businesses GSWC’s and BVES’s revenues depend substantially on the rates and fees they charge their customers and their ability to recover costs on a timely basis as authorized by the CPUC, including the ability to recover the costs of purchased water, groundwater assessments, electricity, natural gas, chemicals, water treatment, security at water facilities and preventative maintenance and emergency repairs.
We may be required to (i) incur greater costs to relocate lines or increase our trimming of trees and other plants near our electric facilities to avoid wildfires, (ii) make significant additional capital expenditures to fund the projects in BVESI’s wildfire and safety mitigation plans, and (iii) bear the costs of damages to property or injuries to the public if it is determined that our power lines or other electrical equipment was a cause of such damages or injuries.
We may be required to (i) incur greater costs to relocate lines or increase our trimming of trees and other plants near our electric facilities to avoid wildfires, (ii) make significant additional capital expenditures to fund the projects in BVES’s wildfire and safety mitigation plans, and (iii) bear the costs of damages to property or injuries to the public if it is determined that our power lines or other electrical equipment was a cause of such damages or injuries.
We continue to incur costs associated with the expansion of our contract activities We continue to incur additional costs in connection with the expansion of our contract operations associated with the preparation of bids for new contract operations on prospective and existing military bases.
We continue to incur costs associated with the expansion of our military base contract activities We continue to incur additional costs in connection with the expansion of our contract operations associated with the preparation of bids for new contract operations on prospective and existing military bases.
Factors that could cause fluctuations in the trading price of our Common Shares include: changes in interest rates; regulatory developments; general economic conditions and trends; price and volume fluctuations in the overall stock market; actual or anticipated changes or fluctuations in our results of operations; actual or anticipated changes in the expectations of investors or securities analysts; actual or anticipated developments in other utilities’ businesses or the competitive landscape generally; litigation involving us or our industry; major catastrophic events, or sales of large blocks of our stock.
Factors that could cause fluctuations in the trading price of our Common Shares include: changes in interest rates; regulatory developments, decisions and delays; general economic conditions and trends; price and volume fluctuations in the overall stock market; actual or anticipated changes or fluctuations in our results of operations; actual or anticipated changes in the expectations of investors or securities analysts; actual or anticipated developments in other utilities’ businesses or the competitive landscape generally; litigation involving us or our industry; major catastrophic events, or sales of large blocks of our stock.
We may be held strictly liable for damages to property caused by our equipment even if we are not negligent Utilities in California may be held strictly liable for damages caused by their property, such as mains, fire hydrants, power lines and other equipment, even though they were not negligent in the operation and maintenance of that property, under a doctrine known as inverse condemnation.
We may, in certain circumstances, be held strictly liable for damages to property caused by our equipment even if we are not negligent Utilities in California may be held strictly liable, in certain circumstances, for damages caused by their property, such as mains, fire hydrants, power lines and other equipment, even though they were not negligent in the operation and maintenance of that property, under a doctrine known as inverse condemnation.
We maintain cybersecurity insurance to provide coverage for a portion of the losses and damages that may result from a security breach, but such insurance is subject to a number of exclusions and may not cover the total loss caused by a breach. Other costs associated with cyber events may not be covered by insurance or recoverable in rates.
We maintain cybersecurity insurance to provide coverage for a portion of the losses and damages that may result from a security breach, but such insurance is subject to a number of exclusions and may not cover the total loss caused by a breach. Other costs associated with cyber incidents may not be covered by insurance or recoverable in rates.
To reinforce our safety efforts and protocols, company-wide safety inspections at GSWC and BVESI are conducted with supervisors. The inspection reports are forwarded to management for review, allocation of resources are made (if needed), and corrective actions are taken. ASUS has a dedicated Safety Coordinator located at each military base installation served.
To reinforce our safety efforts and protocols, company-wide safety inspections at GSWC and BVES are conducted with supervisors. The inspection reports are forwarded to management for review, allocation of resources are made (if needed), and corrective actions are taken. ASUS has a dedicated Safety Coordinator located at each military base installation served.
Item 1A. Risk Factors You should carefully read the risks described below and other information in this Form 10-K in order to understand certain of the risks of our business. Overview of Risk Factors We have three business segments, water utility, electric utility and contracted services, each of which are subject to different risks as further discussed below.
Risk Factors You should carefully read the risks described below and other information in this Form 10-K in order to understand certain of the risks of our business. Overview of Risk Factors We have three business segments, water utility, electric utility and contracted services, each of which are subject to different risks as further discussed below.
We face intense competition for new military privatization contracts An important part of our growth strategy is the expansion of our contracted services business through new contract awards to serve additional military bases for the U.S. government. ASUS competes with other investor-owned utilities, municipalities, and other entities for these contracts.
We face intense competition for new military base contracts An important part of our growth strategy is the expansion of our contracted services business through new contract awards to serve additional military bases for the U.S. government. ASUS competes with other investor-owned utilities, municipalities, and other entities for these contracts.
Our capital and operating costs may also increase as a result of changes in laboratory detection capabilities and drinking water notification and response levels for certain substances, such as perfluoroalkyl substances (“PFAS”) used to make certain fabrics and other materials, certain fire suppression agents and used in various industrial processes.
Our capital and operating costs may also increase as a result of changes in laboratory detection capabilities and drinking water notification levels, response levels, and maximum contaminant levels for certain substances, such as perfluoroalkyl substances (“PFAS”) used to make certain fabrics and other materials, certain fire suppression agents and used in various industrial processes.
Moreover, GSWC and BVESI are obligated to give first priority to their own capital requirements and to maintain capital structures consistent with those determined to be reasonable by the CPUC in its most recent decisions on capital structure for both GSWC and BVESI in order for customers to not be adversely affected by the holding company structure.
Moreover, GSWC and BVES are obligated to give first priority to their own capital requirements and to maintain capital structures consistent with those determined to be reasonable by the CPUC in its most recent decisions on capital structure for both GSWC and BVES in order for customers to not be adversely affected by the holding company structure.
We are also subject to risks frequently encountered by businesses of our size. Regulated Water and Electric Utility Operations GSWC’s and BVESI’s revenues depend substantially on the rates and charges we are permitted to recover from our customers and the timing of that recovery as authorized by the CPUC.
We are also subject to risks frequently encountered by businesses of our size. Regulated Water and Electric Utility Operations GSWC’s and BVES’s revenues depend substantially on the rates and charges we are permitted to recover from our customers and the timing of that recovery as authorized by the CPUC.
Shut-offs can reduce BVESI’s liquidity and decrease customer satisfaction. These shut-offs can also adversely affect GSWC’s water utility operations if the electric utilities that provide electric service to GSWC’s water operations shut off power lines that deliver electricity to GSWC’s water plant and equipment, thereby adversely affecting its ability to provide water service to its customers.
Shut-offs can reduce BVES’s liquidity and decrease customer satisfaction. These shut-offs can also adversely affect GSWC’s water utility operations if the electric utilities that provide electric service to GSWC’s water operations shut off power lines that deliver electricity to GSWC’s water plant and equipment, thereby adversely affecting its ability to provide water service to its customers.
Our costs of obtaining and complying with the terms of franchise agreements are increasing Cities and counties in which GSWC and BVESI operate have granted them franchises to construct, maintain and use pipes, wires and appurtenances in or along public streets and rights of way.
Our costs of obtaining and complying with the terms of franchise agreements are increasing Cities and counties in which GSWC and BVES operate have granted them franchises to construct, maintain and use pipes, wires and appurtenances in or along public streets and rights of way.
The CPUC has adopted regulatory mechanisms for our electric business, which helps mitigate fluctuations in the revenues of our electric business due to changes in the amount of electricity used by BVESI’s customers. Environmental Regulations AWR’s subsidiaries are subject to extensive environmental regulations.
The CPUC has adopted regulatory mechanisms for our electric business, which helps mitigate fluctuations in the revenues of our electric business due to changes in the amount of electricity used by BVES’s customers. Environmental Regulations AWR’s subsidiaries are subject to extensive environmental regulations.
Decisions of the CPUC could also result in impairment charges and customer refunds, and delays in recovering costs in rates.
Decisions of the CPUC could result in impairment charges and customer refunds, and delays in recovering costs in rates.
Furthermore, potential future legislation efforts to ban gas powered power plants as a response to climate change may require us to replace our current 8.4 MW natural gas powered generator before its useful life is completed.
Furthermore, potential future legislative efforts to ban gas powered power plants as a response to climate change may require us to replace our current 8.4 MW natural gas-powered generator before its useful life is completed.
We may not be fully reimbursed for all of our construction costs or may only receive payment on a delayed basis Unlike GSWC and BVESI, who recover their capital investments from customers over the life of the assets through annual depreciation and earn a return on such investments through the ratemaking process, ASUS is reimbursed for the cost of ongoing renewal and replacement construction projects plus a profit through the collection of a monthly cash stream under each of the contracts with the U.S. government.
We may not be fully reimbursed for all of our construction costs or may only receive payment on a delayed basis Unlike GSWC and BVES, who recover their capital investments from customers over the life of the assets through annual depreciation and earn a return on such investments through the ratemaking process, ASUS is reimbursed for the cost of ongoing renewal and replacement construction projects plus a profit through the collection of a monthly cash stream under each of the 50-year contracts with the U.S. government.
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the section titled “ Environmental Matters .” 4 Table of Contents Climate Change Planning, Risks and Opportunities Climate change is one area that we focus on as we develop and execute our business strategy and financial planning, both in the short- and long-term and is subject to the oversight of the Board of Directors and senior management.
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the section titled “ Environmental Matters .” Climate Change Planning, Risks and Opportunities Climate change is one area that we focus on as we develop and execute our business strategy and financial planning, both in the short- and long-term and is subject to the oversight of the Board of Directors and senior management.
Regulatory decisions affecting GSWC and/or BVESI may also impact prospective revenues and earnings, affect the timing of the recognition of revenues and expenses, may overturn past decisions used in determining our revenues and expenses, and could result in impairment charges and customer refunds.
Regulatory decisions affecting GSWC and/or BVES may also impact prospective revenues and earnings, affect the timing of the recognition of revenues and expenses, may overturn past decisions used in determining our revenues and expenses, and could result in impairment charges and customer refunds.
If we are unable to collect amounts owed to us on a timely basis or the U.S. government asserts its offset rights, profits and cash flows could be adversely affected. Moreover, we are subject to potential government investigations of our business practices and compliance with government procurement statutes and security regulations.
If we are unable to collect amounts owed to us on a timely basis or the U.S. government asserts its offset rights, profits and cash flows could be adversely affected. 21 Table of Contents Moreover, we are subject to potential government investigations of our business practices and compliance with government procurement statutes and security regulations.
Any of these or other events could cause system interruption, delays and loss of critical data, or delay or prevent operations and adversely affect our financial results and could result in liabilities not covered by insurance or recoverable in rates for misappropriation of assets or sensitive information, corruption of data and the impact of operational disruptions on our customers.
Any of these or other events could cause system interruption, delays and loss of critical data, delay or prevent operations or delay in notification of system failures or emergencies and adversely affect our financial results and could result in liabilities not covered by insurance or recoverable in rates for misappropriation of assets or sensitive information, corruption of data and the impact of operational disruptions on our customers.
At the same time, there is increasing opposition from consumer groups to rate increases that may be necessary to compensate GSWC and BVESI for the increased costs of regulation by local governments.
At the same time, there is increasing opposition from consumer groups to rate increases that may be necessary to compensate GSWC and BVES for the increased costs of regulation by local governments.
In addition, pursuant to U.S. government regulations regarding cybersecurity of government contractors, we might be subject to fines, penalties or other actions, including debarment, with respect to current contracts or with respect to future contract opportunities.
Pursuant to U.S. government regulations regarding cybersecurity of government contractors, we might be subject to fines, penalties or other actions, including debarment, with respect to current contracts or with respect to future contract opportunities.
Historically, we have taken a number of steps to address contamination, including the removal of wells from service, decreasing the amount of groundwater pumped from wells in order to facilitate remediation of plumes of contaminated water, constructing water treatment facilities and securing alternative sources of supply from other areas not affected by the contamination.
Historically, we have taken a number of steps to address contamination, including the removal of wells from service, decreasing the amount of groundwater pumped from wells in order to facilitate remediation of plumes of contaminated water, constructing water 17 Table of Contents treatment facilities and securing alternative sources of supply from other areas not affected by the contamination.
GSWC has implemented a modified supply cost balancing account, the MCBA, to track and recover costs from supply mix changes and rate changes by wholesale suppliers, as authorized by the CPUC.
Since 2008, GSWC has implemented a modified supply cost balancing account, the MCBA, to track and recover costs from supply mix changes and rate changes by wholesale suppliers, as authorized by the CPUC.
Utility Privatization Contract Risks Our contracts for servicing military bases create certain risks that are different from our public utility operations We have entered into contracts to provide water and/or wastewater services at military bases pursuant to an initial 50-year firm, fixed-priced contract and additional firm, fixed-price contracts, subject to termination, in whole or in part, for the convenience of the U.S. government.
Utility Privatization Contract Risks Our contracts for servicing military bases create certain risks that are different from our public utility operations We have entered into contracts to provide water and/or wastewater services at military bases primarily pursuant to initial 50-year, firm-fixed-priced contracts, additional firm-fixed-price contracts and task order contracts, subject to termination, in whole or in part, for the convenience of the U.S. government.
At times, GSWC and BVESI use temporary and contract workers for a finite period of time and in a limited capacity to continue a project or workflow until they can hire a regular employee. It is also common for those temporary workers to be hired on as a regular, full-time employee.
At times, GSWC and BVES use temporary and contract workers for a finite period of time and in a limited capacity to continue a project or workflow until they can hire a regular employee. It is also common for those temporary workers to be hired as a regular, full-time employee.
Attracting Diverse Candidates We understand that strength comes from having a diverse employee population. We strive to hire from our local communities and have a workforce that is representative, at all job levels, of the communities we serve. This begins with the recruitment process.
Attracting Diverse Qualified Candidates We understand that strength comes from having a diverse employee population. We strive to hire from our local communities and to have a workforce that is representative, at all job levels, of the communities we serve and from which we recruit. This begins with the recruitment process.
The U.S. government may disagree with the 10 Table of Contents increases that we request and may delay approval of requests for equitable adjustment or economic price adjustments, which could adversely affect our anticipated rates of return at our contracted services business.
The U.S. government may disagree with the increases that we request and may delay approval of requests for equitable adjustment or economic price adjustments, which could adversely affect our anticipated rates of return at our contracted services business.
However, cash flows from operations can be 15 Table of Contents significantly affected since much of the balance we recognize in the MCBA is collected from or refunded to customers primarily through surcharges or surcredits, respectively, generally over twelve- to twenty-four-months.
However, cash flows from operations can be significantly affected since much of the balance we recognize in the MCBA is collected from or refunded to customers primarily through surcharges or surcredits, respectively, generally over twelve- to twenty-four-months.
Competition The businesses of GSWC and BVESI are substantially free from direct and indirect competition with other public utilities, municipalities and other public agencies within their existing service territories.
Competition The businesses of GSWC and BVES are substantially free from direct and indirect competition with other public utilities, municipalities and other public agencies within their existing service territories.
On August 27, 2020, the CPUC issued a final decision in the first phase of the CPUC’s Order Instituting Rulemaking evaluating the low income ratepayer assistance and affordability objectives contained in the CPUC’s 2010 Water Action Plan, which also addressed the continued use of the Water Revenue Adjustment Mechanism (“WRAM”) and the Modified Cost Balancing Account (“MCBA”) by California water utilities.
On August 27, 2020, the CPUC issued a final decision in the first phase of the CPUC’s Order Instituting Rulemaking evaluating the low income ratepayer assistance and affordability objectives contained in the CPUC’s 2010 Water Action Plan, addressing the continued use of the Water Revenue Adjustment Mechanism (“WRAM”) and the Modified Cost Balancing Account (“MCBA”) by California water utilities.
ASUS also receives funding from the U.S. government for initial and other new construction projects at the military bases it serves that, in many cases, are outside the scope of contracts with the U.S. government and are granted through firm-fixed contract modifications. Our Military Utility Privatization Subsidiaries expect to continue incurring significant construction costs.
ASUS also receives funding from the U.S. government for initial and other new construction projects at the military bases it serves that, in many cases, are outside the scope of contracts with the U.S. government and are granted through firm-fixed contract modifications. ASUS’s subsidiaries expect to continue incurring significant construction costs.
AWR makes its periodic reports, Form 10-Q and Form 10-K, and current reports, Form 8-K, available free of charge through its website, www.aswater.com, as soon as material is electronically filed with or furnished to the Securities and Exchange Commission (“SEC”). Such reports are also available on the SEC’s website at www.sec.gov.
AWR makes its periodic reports, Form 10-Q and Form 10-K, and current reports, Form 8-K, and amendments to those reports, available free of charge through its website, www.aswater.com, as soon as those reports are electronically filed with or furnished to the Securities and Exchange Commission (“SEC”). Such reports are also available on the SEC’s website at www.sec.gov.
If expenses increase significantly over a short period, we may experience delays in recovery of these expenses, the inability to recover carrying costs for these expenses, and increased risks of regulatory disallowances or write-offs.
If expenses increase significantly over a short period, we may experience delays in recovery of these expenses and the inability to recover the carrying costs for the expenses, which increases risks of regulatory disallowances or write-offs.
Injuries and property damage caused by such events may subject BVESI to significant liabilities that may not be covered or fully covered by insurance.
Injuries and property damage caused by such events may subject BVES to significant liabilities that may not be covered or fully covered by insurance.
Furthermore, due to insurance market conditions resulting in tighter 13 Table of Contents underwriting and increased premiums along with reductions in capacity, we have experienced increased costs and difficulties in obtaining certain insurance coverages, particularly along the general liability, umbrella and cyber insurance lines. We may experience further increased insurance costs and/or coverage reductions in future years.
Furthermore, due to insurance market conditions resulting in tighter underwriting and increased premiums along with reductions in capacity, we have experienced increased costs and difficulties in obtaining certain insurance coverages, particularly along the general liability, umbrella and cyber insurance lines. We may experience further increased insurance costs and/or coverage reductions in future years.
Reimbursement by the U.S government for these construction costs may not 18 Table of Contents be fully reimbursable if the costs incurred are greater than the amounts estimated and approved by the U.S. government, or payments may be delayed awaiting government funding and processing, which could significantly affect our cash flows from operations.
Reimbursement by the U.S government for these construction costs may not be fully reimbursable if the costs incurred are greater than the amounts estimated and approved by the U.S. government, or payments may be delayed awaiting government funding and processing, which could significantly affect our cash flows from operations.
As a result, our cash flows may be affected by increases in spot market prices of electricity purchased and decreases in spot market prices for electricity sold. However, BVESI has implemented a CPUC-approved supply-cost balancing account to mitigate the impact to earnings from fluctuations in supply costs.
As a result, our cash flow may be affected by increases in spot market prices of electricity purchased and decreases in spot market prices for electricity sold. However, BVES has implemented a CPUC-approved supply-cost balancing account to mitigate the impact to earnings from fluctuations in supply costs.
Some of the factors impacting our ability to obtain rate recovery on a timely basis include opposition to rate increases arising out of increased costs for replacing aging infrastructure and increased costs associated with addressing climate change risks, such as drought and wildfires in California, costs incurred in connection with complying with water quality regulations, costs incurred in connection with complying with the COVID-19 pandemic, and costs incurred in connection with obtaining and complying with franchise agreements with local governmental agencies and costs of obtaining permits from local, state and federal governmental agencies.
Some of the factors impacting our ability to obtain rate recovery on a timely basis include opposition to rate increases arising out of increased costs for replacing aging infrastructure and increased costs associated with addressing climate change and weather event risks, such as drought, storms and wildfires in California, costs incurred in connection with complying with water quality regulations, costs incurred in connection with obtaining and complying with franchise agreements with local governmental agencies and costs of obtaining permits from local, state and federal governmental agencies.
Both GSWC’s and BVESI’s operations exhibit seasonal trends. Although both have diversified customer bases, residential and commercial customers account for the majority of water and electric sales and revenues. Revenues derived from commercial and residential customers accounted for approximately 90% of total water and electric revenues for the years ended December 31, 2022, 2021 and 2020.
Both GSWC’s and BVES’s operations exhibit seasonal trends. Although both have diversified customer bases, residential and commercial customers account for the majority of water and electric sales and revenues. Revenues derived from commercial and residential customers accounted for approximately 90% of total water and electric revenues for the years ended December 31, 2023, 2022 and 2021.
We are also, in some cases, required to estimate future expenses and, in others, we are required to incur the expense before recovering costs. As a result, our revenues and earnings may fluctuate depending on the accuracy of our estimates, the timing of our investments or expenses or other factors.
We are also, in some cases, required to estimate future expenses and, in others, we are required to incur the expense before receiving approval to recover the costs. As a result, our revenues and earnings may fluctuate depending on the accuracy of our estimates, the timing of our investments or expenses or other factors.
We implemented the CPUC-approved WRAM at GSWC, which has the effect of stabilizing revenues at the adopted level thereby reducing the potential adverse earnings impact of our customers’ conservation efforts.
Since 2008, we have implemented the CPUC-approved WRAM at GSWC, which has the effect of stabilizing revenues at the adopted level thereby reducing the potential adverse earnings impact of our customers’ conservation efforts.
We believe, however, that the terms of the contracts between the Military Utility Privatization Subsidiaries and the U.S. government provide the opportunity for us to recover costs incurred in the treatment or remediation of any quality issue that arises from the source of water supply.
We believe, however, that the terms of the contracts between ASUS’s subsidiaries and the U.S. government provide the opportunity for us to recover costs incurred in the treatment or remediation of any quality issue that arises from the source of water supply.
Any delays by the CPUC in granting rate relief to cover increased operating and capital costs at our public utilities or delays in obtaining approval of our requests at ASUS for economic price or equitable adjustments for contracted services from the U.S. government may adversely affect our financial performance.
Any delays by the CPUC in granting rate relief to cover increased operating and capital costs at our public utilities or delays in obtaining approval of our requests at ASUS for economic price or equitable adjustments for contracted services from the U.S. government may adversely affect our year-over-year financial performance, liquidity and cash flows.
Under these standards, BVESI must file an annual attestation with the CPUC stating that BVESI has no new ownership investment in generation facilities exceeding the emission performance standards and no long-term commitments for generation exceeding the standards. In January 2023, BVESI filed an attestation that BVESI complied with the standards for 2022.
Under these standards, BVES must file an annual attestation with the CPUC stating that BVES has no new ownership investment in generation facilities exceeding the emission performance standards and no long-term commitments for generation exceeding the standards. In January 2024, BVES filed an attestation that BVES complied with the standards for 2023.
As a result, our financial results are largely subject to political, water supply, labor, utility cost and regulatory risks, economic conditions, natural disasters (which may increase as a result of climate change), and other risks affecting California businesses.
As a result, our financial results are largely subject to political, water supply, labor, utility cost and regulatory risks, economic conditions, natural disasters (which may increase as a result of climate change), and other risks affecting California businesses. Our assets are also subject to condemnation in California.
Losses by insurance companies resulting from wildfires in California have caused insurance coverage for wildfire risks to become more expensive and coverage could become unavailable on reasonable terms, and our insurance may be inadequate 12 Table of Contents to recover all our losses incurred in a wildfire.
Losses by insurance companies resulting from wildfires in California have caused insurance coverage for wildfire risks to become more expensive and coverage could become unavailable on reasonable terms, and our insurance may be inadequate to recover all our losses incurred in a wildfire.
Our contracts are also subject to annual economic price adjustments or other changes permitted by the terms of the contracts. Prices are also subject to equitable adjustment based upon changes in circumstances, laws or regulations and service-requirement changes to the extent provided in each of the contracts.
Our contracts are also subject to annual economic price adjustments, adjustments as task orders are issued or other changes permitted by the terms of the contracts. Prices are also subject to equitable adjustment based upon changes in circumstances, laws or regulations and service-requirement changes to the extent provided in each of the contracts.
However, GSWC and BVESI may be subject to eminent domain proceedings in which governmental agencies, under state law, may acquire GSWC’s water systems or BVESI’s electric system if doing so is necessary and in the public’s interest.
However, GSWC and BVES may be subject to eminent domain proceedings in which governmental agencies, under state law, may acquire GSWC’s water systems or BVES’s electric system if doing so is necessary and in the public’s interest.
GSWC may be able to recover these costs from customers through the ratemaking process. We may also be able to recover these costs from certain third parties under settlement and contractual arrangements.
GSWC may be able to recover these costs from customers through the ratemaking process. We may also be able to recover a portion of these costs from certain third parties under settlement and contractual arrangements.
We are periodically audited or reviewed by the Defense Contract Auditing Agency (“DCAA”), the Defense Contract Management Agency (“DCMA”), the Department of Labor (“DOL”), the Defense Logistics Agency Energy (“DLAE”), and/or the Department of Justice (“DOJ”) for compliance with federal acquisition regulations, cost-accounting standards and other laws, regulations and standards that are not applicable to the operations of GSWC or BVESI.
We are periodically audited or reviewed by the Defense Contract Auditing Agency (“DCAA”), the Defense Contract Management Agency (“DCMA”), the Department of Labor, the Defense Logistics Agency Energy, and/or the Department of Justice for compliance with federal acquisition regulations, cost-accounting standards and other laws, regulations and standards that are not applicable to the operations of GSWC or BVES.
For instance, there can be a higher level of water consumption during the third quarter of each year when weather in California tends to be hot and dry. During unusually wet weather, our customers generally use less water.
For instance, there can be a higher level of water consumption during the third quarter of each year when weather in California has been hot and dry. During unusually wet weather, our customers generally use less water.
We establish prices for these types of firm fixed-price contracts and the overall 50-year contract taken as a whole, based, in part, on cost estimates that are subject to a number of assumptions, including assumptions regarding future economic 17 Table of Contents conditions.
We establish prices for these types of firm-fixed-price contracts and the overall contract taken as a whole, based, in part, on cost estimates that are subject to a number of assumptions, including assumptions regarding future economic conditions.
The State of California and the CPUC have established renewable energy procurement targets. BVESI has entered into a CPUC-approved ten-year contract for renewable energy credits. Because of this agreement, BVESI believes it will comply through at least 2023 with California’s renewable energy statutes that address this issue.
The State of California and the CPUC have established renewable energy procurement targets. BVES has entered into a CPUC-approved eleven-year contract for renewable energy credits. Because of this agreement, BVES believes it will comply through at least 2024 with California’s renewable energy statutes that address this issue.
We are required to record all costs under these types of contracts as they are incurred. As a result, we may record losses associated with unanticipated conditions that result in higher than estimated costs, higher than anticipated infrastructure levels, and required emergency work at the time such expenses occur.
We are required to record all costs under our military base contracts as they are incurred. As a result, we may record losses associated with unanticipated conditions that result in higher than estimated costs, higher than anticipated infrastructure levels, and required emergency work at the time such expenses occur.
Certain positions require employees to maintain all of their job-specific certifications, licenses and continuing education credits. On a regular and ongoing basis, we require all employees to certify that they have reviewed and understand our Code of Conduct as well as our Employee Handbook.
Certain positions require employees to maintain all of their job-specific certifications, licenses and continuing education credits. On a regular and ongoing basis, we require all employees to certify that they have reviewed and understand our Code of Conduct as well as our Employee Handbook. We provide harassment and prevention awareness training for all employees.
Our liquidity and earnings may be adversely affected by wildfires It is possible that wildfires may occur more frequently, be of longer duration or impact larger areas as a result of drought-damaged plants and trees, lower humidity or higher winds that may occur as result of changing weather patterns.
Risks Associated with Health, Safety and Liability Matters Our liquidity and earnings may be adversely affected by wildfires It is possible that wildfires may occur more frequently, be of longer duration or impact larger areas as a result of drought-damaged plants and trees, lower humidity or higher winds that may occur as result of changing weather patterns.
BVESI is a public electric utility that distributes electricity in several San Bernardino County mountain communities in California, and is also regulated by the CPUC. Additional information regarding public utility regulation is discussed in Item 7.
GSWC is regulated by the California Public Utilities Commission (“CPUC”). BVES is a public electric utility that distributes electricity in several San Bernardino County mountain communities in California and is also regulated by the CPUC. Additional information regarding public utility regulation is discussed in Item 7.
Each of the contracts with the U.S. government is subject to termination, in whole or in part, prior to the end of its 50-year term for convenience of the U.S. government or as a result of default or nonperformance by the ASUS subsidiary performing the contract. The price for each of these contracts is subject to annual economic price adjustments.
Each of the contracts with the U.S. government is subject to termination, in whole or in part, prior to the end of its term for convenience of the U.S. government or as a result of default or nonperformance by the ASUS subsidiary performing the contract.
ASUS actively competes for business with other investor-owned utilities, other third-party providers of water and/or wastewater services, and governmental entities primarily on the basis of quality of service and price. 6 Table of Contents AWR Workforce AWR and its subsidiaries had a total of 811 employees as of December 31, 2022. GSWC had 501 employees as of December 31, 2022.
ASUS actively competes for business with other investor-owned utilities, other third-party providers of water and/or wastewater services, and governmental entities primarily on the basis of quality of service and price. AWR Workforce AWR and its subsidiaries had a total of 815 employees as of December 31, 2023. GSWC had 506 employees as of December 31, 2023.
AWR also makes available free of charge its code of business conduct and ethics, its corporate governance guidelines and the charters of its Nominating and Governance Committee, Compensation Committee and Audit and Finance Committee through its website or by calling (877) 463-6297.
AWR also makes available free of charge its code of business conduct and ethics, its corporate governance guidelines, its policy for the recoupment of performance-based compensation, its insider trading policy and the charters of its Nominating and Governance Committee, Compensation Committee and Audit and Finance Committee through its website or by calling (877) 463-6297.
We submit bids on new U.S. government contracts for military bases based on estimates of cost and potential profit. Our estimates and judgment are important, for in the event we overpay to obtain a contract, we could incur losses on it.
We compete with other companies in bidding on providing utility services on military bases. We submit bids on new U.S. government contracts for military bases based on estimates of cost and potential profit. Our estimates and judgment are important, for in the event we overpay to obtain a contract, we could incur losses on it.
Reclaimed water generally has lower tariff rates than potable water. Prolonged droughts may also result in state-ordered mandatory or voluntary conservation efforts by customers, changes in customer conservation patterns and imposition of new regulations impacting such things as landscaping and irrigation patterns.
Reclaimed water generally has lower tariff rates than potable water and may be provided by other companies or government entities in GSWC’s service territory. Prolonged droughts may also result in state-ordered mandatory or voluntary conservation efforts by customers, changes in customer conservation patterns and imposition of new regulations impacting such things as landscaping and irrigation patterns.
Changes in market conditions, including events beyond our control such as recent increases to interest rates, could limit our ability to access capital on terms favorable to us or at all, including credit facilities 21 Table of Contents with the borrowing capacities needed as well as issuing long-term debt.
Changes in market conditions, including events beyond our control such as recent increases to interest rates, could limit our ability to access capital on terms favorable to us or at all, including obtaining credit facilities with the borrowing capacities needed as well as issuing equity or debt securities.
Management periodically reviews its assessment of the probable outcome of these proceedings, the costs and expenses reasonably expected to be incurred, and the availability and extent of insurance coverage. On the basis of this review, management establishes reserves for such matters.
These proceedings may pertain to regulatory investigations, employment matters or other disputes. Management periodically reviews its assessment of the probable outcome of these proceedings, the costs and expenses reasonably expected to be incurred, and the availability and extent of insurance coverage. On the basis of this review, management establishes reserves for such matters.
With respect to GSWC and BVESI, the CPUC has historically allowed utilities to establish a catastrophic emergency memorandum account (“CEMA”) to potentially recover such incremental costs not covered in rates. With respect to the Military Utility Privatization Subsidiaries, costs associated with responding to natural disasters have been recoverable through requests for equitable adjustment.
With respect to GSWC and BVES, the CPUC has historically allowed utilities to establish a catastrophic emergency memorandum account (“CEMA”) to potentially recover incremental costs not covered in rates caused by catastrophic emergency events. With respect to ASUS’s subsidiaries, costs associated with responding to natural disasters have been recoverable through requests for equitable adjustment.
Security risks, data protection breaches and cyberattacks could disrupt our internal operations, and any such disruption could increase our expenses, damage our reputation and adversely affect our stock price There have been an increasing number of cyberattacks on companies around the world, which have caused operational failures or compromised sensitive corporate or customer data.
Cybersecurity incidents could disrupt our internal operations, and any such disruption could increase our expenses, damage our reputation and adversely affect our stock price There continues to be an increasing number of cyberattacks on companies around the world, which have caused operational failures or compromised sensitive corporate or customer data.
“Management’s Discussion and Analysis of Financial Condition" and Results of Operations” under the section titled “ Regulatory Matters . ” AWR’s regulated utilities served 263,265 water customers and 24,705 electric customers at December 31, 2022, or a total of 287,970 customers, compared with 262,770 water customers and 24,656 electric customers at December 31, 2021, or a total of 287,426 customers.
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the section titled “ Regulatory Matters . ” AWR’s regulated utilities served 264,093 water customers and 24,777 electric customers at December 31, 2023, or a total of 288,870 customers, compared with 263,265 water customers and 24,705 electric customers at December 31, 2022, or a total of 287,970 customers.
BVESI is also required to implement a public safety power shut-off program during high wildfire threat conditions. The CPUC may assess penalties if BVESI shuts-down power to its customers and the CPUC determines that the shutdown was not reasonably necessary in the circumstances. BVESI has also obtained a safety certificate, which must be renewed annually by the CPUC.
BVES is also required to implement a public safety power shut-off program during high wildfire threat conditions. The CPUC may assess penalties if BVES shuts-down power to its customers and the CPUC determines that the shutdown was not reasonably necessary in the circumstances.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThe following is a computation and reconciliation of diluted earnings per share from the measure of operating income by business segment as disclosed in Note 17 to the Consolidated Financial Statements, to AWR’s consolidated fully diluted earnings per common share for the year ended December 31, 2022 and 2021: Water Electric Contracted Services AWR (Parent) Consolidated (GAAP) In 000's except per share amounts 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 Operating income (Note 17) $ 92,455 $ 107,573 $ 11,740 $ 10,738 $ 22,449 $ 22,675 $ (8) $ (9) $ 126,636 $ 140,977 Other income and expense 22,339 16,263 425 (101) (273) (488) 2,085 533 24,576 16,207 Income tax expense (benefit) 16,346 22,095 2,439 2,975 5,476 5,434 (597) (81) 23,664 30,423 Net income (loss) $ 53,770 $ 69,215 $ 8,876 $ 7,864 $ 17,246 $ 17,729 $ (1,496) $ (461) $ 78,396 $ 94,347 Weighted Average Number of Diluted Shares 37,039 37,010 37,039 37,010 37,039 37,010 37,039 37,010 37,039 37,010 Diluted earnings per share $ 1.45 $ 1.87 $ 0.24 $ 0.21 $ 0.46 $ 0.48 $ (0.04) $ (0.01) $ 2.11 $ 2.55 Water Segment: For the year ended December 31, 2022, recorded diluted earnings from the water utility segment were $1.45 per share, as compared to $1.87 per share for the same period in 2021, a decrease of $0.42 per share.
Biggest changeThe following is a computation and reconciliation of diluted earnings per share from the measure of operating income by business segment as disclosed in Note 17 to the Consolidated Financial Statements, to AWR’s consolidated fully diluted earnings per common share for the year ended December 31, 2023 and 2022: Water Electric Contracted Services AWR (Parent) Consolidated (GAAP) In 000's except per share amounts 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 Operating income (Note 17) $ 159,177 $ 92,455 $ 11,196 $ 11,740 $ 26,151 $ 22,449 $ 216 $ (8) $ 196,740 $ 126,636 Other (income) and expense 20,780 22,339 2,202 425 1,446 (273) 5,792 2,085 30,220 24,576 Income tax expense (benefit) 35,689 16,346 1,515 2,439 6,109 5,476 (1,714) (597) 41,599 23,664 Net income (loss) $ 102,708 $ 53,770 $ 7,479 $ 8,876 $ 18,596 $ 17,246 $ (3,862) $ (1,496) $ 124,921 $ 78,396 Weighted Average Number of Diluted Shares 37,077 37,039 37,077 37,039 37,077 37,039 37,077 37,039 37,077 37,039 Diluted earnings per share $ 2.77 $ 1.45 $ 0.20 $ 0.24 $ 0.50 $ 0.46 $ (0.10) $ (0.04) $ 3.36 $ 2.11 Note: Certain amounts in the table above may not foot or crossfoot due to rounding. 38 Table of Contents Water Segment: For the year ended December 31, 2023, recorded diluted earnings from the water utility segment were $2.77 per share, as compared to $1.45 per share for 2022, an increase of $1.32 per share, which includes: (i) the impact of retroactive new rates related to the full 2022 year of $0.38 per share (shown separately in the Summary Results by Segment table above), (ii) a net favorable variance of $0.26 per share (shown separately in the Summary Results by Segment table above) from the impact of the final cost of capital decision that resulted in the reversal of $6.4 million, or $0.13 per share, due to a change in estimate from what had been recorded during 2022, and (iii) a net favorable variance of $0.20 per share from gains totaling $5.0 million, or $0.10 per share, recorded during 2023 on investments held to fund a retirement plan, as compared to losses of $5.2 million, or $0.10 per share, recorded in 2022.
The WCCM adjusts return on equity and rate of return on rate base between the three-year cost of capital proceedings only if there is a positive or negative change of more than 100 basis points in the average of the Moody’s Aa utility bond rate as measured over the period October 1 through September 30.
The WCCM adjusts the return on equity and rate of return on rate base between the three-year cost of capital proceedings only if there is a positive or negative change of more than 100 basis points in the average of the Moody’s Aa utility bond rate as measured over the period October 1 through September 30.
In November 2022, the Supreme Court denied the CPUC’s motion to dismiss and established a new proceeding schedule whereby the CPUC filed their answer brief on December 9 and the IOWUs filed their reply brief on January 13, 2023. At this time, management cannot predict the final outcome of this matter.
In November 2022, the Supreme Court denied the CPUC’s motion to dismiss and established a new proceeding schedule whereby the CPUC filed their answer brief on December 9, 2022 and the IOWUs filed their reply brief on January 13, 2023. At this time, management cannot predict the final outcome of this matter.
Internal cash generation is influenced by factors such as weather patterns, conservation efforts, environmental regulation, litigation, changes in tax law and deferred taxes, changes in supply costs and regulatory decisions affecting GSWC’s ability to recover these supply costs, timing of rate relief, increases in maintenance expenses and capital expenditures, surcharges authorized by the CPUC to enable GSWC to recover expenses previously 48 incurred from customers, and CPUC requirements to refund amounts previously charged to customers.
Internal cash generation is influenced by factors such as weather patterns, conservation efforts, environmental regulation, litigation, changes in tax law and deferred taxes, changes in supply costs and regulatory decisions affecting GSWC’s ability to recover these supply costs, timing of rate relief, increases in maintenance expenses and capital expenditures, surcharges authorized by the CPUC to enable GSWC to recover expenses previously incurred from customers, and CPUC requirements to refund amounts previously charged to customers.
GSWC is required to file a water general rate case application every three years according to a schedule established by the CPUC. General rate cases typically include an increase in the first test year with inflation-rate adjustments for expenses for the second and third years of the rate case cycle. For capital projects, there are two test years.
GSWC is required to file a water general rate case application every three years according to a schedule established by the CPUC. General rate cases typically include an increase in the test year with inflation-rate adjustments for expenses in the second and third years of the rate case cycle. For capital projects, there are two test years.
The productivity of GSWC’s groundwater resources varies from year to year depending upon a variety of factors, including natural replenishment from snow-melt or rainfall, the availability of imported replenishment water, the amount of water previously stored in groundwater basins, natural or man- 56 made contamination, legal production limitations, and the amount and seasonality of water use by GSWC’s customers and others.
The productivity of GSWC’s groundwater resources varies from year to year depending upon a variety of factors, including natural replenishment from snow-melt or rainfall, the availability of imported replenishment water, the amount of water previously stored in groundwater basins, natural or man-made contamination, legal production limitations, and the amount and seasonality of water use by GSWC’s customers and others.
In establishing the contribution amount, Registrant has considered the potential impact of funding-rule changes under the Pension Protection Act of 2006. Registrant contributes the minimum required contribution as determined by government regulations or 44 the forecasted annual pension cost authorized by the CPUC and included in customer rates, whichever is higher.
In establishing the contribution amount, Registrant has considered the potential impact of funding-rule changes under the Pension Protection Act of 2006. Registrant contributes the minimum required contribution as determined by government regulations or the forecasted annual pension cost authorized by the CPUC and included in customer rates, whichever is higher.
GSWC actively participates in efforts to protect groundwater basins from over-use and from contamination. In some periods, these efforts may require reductions in groundwater pumping and increased reliance on alternative water resources. GSWC also participates in implementation of California’s Sustainable Groundwater Management Act.
GSWC actively participates in efforts to protect groundwater basins from over-use and from contamination. In some periods, these efforts may require reductions in groundwater pumping and increased reliance on alternative water resources. GSWC also participates in the implementation of California’s Sustainable Groundwater Management Act.
Earnings and cash flows from modifications to the initial 50-year contract or additional contracts thereafter with the U.S. government and agreements with third-party prime contractors for additional construction projects may or may not continue in future periods.
Earnings and cash flows from modifications to the initial 50-year contracts, additional contracts thereafter with the U.S. government and agreements with third-party prime contractors for additional construction projects may or may not continue in future periods.
GSWC, the three other IOWUs and CWA each separately filed a petition with the California Supreme Court (“Court”) to review the CPUC’s decision revoking prior authorization of the WRAM and MCBA. In May 2022, the Court granted the petition for writ of review.
GSWC, the three other IOWUs and CWA each separately filed a petition with the California Supreme Court to review the CPUC’s decision revoking prior authorization of the WRAM and MCBA. In May 2022, the Court granted the petition for writ of review.
In the event that ASUS (i) is managing more assets at specific military bases than were included in the U.S. government’s request for proposal, (ii) is managing assets that are in substandard condition as compared to what was disclosed in the request for proposal, (iii) prudently incurs costs not contemplated under the terms of the utility privatization contract, and/or (iv) becomes subject to new regulatory requirements, such as more stringent water-quality standards, ASUS is permitted to file, and has filed, requests for equitable adjustment (“REAs”).
In the event that ASUS (i) is managing more assets at specific military bases than were included in the U.S. government’s request for proposal, (ii) is managing assets that are in substandard condition as compared to what was disclosed in the request for proposal, (iii) prudently incurs costs not contemplated under the terms of the contract, and/or (iv) becomes subject to new regulatory requirements, such as more stringent water-quality standards, ASUS is permitted to file, and has filed, requests for equitable adjustment (“REAs”).
Replacing them with mechanisms recommended in the final decision will likely 29 result in more volatility in GSWC’s future earnings and could result in less than, or more than, full recovery of its authorized revenue and supply costs.
Replacing them with mechanisms recommended in the final decision will likely result in more volatility in GSWC’s future earnings and could result in less than, or more than, full recovery of its authorized revenue and supply costs.
The Court ordered GSWC, along with the other IOWUs and CWA, to file opening briefs, which were filed on September 1. The CPUC’s answer to the opening briefs was originally due by November 15 and reply briefs were due by December 15.
The Court ordered GSWC, along with the other IOWUs and CWA, to file opening briefs, which were filed on September 1, 2022. The CPUC’s answer to the opening briefs was originally due by November 15, 2022 and reply briefs were due by December 15, 2022.
During sequestration or automatic spending cuts, the Military Utility Privatization Subsidiaries did not experience any earnings impact to their existing operations and maintenance and renewal and replacement services, as utility privatization contracts are an “excepted service.” With the expiration of sequestration, similar issues including further sequestration pursuant to the Balanced Budget and Emergency Deficit Control Act may arise as part of the fiscal uncertainty and/or future debt-ceiling limits imposed by Congress.
During sequestration or automatic spending cuts, the subsidiaries of ASUS did not experience any earnings impact to their existing operations and maintenance and renewal and replacement services, as utility privatization contracts are an “excepted service.” With the expiration of sequestration, similar issues including further sequestration pursuant to the Balanced Budget and Emergency Deficit Control Act may arise as part of the fiscal uncertainty and/or future debt-ceiling limits imposed by Congress.
GSWC has removed some wells from service, and expects to incur additional costs to treat impacted wells. GSWC has provided customers with information regarding PFAS detection, and provided updated information via its website.
GSWC has removed some wells from service, and expects to incur additional costs to treat impacted wells. GSWC has provided customers with information regarding PFAS detection and provides updated information via its website.
These measures consider advances in security and emergency preparedness technology and relevant industry developments in developing their respective capital-improvement plans, and both intend to seek approval of the CPUC to recover any additional costs that either may incur in enhancing the security, reliability and resiliency of their utility systems. On October 23, 2018, America’s Water Infrastructure Act (AWIA) became law.
These measures consider advances in security and emergency preparedness technology and relevant industry developments in developing their respective capital-improvement plans, and both intend to seek approval of the CPUC to recover any additional costs that either may incur in enhancing the security, reliability and resiliency of their utility systems. On October 23, 2018, America’s Water Infrastructure Act (“AWIA”) became law.
Registrant believes that it will be able to refinance debt instruments at their maturity through public issuance or private placement of debt or equity. Annual payments to service debt are generally made from cash flows from operations. The following table reflects Registrant’s contractual obligations and commitments to make future payments pursuant to contracts as of December 31, 2022.
Registrant believes that it will be able to refinance debt instruments at their maturity through public issuance or private placement of debt or equity. Annual payments to service debt are generally made from cash flows from operations. The following table reflects Registrant’s contractual obligations and commitments to make future payments pursuant to contracts as of December 31, 2023.
GSWC and BVESI are subject to regulation by the CPUC which has broad authority over service and facilities, rates, classification of accounts, valuation of properties, the purchase, disposition and mortgaging of properties necessary or useful in rendering public utility service, the issuance of securities, the granting of certificates of public convenience and necessity as to the extension of services and facilities and various other matters.
GSWC and BVES are subject to regulation by the CPUC which has broad authority over service and facilities, rates, classification of accounts, valuation of properties, the purchase, disposition and mortgaging of properties necessary or useful in rendering public utility service, the issuance of securities, the granting of certificates of public convenience and necessity as to the extension of services and facilities and various other matters.
GSWC must now conduct additional risk and resilience assessments and develop emergency response plans for each of our water systems. These assessments and plans include natural hazards as well as malevolent acts. The first such assessments were completed in 2020. They will be reviewed and resubmitted every five years.
GSWC must now conduct additional risk and resilience assessments and develop emergency response plans for each of its water systems. These assessments and plans include natural hazards as well as malevolent acts. The first such assessments were completed in 2020. They will be reviewed and must be resubmitted every five years.
In the event that a portion of either GSWC’s or BVESI’s operations are no longer subject to the accounting guidance for the effects of certain types of regulation, they are required to write-off related regulatory assets that are not specifically recoverable and determine if other assets might be impaired.
In the event that a portion of either GSWC’s or BVES’s operations are no longer subject to the accounting guidance for the effects of certain types of regulation, they are required to write-off related regulatory assets that are not specifically recoverable and determine if other assets might be impaired.
For example, GSWC has contracts with various governmental entities and other parties to purchase water through a total of 58 connections for distribution to customers, in addition to numerous emergency connections. MWD is a public agency organized and managed to provide a supplemental, imported supply to its member public agencies.
For example, GSWC has contracts with various governmental entities and other parties to purchase water through a total of 59 connections for distribution to customers, in addition to numerous emergency connections. MWD is a public agency organized and managed to provide a supplemental, imported supply to its member public agencies.
Accounting for Rate Regulation — Because GSWC and BVESI operate extensively in regulated businesses, they are subject to the authoritative guidance for accounting for the effects of certain types of regulation. Application of this guidance requires accounting for certain transactions in accordance with regulations adopted by the regulatory commissions of the states in which rate-regulated operations are conducted.
Accounting for Rate Regulation — Because GSWC and BVES operate extensively in regulated businesses, they are subject to the authoritative guidance for accounting for the effects of certain types of regulation. Application of this guidance requires accounting for certain transactions in accordance with regulations adopted by the regulatory commissions of the states in which rate-regulated operations are conducted.
AWR has paid common dividends every year since 1931, and has increased the dividends received by shareholders each calendar year for 68 consecutive years, which places it in an exclusive group of companies on the New York Stock Exchange that have achieved that result.
AWR has paid common dividends every year since 1931, and has increased the dividends received by shareholders each calendar year for 69 consecutive years, which places it in an exclusive group of companies on the New York Stock Exchange that have achieved that result.
These assessments provide areas for additional security focus, new controls, and policy changes. Both GSWC and BVESI have security systems and infrastructure in place intended to prevent unlawful intrusion, service disruption and cyber-attacks. GSWC and BVESI utilize a variety of physical security measures to protect their facilities.
These assessments provide areas for additional security focus, new controls, and policy changes. Both GSWC and BVES have security systems and infrastructure in place intended to prevent unlawful intrusion, service disruption and cyber-attacks. GSWC and BVES utilize a variety of physical security measures to protect their facilities.
Revenue Recognition — GSWC and BVESI record water and electric utility operating revenues when the service is provided to customers. Operating revenues include unbilled revenues that are earned (i.e., the service has been provided) but not billed by the end of each accounting period.
Revenue Recognition — GSWC and BVES record water and electric utility operating revenues when the service is provided to customers. Operating revenues include unbilled revenues that are earned (i.e., the service has been provided) but not billed by the end of each accounting period.
As of December 31, 2022, Registrant’s total amount of unrecognized tax benefits was zero. Pension Benefits — Registrant’s pension benefit obligations and related costs are calculated using actuarial concepts within the framework of accounting guidance for employers’ accounting for pensions and post-retirement benefits other than pensions.
As of December 31, 2023, Registrant’s total amount of unrecognized tax benefits was zero. Pension Benefits — Registrant’s pension benefit obligations and related costs are calculated using actuarial concepts within the framework of accounting guidance for employers’ accounting for pensions and post-retirement benefits other than pensions.
The CPUC has authorized GSWC and BVESI to each maintain a two-way balancing account to track differences between their forecasted annual pension expenses adopted in rates and the actual annual expense to be recorded in accordance with the accounting guidance for pension costs.
The CPUC has authorized GSWC and BVES to each maintain a two-way balancing account to track differences between their forecasted annual pension expenses adopted in rates and the actual annual expense to be recorded in accordance with the accounting guidance for pension costs.
These rates are intended to allow recovery of operating costs and a reasonable rate of return on capital. GSWC and BVESI plan to continue seeking additional rate increases in future years from the CPUC to recover operating and supply costs, and receive reasonable returns on invested capital.
These rates are intended to allow recovery of operating costs and a reasonable rate of return on invested capital. GSWC and BVES plan to continue seeking additional rate increases in future years from the CPUC to recover operating and supply costs, and receive reasonable returns on invested capital.
If the CPUC determines that a portion of either GSWC’s or BVESI’s assets are not recoverable in customer rates, management is required to determine if it has suffered an asset impairment that would require a write-down in the asset valuation.
If the CPUC determines that a portion of either GSWC’s or BVES’s assets are not recoverable in customer rates, management is required to determine if it has suffered an asset impairment that would require a write-down in the asset valuation.
These deferred regulatory assets and liabilities are then reflected in the income statement in the period in which the same amounts are reflected in the rates charged for service. Regulation and the effects of regulatory accounting have the most significant impact on the financial statements of GSWC and BVESI.
These deferred regulatory assets and liabilities are then reflected in the income statement in the period in which the same amounts are reflected in the rates charged for service. Regulation and the effects of regulatory accounting have the most significant impact on the financial statements of GSWC and BVES.
Capital expenditures in future years at GSWC and BVESI are expected to remain at substantially higher levels than depreciation expense. When necessary, GSWC and BVESI may obtain funds from external sources in the capital markets and through bank borrowings.
Capital expenditures in future years at GSWC and BVES are expected to remain at substantially higher levels than depreciation expense. When necessary, GSWC and BVES may obtain funds from external sources in the capital markets and through bank borrowings.
Rates that GSWC and BVESI are authorized to charge are determined by the CPUC in general rate cases and are derived using rate base, cost of service and cost of capital, as projected for a future test year.
Rates that GSWC and BVES are authorized to charge are determined by the CPUC in general rate cases and are derived using rate base, cost of service and cost of capital, as projected for a future test year.
Any future impact on ASUS and its operations through the Military Utility Privatization 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.
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.
(15) Other commitments consist primarily of (i) $10.1 million in asset retirement obligations of GSWC that reflect the retirement of wells by GSWC, which by law need to be properly capped at the time of removal; (ii) irrevocable letters of credit in the amount of $624,600 for the deductible in Registrant’s business automobile insurance policies; and (iii) a $15,000 irrevocable letter of credit issued on behalf of GSWC pursuant to a franchise agreement with the City of Rancho Cordova.
(15) Other commitments consist primarily of (i) $10.5 million in asset retirement obligations of GSWC that reflect the retirement of wells by GSWC, which by law need to be properly capped at the time of removal; (ii) irrevocable letters of credit in the amount of $874,600 for the deductible in Registrant’s business automobile insurance policies; and (iii) a $15,000 irrevocable letter of credit issued on behalf of GSWC pursuant to a franchise agreement with the City of Rancho Cordova.
Electric segment supply costs Supply costs for the electric segment consist primarily of purchased power for resale, the cost of natural gas used by BVESI’s generating unit, the cost of renewable energy credits and changes in the electric supply cost balancing account .
Electric segment supply costs Supply costs for the electric segment consist primarily of purchased power for resale, the cost of natural gas used by BVES’s generating unit, the cost of renewable energy credits and changes in the electric supply cost balancing account .
Income Taxes — Registrant’s income tax calculations require estimates due principally to the regulated nature of the operations of GSWC and BVESI, the multiple states in which Registrant operates, and potential future tax rate changes.
Income Taxes — Registrant’s income tax calculations require estimates due principally to the regulated nature of the operations of GSWC and BVES, the multiple states in which Registrant operates, and potential future tax rate changes.
(13) Reflects future minimum payments under noncancelable operating leases for both GSWC and ASUS. (14) Consists of expected contributions to Registrant’s defined benefit pension plan for the year 2023.
(13) Reflects future minimum payments under noncancelable operating leases for both GSWC and ASUS. (14) Consists of expected contributions to Registrant’s defined benefit pension plan for the year 2024.
Reviews by the CPUC may also result in additional regulatory liabilities to refund previously collected revenues to customers if the CPUC were to disallow costs included in the ratemaking process. Registrant also reviews its utility plant in-service for possible impairment in accordance with accounting guidance for regulated entities for abandonments and disallowances of plant costs.
Reviews by the CPUC may also result in additional regulatory liabilities to refund previously collected revenues to customers if the CPUC disallows costs included in the ratemaking process. Registrant also reviews its utility plant in-service for possible impairment in accordance with accounting guidance for regulated entities for abandonments and disallowances of plant costs.
(4) Consists of obligations at GSWC related to (i) a loan agreement supporting $7.7 million in outstanding debt issued by the California Pollution Control Financing Authority, and (ii) $2.8 million of obligations with respect to GSWC’s 500 acre-foot entitlement to water from the State Water Project (“SWP”).
(4) Consists of obligations at GSWC related to (i) a loan agreement supporting $7.7 million in outstanding debt issued by the California Pollution Control Financing Authority, and (ii) $1.7 million of obligations with respect to GSWC’s 500 acre-foot entitlement to water from the State Water Project (“SWP”).
ASUS funds its operating expenses primarily through internal operating sources, which include U.S. government funding under contracts with the U.S. government for operations and maintenance costs and construction activities, as well as 47 investments by, or loans from, AWR. ASUS, in turn, provides funding to its subsidiaries.
ASUS funds its operating expenses primarily through internal operating sources, which include U.S. government funding under long-term contracts with the U.S. government for operations and maintenance costs and construction activities, as well as investments by, or loans from, AWR. ASUS, in turn, provides funding to its subsidiaries.
GSWC is in compliance with all of its covenant provisions as of December 31, 2022. GSWC does not currently have any outstanding mortgages or other liens on indebtedness on its properties.
GSWC is in compliance with all of its covenant provisions as of December 31, 2023. GSWC does not currently have any outstanding mortgages or other liens on indebtedness on its properties.
Assembly Bill 756, signed into law in July 2019 and effective in January 2020, requires, among other things, additional notifications by water systems when they detect levels of PFAS above response levels. GSWC is in the process of collecting and analyzing samples for PFAS under the direction of DDW.
Assembly Bill 756, signed into law in July 2019 and effective in January 2020, requires, among other things, additional notifications by water systems when they detect levels of PFAS above response levels. GSWC is in the process of collecting and analyzing samples for PFAS.
Cash Flows from Operating Activities : Cash flows from operating activities have generally provided sufficient cash to fund operating requirements, including a portion of construction expenditures at GSWC and BVESI, and construction expenses at ASUS, and to pay dividends.
Cash Flows from Operating Activities : Cash flows from operating activities have generally provided sufficient cash to fund operating requirements, including a portion of construction expenditures at GSWC and BVES, and construction expenses at ASUS, and to pay dividends.
The Military Utility Privatization Subsidiaries operate facilities within the boundaries of military bases, which provide limited access to the general public. To further enhance security, in prior years, certain upgrades were completed at various military bases through contract modifications funded by the U.S. government.
ASUS’s subsidiaries operate facilities within the boundaries of military bases, which provide limited access to the general public. To further enhance security, in prior years, certain upgrades were completed at various military bases through contract modifications funded by the U.S. government.
Among other things, BVESI requested (i) capital budgets of approximately $62 million for the four-year rate cycle, and another $6.2 million for a large line replacement capital project to be filed for revenue recovery through an advice letter when the project is completed, and (ii) a capital structure for BVESI of 61.8% equity and 38.2% debt, a return on equity of 11.25%, an embedded cost of debt of 5.1%, and a return on rate base of 9.05%.
Among other things, BVES requested (i) capital budgets of approximately $62.0 million for the four-year rate cycle, and another $6.2 million for a large line replacement capital project to be filed for revenue recovery through an advice letter when the project is completed, and (ii) a capital structure for BVES of 61.8% equity and 38.2% debt, a return on equity of 11.25%, an embedded cost of debt of 5.51%, and a return on rate base of 9.05%.
Employees hired or rehired after December 31, 2010 are eligible to participate in a defined contribution plan instead of the pension plan. 45 Liquidity and Capital Resources AWR AWR’s regulated business is capital intensive and requires considerable capital resources. A portion of these capital resources is provided by internally generated cash flows from operations.
Employees hired or rehired after December 31, 2010 are eligible to participate in a defined contribution plan instead of the pension plan. 50 Table of Contents Liquidity and Capital Resources AWR AWR’s regulated business is capital intensive and requires considerable capital resources. A portion of these capital resources is provided by internally generated cash flows from operations.
Each of the Military Utility Privatization Subsidiaries has the right to seek an equitable adjustment to its contract in the event that there are changes in environmental laws, a change in the quality of water used in providing water service or wastewater discharged by the U.S. government, or contamination of the air or soil not caused by the fault or negligence of the Military Utility Privatization Subsidiary.
Each of the ASUS’s subsidiaries has the right to seek an equitable adjustment to its contract in the event that there are changes in environmental laws, a change in the quality of water used in providing water service or wastewater discharged by the U.S. government, or contamination of the air or soil not caused by the fault or negligence of ASUS’s Subsidiary.
The timely filing for and receipt of EPAs and/or REAs continues to be critical in order for the Military Utility Privatization Subsidiaries to recover increasing costs of operating, maintaining, renewing and replacing the water and/or wastewater systems at the military bases it serves.
The timely filing for and receipt of EPAs and/or REAs continues to be critical in order for ASUS’s subsidiaries to recover increasing costs of operating, maintaining, renewing and replacing the water and/or wastewater systems at the military bases it serves.
On August 30, 2022, BVESI filed a general rate case application that will determine new electric rates for the years 2023 – 2026.
Electric General Rate Case for the years 2023 – 2026: On August 30, 2022, BVES filed a general rate case application that will determine new electric rates for the years 2023 – 2026.
In February 2020, DDW established new response levels for two of the PFAS compounds: 10 parts per trillion (“ppt”) for perfluorooctanoic acid (“PFOA”) and 40 ppt for perfluorooctanesulfonic acid (“PFOS”). In March 2021, DDW issued drinking-water notification and response levels of 0.5 parts per billion (“ppb”) and 5 ppb, respectively, for perfluorobutane sulfonic acid (“PFBS”). In June 2022, the U.S.
In February 2020, DDW established new response levels for two of the PFAS compounds: 10 parts per trillion (“ppt”) for perfluorooctanoic acid (“PFOA”) and 40 ppt for perfluorooctanesulfonic acid (“PFOS”). In March 2021, DDW issued drinking-water notification and response levels of 0.5 parts per billion (“ppb”) and 5 ppb, respectively, for perfluorobutane sulfonic acid (“PFBS”).
Additionally, the governor of California approved Assembly Bill (“AB”) 1054 in July 2019 that, among other things, changed the burden of proof applicable in CPUC proceedings in which an electric utility with a valid safety certification seeks to recover wildfire costs. Previously, an electric utility seeking to recover costs had the burden to prove that it acted reasonably.
Additionally, the governor of California approved AB 1054 in July 2019 that, among other things, changed the burden of proof applicable in CPUC proceedings in which an electric utility with a valid safety certification seeks to recover wildfire costs. Previously, an electric utility seeking to recover costs had the burden to prove that it acted reasonably.
Overall debt levels are expected to increase to fund a portion of the costs of the capital expenditures that will be made by the regulated utilities. Net cash provided by financing activities was $50.3 million for the year ended December 31, 2022 as compared to cash used of $2.3 million for 2021.
Overall debt levels are expected to increase to fund a portion of the costs of the capital expenditures that will be made by the regulated utilities. Net cash provided by financing activities was $129.2 million for the year ended December 31, 2023 as compared to cash provided of $50.3 million for 2022.
Government, and/or (d) delays in solicitation for and/or awarding of new contracts under the Department of Defense utility privatization program. At times, the DCAA and/or the DCMA may, at the request of a contracting officer, perform audits/reviews of contractors for compliance with certain government guidance and regulations, such as the Federal Acquisition Regulations and Defense Federal Acquisition Regulation Supplements.
Government, and/or (d) delays in solicitation for and/or awarding of new contracts under the Department of Defense contracting programs. At times, the DCAA and/or the DCMA may, at the request of a contracting officer, perform audits/reviews of contractors for compliance with certain government guidance and regulations, such as the Federal Acquisition Regulations and Defense Federal Acquisition Regulation Supplements.
Internal cash flows may also be impacted by delays in receiving payments from GSWC customers due to the lingering effects of the COVID-19 pandemic. GSWC may, at times, utilize external sources for long-term financing, as well as obtain funds from equity investments and intercompany borrowings from its parent, AWR, to help fund a portion of its operations and construction expenditures.
Internal cash flows have also been impacted by delays in receiving payments from GSWC customers due to the lingering effects of the COVID-19 pandemic. GSWC may, at times, utilize external sources for long-term financing, as well as obtain funds from equity investments from its parent, AWR, to help fund a portion of its operations and construction expenditures.
ASUS relies on economic price and equitable adjustments by the U.S. government in order to recover operating expenses and provide a profit margin for ASUS. Current operating revenues and earnings may be negatively impacted if the Military Utility Privatization Subsidiaries do not receive adequate price adjustments in a timely manner.
ASUS relies on economic price and equitable adjustments by the U.S. government in order to recover operating expenses and provide a profit margin for ASUS. Current operating revenues and earnings may be negatively impacted if ASUS’s subsidiaries do not receive adequate price adjustments in a timely manner.
GSWC amortizes contributions in aid of construction at the same composite rate of depreciation for the related property. Cash Flows from Operating Activities : Net cash provided by operating activities was $94.5 million for the year ended December 31, 2022 as compared to $100.3 million for 2021.
GSWC amortizes contributions in aid of construction at the same composite rate of depreciation for the related property. Cash Flows from Operating Activities : Net cash provided by operating activities was $54.3 million for the year ended December 31, 2023 as compared to $94.5 million for 2022.
(12) Water purchase agreements consist of (i) a remaining amount of $1.5 million under an agreement expiring in 2028 to use water rights from a third party, and (ii) an aggregate amount of $1.6 million of other water purchase commitments with other third parties, which expire between 2025 through 2038.
(12) Water purchase agreements consist of (i) a remaining amount of $1.3 million under an agreement expiring in 2028 to use water rights from a third party, and (ii) an aggregate amount of $1.4 million of other water purchase commitments with other third parties, which expire between 2025 through 2038.
As regulated utilities, GSWC and BVESI treat certain temporary differences as flow-through adjustments in computing their income tax expense consistent with the income tax approach approved by the CPUC for ratemaking purposes. Flow-through adjustments increase or decrease tax expense in one period, with an offsetting decrease or increase occurring in another period.
As regulated utilities, GSWC and BVES treat certain temporary differences as flowed-through adjustments in computing their income tax expense consistent with the income tax approach approved by the CPUC for ratemaking purposes. Flowed-through adjustments increase or decrease tax expense in one period, with an offsetting decrease or increase occurring in another period.
There are 26 such member agencies, consisting of 14 cities, 11 municipal water districts and one county water authority. GSWC has 45 connections to MWD’s water distribution facilities and those of member agencies. GSWC purchases MWD water through six separate member agencies aggregating 49,767 acre-feet annually.
There are 26 such member agencies, consisting of 14 cities, 11 municipal water districts and one county water authority. GSWC has 45 connections to MWD’s water distribution facilities and those of member agencies. GSWC purchases MWD water through six separate member agencies aggregating 43,810 acre-feet annually.
In accordance with this funding policy, for 2023, the pension contribution is expected to be approximately $2.8 million . Any differences between the forecasted annual pension costs in rates and the actual pension costs are included in the two-way pension balancing accounts. Additionally, market factors can affect assumptions we use in determining funding requirements with respect to our pension plan.
In accordance with this funding policy, for 2024, the pension contribution is expected to be approximately $3.3 million . Any differences between the forecasted annual pension costs in rates and the actual pension costs are included in the two-way pension balancing accounts. Additionally, market factors can affect assumptions we use in determining funding requirements with respect to our pension plan.
The details of the requirements will be better understood over the next year once the LCRI is published and a final rule is approved. 55 Matters Relating to Military Utility Privatization Contracts Each of the Military Utility Privatization Subsidiaries is responsible for testing the water and wastewater systems on the military bases on which it operates in accordance with applicable law.
The details of the requirements will be better understood over the next year once the LCRI is published and a final rule is approved. Matters Relating to Military Base Contracts Each of the ASUS’s subsidiaries is responsible for testing the water and wastewater systems on the military bases on which it operates in accordance with applicable law.
Consolidated interest expense increased as compared to 2021 resulting from an overall increase in total borrowing levels to support, among other things, the capital expenditures programs at the regulated utilities, as well as overall increases in short- and long-term interest rates.
Consolidated interest expense increased as compared to 2022 resulting from an overall increase in total borrowing levels to support, among other things, the capital expenditures programs at the regulated utilities, as well as overall increases in average interest rates both short- and long-term.
Drinking Water Notification Levels In July 2018, DDW issued drinking water notification levels for certain fluorinated organic chemicals used to make certain fabrics and other materials, and used in various industrial processes. These chemicals were also present in certain fire suppression agents. These chemicals are referred to as perfluoroalkyl substances (“PFAS”).
Drinking Water Notification Levels In July 2018, DDW issued drinking water notification levels for certain fluorinated organic chemicals used to make certain fabrics and other materials, and used in various industrial processes. These chemicals were also present in certain fire suppression agents. These chemicals are referred to as PFAS.
Drought Impact In May 2018, the California Legislature passed two bills that provide a framework for long-term water-use efficiency standards and drought planning and resiliency. The initial steps in implementation of this legislation have been laid out in a summary document by the California Department of Water Resources (“DWR”) and State Water Resources Control Board (“SWRCB”).
Drought Impact In May 2018, the California Legislature passed two bills that provide a framework for long-term water-use efficiency standards and drought planning and resiliency. The initial steps in implementation of this legislation have been laid out in a summary document by the California Department of Water Resources (“DWR”) and SWRCB.
Certificates of Public Convenience and Necessity GSWC and BVESI hold Certificates of Public Convenience and Necessity (“CPCN”) granted by the CPUC in each of the ratemaking areas they serve. ASUS is regulated, if applicable, by the state in which it primarily conducts water and/or wastewater operations. FBWS holds a CPCN from the Public Utilities Commission of Texas.
Certificates of Public Convenience and Necessity GSWC and BVES hold Certificates of Public Convenience and Necessity (“CPCN”) granted by the CPUC in each of the ratemaking areas they serve. ASUS subsidiaries are regulated, if applicable, by the state in which it primarily conducts water and/or wastewater operations. FBWS holds a CPCN from the Public Utilities Commission of Texas.
Notification levels are health-based advisory levels established for contaminants in drinking water for which maximum contaminant levels have not been established. The U.S. EPA has also established health advisory levels for these compounds. Notification to consumers and stakeholders is required when the advisory levels or notification levels are exceeded.
Notification levels are health-based advisory levels established for contaminants in drinking water for which maximum contaminant levels have not been established. The USEPA has also established health advisory levels for these compounds. Notification to consumers and stakeholders is required when the advisory levels or notification levels are exceeded.
Cash Flows from Investing Activities : Net cash used in investing activities was $147.7 million for the year ended December 31, 2022 as compared to $124.3 million for 2021, which is mostly related to spending under GSWC’s infrastructure investment plans that are consistent with capital budgets authorized in its general rate cases.
Cash Flows from Investing Activities : Net cash used in investing activities was $162.2 million for the year ended December 31, 2023 as compared to $147.7 million for 2022, which is mostly related to spending under GSWC’s infrastructure investment plans that are consistent with capital budgets authorized in its general rate cases.
Giving effect to these temporary differences as flow-through adjustments typically results in a greater variance between the effective tax rate and the statutory federal income tax rate in any given period than would otherwise exist if GSWC or BVESI were not required to account for its income taxes as regulated enterprises.
Giving effect to these temporary differences as flowed-through adjustments typically results in a greater variance between the effective tax rate and the statutory federal income tax rate in any given period than would otherwise exist if GSWC or BVES were not required to account for their income taxes as regulated enterprises.
The August 2019 final decision also authorized BVESI to record incremental costs related to vegetation management, such as costs for increased minimum clearances around electric power lines, in the CPUC-approved memorandum account for future recovery. As of December 31, 2022, BVESI had approximately $8.7 million in incremental vegetation management costs recorded as a regulatory asset.
The August 2019 final decision also authorized BVES to record incremental costs related to vegetation management, such as costs for increased minimum clearances around electric power lines, in the CPUC-approved memorandum account for future recovery. As of December 31, 2023, BVES had approximately $11.8 million in incremental vegetation management costs recorded as a regulatory asset.
Item 1A. Risk Factors . Water and Electric Segments: GSWC’s and BVESI’s revenues, operating income, and cash flows are earned primarily through delivering potable water to homes and businesses in California and electricity in the Big Bear area of San Bernardino County, California, respectively. Rates charged to GSWC and BVESI customers are determined by the CPUC.
Item 1A. Risk Factors . Water and Electric Segments: GSWC’s and BVES’s revenues, operating income, and cash flows are earned primarily through delivering potable water to homes and businesses in California and electricity in the Big Bear area of San Bernardino County, California, respectively. Rates charged to GSWC and BVES customers are authorized by the CPUC.
MWD sources its supplies from Northern California via the State Water Project and the Colorado River through the Colorado River Aqueduct, which it owns and operates, and from local programs and transfer arrangements. MWD currently has supply levels of 1.13 million acre-feet (MAF) with annual demands of approximately 1.71 MAF resulting in a supply gap of 574 thousand acre feet.
MWD sources its supplies from Northern California via the State Water Project and the Colorado River through the Colorado River Aqueduct, which it owns and operates, and from local programs and transfer arrangements. MWD currently has supply levels of 1.14 million acre-feet (“MAF”) with annual demands of approximately 1.54 MAF resulting in a supply gap of 399 thousand acre feet.
A 25-basis point decrease in the long-term return on pension-plan-asset assumption would have increased 2022 pension cost by approximately $572,000. In addition, changes in the fair value of plan assets will impact future pension cost and the Plan’s funded status. Changes in market conditions can affect the value of plan assets held to fund future long-term pension benefits.
A 25-basis point decrease in the long-term return on pension-plan-asset assumption would have increased 2023 pension cost by approximatel y $456,000. In addition, changes in the fair value of plan assets will impact future pension cost and the Plan’s funded status. Changes in market conditions can affect the value of plan assets held to fund future long-term pension benefits.
Net cash provided by operating activities of AWR was $117.8 million for 2022 as compared to $115.6 million for the same period in 2021. During 2022, GSWC and BVESI received $9.5 million and $473,000, respectively, in COVID-19 relief funds from the state of California to provide assistance to customers for delinquent water and electric customer bills incurred during the pandemic.
Net cash provided by operating activities of AWR was $67.7 million for 2023 as compared to $117.8 million for the same period in 2022. During 2022, GSWC and BVES received $9.5 million and $473,000, respectively, in COVID-19 relief funds from the state of California to provide assistance to customers for delinquent water and electric customer bills incurred during the pandemic.
Military Base EPA period Filing Date Fort Bliss (FBWS) October 2022 - September 2023 Third Quarter 2022 Joint Base Andrews (TUS) February 2023 - January 2024 Fourth Quarter 2022 Fort Lee (ODUS) February 2023 - January 2024 Fourth Quarter 2022 Joint Base Langley Eustis and Joint Expeditionary Base Little Creek Fort Story (ODUS) April 2023 - March 2024 First Quarter of 2023 Fort Jackson (PSUS) February 2023 - January 2024 Fourth Quarter 2022 Fort Bragg (ONUS) March 2023 - February 2024 First Quarter 2023 Eglin Air Force Base (ECUS) June 2023 - May 2024 Second Quarter 2023 Fort Riley (FRUS) July 2023 - June 2024 Second Quarter 2023 52 Regulatory Matters A discussion on various regulatory matters is included in the section titled “Overview” in this Form 10-K ’ s " Management’s Discussion and Analysis of Financial Condition and Results of Operations." The discussion below focuses on other regulatory matters and developments.
Military Base EPA period Filing Date Fort Bliss (FBWS) October 2023 - September 2024 Third Quarter 2023 Fort Gregg-Adams (ODUS) February 2024 - January 2025 Fourth Quarter 2023 Joint Base Langley Eustis and Joint Expeditionary Base Little Creek Fort Story (ODUS) April 2024 - March 2025 First Quarter of 2024 Joint Base Andrews (TUS) February 2024 - January 2025 Fourth Quarter 2023 Fort Jackson (PSUS) February 2024 - January 2025 Fourth Quarter 2023 Fort Liberty (ONUS) March 2024 - February 2025 First Quarter 2024 Eglin Air Force Base (ECUS) June 2024 - May 2025 Second Quarter 2024 Fort Riley (FRUS) July 2024 - June 2025 Second Quarter 2024 57 Table of Contents Regulatory Matters A discussion on various regulatory matters is included in the section titled “Overview” in this Form 10-K ’ s “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The discussion below focuses on other regulatory matters and developments.
Contracted Services Revenues from contracted services are composed of construction revenues (including renewal and replacements) and management fees for operating and maintaining the water and/or wastewater systems at various military bases. For the year ended December 31, 2022, revenues from contracted services decreased $2.5 million to $110.9 million as compared to $113.4 million for 2021.
Contracted Services Revenues from contracted services are composed of construction revenues (including renewal and replacements) and management fees for operating and maintaining the water and/or wastewater systems at various military bases. For the year ended December 31, 2023, revenues from contracted services increased $9.5 million to $120.4 million as compared to $110.9 million for 2022.
All capital expenditures and other costs incurred through December 31, 2022 as a result of BVESI’s WMPs are not currently in rates and have been filed for future recovery in BVESI’s general rate case application in August 2022.
All capital expenditures and other 59 Table of Contents costs incurred through December 31, 2023 as a result of BVES’s WMPs are not currently in rates and have been filed for future recovery in BVES’s general rate case application in August 2022.
If there is a positive or negative change of more than 100 basis points, the return on equity is adjusted by one half of the difference. For the period from October 1, 2021 through September 30, 2022, the Moody’s rate increased by more than 100 basis points from the benchmark, which triggered the WCCM adjustment.
If there is a positive or negative change of more than 35 Table of Contents 100 basis points, the return on equity is adjusted by one half of the difference. For the period from October 1, 2021 through September 30, 2022, the Moody’s Aa utility bond rate increased by 102.8 basis points from the benchmark, which triggered the WCCM adjustment.
Contracted Services Under the terms of the current and future utility privatization contracts with the U.S. government, each contract’s price is subject to an economic price adjustment (“EPA”) on an annual basis.
Contracted Services Under the terms of the contracts with the U.S. government, each contract’s price is subject to an economic price adjustment (“EPA”) on an annual basis.
(11) Consists primarily of capital expenditures estimated to be required under signed contracts at GSWC and BVESI as of December 31, 2022.
(11) Consists primarily of capital expenditures estimated to be required under signed contracts at GSWC and BVES as of December 31, 2023.
Information comparing the consolidated results of operations for fiscal years 2021 and 2020 can be found under Item 7, Management’s Discussion and Analysis under the heading “Consolidated Results of Operations-Years Ended December 31, 2021 and 2020” in AWR’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 filed with the SEC. 42 Critical Accounting Policies and Estimates Critical accounting policies and estimates are those that are important to the portrayal of AWR’s financial condition, results of operations and cash flows, and require the most difficult, subjective or complex judgments of AWR’s management.
Information comparing the consolidated results of operations for fiscal years 2022 and 2021 can be found under Item 7, Management’s Discussion and Analysis under the headings “Summary Results by Segment” and “Consolidated Results of Operations-Years Ended December 31, 2022 and 2021” in AWR’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022 filed with the SEC. 47 Table of Contents Critical Accounting Policies and Estimates Critical accounting policies and estimates are those that are important to the portrayal of AWR’s financial condition, results of operations and cash flows, and require the most difficult, subjective or complex judgments of AWR’s management.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeAs of December 31, 2022, GSWC owned 242 wells, of which 170 are active operable wells equipped with pumps with an aggregate production capacity of approximately 169 million gallons per day. GSWC has 58 connections to the water distribution facilities of the MWD, and other municipal water agencies.
Biggest changeAs of December 31, 2023, GSWC owned 239 wells, of which 167 are active with an aggregate production capacity of approximately 164 million gallons per day. GSWC has 59 connections to the water distribution facilities of the MWD, and other municipal water agencies. GSWC’s storage reservoirs and tanks have an aggregate capacity of approximately 119 million gallons.
GSWC also has additional reservoir capacity through an exclusive right-to-use all of one 8 million gallon reservoir, one-half of another 8 million gallon reservoir, and one-half of a treatment plant’s capacity, all owned by Three Valleys Municipal Water District. Electric Properties BVESI’s properties are located in the Big Bear area of San Bernardino County, California.
GSWC also has additional reservoir capacity through an exclusive right-to-use all of one 8 million gallon reservoir, one-half of another 8 million gallon reservoir, and one-half of a treatment plant’s capacity, all owned by Three Valleys Municipal Water District. Electric Properties BVES’s properties are located in the Big Bear area of San Bernardino County, California.
GSWC also has a number of unadjudicated groundwater rights, which have not been quantified, but are typically measured by historical usage. Office Buildings GSWC owns its general headquarters facility in San Dimas, California. GSWC also owns and leases customer service offices and office space throughout California. BVESI owns office space in California.
GSWC also has a number of unadjudicated groundwater rights, which have not been quantified, but are typically measured by historical usage. Office Buildings GSWC owns its general headquarters facility in San Dimas, California. GSWC also owns and leases customer service offices and office space throughout California. BVES owns office space in California.
BVESI also has franchises, easements and other rights of way for the purpose of constructing and using poles, wires and other appurtenances for transmitting electricity. Adjudicated and Other Water Rights GSWC owns groundwater and surface water rights in California. Groundwater rights are further subject to classification as either adjudicated or unadjudicated rights.
BVES also has franchises, easements and other rights of way for the purpose of constructing and using poles, wires and other appurtenances for transmitting electricity. Adjudicated and Other Water Rights GSWC owns groundwater and surface water rights in California. Groundwater rights are further subject to classification as either adjudicated or unadjudicated rights.
Under the terms of certain debt instruments, AWR, GSWC and BVESI are prohibited from issuing any secured debt, without providing equal and ratable security to the holders of this existing debt. 23 Table of Contents Condemnation of Properties The laws of the state of California provide for the acquisition of public utility property by governmental agencies through their power of eminent domain, also known as condemnation, where doing so constitutes a more necessary use.
Under the terms of certain debt instruments, AWR, GSWC and BVES are prohibited from issuing any secured debt, without providing equal and ratable security to the holders of this existing debt. 29 Table of Contents Condemnation of Properties The laws of the state of California provide for the acquisition of public utility property by governmental agencies through their power of eminent domain, also known as condemnation, where doing so constitutes a more necessary use.
Properties Water Properties As of December 31, 2022, GSWC’s physical properties consisted of water transmission and distribution systems, which included 2,864 miles of pipeline together with services, meters and fire hydrants, and approximately 450 parcels of land generally less than 1 acre each, on which are located wells, pumping plants, reservoirs and other water utility facilities, including three surface water treatment plants.
Properties Water Properties As of December 31, 2023, GSWC’s physical properties consisted of water transmission and distribution systems, which included 2,878 miles of pipeline together with services, meters and fire hydrants, and approximately 450 parcels of land generally less than 1 acre each, on which are located wells, pumping plants, reservoirs and other water utility facilities, including five surface water treatment plants.
ASUS leases office facilities in Georgia, Virginia, and North Carolina, and owns service centers in Florida, Maryland, South Carolina, Virginia, Texas, North Carolina and Kansas. Mortgage and Other Liens As of December 31, 2022, neither AWR, GSWC, BVESI, ASUS, nor any of its subsidiaries, had any mortgage debt or liens securing indebtedness outstanding.
ASUS leases office facilities in Virginia and North Carolina, and owns service centers in Florida, Maryland, South Carolina, Virginia, Texas, North Carolina and Kansas. Mortgage and Other Liens As of December 31, 2023, neither AWR, GSWC, BVES, ASUS, nor any of its subsidiaries, had any mortgage debt or liens securing indebtedness outstanding.
Surface water rights are quantified and managed by the SWRCB, unless the surface water rights originated prior to 1914. As of December 31, 2022, GSWC had adjudicated groundwater rights and surface water rights of 70,176 and 11,335 acre-feet per year, respectively.
Surface water rights are quantified and managed by the SWRCB, unless the surface water rights originated prior to 1914. As of December 31, 2023, GSWC had adjudicated groundwater rights and surface water rights of 69,409 and 11,335 acre-feet per year, respectively.
As of December 31, 2022, BVESI owned and operated approximately 87.80 miles of overhead 34.5 kilovolt (kv) sub-transmission lines (8.96 circuit miles are insulated), 6.49 miles of underground 34.5 kv sub-transmission lines, 492.17 miles of overhead 4.16 kv or 2.4 kv distribution lines (12.15 circuit miles are insulated), 113.57 miles of underground cable, 13 sub-stations and a natural gas-fueled 8.4 MW peaking generation facility.
As of December 31, 2023, BVES owned and operated approximately 87.8 miles of overhead 34.5 kilovolt (kv) sub-transmission lines (17.43 circuit miles are insulated), 6.49 miles of underground 34.5 kv sub-transmission lines, 493.41 miles of overhead 4.16 kv or 2.4 kv distribution lines (36.2 circuit miles are insulated), 114.22 miles of underground cable, 13 sub-stations and a natural gas-fueled 8.4 MW peaking generation facility.
The following table provides, in greater detail, information regarding the water utility plant of GSWC: Pumps Distribution Facilities Reservoirs Well Booster Mains* Services Hydrants Tanks Capacity* 242 387 2,864 263,244 26,698 143 116.6 (1) * Reservoir capacity is measured in millions of gallons. Mains are in miles.
GSWC owns no dams. The following table provides, in greater detail, information regarding the water utility plant of GSWC: Pumps Distribution Facilities Reservoirs Well Booster Mains* Services Hydrants Tanks Capacity* 239 387 2,878 264,097 26,852 145 119 (1) * Reservoir capacity is measured in millions of gallons. Mains are in miles.
Removed
GSWC’s storage reservoirs and tanks have an aggregate capacity of approximately 116.6 million gallons. GSWC owns no dams.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeRelative performance is tracked through December 31, 2022. 12/2017 12/2018 12/2019 12/2020 12/2021 12/2022 American States Water Company $ 100.00 $ 117.91 $ 154.69 $ 144.23 $ 190.76 $ 173.70 S&P 500 $ 100.00 $ 95.62 $ 125.72 $ 148.85 $ 191.58 $ 156.89 Peer Group $ 100.00 $ 98.85 $ 133.37 $ 156.07 $ 192.70 $ 164.94 The stock price performance included in this graph is not necessarily indicative of future stock price performance. 25 Table of Contents Market Information Relating to Common Shares Common Shares of American States Water Company are traded on the New York Stock Exchange (“NYSE”) under the symbol “AWR.” The intraday high and low NYSE prices on the Common Shares for each quarter during the past two years were: Stock Prices High Low 2022 First Quarter $ 103.44 $ 81.26 Second Quarter $ 92.80 $ 71.22 Third Quarter $ 91.02 $ 77.91 Fourth Quarter $ 100.51 $ 77.98 2021 First Quarter $ 83.05 $ 70.07 Second Quarter $ 83.75 $ 75.34 Third Quarter $ 94.96 $ 79.57 Fourth Quarter $ 103.77 $ 84.93 The closing price of the Common Shares of American States Water Company on the NYSE on February 28, 2023 was $89.30.
Biggest changeRelative performance is tracked through December 31, 2023. 12/2018 12/2019 12/2020 12/2021 12/2022 12/2023 American States Water Company $ 100.00 $ 131.19 $ 122.32 $ 161.78 $ 147.31 $ 130.43 S&P 500 $ 100.00 $ 131.49 $ 155.68 $ 200.37 $ 164.08 $ 207.21 Peer Group $ 100.00 $ 134.93 $ 157.90 $ 194.95 $ 166.87 $ 142.93 The stock price performance included in this graph is not necessarily indicative of future stock price performance. 31 Table of Contents Market Information Relating to Common Shares Common Shares of American States Water Company are traded on the New York Stock Exchange (“NYSE”) under the symbol “AWR.” GSWC is a wholly-owned subsidiary of AWR.
Under California law, AWR, GSWC, BVESI and ASUS are each permitted to distribute dividends to its shareholders and repurchase its shares so long as the Board of Directors determines, in good faith, that either: (i) the value of the corporation’s assets equals or exceeds the sum of its total liabilities immediately after the dividend, or (ii) its retained earnings equals or exceeds the amount of the distribution.
Under California law, AWR, GSWC, BVES and ASUS are each permitted to distribute dividends to its shareholders and repurchase its shares so long as the Board of Directors determines, in good faith, that either: (i) the value of the corporation’s assets equals or exceeds the sum of its total liabilities immediately after the dividend, or (ii) its retained earnings equals or exceeds the amount of the distribution.
In accordance with SEC guidance, the returns of the seven utilities included in the peer group are weighted according to their respective market capitalizations. An investment of $100 (with reinvestment of all dividends) is assumed to have been made in our Common Shares, and in the common stock in the index and in the peer group on December 31, 2017.
In accordance with SEC guidance, the returns of the seven utilities included in the peer group are weighted according to their respective market capitalizations. An investment of $100 (with reinvestment of all dividends) is assumed to have been made in our Common Shares, and in the common stock in the index and in the peer group on December 31, 2018.
The following table lists the amounts of dividends paid on Common Shares of American States Water Company: 2022 2021 First Quarter $ 0.3650 $ 0.335 Second Quarter $ 0.3650 $ 0.335 Third Quarter $ 0.3975 $ 0.365 Fourth Quarter $ 0.3975 $ 0.365 Total $ 1.5250 $ 1.400 AWR’s ability to pay dividends is subject to the requirement in its revolving credit facility to maintain compliance with all covenants described in Note 9 Bank Debt included in Part II, Item 8, in the Notes to Consolidated Financial Statements .
The following table lists the amounts of dividends paid on Common Shares of American States Water Company: 2023 2022 First Quarter $ 0.3975 $ 0.3650 Second Quarter $ 0.3975 $ 0.3650 Third Quarter $ 0.4300 $ 0.3975 Fourth Quarter $ 0.4300 $ 0.3975 Total $ 1.6550 $ 1.5250 AWR’s ability to pay dividends is subject to the requirement in its revolving credit facility to maintain compliance with all covenants described in Note 9 Bank Debt included in Part II, Item 8, in the Notes to Consolidated Financial Statements .
(3) Neither the 401(k) plan nor the Common Share Purchase and Dividend Reinvestment Plan contains a maximum number of common shares that may be purchased in the open market.
(3) Neither the 401(k) plan nor the Common Share Purchase and DRP contains a maximum number of Common Shares that may be purchased in the open market.
GSWC is prohibited under the terms of its senior notes from paying dividends if, after giving effect to the dividend, its total indebtedness to capitalization ratio (as defined) would be more than 0.6667-to-1. GSWC would have to issue additional debt of $746.4 million to invoke this covenant as of December 31, 2022.
GSWC is prohibited under the terms of its senior notes from paying dividends if, after giving effect to the dividend, its total indebtedness to capitalization ratio (as defined) would be more than 0.6667-to-1. GSWC would have to issue additional debt of $716.3 million to invoke this covenant as of December 31, 2023.
Frequency and Amount of Any Dividends Declared and Dividend Restrictions For the last two years, AWR has paid dividends on its Common Shares on or about March 1, June 1, September 1 and December 1.
ASUS owns all of the outstanding stock of its subsidiaries. Frequency and Amount of Any Dividends Declared and Dividend Restrictions For the last two years, AWR has paid dividends on its Common Shares on or about March 1, June 1, September 1 and December 1.
Under the least restrictive of the California tests, approximately $709.5 million was available to pay dividends to AWR’s common shareholders and repurchase shares from AWR’s common shareholders at December 31, 2022.
Under the least restrictive of the California tests, approximately $776.1 million was available to pay dividends to AWR’s common shareholders and repurchase shares from AWR’s common shareholders at December 31, 2023.
ASUS paid dividends of $14.7 million in 2022, and did not pay dividends to AWR in 2021. Other Information The shareholders of AWR have approved the material features of all equity-compensation plans under which AWR directly issues equity securities. AWR did not directly issue any unregistered equity securities during 2022.
BVES did not pay dividends to AWR in 2023 and paid dividends of $14.7 million to AWR in 2022. ASUS paid dividends of $16.0 million and $14.7 million to AWR in 2023 and 2022, respectively. Other Information The shareholders of AWR have approved the material features of all equity-compensation plans under which AWR directly issues equity securities.
(2) Of these amounts, 12,996 Common Shares were acquired on the open market for employees pursuant to the 401(k) Plan. The remainder of the shares were acquired on the open market for participants in the Common Share Purchase and Dividend Reinvestment Plan.
(2) Of these amounts, zero Common Shares were acquired on the open market for employees pursuant to the 401(k) plan. The remainder of the shares were acquired on the open market for participants in the DRP.
The following table provides information about AWR repurchases of its Common Shares during the fourth quarter of 2022: Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) Maximum Number of Shares That May Yet Be Purchased under the Plans or Programs (1)(3) October 1 - 31, 2022 13,228 $ 80.12 — — November 1 - 30, 2022 197 $ 96.82 — — December 1 - 31, 2022 2,332 $ 98.18 — — Total 15,757 (2) $ 83.00 — (1) None of the Common Shares were repurchased pursuant to any publicly announced stock repurchase program.
The following table provides information about AWR repurchases of its Common Shares during the fourth quarter of 2023: 32 Table of Contents Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) Maximum Number of Shares That May Yet Be Purchased under the Plans or Programs (1)(3) October 1 - 31, 2023 468 $ 77.22 — — November 1 - 30, 2023 203 $ 80.11 — — December 1 - 31, 2023 3,086 $ 79.55 — — Total 3,757 (2) $ 79.29 — (1) None of the Common Shares were repurchased pursuant to any publicly announced stock repurchase program.
AWR paid $56.4 million in dividends to shareholders for the year ended December 31, 2022, as compared to $51.7 million for the year ended December 31, 2021. GSWC paid dividends of $27.0 million and $38.3 million to AWR in 2022 and 2021, respectively. BVESI paid dividends of $14.7 million during 2022, and did not pay dividends to AWR in 2021.
AWR paid $61.2 million in dividends to shareholders for the year ended December 31, 2023, as compared to $56.4 million for the year ended December 31, 2022. GSWC paid dividends of $55.4 million and $27.0 million to AWR in 2023 and 2022, respectively.
Approximately $643.9 million was available for GSWC to pay dividends to AWR at December 31, 2022, and approximately $64.9 million was available for BVESI to pay dividends to AWR at December 31, 2022.
Approximately $703.8 million was available for GSWC to pay dividends to AWR at December 31, 2023, and approximately $72.3 million was available for BVES to pay dividends to AWR at December 31, 2023.
BVESI has a separate revolving credit facility, and its ability to pay dividends is subject to the requirement in the credit agreement to maintain compliance with all covenants described in Note 9 Bank Debt . 26 Table of Contents ASUS’s ability to pay dividends to AWR is dependent upon the ability of each of the Military Utility Privatization Subsidiaries to pay dividends to ASUS under applicable state law as well as ASUS’s ability to pay dividends under California law.
BVES has a separate revolving credit facility, and its ability to pay dividends is subject to the requirement in the credit agreement to maintain compliance with all covenants described in Note 9 Bank Debt .
Approximate Number of Holders of Common Shares As of February 28, 2023, there were 1,950 holders of record of the 36,969,622 outstanding Common Shares of American States Water Company. AWR owns all of the outstanding Common Shares of GSWC, BVESI and ASUS. ASUS owns all of the outstanding stock of the Military Utility Privatization Subsidiaries.
As a result, there is no public trading market in its common shares. Approximate Number of Holders of Common Shares As of February 20, 2024, there were 1,854 holders of record of the 36,988,764 outstanding Common Shares of American States Water Company. AWR owns all of the outstanding common shares of GSWC, BVES and ASUS.
Added
ASUS’s ability to pay dividends to AWR is dependent upon the ability of each of its subsidiaries to pay dividends to ASUS under applicable state law as well as ASUS’s ability to pay dividends under California law.
Added
AWR did not issue any unregistered equity securities during 2023.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeFurthermore, the gains and losses generated on the investments held to fund one of the Company’s retirement plans during the years ended December 31, 2022 and 2021 have been excluded and the retroactive impact of new 2022 water rates not yet recorded due to the delay in receiving a final decision from the CPUC, which will be retroactive to January 1, 2022 when approved, have been included to calculate adjusted diluted earnings per share when communicating AWR’s consolidated and its water segment’s results for the years ended December 31, 2022 and 2021 to help facilitate comparisons of AWR’s performance from period to period.
Biggest changeThe gains and losses generated on the investments held to fund one of the Company’s retirement plans during the years ended December 31, 2023 and 2022 have been excluded when communicating the results to help facilitate comparisons of AWR’s performance from period to period.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis provides information on AWR’s consolidated operations and assets, and includes specific references to AWR’s individual segments and its subsidiaries (GSWC, BVESI, and ASUS and its subsidiaries), and AWR (parent) where applicable.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis provides information on AWR’s consolidated operations and assets, and includes specific references to AWR’s individual segments and its subsidiaries (GSWC, BVES, and ASUS and its subsidiaries), and AWR (parent) where applicable.
Diluted earnings per share by business segment and adjusted diluted earnings per share constitute “non-GAAP financial measures” under the 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.
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.
The subsidiaries of ASUS are collectively referred to as the “Military Utility Privatization Subsidiaries.” 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.
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 these measures are derived from consolidated financial information of the Registrant, but are not presented in our financial statements that are prepared in accordance with GAAP. 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 uses earnings per share by business segment, a non-GAAP financial measure, 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.
Removed
AWR reviews this measurement regularly and compares it to historical periods and to its operating budget.
Added
In addition, both the impact of retroactive rates related to the full year 2022 recorded during the year ended December 31, 2023 resulting from the final decision on the water general rate case, and the impact from the estimates of revenues subject to refund recorded in 2022 and changes to estimates recorded in 2023 following the receipt of a final cost of capital decision in June 2023 have been excluded when communicating AWR’s consolidated and water segment results for the years ended December 31, 2023 and 2022 to help facilitate comparisons of the Company’s performance from period to period.
Added
All of the measures discussed above 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”).

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeAs of December 31, 2022, there was an $11.8 million derivative asset on these contracts, with a corresponding regulatory liability in the derivative instrument memorandum account, as a result of an increase in energy prices since the execution of the contracts.
Biggest changeAs of December 31, 2023, there was a $2.4 million derivative liability at fair value for the derivatives in the purchase power contracts, with a corresponding regulatory asset recorded in the derivative instrument memorandum account as a result of overall fixed prices under BVES’s purchase power contracts being higher than future energy prices.
Accordingly, all unrealized gains and losses generated from these purchased power contracts are deferred on a monthly basis into a non-interest bearing regulatory memorandum account that tracks the changes in fair value of the derivative throughout the term of the contract. As a result, the unrealized gains and losses on these contracts do not impact Registrant’s earnings.
Accordingly, all unrealized gains and losses generated from derivative instruments in purchase power contracts are deferred on a monthly basis into a non-interest-bearing regulatory memorandum account that tracks the changes in fair value of the derivative throughout the terms of the contracts. As a result, these unrealized gains and losses do not impact Registrant’s earnings.
Commodity/Derivative Risk BVESI is exposed to commodity price risk primarily relating to changes in the market price of electricity. To manage its exposure to energy price risk, BVESI from time to time executes purchased power contracts that qualify as derivative instruments, requiring mark-to-market derivative accounting under the accounting guidance for derivatives.
Commodity/Derivative Risk BVES is exposed to commodity price risk primarily relating to changes in the market price of electricity. To manage its exposure to energy price risk, BVES from time to time executes purchased power contracts that qualify or have elements of the contract that qualify as derivative instruments, requiring mark-to-market derivative accounting under the accounting guidance for derivatives.
Except as discussed above, Registrant has had no other derivative financial instruments, financial instruments with significant off-balance sheet risks or financial instruments with concentrations of credit risk. 59
Except as discussed above, Registrant has had no other derivative financial instruments, financial instruments with significant off-balance sheet risks or financial instruments with concentrations of credit risk. 64 Table of Contents
Interest Rate Risk A significant portion of Registrant’s capital structure is comprised of fixed-rate debt. Market risk related to our fixed-rate debt is deemed to be the potential increase in fair value resulting from a decrease in interest rates. At December 31, 2022, the fair value of Registrant’s long-term debt was $424.2 million.
Interest Rate Risk A significant portion of Registrant’s capital structure is comprised of fixed-rate debt consisting of notes and debentures. Market risk related to our fixed-rate debt is deemed to be the potential increase in fair value resulting from a decrease in interest rates. At December 31, 2023, the fair value of Registrant’s long-term debt was $556.2 million.
A hypothetical ten percent change in market interest rates would result in an increase or decrease of approximately $18.0 million in the fair value of Registrant’s long-term debt. At December 31, 2022, Registrant did not believe that its short-term debt was subject to interest-rate risk due to the fair market value being approximately equal to the carrying value.
A hypothetical ten percent change in market interest rates would result in an increase or decrease of approximately $21.8 million in the fair value of Registrant’s long-term debt. Registrant is also exposed to risk resulting from changes in interest rates as a result of its issuances of short-term debt through unsecured revolving credit facilities.
Removed
A derivative financial instrument or other contract derives its value from another investment or designated benchmark. In 2019, BVESI began taking power under long-term contracts at a fixed cost over three- and five-year terms depending on the amount of power and period during which the power is purchased under the contracts.
Added
At December 31, 2023, Registrant had outstanding consolidated borrowings under its credit facilities of $333.5 million that are exposed to variable short-term interest rate risk. The impact of a 100-basis point change in interest rates on pretax income is approximately $3.3 million as of December 31, 2023.
Removed
The long-term contracts executed in 2019 qualify for derivative accounting treatment. Among other things, the CPUC authorized BVESI to establish a regulatory memorandum account to offset the mark-to-market entries required by the accounting guidance.
Added
BVES has entered into long-term fixed price contracts to purchase power over three and five-year terms. These long-term contracts will expire during the fourth quarter of 2024 and are subject to the accounting guidance for derivatives and require mark-to-market derivative accounting.
Added
In July 2023, the CPUC approved a new power purchase agreement between BVES and a third party to procure renewable portfolio standard eligible energy and RECs as a bundled product. BVES will begin taking power under this long-term contract during the fourth quarter of 2024 to replace the existing expiring contracts.
Added
The new contract provides for the purchase of electricity during a delivery period from November 1, 2024 through December 31, 2035. Under this contract, there is an embedded derivative that also requires mark-to-market accounting. The CPUC authorized the use of a regulatory asset and liability memorandum account to offset the mark-to-market entries required by the accounting guidance.

Other AWR 10-K year-over-year comparisons