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What changed in CALIFORNIA WATER SERVICE GROUP's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of CALIFORNIA WATER SERVICE GROUP's 2024 and 2025 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 2025 report.

+429 added−429 removedSource: 10-K (2026-02-27) vs 10-K (2025-02-27)

Top changes in CALIFORNIA WATER SERVICE GROUP's 2025 10-K

429 paragraphs added · 429 removed · 332 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

133 edited+50 added−55 removed56 unchanged
Biggest changeFactors which may cause actual results to be different than those expected or anticipated include, but are not limited to: • the outcome and timeliness of regulatory commissions’ actions concerning rate relief and other matters, including with respect to the 2024 GRC; • the impact of opposition to rate increases; • our ability to recover costs; • Federal governmental and state regulatory commissions’ decisions, including decisions on proper disposition of property; • changes in state regulatory commissions’ policies and procedures, such as the California Public Utilities Commission (CPUC)’s decision in 2020 to preclude companies from proposing full decoupling (which impacted our 2021 GRC); • changes in California State Water Resources Control Board (Water Board) water quality standards; • changes in environmental compliance and water quality requirements, such as the United States Environmental Protection Agency’s (EPA) finalization of a National Primary Drinking Water Regulation establishing legally enforceable maximum contaminant levels (MCL) for six PFAS in drinking water in 2024; • the impact of weather, climate change, natural disasters, including wildfires and landslides, and actual or threatened public health emergencies, including disease outbreaks, on our operations, water quality, water availability, water sales and operating results and the adequacy of our emergency preparedness; 4 Table of Contents • electric power interruptions, especially as a result of Public Safety Power Shutoff (PSPS) programs; • availability of water supplies; • our ability to invest or apply the proceeds from the issuance of common stock in an accretive manner; • consequences of eminent domain actions relating to our water systems; • increased risk of inverse condemnation losses as a result of the impact of weather, climate change, and natural disasters, including wildfires and landslides; • housing and customer growth; • our ability to renew leases to operate water systems owned by others on beneficial terms; • issues with the implementation, maintenance or security of our information technology systems; • civil disturbances or terrorist threats or acts; • the adequacy of our efforts to mitigate physical and cyber security risks and threats; • the ability of our enterprise risk management processes to identify or address risks adequately; • labor relations matters as we negotiate with the unions; • changes in customer water use patterns and the effects of conservation, including as a result of drought conditions; • our ability to complete, in a timely manner or at all, successfully integrate, and achieve anticipated benefits from announced acquisitions; • restrictive covenants in or changes to the credit ratings on our current or future debt that could increase our financing costs or affect our ability to borrow, make payments on debt or pay dividends; • risks associated with expanding our business and operations geographically; • the impact of stagnating or worsening business and economic conditions, including inflationary pressures, general economic slowdown or a recession, changes in tariff policy, the interest rate environment, instability of certain financial institutions, changes in monetary policy, adverse capital markets activity or macroeconomic conditions as a result of geopolitical conflicts, and the prospect of a shutdown of the U.S. federal government; • the impact of market conditions and volatility on unrealized gains or losses on our non-qualified benefit plan investments and our operating results; • the impact of weather and timing of meter reads on our accrued unbilled revenue; • the impact of evolving legal and regulatory requirements, including emerging environmental, social and governance requirements; • the impact of the evolving U.S. political environment, including, as a result of the change in U.S. federal administration, leadership and policy changes or threatened changes at U.S. federal regulatory agencies that have led to, in some cases, legal challenges and uncertainty around the funding, functioning and policy priorities of U.S. federal regulatory agencies and the status of current and future regulations; and • the risks set forth in “Risk Factors” included elsewhere in this annual report.
Biggest changeFactors which may cause actual results to be different than those expected or anticipated include, but are not limited to: • the outcome and timeliness of regulatory commissions’ actions concerning rate relief and other matters, including with respect to the 2024 CA GRC and the GRCs of our other subsidiaries; • the impact of opposition to rate increases; • our ability to recover costs; • Federal governmental and state regulatory commissions’ decisions, including decisions on proper disposition of property; • changes in state regulatory commissions’ policies and procedures; • changes in California State Water Resources Control Board (Water Board) water quality standards; • changes in environmental compliance and water quality requirements, such as the United States Environmental Protection Agency’s (EPA) finalization of a National Primary Drinking Water Regulation establishing legally enforceable maximum contaminant levels (MCL) for PFAS in drinking water in 2024 as well as legal challenges to such MCLs; • the impact of weather, climate change, natural disasters, including wildfires and landslides, and actual or threatened public health emergencies, including disease outbreaks, on our operations, water quality, water availability, water sales and operating results and the adequacy of our emergency preparedness; 4 Table of Content s • electric power interruptions, especially as a result of Public Safety Power Shutoff (PSPS) programs; • availability of water supplies; • our ability to invest or apply the proceeds from the issuance of common stock in an accretive manner; • consequences of eminent domain actions relating to our water systems; • increased risk of inverse condemnation losses as a result of the impact of weather, climate change, and natural disasters, including wildfires and landslides; • shifts in population, including housing and customer growth; • issues with the implementation, maintenance or security of our information technology systems; • physical and cyber security risks and threats and the adequacy of our efforts to mitigate such risks and threats; • the ability of our enterprise risk management processes to identify or address risks adequately; • labor relations matters as we negotiate with unions; • changes in customer water use patterns and the effects of conservation, including as a result of drought conditions; • our ability to complete, in a timely manner or at all, successfully integrate, and achieve anticipated benefits from announced acquisitions, including the Nexus and BVRT acquisitions; • restrictive covenants in or changes to the credit ratings on our current or future debt that could increase our financing costs or affect our ability to borrow, make payments on debt or pay dividends; • risks associated with expanding our business and operations, including into other geographic areas; • the impact of stagnating or worsening business and economic conditions, including inflationary pressures, general economic slowdown or a recession, changes in tariff policy, the interest rate environment, changes in monetary policy, adverse capital markets activity or macroeconomic conditions as a result of geopolitical conflicts, and the prospect of shutdowns of the U.S. federal government; • the impact of market conditions and volatility on unrealized gains or losses on our non-qualified benefit plan investments and our operating results; • the impact of weather and timing of meter reads on our accrued and unbilled revenue; • the impact of evolving legal and regulatory requirements, including sustainability requirements; • the impact of the evolving U.S. political environment and changes effected, proposed or threatened by the U.S. federal government that has led to, in some cases, legal challenges and uncertainty around the funding, functioning and policy priorities of U.S. federal regulatory agencies and the status of current and future regulations; and • the risks set forth in “Risk Factors” included elsewhere in this annual report.
Our business is conducted through our operating subsidiaries and we provide utility services to approximately two million people. The bulk of our business consists of the production, purchase, storage, treatment, testing, distribution, and sale of water for domestic, industrial, public, and irrigation uses, and the provision of domestic and municipal fire protection services.
Our business is conducted through our operating subsidiaries and we provide utility services to approximately two million people. The bulk of our business consists of the production, purchase, storage, treatment, testing, distribution, and sale of water for domestic, industrial, public, and irrigation uses, and the provision of water for domestic and municipal fire protection services.
In April of 2018, a renewal agreement was negotiated with the City of Commerce for us to continue to lease and to operate its water system for 15 years. Under the agreement, the operating lease requires us to pay $0.8 million per year in monthly installments.
In April of 2018, a renewal agreement was negotiated with the City of Commerce for us to continue to lease and operate its water system for 15 years. Under the agreement, the operating lease requires us to pay $0.8 million per year in monthly installments.
Cap and trade regulations were implemented in 2012 in California with the goal of reducing emissions to 1990 levels by the year 2020. These regulations have not affected water utilities at this time.
Cap-and-trade regulations were implemented in California in 2012 with the goal of reducing emissions to 1990 levels by the year 2020. These regulations have not affected water utilities at this time.
Amongst other things, the 2021 GRC approved an additional $6.4 million of capital costs to be included in base rates plus authority to open a memorandum account allowing Cal Water to track incremental capital-related costs associated with this project.
Amongst other things, the 2021 CA GRC approved an additional $6.4 million of capital costs to be included in base rates plus authority to open a memorandum account allowing Cal Water to track incremental capital-related costs associated with this project.
(Hawaii Water), TWSC, Inc. (Texas Water), CWS Utility Services, and HWS Utility Services LLC (CWS Utility Services and HWS Utility Services LLC being referred to collectively in this annual report as Utility Services). Cal Water, Washington Water, New Mexico Water, and Hawaii Water are regulated public utilities. Texas Water is a holding company with regulated and contracted wastewater utilities.
(Hawaii Water), TWSC, Inc. (Texas Water), CWS Utility Services, and HWS Utility Services LLC (CWS Utility Services and HWS Utility Services LLC being referred to collectively in this annual report as Utility Services). Cal Water, Washington Water, New Mexico Water, and Hawaii Water are regulated public utilities. Texas Water is a holding company with regulated water and wastewater utilities.
Many of our well sites are equipped with emergency electric generators designed to produce electricity to keep the wells operating during power outages. Storage tanks also provide customers with water during interruptions in electrical service. During 2024, 2023, and 2022 we leased additional emergency generators to respond to potential PSPSs, an electric utility operating paradigm approved by the CPUC.
Many of our well sites are equipped with emergency electric generators designed to produce electricity to keep the wells operating during power outages. Storage tanks also provide customers with water during interruptions in electrical service. During 2025, 2024, and 2023 we leased additional emergency generators to respond to potential PSPSs, an electric utility operating paradigm approved by the CPUC.
The agreement allows us to request a rate change annually in order to recover costs. Hawaii Water provides service to approximately 6,700 water and wastewater customer connections on the islands of Kauai, Maui, Oahu, and Hawaii, including several large resorts and condominium complexes. Hawaii Water’s regulated customer connections are subject to the jurisdiction of the Hawaii Public Utilities Commission (HPUC).
The agreement allows us to request a rate change annually in order to recover costs. Hawaii Water provides service to approximately 6,800 water and wastewater customer connections on the islands of Kauai, Maui, Oahu, and Hawaii, including several large resorts and condominium complexes. Hawaii Water’s regulated customer connections are subject to the jurisdiction of the Hawaii Public Utilities Commission (HPUC).
Formerly, President and Chief Executive Officer (2013-2023), President and Chief Operating Officer (2012-2013), Chief Financial Officer and Treasurer (2006-2012), served as Chief Financial Officer of Power Light Corporation (2005-2006), Chief Financial Officer and Executive Vice President of Corporate Services of Hall Kinion and Associates (1997-2004), Deloitte & Touche Consulting (1996-1997), held various positions with Pacific Gas & Electric Company (1989-1996). 58 James P.
Formerly, President and Chief Executive Officer (2013-2023), President and Chief Operating Officer (2012-2013), Chief Financial Officer and Treasurer (2006-2012), served as Chief Financial Officer of Power Light Corporation (2005-2006), Chief Financial Officer and Executive Vice President of Corporate Services of Hall Kinion and Associates (1997-2004), Deloitte & Touche Consulting (1996-1997), held various positions with Pacific Gas & Electric Company (1989-1996). 59 James P.
The forward-looking statements are not guarantees of future performance. They are based on numerous assumptions that we believe are reasonable, but they are open to a wide range of uncertainties and business risks. Consequently, actual results may vary materially from what is contained in a forward-looking statement.
The forward-looking statements are not guarantees of future performance. They are based on numerous assumptions that we believe are reasonable, but they are open to a wide range of uncertainties and business risks. Consequently, actual results or outcomes may vary materially from what is contained in a forward-looking statement.
Formerly, Vice President, Information Technology and Chief Risk Officer (2021-2023), Vice President of Customer Service and Chief Information Officer (2017-2020), Vice President of Customer Service and Information Technology (2013-2016), Acting California Water Service Company District Manager, Los Altos (2012-2013), Director of Information Technology (2008-2012), CIS Development Manager (2005-2008), held various other positions with California Water Service Company since 1999. 45 Shawn C.
Formerly, Vice President, Information Technology and Chief Risk Officer (2021-2023), Vice President of Customer Service and Chief Information Officer (2017-2020), Vice President of Customer Service and Information Technology (2013-2016), Acting California Water Service Company District Manager, Los Altos (2012-2013), Director of Information Technology (2008-2012), CIS Development Manager (2005-2008), held various other positions with California Water Service Company since 1999. 46 Shawn C.
Purchases for the Bayshore and Bear Gulch districts are in accordance with long-term contracts with the San Francisco Public Utilities Commission (SFPUC) until June 30, 2034. Purchases for the Los Altos, Livermore, Oroville, Redwood Valley, Stockton, and Bakersfield districts are pursuant to long-term contracts expiring on various dates after 2024.
Purchases for the Bayshore and Bear Gulch districts are in accordance with long-term contracts with the San Francisco Public Utilities Commission (SFPUC) until June 30, 2034. Purchases for the Los Altos, Livermore, Oroville, Redwood Valley, Stockton, and Bakersfield districts are pursuant to long-term contracts expiring on various dates after 2025.
Non-regulated operations also include the lease of communication antenna sites, lab services, and promotion of other non-regulated services. During the year ended December 31, 2024, there were no significant changes in the kind of products produced or services rendered by our operating subsidiaries, or in the markets or methods of distribution.
Non-regulated operations also include the lease of communication antenna sites, lab services, and promotion of other non-regulated services. During the year ended December 31, 2025, there were no significant changes in the kind of products produced or services rendered by our operating subsidiaries, or in the markets or methods of distribution.
Offsets may be requested to adjust revenues for construction projects authorized in GRCs or recycled water projects when those capital projects go into service (these filings are referred to as “rate base offsets”), or for rate changes charged to Cal Water for purchased water, purchased power, and pump taxes (which are referred to as “expense offsets”).
Offsets may be requested to adjust revenues for authorized construction projects or recycled water projects when those capital projects go into service (these filings are referred to as “rate base offsets”), or for rate changes charged to Cal Water for purchased water, purchased power, and pump taxes (which are referred to as “expense offsets”).
The Plans also include, among other projects: • Water quality upgrades to treat for existing and newly regulated contaminants. • Infrastructure replacements to help ensure reliable delivery of water service. • Equipment such as generators to help withstand power outages and shutoffs, and solar installation projects to help reduce Cal Water’s dependency on the electric power grid and lessen our environmental footprint. • Physical and cyber security and safety enhancements to help protect facilities, customers, and employees. • Water supply initiatives to help safeguard long-term reliability and sustainability of water sources. • Advanced Metering Infrastructure to aid conservation efforts and enhance water-use efficiency. 10 Table of Contents Cal Water’s proposed Low-Use Water Equity Program would, if approved as filed, decouple revenue from water sales across its regulated service areas.
The Plans also include, among other projects: • Water quality upgrades to treat for existing and newly regulated contaminants. • Infrastructure replacements to help provide reliable delivery of water service. • Equipment such as generators to help withstand power outages and shutoffs, and solar installation projects to help reduce Cal Water’s dependency on the electric power grid and lessen our environmental footprint. • Physical and cyber security and safety enhancements to help protect facilities, customers, and employees. • Water supply initiatives to help safeguard long-term reliability and sustainability of water sources. • Advanced Metering Infrastructure to aid conservation efforts and enhance water-use efficiency. 10 Table of Content s Cal Water’s proposed Low-Use Water Equity Program would, if approved as filed, decouple revenue from water sales across its regulated service areas.
In some areas, we provide wastewater collection and treatment services, including treatment which allows water recycling. We also provide non-regulated water-related services under agreements with municipalities and other private companies. The non-regulated services include full water system operation, meter reading, and billing services.
In some areas, we provide wastewater collection and treatment services, including treatment that allows water recycling. We also provide non-regulated water-related services under agreements with municipalities and other private companies. The non-regulated services include full water system operation, meter reading, and billing services.
We have an unwavering commitment to hiring, developing, and supporting an inclusive, diverse and equal opportunity workforce. It’s essential that each employee actively fosters an environment where everyone feels valued and respected. Our employees are expected to exhibit and promote honest, ethical, and respectful conduct. This is not just a guideline but a fundamental value of our Company culture.
We have an unwavering focus on hiring, developing, and supporting an inclusive, diverse and equal opportunity workforce. It’s essential that each employee actively fosters an environment where everyone feels valued and respected. Our employees are expected to exhibit and promote honest, ethical, and respectful conduct. This is not just a guideline but a fundamental value of our Company culture.
We are not under any obligation, and we expressly disclaim any obligation, to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise. 5 Table of Contents Overview California Water Service Group (Company) is a holding company with seven operating subsidiaries: Cal Water, Washington Water Service Company (Washington Water), New Mexico Water Service Company (New Mexico Water), Hawaii Water Service Company, Inc.
We are not under any obligation, and we expressly disclaim any obligation, to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise. 5 Table of Content s Overview California Water Service Group (Company) is a holding company with seven operating subsidiaries: Cal Water, Washington Water Service Company (Washington Water), New Mexico Water Service Company (New Mexico Water), Hawaii Water Service Company, Inc.
Lynch (2) Senior Vice President, Chief Financial Officer and Treasurer since January 3, 2024. Formerly, Manager of Special Projects (2023), Chief Accounting Officer for SJW Group, a water utility company (2022-2023), Chief Financial Officer and Treasurer for SJW Group (2010-2022), Audit Partner with KPMG LLP (1997-2010), held various other positions with KPMG LLP (1984-1997). Certified public accountant. 65 Michael B.
Lynch Senior Vice President, Chief Financial Officer and Treasurer since January 3, 2024. Formerly, Manager of Special Projects (2023), Chief Accounting Officer for SJW Group, a water utility company (2022-2023), Chief Financial Officer and Treasurer for SJW Group (2010-2022), Audit Partner with KPMG LLP (1997-2010), held various other positions with KPMG LLP (1984-1997). Certified public accountant. 66 Michael B.
Milleman (2) Vice President, Rates & Regulatory Affairs since January 1, 2022. Formerly, Vice President, California Rates (2019-2021), Interim Director of Rates (2017-2018), Director of Field Administration & Finance (2014-2017), Manager of Special Projects (2013), and served as Senior Vice President of Administration and Corporate Secretary and various other management positions for Valencia Water Company (1992-2013). 62 Sophie M.
Milleman Vice President, Rates & Regulatory Affairs since January 1, 2022. Formerly, Vice President, California Rates (2019-2021), Interim Director of Rates (2017-2018), Director of Field Administration & Finance (2014-2017), Manager of Special Projects (2013), and served as Senior Vice President of Administration and Corporate Secretary and various other management positions for Valencia Water Company (1992-2013). 63 Sophie M.
Formerly, Vice President, Customer Service and Chief Citizenship Officer (2021-2023), Vice President of Corporate Communications & Community Affairs (2015-2020), Director of Corporate Communications (2000-2014), held various corporate communications, government, and community relations positions for Dominguez Water Company (1991-1999). 57 Michael S. Mares, Jr (2) Senior Vice President, Operations since January 1, 2024.
Formerly, Vice President, Customer Service and Chief Citizenship Officer (2021-2023), Vice President of Corporate Communications & Community Affairs (2015-2020), Director of Corporate Communications (2000-2014), held various corporate communications, government, and community relations positions for Dominguez Water Company (1991-1999). 58 Michael S. Mares, Jr Senior Vice President, Operations since January 1, 2024.
Some districts have unique challenges in meeting water quality standards, but management believes that supplies will meet current standards using currently available treatment processes or by installing the best available technologies. 15 Table of Contents On May 31, 2018, California’s Governor signed two bills (Assembly Bill 1668 and Senate Bill 606) into law that were intended to establish long-term standards for water use efficiency.
Some districts have unique challenges in meeting water quality standards, but management believes that supplies will meet current standards using currently available treatment processes or by installing the best available technologies. On May 31, 2018, California’s Governor signed two bills (Assembly Bill 1668 and Senate Bill 606) into law that were intended to establish long-term standards for water use efficiency.
The City of Commerce retains title to the system and system improvements and remains responsible for setting its customers’ water rates. We bear the risks of operation and collection of amounts billed to customers. In exchange, we receive all revenue from the water system, which was $4.1 million, $4.2 million, and $4.2 million, in 2024, 2023, and 2022, respectively.
The City of Commerce retains title to the system and system improvements and remains responsible for setting its customers’ water rates. We bear the risks of operation and collection of amounts billed to customers. In exchange, we receive all revenue from the water system, which was $4.0 million, $4.1 million, and $4.2 million, in 2025, 2024, and 2023, respectively.
California Drought Memorandum Account (DRMA) In June 2021, Cal Water submitted advice letters to request a DRMA to track the incremental operational and administrative costs incurred to further implement updated Rule 14.1 for voluntary conservation measures and Schedule 14.1 for implementation of our Water Shortage Contingency Plan (WSCP), including activities related to enhanced conservation efforts, staffing, and capital expenditures to provide a safe, reliable water supply.
California Drought Memorandum Account (DRMA) In June 2021, Cal Water submitted an advice letter to request a DRMA to track the incremental operational and administrative costs incurred to further implement updated Rule 14.1 for voluntary conservation measures and Schedule 14.1 for implementation of our Water Shortage Contingency Plan, including activities related to enhanced conservation efforts, staffing, and capital expenditures to provide a safe, reliable water supply.
Luu (2) Senior Vice President, Corporate Services & Chief Risk Officer since June 1, 2023.
Luu Senior Vice President, Corporate Services & Chief Risk Officer since June 1, 2023.
Mortensen (2) Vice President, Corporate Secretary and Chief of Staff since January 1, 2022.
Mortensen Vice President, Corporate Secretary and Chief of Staff since January 1, 2022.
The franchises and permits allow us to operate and maintain facilities in public streets and rights-of-way as necessary. Non-Regulated Activities Non-regulated activities consist primarily of the operation of water systems that are owned by other entities under lease agreements, leasing of communication antenna sites on our properties, and billing of optional third-party insurance programs to our residential customers.
The franchises and permits allow us to operate and maintain facilities in public streets and rights-of-way as necessary. 7 Table of Content s Non-Regulated Activities Non-regulated activities consist primarily of the operation of water systems that are owned by other entities under lease agreements, leasing of communication antenna sites on our properties, and billing of optional third-party insurance programs to our residential customers.
The application also proposes a Low-Use Water Equity Program, that would, if approved as filed, decouple revenue from water sales, to assist low-water-using, lower-income customers.
The application also proposed a Low-Use Water Equity Program, that would, if approved as filed, decouple revenue from water sales, to assist low-water-using, lower-income customers.
James (2) Vice President, Water Quality & Environmental Affairs since January 1, 2024. Formerly, Chief Water Quality Officer (2022-2023), Director of Water Quality (2014-2021), Manager of Laboratory Service (2006-2013), and Environmental Chemist, City of Sunnyvale (1992-2006). 56 Kenneth G. Jenkins (2) Vice President, Water Resources Planning and Sustainability since January 1, 2025.
James Vice President, Water Quality & Environmental Affairs since January 1, 2024. Formerly, Chief Water Quality Officer (2022-2023), Director of Water Quality (2014-2021), Manager of Laboratory Service (2006-2013), and Environmental Chemist, City of Sunnyvale (1992-2006). 57 Kenneth G. Jenkins Vice President, Water Resources Planning and Sustainability since January 1, 2025.
In May of 2021, Texas Water became the majority owner of BVRT Utility Holding Company (BVRT), a Texas-based utility development company owning and operating seven wastewater utilities serving growing communities outside of Austin and San Antonio. BVRT provides regulated wastewater services under the rules and regulation of the Texas Public Utilities Commission.
In May of 2021, Texas Water became the majority owner of BVRT, a Texas-based utility development company owning and operating water and wastewater utilities serving growing communities outside of Austin and San Antonio. BVRT provides regulated water and wastewater services under the rules and regulation of the Public Utilities Commission of Texas (PUCT).
Rate changes approved in offset requests remain in effect until the next GRC is approved. California Regulatory Activity 2024 GRC Application On July 8, 2024, Cal Water submitted Infrastructure Improvement Plans (the Plans) for its California districts from 2025 to 2027 in its 2024 GRC application with the CPUC.
Rate changes approved in offset requests remain in effect until the next GRC is approved. California Regulatory Activity 2024 CA GRC Application and IRMA On July 8, 2024, Cal Water submitted Infrastructure Improvement Plans (the Plans) for its California districts from 2025 to 2027 in its 2024 CA GRC application with the CPUC.
The cost to prepare the CEQA documentation and permit are expected to be included in our capital cost and added to our rate base, which is expected to be requested to be paid for by our customers.
The cost to prepare the CEQA documentation and permits are expected to be included in our capital cost and added to our rate base, which is expected to be requested to be paid for by our customers.
Bunting (2) Senior Vice President, General Counsel & Business Development since January 1, 2024.
Bunting Senior Vice President, General Counsel & Business Development since January 1, 2024.
The water supplies purchased for the Dominguez, East Los Angeles, Hermosa Redondo, Palos Verdes, and Westlake districts as well as the Hawthorne and Commerce systems are provided by public agencies pursuant to a statutory obligation of continued non-preferential service to purveyors within the agencies’ boundaries. 17 Table of Contents Management anticipates water supply contracts will be renewed as they expire though the price of wholesale water purchases is anticipated to increase in the future.
The water supplies purchased for the Dominguez, East Los Angeles, Hermosa Redondo, Palos Verdes, and Westlake districts as well as the Hawthorne and Commerce systems are provided by public agencies pursuant to a statutory obligation of continued non-preferential service to purveyors within the agencies’ boundaries. 16 Table of Content s Management anticipates water supply contracts will be renewed as they expire though the price of wholesale water purchases is anticipated to increase in the future.
(2008-2014), Assistant General Counsel (Director) at Allegheny Energy, Inc. (2005-2008), and attorney at K&L Gates LLP (1998-2005). 52 Shannon C. Dean (2) Senior Vice President, Customer Service & Chief Sustainability Officer since January 1, 2024.
(2008-2014), Assistant General Counsel (Director) at Allegheny Energy, Inc. (2005-2008), and attorney at K&L Gates LLP (1998-2005). 53 Shannon C. Dean Senior Vice President, Customer Service & Chief Sustainability Officer since January 1, 2024.
The approximate number of customer connections served in each regulated district, the City of Hawthorne and the City of Commerce, at December 31 is as follows: (rounded to the nearest hundred) 2024 2023 SAN FRANCISCO BAY AREA/NORTH COAST Bay Area Region (serving South San Francisco, Colma, Broadmoor, San Mateo, San Carlos, Lucerne, Duncans Mills, Guerneville, Dillon Beach, Noel Heights and portions of Santa Rosa) 56,000 56,000 Bear Gulch (serving portions of Menlo Park, Atherton, Woodside and Portola Valley) 19,200 19,100 Los Altos (including portions of Cupertino, Los Altos Hills, Mountain View and Sunnyvale) 19,000 19,000 Livermore 19,000 19,000 113,200 113,100 SACRAMENTO VALLEY North Valley Region (serving Chico, Hamilton City, and Oroville) 35,400 35,200 Marysville 3,800 3,800 Dixon 3,100 3,100 Willows 2,400 2,400 44,700 44,500 SALINAS VALLEY Salinas Valley Region (including Salinas and King City) 31,900 31,800 31,900 31,800 SAN JOAQUIN VALLEY Bakersfield 74,900 74,400 Stockton 45,300 45,200 Visalia 49,100 48,700 Selma 6,700 6,600 Kern River Valley 4,000 4,000 180,000 178,900 LOS ANGELES AREA East Los Angeles 26,900 26,900 South Bay Region (serving Hermosa Beach, Redondo Beach, Carson, and portions of Compton, Harbor City, Long Beach, Los Angeles, and Torrance) 61,800 61,800 Los Angeles County Region (including Palos Verdes Estates, Rancho Palos Verdes, Rolling Hills Estates, Rolling Hills, Fremont Valley, Lake Hughes, Lancaster and Leona Valley) 26,100 26,000 Westlake (a portion of Thousand Oaks) 7,100 7,100 Hawthorne and Commerce (leased municipal systems) and Travis Airforce Base (utility privatization contract) 7,700 7,600 129,600 129,400 CALIFORNIA TOTAL 499,400 497,700 HAWAII 6,700 6,500 NEW MEXICO 11,500 11,400 WASHINGTON 38,300 38,000 TEXAS 4,200 2,800 COMPANY TOTAL 560,100 556,400 9 Table of Contents Rates and Regulation The Commissions have plenary powers setting both rates and operating standards.
The approximate number of customer connections served in each California regulated district, the City of Hawthorne, the City of Commerce, and each operating subsidiary, at December 31 is as follows: (rounded to the nearest hundred) 2025 2024 SAN FRANCISCO BAY AREA/NORTH COAST Bay Area Region (serving South San Francisco, Colma, Broadmoor, San Mateo, San Carlos, Lucerne, Duncans Mills, Guerneville, Dillon Beach, Noel Heights and portions of Santa Rosa) 56,000 56,000 Bear Gulch (serving portions of Menlo Park, Atherton, Woodside and Portola Valley) 19,200 19,200 Los Altos (including portions of Cupertino, Los Altos Hills, Mountain View and Sunnyvale) 19,000 19,000 Livermore 19,000 19,000 113,200 113,200 SACRAMENTO VALLEY North Valley Region (serving Chico, Hamilton City, and Oroville) 35,400 35,400 Marysville 3,800 3,800 Dixon 3,100 3,100 Willows 2,400 2,400 44,700 44,700 SALINAS VALLEY Salinas Valley Region (including Salinas and King City) 31,900 31,900 31,900 31,900 SAN JOAQUIN VALLEY Bakersfield 75,100 74,900 Stockton 45,300 45,300 Visalia 49,500 49,100 Selma 6,700 6,700 Kern River Valley 4,000 4,000 180,600 180,000 LOS ANGELES AREA East Los Angeles 26,900 26,900 South Bay Region (serving Hermosa Beach, Redondo Beach, Carson, and portions of Compton, Harbor City, Long Beach, Los Angeles, and Torrance) 61,800 61,800 Los Angeles County Region (including Palos Verdes Estates, Rancho Palos Verdes, Rolling Hills Estates, Rolling Hills, Fremont Valley, Lake Hughes, Lancaster and Leona Valley) 26,100 26,100 Westlake (a portion of Thousand Oaks) 7,100 7,100 Hawthorne and Commerce (leased municipal systems) and Travis Air Force Base (utility privatization contract) 7,700 7,700 129,600 129,600 CALIFORNIA TOTAL 500,000 499,400 HAWAII 6,800 6,700 NEW MEXICO 11,800 11,500 WASHINGTON 38,500 38,300 TEXAS 4,900 4,200 COMPANY TOTAL 562,000 560,100 9 Table of Content s Rates and Regulation The Commissions have plenary powers to set both rates and operating standards.
Texas Water initially invested funds to enable BVRT to continue to build wastewater infrastructure and converted its investment to equity. BVRT’s seven wastewater utilities currently serve or are under contract to serve approximately 4,200 customer connections.
Texas Water initially invested funds to enable BVRT to continue to build wastewater infrastructure and converted its investment to equity. BVRT’s water and wastewater utilities currently serve or are under contract to serve approximately 4,900 customer connections.
Washington Water accounted for approximately 6.8% of our total customer connections and approximately 2.3% of our total consolidated operating revenue in 2024. New Mexico Water provides service to approximately 11,500 water and wastewater customer connections in our Rio Communities, Rio Del Oro, Meadow Lake, Indian Hills, Squaw Valley, Elephant Butte, Morningstar, Sandia Knolls, Juan Tomas, Monterey, and Cypress Gardens systems.
Washington Water accounted for approximately 6.8% of our total customer connections and approximately 2.6% of our total consolidated operating revenue in 2025. New Mexico Water provides service to approximately 11,800 water and wastewater customer connections in our Rio Communities, Rio Del Oro, Meadow Lake, Indian Hills, Squaw Valley, Elephant Butte, Morningstar, Sandia Knolls, Juan Tomas, Monterey, and Cypress Gardens systems.
In October of 2024, Cal Water submitted a $5.7 million rate base offset advice letter to recover $0.9 million of annual revenue increases in 9 of its regulated districts. The new rates were approved and subsequently implemented on January 1, 2025.
In October of 2024, Cal Water submitted a $5.7 million rate base offset advice letter to recover $0.9 million of annual revenue increases for 9 of its regulated districts. The new rates were implemented on January 1, 2025.
Shown below are wholesaler price rates and increases that became effective in 2024, and estimated wholesaler price rates and percent changes for 2025.
Shown below are wholesaler price rates and increases that became effective in 2025, and estimated wholesaler price rates and percent changes for 2026.
Any increase in the operating cost of the facilities would also be expected to be included in our cost of service paid by our customers as requested in our GRC filings. While recovery of these costs is not guaranteed, we would expect recovery in the regulatory process.
Any increase in the operating cost of the facilities would also be expected to be 19 Table of Content s included in our cost of service paid by our customers, as requested in our GRC filings. While recovery of these costs is not guaranteed, we would expect recovery in the regulatory process.
Hawaii Water accounted for 1.2% of our total customer connections and approximately 4.3% of our total consolidated operating revenue in 2024. Washington Water provides domestic water service to approximately 38,300 customer connections in the Tacoma, Olympia, Graham, Spanaway, Puyallup, Rainier, Yelm, and Gig Harbor areas. Washington Water’s utility operations are regulated by the Washington Utilities and Transportation Commission (UTC).
Hawaii Water accounted for 1.2% of our total customer connections and approximately 4.6% of our total consolidated operating revenue in 2025. Washington Water provides domestic water service to approximately 38,500 customer connections in the Tacoma, Olympia, Graham, Spanaway, Puyallup, Rainier, Yelm, and Gig Harbor areas. Washington Water’s utility operations are regulated by the Washington Utilities and Transportation Commission (UTC).
New Mexico’s regulated operations are subject to the jurisdiction of the New Mexico Public Regulation Commission. New Mexico Water accounted for approximately 2.1% of our total customer connections and 0.7% of our total consolidated operating revenue in 2024.
New Mexico’s regulated operations are subject to the jurisdiction of the New Mexico Public Regulation Commission. New Mexico Water accounted for approximately 2.1% of our total customer connections and 0.8% of our total consolidated operating revenue in 2025.
To show our commitment, we offer our employees a broad range of Company-paid benefits, and we believe our compensation package and benefits are competitive with others in our industry. Additional information about our employee benefit plans is included in Note 11 of the Notes to Consolidated Financial Statements.
To support these efforts, we offer our employees a broad range of Company-paid benefits, and we believe our compensation package and benefits are competitive with others in our industry. Additional information about our employee benefit plans is included in Note 11 of the Notes to Consolidated Financial Statements.
All of our employees must adhere to a business code of conduct that sets standards for appropriate behavior and ethics and includes required internal training on preventing, identifying, reporting, and stopping any type of unlawful discrimination. Employee health and safety in the workplace is another one of the Company’s core values.
All of our employees must adhere to a business code of conduct that sets standards for appropriate behavior and ethics and includes required internal training on preventing, identifying, reporting, and stopping any type of unlawful discrimination. Employee health and safety in the workplace is another one of the Company’s core values that we seek to live by every day.
Capital improvements are recorded as depreciable plant and equipment and depreciated per the asset lives set forth in the agreement. In exchange, we receive all revenue from the water system, which was $12.7 million, $12.2 million, and $12.5 million in 2024, 2023, and 2022, respectively.
Capital improvements are recorded as depreciable plant and equipment and depreciated per the asset lives set forth in the agreement. In exchange, we receive all revenue from the water system, which was $13.0 million, $12.7 million, and $12.2 million in 2025, 2024, and 2023, respectively.
On February 2, 2024, Cal Water received a letter from the CPUC addressed jointly to Cal Water and three other Class A water companies granting their request for a one-year extension in their next cost of capital filing with the CPUC to May 1, 12 Table of Contents 2025. The WCCM will remain in effect during the one-year extension.
On February 2, 2024, Cal Water received a letter from the CPUC addressed jointly to Cal Water and three other Class A water companies granting their request for a one-year extension in their next cost of capital filing with the CPUC to May 1, 2025. The WCCM remained in effect during the one-year extension.
On January 14, 2025, Cal Water received a letter from the CPUC addressed jointly to Cal Water and three other Class A water companies granting their request for an additional one-year extension in their cost of capital filing with the CPUC to May 1, 2026. The WCCM will remain in effect during the one-year extension.
On January 14, 2025, Cal Water received a letter from the CPUC addressed jointly to Cal Water and three other Class A water companies granting a second extension for an additional one-year period in their cost of capital filing with the CPUC to May 1, 2026. The WCCM remained in effect during the one-year extension.
Cal Water has concluded an initial pre-hearing conference and an administrative law judge and Commissioner have been assigned to the case. The Commissioner issued the Scoping Memo and Ruling in November 2024 identifying the issues to be addressed and setting the schedule for the proceeding.
Cal Water concluded an initial pre-hearing conference and an Administrative Law Judge (ALJ) and Commissioner were assigned to the case. The Commissioner issued the Scoping Memo and Ruling in November 2024 identifying the issues to be addressed and setting the schedule for the proceeding.
In Washington, annexation was approved in February 2008 for property served by us on Orcas Island; however, we continue to serve the customers in the annexed area and do not expect the annexation to affect our operations.
In Washington, annexation was approved in February 2008 for property served by us on Orcas Island; however, we continue to 18 Table of Content s serve the customers in the annexed area and do not expect the annexation to affect our operations.
As of December 31, 2024, we had 673 employees represented by the UWUA and 98 employees represented by the IFPTE. In 2021, we reached separate six-year agreements with both unions on new contracts that run from May 14, 2021 (UWUA) and October 4, 2021 (IFPTE) through February 28, 2027.
As of December 31, 2025, we had 696 employees represented by the UWUA and 109 employees represented by the IFPTE. In 2021, we reached separate six-year agreements with both unions on new contracts that run from May 14, 2021 (UWUA) and October 4, 2021 (IFPTE) through February 28, 2027.
Examples of forward-looking statements in this annual report include, but are not limited to, statements describing our intention, indication or expectation regarding our financial performance, dividends or targeted payout ratio, our expectations, anticipations or beliefs regarding governmental, legislative, judicial, administrative or regulatory timelines, regulatory compliance, decisions, approvals, authorizations, requirements or other actions, including plans and proposals pursuant to and timing of the California Water Service Company (Cal Water)’s general rate case (GRC) filed on July 8, 2024 (2024 GRC), timing of our cost of capital application, rate amounts, cost recovery or refunds, certain per- and polyfluoralkyl substances (PFAS) regulations, and associated impacts, such as our expected or estimated revenue, our intentions regarding recovery billing, our expectations regarding regulatory asset and operating revenue recognition, sources of funding or capital requirements, estimates of, or expectations regarding, capital expenditures, funding needs or other capital requirements, obligations, contingencies or commitments, our expectations regarding water sources, our beliefs regarding adequacy of water supplies, our anticipation regarding renewing water supply contracts, and estimated water prices, estimates and assumptions relating to our significant accounting policies, such as deferred revenue or assets or refund of advances, our expectations or assumptions regarding employee benefit plans and stock-based compensation and estimated contributions to our pension plans and other postretirement benefit plans, our estimated annual effective tax rate and expectations regarding tax benefits, our intentions regarding use of net proceeds from any future equity or debt issuances or borrowings, our expectations, intentions or anticipations regarding our sources of funding, capital structure, including authorized return on equity, cost of debt and rate of return, or capital allocation plans, our intentions regarding growth opportunities or our expectations regarding settlement proceeds relating to certain PFAS-contamination claims.
Examples of forward-looking statements in this annual report include, but are not limited to, statements describing our intention, indication or expectation regarding our financial performance, dividends or targeted payout ratio, our expectations, anticipations or beliefs regarding governmental, legislative, judicial, administrative or regulatory timelines, regulatory compliance, decisions, approvals, authorizations, requirements or other actions, including plans and proposals pursuant to and timing of the California Water Service Company (Cal Water)’s general rate case (GRC) filed on July 8, 2024 (2024 CA GRC) and the GRCs filed by our other subsidiaries, the anticipated closing and timing of acquisition of Nexus Water Group’s (Nexus) Nevada and Oregon utilities, and the remaining membership interests in BVRT Utility Holding Company LLC (BVRT) and expected benefits resulting from such transactions, timing of our cost of capital application, rate amounts, cost recovery or refunds, certain per- and polyfluoroalkyl substances (PFAS) regulations, and associated impacts, such as our expected or estimated revenue, our intentions regarding recovery billing, our expectations regarding regulatory asset and operating revenue recognition, sources of funding or capital requirements, estimates of, or expectations regarding, capital expenditures, funding needs or other capital requirements, obligations, contingencies or commitments, our expectations regarding water sources, our beliefs regarding adequacy of water supplies, our anticipation regarding renewing water supply contracts and estimated water prices, estimates and assumptions relating to our significant accounting policies, such as deferred revenue or assets or refund of advances, our expectations or assumptions regarding employee benefit plans and stock-based compensation and estimated contributions to our pension plans and other postretirement benefit plans, our estimated annual effective tax rate and expectations regarding tax benefits, our intentions regarding use of net proceeds from any future equity or debt issuances or borrowings, our expectations, intentions or anticipations regarding our sources of funding, capital structure, including authorized return on equity, cost of debt and rate of return, or capital allocation plans, our intentions regarding growth opportunities or our expectations regarding the amount, timing, and use of settlement proceeds relating to certain PFAS-contamination claims.
Formerly, Vice President, Operations (2021-2023), Vice President, California Operations (2019-2020), California Water Service Company District Manager, Bakersfield (2017-2018), Hawaii Water Service Company General Manager (2014-2016), Hawaii Water Service Company Local Manager, Big Island (2012-2014), California Water Service Company, held various Superintendent positions in the Chico district (2002-2012), California Water Service Company, held various union positions in the Chico district (1992-2002). 58 Ronald D.
Formerly, Vice President, Operations (2021-2023), Vice President, California Operations (2019-2020), California Water Service Company District Manager, Bakersfield (2017-2018), Hawaii Water Service Company General Manager (2014-2016), Hawaii Water Service Company Local Manager, Big Island (2012-2014), California Water Service Company, held various Superintendent positions in the Chico district (2002-2012), California Water Service Company, held various union positions in the Chico district (1992-2002). 59 Michelle R.
Formerly, Chief Procurement and Lead Continuous Improvement Officer (2016-2021), Interim Procurement Director (2013-2016), Acting District Manager - Los Altos (2013), Interim Vice President of Information Technology (2012-2013), Director of Information Technology - Architecture and Security (2008-2012), Business Application Manager (2003-2007), Project Lead/Senior Developer (2001-2003), held various business consulting positions at KPMG Consulting/BearingPoint (1998-2001), and RR Donnelley (1996-1998). 56 Greg A.
Formerly, Chief Procurement and Lead Continuous Improvement Officer (2016-2021), Interim Procurement Director (2013-2016), Acting District Manager - Los Altos (2013), Interim Vice President of Information Technology (2012-2013), Director of Information Technology - Architecture and Security (2008-2012), Business Application Manager (2003-2007), Project Lead/Senior Developer (2001-2003), held various business consulting positions at KPMG Consulting/BearingPoint (1998-2001), and RR Donnelley (1996-1998). 57 21 Table of Content s Name Positions and Offices Age Greg A.
Per- and Polyfluoroalkyl Substances Memorandum Account (PFAS MA) Public water systems have been ordered by the Water Board to detect, monitor, and report perfluorooctanoic and perfluorooctanesulfonic acid in drinking water. In the third quarter of 2020, the CPUC approved the PFAS MA which allows Cal Water to track incremental expenses related to compliance with the order.
PFAS Memorandum Account (PFAS MA) Public water systems have been ordered by the Water Board to detect, monitor, and report certain PFAS in drinking water. In the third quarter of 2020, the CPUC approved the PFAS MA which allows Cal Water to track incremental expenses related to compliance with the order.
The CPUC may reduce a district’s escalation rate increase if, in the most recent 13-month period, the earnings test reflects earnings in excess of what was authorized for that district. In addition, California water utilities are entitled to make offset requests via an advice letter.
The CPUC may reduce a district’s escalation rate increase if, in the most recent 13-month period, the earnings test reflects earnings in excess of what was authorized for that district or if new assets placed in service are less than authorized amounts. In addition, California water utilities are entitled to make offset requests via an advice letter.
Escalation Increase Requests As a part of the decision on the 2021 GRC, Cal Water was authorized to request annual escalation rate increases for 2024 and 2025 for those districts that passed the CPUC’s earnings test. In April of 2024, Cal Water requested 2024 escalation rate increases for 17 of its regulated districts.
Escalation Increase Requests As a part of the decision on Cal Water’s 2021 GRC (2021 CA GRC), Cal Water was authorized to request annual escalation rate increases for 2025 for those districts that passed the CPUC’s earnings test. In November of 2024, Cal Water requested 2025 escalation rate increases for 18 of its regulated districts.
The RRAs are scheduled to be reviewed and resubmitted every five years. While we do not make public comments on our security programs, we have been in contact with federal, state, and local law enforcement agencies to coordinate and improve our water delivery systems’ security. Competition and Condemnation Our principal operations are regulated by the Commission of each state.
While we do not make public comments on our security programs, we have been in contact with federal, state, and local law enforcement agencies to coordinate and improve our water delivery systems’ security. Competition and Condemnation Our principal operations are regulated by the Commission of each state.
On January 30, 2025, a final decision was issued that approved Cal Water’s request to include $14.2 million of incremental costs in rate base and for a temporary surcharge to recover $3.8 million of carrying costs tracked in the memo account.
On January 30, 2025, a resolution was issued that approved Cal Water’s request to include $14.2 million of incremental costs in rate base and for a temporary surcharge to recover $3.8 million of carrying costs tracked in the Palos Verdes Pipeline Memorandum Account.
These are adjudicated groundwater basins, in which a court has settled the dispute between landowners, or other parties over how much annual groundwater can be extracted by each party. All of our adjudicated groundwater basins are located in the State of California.
Some of our wells extract ground water from water basins under adjudicated groundwater basins, in which a court has settled the dispute between landowners, or other parties over how much annual groundwater can be extracted by each party. All of our adjudicated groundwater basins are located in the State of California.
To support these investments, Cal Water has proposed to change 2024 rates to increase 2026 total revenue by $140.6 million, or 17.1%. Cal Water also proposes rate increases of $74.2 million, or 7.7%, in 2027; and $83.6 million, or 8.1%, in 2028. 2021 GRC The CPUC approved a decision on March 7, 2024 on the 2021 GRC.
To support these investments, Cal Water has proposed to change 2024 rates to increase 2026 total revenue by $140.6 million, or 17.1%. Cal Water also proposes rate increases of $74.2 million, or 7.7%, in 2027; and $83.6 million, or 8.1%, in 2028.
The opportunities could include system acquisitions, lease arrangements similar to the City of Hawthorne and City of Commerce contracts, utility development investments similar to the BVRT investment, full service system operation and maintenance agreements, customer service functions, and other utility-related services. 8 Table of Contents Geographical Service Areas and Number of Customer Connections at Year-end Our principal markets are users of water within our service areas.
The opportunities could include system acquisitions, such as our announced agreement to purchase Nexus’s Nevada and Oregon water and wastewater systems, lease arrangements similar to the City of Hawthorne and City of Commerce contracts, utility development investments similar to the BVRT investment, full service system operation and maintenance agreements, customer service functions, and other utility-related services. 8 Table of Content s Geographical Service Areas and Number of Customer Connections at Year-end Our principal markets are users of water within our service areas.
Quality of Water Supply Our operating practices are designed to produce potable water in accordance with accepted water utility practices. Water entering the distribution systems from surface and groundwater sources is treated in compliance with federal and state Safe Drinking Water Act (SDWA) and state standards.
Quality of Water Supply Our operating practices are designed to produce potable water in accordance with accepted water utility practices. Water entering the distribution systems from surface and groundwater sources is treated in compliance with federal and state Safe Drinking Water Act (SDWA) and state standards. Well supplies in California, Hawaii and New Mexico are chlorinated or chloraminated for disinfection.
However, cash flows from operations and short-term borrowings on our credit facilities can be significantly impacted by seasonal fluctuations including recovery of the MWRAM and ICBA. 18 Table of Contents Our water business is seasonal in nature. Weather conditions can have a material effect on customer usage.
However, cash flows from operations and short-term borrowings on our credit facilities can be significantly impacted by seasonal fluctuations including recovery of the MWRAM and ICBA. Our water business is seasonal in nature. Weather conditions can have a material effect on customer usage. Customer demand for water generally is lower during the cooler and rainy winter months.
In October of 2024, Cal Water submitted an advice letter to request offsets for increases in purchased water costs and pump taxes in eight of its regulated districts totaling $17.1 million. The new rates were implemented on January 1, 2025.
In July of 2025, Cal Water submitted an advice letter to request expense offsets for increases in purchased water costs and pump taxes in 2 of its regulated districts totaling $2.6 million. The new rates were implemented on August 1, 2025.
The state regulatory bodies governing our regulated operations are referred to as the Commissions in this annual report. Rates and operations for regulated customers are subject to the jurisdiction of the respective state’s regulatory Commission. The Commissions require that water and wastewater rates for each regulated district be independently determined based on the cost of service.
Rates and operations for regulated customers are subject to the jurisdiction of the respective state’s regulatory Commission. The Commissions require that water and wastewater rates for each regulated district be independently determined based on the cost of service.
The Commissions are expected to authorize rates sufficient to recover normal operating expenses and allow the utility to earn a fair and reasonable return on invested capital. We treat and distribute water and treat wastewater in accordance with accepted water utility methods. Where applicable, we hold franchises and permits in the cities and communities where we operate.
The Commissions are expected to authorize rates sufficient to recover normal operating expenses and allow the utility an opportunity to earn a fair and reasonable return on invested capital. We treat and distribute water and collect and treat wastewater in accordance with accepted water and wastewater utility methods.
New base rates were implemented on February 1, 2025 and new surcharges are expected to be implemented on April 1, 2025.
New base rates were implemented on February 1, 2025, and new surcharges were implemented on April 1, 2025.
If future legislation limits emissions from the power generation process, our cost of power may increase. Any increase in the cost of power would be expected to be passed along to our California customers through the ICBA or included in our cost of service paid by our customers as requested in our GRC filings.
Any increase in the cost of power would be expected to be passed along to our California customers through the ICBA or included in our cost of service paid by our customers as requested in our GRC filings.
Water usage declines during the late fall as temperatures decrease and the rainy season begins. During years in which precipitation is especially heavy or extends beyond the spring into the early summer, customer demand can decrease from historic normal levels, generally due to reduced outdoor water usage.
During years in which precipitation is especially heavy or extends beyond the spring into the early summer, customer demand can decrease from historic normal levels, generally due to reduced outdoor water usage. Likewise, an early start to the rainy season during the fall can cause a decline in customer usage.
This activity is impacted by the demand for housing, commercial development, and general business conditions, including interest rates. See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” for additional information.
This amount fluctuates from year-to-year as the level of construction activity carried on by developers varies. This activity is impacted by the demand for housing, commercial development, and general business conditions, including interest rates. See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” for additional information.
In 2024, several districts experienced purchased water rate increases, resulting in the filing of several purchased water offsets with the CPUC. 2024 2025 District Effective Month Unit Cost Percent Change Effective Month Unit Cost Percent Change Antelope July $790.00 /af 5.1% July $849.00 /af 7.5% Bakersfield (1) July $213.00 /af 9.2% January $213.00 /af — Bear Gulch July $5.67 /ccf 8.8% January $5.67 /ccf — Commerce (2) January $1,426.00 /af 3.4% January $1,565.00 /af 9.7% South Bay Region (2) July $1,708.00 /af 6.4% January $1,899.00 /af 11.2% East Los Angeles (2) January $1,426.00 /af 3.4% January $1,565.00 /af 9.7% Hawthorne (2) July $1,708.00 /af 6.4% January $1,899.00 /af 11.2% Livermore February $2.34 /ccf 3.1% January $2.44 /ccf 4.3% Los Altos July $2,344.00 /af 12.2% January $2,344.00 /af — Oroville February $222,881 /yr 3.2% January $222,881 /yr — Palos Verdes (2) July $1,708.00 /af 6.4% January $1,899.00 /af 11.2% Mid-Peninsula July $5.67 /ccf 8.8% January $5.67 /ccf — Redwood Valley January $69.24 /af — January $69.24 /af — South San Francisco July $5.67 /ccf 8.8% January $5.67 /ccf — Stockton October $1,170,637 /mo 25.8% January $1,170,637 /mo — Westlake January $1,730.00 /af 6.0% January $1,895.00 /af 9.5% _______________________________________________________________________________ af = acre foot; ccf = hundred cubic feet; yr = fixed annual cost; mo = fixed monthly cost (1) untreated water (2) wholesaler price changes occur every six months We work with all local suppliers and agencies responsible for water supply to secure adequate, long-term supply for each system.
In 2025, several districts experienced purchased water rate increases, resulting in the filing of several purchased water offsets with the CPUC. 2025 2026 District Effective Month Unit Cost Percent Change Effective Month Unit Cost Percent Change Antelope Valley July $814.00 /af 3.0% January $814.00 /af — Bakersfield (1) July $233.00 /af 9.4% January $233.00 /af — Bayshore July $5.80 /ccf 2.3% January $5.80 /ccf — Bear Gulch July $5.80 /ccf 2.3% January $5.80 /ccf — Commerce (2) January $1,565.00 /af 9.7% January $1,698.00 /af 8.5% East Los Angeles (2) January $1,565.00 /af 9.7% January $1,698.00 /af 8.5% Hawthorne (2) July $1,917.00 /af 12.2% January $2,063.00 /af 7.6% Livermore January $2.44 /ccf 4.3% January $2.47 /ccf 1.2% Los Altos July $2,565.00 /af 9.4% January $2,565.00 /af — Oroville March $229,169 /yr 2.8% January $229,169 /yr — Palos Verdes (2) July $1,917.00 /af 12.2% January $2,063.00 /af 7.6% Redwood Valley January $69.24 /af — January $69.24 /af — South Bay Region (2) July $1,917.00 /af 12.2% January $2,063.00 /af 7.6% Stockton October $1,229,113 /mo 4.9% January $1,229,113 /mo — Westlake January $1,895.00 /af 9.5% January $2,058.00 /af 8.6% _______________________________________________________________________________ af = acre foot; ccf = hundred cubic feet; yr = fixed annual cost; mo = fixed monthly cost (1) untreated water (2) wholesaler price changes occur every six months We work with all local suppliers and agencies responsible for water supply to secure adequate, long-term supply for each system.
For additional information on our 2024 GRC, see “California Regulatory Activity”. Between GRC filings, Cal Water may file escalation rate increases, which allow Cal Water to recover cost increases, primarily from inflation and incremental investments, generally during the second and third years of the rate case cycle. However, escalation rate increases are district specific and subject to an earnings test.
Between GRCs, Cal Water may file escalation rate increases, which allow Cal Water to recover cost increases, primarily from inflation and incremental investments, generally during the second and third years of the rate case cycle. However, escalation rate increases are district specific and subject to an earnings test.
Customer demand for water generally is lower during the cooler and rainy winter months. Demand increases in the spring when warmer weather returns and the rains end, and customers use more water for outdoor purposes such as landscape irrigation. Warm temperatures during the generally dry summer months result in increased demand.
Demand increases in the spring when warmer weather returns and the rains end, and customers use more water for outdoor purposes such as landscape irrigation. Warm temperatures during the generally dry summer months result in increased demand. Water usage declines during the late fall as temperatures decrease and the rainy season begins.
Any increase in fleet operating costs 20 Table of Contents associated with meeting emission standards and/or requirements to phase-in the use of zero-emission vehicles would be expected to be included in our cost of service paid by our customers as requested in our GRC filings.
Any increase in fleet operating costs associated with meeting emission standards and/or requirements to phase-in the use of zero-emission vehicles would be expected to be included in our cost of service paid by our customers as requested in our GRC filings. While recovery of these costs is not guaranteed, we would expect recovery in the regulatory process.
At the end of the lease, the city is required to reimburse us for the 6 Table of Contents unamortized value of capital improvements made during the term of the lease. The City of Hawthorne capital lease is a 15-year lease and expires in 2026.
At the end of the lease, the city is required to reimburse us for the 6 Table of Content s unamortized value of capital improvements made during the term of the lease. The City of Hawthorne capital lease is a 15-year lease and expires in August of 2026. We do not expect to renew the lease upon expiration.
District Water Purchased (MG) Percentage of Total Water Production Source of Purchased Supply SAN FRANCISCO BAY AREA/NORTH COAST Bay Area Region* 6,361 98.5 % San Francisco Public Utilities Commission and Yolo County Flood Control & Water Conservation District Bear Gulch 3,739 100.0 % San Francisco Public Utilities Commission Los Altos 2,188 62.0 % Valley Water Livermore 1,896 68.7 % Alameda County Flood Control and Water Conservation District, Zone 7 SACRAMENTO VALLEY North Valley Region** 669 8.4 % Pacific Gas and Electric Co. and County of Butte SAN JOAQUIN VALLEY Bakersfield 10,047 53.3 % Kern County Water Agency and City of Bakersfield Stockton 5,938 79.2 % Stockton East Water District LOS ANGELES AREA East Los Angeles 477 11.1 % Central Basin Municipal Water District South Bay Region*** 10,192 78.3 % West Basin Municipal Water District and City of Torrance City of Commerce 81 13.5 % Central Basin Municipal Water District City of Hawthorne 1,087 87.0 % West Basin Municipal Water District Los Angeles County Region**** 4,706 96.9 % West Basin Municipal Water District and Antelope Valley-East Kern Water Agency Westlake 1,941 100.0 % Calleguas Municipal Water District and Triunfo Water and Sanitation District Kern River Valley 55 19.8 % City of Bakersfield _______________________________________________________________________________ MG = million gallons * Bay Area Region includes Bayshore and Redwood Valley ** North Valley Region includes Chico and Oroville *** South Bay Region includes Dominguez and Hermosa Redondo **** Los Angeles County Region includes Palos Verdes and Antelope Valley The Bear Gulch district obtains a portion of its water supply from surface runoff from the local watershed.
District Water Purchased (MG) Percentage of Total Water Production Source of Purchased Supply SAN FRANCISCO BAY AREA/NORTH COAST Bay Area Region* 6,163 98.2 % San Francisco Public Utilities Commission and Yolo County Flood Control & Water Conservation District Bear Gulch 3,389 100.0 % San Francisco Public Utilities Commission Los Altos 2,053 59.5 % Valley Water Livermore 1,760 64.8 % Alameda County Flood Control and Water Conservation District, Zone 7 SACRAMENTO VALLEY North Valley Region** 720 9.1 % Pacific Gas and Electric Co. and County of Butte SAN JOAQUIN VALLEY Bakersfield 9,764 50.5 % Kern County Water Agency and City of Bakersfield Stockton 5,789 81.2 % Stockton East Water District LOS ANGELES AREA East Los Angeles 574 13.2 % Central Basin Municipal Water District South Bay Region*** 10,093 79.1 % West Basin Municipal Water District and City of Torrance City of Commerce 116 19.2 % Central Basin Municipal Water District City of Hawthorne 934 70.3 % West Basin Municipal Water District Los Angeles County Region**** 4,827 97.1 % West Basin Municipal Water District and Antelope Valley-East Kern Water Agency Westlake 2,062 100.0 % Calleguas Municipal Water District and Triunfo Water and Sanitation District Kern River Valley 54 23.9 % City of Bakersfield _______________________________________________________________________________ MG = million gallons * Bay Area Region includes Bayshore and Redwood Valley ** North Valley Region includes Chico and Oroville *** South Bay Region includes Dominguez and Hermosa Redondo **** Los Angeles County Region includes Palos Verdes and Antelope Valley The Bear Gulch district obtains a portion of its water supply from surface runoff from the local watershed.
To management’s knowledge, no application to provide service to an area served by us has been made. 19 Table of Contents State law in California provides that whenever a public agency constructs facilities to extend a utility system into the service area of a privately owned public utility, such an act constitutes the taking of property and requires reimbursement to the utility for its loss.
State law in California provides that whenever a public agency constructs facilities to extend a utility system into the service area of a privately owned public utility, such an act constitutes the taking of property and requires reimbursement to the utility for its loss.
To the best of management’s knowledge, we are meeting water quality, environmental, and other regulatory standards for all Company-owned systems. Historically, approximately half of our annual water supply is pumped from wells. State groundwater management agencies operate differently in each state. Some of our wells extract ground water from water basins under state ordinances.
A small portion of supply comes from surface sources and is processed through Company-owned water treatment plants. To the best of management’s knowledge, we are meeting water quality, environmental, and other regulatory standards for all Company-owned systems. Historically, approximately half of our annual water supply is pumped from wells. State groundwater management agencies operate differently in each state.
Fees for non-regulated activities are based on contracts negotiated between the parties. Under our non-regulated contract arrangements, we operate municipally owned water systems and privately owned water and recycled water distribution systems, but are not responsible for all operating costs.
Fees for non-regulated activities are based on contracts negotiated between the parties. Under our non-regulated contract arrangements, we operate municipally owned water systems and privately owned water and recycled water distribution systems, but are not responsible for all operating costs. Non-regulated revenue received from non-leased water system operations is generally determined on a fee-per-customer basis.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAny of these transactions could involve numerous additional risks, including one or more of the following: • problems integrating the acquired operations, personnel, technologies, physical and cybersecurity processes, or products with our existing businesses and services; • cybersecurity risks associated with acquired systems and infrastructure; • liabilities inherited from the acquired companies’ prior business operations; • diversion of management time and attention from our core business to the acquired business; • failure to retain key technical, management, and other personnel of the acquired business; • difficulty in retaining relationships with suppliers and customers of the acquired business; and • difficulty in obtaining required regulatory approvals and operating in new regulatory jurisdictions.
Biggest changeAny of these transactions could involve numerous additional risks, including one or more of the following: • problems integrating the acquired operations, personnel, technologies, physical and cybersecurity processes, water quality, services, and systems with our existing businesses and services; • cybersecurity risks associated with acquired systems and infrastructure; • liabilities inherited from the acquired companies’ prior business operations, including liabilities that were unknown or undisclosed at the time of acquisition; • challenges to our climate change adaptation and mitigation activities; • diversion of management time and attention from our core business to the acquired business; • failure to retain key technical, management, and other personnel of the acquired business; • risks associated with entering markets in which we have no or limited direct prior experience; • unanticipated capital expenditures or acquisition-related expenses; • failure to maintain effective internal control over financial reporting; • difficulty in retaining relationships with suppliers and customers of the acquired business; and • difficulty in obtaining required regulatory approvals and operating in new regulatory jurisdictions.
Additionally, whenever a public agency constructs facilities to extend its utility system into the service area of a privately owned public utility, such an act may constitute the taking of property and require reimbursement to the public utility for its loss.
Additionally, whenever a public agency constructs facilities to extend its utility system into the service area of a privately owned public utility, such an act may constitute the taking of property and require reimbursement to the privately owned public utility for its loss.
We make certain estimates and judgments in preparing our financial statements regarding, among others: • the useful life of intangible rights; • the number of years to depreciate certain assets; • amounts to set aside for uncollectible accounts receivable, inventory obsolescence, and uninsured losses; • our legal exposure and the appropriate accrual for claims, including medical claims and workers’ compensation claims; • future costs and assumptions for pensions and other postretirement benefits; • regulatory recovery of regulatory assets; • possible tax uncertainties; and • projected collections of MWRAM and ICBA receivables.
We make certain estimates and judgments in preparing our financial statements regarding, among others: • the useful life of intangible rights; • the number of years to depreciate certain assets; • amounts to set aside for uncollectible accounts receivable, inventory obsolescence, and uninsured losses; • our legal exposure and the appropriate accrual for claims, including medical claims and workers’ compensation claims; • future costs and assumptions for pensions and other postretirement benefits; • recovery of regulatory assets; • possible tax uncertainties; and • projected collections of MWRAM and ICBA receivables.
In the event that any of our significant customers or suppliers, or a significant number of smaller customers and suppliers, are adversely affected by these risks, we may face disruptions in supply, significant reductions in demand for our products and services, inability of customers to pay invoices when due, and other adverse effects that could negatively affect our financial condition, results of operations and/or cash flows.
In the event that any of our significant customers or suppliers, or a significant number of smaller customers and suppliers, are adversely affected by these risks, we may face disruptions in supply, significant reductions in demand for our services, inability of customers to pay invoices when due, and other adverse effects that could negatively affect our financial condition, results of operations and/or cash flows.
Wholesale water suppliers may increase their prices for water delivered to us based on factors that affect their operating costs. Purchased water rate increases are beyond our control. In California, our ability to recover increases in the cost of purchased water changed with the adoption of the ICBA, which was approved as part of the 2021 GRC.
Wholesale water suppliers may increase their prices for water delivered to us based on factors that affect their operating costs. Purchased water rate increases are beyond our control. In California, our ability to recover increases in the cost of purchased water changed with the adoption of the ICBA, which was approved as part of the 2021 CA GRC.
Many of our customers and suppliers also have exposure to risks that could affect their ability to meet payment and supply commitments. We operate in geographic areas that may be particularly susceptible to declines in the price of real property, which could result in significant declines in demand for our products and services.
Many of our customers and suppliers also have exposure to risks that could affect their ability to meet payment and supply commitments. We operate in geographic areas that may be particularly susceptible to declines in the price of real property, which could result in significant declines in demand for our services.
We are unable to predict the extent to which the current U.S. federal administration may impose or seek to impose leadership or policy changes at the U.S. federal regulatory agencies responsible for regulating our business, including changes or proposed changes at the EPA or SEC, or changes or proposed changes to rules and policies impacting our operations.
We are unable to predict the extent to which the current U.S. federal administration may continue to impose or seek to impose leadership or policy changes at the U.S. federal regulatory agencies responsible for regulating our business, including changes or proposed changes at the EPA or SEC, or changes or proposed changes to rules and policies impacting our operations.
Municipalities, water districts, and other public agencies may condemn our property by eminent domain action. State statutes allow municipalities, water districts and other public agencies to own and operate water systems. These agencies are empowered to condemn water systems or real property owned by privately owned public utilities in certain circumstances and in compliance with California and federal law.
Municipalities, water districts, and other public agencies may condemn our property by eminent domain action. State statutes allow municipalities, water districts and other public agencies to own and operate water systems. These agencies are empowered to condemn water systems or real property owned by privately owned public utilities in certain circumstances and in compliance with state and federal law.
If we are unable to substitute water supply from an uncontaminated water source, or if we are unable to adequately treat the contaminated water source in a cost-effective manner, there may be an adverse effect on our revenues, operating results, and financial condition.
If we are unable to substitute water supply from an uncontaminated water source, or if we are unable to adequately treat the contaminated water source in a cost-effective manner, there may be an adverse effect on our revenues, operating results, financial condition, and reputation.
New and/or more stringent water quality regulations could increase our operating costs. We are subject to water quality standards set by federal, state, and local authorities that have the power to issue new regulations.
New and/or more stringent water quality regulations could increase our operating costs. We are subject to water quality standards set by federal and state authorities that have the power to issue new regulations.
The effects of natural disasters, attacks by third parties, or poor water quality or contamination to our water supply or wastewater services may result in disruption in our services and litigation, which could adversely affect our business, operating results and financial condition. We operate in areas that are prone to earthquakes, urban fires, wildfires, landslides, mudslides, and other natural disasters.
The effects of natural disasters, attacks by third parties, or poor water quality or contamination to our water supply or wastewater services may result in disruption in our services and litigation, which could adversely affect our business, operating results, financial condition, and reputation. We operate in areas that are prone to earthquakes, urban fires, wildfires, landslides, and other natural disasters.
For example, in 2024, the California Governor proclaimed the Rancho Palos Verdes landslide a state of emergency following an increase in ground movement due to significant rainfall over the past two years, and the Federal Emergency Management Agency and the California Governor’s Office of Emergency Services instituted a voluntary property buyout program for impacted homeowners.
For example, in 2024, the California Governor proclaimed the Rancho Palos Verdes landslide a state of emergency following an increase in ground movement due to significant rainfall over the prior two years, and the Federal Emergency Management Agency and the California Governor’s Office of Emergency Services instituted a voluntary property buyout program for impacted homeowners.
Whether we have an adequate supply varies depending upon a variety of factors, many of which are partially or completely beyond our control, including: • the amount of rainfall; • the amount of water stored in reservoirs; 28 Table of Contents • underground water supply from which well water is pumped; • availability from water wholesalers; • changes in the amount of water used by our customers; • water quality and availability of appropriate treatment technology; • legal limitations on water use such as rationing restrictions during a drought; • changes in prevailing weather patterns and climate; and • population growth.
Whether we have an adequate supply varies depending upon a variety of factors, many of which are partially or completely beyond our control, including: • the amount of rainfall; • the amount of water stored in reservoirs; • underground water supply from which well water is pumped; • availability from water wholesalers; • changes in the amount of water used by our customers; • water quality and availability of appropriate treatment technology; • legal limitations on water use such as rationing restrictions during a drought; • changes in prevailing weather patterns and climate; and • population growth.
Our water supplies are subject to contamination, including contamination from the development of naturally-occurring compounds, chemicals in groundwater systems, pollution resulting from fabricated sources, such as 1,2,3-Trichloropropane (TCP) and PFAS, seawater intrusion, and possible third-party attacks, including physical attacks, terrorist attacks, and cyber-attacks.
Our water supplies are subject to contamination, including contamination from the development of naturally-occurring compounds, chemicals in groundwater systems, pollution resulting from fabricated sources, such as 1,2,3-Trichloropropane and PFAS, seawater intrusion, and possible terrorist and other third-party attacks, including physical attacks, and cyber-attacks.
Demand for our water is subject to various factors and is affected by seasonal fluctuations. Demand for our water during the warmer, dry months is generally greater than during cooler or rainy months due primarily to additional requirements for water in connection with irrigation systems, swimming pools, cooling systems, and other outside water use.
Demand for our water is subject to various factors and is affected by seasonal fluctuations and conservation efforts. Demand for our water during the warmer, dry months is generally greater than during cooler or rainy months due primarily to additional requirements for water in connection with irrigation systems, swimming pools, cooling systems, and other outside water use.
Accounting rules permit us to use expense balancing accounts and memorandum accounts that include cost changes to us that are different from amounts incorporated into the rates approved by the Commissions. These accounts result in expenses and revenues being recognized in periods other than in which they occurred.
Accounting rules permit us to use Commission authorized expense balancing accounts and memorandum accounts that include cost changes to us that are different from amounts incorporated into the rates approved by the Commissions. These accounts result in expenses and revenues being recognized in periods other than in which they occurred.
Standard & Poor’s Rating Agency issues a rating on Cal Water’s ability to repay certain debt obligations. The credit rating agency could downgrade our credit rating based on reviews of our financial performance and projections or upon the occurrence of other events that could affect our business outlook.
Standard & Poor’s Rating Agency issues a rating on the Company and Cal Water’s ability to repay certain debt obligations. The credit rating agency could downgrade our credit ratings based on reviews of our financial performance and projections or upon the occurrence of other events that could affect our business outlook.
To successfully manage our growth and handle the responsibilities of being a public company, we must effectively: • hire, train, integrate, and manage additional qualified engineers for engineering design and construction activities, new business personnel, and financial and information technology personnel; • retain key management, augment our management team, and retain qualified and certified water and wastewater system operators; • implement and improve additional and existing administrative, financial and operations systems, procedures and controls; • expand our technological capabilities; and • manage multiple relationships with our customers, regulators, suppliers, and other third parties.
To successfully manage our growth and handle the responsibilities of being a public company, we must effectively: • hire, train, integrate, and manage additional qualified engineers for engineering design and construction activities, new business personnel, and financial and information technology personnel; • retain key management, augment our management team, and retain qualified and certified water and wastewater system operators; • implement and improve additional and existing administrative, financial and operations systems, procedures and controls; 33 Table of Content s • expand our technological capabilities; and • manage multiple relationships with our customers, regulators, suppliers, and other third parties.
As a result, this doctrine, which is known as inverse condemnation and is routinely invoked in California, imposes strict liability for damages, including legal fees, because of the design, construction, maintenance and operation of utility facilities.
This doctrine, which is known as inverse condemnation and is routinely invoked in California, imposes strict liability for damages, including legal fees, because of the design, construction, maintenance and operation of utility facilities.
In addition, the lack of redundancy for certain of our IT systems, including billing systems, could exacerbate the impact of any of these events on us, all of which could have a negative impact on our business, results of operations, and cash flows.
In addition, the lack of redundancy for certain of our IT systems could exacerbate the impact of any of these events on us, all of which could have a negative impact on our business, results of operations, and cash flows.
There are multiple sources for these chemicals but an extended interruption of supply could adversely affect our ability to adequately treat our water. Purchased power is a significant operating expense. During 2024 and 2023, purchased power expense represented 5.9% and 6.4%, respectively, of our total operating costs. These costs are beyond our control and can change unpredictably and substantially.
There are multiple sources for these chemicals but an extended interruption of supply could adversely affect our ability to adequately treat our water. Purchased power is a significant operating expense. During 2025 and 2024, purchased power expense represented 5.4% and 5.9%, respectively, of our total operating costs. These costs are beyond our control and can change unpredictably and substantially.
We can give no assurance that any of our plans for water reliability and water shortages, including incorporating projected and potential climate 29 Table of Contents change risks into our water supply planning activities, will be adequate or capable of effectively addressing any droughts or longer periods of drought conditions or other conditions affecting water quality and availability.
We can give no assurance that any of our plans for water reliability and water shortages, including incorporating projected and potential climate change risks into our water supply planning activities, will be adequate or capable of effectively addressing any droughts or longer periods of drought conditions or other conditions affecting water quality and availability.
In Hawaii, we serve a number of large resorts, which if their water usage was reduced or ceased could have a material impact to our Hawaii operation. The delay between such date and the effective date of the rate relief may be significant and could adversely affect our operating results and cash flows.
In Hawaii, we serve a number of large resorts, which if their water usage was reduced or ceased could have a material impact to our Hawaii operations. The delay between such date and the effective date of the rate relief, if any, may be significant and could adversely affect our operating results and cash flows.
Therefore, transfer of funds from our subsidiaries to us for the payment of our obligations or dividends may have an adverse effect on ratemaking determinations. Furthermore, our right to receive cash or other assets upon the liquidation or reorganization of a subsidiary is generally subject 32 Table of Contents to the prior claims of creditors of that subsidiary.
Therefore, transfer of funds from our subsidiaries to us for the payment of our obligations or dividends may have an adverse effect on ratemaking determinations. Furthermore, our right to receive cash or other assets upon the liquidation or reorganization of a subsidiary is generally subject to the prior claims of creditors of that subsidiary.
We can give no assurance that issues with our labor forces will be resolved favorably to us in the future or that we will not experience work stoppages. 34 Table of Contents Our operations are geographically concentrated in California and this lack of diversification may negatively affect our operating results.
We can give no assurance that issues with our labor forces will be resolved favorably to us in the future or that we will not experience work stoppages. Our operations are geographically concentrated in California and this lack of diversification may negatively affect our operating results.
Some of our mission and business critical systems are older and the steps we have taken to protect our systems may be insufficient to protect them from damage or interruption from: • power loss, computer systems failures, including hardware equipment and software applications, and internet, telecommunications or data network failures; • operator negligence or improper operation by, or supervision of, employees; • physical and electronic loss of customer data due to security breaches, cyber-attacks, misappropriation, acts of violence, war or terrorism, and similar events; • computer viruses; • intentional security breaches, hacking, denial of services actions, misappropriation of data, and similar events, including intentional cybersecurity breaches aimed at disrupting and interfering with water treatment processes; and • earthquakes, floods, fires, mudslides, and other natural disasters or physical attacks.
Some of our mission and business critical systems are older and the steps we have taken to protect our systems may be insufficient to protect them from damage or interruption from: • power loss, hardware equipment and software application failures, and internet or telecommunications outages; • operator negligence or improper operation by, or supervision of, employees; • physical and electronic loss of customer data due to security breaches, cyber-attacks, misappropriation, acts of violence, war or terrorism, or similar events; • computer viruses; • intentional security breaches, hacking, denial of services actions, misappropriation of data, or similar events, including cybersecurity breaches aimed at disrupting and interfering with water treatment processes; and • earthquakes, floods, fires, landslides, and other natural disasters or physical attacks.
We believe these contaminants may form the basis for additional or increased federal or state regulatory initiatives and requirements in the future, which could significantly increase the cost of our operations. 25 Table of Contents For example, in April of 2024, the EPA finalized MCLs, for six PFAS in drinking water.
We believe these contaminants may form the basis for additional or increased federal or state regulatory initiatives and requirements in the future, which could significantly increase the cost of our operations. For example, in April of 2024, the EPA finalized MCLs for six PFAS in drinking water.
Wastewater collection and treatment involve many risks associated with damage to the environment, and we anticipate that wastewater collection and treatment will become an increasing significant part of our business.
Wastewater collection and treatment involve many risks associated with damage to the environment, and we anticipate that wastewater collection and treatment will become an increasingly significant part of our business.
Our operating cost and costs of providing services may rise faster than our revenues.
Our operating costs and costs of providing services may rise faster than our revenues.
Acquisition and investment transactions may result in the issuance of our equity securities that could be dilutive if the acquisition or business opportunity does not develop in accordance with our business plan. They may also result in significant write-offs and an increase in our debt.
Acquisition and investment transactions may result in the issuance of our equity securities that could be dilutive if the acquisition or business opportunity does not develop in accordance with our business plan. They may also result in significant write-offs, a decrease in liquidity and an increase in our debt.
A significant seismic event, urban or wildfire outbreak, or other natural disaster in California where our operations are concentrated could adversely affect our ability to deliver water and adversely affect our costs of operations. A major disaster 26 Table of Contents could damage or destroy substantial capital assets.
A significant seismic event, urban or wildfire outbreak, or other natural disaster in California where our operations are concentrated could adversely affect our ability to deliver water and adversely affect our costs of operations. A major disaster could damage or destroy substantial capital assets.
Our Board can elect at any time, and for an indefinite duration, not to declare dividends on our capital stock. An important element of our growth strategy is the acquisition of water and wastewater systems. Risks associated with potential acquisitions, divestitures or restructurings may adversely affect us.
Our Board can elect at any time, and for an indefinite duration, not to declare dividends on our capital stock. 32 Table of Content s An important element of our growth strategy is the acquisition of water and wastewater systems. Risks associated with potential acquisitions, divestitures or restructurings may adversely affect us.
If the Commissions disagree with our characterization, there is a risk that the Commissions could determine that realized appreciation in property value should be awarded to customers rather than our stockholders. Changes in laws, rules, and policies of our regulators or operating jurisdictions can significantly affect our business.
If the Commissions disagree with our characterization, there is a risk that the Commissions could determine that realized appreciation in property value should be awarded to customers rather than our stockholders. 23 Table of Content s Changes in laws, rules, and policies of our regulators or operating jurisdictions can significantly affect our business.
If rights are granted to others to serve our customers recycled water, there will likely be a decrease in demand for our water. 30 Table of Contents Finally, changes in prevailing weather patterns due to climate change may affect customer demand. If increased ambient temperatures affect our service areas, water used for irrigation and cooling may increase.
If rights are granted to others to serve our customers recycled water, there will likely be a decrease in demand for our water. Finally, changes in prevailing weather patterns due to climate change may affect customer demand. If increased ambient temperatures affect our service areas, water used for irrigation and cooling may increase.
Some failures of underground pipelines could release disinfection chemicals into the environment, which have a negative impact on sensitive habitats. 27 Table of Contents Any of these failures, whether or not we are responsible, could result in public or employee harm or adversely affect our revenues, operating results, financial condition and reputation.
Certain failures of underground pipelines could release disinfection chemicals into the environment, which have a negative impact on sensitive habitats. Any of these failures, whether or not we are responsible, could result in public or employee harm or adversely affect our revenues, operating results, financial condition and reputation.
The rates that we charge our water customers are subject to the jurisdiction of 23 Table of Contents the regulatory Commissions in the states in which we operate. These Commissions may set water and water-related rates for each operating district independently because the systems are not interconnected.
The rates that we charge our water and wastewater customers are subject to the jurisdiction of the regulatory Commissions in the states in which we operate. These Commissions may set water and water-related rates for each operating district independently because the systems are not interconnected.
We estimate a capital investment of approximately $226.0 million will be required to comply with the regulation, but this amount could be higher or lower depending on factors out of our control such as unforeseen supply issues that may arise as public water systems across the country compete to procure necessary treatment supplies.
We estimate a capital investment of approximately $269.1 million will be required to comply with the currently effective regulation, but this amount could be higher or lower depending on factors out of our control such as unforeseen supply issues that may arise as public water systems across the country compete to procure necessary treatment supplies.
We are subject to a risk of work stoppages and other labor relations matters as we negotiate with the unions to address these issues, which could affect our results of operations and financial condition.
We are subject to a risk of work stoppages and other labor relations matters as we negotiate with the 34 Table of Content s unions to address these issues, which could affect our results of operations and financial condition.
In addition, statements about our sustainability goals, targets, and other objectives, and progress against those goals, targets, and other objectives, are or may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve, and assumptions that are subject to change in the future.
In addition, statements about our sustainability goals, targets, and other objectives, and progress against those goals, targets, and other objectives, are or may be based on standards for measuring progress that are still developing, internal controls and processes 36 Table of Content s that continue to evolve, and assumptions that are subject to change in the future.
Certain districts obtain all of their supply from wells; some districts purchase all of their supply from wholesale suppliers; and other districts obtain their supply from a combination of wells and wholesale suppliers. A small portion of supply comes from surface sources and is processed through Company-owned water treatment plants.
Certain operating subsidiaries and districts obtain all of their supply from wells; some purchase all of their supply from wholesale suppliers; and others obtain their supply from a combination of wells and wholesale suppliers. A small portion of supply comes from surface sources and is processed through Company-owned water treatment plants.
Because scientific investigations have been focused globally, there is tremendous uncertainty over the timing, extent, and types of impacts global climate change may have on our service areas and in our water supplies. Moreover, studies of tree ring data show long periods of drought conditions have occurred prior to significant human impacts in California and prior to our operation.
There is tremendous uncertainty over the timing, extent, and types of impacts global climate change may have on our service areas and in our water supplies. Moreover, studies of tree ring data show long periods of drought conditions have occurred prior to significant human impacts in California and prior to our operation.
Any failure, or perceived failure, to achieve ESG goals and initiatives, as well as to manage ESG risks, adhere to public statements, comply with federal or state ESG laws and regulations or meet evolving and varied stakeholder expectations and standards could result in legal and regulatory proceedings against us and materially adversely affect our business, reputation, results of operations, financial condition, and stock price.
Any failure, or perceived failure, to manage sustainability risks, adhere to public statements, comply with federal or state sustainability laws and regulations or meet evolving and varied stakeholder expectations and standards could result in legal and regulatory proceedings against us and materially adversely affect our business, reputation, results of operations, financial condition, and stock price.
Regulatory agencies may change their rules and policies for various reasons, including changes in the local political environment.
Regulatory agencies have in the past and may in the future change their rules and policies for various reasons, including changes in the local political environment.
We rely on our information technology (IT), operational technology (OT), and a number of complex business systems to assist with the management of our business and customer and supplier relationships, and a disruption of these systems, including from cyber-attacks, could adversely affect our business.
We rely on our information technology (IT), operational technology (OT), and a number of complex business systems to assist with the management of critical business functions and a disruption of these systems, including from cyber-attacks, could adversely affect our business.
In the event that some outside factor such as a wildfire, flood, landslide, changed climate pattern, actual or threatened public health emergency, or change in the local economy reduces or eliminates our customer base in a service area, or negatively affects the ability of a customer to pay, we could face unrecoverable costs.
In the event that some outside factor, such as a wildfire, flood, landslide, extreme heat, storms, or changing climate patterns, actual or threatened public health emergency, or change in the local economy reduces or eliminates our customer base in a service area, or negatively affects the ability of a customer to pay, we could face unrecoverable costs.
We have been and may in the future be party to environmental and service-related lawsuits, which could result in us paying damages not covered by insurance. We have been and may be in the future, party to water contamination lawsuits, which may not be fully covered by insurance.
We have been and may in the future be party to environmental and service-related lawsuits, which could result in us paying damages not covered by insurance. We have been and may be in the future, party to water contamination lawsuits, which may not be fully covered by insurance. Environmental and service-related lawsuits have frequently been filed against other water utilities.
In 2024, 92.3% of our total consolidated operating revenue was derived from the operations of Cal Water. As a result, we are dependent on cash flow from our subsidiaries, and Cal Water in particular, to meet our obligations and to pay dividends on our common stock.
In 2025, 91.2% of our total consolidated operating revenue was derived from the operations of Cal Water. As a result, we are dependent on cash flow from our subsidiaries, and Cal Water in particular, to meet our obligations and to pay dividends on our common stock.
Although we own facilities in a number of states, 92.3% of our total consolidated operating revenue was generated by our operations located in California in 2024. As a result, we are largely subject to political, regulatory, economic, water supply, weather, labor, and energy cost risks affecting California. We are also affected by the real property market in California.
Although we own facilities in a number of states, 91.2% of our total consolidated operating revenue was generated by our operations located in California in 2025. As a result, we are largely subject to political, regulatory, economic, water supply, climate, labor, and energy cost risks affecting California. We are also affected by the real property market in California.
Our billed revenues and cash flows from operations will decrease if a significant business or industrial customer terminates or materially reduces its use of our water. Approximately $210.4 million, or 23.2%, of our 2024 water utility revenues was derived from business and industrial customers.
Our billed revenues and cash flows from operations will decrease if a significant business or industrial customer terminates or materially reduces its use of our water. Approximately $223.6 million, or 23.2%, of our 2025 water utility revenues was derived from business and industrial customers.
Legislation and regulation regarding greenhouse gas emissions may also impose new costs on our business. For example, in October 2023, California enacted legislation addressing the disclosure of greenhouse gas emissions, climate-related risks, environmental claims, and the use or sale of voluntary carbon offsets.
Legislation and regulation regarding greenhouse gas emissions may also impose new costs on our business. For example, in October 2023, California enacted legislation addressing the disclosure of greenhouse gas emissions, climate-related risks, environmental claims, and the use or sale of voluntary carbon offsets, although certain of these law are being challenged in litigation.
We rely on our IT and OT networks and applications to bill customers, process orders, provide customer service, manage construction projects, manage our financial records, track assets, remotely monitor certain of our plants and facilities and manage human resources, inventory and accounts receivable collections.
We rely on our IT and OT networks and applications to bill customers, process orders, provide customer service, manage construction projects, manage our financial records, track assets, monitor treatment facilities, support human resources, and manage inventory and accounts receivable.
At December 31, 2024, 771 of our 1,278 total employees were union employees. Most of our unionized employees are represented by the UWUA, AFL-CIO, except certain engineering and laboratory employees who are represented by the IFPTE, AFL-CIO.
At December 31, 2025, 805 of our 1,336 total employees were union employees. Most of our unionized employees are represented by the UWUA, AFL-CIO, except certain engineering and laboratory employees who are represented by the IFPTE, AFL-CIO.
The cost of purchased water for delivery to customers represented 29.7% and 31.2% of our total operating costs in 2024 and 2023, respectively. Water purchased from suppliers will require renewal of our contracts upon expiration and may result in significant price increases under any such renewed contracts.
The cost of purchased water for delivery to customers represented 30 Table of Content s 30.5% and 29.7% of our total operating costs in 2025 and 2024, respectively. Water purchased from suppliers will require renewal of our contracts upon expiration and may result in significant price increases under any such renewed contracts.
These events may result in physical and/or electronic loss of customer or financial data; security breaches; misappropriation; disruption of service to our customers; loss of revenues, response costs, and other financial loss; loss of management time, attention, and resources from our regular business operations; damage to our reputation; and other adverse consequences, including liability or regulatory penalties under data privacy laws and regulations.
These events may result in physical and/or electronic loss or compromise of customer, employee, operational, or financial data; security breaches; misappropriation; disruption of service to our customers; loss of revenues, response costs, and other 27 Table of Content s financial loss; disruption of electronic monitoring and control of operational systems, disruption in normal system operations, loss of management time, attention, and resources from our regular business operations; damage to our reputation; and other adverse consequences, including liability or regulatory penalties under data privacy laws and regulations.
Any theft, loss or fraudulent use of customer, employee, vendor, or proprietary data as a result of a cyber-attack on us or a vendor could also subject us to significant litigation, liability, and costs, as well as adversely impact our reputation with customers and regulators, among others.
Any theft, loss or fraudulent use of customer, employee, vendor, or proprietary data as a result of a cyber-attack on us or a vendor could also subject us to significant litigation, liability, and costs, as well as adversely impact our reputation with customers and regulators, among others. These risks may escalate during periods of heightened geopolitical tension or conflict.
There is strong scientific consensus that human activity including carbon and methane emissions is impacting many planetary systems such as the heat-trapping capacity of the atmosphere; ocean temperature, circulation, acidity, and volume; weather patterns including the severity and frequency of severe weather events; ambient temperatures; and planetary ice cover.
There is strong scientific consensus that human activity generates greenhouse gas emissions, which can impact planetary systems, such as the heat-trapping capacity of the atmosphere; ocean temperature, circulation, acidity, and volume; weather patterns including the severity and frequency of severe weather events; ambient temperatures; and planetary ice cover.
Retained risks are associated with deductible limits, partial self-insurance programs, and insurance policy coverage ceilings. If we suffer an uninsured loss, we may be unable to pass all or any portion of the loss on to customers, because our rates are regulated by Commissions.
Retained risks are associated with deductible limits, partial self-insurance programs, and insurance policy coverage ceilings. If we suffer an uninsured loss, we may be unable to pass all or a portion of the loss on to customers, because our rates are regulated by Commissions. Consequently, uninsured losses may negatively affect our financial condition, liquidity, and results of operations.
Our commitments and stakeholder expectations relating to environmental, social, and governance (ESG) considerations may expose us to liabilities, increased costs, reputational harm, and other adverse effects on our business. We have announced, and may from time to time announce, certain initiatives, including goals, targets, and other objectives, related to ESG matters.
Stakeholder expectations and evolving legal and regulatory requirements relating to sustainability considerations may expose us to liabilities, increased costs, reputational harm, and other adverse effects on our business. We have announced, and may from time to time announce, certain initiatives, including goals, targets, and other objectives, related to sustainability matters.
We also may occasionally use letters of credit issued under our revolving credit facilities. Disruptions in the capital and credit markets could adversely affect our ability to draw on our credit facilities. Our access to funds under our credit facilities is dependent on the ability of our banks to meet their funding commitments.
Disruptions in the capital and credit markets could adversely affect our ability to draw on our credit facilities. Our access to funds under our credit facilities is dependent on the ability of our banks to meet their funding commitments.
In addition, the businesses and other assets we acquire may not achieve the sales and profitability expected. The occurrence of one or more of these events may have a material adverse effect on our business. There can be no assurance that we will be successful in overcoming these or any other significant risks encountered.
The occurrence of one or more of these events may have a material adverse effect on our business. There can be no assurance that we will be successful in overcoming these or any other significant risks encountered.
Maintenance of these facilities is beyond our control. If these facilities are not adequately maintained or if these parties otherwise default on their obligations to supply water to us, we may not have adequate water supplies to meet our customers’ needs.
The parties from whom we purchase water maintain significant infrastructure and systems to deliver water to us. Maintenance of these facilities is beyond our control. If these facilities are not adequately maintained or if these parties otherwise default on their obligations to supply water to us, we may not have adequate water supplies to meet our customers’ needs.
For example, private plaintiffs have the right to bring personal injury or other toxic tort claims arising from the presence of hazardous substances in our drinking water supplies. Our insurance policies may not be sufficient to cover the costs of these claims.
For example, private plaintiffs have the right to bring personal injury or other toxic tort claims arising from the presence of hazardous substances in our drinking water supplies.
In addition, the recent change in U.S. federal administration has led and is expected to continue to lead to changes in the leadership of various U.S. federal regulatory agencies and changes or proposed or threatened changes to U.S. federal government policy that have led to, in some cases, legal challenges as well as uncertainty around the funding, functioning and policy priorities of U.S. federal regulatory agencies and the status of current and future regulations.
In addition, the current U.S. federal administration has effected and is expected to continue to seek to effect, propose, or threaten changes in the leadership of various U.S. federal regulatory agencies and to U.S. federal government policy, which has led to, in some cases, legal challenges as well as uncertainty around the funding, functioning and policy priorities of U.S. federal regulatory agencies and the status of current and future regulations.
The number of environmental and service-related lawsuits against other water utilities has increased in frequency in recent years. If we are subject to additional environmental or service-related lawsuits, we might incur significant legal costs and it is uncertain whether we would be able to recover the legal costs from customers or other third parties.
If we are subject to additional environmental or service-related lawsuits, we could incur significant legal costs, and it is uncertain whether we would be able to recover the legal costs from customers or other third parties.
We may also be similarly impacted by stagnating or worsening business and economic conditions, including general economic slowdown or a recession, tariffs on U.S. imports, such as those recently implemented on steel and aluminum, higher interest rates for a prolonged period of time, instability of certain financial institutions, changes in monetary policy, adverse capital markets activity or macroeconomic conditions as a result of geopolitical conflicts, and the prospect of a shutdown of the U.S. federal government.
We may also be similarly impacted by stagnating or worsening business and economic conditions, including general economic slowdown or a recession, changes in or uncertainty regarding tariff policy, including tariffs on U.S. imports recently implemented on steel and aluminum, the interest rate environment, changes in monetary policy, adverse capital markets activity or macroeconomic conditions as a result of geopolitical conflicts, and actions or changes effected, proposed or threatened by, or a shutdown of, the U.S. federal government.
Since 2008, the CPUC allowed full decoupling WRAMs. However, in 2020, the CPUC precluded companies from proposing full decoupling WRAMs in their next GRC filings.
Since 2008, the CPUC allowed full decoupling WRAMs. However, in 2020, the CPUC precluded companies from proposing full decoupling WRAMs in their next GRC filings. As a result, we were precluded from requesting a full decoupling WRAM in the 2021 CA GRC.
For example, wildfires in our service areas may have significant impacts on water supply and water system reliability. In addition, our infrastructure faces risks from landslides in our service areas, which can lead to leaks in water mains, impact our ability to deliver water and result in litigation.
In addition, our infrastructure faces risks from landslides in our service areas, which can lead to leaks in water mains, impact our ability to deliver water and result in litigation.
Methodologies for reporting this data have been and may from time to time be updated and previously reported data has been or may be adjusted, as applicable, to reflect improvement in availability and quality of third-party data, changing assumptions, changes in the nature and scope of our operations, and other changes in circumstances, which could result in significant revisions to our current goals, reported progress in achieving such goals, or ability to achieve such goals in the future.
Methodologies for reporting this data have been and may from time to time be updated and previously reported data has been or may be adjusted, which could result in significant revisions to our current goals, reported progress in achieving such goals, or ability to achieve such goals in the future.
If changes in existing laws or the implementation of new laws limit our ability to accomplish some of our business objectives, or make accomplishing such objectives more expensive, our future operating results may be adversely affected. Finally, local jurisdictions may impose new ordinances, laws, fees, and regulations that could increase costs or limit our operations, which affect future operating results.
If changes in existing laws or the implementation of new laws limit our ability to accomplish some of our business objectives, or make accomplishing such objectives more expensive, our future operating results may be adversely affected.
Legislation and regulation designed to mitigate or adapt to climate change may affect our operations. Future legislation or regulation regarding climate change may restrict our operations or impose new costs on our business. Our operations depend on power provided by other public utilities and, in emergencies, power generated by our portable and fixed generators.
Future legislation or regulation regarding climate change may restrict our operations or impose new costs on our business. Our operations depend on power provided by other public utilities and, in emergencies, power generated by our portable and fixed generators. If future legislation or regulations limit emissions from the power generation process, our cost of power may increase.
Our enterprise risk management processes may not be effective in identifying and mitigating the risks to which we are subject, or in reducing the potential for losses in connection with such risks. Our enterprise risk management processes are designed to minimize or mitigate the risks to which we are subject, as well as any losses stemming from such risks.
Our enterprise risk management processes are designed to minimize or mitigate the risks to which we are subject, as well as any losses stemming from such risks.
We can give no assurance that we will succeed in finding attractive acquisition candidates or investments, or that we would be able to reach mutually agreeable terms with such parties.
The execution of our growth strategy exposes us to different risks than those associated with our utility operations. We can give no assurance that we will succeed in finding attractive acquisition candidates or investments, or that we would be able to reach mutually agreeable terms with such parties.
We can give no assurance that the SFPUC, or any of the other parties from whom we purchase water, will renew our contracts upon expiration, or that we will not be subject to significant price increases under any such renewed contracts. The parties from whom we purchase water maintain significant infrastructure and systems to deliver water to us.
For example, we have entered into a water supply contract with the SFPUC that expires on June 30, 2034. We can give no assurance that the SFPUC, or any of the other parties from whom we purchase water, will renew our contracts upon expiration, or that we will not be subject to significant price increases under any such renewed contracts.
The loss of the services of any member of our management team could have an adverse effect on our business as our management team has knowledge of our industry and customers and would be difficult to replace. We retain certain risks not covered by our insurance policies.
The loss of the services of any member of our management team could have an adverse effect on our business as our management team has knowledge of our industry and customers and would be difficult to replace as there is significant competition for such personnel in our industry.
We have and will continue to bear increased costs for security precautions to protect our facilities, operations, and supplies. These costs may be significant. Despite these improved security measures, we may not be able to prevent or deter third-party attacks or be in a position to control the outcome of third-party attacks should they occur.
Despite these improved security measures, we may not be able to prevent or deter third-party attacks or be in a position to control the outcome of third-party attacks should they occur. We depend upon our skilled and trained workforce for water delivery.
Additional factors that could cause fluctuations in the trading price of our stock include regulatory developments, such as the delay in the CPUC’s final decision regarding the 2021 GRC, general economic conditions and trends, including inflationary pressures, general economic slowdown or a recession, changes in monetary policy, adverse capital markets activity or macroeconomic conditions as a result of geopolitical conflicts, and the prospect of a shutdown of the U.S. federal government; 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.
Additional factors that could cause fluctuations in the trading price of our stock include regulatory developments, such as the delay in the CPUC’s final decision regarding the 2024 CA GRC, general economic conditions and trends, including those discussed under “Our business and financial performance may be adversely affected by high inflation and other macroeconomic conditions”; 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 have entered into long-term water supply agreements, which commit us to making certain minimum payments whether or not we purchase any water. Therefore, if demand were insufficient to use our required purchases we would have to pay for water we did not receive.
We have entered into long-term water supply agreements, which commit us to making certain minimum payments whether or not we purchase any water.
However, if interest rates were to increase on a long-term basis, our management believes that customer rates would increase accordingly, subject to approval by the appropriate Commission. We can give no assurance that the Commission would approve such an increase in customer rates. We are obligated to comply with specified debt covenants under certain of our loan and debt agreements.
We can give no assurance that the Commission would approve such an increase in customer rates. 31 Table of Content s We are obligated to comply with specified debt covenants under certain of our loan and debt agreements.
Under the PFAS regulation, water utilities across the country are required to complete initial PFAS monitoring by 2027 and to implement treatment for sources exceeding the MCL by 2029.
Under the PFAS regulation, water utilities across the country are required to complete initial PFAS monitoring by 2027 and to implement treatment for sources exceeding the MCL by 2029. In May of 2025, the EPA announced its intention to rescind the regulations for four of the PFAS compounds, and to extend the compliance date to 2031.
Any such changes could impose additional costs, require the attention of senior management or result in other changes to or limitations on our business.
Any such changes may impose additional cost or result in other changes to or limitations on our business.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeAdditional information on cybersecurity risks we face is discussed in Part I, Item 1A, “Risk Factors,” under the heading “We rely on our information technology (IT), operational technology (OT), and a number of complex business systems to assist with the management of our business and customer and supplier relationships, and a disruption of these systems, including from cyber-attacks, could adversely affect our business.”
Biggest changeAdditional information on cybersecurity risks we face is discussed in Part I, Item 1A, “Risk Factors,” under the heading “We rely on our IT, OT, and a number of complex business systems to assist with the management of our business and customer and supplier relationships, and a disruption of these systems, including from cyber-attacks, could adversely affect our business.”
He served for one year as the President of the Bay Area InfraGard chapter and four years on its Board. InfraGard is a collaboration between the Federal Bureau of Investigation (FBI) and members of the private sector that promotes the protection of U.S. critical infrastructure and enables the exchange of important information.
He 37 Table of Content s served for one year as the President of the Bay Area InfraGard chapter and four years on its Board. InfraGard is a collaboration between the Federal Bureau of Investigation (FBI) and members of the private sector that promotes the protection of U.S. critical infrastructure and enables the exchange of important information.
The IRP applies to all Company personnel and third-party contractors, vendors, and partners that perform functions or services that require access to secure information, and to all devices and network services that are owned or managed by the Company. 38 Table of Contents • Regular testing: We engage a third-party cybersecurity firm to conduct an annual network penetration test on our corporate and supervisory control and data acquisition networks.
The IRP applies to all Company personnel and third-party contractors, vendors, and partners that perform functions or services that require access to secure information, and to all devices and network services that are owned or managed by the Company. • Regular testing: We engage a third-party cybersecurity firm to conduct an annual network penetration test on our corporate and supervisory control and data acquisition networks.
Our Security Incident Event Management tool monitors security logs, includes detective controls, and helps to identify irregular activities. • Detection and preventative technology: We have implemented multiple technologies designed to help protect our systems from cybersecurity threats, including an intrusion prevention system, next-generation antivirus program, end point protection system, and a data loss prevention security tool. • Regular improvements: We regularly work to enhance our systems and integrate new information and technology to upgrade our systems.
Our Security Incident Event Management tool monitors security logs, includes detective controls, and helps to identify irregular activities. 38 Table of Content s • Detection and preventative technology: We have implemented multiple technologies designed to help protect our systems from cybersecurity threats, including an intrusion prevention system, next-generation antivirus program, end point protection system, and a data loss prevention security tool. • Regular improvements: We regularly work to enhance our systems and integrate new information and technology to upgrade our systems.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeCal Water owns and operates six surface water treatment plants with a combined capacity of 46 million gallons per day. There are 6,775 miles of supply and distribution mains in the various owned and managed systems.
Biggest changeThere are 410 owned storage tanks with a capacity of 291 million gallons, 18 managed storage tanks with a capacity of 32 million gallons, and three surface water reservoirs with a capacity of 241 million gallons. Cal Water owns and operates six surface water treatment plants with a combined capacity of 46 million gallons per day.
Properties owned by Cal Water are subject to the lien of an Indenture of Mortgage and Deed of Trust dated October 22, 2024, May 11, 2021, June 11, 2019, November 22, 2010, and April 17, 2009 (the California Indenture), securing Cal Water’s First Mortgage Bonds, of which $1,175.0 million was outstanding at December 31, 2024.
Properties owned by Cal Water are subject to the lien of an Indenture of Mortgage and Deed of Trust dated October 1, 2025, October 22, 2024, May 11, 2021, June 11, 2019, November 22, 2010, and April 17, 2009 (the California Indenture), securing Cal Water’s First Mortgage Bonds, of which $1,305.0 million was outstanding at December 31, 2025.
Washington Water owns 468 wells and manages 5 wells. There are 194 owned storage tanks with a storage capacity of 20.3 million gallons. There are 773 miles of supply and distribution mains. Washington Water operates one wastewater treatment plant with 1.3 miles of sewer collection mains. New Mexico Water owns 28 wells.
Washington Water owns 468 wells and manages 5 wells. There are 194 owned storage tanks with a storage capacity of 20.3 million gallons. There are 774 miles of supply and distribution mains. Washington Water operates one wastewater treatment plant with 1.3 miles of sewer collection mains. New Mexico Water owns 29 wells.
There are 29 storage tanks with a storage capacity of 11.0 million gallons. There are 210 miles of supply and distribution mains. New Mexico operates two wastewater treatment facilities with a combined capacity to process 0.62 million gallons per day. There are eight lift stations and 35 miles of sewer collection mains.
There are 29 storage tanks with a storage capacity of 11.0 million gallons. There are 210 miles of supply and distribution mains. New Mexico operates two wastewater treatment facilities with a combined capacity to process 0.62 million gallons per day.
The California Indenture contains certain restrictions common to such types of instruments regarding the disposition of property and includes various covenants and restrictions. At December 31, 2024, our California utility was in compliance with the covenants of the California Indenture. 39 Table of Contents Cal Water owns 587 wells and operates ten leased wells.
The California Indenture contains certain restrictions common to such types of instruments regarding the disposition of property and includes various covenants and restrictions. At December 31, 2025, our California utility was in compliance with the covenants of the California Indenture. Cal Water owns 588 wells.
In the leased City of Hawthorne and City of Commerce systems or in systems that are operated under contract for municipalities or private companies, title to the various properties is held exclusively by the municipality or private company. Hawaii Water owns 29 wells and manages three potable and five irrigation wells.
There are 6,803 miles of supply and distribution mains in the various owned and managed systems. In the leased City of Hawthorne and City of Commerce systems that are operated under contract for municipalities or private companies, title to the various properties is held exclusively by the municipality or private company. Hawaii Water owns 29 wells.
Texas Water, through its majority ownership of BVRT, owns and operates 7 wastewater treatment plants. The plants have a treatment capacity of 915,000 gallons per day.
There are eight lift stations and 35 miles of sewer collection mains. 39 Table of Content s Texas Water, through its majority ownership of BVRT, owns and operates seven wastewater treatment plants. The plants have a treatment capacity of 1.175 million gallons per day. Item 3. Legal Proceedings.
Removed
There are 417 owned storage tanks with a capacity of 291 million gallons, one leased storage tank with a capacity of 0.25 million gallons, 29 managed storage tanks with a capacity of 32 million gallons, and three surface water reservoirs with a capacity of 241 million gallons.
Added
Information with respect to this item may be found under the subheading Contingencies in Note 15 of the Notes to Consolidated Financial Statements. Item 4. Mine Safety Disclosures. Not applicable. PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe comparison assumes $100 was invested on December 31, 2019, in California Water Service Group’s common stock and in each of the forgoing indices and assumes reinvestment of dividends. 40 Table of Contents Performance Graph Data The following descriptive data is supplied in accordance with Rule 304(d) of Regulations S-T: 2019 2020 2021 2022 2023 2024 California Water Service Group 100 105 139 118 101 88 S&P 500 100 118 152 125 158 197 RW Baird Water Utility Index 100 115 141 117 99 92 An initial $100 investment in the common stock of California Water Service Group on December 31, 2019 including reinvestment of dividends would be worth $88 at the end of the 5-year period ending December 31, 2024.
Biggest changePerformance Graph Data The following descriptive data is supplied in accordance with Rule 304(d) of Regulations S-T: 2020 2021 2022 2023 2024 2025 California Water Service Group 100 133 112 96 84 80 S&P 500 100 129 105 133 166 196 RW Baird Water Utility Index 100 122 103 86 81 83 An initial $100 investment in the common stock of California Water Service Group on December 31, 2020 including reinvestment of dividends would be worth $80 at the end of the 5-year period ending December 31, 2025.
Item 5. Market for Registrant’s Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Our common stock is traded on the New York Stock Exchange under the symbol “CWT.” At December 31, 2024, there were 59,484,145 common shares outstanding. There were 1,680 common stockholders of record as of February 10, 2025.
Item 5. Market for Registrant’s Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Our common stock is traded on the New York Stock Exchange under the symbol “CWT.” At December 31, 2025, there were 59,638,011 common shares outstanding. There were 1,705 common stockholders of record as of February 9, 2026.
Baird Water Utility Index (which is comprised of Artisan Resources Corporation, American Water Works Company, Inc, American States Water Company, Essential Utilities, SJW Group, and York Water) and the Standard & Poor’s 500 Index during the last five years ended December 31, 2024.
Baird Water Utility Index (which is comprised of Artesian Resources Corporation, American Water Works Company, Inc., American States Water Company, Middlesex Water Company, Essential Utilities, Inc., H2O America, and York Water Company) and the Standard & Poor’s 500 Index during the 40 Table of Content s last five years ended December 31, 2025.
During 2024, we paid a cash dividend of $1.12 per common share, or $0.28 per quarter. During 2023, we paid a cash dividend of $1.04 per common share, or $0.26 per quarter.
During 2025, we paid a cash dividend of $1.24 per common share, or $0.30 per quarter and a one-time special dividend in the amount of $0.04 per share. During 2024, we paid a cash dividend of $1.12 per common share, or $0.28 per quarter.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers None. Item 6. [Reserved] Not applicable. 41 Table of Contents
Purchases of Equity Securities by the Issuer and Affiliated Purchasers None.
This represents an indicated annual cash dividend of $1.24, and would be our 58th consecutive year of increasing the annual dividend and marks the 320th consecutive quarterly dividend.
On January 28, 2026, the Board declared a quarterly cash dividend of $0.335 per common share, payable on February 20, 2026, to stockholders of record on February 9, 2026. This represents an indicated annual cash dividend of $1.34, and would be our 59th consecutive year of increasing the annual dividend and marks the 324th consecutive quarterly dividend.
Removed
On January 29, 2025, the Board declared a quarterly cash dividend of $0.30 per common share and a one-time special dividend in the amount of $0.04 per common share. Both the quarterly dividend and the special one-time dividend will be payable on February 21, 2025, to stockholders of record on February 10, 2025.
Added
The comparison assumes $100 was invested on December 31, 2020, in California Water Service Group’s common stock and in each of the forgoing indices and assumes reinvestment of dividends.

Item 7. Management's Discussion & Analysis

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

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Biggest changeSummarized Statement of Operations (in thousands) 2024 2023 Issuer Guarantor Issuer Guarantor Net sales $ 956,447 $ — $ 720,577 $ — Gross profit $ 663,270 $ — $ 449,221 $ — Income (loss) from operations $ 228,066 $ (2,120) $ 82,157 $ 590 Equity in earnings of guarantor $ — $ 174,979 $ — $ 49,998 Net income $ 193,485 $ 179,022 $ 57,168 $ 51,376 Summarized Balance Sheet Information (in thousands) As of December 31, 2024 As of December 31, 2023 Issuer Guarantor Issuer Guarantor Current assets $ 239,632 $ 7,146 $ 213,469 $ 10,126 Intercompany receivable from guarantor & non-issuer subsidiaries 6,031 53,969 3,664 44,882 Other assets 650,395 1,337,468 479,642 1,190,076 Long-term intercompany receivable from non-issuer subsidiaries — 110,802 — 82,610 Net utility plant 3,816,513 — 3,487,788 — Total assets $ 4,712,571 $ 1,509,385 $ 4,184,563 $ 1,327,694 Current liabilities $ 471,432 $ 42,987 $ 351,964 $ 53,069 Intercompany payable to non-issuer subsidiaries 1,001 — — — Long-term debt 1,104,454 — 1,052,350 — Other liabilities 1,799,854 3,146 1,595,852 3,068 Total Liabilities $ 3,376,741 $ 46,133 $ 3,000,166 $ 56,137 Off-Balance Sheet Arrangements We do not have commitments or obligations, including contingent obligations, arising from arrangements with unconsolidated entities or persons that have, or are reasonably likely to have, a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, cash requirements, or capital resources even when the arrangement results in no obligation being reported in our Consolidated Balance Sheets. 49 Table of Contents Contractual Obligations The contractual obligations presented in the table below represent our estimates of future payments under fixed contractual obligations and commitments.
Biggest changeSummarized Statement of Operations (in thousands) 2025 2024 Issuer Guarantor Issuer Guarantor Net sales $ 912,596 $ — $ 956,447 $ — Gross profit $ 609,333 $ — $ 663,270 $ — Income (loss) from operations $ 169,549 $ 1,479 $ 228,066 $ (2,120) Equity in earnings of guarantor $ — $ 121,748 $ — $ 174,979 Net income $ 128,048 $ 127,848 $ 193,485 $ 179,022 48 Table of Content s Summarized Balance Sheet Information (in thousands) As of December 31, 2025 As of December 31, 2024 Issuer Guarantor Issuer Guarantor Current assets $ 260,566 $ 13,713 $ 239,632 $ 7,146 Intercompany receivable from guarantor & non-issuer subsidiaries 7,055 69,246 6,031 53,969 Other assets 689,390 1,478,043 650,395 1,337,468 Long-term intercompany receivable from non-issuer subsidiaries — 135,016 — 110,802 Net utility plant 4,187,250 — 3,816,513 — Total assets $ 5,144,261 $ 1,696,018 $ 4,712,571 $ 1,509,385 Current liabilities $ 383,953 $ 3,882 $ 471,432 $ 42,987 Intercompany payable to non-issuer subsidiaries — 2,498 1,001 — Long-term debt 1,302,788 169,092 1,104,454 — Other liabilities 1,988,083 3,284 1,799,854 3,146 Total Liabilities $ 3,674,824 $ 178,756 $ 3,376,741 $ 46,133 PFAS Settlement Proceeds See Note 15 of the Notes to Consolidated Financial Statements for details on settlement proceeds from PFAS manufacturers.
We also assess the likelihood that deferred tax assets will be recovered in future taxable income and, to the extent recovery is not probable, a valuation allowance would be recorded. We anticipate that future rate actions by the regulatory commissions will reflect revenue requirements for the tax effects of temporary differences recognized, which have previously been passed through to customers.
We also assess the likelihood that deferred tax assets will be recovered in future taxable income and, to the extent recovery is not probable, a valuation allowance is recorded. We anticipate that future rate actions by the regulatory commissions will reflect revenue requirements for the tax effects of temporary differences recognized, which have previously been passed through to customers.
We anticipate any increases in funding for the pension, except for the SERP for Cal Water, and PBOP plans will be recovered in future rate filings, thereby mitigating the financial impact. We believe it is probable that future costs will be recovered in future rates and therefore have recorded a regulatory asset in accordance with generally accepted accounting principles.
We anticipate any increases in funding for the pension, except for the SERP for Cal Water, and PBOP plans will be recovered in future rate filings, thereby mitigating the financial impact. We believe it is probable that future non-SERP costs will be recovered in future rates and therefore have recorded a regulatory asset in accordance with generally accepted accounting principles.
On June 27, 2024, California Senate Bill 167 (SB 167) was enacted into law. SB 167 provides for a three-year suspension of net operating losses under the California Corporation tax. Among other things, this new law temporarily disallows the use of state net operating losses for years beginning in 2024 through 2026.
On June 27, 2024, California Senate Bill 167 (SB 167) was enacted into law. SB 167 provides for a three-year suspension of net operating losses under the California Corporation tax. Among other things, this law temporarily disallows the use of state net operating losses for years beginning in 2024 through 2026.
The comparative results for fiscal 2023 with fiscal 2022 generally have not been included in this Form 10-K, but may be found in “Part II - Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.
The comparative results for fiscal 2024 with fiscal 2023 generally have not been included in this Form 10-K, but may be found in “Part II - Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.
Estimated annual contractual obligations are based on the same payment levels as 2024. For pension and postretirement benefits other than pensions obligations, see Note 11 of the Notes to Consolidated Financial Statements. Advances for construction represent annual contract refunds to developers for the cost of water systems paid for by the developers.
Estimated annual contractual obligations are based on the same payment levels as 2025. For pension and postretirement benefits other than pensions obligations, see Note 11 of the Notes to Consolidated Financial Statements. Advances for construction represent annual contract refunds to developers for the cost of water systems paid for by the developers.
Cal Water has water supply contracts with wholesale suppliers in 13 of its operating districts and for the two leased systems in Hawthorne and Commerce. For each contract, the cost of water is established by the wholesale supplier and is generally beyond our control.
Cal Water has water supply contracts with wholesale suppliers in 12 of its operating districts and for the two leased systems in Hawthorne and Commerce. For each contract, the cost of water is established by the wholesale supplier and is generally beyond our control.
As a result of Cal Water’s 2021 GRC decision that was issued in March of 2024, SERP expenses were disallowed to be recovered from our customers. At this time, we believe it is not probable that SERP costs will be recovered in rates for the three-year period in which the 2021 GRC is in effect.
As a result of the 2021 CA GRC decision that was issued in March of 2024, SERP expenses were disallowed to be recovered from our customers. At this time, we believe it is not probable that SERP costs will be recovered in rates for the three-year period in which the 2021 CA GRC is in effect.
(2) Due to the delay in the resolution of the 2021 GRC, the CPUC authorized Cal Water to track in an IRMA the variances between actual customer billings and those that would have been billed assuming the 2021 GRC had been effective January 1, 2023. Such variances are recorded as regulatory balancing account revenue.
(2) Due to the delay in the resolution of the 2021 CA GRC, the CPUC authorized Cal Water to track in an IRMA the variances between actual customer billings and those that would have been billed assuming the 2021 CA GRC had been effective January 1, 2023. Such variances were recorded as regulatory balancing account revenue.
Generally, water pumped from wells costs less than water purchased from wholesale suppliers. The 2021 GRC approved an ICBA for purchased water, purchased power, and pump taxes. The ICBA mechanism is designed to recover changes in supplier prices from authorized amounts and has been recorded as part of the associated water production expense type.
Generally, water pumped from wells costs less than water purchased from wholesale suppliers. Cal Water has an approved ICBA for purchased water, purchased power, and pump taxes. The ICBA mechanism is designed to recover changes in supplier prices from authorized amounts and has been recorded as part of the associated water production expense type.
(4) Deferred revenue consists of amounts that are expected to be collected from customers beyond 24 months following the end of the accounting period in which the sales transaction has already occurred.
(4) Deferred revenue consists of amounts that are expected to be collected from customers beyond 24 months following the end of the accounting period in which the sales transaction occurred.
On December 22, 2017, the U.S. government enacted expansive tax legislation commonly referred to as the TCJA. Among other provisions, the TCJA reduces the federal income tax rate from 35 percent to 21 percent beginning on January 1, 2018 and eliminated bonus depreciation for utilities.
On December 22, 2017, the U.S. government enacted expansive tax legislation commonly referred to as the Tax Cuts and Jobs Act (TCJA). Among other provisions, the TCJA reduces the federal income tax rate from 35 percent to 21 percent beginning on January 1, 2018 and eliminated bonus depreciation for utilities.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following sections include a discussion of results for fiscal 2024 compared to fiscal 2023 as well as certain 2022 results.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following sections include a discussion of results for fiscal 2025 compared to fiscal 2024 as well as certain 2023 results.
Future payments for advances received are listed under contractual obligations above. Because non-Company-funded construction activity is solely at the discretion of developers, we cannot predict the level of future activity. The cash flow impact is expected to be minor due to the structure of the arrangements.
Future payments for advances received are listed under contractual obligations above. Because non-Company-funded construction 50 Table of Content s activity is solely at the discretion of developers, we cannot predict the level of future activity. The cash flow impact is expected to be minor due to the structure of the arrangements.
Long-term debt payments include maturities of long-term debt and annual payments on other long-term obligations, exclusive of unamortized debt issuance costs of $4.8 million. b. Pension and postretirement benefits include $3.1 million of short-term pension obligations. c. Finance lease obligations represent total cash payments to be made in the future and includes interest expense of $0.2 million. d.
Long-term debt payments include maturities of long-term debt and annual payments on other long-term obligations, exclusive of unamortized debt issuance costs of $6.3 million. b. Pension and postretirement benefits include $3.7 million of short-term pension obligations. c. Finance lease obligations represent total cash payments to be made in the future and includes interest expense of $0.1 million. d.
Total capitalization, including the current portion of long-term debt, was $2,815.3 million at December 31, 2024 and $2,483.8 million at December 31, 2023. In future periods, the Company intends to issue common stock and long-term debt to finance our operations. The capitalization ratios will vary depending upon the method we choose to finance our operations.
Total capitalization, including the current portion of long-term debt, was $3,166.2 million at December 31, 2025 and $2,815.3 million at December 31, 2024. In future periods, the Company intends to issue common stock and long-term debt to finance operations. The capitalization ratios will vary depending upon the method we choose to finance our operations.
Water production costs accounted for 38.3% and 40.2%, of total operating costs in 2024 and 2023, respectively. The rates charged for wholesale water supplies, electricity, and pump taxes are established by various public agencies and utilities. As such, these rates are beyond our control.
Water production costs accounted for 38.8% and 38.3%, of total operating costs in 2025 and 2024, respectively. The rates charged for wholesale water supplies, electricity, and pump taxes are established by various public agencies and utilities. As such, these rates are beyond our control.
We expect our annual capital expenditure to increase during the next five years due to increasing needs to replace and maintain infrastructure. 50 Table of Contents Management expects there will be developer-funded expenditures in 2025 and expects that these expenditures will be financed by developers through refundable advances for construction and non-refundable contributions in aid of construction.
We expect our annual capital expenditures to increase during the next five years due to increasing needs to replace and maintain infrastructure. Management expects there will be developer-funded expenditures in 2026 and expects that these expenditures will be financed by developers through refundable advances for construction and non-refundable contributions in aid of construction.
As of December 31, 2024, our consolidated total capitalization ratio was 45.8% and the interest coverage ratio was greater than seven to one. In summary, as of such date, we are in compliance with all of the covenant requirements and are eligible to use the full amount of the undrawn portion of the Company and Cal Water facilities.
As of December 31, 2025, our consolidated total capitalization ratio was 48.8% and the interest coverage ratio was greater than five to one. In summary, as of such date, we are in compliance with all of the covenant requirements and are eligible to use the full amount of the undrawn portion of the Company and Cal Water facilities.
The process of preparing financial statements requires the use of estimates on the part of management. The estimates used by management are based on historic experience and an understanding of current facts and circumstances. A summary of our significant accounting policies is listed in Note 2 of the Notes to Consolidated Financial Statements.
The estimates used by management are based on historic experience and an understanding of current facts and circumstances. A summary of our significant accounting policies is listed in Note 2 of the Notes to Consolidated Financial Statements.
The TCJA required the Company to re-measure all existing deferred income tax assets and liabilities to reflect the reduction in the federal tax rate. As of December 31, 2024, the TCJA tax liability was $76.5 million. We continue working with state regulators to finalize the TCJA tax liability to confirm compliance with the federal normalization rules.
The TCJA required the Company to re-measure all existing deferred income tax assets and liabilities to reflect the reduction in the federal tax rate. As of December 31, 2025, the TCJA tax liability was $60.6 million. We continue working with state regulators to finalize the TCJA tax liability to confirm compliance with the federal normalization rules.
Equity Issuance On April 29, 2022, we entered into an equity distribution agreement to sell shares of our common stock having an aggregate gross sales price of up to $350.0 million from time to time depending on market conditions through an at-the-market equity program over the next three years.
Equity Issuance On May 14, 2025, we entered into an equity distribution agreement to sell shares of our common stock having an aggregate gross sales price of up to $350.0 million (2025 Equity Agreement) from time to time depending on market conditions through an at-the-market equity program over the next three years.
Cal Water does not include construction work in progress in its regulated rate base; instead, Cal Water was authorized to record allowance for funds used during construction (or AFUDC) on construction work in progress, effective January 1, 2017. Construction work in progress for Cal Water was $260.8 million at December 31, 2024 and $253.9 million at December 31, 2023.
Cal Water does not include construction work in progress in its regulated rate base; instead, Cal Water was authorized to record allowance for funds used during construction (or AFUDC) on construction work in progress, effective January 1, 2017. Construction work in progress for Cal Water was $259.6 million at December 31, 2025 and $260.8 million at December 31, 2024.
The 2021 GRC was approved in March of 2024 and final rates for the 2021 GRC were implemented on May 31, 2024. Cal Water recorded IRMA revenue of $88.6 million in 2024, of which $67.6 million is attributable to 2023.
The 2021 CA GRC was approved in March of 2024 and final rates for the 2021 CA GRC were implemented on May 31, 2024. As a result Cal Water recorded IRMA revenue of $88.6 million in 2024, of which $67.6 million is attributable to 2023. No IRMA revenue was recorded in 2025.
As of December 31, 2024, there were borrowings of $205.0 million outstanding on our unsecured revolving lines of credit, compared to $180.0 million outstanding on our unsecured revolving lines of credit as of December 31, 2023.
As of December 31, 2025, there were borrowings of $130.0 million outstanding on our unsecured revolving lines of credit, compared to $205.0 million outstanding on our unsecured revolving lines of credit as of December 31, 2024.
The table below provides the change in water production costs during the past 2 years: 2024 2023 Amount Change % Change Amount Change % Change Dollars in millions Purchased water $ 241.2 $ 17.4 7.8 % $ 223.8 $ (0.7) (0.3) % Purchased power 47.7 2.0 4.4 % 45.7 1.1 2.5 % Pump taxes 21.8 2.8 14.7 % 19.0 2.8 17.3 % Total water production costs $ 310.7 $ 22.2 7.7 % $ 288.5 $ 3.2 1.1 % The principal factors affecting water production costs are the quantity, price, and source of the water.
The table below provides the change in water production costs during the past 2 years: 2025 2024 Amount Change % Change Amount Change % Change Dollars in millions Purchased water $ 252.9 $ 11.7 4.9 % $ 241.2 $ 17.4 7.8 % Purchased power 45.1 (2.6) (5.5) % 47.7 2.0 4.4 % Pump taxes 24.2 2.4 11.0 % 21.8 2.8 14.7 % Total water production costs $ 322.2 $ 11.5 3.7 % $ 310.7 $ 22.2 7.7 % The principal factors affecting water production costs are the quantity, price, and source of the water.
In March of 2024, Cal Water received approval of the 2021 GRC which authorized the use of the MWRAM effective January 1, 2023. As a result, Cal Water recorded MWRAM revenue of $35.3 million for 2024 of which $17.4 million is attributable to 2023.
In March of 2024, Cal Water received approval of the 2021 CA GRC which authorized the use of the MWRAM effective January 1, 2023. For 2025 and 2024, Cal Water recorded MWRAM revenue of $26.3 million and $35.3 million, respectively. Of the $35.3 million of MWRAM revenue recorded for 2024, $17.4 million is attributable to 2023.
Other Operations Expenses The components of other operations expenses include payroll, material and supplies, and contract service costs of operating the regulated water systems, including the costs associated with water transmission and distribution, pumping, water quality, meter reading, billing, operations of district offices, and water conservation programs. 45 Table of Contents For 2024, other operations expense increased $6.0 million, or 5.3%, compared to 2023.
Other Operations Expenses The components of other operations expenses include payroll, material and supplies, and contract service costs of operating the regulated water systems, including the costs associated with water transmission and distribution, pumping, water quality, meter reading, billing, operations of district offices, and water conservation programs. For 2025, other operations expense increased $11.6 million, or 9.8%, compared to 2024.
In addition, the decision retained approximately $179.0 million of prior financing authority and determined that refinancing long-term debt did not count against the authorization. The CPUC requires that any loans from Cal Water to the Company be at arm’s length. This restriction did not materially affect the Company’s ability to meet its cash obligations in 2024.
In addition, the decision retained approximately $179.0 million of prior financing authority and determined that refinancing long-term debt did not count against the authorization. The CPUC requires that any loans from Cal Water to the Company be at arm’s length.
At December 31, capitalization ratios were: 2024 2023 Equity 59.7 % 57.6 % Long-term debt 40.3 % 42.4 % The return (from both regulated and non-regulated operations) on average equity was 12.5% in 2024 compared to 3.8% in 2023.
At December 31, capitalization ratios were: 2025 2024 Equity 53.5 % 59.7 % Long-term debt 46.5 % 40.3 % The return (from both regulated and non-regulated operations) on average equity was 7.7% in 2025 compared to 12.5% in 2024.
Given our ability to access our lines of credit on a daily basis, cash balances are managed to levels required for daily cash needs and excess cash is invested in short-term or cash equivalent instruments.
Given our ability to access our lines of credit on a daily basis, cash balances are managed to levels required for daily cash needs and excess cash is invested in short-term or cash equivalent instruments. Minimal operating levels of cash are maintained for Washington Water, New Mexico Water, Hawaii Water, and Texas Water.
We intend to use the net proceeds from these sales, after deducting commissions and offering expenses, for general corporate purposes, which may include working capital, construction and acquisition expenditures, investments and repurchases, and redemptions of securities.
The 2025 Equity Agreement replaced the previous agreement that ended in the second quarter of 2025. We intend to use the net proceeds from these sales, after deducting commissions and offering expenses, for general corporate purposes, which may include working capital, construction and acquisition expenditures, investments and repurchases, and redemptions of securities.
Deferred revenue for 2024 increased due to an increase in the balancing account revenue expected to be collected beyond 24 months. 44 Table of Contents Water Production Costs Water production costs, which consist of purchased water, purchased power, and pump taxes, comprise the largest segment of total operating expenses.
Deferred revenue for 2025 decreased due to a decrease in the balancing account revenue expected to be collected beyond 24 months. 44 Table of Content s Water Production Costs Water production costs, which consist of purchased water, purchased power, and pump taxes, comprise the largest segment of total operating expenses.
The table below provides the amounts, percentage change, and source mix for the respective years: 2024 2023 MG % of Total % change from prior year MG % of Total % change from prior year Millions of gallons (MG) Source: Wells 54,546 51.3 % 8.3 % 50,363 48.6 % (4.1) % Purchased 47,665 44.8 % (0.4) % 47,865 46.3 % (5.2) % Surface 4,163 3.9 % (20.8) % 5,256 5.1 % 33.5 % Total 106,374 100.0 % 2.8 % 103,484 100.0 % (3.2) % For 2024, the $17.4 million increase in purchased water expenses is mostly due to a blended purchased water wholesaler rate increase of 8.2% partially offset by a 0.4% decrease in purchased quantities.
The table below provides the amounts, percentage change, and source mix for the respective years: 2025 2024 MG % of Total % change from prior year MG % of Total % change from prior year Millions of gallons (MG) Source: Wells 55,473 52.5 % 1.7 % 54,546 51.3 % 8.3 % Purchased 46,745 44.2 % (1.9) % 47,665 44.8 % (0.4) % Surface 3,523 3.3 % (15.4) % 4,163 3.9 % (20.8) % Total 105,741 100.0 % (0.6) % 106,374 100.0 % 2.8 % For 2025, the $11.7 million increase in purchased water expenses is mostly due to a blended purchased water wholesaler rate increase of 6.9% partially offset by a 1.9% decrease in purchased quantities.
Income Taxes We account for income taxes using the asset and liability method. Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis.
Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis.
Capital Structure Total equity was $1,638.3 million at December 31, 2024, compared to $1,430.3 million at December 31, 2023. The Company sold 1,638,977 and 2,025,891 shares of its common stock in 2024 and 2023, respectively through its at-the-market equity program.
Capital Structure Total equity was $1,692.0 million at December 31, 2025, compared to $1,638.3 million at December 31, 2024. The Company sold 33,497 and 1,638,977 shares of its common stock in 2025 and 2024, respectively, through its at-the-market equity program.
Any change in power costs in other states would be requested to be recovered by the customers in those states. The impact of such regulations is dependent upon the enacted date, the factors that affect our suppliers’ cost structure, and their ability to pass the costs to us in their approved tariffs. These items are not known at this time.
The impact of such regulations is dependent upon the enacted date, the factors that affect our suppliers’ cost structure, and their ability to pass the costs to us in their approved tariffs. These items are not known at this time.
The Company and Cal Water facilities contain affirmative and negative covenants and events of default customary for credit facilities of this type including, among other things, limitations and prohibitions relating to additional indebtedness, liens, mergers, and asset sales.
The proceeds from the Company and Cal Water facilities may be used for working capital or general corporate purposes. The Company and Cal Water facilities contain affirmative and negative covenants and events of default customary for credit facilities of this type including, among other things, limitations and prohibitions relating to additional indebtedness, liens, mergers, and asset sales.
Capital Requirements Capital requirements consist primarily of new construction expenditures for expanding and replacing utility plant facilities and the acquisition of water systems. They also include refunds of advances for construction. Utility plant expenditures in 2024 were $470.8 million, including Company-funded of $450.4 million and developer-funded of $20.4 million.
Capital Requirements Capital requirements consist primarily of new construction expenditures for expanding and replacing utility plant facilities and the acquisition of water systems. They also include refunds of advances for construction. Utility plant expenditures in 2025 were $517.0 million, including Company-funded of $488.4 million and developer-funded of $28.6 million.
Purchased power expenses are affected by the quantity of water pumped from wells and moved through the distribution system, rates charged by electric utility companies, and rate structures applied to usage during peak and non-peak times of the day or season.
For 2025, the $2.4 million increase in pump taxes is primarily due to increases in pump tax rates. Purchased power expenses are affected by the quantity of water pumped from wells and moved through the distribution system, rates charged by electric utility companies, and rate structures applied to usage during peak and non-peak times of the day or season.
Cal Water may borrow up to $400.0 million under the Cal Water facility; however, all of Cal Water’s borrowings under the Cal Water facility must be repaid within 24 months as authorized by the CPUC. The proceeds from the Company and Cal Water facilities may be used for working capital purposes.
The Company and subsidiaries that it designates may borrow up to $200.0 million under the Company facility. Cal Water may borrow up to $400.0 million under the Cal Water facility; however, all of Cal Water’s borrowings under the Cal Water facility must be repaid within 24 months as authorized by the CPUC.
Changes in our business needs, cancellation provisions and changes in interest rates, as well as action by third parties and other factors, may cause these estimates to change. Therefore, our actual payments in future periods may vary from those presented in the table below. The following table summarizes our contractual obligations as of December 31, 2024.
Contractual Obligations The contractual obligations presented in the table below represent our estimates of future payments under fixed contractual obligations and commitments. Changes in our business needs, cancellation provisions and changes in interest rates, as well as action by third parties and other factors, may cause these estimates to change.
As a result, we have reclassified our SERP regulatory asset, net of associated deferred income taxes, for Cal Water to other comprehensive loss in accordance with generally accepted accounting principles. 43 Table of Contents Changes to pension benefits actuarial assumptions can significantly affect pension costs, regulatory assets, and liabilities.
As a result, we record the changes in the funded status for the SERP for Cal Water to accumulated other comprehensive loss in accordance with generally accepted accounting principles. 43 Table of Content s Changes to pension benefits actuarial assumptions can significantly affect pension costs, regulatory assets, and liabilities.
Overview Net Income Attributable to California Water Service Group In 2024 and 2023, net income attributable to California Water Service Group was $190.8 million and $51.9 million, respectively. Earnings per diluted common share increased $2.34 from $0.91 to $3.25 or 257.1% in 2024.
Overview Net Income Attributable to California Water Service Group In 2025 and 2024, net income attributable to California Water Service Group was $128.2 million and $190.8 million, respectively. Earnings per diluted common share decreased $1.10 from $3.25 to $2.15, or 33.8%, in 2025.
Utility plant expenditures in 2023 were $383.7 million, including Company-funded of $366.4 million and developer-funded of $17.3 million. A majority of capital expenditures was associated with mains and water treatment equipment.
Utility plant expenditures in 2024 were $470.8 million, including Company-funded of $450.4 million and developer-funded of $20.4 million. A majority of capital expenditures were associated with mains and water treatment equipment.
The sources of change in operating revenue were: 2024 2023 Dollars in millions Net change due to rate changes, usage, and other (1) $ 122.1 $ 17.9 IRMA revenue (2) 88.6 — MWRAM revenue (3) 35.3 — WRAM revenue — (74.3) MCBA revenue — 7.4 Other balancing account revenue — 4.9 Deferral of revenue (4) (3.8) (7.7) Net change $ 242.2 $ (51.8) _______________________________________________________________________________ (1) In 2024, the net change due to rate changes, usage, and other items in the above table was primarily due to rate increases of $98.5 million and an increase in consumption and new customers of $17.5 million.
The sources of change in operating revenue were: 2025 2024 Dollars in millions Net change due to rate changes and other (1) $ 69.7 $ 116.0 Customer usage (12.7) 6.1 IRMA revenue (2) (88.6) 88.6 MWRAM revenue (3) (9.0) 35.3 Deferral of revenue (4) 3.9 (3.8) Net change $ (36.7) $ 242.2 _______________________________________________________________________________ (1) In 2025, the net change due to rate changes and other items in the above table was primarily due to rate increases of $69.6 million.
The decrease was due primarily to a $4.4 million decrease in other components of net periodic benefit credit and a $1.3 million decrease in the unrealized gains from certain non-qualified benefit plan investments due to market conditions, which was partially offset by a $1.4 million increase in allowance for equity funds used during construction and an increase in interest income of $1.0 million.
The increase was due primarily to a $2.4 million increase in other components of net periodic benefit credit and a $0.8 million increase in allowance for equity funds used during construction, which was partially offset by a $1.3 million increase in income tax expense on other income and expenses.
Customer water usage can be lower than normal in years when more than normal precipitation falls in our service areas or temperatures are lower than normal, especially in the summer months. The reduction in water usage reduces cash flow from operations and increases the need for short-term bank borrowings.
Customer water usage can be lower than normal in years when more than normal precipitation falls in our service areas or temperatures are lower than normal, especially in the summer months.
Determining probability requires significant judgment by management and includes, but is not limited to, consideration of testimony presented in regulatory hearings, proposed regulatory decisions, final regulatory orders, and the strength or status of applications for rehearing or state court appeals. 42 Table of Contents If we determine that a portion of our assets used in utility operations is not recoverable in customer rates, we would be required to recognize the loss of the disallowed assets.
Determining probability requires significant judgment by management and includes, but is not limited to, consideration of testimony presented in regulatory hearings, proposed regulatory decisions, final regulatory orders, and the strength or status of applications for rehearing or state court appeals.
The total operating expense increase was primarily due to an increase in water production costs, which include purchased water, purchased power, and pump tax expenses, of $22.1 million, increases in other operations expenses of $6.0 million, an increase in income tax expense of $51.1 million, an increase in depreciation and amortization expenses of $10.7 million, and an increase in property and other taxes of $4.3 million.
The total operating expense increase was primarily due to an increase in water production costs of $11.5 million, an increase in administrative and general expenses of $2.1 million, an increase in other operations expenses of $11.6 million, an increase in depreciation and amortization expenses of $12.5 million, and an increase in property and other taxes of $3.7 million.
The remaining balance was returned to the Water Board in the third quarter of 2024 in accordance with the program terms. Critical Accounting Policies and Estimates We maintain our accounting records in accordance with accounting principles generally accepted in the United States of America and as directed by the Commissions to which our operations are subject.
Critical Accounting Policies and Estimates We maintain our accounting records in accordance with accounting principles generally accepted in the United States of America and as directed by the Commissions to which our operations are subject. The process of preparing financial statements requires the use of estimates on the part of management.
Additional information regarding the bank borrowings and long-term debt is presented in Notes 7 and 8 in the Notes to Consolidated Financial Statements.
Management believes long-term financing is available to meet our cash flow needs through issuances in both debt and equity instruments. Additional information regarding the bank borrowings and long-term debt is presented in Notes 7 and 8 in the Notes to Consolidated Financial Statements.
The Guarantor fully, absolutely, irrevocably and unconditionally guarantees the due and punctual payment when due, whether at stated maturity, by acceleration, by notice of prepayment or otherwise, of the principal of, premium, if any, and interest on the bonds. The bonds rank equally among Cal Water’s other first mortgage bonds.
Certain subsidiaries of the Company do not guarantee the security and are referred to as Non-guarantors. The Guarantor fully, absolutely, irrevocably and unconditionally guarantees the due and punctual payment when due, whether at stated maturity, by acceleration, by notice of prepayment or otherwise, of the principal of, premium, if any, and interest on the bonds.
The summarized information excludes financial information of the Non-issuers, including earnings from and investments in these entities.
In presenting the summarized financial statements, the equity method of accounting has been applied to the Guarantor interests in the Issuer. The summarized information excludes financial information of the Non-issuers, including earnings from and investments in these entities.
On April 17, 2009, Cal Water (Issuer) issued $100.0 million aggregate principal amount of 5.5% First Mortgage Bonds due 2040, all of which are fully and unconditionally guaranteed by the Company (Guarantor). Certain subsidiaries of the Company do not guarantee the security and are referred to as Non-guarantors.
Additional information regarding this program is presented in Note 6 of the Notes to Consolidated Financial Statements. Summarized Financial Information for Guarantors and the Issuer of Guaranteed Securities. On April 17, 2009, Cal Water (Issuer) issued $100.0 million aggregate principal amount of 5.5% First Mortgage Bonds due 2040, all of which are fully and unconditionally guaranteed by the Company (Guarantor).
The $138.9 million increase in net income was primarily due to an increase in operating revenue of $242.2 million primarily as a result of the cumulative adjustment for the impacts of the 2021 GRC, retroactive to January 1, 2023, and higher rates and increased consumption.
The $62.6 million decrease in net income was primarily due to a decrease in operating revenue of $36.7 million primarily as a result of a decrease in customer usage of $12.7 million and the cumulative adjustment for the impacts of the 2021 CA GRC, retroactive to January 1, 2023, that was recorded in 2024, partially offset by an increase in rates of $69.6 million.
The following tables present summarized financial information of the Issuer and the Guarantor. The information presented below excludes eliminations necessary to arrive at the information on a consolidated basis. In presenting the summarized financial statements, the equity method of accounting has been applied to the Guarantor interests in the Issuer.
The bonds rank equally among Cal Water’s other First Mortgage Bonds. The following tables present summarized financial information of the Issuer and the Guarantor. The information presented below excludes eliminations necessary to arrive at the information on a consolidated basis.
The following table reflects the sensitivity of pension amounts reported for the year ended December 31, 2024, to changes in actuarial assumptions: Increase/(Decrease) in Pension Benefits Actuarial Assumption Increase/(Decrease) in 2024 Net Periodic Benefit Cost Increase/(Decrease) in Projected Benefit Obligation as of December 31, 2024 Dollars in thousands Discount rate (0.5) % $ 3,042 $ 54,170 Long-term rate of return on plan assets (0.5) % 3,372 — Rate of compensation increases (0.5) % (3,047) (13,630) Cost of living adjustment (1) (0.2) % (2,460) (14,233) Discount rate 0.5 % (5,736) (48,220) Long-term rate of return on plan assets 0.5 % (3,372) — Rate of compensation increases 0.5 % 2,534 14,368 Cost of living adjustment 0.5 % 4,237 37,622 ______________________________________________________________________________ 1.
The following table reflects the sensitivity of pension amounts reported for the year ended December 31, 2025, to changes in actuarial assumptions: Increase/(Decrease) in Pension Benefits Actuarial Assumption Increase/(Decrease) in 2025 Net Periodic Benefit Cost Increase/(Decrease) in Projected Benefit Obligation as of December 31, 2025 Dollars in thousands Discount rate (0.5) % $ 3,023 $ 59,245 Long-term rate of return on plan assets (0.5) % 3,709 — Rate of compensation increases (0.5) % (2,501) (14,006) Cost of living adjustment (1) (0.4) % (4,737) (30,763) Discount rate 0.5 % (5,757) (52,880) Long-term rate of return on plan assets 0.5 % (3,709) — Rate of compensation increases 0.5 % 2,256 14,401 Cost of living adjustment 0.5 % 4,318 40,890 ______________________________________________________________________________ (1) The cost of living adjustment was assumed at 2.40% and has a floor of 2.0%.
Acquisitions There were no significant acquisitions in 2024 or 2023. Real Estate Program We own real estate. From time to time, certain parcels are deemed no longer used or useful for water utility operations. Most surplus properties have a low-cost basis. We developed a program to realize the value of certain surplus properties through sale or lease of those properties.
Most surplus properties have a low-cost basis. We developed a program to realize the value of certain surplus properties through sale or lease of those properties. The program will be ongoing for a period of several years. There were no significant sales in 2025 and 2024.
The cost of living adjustment was assumed at 2.20% and has a floor of 2.0%. Results of Operations Operating Revenue Operating revenue in 2024 was $1,036.8 million, an increase of $242.2 million, or 30.5%, over 2023. Operating revenue in 2023 was $794.6 million, a decrease of $51.8 million, or 6.1%, over 2022.
Results of Operations Operating Revenue Operating revenue in 2025 was $1,000.1 million, a decrease of $36.7 million, or 3.5%, over 2024. Operating revenue in 2024 was $1,036.8 million, an increase of $242.2 million, or 30.5%, over 2023.
The increase was mostly due to an increase in our assessed property values for utility plant placed in service during the year. Other Income and Expenses For 2024, net other income and expenses decreased $1.5 million, or 6.1%, to $22.6 million compared to 2023.
Property and Other Taxes For 2025, property and other taxes increased $3.7 million, or 9.2%, compared to 2024. The increase was primarily due to utility plant placed in service in 2024. Other Income and Expenses For 2025, net other income and expenses increased $1.6 million, or 7.1%, to $24.2 million compared to 2024.
The program will be ongoing for a period of several years. There were no significant sales in 2024 and 2023. As sales are dependent on real estate market conditions, future sales, if any, may or may not be at prior year levels.
As sales are dependent on real estate market conditions, future sales, if any, may or may not be at prior year levels.
Additionally, net other income decreased by $1.5 million and net interest expense increased by $7.7 million. The net income benefit of the 2021 GRC from 2023 interim rate relief was approximately $64.0 million included in 2024 results.
The net income benefit of the 2021 CA GRC from 2023 interim rate relief was approximately $64.0 million, or $1.09 earnings per diluted common share, that is included in 2024 results.
Changes associated with climate change regulations could increase the cost of power that in turn would result in an increase in the rates our power suppliers charge us. Any change in pricing of our purchased power in California would be recovered from our customers through the ICBA mechanism.
In 2025, purchased power expenses decreased $2.6 million mainly due to a decrease in production. Changes associated with climate change regulations could increase the cost of power that in turn would result in an increase in the rates our power suppliers charge us.
Cash Flow from Investing Activities During 2024 and 2023, we used $470.8 million and $383.7 million, respectively, of cash for capital expenditures, both Company-funded and developer-funded. Cash used in investing activities fluctuates each year largely due to the availability of construction resources and our ability to obtain construction permits in a timely manner.
Cash used in investing activities fluctuates each year largely due to the availability of construction resources and our ability to obtain construction permits in a timely manner. Cash Flow from Financing Activities During 2025, we issued $170.0 million of Senior Unsecured Notes and $200.0 million of First Mortgage Bonds (see Note 8 of the Notes to Consolidated Financial Statements).
The dividend payout ratio was 34.3% in 2024, 113.8% in 2023, and 56.5% in 2022 for an average of 68.2% over the 3-year period. Our long-term targeted dividend payout ratio is 60%. Short-Term Financing Short-term liquidity is provided by the bank lines of credit described above and by internally generated funds.
Earnings not paid as dividends are reinvested in the business. The dividend payout ratio was 57.6% in 2025, 34.3% in 2024, and 113.8% in 2023 for an average of 68.6% over the 3-year period. Our long-term targeted dividend payout ratio is 60%.
Some capital expenditures are funded by payments received from developers for contributions in aid of construction or advances for construction. Funds received for contributions in aid of construction are non-refundable, whereas funds classified as advances in construction are refundable. Management believes long-term financing is available to meet our cash flow needs through issuances in both debt and equity instruments.
Management expects this trend to continue given our capital expenditure plans for the next five years. Some capital expenditures are funded by payments received from developers for contributions in aid of construction or advances for construction. Funds received for contributions in aid of construction are non-refundable, whereas funds classified as advances in construction are refundable.
Management does not expect this restriction to have a material impact on the Company’s ability to meet its cash obligations in 2025 and beyond. Long-term financing, which includes First Mortgage Bonds, other debt securities, and common stock, has typically been used to replace short-term borrowings and fund capital expenditures.
Long-term financing, which includes First Mortgage Bonds, other debt securities, and common stock, has typically been used to replace short-term borrowings and fund capital expenditures. Internally generated funds, after making dividend payments, provide positive cash flow, but have not been at a level to meet the needs of our capital expenditure requirements.
The receivable balances were primarily financed by Cal Water using short-term financing arrangements to meet operational cash requirements. Interest on the receivable balances, which represents the interest recoverable from customers, is limited to the then-current 90-day commercial paper rates, which typically are significantly lower than Cal Water’s short-term financing rates.
Interest on the receivable balances, which represents the interest recoverable from customers, is limited to the then-current 90-day commercial paper rates, which typically are significantly lower than Cal Water’s short-term financing rates. In January 2026, the Board declared the quarterly dividend, increasing it for the 59th consecutive year. The quarterly dividend was raised from $0.30 to $0.335 per common share.
The increase in 2024 was primarily due to an increase in pre-tax operating income in 2024 attributable to the recognition of income related to the 2021 GRC decision in 2024. Property and Other Taxes For 2024, property and other taxes increased $4.3 million, or 11.8%, compared to 2023.
Income Taxes For 2025, income tax expense decreased $24.7 million, or 68.8%, to $11.2 million compared to an income tax expense of $35.9 million for 2024. The decrease in 2025 was primarily due to a decrease in pre-tax operating income, which resulted from the 2021 CA GRC decision in 2024.
At the January 2025 meeting, the Board declared the quarterly dividend, increasing it for the 58th consecutive year, and a one-time special dividend in the amount of $0.04 per common share. The quarterly dividend was raised from $0.28 to $0.30 per common share. This represents an indicated annual rate of $1.24 per common share.
This represents an indicated annual rate of $1.34 per common share. Dividends have been paid for 80 consecutive years. The annual dividends paid per common share in 2025, 2024, and 2023 were $1.24, $1.12 and $1.04, respectively. The 2025 annual dividend included a one-time special dividend of $0.04 per common share.
For 2025, the Company is estimating its capital expenditures to be between $450.0 million and $550.0 million based on the 2024 GRC in California and normal capital needs in the other subsidiaries.
For 2026, the Company is estimating its capital expenditures to be between $580.0 million and $640.0 million based on the 2024 CA GRC and normal capital needs in the other subsidiaries. This range includes an estimated PFAS compliance cost of $79.2 million. See “Water Supply” in Part I - Item 1 above for details on the currently effective regulation.
The increase was primarily due to an increase in employee wage expense of $2.3 million, water treatment costs of $1.8 million primarily related to the HOH Water Utilities system acquisition that closed in December of 2023, and software licensing fees of $1.3 million.
The increase was primarily due to a $2.8 million increase in labor expense, $2.5 million increase in bad debt expense, $1.8 million increase in software expenses, a $1.8 million increase in miscellaneous office expenses, $1.3 million increase in conservation expenses, and a $1.0 million increase in water treatment costs.
Water Supply Information with respect to Water Supply may be found under the subheading “Water Supply” in Part I - Item 1 above. Liquidity and Capital Resources Cash Flow from Operating Activities During 2024, we generated cash flow from operations of $290.9 million, compared to $217.8 million during 2023.
Liquidity and Capital Resources Cash Flow from Operating Activities During 2025, we generated cash flow from operations of $302.6 million, compared to $290.9 million during 2024. The increase in 2025 was primarily due to an increase in cash collections due to an increase in customer rates and the recovery of MWRAM and IRMA receivables.
Additionally, the credit facilities may be increased by up to an incremental $150.0 million under the Cal Water facility and $50.0 million under the Company facility, subject in each case to certain conditions. The net IRMA, MWRAM, WRAM and MCBA regulatory asset balances were $113.4 million and $64.2 million as of December 31, 2024 and 2023, respectively.
The net IRMA, MWRAM, WRAM and MCBA regulatory asset balances were $96.5 million and $113.4 million as of December 31, 2025 and 2024, respectively. The receivable balances were primarily financed by Cal Water using short-term financing arrangements to meet operational cash requirements.
Cash Flow from Financing Activities During 2024, we borrowed $505.0 million, and paid down $480.0 million on our unsecured revolving credit facilities for general corporate purposes. We also received $30.4 million of advances and contributions in aid of construction, which was reduced by refunds to developers of $9.4 million.
We also borrowed $550.0 million on our unsecured revolving credit facilities, received PFAS settlement proceeds of $40.9 million after fees and expenses, and received $37.5 million of advances and contributions in aid of construction.
We generally expect to satisfy these commitments with cash on hand and cash provided by operating activities. In 2025, we expect to issue First Mortgage Bonds to pay off bonds maturing during the year.
Therefore, our actual payments in future periods may vary from those presented in the table below. 49 Table of Content s The following table summarizes our contractual obligations as of December 31, 2025. We generally expect to satisfy these commitments with cash on hand and cash provided by operating activities.
Removed
The revenue increase was partially offset by an increase in total operating expenses of $94.3 million.
Added
Total operating expenses also increased by $18.0 million.
Removed
California Extended Water and Wastewater Arrearages Payment Program The California Water and Wastewater Arrearages Payment Program was created by the California Legislature to be administered by the Water Board in order to provide relief to community water and wastewater systems for unpaid bills (arrearages) related to the COVID-19 pandemic.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeInterest rate risk does exist on short-term borrowings within our credit facilities, as these interest rates are variable. We also have interest rate risk on new financing, as higher interest cost may occur on new debt if interest rates increase. Over the next 12 months, $70.0 million of the $1,177.0 million of existing long-term debt instruments are expected to mature.
Biggest changeInterest rate risk does exist on short-term borrowings 51 Table of Content s within our credit facilities, as these interest rates are variable. We also have interest rate risk on new financing, as higher interest cost may occur on new debt if interest rates increase.
Applying a hypothetical 10 percent increase in the rate of interest charged on those borrowings would not have a material effect on our earnings. 51 Table of Contents
Over the next 12 months, none of the $1,474.2 million of existing long-term debt instruments are expected to mature. Applying a hypothetical 10 percent increase in the rate of interest charged on those borrowings would not have a material effect on our earnings.

Other CWT 10-K year-over-year comparisons