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What changed in CALIFORNIA WATER SERVICE GROUP's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of CALIFORNIA WATER SERVICE GROUP's 2023 and 2024 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 2024 report.

+429 added−432 removedSource: 10-K (2025-02-27) vs 10-K (2024-02-29)

Top changes in CALIFORNIA WATER SERVICE GROUP's 2024 10-K

429 paragraphs added · 432 removed · 315 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

133 edited+64 added−50 removed47 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 our 2021 GRC; • changes in regulatory commissions' policies and procedures, such as the California Public Utilities Commission (CPUC)’s decision in 2020 to preclude companies from proposing fully decoupled WRAMs (which impacted our 2021 GRC); • our ability to collect eligible customer arrearages and program administrative costs under the California Extended Water and Wastewater Arrearages Payment Program; • our ability to invest or apply the proceeds from the issuance of common stock in an accretive manner; • governmental and regulatory commissions' decisions, including decisions on proper disposition of property; • consequences of eminent domain actions relating to our water systems; • increased risk of inverse condemnation losses as a result of climate change and drought; • changes in California State Water Resources Control Board water quality standards; • changes in environmental compliance and water quality requirements; • electric power interruptions, especially as a result of Public Safety Power Shutoff (PSPS) programs; • availability of water supplies; • housing and customer growth; • the impact of opposition to rate increases; 4 Table of Contents • our ability to recover costs; • 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; • the impact of weather, climate change, natural disasters, 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; • 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, increasing interest rates, 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; 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 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.
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: California Water Service Company (Cal Water), New Mexico Water Service Company (New Mexico Water), Washington Water Service Company (Washington 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 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.
(Hawaii Water), TWSC, Inc. (Texas Water), and 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, New Mexico Water, Washington 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 and contracted wastewater utilities.
Our business is conducted through our operating subsidiaries and we provide utility services to approximately two million people. The bulk of the 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 domestic and municipal fire protection services.
In accordance with the 2018 America's Water Infrastructure Act (AWIA), we are required to conduct additional risk and resilience assessments (RRAs) and develop emergency response plans (ERPs) for each of our water systems. These RRAs and ERPs include natural hazards as well as malevolent acts. The first such assessments were completed in 2020.
In accordance with the 2018 America’s Water Infrastructure Act, we are required to conduct additional risk and resilience assessments (RRAs) and develop emergency response plans (ERPs) for each of our water systems. These RRAs and ERPs include natural hazards as well as malevolent acts. The first such assessments were completed in 2020.
To management's knowledge, other than the Orcas Island property, no municipality, water district, or other public agency is contemplating or has any action pending to acquire or condemn any of our systems. Government Regulations Our water and wastewater services are governed by various federal and state environmental protection, health and safety laws, and regulations.
To management’s knowledge, other than the Orcas Island property, no municipality, water district, or other public agency is contemplating or has any action pending to acquire or condemn any of our systems. Government Regulations Our water and wastewater services are governed by various federal, state, and local environmental protection, health and safety laws, and regulations.
This EO maintained the ban on wasteful water uses and retained the State of Emergency for all 58 California counties to allow for drought response and recovery efforts to continue. On May 8, 2023, Cal Water deactivated Stage 2 and moved to Stage 1 of Cal Water's Schedule 14.1 in all regulated service areas.
This EO maintained the ban on wasteful water uses and retained the State of Emergency for all 58 California counties to allow for drought response and recovery efforts to continue. On May 8, 2023, Cal Water deactivated Stage 2 and moved to Stage 1 of Cal Water’s Schedule 14.1 of the WSCP in all regulated service areas.
In Stage 1, irrigating ornamental landscape with potable water is prohibited during the hours of 8:00 a.m. and 6:00 p.m. For Stage 2, irrigating ornamental landscapes with potable water is limited to no more than three days per week as well as prohibited during the hours of 8:00 a.m. and 6:00 p.m.
In Stage 1, irrigating ornamental landscape with potable water is prohibited during the hours of 8:00 a.m. and 6:00 p.m. In Stage 2, irrigating ornamental landscapes with potable water is limited to no more than three days per week as well as prohibited during the hours of 8:00 a.m. and 6:00 p.m.
Cap and trade regulations were implemented 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.
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.
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). 55 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). 56 Greg A.
The agreement allows us to request a rate change annually in order to recover costs. Hawaii Water provides service to approximately 6,500 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 6,700 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).
Formerly, Vice President of Human Resources (2014-2021), Managing Director, Human Resources Partner for United Airlines (2006-2014), served as Vice President of Human Resources for Black & Decker Corporation (1995-2005), Human Resource Manager for General Electric Company (1990-1994), and held various labor relations positions for National Steel and Shipbuilding Company (1982-1989). 67 Michelle R.
Formerly, Vice President of Human Resources (2014-2021), Managing Director, Human Resources Partner for United Airlines (2006-2014), served as Vice President of Human Resources for Black & Decker Corporation (1995-2005), Human Resource Manager for General Electric Company (1990-1994), and held various labor relations positions for National Steel and Shipbuilding Company (1982-1989). 68 Michelle R.
Certain filings, such as General Rate Case (GRC) filings, escalation rate increase filings, and offset filings, may result in rate changes that generally remain in place until the next GRC. As explained below, surcharges and surcredits to recover balancing and memorandum accounts as well as GRC interim rate relief are temporary rate changes, having specific time frames for recovery.
Certain filings, such as GRC filings, escalation rate increase filings, and offset filings, may result in rate changes that generally remain in place until the next GRC. As explained below, surcharges and surcredits to recover balancing and memorandum accounts as well as GRC interim rate relief are temporary rate changes, having specific time frames for recovery.
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. 44 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. 45 Shawn C.
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, 2023, 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, 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.
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). 57 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). 58 Ronald D.
Amongst other things, the 2021 GRC requested 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 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.
Cal Water filed an advice letter to implement new rates based on an authorized 10.27% return on equity, with a 4.23% cost of debt, and an authorized rate of return of 7.46% effective January 1, 2024. These new rates were implemented on January 1, 2024.
Cal Water filed an advice letter to implement new rates based on an authorized 10.27% return on equity, with a 4.23% cost of debt, and an authorized rate of return of 7.46% effective January 1, 2024. These new rates were approved and subsequently implemented on January 1, 2024.
(2008-2014), Assistant General Counsel (Director) at Allegheny Energy, Inc. (2005-2008), and attorney at K&L Gates LLP (1998-2005). 51 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). 52 Shannon C. Dean (2) Senior Vice President, Customer Service & Chief Sustainability Officer since January 1, 2024.
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, meter reading, billing contracts, 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, 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.
For information about revenue from external customers, net income attributable to California Water Service Group and total assets, see "Item 8. Financial Statements and Supplementary Data." Growth We intend to continue exploring opportunities to expand our regulated and non-regulated water and wastewater activities, particularly in the western United States.
For information about revenue from external customers, net income attributable to California Water Service Group and total assets, see “Item 8. Financial Statements and Supplementary Data.” Growth We intend to continue exploring opportunities to expand our regulated and non-regulated water and wastewater activities, particularly in the western United States.
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 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, 12 Table of Contents 2025. The WCCM will remain in effect during the one-year extension.
We monitor water quality standard changes and upgrade our treatment capabilities to maintain compliance with the various regulations. 19 Table of Contents Impact of Climate Change Legislation and Regulation Our operations depend on power provided by other public utilities and, in emergencies, power generated by our portable and fixed generators.
We monitor water quality standard changes and upgrade our treatment capabilities to maintain compliance with the various regulations. Impact of Climate Change Legislation and Regulation Our operations depend on power provided by other public utilities and, in emergencies, power generated by our portable and fixed generators.
Webb (2) Vice President, Chief Human Resource Officer since January 1, 2022.
Webb (2)(3) Vice President, Chief Human Resource Officer since January 1, 2022.
New rates were implemented on February 1, 2021, with the revenue requirement being effective as of August 27, 2020. Due to the complexity of the Project, total project costs exceeded the advice letter cap of $96.1 million. Total project costs incurred as of the end of 2023 were $117.2 million.
New rates were implemented on February 1, 2021, with the revenue requirement being effective as of August 27, 2020. Due to the complexity of the PV Project, total project costs exceeded the advice letter cap of $96.1 million. Total project costs incurred were $117.2 million.
The CPUC is generally required to issue its GRC decision prior to the first day of the test year or authorize interim rates and an Interim Rates Memorandum Account (IRMA). In accordance with the rate case plan, Cal Water filed its most recent GRC filing in July of 2021 (2021 GRC) requesting rate changes effective January 1, 2023.
The CPUC is generally required to issue its GRC decision prior to the first day of the test year or authorize interim rates and an Interim Rates Memorandum Account (IRMA). In accordance with the rate case plan, Cal Water filed its most recent GRC filing in July of 2024 (2024 GRC) requesting rate changes effective January 1, 2026.
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 $4.2 million, $4.2 million, and $3.4 million in 2023, 2022, and 2021, 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 $4.1 million, $4.2 million, and $4.2 million, in 2024, 2023, and 2022, respectively.
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 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”).
The regulated utility entities also provide some non-regulated services. Utility Services holds non-utility property and provides non-regulated services to private companies and municipalities outside of California (see "Non-Regulated Activities" below for more details). Cal Water was the original operating company that began operations in 1926.
The regulated utility entities also provide non-regulated services. Utility Services holds non-utility property and provides non-regulated services to private companies and municipalities outside of California (see “Non-Regulated Activities” below for more details). Cal Water was the original operating company that began operations in 1926.
Shown below are wholesaler price rates and increases that became effective in 2023, and estimated wholesaler price rates and percent changes for 2024.
Shown below are wholesaler price rates and increases that became effective in 2024, and estimated wholesaler price rates and percent changes for 2025.
In 2020, the Project was completed and Advice Letter 2387 was filed asking for authority to increase rates reflecting the Project costs up to the cap, with an effective date of August 27, 2020. The advice letter was approved on January 29, 2021.
In 2020, the PV Project was completed and Advice Letter 2387 was filed asking for authority to increase rates reflecting the PV Project costs up to the cap, with an effective date of 13 Table of Contents August 27, 2020. The advice letter was approved on January 29, 2021.
However, escalation rate increases are district specific and subject to an earnings test. 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 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. In addition, California water utilities are entitled to make offset requests via an advice letter.
Cal Water also seeks a continuation of its existing waiver that authorizes each Cal Water borrowing under its revolving credit arrangements to be payable at periods up to twenty-four months from the date of the applicable borrowing, rather than the twelve-month period currently permitted for short-term borrowings.
Cal Water was also granted a waiver that authorizes each Cal Water borrowing under its revolving credit arrangements to be payable at periods up to twenty-four months from the date of the applicable borrowing, rather than the twelve-month period currently permitted for short-term borrowings.
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) 2023 2022 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) 19,100 19,000 Los Altos (including portions of Cupertino, Los Altos Hills, Mountain View and Sunnyvale) 19,000 19,000 Livermore 19,000 19,000 113,100 113,000 SACRAMENTO VALLEY Chico (including Hamilton City) 31,500 31,300 Oroville 3,700 3,700 Marysville 3,800 3,800 Dixon 3,100 3,100 Willows 2,400 2,400 44,500 44,300 SALINAS VALLEY Salinas Valley Region (including Salinas and King City) 31,800 31,700 31,800 31,700 SAN JOAQUIN VALLEY Bakersfield 74,400 74,100 Stockton 45,200 45,200 Visalia 48,700 48,100 Selma 6,600 6,600 Kern River Valley 4,000 4,100 178,900 178,100 LOS ANGELES AREA East Los Angeles 26,900 27,000 Hermosa Redondo (serving Hermosa Beach, Redondo Beach and a portion of Torrance) 27,300 27,200 Dominguez (Carson and portions of Compton, Harbor City, Long Beach, Los Angeles and Torrance) 34,500 34,400 Los Angeles County Region (including Palos Verdes Estates, Rancho Palos Verdes, Rolling Hills Estates, Rolling Hills, Fremont Valley, Lake Hughes, Lancaster and Leona Valley) 26,000 25,900 Westlake (a portion of Thousand Oaks) 7,100 7,100 Hawthorne and Commerce (leased municipal systems) 7,600 7,700 129,400 129,300 CALIFORNIA TOTAL 497,700 496,400 HAWAII 6,500 6,200 NEW MEXICO 11,400 10,700 WASHINGTON 38,000 37,500 TEXAS 2,800 2,200 COMPANY TOTAL 556,400 553,000 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 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.
With a majority of our sales expected to be subject to the MWRAM and per-unit variations in production costs being covered by the ICBA, fluctuations in financial results are expected to be moderated once the MWRAM and ICBA mechanisms are approved by the CPUC.
With a majority of our sales expected to be subject to the MWRAM and per-unit variations in production costs being covered by the ICBA, fluctuations in financial results are expected to be moderated by the application of the MWRAM and ICBA mechanisms.
The City of Hawthorne capital lease is a 15-year lease and expires in 2026. 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 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.
"Risk Factors—Risks Related to Our Regulatory Environment." We expect environmental regulation to increase, resulting in higher operating costs in the future, and there can be no assurance that the Commissions would approve rate increases to enable us to recover these additional compliance costs.
“Risk Factors—Risks Related to Our Regulatory Environment.” We expect environmental regulation to increase, resulting in higher operating costs in the future, and there can be no assurance that the Commissions will approve rate increases to enable us to recover these additional compliance costs.
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). 61 Thomas A.
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.
Expense Offset Requests Expense offsets are dollar-for-dollar increases in revenue to match increased expenses, and therefore do not affect net operating income. In December of 2022, Cal Water submitted an advice letter to request offsets for increases in purchased water costs and pump taxes in five of its regulated districts totaling $5.1 million.
Expense Offset Requests Expense offsets are dollar-for-dollar increases in revenue to match increased expenses, and therefore do not affect net operating income. In November of 2023, Cal Water submitted an advice letter to request offsets for increases in purchased water costs and pump taxes in six of its regulated districts totaling $5.1 million.
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). 57 David B.
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.
Washington Water accounted for approximately 6.8% of our total customer connections and approximately 3.0% of our total consolidated operating revenue in 2023. New Mexico Water provides service to approximately 11,400 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, and Cypress Gardens systems.
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.
Cal Water's annual revenue sharing with regulated customers was $2.7 million, $2.7 million, and $3.1 million in 2023, 2022, and 2021, respectively. Operating Segment We operate in one reportable segment, the supply and distribution of water and providing water-related utility services.
Cal Water’s annual revenue sharing with regulated customers was $2.8 million, $2.7 million, and $2.7 million in 2024, 2023, and 2022, respectively. Operating Segment We operate in one reportable segment, the supply and distribution of water and providing water-related utility services.
Hawaii Water accounted for 1.2% of our total customer connections and approximately 5.2% of our total consolidated operating revenue in 2023. Washington Water provides domestic water service to approximately 38,000 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 4.3% 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).
Given these drought proclamations and then-existing water usage levels in all of its service areas, in 2022 Cal Water activated Stage 2 of the "Water Use Restrictions of its Water Shortage Contingency Plan" (WSCP) of Schedule 14.1 in all of its service areas; as a result, Cal Water saw an increase in DRMA related costs in 2022 and 2023.
Given these drought proclamations and then-existing water usage levels in all of its service areas, in 2022 Cal Water activated Stage 2 of the “Water Use Restrictions of its WSCP” of Schedule 14.1 in all of its service areas; as a result, Cal Water saw an increase in DRMA related costs in 2022 and 2023.
The law and its implementing regulations required most basins to select a sustainability agency by 2017, develop a sustainability plan by the end of 2022, and show progress toward sustainability by 2027. We expect that after the SGM Act's provisions are fully implemented, substantially all the Company's California groundwater will be produced from sustainably managed and adjudicated basins.
The law and its implementing regulations required most basins to create a sustainability agency by 2017, develop a sustainability plan by the end of 2022, and show progress toward sustainability by 2027. We expect that after the SGMA provisions are fully implemented, all the Company’s California groundwater will be produced from sustainably managed and/or adjudicated basins.
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 blackout periods. During 2023, 2022, and 2021 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 2024, 2023, and 2022 we leased additional emergency generators to respond to potential PSPSs, an electric utility operating paradigm approved by the CPUC.
The reports are available on our website as soon as reasonably practicable after such reports are filed with the SEC. The content on any website referred to in this annual report is not incorporated by reference in this annual report unless expressly noted.
The reports are available on our website as soon as reasonably practicable after such reports are filed with the U.S. Securities and Exchange Commission (SEC). The content on any website referred to in this annual report is not incorporated by reference in this annual report unless expressly noted.
As a result, Cal Water's authorized return on equity in 2025 is expected to be 10.27% plus or minus any changes from the WCCM. 2023 Financing Application for California On October 6, 2023, Cal Water filed a financing application with the CPUC requesting authority to issue up to $1.3 billion of new equity and debt securities, in addition to previously-authorized amounts, to finance water system infrastructure investments in 2024, 2025, and 2026.
As a result, Cal Water’s authorized return on equity in 2026 is expected to be 10.27% plus or minus any changes from the WCCM. 2023 Financing Application for California On August 2, 2024, the CPUC granted Cal Water the authority to issue up to $1.3 billion of new equity and debt securities, in addition to previously-authorized amounts, to finance water system infrastructure investments from 2023 to 2027.
New Mexico's regulated operations are subject to the jurisdiction of the New Mexico Public Regulation Commission (NMPRC). New Mexico Water accounted for approximately 2.0% of our total customer connections and 0.9% of our total consolidated operating revenue in 2023.
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.
Some of our wells extract ground water from water basins under state ordinances. 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.
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.
Our annual groundwater extraction from adjudicated groundwater basins approximates 6.7 billion gallons or 13.1% of our total annual water supply pumped from wells. Historically, we have extracted less than 100% of our annual adjudicated groundwater rights and have the right to carry forward up to 20% of the unused amount to the next annual period.
Our average annual groundwater extraction from adjudicated groundwater basins approximates 7.8 billion gallons or 14.9% of our total average annual (2023 to 2024) water supply pumped from wells. Historically, we have extracted less than 100% of our annual adjudicated groundwater rights and have the right to carry forward up to 20% of the unused amount to the next annual period.
All of our remaining wells extract ground water from managed or unmanaged water basins. There are no set limits for the ground water extracted from these water basins. Our annual groundwater extraction from managed groundwater basins approximates 29.7 billion gallons or 57.6% of our total annual water supply pumped from wells.
All of our remaining wells extract ground water from managed or unmanaged water basins. There are no set limits for the ground water extracted from these water basins. Our average annual groundwater extraction from managed groundwater basins approximates 29.6 billion gallons or 56.4% of our total average annual (2023 to 2024) water supply pumped from wells.
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. We are committed to hiring, developing, and supporting a diverse and inclusive workplace.
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.
In November of 2023, Cal Water submitted an advice letter to request offsets for increases in purchased water costs and pump taxes in six of its regulated districts totaling $5.1 million. The new rates were implemented on January 1, 2024.
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.
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 sources is treated in compliance with federal and state Safe Drinking Water Act (SDWA) standards. Most well supplies are chlorinated or chloraminated for disinfection.
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.
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. 18 Table of Contents Competition and Condemnation Our principal operations are regulated by the Commission of each state.
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.
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, decisions, approvals, authorizations, requirements or other actions, including our 2021 GRC, rate amounts or cost recovery, certain PFAS regulations, and associated impacts, such as our expected or estimated revenue benefit or loss, authorized return on equity, cost of debt and capital structure, 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, estimated future amortization expense, estimates relating to our significant accounting policies, such as deferred revenue or assets or refund of advances, our expectations regarding 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 or our intentions or anticipations regarding our sources of funding, capital structure or capital allocation plans.
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.
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. 64 Michael B.
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.
Formerly, Vice President, Corporate Secretary (2021), Corporate Secretary (2015-2020), Assistant Corporate Secretary (2014), Treasury Manager (2012-2013), Assistant to the Chief Financial Officer (2011), Regulatory Accounting Manager (2008-2010), held various accounting positions at Piller Data Systems (2006-2007), Hitachi Global Storage (2005), Abbot Laboratories (2002-2004), and Symantec (1998-2001). 49 Elissa Y.
Formerly, Vice President, Corporate Secretary (2021), Corporate Secretary (2015-2020), Assistant Corporate Secretary (2014), Treasury Manager (2012-2013), Assistant to the Chief Financial Officer (2011), Regulatory Accounting Manager (2008-2010), held various accounting positions at Piller Data Systems (2006-2007), Hitachi Global Storage (2005), Abbot Laboratories (2002-2004), and Symantec (1998-2001). 50 22 Table of Contents Name Positions and Offices with California Water Service Group Age Elissa Y.
Our well pump taxes for 2023, 2022, and 2021 were $19.0 million, $16.2 million, and $15.3 million, respectively. In 2014, the State of California enacted the Sustainable Groundwater Management Act of 2014 (SGM Act).
Our well pump taxes for 2024, 2023, and 2022 were $21.8 million, $19.0 million, and $16.2 million, respectively. In 2014, the State of California enacted the Sustainable Groundwater Management Act of 2014 (SGMA).
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.
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.
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.
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.
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.
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.
Cal Water intends to pass on this benefit to its Stockton customers through a reduction of its net WRAM receivable. 12 Table of Contents 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, including activities related to enhanced conservation efforts, staffing, and capital expenditures to ensure a safe, reliable water supply.
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.
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.
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.
For additional information on our 2021 GRC, see "Regulatory Activity - California". 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.
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.
Regulated Business California water operations are conducted by Cal Water, which provides service to approximately 497,700 customer connections in approximately 100 California communities through 21 separate districts, which are subject to regulation by the CPUC. California water operations accounted for approximately 89.5% of our total customer connections and 90.6% of our total consolidated operating revenue in 2023.
Regulated Business California water operations are conducted by Cal Water, which provides service to approximately 499,400 customer connections in approximately 100 California communities through 20 separate districts, which are subject to regulation by the CPUC. California water operations accounted for approximately 89.2% of our total customer connections and 92.3% of our total consolidated operating revenue in 2024.
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 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.
(2) Holds the same position with California Water Service Company, CWS Utility Services, Hawaii Water Service Company, Inc., New Mexico Water Service Company, Washington Water Service Company, and TWSC, Inc.
(2) Holds the same position with California Water Service Company, CWS Utility Services, Hawaii Water Service Company, Inc., New Mexico Water Service Company, Washington Water Service Company, and TWSC, Inc. (3) Scheduled to retire on April 1, 2025.
In the second quarter of 2023, the CPUC issued and adopted a proposed decision for the 2021 Cost of Capital Application. Cal Water was authorized a return on equity of 9.05%, a cost of debt of 4.23%, a capital structure of 53.4% equity and 46.6% debt, and an authorized rate of return of 6.80% for 2023 and 2024.
Cal Water was authorized a return on equity of 9.05%, a cost of debt of 4.23%, a capital structure of 53.4% equity and 46.6% debt, and an authorized rate of return of 6.80% for 2023 and 2024.
Cal Water implemented new rates based on an authorized 9.57% return on equity, with a 4.23% cost of debt, and an authorized rate of return of 7.08% on July 31, 2023.
At the time that WCCM triggered and before new rates were implemented Cal Water’s rate of return was 7.48%. Cal Water implemented new rates based on an authorized 9.57% return on equity, with a 4.23% cost of debt, and an authorized rate of return of 7.08% on July 31, 2023.
The CPUC authorized Cal Water to recover revenue associated with costs up to a cap of $96.1 million after the Project was in service, subject to the CPUC's reasonableness review.
Both of these pipelines were approaching the end of their useful lives. The CPUC authorized Cal Water to recover revenue associated with costs up to a cap of $96.1 million after the PV Project was placed in service, subject to the CPUC’s reasonableness review.
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.
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.
As of December 31, 2023, we had 667 employees represented by the UWUA and 90 employees represented by the IFPTE. In 2021, we reached a six-year agreement with both unions on a new contract that runs from May 14, 2021 (UWUA) and October 4, 2021 (IFPTE) through February 28, 2027.
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.
Human Capital Resources We believe our employees are our most valuable asset and are critical to our continued success. We focus our attention on attracting and retaining talented and experienced individuals to manage and support our operations.
Human Capital Resources We believe that our employees are our greatest asset and are critical to our continued success. We place a strong emphasis on attracting and retaining talented and experienced individuals to manage and support our operations.
In 2023, several districts experienced purchased water rate increases, resulting in the filing of several purchased water offsets. 2023 2024 District Effective Month Unit Cost Percent Change Effective Month Unit Cost Percent Change Antelope July $752.00 /af 7.6% July $809.00 /af 7.6% Bakersfield (1) July $195.00 /af 8.9% January $195.00 /af — Bear Gulch July $5.21 /ccf 9.7% January $5.21 /ccf — Commerce (2) January $1,379.00 /af 5.0% January $1,426.00 /af 3.4% Dominguez (2) July $1,605.00 /af 7.0% January $1,677.00 /af 4.5% East Los Angeles (2) January $1,379.00 /af 5.0% January $1,426.00 /af 3.4% Hawthorne (2) July $1,605.00 /af 7.0% January $1,677.00 /af 4.5% Hermosa-Redondo (2) July $1,605.00 /af 7.0% January $1,677.00 /af 4.5% Livermore February $2.27 /ccf 10.2% January $2.34 /ccf 3.1% Los Altos July $2,089.00 /af 13.6% January $2,089.00 /af — Oroville (2) April $216,068 /yr 8.0% January $216,068 /yr —% Palos Verdes (2) July $1,605.00 /af 7.0% January $1,677.00 /af 4.5% Mid-Peninsula July $5.21 /ccf 9.7% January $5.21 /ccf — Redwood Valley January $69.24 /af — January $69.24 /af — South San Francisco July $5.21 /ccf 9.7% January $5.21 /ccf — Stockton October $931,190 /mo 1.4% January $931,190 /mo — Westlake January $1,632.00 /af 4.5% January $1,730.00 /af 6.0% _______________________________________________________________________________ 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 enable adequate, long-term supply for each system.
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.
Environmental Matters Our operations are subject to environmental regulation by various governmental authorities. Environmental health and safety programs have been designed to provide compliance with water discharge regulations, underground and above-ground fuel storage tank regulations, hazardous materials management plans, hazardous waste regulations, air quality permitting requirements, wastewater discharge limitations, and employee safety issues related to hazardous materials.
Environmental health and safety programs have been designed to provide compliance with water discharge regulations, underground and above-ground fuel storage tank regulations, hazardous materials management plans, hazardous waste regulations, air quality regulatory requirements, wastewater discharge limitations, construction controls and mitigations, and employee safety issues related to hazardous materials.
The CPUC issued a decision effective August 27, 2020 requiring that Class A companies submitting GRC filings after the effective date be (i) precluded from proposing the use of a full decoupling WRAM in their next GRCs and (ii) allowed the use of a Monterey-Style Water Revenue Adjustment Mechanism (MWRAM).
California Supreme Court Decision on Decoupling The CPUC issued a decision effective August 27, 2020 requiring that Class A water utilities submitting GRC filings after the effective date be precluded from proposing the use of a full decoupling Water Revenue Adjustment Mechanisms (WRAM) in their next GRCs.
District Water Purchased (MG) Percentage of Total Water Production Source of Purchased Supply SAN FRANCISCO BAY AREA/NORTH COAST Bay Area Region* 6,275 98.9 % San Francisco Public Utilities Commission and Yolo County Flood Control & Water Conservation District Bear Gulch 3,561 100.0 % San Francisco Public Utilities Commission Los Altos 2,147 63.6 % Valley Water Livermore 1,777 67.5 % Alameda County Flood Control and Water Conservation District, Zone 7 SACRAMENTO VALLEY Oroville 668 89.7 % Pacific Gas and Electric Co. and County of Butte SAN JOAQUIN VALLEY Bakersfield 9,811 55.0 % Kern County Water Agency and City of Bakersfield Stockton 6,462 88.9 % Stockton East Water District LOS ANGELES AREA East Los Angeles 586 14.0 % Central Basin Municipal Water District Dominguez 8,108 78.4 % West Basin Municipal Water District and City of Torrance City of Commerce 361 49.5 % Central Basin Municipal Water District City of Hawthorne 1,059 89.1 % West Basin Municipal Water District Hermosa Redondo 2,901 90.2 % West Basin Municipal Water District Los Angeles County Region** 4,451 97.0 % West Basin Municipal Water District and Antelope Valley-East Kern Water Agency Westlake 1,794 100.0 % Calleguas Municipal Water District and Triunfo Water and Sanitation District Kern River Valley 53 22.8 % City of Bakersfield _______________________________________________________________________________ MG = million gallons * Bay Area Region includes Bayshore and Redwood Valley ** 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* 6,361 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.
Under the California Environmental Quality Act (CEQA), all capital projects of a certain type (primarily wells, tanks, major pipelines, and treatment facilities) require mitigation of greenhouse gas emissions.
While recovery of these costs is not guaranteed, we would expect recovery in the regulatory process. Under the California Environmental Quality Act (CEQA), all capital projects of a certain type (primarily wells, tanks, major pipelines, and treatment facilities) require mitigation of greenhouse gas emissions.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

80 edited+22 added−11 removed152 unchanged
Biggest changeThere can be no assurance that we will not face uninsured losses pertaining to the risks we have retained. 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.
Biggest changeConsequently, uninsured losses may negatively affect our financial condition, 35 Table of Contents liquidity, and results of operations. There can be no assurance that we will not face uninsured losses pertaining to the risks we have retained.
Past events in the utility sector, including those in Flint, Michigan and related to Pacific Gas and Electric Company in California, show that failure to meet one or more water quality, environmental, or safety standards can have severe effects on customer trust, reputation, regulatory treatment, or civil and criminal liability.
Past events in the utility sector, including those in Flint, Michigan and those related to Pacific Gas and Electric Company in California, show that failure to meet one or more water quality, environmental, or safety standards can have severe effects on customer trust, reputation, regulatory treatment, or civil and criminal liability.
We rely on policies and regulations promulgated by the various state commissions in order to recover capital expenditures, maintain favorable treatment on gains from the sale of real property, offset certain production and operating costs, recover the cost of debt, maintain an optimal equity structure without over-leveraging, and have financial and operational flexibility to engage in non-regulated operations.
We rely on policies and regulations promulgated by the various Commissions in order to recover capital expenditures, maintain favorable treatment on gains from the sale of real property, offset certain production and operating costs, recover the cost of debt, maintain an optimal equity structure without over-leveraging, and have financial and operational flexibility to engage in non-regulated operations.
The quality and accuracy of those estimates and judgments may have an impact on our operating results and financial condition. In addition, we must estimate unbilled revenues and costs as of the end of each accounting period. If our estimates are not accurate, we would be required to make an adjustment in a future period.
The quality and accuracy of those estimates and judgments may have an impact on our operating results and financial condition. In addition, we must estimate accrued and unbilled revenues and costs as of the end of each accounting period. If our estimates are not accurate, we would be required to make an adjustment in a future period.
Regulators are elected by popular vote or are appointed by elected officials, and the election of a new administration or the appointment of new officials due to the results of elections may result in dramatic change to the long-established rules and policies of an agency. For example, in 2020 regulation regarding full decoupling WRAMs changed in California.
Regulators are appointed by popular vote or are appointed by elected officials, and the election of a new administration or the appointment of new officials due to the results of elections may result in dramatic change to the long-established rules and policies of an agency. For example, in 2020 regulation regarding full decoupling WRAMs temporarily changed in California.
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 any third-party attacks or be in a position to control the outcome of third-party attacks should they occur.
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.
In the event that some outside factor such as a wildfire, flood, 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, 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.
If any of these catastrophic events were to occur, we can give no assurance that our emergency preparedness plans would be adequate and that we would respond effectively, which could result in public or employee harm or adversely affect our revenues, operating results, and financial condition.
If any of these catastrophic events were to occur, we can give no assurance that our emergency preparedness plans would be adequate and that we would respond effectively, which could result in public or employee harm or adversely affect our revenues, operating results, financial condition, and reputation.
However, our costs, which are subject to market conditions and other factors, may increase significantly. The second largest component of our operating costs after water production is made up of salaries and wages. These costs are affected by the local supply and demand for qualified labor.
However, our costs, which are subject to inflationary market conditions and other factors, may increase significantly. The second largest component of our operating costs after water production is made up of salaries and wages. These costs are affected by the local supply and demand for qualified labor.
The market for cybersecurity insurance continues to evolve and may affect the future availability of cyber insurance at reasonable rates. The adequacy of our water supplies depends upon a variety of factors beyond our control. Interruption in the water supply may adversely affect our reputation and earnings.
The market for cybersecurity insurance continues to evolve and may affect the future availability of cybersecurity insurance at reasonable rates. The adequacy of our water supplies depends upon a variety of factors beyond our control. Interruption in the water supply may adversely affect our reputation and earnings.
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; 27 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; 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.
Certain districts obtain all of their supply from wells; some districts purchase all of the supply from wholesale suppliers; and other districts obtain the 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 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.
If we are unable to manage our growth effectively, we may not be able to take advantage of market opportunities, satisfy customer requirements, execute our business plan, or respond to competitive pressures. 32 Table of Contents We have a number of large-volume commercial and industrial customers and a significant decrease in consumption by one or more of these customers could have an adverse effect on our operating results and cash flows.
If we are unable to manage our growth effectively, we may not be able to take advantage of market opportunities, satisfy customer requirements, execute our business plan, or respond to competitive pressures. 33 Table of Contents We have a number of large-volume commercial and industrial customers and a significant decrease in consumption by one or more of these customers could have an adverse effect on our operating results and cash flows.
Additional factors that could cause fluctuations in the trading price of our stock include regulatory developments, such as the CPUC's ultimate 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 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.
If a public agency were to file an eminent domain lawsuit against us, we would incur substantial attorney's fees, consultant and expert fees, and other costs in considering a challenge to the right to take our utility property and/or its valuation for just compensation, as well as such fees and costs in any subsequent litigation if necessary.
If a public agency were to file an eminent domain lawsuit against us, we would incur substantial legal fees, consultant and expert fees, and other costs in considering a challenge to the right to take our utility property and/or its valuation for just compensation, as well as such fees and costs in any subsequent litigation if necessary.
We can give no assurance that any of our plans for water reliability and water shortages, including incorporating projected and potential climate 28 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 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.
If rights are granted to others to serve our customers recycled water, there will likely be a decrease in demand for our water. 29 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. 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.
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 31 Table of Contents reorganization of a subsidiary is generally subject 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 32 Table of Contents 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. 33 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. 34 Table of Contents Our operations are geographically concentrated in California and this lack of diversification may negatively affect our operating results.
Cities may impose or amend franchise requirements, impose conditions on underground construction or land use, impose various taxes and fees, or restrict our hours for construction, among other things. In the last decade, more cities have imposed excavation moratoria or paving rules, which has required more costly construction than anticipated.
Cities may impose or amend franchise requirements, impose conditions on underground construction or land use, impose various taxes and fees, or restrict our hours for construction, among other things. In the last decade, more cities have imposed excavation moratoria or paving rules, which has resulted in delays and required more costly construction than anticipated.
We are required to test our water quality for certain chemicals and potential contaminants on a regular basis. If the test results indicate that our water exceeds allowable limits, we may be required either to commence treatment to remove the contaminant or to develop an alternate water source. Either of these results may be costly.
We are required to test our water quality and wastewater discharges for certain chemicals and potential contaminants on a regular basis. If the test results indicate that our water exceeds allowable limits, we may be required either to commence treatment to remove the contaminant or to develop an alternate water source. Either of these results may be costly.
The number of environmental and product-related lawsuits against other water utilities has increased in frequency in recent years. If we are subject to additional environmental or product-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.
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.
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 incursion, 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 (TCP) and PFAS, seawater intrusion, and possible third-party attacks, including physical attacks, terrorist attacks, and cyber-attacks.
There can be no assurance that the value of our pension plan assets will be sufficient to cover future liabilities.
There can be no assurance that the value of our pension plan assets will continue to be sufficient to cover future liabilities.
We expect environmental health and safety regulation to increase, resulting in higher operating costs in the future and the potential that the company fails to meet these regulatory standards. Our water and wastewater services are governed by various federal and state environmental protection, health and safety laws, and regulations.
We expect drinking water, wastewater and environmental health and safety regulation to increase, resulting in higher operating costs in the future and the potential that the company fails to meet these regulatory standards. Our water and wastewater services are governed by various federal, state, and local environmental protection, health and safety laws, and regulations.
Compliance with new regulations that are more stringent than current regulations could increase our operating costs and capital expenditures, including requirements for increased monitoring, additional treatment of underground water supplies, fluoridation of all supplies, more stringent performance standards for treatment plants, additional procedures to further reduce levels of disinfection by-products, and more comprehensive measures to monitor, reduce or eliminate known or newly identified contaminants.
Compliance with new regulations that are more stringent than current regulations could increase our operating costs and capital expenditures, including requirements for increased monitoring, additional treatment of surface water and groundwater supplies, fluoridation of all supplies, more stringent performance standards for treatment plants, additional procedures to further reduce levels of disinfection by-products, and more comprehensive measures to monitor, reduce or eliminate known or newly identified contaminants.
Natural disasters, climate change, economic conditions, and other factors may change the population in our service areas.
Natural disasters, wildfires, climate change, economic conditions, and other factors may change the population in our service areas.
With this change, actual per-unit purchased water costs are expected to be compared to authorized per-unit purchased water costs, with variances added to or netted against the variances in purchased power and pump taxes being recorded as a cost recovery.
With this change, actual per-unit purchased water costs are compared to authorized per-unit purchased water costs, with variances added to or netted against the variances in purchased power and pump taxes being recorded as a cost recovery.
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 Contents 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. Changes in laws, rules, and policies of our regulators or operating jurisdictions can significantly affect our business.
We have been and may in the future be party to environmental and product-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.
For example, as a regulated utility, we must obtain approval from our state utilities commissions for our cost structure and capital investments, including capital expenditures for implementing ESG programs, and any changes that may affect customer rates need to be approved within the rate case process with the state public utilities commissions.
For example, as a regulated utility, we must obtain approval from our Commissions for our cost structure and capital investments, including capital expenditures for implementing ESG programs, and any changes that may affect customer rates need to be approved within the rate case process with the Commissions.
If we violate any federal or state regulations or laws governing health and safety, we could be subject to substantial fines or otherwise sanctioned, subject to potential civil liability for damages, and our customers' trust in our operations ability could be eroded. Environmental health and safety laws are complex and change frequently.
If we violate any federal or state regulations or laws governing health and safety, we could be subject to substantial fines or otherwise sanctioned, subject to potential civil liability for damages, and our customers’ trust in our operations ability could be eroded. Drinking water, wastewater, and environmental health and safety laws are complex and change frequently.
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. 34 Table of Contents 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. We retain certain risks not covered by our insurance policies.
The rates that we charge our water 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.
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 effects of natural disasters, attacks by third parties, or poor water quality or contamination to our water supply 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, fires, 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 and financial condition. We operate in areas that are prone to earthquakes, urban fires, wildfires, landslides, mudslides, and other natural disasters.
We cannot give any assurance that these sources will continue to be adequate or that the cost of funds will remain at levels permitting us to earn a reasonable rate of return.
We cannot give any assurance that these sources will continue to be adequate or that the cost of funds will remain 31 Table of Contents at levels permitting us to earn a reasonable rate of return.
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 35 Table of Contents 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 that continue to evolve, and assumptions that are subject to change in the future.
The balance in the ICBA is expected to be collected in the future by billing the ICBA accounts receivable balances over future periods, which may have a short-term negative impact on cash flow. Dependency upon adequate supply of electricity, certain chemicals, and third-party suppliers of parts and skilled labor could adversely affect our results of operations.
The balance in the ICBA is collected/refunded in the future by billing the ICBA accounts receivable/payable balances over future periods, which may have a short-term negative impact on cash flow. Dependency upon adequate supply of electricity, certain chemicals, and third-party suppliers of parts and skilled labor could adversely affect our results of operations.
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 2023 and 2022, purchased power expense represented 6.4% and 6.2%, 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 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.
Any 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 products; • 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.
Any 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.
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 WRAM and MCBA receivables or receivables under subsequent recovery mechanisms, such as MWRAM and ICBA.
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.
Although we own facilities in a number of states, 90.6% of our total consolidated operating revenue was generated by our operations located in California in 2023. 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, 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.
The cost of purchased water for delivery to customers represented 31.2% of our total operating costs in 2023 and in 2022. 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 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.
Standard & Poor's Rating Agency issues a rating on California Water Service Company'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 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.
We may also be similarly impacted by stagnating or worsening business and economic conditions, including general economic slowdown or a recession, 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, 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.
This material weakness has since been remediated. Internal control over financial reporting has inherent limitations, including human error, the possibility that controls could be circumvented or become inadequate because of changed conditions, and fraud. Because of these inherent limitations, internal control over financial reporting might not prevent or detect all misstatements or fraud.
Internal control over financial reporting has inherent limitations, including human error, the possibility that controls could be circumvented or become inadequate because of changed conditions, and fraud. Because of these inherent limitations, internal control over financial reporting might not prevent or detect all misstatements or fraud.
We fund our capital requirements from cash received from operations, from funds received from developers, by raising equity through common stock issuances or by issuing debt 30 Table of Contents obligations.
We fund our capital requirements from cash received from operations, from funds received from developers, by raising equity through common stock issuances or by issuing debt obligations.
Although we contributed to our pension plan in recent years, it is possible that we could incur a pension liability adjustment, or could be required to make additional cash contributions to our pension plan, which would reduce the cash available for business and other needs. Labor relations matters could adversely affect our operating results.
Although we contributed to our pension plan in recent years, it is possible that we could incur a pension liability adjustment, or could be required to make additional cash contributions to our pension plan, which would reduce the cash available for business and other needs.
If the dam were to fail for any reason, we would lose a water supply and flooding likely would occur. Whether or not we were responsible for the dam's failure, we could be sued. We can give no assurance that we would be able to defend such a suit successfully. We operate several water and wastewater treatment plants.
If the dam were to fail for any reason, we would lose a water supply and flooding likely would occur. Whether or not we were responsible for the dam’s failure, our reputation could be harmed, and we could be sued. We can give no assurance that we would be able to defend such a suit successfully.
For example, we experienced an increase in bad debt expense in 2022, which we believe was due to economic impact of the COVID-19 pandemic.
We may also encounter an increase in bad debt expense in times of economic difficulty. For example, we experienced an increase in bad debt expense in 2022, which we believe was due to the economic impact of the COVID-19 pandemic.
Item 1B. Unresolved Staff Comments. None. 36 Table of Contents
Item 1B. Unresolved Staff Comments. None. 37 Table of Contents
At December 31, 2023, 757 of our 1,266 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, 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.
In addition, if current California law regarding CPUC's preemptive jurisdiction over regulated public utilities for claims about compliance with California Department of Health Services and United States EPA water quality standards changes, our legal exposure may be significantly increased.
In addition, if current California law regarding CPUC’s preemptive jurisdiction over regulated public utilities for claims about compliance with California State Water Resources Control Board and United States EPA water quality standards changes, our legal exposure may be significantly increased.
If we determine that assets are no longer used or useful for utility operations, we may remove them from our rate base and subsequently sell those assets with any gain on sales accruing to the stockholders, subject to certain conditions.
If we determine that real property is no longer used or useful for utility operations, we may remove it from our rate base and subsequently sell the property with any gain on sales accruing to the stockholders, subject to certain conditions.
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 regulatory commissions. Consequently, uninsured losses may negatively affect our financial condition, liquidity, and results of operations.
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.
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 $187.1 million, or 23.7%, of our 2023 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 $210.4 million, or 23.2%, of our 2024 water utility revenues was derived from business and industrial customers.
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 is expected to change with the adoption of the ICBA, which is pending approval 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 GRC.
Our subsidiaries are separate and distinct legal entities and generally have no obligation to pay any amounts due on California Water Service Group's debt or to provide California Water Service Group with funds for dividends.
Our subsidiaries are separate and distinct legal entities and generally have no obligation to pay any amounts due on our Company’s debt or to provide our Company with funds for dividends.
In addition to claims that our water or wastewater systems damaged property, Cal Water could be sued under inverse 25 Table of Contents condemnation if its facilities or operations damage private property, or if it is unable to timely deliver sufficient quantities of water for firefighting because of system capacity limitations or water supply disruptions, including as a result of action taken by an electric utility pursuant to a PSPS program or other loss of power.
In addition to claims that our water or wastewater systems damaged property, Cal Water has been and could in the future be sued under inverse condemnation, including pursuant to allegations or claims that our facilities or operations damage private property, or that we are unable to timely deliver sufficient quantities of water for firefighting because of system capacity limitations or water supply disruptions, including as a result of action taken by an electric utility pursuant to a PSPS program or other loss of power.
In the event these contractors are unavailable or cannot meet the demands imposed on them, we may face significantly lengthy interruptions of service or delays in constructing capital projects. We may face additional costs to acquire more resources to complete these activities.
We also rely on outside contractors to complete large construction projects and provide emergency maintenance services. In the event these contractors are unavailable or cannot meet the demands imposed on them, we may face significantly lengthy interruptions of service or delays in constructing capital projects. We may face additional costs to acquire more resources to complete these activities.
In those circumstances, the remaining customers might not be able to pay for the operating costs or capital costs of the water system. We may not be able to recover capital costs of property that is no longer used or useful in utility service. We may also encounter an increase in bad debt expense in times of economic difficulty.
In those circumstances, the remaining customers might not be able to pay for the operating costs or capital costs of the water system. We may not be able to recover capital costs of property that is no longer used or useful in utility service.
In 2023, 90.6% of our total consolidated operating revenue was derived from the operations of California Water Service Company. As a result, we are dependent on cash flow from our subsidiaries, and California Water Service Company in particular, to meet our obligations and to pay dividends on our common stock.
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.
Should parts and material become unavailable, or should the cost of necessary supplies rise substantially, it could adversely affect our ability to operate or have financial effects that are not recoverable through a regulatory process. We also rely on outside contractors to complete large construction projects and provide emergency maintenance services.
We rely on outside contractors to supply us with materials and parts critical to the operation of our systems. Should parts and material become unavailable, or should the cost of necessary supplies rise substantially, it could adversely affect our ability to operate or have financial effects that are not recoverable through a regulatory process.
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.
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.
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 regulation limits emissions from the power generation process, our cost of power may increase.
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.
New and future laws and regulations could increase the complexity of and costs associated with compliance with such regulations, which could have a material adverse effect on our business, results of operations, and financial condition.
New and future laws and regulations, including related uncertainty from modifications to or reversals of such regulations, or inconsistency between requirements in different jurisdictions, could increase the complexity of and costs associated with compliance with such regulations, which could have a material adverse effect on our business, results of operations, and financial condition.
The accuracy of our financial reporting is dependent on the effectiveness of our internal controls. We are required to provide a report from management to our stockholders on our internal control over financial reporting that includes an assessment of the effectiveness of these controls.
We are required to provide a report from management to our stockholders on our internal control over financial reporting that includes an assessment of the effectiveness of these controls, and management has in the past concluded that our internal control over financial reporting was not effective, which was remediated.
Additionally, 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.
Even if approved, there is no guarantee that approval will be given in a timely manner or at a sufficient level to cover our expenses and provide a reasonable return on our investment. If the rate increase decisions are delayed or approved at a level that is lower than what we have requested, our earnings may be adversely affected.
Even if approved, there is no guarantee that approval will be given in a timely manner or at a sufficient level to cover our expenses and provide a reasonable return on our investment.
If a major failure of these facilities were to occur, we would have an interruption in service, potential flooding, and could release potentially harmful material into the environment. 26 Table of Contents We operate over 7,000 miles of underground pipeline. Some failures of underground pipelines could release disinfection chemicals into the environment, which have a negative impact on sensitive habitats.
We operate several water and wastewater treatment plants. If a major failure of these facilities were to occur, we would have an interruption in service, potential flooding, and could release potentially harmful material into the environment. We operate over 7,000 miles of underground pipeline.
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 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.
Therefore, you should not consider the following risks to be a complete statement of all the potential risks or uncertainties that we face. 22 Table of Contents Risks Related to Our Regulatory Environment Our business is heavily regulated by state and federal regulatory agencies and our financial viability depends upon our ability to recover costs and investments from our customers through rates that must be approved by state public utility commissions.
Risks Related to Our Regulatory Environment Our business is heavily regulated by state and federal regulatory agencies and our financial viability depends upon our ability to recover costs and investments from our customers through rates that must be approved by state public utility commissions.
A significant seismic event 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. The CPUC has historically allowed utilities to establish a catastrophic event memorandum account as another possible mechanism to recover costs.
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.
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 have been precluded from recording WRAM revenue since the conclusion of the WRAM as of December 31, 2022.
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.
There are currently limited regulatory mechanisms and procedures available to us for the recovery of such costs and there can be no assurance that such costs will be fully recovered and failure to do so may adversely affect our operating results. 24 Table of Contents Attention is being given to contaminants of emerging concern, including, without limitation, chemicals and other substances that currently do not have any regulatory standard in drinking water or have been recently created or discovered.
There are currently limited regulatory mechanisms and procedures available to us for the recovery of such costs and there can be no assurance that such costs will be fully recovered and failure to do so may adversely affect our operating results.
The amount of such required cash contribution is based on an actuarial valuation of the plan. The funded status of the plan can be affected by investment returns on plan assets, discount rates, mortality rates of plan participants, pension reform legislation, and a number of other factors.
At present, the pension plan is over funded because the aggregate fair value of our plan assets exceeds the projected pension benefit obligation, but the funded status of the plan can be affected by investment returns on plan assets, discount rates, mortality rates of plan participants, pension reform legislation, and a number of other factors.
As with purchased water, purchased power costs are expected to be included in the ICBA. Cash flows between rate filings may be adversely affected until the Commission authorizes a rate change, but earnings will be minimally impacted.
As with purchased water, purchased power costs are included in the ICBA. Cash flows between rate filings may be adversely affected until the Commission authorizes a rate change. Cost of chemicals used in the delivery of water is not an element of the ICBA, and therefore, variances in quantity or cost could affect the results of operations.
At the same time, stakeholders and regulators have increasingly expressed or pursued opposing views, legislation, and investment expectations with respect to sustainability initiatives, including the enactment or proposal of "anti-ESG" legislation or policies. Implementing our ESG programs involves risks and uncertainties, including increased costs, requires investments and often depends on third-party performance or data that is outside our control.
At the same time, stakeholders and regulators have 36 Table of Contents increasingly expressed or pursued opposing views, legislation, and investment expectations with respect to sustainability initiatives, including the enactment or proposal of “anti-ESG” legislation or policies.
At present, the pension plan is underfunded because our projected pension benefit obligation exceeds the aggregate fair value of plan assets. Under applicable law, we are required to make cash contributions to the extent necessary to comply with minimum funding levels imposed by regulatory requirements.
Under applicable law, we are required to make cash contributions to the extent necessary to comply with minimum funding levels imposed by regulatory requirements. The amount of such required cash contribution is based on an actuarial valuation of the plan. Labor relations matters could adversely affect our operating results.
For example, the CPUC has not issued its final decision on our 2021 GRC, which has resulted in lower revenues in 2023 and is leading to financial and operating uncertainty for the Company.
For example, the CPUC did not issue its decision on our 2021 GRC until March 2024, over a year later than expected, which caused uncertainty around and volatility in our financial and operating results until that time.

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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) 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 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.”
The Board and Audit Committee receive regular reports from management no less than quarterly, and on an ad hoc basis, on information and operational technology risks, including cybersecurity and data security risks, as well as on the status of projects to strengthen our information security systems, assessments of our security program, and the emerging threat landscape.
The Board and Audit Committee receive regular but no less than quarterly reports from management, and on an ad hoc basis, on information and operational technology risks, including cybersecurity and data security risks, as well as on the status of projects to strengthen our information security systems, assessments of our security program, and the emerging threat landscape.
Item 1C. Cybersecurity. Governance The Board and Audit Committee are responsible for overseeing IT and OT risks from cybersecurity threats. The Board recognizes the importance of maintaining the trust and confidence of our customers, employees, and stockholders and the need to protect information stored on our and our vendors' systems, including personal and proprietary data.
Item 1C. Cybersecurity. Governance The Board and Audit Committee are responsible for overseeing IT and OT risks from cybersecurity threats. The Board recognizes the importance of maintaining the trust and confidence of our customers, employees, regulators, and stockholders and the need to protect information stored on our and our vendors’ systems, including personal and proprietary data.
The IRP applies to all Company personnel and third-party contractors, vendors, and partners that perform functions or services that require access to secure our information, and to all devices and network services that are owned or managed by the Company. 37 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. 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.
We review and approve software and hardware acquisitions to enhance our ability to detect and manage cybersecurity threats. We also engage the FBI, DHS, and Fusion Center for incident response support and collaborate to share critical information. Management also shares knowledge to protect our infrastructure and learn from recent developments.
We review and approve software and hardware acquisitions to enhance our ability to detect and manage cybersecurity threats. We also engage the FBI, DHS, and fusion centers for incident response support and collaborate to share critical information. Management also shares knowledge to protect our infrastructure and learn from recent developments.
In the last fiscal year, we have not identified risks from known cybersecurity threats, including as a result of any prior cybersecurity incidents, that have materially affected us, but we face certain ongoing cybersecurity risks threats that, if realized, are reasonably likely to materially affect us.
Since the beginning of the last fiscal year, we have not identified risks from known cybersecurity threats, including as a result of any prior cybersecurity incidents, that have materially affected us, but we face certain ongoing cybersecurity risks threats that, if realized, are reasonably likely to materially affect us.
Our Information Technology team also conducts rehearsals of our IRP to test and enhance our ability to respond to cybersecurity incidents. • Monitoring for risks: We engage a third party cybersecurity firm to manage our Security Operations Center (SOC) who is responsible for monitoring our network traffic 24/7.
Our IT team also conducts rehearsals of our IRP to test and enhance our ability to respond to cybersecurity incidents. • Monitoring for risks: We engage a third-party cybersecurity firm to manage our Security Operations Center (SOC), which is responsible for monitoring our network traffic 24/7.
We also assign enhanced cybersecurity training to employees who have access to potentially sensitive governmental information.
We also assign enhanced cybersecurity training to employees who have access to potentially sensitive government information.
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The team is also responsible for overseeing any third-party firms used as part of our information security strategy.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWashington Water has long-term bank loans that are secured primarily by utility plant owned by Washington Water. Texas Water, through its majority ownership of BVRT, owns and operates four wastewater treatment plants. The plants have a treatment capacity of 795,000 gallons per day.
Biggest changeTexas 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 29 storage tanks with a storage capacity of 11.0 million gallons. There are 210 miles of supply and distribution lines. 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. There are eight lift stations and 35 miles of sewer collection mains.
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, manages two potable wells, and manages five irrigation 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.
These properties are located in or near the geographic service areas listed above in Item 1, "Business—Geographical Service Areas and Number of Customer Connections at Year-end." Our headquarters, which houses accounting, engineering, information systems, human resources, legal, purchasing, regulatory, water quality, and executive staff, is located in San Jose, California. The real properties owned are held in fee simple title.
These properties are located in or near the geographic service areas listed above in Item 1, “Business—Geographical Service Areas and Number of Customer Connections at Year-end.” Our headquarters, which houses accounting, engineering, information systems, human resources, legal, purchasing, regulatory, water quality, and executive staff, is located in San Jose, California. The real properties owned are held in fee simple title.
Cal Water owns and operates six surface water treatment plants with a combined capacity of 46 million gallons per day. There are 6,743 miles of supply and distribution mains in the various owned and managed systems.
Cal 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.
Properties owned by Cal Water are subject to the lien of an Indenture of Mortgage and Deed of Trust dated 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 $1,050.0 million was outstanding at December 31, 2023.
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.
There are 38 storage tanks with a storage capacity of 35.8 million gallons. There are 246 miles of supply and distribution lines. Hawaii Water operates seven wastewater treatment facilities with a combined capacity to process approximately 4.8 million gallons per day. There are 77.1 miles of sewer collection mains including force mains.
There are 38 storage tanks with a storage capacity of 35.8 million gallons. There are 246 miles of supply and distribution mains. Hawaii Water operates seven wastewater treatment facilities with a combined capacity to process approximately 4.8 million gallons per day. There are 89.7 miles of sewer collection mains including force mains.
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, 2023, our California utility was in compliance with the covenants of the California Indenture. 38 Table of Contents Cal Water owns 600 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, 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.
Washington Water owns 469 wells and manages 5 wells. There are 194 owned storage tanks with a storage capacity of 23.8 million gallons. There are 734 miles of supply and distribution lines. Washington Water operates one wastewater treatment plant with 1.3 miles of sewer collection mains. New Mexico Water owns 29 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 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.
There are 408 owned storage tanks with a capacity of 290 million gallons, one leased storage tanks with a capacity of 0.25 million gallons, 28 managed storage tanks with a capacity of 32 million gallons, and three surface water reservoirs with a capacity of 241 million gallons.
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.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings. Information with respect to this item may be found under the subheading "Commitments and Contingencies" in Note 14 of the Notes to Consolidated Financial Statements in Item 8, which is incorporated herein by reference. Item 4. Mine Safety Disclosures. Not applicable. PART II
Biggest changeItem 3. Legal Proceedings. Information with respect to this item may be found under the subheading “Contingencies and Commitments” in Note 15 of the Notes to Consolidated Financial Statements in Item 8, which is incorporated herein by reference. 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 changeOn January 25, 2024, our Board declared a quarterly cash dividend of $0.28 per common share payable on February 23, 2024, to stockholders of record on February 12, 2024. This represents an indicated annual cash dividend of $1.12, and would be our 57th consecutive year of increasing the annual dividend and marks the 316th consecutive quarterly dividend.
Biggest changeThis 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.
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, 2023.
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.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers None. Item 6. [Reserved] Not applicable. 40 Table of Contents
Purchases of Equity Securities by the Issuer and Affiliated Purchasers None. Item 6. [Reserved] Not applicable. 41 Table of Contents
During 2023, we paid a cash dividend of $1.04 per common share, or $0.26 per quarter. During 2022, we paid a cash dividend of $1.00 per common share, or $0.25 per quarter.
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.
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, 2023, there were 57,723,738 common shares outstanding. There were 1,767 common stockholders of record as of February 12, 2024.
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.
The comparison assumes $100 was invested on December 31, 2018, in California Water Service Group's common stock and in each of the forgoing indices and assumes reinvestment of dividends. 39 Table of Contents Performance Graph Data The following descriptive data is supplied in accordance with Rule 304(d) of Regulations S-T: 2018 2019 2020 2021 2022 2023 California Water Service Group 100 108 113 151 127 109 S&P 500 100 131 156 200 164 207 RW Baird Water Utility Index 100 134 155 189 156 133 An initial $100 investment in the common stock of California Water Service Group on December 31, 2018 including reinvestment of dividends would be worth $109 at the end of the 5-year period ending December 31, 2023.
The 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.
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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.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeItem 6. R eserved 40 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 41 Overview 41 Critical Accounting Policies and Estimates 42 Results of Operations 45 Rates and Regulation 47 Water Supply 48 Liquidity and Capital Resources 48 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 53 Item 8.
Biggest changeItem 6. Reserved 41 Item 7. Management ’ s Discussion and Analysis of Financial Condition and Results of Operations 42 Overview 42 Critical Accounting Policies and Estimates 42 Results of Operations 44 Rates and Regulation 46 Water Supply 46 Liquidity and Capital Resources 46 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 51 Item 8.

Item 7. Management's Discussion & Analysis

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

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Biggest changeThe sources of change in operating revenue were: 2023 2022 Dollars in millions Net change due to rate changes, usage, and other (1) $ 17.9 $ 6.2 WRAM revenue (2) (74.3) 42.7 MCBA revenue (3) 7.4 (11.2) Other balancing account revenue (4) 4.9 1.3 Deferral of revenue (5) (7.7) 16.5 Net change $ (51.8) $ 55.5 _______________________________________________________________________________ (1) In 2023, the net change due to rate changes, usage, and other in the above table was primarily driven by rate increases in California of $30.7 million, which was partially offset by a 3.4% decrease in customer usage, which we believe is primarily due to higher winter precipitation in our California service territories and water conservation compared to 2022.
Biggest changeThe 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 following tables present summarized financial information of the Issuer subsidiary 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 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.
Acquisitions There were no significant acquisitions in 2023 or 2022. 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.
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.
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, 2023.
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.
The comparative results for fiscal 2022 with fiscal 2021 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, 2022.
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.
On December 22, 2017, the U.S. government enacted expansive tax legislation commonly referred to as the TCJA. Among other provisions, the TCJA reduced 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 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 2023 compared to fiscal 2022 as well as certain 2021 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 2024 compared to fiscal 2023 as well as certain 2022 results.
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. Management expects this trend to continue given our capital expenditures plan for the next five years.
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. Management expects this trend to continue given our capital expenditure plans for the next five years.
In addition, the decision retained approximately $94.0 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 2023.
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.
Management does not expect this restriction to have a material impact on the Company's ability to meet its cash obligations in 2024 and beyond. Long-term financing, which includes First Mortgage Bonds, senior notes, other debt securities, and common stock, has typically been used to replace short-term borrowings and fund capital expenditures.
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.
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 State Water Resources Control Board (Water Board) in order to provide relief to community water and wastewater systems for unpaid bills (arrearages) related to the COVID-19 pandemic.
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.
Also, the Company and Cal Water facilities contain financial covenants that require the Company and its subsidiaries’ consolidated total capitalization ratio not to exceed 66.7% and an interest coverage ratio of three or more (each as defined in the respective credit agreements).
Also, the Company and Cal Water facilities contain financial covenants that require the Company and its subsidiaries’ debt portion of the Company’s consolidated total capitalization ratio not to exceed 66.7% and an interest coverage ratio of three or more to one (each as defined in the respective credit agreements).
We expect our annual capital expenditure to continue to increase during the next five years due to increasing needs to replace and maintain infrastructure. 51 Table of Contents Management expects there will be developer-funded expenditures in 2024 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 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.
The program will be ongoing for a period of several years. There were no significant sales in 2023 and 2022. As sales are dependent on real estate market conditions, future sales, if any, may or may not be at prior year levels. 52 Table of Contents
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.
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 5.500% 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.
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.
Investing Activities During 2023 and 2022, we used $383.7 million and $327.8 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 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.
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 $253.9 million at December 31, 2023 and $219.2 million at December 31, 2022.
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.
As of December 31, 2023, our consolidated total capitalization ratio was 46.4% and the interest coverage ratio was greater than four. 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, 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.
Changes in 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 expenses in California would be recovered from our customers through the ICBA mechanism once the 2021 GRC is resolved.
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.
The proceeds from the Company and Cal Water facilities may be used for working capital 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.
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 Structure Total equity was $1,430.3 million at December 31, 2023, compared to $1,322.4 million at December 31, 2022. The Company sold 2,025,891 and 1,802,063 shares of its common stock in 2023 and 2022, respectively through its at-the-market equity program.
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.
At December 31, capitalization ratios were: 2023 2022 Equity 57.6 % 55.6 % Long-term debt 42.4 % 44.4 % The return (from both regulated and non-regulated operations) on average equity was 3.8% in 2023 compared to 7.7% in 2022.
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.
The increase was due primarily to a $12.1 million increase in the unrealized gains from certain non-qualified benefit plan investments due to market conditions, $5.7 million increase in other components of net periodic benefit credit, and a $1.4 million increase in allowance for equity funds used during construction, which was partially offset by a $2.8 million decrease in non-regulated revenue and a $5.3 million increase in income tax expense.
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.
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.
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.
Net Interest Expense For 2023, net interest expense increased $5.5 million, or 12.4%, compared to 2022. The increase was primarily due to higher short-term borrowing rates and higher outstanding borrowings on our short-term credit facilities. Rates and Regulation The following is a summary of 2023 rate filings.
Net Interest Expense For 2024, net interest expense increased $7.7 million, or 15.5%, compared to 2023. The increase was primarily due to higher average short-term borrowing rates and higher outstanding borrowings on our short-term credit facilities. Rates and Regulation The following is a summary of 2024 rate filings that impacted revenue requirement.
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. In 2023, purchased power expenses increased $1.1 million mainly due to an increase in rates from our power providers.
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.
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.
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.
A description of the "Type of Filing" can be found in the "Item 1 - Rates and Regulation" section above. California decisions and resolutions may be found on the CPUC website at www.cpuc.ca.gov.
A description of the “Type of Filing” can be found in the “Item 1 - Rates and Regulation” section above. California decisions and resolutions may be found on the CPUC website at www.cpuc.ca.gov.
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. 48 Table of Contents The under-collected net WRAM and MCBA receivable balances were $64.2 million and $104.7 million as of December 31, 2023 and 2022, respectively.
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 cost of living adjustment was assumed at 2.23% and has a floor of 2.0%. 44 Table of Contents Results of Operations Operating Revenue Operating revenue in 2023 was $794.6 million, a decrease of $51.8 million, or 6.1%, over 2022. Operating revenue in 2022 was $846.4 million, an increase of $55.5 million, or 7.0%, over 2021.
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.
We intend to use the net proceeds from these sales, after deducting commissions on such sales and offering expenses, for general corporate purposes, which may include working capital, construction and acquisition expenditures, investments and repurchases, and redemptions of securities. Additional information regarding this program is presented in Note 6 of the Notes to Consolidated Financial Statements.
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.
Cal Water expects approval of the request in the first quarter of 2024. 41 Table of Contents 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 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.
The increase in cash flow during the summer allows for a pay down of short-term 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.
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.
Additional information regarding the bank borrowings and long-term debt is presented in Notes 7 and 8 in the Notes to Consolidated Financial Statements. 49 Table of Contents 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 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.
The following sections describe those policies where the level of subjectivity, judgment, and variability of estimates could have a material impact on the financial condition, operating performance, and cash flows of the business.
The following sections describe those policies where the level of subjectivity, judgment, and variability of estimates could have a material impact on the financial condition, operating performance, and cash flows of the business. Regulated Utility Accounting Because our primary business is operating a regulated business, we are subject to the accounting rules and standards for regulated utilities.
Advances for construction represent annual contract refunds to developers for the cost of water systems paid for by the developers. The contracts are non-interest bearing, and refunds are generally on a straight-line basis over a 40-year period. System and facility leases include obligations associated with leasing water systems and rents for office space.
The contracts are non-interest bearing, and refunds are generally on a straight-line basis over a 40-year period. System and facility leases include obligations associated with leasing water systems and rents for office space. For finance and operating lease obligations, see Note 15 of the Notes to Consolidated Financial Statements.
Summarized Statement of Operations (in thousands) 2023 2022 Issuer Guarantor Issuer Guarantor Net sales $ 720,577 $ — $ 775,382 $ — Gross profit $ 449,221 $ — $ 506,890 $ — Income from operations $ 82,157 $ 590 $ 124,464 $ 363 Equity in earnings of guarantor $ 49,998 $ — $ 94,339 Net income $ 57,168 $ 51,376 $ 92,769 $ 95,263 Summarized Balance Sheet Information (in thousands) As of December 31, 2023 As of December 31, 2022 Issuer Guarantor Issuer Guarantor Current assets $ 213,469 $ 10,126 $ 208,962 $ 31,913 Intercompany receivable from guarantor & non-issuer subsidiaries 3,664 44,882 3,339 34,100 Other assets 479,642 1,190,076 450,668 1,080,720 Long-term intercompany receivable from non-issuer subsidiaries — 82,610 — 37,869 Net utility plant 3,487,788 — 2,805,242 — Total assets $ 4,184,563 $ 1,327,694 $ 3,468,211 $ 1,184,602 Current liabilities $ 351,964 $ 53,069 $ 242,538 $ 35,260 Intercompany payable to non-issuer subsidiaries — — 562 — Long-term debt 1,052,350 — 1,051,994 — Other liabilities 1,595,852 3,068 1,098,378 2,485 Total Liabilities $ 3,000,166 $ 56,137 $ 2,393,472 $ 37,745 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. 50 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.
Summarized 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.
Long-Term Financing Long-term financing is accomplished using both debt and equity. Cal Water was authorized to issue $700.0 million of debt and common stock to finance capital projects and operations by a CPUC decision dated November 5, 2020.
Long-Term Financing Long-term financing is accomplished using both debt and equity. Cal Water was authorized to issue $1.3 billion of new debt and equity to finance capital projects and operations by a CPUC decision dated August 2, 2024.
Overview Net Income Attributable to California Water Service Group In 2023 and 2022, net income attributable to California Water Service Group was $51.9 million and $96.0 million, respectively. Earnings per diluted common share decreased $0.86 from $1.77 to $0.91 or 48.6% in 2023.
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.
In addition, the CPUC's decision allowed for ICBAs to replace the MCBA. The MWRAM tracks the difference between the revenue received for actual metered sales through the tiered volumetric rate and the revenue that would have been received with the same actual metered sales if a uniform rate had been in effect.
(3) MWRAM revenue is the variance between actual metered sales billed through the tiered volumetric rate and the revenue that would have been received with the same actual metered sales if a uniform rate had been in effect.
Financing Activities During 2023, we borrowed $227.8 million, and paid down $120.0 million on our unsecured revolving credit facilities for general corporate purposes. We also received $21.2 million of advances and contributions in aid of construction, which was reduced by refunds to developers of $9.4 million. We paid $1.8 million for matured First Mortgage Bonds and other long-term debt obligations.
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.
The TCJA required the Company to re-measure all existing deferred income tax assets and liabilities to reflect the federal tax rate reduction. As of December 31, 2023, the TCJA refund liability was $92.5 million.
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.
For each contract, the cost of water is established by the wholesale supplier and is generally beyond our control. The amount paid annually to the wholesale suppliers is charged to purchased water expense on our statements of operations. Most contracts do not require minimum annual payments and vary with the volume of water purchased.
The amount paid annually to the wholesale suppliers is charged to purchased water expense on our Consolidated Statements of Operations. Most contracts do not require minimum annual payments and vary with the volume of water purchased. For more details related to water supply contracts, see Note 15 of the Notes to Consolidated Financial Statements.
As such, these rates are beyond our control. 45 Table of Contents The table below provides the change in water production expenses during the past 2 years: 2023 2022 Amount Change % Change Amount Change % Change Dollars in millions Purchased water $ 223.8 $ (0.7) (0.3) % $ 224.5 $ (0.5) (0.2) % Purchased power 45.7 1.1 2.5 % 44.6 7.5 20.2 % Pump taxes 19.0 2.8 17.3 % 16.2 0.9 5.9 % Total water production expenses $ 288.5 $ 3.2 1.1 % $ 285.3 $ 7.9 2.8 % The principal factors affecting water production expenses are the quantity, price, and source of the water.
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.
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 $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.
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.
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.
The Company’s effective combined income tax rate for 2023 was (15.2%) as compared to 6.2% for 2022. Property and Other Taxes For 2023, property and other taxes increased $1.2 million, or 3.4%, compared to 2022. The increase was mostly due to an increase in our assessed property values for utility plant placed in service during the year.
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.
In 2023, the California Extended Water and Wastewater Arrearages Payment Program was established and extended the relief period to include arrearages accrued from June 16, 2021 to December 31, 2022. In response to the extended program, Cal Water submitted an application for $83.0 million in eligible customer arrearages and program administrative costs that was subsequently accepted by the Water Board.
In 2023, the California Extended Water and Wastewater Arrearages Payment Program (Extended Program) was established and extended the relief period to include arrearages accrued from June 16, 2021 to December 31, 2022.
Billed revenue is lower in the cool, wet winter months when less water is used compared to the warm, dry summer months when water use is the highest. This seasonality results in the possible need for short-term borrowings under the bank lines of credit in the event cash is not sufficient to cover operating costs during the winter period.
This seasonality results in the possible need for short-term borrowings under the bank lines of credit in the event cash is not sufficient to cover operating costs during the winter period. The increase in cash flow during the summer allows for a pay down of short-term borrowings.
Water Production Expenses Water production expenses, which consist of purchased water, purchased power, and pump taxes, comprise the largest segment of total operating expenses. Water production costs accounted for 40.2% and 39.7%, of total operating costs in 2023 and 2022, respectively. The rates charged for wholesale water supplies, electricity, and pump taxes are established by various public agencies.
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.
We generally expect to satisfy these commitments with cash on hand and cash provided by operating activities.
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.
The following table reflects the sensitivity of pension amounts reported for the year ended December 31, 2023, to changes in actuarial assumptions: Increase/(Decrease) in Pension Benefits Actuarial Assumption Increase/(Decrease) in 2023 Net Periodic Benefit Cost Increase/(Decrease) in Projected Benefit Obligation as of December 31, 2023 Dollars in thousands Discount rate (0.5) % $ 3,494 $ 59,334 Long-term rate of return on plan assets (0.5) % 3,502 — Rate of compensation increases (0.5) % (3,218) (15,000) Cost of living adjustment (1) (0.23) % (2,561) (15,387) Discount rate 0.5 % (6,084) (52,558) Long-term rate of return on plan assets 0.5 % (3,502) — Rate of compensation increases 0.5 % 3,017 15,884 Cost of living adjustment 0.5 % 4,658 40,412 ______________________________________________________________________________ 1.
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 increase was mainly due to an increase of $9.0 million in employee wages primarily driven by annual increases in employee wage rates and an increase in the number of employees. 46 Table of Contents 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.
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.
The estimates used are based on historical experience, current facts, future expectations, and recommendations from independent advisors and actuaries. We use an investment advisor to provide advice in managing the plan's investments. We anticipate any increases in funding for the pension benefits plans will be recovered in future rate filings, thereby mitigating the financial impact.
Different estimates used by our management could result in significant variances in the cost recognized for pension and PBOP plans. The estimates used are based on historical experience, current facts, future expectations, and recommendations from independent advisors and actuaries. We use an investment advisor to provide advice in managing the plans’ investments.
The table below provides the amounts, percentage change, and source mix for the respective years: 2023 2022 MG % of Total % change from prior year MG % of Total % change from prior year Millions of gallons (MG) Source: Wells 50,363 48.6 % (4.1) % 52,534 49.1 % — Purchased 47,865 46.3 % (5.2) % 50,473 47.2 % (5.9) % Surface 5,256 5.1 % 33.5 % 3,938 3.7 % (10.1) % Total 103,484 100.0 % (3.2) % 106,945 100.0 % (3.2) % Purchased water expenses are affected by changes in quantities purchased, supplier prices, and cost differences between wholesale suppliers.
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.
Long-term debt payments include annual sinking fund payments on First Mortgage Bonds, maturities of long-term debt, and annual payments on other long-term obligations, exclusive of unamortized debt issuance costs of $4.9 million. b. Pension and postretirement benefits include $2.8 million of short-term pension obligations. c.
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.
To measure the expense of these benefits, our management must estimate compensation increases, mortality rates, future health cost increases and discount rates used to value related liabilities and to determine appropriate funding. Different estimates used by our management could result in significant variances in the cost recognized for pension and PBOP plans.
Pensions, which include the supplemental executive retirement plan (SERP), and Postretirement Benefits Other Than Pensions (PBOP) We incur costs associated with our pensions and PBOP plans. To measure the expense of these benefits, our management must estimate compensation increases, mortality rates, future health cost increases and discount rates used to value related liabilities and to determine appropriate funding.
Finance lease obligations represent total cash payments to be made in the future and includes interest expense of $0.3 million. d. Estimated annual contractual obligations are based on the same payment levels as 2023. For pension and postretirement benefits other than pensions obligations, see Note 11 of the Notes to the Consolidated Financial Statements.
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.
Short-Term Financing Short-term liquidity is provided by the bank lines of credit described above and by internally generated funds. As of December 31, 2023, there were borrowings of $180.0 million outstanding on our unsecured revolving lines of credit, compared to $70.0 million outstanding on our unsecured revolving lines of credit as of December 31, 2022.
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.
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. Changes to the pension benefits actuarial assumptions can significantly affect pension costs, regulatory assets, and liabilities.
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.
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 borrowings must be repaid within 12 months unless a different period is required or authorized by the CPUC.
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.
For finance and operating lease obligations, see Note 14 of the Notes to the Consolidated Financial Statements. 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.
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.
In addition, we issued $115.1 million of Company common stock through our at-the-market equity plan and our employee stock purchase plan.
In addition, we issued $89.0 million of Company common stock through our at-the-market equity plan and our employee stock purchase plan. On October 22, 2024, Cal Water completed the sale and issuance of $125.0 million in First Mortgage Bonds (the Bonds) in a private placement.
For more details related to water supply contracts, see Note 14 of the Notes to the Consolidated Financial Statements. 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.
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.
(5) The deferral of revenue consists of amounts that are expected to be collected from customers beyond 24 months following the end of the accounting period in which these revenues were recorded. Deferred revenue in 2023 remained flat, while the deferred revenue in 2022 decreased $7.7 million primarily due to the recognition of deferred balancing account revenue in 2022.
(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.
For 2023, the $0.7 million decrease in purchased water expenses is mostly due to a 5.2% decrease in purchased quantities offset by a blended purchased water wholesaler rate increase of 5.1%. For 2023, the $2.8 million increase in pump taxes is primarily due to increases in pump tax rates.
In 2024, Cal Water recorded $8.3 million of ICBA expense, of which $6.9 million was attributable to 2023. For 2024, the $2.8 million increase in pump taxes is primarily due to increases in pump tax rates. In 2024, Cal Water recorded a reduction to pump taxes of $0.8 million for the ICBA, of which $0.1 million was attributable to 2023.
Company-funded and developer-funded utility plant expenditures were $383.7 million and $327.8 million in 2023 and 2022, respectively. A majority of capital expenditures was associated with mains and water treatment equipment. For 2024, our capital program is dependent in part on the timing and nature of regulatory approvals in connection with Cal Water's 2021 GRC.
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.
The quarterly dividend was raised from $0.26 to $0.28 per common share. This represents an indicated annual rate of $1.12 per common share. Dividends have been paid for 78 consecutive years. The annual dividends paid per common share in 2023, 2022, and 2021 were $1.04, $1.00 and $0.92, respectively.
Dividends have been paid for 79 consecutive years. The annual dividends paid per common share in 2024, 2023, and 2022 were $1.12, $1.04 and $1.00, respectively. Earnings not paid as dividends are reinvested in the business for the benefit of stockholders.
Earnings not paid as dividends are reinvested in the business for the benefit of stockholders. The dividend payout ratio was 113.8% in 2023, 56.5% in 2022, and 46.9% in 2021 for an average of 72.4% over the 3-year period. Our long-term targeted dividend payout ratio is 60%.
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.
Interest on the under-collected net WRAM and MCBA receivable balances, the interest recoverable from customers, is limited to the current 90-day commercial paper rate, which is significantly lower than Cal Water's short and long-term financing rates. At the January 2024 meeting, the Board declared the quarterly dividend, increasing it for the 57th consecutive year.
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.
Liquidity and Capital Resources Cash flow from Operations During 2023, we generated cash flow from operations of $217.8 million, compared to $243.8 million during 2022.
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.
Income Taxes For 2023, income tax benefit increased $18.5 million, or 565.6%, to $15.2 million compared to 2022. The increase in 2023 was primarily due to a decrease in pre-tax operating income from the impact of the delayed final decision by the CPUC on Cal Water's pending 2021 GRC.
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.
Type of Filing Decision/Resolution Effective Date Increase (Decrease) Annual Revenue CA District/ Subsidiary GRC and Offset Filings 2023 Expense Offset AL 2465-A Jan 2023 $5.1 million 5 Districts 2021 GRC Interim Rates AL 2475 May 2023 4% or 1.5% 18 Districts 2023 Expense Offset AL 2488 July 2023 $24.6 million 11 Districts Cost of Capital AL 2491 July 2023 ($7 million) 21 Districts 47 Table of Contents Water Supply Our source of supply varies among our operating districts.
Type of Filing Decision/Resolution Effective Date Increase in Annual Revenue CA District/ Subsidiary GRC and Offset Filings 2024 Expense Offset AL 2501 Jan. 2024 $5.1 million 6 Districts Cost of Capital AL 2502 Jan. 2024 $10.0 million All Districts 2024 Rate Base Offset AL 2514 May 2024 $5.8 million All Districts 2021 GRC and 2024 Escalations* AL 2515 May 2024 $42.5 million All Districts _______________________________________________________________________________ * AL 2515 includes the revenue increase from AL 2514, AL 2502, and AL 2501.
Maintenance For 2023, maintenance expenses increased $0.3 million, or 0.8%, compared to 2022 due to increases in reservoir, tank, well, and pumping equipment repairs. Depreciation and Amortization For 2023, depreciation and amortization increased $6.6 million, or 5.8%, compared to 2022 primarily due to utility plant placed in service in 2022.
Depreciation and Amortization For 2024, depreciation and amortization increased $10.7 million, or 8.8%, to $131.9 million compared to 2023 primarily due to utility plant placed in service in 2023. Income Taxes For 2024, income tax expense increased $51.1 million, or 336.6%, to $35.9 million compared to an income tax benefit of $15.2 million for 2023.
Removed
The $44.1 million decrease in net income was primarily due to the delayed final decision from the CPUC on Cal Water's pending 2021 GRC to set new revenue, rates, and regulatory mechanisms. The 2021 GRC was originally scheduled to be completed on December 31, 2022 with new revenue, rates, and regulatory mechanisms effective on January 1, 2023.
Added
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.
Removed
On January 24, 2024, the assigned CPUC ALJs issued a PD on the litigated 2021 GRC, and concurrently, the assigned CPUC Commissioner issued an APD opposing and modifying certain decisions made by the ALJs.
Added
The revenue increase was partially offset by an increase in total operating expenses of $94.3 million.
Removed
The PD issued by the ALJs was closer aligned to Cal Water’s requested revenue requirement whereas the APD issued by the assigned Commissioner was closer aligned to the Public Advocates’ requested revenue requirement. On February 13, 2024, Cal Water filed a request to change several elements in the PD and APD, including correction of possible 2021 GRC technical issues.
Added
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.

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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, none of the $1,052.8 million of existing long-term debt instruments are expected to mature.
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.
Applying a hypothetical 10 percent increase in the rate of interest charged on those borrowings would not have a material effect on our earnings. 53 Table of Contents
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

Other CWT 10-K year-over-year comparisons