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What changed in H2O AMERICA's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of H2O AMERICA's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+380 added−373 removedSource: 10-K (2024-02-23) vs 10-K (2023-02-24)

Top changes in H2O AMERICA's 2023 10-K

380 paragraphs added · 373 removed · 285 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

88 edited+41 added−27 removed57 unchanged
Biggest changeDuring the year ended December 31, 2022, our workforce comprised of: Percentage of Workforce Gender: Female 29 % Male 71 % Ethnicity: Hispanic or Latino 20 % Not Hispanic or Latino 80 % Race: White 62 % Asian 9 % 2 or More Races 4 % Black or African American 4 % American Indian or Alaska Native 1 % Native Hawaiian or Other Pacific Islander 1 % Other/Not Reported 19 % We work to ensure training and development opportunities are available so that all employees can establish and succeed in meaningful careers at SJW Group.
Biggest changeSince inception, the Council has implemented several impactful initiatives including ongoing education and communications utilizing numerous platforms, providing unconscious bias training, and creating opportunities for all employees to celebrate and support cultural days of personal significance in their communities. 12 During the year ended December 31, 2023, our workforce comprised of: Percentage of Workforce Gender: Female 29 % Male 70 % Undisclosed 1 % Ethnicity: Hispanic or Latino 21 % Not Hispanic or Latino 79 % Race: White 60 % Asian 10 % 2 or More Races 4 % Black or African American 3 % American Indian or Alaska Native 1 % Native Hawaiian or Other Pacific Islander 1 % Other/Not Reported 21 % We work to ensure training and development opportunities are available so that all employees can establish and succeed in meaningful careers at SJW Group.
SJWC filed Advice Letter No. 585 on November 10, 2022 to recover $20.6 million in the Interim Rates Memorandum Account in accordance with the 2022 GRC Decision. Advice Letter 585 was approved with an effective date of January 1, 2023.
SJWC filed Advice Letter No. 585 on November 10, 2022, to recover $20.6 million in the Interim Rates Memorandum Account in accordance with the 2022 GRC Decision. Advice Letter No. 585 was approved with an effective date of January 1, 2023.
Surface supply, which during a normal rainfall year satisfies about 6% to 8% of SJWC’s annual water supply needs, provides approximately 1% of its water supply in a dry year and approximately 14% in a wet year.
Surface supply, which during a normal rainfall year satisfies about 6% to 8% of SJWC’s annual 8 water supply needs, provides approximately 1% of its water supply in a dry year and approximately 14% in a wet year.
Our human capital measures and objectives focus on providing a safe and productive work environment that has clear positive and ethical values; a culture that embraces diversity, respect and equity; jobs that offer fair 10 wages as benchmarked to the markets that we live and work in; competitive wages and benefits; and training and development opportunities that support our employees to establish and succeed in meaningful careers at SJW Group.
Our human capital measures and objectives focus on providing a safe and productive work environment that has clear positive and ethical values; a culture that embraces diversity, respect and equity; jobs that offer fair wages as benchmarked to the markets that we live and work in; competitive wages and benefits; and training and development opportunities that support our employees to establish and succeed in meaningful careers at SJW Group.
Under Texas law, municipalities, water districts and other public agencies are authorized to engage in the ownership and operation of water systems. Such entities are empowered to acquire property, whether public or private, real or personal, by the exercise of the right of eminent domain, which entails payment to the owner of just compensation for the property taken.
Under Texas law, municipalities, water districts and other public agencies are authorized to engage in the ownership and operation of water systems. Such entities are empowered to acquire property, whether public or private, real or personal, by the 10 exercise of the right of eminent domain, which entails payment to the owner of just compensation for the property taken.
More broadly, the team collaborates to anticipate and plan for external events such as pandemic or for extreme weather or other external events that could impact our operations. Proactive identification of hazards keeps us one step ahead of our constantly changing workplace conditions.
More broadly, the team collaborates to anticipate and plan for external events such as a pandemic or for extreme weather or other external events that could impact our operations. Proactive identification of hazards keeps us one step ahead of our constantly changing workplace conditions.
SJWC filed Advice Letter No. 586 on November 18, 2022 to increase revenue requirement by $18.4 million or 4% for the escalation year increase in accordance with the 2022 GRC Decision. Advice Letter No. 586 was approved with an effective date of January 1, 2023.
SJWC filed Advice Letter No. 586 on November 18, 2022, to increase the authorized revenue requirement by $18.4 million or 4% for the escalation year increase in accordance with the 2022 GRC Decision. Advice Letter No. 586 was approved with an effective date of January 1, 2023.
Revenue, production expenses and income are affected by changes in water sales and the 7 sources of water supply. Overhead costs, such as payroll and benefits, depreciation, interest on long-term debt, and property taxes are not significantly impacted by seasonality or water supply mix.
Revenue, production expenses and income are affected by changes in water sales and the sources of water supply. Overhead costs, such as payroll and benefits, depreciation, interest on long-term debt, and property taxes are not significantly impacted by seasonality or water supply mix.
Connecticut Water’s utility services hold the necessary franchises to provide water in portions of the towns of Ashford, Avon, Beacon Falls, Bethany, Bolton, Brooklyn, Burlington, Canton, Chester, Clinton, Colchester, Columbia, Coventry, Deep River, Durham, East Granby, East Haddam, East Hampton, East Windsor, Ellington, Enfield, Essex, Farmington, Griswold, Guilford, Haddam, Hebron, Killingly, Killingworth, Lebanon, Madison, Manchester, Mansfield, Marlborough, Middlebury, Naugatuck, Old Lyme, Old Saybrook, Oxford, Plainfield, Plymouth, Portland, Prospect, Simsbury, Somers, Southbury, South Windsor, Stafford, Stonington, Suffield, Thomaston, Thompson, Tolland, Vernon, Voluntown, Waterbury, Westbrook, Willington, Windsor Locks and Woodstock.
CWC’s utility services hold the necessary franchises to provide water in portions of the towns of Ashford, Avon, Beacon Falls, Bethany, Bolton, Brooklyn, Burlington, Canton, Chester, Clinton, Colchester, Columbia, Coventry, Deep River, Durham, East Granby, East Haddam, East Hampton, East Windsor, Ellington, Enfield, Essex, Farmington, Griswold, Guilford, Haddam, Hebron, Killingly, Killingworth, Lebanon, Madison, Manchester, Mansfield, Marlborough, Middlebury, Naugatuck, Old Lyme, Old Saybrook, Oxford, Plainfield, Plymouth, Portland, Prospect, Simsbury, Somers, Southbury, South Windsor, Stafford, Stonington, Suffield, Thomaston, Thompson, Tolland, Vernon, Voluntown, Waterbury, Westbrook, Willington, Windsor Locks and Woodstock.
Maine Water holds franchises necessary to provide water services in the towns served which are Biddeford, Saco, Old Orchard Beach, Scarborough (Pine Point), Porter, Parsonsfield, Hiram, Freeport, Camden, Rockland, Rockport, Owls Head, Union, Thomaston, Warren, Bucksport, Skowhegan, Oakland, Hartland, Millinocket and Greenville. None of the franchises with Maine Water have a termination date.
MWC holds franchises necessary to provide water services in the towns served which are Biddeford, Saco, Old Orchard Beach, Scarborough (Pine Point), Porter, Parsonsfield, Hiram, Freeport, Camden, Rockland, Rockport, Owls Head, Union, Thomaston, Warren, Bucksport, Skowhegan, Oakland, Hartland, Millinocket and Greenville. None of the franchises with MWC have a termination date.
SJWTX also has raw water supply agreements with the Lower Colorado River Authority (“LCRA”) and West Travis Public Utility Agency (“WTPUA”) expiring in 2059 and 2046, respectively, to provide for 350 acre-feet of water per year from Lake Austin and the Colorado River, respectively, at prices that may be adjusted periodically by the agencies.
TWC also has raw water supply agreements with the Lower Colorado River Authority (“LCRA”) and West Travis Public Utility Agency (“WTPUA”) expiring in 2059 and 2046, respectively, to provide for 350 acre-feet of water per year from Lake Austin and the Colorado River, respectively, at prices that may be adjusted periodically by the agencies.
SJWC actively works with Valley Water to meet the challenges by continuing to educate customers on responsible water use practices and conducting long-range water supply planning. Connecticut Water Supply Connecticut Water’s water sources vary among the individual systems, but overall approximately 80% of the total dependable yield comes from surface water supplies and 20% from wells.
SJWC actively works with Valley Water to meet the challenges by continuing to educate customers on responsible water use practices and conducting long-range water supply planning. Connecticut Water Supply CWC’s water sources vary among the individual systems, but overall, approximately 80% of the total dependable yield comes from surface water supplies and 20% from wells.
SJWC provides water services to approximately 232,000 connections that serve approximately one million people over 139 square miles residing in portions of the cities of San Jose and Cupertino and in the cities of Campbell, Monte Sereno, Saratoga and in the Town of Los Gatos, and adjacent unincorporated territories, all in the County of Santa Clara in the State of California.
SJWC provides water services to approximately 232,400 connections that serve approximately one million people over 139 square miles residing in portions of the cities of San Jose and Cupertino and in the cities of Campbell, Monte Sereno, Saratoga and in the Town of Los Gatos, and adjacent unincorporated territories, all in the County of Santa Clara in the State of California.
On May 3, 2021, SJWC filed Application No. 21-05-004 requesting authority to adjust its cost of capital for the period from January 1, 2022 through December 31, 2024. The request seeks a revenue increase of $6.4 million or 1.61% in 2022.
On May 3, 2021, SJWC filed Application No. 21-05-004 requesting authority to adjust its cost of capital for the period from January 1, 2022 through December 31, 2024. The request sought a revenue increase of $6.4 million or 1.61% in 2022.
SJWTX holds the franchises necessary to provide water and wastewater services to the City of Bulverde and the City of Spring Branch, which terminate in 2029 and 2036, respectively. The unincorporated areas that SJWTX serves in Comal, Blanco, Bandera, Hays, Kendall, Medina and Travis Counties do not require water service providers to obtain franchises.
TWC holds the franchises necessary to provide water and wastewater services to the City of Bulverde and the City of Spring Branch, which terminate in 2029 and 2036, respectively. The unincorporated areas that TWC serves in Comal, Blanco, Bandera, Hays, Kendall, Medina and Travis Counties do not require water service providers to obtain franchises.
Our compensation and benefits programs include: • Fair employee wages as benchmarked to the markets that our employees live and work in that are consistent with employee roles and responsibilities, skill levels, experience, and knowledge; • Engagement of nationally, recognized outside compensation and benefits consulting firms to independently evaluate the appropriateness and effectiveness of compensation for our executive and other officers and to provide benchmarks for executive compensation as compared to peer companies; • Short-term incentive compensation for management level staff aligning with company financial and operational goals targeted to our stakeholders: customers, communities, employees and stockholders; • Alignment with stockholder value by utilizing equity awards linked to investment performance over time, as well as certain absolute financial results; • A comprehensive annual employee performance review process pursuant to which we determine and communicate to employees annual merit increases, promotions and other changes to responsibilities and duties; and • Eligibility for all employees to participate in health insurance, dental, vision, cafeteria plans, life and disability/accident coverage, retirement plans and/or salary deferral plans, an Employee Stock Purchase Plan, paid and unpaid leaves, a commuter assistance program, professional education and training, and tuition assistance. 13 Executive Officers of the Registrant The following table summarizes the name, age, offices held and business experience for each of our executive officers, as of February 24, 2023: Name Age Offices and Experience Willie Brown 55 SJW Group— Vice President, General Counsel and Corporate Secretary.
Our compensation and benefits programs include: • Fair employee wages as benchmarked to the markets that our employees live and work in that are consistent with employee roles and responsibilities, skill levels, experience, and knowledge; • Engagement of nationally, recognized outside compensation and benefits consulting firms to independently evaluate the appropriateness and effectiveness of compensation for our executive and other officers and to provide benchmarks for executive compensation as compared to peer companies; • Short-term incentive compensation for management level staff aligning with company financial and operational goals targeted to our stakeholders: customers, communities, employees, and stockholders; • Alignment with stockholder value by utilizing equity awards linked to investment performance over time, as well as certain absolute financial results; • A comprehensive annual employee performance review process pursuant to which we determine and communicate to employees annual merit increases, promotions and other changes to responsibilities and duties; and • Eligibility for all employees to participate in health insurance, dental, vision, cafeteria plans, life and disability/accident coverage, retirement plans and/or salary deferral plans, an employee stock purchase plan, paid and unpaid leaves, a commuter assistance program, professional education and training, and tuition assistance. 13 Executive Officers of the Registrant The following table summarizes the name, age, offices held and business experience for each of our executive officers, as of February 22, 2024: Name Age Offices and Experience Willie Brown 56 SJW Group—Vice President and General Counsel.
Environmental Matters Water Utility Services produce potable water and generates wastewater and hazardous wastes in accordance with all applicable county, state and federal environmental rules and regulations. Additionally, public utilities are subject to environmental regulation by various other state and local governmental authorities.
Environmental Matters Water Utility Services produces potable water and generates wastewater and hazardous wastes in accordance with all applicable county, state and federal environmental rules and regulations. Additionally, public utilities are subject to environmental regulation by various other state and local governmental authorities.
In 2022, the level of water in the Santa Clara Valley groundwater basin, which is managed by the Valley Water, experienced an increase in most areas due to seasonal recovery, an increase in managed recharge operations, and a decrease in groundwater pumping by various water retailers in the region.
In 2023, the level of water in the Santa Clara Valley groundwater basin, which is managed by Valley Water, experienced an increase in most areas due to seasonal recovery, an increase in managed recharge operations, and a decrease in groundwater pumping by various water retailers in the region.
Johnson served as Director of Human Resources, Vice President of Human Resources and Vice President and Corporate Secretary of CTWS and its subsidiaries from 2007, 2008, and 2010, respectively. She served as the Corporate Secretary of The Maine Water Company until July 2020. Craig J. Patla 55 CTWS—President. Mr.
Johnson served as Director of Human Resources, Vice President of Human Resources and Vice President and Corporate Secretary of CTWS and its subsidiaries from 2007, 2008, and 2010, respectively. She served as the Corporate Secretary of The Maine Water Company until July 2020. Craig J. Patla 56 CTWS—President. Mr.
He has served as the Chair of the Board of Directors of SJW Group, SJWC, SJW Land Company and SJWTX since April 25, 2018 and Chair of the Board of Directors of SJWNE LLC, CTWS and its subsidiaries since October 9, 2019. Prior to joining SJW Group, Mr.
He has served as the Chair of the Board of Directors of SJW Group, SJWC, SJW Land Company and TWC since April 25, 2018 and Chair of the Board of Directors of SJWNE LLC, CTWS and its subsidiaries since October 9, 2019. Prior to joining SJW Group, Mr.
SJWC has installed standby power generators at 38 of its strategic water production sites and manages a fleet of 21 portable generators deployed throughout the distribution system for power outages at remaining pumping facilities.
SJWC has installed standby power generators at 38 of its strategic water production sites and manages a fleet of 22 portable generators deployed throughout the distribution system for power outages at remaining pumping facilities.
SJWTX has long-term agreements with the GBRA, which expire in 2037, 2040, 2044 and 2050, 8 respectively. The agreements, which are take-or-pay contracts, provide SJWTX with an aggregate of 7,650 acre-feet of water per year from Canyon Lake at prices that may be adjusted periodically by GBRA.
TWC has long-term agreements with the GBRA, which expire in 2037, 2040, 2044 and 2050, respectively. The agreements, which are take-or-pay contracts, provide TWC with an aggregate of 7,650 acre-feet of water per year from Canyon Lake at prices that may be adjusted periodically by GBRA.
PURA allows the Connecticut regulated operations to add surcharges to customers’ bills in order to recover certain costs associated with approved eligible capital projects through the Water Infrastructure Conservation Adjustment (“WICA”) in between full rate cases, as well as approved surcharges for the Water Revenue Adjustment (“WRA”).
PURA allows the Connecticut regulated operations to add surcharges to customers’ bills in order to recover certain costs associated with approved eligible capital projects through the Water Infrastructure Conservation Adjustment (“WICA”) in between full rate cases, as well as approved surcharges or sur-credits for the Water Revenue Adjustment (“WRA”).
In addition, Connecticut Water has water supply agreements to supplement its water supply with the South Central Connecticut Regional Water Authority and The Metropolitan District that expire 2058 and 2053, respectively. Texas Water Supply SJWTX’s water supply consists of groundwater from wells and purchased treated and raw water from the Guadalupe-Blanco River Authority (“GBRA”).
In addition, CWC has water supply agreements to supplement its water supply with the South Central Connecticut Regional Water Authority and The Metropolitan District that expire 2058 and 2053, respectively. Texas Water Supply TWC’s water supply consists of groundwater from wells and purchased treated and raw water from the Guadalupe-Blanco River Authority (“GBRA”).
Walters served in the Investment Banking Division of Citigroup as managing director and head of infrastructure for the Americas and in other roles focused on mergers and acquisitions and capital raising for clients, since 1993. 14 Principal Accounting Officer of the Registrant The following table summarizes the name, age, offices held and business experience for our principal accounting officer, as of February 24, 2023: Name Age Offices and Experience Mohammed G.
Walters served in the Investment Banking Division of Citigroup as managing director and head of infrastructure for the Americas and in other roles focused on mergers and acquisitions and capital raising for clients, since 1993. 14 Principal Accounting Officer of the Registrant The following table summarizes the name, age, offices held and business experience for our principal accounting officer, as of February 22, 2024: Name Age Offices and Experience Mohammed G.
Connecticut Regulatory Affairs Connecticut Water’s rates, service and other matters affecting its business are subject to regulation by the Public Utilities Regulatory Authority of Connecticut (“PURA”).
Connecticut Regulatory Affairs CWC’s rates, service and other matters affecting its business are subject to regulation by the Public Utilities Regulatory Authority of Connecticut (“PURA”).
In addition, each of our subsidiaries supports their communities through charitable donations or sponsorships with a focus on the communities served. SJWC and Connecticut Water also have matching donations for certain programs to further promote our employees’ involvement in their communities.
In addition, each of our subsidiaries supports their communities through charitable donations or sponsorships with a focus on the communities served. SJWC and CWC also have matching donations for certain programs to further promote our employees’ involvement in their communities.
Additionally, the Heritage Village Water division serves the Town of Southbury with wastewater services. None of the franchises of the Connecticut water utility services have a termination date.
Additionally, the Heritage Village Water division serves the Town of Southbury with wastewater services. None of the franchises of the CWC utility services have a termination date.
Water Utility Services are currently in compliance with all state and local public health and environmental regulations applicable to their operations.
Water Utility Services is currently in compliance with all state and local public health and environmental regulations applicable to their operations.
Prior to joining NextEra, Mr. Hauk served in several roles at American Water Works Company, Inc. from May 2011 to March 2021, lastly serving as President of Regulated Operations and Military Services Group and then as Deputy Chief Operating Officer. Previously, Mr.
Hauk was the President of NextEra Water from May 2021 to August 2022. Prior to joining NextEra, Mr. Hauk served in several roles at American Water Works Company, Inc. from May 2011 to March 2021, lastly serving as President of Regulated Operations and Military Services Group and then as Deputy Chief Operating Officer. Previously, Mr.
SJW Group’s consolidated financial statements reflect the effects of the rate-making process. The rate-making process is intended to provide revenues sufficient to recover normal operating expenses, provide funds for replacement of water infrastructure and produce a fair and reasonable return on stockholder common equity.
SJW Group’s consolidated financial statements reflect the actions of regulators in the rate-making process. The rate-making process is intended to provide revenues sufficient to recover normal operating expenses, provide funds for replacement of water infrastructure and produce a fair and reasonable return on stockholder common equity.
Patla was Region Manager. Mr. Patla joined CTWS in 1990 as an engineer. Eric W. Thornburg 62 SJW Group—President, Chief Executive Officer and Chair of the Board. Mr. Thornburg serves as President and Chief Executive Officer of SJW Group and SJW Land Company and Chief Executive Officer of SJWC and SJWTX since November 6, 2017.
Patla was Region Manager. Mr. Patla joined CTWS in 1990 as an engineer. Eric W. Thornburg 63 SJW Group—President, Chief Executive Officer and Chair of the Board. Mr. Thornburg serves as President and Chief Executive Officer of SJW Group and SJW Land Company and Chief Executive Officer of SJWC and TWC since November 6, 2017.
As reported by Valley Water at the end of 2022, the groundwater level in the Santa Clara Plain was 14 feet higher compared to the same time in 2021. The total groundwater storage at the end of 2022 was within Stage 1 (Normal) of the Valley Water’s Water Shortage Contingency Plan.
As reported by Valley Water at the end of 2023, the groundwater level in the Santa Clara Plain was 17 feet higher compared to the same time in 2022. The total groundwater storage at the end of 2023 was within Stage 1 (Normal) of the Valley Water’s Water Shortage Contingency Plan.
The CTWS companies provide water service to approximately 141,000 service connections that serve a population of approximately 459,000 people in 81 municipalities with a service area of approximately 270 square miles throughout Connecticut and Maine and 3,000 wastewater connections in Southbury, Connecticut.
The CTWS companies provide water service to approximately 141,000 service connections that serve a population of approximately 461,000 people in 81 municipalities with a service area of approximately 272 square miles throughout Connecticut and Maine and 3,000 wastewater connections in Southbury, Connecticut.
The application also proposes a rate of return of 8.11%, an increase from the current rate of 7.64%, a decrease in the average cost of debt rate from 6.20% to 5.48%, and a return of equity of 10.30%, an increase from the current rate of 8.90%.
The application also proposed a rate of return of 8.11%, an increase from 7.64%, a decrease in the average cost of debt rate from 6.20% to 5.48%, and a return on equity of 10.30%, an increase from 8.90%.
However, SJWTX filed its application to establish a System Improvement Charge (“SIC”) with the PUCT on December 30, 2022. This filing will allow SJWTX to add certain utility plant additions made since 2020 to its rate base, thereby increasing revenue and avoiding the immediate need for a general rate case.
However, it filed its application to establish a System Improvement Charge (“SIC”) with the PUCT under Docket No. 54430 on December 30, 2022. This filing will allow TWC to add certain utility plant additions made since 2020 to its rate base, thereby increasing revenue and avoiding the immediate need for a general rate case.
The Connecticut Water Company (“Connecticut Water”) and The Maine Water Company (“Maine Water”) are public utilities in the business of providing water service throughout Connecticut and Maine. The remaining two subsidiaries are Chester Realty, Inc., a real estate company in Connecticut, and New England Water Utility Services, Inc.
The Connecticut Water Company (“CWC”) and The Maine Water Company (“MWC”) are public utilities in the business of providing water service throughout Connecticut and Maine. The remaining two subsidiaries are Chester Realty, Inc., a real estate company in Connecticut, and New England Water Utility Services, Inc.
MPUC approves rates on a division-by-division basis in Maine and allows Maine Water to add surcharges to customers’ bills in order to recover certain costs associated with capital projects through the Water Infrastructure Surcharge (“WISC”) in between general rate cases.
MPUC approves rates on a division-by-division basis in Maine and allows MWC to add surcharges to customers’ bills in order to recover certain costs associated with capital projects through the WISC in between general rate cases.
Hauk served as Deputy Mayor/Chief Administrative Officer for the City of Westfield, Indiana and as Town Manager/Director of Public Works for the City of Westfield, Indiana. Kristen A. Johnson 57 SJW Group—Senior Vice President and Chief Administrative Officer. Ms.
Hauk served as Deputy Mayor/Chief Administrative Officer for the City of Westfield, Indiana and as Town Manager/Director of Public Works for the City of Westfield, Indiana. Kristen A. Johnson 57 SJW Group—Senior Vice President and Chief Administrative Officer. Ms. Johnson serves as Senior Vice President since November 2022 and Chief Administrative Officer of SJW Group, since April 2020. Ms.
Together, SJWC, Connecticut Water, SJWTX, Maine Water and NEWUS, are referred to as “Water Utility Services.” SJW Land Company and Chester Realty, Inc. are collectively referred to as “Real Estate Services.” Regulation and Rates Water Utility Services, excluding non-tariffed activities, are subject to rate regulation based on cost recovery and meets the criteria of accounting guidance for rate-regulated operations, which considers the timing of the recognition of certain revenues and expenses.
Together, SJWC, CWC, TWC , TWOS, TWR, MWC and NEWUS are referred to as “Water Utility Services.” SJW Land Company and Chester Realty, Inc. are collectively referred to as “Real Estate Services.” Regulation and Rates Water Utility Services, excluding non-tariffed activities, are subject to rate regulation based on cost recovery and meets the criteria of accounting guidance for rate-regulated operations, which affects the timing of the recognition of certain revenues and expenses.
Zerhouni 47 SJW Group—Senior Vice President of Finance, Principal Accounting Officer. Mr. Zerhouni serves as Senior Vice President of Finance, Principal Accounting Officer of SJW Group, SJWC, SJWTX and CTWS since January 2023. Prior to joining SJW Group Mr. Zerhouni was the Chief Financial Officer of Veolia Utility Parent, Inc.
Zerhouni 48 SJW Group—Senior Vice President of Finance, Principal Accounting Officer. Mr. Zerhouni serves as Senior Vice President of Finance, Principal Accounting Officer of SJW Group, SJWC, CTWS and TWC, since January 2023, and CWC and MWC, since January 2024. Prior to joining SJW Group, Mr. Zerhouni was the Chief Financial Officer of Veolia Utility Parent, Inc.
In December of 2022, SJWC proposed tentative three-year bargaining agreements with the International Union of Operating Engineers (“OE”), representing certain employees in the engineering department, and the Utility Workers of America (“OWUA”), representing the majority of all non-administrative employees at SJWC covering the period from January 1, 2023 through December 31, 2025.
In the first quarter of 2023, SJWC executed three-year bargaining agreements with the International Union of Operating Engineers (“OE”), representing certain employees in the engineering department, and the Utility Workers of America (“UWUA”), representing the majority of all non-administrative employees at SJWC covering the period from January 1, 2023 11 through December 31, 2025.
SJW Group’s regulated operations 4 financing activity is designed to achieve capital structures consistent with regulatory guidelines in the locations where the companies operate.
SJW Group’s regulated operations financing activities are designed to achieve capital structures consistent with regulatory guidelines in the locations where the companies operate.
SJWC, Connecticut Water and Maine Water provide non-tariffed services under agreements with municipalities and other utilities. These non-tariffed services include water system operations, maintenance agreements and antenna site leases.
Water Utility Services also provide non-tariffed services under agreements with municipalities and other utilities. These non-tariffed services include water system operations, maintenance agreements and antenna site leases.
SJWTX provides water service to approximately 26,000 service connections that serve approximately 77,000 people in a service area comprising more than 268 square miles in the region between San Antonio and Austin, Texas and approximately 900 wastewater connections. Together, the Water Utility Services distribute water to customers in their respective service areas in accordance with accepted water utility methods.
TWC provides water service to approximately 28,000 service connections that serve approximately 83,000 people in a service area comprising more than 271 square miles in the region between San Antonio and Austin, Texas and approximately 950 wastewater connections. Together, the Water Utility Services distribute water to customers in their respective service areas in accordance with accepted water utility methods.
Our 2022 Sustainability Plan and Supplemental Report, to be published in 2023, incorporates specific targets that set the trajectory of our safety program to ensure continuous improvement, including: • Implement processes and systems to track, monitor, report and continually improve health and safety performance; • Communicate the updated Health and Safety Policy to employees to promote compliance, consultation, and participation of workers on health and safety matters; and • Strive for zero accidents and injuries.
We have specific targets that set the trajectory of our safety program to ensure continuous improvement, including: • Implement processes and systems to track, monitor, report and continually improve health and safety performance; • Communicate the updated Health and Safety Policy to employees to promote compliance, consultation, and participation of workers on health and safety matters; and • Strive for zero accidents and injuries.
Hauk serves as the Chief Operating Officer of SJW Group, SJWC, CTWS, and SJWTX since January 2023 and was the Chief Corporate Development and Strategy Officer of SJW Group, SJWC, CTWS, and SJWTX from August 2022 to December 2022. Prior to joining the Company, Mr. Hauk was the President of NextEra Water from May 2021 to August 2022.
Hauk 53 SJW Group—Chief Operating Officer. Mr. Hauk serves as the Chief Operating Officer of SJW Group, SJWC, CTWS, and TWC since January 2023 and was the Chief Corporate Development and Strategy Officer of SJW Group, SJWC, CTWS, and TWC from August 2022 to December 2022. Prior to joining the Company, Mr.
SJWC filed Advice Letter No. 577 on May 24, 2022 to increase revenue requirement by $24.3 million or 5.9% to offset the increases to purchased potable water charges, the groundwater extraction fee, and purchased recycled water charges from its water wholesalers effective July 1, 2022. Advice Letter No. 577 was approved with an effective date of July 1, 2022.
SJWC filed Advice Letter No. 596 on May 31, 2023, to increase the authorized revenue requirement by $27.6 million to offset the increases to purchased potable water charges, the groundwater extraction fee, and purchased recycled water charges from its water wholesalers effective July 1, 2023. Advice Letter No. 596 was approved with an effective date of July 1, 2023.
Water Utility Services is currently in compliance with all of the United States Environmental Protection Agency’s (the “EPA”) surface water treatment performance standards, drinking water standards for disinfection by-products and primary maximum contaminant levels.
Water Utility Services is currently in compliance with all of the United States Environmental Protection Agency’s (the “EPA”) surface water treatment performance standards, drinking water standards for disinfection by-products and primary maximum contaminant levels. These standards have been adopted and are enforced by the applicable state water, public health and environmental agencies.
Past experience shows such a certificate will be issued only after demonstrating that service in such area is inadequate. 9 California law also provides that whenever a public agency constructs facilities to extend utility service to the service area of a privately-owned public utility, like SJWC, such an act constitutes the taking of property and is conditioned upon payment of just compensation to the private utility.
California law also provides that whenever a public agency constructs facilities to extend utility service to the service area of a privately-owned public utility, like SJWC, such an act constitutes the taking of property and is conditioned upon payment of just compensation to the private utility.
SJWTX is a public utility in the business of providing water service in the southern region of the Texas Hill Country in Bandera, Blanco, Comal, Hays, Kendall, Medina and Travis counties, the growing region between San Antonio and Austin, Texas. SJWTX has a 25% interest in Acequia Water Supply Corporation (“Acequia”).
TWC is a public utility in the business of providing water service in Bandera, Blanco, Comal, Hays, Kendall, Medina and Travis Counties in the growing region between San Antonio and Austin, Texas. TWC additionally provides wastewater service in Comal and Kendall counties. TWC also holds a 25% equity interest in Acequia Water Supply Corporation (“Acequia”).
Since joining SJWC in 2008, Mr. Brown has held various legal positions of increasing scope and responsibly. Prior to joining SJWC, Mr. Brown was an associate at two Silicon Valley law firms and is a member of the State Bar of California. Andrew R. Gere 56 SJWC—President. Mr.
Brown served as counsel and Corporate Secretary of various subsidiaries of the Corporation. Since joining SJWC in 2008, Mr. Brown has held various legal positions of increasing scope and responsibly. Prior to joining SJWC, Mr. Brown was an associate at two Silicon Valley law firms and is a member of the State Bar of California. Bruce A.
Mr. Brown serves as Vice President, General Counsel and Corporate Secretary of SJW Group and SJWC since June 1, 2021. Mr. Brown served as Corporate Secretary and Assistant General Counsel of SJW Group and SJWC since January 1, 2020. Since April 2018, Mr. Brown has served as counsel and Corporate Secretary of various subsidiaries of the Corporation.
Mr. Brown serves as Vice President and General Counsel of SJW Group and SJWC since June 2021. Mr. Brown served as Corporate Secretary of SJW Group and SJWC from January 2020 to October 2023. Mr. Brown served as Assistant General Counsel of SJW Group and SJWC from January 2020 to June 2021. From April 2018 to October 2023, Mr.
During normal rainfall years, purchased water provides approximately 40% to 50% of SJWC’s annual production. An additional 40% to 50% of its water supply is pumped from the underground basin which is subject to a groundwater extraction charge paid to Valley Water.
An additional 40% to 50% of its water supply is pumped from the underground basin which is subject to a groundwater extraction charge paid to Valley Water.
Johnson serves as Senior Vice President since November 2022 and Chief Administrative Officer of SJW Group and Senior Vice President of Administration for CTWS and its subsidiaries since November 2019. Previously, Ms.
Johnson also serves as Senior Vice President of Administration for CTWS and certain of its subsidiaries since November 2019. Ms. Johnson also serves as Senior Vice President and Chief Administrative Officer of TWC, and as Senior Vice President of Administration for CWC and MWC, since April 2023. Previously, Ms.
Employee Safety and Pandemic Response Aiming for a “zero-harm” culture, our vision is to manage health and safety performance to become a leader in the water services industry. Protecting the health and safety of our employees is a top priority.
The agreements include a 6% wage increase provided in 2023, 3.5% in 2024 and 5.5% in 2025 for the union employees. Employee Safety Aiming for a “zero-harm” culture, our vision is to manage health and safety performance to become a leader in the water services industry. Protecting the health and safety of our employees is a top priority.
Andrew F. Walters 52 SJW Group—Chief Financial Officer and Treasurer. Mr. Walters serves as Chief Financial Officer and Treasurer of SJW Group, SJWC, SJW Land Company, and SJWTX since January 2022. Mr.
Andrew F. Walters 53 SJW Group—Chief Financial Officer and Treasurer. Mr. Walters serves as Chief Financial Officer and Treasurer of SJW Group, SJWC, SJW Land Company, and TWC since January 2022. Mr. Walters also serves as Chief Financial Officer of CTWS and its subsidiaries since April 2023. Mr.
The PUCT may authorize rate increases after the filing of an Application for a Rate/Tariff Change. Rate cases may be filed as they become necessary, provided there is no current rate case outstanding. Furthermore, rate cases may not be filed more frequently than once every 12 months. SJWTX has no current general rate case pending.
Rate cases may be filed as they become necessary, provided there is no current rate case outstanding. Furthermore, rate cases may not be filed more frequently than once every 12 months. TWC has no current general rate case pending.
Water Supply California Water Supply SJWC’s water supply consists of groundwater from wells, surface water from watershed run-off and diversion, reclaimed water, and imported water purchased from Santa Clara Valley Water District (“Valley Water”) under the terms of a master contract with Valley Water expiring in 2051.
Water Supply California Water Supply SJWC’s water supply consists of groundwater from wells, surface water from watershed run-off and diversion, reclaimed water, and imported water purchased from Valley Water under the terms of a master contract with Valley Water expiring in 2051. During normal rainfall years, purchased water provides approximately 40% to 50% of SJWC’s annual production.
On February 14, 2022 Connecticut Water filed its 2021 WICA reconciliation with PURA. The reconciliation, approved by PURA on March 16, 2022 and effective for 12 months beginning April 1, 2022, replaced the expiring 2020 reconciliation surcharge of 0.07% with a credit of 0.02%. As a result, the net WICA surcharge, effective April 1, 2022 was 2.35%.
On January 25, 2023, CWC filed its 2022 WICA reconciliation with PURA. The reconciliation, approved by PURA on March 29, 2023 and effective for 12 months beginning April 1, 2023, replaced the expiring 2021 reconciliation credit of 0.02% with a credit of 0.16%.
Maine Water Supply Water sources at Maine Water vary among the individual systems, but overall approximately 90% of the total dependable yield comes from surface water supplies and 10% from wells. Maine Water has a water supply agreement with the Kennebec Water District expiring in 2040. Maine Water relies on legislatively granted water rights in order to serve customers.
These wells have been projected to yield an additional 6,000 acre-feet per year or more. Maine Water Supply Water sources at MWC vary among the individual systems, but overall, approximately 90% of the total dependable yield comes from surface water supplies and 10% from wells. MWC has a water supply agreement with the Kennebec Water District expiring in 2040.
On January 1, 2023, Valley Water’s 10 reservoirs were 32% of capacity with 17,263 million gallons of water in storage. As of December 31, 2022, SJWC’s Lake Elsman was 45.5% of capacity with 912 million gallons of water, approximately 113.9% of the five-year seasonal average.
On January 1, 2024, Valley Water’s 10 reservoirs were 54% of restricted capacity with 10.9 billion gallons of water in storage. As of December 31, 2023, SJWC’s Lake Elsman was 55.7% of capacity with 11.2 billion gallons of water, 179.3% of the five-year seasonal average.
In addition, we currently comply with California’s board diversity legislation requiring a minimum number of female directors and directors from underrepresented communities on our board of directors. 12 Community Involvement In support of our mission as trusted, passionate and socially responsible professionals, we are dedicated to the people and the environment of the communities where we live, work, and serve.
Community Involvement In support of our mission as trusted, passionate and socially responsible professionals, we are dedicated to the people and the environment of the communities where we live, work, and serve.
The following summarizes each state’s authorized rates and capital structure as of December 31, 2022: California Connecticut Texas Maine (a) Authorized capital structure (debt/equity) 47% / 53% 47% / 53% 42% / 58% 50% / 50% Authorized return on equity 8.90% 9.00% 10.88% 9.70% Authorized rate base (in millions) $1,028.7 $580.9 $43.3 $129.6 Estimated rate base at year-end (in millions) (b) $1,074.9 $656.3 $92.0 $157.9 ___________________________________ (a) Represents averages over water systems operating in the state.
The following summarizes each state’s authorized rates and capital structure as of December 31, 2023: California Connecticut Texas (a) Maine (b) Authorized capital structure (debt/equity) 45% / 55% 47% / 53% 42% / 58% 50% / 50% Authorized return on equity (c) 9.31% 9.00% 10.88% 9.70% Authorized rate base (in millions) $1,113.7 $620.1 $43.3 $135.1 Estimated rate base at year-end (in millions) (d) $1,136.3 $731.3 $106.5 $172.0 ___________________________________ (a) Estimated by management.
The Maine Business Corporation Act generally provides that property and contract rights of a merged corporation are vested in the surviving corporation without reversion or impairment. In the MPUC proceedings that approved the mergers of these Maine Water predecessor companies, the survivorship of water rights was not contested.
The legislation incorporating these predecessor water companies did not address whether chartered rights may be transferred to another entity without special legislative action. The Maine Business Corporation Act generally provides that property and contract rights of a merged corporation are vested in the surviving corporation without reversion or impairment.
On April 26, 2022, Connecticut Water filed for a WICA increase of $9.8 million in completed projects. PURA approved the Company’s application on June 22, 2022. The cumulative WICA charge as of July 1, 2022 is 3.26%, collecting $3.5 million on an annual basis.
On January 26, 2023, CWC filed for a WICA increase of $3.3 million in annualized revenues for $27.8 million in completed projects. PURA approved CWC’s application on March 22, 2023. The cumulative WICA surcharge as of April 1, 2023 was 6.19%, collecting $6.5 million on an annual basis. On February 27, 2023, CWC filed its 2022 WRA.
Basic Workforce Data As of December 31, 2022, SJW Group had 757 full-time employees, of whom 362 were SJWC employees, 230 were Connecticut Water employees, 87 were SJWTX employees, and 78 were Maine Water employees. At SJWC, 215 employees are members of unions. Employees working for Connecticut Water, Maine Water and SJWTX are not represented by unions.
Basic Workforce Data As of December 31, 2023, SJW Group had 808 full-time employees, of whom 387 were SJWC employees, 248 were CWC employees, 91 were TWC employees, and 82 were MWC employees. At SJWC, 240 employees are members of unions. Employees working for CWC, MWC and TWC are not represented by unions.
SJWC filed Advice Letter No. 583 on October 13, 2022 to increase revenue requirement by $25.1 million or 6.03% and implement new water rates in accordance with the 2022 GRC Decision. Advice Letter No. 583 was approved with an effective date of November 1, 2022.
SJWC filed Advice Letter No. 605 on November 21, 2023, to increase the authorized revenue requirement by $21.3 million or 4.16% for the attrition year increase in accordance with the 2022 GRC Decision. Advice Letter No. 605 was approved with an effective date of January 1, 2024.
In some instances, these rights were granted to predecessor water companies specially chartered by the Maine legislature many decades ago, with those entities later having been merged into Maine Water. The legislation incorporating these predecessor water companies did not address whether chartered rights may be transferred to another entity without special legislative action.
MWC relies on legislatively granted water rights in order to serve customers. In some instances, these rights were granted to predecessor water companies specially chartered by the Maine legislature many decades ago, with those entities later having 9 been merged into MWC.
On February 28, 2022, Connecticut Water filed its 2021 WRA. The mechanism reconciles 2021 revenues as authorized in the company’s most recent rate cases. The 2021 WRA, as approved by PURA on March 30, 2022 and effective for 12 months beginning on April 1, 2022 imposed a 2.85% surcharge on customer bills to collect the 2021 revenue shortfall.
The mechanism reconciles 2022 revenues as authorized in the CWC’s most recent rate case. The 2022 WRA, as approved by PURA on March 24, 2023 and effective for 12 months beginning on April 1, 2023, imposed a 4.97% sur-credit on customer bills to refund the 2022 revenue over-collection.
SJWC’s Montevina Water Treatment Plant treated 1,883 million gallons of water in 2022, which is 103.5% of the five-year average. SJWC’s Saratoga Water Treatment Plant treated 42.7 million gallons of water in 2022, which is 17.1% of the five-year average. SJWC believes that its various sources of water supply will be sufficient to meet customer demand in 2023.
SJWC’s Saratoga Water Treatment Plant treated 0.1 billion gallons of water in 2023, which is 73.3% of the five-year average. SJWC believes that its various sources of water supply will be sufficient to meet customer demand in 2024. On April 11, 2023, Valley Water rescinded its water shortage emergency and 15% mandatory conservation target.
Competition The regulated operations of Water Utility Services are public utilities regulated by the CPUC in California, PURA in Connecticut, PUCT in Texas and MPUC in Maine (collectively, “the Regulators”) and operate within service areas approved by the regulators.
Competition The regulated operations of Water Utility Services are public utilities regulated by applicable state public utility commissions and operate within service areas approved by such regulators.
In dry years, the decrease in water from surface run-off and diversion and the corresponding increase in purchased and pumped water increases production expenses substantially. The pumps and motors at SJWC’s groundwater production facilities are propelled by electric power.
In dry years, the decrease in water from surface run-off and diversion and the corresponding increase in purchased and pumped water increases production expenses substantially. The opposite is also true where water production expenses decrease in wet years.
SJWTX Holdings intends to create a new subsidiary to hold future wholesale water supply assets in 2023. • SJW Land Company was incorporated in 1985. SJW Land Company owns undeveloped land in California and Tennessee and operates commercial buildings in Tennessee.
TWOS was created for non-tariffed service operations and TWR was formed to hold wholesale water supply assets. • SJW Land Company was incorporated in 1985. SJW Land Company owns undeveloped land in California and Tennessee and operates commercial buildings in Tennessee.
Acequia has been determined to be a variable interest entity within the scope of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 810, “Consolidation” with SJWTX. as the primary beneficiary. As a result, Acequia has been consolidated with SJWTX. SJWTX is undergoing a corporate reorganization to separate regulated operations from non-tariffed activities. In 2021, SJWTX Holdings, Inc.
Acequia has been determined to be a variable interest entity within the scope of Accounting Standards Codification (“ASC”) Topic 810, “Consolidation,” with TWC as the primary beneficiary. As a result, Acequia has been consolidated with TWC.
The decision on the SIC filing is expected to be in the third quarter of 2023. Notwithstanding the SIC filing, SJWTX will continue to file its annual adjustments for the Water Pass-through Charges (“WPC”) for Canyon Lake, Deer Creek, and Kendall West customers.
Notwithstanding the SIC filing, TWC will continue to file its annual adjustments for the Water Pass-through Charges (“WPC”) for Canyon Lake, Deer Creek and Kendall West customers. All water supply cost increases are recoverable when the next annual WPC adjustment for each system is filed.
In addition, the rainfall at SJWC’s Lake Elsman was measured at 29.45 inches for the period from July 1, 2022 through December 31, 2022, which is 207.4% of the five-year average. Subsequent to December 31, 2022, California has continued to experience wet weather patterns.
In addition, the rainfall at SJWC’s Lake Elsman was measured at 13 inches for the period from July 1, 2023 through December 31, 2023, which is 70.8% of the five-year average. SJWC’s Montevina Water Treatment Plant treated 4 billion gallons of water in 2023, which is 182.5% of the five-year average.
The CPUC approved the settlement of 2022 GRC on October 6, 2022 and issued Decision No. 22-10-005 (“2022 GRC Decision”) on October 11, 2022. SJWC received authority for an increase of revenue requirement by $25.1 million or 6.03% in 2022, $13.0 million or 2.94% in 2023, and $16.1 million or 3.56% in 2024.
SJWC received authority for an increase of revenue requirement by $25.1 million or 6.03% in 2022, $13.0 million or 2.94% in 2023, and $16.1 million or 3.56% in 2024. The application included requests to recover $18.2 million from balancing and memorandum accounts and authorization for a $350 million capital budget.
The SIC is projected to increase SJWTX’s water revenue by $1.6 million and sewer revenue by $29 thousand within one year of the 6 approval from the PUCT. Once the PUCT files the final order approving the SIC, SJWTX will be required to file a general rate case within four years.
The SIC is projected to increase TWC’s water revenue by $1.6 million and sewer revenue by $29 thousand within one year of the approval from the PUCT. On October 17, 2023, the PUCT found the application administratively complete.
(b) An approximation of rate base which includes net utility plant not yet included in rate base pending rate case filings and outcomes. California Regulatory Affairs SJWC’s rates, service and other matters affecting its business are subject to regulation by the California Public Utilities Commission (“CPUC”).
For California, this represents the weighted-average estimated rate base for the twelve months ended December 31, 2023. California Regulatory Affairs SJWC’s rates, service and other matters affecting its business are subject to regulation by the California Public Utilities Commission (“CPUC”).

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThe value of real estate can decrease materially due to a deflationary market, decline in rental income, market cycle of supply and demand, long lag time in real estate development, legislative and governmental actions, environmental concerns, increases in rates of returns demanded by investors, and fluctuation of interest rates, eroding any unrealized capital appreciation and, potentially, invested capital. 20 The success of SJW Land Company and Chester Realty, Inc.’s real estate investment strategy depend largely on ongoing local, state and federal land use development activities and regulations, future economic conditions, the development and fluctuations in the sale of the undeveloped properties, the ability to identify the developer/potential buyer of the available-for-sale real estate, the timing of the transaction, favorable tax law, and the ability to maintain and manage portfolio properties.
Biggest changeThe success of SJW Land Company and Chester Realty, Inc.’s real estate investment strategy depend largely on ongoing local, state and federal land use development activities and regulations, future economic conditions, the development and fluctuations in the sale of the undeveloped properties, the ability to identify the developer/potential buyer of the available-for-sale real estate, the timing of the transaction, favorable tax law, and the ability to maintain and manage portfolio properties.
If there is a decreased desire by customers to maintain landscaping for their homes or restrictions are placed on outside irrigation, residential water demand would decrease, which would result in lower revenues. Conservation efforts and construction codes, which require the use of low-flow plumbing fixtures, could diminish water consumption and result in reduced revenue.
If there is a decreased desire by customers to maintain landscaping for their homes or restrictions are placed on outside irrigation, residential water demand would decrease, which would result in lower revenues. Conservation efforts and construction codes, which require the use of low-flow plumbing fixtures and appliances, could diminish water consumption and result in reduced revenue.
To the extent they take actions that are not in SJW Group’s interests, our financial condition, results of operations and prospects may be materially adversely affected. 22 Our business strategy, which includes acquiring water systems and expanding non-tariffed services, will expose us to new risks which could have a material adverse effect on our business.
To the extent they take actions that are not in SJW Group’s interests, our financial condition, results of operations and prospects may be materially adversely affected. Our business strategy, which includes acquiring water systems and expanding non-tariffed services, will expose us to new risks which could have a material adverse effect on our business.
These provisions include, but are not limited to, the following: • Authorizing Board of Directors to issue “blank check” preferred stock; • Prohibiting cumulative voting in the election of directors; • Limiting the ability of stockholders to call a special meeting of stockholders to only stockholders holding not less than 20% of outstanding voting power; and 23 • Requiring advance notification of stockholder nomination of directors and proposals.
These provisions include, but are not limited to, the following: • Authorizing Board of Directors to issue “blank check” preferred stock; • Prohibiting cumulative voting in the election of directors; • Limiting the ability of stockholders to call a special meeting of stockholders to only stockholders holding not less than 20% of outstanding voting power; and • Requiring advance notification of stockholder nomination of directors and proposals.
SJWC ’ s liquidity, earnings, and operations may be adversely affected if we are unable to recover the costs of paying claims for damages caused by the operation and maintenance of our property from customers or through insurance. 17 Our water utility property and systems are subject to condemnation and other proceedings through eminent domain.
SJWC ’ s liquidity, earnings, and operations may be adversely affected if we are unable to recover the costs of paying claims for damages caused by the operation and maintenance of our property from customers or through insurance. Our water utility property and systems are subject to condemnation and other proceedings through eminent domain.
Among other things, system malfunctions, computer viruses and security breaches could prevent us from operating or monitoring our facilities, billing and collecting cash accurately and timely analysis of financial results. In addition, we collect, process, and store sensitive data from our customers and employees, including personally identifiable information, on our networks.
Among other things, system malfunctions, computer viruses and security breaches could prevent us from operating or monitoring our facilities, billing, and collecting cash accurately and timely analysis and reporting of financial results. In addition, we collect, process, and store sensitive data from our customers and employees, including personally identifiable information, on our networks.
Any strategic combination or acquisition we decide to undertake may also impact our ability to finance our business, affect our compliance with regulatory requirements, and impose additional burdens on our operations. Any businesses we acquire may not achieve sales, customer growth and projected profitability that would justify the investment.
Any strategic combination or 23 acquisition we decide to undertake may also impact our ability to finance our business, affect our compliance with regulatory requirements, and impose additional burdens on our operations. Any businesses we acquire may not achieve sales, customer growth and projected profitability that would justify the investment.
In such a case, we may be required to incur significant expenses to repair, replace or upgrade our assets, or to defend against costly litigation or disputes with third parties, any of which may adversely affect our business operations or financial conditions.
In such a case, we may be required to incur significant expenses to repair, replace or upgrade our assets, or to defend 25 against costly litigation or disputes with third parties, any of which may adversely affect our business operations or financial conditions.
We operate in areas that are prone to earthquakes, fires, floods, extreme weathers and other natural disasters. A significant seismic event in northern California, where the majority of our operations are concentrated, or other natural disaster in northern California, Connecticut, Texas or Maine could adversely impact our ability to deliver water to our customers and our costs of operations.
We operate in areas that are prone to earthquakes, fires, floods, extreme weather and other natural disasters. A significant seismic event in northern California, where the majority of our operations are concentrated, or other natural disaster in northern California, Connecticut, Texas or Maine could adversely impact our ability to deliver water to our customers and our costs of operations.
Further, the CTWS Entities’ directors have considerable autonomy and, as described in our commitments, have a duty to act in the best interest of the CTWS Entities consistent with the ring-fencing structure and applicable law, which may be contrary to SJW Group’s best interests or be in opposition to SJW Group’s preferred strategic direction for the CTWS Entities.
Furthermore, the CTWS Entities’ directors have considerable autonomy and, as described in our commitments, have a duty to act in the best interest of the CTWS Entities consistent with the ring-fencing structure and applicable law, which may be contrary to SJW Group’s best interests or be in opposition to SJW Group’s preferred strategic direction for the CTWS Entities.
As a result of these ring-fencing measures, in certain situations, SJW Group will be restricted in its ability to access assets of the CTWS Entities as dividends or intracompany loans to satisfy the debt or contractual obligations of any Non-CTWS Entity, including any indebtedness or other contractual obligations of SJW Group.
As a result of these ring-fencing measures, in certain situations, SJW Group will be restricted in its ability to access assets of the CTWS Entities as dividends or intercompany loans to satisfy the debt or contractual obligations of any Non-CTWS Entity, including any indebtedness or other contractual obligations of SJW Group.
SJW Group’ subsidiaries fund capital expenditures through a variety of sources, including cash received from operations, funds received from developers as contributions or advances, borrowings through lines of credit and debt financings, as well as equity financings by SJW Group.
SJW Group’s subsidiaries fund capital expenditures through a variety of sources, including cash received from operations, funds received from developers as contributions or advances, borrowings through lines of credit and debt financings, as well as equity financings by SJW Group.
Many scientists, legislators, and others attribute global warming to increased levels of greenhouse gases, including carbon dioxide. Climate change laws and regulations enacted and proposed limit greenhouse gases emissions from covered entities and require additional monitoring/reporting. We produce a corporate social responsibility report, which provides an overview of our energy usage and greenhouse emissions.
Many scientists, legislators, and others attribute global warming to increased levels of greenhouse gases, including carbon dioxide. Climate change laws and regulations enacted and proposed limit greenhouse gases emissions from covered entities and require additional monitoring/reporting. We produce a corporate sustainability report, which provides an overview of our energy usage and greenhouse emissions.
Water Utility Services are subject to water quality and pollution control regulations issued by the EPA and environmental laws and regulations administered by the respective states and local regulatory agencies. New or more stringent environmental and water quality regulations could increase Water Utility Services’ water quality compliance costs, hamper Water Utility Services’ available water supplies, and increase future capital expenditures.
Water Utility Services is subject to water quality and pollution control regulations issued by the EPA and environmental laws and regulations administered by the respective states and local regulatory agencies. 16 New or more stringent environmental and water quality regulations could increase Water Utility Services’ water quality compliance costs, hamper Water Utility Services’ available water supplies, and increase future capital expenditures.
The effects of these natural disasters in California’s drought-prone areas, such as the Santa Cruz Mountains, 24 the watershed where SJWC typically obtains approximately up to 10% of its water supply, may temporarily compromise its surface water supply resulting in disruption in our services and litigation which could adversely affect our business, operating results, and financial condition.
The effects of these natural disasters in California’s drought-prone areas, such as the Santa Cruz Mountains, the watershed of which SJWC owns approximately 6,400 acres and where SJWC typically obtains approximately up to 10% of its water supply, may temporarily compromise its surface water supply resulting in disruption in our services and litigation which could adversely affect our business, operating results, and financial condition.
In addition, insurance companies may increase premium or deductible or reduce coverage limits based on factors that are beyond our control, including industry trends, financial conditions of insurance companies and catastrophic events such as wildfire, earthquake and pandemic.
In addition, insurance companies may increase premiums or deductibles or reduce coverage limits based on factors that are beyond our control, including industry trends, financial conditions of insurance companies and catastrophic events such as wildfire, earthquake and pandemic.
Investors should also refer to the other information set forth in this Annual Report on Form 10-K, including the consolidated financial statements and the notes thereto. Risks Relating To Regulatory and Legal Matters Our business is regulated and may be adversely affected by changes to the regulatory environment. Our Water Utility Services are regulated public utilities.
Investors should also refer to the other information set forth in this Annual Report on Form 10-K, including the consolidated financial statements and the notes thereto. Risks Relating To Regulatory and Legal Matters Our business is regulated and may be adversely affected by changes to the regulatory environment. Our Water Utility Services represent the tariffed operations of our regulated utilities.
There is no guarantee that we will be able to execute the strategy successfully and failure to do so may adversely affect our operating results and financial condition. Work stoppages and other labor relations matters could adversely affect our business and operating results. As of December 31, 2022, 215 of our 757 total employees were union members.
There is no guarantee that we will be able to execute the strategy successfully and failure to do so may adversely affect our operating results and financial condition. Work stoppages and other labor relations matters could adversely affect our business and operating results. As of December 31, 2023, 240 of our 808 total employees were union members.
In addition, failure to comply with any of the covenants in our existing or future debt agreements could result in a default under those agreements and under other existing agreements containing cross-default provisions. A default would permit lenders to accelerate the maturity of indebtedness under these agreements and to foreclose upon any collateral securing such indebtedness.
In addition, failure to comply with any of the covenants in our existing or future debt agreements could result in a default under those agreements and under other existing agreements containing cross-default provisions. A default would permit lenders to accelerate the maturity of indebtedness under these agreements.
Our business and financial performance may be adversely affected by high inflation. Inflation has the potential to adversely affect our liquidity, business, financial condition and results of operations by increasing our overall cost structure, particularly if we are unable to achieve increases in the rates we charge our customers.
Inflation has the potential to adversely affect our liquidity, business, financial condition and results of operations by increasing our overall cost structure, particularly if we are unable to achieve increases in the rates we charge our customers.
There is no guarantee that these regulatory authorities will approve our applications to recover all or a portion of our capital expenditure or infrastructure investment through such rate adjustment mechanisms, and their failure to do so will adversely affect our financial conditions and results of operations.
Furthermore, there is no guarantee that the Regulators will approve our applications to recover all or a portion of our capital expenditure or infrastructure investment through such rate adjustment mechanisms, and their failure to do so will adversely affect our financial conditions and results of operations.
In addition, the pollution control revenue bonds issued on behalf of SJWC contain affirmative and negative covenants customary for a loan agreement relating to revenue bonds, including, among other things, certain disclosure obligations, the tax exempt status of the interest on the bonds, and limitations and prohibitions on the transfer of projects funded by the loan proceeds and assignment of the loan agreement.
In addition, we have issued certain revenue bonds that contain affirmative and negative covenants customary for a loan agreement relating to revenue bonds, including, among other things, certain disclosure obligations, the tax exempt status of the interest on the bonds, and limitations and prohibitions on the transfer of projects funded by the loan proceeds and assignment of the loan agreement.
Water consumption typically increases during the third quarter of each year when weather tends to be warm and dry. In periods of drought, if customers are encouraged or required to conserve water due to a shortage of water supply or restriction of use, revenue tends to be lower.
Rainfall and other weather conditions also affect Water Utility Services. Water consumption typically increases during the third quarter of each year when weather tends to be warm and dry. In periods of drought, if customers are encouraged or required to conserve water due to a shortage of water supply or restriction of use, revenue tends to be lower.
The next streamflow releases will be initiated by October 2024 and will affect two additional reservoirs. No groundwater supply wells are affected by the regulations. DEEP has finalized stream classifications in all areas of Connecticut where Connecticut Water maintains and operates sources of supply.
Currently, downstream releases are made at two locations. The next streamflow releases will be initiated by October 2024 and will affect two additional reservoirs. No groundwater supply wells are affected by the regulations. DEEP has finalized stream classifications in all areas of Connecticut where CWC maintains and operates sources of supply.
Our business strategy focuses on the following: (1) Regional regulated water utility operations; (2) Regional non-tariffed water utility related services provided in accordance with the guidelines established by the Regulators; and (3) Out-of-region water and utility related services.
Our business strategy focuses on the following: (1) Regional regulated water utility operations (includes water and wastewater); (2) Regional non-tariffed water utility related services provided in accordance with the guidelines established by the applicable state public utility commissions; and (3) Out-of-region water and utility related services.
If the regulators implement policies and regulations that will not allow SJWC, Connecticut Water, SJWTX and Maine Water to accomplish some or all of the items listed above, Water Utility Services’ future operating results may be adversely affected. Further, from time to time, the commissioners at the Regulators may change.
If the regulators implement policies and regulations that will not allow Water Utility Services to accomplish some or all of the items listed above, its future operating results may be adversely affected. Furthermore, from time to time, the commissioners at the Regulators may change.
Information technology is key to the operation of the Water Utility Services, including but not limited to payroll, general ledger activities, outsourced bill preparation and remittance processing, providing customer service and the use of Supervisory Control and Data Acquisition systems to operate our distribution system.
In addition, noncompliance could expose us to liability and adversely affect business operations. Information technology is key to the operation of the Water Utility Services, including but not limited to payroll, general ledger activities, outsourced bill preparation and remittance processing, providing customer service and the use of Supervisory Control and Data Acquisition systems to operate our distribution system.
CTWS and its subsidiaries are required to comply with certain covenants in connection with their various long term loan agreements. The most restrictive of these covenants are the requirements to maintain a consolidated debt to capitalization ratio of not more than 60%. Additionally, Maine Water has restrictions on cash dividends paid based on restricted net assets.
Certain subsidiaries are required to comply with certain covenants in connection with their various long term loan agreements. These covenants include requirements to maintain a consolidated debt to capitalization ratio and restrictions on cash dividends paid based on restricted net assets.
At this time, the existing greenhouse gases laws and regulations are not expected to materially harm Water Utility Services’ operations or capital expenditures. While regulation on climate change could change in light of the current federal administration’s agenda, the uncertainty of future climate change regulatory requirements still remains.
At this time, the existing greenhouse gases laws and regulations are not expected to materially harm Water Utility Services’ operations or capital expenditures. While regulation on climate change could change, the uncertainty of future climate change regulatory requirements still remains. We cannot predict the potential impact of future laws and regulations on our business, financial condition, or results of operations.
In addition, any litigation or regulatory enforcement action against us regarding a water discharge and/or resulting environmental impact may receive negative publicity that can damage our reputation and adversely affect our business and the trading price of our common stock. 16 New or more stringent environmental regulations could increase Water Utility Services’ operating costs and affect its business.
In addition, any litigation or regulatory enforcement action against us regarding a water discharge and/or resulting environmental impact may receive negative publicity that can damage our reputation and adversely affect our business and the trading price of our common stock. Streamflow regulations in Connecticut could potentially impact our ability to serve our customers.
Such “exclusive forum” provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with SJW Group or its directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and other employees.
Such “exclusive forum” provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with SJW Group or its directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and other employees. 24 We may not be able to maintain adequate insurance coverage at reasonable costs, or at all, to cover all losses incurred in our operations.
Under certain circumstances, we may not have sufficient funds or other resources to satisfy all of our obligations under our indebtedness, including principal and interest payments, which, if not cured, may cause an event of default.
Under certain circumstances, we may not have sufficient funds or other resources to satisfy all of our obligations under our indebtedness, including principal and interest payments, which, if not cured, may cause an event of default. 22 Our senior note borrowings include certain financial covenants regarding a maximum debt to equity ratio and an interest coverage requirement.
As a result, we may sustain losses that exceed or are excluded from our insurance coverage or for which we are self-insured. The insurance companies may also seek to challenge, reduce or deny any claims we submit, which may prevent us from recovering fully the losses we incurred.
The insurance companies may also seek to challenge, reduce or deny any claims we submit, which may prevent us from recovering fully the losses we incurred.
As promulgated, the regulations require that certain downstream releases be made from seven of Connecticut Water’s eighteen active reservoirs no later than ten years following the adoption of stream classifications by the Department of Energy and Environmental Protection (“DEEP”). Currently, downstream releases are made at two locations.
In December 2011, regulations concerning the flow of water in Connecticut’s rivers and streams were adopted. As promulgated, the regulations require that certain downstream releases be made from seven of CWC’s eighteen active reservoirs no later than ten years following the adoption of stream classifications by the Department of Energy and Environmental Protection (“DEEP”).
Most of our unionized employees are represented by the OWUA, except certain employees in the engineering department who are represented by the OE. Only employees at SJWC are union members. The current three-year bargaining agreements expired on December 31, 2022 and a tentative agreement has been negotiated and will begin in 2023 for the upcoming period, 2023 through 2025.
Most of our unionized employees are represented by the UWUA, except certain employees in the engineering department who are represented by the OE. Only employees at SJWC are union members. The current three-year bargaining agreements will expire on December 31, 2025.
Water Utility Services rely on information technology and systems that are key to business operations. A system malfunction, security breach, cyber-attacks or other disruptions could compromise our information and expose us to liability, which could adversely affect business operations.
We have incurred, and will continue to incur, costs for security measures in efforts to protect against such risks. 19 Water Utility Services rely on information technology and systems that are key to business operations. A system malfunction, security breach, cyber-attacks, or other disruption that compromises our information could expose us to liability and adversely affect business operations.
In general, if a public agency exercises its eminent domain power to take possession of private property, the government is required to pay just compensation to owners of such property.
In general, if a public agency seeks to exercise its eminent domain power to take possession of private property, it must establish that such taking is for a public purpose and must pay just 17 compensation to owners of such property.
Consequently, our revenue and operating results depend substantially upon the rates the Regulators authorize. In our applications for rate approvals, we rely upon estimates and forecasts to propose rates for approval by the Regulators.
Please refer to Part I, Item 1, “Regulation and Rates” for a discussion of the most recent regulatory proceedings affecting the rates of our regulated operations. Consequently, our revenue and operating results depend substantially upon the rates the Regulators authorize. In our applications for rate approvals, we rely upon estimates and forecasts to propose rates for approval by the Regulators.
State laws in jurisdictions where we operate, including California, Connecticut, Texas and Maine, allow municipalities, water districts and other public agencies to own and operate water systems. These agencies are empowered to condemn water systems or real property owned by privately owned public utilities in certain circumstances and in compliance with state and federal laws.
State laws in jurisdictions where we operate, including California, Connecticut, Texas and Maine, allow municipalities, water districts and other public agencies to own and operate water systems.
Risks Relating To Business Operations Fluctuations in customer demand for water due to seasonality, restrictions of use, weather, and lifestyle can adversely affect operating results. Water Utility Services are seasonal, thus quarterly fluctuation in results of operations may be significant. Rainfall and other weather conditions also affect Water Utility Services.
Competing entities have challenged, and may challenge in the future, our applications for new franchises. 18 Fluctuations in customer demand for water due to seasonality, restrictions of use, weather, and lifestyle can adversely affect operating results. Water Utility Services is seasonal, thus quarterly fluctuation in results of operations may be significant.
For example, severity of drought conditions may impact the availability of water to all Water Utility Services and rising sea levels may impact the availability of groundwater to Water Utility Services. We may be at risk for litigation under the principle of inverse condemnation for activities in the normal course of business which have a damaging effect on private property.
We may be at risk for litigation under the principle of inverse condemnation for activities in the normal course of business that have a damaging effect on private property.
The senior note borrowings of SJW Group, SJWC and SJWTX include certain financial covenants regarding a maximum debt to equity ratio and an interest coverage requirement. In the event the relevant borrower exceeds the maximum debt to equity ratio or interest coverage requirement, we may be restricted from issuing future debt.
In the event the relevant borrower exceeds the maximum debt to equity ratio or interest coverage requirement, we may be restricted from issuing future debt.
We try to ensure that we offer competitive compensation and benefits as well as conduct succession planning and provide opportunities for continued development, and we continually strive to recruit and train qualified personnel and retain key employees.
We believe we offer competitive compensation and benefits as well as conduct succession planning and provide opportunities for continued development, and we continually strive to recruit and train qualified personnel and retain key employees. There can be no assurance, however, that we will continue to be successful in attracting and retaining the personnel we require to grow and operate profitably.
Pollution liability coverage is in place for the majority of the SJW Group locations and operations, but is subject to exclusions and limitations. In addition, any complaints or lawsuits against us based on water quality and contamination may receive negative publicity that can damage our reputation and adversely affect our business and trading price of our common stock.
In addition, any complaints or lawsuits against us based on water quality and contamination may receive negative publicity that can damage our reputation and adversely affect our business and trading price of our common stock. Water Utility Services is subject to possible litigation or regulatory enforcement action concerning water discharges to Waters of the United States (“WOTUS”).
In addition, government policies, the state of the credit markets and other factors could result in increased interest rates, which would increase SJW Group’s cost of capital.
In addition, government policies, the state of the credit markets and other factors could result in increased interest rates, which would increase SJW Group’s cost of capital. Furthermore, equity financings may result in dilution to our existing stockholders and debt financings may contain covenants that restrict the actions of SJW Group and its subsidiaries.
Such changes could lead to changes in policies and regulations and there can be no assurance that the resulting changes in policies and regulation, if any, will not adversely affect our operating results or financial condition. 15 If the CPUC disagrees with our calculation of SJWC’s memorandum and balancing accounts, we may be required to make adjustments that could adversely affect our results of operations.
Such changes could lead to changes in policies and regulations and there can be no assurance that the resulting changes in policies and regulation, if any, will not adversely affect our operating results or financial condition. We have various regulatory mechanisms such as balancing and memorandum accounts and rate adjustment mechanisms for infrastructure replacement, to recover certain costs and expenses.
Water Utility Services is subject to possible litigation or regulatory enforcement action concerning water discharges to Waters of the United States (“WOTUS”). Regulatory actions and fines related to discharges of water to WOTUS against other water utilities have increased in frequency in recent years.
Regulatory actions and fines related to discharges of water to WOTUS against other water utilities have increased in frequency in recent years.
Although we intend to adhere to such health and safety standards and aim for zero injuries, it is difficult to avoid accidents at all times.
Our safety record is critical to our reputation because our business operation involves inherently dangerous activities. We maintain health and safety standards to protect our employees, customers, vendors and the public. Although we intend to adhere to such health and safety standards and aim for zero injuries, it is difficult to avoid accidents at all times.
Our profitability and cash flow could be affected negatively in the event these systems do not operate effectively or are breached.
Our profitability and cash flow could be affected negatively in the event these systems do not operate effectively or are breached. Further, the use of AI by cybercriminals may increase the frequency and severity of cybersecurity attacks, including against us or our third-party vendors.
Generally accepted accounting principles for water utilities include the recognition of regulatory assets and liabilities as permitted by FASB ASC Topic 980—“Regulated Operations.” In accordance with ASC Topic 980, Water Utility Services record deferred costs and credits on the balance sheet as regulatory assets and liabilities when it is probable that these costs and credits will be recovered or refunded in the ratemaking process in a period different from when the costs and credits were incurred.
In accordance with ASC Topic 980, Water Utility Services record deferred costs on the balance sheet as regulatory assets when it is probable that these costs will be recovered in the ratemaking process.
Acceptance of the OE and the OWUA bargaining agreements are anticipated in the first quarter of 2023. We may experience difficulties and delays in the collective bargaining process to reach suitable agreements with union employees, particularly in light of increasing healthcare and pension costs.
We may experience difficulties and delays in the collective bargaining process to reach suitable agreements with union employees, particularly in light of increasing healthcare and pension costs. In addition, changes in applicable law and regulations could have an adverse effect on management’s negotiating position with the unions.
The Regulators set rates that are intended to provide revenues sufficient to recover normal operating expenses, provide funds for replacement of water infrastructure and produce a fair and reasonable return on stockholder common equity. Please refer to Part I, Item 1, “Regulation and Rates” for a discussion of the most recent regulatory proceedings affecting the rates of our regulated operations.
Our operating revenue is generated primarily from the sale of water at rates authorized by applicable state public utility commissions (the “Regulators”). The Regulators set rates that are intended to provide revenues sufficient to recover normal operating expenses, provide funds for replacement of water infrastructure and produce a fair and reasonable return on stockholder common equity.
Among other things, the CCPA establishes statutory damages for victims of data security breaches, and provides 19 additional rights for consumers to obtain their data from any business that has their personally identifying information. On January 1, 2023 the California Privacy Rights Act (“CPRA”) took effect.
The CCPA also establishes statutory damages for victims of data security breaches, and provides additional rights for consumers to obtain their data from any business that has their personally identifying information. We are anticipating updated and finalized implementing regulations under the CCPA that may impact our compliance obligations.
The CPRA amended the CCPA to create new rights for consumers and impose additional obligations on businesses. We will also be subject to Connecticut’s Act Concerning Personal Data Privacy and Online Monitoring (the “Connecticut Privacy Act”), a similar law that takes effect July 1, 2023.
We are also subject to Connecticut’s Act Concerning Personal Data Privacy and Online Monitoring, a similar law that took effect July 1, 2023, and will be subject to Texas Data Privacy and Security Act, a consumer privacy law that will be effective July 1, 2024.
Risks Relating To Our Finances and Corporate Matters We may not have sufficient cash flow or capital resources to fund capital expenditures of our water utility business. The water utility business is capital-intensive. Expenditure levels for renewal and modernization of the system will grow at an increasing rate as components reach the end of their useful lives.
Risks Relating To Our Finances and Corporate Matters We may not have sufficient cash flow or capital resources to fund capital expenditures of our business, and our access to liquidity through the capital markets may be limited. Our business is capital-intensive.
Our insurance programs have varying coverage limits, deductibles, exclusions and maximums, and our insurance coverages include, worker’s compensation, employer’s liability, damage to our property, general liability, pollution liability, cybersecurity, and automobile liability. Each policy includes either deductibles or self-insured retentions and policy limits for covered claims.
We maintain insurance coverage as part of our overall legal and risk management strategy to minimize potential liabilities arising from our operations. Our insurance programs have varying coverage limits, deductibles, exclusions and maximums, and our insurance coverages include: worker’s compensation, employer’s liability, damage to our property, general liability, pollution liability, cybersecurity, and automobile liability.
Furthermore, equity financings may result in dilution to our existing stockholders and debt financings may contain covenants that restrict the actions of SJW Group and its subsidiaries. 21 We have incurred substantial additional indebtedness that may reduce our business and operational flexibility and increase our borrowing costs.
We have incurred substantial additional indebtedness that may reduce our business and operational flexibility and increase our borrowing costs.
Please refer to Note 3 of the “Notes to Consolidated Financial Statements” for a summary of net regulatory assets.
Also, Water Utility Services record regulatory liabilities for amounts expected to be refunded to customers in the ratemaking process and for amounts collected in advance of the related expenditures. Please refer to Note 3 of the “Notes to Consolidated Financial Statements” for a summary of regulatory assets and liabilities.
In addition, changes in applicable law and regulations could have an adverse effect on management’s negotiating position with the unions. Labor actions, work stoppages or the threat of work stoppages, and our failure to obtain favorable labor contract terms during future negotiations may adversely affect our business, financial condition, results of operations, cash flows and liquidity.
Labor actions, work stoppages or the threat of work stoppages, and our failure to obtain favorable labor contract terms during future negotiations may adversely affect our business, financial condition, results of operations, cash flows and liquidity. 21 If we fail to maintain safe work sites, we can be exposed to not only people impacts but also to financial losses such as penalties and other liabilities.
Any environmental or product-related lawsuit may require us to incur significant legal costs and we may not be able to recover the legal costs from ratepayers or other third parties. Although Water Utility Services has liability insurance coverage for bodily injury and property damage, pollution liability is excluded from this coverage and our excess liability coverage.
There can be no guarantee that additional lawsuits will not occur in the future. Any environmental or product-related lawsuit, including the class action against CWC, may require us to incur significant legal costs and we may not be able to recover the legal costs from ratepayers or other third parties.
In addition, in time of drought, water conservation may become a regulatory requirement that impacts the water usage of our customers. On July 8, 2021, Governor Gavin Newsom issued a proclamation declaring a drought emergency in fifty California Counties, including Santa Clara County. SJWC has activated our Water Shortage Contingency Plan to achieve the 15% conservation target.
In addition, in time of drought, such as in the drought experienced in California in 2021 to early 2023, mandatory water conservation may become a regulatory requirement that impacts the water usage of our customers.
Removed
The operating revenue of SJWC, Connecticut Water, SJWTX and Maine Water is generated primarily from the sale of water at rates authorized by t he CPUC, PURA, PUCT and MPUC (the “Regulators”).
Added
If the Regulators disagree with our calculations of our balancing and memorandum accounts, we may be required to make adjustments that could adversely affect our results of 15 operations.
Removed
Under a 2007 Connecticut law, PURA authorizes regulated water companies to use a rate adjustment mechanism, known as WICA, for eligible projects completed and in service for the benefit of the customers.
Added
Generally accepted accounting principles for water utilities include the recognition of regulatory assets and liabilities to reflect the actions of regulators as permitted by FASB ASC Topic 980—“Regulated Operations.” These actions may result in the recognition of revenues and expenses in time periods that are different from non-rate-regulated enterprises.
Removed
Maine legislature enacted a law that allows Maine Water expedited recovery of investments in water systems infrastructure replacement, both treatment and distribution, through WISC, similar to WICA in Connecticut.
Added
Water Utility Services is subject to litigation risks concerning water quality and contamination. In October 2023, CWC, a subsidiary of SJW Group in our Water Utility Services segment, was named as a defendant in a class action lawsuit alleging that the water provided by CWC contained contaminants. CWC intends to vigorously defend itself in this lawsuit.
Removed
Streamflow regulations in Connecticut could potentially impact our ability to serve our customers. In December 2011, regulations concerning the flow of water in Connecticut’s rivers and streams were adopted.
Added
Although Water Utility Services has liability insurance coverage for bodily injury and property damage, pollution liability is excluded from this coverage and our excess liability coverage. Pollution liability coverage is in place for the majority of the SJW Group locations and operations but is subject to exclusions and limitations.
Removed
Water Utility Services is subject to litigation risks concerning water quality and contamination. Although Water Utility Services is not a party to any environmental and product-related lawsuits, there is no guarantee that such lawsuits will not occur in the future.
Added
New or more stringent environmental regulations could increase Water Utility Services’ operating costs and affect its business.
Removed
We cannot predict the potential impact of future laws and regulations on our business, financial condition, or results of operations.
Added
For example, severity of drought conditions may impact the availability of water to all Water Utility Services and rising sea levels and their effect on contributing tributary’s water quality may impact the availability of groundwater to Water Utility Services.
Removed
On July 9, 2021 Valley Water, the water supply agency for Santa Clara County, declared a water shortage emergency and requested its retailers enact conservation measures to achieve a mandatory 15% reduction compared to 2019 water consumption. SJWC has activated our Water Shortage Contingency Plan to achieve the 15% conservation target.
Added
If these public agencies are able to establish certain eminent domain elements required under state and federal laws, they may condemn water systems or real property owned by privately owned public utilities in certain circumstances.
Removed
On January 4, 2022, the State Water Resource Control Board (“State Water Board”) adopted emergency water use regulations that prohibit certain outdoor wasteful water practices. SJWC’s drought response through our Water Shortage Contingency Plan includes the same restrictions on wasteful water practices. On June 10, 2022, the State Water Board’s Second Water Conservation Emergency Declaration of 2022 became effective.
Added
Regulatory agencies may disagree with our valuation and characterization of certain of our assets. 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.
Removed
This declaration prohibits the use of potable water for irrigation of non-functional turf at commercial, industrial, and institutional properties. SJWC is currently collaborating with our wholesaler and utility peers to engage and inform customers. Both water conservation emergency declarations will remain in effect for one year.
Added
If the regulators disagree with our characterization, there is a risk that the regulators could determine that a portion or all of the realized appreciation in property value should be awarded to customers rather than our stockholders. Risks Relating To Business Operations The adequacy of our water supplies depends upon a variety of factors beyond our control.
Removed
The implementation of mandatory or voluntary conservation measures during the current drought has resulted and is expected to result in lower water usage by our customers which may adversely affect our results of operation.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe majority of the service area surrounds an 8,200 surface acre reservoir, Canyon Lake. SJWTX production wells have the ability to pump a combined 5.8 billion gallons annually.
Biggest changeTWC maintains a service area that covers approximately 271 square miles located in the southern region of the Texas hill country in Bandera, Blanco, Comal, Hays, Kendall, Medina and Travis counties. The majority of the service area surrounds an 8,200-surface acre reservoir, Canyon Lake. TWC production wells have the ability to pump a combined 5.8 billion gallons annually.
As of December 31, 2022, SJW Land Company and Chester Realty, Inc. own approximately 101 acres of property in the State of California, 55 acres of property in the State of Tennessee and 23 acres of property in State of Connecticut.
As of December 31, 2023, SJW Land Company and Chester Realty, Inc. own approximately 101 acres of property in the State of California, 55 acres of property in the State of Tennessee and 23 acres of property in State of Connecticut.
CTWS also owns, maintains and operates 50 small, non-interconnected satellite and consecutive water systems, that combined, have the ability to deliver about 3.5 million gallons of additional water per day to their respective systems. CTWS’s 30 water treatment plants have a combined treatment capacity of approximately 52 million gallons per day.
CTWS also owns, maintains and operates 50 small, non-interconnected satellite and consecutive water systems, that combined, have the ability to deliver about 3.5 million gallons of additional water per day to their respective systems. CTWS’s 30 water treatment plants have a combined treatment capacity of approximately 0.05 billion gallons per day.
In certain cases, Connecticut Water and Maine Water are or may be a party to limited contractual arrangements for the provision of water supply from neighboring utilities. Sources of water supply owned, maintained and operated by CTWS include 25 surface water reservoirs and 108 well fields.
In certain cases, CWC and MWC are or may be a party to limited contractual arrangements for the provision of water supply from neighboring utilities. Sources of water supply owned, maintained and operated by CTWS include 25 surface water reservoirs and 108 well fields.
A substantial portion of treatment, storage and distribution properties owned by Maine Water are subject to liens of mortgage or indentures that secure bonds, notes and other evidences of long-term indebtedness.
A substantial portion of treatment, storage and distribution properties owned by MWC are subject to liens of mortgage or indentures that secure bonds, notes and other evidences of long-term indebtedness.
The following table is a summary of SJW Land Company and Chester Realty, Inc. properties described previously: % for Year Ended December 31, 2022 of Real Estate Services Description Location Acreage Square Footage Revenue Expense Warehouse building Knoxville, Tennessee 30 361,500 52 % 42 % Commercial building Knoxville, Tennessee 15 135,000 47 % 57 % Undeveloped land and parking lot Knoxville, Tennessee 10 N/A N/A N/A Undeveloped land San Jose, CA 101 N/A N/A N/A Commercial building Clinton, CT 22 9,000 1 % 1 % Commercial building Guilford, CT 1 1,300 — % — % 26
The following table is a summary of SJW Land Company and Chester Realty, Inc. properties described previously: % for Year Ended December 31, 2023 of Real Estate Services Description Location Acreage Square Footage Revenue Expense Warehouse building Knoxville, TN 30 361,500 52 % 47 % Commercial building Knoxville, TN 15 135,000 47 % 52 % Undeveloped land and parking lot Knoxville, TN 10 N/A N/A N/A Undeveloped land San Jose, CA 101 N/A N/A N/A Commercial building Clinton, CT 22 9,000 1 % 1 % Commercial building Guilford, CT 1 1,300 — % — %
In general, the property is comprised of franchise rights, water rights, necessary rights-of-way, approximately 6,400 acres of land held in fee (which is primarily non-developable watershed), impounding reservoirs with a capacity of approximately 2.256 billion gallons, 2,491 miles of transmission and distribution mains, distribution storage of approximately 194 million gallons, wells, boosting facilities, diversions, surface water treatment plants, equipment, office buildings and other property necessary to provide water service to its customers.
In general, the property is comprised of franchise rights, water rights, necessary rights-of-way, approximately 6,400 acres of land held in fee (which is primarily non-developable watershed), impounding reservoirs with a capacity of approximately 2.3 billion gallons, 2,492 miles of transmission and distribution mains, distribution storage of approximately 0.20 billion gallons, wells, boosting facilities, diversions, surface water treatment plants, equipment, office buildings and other property necessary to provide water service to its customers.
SJWC maintains all of its properties in good operating condition in accordance with customary practice for a water utility. SJWC’s groundwater pumping stations have a production capacity of approximately 264 million gallons per day and the present capacity for taking purchased water is approximately 84 million gallons per day.
SJWC maintains all of its properties in good operating condition in accordance with customary practice for a water utility. SJWC’s groundwater pumping stations have a production capacity of approximately 0.26 billion gallons per day and the present capacity for taking purchased water is approximately 0.08 billion gallons per day.
SJWTX has contracts for 2 billion gallons of untreated surface water and 235 million gallons of treated surface water from the GBRA annually, and 81 million gallons of treated surface water from LCRA. SJWTX owns and operates three surface water treatment plants with a combined production capacity of 9 million gallons per day.
TWC has contracts for 2 billion gallons of untreated surface water and 0.24 billion gallons of treated surface water from the GBRA annually, and 0.11 billion gallons of treated surface water from LCRA. TWC owns and operates three surface water treatment plants with a combined production capacity of 9 million gallons per day.
In addition, Connecticut Water and Maine Water have agreements with various neighboring water utilities to provide water, at negotiated rates, to our water systems. Collectively, these sources have the capacity to deliver approximately 84 million gallons of potable water daily to the 27 major operating systems.
In addition, CWC and MWC have agreements with various neighboring water utilities to provide water, at negotiated rates, to our water systems. Collectively, these sources have the capacity to deliver approximately 0.08 billion gallons of potable water daily to the 27 major operating systems.
The surface water collection system has a physical delivery capacity of approximately 35 million gallons per day. During 2022, a maximum and average of 120 million gallons and 92 million gallons of water per day, respectively, were delivered to the system.
The surface water collection system has a physical delivery capacity of approximately 0.03 billion gallons per day. During 2023, a maximum and average of 0.13 billion gallons and 0.09 billion gallons of water per day, respectively, were delivered to the system.
Water Utility Services hold all of its principal properties in fee simple, subject to current tax and assessment liens, rights-of-way, easements, and certain minor defects in title which do not materially affect their use.
These wells have been projected to yield an additional 2.0 billion gallons per year or more. 27 Water Utility Services hold all of its principal properties in fee simple, subject to current tax and assessment liens, rights-of-way, easements, and certain minor defects in title which do not materially affect their use.
In addition, CTWS owns and operates one wastewater treatment plant with a capacity of 780,000 gallons per day. SJWTX maintains a service area that covers approximately 268 square miles located in the southern region of the Texas hill country in Bandera, Blanco, Comal, Hays, Kendall, Medina and Travis counties.
In addition, CTWS owns and operates one wastewater treatment plant with a capacity of 780,000 gallons per day.
SJWTX has 764 miles of transmission and distribution mains and maintains 78 storage tanks with a total storage capacity of 12.4 million gallons. SJWTX owns and operates four wastewater treatment plants with a combined capacity of 293,500 gallons per day.
TWC maintains 87 storage tanks with a total storage capacity of 0.02 billion gallons. TWC owns and operates four wastewater treatment plants with a combined capacity of 293,500 gallons per day. In August 2023, TWR acquired eight wells and the water rights of KT Water Resources LLC.
Added
The properties of TWC consist of land, easements, rights (including water rights), buildings, reservoirs, standpipes, wells, supply lines, water treatment plants, pumping plants, 818 miles of transmission and distribution mains and other facilities and equipment used for the collection, purification, storage and distribution of water throughout its service area.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings SJW Group and its subsidiaries are subject to ordinary routine litigation incidental to its business.
Biggest changeItem 3. Legal Proceedings SJW Group and its subsidiaries are subject to ordinary routine litigation incidental to its business. In October 2023, The Connecticut Water Company, a subsidiary of SJW Group, was named as a defendant in a class action lawsuit alleging that the water provided by Connecticut Water contained contaminants.
There are no pending legal proceedings to which SJW Group or any of its subsidiaries is a party, or to which any of its properties is the subject, that are expected to have a material effect on SJW Group’s business, financial position, results of operations or cash flows. Item 4. Mine Safety Disclosures None. 27 PART II
Connecticut Water intends to vigorously defend itself in this lawsuit. There are no pending legal proceedings to which SJW Group or any of its subsidiaries is a party, or to which any of its properties is the subject, that are expected to have a material effect on SJW Group’s business, financial position, results of operations or cash flows.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeCOMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN Among SJW Group, a Water Utility Index and the S&P 500 Index The following descriptive data of the performance graph is supplied in accordance with Rule 304(d) of Regulation S-T (numbers represent U.S. dollars ($)): 2017 2018 2019 2020 2021 2022 SJW Group $ 100 89 116 115 124 140 Water Utility Index $ 100 103 144 166 207 177 S&P 500 Index $ 100 96 126 149 192 157 The Water Utility Index is the 9 water company Water Utility Index (including CTWS up to the time of its merger with SJW Group) prepared by Wells Fargo Securities, LLC.
Biggest changeCOMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN Among SJW Group, a Water Utility Index and the S&P 500 Index The following descriptive data of the performance graph is supplied in accordance with Rule 304(d) of Regulation S-T (numbers represent U.S. dollars ($)): 2018 2019 2020 2021 2022 2023 SJW Group $ 100 130 130 139 158 130 Water Utility Index $ 100 140 162 201 173 155 S&P 500 Index $ 100 131 156 200 164 207 The Water Utility Index is the nine water company Water Utility Index (including CTWS up to the time of its merger with SJW Group) prepared by Wells Fargo Securities, LLC.
Five-Year Performance Graph The following performance graph compares the changes in the cumulative stockholder return on SJW Group’s common stock with the cumulative total return on a Water Utility Index and the Standard & Poor’s 500 Index during the last five years ended December 31, 2022.
Five-Year Performance Graph The following performance graph compares the changes in the cumulative stockholder return on SJW Group’s common stock with the cumulative total return on a Water Utility Index and the Standard & Poor’s 500 Index during the last five years ended December 31, 2023.
The comparison assumes $100 was invested on December 31, 2017 in SJW Group’s common stock and in each of the foregoing indices and assumes reinvestment of dividends.
The comparison assumes $100 was invested on December 31, 2018 in SJW Group’s common stock and in each of the foregoing indices and assumes reinvestment of dividends.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information SJW Group’s common stock is traded on the New York Stock Exchange under the symbol “SJW”. As of December 31, 2022, there were 291 record holders of SJW Group’s common stock, excluding those shares held in street or nominee name.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information SJW Group’s common stock is traded on the New York Stock Exchange under the symbol “SJW.” As of December 31, 2023, there were 271 record holders of SJW Group’s common stock, excluding those shares held in street or nominee name.

Item 7. Management's Discussion & Analysis

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

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Biggest changeWater Utility Services’ Operating Revenue and Customer Counts The following tables present operating revenues and number of customers by customer group of Water Utility Services: Operating Revenue by Customer Group 2022 2021 2020 Residential and business $ 509,284 487,038 487,675 Industrial 5,619 5,216 5,025 Public authorities 22,633 20,942 20,534 Others 50,821 45,968 45,376 Balancing and memorandum accounts and other regulatory mechanisms 26,736 9,143 384 $ 615,093 568,307 558,994 Number of Customers 2022 2021 2020 Residential and business 384,346 380,416 372,641 Industrial 609 608 605 Public authorities 2,389 2,387 2,406 Others 10,982 10,873 13,641 398,326 394,284 389,293 Operating Expense Operating expense by segment was as follows: Operating Expense 2022 2021 2020 Water Utility Services $ 482,679 456,539 438,318 Real Estate Services 3,719 3,585 3,510 All Other 3,322 2,403 5,028 $ 489,720 462,527 446,856 35 The change in consolidated operating expenses was due to the following factors: 2022 vs. 2021 Increase/(decrease) 2021 vs. 2020 Increase/(decrease) Water production expenses: Change in surface water supply $ (7,262) (2) % $ 3,897 1 % Change in usage and new customers (15,311) (3) % (13,534) (3) % Purchased water and groundwater extraction charge and energy price increase 28,576 6 % 11,626 3 % Balance and memorandum account cost recovery (2,296) — % 1,302 — % Total water production expenses 3,707 1 % 3,291 1 % Administrative and general 6,576 2 % 6,649 2 % Balance and memorandum account cost recovery 1,496 — % 942 — % Maintenance 4,703 1 % 2,654 1 % Balance and memorandum account cost recovery — — % 1,219 — % Property taxes and other non-income taxes 1,608 — % 1,078 — % Depreciation and amortization 10,017 2 % 5,121 1 % Impairment of long lived assets (2,211) — % 2,211 — % Sale of nonutility property 1,297 — % (7,494) (2) % $ 27,193 6 % $ 15,671 3 % Sources of Water Supply SJWC’s water supply consists of groundwater from wells, surface water from watershed run-off and diversion, reclaimed water, and imported water purchased from Valley Water under the terms of a master contract with Valley Water expiring in 2051.
Biggest changeWater Utility Services’ Operating Revenue and Customer Counts The following tables present operating revenues and number of customers by customer group of Water Utility Services: Operating Revenue by Customer Group 2023 2022 Residential and business $ 566,651 509,284 Industrial 5,038 5,619 Public authorities 24,395 22,633 Others 56,823 50,821 Balancing and memorandum accounts and other regulatory mechanisms 11,772 26,736 $ 664,679 615,093 Number of Customers 2023 2022 Residential and business 387,616 384,346 Industrial 614 609 Public authorities 2,424 2,389 Others 11,056 10,982 401,710 398,326 Operating Expense Operating expense by segment was as follows: Operating Expense 2023 2022 Water Utility Services $ 514,375 482,679 Real Estate Services 2,956 3,719 All Other 3,597 3,322 $ 520,928 489,720 36 The change in consolidated operating expenses was due to the following factors: 2023 vs. 2022 Increase/(decrease) Water production expenses: Change in surface water use $ (11,510) (2) % Change in usage and new customers (9,716) (2) % Purchased water and groundwater extraction charge, energy price change and other production expenses, net 31,767 7 % Balancing and memorandum account cost recovery 12,869 2 % Total water production expenses 23,410 5 % Administrative and general 3,252 1 % Maintenance (5,005) (1) % Property taxes and other non-income taxes 1,903 — % Depreciation and amortization 1,451 — % Gain on sale of nonutility property 6,197 1 % $ 31,208 6 % Sources of Water Supply SJWC’s water supply consists of groundwater from wells, surface water from watershed run-off and diversion, reclaimed water, and imported water purchased from Valley Water under the terms of a master contract with Valley Water expiring in 2051.
The pension balancing account is intended to capture the 30 difference between actual pension expense and the amount approved in rates by the CPUC. The general rate case true-up accounts are a result of revenue shortfalls authorized for collection or refund by the CPUC due to delayed rate case and cost of capital decisions.
The pension balancing account is intended to capture the difference between actual pension expense and the amount approved in rates by the CPUC. The general rate case true-up accounts are a result of revenue shortfalls authorized for collection or refund by the CPUC due to delayed rate case and cost of capital decisions.
See current authorized capital structures in Item 1 , “Business” under “Regulation and Rates.” 41 Short-term Financing Arrangements SJW Group and its subsidiaries have unsecured line of credit agreements where borrowings are used to refinance existing debt, for working capital, and for general corporate purposes.
See current authorized capital structures in Item 1 , “Business” under “Regulation and Rates.” Short-term Financing Arrangements SJW Group and its subsidiaries have unsecured line of credit agreements where borrowings are used to refinance existing debt, for working capital, and for general corporate purposes.
The unaccounted-for water estimate is based on the results of past experience and the impact of flows through the system, partially offset by SJWC’s main replacements and water loss reduction programs. Connecticut Water has an agreement with the South Central Connecticut Regional Water Authority (“RWA”) to purchase water from RWA.
The unaccounted-for water estimate is based on the results of past experience and the impact of flows through the system, partially offset by SJWC’s main replacements and water loss reduction programs. CWC has an agreement with the South Central Connecticut Regional Water Authority (“RWA”) to purchase water from RWA.
The level of future earnings and the related cash flow from operations is dependent, in large part, on the timing and outcome of regulatory proceedings. SJW Group’s regulated operations financing activity is designed to achieve capital structures consistent with regulatory guidelines in the locations where the companies operate.
The level of future earnings and the related cash flow from operations is dependent, in large part, on the timing and outcome of regulatory proceedings. SJW Group’s regulated operations’ financing activity is designed to achieve capital structures consistent with regulatory guidelines in the locations where the companies operate.
SJWC also maintains memorandum accounts to track revenue impacts due to catastrophic events, certain unforeseen water quality expenses related to new federal and state water quality standards, energy efficiency, water conservation, water tariffs, and other approved activities or as directed by the CPUC.
SJWC also maintains memorandum accounts to track impacts due to catastrophic events, certain unforeseen water quality expenses related to new federal and state water quality standards, energy efficiency, water conservation, water tariffs, and other approved activities or as directed by the CPUC.
The condition of the capital and credit markets or the strength of financial institutions could impact SJW Group’s ability to draw on its lines of credit, issue long-term debt, sell its equity or earn interest income.
Credit Rating The condition of the capital and credit markets or the strength of financial institutions could impact SJW Group’s ability to draw on its lines of credit, issue long-term debt, sell its equity or earn interest income.
Factors Affecting Our Results of Operations SJW Group’s financial condition and results of operations are influenced by a variety of factors including the following: • Economic utility regulation; • Infrastructure investment; • Compliance with environmental, health and safety standards; • Production expenses; • Customer growth; • Water usage per customer; • Weather conditions, seasonality and sources of water supply; and • Merger and acquisition activities, if any. 31 Economic Utility Regulation Water Utility Services is generally subject to economic regulation by the Regulators overseeing public utilities.
Factors Affecting Our Results of Operations SJW Group’s financial condition and results of operations are influenced by a variety of factors including the following: • Economic utility regulation; • Infrastructure investment; • Compliance with environmental, health and safety standards; • Production expenses; • Customer growth; • Water usage per customer; • Weather conditions, seasonality and sources of water supply; and • Merger and acquisition activities, if any. 32 Economic Utility Regulation Water Utility Services is generally subject to economic regulation by the Regulators overseeing public utilities.
SJWTX has long-term contracts with the GBRA. The agreements expire in 2037, 2040, 2044 and 2050. The agreements, which are take-or-pay contracts, provide SJWTX with 7,650 acre-feet per year of water supply from Canyon Lake. The water rate may be adjusted by GBRA at any time, provided GBRA gives SJWTX a 60-day written notice on the proposed adjustment.
TWC has long-term contracts with the GBRA. The agreements expire in 2037, 2040, 2044 and 2050. The agreements, which are take-or-pay contracts, provide TWC with 7,650 acre-feet per year of water supply from Canyon Lake. The water rate may be adjusted by GBRA at any time, provided GBRA gives TWC a 60-day written notice on the proposed adjustment.
The factors SJW Group considers in evaluating such opportunities include: • Potential profitability; • Regulatory environment; • Additional growth opportunities within the region; • Water supply, water quality and environmental issues; • Capital requirements; • General economic conditions; and • Synergy potential. 29 As part of our pursuit of the above three strategic areas, we consider from time to time opportunities to acquire businesses and assets.
The factors SJW Group considers in evaluating such opportunities include: • Potential profitability; • Regulatory environment; • Additional growth opportunities within the region; • Water supply, water quality and environmental issues; • Capital requirements; • General economic conditions; and • Synergy potential. 30 As part of our pursuit of the above three strategic areas, we consider from time-to-time opportunities to acquire businesses and assets.
The SIC will allow SJWTX to earn a return on some of its capital improvements made after 2020 through a surcharge to its customers. The SIC is a cost recovery mechanism recently adopted in Texas that avoids the immediate need for a general rate case. The PUCT permits the acquisition of utilities using a process termed the Fair Market Value.
The SIC will allow TWC to earn a return on some of its capital improvements made after 2020 through a surcharge to its customers. The SIC is a cost recovery mechanism recently adopted in Texas that avoids the immediate need for a general rate case. The PUCT permits the acquisition of utilities using a process termed the Fair Market Value.
Water Utility Services has implemented monitoring activities and installed specific 32 water treatment improvements enabling it to comply with existing maximum contaminant levels and plan for compliance with future drinking water regulations. However, the EPA and the respective state agencies have continuing authority to issue additional regulations under the Safe Drinking Water Act.
Water Utility Services has implemented monitoring activities and installed specific water 33 treatment improvements enabling it to comply with existing maximum contaminant levels and plan for compliance with future drinking water regulations. However, the EPA and the respective state agencies have continuing authority to issue additional regulations under the Safe Drinking Water Act.
Surface water is sourced from SJWC’s 6,400 acre of watershed in the Santa Cruz mountains. In 2022, SJWC’s general rate case decision approved the use of the Full Cost Balancing Account which mitigates the cost of the water supply from changes and variations in quantities from each of these sources affect the overall mix of the water supply.
Surface water is sourced from SJWC’s 6,400 acres of watershed in the Santa Cruz mountains. In 2022, SJWC’s general rate case decision approved the use of the Full Cost Balancing Account which mitigates the cost of the water supply from changes and variations in quantities from each of these sources which affect the overall mix of the water supply.
SJWTX also has raw water supply agreements with the LCRA and WTPUA expiring in 2059 and 2046, respectively, to provide for 350 acre-feet of water per year from Lake Austin and the Colorado River, respectively, at prices that may be adjusted periodically by the agencies.
TWC also has raw water supply agreements with the LCRA and WTPUA expiring in 2059 and 2046, respectively, to provide for 350 acre-feet of water per year from Lake Austin and the Colorado River, respectively, at prices that may be adjusted periodically by the agencies.
SJWTX also has raw water supply agreements with the LCRA and WTPUA expiring in 2059 and 2046, respectively, for 350 acre-feet of water per each agreement per year from Lake Austin and the Colorado River, respectively, at prices that may be adjusted periodically by the agencies.
TWC also has raw water supply agreements with the LCRA and WTPUA expiring in 2059 and 2046, respectively, for 350 acre-feet of water per each agreement per year from Lake Austin and the Colorado River, respectively, at prices that may be adjusted periodically by the agencies.
Upon CPUC approval, acquiring utilities can include the Fair Market Value in rate base. Pursuant to Connecticut regulations, Connecticut Water employs a historical test year. To address regulatory risk due to regulatory lag and changing legislation policies and regulations, rate cases may be filed as necessary in Connecticut.
Upon CPUC approval, acquiring utilities can include the Fair Market Value in rate base. Pursuant to Connecticut regulations, CWC employs a historical test year. To address regulatory risk due to regulatory lag and changing legislation policies and regulations, rate cases may be filed as necessary in Connecticut.
SJWC’s other benefit obligations include employees’ and directors’ postretirement benefits, an Executive Supplemental Retirement Plan, Cash Balance Executive Supplemental Retirement Plan, Special Deferral Election Plan and Deferral Election Program for non-employee directors. Under these benefit plans, SJWC is committed to pay approximately $1,750 annually to former officers and directors.
SJWC’s other benefit obligations include employees’ and directors’ postretirement benefits, an Executive Supplemental Retirement Plan, Cash Balance Executive Supplemental Retirement Plan, Special Deferral Election Plan and Deferral Election Program for non-employee directors. Under these benefit plans, SJWC is committed to pay approximately $1,909 annually to former officers and directors.
Future payments may fluctuate depending on the contribution rates of employees into the deferred compensation plan and the life span of the retirees and as current officers and executives retire. Under these benefit plans, CTWS is committed to pay approximately $1,334 annually to former officers and directors.
Future payments may fluctuate depending on the contribution rates of employees into the deferred compensation plan and the life span of the retirees and as current officers and executives retire. Under these benefit plans, CTWS is committed to pay approximately $1,678 annually to former officers and directors.
Sources of Capital SJW Group’s regulated operations ability to finance future construction programs and sustain dividend payments depends on its ability to maintain or increase internally generated funds and obtain external financing through the issuance of new long-term debt or issuance of equity.
Sources of Capital SJW Group’s regulated operations’ ability to finance future construction programs and sustain dividend payments depends on its ability to maintain or increase internally generated funds and obtain external financing through the issuance of new long-term debt or issuance of equity.
All of the lines of credit also include certain customary financial covenants such as a funded debt to capitalization ratio and a minimum interest coverage ratio. As of December 31, 2022, SJW Group and its subsidiaries were in compliance with all covenants on their lines of credit.
All of the lines of credit also include certain customary financial covenants such as a funded debt to capitalization ratio and a minimum interest coverage ratio. As of December 31, 2023, SJW Group and its subsidiaries were in compliance with all covenants on their lines of credit.
SJW Group and its subsidiaries have unsecured bank lines of credit totaling $350,000 as of December 31, 2022. Drawdowns on our lines of credit are restricted by our funded debt not exceeding a percent of total capitalization as defined in our debt covenants.
SJW Group and its subsidiaries have unsecured bank lines of credit totaling $350,000 as of December 31, 2023. Drawdowns on our lines of credit are restricted by our funded debt not exceeding a percent of total capitalization as defined in our debt covenants.
When such evidence provides sufficient support, the balances are recorded in SJW Group’s financial statements. It is typical for the CPUC to incorporate any over-collected and/or under-collected balances in balancing or memorandum accounts into customer rates at the time rate decisions are made as part of SJWC’s general rate case proceedings by assessing temporary surcredits and/or surcharges.
When such evidence provides sufficient support, the balances are recorded in SJW Group’s financial statements. It is typical for the CPUC to incorporate any over-collected and/or under-collected balances in balancing or memorandum accounts into customer rates at the time rate decisions are made as part of SJWC’s general rate case proceedings by assessing temporary sur-credits and/or surcharges.
Further to mitigate risks from variations in revenues from changes in customer usage, the Connecticut State Legislature has approved a WRA to provide for recovery of the company’s authorized revenues. Pursuant to Texas regulation, SJWTX employs a historical test year.
Further, to mitigate risks from variations in revenues from changes in customer usage, the Connecticut State Legislature has approved a WRA to provide for recovery of the company’s authorized revenues. Pursuant to Texas regulation, TWC employs a historical test year.
The agreements, which are take-or-pay contracts, provide SJWTX with an aggregate of 7,650 acre-feet of water per year from Canyon Lake at prices that may be adjusted periodically by GBRA.
The agreements, which are take-or-pay contracts, provide TWC with an aggregate of 7,650 acre-feet of water per year from Canyon Lake at prices that may be adjusted periodically by GBRA.
Cash Flow from Investing Activities In 2022, SJW Group used approximately $218,800 of cash for Company funded capital expenditures, $22,900 for developer funded capital expenditures, $2,500 in utility plant retirement costs, $600 for real estate investments related to leasehold improvement additions for the properties located in Knoxville, Tennessee, and $400 for ongoing business and asset acquisition activities in Texas.
In 2022, SJW Group used approximately $218,800 of cash for Company funded capital expenditures, $22,900 for developer funded capital expenditures, $2,500 in utility plant retirement costs, $600 for real estate investments related to leasehold improvement additions for the properties located in Knoxville, Tennessee, and $400 for ongoing business and asset acquisition activities in Texas.
Connecticut Water’s water sources vary among the individual systems, but overall approximately 80% of the total dependable yield comes from surface water supplies and 20% from wells. In addition, Connecticut Water has water supply agreements to supplement its water supply with the South Central Connecticut Regional Water Authority and The Metropolitan District that expire in 2058 and 2053, respectively.
CWC’s water sources vary among the individual systems, but overall, approximately 80% of the total dependable yield comes from surface water supplies and 20% from wells. In addition, CWC has water supply agreements to supplement its water supply with the South Central Connecticut Regional Water Authority and The Metropolitan District that expire in 2058 and 2053, respectively.
Similarly, in unusually wet periods, water supply tends to be higher and customer demand tends to be lower, again resulting in lower revenues. 33 SJWC believes that its various sources of water supply, which consists of groundwater from wells, surface water from watershed run-off and diversion, reclaimed water, and purchased imported water, will be sufficient to meet customer demand for 2023.
Similarly, in unusually wet periods, water supply tends to be higher and customer demand tends to be lower, again resulting in lower revenues. SJWC believes that its various sources of water supply, which consists of groundwater from wells, surface water from watershed run-off and diversion, reclaimed water, and purchased imported water, will be sufficient to meet customer demand for 2024.
Recently Adopted Accounting Policies and New Accounting Pronouncements See Note 2 of “Notes to Consolidated Financial Statements” for a discussion of recently adopted accounting policies and new accounting pronouncements for the year ended December 31, 2022.
Recently Adopted Accounting Policies and New Accounting Pronouncements See Note 2 of “Notes to Consolidated Financial Statements” for a discussion of recently adopted accounting policies and new accounting pronouncements for the year ended December 31, 2023.
All of SJW Group’s and subsidiaries lines of credit contain customary representations, warranties and events of default, as well as certain restrictive covenants customary for facilities of this type, including restrictions on indebtedness, liens, acquisitions and investments, restricted payments, asset sales, and fundamental changes.
All of SJW Group’s and subsidiaries’ lines of credit contain customary representations, warranties and events of default, as well as certain restrictive covenants customary for facilities of this type, including restrictions on indebtedness, liens, acquisitions 41 and investments, restricted payments, asset sales, and fundamental changes.
Water sources at Maine Water vary among the individual systems, but overall approximately 90% of the total dependable yield comes from surface water supplies and 10% from wells.
Water sources at MWC vary among the individual systems, but overall, approximately 90% of the total dependable yield comes from surface water supplies and 10% from wells.
Dividends have been paid on SJW Group’s and its predecessor’s common stock for 317 consecutive quarters and the annual dividend amount has increased in each of the last 55 years. While historically SJW Group has generally paid dividends equal to approximately 50% to 60% of its net income, SJW Group cannot guarantee that this trend will continue in the future.
Dividends have been paid on SJW Group’s and its predecessor’s common stock for 321 consecutive quarters and the annual dividend amount has increased in each of the last 56 years. While historically SJW Group has generally paid dividends equal to approximately 50% to 60% of its net income, SJW Group cannot guarantee that this trend will continue in the future.
While our ability to obtain financing will continue to be a key risk, we believe that based on our successful 2022 activities, we will have access to the external funding sources necessary to implement our on-going capital investment programs in the future.
While our ability to obtain financing will continue to be a key risk, we believe that based on our successful 2023 activities, we will have access to the external funding sources necessary to implement our ongoing capital investment programs in the future.
These expenses include power, which is used to operate pumps and other equipment, purchased water and groundwater extraction charges. For 2022, production expenses accounted for approximately 48% of our total operating expenses. Price increases associated with these production inputs would adversely impact our results of operations until rate relief is granted.
These expenses include power, which is used to operate pumps and other equipment, purchased water and groundwater extraction charges. For 2023, production expenses accounted for 49% of our total operating expenses. Price increases associated with these production inputs would adversely impact our results of operations until rate relief is granted.
In regards to uncertain tax positions, we are unable to predict the timing of tax settlements as tax audits can involve complex issues and the resolution of those issues may span multiple years, particularly if subject to negotiation or litigation.
With regard to uncertain tax positions, we are unable to predict the timing of tax settlements as tax audits can involve complex issues and the resolution of those issues may span multiple years, particularly if subject to negotiation or litigation.
Over the next five years, Water Utility Services expects to incur approximately $1,353,390 in capital expenditures. A significant portion of this amount is subject to future approval from the Regulators. Capital expenditures have the effect of increasing utility plant rate base on which Water Utility Services earns a return.
Over the next five years, Water Utility Services expects to incur approximately $1,621,000 in capital expenditures. A significant portion of this amount is subject to future approval from the Regulators. Capital expenditures have the effect of 40 increasing utility plant rate base on which Water Utility Services earns a return.
Cash flow from operations is primarily generated by net income from revenue producing activities, adjusted for non-cash expenses for depreciation and amortization, deferred income taxes, share-based compensation, allowance for equity funds used during construction, gains on the sale of assets, and other changes in working capital items. Cash flow from operations increased in 2022 by approximately $36,200.
Cash flow from operations is primarily generated by net income from revenue producing activities, adjusted for non-cash expenses for depreciation and amortization, deferred income taxes, share-based compensation, allowance for equity funds used during construction, gains on the sale of assets, and other changes in working capital items. Cash flow from operations increased in 2023 by approximately $24,600.
Connecticut Water and SJWTX also provides regulated wastewater services. The United States water utility industry is largely fragmented and is dominated by municipal-owned water systems. The water industry is regulated, and provides a life-sustaining product. This makes water utilities subject to lower business cycle risks than non-tariffed industries.
The United States water utility industry is largely fragmented and is dominated by municipal-owned water systems. The water industry is regulated, and provides a life-sustaining product. This makes water utilities subject to lower business cycle risks than non-tariffed industries.
SJWTX’s water supply consists of groundwater from wells and purchased treated and raw water from the GBRA. SJWTX has long-term agreements with the GBRA, which expire in 2037, 2040, 2044 and 2050.
TWC’s water supply consists of groundwater from wells and purchased treated and raw water from the GBRA. TWC has long-term agreements with the GBRA, which expire in 2037, 2040, 2044 and 2050.
SJWTX believes that it will be able to meet customer demand for 2023 with their water supply which consists of groundwater from wells and purchased treated and raw water from the GBRA. Results of Operations Among other things, water sales are seasonal in nature and influenced by weather conditions.
TWC believes that it will be able to meet customer demand for 2024 with their water supply which consists of groundwater from wells and purchased treated and raw water from the GBRA. Results of Operations Water sales are seasonal in nature and influenced by weather conditions.
The Monterey Water Revenue Adjustment Mechanism 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 would have been in effect.
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 would have been in effect.
Connecticut Water and Maine Water believes that they will be able to meet customer demand for 2023 with their existing water supply which consists of groundwater from wells, surface water in reservoirs and purchased water treated by neighboring water utilities.
CWC and MWC believes that they will be able to meet customer demand for 2024 with their existing water supply which consists of groundwater from wells, surface water in reservoirs and purchased water treated by neighboring water utilities.
The agreement became effective on October 6, 2000 and has a term of fifty years beginning May 19, 2003, the date the water supply facilities related to the agreement were placed in service. Connecticut Water has agreed to purchase 283 million gallons of water annually from MDC.
The agreement became effective on October 6, 2000 and has a term of fifty years beginning May 19, 2003, the date the water supply facilities related to the agreement were placed in service. CWC has agreed to purchase 0.28 billion gallons of water annually from MDC.
Employee Benefit Arrangements SJWC and CTWS sponsor noncontributory defined benefit pension plans and provide health care and life insurance benefits for retired employees. In 2022, SJWC and CTWS contributed $11,712 and $626 to the pension plans and other postretirement benefit plans, respectively.
Employee Benefit Arrangements SJWC and CTWS sponsor noncontributory defined benefit pension plans and provide health care and life insurance benefits for retired employees. In 2023, SJWC and CTWS contributed $11,145 and $920 to the pension plans and other postretirement benefit plans, respectively.
In 2023, SJWC and CTWS expect to make required and discretionary cash contributions of up to $9,115 to the pension plans and other postretirement benefit plans. The amount of required contributions for years thereafter is not actuarially determinable.
In 2024, SJWC and CTWS expect to make required and discretionary cash contributions of up to $8,744 to the pension plans and other postretirement benefit plans. The amount of required contributions for years thereafter is not actuarially determinable.
In addition, Connecticut Water is able, but under no obligation, to purchase up to one million gallons of water per day at the then current wholesale rates per the agreement, $2.621 per million gallons as of December 31, 2022. Connecticut Water has an agreement with The Metropolitan District (“MDC”) to purchase water from MDC to serve the Unionville system.
In addition, CWC is able, but under no obligation, to purchase up to one million gallons of water per day at the then current wholesale rates per the agreement, $3.1 million per billion gallons as of December 31, 2023. CWC has an agreement with The Metropolitan District (“MDC”) to purchase water from MDC to serve the Unionville system.
The contractual cost of the groundwater extraction charge for water pumped from the ground basin was $5.3, $4.6 and $4.2 per million gallons for Valley Water’s fiscal years 2023, 2022 and 2021, respectively. SJWC’s unaccounted-for water for 2022 and 2021 approximated 8.9% and 7.8%, respectively, as a percentage of production.
The contractual cost of the groundwater extraction charge for water pumped from the ground basin was $6.058 million, $5.290 million and $4.600 million per billion gallons for Valley Water’s fiscal years 2024, 2023 and 2022, respectively. SJWC’s unaccounted-for water for 2023 and 2022 approximated 8.4% and 8.9%, respectively, as a percentage of production.
Regional Regulated Activities SJW Group’s regulated utility operation is conducted through SJWC, Connecticut Water, SJWTX and Maine Water. SJW Group plans and applies a diligent and disciplined approach to maintaining and improving its water system infrastructures and also seeks to acquire regulated water systems adjacent to or near its existing service territory.
Regional Regulated Activities SJW Group’s regulated utility operation is conducted through SJWC, CWC, TWC and MWC. SJW Group plans and applies a diligent and disciplined approach to maintaining and improving its water system infrastructures and also seeks to acquire regulated water systems adjacent to or near its existing service territory. CWC and TWC also provide regulated wastewater services.
The agreement has been in place for 20 years and was extended on November 7, 2020 for a new term of up to 20 years. Maine Water guarantees a minimum consumption of 50 million gallons of water annually.
The agreement has been in place for 20 years and was extended on November 7, 2020 for a new term of up to 20 years. MWC guarantees a minimum consumption of 0.05 billion gallons of water annually.
In addition, Connecticut Water has the option, but is under no obligation, to purchase up to one million gallons of water per day at the then current wholesale rates per the agreement ($2.6 per million gallons as of December 31, 2022). Connecticut Water has an agreement with the MDC to purchase water from MDC to serve the Unionville system.
In addition, CWC has the option, but is under no obligation, to purchase up to one million gallons of water per day at the then current wholesale rates per the agreement ($3.1 million per billion gallons as of December 31, 2023). CWC has an agreement with the MDC to purchase water from MDC to serve the Unionville system.
The rate charged by the MDC at December 31, 2022 were $4.09 per hundred cubic feet. 44 Maine Water has an agreement with the Kennebec Water District for potable water service. The agreement has been in place for 20 years and was extended on November 7, 2020 for a new term of up to 20 years.
The rate charged by the MDC at December 31, 2023 were three dollars and eighty cents per hundred cubic feet. MWC has an agreement with the Kennebec Water District for potable water service. The agreement has been in place for 20 years and was extended on November 7, 2020 for a new term of up to 20 years.
Business Strategy for Water Utility Services SJW Group focuses its business initiatives in three strategic areas: (1) Investing in regional regulated water utility operations to support the health, safety and quality of life of our customers; (2) Regional non-tariffed water utility related services provided in accordance with the guidelines established by the CPUC in California, PURA in Connecticut, PUCT in Texas, and MPUC in Maine; and (3) Out-of-region water and utility related services.
Business Strategy for Water Utility Services SJW Group focuses its business initiatives in three strategic areas: (1) Investing in regional regulated water utility operations to support the health, safety and quality of life of our customers; (2) Regional non-tariffed water utility related services provided in accordance with the guidelines established by the applicable state public utility commissions; and (3) Out-of-region water and utility related services.
The qualitative assessment found no indicators of impairment and therefore did not perform the quantitative impairment test. No impairments occurred during 2022, 2021 or 2020.
The qualitative assessment found no indicators of impairment and therefore did not perform the quantitative impairment test. No impairments occurred during the years ended December 31, 2023, 2022 or 2021.
Cash Flow from Financing Activities Net cash provided by financing activities for the year ended December 31, 2022, decreased by approximately $54,500 from the same period in the prior year, primarily as a result of decrease in cash proceeds from long-term debt and issuances of common stock, an increase in payments of dividends, and decreases in cash receipts of advances and contributions in aid of construction, partially offset by an increase in the amount of net borrowings on our lines of credit.
Cash Flow from Financing Activities Net cash provided by financing activities for the year ended December 31, 2023, increased by approximately $50,500 from the same period in the prior year, primarily as a result of increase in cash proceeds from long-term debt and issuances of common stock, partially offset by an increase in the amount of net borrowings on our lines of credit, and an increase in payments of dividends.
If SJW Group determines that as a result of the qualitative assessment it is more likely than not (> 50% likelihood) that the fair value is less than carrying amount, then a quantitative test is performed. SJW Group’s goodwill is primarily associated with the 2019 acquisition of CTWS. SJW Group performed an impairment analysis as of October 1, 2022.
If SJW Group determines that as a result of the qualitative assessment it is more likely than not (> 50% likelihood) that the fair value is less than carrying amount, then a quantitative test is performed. SJW Group performed an impairment analysis as of October 1, 2023.
Based on current prices and estimated deliveries, SJWC is committed to purchase from Valley Water a minimum of 90% of the reduced delivery schedule, or 18,864 million gallons ($106,463) of water at the current contract water rate of $5.6 per million gallons in the year ending December 31, 2023.
Based on current prices and estimated deliveries, SJWC is committed to purchase from Valley Water a minimum of 90% of the reduced delivery schedule, or 18.9 billion gallons ($121,182) of water at the current contract water rate of $6.41 million per billion gallons in the year ending December 31, 2024.
SJW Group’s consolidated weighted-average cost of long-term debt, including the mortgages and the amortization of debt issuance costs, was 4.0%, 4.1% and 4.3% for the years ended December 31, 2022 and 2021 and 2020. Cost of borrowing on the lines of credit averaged 3.41%, 1.32% and 1.78% as of December 31, 2022, 2021 and 2020, respectively.
SJW Group’s consolidated weighted-average cost of long-term debt, including the amortization of debt issuance costs, was 3.97% and 4.0% for the years ended December 31, 2023 and 2022. Cost of borrowing on the lines of credit averaged 6.29% and 3.41% for the years ended December 31, 2023 and 2022, respectively.
For the years ended December 31, 2022, 2021 and 2020, SJWC purchased from Valley Water 18,183 million gallons ($96,793), 19,365 million gallons ($91,938) and 21,269 million gallons ($96,212), respectively, of contract water. On June 16, 2022, Valley Water Board of Directors approved treated water deliveries reflecting the contractual delivery schedule reduced by 23% through June 30, 2023.
For the years ended December 31, 2023, 2022 and 2021, SJWC purchased from Valley Water 18.3 billion gallons ($111,173), 18.2 billion gallons ($96,793) and 19.4 billion gallons ($91,938), respectively, of contract water. On June 16, 2022, Valley Water Board of Directors approved treated water deliveries reflecting the contractual delivery schedule reduced by 23% through June 30, 2024.
Please refer to Note 7 , “Income Taxes,” of Notes to Consolidated Financial Statements for a reconciliation of actual to expected income tax expense.
Please refer to Note 7 , “Income Taxes,” of Notes to Consolidated Financial Statements for a reconciliation of income tax computed at the federal statutory rate to actual income tax expense.
The unaccounted-for water estimate is based on the results of past experience and the impact of flows through CTWS’s systems, unadjusted for any required system flushing, partially offset by WICA and WISC main replacement programs and lost water reduction initiatives.
CTWS’s unaccounted-for water for 2023 and 2022 approximated 13.1% and 14.2%, respectively, as a percentage of production. The unaccounted-for water estimate is based on the results of past experience and the impact of flows through CTWS’s systems, unadjusted for any required system flushing, partially offset by WICA and WISC main replacement programs and lost water reduction initiatives.
Other Comprehensive Income The change in other comprehensive income in 2022 and 2021 was primarily due to the change in the benefit obligation for Connecticut Water’s supplemental executive retirement agreements as a result of a change in the discount rate. Liquidity and Capital Resources Water Utility Services’ business derives the majority of its revenue directly from residential and business customers.
Other Comprehensive Income The change in other comprehensive income in 2023 compared to 2022 was primarily due to the change in the benefit obligation for CWC’s supplemental executive retirement plan primarily as a result of changes in the discount rate and the unrealized gain on its investments. 39 Liquidity and Capital Resources Water Utility Services’ business derives the majority of its revenue directly from residential and business customers.
To address the difference between conservation usage and authorized usage in the rate case, the CPUC has approved the activation of the WCMA which tracks the divergence between authorized versus actual consumption in a balancing account for future recovery. SJWTX residential and business usage increased 8.5% from 2021 to 2022 and decreased 8.5% from 2020 to 2021.
To address the difference between conservation usage and authorized usage in the rate case, the CPUC has approved the activation of the WCMA which tracks the divergence between authorized versus actual consumption in a balancing account for future recovery.
During 2022, we had cash outflows of $433 for business acquisitions and water rights which we believe will allow SJW Group to expand our regulated customer base.
During 2023, we had cash outflows of $7,537 for business acquisitions which we believe will allow SJW Group to expand our regulated customer base.
Regional Non-tariffed Activities Operating in accordance with guidelines established by the CPUC, SJWC provides non-tariffed services, such as water system operations, maintenance agreements and antenna site leases under agreements with municipalities and other utilities. SJWTX provides non-tariffed wholesale water service to adjacent utilities and non-tariffed wastewater services.
Regional Non-tariffed Activities SJWC provides non-tariffed services, such as water system operations, maintenance agreements and antenna site leases under agreements with municipalities and other utilities. TWC provides non-tariffed wholesale water service to adjacent utilities and non-tariffed wastewater services. CTWS provides non-tariffed services, such as water system operations and maintenance under agreements with municipalities and other utilities.
Water Usage Per Customer Fluctuations in customer demand for water could be due to seasonality, restrictions of use, weather or lifestyle choices, all of which could affect Water Utility Services’ results of operations. SJWC residential usage decreased 11.1% and 11.4% from 2021 to 2022 and from 2020 to 2021, respectively.
Water Usage Per Customer Fluctuations in customer demand for water could be due to seasonality, restrictions of use, weather or lifestyle choices, all of which could affect Water Utility Services’ results of operations.
Funds were also generated from borrowings. In 2022, SJW Group and its subsidiaries obtained $55,000 in funds from new long-term debt and $39,085 in fund from equity issuances. From these amounts, SJW Group funded its 2022 capital expenditure programs refinanced certain short and long-term borrowings, and funded working capital.
In 2023, SJW Group and its subsidiaries obtained $70,000 in funds from new long-term debt and $80,659 in funds from equity issuances. From these amounts, SJW Group funded its 2023 capital expenditure programs, refinanced certain short and long-term borrowings, and funded working capital.
While our ability to obtain financing will continue to be a risk, we believe that based on our 2022 activities, we will have access to the external funding sources necessary to implement our on-going capital investment programs in the future.
While our ability to obtain financing will continue to be a risk, we believe that based on our 2023 and 2022 activities, we will have access to the external funding sources necessary to implement our ongoing capital investment programs in the future. SJW Group, CTWS and CWC were put on negative watch on September 19, 2023.
Administrative and General Expense Administrative and general expenses include payroll related to administrative and general functions, all employee benefits charged to expense accounts, insurance expenses, legal fees, regulatory utility commissions’ expenses, expenses associated with being a public company, and general corporate expenses. 2022 vs. 2021 Administrative and general expense increased $8,072 in 2022, or 2% of the total operating expenses in 2021.
Administrative and General Expense Administrative and general expenses include payroll related to administrative and general functions, all employee benefits charged to expense accounts, insurance expenses, legal fees, regulatory utility commissions’ expenses, expenses associated with being a public company, and general corporate expenses.
With the availability of the WRA in Connecticut, which allows for recovery of authorized revenues, decreases in consumption year to year do not present the same financial risk as in our other water utility services utilities. Maine Water residential usage decreased 5.4% and 0.2% from 2021 to 2022 and from 2020 to 2021, respectively.
With the availability of the WRA in Connecticut, which allows for recovery of authorized revenues, decreases in consumption year to year do not present the same financial risk as in our other water utility services utilities.
This allows water utilities the option of applying their previously approved rates to the customers of newly acquired systems, which encourages consolidation by minimizing rate case expenses. Pursuant to Maine regulations, Maine Water employs a historical test year.
This allows water utilities the option of applying their previously approved rates to the customers of newly acquired systems, which encourages consolidation by minimizing rate case expenses. Pursuant to Maine regulations, MWC employs a historical test year. To address regulatory risk due to regulatory lag and changing legislation policies and regulations, rate cases may be filed as necessary in Maine.
Maine Water guarantees a minimum consumption of 50 million gallons of water annually. Water sales to Maine Water are billed at a wholesale discount of $0.20 per hundred cubic feet of water below Kennebec Water District's tariffed rates. The current tariff rate wa s $1.51 per hundred cubic feet as of December 31, 2022.
MWC guarantees a minimum consumption of 50 million gallons of water annually. Water sales to MWC are billed at a wholesale discount of twenty cents per hundred cubic feet of water below Kennebec Water District's tariffed rates. The current tariff rate was one dollar and fifty-one cents per hundred cubic feet as of December 31, 2023.
See Note 4 and Note 6 of “Notes to Consolidated Financial Statements” for discussion on the equity and debt financing 39 activities of SJW Group. In addition, SJW Group paid cash dividends of approximately $43,582 during the year ended December 31, 2022.
See Note 4 and Note 6 of “Notes to Consolidated Financial Statements” for discussion on the equity and debt financing activities of SJW Group. In addition, SJW Group paid cash dividends of $47,905 during the year ended December 31, 2023. In 2023, the common dividends declared and paid on SJW Group’s common stock represented 56% of net income.
See Item 1 , “Business” and Item 1A , “Risk Factors” for a discussion of SJW Group’s general business and regulatory activities as well the ongoing drought in California. Overview SJW Group’s consolidated net income for the year ended December 31, 2022 was $73,828, compared to $60,478 for the same period in 2021.
See Item 1 , “Business” and Item 1A , “Risk Factors” for a discussion of SJW Group’s general business and regulatory activities. Overview SJW Group’s consolidated net income for the year ended December 31, 2023 was $84,987, compared to $73,828 for the same period in 2022. This represents an increase of $11,159 or 15%, from 2022.
Infrastructure Investment The water utility business is capital-intensive. In 2022 and 2021, company-funded capital improvements were $218,784 and $233,933, respectively, for additions to, or replacements of, property, plant and equipment for our Water Utility Services. We plan to spend approximately $255,053 in 2023 and $1,353,390 over five years for capital improvements.
In 2023 and 2022, company-funded capital improvements were $271,772 and $218,784, respectively, for additions to, or replacements of, property, plant and equipment for our Water Utility Services. We plan to spend approximately $332,000 in 2024 and $1,621,000 over five years for capital improvements.
SJWC also pumps water from the local groundwater basin. There are no delivery schedules or contractual obligations associated with the purchase of groundwater. Valley Water determines the groundwater extraction charge and it is applied on a per unit basis. In addition to the Valley Water groundwater extraction charge, SJWC also incurs power costs to pump the groundwater from the basin.
Valley Water determines the groundwater extraction charge and it is applied on a per unit basis. In addition to the Valley Water groundwater extraction charge, SJWC also incurs power costs to pump the groundwater from the basin. CWC has an agreement with the RWA to purchase water.
Connecticut Water has agreed to purchase 283 million gallons of water annually from MDC at the published retail rate, $4.09 per hundred cubic feet as of December 31, 2022. Maine Water has an agreement with the Kennebec Water District for potable water service.
CWC has agreed to purchase 0.28 billion gallons of water annually from MDC at the published retail rate, three dollars and eighty cents per hundred cubic feet as of December 31, 2023. MWC has an agreement with the Kennebec Water District for potable water service.
The regulatory assets and liabilities recorded by Water Utility Services primarily relate to the recognition of deferred income taxes for ratemaking versus tax accounting purposes, balancing and memorandum accounts, postretirement pension benefits, medical costs, accrued benefits for vacation and asset retirement obligations that have not been passed through in rates.
The regulatory assets and liabilities recorded by Water Utility Services primarily relate to asset removal costs, the recognition of deferred income taxes for ratemaking versus tax accounting purposes, balancing and memorandum accounts, pensions and other postretirement benefits, and employee benefit costs.
For the twelve months ended months ended December 31, 2022, SJW Group issued and sold a total of 529,736 shares of common stock with a weighted average price of $75.49 per share and received approximately $39,179 in net proceeds under the Equity Distribution Agreement.
For the year ended December 31, 2023, SJW Group issued and sold a total of 1,119,806 shares of common stock with a weighted average price of $73.68 per share and received $80,659 in net proceeds under the Equity Distribution Agreement.
Since the inception of the Equity Distribution Agreement, SJW Group has issued and sold 884,851 shares of common stock with a weighted average price of $73.44 for a total net proceeds of $63,432 and has a remaining $35,012 under the Equity Distribution Agreement to issue into shares.
Since the inception of the Equity Distribution Agreement, SJW Group has issued and sold 2,004,657 shares of common stock with a weighted average price of $73.57 for a total net proceeds of $143,998 and has a remaining $92,509 under the Equity Distribution Agreement.
Cash Flow from Operations In 2022, SJW Group generated cash flow from operations of approximately $166,200 compared to $130,000 in 2021 and $104,051 in 2020.
Cash Flow from Operations In 2023, SJW Group generated cash flow from operations of approximately $190,800 compared to $166,200 in 2022.
Balancing and memorandum accounts are recognized by SJWC when it is probable that future recovery of previously incurred costs or future refunds that are to be credited to customers will occur through the ratemaking process.
Balancing and memorandum accounts are recognized by SJWC when it is probable that future recovery of previously incurred costs or future refunds that are to be credited to customers will occur through the ratemaking process. 31 Balancing accounts are currently being maintained for the following items: purchased water, purchased power, groundwater extraction charges, pensions, and general rate case and cost of capital true-ups.

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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 changeSJWC and Connecticut Water sponsor noncontributory pension plans for its employees. Pension costs and the funded status of the plans are affected by a number of factors including the discount rate, mortality rates of plan participants, investment returns on plan assets, and pension reform legislation.
Biggest changeSJW Group’s subsidiaries sponsor noncontributory pension and other postretirement plans for its employees. Pension and other postretirement costs and the funded status of the plans may be affected by a number of factors including the discount rate, mortality rates of plan participants, investment returns on plan assets, and pension reform legislation.
SJW Group has no derivative financial instruments, financial instruments with significant off-balance sheet risks, or financial instruments with concentrations of credit risk. 45
SJW Group has no derivative financial instruments, financial instruments with significant off-balance sheet risks, or financial instruments with concentrations of credit risk. 44

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