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Indicate by check mark whether Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

 

Indicate by check mark whether Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or such shorter period that the Registrant was required to submit such files).

 Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.¨

 Indicate by check mark whether Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)

As of May 6, 2025, the number of common shares, no par value (“Common Shares”) outstanding of American States Water Company was 38,508,767. As of May 6, 2025, all of the 173.7586 outstanding shares of common stock, no par value, of Golden State Water Company were owned by American States Water Company.

Golden State Water Company meets the conditions set forth in General Instruction (H)(1)(a) and (b) of Form 10-Q and is therefore filing this Form, in part, with the reduced disclosure format for Golden State Water Company.

The following terms and acronyms used in this Form 10-Q are defined below:

This Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements reflect the current views of our senior management with respect to future events and our financial performance. These statements include forward-looking statements with respect to our business and industry in general. Statements that include the words “expect,” “intend,” “believe,” “estimate,” “may,” “can,” “will,” “likely,” “should,” “could,” “anticipate,” “plan” and similar statements of a future or forward-looking nature identify forward-looking statements for purposes of the federal securities laws or otherwise. Forward-looking statements address matters that involve risks and uncertainties. Accordingly, there are or will be important factors that could cause our actual results to differ materially from those indicated in these statements. We believe that these factors include, but are not limited to, the following:

•the impact of laws, regulations and policies of regulatory agencies or the U.S. government applicable to water, wastewater and electric utility operations;

•the ability of GSWC and BVES to recover their respective costs through regulated rates, including increased costs associated with addressing climate change risks, such as drought and wildfires in California, costs incurred in connection with complying with water quality regulations, and increased costs of operation and maintenance and capital investments due to inflation, tariffs imposed, supply chain disruptions and increases in interest rates, while facing an increase in customer rate increase opposition and possible reluctance from the CPUC to pass through all such costs to customers;

•customer dissatisfaction due to rising rates needed to recover the costs of replacing aging infrastructure, address climate change risks, comply with water quality, renewable energy and greenhouse gas regulations;

•all of our contracts for providing services on military bases are provided to the U.S. government under long-term, fixed-price contracts subject to annual economic price adjustments;

•all contracts for providing services on military bases may be terminated or suspended at any time by the government;

•ASUS is subject to potential government audits or investigations of its business practices and compliance with government procurement statutes and regulations that could result in fines and penalties;

•GSWC and BVES are subject to potential audit and investigations by the CPUC for failure to comply with regulations applicable to public utilities, including failure to comply with state and federal water quality requirements, wildfire mitigation plans, renewable energy legislation, greenhouse gas regulations and other climate related regulations that could result in fines and penalties;

•we compete with other companies in bidding on providing utility services on military bases which involves estimating costs and potential profits that may not be realized;

•the impact of water quality and wastewater quality regulations on military bases;

•asset or business acquisitions may not yield the anticipated benefits;

•the impact of climate change and extreme weather events, including droughts, storms, high wind events, wildfires, flash flooding and other natural disasters, and the effects they could have on our operations;

•our assets at our regulated utilities are subject to condemnation by municipalities and other governmental subdivisions;

•increases in the costs of obtaining and complying with the terms of franchise agreements;

•damage to our reputation or adverse publicity may lead to increased regulatory oversight or sanctions;

•costs and effects of legal and administrative proceedings, settlements, investigations and claims;

•our ability to control operation and maintenance costs within the amounts that have been approved in rates or estimated in our military base contracts;

•the outbreak of pandemics, such as COVID-19, and other events may cause regionwide, statewide, nationwide or even global disruption, which could impact our businesses, operations, cash flows or financial results;

•the inherent risk of damage to private property and injury to employees and the general public involved in the generation, transmission and distribution of electricity, the handling of hazardous materials and equipment, and being in close proximity to public utility construction and maintenance operations;

•the impact of groundwater contamination and the increasing costs associated with treatment of groundwater due to contamination and increasing water quality regulation and mitigation of contaminants;

•risks of incurring losses not covered by insurance or recoverable in rates;

•risks of inadequate insurance coverages to cover significant losses due to a wildfire as insurance coverages become more expensive or unavailable on reasonable terms;

•the adequacy of water supplies due to fluctuations of weather, climate change and other uncontrollable factors;

•the impact that water conservation efforts may have on GSWC’s operations and costs incurred;

•changes in electricity and natural gas prices in California;

•failure to make accurate estimates about financing and accounting matters;

•changes in accounting, public utility, environmental and tax laws and regulations affecting our businesses;

•changes in fair value of investments and other assets;

•the performance of subcontractors engaged to assist us in the performance of contracted services on military bases;

•incomplete or delayed reimbursement from the U.S. government and delays in obtaining decisions from the CPUC on regulated public utility rates that can adversely impact our financial condition and liquidity;

•physical security of our critical assets, personnel and data critical to our business, employees, customers and vendors;

•cybersecurity incidents or information and operational technology outages, including cybersecurity incidents and outages caused by third party solutions that support operational or business processes, could disrupt operations and critical technology systems, resulting in an inability to deliver services to customers, loss of financial and other information critical to operations or the breach of confidential information of our customers, employees and vendors;

•our ability to attract, retain, train, motivate, develop, and transition key employees;

•the failure of our employees to maintain required certifications and licenses or to complete required compliance training;

•changes in interest rates and our ability to borrow funds and access bank and capital markets on reasonable terms;

•the impact of inflation, tariffs imposed and supply chain disruptions on our operational costs and costs of capital that may not be recovered in rates for our regulated utilities and through economic price adjustments for our military bases;

•results of financing efforts, including the ability to obtain financing on favorable terms, which can be affected by various factors, including credit ratings, interest rate fluctuations, compliance with debt covenants and conditions, delays in receiving general rate case decisions from the CPUC, and general market and economic conditions;

•actions by credit rating agencies to downgrade AWR or GSWC’s credit ratings or to place those ratings on negative outlook;

•our ability to finance the significant capital expenditures required by our operations, which are increasing;

•volatility in the price of our Common Shares;

•declines in the market prices of equity and fixed-income securities and resulting cash funding requirements for defined benefit pension plans and other post-retirement benefit plans;

•our reliance on cash flow from our subsidiaries to meet our financial obligations and to pay dividends on our Common Shares;

•the geographic concentration of our operations in California; and

•other risks and uncertainties described under the heading “Item 1A. Risk Factors” in the Form 10-K that we filed with the SEC.

Although we believe that the expectations reflected in these forward-looking statements are reasonable based on our current knowledge of our business and operations, we cannot guarantee future results, levels of activity, performance or achievements. If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may differ materially from what we anticipate. Any forward-looking statements you read in this Form 10-Q and the information incorporated herein by reference reflect our views as of their respective dates and are subject to these and other risks, uncertainties and assumptions relating to our operations, results of operations, growth strategy and liquidity. You should not place undue reliance on these forward-looking statements and you should carefully consider all of the factors identified in this Form 10-Q and the information incorporated herein by reference that could cause actual results to differ. Forward-looking statements speak only as of the date they are made and except as required by law, Registrant expressly disclaims an obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

 The basic financial statements included herein have been prepared by Registrant, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission.

 Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, all adjustments consisting of normal recurring items and estimates necessary for a fair statement of results for the interim period have been made.

 It is suggested that these financial statements be read in conjunction with the financial statements and notes thereto in the latest Annual Report on Form 10-K of American States Water Company and its wholly owned subsidiary, Golden State Water Company. 

American States Water Company (“AWR”) is the parent company of Golden State Water Company (“GSWC”), Bear Valley Electric Service, Inc. (“BVES”) and American States Utility Services, Inc. and its subsidiaries (“ASUS”).

This quarterly report on Form 10-Q is a combined report being filed by two separate Registrants: AWR and GSWC. For more information, please see Note 1 of the Notes to Consolidated Financial Statements and the heading titled “General” in “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.” References in this report to “Registrant” are to AWR and GSWC, collectively, unless otherwise specified. GSWC makes no representations as to the information contained in this report other than with respect to itself.

 

 

 

 

 

 

Nature of Operations: American States Water Company (“AWR”) is the parent company of Golden State Water Company (“GSWC”), Bear Valley Electric Service Inc. (“BVES”), and American States Utility Services, Inc. (“ASUS”) (and its subsidiaries, Fort Bliss Water Services Company (“FBWS”), Old Dominion Utility Services, Inc. (“ODUS”), Terrapin Utility Services, Inc. (“TUS”), Palmetto State Utility Services, Inc. (“PSUS”), Old North Utility Services, Inc. (“ONUS”), Emerald Coast Utility Services, Inc. (“ECUS”), Fort Riley Utility Services, Inc. (“FRUS”), Bay State Utility Services LLC (“BSUS”), and Patuxent River Utility Services LLC (“PRUS”)). AWR and its subsidiaries may be collectively referred to as “the Company.” AWR, through its wholly owned subsidiaries, serves over one million people in ten states.

 GSWC and BVES are both California public utilities. GSWC engages in the purchase, production, distribution and sale of water throughout California serving approximately 264,800 customer connections. BVES distributes electricity in several San Bernardino County mountain communities in California serving approximately 24,900 customer connections. The California Public Utilities Commission (“CPUC”) regulates GSWC’s and BVES’s businesses in matters including properties, rates, services, facilities, and transactions between GSWC, BVES, and their affiliates.

ASUS, through its wholly owned subsidiaries, operates, maintains and performs construction activities (including renewal and replacement capital work) on water and/or wastewater systems at various U.S. military bases pursuant to initial 50-year firm fixed-price contracts with the U.S. government and one 15-year contract with the U.S. government. These contracts are subject to annual economic price adjustments and modifications for changes in circumstances, changes in laws and regulations, and additions to the contract value for new construction of facilities at the military bases. ASUS also from time to time performs construction services on military bases as a subcontractor.

There is no direct regulatory oversight by the CPUC over AWR or the operations, rates or services provided by ASUS or any of its wholly owned subsidiaries.

Basis of Presentation: The consolidated financial statements and notes hereto are presented in a combined report filed by two separate Registrants: AWR and GSWC. References in this report to “Registrant” are to AWR and GSWC, collectively, unless otherwise specified. AWR owns all of the outstanding common shares of GSWC, BVES and ASUS. ASUS owns all of the outstanding equity of its subsidiaries. The consolidated financial statements of AWR include the accounts of AWR and its subsidiaries. These financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). Intercompany transactions and balances have been eliminated in the AWR consolidated financial statements.

The consolidated financial statements included herein have been prepared by Registrant, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).  The December 31, 2024 condensed consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by GAAP. The preparation of the consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. In the opinion of management, all adjustments consisting of normal, recurring items, and estimates necessary for a fair statement of the results for the interim periods have been made. It is suggested that these consolidated financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in the Form 10-K for the year ended December 31, 2024 filed with the SEC.

Related Party and Intercompany Transactions: GSWC, BVES and ASUS provide and/or receive various support services to and from their parent, AWR, and among themselves. GSWC allocates certain corporate office administrative and general costs to its affiliates, BVES and ASUS, using allocation factors approved by the CPUC. GSWC allocated corporate office administrative and general costs to BVES of approximately $1.0 million and $0.9 million during the three month periods ended March 31, 2025 and 2024, respectively. GSWC also allocated corporate office administrative and general costs to ASUS of approximately $1.6 million for each of the three month periods ended March 31, 2025 and 2024. When necessary, AWR will make capital contributions to its regulated utilities in order to maintain the CPUC-authorized capital structure. In addition, as discussed under Liquidity and Financing Activities, under AWR’s credit facility, AWR borrows and provides funds to ASUS in support of its operations.

Liquidity and Financing Activities: On February 27, 2024, AWR entered into an Equity Distribution Agreement with third-party sales agents, under which AWR, may offer and sell its Common Shares, from time to time at its sole discretion, through an at-the-market (“ATM”) offering program having an aggregate gross offering price of up to $200 million over a three-year period and pursuant to AWR’s effective shelf registration statement on Form S-3. AWR intends to use the net proceeds from these sales, after deducting commissions on such sales and offering expenses, for general corporate purposes, including, but not limited to, repayment of debt and equity contributions to its subsidiaries. During the three months ended March 31, 2025 and 2024, AWR sold 334,548 and 227,981 Common Shares, respectively, through this ATM offering program and raised proceeds of $25.8 million, net of $0.4 million in commissions paid and $16.2 million, net of $0.2 million in commissions paid, respectively, under the terms of the Equity Distribution Agreement. AWR also incurred $0.1 million and $0.6 million of other expenses during the three months ended March 31, 2025 and 2024, respectively, which was primarily legal and other costs to support this ATM offering program. As of March 31, 2025, approximately $82.9 million remains available for sale under the ATM offering program.

AWR and GSWC each have credit agreements with a term of five years which mature in June 2028. As of March 31, 2025, the credit agreements provided AWR and GSWC unsecured revolving credit facilities with borrowing capacities of $165.0 million and $200.0 million, respectively. Under the terms of the credit agreements, as of March 31, 2025, the borrowing capacities for AWR and GSWC may be expanded up to an additional $60.0 million and $75.0 million, respectively, subject to the lenders’ approval. On May 6, 2025, AWR and GSWC both executed amendments to their credit agreements to extend their credit facility terms from June 2028 to June 2029. In addition, as part of its amendment, AWR expanded its credit facility borrowing capacity to $195.0 million through an existing bank from the original syndicate group and the addition of a new bank to the existing syndicate group participating in AWR’s credit facility. AWR’s credit facility is primarily used to provide support to AWR (parent) and ASUS. As of March 31, 2025, AWR’s outstanding borrowings under its credit facility of $106.0 million have been classified as non-current liabilities on AWR’s Consolidated Balance Sheet. GSWC’s credit facility provides support for its water operations and is considered a short-term debt arrangement by the CPUC. Therefore, pursuant to the CPUC’s requirements, borrowings under GSWC’s credit facility are required to be paid-off in full within a 24-month period. GSWC’s next pay-off period ends in June 2025. Accordingly, GSWC’s outstanding borrowings under its credit facility of $143.0 million as of March 31, 2025 are classified as current liabilities in AWR’s Consolidated Balance Sheet and GSWC’s Balance Sheet. On March 13, 2025, the CPUC issued a final decision in GSWC’s financing application, which approves, among other items, GSWC’s request to issue up to $750.0 million of new long-term debt and equity securities. GSWC expects to issue long-term debt and equity during the second quarter of 2025 to facilitate the pay-off of all outstanding borrowings under its credit facility, after which GSWC may borrow under the credit facility again.

BVES has a separate revolving credit facility without a parent guaranty that supports its electric operations and capital expenditures with a borrowing capacity of $65.0 million, and expires on July 1, 2026. BVES’s revolving credit facility is considered a short-term debt arrangement by the CPUC. Therefore, pursuant to the CPUC’s requirements, borrowings under this credit facility are required to be fully paid off within a 24-month period, after which, BVES may borrow under the credit facility again. BVES’s extended pay-off period as approved by the CPUC was set to end on May 1, 2025. On February 12, 2025, BVES completed the issuance of $50.0 million in unsecured private-placement notes maturing on February 12, 2030. BVES used the proceeds from the notes to pay down all amounts under its revolving credit facility outstanding at the time of issuing the notes satisfying the CPUC’s requirement. As of March 31, 2025, there are no outstanding borrowings under this facility.

Recent Accounting Pronouncements: In December 2023, the FASB issued Accounting Standards Update 2023-09 (Improvements to Income Tax Disclosures) requiring public entities to provide more disclosures primarily related to the income tax rate reconciliation and income taxes paid. The guidance also eliminates certain existing disclosure requirements related to uncertain tax positions and unrecognized deferred tax liabilities. The guidance is effective for annual periods beginning after December 15, 2024 and will be applied prospectively to the annual income tax disclosures starting with Registrant’s Annual Report on Form 10-K for the year ended December 31, 2025. Registrant is currently evaluating the impact of this standard on its annual income tax disclosures.

In November 2024, the FASB issued Accounting Standards Update 2024-03, (Disaggregation of Income Statement Expenses) requiring public entities to disclose additional information about specific expense categories in the notes to the financial statements on an interim and annual basis. The guidance will be effective for fiscal years beginning after December 15, 2026, and for interim periods beginning after December 15, 2027, with early adoption permitted. Registrant is currently evaluating the impact of adopting this standard.

Most of Registrant’s revenues are derived from contracts with customers, including tariff-based revenues from its regulated utilities at GSWC and BVES. ASUS’s initial firm fixed-price long-term contracts with the U.S. government are considered service concession arrangements under ASC 853, Service Concession Arrangements. ASUS’s military base contracts consist primarily of 50-year contracts and one 15-year contract with the U.S. government. Accordingly, the services under these contracts are accounted for under Topic 606—Revenue from Contracts with Customers, and the water and/or wastewater systems are not recorded as Property, Plant and Equipment on Registrant’s balance sheets.

Although GSWC and BVES have a diversified customer base of residential, commercial, industrial, and other customers, revenues derived from residential and commercial customers generally account for approximately 90% of total water and electric revenues. Most of ASUS’s revenues are derived from the U.S. government. For the three months ended March 31, 2025 and 2024, disaggregated revenues from contracts with customers by segment were as follows:

(1) On January 30, 2025, the CPUC issued a final decision in connection with GSWC’s general rate case (“GRC”) that adopted a settlement agreement between GSWC and Cal Advocates and set new rates for 2025 – 2027, with rates retroactive to January 1, 2025. The final decision rejected GSWC’s request for the continuation of the WRAM, and instead orders GSWC to transition to a modified rate adjustment mechanism (a Monterey-style WRAM or “M-WRAM”). The M-WRAM tracks the difference between the revenue based on actual metered sales through a tiered volumetric rate and the revenue that would have been received with the same actual metered sales if a standard quantity rate had been in effect. During the three months ended March 31, 2025, the balances recorded in the new M-WRAM were not material.

The opening and closing balances of the receivable from the U.S. government, contract assets, and contract liabilities from contracts with customers, which are related entirely to ASUS, are as follows:    

Unbilled receivables and Receivable from the U.S. government represent receivables where the right to payment is conditional only by the passage of time.

Contract Assets - Contract assets are assets of ASUS and its subsidiaries and consist of unbilled revenues recognized from work-in-progress construction projects, where the right to payment is conditional on something other than the passage of time. The classification of this asset as current or noncurrent is based on the timing of when ASUS expects to bill these amounts.

Contract Liabilities - Contract liabilities are liabilities of ASUS and consist of billings in excess of revenue recognized. The classification of this liability as current or noncurrent is based on the timing of when ASUS expects to recognize revenue. Contracted services revenues recognized during the three months ended March 31, 2025, which were included in contract liabilities at the beginning of the period were approximately $1.4 million.

Contracted services revenues recognized during the three months ended March 31, 2025 from performance obligations satisfied in previous periods were not material.

As of March 31, 2025, AWR’s aggregate remaining performance obligations, which are entirely from the contracted services segment, were $4.1 billion. ASUS expects to recognize revenue on these remaining performance obligations over the remaining term of each of the contracts, which range from 14 to 49 years. Each of the contracts with the U.S. government is subject to termination, in whole or in part, prior to the end of its contract term for convenience of the U.S. government.

In accordance with accounting principles for rate-regulated enterprises, GSWC and BVES record regulatory assets, which represent probable future recovery of incurred costs from customers through the ratemaking process, and regulatory liabilities, which represent probable future refunds that are to be credited to customers through the ratemaking process. At March 31, 2025, GSWC and BVES had $59.6 million of net regulatory assets on the balance sheets, which included $153.6 million of regulatory assets net of $94.0 million of regulatory liabilities. As authorized by the CPUC, the majority of the regulatory assets and liabilities accrue interest at the current 90-day commercial-paper rate. There are approximately $31.8 million of regulatory assets not accruing a carrying cost, which included $15.7 million related to flowed-through deferred income taxes including the gross-up portion on the deferred tax resulting from the excess deferred income tax regulatory liability, and $13.1 million related to memorandum accounts authorized by the CPUC to track unrealized gains and losses on BVES’s purchase power contracts over the term of the contracts. The remaining $3.0 million relates to other regulatory assets that do not provide for a carrying cost. Furthermore, there are $90.8 million of regulatory liabilities not incurring interest that consisted of $67.5 million related to excess deferred income taxes arising from the lower federal income tax rate under the Tax Cuts and Jobs Act enacted in December 2017 that are being refunded to customers, and $23.3 million related to the net over funded position in Registrant’s pension and other retirement obligations (not including the two-way pension balancing accounts, which accrues interest).

Regulatory assets represent costs incurred by GSWC and/or BVES for which they have received or expect to receive rate recovery in the future. In determining the probability of costs being recognized in other periods, GSWC and BVES consider regulatory rules and decisions, past practices, and other facts or circumstances that would indicate if recovery is probable. If the CPUC determines that a portion of either GSWC’s or BVES’s regulatory assets are not recoverable in customer rates, the applicable utility must determine if it has suffered an asset impairment that requires it to write down the asset’s value. Regulatory assets are offset against regulatory liabilities within each ratemaking area. Amounts expected to be collected or refunded in the next twelve months have been classified as current assets and current liabilities by ratemaking area. Regulatory assets, less regulatory liabilities, included in the consolidated balance sheets are as follows:

Regulatory matters are discussed in the consolidated financial statements and the notes thereto included in the Company’s Form 10-K for the year ended December 31, 2024 filed with the SEC. The discussion below focuses on significant matters and developments since December 31, 2024.

On August 14, 2023, GSWC filed a general rate case application for all of its water regions and the general office. On January 30, 2025, the CPUC issued a final decision in connection with GSWC’s general rate case that adopted a settlement agreement between GSWC and Cal Advocates and set new rates for 2025 – 2027. GSWC continued to bill its customers based on the existing adopted 2024 rates until the new 2025 rates were approved and implemented effective February 1, 2025. GSWC had filed with the CPUC to establish a memorandum account to track interim rates, which made the new 2025 rates retroactive to January 1, 2025. As of March 31, 2025, there is an aggregate cumulative balance of $4.4 million under-collection recorded as a regulatory asset for retroactive water revenues. On April 14, 2025, GSWC filed an advice letter to recover the cumulative retroactive amounts related to January 2025 with a 12-month surcharge effective May 1, 2025.

In June 2023, the CPUC adopted a final decision in GSWC’s general rate case application for all its water regions and its general office that determined new water rates for the years 2022–2024, with new rates retroactive to January 1, 2022. Upon receiving the final decision, GSWC filed for the implementation of 2023 rate increases that went into effect on July 31, 2023. Due to the delay in finalizing the water general rate case, water revenues billed to customers for the year ended December 31, 2022 and for the period from January 1, 2023 to July 30, 2023 were based on 2021 adopted rates. GSWC was authorized to create general rate case memorandum accounts to track the revenue differences between the 2021 adopted rates and the 2022 and 2023 rates authorized by the CPUC for future recovery. In October 2023, surcharges were implemented to recover the cumulative retroactive rate differences over 36 months. As of March 31, 2025, there is an aggregate cumulative amount of $34.5 million under-collection in the general rate case memorandum account that GSWC has recorded as a regulatory asset for retroactive water revenues.

Since 2008 and through December 31, 2024, GSWC recorded the difference between what it bills its water customers and that which is authorized by the CPUC using the Water Revenue Adjustment Mechanism (“WRAM”) and the Modified Cost Balancing Account (“MCBA”) approved by the CPUC. The over- or under-collection of the WRAM is aggregated with the MCBA over- or under-collection for the corresponding ratemaking area and bears interest at the current 90-day commercial-paper rate. As of March 31, 2025, GSWC had an aggregated net regulatory asset of $23.4 million, which is comprised of a $22.6 million under-collection in the WRAM accounts and a $0.8 million under-collection in the MCBA accounts, both related to pre-2025 revenue and supply cost activity. On March 31, 2025, GSWC filed an advice letter to recover all pre-2025 WRAM/MCBA balances. The surcharges filed were made effective May 1, 2025, with the majority of the balances to be recovered within 18 months.

The CPUC’s final decision in connection with the most recent GRC rejected GSWC’s request for the continuation of the WRAM and MCBA, and instead orders GSWC to transition to a modified rate adjustment mechanism (a Monterey-style WRAM or “M-WRAM”) and an incremental cost balancing account (“ICBA”) for supply costs. The new M-WRAM tracks the difference between the revenue based on actual metered sales through a tiered volumetric rate and the revenue that would have been received with the same actual metered sales if a standard quantity rate had been in effect. The new ICBA for supply costs tracks differences between the CPUC-authorized per-unit prices of water production costs and actual per-unit prices of water production costs. Both the M-WRAM and the ICBA were effective January 1, 2025. During the three months ended March 31, 2025, the balances recorded in the new M-WRAM and ICBA were not material.

As required by the accounting guidance for alternative revenue programs, GSWC is required to collect its WRAM and M-WRAM balances within 24 months following the year in which an under-collection is recorded. As of March 31, 2025, there were no significant WRAM or M-WRAM under-collections that were estimated to be collected over more than a 24 month period.

On January 16, 2025, the CPUC adopted a final decision that, among other things, set the new rates for the years 2023 – 2026 and adopted a settlement agreement in its entirety. BVES was authorized by the CPUC to establish a general rate case memorandum account that made the new rates retroactive to January 1, 2023 with new 2025 rates implemented effective March 1, 2025. Because of the delay in finalizing the electric general rate case, billed electric revenues for the years of 2023, 2024 and through February 2025, were based on 2022 adopted rates. The general rate case memorandum account tracks the revenue differences between the 2022 adopted rates and the 2023 and 2024 rates authorized by the CPUC for future recovery. As of March 31, 2025, the aggregate cumulative under-collection in retroactive revenues related to the full year of 2023 and 2024 amounted to $10.0 million. On February 28, 2025, BVES filed an advice letter to recover the cumulative retroactive amounts related to 2023 and 2024 through a surcharge to be collected over a 36-month period. The surcharge was implemented and made effective on April 1, 2025.

Furthermore, the impact of the new rates related to the months of January and February 2025 have been added to the Base Revenue Requirement Adjustment Mechanism balancing account for future recovery.

Among other things, the settlement agreement adopted in the final decision also approved for recovery the requested capital expenditures and other incremental operating costs already incurred prior to 2023 in connection with BVES’s wildfire mitigation plans (“WMP”s) that were not included in customer rates prior to receiving a CPUC final decision on its recent general rate case. The decision approved BVES’s recovery of incremental vegetation management costs and other wildfire mitigation and prevention costs incurred prior to 2023 that were being tracked in memorandum accounts for future recovery and were recorded as regulatory assets. As of March 31, 2025, BVES had a total of approximately $14.8 million in regulatory assets related to these memorandum accounts. During the first quarter of 2025, BVES filed advice letters to recover all pre-2023 costs included in the vegetation management and other WMP memorandum accounts, which will be recovered over a period of 24 to 36 months through surcharges that were implemented on March 1, 2025 and April 1, 2025.

Other regulatory assets represent costs incurred by GSWC or BVES for which they have received or expect to receive rate recovery in the future. Registrant believes that these regulatory assets are supported by regulatory rules and decisions, past practices, and other facts or circumstances that indicate recovery is probable. If the CPUC determines that a portion of either GSWC’s or BVES’s assets are not recoverable in customer rates, the applicable entity must determine if it has suffered an asset impairment that requires it to write down the regulatory asset to the amount that is probable of recovery.

In accordance with the accounting guidance for participating securities and earnings per share (“EPS”), Registrant uses the “two-class” method of computing EPS. The “two-class” method is an earnings allocation formula that determines EPS for each class of common stock and participating security. AWR has participating securities related to restricted stock units that earn dividend equivalents on an equal basis with AWR’s Common Shares, and that have been issued under AWR’s stock incentive plans for employees and the non-employee directors stock plans.  In applying the “two-class” method, undistributed earnings are allocated to both Common Shares and participating securities.

The following is a reconciliation of Registrant’s net income and weighted average Common Shares outstanding used to calculate basic EPS:

Diluted EPS is based upon the weighted average number of Common Shares, including both outstanding shares and shares potentially issuable in connection with restricted stock units granted under AWR’s stock incentive plans for employees and directors, and net income. There were no stock options outstanding as of March 31, 2025 and 2024 under these plans.

The following is a reconciliation of Registrant’s net income and weighted average Common Shares outstanding used to calculate diluted EPS:

(1)     In applying the treasury stock method of reflecting the dilutive effect of outstanding stock-based compensation in calculating diluted EPS, 153,583 and 128,668 restricted stock units, including performance awards to officers of the Company at March 31, 2025 and 2024, respectively, were deemed to be outstanding and included in the calculation of diluted EPS.

During the three months ended March 31, 2025 and 2024, AWR sold 334,548 and 227,981 Common Shares, respectively, through its ATM offering program and raised proceeds of $25.8 million, net of $0.4 million in commissions paid and $16.2 million, net of $0.2 million in commissions paid, respectively (Note 1). During the three months ended March 31, 2025 and 2024, AWR also issued 23,014 and 20,290 Common Shares related to restricted stock units, respectively, pursuant to stock-based compensation plans.

During the three months ended March 31, 2025 and 2024, AWR paid $1.3 million and $1.1 million, respectively, to taxing authorities on employees’ behalf for shares withheld related to net share settlements. During the three months ended March 31, 2025 and 2024, GSWC paid $1.2 million and $1.0 million, respectively, to taxing authorities on employees’ behalf for shares withheld related to net share settlements. These payments are included in the stock-based compensation caption of the statements of equity.

During the three months ended March 31, 2025 and 2024, AWR paid quarterly dividends of approximately $17.8 million, or $0.4655 per share, and $15.9 million, or $0.4300 per share, respectively. During the three months ended March 31, 2025 and 2024, GSWC did not make dividend payments to AWR.

In July 2023, the CPUC approved a new power purchase agreement between BVES and a third party to procure renewable portfolio standard eligible energy and renewable energy credits as a bundled product. BVES began taking power under this long-term contract during the fourth quarter of 2024 and provides for the purchase of electricity during a delivery period from November 1, 2024 through December 31, 2035. Under this contract, there is an embedded derivative that is subject to the accounting guidance for derivatives and requires mark-to-market accounting.

The CPUC authorized the use of a regulatory asset and liability memorandum account to offset the mark-to-market entries required by the accounting guidance. Accordingly, all unrealized gains and losses generated from derivative instruments in purchase power contracts are deferred on a monthly basis into a non-interest-bearing regulatory memorandum account that tracks the changes in fair value of the derivative throughout the terms of the contracts. As a result, these unrealized gains and losses do not impact Registrant’s earnings. As of March 31, 2025, the fair value of the derivative liability was $13.1 million for the power purchase contracts, with a corresponding regulatory asset recorded in the derivative instrument memorandum account as a result of overall fixed prices under BVES’s purchase power contract being higher than future energy prices. The notional volume of obligations remaining under these long-term contract as of March 31, 2025 was 565,488 megawatt hours.

The accounting guidance for fair value measurements applies to all financial assets and financial liabilities that are measured and reported on a fair value basis. Under the accounting guidance, Registrant has made fair value measurements that are classified and disclosed in one of the following three categories:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2: Quoted prices in markets that are not active or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; or

Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

To value the derivatives in the purchase power contracts, BVES utilizes various inputs that include quoted market prices for energy over the duration of its contracts. The market prices used to determine the fair value for the derivative instruments were estimated based on independent sources such as broker quotes and publications that are not observable in or corroborated by the market.  When such inputs have a significant impact on the measurement of fair value, the instruments are categorized as Level 3. Accordingly, the valuation of the derivatives within BVES’s purchase power contracts have been classified as Level 3 for all periods presented.

The change in fair value was due to the change in market energy prices during the three months ended March 31, 2025 and 2024. The following table presents changes in the fair value of the Level 3 derivatives for the periods ended March 31, 2025 and 2024:

For cash and cash equivalents, accounts receivable, accounts payable and short-term debt, the carrying amount is assumed to approximate fair value due to the short-term nature of these items.

Investments held in a Rabbi Trust for the supplemental executive retirement plan (“SERP”) are measured at fair value and totaled $40.6 million as of March 31, 2025 and $41.2 million as of December 31, 2024. All equity investments in the Rabbi Trust are Level 1 investments in mutual funds. The investments held in the Rabbi Trust are included in “Other Property and Investments” on Registrant’s balance sheets.

The table below estimates the fair value of long-term debt held by AWR and GSWC, respectively. The fair values as of March 31, 2025 and December 31, 2024 were determined using rates for similar financial instruments of the same duration utilizing Level 2 methods and assumptions. Changes in the assumptions will produce different results.

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(1) Excludes debt issuance costs of approximately $3.2 million and $3.1 million as of March 31, 2025 and December 31, 2024, respectively.

(2) Excludes debt issuance costs of approximately $2.8 million and $3.0 million as of March 31, 2025 and December 31, 2024, respectively.

AWR’s effective income tax rate (“ETR”) was 24.0% and 24.2% for the three months ended March 31, 2025 and 2024, respectively. GSWC’s ETR was 24.7% for each of the three months ended March 31, 2025 and 2024.

The AWR and GSWC ETRs differed from the federal corporate statutory tax rate of 21% primarily due to (i) state taxes; (ii) permanent differences, including certain tax effects from stock compensation; (iii) the ongoing amortization of the excess deferred income tax liability; and (iv) differences between book and taxable income that are treated as flowed-through adjustments in accordance with regulatory requirements (principally from plant, rate-case, and compensation-related items). As regulated utilities, GSWC and BVES treat certain temporary differences as being flowed-through to customers in computing their income tax expense consistent with the income tax method used in their CPUC-jurisdiction rate making. Flowed-through items either increase or decrease tax expense and thus impact the ETR.

The components of net periodic benefit costs for Registrant’s pension plan, postretirement medical benefit plan and SERP for the three months ended March 31, 2025 and 2024 were as follows:

In 2025, Registrant expects to contribute approximately $3.4 million to its pension plan.

As authorized by the CPUC in the water and electric general rate case decisions, GSWC and BVES each utilize two-way balancing accounts to track differences between the forecasted annual pension expenses in rates, or expected to be in rates, and the actual annual expense recorded in accordance with the accounting guidance for pension costs. During the three months ended March 31, 2025 and 2024, GSWC’s actual pension expense was lower than the amounts included in water customer rates by $0.3 million and $0.1 million, respectively. As of March 31, 2025, GSWC has a $0.8 million over-collection in its two-way balancing account, which is included as part of regulatory liabilities (Note 3).

BVES’s actual expense was lower than the amounts included in electric customer rates for all periods presented. As a result of receiving a final decision in its electric general rate case in the fourth quarter of 2024, BVES’s actual pension expense is nearly aligned with the amounts included in electric rates, resulting in an insignificant balance in their pension balancing account as of March 31, 2025.

Environmental Clean-Up and Remediation at GSWC:

GSWC has been involved in environmental remediation and cleanup at one of its plant sites that contained an underground storage tank, which was used to store gasoline for its vehicles. This tank was removed from the ground in July 1990 along with the dispenser and ancillary piping. Since then, GSWC has been involved in various remediation activities at this site. 

As of March 31, 2025, the total amount spent to clean-up and remediate the plant site, since inception of the remediation period, amounted to $6.8 million, of which $1.5 million has been paid by the State of California Underground Storage Tank Fund. Amounts paid by GSWC have been included in rate base and approved by the CPUC for recovery. As of March 31, 2025, GSWC has a regulatory asset and an accrued liability for the estimated remaining cost of $1.3 million to complete the clean-up at the site. The estimate includes costs for continued activities of groundwater cleanup and monitoring, future soil treatment and site-closure-related activities. The ultimate cost may vary as there are many unknowns in remediation of underground gasoline spills and this is an estimate based on currently available information. Management believes it is probable that the estimated additional costs will continue to be approved in rate base by the CPUC as approved historically.

Registrant is also subject to other ordinary routine litigation incidental to its business, some of which may include claims for compensatory and punitive damages. Management believes that rate recovery, proper insurance coverage and reserves are in place to insure against, among other things, property, general liability, employment, and workers’ compensation claims incurred in the ordinary course of business. Insurance coverage may not cover certain claims involving punitive damages. Registrant does not believe the outcome from any pending suits or administrative proceedings will have a material effect on Registrant’s consolidated results of operations, financial position, or cash flows.

AWR has three reportable segments: water, electric and contracted services. GSWC has one segment, water. On a stand-alone basis, AWR has no material assets or liabilities other than its equity investments in its subsidiaries, note payables to bank, deferred taxes and intercompany note receivables.

GSWC and BVES are CPUC regulated public utilities with business activities conducted in California. Activities of ASUS and its subsidiaries are conducted in California, Florida, Kansas, Maryland, Massachusetts, New Mexico, North Carolina, South Carolina, Texas and Virginia. Some of ASUS’s wholly owned subsidiaries are regulated by the state in which the subsidiary primarily conducts water and/or wastewater operations. Fees charged for operations and maintenance and renewal and replacement services are based upon the terms of the contracts with the U.S. government, which have been filed, as appropriate, with the commissions in the states in which ASUS’s subsidiaries are incorporated.

In November 2023, the Financial Accounting Standards Board issued Accounting Standards Update 2023-07 (Segment Reporting: Improvements to Reportable Segment Disclosures). The standard enhances reportable segment disclosures primarily through enhanced disclosures of significant segment expenses. Registrant evaluates the performance of its reportable segments based on segment net income (loss). Registrant’s chief operating decision maker is the chief executive officer. The chief operating decision maker uses segment net income (loss) as a financial measure as part of the annual operating budget and forecasting process to monitor monthly financial activities of its segments. This financial information is reviewed and evaluated by the chief operating decision maker in making segment operating, capital, and business decisions.

The following tables present information by reportable segment and AWR (parent) that reconcile segment net income (loss) to total consolidated net income (loss) and segment assets to total consolidated assets. The utility plant balances are net of respective accumulated provisions for depreciation. The net property, plant and equipment of the electric segment is presented net of Contributions in Aid of Construction (CIAC). Capital additions reflect capital expenditures paid in cash and exclude U.S. government-funded and third-party prime funded capital expenditures for ASUS’s subsidiaries and property installed by developers and conveyed to GSWC and BVES.

						For The Three Months Ended March 31, 2025
																								Total
																		Contracted						Reportable						AWR						Consolidated
(dollars in thousands)						Water						Electric						Services						Segments						Parent						AWR
Operating revenues						$	102,003					$	15,002					$	31,008					$	148,013					$	—					$	148,013
Less:
Supply costs						25,423						4,065						—						29,488						—						29,488
Other operation						6,675						1,241						2,574						10,490						—						10,490
Administrative and general						17,657						3,098						6,119						26,874						1						26,875
Depreciation and amortization expense (1)						9,824						885						873						11,582						—						11,582
Maintenance						2,004						911						1,232						4,147						—						4,147
Property and other taxes						5,624						686						642						6,952						—						6,952
ASUS construction expense						—						—						12,933						12,933						—						12,933
Segment operating income (loss)						34,796						4,116						6,635						45,547						(1)						45,546
Interest expense						(9,328)						(1,136)						(313)						(10,777)						(1,305)						(12,082)
Interest income						1,272						524						199						1,995						18						2,013
Gain (loss) on investments held in a trust						(586)						—						—						(586)						—						(586)
Income tax expense (benefit)						6,514						1,047						1,377						8,938						(476)						8,462
Other segment items income (expense) (2)						266						169						(20)						415						—						415
Segment net income (loss)						$	19,906					$	2,626					$	5,124					$	27,656					$	(812)					$	26,844
						For The Three Months Ended March 31, 2025
																								Total
																		Contracted						Reportable						AWR						Consolidated
(dollars in thousands)						Water						Electric						Services						Segments						Parent						AWR
Capital additions (3)						$	57,858					$	7,853					$	1,854					$	67,565					$	—					$	67,565