What changed in this filing

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Item 1. Financial Statements

2021-10-29 compared with 2021-07-30 · 182 added, 121 removed, 501 unchanged (38% of the section changed)

3 unchanged sentences

(in thousands, except share and per share data)

Three months ended June 30, Six months ended June 30,

Three months ended September 30, Nine months ended September 30,

2021 2020 2021 2020

17 unchanged sentences

Gain on sale of Texas Water Alliance — — 3,000 —

Gain on sale of real estate investments — 1,050 — 1,050

Other, net 1,244 1,130 4,782 2,935

2 unchanged sentences

NET INCOME 19,068 26,093 42,459 48,231

Other comprehensive income (loss), net 107 10 145 ( 125 )

Other comprehensive (loss) income, net ( 12 ) 76 133 ( 49 )

COMPREHENSIVE INCOME $ 19,056 26,169 $ 42,592 48,182

10 unchanged sentences

(in thousands, except share and per share data)

September 30,

2021 December 31,

15 unchanged sentences

Accounts receivable:

Customers, net of allowances for uncollectible accounts of $ 3,866 and $ 3,891 on June 30, 2021 and December 31, 2020, respectively

Customers, net of allowances for uncollectible accounts of $ 4,272 and $ 3,891 on September 30, 2021 and December 31, 2020, respectively

58,725 46,832

17 unchanged sentences

(in thousands, except share and per share data)

September 30,

2021 December 31,

4 unchanged sentences

authorized 70,000,000 shares;

issued and outstanding shares 29,804,927 on June 30, 2021 and 28,556,605 on December 31, 2020

issued and outstanding shares 29,822,182 on September 30, 2021 and 28,556,605 on December 31, 2020

Additional paid-in capital 581,201 510,158

11 unchanged sentences

Accrued payroll 13,231 14,012

Income tax payable 246 —

Other current liabilities 21,612 19,203

4 unchanged sentences

POSTRETIREMENT BENEFIT PLANS 125,005 121,597

REGULATORY LIABILITIES — —

OTHER NONCURRENT LIABILITIES 25,627 21,786

15 unchanged sentences

— — — — 38 38

Share-based compensation — — 1,280 ( 32 ) — 1,248

Stock-based compensation — — 1,280 ( 32 ) — 1,248

Issuance of restricted and deferred stock units 30,547 — ( 964 ) — — ( 964 )

7 unchanged sentences

— — — — 107 107

Share-based compensation — — 791 ( 28 ) — 763

Stock-based compensation — — 791 ( 28 ) — 763

Issuance of restricted and deferred stock units 15,040 — ( 9 ) — — ( 9 )

3 unchanged sentences

BALANCES, June 30, 2021 29,804,927 30 579,057 411,511 ( 919 ) 989,679

Net income — — — 19,068 — 19,068

Unrealized loss on investment, net of tax benefit of $ 4

— — — — ( 12 ) ( 12 )

Stock-based compensation — — 1,130 ( 29 ) — 1,101

Issuance of restricted and deferred stock units 186 — 14 — — 14

Employee stock purchase plan 17,069 — 1,000 — — 1,000

Dividends paid ($ 0.34 per share)

— — — ( 10,139 ) — ( 10,139 )

BALANCES, September 30, 2021 29,822,182 $ 30 $ 581,201 $ 420,411 $ ( 931 ) $ 1,000,711

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

SJW GROUP AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(in thousands, except share and per share data)

Common Stock Additional

6 unchanged sentences

Net income — — — 2,417 — 2,417

Unrealized loss on investment, net of tax of $( 50 )

Unrealized loss on investment, net of tax benefit of $ 50

— — — — ( 135 ) ( 135 )

Share-based compensation — — 251 ( 43 ) — 208

Stock-based compensation — — 251 ( 43 ) — 208

Issuance of restricted and deferred stock units 25,781 — ( 785 ) — — ( 785 )

6 unchanged sentences

— — — — 10 10

Share-based compensation — — 1,009 ( 43 ) — 966

Stock-based compensation — — 1,009 ( 43 ) — 966

Issuance of restricted and deferred stock units 18,864 1 14 — — 15

2 unchanged sentences

BALANCES, June 30, 2020 28,516,705 29 508,098 387,003 1 895,131

Net income — — — 26,093 — 26,093

Unrealized gain on investment, net of tax of $ 28

— — — — 77 77

Stock-based compensation — — 1,058 ( 42 ) — 1,016

Issuance of restricted and deferred stock units 19,274 — ( 985 ) — — ( 985 )

Employee stock purchase plan 16,198 — 860 — — 860

Dividends paid ($ 0.32 per share)

— — — ( 9,131 ) — ( 9,131 )

BALANCES, September 30, 2020 28,552,177 $ 29 $ 509,031 $ 403,923 $ 78 $ 913,061

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

2 unchanged sentences

(in thousands)

Six months ended June 30,

Nine months ended September 30,

OPERATING ACTIVITIES:

5 unchanged sentences

Allowance for equity funds used during construction ( 1,490 ) —

Gain on sale of Texas Water Alliance ( 3,000 ) —

Gain on sale of Texas Water Alliance and real estate investments ( 3,000 ) ( 1,050 )

Changes in operating assets and liabilities:

5 unchanged sentences

Regulatory assets and liabilities excluding income tax temporary differences, net and postretirement benefits ( 12,418 ) ( 14,086 )

( 8,231 ) ( 13,903 )

Up-front service concession payment — ( 5,000 )

7 unchanged sentences

Payments to retire utility plant, net of salvage ( 3,535 ) ( 1,877 )

Proceeds from sale of Texas Water Alliance 3,000 —

Payment for asset acquisition ( 1,452 ) —

Proceeds from sale of Texas Water Alliance and real estate investments 3,000 1,068

NET CASH USED IN INVESTING ACTIVITIES ( 182,899 ) ( 141,210 )

26 unchanged sentences

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2021

SEPTEMBER 30, 2021

(in thousands, except share and per share data)

11 unchanged sentences

The major streams of revenue for SJW Group are as follows:

Three months ended June 30, Six months ended June 30,

Three months ended September 30, Nine months ended September 30,

2021 2020 2021 2020

9 unchanged sentences

(“CTWS”), and shares potentially issuable under the Employee Stock Purchase Plan (“ESPP”).

For the three months ended June 30, 2021 and 2020, 4,304 and 9,397 anti-dilutive restricted common stock units were excluded from the dilutive earnings per share calculation, respectively.

For the six months ended June 30, 2021 and 2020, 12,883 and 19,191 anti-dilutive restricted common stock units were excluded from the dilutive earnings per share calculation, respectively.

Utility Plant Depreciation

A portion of depreciation expense is allocated to administrative and general expense.

For the three months ended June 30, 2021 and 2020, the amounts allocated to administrative and general expense were $ 120 and $ 370 , respectively.

For the six months

For the three months ended September 30, 2021 and 2020, 1,558 and 1,029 anti-dilutive restricted common stock units were excluded from the dilutive earnings per share calculation, respectively.

For the nine months ended September 30, 2021 and 2020, 14,441 and 20,220 anti-dilutive restricted common stock units were excluded from the dilutive earnings per share calculation, respectively.

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

June 30, 2021

September 30, 2021

(in thousands, except share and per share data)

ended June 30, 2021, and 2020, the amounts allocated to administrative and general expense were $ 1,456 and $ 1,469 , respectively.

Real Estate Investments

The major components of real estate investments as of June 30, 2021, and December 31, 2020, are as follows:

The major components of real estate investments as of September 30, 2021, and December 31, 2020, are as follows:

September 30,

2021 December 31,

7 unchanged sentences

SJW Group received the holdback amount without reduction from the GBRA on June 29, 2021 and recognized a pre-tax gain on sale of $ 3,000 .

On September 28, 2020, San Jose Water Company sold six nonutility properties located in Los Gatos, California for $ 1,075 .

SJW Group recognized a pre-tax gain on the sale of real estate investments of $ 1,048 , net of selling expenses of $ 22 .

Regulatory Rate Filings

10 unchanged sentences

On June 23, 2021, SJWC filed Advice Letter 565 to extend Resolution M-4849’s emergency customer protections through September 30, 2021.

This advice was approved on July 1, 2021.

This advice letter was approved on July 1, 2021.

On September 23, 2021, Governor Newsom approved Senate Bill 155, which included a provision extending the water shutoff moratorium through December 31, 2021.

SJWC filed Advice Letter 556 on November 16, 2020, with the CPUC requesting authorization to increase its revenue requirement by $ 11,750 or 3.04 % in 2021 for the final escalation year authorized in our 2018 General Rate Case Decision 18-011-025 which established rates for 2019, 2020, and 2021.

3 unchanged sentences

The application also includes requests to recover $ 18,499 from balancing and memorandum accounts, authorization for a $ 435,000 capital budget, further alignment between actual and authorized usage, and a shift to greater revenue collection in the service charge.

The application will undergo a year-long review process and new rates, if approved, are expected to be effective in the second quarter of 2022.

The application will undergo a year-long review process and new rates, if approved, are expected to be effective by the second quarter of 2022.

SJWC will file for interim rates to be effective on January 1, 2022.

On May 3, 2021, SJWC filed Application No.

2 unchanged sentences

The application also proposes a rate of return of 8.11 % 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 % from the current rate of 8.90 %.

In addition, the request seeks to adjust SJWC’s currently authorized capital structure of approximately 47 % debt and 53 % equity to approximately 45 % debt and 55 % equity.

If approved, rates are expected to be effective on January 1, 2022.

In addition, the request seeks to adjust

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

June 30, 2021

September 30, 2021

(in thousands, except share and per share data)

SJWC’s currently authorized capital structure of approximately 47 % debt and 53 % equity to approximately 45 % debt and 55 % equity.

If approved, rates are expected to be effective in the second quarter of 2022.

On May 27, 2021, SJWC filed Advice Letter No.

561/561A with the CPUC requesting authorization to increase revenue by $ 17,262 or 4.34 % to recover the increases to purchased potable water charges, the groundwater extraction fee, and purchased recycled water charges implemented by Santa Clara Valley Water District (“Valley Water”) and South Bay Water Recycling effective July 1, 2021.

This advice letter was approved with an effective date of July 1, 2021.

3 unchanged sentences

Similar memorandum accounts were authorized during the previous drought.

On July 20, 2021, Advice Letter 564 was approved.

Advice Letter 563 is pending with the CPUC.

Advice Letters 564 and 563 were approved with the effective dates of July 20, 2021, and August 5, 2021, respectively.

On August 5, 2021, SJWC filed Advice Letter 567 with the CPUC requesting authorization to update its Drought Allocations and Drought Surcharges program contained within its Schedule 14.1.

This filing updates the program developed during the drought of 2014-2017.

Advice Letter 567 was approved with an effective date of September 6, 2021.

This approval does not authorize its activation.

SJWC will submit another filing with the commission to activate the program should water supply conditions dictate or if it is required to do so by the CPUC and/or the State of California.

On October 15, 2021, SJWC filed Advice Letter 569 with the CPUC requesting authorization to activate Schedule 14.1 effective November 15, 2021, as approved in Advice Letter 567.

If approved, drought surcharges collected will be used to offset the revenue losses tracked in the Water Conservation Memorandum Account authorized in Advice Letter 564.

This filing is pending before the CPUC.

Connecticut Regulatory Affairs

3 unchanged sentences

On March 3, 2021, PURA approved the reconciliation, resulting in a net cumulative 7.03 % surcharge for Connecticut Water which became effective on customers’ bills on April 1, 2021.

As of June 30, 2021, WICA surcharges for Connecticut Water and its Avon Water division were 7.03 % and 8.51 %, respectively.

The Heritage Village Water division does not have an approved WICA surcharge.

On January 15, 2021, Connecticut Water filed an application with PURA to amend rates for its customers, including the divisions of Avon and Heritage Village.

The WICA surcharge was reset to zero as part of the July 28, 2021, rate case decision.

On October 26, 2021, Connecticut Water filed for a WICA increase for approximately $ 21,746 in completed projects.

Many of the projects were those that were not considered by PURA in the rate case because of the deadline in the proceeding for pro forma capital additions.

If approved as submitted, Connecticut Water expects a WICA surcharge of 2.49 % to be added to customer bills in January 2022 which is expected to generate approximately $ 2,581 in additional revenue.

Prior to being reset to zero concurrent with the new rates from the Connecticut Water rate proceeding effective July 28, 2021, WICA surcharges for Connecticut Water and its Avon Water division were 7.03 % and 8.51 %, respectively.

The Heritage Village Water division did not have an approved WICA surcharge, but Connecticut Water is authorized in its July 28, 2021, rate case decision to include Heritage Village Water division in the WICA program in the future.

On January 15, 2021, Connecticut Water filed an application with PURA to amend rates for its customers, including the divisions of Avon Water and Heritage Village Water.

The filing requests an increase of $ 20,206 in annual revenues that includes more than $ 265,514 in completed infrastructure investments that are not currently in approved rates and surcharges.

The filing proposes a new rate that would provide a 15 % reduction in water bills for income-eligible customers, which would be the first low-income rate for a Connecticut water utility, if approved.

The filing also includes a tiered block rate structure for residential water customers to promote water conservation.

The proposed increase will be applied across the company but may differ by rate divisions, meter size and between customer rate categories.

The application also reflects the costs of operating and maintaining the utility, including expenditures on power and treatment additives that have increased since the company’s last general rate case decision in 2010.

PURA has 200 days from the filing date to review the application, and the approved rates will go into effect soon thereafter.

On July 28, 2021, Connecticut Water received the final decision approving an increase of $ 5,208 in annual revenues, a return on equity of 9.0 %, with new rates effective July 28, 2021.

The final decision also approved the low-income rate, tiered block rate structure for residential water customers and the cost of debt and equity percentage as requested.

The final decision also approved a low-income rate, tiered block rate structure for residential water customers and the cost of debt and equity percentage as requested.

The final decision did not include all of the requested proforma plant in service due to the timing of its completion.

1 unchanged sentence

Connecticut Water will seek recovery for the projects in the future, including a portion of plant which is eligible for recovery through WICA.

In addition, the final decision reset WICA, which was approaching its statutory cap to zero .

In addition, the final decision reset WICA, which was approaching its statutory caps to zero .

On August 11, 2021, Connecticut Water filed a petition for reconsideration with PURA to consider matters specific to excess deferred income taxes contained in the July 28, 2021, decision.

The proposed increased revenues associated with the petition is $ 2,229 .

On October 25, 2021, PURA issued a draft decision approving $ 1,752 of Connecticut Water’s request.

A final decision on the matter is expected on November 10, 2021.

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2021

(in thousands, except share and per share data)

Long-term debt issuances for Connecticut Water require regulatory authorization which is typically obtained for a specified amount of debt to be issued during a specified period of time.

6 unchanged sentences

The 2020 WPC true-up report resulted in a reduction of the WPC usage rate from $ 0.95 dollars to $ 0.70 dollars per thousand gallons which became effective on March 1, 2021.

On August 18, 2021, the GBRA announced a 13 % increase for treated water effective September 1, 2021.

The Deer Creek Ranch water system has a separate WPC.

A WPC filing for Deer Creek Ranch is required only when there is a change in purchased water costs.

The WPC true-up report for this system was submitted December 1, 2020, which resulted in a decrease in the usage charge from $ 2.02 to $ 1.84

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

June 30, 2021

(in thousands, except share and per share data)

dollars per thousand gallons, and an increase in the monthly base charge of $ 0.51 dollars per residential account.

The WPC true-up report for this system was last submitted December 1, 2020, which resulted in a decrease in the usage charge from $ 2.02 to $ 1.84 dollars per thousand gallons, and an increase in the monthly base charge of $ 0.51 dollars per residential account.

The Deer Creek Ranch WPC rate changes became effective February 25, 2021.

A disaster declaration was declared on February 12, 2021 by the Public Utilities Commission of Texas (“PUCT”) because of severe winter weather.

A disaster declaration was issued on February 12, 2021, by the Public Utilities Commission of Texas (“PUCT”) because of severe winter weather.

The PUCT issued orders under Docket No.

1 unchanged sentence

On March 5, 2021, the PUCT reinstituted the utilities’ ability to resume charging late fees, and on June 15, 2021, removed the prohibition on disconnections for non-payment.

On June 28, 2021, CLWSC announced that it reached an agreement to acquire the Kendall West and Bandera East utilities in Bandera and Medina counties in Texas and that change in ownership applications had been filed with the PUCT.

The acquisition, pending approval by the PUCT, would grow CLWSC by 1,400 service connections that serve an estimated 4,000 county residences.

The Texas Legislature passed Senate Bill 3 on August 6, 2021.

Under this bill, utilities are obligated to report to the PUCT steps they are taking to mitigate for the type of long-term power outages experienced during the February 2021 storm.

CLWSC expects to incur capital expenditures related to meeting these new requirements, largely for procurement of backup generators.

The acquisition, pending approval by the PUCT, would grow CLWSC by 1,400 service connections.

Rates will remain the same for those customers of the acquired Certificate of Convenience and Necessity.

A decision by the PUCT is expected in the fourth quarter of 2021.

7 unchanged sentences

On March 10, 2021, Maine Water filed a general rate increase application for the Biddeford Saco Division seeking approximately $ 6,659 , or 77.5 %, in additional revenue.

The application has proposed a multi-year rate plan that is designed to ease the transition to higher water bills over the period from July 2021 to July 2023.

The application proposed a three step, multi-year rate plan designed to ease the transition to higher water bills over the period from July 2021 to July 2023.

The primary driver for the increase in rates is the support for a new drinking water treatment facility on the Saco River, a $ 60,000 project to replace the existing facility that is expected to be in service in the second quarter of 2022.

On June 23, 2021, the MPUC approved the first step in the plan adopting the proposed rate smoothing mechanism and implementing a temporary 22.65 % surcharge on all customer bills.

The surcharge will be in effect for one year while the MPUC reviews and acts on the requested increase in base rates.

A decision on the requested revenue increase is expected in the second quarter of 2022, in alignment with the completion of the new water treatment facility.

The surcharge will be in effect for one year .

Action on the rate increase request was deferred by agreement of the parties.

On September 8, 2021, Maine Water filed a supplemental application to update its request to increase base rates, initiating the second step in the rate plan.

The supplemental application seeks $ 6,880 , or 80.1 % in additional revenue primarily to support a

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2021

(in thousands, except share and per share data)

new drinking water treatment facility on the Saco River.

A decision on the requested revenue increase is expected in the second quarter of 2022, corresponding with the completion of the new water treatment facility.

Regulatory Assets, Net

Regulatory assets, net are comprised of the following as of June 30, 2021, and December 31, 2020:

June 30, 2021 December 31, 2020

Regulatory assets, net are comprised of the following as of September 30, 2021, and December 31, 2020:

September 30, 2021 December 31, 2020

Regulatory assets:

8 unchanged sentences

Total regulatory assets, net, less current portion $ 178,861 156,482

As of September 30, 2021, and December 31, 2020, SJW Group’s regulatory assets, net not earning a return primarily included postretirement pensions and other medical benefits unfunded amount, and the business combinations debt premium, net.

The total amount of regulatory assets, net not earning a return at September 30, 2021, and December 31, 2020, either by interest on the regulatory asset/liability or as a component of rate base at the allowed rate of return was $ 121,090 and $ 119,236 , respectively.

Balancing and Memorandum Accounts

SJWC has established balancing accounts for the purpose of tracking the under-collection or over-collection associated with expense changes and revenue authorized by the CPUC to offset those expense changes.

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.

The Monterey Water Revenue Adjustment Mechanism (“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.

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

June 30, 2021

September 30, 2021

(in thousands, except share and per share data)

At June 30, 2021 and December 31, 2020, SJW Group’s regulatory assets, net not earning a return primarily included the postretirement pensions and other medical benefits unfunded amount, and the business combinations debt premium, net.

The total amount of regulatory assets, net not earning a return at June 30, 2021, and December 31, 2020, either by interest on the regulatory asset/liability or as a component of rate base at the allowed rate of return was $ 120,482 and $ 119,236 , respectively.

Balancing and Memorandum Accounts

SJWC has established balancing accounts for the purpose of tracking the under-collection or over-collection associated with expense changes and the revenue authorized by the CPUC to offset those expense changes.

The Monterey Water Revenue Adjustment Mechanism (“WRAM”) 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.

Balancing and memorandum accounts recorded to regulatory assets, net for the three and six months ended June 30, 2021 and 2020 as follows:

Three months ended June 30, 2021 Three months ended June 30, 2020

Balancing and memorandum accounts recorded to regulatory assets, net for the three and nine months ended September 30, 2021, and 2020 as follows:

Three months ended September 30, 2021 Three months ended September 30, 2020

Beginning Balance Regulatory Asset Increase (Decrease) Refunds (Collections) Adjustments Ending Balance Beginning Balance Regulatory Asset Increase (Decrease) Refunds (Collections) Adjustments Ending Balance

Revenue accounts:

Monterey WRAM $ 13,853 1,424 1 15,278 $ 8,958 1,591 — 10,549

MWRAM $ 15,278 363 — 15,641 $ 10,549 ( 1,124 ) 2,625 12,050

Cost of capital memorandum account ( 1,562 ) — — ( 1,562 ) ( 1,560 ) ( 1 ) — ( 1,561 )

11 unchanged sentences

Total $ 31,317 2,081 ( 121 ) 33,277 $ 17,615 1,101 2,619 21,335

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

June 30, 2021

(in thousands, except share and per share data)

Six months ended June 30, 2021 Six months ended June 30, 2020

Nine months ended September 30, 2021 Nine months ended September 30, 2020

Revenue accounts:

Monterey WRAM $ 12,077 3,200 1 15,278 $ 7,015 3,561 ( 27 ) 10,549

MWRAM $ 12,077 3,563 1 15,641 $ 7,015 2,437 2,598 12,050

Cost of capital memorandum account ( 1,561 ) ( 1 ) — ( 1,562 ) ( 1,553 ) ( 8 ) — ( 1,561 )

10 unchanged sentences

Total $ 25,463 8,108 ( 294 ) 33,277 $ 5,283 6,608 9,444 21,335

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2021

(in thousands, except share and per share data)

All balancing accounts and memorandum-type accounts not included for recovery or refund in the current general rate case will be reviewed by the CPUC in SJWC’s next general rate case or at the time an individual account balance reaches a threshold of 2 % of authorized revenue, whichever occurs first.

9 unchanged sentences

The Incentive Plan allows SJW Group to provide employees, non-employee board members or the board of directors of any parent or subsidiary, consultants, and other independent advisors who provide services to the company or any parent or subsidiary the opportunity to acquire an equity interest in SJW Group.

As of June 30, 2021, 174,489 shares are issuable upon the vesting of outstanding restricted stock units and deferred restricted stock units and an additional 685,578 shares are available for award issuances under the Incentive Plan.

As of September 30, 2021, 174,154 shares are issuable upon the vesting of outstanding restricted stock units and deferred restricted stock units and an additional 685,660 shares are available for award issuances under the Incentive Plan.

In connection with the merger with CTWS on October 9, 2019, SJW Group assumed outstanding awards of restricted stock units and deferred share units under the following stock plans:

the CTWS 2014 Performance Stock Program, the CTWS 2004 Performance Stock Program and the CTWS 1994 Performance Stock Program (collectively, the “CTWS Plans”).

As of June 30, 2021, approximately 56,056 shares are issuable upon the exercise of outstanding restricted stock units and deferred restricted stock units under the CTWS Plans.

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

June 30, 2021

(in thousands, except share and per share data)

A summary of compensation costs charged to income and proceeds from the exercise of any restricted stock and similar instruments that are recorded to additional paid-in capital and common stock, by award type, are presented below for the three and six months ended June 30, 2021, and 2020.

Three months ended June 30, Six months ended June 30,

As of September 30, 2021, approximately 56,326 shares are issuable upon the exercise of outstanding restricted stock units and deferred restricted stock units under the CTWS Plans.

Three months ended September 30, Nine months ended September 30,

2021 2020 2021 2020

Adjustments to additional paid-in capital and common stock for:

Compensation costs charged to income:

4 unchanged sentences

Restricted Stock and Deferred Restricted Stock

For the three months ended June 30, 2021, and 2020, SJW Group granted under the Incentive Plan 11,732 and 14,346 , respectively, one year and three year service-based restricted stock awards with a weighted-average grant date fair value of $ 65.43 and $ 60.17 , respectively, per unit.

For the six months ended June 30, 2021, and 2020, SJW Group granted under the Incentive Plan 45,433 and 42,713 , respectively, one year and three year service-based restricted stock awards with a weighted-average grant date fair value of $ 64.53 and $ 63.97 , respectively, per unit.

For the three months ended June 30, 2021, and 2020, SJW Group granted under the Incentive Plan 1,182 and 138 target units, respectively, performance-based and market-based restricted stock awards with a weighted-average grant date fair value of $ 65.70 and $ 66.99 , respectively, per unit.

For the six months ended June 30, 2021, and 2020, SJW Group granted under the Incentive Plan 30,641 and 24,719 target units, respectively, performance-based and market-based restricted stock awards granted with a weighted-average grant date fair value of $ 66.33 and $ 72.01 , respectively, per unit.

For the three months ended September 30, 2021, and 2020, SJW Group granted under the Incentive Plan 1,134 and 761 , respectively, one year and three year service-based restricted stock awards with a weighted-average grant date fair value of $ 69.20 and $ 58.63 , respectively, per unit.

For the nine months ended September 30, 2021, and 2020, SJW Group granted under the Incentive Plan 46,567 and 43,474 , respectively, one year and three year service-based restricted stock awards with a weighted-average grant date fair value of $ 64.65 and $ 63.87 , respectively, per unit.

For the three months ended September 30, 2021, and 2020, SJW Group granted under the Incentive Plan 0 and 58 target units, respectively, performance-based and market-based restricted stock awards with a weighted-average grant date fair value of $ 0.00 and $ 62.95 , respectively, per unit.

For the nine months ended September 30, 2021, and 2020, SJW Group granted under

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2021

(in thousands, except share and per share data)

the Incentive Plan 30,641 and 24,777 target units, respectively, performance-based and market-based restricted stock awards granted with a weighted-average grant date fair value of $ 66.33 and $ 65.02 , respectively, per unit.

Based upon actual attainment relative to the target performance metric, the number of shares issuable can range between 0 % to 150 % of the target number of shares for performance-based restricted stock awards, or between 0 % and 200 % of the target number of shares for market-based restricted stock awards.

As of June 30, 2021, the total unrecognized compensation costs related to restricted and deferred restricted stock plans amounted to $ 6,528 .

As of September 30, 2021, the total unrecognized compensation costs related to restricted and deferred restricted stock plans amounted to $ 5,442 .

This cost is expected to be recognized over a weighted-average period of 1.72 years.

Employee Stock Purchase Plan

SJW Group’s recorded expenses were $ 86 and $ 174 for the three and six months ended June 30, 2021, respectively, and $ 74 and $ 160 for the three and six months ended June 30, 2020, respectively, related to the ESPP.

The total unrecognized compensation costs related to the semi-annual offering period that ends July 30, 2021, for the ESPP is approximately $ 30 .

This cost is expected to be recognized during the third quarter of 2021.

SJW Group’s recorded expenses were $ 91 and $ 265 for the three and nine months ended September 30, 2021, respectively, and $ 85 and $ 244 for the three and nine months ended September 30, 2020, respectively, related to the ESPP.

The total unrecognized compensation costs related to the semi-annual offering period that ends January 31, 2022, for the ESPP is approximately $ 124 .

This cost is expected to be recognized during the fourth quarter of 2021 and first quarter of 2022.

Bank Borrowings and Long-Term Liabilities

9 unchanged sentences

The SJWC Credit Agreement also includes certain customary financial covenants such as a funded debt to capitalization ratio.

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

June 30, 2021

(in thousands, except share and per share data)

Also on April 23, 2021, SJW Group, as guarantor, and CLWSC closed its $ 5,000 line of credit agreement which was set to mature on June 1, 2021, and entered into a new $ 5,000 credit agreement (“SJWTX Credit Agreement”) with the Lender.

17 unchanged sentences

The notes are also subject to customary events of default, the occurrence of which may result in all of the notes then outstanding becoming immediately due and payable.

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2021

(in thousands, except share and per share data)

On June 25, 2021, SJWC entered into a note purchase agreement with certain affiliates of New York Life Insurance (collectively the “Purchasers”), pursuant to which the company sold an aggregate principal amount of $ 50,000 of its 3.00 % Senior Notes, Series N (“Series N Notes”) to the Purchasers.

4 unchanged sentences

The closing occurred simultaneously with the signing of the note purchase agreement.

On August 4, 2021, Connecticut Water entered into a note purchase agreement with certain affiliates of Metropolitan Life Insurance Company, New York Life Insurance Company, the Northwestern Mutual Life Insurance Company and Pacific Life Insurance Company, pursuant to which Connecticut Water sold on August 4, 2021, an aggregate principal amount of $ 50,000 of its 3.07 % Senior Notes, Series 2021A, due 2051 (the “2021A Notes”) and will sell on December 1, 2021, an aggregate principal amount of $ 50,000 of its 3.10 % Senior Notes, Series 2021B, due 2051 (the “2021B Notes” and together with the 2021A Notes, the “CWC Notes”).

The closing on December 1, 2021, is subject to customary closing conditions.

The CWC Notes are unsecured obligations of Connecticut Water, with the 2021A Notes due on June 1, 2051, and the 2021B Notes due on December 1, 2051.

Interest on the CWC Notes is payable semi-annually in arrears on June 1st and December 1st of each year.

The note purchase agreement contains customary representations and warranties.

Connecticut Water has agreed to customary affirmative and negative covenants for as long as the CWC Notes are outstanding.

The CWC Notes are also subject to customary events of default, the occurrence of which may result in all of the CWC Notes then outstanding becoming immediately due and payable.

The proceeds from the sale of the CWC Notes will be used to repay outstanding short and/or long-term borrowings, to fund Connecticut Water’s capital expenditures, and/or for other general corporate purposes.

On August 4, 2021, SJWC entered into a note purchase agreement with the purchasers listed in the agreement, pursuant to which the company sold an aggregate principal amount of $ 50,000 of its 3.00 % Senior Notes, Series O (“Series O Notes”), due December 1, 2051.

The Series O Notes are unsecured obligations of SJWC.

Interest is payable semi-annually in arrears on June 1st and December 1st of each year.

The note purchase agreement contains customary affirmative and negative covenants for as long as the Series O Notes are outstanding.

The Series O Notes are also subject to customary events of default, the occurrence of which may result in all of the Series O Notes then outstanding becoming immediately due and payable.

The closing of the note purchase agreement is expected to occur on December 1, 2021.

Benefit Plans

11 unchanged sentences

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

June 30, 2021

September 30, 2021

(in thousands, except share and per share data)

The components of net periodic benefit costs for the defined benefit plans and other postretirement benefits for the three and six months ended June 30, 2021, and 2020 are as follows:

Three months ended June 30, Six months ended June 30,

The components of net periodic benefit costs for the defined benefit plans and other postretirement benefits for the three and nine months ended September 30, 2021, and 2020 are as follows:

Three months ended September 30, Nine months ended September 30,

2021 2020 2021 2020

6 unchanged sentences

In 2021, SJW Group expects to make required and discretionary cash contributions of up to $ 9,043 to the pension plans and other postretirement benefits.

For the three and six months ended June 30, 2021, SJW Group has made $ 1,480 contributions to such plans.

For the three and six months ended June 30, 2021, income tax expense was $ 3,306 and $ 2,410 , respectively.

Income tax expense for the three and six months ended June 30, 2020, was $ 4,210 and $ 4,648 , respectively.

The effective consolidated income tax rates were 14 % and 18 % for the three months ended June 30, 2021 and 2020, respectively, and 9 % and 17 % for the six months ended June 30, 2021, and 2020, respectively.

The lower effective rates for the three and six months ended June 30, 2021, were primarily due to flow-through tax benefits.

In addition, discrete tax benefits recorded in the first quarter of 2021 resulted in a lower effective tax rate for the six months ended June 30, 2021.

SJW Group had unrecognized tax benefits, before the impact of deductions of state taxes, excluding interest and penalties of approximately $ 6,882 and $ 6,468 as of June 30, 2021 and December 31, 2020, respectively.

For the three and nine months ended September 30, 2021, SJW Group has made $ 3,517 and $ 4,997 , respectively, contributions to such plans.

For the three and nine months ended September 30, 2021, income tax expense was $ 2,749 and $ 5,159 , respectively.

Income tax expense for the three and nine months ended September 30, 2020, was $ 4,578 and $ 9,226 , respectively.

The effective consolidated income tax rates were 13 % and 15 % for the three months ended September 30, 2021 and 2020, respectively, and 11 % and 16 % for the nine months ended September 30, 2021, and 2020, respectively.

The lower effective rates for the three and nine months ended September 30, 2021, were primarily due to flow-through tax benefits.

SJW Group had unrecognized tax benefits, before the impact of deductions of state taxes, excluding interest and penalties of approximately $ 7,537 and $ 6,468 as of September 30, 2021, and December 31, 2020, respectively.

SJW Group does not expect its unrecognized tax benefits to change significantly within the next 12 months.

2 unchanged sentences

Fair Value Measurement

The following instruments are not measured at fair value on SJW Group’s condensed consolidated balance sheets as of June 30, 2021, but require disclosure of their fair values:

The following instruments are not measured at fair value on SJW Group’s condensed consolidated balance sheets as of September 30, 2021, but require disclosure of their fair values:

cash and cash equivalents, accounts receivable and accounts payable.

The estimated fair value of such instruments as of June 30, 2021, approximates their carrying value as reported on the condensed consolidated balance sheets.

The fair value of such financial instruments are determined using the income approach based on the present value of estimated future cash flows.

There have been no changes in valuation techniques during the three and six months ended June 30, 2021.

The estimated fair value of such instruments as of September 30, 2021, approximates their carrying value as reported on the condensed consolidated balance sheets.

The estimated fair value of such financial instruments are determined using the income approach based on the present value of estimated future cash flows.

There have been no changes in valuation techniques during the three and nine months ended September 30, 2021.

The fair value of these instruments would be categorized as Level 2 in the fair value hierarchy, with the exception of cash and cash equivalents, which would be categorized as Level 1.

The fair value of SJW Group’s long-term debt was approximately $ 1,546,640 and $ 1,570,727 as of June 30, 2021, and December 31, 2020, respectively, and was determined using a discounted cash flow analysis, based on the current rates for similar financial instruments of the same duration and creditworthiness of the company.

The book value of long-term debt was $ 1,398,396 and $ 1,363,821 as of June 30, 2021, and December 31, 2020, respectively.

The fair value of SJW Group’s long-term debt was approximately $ 1,573,581 and $ 1,570,727 as of September 30, 2021, and December 31, 2020, respectively, and was determined using a discounted cash flow analysis, based on the current rates for similar financial instruments of the same duration and creditworthiness of the company.

The book value of long-term debt was $ 1,446,320 and $ 1,363,821 as of September 30, 2021, and December 31, 2020, respectively.

The fair value of long-term debt would be categorized as Level 2 in the fair value hierarchy.

CTWS’s additional retirement benefits under the supplemental executive retirement plans and retirement contracts are funded by investment assets held by a Rabbi Trust.

The fair value of the money market funds, mutual funds and fixed income investments in the Rabbi Trust was $ 3,078 and $ 3,014 as of June 30, 2021, and December 31, 2020, respectively, and are categorized as Level 1 in the fair value hierarchy.

The fair value of the money market funds, mutual funds and fixed income investments in the Rabbi Trust was $ 3,738 and $ 3,014 as of September 30, 2021, and December 31, 2020, respectively, and are categorized as Level 1 in the fair value hierarchy.

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

June 30, 2021

September 30, 2021

(in thousands, except share and per share data)

9 unchanged sentences

Other business activity of SJW Group not included in the reportable segments is included in the “All Other” category.

For Three Months Ended June 30, 2021

For Three Months Ended September 30, 2021

Water Utility Services Real Estate Services All Other (1) SJW Group

8 unchanged sentences

Assets $ 3,352,976 7,141 44,629 64,995 3,352,976 116,765 3,469,741

For Three Months Ended June 30, 2020

For Three Months Ended September 30, 2020

Water Utility Services Real Estate Services All Other (1) SJW Group

10 unchanged sentences

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

June 30, 2021

September 30, 2021

(in thousands, except share and per share data)

For Six Months Ended June 30, 2021

For Nine Months Ended September 30, 2021

Water Utility Services Real Estate Services All Other (1) SJW Group

8 unchanged sentences

Assets $ 3,352,976 7,141 44,629 64,995 3,352,976 116,765 3,469,741

For Six Months Ended June 30, 2020

For Nine Months Ended September 30, 2020

Water Utility Services Real Estate Services All Other (1) SJW Group

9 unchanged sentences

____________________

(1) The “All Other” category for the six months ended June 30, 2021 and June 30, 2020, includes the accounts of SJW Group, SJWNE LLC and CTWS on a stand-alone basis.

(2) As of June 30, 2021 and December 31, 2020, the Company has performed an allocation of goodwill associated with the acquisition of CTWS to two reporting units, Connecticut and Maine, which are both aggregated within the Regulated Water Utility Services reportable segment.

(1) The “All Other” category for the nine months ended September 30, 2021 and September 30, 2020, includes the accounts of SJW Group, SJWNE LLC and CTWS on a stand-alone basis.

(2) As of September 30, 2021 and December 31, 2020, the Company has performed an allocation of goodwill associated with the acquisition of CTWS to two reporting units, Connecticut and Maine, which are both aggregated within the Regulated Water Utility Services reportable segment.

Commitments and Contingencies

1 unchanged sentence

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.

Subsequent Events

On October 29, 2021, San Jose Water sold two non-utility properties located in San Jose, California for $ 13,150 .

Also, on the same date, SJW Land sold undeveloped land located in San Jose, California for $ 2,600 .

SJW Group will record an estimated pre-tax gain on the sale of real estate investments of $ 13,600 in the fourth quarter of 2021.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements