What changed in this filing

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Item 1A. Risk Factors

2022-02-28 compared with 2021-03-01 · 105 added, 99 removed, 306 unchanged (40% of the section changed)

8 unchanged sentences

Our Water Utility Services are regulated public utilities.

The operating revenue of SJWC, Connecticut Water, CLWSC and Maine Water is generated primarily from the sale of water at rates authorized by t he Regulators.

The operating revenue of SJWC, Connecticut Water, CLWSC and Maine Water is generated primarily from the sale of water at rates authorized by t he CPUC, PURA, PUCT and MPUC (the “Regulators”).

The Regulators set rates that are intended to provide revenues sufficient to recover normal operating expenses, provide funds for replacement of water infrastructure and produce a fair and reasonable return on stockholder common equity.

Please refer to Part I, Item 1, “Regulation and Rates” for a discussion of the most recent regulatory proceedings affecting the rates of SJWC and CLWSC.

Please refer to Part I, Item 1, “Regulation and Rates” for a discussion of the most recent regulatory proceedings affecting the rates of our regulated operations.

Consequently, our revenue and operating results depend substantially upon the rates the Regulators authorize.

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If the CPUC disagrees with our calculation of SJWC’s memorandum and balancing accounts, we may be required to make adjustments that could adversely affect our results of operations.

Under a 2007 Connecticut law, PURA authorizes regulated

water companies to use a rate adjustment mechanism, known as WICA, for eligible projects completed and in service for the benefit of the customers.

Under a 2007 Connecticut law, PURA authorizes regulated water companies to use a rate adjustment mechanism, known as WICA, for eligible projects completed and in service for the benefit of the customers.

Maine legislature enacted a law that allows Maine Water expedited recovery of investments in water systems infrastructure replacement, both treatment and distribution, through WISC, similar to WICA in Connecticut.

Maine Water began to use the WISC during 2014.

There is no guarantee that these regulatory authorities will approve our applications to recover all or a portion of our capital expenditure or infrastructure investment through such rate adjustment mechanisms, and their failure to do so will adversely affect our financial conditions and results of operations.

There is no guarantee that these regulatory authorities will approve our applications

to recover all or a portion of our capital expenditure or infrastructure investment through such rate adjustment mechanisms, and their failure to do so will adversely affect our financial conditions and results of operations.

Recovery of regulatory assets is subject to adjustment by regulatory agencies and could impact the operating results of Water Utility Services.

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If the assessment of the probability of recovery in the ratemaking process is incorrect and the applicable ratemaking body determines that a deferred cost is not recoverable through future rate increases, the regulatory assets or liabilities would need to be adjusted, which could have an adverse effect on our results of operations and financial condition.

Streamflow Regulations in New England could potentially impact our ability to serve our customers.

Streamflow regulations in Connecticut could potentially impact our ability to serve our customers.

In December 2011, regulations concerning the flow of water in Connecticut’s rivers and streams were adopted.

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Although costs associated with the regulations may be recovered in the form of higher rates and Connecticut law allows for a WICA surcharge to recover capital improvement costs necessary to achieve compliance with the regulations, there can be no assurance PURA would approve rate increases to enable us to recover all such costs and surcharges.

Maine also has regulations that govern the flow of water in rivers and streams and also govern lake levels on great ponds.

Code of Maine Rules Chapter 587 (“Chapter 587”) regulates any activity that alters the flow or level of classified state waters after August 2007.

Maine Water operates five water systems that use surface waters governed by Chapter 587.

Maine Water has operated in full compliance with the chapter since its effective date and fully expects continued compliance.

For public water systems, Chapter 587 allows the Maine Department of Environmental Protection (“MDEP”) to impose site specific conditions in locations where Maine’s water quality classifications are not being met.

Any conditions proposed on a water withdrawal by a public water system must consider the provisions of any legislative charter, the watershed protection benefits provided by the utility and the financial viability of the utility.

Further, any conditions imposed must be accommodated by the existing MPUC approved rate schedule for the utility and may not, in and of themselves, cause a utility to request a rate increase from their customers.

To date, the MDEP has not imposed any withdrawal conditions on any public water system in Maine.

Water Utility Services is subject to litigation risks concerning water quality and contamination.

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Regulatory actions and fines related to discharges of water to WOTUS against other water utilities have increased in frequency in recent years.

If Water Utility Services is subject to a litigation or regulatory enforcement action, it might incur significant

costs in fines and restoration efforts, and it is uncertain whether Water Utility Services would be able to recover some or all of such costs from ratepayers or other third parties.

If Water Utility Services is subject to a litigation or regulatory enforcement action, it might incur significant costs in fines and restoration efforts, and it is uncertain whether Water Utility Services would be able to recover some or all of such costs from ratepayers or other third parties.

In addition, any litigation or regulatory enforcement action against us regarding a water discharge and/or resulting environmental impact may receive negative publicity that can damage our reputation and adversely affect our business and the trading price of our common stock.

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Under the federal Safe Drinking Water Act, Water Utility Services is subject to regulation by the EPA relating to the quality of water it sells and treatment techniques it uses to make the water potable.

The EPA promulgates, from time to time, nationally applicable standards, including maximum contaminant levels for drinking water.

The EPA promulgates, from time to time, nationally

applicable standards, including maximum contaminant levels for drinking water.

Additional or more stringent requirements may be adopted by each state.

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There are currently limited regulatory mechanisms and procedures available to us for the recovery of such costs and there can be no assurance that such costs will be fully recovered and failure to do so may adversely affect our operating results.

Climate change laws and regulations have been passed and are being proposed that require compliance with greenhouse gas emissions standards, as well as other climate change initiatives, which could increase Water Utility Services’ operating costs and affect our business.

Climate change is receiving ever increasing attention worldwide.

Many scientists, legislators, and others attribute global warming to increased levels of greenhouse gases, including carbon dioxide.

Climate change laws and regulations enacted and proposed limit greenhouse gases emissions from covered entities and require additional monitoring/reporting.

We produce a corporate social responsibility report, which provides an overview of our energy usage and greenhouse emissions.

At this time, the existing greenhouse gases laws and regulations are not expected to materially harm Water Utility Services’ operations or capital expenditures.

While regulation on climate change could change in light of the current federal administration’s agenda, the uncertainty of future climate change regulatory requirements still remains.

We cannot predict the potential impact of future laws and regulations on our business, financial condition, or results of operations.

Although these future expenditures and costs for regulatory compliance may be recovered in the form of higher rates, there can be no assurance that the various state utility commissions that govern our business would approve rate increases to enable us to recover such expenditures and costs

We may be at risk for litigation under the principle of inverse condemnation for activities in the normal course of business which have a damaging effect on private property.

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Risks Relating To Business Operations

Our business, financial condition, and results of operations have been and will continue to be negatively impacted by the Coronavirus (“COVID-19”) pandemic.

We are subject to risks related to the global pandemic associated with COVID-19.

Numerous governmental jurisdictions, including the States of California, Connecticut, Maine and Texas where we maintain our water utility operations, have imposed “shelter-in-place” orders, quarantines, executive orders and similar governmental orders and restrictions for their residents to control the spread of COVID-19.

Such orders or restrictions have resulted in business closures, work stoppages, slowdowns and delays in commercial activities, unprecedented and widespread unemployment, travel restrictions and cancellation of events, among other effects, thereby negatively impacting our suppliers, employees and customers, among others.

While state governments have permitted some reopening of businesses and approved gradual easing of various restrictions, the pandemic continues to have a significant and negative impact on all aspects of economic activities in the U.S., and some state governments have reversed or suspended their reopening plans in response to surges of COVID-19 cases in their states, including California.

In California, Governor Gavin Newsom signed an executive order suspending water service disconnections due to non-payment by customers retroactive to March 4, 2020 and until further notice.

On February 11, 2021, the CPUC approved Resolution M-4849 extending customer protections (i.e.

shutoffs and collections) required in Resolution M-4842 through June 30, 2021.

The resolution also requires water utilities to develop a transition plan regarding shutoffs and terminations with customers once the moratorium ends.

In Connecticut, the March 12, 2020, PURA moratorium ruling to halt shutoff for nonpayment expired on October 1, 2020.

In Maine, MPUC lifted the moratorium on utility disconnections effective November 1, 2020.

PUCT in Texas had ordered on March 13, 2020 public utilities to suspend water service disconnections and late fees charged to customers which expired on June 13, 2020, but there is no guarantee that PUCT will not reinstate or impose similar orders in the future.

The federal government may also take actions to impose a nation-wide utility termination moratorium through executive orders.

These and other events associated with the COVID-19 pandemic have reduced the incentive and ability of our residential and commercial customers to pay their water services bills on time, if at all, which could negatively impact our result of operations.

Our business, financial condition, and results of operations have been and will continue to be negatively impacted by the COVID-19 pandemic.

We are subject to risks associated with the COVID-19 pandemic.

In 2020 and 2021, numerous governmental jurisdictions, including the States of California, Connecticut, Maine and Texas where we operate our water utility services, imposed “shelter-in-place” orders, quarantines, executive orders and similar governmental orders and restrictions for their residents to control the spread of COVID-19 disease.

Such orders and restrictions resulted in business closures, work stoppages, slowdowns and delays in commercial activities, unprecedented and widespread unemployment, travel restrictions and cancellation of events, among other effects, thereby negatively impacting our suppliers, employees and customers.

Since the start of the second quarter of 2021, there has been increased availability and administration of vaccines against COVID-19, as well as an easing of restrictions on social, business, travel, and government functions, which resulted in gradual resumption of economic and commercial activities.

On the other hand, infection rates continue to fluctuate in various regions and new strains of the virus remain a risk, including the Delta and most recently the Omicron variants which has increased the spread and transmission of COVID-19 disease and prompted government agencies to reinstate or impose public health measures and restrictions that were previously lifted.

The continuation of such restrictions or reversal of prior orders to ease restrictions will have a negative effect on our business operations and results of operations.

In response to the pandemic, federal and state governments have and may continue to take actions to impose utility termination moratoriums which prohibit water companies from turning off water supplies for nonpayment of water bills.

These and other events associated with the COVID-19 pandemic have reduced the incentive and ability of certain of our residential and commercial customers to pay their water services bills on time, if at all, which could negatively impact our result of operations.

Recently, state governments have acted to end existing utility termination moratoriums.

In California, the most recent state executive order suspending water service disconnections due to non-payment by customers expired December 31, 2021.

However, the CPUC directed that regulated water utilities continue to suspend customer disconnections until February 1, 2022.

There are currently no such orders remaining in effect in the other states where we operate on suspending water service disconnections due to non-payment.

However, if COVID-19 infection rates rise and health officials recommend more stringent measures to stop spread of the disease, state governments may decide to reverse these actions which may prolong our inability to collect fully water services bills from customers.

Furthermore, a significant portion of our revenue is derived from water usage by commercial customers.

As many of these customers have suspended, altered or terminated their business operations to comply with government orders, their water usage may decline significantly or cease, which could adversely affect our revenue.

While some states and counties, including Santa Clara county where our headquarters is located, have previously announced a schedule to allow more businesses to reopen, recent increases in COVID-19 cases and hospitalization rates in California and elsewhere have prompted reinstatement of restrictions and lockdown.

Furthermore, even if these restrictions are eased or lifted, some of our commercial customers may decide not to open fully or at all due to their ongoing concerns with safety at the workplace.

Connecticut Water has an approved regulatory mechanism for a water revenue adjustment that provides for recovery of the companies’ authorized annual revenues through a customer surcharge or credit that mitigates the impact of reduced usage but will not cover losses for non-payment or bad debt.

As many of these customers have suspended, altered or terminated their business operations, their water usage may decline significantly or cease, which could adversely affect our revenue.

Even though many of these legal restrictions have been eased and lifted in certain jurisdictions, including California, some of our commercial customers may decide not to open fully or at all due to their ongoing concerns with health and safety of employees at the workplace, in which case their water usage may remain at a lower level and continue to adversely impact our revenue.

The regulators in states we operate have approved mechanisms to either record a regulatory asset or track, in a memorandum account, expenses and savings related to COVID-19.

If a state regulator disagrees with our calculation of recorded COVID-19 account balances, we may be required to make adjustments that could adversely affect our results of operations.

While we expect to recover some of the revenue loss and costs through the rate-making processes, there is no guarantee that such recovery will be approved by the regulated utility authorities in a timely manner, or at all.

In addition to loss of revenue, we are subject to the following risks resulting from the COVID-19 pandemic and related events:

• we may encounter difficulties and disruptions in communication and coordination among our employees, partners, customers and others, which may reduce our productivity and interfere with our normal operations;

• our planned infrastructure improvement projects were temporarily interrupted by COVID-19 government orders, restrictions and supply shortages.

This may negatively impact our ability to maintain our infrastructure and provide reliable services to customers.

In addition, our expenditures on capital improvements has been reduced, which may in turn impact rate decisions by the Regulators.

• widespread COVID-19 disease could impact the health of our employees and management team, which may disrupt our business operations;

• a recession, stock market correction, or debt market disruptions resulting from the spread of COVID-19 could materially affect our business, our results of operations, our cash flow, and the value of our common stock, which may make it more difficult for us to access capital in equity and debt markets.

• the financial impact of the COVID-19 pandemic may require us to reassess the goodwill recorded by SJW Group following the completion of our merger with CTWS in October 2019, and such reassessment may result in a future significant or material impairment of our goodwill asset;

The ultimate impact of the COVID-19 pandemic continues to be uncertain and subject to change.

We cannot predict when this pandemic will end and when and to what extent various government orders and restrictions will be imposed, modified, eased or

lifted, and any extension or prolonged implementation of these measures will further adversely affect our business and financial results.

Even after such orders and restrictions are eased or lifted, the severe economic impact on the jurisdictions and areas in which we operate may last for an extended period of time and continue to adversely affect our business and financial conditions, and there is no guarantee that we will be able to quickly return to our normal operations.

Recently federal and state governments have issued orders and regulations directing employers to require their employees to be vaccinated as a condition to continuing employment, which may adversely affect our operations.

In November 2021, and in response to the order by President Joseph Biden, the federal Occupational Safety and Health Administration (“OSHA”) issued an Emergency Temporary Standard (“ETS”) mandating that all employers with more than 100 employees ensure their workers are either fully vaccinated against COVID-19 or produce a negative COVID test on a weekly basis.

However, on January 13, 2022, the U.S.

Supreme Court invalidated President Biden’s federal vaccine mandate holding that OSHA had exceeded its authority.

Accordingly, the implementation of such federal vaccine mandate is suspended, but similar state and local mandates may continue to be enforced and implemented.

In response to these regulatory developments and the need to protect the health and safety of our employees, we implemented a policy requiring our employees, subject to certain exemptions, to be vaccinated.

On January 22, 2022, SJWC received a letter from the National Labor Relations Board (“NLRB”) stating that it would investigate the allegations from the Utility Workers Union of America Local 259 that SJWC failed to bargain in good faith by imposing a COVID vaccine mandate and threatening to terminate noncompliant employees and for, otherwise, failing to bargain over its decision to impose the mandate.

SJWC intends to cooperate with the NLRB’s investigation requests for affidavits from SJWC management and relevant documents.

These regulatory requirements and company policies may result in increased operating costs, labor disruptions or employee attrition, and if we lose employees, it may be difficult in the current competitive labor market to recruit and hire replacement employees, all of which may have an adverse effect on our business operations and financial conditions.

In addition to the above risks, we are subject to the following risks resulting from the COVID-19 pandemic and related events:

• if governments impose or reinstate “shelter-in-place” orders and quarantines, our planned infrastructure improvement projects could be temporarily interrupted by supply shortages, lack of sufficient workforce and disruption in transportation.

This may negatively impact our ability to maintain and improve our infrastructure and provide reliable services to customers.

In addition, our expenditures on capital improvements could be reduced, which may in turn impact rate decisions by state regulators.

• wide-spread COVID-19 disease could impact the health of our employees and management team, which may disrupt our business operations;

• a recession, stock market correction, or debt market disruptions resulting from the spread of COVID-19 could materially affect our business, results of operations, cash flow, and the value of our common stock, which may make it more difficult for us to raise capital in equity or debt markets;

• we may experience higher uncollectible accounts receivables and increased costs from COVID-19 related prevention activities.

In addition, the COVID-19 pandemic has resulted in widespread global supply chain disruptions to vendors and suppliers, which may negatively affect our business operations, including delays in procuring materials and supplies that are required for capital additions and operations.

The full extent of the future impact of COVID-19 pandemic on our operational and financial performance is uncertain and will depend on many factors, many of which are outside our control, including, without limitation the timing, extent, trajectory and duration of the pandemic;

the availability, distribution and effectiveness of vaccines;

the imposition of protective public safety measures;

and the impact of the pandemic on state and local economy and customer behaviors.

Any of these factors may continue to adversely affect our business and financial conditions, and there is no guarantee that we will be able to quickly return to our normal operations.

Changes in water supply, water supply costs or the mix of water supply could adversely affect the operating results and business of Water Utility Services.

SJWC’s supply of water primarily relies upon three main sources:

treated water purchased from Valley Water, surface water from its watershed in the Santa Cruz Mountains, and water pumped from underground.

treated water purchased from Valley Water, surface water from its watershed in the Santa Cruz Mountains, and water pumped from the local groundwater basin.

Changes and variations in quantities from each of these three sources including changes due to production assets being taken off-line for renovation or non-compliance with regulations affect the overall mix of the water supply, thereby affecting the cost of the water supply.

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In a normal year, surface water supply provides 6% to 8% of the total water supply of the system.

In a season with little rainfall, such as the record drought conditions in California in 2015 and most of 2016 water supply from surface water sources may be low, thereby causing SJWC to increase the amount of water purchased from outside sources at a higher cost than surface water, thus increasing water production expenses.

In a season with little rainfall, such as the record drought conditions in California in 2021, water supply from surface water sources may be low, thereby causing SJWC to increase the amount of water purchased from outside sources at a higher cost than surface water, thus increasing water production expenses.

When drought conditions occur, we may be required to rely more heavily on purchased water than surface water, which would increase our costs and adversely affect our results of operations.

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Optimization and energy management efficiency are achieved through the implementation of software applications that control pumps based on demand and cost of energy.

An increase in demand or a reduction in the availability of surface water or import water could result in the need to pump more water during peak hours which may adversely affect the operating results of SJWC.

An increase in demand or a reduction in the availability of surface water or import water could result in the need to pump more water during peak hours which will increase the cost of energy and therefore adversely affect the operating results of SJWC.

SJWC has been granted permission by CPUC to employ certain balancing accounts to track various water supply expenses and revenues.

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None of the Connecticut regulated operations were parties in the recent merger between the parent companies CTWS and SJW Group and no conditions were imposed that would adversely impact those rights and franchises.

The companies further rely on environmental permits or registrations authorizing the use of water supplies in Connecticut, and those

were not altered as a result of the merger with SJW Group.

The companies further rely on environmental permits or registrations authorizing the use of water supplies in Connecticut, and those were not altered as a result of the merger with SJW Group.

There is a possibility that the state could revoke our franchises and allow a governmental entity to take over some or all of our systems or could modify laws related to water supply use.

From time to time such legislation has been contemplated in the past.

The Connecticut regulated operations do not face long-term water supply constraints, but in times of persistent dry weather and continued drought conditions, Connecticut Water has requested that customers voluntarily reduce water usage, which may negatively affect its results of operations.

Maine Water Company relies on legislatively granted water rights in order to serve customers.

In some instances, these rights were granted to predecessor water companies specially chartered by the Maine legislature many decades ago, with those entities later having been merged into Maine Water.

The legislation incorporating these predecessor water companies did not address whether chartered rights may be transferred to another entity without special legislative action.

The Maine Business Corporation Act generally provides that property and contract rights of a merged corporation are vested in the surviving corporation without reversion or impairment.

In the MPUC proceedings that approved the mergers of these Maine Water predecessor companies, the survivorship of water rights was not contested and Maine Water has not sought specific legislation to reaffirm the transfer of chartered rights granted to predecessor water companies.

Maine Water does not face long-term water supply constraints.

(See also Part I, Item 1, “Water Supply”).

Climate change may also impact water supply.

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In addition, in time of drought, water conservation may become a regulatory requirement that impacts the water usage of our customers.

For example, in response to the continuing severe drought conditions in 2016 and 2017 in California, Valley Water adopted Resolution 17-43 to encourage making water conservation a way of life in California through recommendations on watering schedules and a call for customers to achieve a 20% reduction in water use as compared to 2013.

The implementation of mandatory conservation measures has resulted and is expected to result in lower water usage by our customers which may adversely affect our results of operation.

Weather conditions can also affect the sources of water supply, including the need to use more purchased water than surface water during a drought, which may increase our operating expenses.

On July 8, 2021, Governor Gavin Newsom issued a proclamation declaring a drought emergency in fifty California Counties, including Santa Clara County.

San Jose Water Company has activated our Water Shortage Contingency Plan to achieve the 15% conservation target.

The implementation of mandatory or voluntary conservation measures during the current drought has resulted and is expected to result in lower water usage by our customers which may adversely affect our results of operation.

If the current conservation measures continue, or if new measures are imposed in response to drought conditions in the future, we may experience fluctuations in the timing of or a reduction in customer revenue.

In addition, the current drought reduced the amount of available surface water, which required us to incur more costs to extract groundwater or obtain purchased water, which can significantly impact our results of operations.

Furthermore, the CPUC may approve memorandum accounts, such as a Water Conservation Memorandum Account (“WCMA”), to allow companies to recover revenue reductions due to water conservation activities and certain conservation related costs.

However, collection of such memorandum accounts are subject to a review and approval process by CPUC, which can be lengthy, and there is no assurance that we will be able to recover in a timely manner all or some of the revenue and costs recorded in the memorandum accounts.

When drought conditions ease and the State Water Board and Valley Water no longer mandate water conservation, the Company may no longer be allowed to recover revenue lost due to continued conservation activities under the WCMA account and would therefore be exposed to differences between actual and authorized usage.

However, collection of such memorandum accounts is subject to a review and approval process by CPUC, which can be lengthy, and there is no assurance that we will be able to recover in a timely manner all or some of the revenue and costs

recorded in the memorandum accounts.

When drought conditions ease and the California State Water Board and Valley Water no longer mandate water conservation, the company may no longer be allowed to recover revenue lost due to continued conservation activities under the WCMA account and would therefore be exposed to differences between actual and authorized usage.

This could result in lower revenues.

In December 2019, the CPUC denied SJWC’s request in Advice Letter No.

532 to recover the 2018 balances of WCMA and was ordered to remove the WCMA accounts.

As a result of this decision, during the year ended December 31, 2019, SJWC wrote off a total balance of $9.4 million recorded in the 2018 WCMA and $0.6 million recorded in the 2019 WCMA memorandum accounts.

(See also Note 1, “Summary of Accounting Principles” in the consolidated financial statements).

Similar to SJWC, Connecticut Water and Maine Water have also been impacted by increased water conservation, as well as the use of more efficient household fixtures and appliances among residential users.

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The rates Connecticut Water and Maine Water charge for its water is regulated by PURA in Connecticut and MPUC in Maine, and CTWS’s water services subsidiaries may not unilaterally adjust their rates to reflect changes in demand.

declining volume of residential water usage may have a negative impact on our operating revenues in the future if regulators do not reflect usage declines in the rate setting design process.

Although the legislatures in Maine and Connecticut have provided enabling legislation for water utilities to implement revenue adjustment mechanisms to allow for recovery of authorized rates where conservation has occurred and consumption has declined and such a mechanism has been approved by PURA for Connecticut Water, this mechanism has yet to be implemented at Maine Water.

A declining volume of residential water usage may have a negative impact on our operating revenues in the future if regulators do not reflect usage declines in the rate setting design process.

Although the legislatures in Maine and Connecticut have provided enabling legislation for water utilities to implement revenue adjustment mechanisms to allow for recovery of authorized rates where conservation has occurred and consumption has declined and such a mechanism has been approved by PURA and implemented for Connecticut Water, this mechanism has yet to be implemented at Maine Water.

A contamination event or other decline in source water quality could affect the water supply of Water Utility Services and therefore adversely affect our business and operating results.

Water Utility Services is required under environmental regulations to comply with water quality requirements.

Water Utility Services is required under drinking water regulations to comply with water quality requirements.

Through water quality compliance programs, Water Utility Services monitors for contamination and pollution of its sources of water.

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Our insurance policies may not cover or may not be sufficient to cover the costs of these claims.

CTWS’s wastewater operations, wastewater collection and treatment and septage pumping and sludge hauling also involve various unique risks that could impact our company.

CTWS’s wastewater operations, wastewater collection and treatment and septage pumping and sludge hauling also involve various risks that could impact our company.

If collection or treatment systems fail or do not operate properly, or if there is a spill, untreated or partially treated wastewater could discharge onto property or into nearby streams and rivers, causing various damages and injuries, including environmental damage and health hazards.

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On a permanent basis, such an event could require additional treatment or the replacement of the source water supply.

In either case, such an event or occurrence could cause a decline in consumer trust, significant investment or expense and potential claims from customers.

In either case, such an event or occurrence could cause a decline in consumer trust, significant investment or expense for remediation efforts and potential claims from customers.

Our insurance policies may not cover or may not be sufficient to cover the costs of these claims.

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A system malfunction, security breach, cyber-attacks or other disruptions could compromise our information and expose us to liability, which could adversely affect business operations.

Information technology is key to the operation of Water Utility Services, including but not limited to payroll, general ledger activities, outsourced bill preparation and remittance processing, providing customer service and the use of Supervisory Control and Data Acquisition systems to operate our distribution system.

Information technology is key to the operation of the Water Utility Services, including but not limited to payroll, general ledger activities, outsourced bill preparation and remittance processing, providing customer service and the use of Supervisory Control and Data Acquisition systems to operate our distribution system.

Among other things, system malfunctions, computer viruses and security breaches could prevent us from operating or monitoring our facilities, billing and collecting cash accurately and timely analysis of financial results.

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Our profitability and cash flow could be affected negatively in the event these systems do not operate effectively or are breached.

In addition, we may not be able to develop or acquire information technology that is

competitive and responsive to the needs of our business, and we may lack sufficient resources to make the necessary upgrades or replacements of our outdated existing technology to allow us to continue to operate at our current level of efficiency.

In addition, we may not be able to develop or acquire information technology that is competitive and responsive to the needs of our business, and we may lack sufficient resources to make the necessary upgrades or replacements of our outdated existing technology to allow us to continue to operate at our current level of efficiency.

In addition, we must comply with privacy rights regulations such as The California Consumer Privacy Act (“CCPA”), a state statute that became effective January 1, 2020, which enhances the privacy rights and consumer protections for California residents.

Among other things, the CCPA establishes statutory damages for victims of data security breaches, and provides additional rights for consumers to obtain their data from any business that has their personally identifying information.

If we fail to comply with CCPA, it may lead to investigations, claims, and proceedings by governmental entities and private parties, damages for breach, and cause us to incur other significant costs, penalties, and other liabilities, as well as harm to our reputation.

A failure of our reservoirs, storage tanks, mains or distribution networks could result in losses and damages that may adversely affect our financial condition and reputation.

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have real estate holdings that are subject to various business and investment risks.

SJW Land Company owns real estate in Tennessee and Chester Realty, Inc.

SJW Land Company owns real estate in California and Tennessee, and Chester Realty, Inc.

owns real estate in Connecticut.

The risks in investing directly in real estate vary depending on the investment strategy and investment objective and include the following:

The risks of investing directly in real estate vary depending on the investment strategy and investment objective and include the following:

• Market and general economic risks—real estate investment is tied to overall domestic economic growth and, therefore, carries market risk which cannot be eliminated by diversification.

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Only employees at SJWC are union members.

The current three-year bargaining agreements will expire on December 31, 2022 and negotiations will begin in 2022 for the upcoming period, 2023 through 2025.

We may experience difficulties and delays in the collective bargaining process to reach suitable agreements with union employees, particularly in light of increasing healthcare and pension costs.

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Labor actions, work stoppages or the threat of work stoppages, and our failure to obtain favorable labor contract terms during future negotiations may adversely affect our business, financial condition, results of operations, cash flows and liquidity.

Our business has inherently dangerous workplaces.

If we fail to maintain safe work sites, we can be exposed to not only people impacts but also to financial losses such as penalties and other liabilities.

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Furthermore, equity financings may result in dilution to our existing stockholders and debt financings may contain covenants that restrict the actions of SJW Group and its subsidiaries.

We incurred substantial additional indebtedness to finance our operations, which may reduce our business and operational flexibility and increase our borrowing costs.

To finance the merger, we incurred an aggregate of $510 million of additional indebtedness, a substantial increase compared to our indebtedness prior to the merger.

We incurred substantial additional indebtedness to finance our acquisition of CTWS, which may reduce our business and operational flexibility and increase our borrowing costs.

Our increased indebtedness and higher debt-to-equity ratio in comparison to that of our recent historical basis may have the effect, among other things, of:

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CTWS and its subsidiaries are required to comply with certain covenants in connection with their various long term loan agreements.

The most restrictive of these covenants is to maintain a consolidated debt to capitalization ratio of not more than 60%.

The most restrictive of these covenants are the requirements to maintain a consolidated debt to capitalization ratio of not more than 60%.

Additionally, Maine Water has restrictions on cash dividends paid based on restricted net assets.

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The phaseout of the London Interbank Offered Rate ( “ LIBOR ” ), or the replacement of LIBOR with a different reference rate, may adversely affect interest rates.

On July 27, 2017, the Financial Conduct Authority (the authority that regulates LIBOR) announced that it would phaseout LIBOR by the end of 2021.

It is unclear whether new methods of calculating LIBOR will be established such that it continues to exist after 2021, or if alternative rates or benchmarks will be adopted.

On July 27, 2017, the Financial Conduct Authority (“FCA”), the authority that regulates LIBOR, announced that it would phaseout LIBOR by the end of 2021.

In March 2021, the FCA announced an extension of certain panels of LIBOR to continue until the end of June 2023.

However, in November 2021, the FCA confirmed that it will prohibit the use of LIBOR in new contracts written after December 31, 2021.

In the United States, the Alternative Reference Rates Committee has proposed the Secured Overnight Financing Rate (“SOFR”) as an alternative to LIBOR.

It is not presently known whether SOFR or any other alternative reference rates that have been proposed will attain market acceptance as replacements of LIBOR.

Changes in the method of calculating LIBOR, or the replacement of LIBOR with an alternative rate or benchmark, may adversely affect interest rates and result in higher borrowing costs for both our existing debt agreements that include LIBOR interest rates and future loan agreements that we may enter into.

In addition, we have not engaged in discussions with our existing lenders regarding the LIBOR transition and we cannot predict how such transition will impact the interest rates and other terms of our existing debt agreements.

This could materially and adversely affect the SJW Group’s results of operations, cash flows and liquidity.

We cannot predict the effect of the potential changes to LIBOR or the establishment and use of alternative rates or benchmarks.

In addition, uncertainty as to the nature of such phase out and selection of an alternative reference rate can result in disruptions in the overall financial market, which could negatively impact our ability to obtain debt financing at favorable rates.

We cannot predict how the LIBOR transition will impact the interest rates and other terms of our existing debt agreements, and such transition may materially and adversely affect SJW Group’s results of operations, cash flows and liquidity.

SJW Group has committed to certain “ring-fencing” measures which will enhance CTWS’s separateness from SJW Group, which may limit SJW Group’s ability to influence the management and policies of CTWS (beyond the limitations included in other existing governance mechanisms).

Pursuant to the agreements related to the Merger and commitments made by SJW Group as part of the application for PURA and MPUC approval of the merger with CTWS, SJW Group has instituted certain “ring-fencing” measures to enhance CTWS’s separateness from SJW Group and to mitigate the risk that CTWS would be negatively impacted in the event of a bankruptcy or other adverse financial developments affecting SJW Group or its non-ring-fenced affiliates.

These commitments became effective upon the closing of the Merger.

Pursuant to the agreements related to the acquisition of CTWS and commitments made by SJW Group as part of the application for PURA and MPUC approval of the acquisition of CTWS, SJW Group has instituted certain “ring-fencing” measures to enhance CTWS’s separateness from SJW Group and to mitigate the risk that CTWS would be negatively impacted in the event of a bankruptcy or other adverse financial developments affecting SJW Group or its non-ring-fenced affiliates.

These commitments became effective upon the closing of the acquisition.

In order to satisfy the ring-fencing commitments, SJW Group formed SJWNE, LLC a wholly-owned special purpose entity (“SPE”) to own the capital stock of CTWS.

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(3) Out-of-region water and utility related services.

As part of our pursuit of the above three strategic areas, we consider from time to time opportunities to acquire businesses and assets, for example the merger with CTWS in 2019.

As part of our pursuit of the above three strategic areas, we consider from time to time opportunities to acquire businesses and assets.

However, we cannot be certain we will be successful in identifying and consummating any strategic business combination or acquisitions relating to such opportunities.

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Adverse investment returns and other factors may increase our pension costs and pension plan funding requirements.

A substantial number of our employees are covered by a defined benefit pension plan.

Our pension costs and the funded status of the plan are affected by a number of factors including the discount rate, applicable mortality tables, mortality rates of plan participants, investment returns on plan assets, and pension reform legislation.

Any change in such factors could result in an increase in future pension costs and an increase in our pension liability, requiring an increase in plan contributions which may adversely affect our financial conditions and results of operations.

A substantial number of our employees are covered by defined benefit pension plans.

Our pension costs and the funded status of the plans are affected by a number of factors including the discount rate, applicable mortality tables, mortality rates of plan participants, investment returns on plan assets, and pension reform legislation.

Any change in such factors could result in an

increase in future pension costs and an increase in our pension liabilities, requiring an increase in plan contributions which may adversely affect our financial conditions and results of operations.

SJW Group’s dividend policy is subject to the discretion of our board of directors and may be limited by legal and contractual requirements.

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The insurance companies may also seek to challenge, reduce or deny any claims we submit, which may prevent us from recovering fully the losses we incurred.

In addition, insurance companies may increase premium or deductible or reduce coverage limit based on factors that are beyond our control, including industry trends, financial conditions of insurance companies and catastrophic events such as wildfire, earthquake and pandemic.

In addition, insurance companies may increase premium or deductible or reduce coverage limits based on factors that are beyond our control, including industry trends, financial conditions of insurance companies and catastrophic events such as wildfire, earthquake and pandemic.

There can be no assurance that we can secure all necessary or appropriate insurance in the future, or that such insurance can be obtain at reasonable cost, or at all.

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A major disaster could damage or destroy our capital assets, harm our reputations and adversely affect our results of operations.

For example, the recent extreme cold weather and winter storm in Texas have caused disruptions to water services to our CLWSC customers due to power outages, water main breaks and delays in repair efforts.

The Regulators have historically allowed utilities to establish catastrophic event memorandum accounts as a possible mechanism to recover costs, such as the CEMA memorandum account in California.

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Our operations, liquidity, and earnings may be adversely affected by wildfires and risk of fire hazards.

It is possible that wildfires and other fire hazards may occur more frequently, be of longer duration or impact larger areas as a result of drought-damaged plants and trees, lower humidity or higher winds that might be occurring as result of changed

weather patterns.

The effects of these natural disasters in California’s drought-prone areas, such as the Santa Cruz Mountains, the watershed where SJWC obtains up to 10% of its water supply, may temporarily compromise its surface water supply resulting in disruption in our services and litigation which could adversely affect our business, operating results, and financial condition.

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The trading price of our common stock may fluctuate in the future based on a variety of factors, many of which are beyond our control and unrelated to our financial results.

Factors that could cause fluctuations in the trading price of our common stock include volatility of the general stock market or the utility index, regulatory developments, public announcement of material development in strategic transactions general economic conditions and trends, actual or anticipated changes or fluctuations in our results of operations, actual or anticipated changes in the expectations of investors or securities analysts, actual or anticipated developments in our competitors’ businesses or the competitive landscape generally, litigation involving us or our industry, and major catastrophic event(s) or sales of large blocks of our stock.

anticipated developments in our competitors’ businesses or the competitive landscape generally, litigation involving us or our industry, and major catastrophic event(s) or sales of large blocks of our stock.

Furthermore, we believe that stockholders invest in public stocks in part because they seek reliable dividend payments.

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The loss of the services of any member of our management team or the inability to hire and retain experienced management personnel could have an adverse effect on our business, as our management team has knowledge of our industry and customers and would be difficult to replace.

We try to ensure that we offer competitive compensation and benefits as well as conduct success planning and provide opportunities for continued development, and we continually strive to recruit and train qualified personnel and retain key employees.

We try to ensure that we offer competitive compensation and benefits as well as conduct succession planning and provide opportunities for continued development, and we continually strive to recruit and train qualified personnel and retain key employees.

There can be no assurance, however, that we will continue to be successful in attracting and retaining the personnel we require to grow and operate profitably.

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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-K

Item 1A. Risk Factors