What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-02-28 compared with 2021-03-01 · 351 added, 560 removed, 1006 unchanged (48% of the section changed)

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors

of SJW Group:

To the stockholders and the Board of Directors of SJW Group:

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of SJW Group and subsidiaries (the “Company”) as of December 31, 2020, the related consolidated statements of comprehensive income, changes in stockholders’ equity, and cash flows, for the year then ended, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the “financial statements”).

We have also audited the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations (COSO).

In our opinion, the 2020 financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2020, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

We have audited the accompanying consolidated balance sheets of SJW Group and subsidiaries (the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of comprehensive income, changes in stockholders’ equity, and cash flows, for each of the two years in the period ended December 31, 2021, and the related notes and the schedules listed in the Index at Item 15 (collectively referred to as the “financial statements”).

We have also audited the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by COSO.

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The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying “Management’s Report on Internal Control over Financial Reporting”.

Our responsibility is to express an opinion on these financial statements and an opinion on Company’s internal control over financial reporting based on our audits.

Our responsibility is to express an opinion on these financial statements and an opinion on the Company’s internal control over financial reporting based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

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We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

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Our audits also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audits provide a reasonable basis for our opinion.

We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

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A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

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The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

The communication of critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which they relate.

Impact of Rate Regulation on the Financial Statements — Refer to Note 3 to the financial statements

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The Company is subject to rate regulation by state utility regulatory agencies (the “Commissions”), which have jurisdiction with respect to the rates of the Company’s water and wastewater services.

Management has determined it meets the requirements under accounting principles generally accepted in the United States of America to prepare its financial statements applying the specialized principles to account for the effects of cost-based rate regulation.

Accounting for the economics of rate regulation impacts multiple financial statement line items and disclosures, including depreciable utility plant;

Management has determined it meets the requirements under accounting principles generally accepted in the United States of America to prepare its financial statements applying the specialized rules to account for the effects of cost-based rate regulation.

Accounting for the economics of rate regulation impacts multiple financial statement line items and disclosures, such as depreciable utility plant;

regulatory assets and liabilities;

operating revenue;

maintenance expense;

and depreciation and amortization expense.

operating revenues;

operation and maintenance expense;

and depreciation expense.

The Commissions establish rates for the purpose of permitting the recovery of the cost of service and a return on investment.

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Accounting for such costs and credits is based on management’s judgment and prior historical ratemaking practices, and it occurs when management determines that it is probable that these costs and credits will be recognized in the future revenue of the Company through the ratemaking process.

We identified the impact of rate regulation as a critical audit matter due to the significant judgments that underlie the Company’s financial statement line items and disclosures impacted by rate regulation and the high degree of subjectivity involved in assessing the impact of regulatory decisions on the financial statements.

Management judgments include considering evidence, such as regulatory rules and decisions, past practices, and other facts and circumstances and assessing the probability of (1) recovery in future rates of incurred costs and (2) the requirement to refund amounts to customers.

Given that management’s accounting judgments are based on consideration of evidence, such as regulatory rules and decisions, past practices, and other facts and circumstances, and uncertain outcome of future regulatory decisions, auditing these judgments required specialized knowledge of accounting for rate regulation and the rate setting process due its inherent complexities and pervasive impact on the financial statements.

We identified the impact of rate regulation as a critical audit matter due to the significant judgments that underlie the Company’s financial statement line items and disclosure impacted by rate regulation and the high degree of subjectivity involved in assessing the impact of regulatory decisions on the financial statements.

Management judgments include assessing the probability of (1) recovery in future rates of incurred costs and (2) the requirement to refund amounts to customers.

Given that management’s accounting judgements are based on consideration of evidence, such as regulatory rules and decisions, past practice, and other facts and circumstances, and uncertain outcome of future regulatory decisions, auditing these judgements required specialized knowledge of accounting for rate regulation and the rate setting process due its inherent complexities and pervasive impact on the financial statements.

How the Critical Audit Matter Was Addressed in the Audit

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We also tested the effectiveness of management’s controls over the monitoring and evaluation of regulatory developments that may affect the probability of recovering costs in future rates or of a future reduction in rates.

determination of the accounting impacts of any new or revised regulatory decisions and their impact on measurement of related regulatory assets and liabilities.

• We read regulatory orders issued by the Commissions to the Company, regulatory statutes, interpretations, procedural memorandums, filings made by interveners, and other publicly available information to evaluate management’s determination of the accounting impacts of any new or revised regulatory decisions and their impact on measurement of related regulatory assets and liabilities.

• We obtained supporting documentation from management regarding the evidence, such as regulatory rules and decisions, past practices, and other facts and circumstances, used in the measurement of regulatory assets and liabilities for compliance with the related orders.

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San Jose, California

March 1, 2021

February 25, 2022

We have served as the Company’s auditor since 2020.

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Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheet of SJW Group and subsidiaries (the Company) as of December 31, 2019, the related consolidated statements of comprehensive income, changes in stockholders’ equity, and cash flows for the years ended December 31, 2019 and 2018, and the related notes and financial statement schedules listed in the Index at Item 15 (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019, and the results of its operations and its cash flows for the years ended December 31, 2019 and 2018, in conformity with U.S.

We have audited the accompanying consolidated statements of comprehensive income, changes in stockholders’ equity, and cash flows of SJW Group and subsidiaries (the “Company”) for the year ended December 31, 2019, and the related notes and financial statement schedules listed in the Index at Item 15 (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the results of its operations and its cash flows for the years ended December 31, 2019, in conformity with U.S.

generally accepted accounting principles.

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2,497,499 2,334,912

Real estate investments 58,129 57,699

Real estate investments and nonutilty properties 57,632 58,129

Less accumulated depreciation and amortization 15,951 14,783

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Customers, net of allowances for uncollectible accounts of $ 4,600 and $ 3,891 in 2021 and 2020, respectively

53,699 46,832

Income tax 2,308 7,041

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Retained earnings 428,260 408,037

Accumulated other comprehensive (loss) income ( 1,064 ) 126

Accumulated other comprehensive (loss) ( 163 ) ( 1,064 )

Total stockholders’ equity 1,034,519 917,160

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Depreciation and amortization 94,400 89,279 65,592

Gain on sale of nonutility properties ( 7,494 ) — —

Impairment of long-lived asset 2,211 — —

Merger related expenses — — 15,768

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Pension non-service cost 1,330 ( 374 ) ( 3,158 )

Unrealized loss on equity investments — — ( 527 )

Gain on sale of equity investments — — 104

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

Gain on sale of real estate investments 927 948 929

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Other comprehensive income:

Unrealized (loss) gain on investment, net of taxes of $247 in 2020, $43 in 2019 and $0 in 2018 ( 310 ) 117 —

Unrealized gain (loss) on investment, net of taxes of $ 68 in 2021, $ 247 in 2020 and $ 43 in 2019

185 ( 310 ) 117

Adjustment to pension benefit plans, net of taxes of $ 264 in 2021, $( 324 ) in 2020 and $ 22 in 2019

716 ( 880 ) 9

SJW Group comprehensive income $ 61,379 60,325 23,529

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Cumulative effect of change in accounting principle, net of tax effect of $ 33

— — — 97 — — 97

Distribution to noncontrolling interest — — — — — ( 224 ) ( 224 )

Unrealized income on investment, net of tax effect of $ 43

— — — — 117 — 117

Adjustment to pension benefit plans, net of taxes of $ 22

— — — — 9 — 9

Share-based compensation — — 3,406 ( 93 ) — — 3,313

Share-based compensation related to business combination — — 6,384 — — — 6,384

Issuance of restricted and deferred stock units 21,909 — ( 110 ) — — — ( 110 )

Employee stock purchase plan 30,283 — 1,603 — — — 1,603

Common stock issued 7,762,500 7 411,069 — — — 411,076

Common stock issued, net of costs — — ( 10 ) — — — ( 10 )

Dividends paid ($ 1.20 per share)

— — — ( 34,134 ) — — ( 34,134 )

Balances, December 31, 2019 28,456,508 28 506,639 383,191 126 — 889,984

Net income — — — 61,515 — — 61,515

Cumulative effect of change in accounting principle, net of tax effect of $33 — — — 97 — — 97

Distribution to noncontrolling interest — — — — — ( 224 ) ( 224 )

Unrealized income on investment, net of tax effect of $43 — — — — 117 — 117

Unrealized loss on investment, net of tax effect of $ 247

— — — — ( 310 ) — ( 310 )

Adjustment to pension benefit plans, net of taxes of $( 324 )

— — — — ( 880 ) — ( 880 )

Share-based compensation — — 3,553 ( 160 ) — — 3,393

Share-based compensation related to business combination — — 6,384 — — — 6,384

Issuance of restricted and deferred stock units 68,347 1 ( 1,864 ) — — — ( 1,863 )

Employee stock purchase plan 31,750 — 1,830 — — — 1,830

Common stock issuance cost — — ( 10 ) — — — ( 10 )

Dividends paid ($ 1.28 per share)

— — — ( 36,509 ) — — ( 36,509 )

Balances, December 31, 2020 28,556,605 29 510,158 408,037 ( 1,064 ) — 917,160

Net income — — — 60,478 — — 60,478

Unrealized loss on investment, net of tax effect of $247 — — — — ( 310 ) — ( 310 )

Unrealized gain on investment, net of tax effect of $ 68

— — — — 185 — 185

Adjustment to pension benefit plans, net of taxes of $ 264

— — — — 716 — 716

Share-based compensation — — 4,246 ( 118 ) — — 4,128

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Employee stock purchase plan 35,304 — 2,026 — — — 2,026

Common stock issuance, net of costs 1,539,615 1 91,028 — — — 91,029

Dividends paid ($ 1.36 per share)

— — — ( 40,137 ) — — ( 40,137 )

Balances, December 31, 2021 30,181,348 $ 30 606,392 428,260 ( 163 ) — 1,034,519

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Share-based compensation 4,246 3,553 3,406

Gain on sale of real estate investments ( 948 ) ( 929 ) —

Gain on sale of TWA, real estate investments and nonutility properties ( 11,421 ) ( 948 ) ( 909 )

Allowance for equity funds used during construction ( 1,926 ) ( 1,249 ) —

Other non-cash, net — 20 414

Impairment of long-lived asset 2,211 — —

Changes in operating assets and liabilities, net of acquired assets and liabilities:

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Postretirement benefits ( 4,312 ) ( 2,965 ) ( 4,000 )

Regulatory asset related to balancing and memorandum accounts ( 14,459 ) 30,838 ( 6,488 )

Regulatory assets and liabilities excluding income tax temporary differences, net and postretirement benefits ( 14,629 ) ( 14,459 ) 30,838

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

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Additions to real estate investment ( 826 ) ( 435 ) ( 137 )

Payments for business/asset acquisition and water rights — ( 835,465 ) ( 2,496 )

Payments for business/asset acquisitions ( 23,587 ) — ( 835,465 )

Cost to retire utility plant, net of salvage ( 2,781 ) ( 2,556 ) ( 5,026 )

Proceeds from sale of real estate investments and utility property 1,151 745 —

Proceeds from sale of equity investments — — 4,112

Proceeds from sale of TWA, real estate investments and nonutility properties 18,228 1,151 745

Net cash used in investing activities ( 259,995 ) ( 214,259 ) ( 1,017,771 )

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Repayments of long-term borrowings ( 76,113 ) ( 28,931 ) ( 1,400 )

Debt issuance costs ( 829 ) ( 4,918 ) —

Dividends paid ( 40,137 ) ( 36,509 ) ( 34,134 )

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Supplemental disclosure of non-cash activities:

Increase (decrease) in accrued payables for construction costs capitalized $ 1,448 ( 516 ) 340

(Decrease) Increase in accrued payables for construction costs capitalized $ ( 5,436 ) 1,448 ( 516 )

Utility property installed by developers $ 2,659 9,779 3,077

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(Dollars in thousands, except share and per share data)

Summary of Significant Accounting Policies

Organization and Operations

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of SJW Group, its wholly owned subsidiaries, and two variable interest entities in which two SJW Group subsidiaries are the primary beneficiaries.

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Approximately 92 % of SJWC’s revenues are derived from the sale of water to residential and business customers.

SJWNE is a special purpose entity holding company for SJW Group’s investment in Connecticut Water Service, Inc.

(“CTWS”) which was acquired on October 9, 2019.

CTWS, headquartered in Connecticut, is a holding company for water utilities companies providing water service to approximately 139,000 connections that serve a population of approximately 485,000 people in 81 municipalities throughout Connecticut and Maine and more than 3,000 wastewater connections in Southbury, Connecticut.

As part of the merger transaction between SJW Group and CTWS on October 9, 2019, CTWS became a wholly-owned subsidiary of SJWNE LLC which is a wholly-owned subsidiary of SJW Group (see, Note 12, “Business Combinations”).

The subsidiaries held by CTWS that provide utility water services are The Connecticut Water Company (“Connecticut Water”) and The Maine Water Company (“Maine Water”).

SJWNE, LLC is a special purpose entity holding company for SJW Group’s investment in Connecticut Water Service, Inc.

Connecticut Water Service, Inc., headquartered in Connecticut, is a holding company for water utilities companies providing water service to approximately 140,000 connections that serve a population of approximately 456,000 people in 81 municipalities throughout Connecticut and Maine and more than 3,000 wastewater connections in Southbury, Connecticut.

Connecticut Water Service, Inc.

and its subsidiaries (“CTWS”) became a wholly-owned subsidiary of SJWNE LLC which is a wholly-owned subsidiary of SJW Group (see, Note 1 4 , “Business Combinations”) in 2019.

The subsidiaries held by Connecticut Water Service, Inc.

that provide utility water services are The Connecticut Water Company (“Connecticut Water”) and The Maine Water Company (“Maine Water”).

The remaining two subsidiaries are Chester Realty, Inc., a real estate company in Connecticut, and New England Water Utility Services, Inc.

(“NEWUS”), which provides contract water and sewer operations and other water related services.

Effective September 30, 2020, The Heritage Village Water Company (“HVWC”) and The Avon Water Company (“Avon Water”) merged into Connecticut Water after receiving the merger approval from the Connecticut Public Utilities Regulatory Authority (“PURA”).

is incorporated in the State of Texas and is doing business as Canyon Lake Water Service Company (“CLWSC”).

CLWSC is a public utility in the business of providing water service to approximately 59,000 people.

CLWSC’s service area comprises more than 247 square miles in the southern region of the Texas Hill Country in Blanco, Comal, Hays and Travis counties, the growing region between San Antonio and Austin, Texas.

is doing business as Canyon Lake Water Service Company (“CLWSC”).

CLWSC is a public utility in the business of providing water service to approximately 24,000 service connections that serve a population of approximately 70,000 people.

CLWSC’s service area comprises more than 266 square miles in the southern region of the Texas Hill Country in Bandera, Blanco, Comal, Hays, Kendall, Medina and Travis counties, the growing region between San Antonio and Austin, Texas.

On December 17, 2021, CLWSC completed its acquisition of Kendall West Utility and Bandera East Utility, companies that provide water services, including wastewater and recycled water services, in Kendall, Bandera and Medina counties which are located in south central Texas.

Kendall West Utility and Bandera East Utility, together, added approximately 5,000 people through 1,600 service connections in a service area approximately 19 square miles to CLWSC’s operations.

has a 25 % interest in Acequia Water Supply Corporation.

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As a result, Acequia has been consolidated with SJWTX, Inc.

SJWTX, Inc is undergoing a corporate reorganization to separate regulated operations from non-tariffed activities.

In November 2021, SJWTX Holdings, Inc.

(“SJWTX Holdings”) and Texas Water Operation Services LLC (“TWOS”) were formed for the purpose of effecting a corporate reorganization of our water services organization in Texas.

TWOS was created for non-tariffed operations and is wholly-owned by SJWTX Holdings.

SJWTX Holdings is a wholly-owned subsidiary of SJW Group, incorporated to hold the investments in SJWTX, Inc.

In addition, in 2022, SJWTX Holdings intends to create a new subsidiary to hold future wholesale water supply assets.

SJW Land Company owns a commercial property and undeveloped real estate property in the states of California and Tennessee and owns and operates commercial properties in the state of Tennessee.

SJW Land also has a 70 % limited partnership interest in 444 West Santa Clara Street, L.P.

444 West Santa Clara Street, L.P.

has been determined to be a variable interest entity within the scope of ASC Topic 810 with SJW Land Company as the primary beneficiary.

As a result, 444 West Santa Clara Street L.P.

has been consolidated with SJW Land Company.

In 2017, 444 West Santa Clara Street, L.P.

sold all of its interests in the commercial building and land the partnership owned and operated.

The limited partnership is expected to dissolve in 2021.

Results of operations and balances of the non-controlling interest are not material to the consolidated financial statements (see below in Note 1, “Real Estate Investments”).

Water sales are seasonal in nature and influenced by weather conditions.

The timing of precipitation and climatic conditions can cause seasonal water consumption by customers to vary significantly.

Revenue is generally higher in the warm, dry summer months when water usage and sales are greater and lower in the winter months when cooler temperatures and increased rainfall curtail water usage and sales.

Summary of Significant Accounting Policies

Recently Adopted Accounting Principles

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments,” and subsequent amendments.

Topic 326 requires measurement and recognition of expected credit losses for financial assets held.

ASU 2016-13 was effective for SJW Group in the first quarter of fiscal 2020.

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-12, “Simplifying the Accounting for Income Taxes”, which simplifies the accounting for income taxes, eliminates certain exceptions within Topic 740, “Income Taxes”, and clarifies certain aspects of the current guidance to promote consistency among reporting entities.

ASU 2019-12 was effective for SJW Group in the first quarter of fiscal year 2021.

The adoption of ASU 2019-12 did not have a material impact on the consolidated financial statements.

In August 2018, the FASB issued Accounting Standards Update (“ASU”) 2018-14, “Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20:

“Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans,” which aims to improve the overall usefulness of disclosure to financial statement users and reduce unnecessary costs to companies when preparing defined benefit plan disclosures.

This update was effective for SJW Group’s Form 10-K for the year ending December 31, 2020.

Retrospective adoption is required and early adoption is permitted.

The adoption of ASU 2018-14 did not have a material impact on the condensed consolidated financial statements.

New Accounting Pronouncements Not Yet Adopted

In December 2019, the FASB issued ASU 2019-12, “Simplifying the Accounting for Income Taxes”, which simplifies the accounting for income taxes, eliminates certain exceptions within Topic 740, “Income Taxes”, and clarifies certain aspects of the current guidance to promote consistency among reporting entities.

This update is effective for fiscal years beginning after December 15, 2021.

Most amendments within the standard are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis.

Management is currently evaluating the impacts of the provisions of ASU 2019-12 on the consolidated financial statements.

Use of Estimates

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.

Actual results could differ from those estimates.

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Depreciation expense for utility plant for the years ended December 31, 2021, 2020 and 2019 was $ 91,906 , $ 86,823 and $ 63,785 , respectively.

For the years 2020, 2019 and 2018, the amounts allocated to administrative and general expense were $ 2,343 , $ 2,869 and $ 2,306 , respectively.

The cost of utility plant retired, including retirement costs (less salvage), is charged to accumulated depreciation and no gain or loss is recognized.

As of December 31, 2021 and 2020, accrued payables for additions to depreciable utility plant were $ 20,579 and $ 24,571 , respectively.

Allowance For Funds Used During Construction (“AFUDC”)

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Interest on long-term debt is presented net of amounts capitalized on the Consolidated Statement of Comprehensive Income.

The amount of equity funds capitalized in 2020 was $ 1,249 , reflected in “Other, net” on the Consolidated Statement of Comprehensive Income.

The amount of equity funds capitalized in 2021, 2020 and 2019 was $ 1,926 , $ 1,249 and $ 198 , respectively, reflected in “Other, net” on the Consolidated Statement of Comprehensive Income.

Prior to the merger with CTWS on October 9, 2019, SJW Group did not have AFUDC for equity funds.

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Intangible assets are recorded at cost and are amortized using the straight-line method over the estimated useful life of the asset, ranging from 5 to 70 years (see Note 8 , “Utility Plant Intangible Assets”).

Real Estate Investments

Real estate investments are recorded at cost and consist primarily of land and buildings.

Net gains and losses from the sale of real estate investments are recorded as a component of other (expense) income in the Consolidated Statements of Comprehensive Income.

Nonutility property in Water Utility Services is also classified in real estate investments.

Real Estate Investments and Nonutility Properties

Real estate investments and nonutility properties are recorded at cost and consist primarily of land and buildings.

Net gains and losses from the sale of real estate investments and nonutility properties are recorded as a component of other (expense) income and operating expense, respectively, in the Consolidated Statements of Comprehensive Income.

Nonutility property is property that is neither used nor useful in providing water utility services to customers and is excluded from rate base for rate-setting purposes.

SJWC recognizes gain/loss on disposition of nonutility property in accordance with California

Public Utilities Commission (“CPUC”) Code Section 790, whereby the net proceeds are reinvested back into property that is useful in providing water utility services to customers.

SJWC recognizes gain/loss on disposition of nonutility property in accordance with California Public Utilities Commission (“CPUC”) Code Section 790, whereby the net proceeds are reinvested back into property that is useful in providing water utility services to customers.

CTWS and CLWSC do not have regulatory restrictions on the use of proceeds from the sale of nonutility property.

There is no depreciation associated with Water Utility Services nonutility property as it is all undeveloped land.

The major components of real estate investments as of December 31, 2020 and 2019 are as follows:

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

Land $ 12,615 14,168

Buildings and improvements 45,017 43,961

Total real estate investment $ 58,129 57,699

Total real estate investments and nonutility properties $ 57,632 58,129

Depreciation on buildings and improvements for real estate investments is computed using the straight-line method over the estimated useful lives of the assets, ranging from 7 to 39 years.

A former wholly owned subsidiary of SJW Group, Texas Water Alliance Limited was sold to Guadalupe-Blanco River Authority (“GBRA”) in 2017.

The sales agreement with GBRA included a holdback amount of $ 3,000 to be paid to SJW Group on June 30, 2021, subject to reduction under certain conditions.

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 October 29, 2021, San Jose Water sold two nonutility properties located in San Jose, California for $ 13,150 .

SJW Group recognized a pre-tax gain on the sale of nonutility properties of $ 7,230 , after selling expenses of $ 277 for one of the properties sold, and a gain of $ 5,442 was deferred on the other nonutility property pending CPUC review.

On February 15, 2022, the CPUC review was completed and the deferred gain will be recognized in the first quarter of 2022.

Also, on October 29, 2021, SJW Land sold undeveloped land located in San Jose, California for $ 2,600 .

SJW Group recognized a pre-tax gain on the sale of real estate investments of $ 927 , after selling expenses of $ 121 .

On September 28, 2020, SJWC 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 , after selling expenses of $ 22 .

During the year ended December 31, 2020, Maine sold various nonutility properties for a total of $ 143 .

SJW Group recognized a pre-tax loss on the sale of real estate investments of $ 100 , after selling expenses of $ 45 .

On December 19, 2019, Maine Water completed the second half of a previously announced land sale with the Coastal Mountains Land Trust, Maine nonprofit corporation.

The transaction was structured such that Maine Water sold a conservation easement valued at $ 1,200 for $ 600 .

Accordingly, Maine Water expects to claim a $ 600 charitable deduction for federal and state income tax purposes on the bargain sale.

The MPUC has previously ruled that the net proceeds from the transaction will be shared equally between the customers of the Camden Rockland division and Maine Water.

The transaction generated approximately $ 180 in pre-tax gain on sale of nonutility property at Maine Water.

Additionally, Connecticut Water disposed of a small parcel of land generating an additional $ 4 in pre-tax gain on sale of nonutility property.

On April 22, 2019, all creek repairs were completed for a commercial building and land SJW Land sold in 2017 and a reimbursement of $ 745 was provided to a SJW Land partnership.

SJW Land Company and the noncontrolling interest recognized a pre-tax gain on the creek reimbursement of $ 521 and $ 224 , respectively, on the transaction.

Real estate investments include $ 58,330 and $ 57,273 as of December 31, 2021 and 2020, respectively, of assets that are leased or available for lease.

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Business Combinations

SJW Group applies the provisions of ASC Topic 805—“Business Combinations” for the purchase accounting related to the merger with CTWS on October 9, 2019.

SJW Group applies the provisions of Accounting Standards Codification (“ASC”) Topic 805—“Business Combinations” for the purchase accounting related to business acquisitions.

Topic 805 requires SJW Group to recognize separately from goodwill the assets acquired and the liabilities assumed at the acquisition date fair values.

Goodwill as of the acquisition date is measured as the excess of consideration transferred over the net of the acquisition date fair values of the assets acquired and the liabilities assumed.

While SJW Group used our best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date, our estimates were inherently uncertain and subject to refinement.

As a result, during the one year measurement period from the acquisition date, we recorded adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill.

Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments were recorded to our Consolidated Statements of Comprehensive Income.

While SJW Group uses best available estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date, such estimates are inherently uncertain and subject to refinement.

As a result, during the one year measurement period from the acquisition date, we record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill.

Upon the conclusion of the measurement period or final determination of the values

of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to our Consolidated Statements of Comprehensive Income.

Accounting for business combinations requires SJW Group to make significant estimates and assumptions, especially at the acquisition date, including estimates for intangible assets, contractual obligations assumed and pre-acquisition contingencies.

Although SJW Group believes that the assumptions and estimates we make are reasonable and appropriate, they are based in part on historical experience and information obtained from CTWS’s management

and are inherently uncertain.

Events and circumstances may occur that may affect the accuracy or validity of such assumptions, estimates or actual results.

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and discount rates.

See Note 12, “Business Combination” for further discussion on the CTWS transaction.

See Note 1 4 , “Business Combinations” for further discussion.

Impairment of Long-Lived Assets and Goodwill

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If SJW Group determines that as a result of the qualitative assessment it is more likely than not (> 50% likelihood) that the fair value is less than carrying amount, then a quantitative test is performed.

No impairments occurred during 2020, 2019 or 2018.

During the year ended December 31, 2021, SJW Group determined that an implementation project for a customer care billing system at CLWSC will no longer be pursued and accordingly wrote-off $ 2,211 of accumulated costs for the project that were previously recorded as construction in progress on the consolidated balance sheets.

No impairments occurred during 2020 and 2019.

Goodwill represents the excess of the purchase price paid over the estimated fair value of the assets acquired and liabilities assumed in the acquisition of a business.

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SJW Group’s goodwill is primarily associated with the recent merger with CTWS on October 9, 2019.

SJW Group’s goodwill is primarily associated with the recent merger with CTWS in 2019.

As of October 1, 2021, SJW Group performed a qualitative assessment and found no indicators of impairment and therefore did not perform the quantitative impairment test.

No impairments occurred during 2020, 2019 or 2018.

No goodwill impairments occurred during 2021, 2020 or 2019.

Cash and Cash Equivalents, and Restricted Cash

Cash and cash equivalents primarily consist of cash on deposit with banks with maturities of three months or less from the date of purchase.

Restricted funds consist of proceeds from a Maine state revolving fund bond issuances to Maine Water of $ 5,000 and $ 4,000 on December 19, 2019 and December 23, 2020, respectively for capital expenditures.

Restricted funds consist of proceeds from state revolving fund bond issuances to Maine Water of $ 4,000 on December 23, 2020, for capital expenditures.

Proceeds are held by a trustee for the bonds and as funding conditions are met, funds are released.

In the first quarter of 2020, all the proceeds from the December 19, 2019 bond were released by the trustee.

As of December 31, 2021, $ 2,789 of the proceeds from the December 23, 2020, bond were released by the trustee, and a balance of $ 1,211 remains.

No bond issuances of this nature took place during 2021.

Financial Instruments and Investments

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SJW Group has investments in company owned life insurance which are valued at cash surrender value of the policies as reported by the insurer.

These contracts are based principally on a referenced pool of investment funds that actively redeem shares, are observable and measurable, and are presented in “Other investments” on SJW Group’s consolidated balance sheets.

The value of these contracts is based principally on a referenced pool of investment funds that actively redeem shares, are observable and measurable, and are presented in “Other investments” on SJW Group’s Consolidated Balance Sheets.

As of December 31, 2021 and 2020, the value of the company owned life insurance was $ 8,026 and $ 8,026 , respectively, of which $ 4,191 and $ 4,311 , respectively, was related to assets to fund CTWS’ supplemental retirement plan agreements.

See discussion on pension plans in Note 11 , “Benefit Plans”.

Regulatory Rate Filings

California Regulatory Affairs

SJWC’s rates, service and other matters affecting its business are subject to regulation by the CPUC.

Generally, there are three types of rate adjustments that affect SJWC’s revenue collection:

general rate adjustments, cost of capital adjustments, and offset rate adjustments.

General rate adjustments are authorized in general rate case decisions, which usually authorize an initial rate adjustment followed by two annual escalation adjustments.

General rate applications are normally filed and processed during the last year covered by the most recent general rate case as required by the CPUC in order to avoid any gaps in regulatory decisions on general rate adjustments.

Cost of capital adjustments are rate adjustments resulting from the CPUC’s usual tri-annual establishment of a reasonable rate of return on equity and average cost of borrowing on debt incurred for SJWC’s capital investments.

The purpose of an offset rate adjustment is to compensate utilities for changes in specific pre-authorized offsettable capital investments or expenses, primarily for purchased water, groundwater extraction, purchased power and pensions.

Pursuant to Section 792.5 of the California Public Utilities Code, a balancing account must be maintained for each expense item for which such revenue offsets have been authorized.

Memorandum accounts 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 during periods of mandated water restrictions, water tariffs and other approved activities or as directed by the CPUC.

The purpose of a balancing and memorandum account is to track the under-collection or over-collection associated with such expense changes and activities for future recovery consideration.

On April 10, 2020, SJWC filed Application No.

20-04-009 seeking authorization to issue $ 300,000 in new debt and $ 50,000 in new equity.

A final decision authorizing our financing application was approved on November 19, 2020.

On January 22, 2020, SJWC, along with three other California water utilities, filed a joint request for a one-year deferment on the Cost of Capital filings which would otherwise be due on May 1, 2020.

Postponing the filing one year would alleviate administrative processing costs on the utilities as well as the CPUC staff, and provide relief for both CPUC and utility resources already strained by numerous other proceedings.

The request was conditioned on no changes to the current Water Cost of Capital Mechanism in place during the one-year deferment.

On March 11, 2020, the CPUC approved the request.

On March 17, 2020, the CPUC ordered its regulated water utilities to halt customer disconnection activities in connection with the COVID-19 pandemic.

On April 2, 2020, Governor Gavin Newsom issued Executive Order N-42-20 suspending customer disconnection activities until further notice.

On April 16, 2020, the CPUC issued Resolution M-4842 directing utilities to implement emergency customer protections to assist customers such as waiving reconnection deposits, offering payment arrangements, and suspending disconnections for nonpayment.

This resolution is effective for up to one year, or April 15, 2021, with the option to extend.

On February 11, 2021, the CPUC approved extending customer protections required in Resolution M-4842 through June 30, 2021, through approval of Resolution M-4849 .

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

SJWC is currently working on such plan.

On March 19, 2020, SJWC filed Advice Letter 546 to extend customer protections listed in the company’s Disaster Relief Customer Protections and Outreach Plan as required by the CPUC in response to the COVID-19 pandemic.

The filing also activated SJWC’s Catastrophic Event Memorandum Account (“CEMA”) to track costs related to SJWC’s response which includes labor and materials, increases in bad debt from the suspension of shutoffs for non-payment, waived deposits and reconnection fees, and divergence from actual versus authorized usage.

The customer protections and CEMA were approved effective March 4, 2020.

SJWC anticipates requesting recovery of the COVID-19 pandemic response costs in a future general rate case or other filings.

On January 4, 2021, SJWC filed General Rate Case Application No.

21-01-003 requesting authority for an increase of revenue of $ 51,585 or 13.35 % in 2022, $ 16,932 or 3.88 % in 2023, and $ 19,195 or 4.24 % in 2024.

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 the new rates, if approved, are expected to be effective January 1, 2022.

On January 5, 2021, SJWC, along with three other California water utilities, filed a joint request for another one-year deferment on the Cost of Capital filings which would otherwise be due on May 1, 2021.

Postponing the filing another year would alleviate administrative processing costs on the utilities as well as the CPUC staff, and provide relief for both CPUC and utility resources already strained by numerous other proceedings and COVID-19.

The request is conditioned on no changes to the

current Water Cost of Capital Mechanism in place during the one-year deferment.

The request was denied on February 22, 2021.

Connecticut Regulatory Affairs

Connecticut Water’s rates, service and other matters affecting its business are subject to regulation by the Public Utilities Regulatory Authority of Connecticut (“PURA”).

The Connecticut regulated operations seek rate relief as necessary to enable it to achieve an authorized rate of return.

PURA allows the Connecticut regulated operations to add surcharges to customers’ bills in order to recover certain costs associated with approved eligible capital projects through the Water Infrastructure Conservation Adjustment (“WICA”) in between full rate cases, as well as approved surcharges for the Water Revenue Adjustment (“WRA”).

Connecticut Water and the HVWC division mitigate the risk associated with changes in demand through a PURA approved WRA mechanism.

The WRA is used to reconcile actual water demands with the demands projected in the most recent general rate case and allows companies to implement a surcharge or surcredit as necessary to recover the revenues approved in the general rate case.

The WRA removes the financial disincentive for water utilities to develop and implement effective water conservation programs.

The WRA allows water companies to defer on the balance sheet, as a regulatory asset or liability, for later collection from or crediting to customers the amount by which actual revenues deviate from the revenues allowed in the most recent general rate proceedings, including WICA proceedings.

Projects eligible for WICA surcharges include certain types of aging utility plant, primarily water mains, meters, and service lines.

Additionally, certain energy conservation projects, improvements required to comply with streamflow regulations, and improvements to acquired systems are eligible for WICA surcharges.

As of December 31, 2020, WICA surcharges for Connecticut Water and the Avon Water division were 5.75 % and 9.31 %, respectively.

The HVWC division did not have an approved WICA surcharge.

On January 28, 2020, Connecticut Water filed a WICA application representing an additional 2.6 % surcharge, for a cumulative WICA surcharge of 5.84 %.

Additionally, on February 7, 2020, Connecticut Water and the Avon Water division separately filed their annual WICA reconciliations which called for 0.09 % and 0.05 % reductions of the WICA surcharges, respectively.

On March 25, 2020, in separate decisions, PURA approved a net cumulative 5.75 % surcharge for Connecticut Water and a net cumulative 9.26 % WICA surcharge for the Avon Water division, both of which became effective on customers’ bills on April 1, 2020.

On October 28, 2020, Connecticut Water filed a WICA application representing an additional 1.11 % surcharge or approximately $ 956 increase in revenues, for a cumulative WICA surcharge of 6.94 % which is scheduled to become effective April 1, 2021.

On January 15, 2021, Connecticut Water filed an application with PURA to amend rates for its customer, including those of former AWC and HVWC companies.

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

for residential, commercial, industrial, etc.

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 in 2010.

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

On March 12, 2020, PURA issued Docket No.

20-03-15 to establish a State of Emergency Utility Shut-off Moratorium for the COVID-19 pandemic.

The moratorium ordered regulated utility companies to refrain from terminating utility service to residential customers, except for safety reasons until August 1, 2020, or until such other time as determined by the PURA.

The moratorium was extended through October 1, 2020 at which time the company was permitted to resume standard collection practices until or unless there is further action by PURA.

In the same docket, PURA directed the public service companies to offer COVID-19 payment plans for the duration of the Governor’s Emergency Order (currently through April 20, 2021), and allow customers up to 24 months for payment arrangements on their water bills.

The docket directs the public service companies to maintain a detailed record of costs incurred and revenues lost as a result of implementing its orders in the docket and allows for the establishment a regulatory asset to track incurred costs.

Approval for recovery of additional costs incurred and/or revenues lost relating to the COVID-19 pandemic would be considered for recovery in the Connecticut Water’s next general rate case proceeding.

Texas Regulatory Affairs

CLWSC’s rates are subject to the economic regulation of the Public Utilities Commission of Texas (“PUCT”).

The PUCT authorize rate increases after the filing of an Application for a Rate/Tariff Change.

Rate cases may be filed as they become necessary, provided there is no current rate case outstanding.

Further, rate cases may not be filed more frequently than once every 12 months.

Maine Regulatory Affairs

Maine Water’s rates, service and other matters affecting its business are subject to regulation by the Maine Public Utilities Commission (“MPUC”).

As with the Connecticut regulated operations, rate relief is sought as necessary to enable the company to achieve an authorized rate of return.

MPUC approves Maine Water’s rates on a division-by-division basis in Maine and allows Maine Water to add surcharges to customers’ bills in order to recover certain costs associated with capital projects through the Water Infrastructure Surcharge (“WISC”) in between general rate cases.

Projects eligible for WISC surcharges include all infrastructure replacement or repair projects, excluding meters, that are necessary for the transmission, distribution or treatment of water.

In 2015, a WRA mechanism law in Maine became available to regulated water utilities.

Maine’s rate-adjustment mechanism could provide revenue stabilization in divisions with declining water consumption and Maine Water expects to request usage of this mechanism in future rate filings when consumption trends support its use.

On January 20, 2020, Maine Water filed Water Infrastructure Surcharge (“WISC”) applications with the MPUC in four divisions requesting an increase between 1.76 % and 3.00 %, representing approximately $ 371 in additional revenues.

The WISC application was approved on February 26, 2020 and the surcharges were effective March 1, 2020.

On March 16, 2020, MPUC issued an emergency moratorium on utility disconnection activities in connection to the COVID-19 pandemic.

The moratorium directed public utility companies not to engage in any disconnection activities including disconnection notices for all classes of customers until further notice from MPUC.

Maine Water is tracking COVID-19 related costs for potential future recovery in rates charged to customers.

On September 17, 2020, the MPUC issued an order lifting the moratorium on utility disconnections in Maine effective November 1, 2020.

The Order requires specific notifications by utilities to their customers prior to resuming disconnection activities and requires a waiver of late payment fess for customers who enter into payment arrangements on or before December 31, 2020.

Maine Water is providing customer notices as required and resumed utility disconnections in November, 2020.

On November 23, 2020, Maine Water filed WISC applications with the MPUC in five divisions requesting an increase of between 1.1 % and 5 %, representing approximately $ 304 in additional revenues.

The WISC applications were approved on December 15th and 22nd, 2020 and the surcharges became effective January 1, 2021.

Balancing and Memorandum Accounts

In California, the CPUC has established a balancing account mechanism 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.

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.

CPUC approved Advice Letter No.

548A for the recovery of the Hydro Generation Research, Development and Demonstration Memorandum Account (“PRVMA”) on August 27, 2020.

Advice Letter No.

548A allowed recovery of $ 1,219 which was recognized as a regulatory asset for the year ended December 31, 2020.

The amounts have been reflected in the PRVMA balances shown in the table below.

In response to the California Governor’s Emergency Declaration on March 4, 2020, CPUC Resolution M-4842 authorized water utilities to activate a COVID-19 CEMA with the same effective date.

The CEMA was activated for SJWC through the filing of Advice Letter 546 on March 19, 2020.

The account tracks savings and costs from COVID-19 related activities as well as uncollectibles beyond the authorized bad debt in the general rate case.

SJWC has determined that future recovery of the account is probable and recognized regulatory assets of $ 2,266 in the COVID-19 CEMA for the year ended December 31, 2020.

The amounts have been reflected in the CEMA balances shown in the table below.

On December 19, 2019, the CPUC denied the recovery of the 2018 Water Conservation Memorandum Account (“WCMA”) in Advice Letter No.

532 and no longer approved the tracking of WCMA balances.

Due to the decision, SJWC determined it no longer met the probability criteria under ASC Topic 980-605-25 for the 2018 WCMA and recognized a reduction to regulatory assets of $ 9,386 for the year ended December 31, 2019.

As a result of the current status of the CPUC filing for the 2018 WCMA above, SJW Group also eliminated the regulatory asset balance for its 2019 WCMA as of December 31, 2019.

As of December 31, 2019, $ 639 in lost revenues had accumulated in the 2019 WCMA.

SJWC recognized regulatory assets of $ 1,182 due to lost revenues accumulated in the 2017 WCMA account which represented the relief of the $ 1,169 reserve and interest earned on the balance during the year ended December 31, 2018.

The reserve had represented the estimated amount that may not be collected within the 24-month period defined in the guidance.

A cost of capital memorandum account was approved by the CPUC on March 14, 2018.

The account tracks the difference between current water rates and the lower rates adopted in the cost of capital decision issued on March 22, 2018.

SJWC recorded a regulatory liability of $ 1,379 in the cost of capital memorandum account for the year ended December 31, 2018 with a corresponding reduction to revenue.

The amount has been reflected in the 2018 cost of capital memorandum account balance shown in the table below.

The CPUC directed SJWC to establish a memorandum account to capture all of the impacts of the Tax Act including the benefit of the reduction in the federal statutory income tax rate from 35% to 21% on its regulated revenue requirement.

The CPUC has indicated that the net benefit from implementing the new law should ultimately be passed on to ratepayers.

The benefits associated with regulatory activities is expected to flow back to customers as directed by the CPUC, with no impact to net income.

Per Advice Letter 522A filed with the CPUC, the benefit of the reduction in the federal statutory income tax rate from 35% to 21% were reflected in the customer bills effective July 1, 2018.

As such, the tax memorandum account only includes the benefit of the reduction in the federal statutory income tax rate through June 30, 2018.

The other impacts of the Tax Act were recorded in the tax memorandum account for the entire year.

Accordingly, SJWC recorded a regulatory liability of $ 6,504 in the tax memorandum account for the for the year ended December 31, 2018 with a corresponding reduction to revenue.

The amount has been reflected in the tax memorandum account balance shown in the table below.

Refunds for tax memorandum account balances began on January 27, 2020.

SJWC met the recognition requirements for certain of its balancing and memorandum accounts and certain amounts subject to balancing and memorandum accounts and recorded regulatory assets, net, as follows:

For the year ended December 31, 2020

Beginning Balance Regulatory Asset

Increase (Decrease) Refunds (Collections)

Adjustments Ending

Revenue accounts:

Monterey WRAM $ 7,015 2,464 2,598 12,077

2014 - 2017 WCMA 708 — ( 42 ) 666

2012 General Rate Case true-up 752 — — 752

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

Tax memorandum account ( 6,643 ) ( 2 ) 6,978 333

All others ( 2,219 ) 62 ( 67 ) ( 2,224 )

Total revenue accounts ( 1,940 ) 2,516 9,467 10,043

Cost-recovery accounts:

Water supply costs 4,328 3,828 ( 33 ) 8,123

Pension 2,449 1,008 21 3,478

PRVMA — 1,219 ( 111 ) 1,108

CEMA — 2,266 — 2,266

All others 446 3 ( 4 ) 445

Total cost-recovery accounts 7,223 8,324 ( 127 ) 15,420

Total $ 5,283 10,840 9,340 25,463

For the year ended December 31, 2019

Beginning Balance Regulatory Asset

Increase (Decrease) Refunds (Collections)

Adjustments Ending

Revenue accounts:

Monterey WRAM $ 6,847 4,582 ( 4,414 ) 7,015

2014 - 2017 WCMA 7,750 — ( 7,042 ) 708

2018 WCMA 9,386 ( 9,386 ) — —

2012 General Rate Case true-up 11,328 96 ( 10,672 ) 752

Cost of capital memorandum accounts ( 1,523 ) ( 30 ) — ( 1,553 )

Tax memorandum account ( 6,504 ) ( 139 ) — ( 6,643 )

All others ( 1,735 ) ( 107 ) ( 377 ) ( 2,219 )

Total revenue accounts 25,549 ( 4,984 ) ( 22,505 ) ( 1,940 )

Cost-recovery accounts:

Water supply costs 9,617 207 ( 5,496 ) 4,328

Pension ( 1,843 ) 745 3,547 2,449

All others 1,090 10 ( 654 ) 446

Total cost-recovery accounts 8,864 962 ( 2,603 ) 7,223

Total $ 34,413 ( 4,022 ) ( 25,108 ) 5,283

As of December 31, 2020, the total balance in SJWC’s balancing and memorandum accounts combined, including interest, that has not been recorded into the financial statements was a net under-collection of $ 1,586 .

On December 28, 2018, SJWC’s GRC with the CPUC was approved with new rates effective on January 1, 2019.

As part of the GRC decision, $ 27,045 of balancing and memorandum accounts were also approved for recovery over a 12 -month period at $0.5894 per centum cubic feet surcharge effective on January 1, 2019.

For the year ended December 31, 2020 and 2019, SJWC collected $ 151 and $ 25,108 , respectively, in surcharges for the approved recovery.

Recovery of this surcharge ended in January 2020 and the remaining uncollected balance will be filed in the next general rate case.

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.

Regulatory Assets and Liabilities

Water Utility Services recognizes regulatory assets and liabilities for amounts that are deemed probable of recovery from, or refund to, customers.

Determining probability requires significant judgement by management and includes assessing evidence that may exist prior to regulatory authorization, including regulatory rules and decisions, historical ratemaking practices, and other facts and circumstances that would indicate that recovery or refund is probable.

If the utility determined that it is no longer probable that regulatory assets would be recovered or reflected in future rates, or if the utility ceased to be subject to rate regulation, the regulatory assets would be charged against income in the period in which that determination was made.

If regulatory accounting did not apply, the utility’s future financial results could become more volatile as compared to historical financial results due to the differences in the timing of expense or revenue recognition.

The company adjusts the related asset and liabilities for these items through its regulatory asset and liability accounts at year-end, except for certain postretirement benefit costs and balancing and memorandum accounts which are adjusted monthly.

Rate-regulated enterprises are required to charge a regulatory asset to earnings if and when it is determined that the asset is no longer probable of recovery.

SJW Group continually evaluates the recoverability of regulatory assets by assessing whether the amortization of the balance over the remaining life can be recovered through expected and undiscounted future cash flows.

Regulatory assets, net, are comprised of the following as of December 31:

Regulatory assets:

Income tax temporary differences, net (a) $ 6,230 2,433

Postretirement pensions and other medical benefits 95,559 73,525

Business combinations debt premium, net 22,479 25,020

Balancing and memorandum accounts, net 25,463 5,283

WRA (b) 323 9,108

Other, net (c) 8,176 5,048

Total regulatory assets, net 158,230 120,417

current regulatory asset, net 1,748 6,472

Total regulatory assets, net, less current portion $ 156,482 113,945

___________________________________

(a) The company expects to recover regulatory assets related to plant depreciation income tax temporary differences over the average lives of the plant assets of between 5 to 75 years.

(b) WRA is a Connecticut Water decoupling mechanism that qualifies as an alternative revenue program.

It is used to reconcile actual water demands with the demands projected in the most recent general rate case and allows companies to implement a surcharge or surcredit as necessary to recover the revenues approved in the general rate case.

(c) Other, net includes other regulatory mechanisms, accrued benefits for vacation, and asset retirement obligations that have not yet been passed through in rates.

Income taxes are accounted for using the asset and liability method.

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In California, advances for construction received after 1981 are primarily refunded ratably over 40 years.

In Connecticut and Maine, advances for construction are refunded as services are connected to the main, over periods not exceeding 15 years and in Texas non-refundable.

In Connecticut and Maine, advances for construction are refunded as services are connected to the main, over periods not exceeding 15 years and in Texas advances for construction are non-refundable.

Estimated refunds for the next five years and thereafter are shown below:

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Thereafter 49,582

As of December 31, 2020, advances for construction was $ 125,027 of which $ 29,117 was related to non-refundable advances for construction and $ 28,456 was related to advances which are refunded based on service connections made.

As of December 31, 2021, advances for construction were $ 130,693 of which $ 36,388 was related to non-refundable advances for construction and $ 28,445 was related to advances which are refunded based on service connections made.

As of December 31, 2021 and 2020, the fair value of the advances for construction refunded ratably over 40 years is $ 51,067 and $ 50,391 , respectively.

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Customer advances and contributions in aid of construction received subsequent to 1986 and prior to June 12, 1996, generally must be included in federal taxable income, except for CTWS.

Taxes paid relating to advances and contributions are recorded as deferred tax assets for financial reporting purposes and are amortized over 40 years for advances and over the tax depreciable

life of the related asset for contributions.

Taxes paid relating to advances and contributions are recorded as deferred tax assets for financial reporting purposes and are amortized over 40 years for advances and over the tax depreciable life of the related asset for contributions.

Receipts subsequent to June 12, 1996, are generally exempt from federal taxable income, unless specifically prescribed under treasury regulations, including CTWS.

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Retirement obligation, present value $ 925 939

Management has determined that the company has principally four categories of revenues.

Management has determined that the company has principally five categories of revenues.

The first category is recognized in accordance with ASC Topic 606- “Revenue from Contracts with Customers” and represents metered revenue of Water Utility Services which includes billings to customers based on meter readings plus an estimate of water used between the customers’ last meter reading and the end of the accounting period.

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The second category is recognized in accordance with ASC Topic 980-605-25, “Alternative Revenue Programs”.

Under Programs established by the CPUC and PURA, allowing for automatic adjustment of future rates, the company recognizes revenue when it is objectively determinable, probable of recovery and expected to be collected within 24 months of the year-end in which the revenue is recognized.

Under Programs established by the CPUC and Public Utilities Regulatory Authority of Connecticut (“PURA”), allowing for automatic adjustment of future rates, the company recognizes revenue when it is objectively determinable, probable of recovery and expected to be collected within 24 months of the year-end in which the revenue is recognized.

A reserve, based on an estimate of actual usage over the recovery period, is recorded for amounts SJW Group estimates will not be collected within the 24-month period.

SJW Group’s alternative revenue programs include SJWC’s WCMA and CTWS’s WRA.

• The WCMA allowed SJWC to track lost revenue, net of related water costs, associated with reduced sales due to water conservation and associated calls for water use reductions.

SJWC recorded the lost revenue captured in the WCMA balancing accounts.

In December 2019, CPUC denied SJWC’s request to recover the 2018 WCMA balance.

SJW Group’s alternative revenue programs include SJWC’s Water Conservation Memorandum Account (“WCMA”) and CTWS’s Water Rate Adjustment mechanism (“WRA”).

• The WCMA allows SJWC to track lost revenue, net of related water costs, associated with reduced sales due to water conservation and associated calls for water use reductions.

SJWC records the lost revenue captured in the WCMA balancing accounts.

In 2021, with the declaration of a drought emergency and conservation mandates in California by Governor Gavin Newsom and Santa Clara Valley Water District (“Valley Water”), SJWC obtained approval to reestablish a WCMA effective July 20, 2021.

For the year ended December 31, 2021, SJWC recognized $ 3,243 in lost revenues accumulated in the WCMA.

In December 2019, CPUC denied SJWC’s request to recover the 2018 WCMA balance due to drought mandatory conservation mandates that ended in 2017.

As a result of the decision, during the year ended December 31, 2019, SJWC wrote off a total balance of $ 9,386 related to 2018 lost revenue and $ 639 related to 2019 lost revenue that was recorded in the 2018 and 2019 WCMA accounts, respectively.

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The WRA allows the company to defer, as a regulatory asset or liability, the amount by which actual revenues deviate from the revenues allowed in the most recent general rate proceedings.

The third category represents the impact of other balancing and memorandum accounts and other regulatory mechanisms that are accounted for under FASB ASC Topic 980 - “Regulated Operations”.

The third and fourth category represents the impact of other balancing and memorandum accounts and other regulatory mechanisms that are accounted for under FASB ASC Topic 980 - “Regulated Operations”.

Balancing and memorandum accounts are recognized by SJWC when it is probable that future recovery of previously incurred costs or future refunds that are to be credited to customers will occur through the ratemaking process.

The fourth category, rental income, represents lease rental income.

The last category, rental income, represents lease rental income.

Tenants pay monthly in accordance with lease agreements and SJW Group recognizes the income ratably over the lease term as this is the most representative of the pattern in which the benefit is expected to be derived from SJW Group’s underlying asset.

3 unchanged sentences

Alternative revenue programs, net 5,304 ( 493 ) ( 18,232 )

Other balancing and memorandum accounts revenue and regulatory mechanisms, net 10,217 ( 14,403 ) ( 7,541 )

Other balancing and memorandum accounts, net 5,138 11,856 ( 30,092 )

Other regulatory mechanisms, net ( 1,703 ) ( 1,639 ) 15,689

Rental income 5,379 5,532 5,397

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Restricted common stock units of 16,347 , 22,396 and 27,082 as of December 31, 2021, 2020 and 2019, respectively, were excluded from the dilutive earnings per share calculation as their effect would have been anti-dilutive.

Regulatory Matters

Water Utility Services are subject to rate regulation based on cost recovery and meets the criteria of accounting guidance for rate-regulated operations, which considers the timing of the recognition of certain revenues and expenses.

SJW Group’s consolidated financial statements reflect the effects of the rate-making process.

The rate-making process is intended to provide revenues sufficient to recover normal operating expenses, provide funds for replacement of water infrastructure and produce a fair and reasonable return on stockholder common equity.

Regulatory Assets, Net

Water Utility Services recognizes regulatory assets and liabilities for amounts that are deemed probable of recovery from, or refund to, customers.

If the utility determines that it is no longer probable that regulatory assets would be recovered or reflected in future rates, or if the utility ceased to be subject to rate regulation, the regulatory assets would be charged against income in the period in which that determination was made.

Rate-regulated enterprises are required to charge a regulatory asset to earnings if and when it is determined that the asset is no longer probable of recovery.

SJW Group’s net regulatory assets not earning a return primarily included postretirement pensions and other medical benefits unfunded amounts, and business combinations debt premium, net.

The total amount of net regulatory assets not earning a return at December 31, 2021 and 2020, either by interest on the regulatory asset/liability or as a component of rate base at the allowed rate of return was $ 84,887 and $ 119,236 , respectively.

Regulatory assets, net are comprised of the following as of December 31:

Regulatory assets:

Income tax temporary differences, net (a) $ 22,420 6,230

Postretirement pensions and other medical benefits 62,197 94,362

Business combinations debt premium 19,937 22,479

Balancing and memorandum accounts, net 38,334 25,463

WRA (b) 2,588 323

Other, net (c) 9,145 9,373

Total regulatory assets, net 154,621 158,230

current regulatory asset, net 2,629 1,748

Total regulatory assets, net, less current portion $ 151,992 156,482

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(a) The company expects to recover regulatory assets related to plant depreciation income tax temporary differences over the average lives of the plant assets of between 5 to 75 years.

(b) WRA is a Connecticut Water decoupling mechanism that qualifies as an alternative revenue program.

(c) Other, net includes other regulatory mechanisms, accrued benefits for vacation, and asset retirement obligations that have not yet been passed through in rates.

Balancing and Memorandum Accounts

As of December 31, 2021, the total balance in SJWC’s balancing and memorandum accounts combined, including interest, that has not been recorded into the financial statements was a net under-collection of $ 2,312 .

For the year ended December 31, 2021

Beginning Balance Regulatory Asset

Increase (Decrease) Refunds (Collections)

Adjustments Ending

Revenue accounts:

Monterey Water Revenue Adjustment Mechanism (“MWRAM”) $ 12,077 4,788 1 16,866

WCMA (a) 666 3,243 ( 375 ) 3,534

Cost of capital memorandum accounts ( 1,561 ) ( 2 ) — ( 1,563 )

Tax memorandum account 333 — — 333

All others ( 1,472 ) 750 3 ( 719 )

Total revenue accounts 10,043 8,779 ( 371 ) 18,451

Cost-recovery accounts:

Water supply costs 8,123 2,421 1 10,545

Pension 3,478 1,464 ( 1 ) 4,941

PRVMA (b) 1,108 1 ( 402 ) 707

CEMA (c) 2,266 979 — 3,245

All others 445 — — 445

Total cost-recovery accounts 15,420 4,865 ( 402 ) 19,883

Total $ 25,463 13,644 ( 773 ) 38,334

For the year ended December 31, 2020

Beginning Balance Regulatory Asset

Increase (Decrease) Refunds (Collections)

Adjustments Ending

Revenue accounts:

MWRAM $ 7,015 2,464 2,598 12,077

WCMA 708 — ( 42 ) 666

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

Tax memorandum account ( 6,643 ) ( 2 ) 6,978 333

All others ( 1,467 ) 62 ( 67 ) ( 1,472 )

Total revenue accounts ( 1,940 ) 2,516 9,467 10,043

Cost-recovery accounts:

Water supply costs 4,328 3,828 ( 33 ) 8,123

Pension 2,449 1,008 21 3,478

PRVMA (b) — 1,219 ( 111 ) 1,108

CEMA (c) — 2,266 — 2,266

All others 446 3 ( 4 ) 445

Total cost-recovery accounts 7,223 8,324 ( 127 ) 15,420

Total $ 5,283 10,840 9,340 25,463

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(a) In 2021, with the declaration of a drought emergency and conservation mandates in California by Governor Gavin Newsom and Valley Water, SJWC obtained approval to reestablish a WCMA effective July 20, 2021.

For the year ended December 31, 2021, SJWC recognized $ 3,243 in lost revenues accumulated in the WCMA.

(b) On August 27, 2020, the Hydro Generation Research, Development and Demonstration Memorandum Account (“PRVMA”) costs of $ 1,219 were approved for recovery by the CPUC.

In response, the CPUC ordered its regulated water utilities to implement emergency customer protections in accordance with the Company’s Disaster Relief Customer Protections and Outreach Plan, including waiving reconnection deposits, offering payment arrangements, suspending water service disconnections due to non-payment and requiring water utilities to develop a transition plan regarding shutoffs and terminations with customers once the moratorium ends.

The customer protections currently extend through February 1, 2022.

As a result, CPUC authorized water utilities to activate a COVID-19 Catastrophic Event Memorandum Account (“CEMA") in order to track savings and costs related to SJWC’s response, which includes labor and materials, increases in bad debt from the suspension of shutoffs for non-payment, waived deposits and reconnection fees, and divergence from actual versus authorized

The CEMA was activated for SJWC through the filing of Advice Letter 546 on March 19, 2020.

SJWC anticipates requesting recovery of the COVID-19 pandemic response costs in a future general rate case or other filings.

SJWC has determined that future recovery of the account is probable and recognized a regulatory asset of $ 979 and $ 2,266 in the years ended December 31, 2021 and 2020, respectively.

Capitalization

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At December 31, 2021 and 2020, no shares of preferred stock were issued or outstanding.

On March 8, 2021, SJW Group entered into an underwriting agreement with J.P.

Morgan Securities LLC, as the representative of the several underwriters named therein (the “Underwriters”), which provided for the issuance and sale by SJW Group to the Underwriters 1,030,000 shares of common stock, par value $ 0.001 per share, in an underwritten public offering (the “Offering”).

The shares in the Offering were sold at a public offering price of $ 59.00 per share.

SJW Group also granted the Underwriters an option to purchase up to 154,500 additional shares of common stock, which was exercised in full.

The Offering closed on March 11, 2021, and the offering of option shares closed on March 16, 2021.

SJW Group received net proceeds of approximately $ 66,775 from the Offering and the sale of option shares, after deducting the underwriting discounts and commissions and offering expenses.

SJW Group used the proceeds from the offerings to pay down a bank line of credit agreement, dated as of June 1, 2016, between SJWC and JPMorgan Chase Bank, N.A.

and for general corporate purposes, which included, among other things, financing infrastructure improvements and other capital expenditures, repayment of debt or other corporate obligations and working capital.

On November 17, 2021, SJW Group entered into an equity distribution agreement (the “Equity Distribution Agreement”) with J.P.

Morgan Securities LLC, Janney Montgomery Scott LLC, RBC Capital Markets, LLC and Wells Fargo Securities, LLC (each a “Sales Agent” and, collectively, the “Sales Agents”), pursuant to which the Company may offer and sell shares of its common stock, $ 0.001 par value per share (the “Shares”), from time to time in “at-the-market” offerings, having an aggregate gross sales price of up to $ 100,000 (the “Offering”).

Pursuant to the Equity Distribution Agreement, the Shares may be offered and sold through the Sales Agents in transactions that are deemed to be “at-the-market” offerings as defined in Rule 415 under the Securities Act of 1933, as amended, including sales by means of ordinary brokers’ transactions on the New York Stock Exchange or otherwise at market prices prevailing at the time of sale, at prices related to the prevailing market prices or at negotiated prices, in block transactions, or as otherwise agreed upon by the Company and the Sales Agents.

Proceeds from the sale of the shares under the Equity Distribution Agreement can be used in the financing of acquisitions, including the acquisition of the Kendall West and Bandera East utilities in Texas, infrastructure improvements and other capital expenditures, repayment of debt or other corporate obligations, and working capital over the term of the Equity Distribution Agreement as such needs arise.

SJW Group issued and sold a total of 355,115 shares of common stock with a weighted average price of $ 70.40 per share and received approximately $ 24,253 in net proceeds under the Equity Distribution Agreement during the year ended December 31, 2021.

Lines of Credit

SJWC entered into a $ 125,000 credit agreement (the “Credit Agreement”) with JPMorgan Chase Bank, N.A., as the lender (the “Lender”) on June 1, 2016.

The Credit Agreement provides an unsecured credit facility with a letter of credit sublimit of $ 10,000 .

Proceeds of borrowings under the Credit Agreement may be used to refinance existing debt, for working capital, and for general corporate purposes.

The Credit Agreement has a maturity date of June 1, 2021.

On May 11, 2020, SJWC amended its $ 125,000 unsecured line of credit to increase the lending commitment by $ 15,000 to $ 140,000 .

In addition, on May 11, 2020, SJWC entered into an additional unsecured line of credit allowing borrowings of up to $ 50,000 for a six month period which had a zero balance at its maturity on November 11, 2020.

The Credit Agreement contains customary representations, warranties and events of default, as well as certain restrictive covenants customary for facilities of this type, including restrictions on indebtedness, liens, acquisitions and investments, restricted payments, asset sales, and fundamental changes.

The Credit Agreement also includes certain financial covenants that require the Company to maintain a maximum funded debt to capitalization ratio and a minimum interest coverage ratio.

SJW Group and SJW Land Company (collectively, the “Borrowers”), entered into a $ 15,000 credit agreement with the Lender (the “SJW Group Credit Agreement”) on June 1, 2016, which provides an unsecured credit facility to the Borrowers with a letter of credit sublimit of $ 5,000 .

The SJW Group Credit Agreement matures on June 1, 2021.

Borrowings under the SJW Group Credit Agreement bear interest under the same terms and conditions as those in the Credit Agreement.

On April 24, 2020, SJW Group terminated the joint unsecured bank line of credit held by SJW Group and SJW Land Company effective April 29, 2020.

In addition, on June 1, 2016, SJW Group, as guarantor, and SJWTX, Inc.

(the “Borrower”), entered into a $ 5,000 credit agreement with the Lender (the “SJWTX Credit Agreement”), which provides an unsecured credit facility to the Borrower with a letter of credit sublimit of $ 1,000 .

The SJWTX Credit Agreement matures on June 1, 2021.

CTWS maintains a $ 15,000 line of credit agreement with CoBank, ACB, which was scheduled to expire on July 1, 2020.

On May 29, 2020, CTWS entered into a Second Amendment to the CTWS’s existing $ 15,000 credit agreement, dated as of August 6, 2014, with CoBank, ACB (“CoBank”), as amended by the First Amendment, dated October 28, 2015.

The Second Amendment amends the prior agreement to, among other things, increase the total commitment by $ 25,000 , from $ 15,000 to $ 40,000 .

The $ 40,000 line of credit expires on May 15, 2025.

CTWS maintains an additional credit agreement that was temporarily increased to $ 95,000 with RBS Citizens, N.A.

On March 1, 2020, the amount available on the RBS Citizens, N.A.

line of credit was reduced to the original amount of $ 75,000 .

The line of credit matures on December 14, 2023.

As of December 31, 2020 and 2019, SJW Group had outstanding balances on the lines of credit of $ 175,094 and $ 117,209 , respectively.

SJW Group and its subsidiaries have unsecured line of credit agreements where borrowings are used to refinance existing debt, for working capital, and for general corporate purposes.

A summary of the line of agreements as of December 31, 2021 and 2020 are as follows:

Maturity Date Line Limit Amounts Outstanding Unused Portion Amounts Outstanding

SJWC credit agreement (a) December 31, 2023 $ 140,000 — 140,000 80,000

CTWS credit agreement December 14, 2023 75,000 22,996 52,004 55,094

CTWS credit agreement May 15, 2025 40,000 40,000 — 40,000

credit agreement (b) December 31, 2023 5,000 — 5,000 —

$ 260,000 62,996 197,004 175,094

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(a) Credit agreement also provides for a letter of credit sublimit of $ 15,000 .

(b) Credit agreement also provides for a letter of credit sublimit of $ 1,000 .

On April 23, 2021, SJWC closed its $ 140,000 line of credit agreement which was set to mature on June 1, 2021, and entered into a new $ 140,000 credit agreement (“SJWC Credit Agreement”) with JPMorgan Chase Bank, N.A., as the lender (the “Lender”).

The SJWC Credit Agreement provides an unsecured credit facility with a letter of credit sublimit of $ 15,000 .

Proceeds of borrowings under the SJWC Credit Agreement may be used to refinance existing debt, for working capital, and for general corporate purposes.

The new SJWC Credit Agreement has a maturity date of December 31, 2023.

The line of credit bears interest at variable rates.

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.

The SJWTX Credit Agreement provides an unsecured credit facility with a letter of credit sublimit of $ 1,000 .

The new SJWTX Credit Agreement has a maturity date of December 31, 2023.

Cost of borrowing on the lines of credit averaged 1.32 % and 1.78 % as of December 31, 2021 and 2020, respectively.

The SJW Group and SJWTX, Inc.

unsecured bank lines of credit have the following affirmative covenants calculated with the financial statements of SJW Group, on a consolidated basis:

(1) the funded debt cannot exceed 66-2/3% of total capitalization, and (2) net income available for interest charges for the trailing 12-calendar-month period cannot be less than 175 % of interest charges.

As of December 31, 2020, SJW Group and SJWTX, Inc.

were in compliance with all covenants.

SJWC’s unsecured bank lines of credit have the following affirmative covenants:

As of December 31, 2020, SJWC was in compliance with all covenants.

The CTWS unsecured bank lines of credit have the following affirmative covenants:

(1) Connecticut Water’s earnings before interest and taxes to its interest expense shall be equal or greater to 3 to 1, (2) Maine Water’s debt to capitalization ratio shall not exceed 60 %, (3) Connecticut Water’s debt to capitalization ratio shall not exceed 60 %, and (4) CTWS’s debt to capitalization ratio shall not exceed 65 %.

As of December 31, 2020, CTWS was in compliance with all covenants.

All of SJW Group’s and subsidiaries lines of credit contain customary representations, warranties and events of default, as well as certain restrictive covenants customary for facilities of this type, including restrictions on indebtedness, liens, acquisitions and investments, restricted payments, asset sales, and fundamental changes.

The lines of credit also include certain customary financial covenants such as a funded debt to capitalization ratio and a minimum interest coverage ratio.

As of December 31, 2021, SJW Group and its subsidiaries were in compliance with all covenants on the lines of credit.

Long-Term Debt

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Description Rate Maturity 2021 2020

Senior notes 2.47% - 4.35% 2021 - 2039 $ 610,000 560,000

Senior notes 4.29% - 8.58% 2022 - 2049 320,000 330,000

SJW Group Senior notes (a) 2.47 % - 3.53 %

2029 - 2039 $ 560,000 610,000

Senior notes (a) 3.00 % - 8.58 %

2022 - 2051 420,000 320,000

California Pollution Control Financing Authority Revenue Bonds 4.75 %, 5.10 %

2040, 2046 120,000 120,000

Total SJWC 540,000 440,000

CTWS bank term loans 4.09 %, 4.15 %

2027, 2037 20,351 22,169

Connecticut Water:

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Connecticut Innovations Revenue Bonds, fixed rate — 22,260

Senior notes 3.53%, 3.51% 2037, 2050 70,000 35,000

Senior notes (a) 3.07 % - 3.53 %

2037 - 2051 170,000 70,000

Bank term loans 3.51 % - 4.75 %

2022 - 2036 111,090 111,090

Total Connecticut Water 303,140 225,400

senior note 6.27% 2036 15,000 15,000

Senior note (a) 6.27 % 2036 15,000 15,000

Bank term loans 4.01 %, 4.11 %

2041 30,000 —

Total SJWTX, Inc.

45,000 15,000

State revolving fund loans 0.00 % - 2.58 %

Other First Mortgage Bonds 8.95% 2024 3,600 4,500

2022 - 2048 17,264 18,651

Other First Mortgage Bond 8.95 % 2024 2,700 3,600

Bank term loans 3.89 % - 5.51 %

2024 - 2043 34,500 17,500

Total Maine Water 54,464 39,751

HVWC bank term loan 4.75% 2034 — 4,164

Avon Water mortgage loan 3.05% 2033 — 2,809

Total debt 1,522,955 1,352,320

Unamortized debt premium, net (a) 22,479 25,020

Unamortized debt premium, net (b) 19,937 22,479

Unamortized debt issuance costs ( 10,851 ) ( 10,978 )

2 unchanged sentences

___________________________________

(a) Consists of fair value adjustments recognized through purchase accounting for the completed merger with CTWS on October 9, 2019.

Senior notes held by institutional investors are unsecured obligations of SJW Group, SJWC, Connecticut Water, SJWTX, Inc.

(a) Senior notes held by institutional investors are unsecured obligations of SJW Group, SJWC, Connecticut Water, SJWTX, Inc.

and Maine Water and require interest-only payments until maturity.

To minimize issuance costs, the companies’ debt has primarily been placed privately.

The 2011 senior note agreement of SJW Group has terms and conditions that restrict SJW Group from issuing additional funded debt if:

(1) the funded consolidated debt would exceed 66-2/3% of total capitalization, and (2) the minimum net worth of SJW Group becomes less than $ 175,000 plus 30 % of Water Utility Services cumulative net income, since June 30, 2011.

SJW Group’s 2019 and 2020 unsecured senior note agreements have terms and conditions that restrict SJW Group from issuing additional funded debt if the funded consolidated debt would exceed 70 % of total capitalization.

As of December 31, 2020, SJW Group was not restricted from issuing future indebtedness as a result of these terms and conditions.

(b) Consists of fair value adjustments recognized through purchase accounting for the completed merger with CTWS on October 9, 2019.

The following is a table of the consolidated company’s schedule of principal payments:

2022 $ 39,179

Thereafter 1,403,482

The estimated fair value of long-term debt as of December 31, 2021 and 2020 was approximately $ 1,651,825 and $ 1,570,727 , 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 fair value of long-term debt would be categorized as Level 2 of the fair value hierarchy.

On August 11, 2020, SJW Group entered into a note purchase agreement with the purchasers listed in the agreement, pursuant to which SJW Group sold an aggregate principal amount of $ 50,000 of its 2.47 % Senior Notes, Series 2020, due August 1, 2030.

1 unchanged sentence

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

The note purchase agreement contains customary representations and warranties.

Under the note purchase agreement, SJW Group is required to comply with certain customary affirmative and negative covenants for as long as

the notes are outstanding.

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.

On October 8, 2019, SJW Group entered into a note purchase agreement with the purchasers listed in the agreement, pursuant to which SJW Group sold an aggregate principal amount of $ 310,000 of its 3.05 % Senior Notes, Series 2019A, due November 1, 2029, $ 75,000 of its 3.15 % Senior Notes, Series 2019B, due November 1, 2031, and $ 125,000 of its 3.53 % Senior Notes, Series 2019C, due November 1, 2039.

The notes are unsecured obligations of the Company.

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

The note purchase agreement contains customary representations and warranties.

Under the note purchase agreement, SJW Group is required to comply with certain customary affirmative and negative covenants for as long as the notes are outstanding.

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.

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

The senior note agreements of SJWC generally have terms and conditions that restrict the company from issuing additional funded debt if:

(1) the funded debt would exceed 66-2/3% of total capitalization, and (2) net income available for interest charges for the trailing 12-calendar-month period would be less than 175 % of interest charges.

In addition, SJWC has a restricted payment clause which prohibits any payment or distribution, including dividends, if it exceeds the sum of (1) cumulative net income since December 31, 1991, (2) the aggregate net proceeds received from the sale of shares of its capital stock since December 31, 1991, and (3) $ 20,000 .

On November 2, 2020, SJWC paid in full its $ 10,000 Series C senior notes that reached maturity.

As of December 31, 2020, SJWC was in compliance with all terms and conditions of these unsecured senior notes.

On March 28, 2019, SJWC entered into a note purchase agreement with certain affiliates of MetLife, Inc., Brighthouse Financial, Inc.

and New York Life Insurance (collectively the “Purchasers”), pursuant to which the company sold an aggregate principal amount of $ 80,000 of its 4.29 % Senior Notes, Series M (“Series M Notes”) to the Purchasers.

The Series M Notes are unsecured obligations of SJWC and are due on April 1, 2049.

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

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

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

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.

The Series N Notes are unsecured obligations of SJWC and are due on June 25, 2051.

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

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

SJWC has obligations pursuant to loan agreements with the California Pollution Control Financing Activity (“CPCFA”) totaling $ 120,000 in aggregate principal amounts of CPCFA revenue bonds outstanding as of December 31, 2020.

The loan agreements contain affirmative and negative covenants customary for loan agreements relating to revenue bonds, containing, among other things, certain disclosure obligations, the tax exempt status of the interest on the bonds and limitations, and prohibitions on the transfer of projects funded by the loan proceeds and assignment of the loan agreements.

As of December 31, 2020, SJWC was in compliance with all such covenants.

CTWS has outstanding term loans with a commercial bank in an aggregate amount of $ 22,169 as of December 31, 2020.

Under the master loan agreement, CTWS is required to comply with certain financial ratio and operational covenants.

The most restrictive of these covenants is to maintain a consolidated (CTWS and its subsidiaries) debt to capitalization ratio of not more than 60 %.

As of December 31, 2020, CTWS was in compliance with all covenants under the master loan agreement.

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 closing of the note purchase agreement occurred on December 1, 2021.

Connecticut Water

Connecticut Water has outstanding term loans with a commercial bank in an aggregate amount of $ 111,090 as of December 31, 2020.

Under its master loan agreement, Connecticut Water is required to comply with financial and operational covenants substantially identical to those found in CTWS’ master loan agreement.

Connecticut Water is required to maintain a debt to capitalization ratio of not more than 60 % and an interest coverage ratio of no less than 3 to 1.

On December 15, 2020, Connecticut Water paid in full a $ 8,000 term loan that reached maturity.

As of December 31, 2020, Connecticut Water was in compliance with all covenants under its master loan agreement.

Connecticut Water has outstanding $ 44,310 of tax exempt and taxable Water Facilities Revenue Bonds issued through Connecticut Innovations (formerly the Connecticut Development Authority).

The bond indentures and loan agreements contain customary affirmative and negative covenants and require compliance with financial and operational covenants, and also provide for the acceleration of the Revenue Bonds upon the occurrence of stated events of default.

As of December 31, 2020, Connecticut Water was in compliance with all covenants of the bond indentures and loan agreements.

Connecticut Water has a $ 70,000 unsecured senior note that has terms and conditions that restrict Connecticut Water from issuing additional debt or paying a dividend to CTWS if such debt or distribution would trigger an event of default.

The senior note agreement also requires Connecticut Water to maintain a debt to capitalization ratio of not more than 60 % and an interest coverage ratio of no less than 3 to 1.

As of December 31, 2020, Connecticut Water was in compliance with all financial ratio and operational covenants under this 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 on December 1, 2021, sold 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 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 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 March 12, 2020, Connecticut Water entered into a note purchase agreement with NYL Investors, LLC as agent of the purchasers listed in the agreement, pursuant to which Connecticut Water sold on the same date an aggregate principal amount of $ 35,000 of its 3.51 % Senior Notes, due March 12, 2050.

1 unchanged sentence

Interest is payable semi-annually in arrears on March 12th and September 12th of each year.

The note purchase agreement contains customary representations and warranties.

Under the note purchase agreement, Connecticut Water is required to comply with certain customary affirmative and negative covenants for as long as the notes are outstanding.

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.

HVWC division had a term loan with a commercial bank due in 2034.

The note was paid in full on September 24, 2020.

Avon Water had a mortgage loan that is due in 2033.

The note was paid in full on September 24, 2020

The senior note agreement of SJWTX, Inc.

has terms and conditions that restrict SJWTX, Inc.

from issuing additional funded debt if:

In addition, SJW Group is a guarantor of SJWTX, Inc.’s senior note which has terms and conditions that restrict SJW Group from issuing additional funded debt if:

(1) the funded consolidated debt would exceed 66-2/3% of total capitalization, and (2) the minimum net worth of SJW Group becomes less than $ 125,000 plus 30 % of Water Utility Services cumulative net income, since December 31, 2005.

As of December 31, 2020, SJWTX, Inc.

and SJW Group were not restricted from issuing future indebtedness as a result of these terms and conditions.

Maine Water has $ 18,651 of First Mortgage Bonds issued to the Maine Municipal Bond Bank through the State Safe Drinking Water Revolving Loan Fund and $ 3,600 of First Mortgage Bonds issued to One America.

The associated bond indentures and loan agreements contain customary affirmative and negative covenants, including a prohibition on the issuance of indebtedness secured by assets or revenue of Maine Water where the lien is senior to the lien of the bond trustee under the above bonds except as permitted by the bond indentures and related loan and security agreements, a requirement to maintain a debt to capitalization ratio of not more than 65 %, an interest coverage ratio of no less than 3 to 1, a dividend restriction where cumulative dividends paid since 1993 can not exceed cumulative net income since 1982 plus $ 120 , required compliance with various financial and operational covenants, and a provision for maturity acceleration upon the occurrence of stated events of default.

As of December 31, 2020, Maine Water was in compliance with all covenants in its bond indentures and related loan agreements.

On May 13, 2021, CLWSC entered into a master credit agreement and promissory note with a commercial bank under which it entered into a borrowing agreement for an aggregate principal amount not to exceed $ 30,000 , of which $ 20,000 was advanced at the closing date.

The borrowing carries a fixed interest rate of 4.01 % due on March 20, 2041.

On December 1, 2021, the remaining aggregate principal amount of the promissory note, $ 10,000 , was advanced to CLWSC at a fixed interest rate of 4.11 %.

The notes are unsecured obligations of CLWSC.

Interest is payable quarterly in arrears on the 20th day of January, April, July and October of each year.

On March 2, 2021, Maine Water entered into a credit agreement with a commercial bank, pursuant to an existing master loan agreement under which the commercial bank issued Maine Water a promissory note on the same date with an aggregate principal amount of $ 17,000 and a fixed interest rate of 3.89 %, due March 1, 2041.

The notes are unsecured obligations of Maine Water.

Interest is payable quarterly in arrears on the 20th day of January, April, July and October of each year.

Proceeds from the borrowing were received on March 18, 2021.

On December 23, 2020, Maine Water issued $ 4,000 of Series T First Mortgage Bonds to the Maine Municipal Bond Bank through the State Safe Drinking Water Revolving Loan Fund.

1 unchanged sentence

The Series T First Mortgage Bond covenants are the same as all other First Mortgage Bonds.

The proceeds of the Series T bond issuance are represented as restricted cash on the Consolidated Balance Sheets at December 31, 2020.

The restricted cash will be used for pre-approved projects primarily related to preliminary engineering and design work of a water treatment plant in Maine’s Biddeford and Saco division.

On December 19, 2019, Maine Water issued $ 5,000 of Series S First Mortgage Bonds to the Maine Municipal Bond Bank through the State Safe Drinking Water Revolving Loan Fund.

The Series S bonds mature on October 1, 2039 and carry 1 % interest.

The Series S First Mortgage Bond covenants are the same as all other First Mortgage Bonds.

The proceeds of the Series S bond issuance are represented as restricted cash on the Consolidated Balance Sheets at December 31, 2019 and are held by a trustee for the bond until conditions are met.

The restricted cash will be used for pre-approved projects primarily related to preliminary engineering and design work of a water treatment plant in Maine’s Biddeford and Saco division.

The trustee released all proceeds of from the bond during the first quarter of 2020.

Maine Water has outstanding term loans with a commercial bank in an aggregate amount of $ 17,500 as of December 31, 2020.

Under its master loan agreement, Maine Water is required to comply with financial and operational covenants substantially identical to those found in CTWS and Connecticut Water’s master loan agreements.

Maine is required to maintain a debt to

capitalization ratio of not more than 60 % and an interest coverage ratio of no less than 3 to 1.

As of December 31, 2020, Maine Water was in compliance with all covenants under its master loan agreement.

The following is a table of the consolidated company’s schedule of principal payments:

2021 $ 76,322

Thereafter 1,179,828

The estimated fair value of long-term debt as of December 31, 2020 and 2019 was approximately $ 1,570,727 and $ 1,396,205 , 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 fair value of long-term debt would be categorized as Level 2 of the fair value hierarchy.

The proceeds were used for pre-approved projects primarily related to preliminary engineering and design work of a water treatment plant in Maine’s Biddeford and Saco division.

Financial Covenants

The debt and credit agreements of SJW Group and its subsidiaries contain various financial and other covenants.

Non-compliance with these covenants could result in accelerated due dates and termination of the agreements.

In addition, the credit

agreements contain customary representations and warranties and subject to customary events of default, which may result in outstanding notes becoming immediately due and payable.

As of December 31, 2021, SJW Group and its subsidiaries were in compliance with all covenants related to its long-term debt agreements.

The components of income tax expense were:

28 unchanged sentences

Other 8,128 6,792

Gross deferred tax assets 78,760 68,361

Valuation allowance — ( 1,924 )

Total deferred tax assets 71,800 78,760

16 unchanged sentences

Net operating loss carryforwards expire beginning in 2032 and ending in 2039.

As of December 31, 2020, the estimated amount of net operating loss carryforwards available to offset future taxable income for Connecticut and Maine purposes are $ 29,555 and $ 1,087 , respectively.

SJW Group also acquired from the CTWS merger estimated state tax credit carryforwards of $ 1,033 which will expire beginning in 2021 and ending in 2040.

As of December 31, 2021, the estimated amount of net operating loss carryforwards available to offset future taxable income for Connecticut purposes is $ 26,820 .

The estimated state tax credit carryforwards are $ 667 which will expire beginning in 2023 and ending in 2040.

The change in the net deferred tax liabilities of $ 9,036 in 2021 included other non-cash items primarily consisting of regulatory assets and liabilities relating to income tax temporary differences.

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SJW Group has not accrued any penalties for unrecognized tax benefits.

The amount of interest recognized in 2020 was a increase to expense of $ 80 .

The amount of interest recognized in 2021 was an increase to expense of $ 270 .

SJW Group does not foresee material changes to its gross uncertain tax liability within the next 12 months following December 31, 2021.

On December 22, 2017 the Tax Act was signed into law.

The Tax Act includes a number of changes in existing tax law impacting businesses including, among other things, a reduction in the corporate income tax rate from 35% to 21%.

The rate reduction was effective on January 1, 2018.

The lower tax rate benefits associated with regulatory operations governed by state public utility commissions are expected to flow back to customers with no impact to net income.

The state public utility commissions have directed the water utilities to record the difference between the revenues collected under existing rates and the revenue that would have been collected had the existing rates been set using the new federal statutory income tax rate as a regulatory liability or to establish a memorandum account.

In addition, the benefit of amortization of excess deferred income taxes created by the reduction of tax rate to 21% will flow back to the customers under current normalization rules and agreed upon methods with the commissions.

On March 27, 2020 the CARES Act was signed into law and included several income tax provisions.

The income tax provisions included modifications to net operating loss (“NOL”) usage limitations, net operating loss carrybacks, business interest expense limitations and timing of estimated tax payments.

SJW Group has not generated NOLs in recent years and does not expect to generate a loss in 2020 so the CARES Act’s provisions related to carryback of losses are not applicable.

The business interest limitation rules, including those changes under the CARES Act, under Section 163(j) are not applicable to the SJW Group’s regulated businesses.

SJW Group has accounted for the applicable effects of the CARES Act.

SJW Group files U.S.

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Intangible assets consist of a concession fee paid to the City of Cupertino of $ 6,800 for operating the City of Cupertino municipal water system, $ 13,400 related to the purchase premium for customer relationships and other intangibles of $ 16,076 as of December 31, 2021.

Other intangibles primarily consist of $ 3,999 which was paid for service area and water rights related to CLWSC, $ 5,984 for infrastructure related to the Cupertino service concession arrangement, $ 1,400 for customer relationships and $ 1,040 incurred in conjunction with Valley Water water contracts related to the operation of SJWC.

All intangible assets are recorded at cost and are primarily being amortized using the straight-line method over the legal or estimated economic life of the asset ranging from 5 to 70 years.

Other intangibles primarily consist of $ 4,290 which was paid for service area and water rights by CLWSC, $ 5,984 for infrastructure related to the Cupertino service concession arrangement, $ 1,400 for customer relationships and $ 1,040 incurred in conjunction with Valley Water water contracts related to the operation of SJWC.

All intangible assets are recorded at cost and are primarily being amortized using the straight-line method over the legal or estimated economic life of the assets ranging from 5 to 70 years.

Amortization expense for the intangible assets was $ 1,553 , $ 1,401 and $ 745 for the years ended December 31, 2021, 2020 and 2019, respectively.

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On June 24, 2021, the Valley Water Board of Directors approved treated water deliveries reflecting the contractual delivery schedule reduced by 23 % through June 30, 2022.

Effective February 1, 2022, the treated water contract delivery schedule will increase by 10 %, and Valley Water will evaluate supply conditions and adjust the delivery schedules as appropriate.

Based on current prices and estimated deliveries, SJWC is committed to purchase from Valley Water a minimum of 90 % of the reduced delivery schedule, or 18,756 million gallons ($ 92,902 ) of water at the current contract water rate of $ 5.0 per million gallons for the year ending December 31, 2022.

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Under the terms of the contract agreement, SJWC assumed responsibility for maintenance and operating costs, while receiving all payments for water service.

SJWC and the City of Cupertino signed an amendment to the lease agreement dated January 8, 2020.

SJWC and the City of Cupertino signed an amendment to the lease agreement dated

January 8, 2020.

Under the terms of the amended lease agreement, SJWC agreed to an incremental up-front payment of $ 5,000 to be used by the City of Cupertino for capital improvements to the City’s municipal water system prior to the expiration of the lease in September 2022.

Any unspent funds at lease termination remain the property of the City.

On November 2, 2021, the City of Cupertino approved another amendment to the current lease agreement executed on January 8, 2020.

This second amendment provides the City of Cupertino options to extend the lease agreement by periods of six months , two years , or three years with modifications of additional capital improvement funds of $ 350 , $ 1,600 and $ 2,500 , respectively, depending on the lease extension period option.

These options are intended to provide the City of Cupertino more time, if needed, to complete its Request For Proposals process for a new lease term and conduct analyses of other alternatives for the operation of the water system.

Connecticut Water has an agreement with the South Central Connecticut Regional Water Authority (“RWA”) to purchase water from RWA.

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The current tariff rate wa s $ 1.51 per hundred cubic feet as of December 31, 2021.

As of December 31, 2020, SJWC had 370 employees, of whom 137 were executive, administrative or supervisory personnel, and of whom 233 were members of unions.

On November 12, 2019 and February 20, 2020, SJWC reached three-year bargaining agreements with the International Union of Operating Engineers, representing certain employees in the engineering department, and the Utility Workers of America, representing the majority of all nonadministrative employees at SJWC, respectively, covering January 1, 2020 through December 31, 2022.

As of December 31, 2021, SJWC had 362 employees, of whom 226 were members of unions.

On November 12, 2019 and February 20, 2020, SJWC reached three-year bargaining agreements with the International Union of Operating Engineers, representing certain employees in the engineering department, and the Utility Workers of America, representing the majority of all nonadministrative employees at SJWC covering January 1, 2020 through December 31, 2022.

The agreements include a 3 % wage increase in 2020, 3 % in 2021 and 4 % in 2022 for members of both unions.

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

Contingencies

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For SJWC employees hired on or after March 31, 2008, benefits are determined using a cash balance formula based upon compensation credits and interest credits for each employee.

Certain employees hired before March 1, 2012, and covered by a plan merged into the CTWS plan in 2013 are also entitled to benefits based on the employee’s years of service and compensation.

Interest is credited based on the annual yield on 30-year Treasury bonds as of October for the preceding plan year with a minimum annual rate of 3.25% and a maximum annual rate of 6.00%.

For the year ended December 31, 2021, interest credits assumption was 3.50%.

CTWS employees hired on or after January 1, 2009 are entitled to an additional 1.5 % of eligible compensation to their company sponsored savings plan.

Certain employees hired before March 1, 2012, and covered by a plan merged into the CTWS plan in 2013 are also entitled to benefits based on the employee’s years of service and compensation.

CTWS employees hired on or after January 1, 2009 are entitled to

an additional 1.5 % of eligible compensation to their company sponsored savings plan.

SJW Group does not have multi-employer plans.

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Unrealized actuarial gains and losses on pension assets are amortized over the expected future working lifetime of participants for actuarial expense calculation purposes.

Market gains in 2019 decreased pension expense by approximately $ 5,464 in 2020 and market losses in 2018 increased pension expense by approximately $ 4,485 in 2019.

Fo r t he year ended December 31, 2020, the net actuarial loss of the benefit obligation was related primarily a loss from changes of discount rate of $ 46,443 , a $ 489 loss in data and other changes, and a gain from mortality changes of $ 2,139 .

Market gains in 2020 decreased pension expense by approximately $ 2,442 in 2021 and market gains in 2019 decreased pension expense by approximately $ 5,464 in 2020.

For the year ended December 31, 2021, the net actuarial gain of the benefit obligation was related primarily a gain from changes of discount rate of $ 20,017 , a $ 11,913 loss from pension data changes, and a loss from mortality changes of $ 593 .

Generally, it is expected of the investment managers that the performance of the assets held in the pension plans, computed on a total annual rate of return basis, should meet or exceed specific performance standards over a three -to- five-year period and/or full market cycle.

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SJWC’s senior management hired on or after March 31, 2008 are eligible to receive additional retirement benefits under SJWC’s Cash Balance Executive Supplemental Retirement Plan ("Cash Balance Executive Supplemental Retirement Plan").

plans are non-qualified plans in which only senior management and other designated members of management may participate.

Both of the plans are non-qualified plans in which only senior management and other designated members of management may participate.

The annual cost of the plans has been included in the determination of the net periodic benefit cost shown below.

The SERP and Cash Balance Executive Supplemental Retirement Plan had a projected benefit obligation of $ 50,742 and $ 50,757 as of December 31, 2021 and 2020, respectively, and net periodic pension cost of $ 4,456 , $ 4,480 and $ 3,219 for 2021, 2020 and 2019, respectively.

For the year ended December 31, 2021, 2020 and 2019, the amounts not recognized as a component of net periodic benefit cost was $ 901 , $( 1,190 ), and $( 788 ), respectively, recorded as other comprehensive income on the consolidated financial statements.

SJWC’s plans are unfunded while CTWS’s SERP is funded through investments consisting primarily of life insurance contracts and assets in a Rabbi Trust.

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For CTWS’s employees hired on or after January 1, 2009 and ineligible to participate in the defined benefit pension plan, CTWS contributes an additional 1.5 % of eligible contributions.

SJW Group contributions were $ 2,824 , $ 2,046 and $ 1,569 in 2020,

2019 and 2018, respectively.

SJW Group contributions were $ 2,822 , $ 2,824 and $ 2,046 in 2021, 2020 and 2019, respectively.

All of the company’s contributions are invested at the direction of the employees in funds offered under the plans.

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CTWS’s deferred compensation plan allows the company to make discretionary contributions.

Senior management and non-employee directors had deferred $ 6,144 , $ 7,834 and $ 4,244 under the plans as of December 31, 2020, 2019 and 2018, respectively.

As of December 31, 2020 and 2019, $ 4,130 and $ 3,801 , respectively, of the total amount deferred is related to CTWS agreements that were assumed as part of the merger transaction on October 9, 2019.

Senior management and non-employee directors

had deferred $ 6,237 , $ 6,144 and $ 7,834 under the plans as of December 31, 2021, 2020 and 2019, respectively.

As of December 31, 2021 and 2020, $ 4,599 and $ 4,130 , respectively, of the total amount deferred is related to CTWS agreements.

Assumptions Utilized on Actuarial Calculations

37 unchanged sentences

Interest cost 9,415 10,484 806 956

Business combination — 108,162 — 12,537

Actuarial (gain)/loss ( 5,477 ) 42,164 ( 2,235 ) 2,421

7 unchanged sentences

Actual return on plan assets 34,826 32,869 2,460 2,383

Business combination — 79,382 — 9,314

Employer contributions 13,147 16,609 669 675

7 unchanged sentences

2021 2020 2021 2020

Noncurrent assets $ 6,422 — $ — —

Current liabilities ( 2,782 ) ( 2,760 ) ( 139 ) ( 133 )

5 unchanged sentences

Regulatory asset, amount to be recovered in future rates $ 62,197 94,362

As of December 31, 2021 and 2020, the amounts deferred in regulatory assets that have not yet been recognized as components of net periodic benefit cost include net loss of $ 62,270 and $ 94,476 , respectively, and prior service cost of $ 73 and $ 114 , respectively.

Plan assets as of December 31 were as follows:

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The Plan was subsequently amended and restated by the Board on July 29, 2015, and thereafter amended on November 15, 2016, October 28, 2020 and January 28, 2021.

SJW Group also maintains stock plans in connection with the merger with CTWS which are no longer granting new awards under those plans.

The 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.

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In addition, shares are issued to employees under the Employee Stock Purchase Plan (“ESPP”) that was approved by SJW Group stockholders.

As of December 31, 2020, 2019 and 2018, 880,495 , 819,340 and 793,811 shares have been issued pursuant to the Plan, and 178,106 , 174,764 and 124,275 shares are issuable upon the vesting of outstanding restricted stock units and deferred restricted stock units for the years ended 2020, 2019 and 2018, respectively.

As of December 31, 2021, 2020 and 2019, 946,086 , 880,495 and 819,340 shares have been issued pursuant to the Plan, and 168,721 , 178,106 and 174,764 shares are issuable upon the vesting of outstanding restricted stock units, performance-based stock units, and deferred restricted stock units for the years ended 2021, 2020 and 2019, respectively.

The remaining shares available for issuance under the Plan are 685,193 as of December 31, 2021.

6 unchanged sentences

Total compensation costs charged to income $ 4,246 3,553 3,406

Proceeds from the exercise of stock options and similar instruments:

ESPP 1,830 1,603 1,371

Total proceeds from the exercise of stock options and similar instruments $ 1,830 1,603 1,371

ESPP proceeds $ 2,026 1,830 1,603

Restricted Stock and Deferred Restricted Stock

Under SJW Group’s Amended and Restated Deferred Restricted Stock Program (the “Deferred Restricted Stock Program”), SJW Group granted deferred restricted stock units to non-employee Board members.

This program was amended effective January 1, 2008.

As a result of that amendment, no new awards of deferred restricted stock units will be made under the Deferred Restricted Stock Program with respect to Board service after December 31, 2007.

A summary of SJW Group’s restricted and deferred restricted stock awards under the Plan as of December 31, 2021, and changes during the year ended December 31, 2021, are presented below:

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Nonvested as of December 31, 2021 123,410 $ 66.43

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

CTWS 2014 Performance Stock Program, CTWS 2004 Performance Stock Program and CTWS 1994 Performance Stock Program (collectively, the “CTWS Plan”);

as of October 9, 2019 a total of 156,022 shares of SJW common stock have been reserved for issuance under the assumed awards.

These assumed awards generally retain all of the rights, terms and conditions of the respective plans and award agreements under which they were originally granted.

During the year ended December 31, 2020, the CTWS Plan issued, exercised and forfeited 1,701 , 47,583 and 0 of shares respectively, of restricted stock based awards and deferred restricted stock.

As of December 31, 2020, approximately 57,049 shares of restricted stock based awards and deferred restricted stock were outstanding under the CTWS Plan that were assumed by SJW Group on October 9, 2019.

Total fair value of restricted stock awards for all plans that were vested for the years ended 2021, 2020 and 2019 were $ 3,332 , $ 3,333 and $ 2,420 , respectively.

4 unchanged sentences

As of December 31, 2021, 15,577 performance-based and market-based restricted stock awards vested and 51,160 remained outstanding.

Dividend Equivalent Rights

Under the Plan, certain holders of restricted stock and deferred restricted stock awards may have the right to receive dividend equivalent rights (“DERs”) each time a dividend is paid on common stock after the grant date.

Stock compensation on DERs is recognized as a liability and recorded against retained earnings on the date dividends are issued.

The Deferred Restricted Stock and Deferral Election Programs for non-employee Board members were amended effective January 1, 2008, to allow the DERs’ with respect to the deferred shares to remain in effect only through December 31, 2017.

Accordingly, the last DERs’ conversion into deferred restricted stock units under such programs occurred on the first business day in January 2018.

Previously, no such time limitation was placed in the Deferred Restricted Stock and Deferral Election Program.

Certain CTWS restricted stock awards and deferred restricted stock assumed under the merger agreement retained rights to receive DERs that will convert into deferred restricted stock awards on SJW Group’ quarterly dividend payment dates.

As of December 31, 2020, 2019 and 2018, a cumulative of 83,679 , 81,231 and 79,478 dividend equivalent rights were converted, since inception, to deferred restricted stock awards, respectively.

For the years ended December 31, 2020, 2019 and 2018, $ 160 , $ 93 and $ 97 , respectively, related to dividend equivalent rights were recorded against retained earnings and were accrued as a liability.

Employee Stock Purchase Plan

3 unchanged sentences

The remaining shares available for issuance under the ESPP are 185,509 as of December 31, 2021.

As of December 31, 2020, the ESPP had twelve purchase intervals since its inception.

As of December 31, 2021, the ESPP had fourteen purchase intervals since its inception.

For the year ended December 31, 2021, 2020 and 2019, a total of 35,304 , 31,750 and 30,255 shares, respectively, were issued under the ESPP.

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(i) SJWC, a water utility operation with both regulated and non-tariffed businesses, (ii) SJWTX, Inc.

which is doing business as CLWSC, a regulated water utility located in Canyon Lake, Texas, and its consolidated non-tariffed variable interest entity, Acequia Water Supply Corporation, (iii) SJW Land Company and its consolidated variable interest entity, 444 West Santa Clara Street, L.P., which operated commercial building rentals, and (iv) as of October 9, 2019, SJWNE LLC a holding company for CTWS and its subsidiaries, Connecticut Water, Maine Water, HVWC, Avon Water, NEWUS and Chester Realty, Inc.

On September 30, 2020, Avon Water and HVWC merged into Connecticut Water after receiving merger approval from PURA.

and (iv) SJWNE LLC a holding company for CTWS and its subsidiaries, Connecticut Water, Maine Water, NEWUS and Chester Realty, Inc.

In accordance with FASB ASC Topic 280—“Segment Reporting,” SJW Group has determined that it has two reportable business segments.

1 unchanged sentence

SJW Group’s reportable segments have been determined based on information used by the chief operating decision maker.

SJW Group’s chief operating decision maker includes the Chairman, President and Chief Executive Officer, and his executive staff.

SJW Group’s chief operating decision maker includes the Chair, President and Chief Executive Officer, and his executive staff.

The executive staff reviews financial information presented on a consolidated basis that is accompanied by disaggregated information about operating revenue, net income and total assets, by subsidiary.

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on a stand-alone basis.

For the year ended December 31, 2018, the “All Other” category includes the accounts of SJW Group on a stand-alone basis.

(2) As of December 31, 2021, 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.

Business Combination

Business Combinations

Kendall West Utility and Bandera East Utility

Kendall West Utility and Bandera East Utility, together, add approximately 5,000 people through 1,600 service connections in a service area approximately 19 square miles to CLWSC’s operations.

The total net cash price was approximately $ 23,587 .

The preliminary purchase price allocation for these acquisitions primarily consisted of acquired utility plant of approximately $ 9,400 and goodwill of approximately $ 12,300 .

The results of Kendall West Utility and Bandera East Utility are included in SJW Group’s consolidated statements of comprehensive income since the acquisition date, including revenues and net loss, and were not material.

Pro forma financial information has not been presented because the acquisition was not material to SJW Group’s consolidated financial statements.

On October 9, 2019, SJW Group completed the merger with CTWS, a company that provides water service throughout Connecticut and Maine.

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There was no impact associated with the measurement period adjustments to the consolidated statement of comprehensive income for the year ended December 31, 2020.

The following unaudited pro forma financial information summarizes the combined results of operations for SJW Group and CTWS, as though the companies were combined as of January 1, 2018.

Fiscal Year Ended

Total revenues $ 515,153 514,364

Pretax income (loss) 60,862 72,938

Net income (loss) 56,968 65,449

Basic earnings per share 2.00 2.31

The historical consolidated financial information has been adjusted in the pro forma combined financial statements to give effect to pro forma events that are:

(1) directly attributable to the transaction, (2) factually supportable and (3) expected to have continuing impact on the combined results of SJW Group and CTWS.

As such, the impact of non-recurring transaction related expenses is not included.

The pro forma financial statements do not reflect all cost savings (or associated costs to achieve such savings) from operating efficiencies or synergies that could result from the transaction.

In addition, the pro forma financial information is for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at January 1, 2018.

Unaudited Quarterly Financial Data

Summarized quarterly financial data is as follows:

2020 Quarter Ended

March June September December

Operating revenue $ 115,754 147,209 165,863 135,700

Operating income 15,427 36,070 41,883 24,290

SJW Group net income 2,417 19,721 26,093 13,284

Comprehensive income 2,282 19,731 26,169 12,142

Earnings per share:

—Basic 0.08 0.69 0.91 0.47

—Diluted 0.08 0.69 0.91 0.46

Market price range of stock:

—High 74.73 65.93 71.06 70.34

—Low 49.48 53.11 58.56 60.11

Dividend per share 0.32 0.32 0.32 0.32

2019 Quarter Ended

March June September December

Operating revenue $ 77,682 102,965 113,997 125,838

Operating income 12,408 21,971 17,084 6,016

SJW Group net income 5,873 13,538 9,478 ( 5,486 )

Comprehensive income 5,873 13,538 9,478 ( 5,360 )

Earnings per share:

—Basic 0.21 0.48 0.33 ( 0.20 )

—Diluted 0.21 0.47 0.33 ( 0.19 )

Market price range of stock:

—High 63.76 63.40 69.23 74.47

—Low 54.74 59.83 61.23 67.13

Dividend per share 0.30 0.30 0.30 0.30

FINANCIAL STATEMENT SCHEDULE

6 unchanged sentences

Intercompany receivables — 258

Income tax receivable — 7,491

Intercompany notes receivable 6,015 15,680

1 unchanged sentence

$ 1,617,356 1,552,604

$ 1,552,604 1,481,376

See Accompanying Notes to Schedule I

FINANCIAL STATEMENT SCHEDULE

SJW Group (Parent Only)

CONDENSED BALANCE SHEETS

(in thousands, except share and per share data)

Capitalization and Liabilities

14 unchanged sentences

Intercompany notes payable 9,712 19,540

Accounts payable 170 1,042

Accrued interest 3,223 3,195

21 unchanged sentences

Interest on long-term debt, mortgage and other interest expense ( 18,673 ) ( 19,430 ) ( 6,615 )

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

Interest income on money market fund — — 6,536

1 unchanged sentence

Loss before income taxes and equity earnings from subsidiaries ( 17,845 ) ( 23,040 ) ( 23,219 )

Benefit for income taxes ( 6,414 ) ( 1,431 ) ( 6,917 )

Income tax benefit ( 4,660 ) ( 6,414 ) ( 1,431 )

Equity earnings from subsidiaries, net of taxes 73,663 78,141 45,191

SJW Group net income 60,478 61,515 23,403

Other comprehensive (loss) income, net ( 1,190 ) 126 —

Other comprehensive income (loss), net 901 ( 1,190 ) 126

SJW Group comprehensive income $ 61,379 60,325 23,529

11 unchanged sentences

Share-based compensation 679 466 141

Other non-cash, net — — 423

Gain on sale of TWA ( 3,000 ) — —

Changes in operating assets and liabilities, net of acquired assets and liabilities:

5 unchanged sentences

Other changes, net 605 367 808

Net cash provided by (used in) operating activities 38,236 11,630 ( 5,268 )

Net cash provided by operating activities 33,812 38,236 11,630

Investing activities:

2 unchanged sentences

Investments in subsidiaries ( 35,118 ) ( 37,952 ) ( 62,262 )

Proceeds from sale of TWA 3,000 — —

Payments for business acquisition — — ( 837,903 )

Proceeds from sale of equity investments — — 4,112

Net cash (used in) provided by investing activities ( 46,905 ) ( 906,892 ) 19,540

Net cash used in investing activities ( 22,453 ) ( 46,905 ) ( 906,892 )

Financing activities:

2 unchanged sentences

Long-term borrowings — 50,000 510,000

Repayments of long-term borrowings ( 50,000 ) — —

Issuance of common stock, net of issuance costs 91,029 — ( 10 )

1 unchanged sentence

Dividends paid ( 40,137 ) ( 36,509 ) ( 34,134 )

Other changes, net — ( 10 ) —

Net cash provided by financing activities 8,070 484,059 397,658

Net cash (used in) provided by financing activities ( 8,936 ) 8,070 484,059

Net change in cash and cash equivalents 2,423 ( 599 ) ( 411,203 )

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SJW Group is a legal entity separate and distinct from its various subsidiaries.

As a holding company with no significant operations of its own, SJW Group’s principal sources of funds are dividends or other distributions from its operating subsidiaries, borrowings and sales of equity.

The rights of SJW Group and, consequently, its creditors and shareholders, to participate in any distribution of assets of any of its subsidiaries are subject to certain prior claims of creditors of such subsidiary.

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SJW Group and its subsidiaries are subject to debt covenants that could limit their respective abilities to pay dividends.

For a discussion on these covenants, see Note 4 to SJW Group and Subsidiaries Notes to Consolidated Financial Statements.

For a discussion on these covenants, see Note 6 , “Long-term Debt” to SJW Group and Subsidiaries Notes to Consolidated Financial Statements.

In addition, Connecticut Water Service, Inc.

(“CTWS”) and its regulated subsidiaries are prohibited from paying dividends if not in compliance with minimum equity requirements under commitments made by SJW Group as part of the approval granted by the Connecticut Public Utilities Regulatory Authority and the Maine Public Utilities Commission in connection with the merger with CTWS.

As of December 31, 2021, the restricted net assets of SJW Group’s subsidiaries was approximately $ 337,787 or 33 % of consolidated net assets of SJW Group.

21 unchanged sentences

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 8. Financial Statements and Supplementary Data