What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-07-29 compared with 2022-04-29 · 117 added, 86 removed, 249 unchanged (45% of the section changed)

35 unchanged sentences

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.

In addition, SJWTX Holdings intends to create a new subsidiary to hold future wholesale water supply assets prior to the end of 2022.

SJW Land Company and Chester Realty, Inc.

own undeveloped land and operate commercial buildings in Tennessee, California and Connecticut.

SJW Land Company owned the following real properties during the three months ended March 31, 2022:

% for Three months ended March 31, 2022 of SJW Land Company

SJW Land Company and Chester Realty, Inc.

owned the following real properties during the six months ended June 30, 2022:

% for Six months ended June 30, 2022 of SJW Land Company

Description Location Acreage Square Footage Revenue Expense

8 unchanged sentences

(1) Regional regulated water utility operations;

(2) Regional non-tariffed water utility related services provided in accordance with the guidelines established by the California Public Utilities Commission (“CPUC”) in California, the Public Utilities Regulatory Authority (“PURA”) in Connecticut, the Public Utilities Commission of Texas (“PUCT”) in Texas, and the Maine Public Utilities Commission (“MPUC”) in Maine;

(2) Regional non-tariffed water utility related services provided in accordance with the guidelines established by the CPUC in California, the Public Utilities Regulatory Authority (“PURA”) in Connecticut, the Public Utilities Commission of Texas (“PUCT”) in Texas, and the Maine Public Utilities Commission (“MPUC”) in Maine;

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

11 unchanged sentences

Chester Realty, Inc.

owns and operates land and commercial buildings in the State of Connecticut.

owns and operates land and commercial buildings in Connecticut.

SJW Land Company and Chester Realty, Inc.

5 unchanged sentences

Our significant accounting policies are described in our notes to the 2021 Consolidated Financial Statements included in our annual report on Form 10-K for the year ended December 31, 2021.

There have been no changes to our critical or significant accounting policies during the three months ended March 31, 2022.

There have been no changes to our critical or significant accounting policies during the three months ended June 30, 2022.

Results of Operations:

3 unchanged sentences

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.

SJW Group’s consolidated net income for the three months ended March 31, 2022, was $3,737, an increase of $1,121, or approximately 43%, from $2,616 for the same period in 2021.

Consolidated net income in 2022 includes $2,550 from ongoing operations and a gain on the sale of nonutility property of $4,240, offset by the one-time impacts of $1,867 related to depreciation on certain Cupertino concession assets and $1,366 related to San Jose Water Company’s Order Instituting Investigation settlement expenses and certain true-ups of deferred taxes and acquisition related tax expenses.

SJW Group’s consolidated net income for the three months ended June 30, 2022, was $11,558, a decrease of $9,217, or approximately 44%, from $20,775 for the same period in 2021.

Consolidated net income includes a one-time impact of $441 related to SJWC’s Order Instituting Investigation settlement expenses.

SJW Group’s consolidated net income for the six months ended June 30, 2022, was $15,295, a decrease of $8,096, or approximately 35%, from $23,391 for the same period in 2021.

Consolidated net income in 2022 includes a gain on the sale of nonutility property of $4,450, offset by the one-time impacts of $1,960 related to depreciation on certain Cupertino concession assets and $1,709 related to SJWC’s Order Instituting Investigation settlement expenses and certain true-ups of deferred taxes and acquisition related tax expenses.

Operating Revenue

Operating Revenue by Segment

Three months ended March 31,

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

2022 2021 2022 2021

Water Utility Services $ 147,675 150,921 $ 270,621 264,362

3 unchanged sentences

Three months ended

Increase/(decrease)

2021 Six months ended

Increase/(decrease) Increase/(decrease)

Water Utility Services:

6 unchanged sentences

Real Estate Services 46 — % 57 — %

$ (3,200) (2) % $ 6,317 2 %

Operating Expense

Operating Expense by Segment

Three months ended March 31,

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

2022 2021 2022 2021

Water Utility Services $ 121,227 117,514 $ 226,657 217,361

4 unchanged sentences

Three months ended

Increase/(decrease)

2021 Six months ended

Increase/(decrease) Increase/(decrease)

Water production expenses:

10 unchanged sentences

Gain on sale of nonutility properties — — % (5,450) (2) %

$ 3,037 2 % $ 9,044 4 %

Sources of Water Supply

3 unchanged sentences

In addition, the water rate for purchased water and the groundwater extraction charge may be increased by Valley Water at any time.

If an increase occurs, then SJWC would file an advice letter with the California Public Utilities Commission (“CPUC”) seeking authorization to increase customer rates to offset the cost increase.

If an increase occurs, then SJWC would file an advice letter with the CPUC seeking authorization to increase customer rates to offset the cost increase.

We are currently experiencing a severe drought in California that is expected to have a significant impact on the sources of our water supply.

On April 1, 2022, Valley Water’s 10 reservoirs were at approximately 25% of total capacity with 13,595 million gallons of water in storage, which is 42% of the twenty-year average for this date.

Valley Water’s largest reservoir, Anderson, remains drained for the 8-10 year Anderson Dam Seismic Retrofit Project.

On July 1, 2022, Valley Water’s 10 reservoirs were at approximately 22% of total capacity with 11,822 million gallons of water in storage, which is 40% of the twenty-year average for this date.

Valley Water’s largest reservoir, Anderson, remains drained for a dam seismic retrofit project.

As reported by Valley Water, there was 8.35 inches of rainfall in San Jose during the current annual rainfall season that commenced on July 1, 2021.

Rainfall at SJWC’s Lake Elsman was measured at 34.48 inches during the current rainfall season.

Rainfall at SJWC’s Lake Elsman was measured at 37.50 inches during the current rainfall season compared to the five-year average of 47.17 inches.

Under normal hydrologic conditions, state and federal water allocations represent approximately 40% of the Valley Water’s total annual water supply.

As of April 1, 2022, Valley Water reported that allocations from the State Water Project was 5% or 1,629 million gallons.

Due to an exceptionally dry start to 2022, the U.S.

Bureau of Reclamation reduced the initial Central Valley Project allocation of 25% down to the Public Health and Safety limit.

As of July 1, 2022, Valley Water reported that allocations from the State Water Project was 5% or 1,629 million gallons and an additional allocation of human health and safety water has been secured.

Bureau of Reclamation allocation remains at public health and safety water only.

Valley Water reported that its Semitropic groundwater bank reserves are at 80% of capacity or 91,747 million gallons, which can be used to perform water transfers with other state water contractors.

Valley Water also reported that the managed groundwater recharge from January to March in the Santa Clara Plain was 108% of the five-year average.

The groundwater level in the Santa Clara Plain is approximately 5 feet higher than the five-year average.

Valley Water also reported that the managed groundwater recharge from January to June in the Santa Clara Plain was 84% of the five-year average.

The groundwater level in the Santa Clara Plain is approximately 10 feet higher than June 2021.

According to Valley Water, the projected total groundwater storage at the end of 2022 is expected to fall within the Alert Stage of Valley Water’s Water Shortage Contingency Plan.

On April 1, 2022, SJWC’s Lake Elsman contained 1,471 million gallons of water, of which approximately 1,321 million gallons can be utilized for treatment in water production.

On July 1, 2022, SJWC’s Lake Elsman contained 1,099 million gallons of water, of which approximately 949 million gallons can be released for treatment in water production and maintaining downstream bypass flow regulatory requirements.

This Lake Elsman volume represents 91% of the five-year average.

1 unchanged sentence

Typically, SJWC will utilize surface water and additional water from its portfolio of groundwater supplies to supplement imported water from Valley Water.

Production from the Montevina Surface Water Treatment Plant through the first quarter was 575 million gallons, which is 115% of the five-year average.

Through the first quarter of 2022, there was 43 million gallons of water production at SJWC’s smaller Saratoga Water Treatment Plant.

The Saratoga Water Treatment Plant was taken out of service due to lack of run-off from Saratoga Creek and remains offline.

Production from the Montevina Surface Water Treatment Plant through the second quarter was 996 million gallons, which is 88% of the five-year average.

Through the second quarter of 2022, there was 43 million gallons of water production at SJWC’s smaller Saratoga Water Treatment Plant.

The Saratoga Water Treatment Plant is out of service due to lack of run-off from Saratoga Creek and remains offline.

Nonetheless, SJWC believes that its various other water supply sources will be sufficient to meet customer demand through the remainder of 2022.

17 unchanged sentences

The following table presents the change in sources of water supply, in million gallons, for Water Utility Services:

Three months ended March 31, Increase/

Three months ended June 30, Increase/

(decrease) % of Total Change Six months ended June 30, Increase/

(decrease) % of Total Change

2022 2021 2022 2021

Purchased water 5,274 5,885 (611) (4) % 9,038 9,257 (219) (1) %

4 unchanged sentences

The changes in the source of supply mix were consistent with the changes in the water production expenses.

SJWC’s unaccounted-for water on a 12-month-to-date basis for March 31, 2022, and 2021 approximated 7.2% for each of the respective periods, as a percentage of total production.

SJWC’s unaccounted-for water on a 12-month-to-date basis for June 30, 2022, and 2021 approximated 7.5% and 7.1%, respectively, as a percentage of total production.

The unaccounted-for water estimate is based on the results of past experience and the impact of flows through the system, partially offset by SJWC’s main replacements and lost water reduction programs.

CTWS’s unaccounted-for water on a 12-month-to-date basis for March 31, 2022, and 2021 was approximately 13.9% and 16.2%, respectively, as a percentage of total production.

CTWS’s unaccounted-for water on a 12-month-to-date basis for June 30, 2022, and 2021 was approximately 13.5% and 15.7%, respectively, as a percentage of total production.

The unaccounted-for water estimate is based on the results of past experience and the impact of flows through CTWS’s systems, unadjusted for any required system flushing, partially offset by Water Infrastructure Conservation Adjustment and Water Infrastructure Surcharge main replacement programs and lost water reduction initiatives.

Water Production Expenses

The change in water production expenses for the three months ended March 31, 2022, compared to the same period in 2021, was primarily attributable to increases in average per unit costs for purchased water, groundwater extraction, energy charges and other production expenses, offset by an increase in available surface water for SJWC.

The change in water production expenses for the three and six months ended June 30, 2022, compared to the same period in 2021, was primarily attributable to increases in average per unit costs for purchased water, groundwater extraction, energy charges and other production expenses, offset by a decrease in customer usage and an increase in available surface water for SJWC.

Effective July 1, 2021, Valley Water increased the unit price of purchased water by approximately 9.5% and the groundwater extraction charge by approximately 9.1%.

SJWC was notified by Valley Water that the unit price of purchased water and groundwater extraction charges was increased 13.9% and 15%, respectively, effective July 1, 2022.

Other Operating Expenses

Operating expenses, excluding water production expenses, increased $3,254 for the three months ended March 31, 2022, compared to the same period in 2021.

The increase was primarily attributable to increases of $3,312 in administrative and general expenses primarily due to increases in labor and pension expense, and an increase of $4,168 in depreciation and amortization due to increases in utility plant and a true up related to Cupertino assets to adjust the useful lives over the concession term, partially offset by $5,450 from the gain on sale of vacant land located in California and nonutility property in Texas.

Operating expenses, excluding water production expenses, increased $4,363 for the three months ended June 30, 2022, compared to the same period in 2021.

The increase was primarily attributable to increases of $1,934 in administrative and general expenses primarily due to increases in labor and group insurance costs, and an increase of $1,695 in depreciation and amortization due to increases in utility plant.

Operating expenses, excluding water production expenses, increased $7,618 for the six months ended June 30, 2022, compared to the same period in 2021.

The increase was primarily attributable to increases of $5,863 in depreciation and amortization due to increases in utility plant and a true up related to Cupertino assets to adjust the useful lives over the concession term, and an increase of $5,247 in administrative and general expenses primarily due to increases in labor and group insurance costs, partially offset by $5,450 from the gain on sale of vacant land located in California and nonutility property in Texas.

Other (Expense) Income

For the three months ended March 31, 2022, compared to the same period in 2021, the change in other (expense) income was primarily due to an increase in interest on long term debt and a decrease on the return from retirement plan assets, partially offset by income generated from pension non service cost and a decrease in interest on the line of credit.

For the three and six months ended June 30, 2022 , compared to the same period in 2021, the change in other (expense) income was primarily due to the $3,000 pre-tax gain on sale from the release of a holdback amount by GBRA for the sale of TWA, an increase in interest on long term debt and a decrease on the return from retirement plan assets, partially offset by income generated from pension non service cost.

Provision for Income Taxes

For the three months ended March 31, 2022, compared to the same period in 2021, income tax expense increased $1,963.

The increase in income tax expense was primarily due to a decrease in pre-tax book income and discrete tax expense items.

The effective consolidated income tax rates were 22% and (52)% for the three months ended March 31, 2022, and 2021, respectively.

The higher effective rate for the three months ended March 31, 2022, was also primarily due to discrete tax expense items.

For the three and six months ended June 30, 2022, compared to the same period in 2021, income tax expense decreased $938 and increased by $1,025, respectively.

The decrease in income tax expense for the three months ended June 30, 2022 was primarily due to a decrease in pre-tax book income while the increase in income tax expense for the six months ended June 30, 2022 was primarily due to discrete tax expense items.

The effective consolidated income tax rates were 17% and 14% for the three months ended June 30, 2022, and 2021, respectively, and 18% and 9% for the six months ended June 30, 2022, and 2021, respectively.

The higher effective rate for the three and six months ended June 30, 2022, was also primarily due to discrete tax expense items.

Regulation and Rates

7 unchanged sentences

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

Review of the application is currently underway by the CPUC and new rates, if approved, are expected to be effective in the third quarter of 2022.

Review of the application is currently underway by the CPUC and new rates, if approved, are expected to be effective in the fourth quarter of 2022.

Due to the processing delay, SJWC filed Advice Letter No.

573 on December 30, 2021, to request interim rates effective January 1, 2022, which will allow SJWC to retroactively apply the final decision to January 1, 2022.

Interim rates are proposed to be set equal to present rates in order to avoid customer confusion and short-term bill changes.

Interim rates were requested to equal the present rates in effect to avoid customer confusion and short-term bill changes.

This advice letter was approved with an effective date of January 1, 2022.

SJWC and the Public Advocates Office filed a settlement agreement resolving all issues in the proceeding on January 13, 2022, which will be considered by the CPUC for adoption.

SJWC and the Public Advocates Office filed an amended settlement agreement resolving all issues in the proceeding on February 4, 2022, which will be considered by the CPUC for adoption.

The settlement provides a revenue increase of $54,131 over the three-year period with an increase of $25,074 in 2022.

The settlement recognizes the need for continued investments in the water system to deliver safe and reliable water service, providing authorization of a three-year $350,000 capital budget.

Additionally, it further aligns authorized and actual consumption, particularly for business customers, addresses our water supply mix variability, and provides greater revenue recovery in the fixed charge.

Additionally, it further aligns authorized and actual consumption, particularly for business customers, addresses the water supply mix variability, and provides greater revenue

recovery in the fixed charge.

The settlement also approves the recovery of $18,254 from balancing and memorandum accounts.

New rates are anticipated in the third quarter of 2022.

New rates are anticipated in the fourth quarter of 2022.

On May 3, 2021, SJWC filed Application No.

4 unchanged sentences

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

SJWC’s Advanced Metering Infrastructure (“AMI”) application is pending before the CPUC.

An all-party settlement agreement was submitted to the CPUC for adoption that would authorize the deployment of AMI outside of the capital budget requested in the 2021 GRC.

A final decision is anticipated on the AMI proceeding in the second quarter of 2022.

On December 6, 2019, SJWC filed Application No.

19-12-002 to deploy Advanced Metering Infrastructure (“AMI”) throughout its service area.

On August 5, 2021, an all-party settlement agreement was submitted to the CPUC for adoption that would authorize the deployment of AMI outside of the capital budget requested in the 2021 GRC.

A final decision approving the settlement agreement was issued on June 10, 2022.

On May 3, 2022, SJWC filed Advice Letter 575 to increase revenue requirement by $232 or 0.06% for utility plant improvements to the Franciscan Station Pumps.

This advice letter was approved on June 10, 2022 with an effective date of July 1, 2022.

SJWC filed Advice Letter No.

577 on May 24, 2022 to increase revenue requirement by $24,331 or 5.9% to offset the increases to purchased potable water charges, the groundwater extraction fee, and purchased recycled water charges from its water wholesalers effective July 1, 2022.

Advice Letter No.

577 was approved on June 30, 2022.

Connecticut Regulatory Affairs

9 unchanged sentences

On April 26, 2022, Connecticut Water filed for a WICA increase of $9,779 in completed projects.

If approved by PURA, the new WICA adjustment would be effective July 1, 2022 and would be expected to generate $963 in additional revenue.

PURA approved the Company’s application on June 22, 2022.

The cumulative WICA charge as of July 1, 2022 is 3.26%, collecting $3,448 on an annual basis.

On June 17, 2022, Connecticut Water submitted an application to PURA for the approval to issue unsecured notes in the amount of $25,000.

The notes carry an interest rate of 4.71% and the closing is expected to occur on December 15, 2022.

A decision is expected from PURA in August.

Texas Regulatory Affairs

CLWSC filed its annual Water Pass Through Charge (“WPC”) true-up report on January 31, 2022.

The 2022 WPC usage rate will increase from $0.70 to $1.02 dollars per thousand gallons due to CLWSC under-collecting the actual cost of purchased water and GBRA increasing its rates.

The PUCT modified the WPC formula which resulted in a new usage rate of $0.90 dollars per thousand gallons.

CLWSC filed its annual Water Pass Through Charge (“WPC”) true-up report on January 31, 2022 with the PUCT under Docket No.

The PUCT modified the WPC formula which resulted in a new usage rate increasing from $0.70 to $0.90 dollars per thousand gallons.

The new usage rate was effective March 1, 2022.

The Deer Creek Ranch water system has a separate WPC.

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

CLWSC received notice of an increase of 4% for the Deer Creek purchased water cost from WTPUA, effective in October 2021.

SJWTX also received notice from the LCRA of an increase of 7% per acre-foot for the firm water rate and the reservation rate.

The WPC true-up report for this system was submitted on December 1, 2021, which will result in an increase in the usage charge from $1.84 to $1.87 dollars per thousand gallons, and an increase in the monthly base charge of $1.04 dollars per residential account effective January 1, 2022.

The PUCT approved the new rates on March 25, 2022.

On September 3, 2021, Kendall West Utility filed its annual WPC true-up report under Docket No.

The true-up report resulted in a decrease in its WPC from $2.75 to $2.39 per thousand gallons.

The new rate was approved by the PUCT on January 24, 2022.

The PUCT issued the stamped approved tariff on February 4.

The true-up report was approved by the PUCT on May 10, 2022 and CLWSC received approval of the new tariff on May 24, 2022.

CLWSC filed its annual WPC true-up report for its Kendall West system on June 29, 2022 with the PUCT under Docket No.

CLWSC requested an increase from $2.39 to $3.69 per thousand gallons for the WPC.

Subsequent to this filing, the increase requested was revised to $2.56 per thousand gallons on July 15, 2022.

Maine Regulatory Affairs

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

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

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

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

The surcharge will be in effect for one year.

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

The supplemental application updates the March application and seeks $6,880, or 80.1% in additional revenue and provides a bill credit funded by the year one surcharge to offset a portion of the increase.

Like the surcharge, the bill credit will be in effect for one year.

On April 5, 2022, the MPUC approved a stipulated agreement which authorized a rate increase of $6,313, or 72.5% with an effective date of July 1, 2022, sets a 9.70% return on equity to be applied across all of Maine Water’s divisions until amended in a future rate case, and approved the use of a bill credit to return the amount collected through surcharge, effectively reducing the full impact of the rate increase during the one year credit period.

On October 28, 2021, Maine Water filed a Water Infrastructure Surcharge (“WISC”) application with the MPUC for the Skowhegan division requesting an increase of 3%, representing approximately $50 in additional revenues.

The WISC application was approved on December 27, 2021, and the surcharge became effective January 1, 2022.

The rates approved in the Biddeford Saco division by the April 5, 2022 stipulated agreement, which authorized a rate increase of $6,313, or 72.5% went into effect on July 1, 2022.

The Saco River Drinking Water Resource Center began supplying the water distribution system on June 16, 2022.

On February 28, 2022, Maine Water filed requests for general rate increases in the Camden-Rockland, Freeport, Millinocket and Oakland Divisions.

The four filings collectively request $529 in new revenue and seek to reset the WISC in all four

The four filings collectively request $532 in new revenue and seek to reset the WISC in all four divisions.

Individually, the Camden Rockland Division request is $225, or 3.4%;

2 unchanged sentences

and the Oakland request is $72, or 9.9%.

The four cases, while docketed separately, are proceeding through the adjudication process together.

Decisions by the Commission in these filings are expected in the third quarter of 2022.

On March 14, 2022, Maine Water filed a request for approval to issue $15,000 in long-term debt.

If approved, the new debt would be used to reduce short term borrowings.

The debt issuance was approved by the MPUC on April 20, 2022.

Cash Flow from Operating Activities

During the three months ended March 31, 2022, SJW Group generated cash flows from operations of approximately $45,300, compared to $33,400 for the same period in 2021.

During the six months ended June 30, 2022, SJW Group generated cash flows from operations of approximately $83,600, compared to $67,100 for the same period in 2021.

Cash flow from operations is primarily generated by net income from revenue producing activities, adjusted for non-cash expenses for depreciation and amortization, deferred income taxes, stock-based compensation, allowance for equity funds used during construction, gains or losses on the sale of assets, and changes in working capital items.

1 unchanged sentence

This increase was the result of a combination of the following factors:

(1) an increase of $6,900 in regulatory assets primarily due to the recognition of balancing and memorandum accounts, (2) payments of amounts previously invoiced and accrued including accrued production costs, increased by $5,200, (3) an increase in other changes, net of $2,800 primarily due to the funds from the State of California Water and Wastewater Arrearages Payment Program, and (4) general working capital and net income, adjusted for non-cash items increased by $2,600, offset by (5) a decrease in collections from accounts receivable and accrued unbilled utility revenue of $3,400, and (6) net collection of taxes receivable which was $2,200 less than in prior year.

As of March 31, 2022, Water Utility Services’ write-offs for uncollectible accounts represented less than 1% of its total revenue, unchanged from March 31, 2021.

(1) an increase of $25,500 in regulatory assets primarily due to the recognition of balancing and memorandum accounts, offset by (2) general working capital and net income, adjusted for non-cash items, decreased by $5,100, (3) an increase of a net payable of taxes payable which was $2,700 more than in prior year, and (4) payments of amounts previously invoiced and accrued including accrued production costs, decreased by $1,200.

As of June 30, 2022, Water Utility Services’ write-offs for uncollectible accounts represented less than 1% of its total revenue, unchanged from June 30, 2021.

As of February 1, 2022, the remaining state executive order suspending water service disconnections due to non-payment by customers expired in California.

2 unchanged sentences

On February 3, 2022, SJWC received $9,757 through the State of California Water and Wastewater Arrearages Payment Program to relieve outstanding payment delinquencies for customers accounts greater that 60-days past due as of June 30, 2021.

Bill credits were applied to customer accounts that remained outstanding and the excess of $3,272 was returned to the State of California.

The financial impact of certain remaining past due accounts are being recorded for future recovery through the rate-making process.

1 unchanged sentence

Cash Flow from Investing Activities

During the three months ended March 31, 2022, SJW Group used cash flows from investing activities of approximately $49,400, compared to $51,900 for the same period in 2021.

During the six months ended June 30, 2022, SJW Group used cash flows from investing activities of approximately $117,100, compared to $107,000 for the same period in 2021.

SJW Group used approximately:

1 unchanged sentence

Water Utility Services’ budgeted capital expenditures for 2022, exclusive of capital expenditures financed by customer contributions and advances, are anticipated to be approximately $223,000.

As of March 31, 2022, approximately $43,700 or 20% of the $223,000 has been invested.

As of June 30, 2022, approximately $101,600 or 46% of the $223,000 has been invested.

Water Utility Services’ capital expenditures are incurred in connection with normal upgrading and expansion of existing facilities and to comply with environmental regulations.

8 unchanged sentences

Cash Flow from Financing Activities

Net cash provided by financing activities for the three months ended March 31, 2022, decreased by approximately $13,700 from the same period in the prior year, primarily as a result of (1) a decrease in net proceeds from our common stock equity offering in prior year of $67,200, (2) a decrease in net proceeds of $17,000 from new long-term debt, offset by (3) an increase

in net borrowings and repayments on our lines of credit of $66,600, (4) $5,300 increase in net cash receipts from advances and contributions in aid of construction, and (5) an increase of dividends paid to stockholders of $1,200.

Net cash provided by financing activities for the six months ended June 30, 2022, decreased by approximately $24,700 from the same period in the prior year, primarily as a result of (1) a decrease in net proceeds from our common stock equity offering in prior year of $66,800, (2) a decrease in net proceeds of $72,000 from new long-term debt, (3) an increase of dividends paid to stockholders of $1,900, offset by (4) an increase in net borrowings and repayments on our lines of credit of $114,900, and (5) $1,100 increase in net cash receipts from advances and contributions in aid of construction.

Sources of Capital:

2 unchanged sentences

Short-term Financing Agreements

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 credit agreements as of March 31, 2022, are as follows:

SJW Group and its subsidiaries have unsecured line of credit agreements where borrowings are used for long-term capital expenditure financing, working capital, and general corporate purposes.

A summary of the line of credit agreements as of June 30, 2022, are as follows:

Maturity Date Line Limit Amounts Outstanding Unused Portion

7 unchanged sentences

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

During 2021, cost of borrowing on the lines of credit averaged 1.64%.

During the first half of 2022, cost of borrowing on the lines of credit averaged 1.44% compared to 1.39% in the same period in 2021.

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

All of 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 March 31, 2022, SJW Group and its subsidiaries were in compliance with all covenants on their lines of credit.

As of June 30, 2022, SJW Group and its subsidiaries were in compliance with all covenants on their lines of credit.

Long-term Financing Agreements

SJW Group and its subsidiaries long-term debt activities are for purposes of refinancing short-term borrowings, funding capital expenditures and working capital, and repayments of maturing long-term debt.

SJW Group and its subsidiaries long-term debt activities are for purposes of refinancing short-term borrowings, long-term capital expenditure financing and working capital, and refinancing of maturing long-term debt.

On April 6, 2022, 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 $15,000 and a fixed interest rate of 4.54%, due May 31, 2042.

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.

The promissory note contains customary representations and warranties.

Under the promissory note, Maine 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.

Proceeds from the borrowing were received on May 13, 2022.

On June 28, 2022, Connecticut Water entered into a note purchase agreement with certain affiliates of New York Life Insurance Company, pursuant to which Connecticut Water sold an aggregate principal amount of $25,000 of its 4.71% Senior Notes, Series 2022, due 2052.

The closing of the note purchase agreement is expected to occur on December 15, 2022, and is subject to customary closing conditions and regulatory approval.

The Series 2022 Notes are unsecured obligations of Connecticut Water.

Interest is payable semi-annually in arrears on June 15th and December 15th of each year.

The note purchase agreement contains customary representations and warranties.

Connecticut Water has agreed to customary affirmative and negative covenants for as long as the Series 2022 Notes are outstanding.

The Series 2022 Notes are also subject to customary

events of default, the occurrence of which may result in all of the Series 2022 Notes then outstanding becoming immediately due and payable.

On July 14, 2022, SJWC entered into a note purchase agreement with certain affiliates of New York Life Insurance, Metropolitan Life Insurance, Northwestern Mutual Life Insurance, and John Hancock Life Insurance (collectively the “Purchasers”), pursuant to which the company will sell an aggregate principal amount of $70,000 of its 4.85% Senior Notes, Series P (“Series P Notes”) to the Purchasers.

The Series P Notes are unsecured obligations of SJWC and are due on February 1, 2053.

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

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

The Series P Notes are also subject to customary events of default.

The closing is expected to occur in January 2023 upon satisfaction of customary closing conditions.

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

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In addition, the credit agreements contain customary representations and warranties and are subject to customary events of default, which may result in the outstanding debt becoming immediately due and payable.

As of March 31, 2022, SJW Group and its subsidiaries were in compliance with all covenants related to its long-term debt agreements.

As of June 30, 2022, SJW Group and its subsidiaries were in compliance with all covenants related to its long-term debt agreements.

Equity Financing Arrangements

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Proceeds from the sale of the shares under the Equity Distribution Agreement can be used in the financing of acquisitions, 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.

As of March 31, 2022, SJW Group has $75,000 remaining on the Equity Distribution agreement.

No shares were sold in the first quarter of 2022.

As of June 30, 2022, SJW Group has $75,000 remaining on the Equity Distribution agreement.

No shares were sold in the first and second quarters of 2022.

Credit Rating

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis