What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-10-28 compared with 2022-07-29 · 132 added, 100 removed, 266 unchanged (47% of the section changed)

24 unchanged sentences

In certain cases, Connecticut Water and Maine Water are or may be a party to limited contractual arrangements for the provision of water supply from neighboring utilities.

SJWTX, Inc., doing business as Canyon Lake Water Service Company (“CLWSC”), is a public utility in the business of providing water service to approximately 24,000 connections that serve approximately 73,000 people.

SJWTX, Inc., doing business as Canyon Lake Water Service Company (“CLWSC”), is a public utility in the business of providing water service to approximately 25,000 connections that serve approximately 76,000 people and approximately 900 wastewater connections.

CLWSC’s service area comprises more than 267 square miles in Bandera, Blanco, Comal, Hays, Kendall, Medina and Travis County in the growing region between San Antonio and Austin, Texas.

3 unchanged sentences

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,

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

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.

5 unchanged sentences

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

owned the following real properties during the nine months ended September 30, 2022:

% for Nine months ended September 30, 2022 of

Real Estate Services

Description Location Acreage Square Footage Revenue Expense

30 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 June 30, 2022.

There have been no changes to our critical or significant accounting policies during the three months ended September 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 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.

SJW Group’s consolidated net income for the three months ended September 30, 2022, was $25,034, an increase of $5,966, or approximately 31%, from $19,068 for the same period in 2021.

Consolidated net income for the three months ended September 30, 2022 includes a one-time impact of $355 related to SJWC’s Order Instituting Investigation settlement expenses.

SJW Group’s consolidated net income for the nine months ended September 30, 2022, was $40,329, a decrease of $2,130, or approximately 5%, from $42,459 for the same period in 2021.

Consolidated net income in 2022 includes a gain on the sale of nonutility property of $5,072, offset by the one-time impacts of $2,200 related to depreciation on certain Cupertino concession assets and $1,196 related to SJWC’s Order Instituting Investigation settlement expenses and certain true-ups of deferred taxes and acquisition related tax expenses.

1 unchanged sentence

Operating Revenue by Segment

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

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

2022 2021 2022 2021

4 unchanged sentences

Three months ended

2021 Six months ended

September 30,

2021 Nine months ended

September 30,

Increase/(decrease) Increase/(decrease)

3 unchanged sentences

Rate increases 9,485 6 % 22,172 5 %

Texas winter storm customer credits 838 — % 838 — %

Balancing and memorandum accounts

Monterey Water Revenue Adjustment Mechanism (“MWRAM”) 1,019 1 % 2,047 1 %

Water Conservation Memorandum Account (“WCMA”) 3,868 2 % 2,768 1 %

Other 184 — % 1,011 — %

Other regulatory mechanisms (2,967) (2) % (8,466) (2) %

4 unchanged sentences

Operating Expense by Segment

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

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

2022 2021 2022 2021

3 unchanged sentences

$ 138,379 133,149 $ 368,731 354,457

The change in consolidated operating expenses was due to the following factors:

The change in consolidated operating expense was due to the following factors:

Three months ended

2021 Six months ended

September 30,

2021 Nine months ended

September 30,

Increase/(decrease) Increase/(decrease)

18 unchanged sentences

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.

Such water supply cost and rate changes are expected to be mitigated in the future as a result of the water cost balancing account adopted in SJWC’s general rate case decision on October 6, 2022.

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 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.

On October 1, 2022, Valley Water’s 10 reservoirs were at approximately 17% of total capacity with 9,277 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.

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

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.

As of October 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 90,747 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 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 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.

Valley Water also reported that the managed groundwater recharge from January to September in the Santa Clara Plain was 112% of the five-year average.

The groundwater level in the Santa Clara Plain is approximately 21 feet higher than September 2021.

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

On October 1, 2022, SJWC’s Lake Elsman contained 679 million gallons of water, of which approximately 529 million gallons can be released for treatment in water production and to maintain downstream bypass flow regulatory requirements.

This Lake Elsman volume represents 82% 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 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.

Production from the Montevina Surface Water Treatment Plant through the third quarter was 1,340 million gallons, which is 88% of the five-year average.

Through the third 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.

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

3 unchanged sentences

The restrictions include limits on watering days and times, use of potable water for washing structures and other non-porous surfaces except to protect public health and safety, and no outdoor watering during and up to 48 hours after measurable rainfall.

Connecticut Water’s infrastructure consists of 65 noncontiguous water systems in the State of Connecticut.

These systems, in total, consist of approximately 1,800 miles of water main and reservoir storage capacity of 2.4 billion gallons.

The safe, dependable yield from our 235 active wells and 18 surface water supplies is approximately 65 million gallons per day.

Water sources vary among the individual systems, but overall approximately 80% of the total dependable yield comes from surface water supplies and 20% from wells.

Connecticut Water’s water sources vary among the individual systems, but overall approximately 80% of the total dependable yield comes from surface water supplies and 20% from wells.

In addition, Connecticut Water has water supply agreements to supplement its water supply with the South Central Connecticut Regional Water Authority and The Metropolitan District that expire 2058 and 2053, respectively.

CLWSC’s water supply consists of groundwater from wells and purchased treated and untreated raw water from local water agencies.

3 unchanged sentences

Production wells located in a Comal Trinity Groundwater Conservation District, a regulated portion of the Trinity aquifer, are charged a groundwater pump tax based upon usage.

Maine Water’s infrastructure consists of 12 noncontiguous water systems in the State of Maine.

These systems, in total, consist of approximately 600 miles of water main and reservoir storage capacity of 7.0 billion gallons.

The safe, dependable yield from our 14 active wells and 7 surface water supplies is approximately 120 million gallons per day.

Water sources vary among the individual systems, but overall approximately 90% of the total dependable yield comes from surface water supplies and 10% from wells.

Water sources at Maine Water vary among the individual systems, but overall approximately 90% of the total dependable yield comes from surface water supplies and 10% from wells.

Maine Water has a water supply agreement with the Kennebec Water District expiring in 2040.

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

Three months ended June 30, Increase/

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

Three months ended September 30, Increase/

(decrease) % of Total Change Nine months ended September 30, Increase/

(decrease) % of Total Change

6 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 June 30, 2022, and 2021 approximated 7.5% and 7.1%, respectively, as a percentage of total production.

SJWC’s unaccounted-for water on a 12-month-to-date basis for September 30, 2022, and 2021 approximated 8.6% and 6.9%, 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 June 30, 2022, and 2021 was approximately 13.5% and 15.7%, respectively, as a percentage of total production.

CTWS’s unaccounted-for water on a 12-month-to-date basis for September 30, 2022, and 2021 was approximately 14.2% and 14.6%, 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 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.

The change in water production expenses for the three and nine months ended September 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, 2022, Valley Water increased the unit price of purchased water by approximately 14% and the groundwater extraction charge by approximately 15%.

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 $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.

Operating expenses, excluding water production expenses, increased $3,731 for the three months ended September 30, 2022, compared to the same period in 2021.

The increase was primarily attributable to increases of $1,692 in depreciation and amortization due to increases in utility plant, $1,196 in administrative and general expenses primarily due to increases in labor, and an increase of $696 in maintenance expenses.

Operating expenses, excluding water production expenses, increased $11,348 for the nine months ended September 30, 2022, compared to the same period in 2021.

The increase was primarily attributable to increases of $7,555 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, an increase of $6,442 in administrative and general expenses primarily due to increases in labor and changes in cost recovery balancing and memorandum accounts, an increase of $1,453 in taxes other than income due to utility plant increases and an increase of $1,430 in maintenance expenses, partially offset by the gain on sale of vacant land located in California and nonutility property in Texas.

Other (Expense) Income

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.

For the three months ended September 30, 2022 , compared to the same period in 2021, the change in other (expense) income was primarily due to an increase in interest on the line of credit resulting from an increase in borrowings and higher short term borrowing rates, partially offset by a reduction in pension non-service cost.

For the nine months ended September 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 in prior year and a decrease in the return from retirement plan assets, partially offset by a reduction in pension non-service cost.

Provision for Income Taxes

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.

For the three and nine months ended September 30, 2022, compared to the same period in 2021, income tax expense decreased $2,526 and $1,501, respectively.

The decrease in income tax expense for the three and nine months ended September 30, 2022 was primarily due to discrete tax items and, for the nine months ended September 30, 2022, lower income.

The effective consolidated income tax rates were 1% and 13% for the three months ended September 30, 2022, and 2021, respectively, and 8% and 11% for the nine months ended September 30, 2022, and 2021, respectively.

The lower effective rate for the three and nine months ended September 30, 2022, was primarily due to a tax accounting method change at CTWS related to the non-network assets repairs deduction.

On August 16, 2022, the Inflation Reduction Act of 2022 (the “IRA”) was signed into law.

SJW Group has considered the income tax implications of the IRA in its estimated tax provision and does not believe it will materially impact the company’s year-end tax rate.

Regulation and Rates

4 unchanged sentences

California Regulatory Affairs

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.

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 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 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 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 fourth quarter of 2022.

SJWC filed General Rate Case Application No.

21-01-003 (“2022 GRC”) on January 4, 2021, 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 included 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.

Due to the delayed CPUC decision, SJWC was approved for interim rates effective January 1, 2022 via Advice Letter No.

573 on December 30, 2021.

The authorization of interim rates allows SJWC to retroactively apply the final decision to January 1, 2022.

The interim rates approved were set to equal the present rates in effect to avoid customer confusion and short-term bill changes.

SJWC and the Public Advocates Office filed an amended settlement agreement resolving all issues in the proceeding on February 4, 2022, for the CPUC’s consideration and adoption.

The settlement provides a revenue increase of $54,131 over the three-year period with an increase of $25,074 in 2022 and a recovery of $18,174 from balancing and memorandum accounts.

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 the water supply mix variability, and provides greater revenue recovery in the fixed charge.

The CPUC approved the settlement on October 6, 2022 and issued Decision No.

22-10-005 (“2022 GRC Decision”) on October 11, 2022.

SJWC will be filing advice letters to implement new rates and to recover interim revenue and balancing and memorandum accounts in accordance with the 2022 GRC Decision.

On May 3, 2021, SJWC filed Application No.

3 unchanged sentences

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

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

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

On December 6, 2019, SJWC filed Application No.

2 unchanged sentences

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.

2 unchanged sentences

577 was approved on June 30, 2022.

On October 12, 2022, SJWC filed Advice Letter No.

581 to recover $18,174 in balancing and memorandum accounts in accordance to the 2022 GRC Decision.

This filing is pending before the CPUC.

On October 12, 2022, SJWC filed Advice Letter No.

582 to refund $19,921 accumulated in its WCMA and its Water Conservation Expense Memorandum Account (“WCEMA”) through August 31, 2022.

This refund amount will offset the $18,174 requested in Advice Letter No.

581 resulting in a net refund to customers of $1,747.

Netting the two balances against each other allows for immediate recovery of the balancing and memorandum accounts and results in less confusion on customer bills.

The approvals of both Advice Letter No.

581 and 582 are conditioned on this approach and are pending before the CPUC.

On October 13, 2022, SJWC filed Advice Letter No.

583 to increase revenue requirement by $25,074 or 6% and implement new water rates in accordance with the 2022 GRC Decision.

This filing is anticipated to become effective November 1, 2022, pending the CPUC’s approval.

Connecticut Regulatory Affairs

13 unchanged sentences

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.

A decision from PURA approving the application was received on August 10, 2022.

Texas Regulatory Affairs

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.

CLWSC filed its 2022 Water Pass Through Charge (“WPC”) true-up report for its Canyon Lake water system 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 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 filed its 2022 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.

The WPC increased the rate from $2.39 to $2.56 per thousand gallons on October 1, 2022.

Maine Regulatory Affairs

3 unchanged sentences

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%;

the Freeport request is $51, or 6.1%;

the Millinocket request is $184, or 14.5%;

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.

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

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

Cash Flow from Operating Activities

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.

During the nine months ended September 30, 2022, SJW Group generated cash flows from operations of approximately $129,300, compared to $100,300 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 $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.

(1) an increase of $34,200 in regulatory assets primarily due to the recognition of balancing and memorandum accounts, and (2) general working capital and net income, adjusted for non-cash items, increased by $5,200, offset by (3) payments of amounts previously invoiced and accrued including accrued production costs, decreased by $4,500, (4) increase of payments for postretirement benefits of $3,000, and (5) a decrease of $2,900 from higher accounts receivable balances.

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

6 unchanged sentences

Cash Flow from Investing Activities

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.

During the nine months ended September 30, 2022, SJW Group used cash flows from investing activities of approximately $181,500, compared to $182,900 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 June 30, 2022, approximately $101,600 or 46% of the $223,000 has been invested.

As of September 30, 2022, approximately $160,500 or 72% 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.

3 unchanged sentences

Water Utility Services actual capital expenditures may vary from their projections due to changes in the expected demand for services, weather patterns, actions by governmental agencies, and general economic conditions.

Total additions to utility plant normally exceed Company-financed additions as a result of new facilities construction funded with advances from developers and contributions in aid of construction.

Total additions to utility plant normally

exceed Company-financed additions as a result of new facilities construction funded with advances from developers and contributions in aid of construction.

The Water Utility Services’ distribution systems were constructed during the period from the early 1900’s through today.

2 unchanged sentences

Cash Flow from Financing Activities

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.

Net cash provided by financing activities for the nine months ended September 30, 2022, decreased by approximately $36,400 from the same period in the prior year, primarily as a result of (1) a decrease in net proceeds of $157,100 from lower borrowings on long-term debt and increase of payments to long-term debt, (2) a decrease in net proceeds from our common stock equity offering in prior year of $63,700, (3) an increase of dividends paid to stockholders of $2,700, offset by (4) an increase in net borrowings and repayments on our lines of credit of $189,200.

Sources of Capital:

3 unchanged sentences

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:

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

Maturity Date Line Limit Amounts Outstanding Unused Portion

SJWC credit agreement (a) December 31, 2023 $ 140,000 66,000 74,000

Syndicated credit agreement:

August 2, 2027

SJW Group $ 50,000 — 50,000

SJWC 140,000 95,000 45,000

CTWS 90,000 56,000 34,000

20,000 1,500 18,500

Total syndicated credit agreement 300,000 152,500 147,500

CTWS credit agreement December 14, 2023 10,000 6,670 3,330

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

credit agreement (b) December 31, 2023 5,000 1,500 3,500

$ 350,000 199,170 150,830

___________________________________

(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.

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.

On August 2, 2022, SJW Group, SJWC, SJWTX, Inc., and CTWS entered into a $300,000 credit agreement (the “Credit Agreement”) with JPMorgan Chase Bank, N.A., as Administrative Agent (“JP Morgan”), Wells Fargo Bank, National Association, as Documentation Agent, and a syndicate of banks.

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

The Credit Agreement has a maturity date of August 2, 2027.

Under the terms of the Credit Agreement, each of SJW Group, SJWC, SJWTX, Inc., and CTWS is a borrower with several and not joint liability.

Each borrower has an initial borrowing entitlement, or sublimit, which can be periodically adjusted from time to time as set forth in the Credit Agreement.

The initial sublimit of each borrower is as presented in the table above.

Borrowings under the Credit Agreement bear interest at either the Alternative Base Rate (as defined in the Credit Agreement and hereinafter referred to as “ABR”) or the Adjusted Term Secured Overnight Financing Rate (as defined in the Credit Agreement and hereinafter referred to as “SOFR”).

ABR borrowings (which are borrowings bearing interest at a rate determined by reference to ABR) will bear interest at a rate per annum equal to ABR plus the applicable rate.

SOFR borrowings (which are borrowings bearing interest at a rate determined by reference to SOFR) will bear interest at a rate per annum equal to SOFR plus the applicable rate.

The applicable rate and pricing is variable depending on credit ratings of the borrower.

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, asset sales, and fundamental changes.

The Credit Agreement also includes a financial covenant that requires each of the borrowers to maintain its funded debt to capitalization ratio at or below 70%.

This Credit Agreement replaces the existing $140,000 credit agreement, dated April 23, 2021, between SJWC and JP Morgan and the existing $5,000 credit agreement, dated April 23, 2021, between SJWTX and JP Morgan, with SJW Group as guarantor, both of which were terminated upon entering into the Credit Agreement and were set to mature on December 31, 2023.

In addition, on August 2, 2022, CTWS and Citizens Bank, National Association, entered into a fourth modification to the amended and restated revolving credit facility, dated December 18, 2019, as amended, pursuant to which the credit commitment was reduced from $75,000 to $10,000.

During the nine months ended September 30, 2022, cost of borrowing on the lines of credit averaged 2.79% compared to 1.34% 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 June 30, 2022, SJW Group and its subsidiaries were in compliance with all covenants on their lines of credit.

As of September 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, 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.

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 at a fixed interest rate of 4.54%, due May 31, 2042.

The notes are unsecured obligations of Maine Water.

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

The Series 2022 Notes are unsecured obligations of Connecticut Water.

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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.

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.

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

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

Equity Financing Arrangements

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.

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.

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, 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 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.

For the three and nine months ended September 30, 2022, SJW Group issued and sold a total of 47,608 shares of common stock with a weighted average price of $66.26 per share and received approximately $3,107 in net proceeds under the Equity Distribution Agreement.

Since the inception of the Equity Distribution Agreement, SJW Group has issued and sold 402,723 shares of common stock with a weighted average price of $69.91 for a total net proceeds of $27,360 and has a remaining $71,845 under the Equity Distribution Agreement to issue into shares.

Credit Rating

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While our ability to obtain financing will continue to be a risk, we believe that based on our 2022 and 2021 activities, we will have access to the external funding sources necessary to implement our on-going capital investment programs in the future.

The current Standard & Poor’s Rating Service assigned company rating for SJW Group is an A-, with a stable outlook, for SJWC is an A, with a stable outlook, for CTWS is an A- with a stable outlook, and for Connecticut Water is an A- with a stable outlook.

The current Standard & Poor’s Rating Service assigned company rating for SJW Group is an A-, with a stable outlook, for SJWC is an A, with a stable outlook, CTWS is an A- with a stable outlook, and Connecticut Water is an A- with a stable outlook.

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