What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-02-24 compared with 2022-02-28 · 143 added, 179 removed, 415 unchanged (44% of the section changed)

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(Dollar amounts in thousands, except where otherwise noted)

Description of Business

SJW Group is a publicly traded company and is a holding company with four subsidiaries:

SJWC, a wholly-owned subsidiary of SJW Group, is a public utility in the business of providing water service to approximately 231,000 connections that serve a population of approximately one million people in an area comprising approximately 139 square miles in the metropolitan San Jose, California area.

SJWNE LLC is a wholly-owned subsidiary of SJW Group.

On October 9, 2019, CTWS became a wholly-owned subsidiary of SJWNE LLC.

Connecticut Water Service, Inc.

is a holding company whose subsidiaries are primarily public utilities providing water service to approximately 140,000 service connections that serve a population of approximately 456,000 people in 81 municipalities with a service area of approximately 269 square miles throughout Connecticut and Maine and 3,000 wastewater connections in Southbury, Connecticut.

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

CLWSC’s service area comprises more than 266 square miles in Bandera, Blanco, Comal, Hays, Kendall, Medina and Travis County in 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.

Acequia has been determined to be a variable interest entity within the scope of ASC Topic 810 with SJWTX, Inc.

as the primary beneficiary.

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 and 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, a wholly owned subsidiary of SJW Group, owns undeveloped land in the States of California and Tennessee, owns and operates commercial buildings in Tennessee.

The following discussion and analysis of our financial condition and results of operations should be read together with “Forward-Looking Statements,” Part 1, Item 1 “Business,” Part I, Item 1A “Risk Factors,” and our consolidated financial statements and notes included under Item 8 of this Annual Report on Form 10-K.

Business Strategy for Water Utility Services

SJW Group focuses its business initiatives in three strategic areas:

(1) Regional regulated water utility operations;

(1) Investing in regional regulated water utility operations to support the health, safety and quality of life of our customers;

(2) Regional non-tariffed water utility related services provided in accordance with the guidelines established by the CPUC in California, PURA in Connecticut, PUCT in Texas, and MPUC in Maine;

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Regional Regulated Activities

SJW Group’s regulated utility operation is conducted through SJWC, Connecticut Water, CLWSC and Maine Water.

SJW Group’s regulated utility operation is conducted through SJWC, Connecticut Water, SJWTX and Maine Water.

SJW Group plans and applies a diligent and disciplined approach to maintaining and improving its water system infrastructures and also seeks to acquire regulated water systems adjacent to or near its existing service territory.

Connecticut Water also provides regulated wastewater services.

Connecticut Water and SJWTX also provides regulated wastewater services.

The United States water utility industry is largely fragmented and is dominated by municipal-owned water systems.

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Operating in accordance with guidelines established by the CPUC, SJWC provides non-tariffed services, such as water system operations, maintenance agreements and antenna site leases under agreements with municipalities and other utilities.

CLWSC provides non-tariffed wholesale water service to adjacent utilities and non-tariffed wastewater services.

SJWTX provides non-tariffed wholesale water service to adjacent utilities and non-tariffed wastewater services.

CTWS provides non-tariffed services, such as water system operations and maintenance under agreements with municipalities and other utilities.

Additionally, CTWS offers Linebacker, an optional service line protection program covering a limited amount of the cost of

repairs for leaking or broken water and wastewater service lines and in-home plumbing to eligible residential customers in Connecticut and water service lines to eligible residential customers in Maine.

Additionally, CTWS offers Linebacker © , an optional service line protection program covering a limited amount of the cost of repairs for leaking or broken water and wastewater service lines and in-home plumbing to eligible residential customers in Connecticut and water service lines to eligible residential customers in Maine.

SJW Group also seeks appropriate non-tariffed business opportunities that complement its existing operations or that allow it to extend its core competencies beyond existing operations.

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Out-of-Region Opportunities

SJW Group also from time to time pursues opportunities to participate in out-of-region water and utility related services, particularly regulated water businesses.

SJW Group also from time to time pursues opportunities to participate in out-of-region water and utility related services, particularly regulated water and wastewater businesses.

SJW Group evaluates out-of-region and out-of-state opportunities that meet SJW Group’s risk and return profile.

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Generally accepted accounting principles for water utilities include the recognition of regulatory assets and liabilities as permitted by ASC Topic 980.

In accordance with ASC Topic 980, Water Utility Services, to the extent applicable, records

deferred costs and credits on the balance sheet as regulatory assets and liabilities when it is probable that these costs and credits will be recognized in the ratemaking process in a period different from when the costs and credits are incurred.

In accordance with ASC Topic 980, Water Utility Services, to the extent applicable, records deferred costs and credits on the balance sheet as regulatory assets and liabilities when it is probable that these costs and credits will be recognized in the ratemaking process in a period different from when the costs and credits are incurred.

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 Water Utility Services through the ratemaking process.

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The disallowance of any asset in future ratemaking, including deferred regulatory assets, would require Water Utility Services to immediately recognize the impact of the costs for financial reporting purposes.

No disallowances were recognized during the years ending December 31, 2021 and 2020.

No disallowances were recognized during the years ended December 31, 2022 and 2021.

Recognition of Balancing and Memorandum Accounts

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The amount in the water production balancing accounts varies with the seasonality of the water utility business such that, during the summer months when the demand for water is at its peak, the account tends to reflect an under-collection, while during the winter months when demand for water is relatively lower, the account tends to reflect an over-collection.

The pension balancing account is intended to capture the difference between actual pension expense and the amount approved in rates by the CPUC.

The pension balancing account is intended to capture the

difference between actual pension expense and the amount approved in rates by the CPUC.

The general rate case true-up accounts are a result of revenue shortfalls authorized for collection or refund by the CPUC due to delayed rate case and cost of capital decisions.

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change in industry and competitive environment, financial performance, macroeconomic conditions, and other relevant Company-specific events.

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.

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

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.

SJW Group’s goodwill is primarily associated with the 2019 acquisition of CTWS.

SJW Group performed an impairment analysis as of October 1, 2022.

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Regulatory risk in California is mitigated by use of a forward-looking test year which allows the return on and return of utility plant on a forecasted basis as it is placed in service, and in some cases interim rate relief is allowed in the event of regulatory lag.

The CPUC permits its regulated utilities to acquire other utilities if the proposed sale and asset purchase transaction is determined to be in the public interest.

Under Public Utilities Code § 2720, the purchase price, subject to a reasonable test involving appraisals from the acquirer as well as the Public Advocates Office, represents the Fair Market Value.

Upon CPUC approval, acquiring utilities can include the Fair Market Value in rate base.

Pursuant to Connecticut regulations, Connecticut Water employs a historical test year.

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Further to mitigate risks from variations in revenues from changes in customer usage, the Connecticut State Legislature has approved a WRA to provide for recovery of the company’s authorized revenues.

Pursuant to Texas regulation, CLWSC employs a historical test year.

Pursuant to Texas regulation, SJWTX employs a historical test year.

To address regulatory risk due to regulatory lag and changing legislation policies and regulations, rate cases may be filed as necessary in Texas, provided there is no current rate case outstanding.

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

Additionally, to mitigate regulatory lag for capital improvements, Texas seeks to implement its first SIC.

The SIC will allow SJWTX to earn a return on some of its capital improvements made after 2020 through a surcharge to its customers.

The SIC is a cost recovery mechanism recently adopted in Texas that avoids the immediate need for a general rate case.

The PUCT permits the acquisition of utilities using a process termed the Fair Market Value.

This process brings in three appraisers to determine the market value of a system which the acquiring utility can apply as the value of utility plant included in rate base.

In addition, after recent legislation the PUCT adopted rules allowing the application of the Filed Rate Doctrine.

This allows water utilities the option of applying their previously approved rates to the customers of newly acquired systems, which encourages consolidation by minimizing rate case expenses.

Pursuant to Maine regulations, Maine Water employs a historical test year.

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In 2022 and 2021, company-funded capital improvements were $218,784 and $233,933, respectively, for additions to, or replacements of, property, plant and equipment for our Water Utility Services.

We plan to spend approximately $222,823 in 2022 and $1,311,271 over the next five years for capital improvements, subject to CPUC, PURA, PUCT, and MPUC approval.

We plan to spend approximately $255,053 in 2023 and $1,353,390 over five years for capital improvements.

SJW Group funds these expenditures through a variety of sources, including earnings received from operations, debt and equity financing, and other borrowings.

SJW Group relies upon lines of credit to fund capital expenditures in the short term and has historically issued long-term debt to refinance our short-term debt.

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

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

Compliance with Environmental, Health and Safety Standards

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

Water Utility Services has implemented monitoring activities and installed specific water treatment improvements enabling it to comply with existing maximum contaminant levels and plan for compliance with future drinking water regulations.

Water Utility Services has implemented monitoring activities and installed specific

water treatment improvements enabling it to comply with existing maximum contaminant levels and plan for compliance with future drinking water regulations.

However, the EPA and the respective state agencies have continuing authority to issue additional regulations under the Safe Drinking Water Act.

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Customer Growth

Customer growth in our water Water Utility Services’ is driven by:

Customer growth in our Water Utility Services’ is driven by:

(i) organic population growth within our authorized service areas and (ii) the addition of new customers to our regulated customer base by acquiring regulated water systems adjacent to or near our existing service territories.

During 2021, we had cash outflows of $23,587 for business acquisitions and water rights which we believe will allow SJW Group to expand our regulated customer base, including the recent expanded customer base in Texas as a result of the Kendall West Utility and Bandera East Utility acquisition.

During 2022, we had cash outflows of $433 for business acquisitions and water rights which we believe will allow SJW Group to expand our regulated customer base.

Before entering new regulated markets, we evaluate the regulatory environment to ensure that we will have the opportunity to achieve an appropriate rate of return on our investment while maintaining our high standards for quality, reliability and compliance with environmental, health and safety and water quality standards.

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Fluctuations in customer demand for water could be due to seasonality, restrictions of use, weather or lifestyle choices, all of which could affect Water Utility Services’ results of operations.

SJWC residential usage decreased 11.4% from 2020 to 2021 and increased 13.3% from 2019 to 2020.

SJWC business usage decreased 2.7% and increased 1.4% from 2020 to 2021 and from 2019 to 2020, respectively.

In addition, 2021 residential and business usage was lower by 0.09% and 5.25%, respectively, than the amount authorized in our 2019-2021 general rate case.

Residential usage and business usage in 2020 was 12.75% higher and 2.57% lower, respectively, than the amount authorized in our 2019-2021 general rate case.

CLWSC residential and business usage decreased 8.5% from 2020 to 2021 and increased 13.6% from 2019 to 2020.

CTWS residential usage decreased 4.5% and business usage increased 0.9% from 2020 to 2021 With the availability of the WRA in Connecticut that allows for recovery of authorized revenues, decreases in consumption year to year do not present the same financial risk as in our other water utility services utilities.

SJWC residential usage decreased 11.1% and 11.4% from 2021 to 2022 and from 2020 to 2021, respectively.

SJWC business usage decreased 5.7% and 2.7% from 2021 to 2022 and from 2020 to 2021, respectively.

Residential and business usage was lower by 12.50% and 2.40%, respectively, than the amount authorized in our 2022-2024 general rate case.

SJWC’s service area is currently under mandatory 15% reduction of 2019 water consumption since 2021.

To address the difference between conservation usage and authorized usage in the rate case, the CPUC has approved the activation of the WCMA which tracks the divergence between authorized versus actual consumption in a balancing account for future recovery.

SJWTX residential and business usage increased 8.5% from 2021 to 2022 and decreased 8.5% from 2020 to 2021.

Connecticut Water residential usage decreased 0.5% and 10.2% from 2021 to 2022 and from 2020 to 2021, respectively.

Connecticut Water business usage increased 26% and 4% from 2021 to 2022 and from 2020 to 2021, respectively.

With the availability of the WRA in Connecticut, which allows for recovery of authorized revenues, decreases in consumption year to year do not present the same financial risk as in our other water utility services utilities.

Maine Water residential usage decreased 5.4% and 0.2% from 2021 to 2022 and from 2020 to 2021, respectively.

Maine Water business usage increased 12.2% and 5.7% from 2021 to 2022 and from 2020 to 2021, respectively.

Weather Conditions, Seasonality and Sources of Water Supply

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Also, customer usage of water is affected by weather conditions, in particular during the warmer months.

Our water systems experience higher demand in the summer due to the warmer temperatures and

increased usage by customers for outside irrigation of lawns and landscaping.

Our water systems experience higher demand in the summer due to the warmer temperatures and increased usage by customers for outside irrigation of lawns and landscaping.

In periods of drought, if customers are encouraged or required to conserve water due to a shortage of supply or restriction of use, revenue tends to be lower.

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Connecticut Water and Maine Water believes that they will be able to meet customer demand for 2023 with their existing water supply which consists of groundwater from wells, surface water in reservoirs and purchased water treated by neighboring water utilities.

CLWSC believes that it will be able to meet customer demand for 2022 with their water supply which consists of groundwater from wells and purchased treated and raw water from the GBRA.

SJWTX believes that it will be able to meet customer demand for 2023 with their water supply which consists of groundwater from wells and purchased treated and raw water from the GBRA.

Results of Operations

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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.

See Item 1 , “Business” for a discussion of SJW Group’s general business and regulatory activities.

See Item 1 , “Business” and Item 1A , “Risk Factors” for a discussion of SJW Group’s general business and regulatory activities as well the ongoing drought in California.

SJW Group’s consolidated net income for the year ended December 31, 2022 was $73,828, compared to $60,478 for the same period in 2021.

This represents a decrease of $1,037 or 2%, from 2020.

The decrease in net income was primarily due to an increase in administrative and general expenses as a result of increased insurance costs and higher employee compensation, an increase in depreciation expense due to assets placed in service in 2020, an increase in maintenance expenses due to an increase in leak repairs, an increase in production costs due to higher average per unit costs for purchased water, groundwater extraction, energy charges, and a decrease in available surface water at SJWC, and an impairment of long-lived asset for a customer care and billing implementation project no longer being pursued by CLWSC.

These increases were partially offset by an increase in revenue due to cumulative water rate increases and net recognition of certain balancing and memorandum accounts, offset by a decrease in usage.

In addition, the sale of real estate investments and nonutility properties generated a pre-tax gain of $8,421 and the sale of Texas Water Alliance generated a $3,000 pre-tax gain.

COVID-19 Update

The COVID-19 pandemic has had significant impact on the global economy.

Financial impacts experienced by SJW Group due to the COVID-19 pandemic include higher uncollectible accounts receivables and increased costs from COVID-19 related prevention activities.

The regulators in the states SJW Group operates have approved mechanisms to either record a regulatory asset or track in a memorandum account expenses and savings related to COVID-19.

SJWC and CLWSC have determined that future recovery of the amount related to COVID-19 activities is probable and have recognized the related regulatory assets.

Probability criteria have not yet been met for CTWS.

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

SJW Group continues to monitor COVID-19 developments affecting our business, employees and suppliers and will take additional precautions as management believes is necessary.

See Item 1A , “Risk Factors” and Item 7 , “Liquidity and Capital Resources” for further discussion.

This represents an increase of $13,350 or 22%, from 2021.

Consolidated net income in 2022 includes a gain on the sale of nonutility property of $5,557, offset by the impacts of $3,596 related to SJWC’s Order Instituting Investigation (“OII”) settlement and $2,200 related to depreciation on certain Cupertino concession assets.

Operating Revenue

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Rate increases 38,706 7 % 25,179 4 %

Customer rate credits — — % 4,964 1 %

Texas winter storm customer credits 839 — % (839) — %

Balancing and memorandum accounts:

Cost of capital memorandum account 6 — % 22 — %

Water Conservation Memorandum Account 798 — % 3,243 1 %

Tax Act 3 — % 137 — %

2022 GRC true-up memorandum account 20,650 4 % — — %

All other 1,254 — % 698 — %

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$ 47,012 8 % $ 9,160 2 %

The revenue increase consists of $46,786 from Water Utility Services and $226 from Real Estate Services.

The revenue increase for Water Utility Services is primarily due to an increase in authorized rates which resulted in $38,706 of additional revenue, $20,650 increase in 2022 GRC true-up memorandum account in California, a net increase in revenue recognized from certain balancing and memorandum accounts of $2,052, an increase due to new customers of $5,082, and an increase of $839 from the winter storm credits in Texas recorded in the prior year, partially offset by a decreases of $14,302 due to lower usage and $6,406 in other regulatory mechanisms.

The revenue increase consists of $9,313 from Water Utility Services offset by a $153 decrease from Real Estate Services.

The revenue increase for Water Utility Services is primarily due to an increase in authorized rates which resulted in $25,179 of additional revenue, a net increase in revenue recognized from certain balancing and memorandum accounts of $3,941, an increase due to new customers of $2,896, and an increase in other regulatory mechanisms of $2,491, partially offset by a decrease in revenue of $24,702 due to lower usage and a decrease of $839 from the winter storm credits in Texas.

The revenue increase consists of $143,909 from Water Utility Services and $135 from Real Estate Services.

The revenue increase for Water Utility Services is primarily due to an increase of $111,183 due to higher customer usage primarily due to the acquisition of CTWS in October 2019.

In addition, we experienced an increase in authorized rates which resulted in $12,234 of additional revenue and an increase from customer rate credits of $4,964 related to a CTWS merger commitment and as a result of our billing settlement with the CPUC.

Also, in 2019, we wrote off the 2018 and 2019 WCMA balances as we determined these amounts were no longer probable of recovery.

No similar write-off occurred in 2020.

Water Utility Services’ Operating Revenue and Customer Counts

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Depreciation and amortization 10,017 2 % 5,121 1 %

Merger related expenses — — % (15,768) (4) %

Impairment of long lived assets (2,211) — % 2,211 — %

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SJWC’s water supply consists of groundwater from wells, surface water from watershed run-off and diversion, reclaimed water, and imported water purchased from Valley Water under the terms of a master contract with Valley Water expiring in 2051.

Surface water, which is the least expensive water supply, is sourced from SJWC’s 6,500 acre of watershed in the Santa Cruz mountains.

Changes and variations in quantities from each of these sources affect the overall mix of the water supply, thereby affecting the cost of the water supply.

In addition, the water rates for purchased water and the groundwater extraction charge

may be increased by Valley Water at any time.

Surface water is sourced from SJWC’s 6,400 acre of watershed in the Santa Cruz mountains.

In 2022, SJWC’s general rate case decision approved the use of the Full Cost Balancing Account which mitigates the cost of the water supply from changes and variations in quantities from each of these sources affect the overall mix of the water supply.

The water rates 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 CPUC seeking authorization to increase revenues to offset the rate increase.

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.

CLWSC’s water supply consists of groundwater from wells and purchased treated and raw water from the GBRA.

CLWSC has long-term agreements with the GBRA, which expire in 2037, 2040, 2044 and 2050.

The agreements, which are take-or-pay contracts, provide CLWSC with an aggregate of 7,650 acre-feet of water per year from Canyon Lake at prices that may be adjusted periodically by GBRA.

CLWSC also has raw water supply agreements with the LCRA and WTPUA expiring in 2059 and 2046, respectively, to provide for 250 acre-feet of water per year from Lake Austin and the Colorado River, respectively, at prices that may be adjusted periodically by the agencies.

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

These systems, in total, consists 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.

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 in 2058 and 2053, respectively.

SJWTX’s water supply consists of groundwater from wells and purchased treated and raw water from the GBRA.

SJWTX has long-term agreements with the GBRA, which expire in 2037, 2040, 2044 and 2050.

The agreements, which are take-or-pay contracts, provide SJWTX with an aggregate of 7,650 acre-feet of water per year from Canyon Lake at prices that may be adjusted periodically by GBRA.

SJWTX also has raw water supply agreements with the LCRA and WTPUA expiring in 2059 and 2046, respectively, to provide for 350 acre-feet of water per year from Lake Austin and the Colorado River, respectively, at prices that may be adjusted periodically by the agencies.

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 sources of water supply for water utility services:

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Water production in 2022 for water utility services decreased 1,708 million gallons from 2021.

Water production in 2020 for water utility services increased 11,388 million gallons from 2019 primarily due to a full year of CTWS operations in 2020.

Water production in 2021 for water utility services decreased 2,563 million gallons from 2020.

The changes are primarily attributable to changes in consumption by customers and are consistent with the changes in the related water production expenses.

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The agreement was signed in April 2006 and became effective upon the receipt of all regulatory approvals in 2008 and will remain in effect for a minimum of fifty years upon becoming effective.

Connecticut Water will pay RWA $75 per year as part of a capacity agreement, for a total of 14 years, starting on the effective date of the agreement and sunsetting in 2022.

In addition, Connecticut Water is able, but under no obligation, to purchase up to one million gallons of water per day at the then current wholesale rates per the agreement, $2.621 per million gallons as of December 31, 2022.

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The current tariff rate was $1.51 per hundred cubic feet as of December 31, 2022.

CTWS’s unaccounted-for water for the period ending December 31, 2021 was approximately 14.3% 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 WICA and Water Infrastructure Surcharge (“WISC”) main replacement programs and lost water reduction initiatives.

CTWS’s unaccounted-for water for 2022 and 2021 approximated 14.2% and 14.3%, respectively, as a percentage of 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 WICA and WISC main replacement programs and lost water reduction initiatives.

The various components of operating expenses are discussed below.

Water production expenses

Water production expenses increased $28,576 in higher per unit costs paid for purchased water, groundwater extraction and energy charges, offset by decreases of $15,311 due to lower customer usage, $7,262 as a result of increased availability of California surface water in 2022 compared to 2021, and $2,296 due to changes in water production balancing and memorandum accounts.

Water production expenses increased $11,626 in higher per unit costs paid for purchased water, groundwater extraction and energy charges, $3,897 as a result of decreased availability of California surface water in 2021 compared to 2020, and $1,302 due to changes in water production balancing and memorandum accounts, offset by a decrease of $13,534 due to a decrease in customer usage.

Water production expenses increased $33,864 due to an increase in customer usage including increases due to the October 2019 acquisition of CTWS, $18,992 as a result of decreased availability of California surface water in 2020 compared to 2019, and $588 in higher per unit costs paid for purchased water, groundwater extraction and energy charges, offset by a decrease of $3,421 due to changes in water production balancing and memorandum accounts.

Valley Water did not increase the unit price of purchased water and groundwater extraction fees for their fiscal year beginning July 1, 2020.

Administrative and General Expense

Administrative and general expenses include payroll related to administrative and general functions, all employee benefits charged to expense accounts, insurance expenses, legal fees, regulatory utility commissions’ expenses, expenses associated with being a public company, and general corporate expenses.

Administrative and general expense increased $7,591 in 2021, or 2%, in comparison to 2020.

Administrative and general expense increased $8,072 in 2022, or 2% of the total operating expenses in 2021.

The increase consisted primarily of $3,974 increase in compensation, $595 increase in materials and supplies, $576 in regulatory surcharge, $572 in uninsured losses, $446 in bank fees, $434 in corporate expenses, $316 in liability insurance, $314 in travel, $263 increase in uncollectible accounts, and $209 increase in telephone expenses.

Administrative and general expense increased $7,591 in 2021, or 2% of the total operating expenses in 2020.

The increase consisted primarily of $1,928 in group health insurance costs, $1,542 increase in compensation, $1,229 increase in insurance expense, $1,108 increase in uncollectible accounts due to a credit recorded in 2020 for the Current Expected Credit Loss adoption, $1,104 increase in contracted work, and $703 increase in rate case expenses.

Administrative and general expense increased $13,440 in 2020, or 4%, in comparison to 2019.

The increase consisted primarily of $17,793 due to the addition of CTWS’s operations, partially offset by a decrease of $4,520 due to integration costs incurred in 2019 related to the merger that did not recur in 2020.

Maintenance Expense

Maintenance expense increased $3,873 in 2021, or 17%, in comparison to 2020, and increased $1,653 in 2020, or less than 1%, in comparison to 2019.

The increase in 2021 was primarily due to increases of $2,402 in contract, repairs and maintenance, and

materials expense as a result of increased leaks, $1,298 due to a favorable change in the probability assessment of regulatory recovery of a hydro-turbine generator project reserve established in a prior year, and $408 increase in compensation.

The increase in 2020 consisted primarily of $3,639 due to the addition of CTWS’s operations, offset by a decrease of $1,745 in SJWC primarily due to a change in the probability assessment of regulatory recovery of the hydro-turbine generator project.

Maintenance expense increased $4,703 in 2022, or 1% of the total operating expenses in 2021, and increased $3,873 in 2021, or 1% of the total operating expenses in 2020.

The increase in 2022 was primarily due to increases of $3,680 in contract and materials expense related to the OII settlement agreement.

The increase in 2021 was primarily due to increases of $2,402 in contract, repairs and maintenance, and materials expense as a result of increased leaks, $1,298 due to a favorable change in the probability assessment of regulatory recovery of a hydro-turbine generator project reserve established in a prior year, and $408 increase in compensation.

Property Taxes and Other Non-income Taxes

Property taxes and other non-income taxes for 2022 and 2021 increased $1,608, and $1,078 from the prior years, respectively.

The increase in 2022 was primarily the result of increased property taxes due to utility plant additions, an increase in payroll taxes due to increases in wages and a one-time increase in transfer tax.

The increase in 2021 was primarily a result of increased utility plant.

The increase in 2020 was primarily due to the addition of $10,603 related to CTWS’s operations.

SJW Group anticipates increases in 2023 for property taxes and other non-income taxes due to increases in utility plant.

Depreciation and Amortization

Depreciation and amortization expense increased $5,121 in 2021, or 1%, in comparison to 2020, and increased $23,687 in 2020, or 6%, in comparison to 2019.

Depreciation and amortization expense increased $10,017 in 2022, or 2% of the total operating expenses in 2021, and increased $5,121 in 2021, or 1% of the total operating expenses in 2020.

The increases were primarily due to increases in utility plant.

In addition, the increase in 2020 also included $16,380 due to the the addition of CTWS’s operations.

SJW Group anticipates increases in 2023 for depreciation expense due to increases in utility plant.

Impairment of long-lived asset

Impairment of long-lived asset increased $2,211 in 2021 due to the write-off of a customer care and billing system implementation in Texas.

Impairment of long-lived asset decreased $2,211 in 2022 in comparison to 2021, and increased the same amount in 2021 in comparison to 2020, due to the 2021 write-off of a customer care and billing system implementation in Texas.

Sale of nonutility properties

Sale of nonutility properties increased $7,494 in 2021 primarily due to the sales of multiple vacant land properties located in California.

Gain on sale of nonutility properties decreased $1,297 in 2022 primarily due to the lower total value of sales of multiple vacant land properties located in California.

Other Income and Expense

The change in other (expense) income in 2022 compared to 2021 was primarily due to a $3,000 pre-tax gain on sale from the release of a holdback amount by GBRA for the sale of Texas Water Alliance (“TWA”) recorded in 2021, an increase in other interest due to higher short term borrowing rates, and a decrease in investment income from retirement plan assets and life insurance policies, partially offset by a decrease in pension non-service cost due to an increase on the return of pension assets and an increase in the discount rate.

The change in other (expense) income in 2021 compared to 2020 was primarily due to a $3,000 pre-tax gain on sale from the release of a holdback amount by GBRA for the sale of TWA recorded in 2017 and $1,704 decrease in pension non-service cost due to an increase on the return of pension assets and an increase in the discount rate.

The change in other (expense) income in 2020 compared to 2019 was primarily due to an increase in interest on long-term debt as a result of the issuance of SJW Group’s Series 2019A, 2019B, 2019C and 2020 notes.

In addition, interest income decreased due to the use of previously invested money market funds for the merger with CTWS.

The new CTWS operations generated an additional increase of $5,144 in expense.

SJW Group’s consolidated weighted-average cost of long-term debt, including the mortgages and the amortization of debt issuance costs, was 4.0%, 4.1% and 4.3% for the years ended December 31, 2022 and 2021 and 2020.

Cost of borrowing on the lines of credit averaged 3.41%, 1.32% and 1.78% as of December 31, 2022, 2021 and 2020, respectively.

Provision for Income Taxes

Income tax expense for 2022 was $8,496, compared to $8,369 in 2021.

The effective consolidated income tax rate was 12% for 2021, 12% for 2020 and 26% for 2019.

The effective income tax rate decreased from 2019 due to flow-through deductions and the absence of the write-off of non-deductible merger costs in 2020 and 2021.

The effective consolidated income tax rate was 10% for 2022 and 12% for 2021.

The effective income tax rate decreased from 2021 primarily due to tax accounting method change related to non-network 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.

The Act did not have a material impact to the year-end tax rate.

Please refer to Note 7 , “Income Taxes,” of Notes to Consolidated Financial Statements for a reconciliation of actual to expected income tax expense.

Other Comprehensive (Loss) Income

Other Comprehensive Income

The change in other comprehensive income in 2022 and 2021 was primarily due to the change in the benefit obligation for Connecticut Water’s supplemental executive retirement agreements as a result of a change in the discount rate.

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Payment delinquencies are mitigated by service interruptions due to non-payment prior to the COVID-19 pandemic.

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

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

There are currently no such orders effective

in the other states where we operate.

There is no guarantee that the Regulators will extend or reinstate such orders.

As of December 31, 2021, the change in allowance for doubtful accounts was primarily due to adjustments made for the effect of COVID-19 on our customers.

Impacts to allowance for doubtful accounts related to COVID-19 are being recorded for future recovery through the rate-making process.

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.

Write-offs for uncollectible accounts remain less than 1% of total revenue consistent with prior year.

Management believes that the accounts receivable aging will continue to deteriorate throughout the duration of the COVID-19 pandemic as long as the moratoriums on water service disconnections for non-payment continue in California.

During 2022, the remaining state orders to suspend water service disconnections expired.

As of December 31, 2022, the change in allowance for doubtful accounts was primarily due to slower collections on payments from customers.

Impacts to allowance for doubtful accounts related to COVID-19 have been recorded for future recovery through the rate-making process.

There is no guarantee that such recovery will be approved by the respective state regulatory utility commissions.

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 customer accounts greater that 60-days past due as of June 30, 2021.

Bill credits were applied to the customer accounts filed in the state payment program that were still outstanding and the excess of $3,272 was returned to the State of California.

Although the COVID-19 state moratoriums restrictions on water service disconnections from non-payment ended in February 2022 in California, there has been a delayed start to disconnections from non-payment.

Write-offs for uncollectible accounts remain less than 1% of total revenue consistent with prior year.

Management believes the collection rate will gradually return to pre-pandemic levels when service disconnections are fully active again to mitigate payment delinquencies.

Funds collected from Water Utility Services’ customers are used to pay for water production expenses, in addition to costs associated with general operations.

Funds were also generated from borrowings.

In 2021, SJW Group and its subsidiaries obtained $247,000 in funds from new long-term debt.

In 2022, SJW Group and its subsidiaries obtained $55,000 in funds from new long-term debt and $39,085 in fund from equity issuances.

From these amounts, SJW Group funded its 2022 capital expenditure programs refinanced certain short and long-term borrowings, and funded working capital.

See Note 6 of “Notes to Consolidated Financial Statements” for discussion on the debt financing activities of SJW Group.

See Note 4 and Note 6 of “Notes to Consolidated Financial Statements” for discussion on the equity and debt financing

activities of SJW Group.

In addition, SJW Group paid cash dividends of approximately $43,582 during the year ended December 31, 2022.

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While our ability to obtain financing will continue to be a risk, we believe that based on our 2022 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, 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, and for CTWS is an A- with a stable outlook.

In 2022, the common dividends declared and paid on SJW Group’s common stock represented 59% of net income.

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The increase was primarily due to a combination of the following factors:

(1) an increase in general working capital and net income adjusted for non-cash items increase by $31,600, and (2) an increase in collections against our regulatory assets which generated an increase of $16,300, offset by (3) payments of previously invoiced and accrued payables or amounts, increased by $6,200, and (4) net collection of taxes receivable was $5,500 less than in prior year.

Cash flow from operations increased in 2021 by approximately $26,000.

The increase was primarily due to a combination of the following factors:

(1) increase in collections of previously billed and accrued receivables by $13,000, (2) an increase in general working capital and net income adjusted for non-cash items increase by $6,800, (3) payments of previously invoiced and accrued payables or amounts, decreased by $5,200, and (4) a $5,000 up-front service concession payment that occurred in the previous year, offset by (5) an increase in accrued groundwater extraction charges, purchased water and power of $4,000.

Cash flow from operations decreased in 2020 by approximately $25,900.

The decrease was primarily due to a combination of the following factors:

(1) a decrease in collections of the balancing and memorandum accounts by $45,300, (2) a decrease in collections of previously billed and accrued receivables by $15,000, (3) a decrease in the other noncurrent assets and noncurrent liabilities of $6,700 primarily from an increase in payments for executive and board deferrals for retirees and deferred tax changes, and (4) an up-front payment of $5,000 for renewal of the Cupertino service concession agreement, offset by (5) general working capital and net income, adjusted for non-cash items which increased by $46,100.

Cash Flow from Investing Activities

In 2021, SJW Group used approximately $234,000 of cash for Company funded capital expenditures, $23,600 for SJWTX, Inc.’s acquisition of Kendall West Utility and Bandera East Utility, $17,100 for developer funded capital expenditures, $2,800 in utility plant retirement costs, and $800 for real estate investments related to leasehold improvement additions for the properties located in Knoxville, Tennessee.

These uses were offset by cash proceeds of $18,200 from the sale of Texas Water Alliance, real estate investments and nonutility properties.

In 2020, SJW Group used approximately $195,300 of cash for Company funded capital expenditures, $17,100 for developer funded capital expenditures, $2,600 in utility plant retirement costs, and $400 for real estate investments related to leasehold improvement additions for the properties located in Knoxville, Tennessee.

These uses were offset by cash proceeds of $1,200 from the sale of real estate investments and utility property.

In 2022, SJW Group used approximately $218,800 of cash for Company funded capital expenditures, $22,900 for developer funded capital expenditures, $2,500 in utility plant retirement costs, $600 for real estate investments related to leasehold improvement additions for the properties located in Knoxville, Tennessee, and $400 for ongoing business and asset acquisition activities in Texas.

These uses were offset by cash proceeds of $1,000 from the sale of various nonutility properties during the year.

In 2021, SJW Group used approximately $234,000 of cash for Company funded capital expenditures, $23,600 for SJWTX’s acquisition of Kendall West Utility and Bandera East Utility, $17,100 for developer funded capital expenditures, $2,800 in utility plant retirement costs, and $800 for real estate investments related to leasehold improvement additions for the properties located in Knoxville, Tennessee.

These uses were offset by cash proceeds of $18,200 from the sale of TWA, real estate investments and nonutility properties.

Water Utility Services budgeted capital expenditures for 2023, excluding capital expenditures financed by customer contributions and advances is estimated as follows:

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Cash Flow from Financing Activities

Net cash provided by financing activities for the year ended December 31, 2021, increased by approximately $31,300 from the same period in the prior year, primarily as a result of increase in cash proceeds from long-term debt issued in current year, cash proceeds from issuances of common stock, and increase in cash receipts of advances and contributions in aid of construction, partially offset by an decrease in the amount of net borrowings on our lines of credit and an increase in payments for dividends.

Net cash provided by financing activities for the year ended December 31, 2022, decreased by approximately $54,500 from the same period in the prior year, primarily as a result of decrease in cash proceeds from long-term debt and issuances of common stock, an increase in payments of dividends, and decreases in cash receipts of advances and contributions in aid of construction, partially offset by an increase in the amount of net borrowings on our lines of credit.

SJW Group’s cash management policy includes the issuance of long-term debt to pay down borrowings on our lines of credit.

As such, during years when long-term borrowings are high, borrowings on our line of credit tend to be low and when long-term borrowings are low, borrowings on our line of credit tend to be high.

SJWC, CTWS and SJWTX, Inc.

have unsecured bank lines of credit totaling $260,000 as of December 31, 2021.

SJW Group and its subsidiaries have unsecured bank lines of credit totaling $350,000 as of December 31, 2022.

Drawdowns on our lines of credit are restricted by our funded debt not exceeding a percent of total capitalization as defined in our debt covenants.

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Maturity Date Line Limit Amounts Outstanding Unused Portion Amounts Outstanding

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

Syndicated credit agreement:

August 2, 2027

SJW Group $ 50,000 — 50,000 —

SJWC 140,000 95,000 45,000 —

CTWS 90,000 20,000 70,000 —

SJWTX 20,000 — 20,000 —

Total syndicated credit agreement 300,000 115,000 185,000 —

CTWS credit agreement December 14, 2023 10,000 4,578 5,422 22,996

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

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

$ 350,000 159,578 190,422 62,996

___________________________________

(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.

On August 2, 2022, SJW Group, SJWC, SJWTX, 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, 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 Adjusted Term Secured Overnight Financing Rate (“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.

On October 31, 2022, CTWS and Citizens Bank, National Association, entered into a fifth modification to the amended and restated revolving credit facility to update the interest rate from London Interbank Offered Rate (“LIBOR”) plus the applicable rate to SOFR plus the applicable rate.

On February 6, 2023, CTWS modified its existing $40,000 credit agreement with CoBank to update the interest rate from LIBOR plus the applicable rate to SOFR plus the applicable rate.

On February 6, 2023, CTWS entered into a third amendment to the amended and restated promissory note and supplement with CoBank to update the one of the stated terms regarding one of interest rate options from LIBOR plus the applicable rate to SOFR plus the applicable rate.

CTWS previously locked the interest rate under this agreement such that this amendment has no impact.

Cost of borrowing on the lines of credit averaged 3.41% and 1.32% as of December 31, 2022 and 2021, respectively.

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Issuance (Repayment) Activity Date Maturity Date

Senior Note, Series A, 4.35% $ (50,000) June 2021 June 2021

Senior Note, Series N, 3.30% 50,000 June 2021 June 2051

Senior Note, Series O, 3.00% 50,000 December 2021 December 2051

California Pollution Control Financing Authority Revenue Bonds, 5.10% $ (50,000) May 2022 June 2040

Senior note, Series A, 8.58% (20,000) July 2022 July 2022

Bank term loan, 4.09% (1,322) 2022 December 2027

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Connecticut Water:

2021A Senior Note, 3.07% 50,000 August 2021 June 2051

2021B Senior Note, 3.10% 50,000 December 2021 December 2051

Connecticut Innovations Revenue Bonds, 5.00% (22,050) December 2021 December 2021

Bank term loan, 4.01% 20,000 May 2021 March 2041

Bank term loan, 4.11% 10,000 December 2021 March 2041

Bank term loan, 3.89% 17,000 March 2021 March 2041

Bank term loan, 3.51% (14,795) September 2022 September 2022

Senior note, Series 2022, 4.71% 25,000 December 2022 December 2052

Bank term loan, 5.54% 15,000 October 2022 May 2052

Bank term loan, 4.54% 15,000 May 2022 May 2042

Senior Note, Series G, 8.95% (900) December 2022 December 2024

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Equity Financing Arrangements

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 our 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.

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.

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

For the twelve months ended months ended December 31, 2022, SJW Group issued and sold a total of 529,736 shares of common stock with a weighted average price of $75.49 per share and received approximately $39,179 in net proceeds under the Equity Distribution Agreement.

Since the inception of the Equity Distribution Agreement, SJW Group has issued and sold 884,851 shares of common stock with a weighted average price of $73.44 for a total net proceeds of $63,432 and has a remaining $35,012 under the Equity Distribution Agreement to issue into shares.

Off-Balance Sheet Arrangement/Contractual Obligations

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Advances for construction, SJWC (1) 62,889 3,372 6,467 5,680 47,370

California Pollution Control Financing Authority Revenue Bonds, SJWC 120,000 — — — 120,000

California Pollution Control Financing Authority Revenue Bond, SJWC 70,000 — — — 70,000

Connecticut Innovations Revenue Bonds, Connecticut Water 22,050 — — — 22,050

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On June 16, 2022, Valley Water Board of Directors approved treated water deliveries reflecting the contractual delivery schedule reduced by 23% through June 30, 2023.

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 18,864 million gallons ($106,463) of water at the current contract water rate of $5.6 per million gallons in the year ending December 31, 2023.

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There are no delivery schedules or contractual obligations associated with the purchase of groundwater.

Valley Water determines the groundwater extraction charge and it is applied on a

per unit basis.

Valley Water determines the groundwater extraction charge and it is applied on a per unit basis.

In addition to the Valley Water groundwater extraction charge, SJWC also incurs power costs to pump the groundwater from the basin.

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The current tariff rate wa s $1.51 per hundred cubic feet as of December 31, 2022.

CLWSC has long-term contracts with the GBRA.

SJWTX has long-term contracts with the GBRA.

The agreements expire in 2037, 2040, 2044 and 2050.

The agreements, which are take-or-pay contracts, provide CLWSC with 7,650 acre-feet per year of water supply from Canyon Lake.

The water rate may be adjusted by GBRA at any time, provided GBRA gives CLWSC a 60-day written notice on the proposed adjustment.

CLWSC also has raw water supply agreements with the LCRA and WTPUA expiring in 2059 and 2046, respectively, for 250 acre-feet of water per each agreement per year from Lake Austin and the Colorado River, respectively, at prices that may be adjusted periodically by the agencies.

The agreements, which are take-or-pay contracts, provide SJWTX with 7,650 acre-feet per year of water supply from Canyon Lake.

The water rate may be adjusted by GBRA at any time, provided GBRA gives SJWTX a 60-day written notice on the proposed adjustment.

SJWTX also has raw water supply agreements with the LCRA and WTPUA expiring in 2059 and 2046, respectively, for 350 acre-feet of water per each agreement per year from Lake Austin and the Colorado River, respectively, at prices that may be adjusted periodically by the agencies.

Employee Benefit Arrangements

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

What changed 10-K

Item 7. Management’s Discussion and Analysis