What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2023-02-24 compared with 2022-02-28 · 173 added, 229 removed, 1128 unchanged (26% of the section changed)

3 unchanged sentences

Opinions on the Financial Statements and Internal Control over Financial Reporting

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

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

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

We have audited the accompanying consolidated balance sheets of SJW Group and subsidiaries (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of comprehensive income, changes in stockholders’ equity, and cash flows, for each of the three years in the period ended December 31, 2022, and the related notes and the schedules listed in the Index at Item 15 (collectively referred to as the “financial statements”).

We also have audited the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by COSO.

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

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

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

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

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

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

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

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

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

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How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the consideration of evidence, such as regulatory rules and decisions, past practices, and other facts and circumstances, and the uncertain outcome of future regulatory decisions, that may impact the Company’s financial statement line items and disclosures impacted by rate regulation, among others:

• We tested the effectiveness of management’s controls over the initial recognition of amounts as utility plant and regulatory assets or liabilities and the evaluation of the probability of (1) the recovery in future rates of costs incurred as utility plant and deferred as regulatory assets, and (2) a refund or a future reduction in rates that should be reported as regulatory liabilities.

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We reconciled the underlying data or inputs used in the measurement to rate decisions approved by the Commissions and tested the mathematical accuracy of the calculations.

• We obtained an analysis from management regarding probability of recovery for regulatory assets or refund or future reduction in rates for regulatory liabilities not yet addressed in a regulatory order to assess management’s assertion that amounts are probable of recovery or a future reduction in rates.

• We evaluated the Company’s disclosures related to the impacts of rate regulation, including the balances recorded, and regulatory developments, were appropriate and consistent with the information obtained in our procedures.

/s/ DELOITTE & TOUCHE LLP

Deloitte & Touche

San Jose, California

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

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

Opinion on the Consolidated Financial Statements

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

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

generally accepted accounting principles.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

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

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

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

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

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

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

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

We served as the Company’s auditor from 1933 to 2020.

Santa Clara, California

March 2, 2020, except for Schedule I, as to which the date is March 1, 2021.

SJW Group and Subsidiaries

9 unchanged sentences

2,630,317 2,497,499

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

Real estate investments and nonutility properties 58,033 57,632

Less accumulated depreciation and amortization 17,158 15,951

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Retained earnings 458,356 428,260

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

Accumulated other comprehensive income (loss) 1,477 ( 163 )

Total stockholders’ equity 1,110,868 1,034,519

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Accrued payroll 11,908 11,583

Income tax payable 2,696 —

Other current liabilities 22,913 27,821

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Impairment of long-lived asset — 2,211 —

Merger related expenses — — 15,768

Total operating expense 489,720 462,527 446,856

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Gain on sale of real estate investments — 927 948

Interest income on money market fund — — 6,536

Other, net 4,385 6,770 5,906

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Provision for income taxes 8,496 8,369 8,380

Net income before noncontrolling interest 60,478 61,515 23,627

Less net income attributable to the noncontrolling interest — — 224

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

Net income 73,828 60,478 61,515

Other comprehensive income:

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

Unrealized (loss) gain on investment, net of taxes of $( 188 ) in 2022, $ 68 in 2021 and $( 247 ) in 2020

( 511 ) 185 ( 310 )

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2,151 716 ( 880 )

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

SJW Group earnings per share

Comprehensive income $ 75,468 61,379 60,325

Earnings per share

—Basic $ 2.44 2.04 2.16

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Comprehensive

Income (Loss) Noncontrolling Interest Total

Income (Loss) Total

Stockholders’

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Net income — — — 61,515 — 61,515

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

— — — 97 — — 97

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

Unrealized income on investment, net of tax effect of $( 247 )

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

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

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

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

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

Dividends paid ($ 1.28 per share)

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

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

Dividends paid ($ 1.36 per share)

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Operating activities:

Net income before noncontrolling interest $ 60,478 61,515 23,627

Net income $ 73,828 60,478 61,515

Adjustments to reconcile net income to net cash provided by operating activities:

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Supplemental disclosure of non-cash activities:

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

Accrued payables for additions to utility plant $ 22,561 20,579 24,571

Utility property installed by developers $ 2,433 2,659 9,779

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The accounting policies of SJW Group’s subsidiaries comply with the applicable uniform system of accounts prescribed by the respective regulators and conform to generally accepted accounting principles for rate-regulated public utilities.

SJW Group’s subsidiaries are as follows:

San Jose Water Company (“SJWC”), is a regulated California water utility providing water service to approximately 231,000 connections that serve approximately one million people in the greater metropolitan San Jose area.

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

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

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

Connecticut Water Service, Inc.

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

The subsidiaries held by Connecticut Water Service, Inc.

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

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

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

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

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

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

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

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

has a 25 % interest in Acequia Water Supply Corporation.

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, Inc.

SJW Group is a holding company of San Jose Water Company (“SJWC”), SJWNE LLC, SJWTX, Inc.

(“SJWTX”), SJW Land Company and SJWTX Holdings.

SJWNE LLC is a special purpose entity holding company for Connecticut Water Service, Inc.

(“CTWS”) (and its wholly subsidiaries, The Connecticut Water Company (“Connecticut Water”), The Maine Water Company (“Maine Water”), Chester Realty, Inc.

and New England Water Utility Services, Inc.

SJWTX has a 25 % interest in Acequia Water Supply Corporation (“Acequia”).

Acequia has been determined to be a variable interest entity within the scope of Accounting Standards Codification (“ASC”) Topic 810 with SJWTX as the primary beneficiary.

As a result, Acequia has been consolidated with SJWTX.

SJW Group, through its wholly-owned subsidiaries, primarily provides water utility and other related services in California, Connecticut, Maine and Texas.

SJW Group has business in property management and real estate investment activity conducted by SJW Land Company and Chester Realty, Inc.

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

In 2021, SJWTX Holdings, Inc.

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

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

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

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

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

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

In 2022, SJWTX filed with the State of Texas an assumed named certificate to operate under the name The Texas Water Company.

SJWTX Holdings intends to create a new subsidiary to hold future wholesale water supply assets in 2023.

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

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Summary of Significant Accounting Policies

Recently Adopted Accounting Principles

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

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

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

Use of Estimates

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Equipment $ 652,723 598,285

Transmission and distribution 1,802,008 1,699,953

Transmission and distribution plant 2,649,476 1,802,008

Office buildings and other structures 359,086 981,615

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

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

Allowance For Funds Used During Construction (“AFUDC”)

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The amount of equity funds capitalized in 2022, 2021 and 2020 was $ 1,551 , $ 1,926 and $ 1,249 , respectively, reflected in “Other, net” on the Consolidated Statement of Comprehensive Income.

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

Intangible Assets

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

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

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

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

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

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

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

For the year ended December 31, 2022, SJW Group recognized the pre-tax gain on the sale of nonutility properties of $ 7,230 , after selling expenses of $ 277 for one of the properties sold, and a gain of $ 5,442 which was deferred in 2021 pending the CPUC review.

On February 15, 2022, the CPUC review was complete and SJWC recognized the deferred gain on sale of nonutility property in 2022.

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

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

SJW Group received the holdback amount without reduction from the GBRA on June 29, 2021 and recognized a pre-tax gain on sale of $ 3,000 .

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

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

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

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

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

On September 28, 2020, SJWC sold six nonutility properties located in Los Gatos, California for $ 1,075 .

SJW Group recognized a pre-tax gain on the sale of real estate investments of $ 1,048 , after selling expenses of $ 22 .

Real estate investments include $ 58,730 and $ 58,330 as of December 31, 2022 and 2021, respectively, of assets that are leased or available for lease.

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Business Combinations

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

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

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

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

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

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

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

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

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Impairment of Long-Lived Assets and Goodwill

In accordance with the requirements of FASB ASC Topic 360—“Property, Plant and Equipment,” the long-lived assets of SJW Group are reviewed for impairment when changes in circumstances or events require adjustments to the carrying values of the assets.

In accordance with the requirements of Financial Accounting Standards Board (“FASB”) ASC Topic 360—“Property, Plant and Equipment,” the long-lived assets of SJW Group are reviewed for impairment when changes in circumstances or events require adjustments to the carrying values of the assets.

When such changes in circumstances or events occur, the company assesses recoverability by determining whether the carrying value of such assets will be recovered through the undiscounted expected future cash flows.

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

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

No impairments occurred during 2022 and 2020.

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

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

Goodwill is not amortized but is tested for impairment annually on October 1st or more frequently if an event occurs or circumstances change that would more likely than not, reduce the fair value of a reporting unit below its carrying amount.

Goodwill is not amortized but is tested for impairment annually on October 1st or

more frequently if an event occurs or circumstances change that would more likely than not, reduce the fair value of a reporting unit below its carrying amount.

SJW Group first performs a qualitative assessment to determine whether it is necessary to perform the quantitative impairment test.

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No goodwill impairments occurred during 2022, 2021 or 2020.

Cash and Cash Equivalents, and Restricted Cash

Cash and Cash Equivalents

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

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

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

Proceeds were held by a trustee for the bonds and released when the funding conditions are met.

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

No bond issuances of this nature took place during 2021.

Financial Instruments and Investments

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As of December 31, 2022, advances for construction were $ 137,696 of which $ 46,380 was related to non-refundable advances for construction and $ 28,427 was related to advances which are refunded based on service connections made.

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

December 31, 2022 and 2021, the fair value of the advances for construction refunded ratably over 40 years is $ 44,715 and $ 51,067 , respectively.

Contributions in aid of construction represent funds received from developers that are not refundable under applicable regulations.

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As of December 31, 2022 and 2021, the asset retirement obligation is as follows:

Retirement obligation $ 4,511 4,619

Estimated future retirement costs $ 4,426 4,511

Discount rate 6 % 6 %

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

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

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

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

For the year ended December 31, 2022 and 2021, SJWC recognized $ 4,041 and $ 3,243 , respectively, in lost revenues accumulated in the WCMA.

Effective on November 11, 2022, the CPUC approved the net refund of the overcollected drought surcharges of $ 23,753 and lost revenues in WCMA of $ 3,279 in Advice Letter No.

• The WRA allows Connecticut Water to mitigate risk associated with changes in demand.

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

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

The rate-making process is intended to provide

revenues sufficient to recover normal operating expenses, provide funds for replacement of water infrastructure and produce a fair and reasonable return on stockholder common equity.

Regulatory Assets, Net

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All balancing accounts and memorandum-type accounts not included for recovery or refund in the current general rate case will be reviewed by the CPUC in SJWC’s next general rate case or at the time an individual account balance reaches a threshold of 2 % of authorized revenue, whichever occurs first.

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

As of December 31, 2022, the total balance in SJWC’s balancing and memorandum accounts combined, including interest, that has not been recorded into the financial statements was a net under-

collection of $ 655 .

On October 11, 2022, the CPUC issued General Rate Case Decision No.

22-10-005, which approved a recovery of $ 18,174 in balancing and memorandum accounts from customers.

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

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Cost of capital memorandum accounts ( 1,563 ) ( 28 ) 1,416 ( 175 )

Tax memorandum account 333 — — 333

2022 GRC interim memorandum account — 20,650 — 20,650

All others ( 386 ) 2,034 795 2,443

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MWRAM $ 12,077 4,788 1 16,866

WCMA 708 — ( 42 ) 666

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

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

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

All others ( 1,139 ) 750 3 ( 386 )

10 unchanged sentences

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

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

Drought surcharges collected are used to offset the revenue losses tracked in the WCMA.

For the year ended December 31, 2022 and 2021, SJWC recognized $ 4,041 and $ 3,243 , respectively, in lost revenues accumulated in the WCMA.

Effective on November 11, 2022, the CPUC approved the refund of the net WCMA balance of $ 20,474 to customers.

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

1 unchanged sentence

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

The customer protections currently extend through February 1, 2022.

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

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

protections extended through to February 1, 2022.

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

The CEMA was activated for SJWC through the filing of Advice Letter No.

546 on March 19, 2020.

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

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At December 31, 2022 and 2021, no shares of preferred stock were issued or outstanding.

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, 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 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.

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

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

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

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

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

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

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

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

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

Lines of Credit

2 unchanged sentences

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 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 .

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.

9 unchanged sentences

2024 - 2051 400,000 420,000

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

California Pollution Control Financing Authority Revenue Bond 4.75 %

2046 70,000 120,000

4 unchanged sentences

Connecticut Innovations Revenue Bonds, variable rate 2028 - 2029 22,050 22,050

Connecticut Innovations Revenue Bonds, fixed rate — 22,260

Senior notes (a) 3.07 % - 4.71 %

6 unchanged sentences

2041, 2052 45,000 30,000

Total SJWTX, Inc.

45,000 15,000

Total SJWTX 60,000 45,000

State revolving fund loans 0.00 % - 2.23 %

10 unchanged sentences

___________________________________

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

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

(a) Senior notes held by institutional investors are unsecured obligations of SJW Group, SJWC, Connecticut Water, SJWTX and Maine Water and require interest-only payments until maturity.

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

1 unchanged sentence

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

2022 $ 39,179

Thereafter 1,406,195

1 unchanged sentence

The fair value of long-term debt would be categorized as Level 2 of the fair value hierarchy.

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

The notes are unsecured obligations of the company.

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

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

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

On June 25, 2021, SJWC entered into a note purchase agreement with certain affiliates of New York Life Insurance (collectively the “Purchasers”), pursuant to which the company sold an aggregate principal amount of $ 50,000 of its 3.00 % Senior Notes, Series N (“Series N Notes”) to the Purchasers.

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

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

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

On August 4, 2021, SJWC entered into a note purchase agreement with the purchasers listed in the agreement, pursuant to which the company sold an aggregate principal amount of $ 50,000 of its 3.00 % Senior Notes, Series O (“Series O Notes”), due December 1, 2051.

The Series O Notes are unsecured obligations of SJWC.

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

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

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

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

The closing of the note purchase agreement occurred on January 25, 2023.

Connecticut Water

On August 4, 2021, Connecticut Water entered into a note purchase agreement with certain affiliates of Metropolitan Life Insurance Company, New York Life Insurance Company, the Northwestern Mutual Life Insurance Company and Pacific Life Insurance Company, pursuant to which Connecticut Water sold on August 4, 2021, an aggregate principal amount of $ 50,000 of its 3.07 % Senior Notes, Series 2021A, due 2051 (the “2021A Notes”) and on December 1, 2021, sold an aggregate principal amount of $ 50,000 of its 3.10 % Senior Notes, Series 2021B, due 2051 (the “2021B Notes” and together with the 2021A Notes, the “CWC Notes”).

The CWC Notes are unsecured obligations of Connecticut Water, with the 2021A Notes due on June 1, 2051, and the 2021B Notes due on December 1, 2051.

Interest on the CWC Notes is payable semi-annually in arrears on June 1st and December 1st of each year.

The proceeds from the sale of the CWC Notes will be used to repay outstanding short and/or long-term borrowings, to fund Connecticut Water’s capital expenditures, and/or for other general corporate purposes.

On March 12, 2020, Connecticut Water entered into a note purchase agreement with NYL Investors, LLC as agent of the purchasers listed in the agreement, pursuant to which Connecticut Water sold on the same date an aggregate principal amount of $ 35,000 of its 3.51 % Senior Notes, due March 12, 2050.

The notes are unsecured obligations of Connecticut Water.

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

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

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

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

The notes are unsecured obligations of CLWSC.

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 occurred on December 14, 2022.

The Series 2022 Notes are unsecured obligations of Connecticut Water.

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

On October 31, 2022, SJWTX entered into a credit with a commercial bank, pursuant to an existing master loan agreement under which the commercial bank issued SJWTX a promissory note on the same date with an aggregate principal amount of $ 15,000 at a fixed interest rate of 5.54 % due on May 30, 2052.

The notes are unsecured obligations of SJWTX.

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

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

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.

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

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

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

The Series T bonds mature on October 1, 2041 and carry 1 % interest.

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

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

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

Financial Covenants

1 unchanged sentence

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

In addition, the credit

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

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

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

6 unchanged sentences

$ 8,496 8,369 8,380

The following table reconciles income tax expense to the amount computed by applying the federal statutory rate to income before income taxes of $ 68,847 , $ 69,895 and $ 32,081 in 2021, 2020 and 2019:

The following table reconciles income tax expense to the amount computed by applying the federal statutory rate to income before income taxes of $ 82,324 , $ 68,847 and $ 69,895 in 2022, 2021 and 2020, respectively:

2022 2021 2020

5 unchanged sentences

Capitalized merger costs — — ( 296 )

Tax reform - rate change impact on deferred taxes — — 77

Reversal of excess deferred taxes recognized in regulatory liability ( 3,885 ) ( 3,295 ) ( 2,912 )

10 unchanged sentences

California franchise tax 640 514

Net operating loss — 550

Deferred revenue 1,444 —

Other 6,627 8,128

27 unchanged sentences

Increase related to tax positions taken during a prior year — 117 1,530

Reductions related to statute expiration ( 284 ) — —

Reductions related to tax positions taken in a prior year ( 222 ) — —

5 unchanged sentences

The amount of interest recognized in 2022 was an increase to expense of $ 230 .

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

SJW Group currently does not expect uncertain tax positions to change significantly over the next 12 months, except in the case of lapse of the statute of limitations.

SJW Group files U.S.

4 unchanged sentences

Intangible assets consist of a concession fee paid to the City of Cupertino of $ 6,800 for operating the City of Cupertino municipal water system, $ 13,400 related to the purchase premium for customer relationships and other intangibles of $ 15,759 as of December 31, 2022.

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

Other intangibles primarily consist of $ 4,304 which was paid for service area and water rights by SJWTX, $ 5,984 for infrastructure related to the Cupertino service concession arrangement, $ 1,400 for customer relationships and $ 1,040 incurred in conjunction with Valley Water water contracts related to the operation of SJWC.

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

15 unchanged sentences

On June 16, 2022, the 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.

Effective February 1, 2022, the treated water contract delivery schedule increased by 10 %.

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 for the year ending December 31, 2023.

Additionally, SJWC purchases non-contract water from Valley Water on an “as needed” basis if the water supply is available.

In 1997, SJWC entered into a 25-year contract agreement with the City of Cupertino to operate the City’s municipal water system.

SJWC paid a one-time, upfront concession fee of $ 6,800 to the City of Cupertino which is amortized over the contract term.

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

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

January 8, 2020.

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

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

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

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

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

In 1997, SJWC entered into a 25-year contract agreement, as amended, with the City of Cupertino to operate the City’s municipal water system.

SJWC paid a one-time, upfront concession fee of $ 6,800 to the City of Cupertino and an incremental up-front payment of $ 5,000 to be used by the City of Cupertino for capital improvements.

On February 25, 2022, SJWC received a letter from the City of Cupertino exercising their option to extend the term of the lease an additional two years through October, 1, 2024.

SJWC paid an additional $ 1,600 concession fee for the extension period.

The total fees paid for the agreement is being amortized over the contract term including the extension period.

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

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.

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, which ended 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, $ 2.6 per million gallons as of December 31, 2021.

2 unchanged sentences

Connecticut Water agrees to purchase 283 million gallons of water annually from MDC.

The rate charged by the MDC at December 31, 2021 were $ 4.05 per hundred cubic feet.

CLWSC has long-term contracts with the GBRA.

The terms of 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 they give CLWSC a 60-day written notice on the proposed adjustment.

CLWSC also has raw water supply agreements with the Lower Colorado River Authority (“LCRA”) and West Travis Public Utility Agency (“WTPUA”) expiring in 2059 and 2046, respectively, for 250 acre-feet of water under each agreement per year from Lake Austin and the Colorado River, respectively, at prices that may be adjusted periodically by the agencies.

The rate charged by the MDC at December 31, 2022 was $ 4.09 per hundred cubic feet.

SJWTX has long-term contracts with the GBRA.

The terms of the agreements expire in 2037, 2040, 2044 and 2050, respectively.

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 they give SJWTX a 60-day written notice on the proposed adjustment.

SJWTX also has raw water supply agreements with the Lower Colorado River Authority and West Travis Public Utility Agency 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.

Maine Water has an agreement with the Kennebec Water District for potable water service.

4 unchanged sentences

As of December 31, 2022, SJWC had 362 employees, of whom 215 were members of unions.

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

In December of 2022, SJWC proposed a tentative three-year bargaining agreements with the International Union of Operating Engineers (“OE”), representing certain employees in the engineering department, and the Utility Workers of America (“OWUA”), representing the majority of all nonadministrative employees at SJWC covering January 1, 2023 through December 31, 2025.

The agreements include a 6 % wage increase in 2023, 3.5 % in 2024 and 5.5 % in 2025 for members of both unions.

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

Acceptance of the OE and the OWUA bargaining agreements are anticipated in the first quarter of 2023.

Contingencies

9 unchanged sentences

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

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

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

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

SJW Group does not have multi-employer plans.

8 unchanged sentences

Market gains in 2021 decreased pension expense by approximately $ 2,979 in 2022 and market gains in 2020 decreased pension expense by approximately $ 2,442 in 2021.

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

For the year ended December 31, 2022, the net actuarial gain of the benefit obligation was related primarily a gain from changes of discount rate of $ 116,372 , a $ 12,422 loss from pension data changes, and a gain from mortality changes of $ 4 .

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

5 unchanged sentences

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

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

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

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

1 unchanged sentence

For the year ended December 31, 2022, 2021 and 2020, the amounts not recognized as a component of net periodic benefit cost was $ 1,640 , $ 901 , and $( 1,190 ), respectively, recorded as other comprehensive income on the consolidated financial statements.

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

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

As of December 31, 2022 and 2021, total investments made to fund CTWS’s SERP was $ 6,395 and $ 8,147 , respectively, which is included in “Investments” in SJW Group’s Consolidated Balance Sheets.

29 unchanged sentences

Contributions, not to exceed set limits, are matched by the company.

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

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

SJW Group contributions were $ 3,003 , $ 2,822 and $ 2,824 in 2022, 2021 and 2020, respectively.

4 unchanged sentences

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

Senior management and non-employee directors

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

Senior management and non-employee directors had deferred $ 6,197 and $ 6,237 under the plans as of December 31, 2022 and 2021, respectively.

As of December 31, 2022 and 2021, $ 4,508 and $ 4,599 , respectively, of the total amount deferred is related to CTWS agreements.

5 unchanged sentences

Expected return on plan assets 6.50 , 6.75

Rate of compensation increase 4.00 4.00 4.00 N/A N/A N/A

Rate of compensation increase 4.00 , 4.50

4.00 4.00 N/A N/A N/A

The expected rate of return on plan assets was determined based on a review of historical returns, for the pension plans and for medium- to large-sized defined benefit pension funds with similar asset allocations.

5 unchanged sentences

Discount rate 4.95 - 5.24

Rate of compensation increase 4.00 4.00 N/A N/A

SJW Group utilized each plan’s projected benefit stream in conjunction with the FTSE Pension Discount Curve (formerly the Citigroup Pension Discount Curve) and the FTSE Above Median Double-A Curve for SJWC and CTWS, respectively, in determining the discount rate used in calculating the pension and other postretirement benefits liabilities at the measurement date.

In 2021 and 2020, SJW Group adopted the newly then issued MP-2021 and MP-2020, respectively, Mortality Improvement Scales to determine mortality assumptions.

Rate of compensation increase 4.50 , 5.00

SJW Group utilized each plan’s projected benefit stream in conjunction with the FTSE Pension Discount Curve (formerly the Citigroup Pension Discount Curve) in determining the discount rate used in calculating the pension and other postretirement benefits liabilities at the measurement date.

In 2022 and 2021, SJW Group adopted the newly then issued MP-2021, Mortality Improvement Scales to determine mortality assumptions.

The tables and scales reflect increasing life expectancies of participants in the United States.

9 unchanged sentences

Amortization of prior service cost 17 41 41 — — 97

Recognized actuarial loss 6,901 4,971 3,984 257 229 240

Recognized actuarial loss/(gain) 4,620 6,901 4,971 ( 115 ) 257 229

Recognition of significant event ( 1,595 ) — — — — —

Net periodic benefit cost $ 4,268 8,068 8,440 $ 753 1,208 1,325

12 unchanged sentences

Administrative expenses paid ( 136 ) ( 144 ) — —

Benefits paid ( 15,777 ) ( 13,293 ) ( 1,017 ) ( 1,072 )

Benefits paid and settlements ( 19,853 ) ( 15,777 ) ( 1,108 ) ( 1,017 )

Benefit obligation at end of year $ 289,123 383,838 $ 25,830 34,412

5 unchanged sentences

Administrative expenses paid ( 136 ) ( 144 ) ( 65 ) ( 63 )

Benefits paid ( 15,777 ) ( 14,712 ) ( 949 ) ( 1,005 )

Benefits paid and settlements ( 19,853 ) ( 15,777 ) ( 977 ) ( 949 )

Fair value of plan assets at end of year 251,960 310,176 17,952 21,767

40 unchanged sentences

Cash and cash equivalents $ 14,186 14,186 — —

Equity securities (a) 183,509 183,509 — —

Fixed Income (b) 101,619 36,012 65,607 —

Equity securities 212,180 212,180 — —

Fixed Income 105,577 38,608 66,969 —

Total $ 331,943 264,974 66,969 —

___________________________________

(a) Actively managed portfolio of equity securities with the goal to exceed the benchmark performance.

(b) Actively managed portfolio of fixed income securities with the goal to exceed the benchmark performance

In 2023, SJW Group expects to make required and discretionary cash contributions of up to $ 9,115 to the pension plans and other postretirement benefit plans.

57 unchanged sentences

The remaining shares available for issuance under the ESPP are 148,924 as of December 31, 2022.

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

As of December 31, 2022, the ESPP had sixteen purchase intervals since its inception.

For the year ended December 31, 2022, 2021 and 2020, a total of 36,585 , 35,304 and 31,750 shares, respectively, were issued under the ESPP.

4 unchanged sentences

Segment and Non-Tariffed Businesses Reporting

SJW Group is a holding company with four subsidiaries:

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

which is doing business as CLWSC, a regulated water utility located in Canyon Lake, Texas, and its consolidated non-tariffed variable interest entity, Acequia Water Supply Corporation, (iii) SJW Land Company,

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

SJW Group is a holding company with five subsidiaries:

(i) SJWC, a water utility operation with both regulated and non-tariffed businesses, (ii) SJWTX which is doing business as Canyon Lake Water Service Company, a regulated water utility located in Canyon Lake, Texas, and its consolidated non-tariffed variable interest entity, Acequia, (iii) SJW Land Company,

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

which was formed for the purpose of effecting a corporate reorganization of the water utility operations in Texas.

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

The first segment is that of providing water utility and utility-related services to its customers through SJW Group’s subsidiaries, SJWC, Connecticut Water, CLWSC, Maine Water and NEWUS, together referred to as “Water Utility Services.” The second segment is property management and investment activity conducted by SJW Land Company and Chester Realty, Inc., referred to as “Real Estate Services.”

The first segment is that of providing water utility and utility-related services to its customers through SJW Group’s subsidiaries, SJWC, Connecticut Water, SJWTX, Maine Water and NEWUS, together referred to as “Water Utility Services.” The second segment is property management and investment activity conducted by SJW Land Company and Chester Realty, Inc., referred to as “Real Estate Services.”

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

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

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

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

The following tables set forth information relating to SJW Group’s reportable segments and distribution of regulated and non-tariffed business activities within the reportable segments.

Certain allocated assets, revenue and expenses have been included in the reportable segment amounts.

Certain allocated assets, such as goodwill, revenue and expenses have been included in the reportable segment amounts.

Other business activity of SJW Group not included in the reportable segments is included in the “All Other” category.

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Kendall West Utility and Bandera East Utility

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

On December 17, 2021, SJWTX 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, add approximately 5,000 people through 1,600 service connections in a service area approximately 19 square miles to SJWTX’s operations.

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

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

During the measurement period in 2022, SJWTX reduced goodwill previously recognized by $ 161 primarily related to additional regulatory assets recognized.

The final purchase price allocation resulted in goodwill of $ 12,167 for the transaction.

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

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

Subsequent Event

On January 13, 2023, SJWTX has reached agreements to acquire KT Water Development Ltd and KT Water Resource L.P.

for purchase prices of $ 7,338 and $ 53,500 , respectively.

KT Water Development Ltd is an investor-owned water utility providing water to approximately 1,725 people through over 575 service connections in the Rockwall Ranch subdivision in southern Comal County, Texas.

KT Water Resources L.P.

is a private-held company formed to develop wholesale water supplies for the fast-growing utilities of Comal County, Texas.

The transaction is expected to close in the third quarter of 2023, pending the Public Utilities Commission of Texas approval of the KT Water Development Ltd.

FINANCIAL STATEMENT SCHEDULE

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Cash and cash equivalents 5,142 2,859

Intercompany receivables — 258

Intercompany notes receivable 13,094 6,015

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Retained earnings 458,356 428,260

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

Accumulated other comprehensive income (loss) 1,477 ( 163 )

Total stockholders’ equity 1,110,868 1,034,519

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Current liabilities:

Current portion of long-term debt — 49,929

Intercompany payables 789 2,097

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Property taxes and other non-income taxes 93 ( 38 ) 250

Merger related expenses — — 14,849

Total operating expense 2,070 2,012 3,360

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Interest on long-term debt, mortgage and other interest expense ( 17,795 ) ( 18,673 ) ( 19,430 )

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

Interest income on money market fund — — 6,536

Gain on sale of TWA — 3,000 —

Other, net ( 340 ) ( 160 ) ( 250 )

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Proceeds from sale of TWA — 3,000 —

Payments for business acquisition — — ( 837,903 )

Net cash used in investing activities ( 32,971 ) ( 22,453 ) ( 46,905 )

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For a discussion on these covenants, see Note 6 , “Long-term Debt” to SJW Group and Subsidiaries Notes to Consolidated Financial Statements.

In addition, Connecticut Water Service, Inc.

(“CTWS”) and its regulated subsidiaries are prohibited from paying dividends if not in compliance with minimum equity requirements under commitments made by SJW Group as part of the approval granted by the Connecticut Public Utilities Regulatory Authority and the Maine Public Utilities Commission in connection with the acquisition of CTWS.

In addition, CTWS and its regulated subsidiaries are prohibited from paying dividends if not in compliance with minimum equity requirements under commitments made by SJW Group as part of the approval granted by the PURA and the Maine Public Utilities Commission in connection with the acquisition of CTWS.

As of December 31, 2022, the restricted net assets of SJW Group’s subsidiaries was approximately $ 366,512 or 33 % of consolidated net assets of SJW Group.

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Balance, beginning of period $ 4,600 3,891 1,512

Opening balance, SJWNE, LLC — — 1,283

Charged to expense 1,195 932 ( 177 )

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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 8. Financial Statements and Supplementary Data