UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

___________________________________________

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, ~~2022~~2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 1-8966

SJW GROUP

(Exact name of registrant as specified in its charter)

Delaware

77-0066628

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

110 West Taylor Street,

San Jose,

95110

(Address of principal executive offices)

(Zip Code)

(408) 279-7800

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.001 per share

SJW

New York Stock Exchange LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “non-accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒ Non-accelerated filer ☐

Accelerated filer ☐ Smaller reporting company ☐

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

APPLICABLE ONLY TO CORPORATE ISSUERS:

As of July 25, ~~2022,~~2023, there were ~~30,247,674~~31,768,933 shares of the registrant’s Common Stock outstanding.

FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements within the meaning of the federal securities laws relating to future events and future results of SJW Group and its subsidiaries that are based on current expectations, estimates, forecasts, and projections about SJW Group and its subsidiaries and the industries in which SJW Group and its subsidiaries operate and the beliefs and assumptions of the management of SJW Group. Some of these forward-looking statements can be identified by the use of forward-looking words such as “believes,” “expects,” “may,” “will,” “should,” “seeks,” “approximately,” “intends,” “plans,” “estimates,” “projects,” “strategy,” or “anticipates,” or the negative of those words or other comparable terminology. These forward-looking statements are only predictions and are subject to risks, uncertainties and assumptions that are difficult to predict.

The accuracy of such statements is subject to a number of risks, uncertainties and assumptions including, but not limited to, the following factors:

•the effect of water, utility, environmental and other governmental policies and regulations, including regulatory actions concerning rates, authorized return on equity, authorized capital structures, capital expenditures and other decisions;

•changes in demand for water and other services;

•~~the impact of the Coronavirus (“COVID-19”) pandemic on our business operation and financial results;~~

•unanticipated weather conditions and changes in seasonality including those affecting water supply and customer usage;

•the effect of the impact of climate ~~change and the effects thereof;~~change;

•unexpected costs, charges or expenses;

•our ability to successfully evaluate investments in new business and growth initiatives;

•contamination of our water supplies and damage or failure of our water equipment and infrastructure;

•the risk of work stoppages, strikes and other labor-related actions;

•catastrophic events such as fires, earthquakes, explosions, floods, ice storms, tornadoes, hurricanes, terrorist acts, physical attacks, cyber-attacks, epidemic or other similar occurrences;

•changes in general economic, political, business and financial market conditions;

•the ability to obtain financing on favorable terms, which can be affected by various factors, including credit ratings, changes in interest rates, compliance with regulatory requirements, compliance with the terms and conditions of our outstanding indebtedness and general market and economic conditions; and

•legislative and general market and economic developments.

Results for a quarter are not indicative of results for a full year due to seasonality and other factors. In addition, actual results are subject to other risks and uncertainties that relate more broadly to our overall business, including those more fully described in our filings with the SEC, including our most recent reports on Form 10-K, Form 10-Q and Form 8-K. Forward-looking statements are not guarantees of performance, and speak only as of the date made, and we undertake no obligation to update or revise any forward-looking statements except as required by law.

PART I. FINANCIAL INFORMATION

ITEM 1.FINANCIAL STATEMENTS

SJW GROUP AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

(in thousands, except share and per share data)


		Three months ended June 30,			Six months ended June 30,				Three months ended June 30,			Six months ended June 30,
		2022		2021	2022		2021		2023		2022	2023		2022
REVENUE	REVENUE	$	149,041	152,241	$	273,343	267,026	REVENUE	$	156,886	149,041	$	294,182	273,343
OPERATING EXPENSE:	OPERATING EXPENSE:							OPERATING EXPENSE:
Production Expenses:	Production Expenses:							Production Expenses:
Purchased water	Purchased water	26,352		27,668	45,569		43,313	Purchased water	32,592		26,352	55,010		45,569
Power	Power	3,394		3,391	6,474		6,394	Power	2,379		3,394	4,578		6,474
Groundwater extraction charges	Groundwater extraction charges	18,360		20,138	32,288		35,683	Groundwater extraction charges	14,994		18,360	25,353		32,288
Other production expenses	Other production expenses	11,596		9,831	21,719		19,233	Other production expenses	11,921		11,596	23,964		21,719
Total production expenses	Total production expenses	59,702		61,028	106,050		104,623	Total production expenses	61,886		59,702	108,905		106,050
Administrative and general	Administrative and general	23,260		21,326	47,465		42,219	Administrative and general	23,527		23,260	47,871		47,465
Maintenance	Maintenance	6,891		6,587	13,586		12,852	Maintenance	6,298		6,891	12,356		13,586
Property taxes and other non-income taxes	Property taxes and other non-income taxes	7,579		7,149	15,888		14,664	Property taxes and other non-income taxes	7,896		7,579	16,297		15,888
Depreciation and amortization	Depreciation and amortization	25,207		23,512	52,813		46,950	Depreciation and amortization	26,121		25,207	52,417		52,813
Gain on sale of nonutility properties		—		—	(5,450)		—
Gain on sale of nonutility property								Gain on sale of nonutility property	—		—	—		(5,450)
Total operating expense	Total operating expense	122,639		119,602	230,352		221,308	Total operating expense	125,728		122,639	237,846		230,352
OPERATING INCOME	OPERATING INCOME	26,402		32,639	42,991		45,718	OPERATING INCOME	31,158		26,402	56,336		42,991
OTHER (EXPENSE) INCOME:	OTHER (EXPENSE) INCOME:							OTHER (EXPENSE) INCOME:
Interest on long-term debt and other interest expense	Interest on long-term debt and other interest expense	(14,241)		(13,681)	(27,970)		(27,120)	Interest on long-term debt and other interest expense	(16,397)		(14,241)	(32,169)		(27,970)
Pension non-service cost	Pension non-service cost	941		339	1,890		665	Pension non-service cost	(102)		941	(166)		1,890
Gain on sale of Texas Water Alliance		—		3,000	—		3,000

Other, net	Other, net	824		1,784	1,819		3,538	Other, net	2,115		824	5,381		1,819
Income before income taxes	Income before income taxes	13,926		24,081	18,730		25,801	Income before income taxes	16,774		13,926	29,382		18,730
Provision for income taxes	Provision for income taxes	2,368		3,306	3,435		2,410	Provision for income taxes	(1,512)		2,368	(434)		3,435
NET INCOME	NET INCOME	11,558		20,775	15,295		23,391	NET INCOME	18,286		11,558	29,816		15,295
Other comprehensive (loss) income, net		(248)		107	(429)		145
Other comprehensive income (loss), net								Other comprehensive income (loss), net	9		(248)	102		(429)
COMPREHENSIVE INCOME	COMPREHENSIVE INCOME	$	11,310	20,882	$	14,866	23,536	COMPREHENSIVE INCOME	$	18,295	11,310	$	29,918	14,866

EARNINGS PER SHARE	EARNINGS PER SHARE							EARNINGS PER SHARE
Basic	Basic	$	0.38	0.70	$	0.51	0.80	Basic	$	0.58	0.38	$	0.96	0.51
Diluted	Diluted	$	0.38	0.69	$	0.50	0.79	Diluted	$	0.58	0.38	$	0.95	0.50
DIVIDENDS PER SHARE	DIVIDENDS PER SHARE	$	0.36	0.34	$	0.72	0.68	DIVIDENDS PER SHARE	$	0.38	0.36	$	0.76	0.72
WEIGHTED AVERAGE SHARES OUTSTANDING	WEIGHTED AVERAGE SHARES OUTSTANDING							WEIGHTED AVERAGE SHARES OUTSTANDING
Basic	Basic	30,244,511		29,799,499	30,234,381		29,333,776	Basic	31,499,068		30,244,511	31,219,324		30,234,381
Diluted	Diluted	30,346,040		29,924,191	30,341,065		29,459,782	Diluted	31,594,494		30,346,040	31,319,248		30,341,065

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

SJW GROUP AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(in thousands, except share and per share data)


		June 30, 2022		December 31, 2021		June 30, 2023		December 31, 2022
ASSETS	ASSETS				ASSETS
Utility plant:	Utility plant:				Utility plant:
Land	Land	$	39,900	39,004	Land	$	41,386	39,982
Depreciable plant and equipment	Depreciable plant and equipment	3,468,240		3,381,908	Depreciable plant and equipment	3,761,749		3,661,285
Construction in progress	Construction in progress	192,580		176,427	Construction in progress	141,179		116,851
Intangible assets	Intangible assets	36,220		36,276	Intangible assets	35,947		35,959
		3,736,940		3,633,615
Total utility plant					Total utility plant	3,980,261		3,854,077
Less accumulated depreciation and amortization	Less accumulated depreciation and amortization	1,183,159		1,136,116	Less accumulated depreciation and amortization	1,277,102		1,223,760
Net utility plant					Net utility plant	2,703,159		2,630,317
		2,553,781		2,497,499
Real estate investments and nonutility properties	Real estate investments and nonutility properties	58,234		57,632	Real estate investments and nonutility properties	1,388		58,033
Less accumulated depreciation and amortization	Less accumulated depreciation and amortization	16,553		15,951	Less accumulated depreciation and amortization	191		17,158
Net real estate investments and nonutility properties					Net real estate investments and nonutility properties	1,197		40,875
		41,681		41,681
CURRENT ASSETS:	CURRENT ASSETS:				CURRENT ASSETS:
Cash and cash equivalents:
Cash		12,049		10,908
Restricted cash		602		1,211
Cash and cash equivalents					Cash and cash equivalents	25,474		12,344

Accounts receivable:	Accounts receivable:				Accounts receivable:
Customers, net of allowances for uncollectible accounts of $5,222 and $4,600 on June 30, 2022 and December 31, 2021, respectively		58,815		53,699
Income tax		—		2,308
Customers, net of allowances for uncollectible accounts of $6,414 and $5,753 on June 30, 2023 and December 31, 2022, respectively					Customers, net of allowances for uncollectible accounts of $6,414 and $5,753 on June 30, 2023 and December 31, 2022, respectively	58,545		59,172

Other	Other	4,079		4,735	Other	4,814		5,560
Accrued unbilled utility revenue	Accrued unbilled utility revenue	47,824		44,026	Accrued unbilled utility revenue	50,555		45,722
Assets held for sale					Assets held for sale	40,850		—
Prepaid expenses	Prepaid expenses	8,106		9,667	Prepaid expenses	9,152		9,753
Current regulatory assets, net	Current regulatory assets, net	2,841		2,629	Current regulatory assets, net	5,968		16,068
Other current assets	Other current assets	4,476		4,902	Other current assets	6,075		6,095
		138,792		134,085		201,433		154,714
OTHER ASSETS:	OTHER ASSETS:				OTHER ASSETS:
Net regulatory assets, less current portion	Net regulatory assets, less current portion	139,312		151,992	Net regulatory assets, less current portion	130,009		127,275
Investments	Investments	15,011		15,784	Investments	16,136		14,819
Goodwill	Goodwill	640,311		640,471	Goodwill	640,311		640,311
Other	Other	12,159		10,883	Other	19,913		24,313
		806,793		819,130		806,369		806,718
		$	3,541,047	3,492,395		$	3,712,158	3,632,624

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

SJW GROUP AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(in thousands, except share and per share data)

June 30,
2022 December 31,
2021
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
Stockholders’ equity:
Common stock, $0.001 par value; authorized 70,000,000 shares; issued and outstanding shares 30,247,674 on June 30, 2022 and 30,181,348 on December 31, 2021 $ 30 30
Additional paid-in capital 608,666 606,392
Retained earnings 421,741 428,260
Accumulated other comprehensive income (592) (163)
Total stockholders’ equity 1,029,845 1,034,519
Long-term debt, less current portion 1,455,709 1,492,935
2,485,554 2,527,454
CURRENT LIABILITIES:
Line of credit 141,336 62,996
Current portion of long-term debt 38,966 39,106
Accrued groundwater extraction charges, purchased water and power 24,798 17,200
Accounts payable 26,580 30,391
Accrued interest 14,615 14,174
Accrued payroll 9,814 11,583
Income tax payable 1,087 —
Other current liabilities 20,633 27,821
277,829 203,271
DEFERRED INCOME TAXES 203,561 200,451
ADVANCES FOR CONSTRUCTION 138,430 130,693
CONTRIBUTIONS IN AID OF CONSTRUCTION 319,564 316,479
POSTRETIREMENT BENEFIT PLANS 92,060 89,998
OTHER NONCURRENT LIABILITIES 24,049 24,049
COMMITMENTS AND CONTINGENCIES 0 0
$ 3,541,047 3,492,395


	June 30, 2023		December 31, 2022
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
Stockholders’ equity:
Common stock, $0.001 par value; authorized 70,000,000 shares; issued and outstanding shares 31,731,030 on June 30, 2023 and 30,801,912 on December 31, 2022	$	32	31
Additional paid-in capital	716,642		651,004
Retained earnings	464,464		458,356
Accumulated other comprehensive income	1,578		1,477
Total stockholders’ equity	1,182,716		1,110,868
Long-term debt, less current portion	1,519,281		1,491,965
	2,701,997		2,602,833

CURRENT LIABILITIES:
Lines of credit	83,310		159,578
Current portion of long-term debt	44,328		4,360
Accrued groundwater extraction charges, purchased water and power	23,006		19,707
Accounts payable	36,446		29,581
Accrued interest	15,680		13,907
Accrued payroll	10,011		11,908
Income tax payable	4,604		2,696
Other current liabilities	20,569		22,913
	237,954		264,650

DEFERRED INCOME TAXES	228,976		218,155
ADVANCES FOR CONSTRUCTION	140,005		137,696
CONTRIBUTIONS IN AID OF CONSTRUCTION	327,280		323,668
POSTRETIREMENT BENEFIT PLANS	53,001		59,738

OTHER NONCURRENT LIABILITIES	22,945		25,884
COMMITMENTS AND CONTINGENCIES
	$	3,712,158	3,632,624

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

SJW GROUP AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(UNAUDITED)

(in thousands, except share and per share data)


		Common Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income				Total Stockholders’ Equity			Common Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income				Total Stockholders’ Equity
		Number of Shares	Amount								Total Stockholders’ Equity	Number of Shares				Amount	Additional Paid-in Capital
BALANCES, December 31, 2021		30,181,348	$	30	$	606,392	$	428,260	$	(163)			$	1,034,519
BALANCES, December 31, 2022															BALANCES, December 31, 2022	30,801,912			$	31	$	651,004	$	458,356	$	1,477			$	1,110,868
Net income	Net income	—	—		—		3,737		—				3,737		Net income	—	—		—		11,530		—				11,530
Unrealized loss on investment, net of tax benefit of $67		—	—		—		—		(181)				(181)
Unrealized gain on investment, net of taxes of $0															Unrealized gain on investment, net of taxes of $0	—	—		—		—		93				93
Stock-based compensation	Stock-based compensation	—	—		1,552		(20)		—				1,532		Stock-based compensation	—	—		1,199		(22)		—				1,177
Issuance of restricted and deferred stock units	Issuance of restricted and deferred stock units	37,879	—		(1,269)		—		—				(1,269)		Issuance of restricted and deferred stock units	38,776	—		(1,538)		—		—				(1,538)
Employee stock purchase plan	Employee stock purchase plan	17,918	—		1,049		—		—				1,049		Employee stock purchase plan	16,410	—		1,080		—		—				1,080
Common stock issuance costs		—	—		(87)		—		—				(87)
Dividends paid ($0.36 per share)		—	—		—		(10,882)		—				(10,882)
BALANCES, March 31, 2022		30,237,145	30		607,637		421,095		(344)				1,028,418
Common stock issuance, net of costs															Common stock issuance, net of costs	570,026	—		40,997		—		—				40,997
Dividends paid ($0.38 per share)															Dividends paid ($0.38 per share)	—	—		—		(11,722)		—				(11,722)
BALANCES, March 31, 2023															BALANCES, March 31, 2023	31,427,124	31		692,742		458,142		1,570				1,152,485
Net income	Net income	—	—		—		11,558		—				11,558		Net income	—	—		—		18,286		—				18,286
Unrealized gain on investment, net of tax of $—		—	—		—		—		(248)				(248)
Unrealized gain on investment, net of tax of $(37)															Unrealized gain on investment, net of tax of $(37)	—	—		—		—		8				8
Stock-based compensation	Stock-based compensation	—	—		1,041		(23)						1,018		Stock-based compensation	—	—		1,139		(17)						1,122
Issuance of restricted and deferred stock units	Issuance of restricted and deferred stock units	10,529	—		(6)		—		—				(6)		Issuance of restricted and deferred stock units	13,429	—		(20)		—		—				(20)
Common stock issuance, net of costs		—	—		(6)		—		—				(6)
Dividends paid ($0.36 per share)		—	—		—		(10,889)		—				(10,889)
BALANCES, June 30, 2022		30,247,674	$	30	$	608,666	$	421,741	$	(592)			$	1,029,845
Common stock issuance costs															Common stock issuance costs	290,477	1		22,781		—		—				22,782
Dividends paid ($0.38 per share)															Dividends paid ($0.38 per share)	—	—		—		(11,947)		—				(11,947)
BALANCES, June 30, 2023															BALANCES, June 30, 2023	31,731,030	$	32	$	716,642	$	464,464	$	1,578			$	1,182,716


	Common Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity
	Number of Shares	Amount
BALANCES, December 31, 2021	30,181,348	$	30	$	606,392	$	428,260	$	(163)	$	1,034,519
Net income	—	—		—		3,737		—		3,737
Unrealized loss on investment, net of taxes of $67	—	—		—		—		(181)		(181)
Stock-based compensation	—	—		1,552		(20)		—		1,532
Issuance of restricted and deferred stock units	37,879	—		(1,269)		—		—		(1,269)
Employee stock purchase plan	17,918	—		1,049		—		—		1,049
Common stock issuance, net of costs	—	—		(87)		—		—		(87)
Dividends paid ($0.36 per share)	—	—		—		(10,882)		—		(10,882)
BALANCES, March 31, 2022	30,237,145	30		607,637		421,095		(344)		1,028,418
Net income	—	—		—		11,558		—		11,558
Unrealized loss on investment, net of tax of $0	—	—		—		—		(248)		(248)
Stock-based compensation	—	—		1,041		(23)				1,018
Issuance of restricted and deferred stock units	10,529	—		(6)		—		—		(6)
Common stock issuance, net of costs	—	—		(6)		—		—		(6)
Dividends paid ($0.36 per share)	—	—		—		(10,889)		—		(10,889)
BALANCES, June 30, 2022	30,247,674	$	30	$	608,666	$	421,741	$	(592)	$	1,029,845

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

SJW GROUP AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF ~~CHANGES IN STOCKHOLDERS’ EQUITY~~CASH FLOWS

(UNAUDITED)

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

Common Stock Additional
Paid-in
Capital Retained
Earnings Accumulated
Other
Comprehensive
Income Total
Stockholders’
Equity
Number of
Shares Amount
BALANCES, December 31, 2020 28,556,605 $ 29 $ 510,158 $ 408,037 $ (1,064) $ 917,160
Net income — — — 2,616 — 2,616
Unrealized income on investment, net of taxes of $14 — — — — 38 38
Stock-based compensation — — 1,280 (32) — 1,248
Issuance of restricted and deferred stock units 30,547 — (964) — — (964)
Employee stock purchase plan 18,235 — 1,026 — — 1,026
Common stock issuance, net of costs 1,184,500 1 66,895 — — 66,896
Dividends paid ($0.34 per share) — — — (9,724) — (9,724)
BALANCES, March 31, 2021 29,789,887 30 578,395 400,897 (1,026) 978,296
Net income — — — 20,775 — 20,775
Unrealized gain on investment, net of tax of $39 — — — — 107 107
Stock-based compensation — — 791 (28) — 763
Issuance of restricted and deferred stock units 15,040 — (9) — — (9)
Common stock issuance, net of costs — — (120) — — (120)
Dividends paid ($0.34 per share) — — — (10,133) — (10,133)
BALANCES, June 30, 2021 29,804,927 $ 30 $ 579,057 $ 411,511 $ (919) $ 989,679


	Six months ended June 30,
	2023		2022
OPERATING ACTIVITIES:
Net income	$	29,816	15,295
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	53,510		53,830
Deferred income taxes	8,706		2,239
Stock-based compensation	2,338		2,593
Allowance for equity funds used during construction	(1,111)		(1,084)

Gain on sale of nonutility property	—		(5,450)
Changes in operating assets and liabilities:
Accounts receivable and accrued unbilled utility revenue	(3,687)		(8,487)
Accounts payable and other current liabilities	(107)		(1,158)
Accrued groundwater extraction charges, purchased water and power	3,300		7,598
Tax receivable and payable, and other accrued taxes	(3,367)		(22)
Postretirement benefits	(628)		459
Regulatory assets and liabilities excluding income tax temporary differences, net and postretirement benefits	12,142		17,284

Other changes, net	(3,548)		501
NET CASH PROVIDED BY OPERATING ACTIVITIES	97,364		83,598
INVESTING ACTIVITIES:
Additions to utility plant:
Company-funded	(115,749)		(101,611)
Contributions in aid of construction	(9,287)		(13,332)
Additions to real estate investments	—		(546)
Payments to retire utility plant, net of salvage	(468)		(1,836)
Proceeds from sale of nonutility properties	—		227

Other changes, net	125		(33)
NET CASH USED IN INVESTING ACTIVITIES	(125,379)		(117,131)
FINANCING ACTIVITIES:
Borrowings on line of credit	39,828		88,664
Repayments on line of credit	(116,095)		(10,324)
Long-term borrowings	70,000		15,000
Repayments of long-term borrowings	(1,560)		(51,612)
Issuance of common stock, net of issuance costs	63,779		—

Dividends paid	(23,669)		(21,771)
Receipts of advances and contributions in aid of construction	11,047		15,769
Refunds of advances for construction	(1,341)		(1,345)
Other changes, net	(844)		(316)
NET CASH PROVIDED BY FINANCING ACTIVITIES	41,145		34,065
NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH	13,130		532
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD	12,344		12,119
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD	25,474		12,651
LESS RESTRICTED CASH, END OF PERIOD	—		602
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	25,474	12,049

Cash paid during the period for:
Interest	$	31,656	30,189
Income taxes	655		458

Supplemental disclosure of non-cash activities:
Accrued payables for additions to utility plant	$	27,580	18,502
Utility property installed by developers	938		1,066

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

~~SJW GROUP AND SUBSIDIARIES~~

~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS~~

~~(UNAUDITED)~~

~~(in thousands)~~

Six months ended June 30,
2022 2021
OPERATING ACTIVITIES:
Net income $ 15,295 23,391
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 53,830 48,406
Deferred income taxes 2,239 903
Stock-based compensation 2,593 2,071
Allowance for equity funds used during construction (1,084) (916)
Gain on sale of nonutility properties and Texas Water Alliance (5,450) (3,000)
Changes in operating assets and liabilities:
Accounts receivable and accrued unbilled utility revenue (8,487) (7,812)
Accounts payable and other current liabilities (1,158) 553
Accrued groundwater extraction charges, purchased water and power 7,598 7,106
Tax receivable and payable, and other accrued taxes (22) 2,647
Postretirement benefits 459 1,955
Regulatory assets and liabilities excluding income tax temporary differences, net and postretirement benefits 17,284 (8,231)
Other changes, net 501 23
NET CASH PROVIDED BY OPERATING ACTIVITIES 83,598 67,096
INVESTING ACTIVITIES:
Additions to utility plant:
Company-funded (101,611) (100,057)
Contributions in aid of construction (13,332) (7,357)
Additions to real estate investments (546) (230)
Payments to retire utility plant, net of salvage (1,836) (909)
Proceeds from sale of nonutility properties and Texas Water Alliance 227 3,000
Payments for business acquisitions (33) (1,452)
NET CASH USED IN INVESTING ACTIVITIES (117,131) (107,005)
FINANCING ACTIVITIES:
Borrowings on line of credit 88,664 45,669
Repayments on line of credit (10,324) (82,222)
Long-term borrowings 15,000 87,000
Repayments of long-term borrowings (51,612) (51,617)
Issuance of common stock, net of issuance costs — 66,775
Debt issuance costs — (296)
Dividends paid (21,771) (19,857)
Receipts of advances and contributions in aid of construction 15,769 14,673
Refunds of advances for construction (1,345) (1,363)
Other changes, net (316) (21)
NET CASH PROVIDED BY FINANCING ACTIVITIES 34,065 58,741
NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH 532 18,832
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD 12,119 9,269
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD 12,651 28,101
LESS RESTRICTED CASH, END OF PERIOD 602 2,659
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 12,049 25,442
Cash paid during the period for:
Interest $ 30,189 29,266
Income taxes 458 1,020
Supplemental disclosure of non-cash activities:
Accrued payables for additions to utility plant $ 18,502 29,123
Utility property installed by developers 1,066 1,230

~~See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.~~

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, ~~2022~~2023

(in thousands, except share and per share data)

Note 1.General

In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting only of normal, recurring adjustments) necessary for a fair presentation of the results for the interim periods.

The unaudited interim financial information has been prepared in accordance with accounting principles generally accepted in the United States of America and in accordance with the instructions for Form 10-Q and Rule 10-01 of Regulation S-X promulgated by the Securities and Exchange Commission. The Notes to Consolidated Financial Statements in SJW Group’s ~~2021~~2022 Annual Report on Form 10-K should be read with the accompanying unaudited condensed consolidated financial statements.

SJW Group is a holding company with 5five wholly-owned subsidiaries: San Jose Water Company (“SJWC”), SJWNE LLC, SJWTX, Inc., SJW Land Company, and SJWTX Holdings, Inc. SJWNE LLC is the holding company for Connecticut Water Service, Inc. (“CTWS”) whose wholly-subsidiaries are The Connecticut Water Company (“Connecticut Water”), The Maine Water Company (“Maine Water”), New England Water Utility Services, Inc. (“NEWUS”), and Chester Realty, Inc. SJWTX Holdings, Inc. is a holding company that was formed with the purpose of effecting a corporate reorganization of our water utility operations in Texas. Texas Water Resources, LLC was formed as a subsidiary of SJWTX Holdings, Inc. to hold future wholesale water supply assets. SJWC, Connecticut Water, SJWTX, Inc. doing business as ~~Canyon Lake~~The Texas Water ~~Service~~ Company (“~~CLWSC”~~Texas Water”), Maine Water and NEWUS are referred to as “Water Utility ~~Services.”~~Services”. SJW Land Company and Chester Realty, Inc. are collectively referred to as “Real Estate Services.”

Revenue

Water sales are seasonal in nature and influenced by weather conditions. The timing of precipitation and climatic conditions can cause seasonal water consumption by customers to vary significantly. Due to the seasonal nature of the water business, the operating results for interim periods are not indicative of the operating results for a 12-month period. 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 precipitation curtail water usage resulting in lower sales.

The major streams of revenue for SJW Group are as follows:

Three months ended June 30, Six months ended June 30,
2022 2021 2022 2021
Revenue from contracts with customers $ 148,657 147,204 $ 270,434 259,442
Alternative revenue programs, net (2,982) 2,656 (4,909) 2,768
Other balancing and memorandum accounts, net 2,432 1,477 4,862 2,998
Other regulatory mechanisms, net (432) (416) 234 (846)
Rental income 1,366 1,320 2,722 2,664
$ 149,041 152,241 $ 273,343 267,026


	Three months ended June 30,			Six months ended June 30,
	2023		2022	2023		2022
Revenue from contracts with customers	$	159,724	148,657	$	295,560	270,434
Alternative revenue programs, net	(2,204)		(2,982)	(3,595)		(4,909)
Other balancing and memorandum accounts, net	(1,617)		2,432	178		4,862
Other regulatory mechanisms, net	(433)		(432)	(824)		234
Rental income	1,416		1,366	2,863		2,722
	$	156,886	149,041	$	294,182	273,343

Real Estate Investments and Nonutility Properties

The major components of real estate investments and nonutility properties as of June 30, ~~2022,~~2023 and December 31, ~~2021,~~2022, are as follows:


		June 30, 2022		December 31, 2021		June 30, 2023		December 31, 2022
Land	Land	$	12,900	12,615	Land	$	918	12,615
Buildings and improvements	Buildings and improvements	45,334		45,017	Buildings and improvements	470		45,418

Subtotal	Subtotal	58,234		57,632	Subtotal	1,388		58,033
Less: accumulated depreciation and amortization	Less: accumulated depreciation and amortization	16,553		15,951	Less: accumulated depreciation and amortization	191		17,158
Total	Total	$	41,681	41,681	Total	$	1,197	40,875

~~On October 29, 2021, SJWC sold 2 nonutility properties~~In March 2023, SJW Land Company entered into a broker agreement to sell its warehouse buildings and land property located in ~~San Jose, California for $13,150. SJW Group recognized a pre-tax gain on~~Knoxville, Tennessee. The company reclassified the ~~sale of nonutility~~Tennessee properties of $7,230, after selling expenses of $277 for one of the properties sold, and a gain of $5,442, after selling expenses of $178, was deferred on the other nonutility property pending California Public Utilitiesfrom held-and-used to held-for-sale at March 31,

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

June 30, ~~2022~~2023

(in thousands, except share and per share data)

~~Commission (“CPUC”) review~~2023. The company’s intention is to complete the sale of these assets within a twelve month period. The company recorded the Tennessee properties at the lower of their carrying value or estimated fair value less cost to sell, and also stopped recording depreciation on assets held for sale. The company's broker provided the ~~year ended December 31, 2021.~~ estimated fair value of the Tennessee properties. The estimated costs to sell was subtracted to estimate the fair value. The resulting net fair value of the Tennessee properties exceeded their carrying value, and accordingly no impairment was recorded.

The sale of the Tennessee properties does not represent a strategic shift that has or will have a major effect on SJW Group; therefore, the sale does not qualify for treatment as a discontinued operation.

The Tennessee warehouse buildings and land property is included in SJW Group’s “Real Estate Services” reportable segment in Note 9, “Segment and Non-Tariffed Business Reporting”. The following represents the major components of the Tennessee warehouse building and land property recorded in assets held-for-sale on the condensed consolidated balance sheets as of June 30, 2023:


	June 30, 2023
Land	$	13,170
Buildings and improvements	44,950

Subtotal	58,120
Less: accumulated depreciation and amortization	17,270
Total	$	40,850

On February 15, 2022, the ~~CPUC~~California Public Utilities Commission (“CPUC”) review on a SJWC nonutility property sold in October 2021 was completed and the deferred gain of $5,442 was recognized as gain on sale in the first quarter of ~~the second nonutility property.~~

A former wholly owned subsidiary of SJW Group, Texas Water Alliance Limited, was sold to Guadalupe-Blanco River Authority (“GBRA”) in 2017. The sales agreement with GBRA included a holdback amount of $3,000 to be paid to SJW Group on June 30, 2021, subject to reduction under certain conditions. SJW Group received the holdback amount without reduction from the GBRA on June 29, 2021 and recognized a pre-tax gain on sale of $3,000.2022.

Fair Value Measurement

The following instruments are not measured at fair value on SJW Group’s condensed consolidated balance sheets as of June 30, ~~2022,~~2023, but require disclosure of their fair values: cash and cash equivalents, accounts receivable and accounts payable. The estimated fair value of such instruments as of June 30, ~~2022,~~2023, approximates their carrying value as reported on the condensed consolidated balance sheets. ~~The estimated fair value of such financial instruments were determined using the income approach based on the present value of estimated future cash flows.~~ There have been no changes in valuation techniques during the three and six months ended June 30, ~~2022.~~2023. The fair value of these instruments would be categorized as Level 2 in the fair value hierarchy, with the exception of cash and cash equivalents, which would be categorized as Level 1.

The fair value of SJW Group’s long-term debt was ~~approximately $1,348,114~~$1,354,865 and ~~$1,651,825~~$1,294,354 as of June 30, ~~2022,~~2023 and December 31, ~~2021,~~2022, respectively, and was determined using a discounted cash flow analysis, based on the current rates for similar financial instruments of the same duration and creditworthiness of the company. The book value of long-term debt was ~~$1,494,675~~$1,563,609 and ~~$1,532,041~~$1,496,325 as of June 30, ~~2022,~~2023 and December 31, ~~2021,~~2022, respectively. The fair value of long-term debt would be categorized as Level 2 in the fair value hierarchy.

~~CTWS~~CTWS’s additional retirement benefits under the supplemental executive retirement plans and retirement contracts are funded by investment assets held by a Rabbi Trust. The fair value of the money market funds, mutual funds and fixed income investments in the Rabbi Trust was ~~$3,117~~$2,808 and ~~$3,797~~$2,809 as of June 30, ~~2022,~~2023 and December 31, ~~2021,~~2022, respectively, and are categorized as Level 1 in the fair value hierarchy.

Earnings per Share

Basic earnings per share is calculated using income available to common stockholders, divided by the weighted average number of shares outstanding during the period. Diluted earnings per share is calculated using income available to common stockholders divided by the weighted average number of shares of common stock including both shares outstanding and shares potentially issuable in connection with restricted common stock awards under SJW Group’s ~~Long-Term Incentive Plan (as amended, the “Incentive Plan”),~~long-term incentive plans, shares potentially issuable under the performance stock plans assumed through the business combination with CTWS, and shares potentially issuable under ~~the Employee Stock Purchase Plan (“ESPP”).~~SJW Group’s employee stock purchase plans. For the three months ended June 30, 2023 and 2022, 1,843 and ~~2021,~~ 4,964 ~~and 4,304~~ anti-dilutive restricted common stock units were excluded from the dilutive earnings per share calculation, respectively. For the six months ended June 30, 2023 and 2022, 10,698 and ~~2021,~~ 15,824 ~~and 12,883~~ anti-dilutive restricted common stock units were excluded from the dilutive earnings per share calculation, respectively.

109

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

June 30, ~~2022~~2023

(in thousands, except share and per share data)

Note 2.Regulatory Matters

Regulatory assets, net are comprised of the following as of June 30, ~~2022,~~2023 and December 31, ~~2021:~~2022:

June 30, 2022 December 31, 2021
Regulatory assets:
Income tax temporary differences, net $ 25,946 22,420
Postretirement pensions and other postretirement benefits 64,022 62,197
Business combinations debt premium, net 18,667 19,937
Balancing and memorandum accounts, net 24,772 38,334
Water Rate Adjustment (1,176) 2,588
Other, net 9,922 9,145
Total regulatory assets, net in Condensed Consolidated Balance Sheets 142,153 154,621
Less: current regulatory assets, net 2,841 2,629
Total regulatory assets, net, less current portion $ 139,312 151,992

As of June 30, 2022, and December 31, 2021, SJW Group’s regulatory assets, net not earning a return primarily included postretirement pensions and other medical benefits unfunded amount, and business combination debt premiums, net. The total amount of regulatory assets, net not earning a return at June 30, 2022, and December 31, 2021, either by interest on the regulatory asset/liability or as a component of rate base at the allowed rate of return was $85,798 and $84,887, respectively.

~~Balancing and Memorandum Accounts~~


	June 30, 2023		December 31, 2022
Regulatory assets:
Income tax temporary differences, net	$	54,110	43,434
Postretirement pensions and other postretirement benefits	30,548		31,493
Business combinations debt premium, net	16,125		17,396
Monterey Water Revenue Adjustment Mechanism (“MWRAM”)	15,834		10,864
Water Conservation Memorandum Account (“WCMA”)	(7,621)		(5,039)
2022 General Rate Case Interim Memorandum Account	15,108		20,650
Cost recovery balancing and memorandum accounts	6,225		16,545
All other balancing and memorandum accounts	3,698		2,749
Water Revenue Adjustment (“WRA”)	(8,063)		(4,488)
Other, net	10,013		9,739
Total regulatory assets, net in Condensed Consolidated Balance Sheets	135,977		143,343
Less: current regulatory assets, net	5,968		16,068
Total regulatory assets, net, less current portion	$	130,009	127,275

SJWC has established balancing accounts for the purpose of tracking the under-collection or over-collection associated with expense changes and revenue authorized by the CPUC to offset those expense changes. In 2022, SJWC’s general rate case decision approved the use of the Full Cost Balancing Account to track the water supply costs and energy consumption. The MWRAM balancing account tracks the difference between the revenue received for actual metered sales through the tiered volumetric rate and the revenue that would have been received with the same actual metered sales if a uniform rate would have been in effect.

SJWC also maintains memorandum accounts to track revenue impacts due to catastrophic events, certain unforeseen water quality expenses related to new federal and state water quality standards, energy efficiency, water conservation, water tariffs, and other approved activities or as directed by the CPUC. The Monterey Water Revenue Adjustment Mechanism (“MWRAM”) tracks the difference between the revenue received for actual metered sales through the tiered volumetric rate and the revenue that would have been received with the same actual metered sales if a uniform rate would have been in effect. The Water Conservation Memorandum Account (“WCMA”)WCMA allows SJWC to track lost revenue, net of related water costs, associated with reduced sales due to water conservation and associated calls for water use reductions. SJWC records the lost revenue captured in the WCMA balancing accounts. Drought surcharges collected ~~will be~~are used to offset the revenue losses tracked in the WCMA.

Mandatory water conservation requirements from Santa Clara Valley Water District ended on April 11,

2023, which also ended

~~SJW GROUP AND SUBSIDIARIES~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~June 30, 2022~~

~~(in thousands, except share~~ SJWC’s Mandatory Conservation Plan, that included drought allocations and ~~per share data)~~

surcharges.

~~Balancing and memorandum accounts recorded to regulatory assets, net for the three and six months ended June 30, 2022, and 2021 as follows:~~
Three months ended June 30, 2022 Three months ended June 30, 2021
Beginning Balance Regulatory Asset Increase (Decrease) Refunds (Collections) Adjustments Ending Balance Beginning Balance Regulatory Asset Increase (Decrease) Refunds (Collections) Adjustments Ending Balance
Revenue accounts:
MWRAM $ 19,060 2,036 — 21,096 $ 13,853 1,424 1 15,278
WCMA (3,061) (1,000) (10,900) (14,961) 666 — 2 668
Cost of capital memorandum account (1,564) (4) — (1,568) (1,561) (1) — (1,562)
All others (73) 490 — 417 (1,313) 147 2 (1,164)
Total revenue accounts $ 14,362 1,522 (10,900) 4,984 $ 11,645 1,570 5 13,220
Cost-recovery accounts:
Water supply costs 10,789 322 — 11,111 8,910 984 1 9,895
Pension 5,006 63 — 5,069 3,844 366 — 4,210
Hydro Generation Research, Development and Demonstration Memorandum Account (“PRVMA”) 632 1 (90) 543 1,027 — (99) 928
COVID-19 Catastrophic Event Memorandum Account (“CEMA”) 2,438 148 — 2,586 2,266 352 — 2,618
All others 573 (94) — 479 445 1 — 446
Total cost-recovery accounts $ 19,438 440 (90) 19,788 $ 16,492 1,703 (98) 18,097
Total $ 33,800 1,962 (10,990) 24,772 $ 28,137 3,273 (93) 31,317

Six months ended June 30, 2022 Six months ended June 30, 2021
Beginning Balance Regulatory Asset Increase (Decrease) Refunds (Collections) Adjustments Ending Balance Beginning Balance Regulatory Asset Increase (Decrease) Refunds (Collections) Adjustments Ending Balance
Revenue accounts:
MWRAM $ 16,866 4,229 1 21,096 $ 12,077 3,200 1 15,278
WCMA 3,534 (1,100) (17,395) (14,961) 666 — 2 668
Cost of capital memorandum account (1,563) (5) — (1,568) (1,561) (1) — (1,562)
All others (386) 802 1 417 (1,139) (28) 3 (1,164)
Total revenue accounts $ 18,451 3,926 (17,393) 4,984 $ 10,043 3,171 6 13,220
Cost-recovery accounts:
Water supply costs 10,545 566 — 11,111 8,123 1,771 1 9,895
Pension 4,941 128 — 5,069 3,478 732 — 4,210
PRVMA 707 2 (166) 543 1,108 — (180) 928
CEMA 3,245 (659) — 2,586 2,266 352 — 2,618
All others 445 34 — 479 445 1 — 446
Total cost-recovery accounts $ 19,883 71 (166) 19,788 $ 15,420 2,856 (179) 18,097
Total $ 38,334 3,997 (17,559) 24,772 $ 25,463 6,027 (173) 31,317

~~SJW GROUP AND SUBSIDIARIES~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~June 30, 2022~~

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

All balancing accounts and ~~memorandum-type~~memorandum 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.

Connecticut Water has been authorized by the Connecticut Public Utilities Regulatory Authority to utilize a WRA, a decoupling mechanism, to mitigate risk with changes in demand. The WRA is used to reconcile actual water demands with the demands projected in the most recent general rate case and allows the company to implement a surcharge or surcredit as necessary to recover or refund the revenues approved in the general rate case. The WRA allows the company to defer, as a regulatory asset or liability, the amount by which actual revenues deviate from the revenues allowed in the most recent general rate proceedings.

As of June 30, 2023 and December 31, 2022, SJW Group’s regulatory assets, net, not earning a return primarily included postretirement pensions and the unfunded amount of other medical benefits, and business combination debt premiums, net. The total amount of regulatory assets, net not earning a return at June 30, 2023 and December 31, 2022, either by interest on the regulatory asset/liability or as a component of rate base at the allowed rate of return was $49,958 and $52,066, respectively.

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

June 30, 2023

(in thousands, except share and per share data)

Note 3.Capitalization

In March 2023, SJW Group entered into an Amendment No. 1 to the equity distribution agreement (the “Equity Distribution Agreement”), dated November 17, 2021, between SJW Group and 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 SJW Group increased the aggregate gross sales price of shares of SJW Group’s common stock, $0.001 par value per share, that may be sold under the Equity Distribution Agreement from $100,000 to $240,000. For the three and six months ended June 30, 2023, SJW Group issued and sold a total of 312,683 and 860,503 shares of common stock, respectively, with a weighted average price of $74.60 and $75.56 per share, respectively, and received $22,782 and $63,779 in net proceeds, respectively, under the Equity Distribution Agreement. Since the inception of the Equity Distribution Agreement, SJW Group has issued and sold 1,745,354 shares of common stock with a weighted average price of $74.49 for a total net proceeds of $127,210 and has $109,995 remaining under the Equity Distribution Agreement to issue into shares.

Note 3.4.Bank Borrowings and Long-Term Liabilities

SJW Group’s contractual obligations and commitments include senior notes, bank term loans, revenue bonds, state revolving fund loans and other obligations. Water Utility Services ~~had~~has received advance deposit payments from its customers and developers on certain construction projects. The refunds of the advance deposit payments constitute an obligation of the respective entities.

~~On April 6,~~Long-term Financing Agreements

In July 2022, Maine Water entered into a credit agreement with a commercial bank, pursuant to an existing master loan agreement under which the commercial bank issued Maine Water a promissory note on the same date with an aggregate principal amount of $15,000 and a fixed interest rate of 4.54%, due May 31, 2042. ~~The notes are unsecured obligations of Maine Water. Interest is payable quarterly in arrears on the 20th day of January, April, July and October of each year.~~ ~~The promissory note contains customary representations and warranties.~~ ~~Under the promissory note, Maine Water is required to comply with certain customary affirmative and negative covenants for as long as the notes are outstanding.~~ ~~The notes are also subject to customary events of default, the occurrence of which may result in all of the notes then outstanding becoming immediately due and payable.~~ ~~Proceeds from the borrowing were received on May 13, 2022.~~

~~On June 28, 2022, Connecticut Water~~SJWC entered into a note purchase agreement with certain affiliates of New York Life Insurance, ~~Company,~~Metropolitan Life Insurance, Northwestern Mutual Life Insurance, and John Hancock Life Insurance (collectively the “Purchasers”), pursuant to which ~~Connecticut Water sold~~SJWC will sell an aggregate principal amount of ~~$25,000~~$70,000 of its ~~4.71%~~4.85% Senior Notes, Series ~~2022, due 2052. The closing of~~P (“Series P Notes”) to the ~~note purchase agreement is expected to occur on December 15, 2022, and is subject to customary closing conditions and regulatory approval.~~Purchasers. The Series ~~2022~~P Notes are unsecured obligations of ~~Connecticut Water.~~SJWC and are due on February 1, 2053. Interest is payable semi-annually in arrears on ~~June 15th~~February 1st and ~~December 15th~~August 1st of each year. The note purchase agreement contains ~~customary representations and warranties. Connecticut Water has agreed to~~ customary affirmative and negative covenants for as long as the Series ~~2022~~P Notes are outstanding. The Series ~~2022~~P Notes are also subject to customary events of ~~default, the occurrence of which may result in all~~default. The closing of the ~~Series 2022 Notes then outstanding becoming immediately due and payable.~~note purchase agreement occurred on January 25, 2023.

Note 4.5.Income Taxes

For the three and six months ended June 30, ~~2022,~~2023, income tax ~~expense~~benefit was ~~$2,368~~$1,512 and ~~$3,435,~~$434, respectively. Income tax expense for the three and six months ended June 30, ~~2021,~~2022, was ~~$3,306~~$2,368 and ~~$2,410,~~$3,435, respectively. The effective consolidated income tax rates were ~~17%~~(9)% and ~~14%~~17% for the three months ended June 30, ~~2022~~2023 and ~~2021,~~2022, respectively, and ~~18%~~(1)% and 9%18% for the six months ended June 30, ~~2022,~~2023 and ~~2021,~~2022, respectively. The ~~higher~~lower effective tax rate for the three and six months ended June 30, ~~2022,~~2023, was primarily due to ~~discrete~~the partial release of an uncertain tax ~~expense items.~~position reserve.

In April 2023, the Internal Revenue Service issued additional tax guidance that has allowed the company to revisit certain historical income tax reserves. Pursuant to the issuance of this guidance, which provided additional clarification regarding some of the uncertain tax areas, the company re-evaluated the risk relating to repair deductions. The result of the analysis led to a partial release of an uncertain tax position reserve of $3,087. The release relates to repairs expenditures that are more likely than not to be sustained on audit.

SJW Group had unrecognized tax benefits, before the impact of deductions of state taxes, excluding interest and penalties, of approximately ~~$8,221~~$5,877 and ~~$7,961~~$9,004 as of June 30, ~~2022,~~2023 and December 31, ~~2021,~~2022, respectively.

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

Note 5.6.Commitments and Contingencies

SJW Group is subject to ordinary routine litigation incidental to its business. There are no pending legal proceedings to which SJW Group or any of its subsidiaries is a party, or to which any of its properties is the subject, that are expected to have a material effect on SJW Group’s business, financial position, results of operations or cash flows.

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

June 30, 2023

(in thousands, except share and per share data)

Note 6.7.Benefit Plans

SJW Group maintains noncontributory defined benefit pension plans for its eligible employees. SJWC and CTWS employees hired before March 31, 2008, and January 1, 2009, respectively, are entitled to benefits under the pension plans based on the employee’s years of service and compensation. For SJWC employees hired on or after March 31, 2008, benefits are determined using a cash balance formula based upon compensation credits and interest credits for each employee. Starting in 2023, Texas Water employees are also eligible to participate under SJWC’s cash balance plan. Certain CTWS 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

~~SJW GROUP AND SUBSIDIARIES~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~June 30, 2022~~

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

an additional 1.5% of eligible compensation to their company sponsored savings plan. ~~SJW Group does not have multi-employer plans.~~

In addition, senior management hired before March 31, 2008 for SJWC and January 1, 2009 for CTWS, are eligible to receive additional retirement benefits under supplemental executive retirement plans and retirement contracts. 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. The supplemental retirement plans and Cash Balance Executive Supplemental Retirement Plan are non-qualified plans in which only senior management and other designated members of management may participate. SJW Group also provides health care and life insurance benefits for retired employees under employer-sponsored postretirement benefits that are not pension plans.

The components of net periodic benefit costs for the defined benefit plans and other postretirement benefits for the three and six months ended June 30, ~~2022,~~2023 and ~~2021~~2022 are as follows:


									Pension Benefits			Other Benefits
		Three months ended June 30,			Six months ended June 30,				Three months ended June 30,
		2022		2021	2022		2021		2023		2022	2023		2022
Service cost	Service cost	$	2,652	2,688	$	5,304	5,423	Service cost	$	1,892	2,397	$	160	255
Interest cost	Interest cost	2,861		2,530	5,721		5,110	Interest cost	3,557		2,642	317		219
Expected return on assets	Expected return on assets	(5,045)		(4,742)	(10,088)		(9,494)	Expected return on assets	(4,069)		(4,824)	(217)		(221)
Unrecognized actuarial loss	Unrecognized actuarial loss	1,200		1,794	2,364		3,574	Unrecognized actuarial loss	554		1,275	(88)		(75)
Amortization of prior service cost	Amortization of prior service cost	4		13	8		25	Amortization of prior service cost	4		4	—		—
Total	Total	$	1,672	2,283	$	3,309	4,638	Total	$	1,938	1,494	$	172	178


	Pension Benefits			Other Benefits
	Six months ended June 30,
	2023		2022	2023		2022
Service cost	$	3,784	4,794	$	320	510
Interest cost	7,115		5,283	634		438
Expected return on assets	(8,138)		(9,646)	(434)		(442)
Unrecognized actuarial loss	1,108		2,515	(176)		(151)
Amortization of prior service cost	7		8	—		—
Total	$	3,876	2,954	$	344	355

In ~~2022,~~2023, SJW Group expects to make required and discretionary cash contributions of up to ~~$7,842~~$8,120 to the pension plans and other postretirement benefits. For the three and six months ended June 30, ~~2022,~~2023, SJW Group has made ~~$1,961~~$4,060 of contributions to such plans.

Note 7.8.Equity Plans

~~The Incentive Plan allows~~ SJW ~~Group to~~Group’s long-term incentive plans provide employees, non-employee board members or the board of directors of any parent or subsidiary, consultants, and other independent advisors who provide services to the company ~~or any parent~~ or subsidiary the opportunity to acquire an equity interest in SJW Group. SJW Group also maintains stock plans in connection with its acquisition of CTWS which are no longer granting new stock awards. In addition, shares are issued to employees under SJW Group’s employee stock purchase plan. As of June 30, ~~2022, 178,820~~2023, 156,299 shares are issuable upon the vesting of outstanding

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

June 30, 2023

(in thousands, except share and per share data)

restricted stock units and deferred restricted stock units and an additional ~~615,154~~1,132,390 shares are available for award issuances under the long-term incentive plans.

On April 26, 2023, SJW Group adopted the successor plans, 2023 Long-Term Incentive ~~Plan.~~Plan and 2023 Employee Stock Purchase Plan, to replace the Amended and Restated Long-Term Incentive Plan (the, “Predecessor Incentive Plan”) and 2014 Employee Stock Purchase Plan (the, “Predecessor ESPP”), respectively. The Predecessor Incentive Plan terminated on April 23, 2023 and Predecessor ESPP terminated on July 31, 2023. Each outstanding award under the Predecessor Incentive Plan will remain outstanding under the Predecessor Incentive Plan and shall be governed solely by the terms of the documents evidencing such awards. The 2023 Long-Term Incentive Plan reserves a total of 1,142,000 shares of SJW Group’s common stock for issuance to employees, non-employee board members or the board of directors of any parent or subsidiary, consultants, and other independent advisors who provide services to the SJW Group and its subsidiaries. The 2023 Employee Stock Purchase Plan reserves for a total of 500,000 shares of SJW Group’s common stock for issuance for eligible employees to purchase common stock at a discount through accumulated payroll deductions. Remaining reserves for both of the predecessor plans will be terminated with the adoption of the successor plans.

A summary of compensation costs charged to income and proceeds from the exercise of restricted stock and similar instruments that are recorded to additional paid-in capital and common stock, by award type, are presented below for the three and six months ended June 30, ~~2022,~~2023 and ~~2021:~~2022:


		Three months ended June 30,			Six months ended June 30,				Three months ended June 30,			Six months ended June 30,
		2022		2021	2022		2021		2023		2022	2023		2022
Compensation costs charged to income:	Compensation costs charged to income:							Compensation costs charged to income:
ESPP	ESPP	$	—	—	$	185	181	ESPP	$	—	—	$	191	185
Restricted stock and deferred restricted stock	Restricted stock and deferred restricted stock	1,041		791	2,408		1,890	Restricted stock and deferred restricted stock	1,139		1,041	2,147		2,408
Total compensation costs charged to income	Total compensation costs charged to income	$	1,041	791	$	2,593	2,071	Total compensation costs charged to income	$	1,139	1,041	$	2,338	2,593
ESPP proceeds	ESPP proceeds	$	—	—	$	1,049	1,026	ESPP proceeds	$	—	—	$	1,080	1,049

Restricted Stock and Deferred Restricted Stock

For the three months ended June 30, ~~2022,~~2023, and ~~2021,~~2022, SJW Group granted ~~under the Incentive Plan~~9,610 and 12,604, ~~and 11,732,~~ respectively, one year and three year service-based restricted stock awards with a weighted-average grant date fair value per unit of $75.28 and $58.04, ~~and $65.43, respectively, per unit.~~respectively. For the six months ended June 30, ~~2022,~~2023 and ~~2021,~~2022, SJW Group granted ~~under the~~

~~SJW GROUP AND SUBSIDIARIES~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~June 30, 2022~~

~~(in thousands, except share~~37,342 and ~~per share data)~~

~~Incentive Plan~~ 44,003, ~~and 45,433,~~ respectively, one year and three year service-based restricted stock awards with a weighted-average grant date fair value per unit of $77.21 and $65.41, ~~and $64.53, respectively, per unit.~~respectively.

For the three months ended June 30, 2023, no performance-based or market-based restricted stock awards were granted. For the three months ended June 30, 2022, ~~and 2021,~~ SJW Group granted ~~under the Incentive Plan~~ 32 ~~and 1,182~~ target units ~~respectively,~~ performance-based and market-based restricted stock awards granted with a weighted-average grant date fair value per unit of ~~$66.14 and $65.70, respectively, per unit.~~$66.14. For the six months ended June 30, ~~2022,~~2023 and ~~2021,~~2022, SJW Group granted ~~under the Incentive Plan~~31,345 and 33,653 ~~and 30,641~~ target units, respectively, performance-based and market-based restricted stock awards granted with a weighted-average grant date fair value per unit of $80.05 and $70.35, ~~and $66.33, respectively, per unit.~~respectively. Based upon actual attainment relative to the target performance metric, the number of shares issuable can range between 0% to 150% of the target number of shares for performance-based restricted stock awards, or between 0% and 200% of the target number of shares for market-based restricted stock awards.

As of June 30, ~~2022,~~2023, the total unrecognized compensation costs related to restricted and deferred restricted stock plans ~~amounted to $6,721.~~was $7,121. This cost is expected to be recognized over a weighted-average period of ~~1.88~~1.99 years.

Employee Stock Purchase Plan

SJW Group’s recorded expenses for its ESPP were $106 and $196 for the three and six months ended June 30, 2023, respectively, and $89 and $182 for the three and six months ended June 30, 2022, ~~respectively, and $86 and $174 for the three and six months ended June 30, 2021,~~ respectively. The total unrecognized compensation costs related to the semi-annual offering period that ends July ~~29, 2022,~~31, 2023, for the ~~ESPP~~employee stock purchase plan is approximately ~~$31.~~$34. This cost is expected to be recognized during the third quarter of ~~2022.~~2023.

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

June 30, 2023

(in thousands, except share and per share data)

Note 8.9.Segment and Non-Tariffed Business Reporting

SJW Group is a holding company with 5five subsidiaries: (i) SJWC, a water utility operation with both regulated and non-tariffed businesses, (ii) ~~CLWSC,~~Texas Water, a regulated water and non-tariffed wastewater utility located in Canyon Lake, Texas, and its consolidated non-tariffed variable interest entity, Acequia Water Supply Corporation, (iii) SJW Land Company and its consolidated variable interest entity, 444 West Santa Clara Street, L.P., which operated commercial building rentals, (iv) SJWNE LLC, a holding company for CTWS and its subsidiaries, ~~The~~ Connecticut Water, ~~Company, The~~ Maine Water, ~~Company, New England Water Utility Services, Inc.~~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’s reportable segments have been determined based on information used by the chief operating decision maker. SJW Group’s chief operating decision maker includes the Chairman, President and Chief Executive Officer, and his executive staff. The first segment ~~is providing~~provides water utility and utility-related services to its customers through SJW Group’s subsidiaries, SJWC, Connecticut Water, ~~CLWSC,~~Texas Water, Maine Water, and NEWUS together referred to as “Water Utility ~~Services.”~~Services”. The second segment isconsists of property management and investment activity conducted by SJW Land Company and Chester Realty, Inc., referred to as “Real Estate Services.”

~~SJW GROUP AND SUBSIDIARIES~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~June 30, 2022~~

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

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, 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.
For Three Months Ended June 30, 2022
Water Utility Services Real Estate Services All Other (1) SJW Group
Regulated Non-tariffed Non-tariffed Non-tariffed Regulated Non-tariffed Total
Operating revenue $ 144,261 3,414 1,366 — 144,261 4,780 149,041
Operating expense 119,430 1,797 915 497 119,430 3,209 122,639
Operating income (loss) 24,831 1,617 451 (497) 24,831 1,571 26,402
Net income (loss) 12,765 1,768 323 (3,298) 12,765 (1,207) 11,558
Depreciation and amortization 24,458 165 301 283 24,458 749 25,207
Interest on long-term debt and other interest expense 9,805 — (3) 4,439 9,805 4,436 14,241
Provision (benefit) for income taxes 2,721 443 110 (906) 2,721 (353) 2,368
Assets $ 3,435,758 4,220 44,033 57,036 3,435,758 105,289 3,541,047
For Three Months Ended June 30, 2021
Water Utility Services Real Estate Services All Other (1) SJW Group
Regulated Non-tariffed Non-tariffed Non-tariffed Regulated Non-tariffed Total
Operating revenue $ 148,237 2,684 1,320 — 148,237 4,004 152,241
Operating expense 115,572 1,942 881 1,207 115,572 4,030 119,602
Operating income (loss) 32,665 742 439 (1,207) 32,665 (26) 32,639
Net income (loss) 20,585 677 296 (783) 20,585 190 20,775
Depreciation and amortization 22,887 110 291 224 22,887 625 23,512
Interest on long-term debt and other interest expense 8,347 — — 5,334 8,347 5,334 13,681
Provision (benefit) for income taxes 4,580 203 96 (1,573) 4,580 (1,274) 3,306
Assets $ 3,300,414 8,248 45,090 55,770 3,300,414 109,108 3,409,522

For Six Months Ended June 30, 2022
Water Utility Services Real Estate Services All Other (1) SJW Group
Regulated Non-tariffed Non-tariffed Non-tariffed Regulated Non-tariffed Total
Operating revenue $ 264,779 5,842 2,722 — 264,779 8,564 273,343
Operating expense 220,881 5,776 1,824 1,871 220,881 9,471 230,352
Operating income (loss) 43,898 66 898 (1,871) 43,898 (907) 42,991
Net income (loss) 22,480 451 631 (8,267) 22,480 (7,185) 15,295
Depreciation and amortization 48,969 2,737 601 506 48,969 3,844 52,813
Interest on long-term debt and other interest expense 18,568 — (3) 9,405 18,568 9,402 27,970
Provision (benefit) for income taxes 4,741 6 213 (1,525) 4,741 (1,306) 3,435
Assets $ 3,435,758 4,220 44,033 57,036 3,435,758 105,289 3,541,047


	For Three Months Ended June 30, 2023
	Water Utility Services			Real Estate Services	All Other (1)	SJW Group
	Regulated		Non-tariffed	Non-tariffed	Non-tariffed	Regulated	Non-tariffed	Total
Operating revenue	$	152,525	2,945	1,416	—	152,525	4,361	156,886
Operating expense	122,678		1,789	661	600	122,678	3,050	125,728
Operating income (loss)	29,847		1,156	755	(600)	29,847	1,311	31,158
Net income (loss)	20,510		596	544	(3,364)	20,510	(2,224)	18,286
Depreciation and amortization	25,811		85	1	224	25,811	310	26,121
Interest on long-term debt and other interest expense	10,846		—	—	5,551	10,846	5,551	16,397
Provision (benefit) for income taxes	102		320	243	(2,177)	102	(1,614)	(1,512)
Assets	$	3,605,238	4,480	43,714	58,726	3,605,238	106,920	3,712,158


	For Three Months Ended June 30, 2022
	Water Utility Services			Real Estate Services	All Other (1)	SJW Group
	Regulated		Non-tariffed	Non-tariffed	Non-tariffed	Regulated	Non-tariffed	Total
Operating revenue	$	144,261	3,414	1,366	—	144,261	4,780	149,041
Operating expense	119,430		1,797	915	497	119,430	3,209	122,639
Operating income (loss)	24,831		1,617	451	(497)	24,831	1,571	26,402
Net income (loss)	12,765		1,768	323	(3,298)	12,765	(1,207)	11,558
Depreciation and amortization	24,458		165	301	283	24,458	749	25,207
Interest on long-term debt and other interest expense	9,805		—	(3)	4,439	9,805	4,436	14,241
Provision (benefit) for income taxes	2,721		443	110	(906)	2,721	(353)	2,368
Assets	$	3,435,758	4,220	44,033	57,036	3,435,758	105,289	3,541,047

1614

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

June 30, ~~2022~~2023

(in thousands, except share and per share data)


		For Six Months Ended June 30, 2021									For Six Months Ended June 30, 2023
		Water Utility Services			Real Estate Services	All Other (1)	SJW Group				Water Utility Services			Real Estate Services	All Other (1)	SJW Group
		Regulated		Non-tariffed	Non-tariffed	Non-tariffed	Regulated	Non-tariffed	Total		Regulated		Non-tariffed	Non-tariffed	Non-tariffed	Regulated	Non-tariffed	Total
Operating revenue	Operating revenue	$	259,633	4,729	2,664	—	259,633	7,393	267,026	Operating revenue	$	285,797	5,522	2,863	—	285,797	8,385	294,182
Operating expense	Operating expense	214,050		3,311	1,762	2,185	214,050	7,258	221,308	Operating expense	231,545		3,203	1,560	1,538	231,545	6,301	237,846
Operating income (loss)	Operating income (loss)	45,583		1,418	902	(2,185)	45,583	135	45,718	Operating income (loss)	54,252		2,319	1,303	(1,538)	54,252	2,084	56,336
Net income (loss)	Net income (loss)	26,284		1,399	619	(4,911)	26,284	(2,893)	23,391	Net income (loss)	33,732		1,214	969	(6,099)	33,732	(3,916)	29,816
Depreciation and amortization	Depreciation and amortization	45,704		219	580	447	45,704	1,246	46,950	Depreciation and amortization	51,497		169	304	447	51,497	920	52,417
Interest on long-term debt and other interest expense	Interest on long-term debt and other interest expense	16,518		—	—	10,602	16,518	10,602	27,120	Interest on long-term debt and other interest expense	21,393		—	—	10,776	21,393	10,776	32,169
Provision (benefit) for income taxes	Provision (benefit) for income taxes	4,464		385	205	(2,644)	4,464	(2,054)	2,410	Provision (benefit) for income taxes	2,826		643	385	(4,288)	2,826	(3,260)	(434)
Assets	Assets	$	3,300,414	8,248	45,090	55,770	3,300,414	109,108	3,409,522	Assets	$	3,605,238	4,480	43,714	58,726	3,605,238	106,920	3,712,158


	For Six Months Ended June 30, 2022
	Water Utility Services			Real Estate Services	All Other (1)	SJW Group
	Regulated		Non-tariffed	Non-tariffed	Non-tariffed	Regulated	Non-tariffed	Total
Operating revenue	$	264,779	5,842	2,722	—	264,779	8,564	273,343
Operating expense	220,881		5,776	1,824	1,871	220,881	9,471	230,352
Operating income (loss)	43,898		66	898	(1,871)	43,898	(907)	42,991
Net income (loss)	22,480		451	631	(8,267)	22,480	(7,185)	15,295
Depreciation and amortization	48,969		2,737	601	506	48,969	3,844	52,813
Interest on long-term debt and other interest expense	18,568		—	(3)	9,405	18,568	9,402	27,970
Provision (benefit) for income taxes	4,741		6	213	(1,525)	4,741	(1,306)	3,435
Assets	$	3,435,758	4,220	44,033	57,036	3,435,758	105,289	3,541,047

____________________

(1) The “All Other” category for the six months ended June 30, ~~2022,~~2023, includes the accounts of SJW Group, SJWNE LLC, CTWS and SJWTX Holdings, Inc. on a stand-alone basis. SJWTX Holdings, Inc. had no activity for the six months ended June 30, ~~2022 .~~2023. For the six months ended June 30, ~~2021,~~2022, “All Other” category includes the accounts of SJW Group, SJWNE LLC and CTWS on a stand-alone basis.

(2) As of June 30, 2022 and December 31, 2021, the Company has performed an allocation of goodwill associated with the acquisition of CTWS to 2 reporting units, Connecticut and Maine, which are both aggregated within the Regulated Water Utility Services reportable segment.

Note 9.10.~~Subsequent Event~~Acquisitions

On January 13, 2023, Texas Water reached agreements to acquire KT Water Development Ltd. and KT Water Resource L.P. for the purchase price of $7,338 and $56,500, respectively. KT Water Development Ltd. is an investor-owned water utility providing water to approximately 1,725 people through over 570 service connections in the Rockwall Ranch subdivision in southern Comal County, Texas. KT Water Resources L.P. is a privately-held company formed to develop wholesale water supplies for the fast-growing utilities of Comal County, Texas. The Public Utility Commission of Texas approved of the proposed KT Water Development Ltd. acquisition 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 Notes24, 2023. Both transactions are unsecured obligations of SJWC and are due on February 1, 2053. Interest is payable semi-annually in arrears on February 1st and August 1st of each year. The note purchase agreement contains customary affirmative and negative covenants for as long as the Series P Notes are outstanding. The Series P Notes are also subject to customary events of default. The closing is expected to ~~occur~~close in ~~January 2023 upon satisfaction~~the third quarter of ~~customary closing conditions.~~2023.

1715

ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollar amounts in thousands, except per share amounts and otherwise noted)

The information in this Item 2 should be read in conjunction with the financial information and the notes thereto included in Item 1 of this Form 10-Q and the condensed consolidated financial statements and notes thereto and the related “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in SJW Group’s Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

This report contains forward-looking statements within the meaning of the federal securities laws relating to future events and future results of SJW Group and its subsidiaries that are based on current expectations, estimates, forecasts, and projections about SJW Group and its subsidiaries and the industries in which SJW Group and its subsidiaries operate and the beliefs and assumptions of the management of SJW Group. Actual results may differ materially from those currently anticipated and expressed in such forward-looking statements as a result of a number of factors. For more information about such forward-looking statements, including some of the factors that may affect our actual results, please see our disclosures under “Forward-Looking Statements,” and elsewhere in this Form 10-Q, including Part II, Item 1A under “Risk Factors” as well as the disclosures under Part I, Item 1A in SJW Group’s Annual Report on Form 10-K for the year ended December 31, 2022 under “Risk Factors.”

General:

SJW Group is a holding company with five wholly-owned subsidiaries: San Jose Water Company (“SJWC”), SJWNE LLC, SJWTX, Inc., SJW Land Company, and SJWTX Holdings, Inc.

SJWC is a public utility in the business of providing water service to approximately 232,000 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. The principal business of SJWC consists of the production, purchase, storage, purification, distribution, wholesale, and retail sale of water. SJWC provides water service to customers in portions of the cities of San Jose and Cupertino and in the cities of Campbell, Monte Sereno, and Saratoga and the Town of Los Gatos, and adjacent unincorporated territories, all in the County of Santa Clara in the State of California. SJWC distributes water to customers in accordance with accepted water utility methods which include pumping from storage and gravity feed from high elevation reservoirs. SJWC also provides non-tariffed services under agreements with municipalities and other utilities. These non-tariffed services include water system operations, maintenance agreements, and antenna site leases.

SJWC has utility property including land held in fee, impounding reservoirs, diversion facilities, wells, distribution storage, and all water facilities, equipment, office buildings and other property necessary to serve its customers. Under Section 851 of the California Public Utilities Code, properties currently used and useful in providing utilities services cannot be disposed of unless California Public Utilities Commission (“CPUC”) approval is obtained.

SJWC also has approximately 234 acres of nonutility property which has been identified as no longer used and useful in providing utility services. The majority of the properties are located in the hillside areas adjacent to SJWC’s various watershed properties.

SJWNE LLC is the holding company for Connecticut Water Service, Inc. (“CTWS”). CTWS, headquartered in Connecticut, serves as a holding company for water utility companies providing water service to approximately 141,000 connections that serve a population of approximately ~~459,000~~461,000 people in 81 municipalities throughout Connecticut and Maine and more than 3,000 wastewater connections in Southbury, Connecticut. The subsidiaries held by CTWS that provide utility water services are The Connecticut Water Company (“Connecticut Water”) and The Maine Water Company (“Maine Water”). The remaining two CTWS 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.

The properties of CTWS’s subsidiaries consist of land, easements, rights (including water rights), buildings, reservoirs, standpipes, dams, wells, supply lines, water treatment plants, pumping plants, transmission and distribution mains and other facilities and equipment used for the collection, purification, storage and distribution of water throughout Connecticut and Maine. In certain cases, Connecticut Water and Maine Water are or may be a ~~party`~~party to limited contractual arrangements for the provision of water supply from neighboring utilities.

SJWTX, Inc., doing business as ~~Canyon Lake~~The Texas Water ~~Service~~ Company (“~~CLWSC”~~Texas Water”), is a public utility in the business of providing water service to approximately ~~24,000~~26,000 connections that serve approximately ~~73,000 people. CLWSC’s~~79,000 people and approximately 900 wastewater connections. In 2022, SJWTX, Inc. filed and was approved with the State of Texas an assumed named certificate to operate under the name The Texas Water Company. Texas Water was previously doing business as Canyon Lake Water Service Company. Texas Water’s service area comprises more than ~~267~~268 square miles in Bandera, Blanco, Comal, Hays, Kendall,

Medina and Travis ~~County~~Counties in the growing region between San Antonio and Austin, Texas. ~~SJWTX, Inc.~~Texas Water holds a 25% equity interest in Acequia Water Supply ~~Corporation.~~Corporation (“Acequia”). Acequia has been determined to be a variable interest entity within the scope of ~~ASC~~Accounting Standards Codification Topic 810 with ~~SJWTX, Inc.~~Texas Water as the primary beneficiary. As a result, Acequia has been consolidated with ~~SJWTX, Inc. SJWTX, Inc~~Texas Water. Texas Water is undergoing a corporate reorganization to separate regulated operations from non-tariffed activities. In ~~November~~ 2021, SJWTX Holdings,

Inc. ~~(“SJWTX Holdings”)~~ and Texas Water Operation Services LLC (“TWOS”) were formed for the purpose of effecting a corporate reorganization of our water services organization in Texas. TWOS was created for non-tariffed operations and is wholly-owned by SJWTX ~~Holdings.~~Holdings, Inc. In the second quarter of 2023, Texas Water Resources, LLC (“TWR”) was formed to hold wholesale water supply assets. SJWTX Holdings, Inc. is a wholly-owned subsidiary of SJW Group, incorporated to hold the investments in ~~SJWTX, Inc.~~Texas Water, TWOS and ~~TWOS. In addition, SJWTX Holdings intends to create a new subsidiary to hold future wholesale water supply assets prior to the end of 2022.~~TWR.

SJW Land Company and Chester Realty, Inc. own undeveloped land and operate commercial buildings in Tennessee, California and Connecticut. SJW Land Company and Chester Realty, Inc. owned the following real properties during the six months ended June 30, ~~2022:~~2023:


					% for Six months ended June 30, 2022 of SJW Land Company								% for Six months ended June 30, 2023 of Real Estate Services
Description	Description	Location	Acreage	Square Footage	Revenue		Expense		Description	Location	Acreage	Square Footage	Revenue		Expense
Warehouse building	Warehouse building	Knoxville, Tennessee	30	361,500	52	%	42	%	Warehouse building	Knoxville, Tennessee	30	361,500	53	%	45	%
Commercial building	Commercial building	Knoxville, Tennessee	15	135,000	47	%	57	%	Commercial building	Knoxville, Tennessee	15	135,000	46	%	55	%
Undeveloped land and parking lot	Undeveloped land and parking lot	Knoxville, Tennessee	10	N/A	N/A		N/A		Undeveloped land and parking lot	Knoxville, Tennessee	10	N/A	N/A		N/A
Undeveloped land	Undeveloped land	San Jose, California	101	N/A	N/A		N/A		Undeveloped land	San Jose, California	101	N/A	N/A		N/A
Commercial building	Commercial building	Clinton, CT	22	9,000	1	%	1	%	Commercial building	Clinton, CT	22	9,000	1	%	—	%
Commercial building	Commercial building	Guilford, CT	1	1,300	—	%	—	%	Commercial building	Guilford, CT	1	1,300	—	%	—	%

Business Strategy for Water Utility Services:

SJW Group focuses its business initiatives in three strategic areas:

(1)Regional regulated water utility operations;

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

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

As part of our pursuit of the above three strategic areas, we consider from time to time opportunities to acquire businesses and assets. However, we cannot be certain we will be successful in identifying and consummating any strategic business combination or acquisitions relating to such opportunities. In addition, the execution of our business strategy will expose us to different risks than those associated with the current utility operations. We expect to incur costs in connection with the execution of this strategy and any integration of an acquired business could involve significant costs, the assumption of certain known and unknown liabilities related to the acquired assets, the diversion of management’s time and resources, the potential for a negative impact on our financial position and operating results, entering markets in which we have no or limited direct prior experience and the potential loss of key employees of any acquired company. Any strategic combination or acquisition we decide to undertake may also impact our ability to finance our business, affect our compliance with regulatory requirements, and impose additional burdens on our operations. Any businesses we acquire may not achieve sales, customer growth and projected profitability that would justify the investment. Any difficulties we encounter in the integration process, including the integration of controls necessary for internal control and financial reporting, could interfere with our operations, reduce our operating margins and adversely affect our internal controls. SJW Group cannot be certain that any transaction will be successful or that it will not materially harm operating results or our financial condition.

Please also see Note 10 of “Notes to Condensed Consolidated Financial Statements” for SJW Group’s current acquisition activities.

Real Estate Services:

SJW Group’s real estate investment activity is conducted through SJW Land Company and Chester Realty, Inc. As noted above, SJW Land Company owns undeveloped land and operates commercial buildings in Tennessee. Chester Realty, Inc. owns and operates land and commercial buildings in Connecticut. SJW Land Company and Chester Realty, Inc. manage

income producing and other properties until such time a determination is made to reinvest proceeds from the sale of such properties.

Critical Accounting Policies:

The discussion and analysis of our financial condition and results of operations is based on the accounting policies used and disclosed in our ~~2021~~2022 consolidated financial statements and accompanying notes that were prepared in accordance with

accounting principles generally accepted in the United States of America and included as part of our annual report on Form 10-K for the year ended December 31, ~~2021,~~2022, that was filed with the Securities and Exchange Commission on February ~~28, 2022.~~24, 2023.

Our critical accounting policies are described in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our annual report on Form 10-K for the year ended December 31, ~~2021.~~2022. Our significant accounting policies are described in ~~our~~the notes to the ~~2021 Consolidated Financial Statements~~2022 consolidated financial statements included in our annual report on Form 10-K for the year ended December 31, ~~2021.~~2022. There have been no changes to our critical or significant accounting policies during the three ~~months~~and six ended June 30, ~~2022.~~2023.

Results of Operations:

Overview

SJW Group’s consolidated net income for the three months ended June 30, ~~2022,~~2023, was ~~$11,558, a decrease~~$18,286, an increase of ~~$9,217,~~$6,728, or approximately ~~44%~~58%, from ~~$20,775~~$11,558 for the same period in ~~2021. Consolidated~~2022. The increase in net income ~~includes~~was primarily driven by rate increases in California and Maine, and the delay in SJWC's 2022 General Rate Case and a ~~one-time impact~~decrease in income taxes due to the partial release of ~~$441 related to SJWC’s Order Instituting Investigation settlement~~uncertain tax position reserve, offset by a decrease from lower customer usage driven primarily by weather conditions, higher water production expenses, and higher debt interest expenses. SJW Group’s consolidated net income for the six months ended June 30, ~~2022,~~2023 was ~~$15,295, a decrease~~$29,816, an increase of ~~$8,096,~~$14,521, or approximately ~~35%~~95%, from ~~$23,391~~$15,295 for the same period in ~~2021. Consolidated~~2022. The increase in net income was primarily driven by rate increases in California and Maine, and the delay in SJWC's 2022 ~~includes~~General Rate Case, a ~~gain on~~decrease in income taxes due to the ~~sale~~partial release of ~~nonutility property of $4,450, offset by the~~uncertain tax position reserve, and a decrease in depreciation and amortization primarily due to a one-time ~~impacts of $1,960~~impact related to ~~depreciation~~amortization on certain Cupertino concession assets ~~and $1,709~~in 2022 net of increases in depreciation related to ~~SJWC’s Order Instituting Investigation settlement expenses~~new utility plant additions, offset by a decrease from lower customer usage, a one-time gain on sale of nonutility properties of $5,450 in 2022, and ~~certain true-ups of deferred taxes and acquisition related tax~~higher water production expenses.

Operating Revenue


		Operating Revenue by Segment							Operating Revenue by Segment
		Three months ended June 30,			Six months ended June 30,				Three months ended June 30,			Six months ended June 30,
		2022		2021	2022		2021		2023		2022	2023		2022
Water Utility Services	Water Utility Services	$	147,675	150,921	$	270,621	264,362	Water Utility Services	$	155,470	147,675	$	291,319	270,621
Real Estate Services	Real Estate Services	1,366		1,320	2,722		2,664	Real Estate Services	1,416		1,366	2,863		2,722
		$	149,041	152,241	$	273,343	267,026		$	156,886	149,041	$	294,182	273,343

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

Three months ended
June 30,
2022 vs. 2021 Six months ended
June 30,
2022 vs. 2021
Increase/(decrease) Increase/(decrease)
Water Utility Services:
Consumption changes (including unbilled utility revenue) $ (6,631) (4) % $ (4,829) (2) %
Increase in customers 417 — % 2,881 1 %
Rate increases 7,524 5 % 12,687 5 %
Balancing and memorandum accounts (48) — % 755 — %
Other regulatory mechanisms (4,672) (3) % (5,498) (2) %
Other 164 — % 264 — %
Real Estate Services 46 — % 57 — %
$ (3,200) (2) % $ 6,317 2 %


	Three months ended June 30, 2023 vs. 2022				Six months ended June 30, 2023 vs. 2022
	Increase/(decrease)				Increase/(decrease)
Water Utility Services:
Consumption changes (including unbilled utility revenue)	$	(9,024)	(6)	%	$	(15,643)	(6)	%
Increase in customers	897		1	%	1,903		1	%
Rate increases	14,700		9	%	32,104		11	%
Balancing and memorandum accounts:
Monterey Water Revenue Adjustment Mechanism	472		—	%	1,586		1	%
Water Conservation Memorandum Account (“WCMA”)	903		1	%	1,401		1	%
Other	134		—	%	544		—	%
Other regulatory mechanisms	(126)		—	%	(1,145)		—	%
Other	(161)		—	%	(52)		—	%
Real Estate Services	50		—	%	141		—	%
	$	7,845	5	%	$	20,839	8	%

Operating Expense


		Operating Expense by Segment							Operating Expense by Segment
		Three months ended June 30,			Six months ended June 30,				Three months ended June 30,			Six months ended June 30,
		2022		2021	2022		2021		2023		2022	2023		2022
Water Utility Services	Water Utility Services	$	121,227	117,514	$	226,657	217,361	Water Utility Services	$	124,467	121,227	$	234,748	226,657
Real Estate Services	Real Estate Services	915		881	1,824		1,762	Real Estate Services	661		915	1,560		1,824
All Other	All Other	497		1,207	1,871		2,185	All Other	600		497	1,538		1,871
		$	122,639	119,602	$	230,352	221,308		$	125,728	122,639	$	237,846	230,352

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


		Three months ended June 30, 2022 vs. 2021				Six months ended June 30, 2022 vs. 2021					Three months ended June 30, 2023 vs. 2022				Six months ended June 30, 2023 vs. 2022
		Increase/(decrease)				Increase/(decrease)					Increase/(decrease)				Increase/(decrease)
Water production expenses:	Water production expenses:									Water production expenses:
Change in surface water use	Change in surface water use	$	(1,805)	(2)	%	$	(3,651)	(2)	%	Change in surface water use	$	(5,398)	(4)	%	$	(10,044)	(4)	%
Change in usage and new customers	Change in usage and new customers	(6,913)		(6)	%	(7,224)		(3)	%	Change in usage and new customers	(4,253)		(3)	%	(11,285)		(5)	%
Purchased water and groundwater extraction charge, energy price change and other production expenses, net	Purchased water and groundwater extraction charge, energy price change and other production expenses, net	6,636		6	%	11,131		5	%	Purchased water and groundwater extraction charge, energy price change and other production expenses, net	6,630		5	%	12,822		5	%
Balancing and memorandum accounts cost recovery	Balancing and memorandum accounts cost recovery	756		1	%	1,170		—	%	Balancing and memorandum accounts cost recovery	5,205		4	%	11,362		5	%
Total water production expenses	Total water production expenses	(1,326)		(1)	%	1,426		—	%	Total water production expenses	2,184		2	%	2,855		1	%
Administrative and general	Administrative and general	1,427		1	%	3,632		2	%	Administrative and general	199		—	%	1,720		1	%
Balance and memorandum account cost recovery	Balance and memorandum account cost recovery	507		1	%	1,615		1	%	Balance and memorandum account cost recovery	68		—	%	(1,314)		(1)	%
Maintenance	Maintenance	304		—	%	734		—	%	Maintenance	(593)		—	%	(1,230)		—	%
Property taxes and other non-income taxes	Property taxes and other non-income taxes	430		—	%	1,224		—	%	Property taxes and other non-income taxes	317		—	%	409		—	%
Depreciation and amortization	Depreciation and amortization	1,695		1	%	5,863		3	%	Depreciation and amortization	914		1	%	(396)		—	%
Gain on sale of nonutility properties	Gain on sale of nonutility properties	—		—	%	(5,450)		(2)	%	Gain on sale of nonutility properties	—		—	%	5,450		2	%
		$	3,037	2	%	$	9,044	4	%		$	3,089	3	%	$	7,494	3	%

Sources of Water Supply

SJWC’s water supply consists of groundwater from wells, surface water from watershed run-off and diversion, reclaimed water, and imported water purchased from ~~the~~ Santa Clara Valley Water District (“Valley Water”) under the terms of a master contract with Valley Water expiring in ~~2051,~~2051. During normal rainfall years, purchased water provides approximately 40% to 50% of SJWC’s annual production. An additional 40% to 50% of its water supply is pumped from the underground basin which is

subject to a groundwater ~~from wells, surface~~extraction charge paid to Valley Water. Surface supply, which during a normal rainfall year satisfies about 6% to 8% of SJWC’s annual water supply needs, provides approximately 1% of its water supply in a dry year and approximately 14% in a wet year. In dry years, the decrease in availability of water from ~~watershed~~surface run-off and diversion and ~~reclaimed water. Surface~~the corresponding increase in purchased and pumped water increases production expenses substantially. The opposite is also true where water production expenses decrease in wet years. In both instances, the ~~least expensive source~~impacts of ~~water. Changes and variations in quantities from each of these sources affect the overall mix of the~~surface water, ~~supply, thereby affecting water supply cost. In addition, the water rate for~~ purchased water, groundwater charges and purchased power are now tracked in SJWC’s Full Cost Balancing Account authorized in the 2022 GRC Decision.

Throughout the three months ended June 30, 2023, Santa Clara County’s drought classification remained at “None.” As a result, Valley Water received 100% allocations of water from the State Water Project (“SWP”) and the ~~groundwater extraction charge may be increased by~~U.S Bureau of Reclamation’s Central Valley ~~Water at any time. If~~Project (“CVP”). In prior year period, SWP allocation was 5% of contracted amounts and the CVP allocation was reduced to the Public Health and Safety limit due to an ~~increase occurs, then SJWC would file an advice letter with the CPUC seeking authorization to increase customer rates to offset the cost increase.~~

~~We are currently experiencing a severe drought~~exceptionally dry period beginning in ~~California that is expected to have a significant impact on the sources of our water supply.~~2022. On July 1, ~~2022,~~2023, Valley Water’s 10 reservoirs were ~~at approximately 22%~~35% of ~~total~~ capacity with ~~11,822 million~~19.2 billion gallons of water in ~~storage, which is 40% of the twenty-year average for this date.~~storage. Valley Water’s largest reservoir, Anderson, ~~remains~~remained drained for a dam seismic retrofit project. As reported by Valley Water, there was 8.35 inches of rainfall in San Jose during the current annual rainfall season that commenced on July 1, 2021. Rainfall at SJWC’s Lake Elsman was measured at 37.50 inches during the current rainfall season compared to the five-year average of 47.17 inches. Under normal hydrologic conditions, state and federal water allocations represent approximately 40% of the Valley Water’s total annual water supply. As of July 1, 2022, Valley Water reported that allocations from the State Water Project was 5% or 1,629 million gallons and an additional allocation of human health and safety water has been secured. The U.S. Bureau of Reclamation allocation remains at public health and safety water only. Valley Water reported that its Semitropic groundwater bank reserves are at 80% of capacity or 91,747 million gallons, which can be used to perform water transfers with other state water contractors. Valley Water also reported that the managed groundwater recharge from January to June in the Santa Clara Plain was ~~84%~~181% of the five-year average. The groundwater level in the Santa Clara Plain is approximately 1031 feet higher than June ~~2021.~~2022. According to Valley Water, the projected total groundwater storage at the end of ~~2022~~2023 is expected to ~~fall within~~be in the ~~Alert~~Normal Stage of ~~Valley Water’s~~the Water Shortage Contingency Plan.

OnAs of June 30, 2023, SJWC’s Lake Elsman was 96.7% of capacity with 1.9 billion gallons of water, approximately 189.1% of the five-year seasonal average. In addition, the rainfall at SJWC’s Lake Elsman was measured at 82.52 inches for the period from July 1, 2022 ~~SJWC’s Lake Elsman contained 1,099 million gallons of water, of~~through June 30, 2023, which ~~approximately 949 million gallons can be released for treatment in water production and maintaining downstream bypass flow regulatory requirements. This Lake Elsman volume represents 91%~~is 224.2% of the five-year average. ~~Local surface water is a less costly source of water than groundwater or purchased water and its availability significantly impacts~~ SJWC’s ~~results of operations. Typically, SJWC will utilize surface water and additional water from its portfolio of groundwater supplies to supplement imported water from Valley Water. Production from the~~ Montevina ~~Surface~~ Water Treatment Plant treated 2.9 billion gallons of water through the second quarter, ~~was 996 million gallons,~~ which is ~~88%~~214.7% of the five-year average. ~~Through~~SJWC’s Saratoga Water Treatment Plant treated 0.1 billion gallons of water through the second quarter, which is 84.2% of ~~2022, there was 43 million gallons of water production at SJWC’s smaller Saratoga Water Treatment Plant.~~the five-year average. The Saratoga Water Treatment Plant iswas taken out of service ~~due to lack of run-off from Saratoga Creek~~ and ~~remains offline. Nonetheless,~~will remain offline until the next rain season. SJWC believes that its various ~~other~~sources of water supply ~~sources~~ will be sufficient to meet customer demand through the remainder of ~~2022.~~2023.

On ~~June 9, 2021,~~April 11, 2023, Valley Water ~~declared a~~rescinded its water shortage emergency and ~~asked its retailers to reduce consumption by~~ 15% ~~based on 2019 usage. In response to~~mandatory conservation target. Valley ~~Water’s declaration of drought emergency and~~Water also established a 15% voluntary call for conservation and retained certain watering and water waste rules. On the same day, SJWC ~~filed with the CPUC to activate~~ended its Mandatory Conservation Plan, which included drought allocations and surcharges, and lowered its drought response from Stage 3 ofto Stage 1. SJWC’s request to continue its ~~Rule 14.1~~WCMA and Water ~~Shortage Contingency Plan. Like~~Conservation Expense Memorandum Account (“WCEMA”) under the ~~most recent drought,~~voluntary call for conservation is pending before the ~~current restrictions center~~CPUC. SJWC continues to work with Valley Water to promote conservation, educate customers on ~~outdoor~~responsible water ~~usage which typically accounts for half of a residential customer’s consumption. The restrictions include limits~~use practices, and collaborate on ~~watering days and times, use of potable~~long-range water ~~for washing structures and other non-porous surfaces except to protect public health and safety, and no outdoor watering during and up to 48 hours after measurable rainfall.~~supply planning.

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

~~CLWSC’s~~Texas Water’s water supply consists of groundwater from wells and purchased treated and untreated raw water from local water agencies. ~~CLWSC~~Texas Water has long-term agreements with the ~~GBRA,~~Guadalupe-Blanco River Authority (“GBRA”), which expire in 2037, 2040, 2044 and 2050. The agreements, which are take-or-pay contracts, provide ~~CLWSC~~Texas Water 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~~Texas Water 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, 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. Production wells located in a Comal Trinity Groundwater Conservation District, a regulated portion of the Trinity aquifer, are charged a groundwater pump tax based upon usage.

~~Maine Water’s infrastructure consists~~ In July 2023, Texas Water implemented its Drought Management Plan as approved the PUCT as a result of ~~12 noncontiguous~~persistent drought conditions, decreasing water ~~systems~~levels in ~~the State of Maine. These systems, in total, consist of approximately 600 miles of water main~~Canyon Lake and ~~reservoir storage capacity of 7.0 billion gallons. The safe, dependable yield from our 14 active~~groundwater wells, and ~~7 surface~~ water ~~supplies is approximately 120 million gallons per day.~~ production levels operating at near-capacity level.

Water sources at Maine Water vary among the individual systems, but overall approximately 90% of the total dependable yield comes from surface water supplies and 10% from wells. Maine Water has a water supply agreement with the Kennebec Water District expiring in 2040.

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


		Three months ended June 30,		Increase/ (decrease)		% of Total Change				Six months ended June 30,				Increase/ (decrease)		% of Total Change			Three months ended June 30,					Increase/ (decrease)		% of Total Change				Six months ended June 30,				Increase/ (decrease)		% of Total Change
		2022	2021					2022			2021		2023								2022							2023			2022
Purchased water	Purchased water	5,274	5,885		(611)			(4)	%		9,038		9,257		(219)			(1)	%	Purchased water	5.3		5.3		—			—	%		8.7		9.0		(0.3)			(1)	%
Groundwater	Groundwater	5,062	5,964	(902)		(6)	%			8,920		10,567		(1,647)		(7)	%	Groundwater	3.2			5.1		(1.9)		(14)	%			5.2		8.9		(3.7)		(16)	%
Surface water	Surface water	2,720	2,368	352		2	%			5,287		4,475		812		3	%	Surface water	3.6			2.7		0.9		7	%			6.9		5.3		1.6		7	%
Reclaimed water	Reclaimed water	247	243	4		—	%			372		328		44		—	%	Reclaimed water	0.2			0.2		—		—	%			0.2		0.4		(0.2)		(1)	%
		13,303	14,460	(1,157)		(8)	%			23,617		24,627		(1,010)		(5)	%		12.3			13.3		(1.0)		(7)	%			21.0		23.6		(2.6)		(11)	%

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

SJWC’s unaccounted-for water on a 12-month-to-date basis for June 30, 2023 and 2022 approximated 10.1% and ~~2021 approximated~~ 7.5% ~~and 7.1%~~, respectively, as a percentage of total production. The unaccounted-for water estimate is based on the results of past experience and the impact of flows through the system, partially offset by SJWC’s main replacements and lost water reduction programs.

CTWS’s unaccounted-for water on a 12-month-to-date basis for June 30, 2023 and 2022 approximated 13.8% and ~~2021 was approximately~~ 13.5% ~~and 15.7%, respectively,~~for each of the respective periods, as a percentage of total production. The unaccounted-for water estimate is based on the results of past experience and the impact of flows through CTWS’s systems, unadjusted for any required system flushing, partially offset by Water Infrastructure Conservation Adjustment and Water Infrastructure Surcharge main replacement programs and lost water reduction initiatives.

Water Production Expenses

The change in water production expenses of $2,184 for the three ~~and six~~ months ended June 30, ~~2022,~~2023, compared to the same period in ~~2021,~~2022, was primarily attributable to increases in average per unit costs for purchased water, groundwater extraction, ~~energy charges~~ and other production expenses and increases in SJWC’s regulatory Full Cost Balancing Account, offset by a decrease in customer usage and an increase in available surface water for SJWC. Effective July 1, ~~2021,~~2022, Valley Water increased the unit price of purchased water by approximately ~~9.5%~~14% and the groundwater extraction charge by approximately ~~9.1%~~15%. ~~SJWC~~

The change in water production expenses of $2,855 for the six months ended June 30, 2023, compared to the same period in 2022, was ~~notified~~primarily attributable to increases in average per unit costs for purchased water, groundwater extraction, and other production expenses and increases in SJWC’s regulatory Full Cost Balancing Account, offset by a decrease in customer usage and an increase in available surface water for SJWC. Effective July 1, 2022, Valley Water ~~that~~increased the unit price of purchased water by approximately 14% and the groundwater extraction ~~charges was increased 13.9% and~~charge by approximately 15%~~, respectively, effective July 1, 2022.~~.

Other Operating Expenses

Operating expenses, excluding water production expenses, increased ~~$4,363~~$905 for the three months ended June 30, ~~2022,~~2023, compared to the same period in ~~2021.~~2022. The increase was primarily attributable to increases ~~of $1,934~~ in ~~administrative and general expenses primarily due~~depreciation related to ~~increases in labor and group insurance costs,~~new utility plant additions and an increase ~~of $1,695~~ in ~~depreciation and amortization~~taxes other than income taxes, offset by a decrease in maintenance expenses due to ~~increases in utility plant.~~the timing of contract work and materials expenses.

Operating expenses, excluding water production expenses, increased ~~$7,618~~$4,639 for the six months ended June 30, ~~2022,~~2023, compared to the same period in ~~2021.~~2022. The increase was primarily attributable to ~~increases~~the $5,450 gain on sale of ~~$5,863~~nonutility properties recorded in the prior year, partially offset by decreases in depreciation and amortization due to a $2,400 one-time impact related to amortization on certain Cupertino concession assets net of increases in depreciation related to new utility plant ~~and a true up related to Cupertino assets to adjust the useful lives over the concession term, and an increase of $5,247~~additions. In addition, there were decreases in ~~administrative and general~~maintenance expenses ~~primarily~~ due to ~~increases in labor~~the timing of contract work and ~~group insurance costs, partially offset by $5,450 from the gain on sale of vacant land located in California and nonutility property in Texas.~~materials expenses.

Other (Expense) Income

For the three ~~and six~~ months ended June 30, ~~2022 ,~~2023, compared to the same period in ~~2021,~~2022, the change in other (expense) income was primarily due to ~~the $3,000 pre-tax gain on sale from the release of a holdback amount by GBRA for the sale of TWA,~~ an increase in interest expense due to an increase in long-term debt balances, higher interest rates on ~~long term debt~~lines of credit borrowings and ~~a decrease on the return from retirement plan assets, partially~~an increase in pension non-service cost, offset by the changes in the Rabbi Trust and life insurance policy values.

For the six months ended June 30, 2023, compared to the same period in 2022, the change in other (expense) income ~~generated from~~was primarily due to a true-up on prior real estate sale transactions, an increase in interest expense due to an increase in long-term debt balances, higher interest rates on lines of credit borrowings and an increase in pension ~~non service cost.~~non-service cost, offset by the changes in the Rabbi Trust and life insurance policy values.

Provision for Income Taxes

For the three and six months ended June 30, ~~2022,~~2023, compared to the same period in ~~2021,~~2022, income tax expense decreased ~~$938~~$3,880 and ~~increased by $1,025,~~$3,869, respectively. The decrease in income tax expense for the three and six months ended June 30, ~~2022~~2023 was primarily due to ~~a decrease in pre-tax book income while~~ the ~~increase in~~partial release of an uncertain tax position reserve of $3,087.

The effective consolidated income tax ~~expense~~rates were (9)% and 17% for the three months ended June 30, 2023 and 2022, respectively, and (1)% and 18% for the six months ended June 30, ~~2022 was primarily due to discrete tax expense items. The effective consolidated income tax rates were 17%~~2023 and ~~14% for the three months ended June 30,~~ 2022, ~~and 2021, respectively, and 18% and 9% for the six months ended June 30, 2022, and 2021,~~ respectively. The ~~higher~~lower effective tax rate for the three and six months ended June 30, ~~2022,~~2023, was ~~also~~ primarily due to ~~discrete~~the partial release of an uncertain tax ~~expense items.~~position reserve of $3,087.

Regulation and Rates

Almost all of the operating revenue of SJW Group results from the sale of water at rates authorized by the subsidiaries’ respective state utilities commissions. The state utilities commissions set rates that are intended to provide revenue sufficient to recover operating expenses and the opportunity to achieve a specified return on common equity. The timing of rate decisions could have an impact on the results of operations.

Please also see Note 2 of “Notes to Condensed Consolidated Financial Statements.”

California Regulatory Affairs

On January 4, 2021, SJWC filed General Rate Case Application No. 21-01-003 requesting authority for an increase of revenue of $51,585 or 13.35% in 2022, $16,932 or 3.88% in 2023, and $19,195 or 4.24% in 2024. The application also includes requests to recover $18,499 from balancing and memorandum accounts, authorization for a $435,000 capital budget, further alignment between actual and authorized usage, and a shift to greater revenue collection in the service charge. Review of the application is currently underway by the CPUC and new rates, if approved, are expected to be effective in the fourth quarter of 2022. Due to the processing delay, SJWC filed Advice Letter No. 573 on December 30, 2021, to request interim rates effective January 1, 2022, which will allow SJWC to retroactively apply the final decision to January 1, 2022. Interim rates were requested to equal the present rates in effect to avoid customer confusion and short-term bill changes. This advice letter was approved with an effective date of January 1, 2022. SJWC and the Public Advocates Office filed an amended settlement agreement resolving all issues in the proceeding on February 4, 2022, which will be considered by the CPUC for adoption. The settlement provides a revenue increase of $54,131 over the three-year period with an increase of $25,074 in 2022. The settlement recognizes the need for continued investments in the water system to deliver safe and reliable water service, providing authorization of a three-year $350,000 capital budget. Additionally, it further aligns authorized and actual consumption, particularly for business customers, addresses the water supply mix variability, and provides greater revenue

~~recovery in the fixed charge. The settlement also approves the recovery of $18,254 from balancing and memorandum accounts. New rates are anticipated in the fourth quarter of 2022.~~

On May 3, 2021, SJWC filed Application No. 21-05-004 requesting authority to adjust its cost of capital for the period from January 1, 2022 through December 31, 2024. The request seeks a revenue increase of $6,418 or 1.61% in 2022. The application also proposes a rate of return of 8.11%, an increase from the current rate of 7.64%, a decrease in the average cost of debt rate from 6.20% to 5.48%, and a return of equity of 10.30%, which is an increase from the current rate of 8.90%. In addition, the request seeks to adjust SJWC’s currently authorized capital structure of approximately 47% debt and 53% equity to approximately 45% debt and 55% equity. IfIntervenors in this proceeding, namely the Public Advocates Office and Water Rate Advocates for Transparency, Equity, and Sustainability, have suggested a lower return on equity while the latter has also suggested a higher cost of debt and different capital structure as part of their testimonies. On June 29, 2023, the CPUC approved Decision No. 23-06-025 in this proceeding. The decision authorizes a rate of return of 7.28% based on a return on equity of 8.80%, a cost of debt of 5.46%, and a capital structure of approximately 45% debt and 55% equity. The CPUC also authorized continuation of the Water Cost of Capital Mechanism (“WCCM”) in the same decision. The WCCM provides for an adjustment in SJWC’s return on equity and cost of debt if the average Moody’s Aa utility bond index rate between October 1, 2021 and September 30, 2022 varies by more than 100 basis points when compared to the same period from the prior year. The index rate difference between those periods increased 103 basis points, thereby triggering the WCCM. Accordingly, SJWC filed a Tier 2 Advice Letter to trigger the WCCM on June 30, 2023. This filing is pending before the CPUC. On July 31, 2023, the company expects to file a Tier 1 Advice Letter to implement new rates. The new rates ~~are expected to~~will be prospectively effective inon the ~~third quarter of 2022.~~

On December 6, 2019, SJWC filed Application No. 19-12-002 to deploy Advanced Metering Infrastructure (“AMI”) throughout its service area. On August 5, 2021, an all-party settlement agreement was submitted to the CPUC for adoption that would authorize the deployment of AMI outsidedate of the ~~capital budget requested in~~filing and reflect the ~~2021 GRC. A final decision approving the settlement agreement was issued~~WCCM-adjusted return on ~~June 10, 2022.~~

On May 3, 2022, SJWC filed Advice Letter 575 to increase revenue requirement by $232 or 0.06% for utility plant improvements to the Franciscan Station Pumps. This advice letter was approved on June 10, 2022 withequity of 9.31%, a cost of debt of 5.26%, and an ~~effective date~~overall rate of ~~July 1, 2022.~~return of 7.47%.

SJWC filed Advice Letter No. ~~577~~585 on ~~May 24,~~November 10, 2022, to recover $20,554 in the Interim Rates Memorandum Account in accordance with the 2022 GRC Decision. Advice Letter No. 585 was approved with an effective date of January 1, 2023.

SJWC filed Advice Letter No. 586 on November 18, 2022, to increase the authorized revenue requirement by ~~$24,331~~$18,418 or ~~5.9%~~4% for the escalation year increase in accordance with the 2022 GRC Decision. Advice Letter No. 586 was approved with an effective date of January 1, 2023.

SJWC filed Advice Letter No. 590 on April 6, 2023, to recover a $14,196 under-collection in its Monterey Water Revenue Adjustment Mechanism Balancing Account as of March 31, 2023. SJWC proposed that this amount be recovered via a 12-month volume surcharge. This filing is pending before the CPUC.

SJWC filed Advice Letter No. 591 on April 11, 2023, to discontinue its drought allocation surcharges and move from Stage 3 to Stage 1 of its Schedule 14.1 Advice Letter No. 591 was approved with an effective date of April 11, 2023.

SJWC filed Advice Letter No. 592 on April 20, 2023, to continue its WCMA and WCEMA under Valley Water’s voluntary call for 15% conservation. This filing is pending before the CPUC.

SJWC filed Advice Letter No. 596 on May 31, 2023, to increase the authorized revenue requirement by $27,607 to offset the increases to purchased potable water charges, the groundwater extraction fee, and purchased recycled water charges from its water wholesalers effective July 1, ~~2022.~~2023. Advice Letter No. ~~577~~596 was approved ~~on June 30, 2022.~~with an effective date of July 1, 2023.

Connecticut Regulatory Affairs

On ~~October~~January 26, ~~2021,~~2023, Connecticut Water filed for a Water Infrastructure Conservation Adjustment (“WICA”) increase of ~~approximately $21,746~~$3,253 in annualized revenues for $27,775 in completed projects. ~~Many of the projects were those that were not considered by PURA in the rate case because of the deadline in the proceeding for pro forma capital additions. On December 22, 2021,~~ PURA approved ~~a WICA surcharge of 2.44% to be added to bills of all~~the Connecticut ~~Water customers, including those of the former The Avon Water Company and The Heritage Village Water Company, effective~~Water’s application on March 22, 2023. On January ~~1, 2022 which is expected to generate approximately $2,581 in additional revenue. On February 14, 2022~~25, 2023, Connecticut Water filed its ~~2021~~2022 WICA reconciliation with PURA. The reconciliation,

approved by PURA on March ~~16, 2022~~29, 2023 and effective for 12 months beginning April 1, ~~2022,~~2023, replaced the expiring ~~2020~~ 2021 reconciliation ~~surcharge~~credit of ~~0.07%~~0.02% with a credit of ~~(0.02)%~~0.16%. ~~As a result, the net~~The cumulative WICA surcharge ~~effective~~as of April 1, ~~2022 was 2.35%.~~2023 is 6.19%, collecting $6,544 on an annual basis.

On February ~~28, 2022~~27, 2023, Connecticut ~~Water~~Water filed its ~~2021~~2022 Water ~~Rate~~Revenue Adjustment mechanism (“WRA”). The mechanism reconciles ~~2021~~2022 revenues as authorized in the ~~Company’s~~Connecticut Water’s most recent rate ~~cases.~~case. The ~~2021~~2022 WRA, as approved by PURA on March ~~30, 2022~~24, 2023 and effective for 12 months beginning on April 1, ~~2022 imposed~~2023, imposes a ~~2.85% surcharge~~4.97% surcredit on customer bills to ~~collect~~refund the ~~2021~~2022 revenue ~~shortfall.~~over-collection.

On ~~April 26, 2022,~~July 27, 2023, Connecticut Water filed for a WICA increase of ~~$9,779~~$1,259 in annualized revenues for $11,464 in completed projects. ~~PURA~~If approved, the ~~Company’s application on June 22, 2022. The cumulative WICA charge as of July 1, 2022 is 3.26%, collecting $3,448 on an annual basis.~~

~~On June 17, 2022, Connecticut Water submitted an application to PURA for the approval to issue unsecured notes in the amount of $25,000. The notes carry an interest rate of 4.71% and the closing~~increase is expected to ~~occur on December 15, 2022. A decision is expected from PURA~~become effective in ~~August.~~the fourth quarter of 2023 and the cumulative WICA surcharge would be 7.38%.

Texas RegulatoryAffairs

~~CLWSC~~Texas Water has no current general rate case pending. However, it filed its ~~annual Water Pass Through~~application to establish a System Improvement Charge (“~~WPC”~~SIC”) ~~true-up report on January 31, 2022~~ with the PUCT under Docket No. ~~53173.~~54430 on December 30, 2022. This filing will allow Texas Water to add certain utility plant additions made since 2020 to its rate base, thereby increasing revenue and avoiding the immediate need for a general rate case. The SIC is projected to increase Texas Water’s water revenue by $1,596 and sewer revenue by $29 within one year of the approval from the PUCT. The PUCT ~~modified~~will determine the ~~WPC formula which resulted in a new usage rate increasing from $0.70 to $0.90 dollars per thousand gallons. The new usage rate was effective March 1, 2022. The true-up report was approved by~~completeness of the application and sufficiency of the notices on July 31, 2023. Once the PUCT ~~on May 10, 2022 and CLWSC received approval~~files the final order approving the SIC, Texas Water will be required to file a general rate case within four years. Texas Water will incrementally increase its SIC annually until that rate case. Texas Water expects to receive the final order during the fourth quarter of 2023 or first quarter of 2024. Notwithstanding the ~~new tariff on May 24, 2022.~~

~~CLWSC filed~~SIC filing, Texas Water will continue to file its annual ~~WPC true-up report~~adjustments for ~~its~~the Water Pass-through Charges (“WPC”) for Canyon Lake, Deer Creek and Kendall West customers. All water supply cost increases are recoverable when the next annual WPC adjustment for each system ~~on June 29, 2022~~is filed.

On April 10, 2023, Texas Water filed an application with the PUCT ~~under Docket No. 53751. CLWSC requested an increase from $2.39~~ to ~~$3.69 per thousand gallons~~acquire the Elm Ridge water system that serves 21 residential customers. Texas Water has asked for filed rate doctrine treatment, which allows the acquiring utility’s current rates to be applied at the time of acquisition.

On June 15, 2023, the PUCT approved the application for the ~~WPC. Subsequent~~transfer of 520 acres of water Certificate of Convenience and Necessity (“CCN”) and 314 acres of sewer CCN from the San Antonio Water System's to ~~this filing,~~Texas Water's CCN. No customers were transferred as part of the ~~increase requested was revised~~transaction.

On July 24, 2023, the PUCT approved Texas Water's application to ~~$2.56 per thousand gallons~~acquire KT Water Development Ltd. KT Water Development Ltd. provides service to approximately 570 residential water connections. We expect to close on ~~July 15, 2022.~~the acquisition during the third quarter of 2023. The PUCT's final decision that transfers the CCN to Texas Water is expected in the fourth quarter of 2023, which is when we anticipate approval of our request for fair market value and filed rate doctrine treatment.

Maine Regulatory Affairs

The rates approved in the Biddeford Saco division by the April 5, 2022 stipulated agreement, which authorized a rate increase of $6,313, or 72.5% went into effect on July 1, 2022. The Saco River Drinking Water Resource Center began supplying the water distribution system on June 16, 2022. As part of the stipulated agreement, Maine Water agreed to file a final phase of the rate case by April 1, 2023. The third filing was submitted on March 31, 2023. Step 3 of the planned multi-year rate filings for the Saco River Drinking Water Resource Center was filed in accordance with the Commission order on March 31, 2023. The filing requested an increase in revenue requirement of $2,949, or 19.9% and requested that the increase be implemented over two years with a 12% increase effective July 1, 2023 followed by a 9% increase effective July 1, 2024 with a slight decrease in year three to reach the overall 19.9% requested. Through a scheduling order, an Examiner’s report is expected to be issued in July regarding temporary rates effective July 1, 2023 while the areas of dispute in the case are more fully litigated into the fall. A final decision is expected in the fourth quarter of 2023.

On February 2, 2023, Maine Water received final decisions from the MPUC on four general rate cases filed in 2022. The rate increases are retroactively effective for January 1, 2023 and authorize a $692 increase in annual revenues. On February 28, 2022, Maine Water filed requests for general rate increases in the Camden-Rockland, Freeport, Millinocket and Oakland Divisions.

On June 30, 2023, Maine Water filed a Water Infrastructure Surcharge for the Camden-Rockland division. The ~~four filings collectively request $532 in new revenue and seek to reset the WISC in all four divisions. Individually, the Camden Rockland Division request~~requested surcharge is ~~$225,~~2.34% or ~~3.4%; the Freeport request~~$158 with a rate effective date of August 1, 2023. A decision is $51, or 6.1%; the Millinocket request is $184, or 14.5%; and the Oakland request is $72, or 9.9%. The four cases, while docketed separately, are proceeding through the adjudication process together. Decisions by the Commission in these filings are expected in the third quarter of ~~2022.~~

~~On March 14, 2022, Maine Water filed a request for approval to issue $15,000 in long-term debt. The debt issuance was approved by the MPUC on April 20, 2022.~~2023.

Liquidity:

Cash Flow from Operating Activities

During the six months ended June 30, ~~2022,~~2023, SJW Group generated cash flows from operations of approximately ~~$83,600,~~$97,400, compared to ~~$67,100~~approximately $83,600 for the same period in ~~2021.~~2022. Cash flow from operations is primarily generated by net income from revenue producing activities, adjusted for non-cash expenses for depreciation and amortization, deferred income taxes, stock-based compensation, allowance for equity funds used during construction, gains or losses on the sale of assets, and changes in working capital items. Cash flow from operations increased by approximately ~~$16,500.~~$13,800. This increase was the result of a combination of the following factors: (1) ~~an increase of $25,500 in regulatory assets primarily due to the recognition of balancing and memorandum accounts, offset by (2)~~ general working capital and net income, adjusted for non-cash items, ~~decreased~~increased by ~~$5,100, (3)~~$25,800, and (2) an increase in collections from accounts receivable and accrued unbilled utility revenue of $4,800, offset by (3) a ~~net payable~~decrease of ~~taxes payable which was $2,700~~$5,200 in regulatory assets primarily due to lower surcharge collections on balancing and memorandum accounts, (4) a decrease of $5,100 in other changes primarily due to prior funds received from the State of California Water and Wastewater Arrearages Payment Program, (5) a decrease in tax accruals of more than in$3,300 than the prior ~~year,~~period, and ~~(4)~~(6) a decrease in payments of amounts previously invoiced and accrued including accrued production costs ~~decreased by $1,200.~~of $3,200.

As of June 30, ~~2022,~~2023, Water Utility Services’ write-offs for uncollectible accounts represented ~~less than~~ 1% of its total revenue, ~~unchanged~~increased from less than 1% as of June 30, ~~2021. As of February 1, 2022,~~2022. The increase in write-offs from the ~~remaining state executive order suspending water service disconnections~~prior year is due to ~~non-payment by customers expired in California. There is no guarantee that~~ the ~~respective~~end of state ~~regulators will not reinstate such orders.~~moratoriums to halt collection efforts related to the COVID pandemic. Management believes that the collection rate for its accounts receivables will gradually return to pre-pandemic levels now that service disconnections are ~~allowable~~ once again allowable in order to mitigate payment delinquencies. On February 3, 2022, SJWC received $9,757 through the State of California Water and Wastewater Arrearages Payment Program to relieve outstanding payment delinquencies for customers accounts greater that 60-days past due as of June 30, 2021. Bill credits were applied to customer accounts that remained outstanding and the excess of $3,272 was returned to the State of California. The financial impact of certain remaining past due accounts are being recorded for future recovery through the rate-making process. There is no guarantee that such recovery will be approved by the respective state regulatory utility commissions.

Cash Flow from Investing Activities

During the six months ended June 30, ~~2022,~~2023, SJW Group used cash flows from investing activities of approximately ~~$117,100,~~$125,400, compared to ~~$107,000~~approximately $117,100 for the same period in ~~2021.~~2022. SJW Group used approximately: (1) ~~$101,600~~$115,700 of cash for company-funded capital expenditures, (2) ~~$13,300~~$9,300 for developer-funded capital expenditures, and (3) ~~$1,800~~$500 for utility plant retirements.

Water Utility Services’ ~~budgeted~~estimated capital expenditures for ~~2022,~~2023, exclusive of capital expenditures financed by customer contributions and advances, are anticipated to be approximately ~~$223,000.~~$255,000. As of June 30, ~~2022,~~2023, approximately ~~$101,600~~$115,700 or ~~46%~~45% of the ~~$223,000~~$255,000 has been invested.

Water Utility Services’ capital expenditures are incurred in connection with normal upgrading and expansion of existing facilities and to comply with environmental regulations. Over the next five years, Water Utility Services expects to incur approximately ~~$1,300,000~~$1,630,000 in capital expenditures, which includes replacement of pipes and mains, ~~and~~ maintaining water ~~systems.~~systems, and installing PFAS treatment. A significant portion of this amount is subject to future respective state regulatory utility commissions’ approval. Capital expenditures have the effect of increasing utility plant rate base on which Water Utility Services earns a return. Water Utility Services actual capital expenditures may vary from their projections due to changes in the expected demand for services, weather patterns, actions by governmental agencies, and general economic conditions. Total additions to utility plant normally exceed ~~Company-financed~~company-financed additions as a result of new facilities construction funded with advances from developers and contributions in aid of construction.

The Water Utility Services’ distribution systems were constructed during the period from the early 1900’s through today. Expenditure levels for renewal and modernization will occur as the components reach the end of their useful lives. In most cases, replacement ~~cost~~costs will significantly exceed the original installation ~~cost~~costs of the retired assets due to increases in the costs of goods and services and increased regulation.

Cash Flow from Financing Activities

Net cash provided by financing activities for the six months ended June 30, ~~2022, decreased~~2023 increased by approximately ~~$24,700~~$7,100 from the same period in the prior year, primarily as a result of (1) ~~a decrease~~an increase in net borrowings and repayments on long-term debt of $105,100, and (2) an increase in net proceeds from our common stock equity ~~offering in prior year~~offerings of ~~$66,800, (2) a decrease in net proceeds of $72,000 from new long-term debt, (3) an increase of dividends paid to stockholders of $1,900,~~$63,800, offset by ~~(4) an increase~~(3) a decrease in net borrowings and repayments on our lines of credit of ~~$114,900,~~$154,600, and ~~(5) $1,100 increase~~(4) $4,700 decrease in net cash receipts from advances and contributions in aid of construction.

Sources of Capital:

SJW Group’s ability to finance future construction programs and sustain dividend payments depends on its ability to maintain or increase internally generated funds and attract external financing. The level of future earnings and the related cash flow from operations is dependent, in large part, upon the timing and outcome of regulatory proceedings.

Short-term Financing Agreements

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

A summary of the line of credit agreements as of June 30, ~~2022,~~2023, are as follows:

Maturity Date Line Limit Amounts Outstanding Unused Portion
SJWC credit agreement (a) December 31, 2023 $ 140,000 66,000 74,000
CTWS credit agreement December 14, 2023 75,000 33,836 41,164
CTWS credit agreement May 15, 2025 40,000 40,000 —
SJWTX, Inc. credit agreement (b) December 31, 2023 5,000 1,500 3,500
$ 260,000 141,336 118,664
~~___________________________________~~


	Maturity Date	Line Limit		Amounts Outstanding	Unused Portion

Syndicated credit agreement:	August 2, 2027
SJW Group		$	50,000	—	50,000
SJWC		140,000		22,000	118,000
CTWS		90,000		15,000	75,000
Texas Water		20,000		—	20,000
Total syndicated credit agreement		300,000		37,000	263,000
CTWS credit agreement	August 2, 2027	10,000		6,310	3,690
CTWS credit agreement	May 15, 2025	40,000		40,000	—
		$	350,000	83,310	266,690

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

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

~~During~~For the first half of ~~2022,~~2023, cost of borrowing on the lines of credit averaged ~~1.44%~~5.96% compared to ~~1.39%~~1.44% in the same period in ~~2021.~~2022.

All of SJW Group’s and subsidiaries lines of credit contain customary representations, warranties and events of default, as well as certain restrictive covenants customary for facilities of this type, including restrictions on indebtedness, liens, acquisitions and investments, restricted payments, asset sales, and fundamental changes. All of the lines of credit also include certain customary financial covenants such as a funded debt to capitalization ratio and a minimum interest coverage ratio. As of June 30, ~~2022,~~2023, SJW Group and its subsidiaries were in compliance with all covenants on their lines of credit.

Long-term Financing Agreements

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

On April 6, 2022, Maine Water entered into a credit agreement with a commercial bank, pursuant to an existing master loan agreement under which the commercial bank issued Maine Water a promissory note on the same date with an aggregate principal amount of $15,000 and a fixed interest rate of 4.54%, due May 31, 2042. ~~The notes are unsecured obligations of Maine Water. Interest is payable quarterly in arrears on the 20th day of January, April, July and October of each year.~~ ~~The promissory note contains customary representations and warranties.~~ ~~Under the promissory note, Maine Water is required to comply with certain customary affirmative and negative covenants for as long as the notes are outstanding.~~ ~~The notes are also subject to customary events of default, the occurrence of which may result in all of the notes then outstanding becoming immediately due and payable.~~ ~~Proceeds from the borrowing were received on May 13, 2022.~~

On June 28, 2022, Connecticut Water entered into a note purchase agreement with certain affiliates of New York Life Insurance Company, pursuant to which Connecticut Water sold an aggregate principal amount of $25,000 of its 4.71% Senior Notes, Series 2022, due 2052. The closing of the note purchase agreement is expected to occur on December 15, 2022, and is subject to customary closing conditions and regulatory approval. The Series 2022 Notes are unsecured obligations of Connecticut Water. Interest is payable semi-annually in arrears on June 15th and December 15th of each year. The note purchase agreement contains customary representations and warranties. Connecticut Water has agreed to customary affirmative and negative covenants for as long as the Series 2022 Notes are outstanding. The Series 2022 Notes are also subject to customary

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

On July 14, 2022, SJWC entered into a note purchase agreement with certain affiliates of New York Life Insurance, Metropolitan Life Insurance, Northwestern Mutual Life Insurance, and John Hancock Life Insurance (collectively the “Purchasers”), pursuant to which the company will sell an aggregate principal amount of $70,000 of its 4.85% Senior Notes, Series P (“Series P Notes”) to the Purchasers. The Series P Notes are unsecured obligations of SJWC and are due on February 1, 2053. Interest is payable semi-annually in arrears on February 1st and August 1st of each year. The note purchase agreement contains customary affirmative and negative covenants for as long as the Series P Notes are outstanding. The Series P Notes are also subject to customary events of default. The closing ~~is expected to occur in January 2023 upon satisfaction of customary closing conditions.~~

The debt and credit agreements of SJW Group and its subsidiaries contain various financial and other covenants. 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 are subject to customary events of default, which may result in the outstanding debt becoming immediately due and payable. As of June 30, 2022, SJW Group and its subsidiaries were in compliance with all covenants related to its long-term debt agreements.note purchase agreement occurred on January 25, 2023.

Equity Financing Arrangements

On ~~November 17, 2021,~~March 1, 2023, SJW Group entered into anAmendment No. 1 to the equity distribution agreement (the “Equity Distribution Agreement”) ~~with~~, dated November 17, 2021, between SJW Group and 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 SJW Group increased the ~~company may offer and sell~~aggregate gross sales price of shares of ~~its~~SJW Group’s 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~~that 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~~from $100,000 to $240,000. For the three and six months ended June 30, 2023, SJW Group issued and sold a total of 312,683 and 860,503 shares of common stock, respectively, with a weighted average price of $74.60 and $75.56 per share, respectively, and received $22,782 and $63,779 in net proceeds, respectively, under the ~~financing of acquisitions, infrastructure improvements and other capital expenditures, repayment of debt or other corporate obligations, and working capital over~~Equity Distribution Agreement. Since the ~~term~~inception of the Equity Distribution Agreement, SJW Group has issued and sold 1,745,354 shares of common stock with a weighted average price of $74.49 for a total net proceeds of $127,210 and has $109,995 remaining to issue from the sale of shares as ~~such needs arise. As~~ of June 30, ~~2022, SJW Group has $75,000 remaining on~~2023 under the Equity Distribution ~~agreement. No shares were sold in the first and second quarters of 2022.~~Agreement.

Credit Rating

The condition of the capital and credit markets or the strength of financial institutions could impact SJW Group’s ability to draw on its lines of credit, issue long-term debt, sell its equity or earn interest income. In addition, government policies, the state of the credit markets and other factors could result in increased interest rates, which would increase SJW Group’s cost of capital. While our ability to obtain financing will continue to be a risk, we believe that based on our ~~2022~~2023 and ~~2021~~2022 activities, we will have access to the external funding sources necessary to implement our on-going capital investment programs in the future.

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

Entity

Rating

Outlook

SJW Group

A-

Stable

SJWC

Stable

CTWS

A-

Stable

Connecticut Water

A-

Stable

ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

SJW Group is subject to market risks in the normal course of business, including changes in interest rates, pension plan asset values, and equity prices. The exposure to changes in interest rates can result from the issuance of debt and short-term funds obtained through the company’s variable rate lines of credit. ~~SJWC and Connecticut Water~~SJW Group’s subsidiaries sponsor noncontributory pension and other post-retirement plans for its employees. Pension and other post-retirement costs and the funded status of the plans ~~are~~may be affected by a number of factors including the discount rate, mortality rates of plan participants, investment returns on plan assets, and pension reform legislation.

SJW Group has no derivative financial instruments, financial instruments with significant off-balance sheet risks, or financial instruments with concentrations of credit risk.

ITEM 4. CONTROLS AND PROCEDURES

SJW Group’s management, with the participation of its Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of SJW Group’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, the “Exchange Act”), as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that SJW Group’s disclosure controls and

procedures as of the end of the period covered by this report have been designed and are functioning effectively to provide reasonable assurance that the information required to be disclosed by SJW Group in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. SJW Group believes that a control system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the control system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

There has been no change in internal control over financial reporting during the second fiscal quarter of ~~2022~~2023 that has materially affected, or is reasonably likely to materially affect, the internal controls over financial reporting of SJW Group.

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PART II. OTHER INFORMATION

ITEM 1.LEGAL PROCEEDINGS

ITEM 1A.RISK FACTORS

In addition to the other information set forth in this report, you should carefully consider the factors discussed in the “Risk Factors” in SJW Group’s annual report on Form 10-K for the year ended December 31, ~~2021~~2022 and our other public filings, which could materially affect our business, financial condition or future results. ~~Other than the updates to the risk factors below, there~~There has been no material changes from risk factors previously disclosed in “Risk Factors” in SJW Group’s annual report on Form 10-K for the year ended December 31, ~~2021.~~

~~Fluctuations in customer demand for water due to seasonality, restrictions of use, weather, and lifestyle can adversely affect operating results.~~

Water Utility Services are seasonal, thus quarterly fluctuation in results of operations may be significant. Rainfall and other weather conditions also affect Water Utility Services. Water consumption typically increases during the third quarter of each year when weather tends to be warm and dry. In periods of drought, if customers are encouraged or required to conserve water due to a shortage of water supply or restriction of use, revenue tends to be lower. Similarly, in unusually wet periods, water supply tends to be higher and customer demand tends to be lower, again resulting in lower revenues. Furthermore, certain lifestyle choices made by customers can affect demand for water. For example, a significant portion of residential water use is for outside irrigation of lawns and landscaping. If there is a decreased desire by customers to maintain landscaping for their homes or restrictions are placed on outside irrigation, residential water demand would decrease, which would result in lower revenues.

Conservation efforts and construction codes, which require the use of low-flow plumbing fixtures, could diminish water consumption and result in reduced revenue. In addition, in time of drought, water conservation may become a regulatory requirement that impacts the water usage of our customers. Weather conditions can also affect the sources of water supply, including the need to use more purchased water than surface water during a drought, which may increase our operating expenses. California has been experiencing a severe drought for the past year. On July 8, 2021, Governor Gavin Newsom issued a proclamation declaring a drought emergency in fifty California Counties, including Santa Clara County. On July 9, 2021 Valley Water, the water supply agency for Santa Clara County, declared a water shortage emergency and requested its retailers enact conservation measures to achieve a mandatory 15% reduction compared to 2019 water consumption. SJWC has activated our Water Shortage Contingency Plan to achieve the 15% conservation target.

On January 4, 2022, the State Water Resource Control Board (“State Water Board”) adopted emergency water use regulations that prohibit certain outdoor wasteful water practices. SJWC’s drought response through our Water Shortage Contingency Plan includes the same restrictions on wasteful water practices. On June 10, 2022, the State Water Board’s Second Water Conservation Emergency Declaration of 2022 became effective. This declaration prohibits the use of potable water for irrigation of non-functional turf at commercial, industrial, and institutional properties. SJWC is currently collaborating with our wholesaler and utility peers to engage and inform customers. Both water conservation emergency declarations will remain in effect for one year.

The implementation of mandatory or voluntary conservation measures during the current drought has resulted and is expected to result in lower water usage by our customers which may adversely affect our results of operation and financial conditions. We cannot predict how long the current drought will continue and when the current conservation measures will be relaxed or lifted. If the current conservation measures continue, or if new measures are imposed in response to drought conditions in the future, we may experience fluctuations in the timing of or a reduction in customer revenue. In addition, the current drought reduced the amount of available surface water, which required us to incur more costs to extract groundwater or obtain purchased water, which can significantly impact our results of operations.

Furthermore, the CPUC may approve memorandum accounts, such as a Water Conservation Memorandum Account (“WCMA”), to allow companies to recover revenue reductions due to water conservation activities and certain conservation related costs, including those implemented and incurred during the current drought. However, collection of such memorandum accounts is subject to a review and approval process by CPUC, which can be lengthy, and there is no assurance that we will be able to recover in a timely manner all or some of the revenue and costs recorded in the memorandum accounts. When drought conditions ease and the California State Water Board and Valley Water no longer mandate water conservation, the company may no longer be allowed to recover revenue lost due to continued conservation activities under the WCMA account and would

~~therefore be exposed to differences between actual and authorized usage. This could result in lower revenues and adversely affect our results of operations.~~

SJWC was authorized a WCMA and a Water Conservation Expense Memorandum Account since July 19, 2021. Lost revenues and additional expenses related to the drought continue to be tracked in these accounts for potential future recovery. Any drought surcharges currently collected through the implementation of Schedule 14.1 are being used to offset revenue losses in the WCMA thereby lowering the balance that may need to be recovered.

Similar to SJWC, Connecticut Water and Maine Water have also been impacted by increased water conservation, as well as the use of more efficient household fixtures and appliances among residential users. There has been a trend of declining per customer residential water usage in Connecticut and Maine over the last several years. CTWS’s regulated businesses at Maine Water are heavily dependent on revenue generated from rates it charges to its residential customers for the volume of water they use. The rates Connecticut Water and Maine Water charge for its water is regulated by PURA in Connecticut and MPUC in Maine, and CTWS’s water services subsidiaries may not unilaterally adjust their rates to reflect changes in demand. A declining volume of residential water usage may have a negative impact on our operating revenues in the future if regulators do not reflect usage declines in the rate setting design process. Although the legislatures in Maine and Connecticut have provided enabling legislation for water utilities to implement revenue adjustment mechanisms to allow for recovery of authorized rates where conservation has occurred and consumption has declined and such a mechanism has been approved by PURA and implemented for Connecticut Water, this mechanism has yet to be implemented at Maine Water.

~~Our business, financial condition, and results of operations have been and will continue to be negatively impacted by the COVID-19 pandemic.~~

Since 2020, we have been subject to risks associated with the COVID-19 pandemic. There have been numerous governmental executive orders and restrictions for their residents to control the spread of COVID-19 disease. Such orders and restrictions resulted in business closures, work stoppages, slowdowns and delays in commercial activities, unprecedented and widespread unemployment, travel restrictions and cancellation of events, among other effects, thereby negatively impacting our suppliers, employees and customers. Since the start of the second quarter of 2021, there has been increased availability and administration of vaccines against COVID-19, as well as an easing of restrictions on social, business, travel, and government functions, which resulted in gradual resumption of economic and commercial activities. During the first half of 2022, government mandates and restrictions relating to the pandemic continued to ease and terminate, although the recent rising infection rates due to new variants may cause government agencies to reconsider imposition of such mandates and restrictions. The reversal of prior orders to ease restrictions will have a negative effect on our business operations and results of operations.

In response to the pandemic, federal and state governments have and may continue to take actions to impose utility termination moratoriums which prohibit water companies from turning off water supplies for nonpayment of water bills which have reduced the incentive to our residential and commercial customers to pay their water services bills on time, if at all, which could negatively impact our results of operations.

The regulators in states we operate have approved mechanisms to either record a regulatory asset or track, in a memorandum account, expenses and savings related to COVID-19. If a state regulator disagrees with our calculation of recorded COVID-19 account balances, we may be required to make adjustments that could adversely affect our results of operations. While we expect to recover some of the revenue loss and costs through the rate-making processes, there is no guarantee that such recovery will be approved by the regulated utility authorities in a timely manner, or at all.

In response to COVID-19 and the need to protect the health and safety of our employees, we implemented a policy requiring our employees, subject to certain exemptions, to be vaccinated. On January 22, 2022, SJWC received a letter from the National Labor Relations Board (“NLRB”) stating that it would investigate the allegations from the Utility Workers Union of America Local 259 (“Union”) that SJWC failed to bargain in good faith by imposing a COVID vaccine mandate and threatening to terminate noncompliant employees and for failing to bargain over its decision to impose the mandate. Subsequent to the notice, NLRB chose not to investigate and denied the claim instructing the Union to seek a mediation process to resolve the matter. The Union appealed the NLRB’s decision, but NLRB denied the appeal and upheld their original decision. These regulatory requirements and company policies may result in increased operating costs, labor disruptions or employee attrition, and if we lose employees, it may be difficult in the current competitive labor market to recruit and hire replacement employees, all of which may have an adverse effect on our business operations and financial conditions.

~~In addition to the above risks, we are subject to the following risks resulting from the COVID-19 pandemic and related events:~~

•if governments impose or reinstate “shelter-in-place” orders and quarantines, our planned infrastructure improvement projects could be temporarily interrupted by supply shortages, lack of sufficient workforce and disruption in transportation. This may negatively impact our ability to maintain and improve our infrastructure and provide reliable services to customers. In addition, our expenditures on capital improvements could be reduced, which may in turn impact rate decisions by state regulators.

•~~wide-spread COVID-19 disease could impact the health of our employees and management team, which may disrupt our business operations;~~

•a recession, stock market correction, or debt market disruptions resulting from the spread of COVID-19 could materially affect our business, results of operations, cash flow, and the value of our common stock, which may make it more difficult for us to raise capital in equity or debt markets;

•~~we may experience higher uncollectible accounts receivables; and,~~

•~~increased costs from COVID-19 related prevention activities.~~

In addition, the COVID-19 pandemic has resulted in widespread global supply chain disruptions to vendors and suppliers, which may negatively affect our business operations, including delays in procuring materials and supplies that are required for capital additions and operations. We are continually working through supply chain disruptions, however there is no guarantee of our success on minimizing the impacts to our business operations.

The full extent of the future impact of COVID-19 pandemic on our operational and financial performance is uncertain and will depend on many factors, many of which are outside our control, including, without limitation the timing, extent, trajectory and duration of the pandemic; the availability, distribution and effectiveness of vaccines; the imposition of protective public safety measures; and the impact of the pandemic on state and local economy and customer behaviors. Any of these factors may continue to adversely affect our business and financial conditions, and there is no guarantee that we will be able to quickly return to our normal operations.

~~Our business and financial performance may be adversely affected by the rising inflation.~~

Inflation has the potential to adversely affect our liquidity, business, financial condition and results of operations by increasing our overall cost structure, particularly if we are unable to achieve increases in the rates we charge our customers. There is no guarantee that any future rate increase requests will be approved and granted in a timely manner and/or will be sufficient to cover costs for the impact of inflation. The existence of inflation in the economy has resulted in, and may continue to result in, higher interest rates and capital costs, shipping costs, supply shortages, increased costs of labor, weakening exchange rates and other similar effects. As a result of inflation, we have experienced and may continue to experience, cost increases. Although we may take measures to mitigate the impact of this inflation, if these measures are not effective, our business, financial condition, results of operations and liquidity could be materially adversely affected. Even if such measures are effective, there could be a difference between the timing of when these beneficial actions impact our results of operations and when the cost of inflation is incurred.2022.

ITEM 5.OTHER INFORMATION

Quarterly Dividend

On July ~~27, 2022,~~26, 2023, the Board of Directors of SJW Group declared the regular quarterly dividend of ~~$0.36~~$0.38 per share of common stock. The dividend will be paid on September 1, ~~2022,~~2023, to stockholders of record as of the close of business on August ~~8, 2022.~~7, 2023.

Information Web Sites

SJW Group posts information about the operating and financial performance of SJW Group and its subsidiaries on its web sites at www.sjwgroup.com, www.sjwater.com, www.ctwater.com, ~~www.sjwtx.com~~www.txwaterco.com and www.mainewater.com from time to time. The information on our web sites is not a part of and should not be considered incorporated by reference into this Form 10-Q.

3127

ITEM 6.EXHIBITS


Exhibit Number						Description

10.1						SJW Group 2023 Long-Term Incentive Plan, Incorporated by reference to Appendix I to the Proxy Statement filed on March 9, 2023.

10.2						SJW Group 2023 Employee Stock Purchase Plan, Incorporated by reference to Appendix II to the Proxy Statement filed on March 9, 2023.

31.1						Certification Pursuant to Rule 13a-14(a)/15d-14(a) by Chairman, President and Chief Executive Officer. (1)

31.2						Certification Pursuant to Rule 13a-14(a)/15d-14(a) by Chief Financial Officer and Treasurer. (1)

32.1						Certification Pursuant to 18 U.S.C. Section 1350 by Chairman, President and Chief Executive Officer, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (1)

32.2						Certification Pursuant to 18 U.S.C. Section 1350 by Chief Financial Officer and Treasurer, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (1)

101.INS						XBRL Instance Document - the instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.

101.SCH						XBRL Taxonomy Extension Schema Document

101.CAL						XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF						XBRL Taxonomy Extension Definition Linkbase Document

101.LAB						XBRL Taxonomy Extension Label Linkbase Document

101.PRE						XBRL Taxonomy Extension Presentation Linkbase Document

104						Cover Page Interactive Data File – the cover page XBRL tags are embedded within the Inline XBRL document

(1)Filed currently herewith.

3228

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

SJW GROUP

DATE:

July ~~29, 2022~~31, 2023

By:

/s/ ANDREW F. WALTERS

Andrew F. Walters

Chief Financial Officer and Treasurer
(Principal financial officer)

3329


	June 30, 2022		December 31, 2021
Regulatory assets:
Income tax temporary differences, net	$	25,946	22,420
Postretirement pensions and other postretirement benefits	64,022		62,197
Business combinations debt premium, net	18,667		19,937
Balancing and memorandum accounts, net	24,772		38,334
Water Rate Adjustment	(1,176)		2,588
Other, net	9,922		9,145
Total regulatory assets, net in Condensed Consolidated Balance Sheets	142,153		154,621
Less: current regulatory assets, net	2,841		2,629
Total regulatory assets, net, less current portion	$	139,312	151,992


	Three months ended June 30, 2022				Three months ended June 30, 2021
	Beginning Balance		Regulatory Asset Increase (Decrease)	Refunds (Collections) Adjustments	Ending Balance	Beginning Balance		Regulatory Asset Increase (Decrease)	Refunds (Collections) Adjustments	Ending Balance
Revenue accounts:
MWRAM	$	19,060	2,036	—	21,096	$	13,853	1,424	1	15,278
WCMA	(3,061)		(1,000)	(10,900)	(14,961)	666		—	2	668
Cost of capital memorandum account	(1,564)		(4)	—	(1,568)	(1,561)		(1)	—	(1,562)
All others	(73)		490	—	417	(1,313)		147	2	(1,164)
Total revenue accounts	$	14,362	1,522	(10,900)	4,984	$	11,645	1,570	5	13,220
Cost-recovery accounts:
Water supply costs	10,789		322	—	11,111	8,910		984	1	9,895
Pension	5,006		63	—	5,069	3,844		366	—	4,210
Hydro Generation Research, Development and Demonstration Memorandum Account (“PRVMA”)	632		1	(90)	543	1,027		—	(99)	928
COVID-19 Catastrophic Event Memorandum Account (“CEMA”)	2,438		148	—	2,586	2,266		352	—	2,618
All others	573		(94)	—	479	445		1	—	446
Total cost-recovery accounts	$	19,438	440	(90)	19,788	$	16,492	1,703	(98)	18,097

Total	$	33,800	1,962	(10,990)	24,772	$	28,137	3,273	(93)	31,317


	Six months ended June 30, 2022				Six months ended June 30, 2021
	Beginning Balance		Regulatory Asset Increase (Decrease)	Refunds (Collections) Adjustments	Ending Balance	Beginning Balance		Regulatory Asset Increase (Decrease)	Refunds (Collections) Adjustments	Ending Balance
Revenue accounts:
MWRAM	$	16,866	4,229	1	21,096	$	12,077	3,200	1	15,278
WCMA	3,534		(1,100)	(17,395)	(14,961)	666		—	2	668
Cost of capital memorandum account	(1,563)		(5)	—	(1,568)	(1,561)		(1)	—	(1,562)
All others	(386)		802	1	417	(1,139)		(28)	3	(1,164)
Total revenue accounts	$	18,451	3,926	(17,393)	4,984	$	10,043	3,171	6	13,220
Cost-recovery accounts:
Water supply costs	10,545		566	—	11,111	8,123		1,771	1	9,895
Pension	4,941		128	—	5,069	3,478		732	—	4,210
PRVMA	707		2	(166)	543	1,108		—	(180)	928
CEMA	3,245		(659)	—	2,586	2,266		352	—	2,618
All others	445		34	—	479	445		1	—	446
Total cost-recovery accounts	$	19,883	71	(166)	19,788	$	15,420	2,856	(179)	18,097

Total	$	38,334	3,997	(17,559)	24,772	$	25,463	6,027	(173)	31,317


	For Three Months Ended June 30, 2021
	Water Utility Services			Real Estate Services	All Other (1)	SJW Group
	Regulated		Non-tariffed	Non-tariffed	Non-tariffed	Regulated	Non-tariffed	Total
Operating revenue	$	148,237	2,684	1,320	—	148,237	4,004	152,241
Operating expense	115,572		1,942	881	1,207	115,572	4,030	119,602
Operating income (loss)	32,665		742	439	(1,207)	32,665	(26)	32,639
Net income (loss)	20,585		677	296	(783)	20,585	190	20,775
Depreciation and amortization	22,887		110	291	224	22,887	625	23,512
Interest on long-term debt and other interest expense	8,347		—	—	5,334	8,347	5,334	13,681
Provision (benefit) for income taxes	4,580		203	96	(1,573)	4,580	(1,274)	3,306
Assets	$	3,300,414	8,248	45,090	55,770	3,300,414	109,108	3,409,522