UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended ~~September 30, 2020~~March 31, 2021


☐			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 1-13883

CALIFORNIA WATER SERVICE GROUP

(Exact name of registrant as specified in its charter)


Delaware						77-0448994
(State or other jurisdiction						(I.R.S. Employer identification No.)
of incorporation or organization)

1720 North First Street

San Jose, California 95112

(Address of principal executive offices)

408-367-8200

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

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, $0.01 par value per share

CWT

New York Stock Exchange

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 ý No o

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 during the preceding 12 months (or for such shorter period that the registrant was required to submit). Yes ý No o

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 the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange ~~Act. (Check one):~~Act:


Large accelerated filer	☒	Accelerated filer	☐
Non-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. o

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. Common shares outstanding as of ~~September 30, 2020~~March 31, 2021 — ~~49,840,000~~50,835,000

Table of Contents

TABLE OF CONTENTS


			Page
PART I Financial Information			3
Item 1 Financial Statements			3
Condensed Consolidated Balance Sheets (unaudited) as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020			3
~~Condensed Consolidated Statements of Income (unaudited) For the Three Months Ended September 30, 20~~20 ~~and 201~~9			4
Condensed Consolidated Statements of ~~Income~~Operations (unaudited) For the ~~Nine~~Three Months Ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~			54
Condensed Consolidated Statements of Cash Flows (unaudited) For the ~~Nine~~Three Months Ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~			65
Notes to Unaudited Condensed Consolidated Financial Statements			76
Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations			2818
Item 3 Quantitative and Qualitative Disclosure about Market Risk			4027
Item 4 Controls and Procedures			4027
PART II Other Information			4128
Item 1 Legal Proceedings			4128
Item 1A Risk Factors			4128
Item 6 Exhibits			4228
Signatures			4329

Table of Contents

PART I FINANCIAL INFORMATION

Item 1.

FINANCIAL STATEMENTS

The condensed consolidated financial statements presented in this filing on Form 10-Q have been prepared by management and are unaudited.

CALIFORNIA WATER SERVICE GROUP

CONDENSED CONSOLIDATED BALANCE SHEETS

Unaudited (In thousands, except per share data)


		September 30, 2020		December 31, 2019			March 31, 2021		December 31, 2020
ASSETS	ASSETS					ASSETS
Utility plant:	Utility plant:					Utility plant:
Utility plant	Utility plant	$	3,835,194	$	3,550,485	Utility plant	$	3,952,681	$	3,890,423
Less accumulated depreciation and amortization	Less accumulated depreciation and amortization	(1,238,880)		(1,144,115)		Less accumulated depreciation and amortization	(1,267,745)		(1,239,865)
Net utility plant	Net utility plant	2,596,314		2,406,370		Net utility plant	2,684,936		2,650,558
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	113,312		42,653		Cash and cash equivalents	84,387		44,555
Receivables:	Receivables:					Receivables:
Customers, net	Customers, net	53,397		32,058		Customers, net	39,652		44,025
Regulatory balancing accounts	Regulatory balancing accounts	54,415		38,225		Regulatory balancing accounts	97,820		96,241
Other, net	Other, net	15,056		14,187		Other, net	19,470		20,331
Unbilled revenue, net	Unbilled revenue, net	46,247		34,879		Unbilled revenue, net	33,945		34,069
Materials and supplies at weighted average cost	Materials and supplies at weighted average cost	8,611		7,745		Materials and supplies at weighted average cost	9,201		8,831
Taxes, prepaid expenses, and other assets	Taxes, prepaid expenses, and other assets	14,726		14,965		Taxes, prepaid expenses, and other assets	17,925		17,964
Total current assets	Total current assets	305,764		184,712		Total current assets	302,400		266,016
Other assets:	Other assets:					Other assets:
Regulatory assets	Regulatory assets	484,435		433,322		Regulatory assets	328,336		325,376
Goodwill	Goodwill	30,349		2,615		Goodwill	31,390		31,842
Other assets	Other assets	89,572		84,289		Other assets	124,405		120,456
Total other assets	Total other assets	604,356		520,226		Total other assets	484,131		477,674
TOTAL ASSETS	TOTAL ASSETS	$	3,506,434	$	3,111,308	TOTAL ASSETS	$	3,471,467	$	3,394,248
CAPITALIZATION AND LIABILITIES	CAPITALIZATION AND LIABILITIES					CAPITALIZATION AND LIABILITIES
Capitalization:	Capitalization:					Capitalization:
Common stock, $0.01 par value; 68,000 shares authorized, 49,840 and 48,532 outstanding in 2020 and 2019, respectively		$	498	$	485
Common stock, $0.01 par value; 68,000 shares authorized, 50,835 and 50,334 outstanding in 2021 and 2020, respectively						Common stock, $0.01 par value; 68,000 shares authorized, 50,835 and 50,334 outstanding in 2021 and 2020, respectively	$	508	$	503
Additional paid-in capital	Additional paid-in capital	422,391		362,275		Additional paid-in capital	471,698		448,632
Retained earnings	Retained earnings	467,303		417,146		Retained earnings	457,596		472,209
Total common stockholders’ equity	Total common stockholders’ equity	890,192		779,906		Total common stockholders’ equity	929,802		921,344
Long-term debt, net	Long-term debt, net	785,055		786,754		Long-term debt, net	780,951		781,100
Total capitalization	Total capitalization	1,675,247		1,566,660		Total capitalization	1,710,753		1,702,444
Current liabilities:	Current liabilities:					Current liabilities:
Current maturities of long-term debt, net	Current maturities of long-term debt, net	21,883		21,868		Current maturities of long-term debt, net	5,136		5,127
Short-term borrowings	Short-term borrowings	375,100		175,100		Short-term borrowings	435,000		370,000
Accounts payable	Accounts payable	127,158		108,463		Accounts payable	120,549		131,725
Regulatory balancing accounts	Regulatory balancing accounts	11,003		4,462		Regulatory balancing accounts	34,215		34,636
Accrued interest	Accrued interest	14,233		5,810		Accrued interest	14,728		6,178
Accrued expenses and other liabilities	Accrued expenses and other liabilities	54,446		43,018		Accrued expenses and other liabilities	45,838		41,040
Total current liabilities	Total current liabilities	603,823		358,721		Total current liabilities	655,466		588,706
Deferred income taxes	Deferred income taxes	245,456		222,590		Deferred income taxes	275,987		276,032
Pension and postretirement benefits other than pensions	Pension and postretirement benefits other than pensions	261,081		258,907		Pension and postretirement benefits other than pensions	111,926		115,581
Regulatory liabilities and other	Regulatory liabilities and other	257,054		271,831		Regulatory liabilities and other	251,851		247,810
Advances for construction	Advances for construction	196,853		191,062		Advances for construction	197,715		195,625
Contributions in aid of construction	Contributions in aid of construction	266,920		241,537		Contributions in aid of construction	267,769		268,050
Commitments and contingencies (Note 10)	Commitments and contingencies (Note 10)					Commitments and contingencies (Note 10)	0		0
TOTAL CAPITALIZATION AND LIABILITIES	TOTAL CAPITALIZATION AND LIABILITIES	$	3,506,434	$	3,111,308	TOTAL CAPITALIZATION AND LIABILITIES	$	3,471,467	$	3,394,248

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements

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CALIFORNIA WATER SERVICE GROUP

CONDENSED CONSOLIDATED STATEMENTS OF ~~INCOME~~OPERATIONS

Unaudited (In thousands, except per share data)


For the three months ended	For the three months ended	September 30, 2020		September 30, 2019		For the three months ended	March 31, 2021		March 31, 2020
Operating revenue	Operating revenue	$	304,108	$	232,537	Operating revenue	$	147,737	$	125,563
Operating expenses:	Operating expenses:					Operating expenses:
Operations:	Operations:					Operations:
Water production costs	Water production costs	85,344		80,568		Water production costs	54,826		53,976
Administrative and general	Administrative and general	29,208		26,779		Administrative and general	30,369		29,680
Other operations	Other operations	29,746		24,550		Other operations	17,912		13,974
Maintenance	Maintenance	7,129		7,065		Maintenance	6,769		7,073
Depreciation and amortization	Depreciation and amortization	24,699		22,273		Depreciation and amortization	27,047		24,492
Income taxes		13,804		12,194
Income tax benefit						Income tax benefit	(101)		(3,937)
Property and other taxes	Property and other taxes	8,116		7,541		Property and other taxes	7,996		7,228
Total operating expenses	Total operating expenses	198,046		180,970		Total operating expenses	144,818		132,486
Net operating income		106,062		51,567
Net operating income (loss)						Net operating income (loss)	2,919		(6,923)
Other income and expenses:	Other income and expenses:					Other income and expenses:
Non-regulated revenue	Non-regulated revenue	3,934		4,118		Non-regulated revenue	5,572		3,827
Non-regulated expenses	Non-regulated expenses	(2,865)		(4,351)		Non-regulated expenses	(4,760)		(8,454)
Other components of net periodic benefit cost		(1,008)		(1,857)
Other components of net periodic benefit credit (cost)						Other components of net periodic benefit credit (cost)	2,979		(1,430)
Allowance for equity funds used during construction	Allowance for equity funds used during construction	973		1,868		Allowance for equity funds used during construction	544		1,614
Income tax (expense) benefit on other income and expenses	Income tax (expense) benefit on other income and expenses	(245)		330		Income tax (expense) benefit on other income and expenses	(358)		913
Net other income		789		108
Net other income (loss)						Net other income (loss)	3,977		(3,530)
Interest expense:	Interest expense:					Interest expense:
Interest expense	Interest expense	11,162		10,279		Interest expense	10,222		10,798
Allowance for borrowed funds used during construction	Allowance for borrowed funds used during construction	(671)		(1,028)		Allowance for borrowed funds used during construction	(294)		(944)
Net interest expense	Net interest expense	10,491		9,251		Net interest expense	9,928		9,854
Net income		$	96,360	$	42,424
Earnings per share:
Net loss						Net loss	$	(3,032)	$	(20,307)
Loss per share:						Loss per share:
Basic	Basic	$	1.94	$	0.88	Basic	$	(0.06)	$	(0.42)
Diluted	Diluted	1.94		0.88		Diluted	(0.06)		(0.42)
Weighted average shares outstanding:	Weighted average shares outstanding:					Weighted average shares outstanding:
Basic	Basic	49,576		48,141		Basic	50,440		48,583
Diluted	Diluted	49,576		48,141		Diluted	50,440		48,583

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements

Table of Contents

CALIFORNIA WATER SERVICE GROUP

CONDENSED CONSOLIDATED STATEMENTS OF ~~INCOME~~CASH FLOWS

Unaudited (In ~~thousands, except per share data)~~thousands)

For the nine months ended September 30,
2020 September 30,
2019
Operating revenue $ 605,155 $ 537,679
Operating expenses:
Operations:
Water production costs 210,462 190,795
Administrative and general 85,827 81,310
Other operations 69,618 64,913
Maintenance 20,924 19,212
Depreciation and amortization 73,733 66,967
Income taxes 10,489 13,524
Property and other taxes 22,470 21,902
Total operating expenses 493,523 458,623
Net operating income 111,632 79,056
Other income and expenses:
Non-regulated revenue 11,969 14,149
Non-regulated expenses (11,811) (10,470)
Other components of net periodic benefit cost (3,770) (4,308)
Allowance for equity funds used during construction 4,292 5,087
Income taxes on other income and expenses (152) (985)
Net other income 528 3,473
Interest expense:
Interest expense 33,573 33,532
Allowance for borrowed funds used during construction (2,747) (2,783)
Net interest expense 30,826 30,749
Net income $ 81,334 $ 51,780
Earnings per share:
Basic $ 1.66 $ 1.08
Diluted 1.66 1.08
Weighted average shares outstanding:
Basic 49,034 48,121
Diluted 49,034 48,121


For the three months ended	March 31, 2021		March 31, 2020
Operating activities:
Net loss	$	(3,032)	$	(20,307)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	27,669		25,093
Change in value of life insurance contracts	(349)		4,717
Allowance for equity funds used during construction	(544)		(1,614)
Changes in operating assets and liabilities:
Receivables and unbilled revenue	6,265		7,261
Accounts payable	(10,222)		(7,379)
Other current assets	(152)		(3,768)
Other current liabilities	12,367		3,316
Other changes in noncurrent assets and liabilities	(2,023)		(3,252)
Net cash provided by operating activities	29,979		4,067
Investing activities:
Utility plant expenditures	(66,817)		(65,270)
Payment for investment	(2,900)		0
Refund of investment	1,000		0
Net cash used in investing activities	(68,717)		(65,270)
Financing activities:
Short-term borrowings	105,000		170,000
Repayment of short-term borrowings	(40,000)		(10,000)
Repayment of long-term debt	(176)		(197)
Advances and contributions in aid of construction	6,469		6,432
Refunds of advances for construction	(2,711)		(2,157)
Repurchase of common stock	(1,415)		(1,373)
Issuance of common stock	23,175		6,511
Dividends paid	(11,581)		(10,315)
Net cash provided by financing activities	78,761		158,901
Change in cash, cash equivalents, and restricted cash	40,023		97,698
Cash, cash equivalents, and restricted cash at beginning of period	45,129		43,298
Cash, cash equivalents, and restricted cash at end of period	$	85,152	$	140,996
Supplemental information:
Cash paid for interest (net of amounts capitalized)	$	1,225	$	909
Supplemental disclosure of non-cash activities:
Accrued payables for investments in utility plant	$	48,552	$	38,018
Utility plant contribution by developers	$	5,899	$	8,007

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements

Table of Contents

CALIFORNIA WATER SERVICE GROUP

~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS~~

~~Unaudited (In thousands)~~

For the nine months ended September 30,
2020 September 30,
2019
Operating activities:
Net income $ 81,334 $ 51,780
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 75,550 68,522
Change in value of life insurance contracts (621) (3,433)
Allowance for equity funds used during construction (4,292) (5,087)
Changes in operating assets and liabilities:
Receivables and unbilled revenue (41,374) (29,436)
Accounts payable 7,199 16,735
Other current assets (536) (3,937)
Other current liabilities 16,304 11,597
Other changes in noncurrent assets and liabilities (36,900) 21,602
Net cash provided by operating activities 96,664 128,343
Investing activities:
Utility plant expenditures (221,261) (194,942)
Purchase of life insurance contracts (2,335) (2,216)
Business acquisition, net of cash acquired (39,544) 0
Net cash used in investing activities (263,140) (197,158)
Financing activities:
Short-term borrowings 270,000 210,000
Repayment of short-term borrowings (70,000) (120,000)
Issuance of long-term debt, net of expenses of $1,569 for 2019 0 398,431
Repayment of long-term debt (1,535) (401,630)
Advances and contributions in aid of construction 19,862 21,266
Refunds of advances for construction (7,017) (5,560)
Repurchase of common stock (1,578) (2,355)
Issuance of common stock 58,573 1,278
Dividends paid (31,177) (28,507)
Net cash provided by financing activities 237,128 72,923
Change in cash, cash equivalents, and restricted cash 70,652 4,108
Cash, cash equivalents, and restricted cash at beginning of period 43,298 47,715
Cash, cash equivalents, and restricted cash at end of period $ 113,950 $ 51,823
Supplemental information:
Cash paid for interest (net of amounts capitalized) $ 21,862 $ 22,060
Supplemental disclosure of non-cash activities:
Accrued payables for investments in utility plant $ 47,015 $ 31,676
Utility plant contribution by developers $ 22,762 $ 23,955

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

~~Table of Contents~~

~~CALIFORNIA WATER SERVICE GROUP~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

~~September 30, 2020~~March 31, 2021

Dollar amounts in thousands unless otherwise stated

Note 1. Organization and Operations and Basis of Presentation

California Water Service Group (the Company) is a holding company that provides water utility and other related services in California, Washington, New Mexico and Hawaii through its wholly-owned subsidiaries. California Water Service Company (Cal Water), Washington Water Service Company (Washington Water), New Mexico Water Service Company (New Mexico Water), and Hawaii Water Service Company, Inc. (Hawaii Water) provide regulated utility services under the rules and regulations of their respective state’s regulatory commissions (jointly referred to herein as the Commissions). CWS Utility Services and HWS Utility Services LLC provide non-regulated water utility and utility-related services.

The Company operates in 1 reportable segment, providing water and related utility services.

Basis of Presentation

The unaudited condensed consolidated interim financial information has been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X promulgated by the Securities and Exchange Commission (SEC) and therefore do not contain all of the information and footnotes required by GAAP and the SEC for annual financial statements. The unaudited condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 as filed with the SEC on February ~~27, 2020.~~25, 2021.

The preparation of the Company’s unaudited condensed consolidated interim financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the balance sheet dates and the reported amounts of revenues and expenses for the periods presented. These include, but are not limited to, estimates and assumptions used in determining the Company’s regulatory asset and liability balances based upon probability assessments of regulatory recovery, revenues earned but not yet billed, asset retirement obligations, allowance for credit losses, pension and other employee benefit plan liabilities, and income tax-related assets and liabilities. Actual results could differ from these estimates.

In the opinion of management, the accompanying unaudited condensed consolidated interim financial statements reflect all adjustments, consisting of normal recurring transactions that are necessary to provide a fair presentation of the results for the periods covered.

Due to the seasonal nature of the water business, the results for interim periods are not indicative of the results for a 12-month period. Revenue and income are generally higher in the warm, dry summer months when water usage and sales are greater. Revenue and income are generally lower in the winter months when cooler temperatures and rainfall curtail water usage and sales.

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Note 2. Summary of Significant Accounting Policies

Operating revenue

The following ~~tables disaggregate~~table disaggregates the Company’s operating revenue by source for the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 and ~~2019:~~2020:


		Three Months Ended September 30					Three Months Ended March 31
		2020		2019			2021		2020
Revenue from contracts with customers	Revenue from contracts with customers	$	222,474	$	214,963	Revenue from contracts with customers	$	146,528	$	134,833
Regulatory balancing account revenue (a)	Regulatory balancing account revenue (a)	81,634		17,574		Regulatory balancing account revenue (a)	1,209		(9,270)
Total operating revenue	Total operating revenue	$	304,108	$	232,537	Total operating revenue	$	147,737	$	125,563

Nine Months Ended September 30
2020 2019
Revenue from contracts with customers $ 529,804 $ 499,840
Regulatory balancing account revenue (a) 75,351 37,839
Total operating revenue $ 605,155 $ 537,679

(a) ~~The adjustments~~As further discussed below, no amounts were recorded for the Company’s Water Revenue Adjustment Mechanism (WRAM), Modified Cost Balancing Account (MCBA), Pension Cost Balancing Account (PCBA), and Health Cost Balancing Account (HCBA) for the ~~first six months ended June 30, 2020 were recorded in the~~ three months ended ~~September 30,~~March 31, 2020 as the Company received a proposed decision for its 2018 General Rate Case for Cal Water (2018 GRC) in October of 2020. The Company also recorded an adjustment for its interim rate memorandum account (IRMA) where it was authorizeddue to ~~track the effect of~~ the delay in the resolution of the 2018 ~~GRC on customer billings.~~General Rate Case (GRC).

Revenue from contracts with customers

The Company principally generates operating revenue from contracts with customers by providing regulated water and wastewater services at tariff-rates authorized by the Commissions in the states in which they operate and non-regulated water and wastewater services at rates authorized by contracts with government agencies. Revenue from contracts with customers reflects amounts billed for the volume of consumption at authorized per unit rates, for a service charge, and for other authorized charges.

The Company satisfies its performance obligation to provide water and wastewater services over time as services are rendered. The Company applies the invoice practical expedient and recognizes revenue from contracts with customers in the amount for which the Company has a right to invoice. The Company has a right to invoice for the volume of consumption, for the service charge, and for other authorized charges.

The measurement of sales to customers is generally based on the reading of their meters, which occurs on a systematic basis throughout the month. At the end of each month, the Company estimates consumption since the date of the last meter reading and a corresponding unbilled revenue is recognized. The estimate is based upon the number of unbilled days that month and the average daily customer billing rate from the previous month (which fluctuates based upon customer usage).

Contract terms are generally short-term and at will by customers and, as a result, no separate financing component is recognized for the Company's collections from customers, which generally require payment within 30 days of billing. The Company applies judgment, based principally on historical payment experience, in estimating its customers’ ability to pay.

Certain customers are not billed for volumetric consumption, but are instead billed a flat rate at the beginning of each monthly service period. The amount billed is initially deferred and subsequently recognized over the monthly service period, as the performance obligation is satisfied. The deferred revenue balance or contract liability, which is included in "accrued expenses and other liabilities" on the unaudited condensed consolidated balance sheets, is inconsequential.

Table of Contents

In the following ~~tables,~~table, revenue from contracts with customers is disaggregated by class of customers for the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 and ~~2019:~~2020:


		Three Months Ended September 30					Three Months Ended March 31
		2020		2019			2021		2020
Residential	Residential	$	151,938	$	139,137	Residential	$	101,371	$	92,544
Business	Business	36,951		38,247		Business	27,721		27,693
Industrial	Industrial	7,496		9,077		Industrial	6,043		7,878
Public authorities	Public authorities	12,862		12,482		Public authorities	6,403		5,897
Other (a)	Other (a)	13,227		16,020		Other (a)	4,990		821
Total revenue from contracts with customers	Total revenue from contracts with customers	$	222,474	$	214,963	Total revenue from contracts with customers	$	146,528	$	134,833

Nine Months Ended September 30
2020 2019
Residential $ 360,935 $ 330,745
Business 93,175 95,433
Industrial 21,996 23,866
Public authorities 26,470 24,566
Other (a) 27,228 25,230
Total revenue from contracts with customers $ 529,804 $ 499,840

(a) Other includes ~~the~~ accrued unbilled revenue.

Regulatory balancing account revenue

The Company’s ability to recover revenue requirements authorized by the California Public Utilities Commission (CPUC) in its triennial ~~general rate case (GRC)~~GRC is decoupled from the volume of the sales. Regulatory balancing account revenue is revenue related to rate mechanisms authorized in California by the CPUC, which allow the Company to recover the authorized revenue and are not considered contracts with customers. These mechanisms include the following:

The WRAM allows the Company to recognize the adopted level of volumetric revenues. The variance between adopted volumetric revenues and actual billed volumetric revenues for metered accounts is recorded as regulatory balancing account revenue.

Cost-recovery rates, such as the MCBA, Conservation Expense Balancing Account (CEBA), PCBA, and HCBA, generally provide for recovery of the adopted levels of expenses for purchased water, purchased power, pump taxes, water conservation program costs, pension, and health care. Variances between adopted and actual costs are recorded as regulatory balancing account revenue.

For 2021, the WRAM, MCBA, PCBA, and HCBA have all been authorized by the CPUC with the approval of the 2018 GRC in the fourth quarter of 2020. For 2020, the WRAM, MCBA, PCBA, and HCBA were being litigated in the 2018 GRC. As a result, the Company determined that the regulatory asset and liability recognition criteria under accounting standards for regulated entities was not met and the Company did not record regulatory assets or liabilities with respect to these mechanisms for the first quarter of 2020. As the CEBA was not being litigated in the then-pending 2018 GRC, the Company recorded a regulatory liability for the CEBA for the first three months of 2020. The Company determined that the CEBA met the regulatory liability recognition criteria under accounting standards for regulated utilities.

Due to the delay in the resolution of the 2018 GRC, the CPUC authorized Cal Water to track the effect of the delay on customer billings in ~~IRMA~~an interim rates memorandum account (IRMA) effective January 1, 2020. Variances between actual customer billings and those that would have been billed assuming the GRC had been effective January 1, 2020 are recorded as regulatory balancing account revenue. InRates for the ~~third~~2018 GRC were implemented on February 1, 2021; as a result, Cal Water recorded an IRMA regulatory asset for January of 2021. For the first quarter of 2020, ~~Cal Water determined that~~the Company did not record a regulatory asset for the IRMA ~~met~~because the regulatory asset recognition criteria under accounting standards for regulated ~~utilities.~~entities was not met as the 2018 GRC was still pending resolution as of the end of the quarter.

Each district's WRAM and MCBA regulatory assets and liabilities are allowed to be netted against one another. The Company recognizes regulatory balancing account revenues that have been authorized for rate recovery, are objectively determinable and probable of recovery, and are expected to be collected within 24 months. To the extent that regulatory balancing account revenue is estimated to be collectible beyond 24 months, recognition is deferred.

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Non-regulated Revenue

The following ~~tables disaggregate~~table disaggregates the Company’s non-regulated revenue by source for the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 and ~~2019:~~2020:


		Three Months Ended September 30					Three Months Ended March 31
		2020		2019			2021		2020
Operating and maintenance revenue	Operating and maintenance revenue	$	2,680	$	2,929	Operating and maintenance revenue	$	4,087	$	2,499
Other non-regulated revenue	Other non-regulated revenue	625		626		Other non-regulated revenue	860		765
Non-regulated revenue from contracts with customers	Non-regulated revenue from contracts with customers	$	3,305	$	3,555	Non-regulated revenue from contracts with customers	$	4,947	$	3,264
Lease revenue	Lease revenue	$	629	$	563	Lease revenue	$	625	$	563
Total non-regulated revenue	Total non-regulated revenue	$	3,934	$	4,118	Total non-regulated revenue	$	5,572	$	3,827

Nine Months Ended September 30
2020 2019
Operating and maintenance revenue $ 7,969 $ 9,248
Other non-regulated revenue 2,223 3,189
Non-regulated revenue from contracts with customers $ 10,192 $ 12,437
Lease revenue $ 1,777 $ 1,712
Total non-regulated revenue $ 11,969 $ 14,149

Operating and maintenance services are provided for non-regulated water and wastewater systems owned by private companies and municipalities. The Company negotiates formal agreements with the customers, under which they provide operating, maintenance and customer billing services related to the customers’ water system. The formal agreements outline the fee schedule for the services provided. The agreements typically call for a fee-per-service or a flat-rate amount per month. The Company satisfies its performance obligation of providing operating and maintenance services over time as services are rendered; as a result, the Company employs the invoice practical expedient and recognizes revenue in the amount that it has the right to invoice. Contract terms are generally short-term and, as a result, no separate financing component is recognized for its collections from customers, which generally require payment within 30 days of billing.

Other non-regulated revenue primarily relates to services for the design and installation of water mains and other water infrastructure for customers outside the regulated service areas and insurance program administration.

Lease revenue is not considered revenue from contracts with customers and is recognized following operating lease standards. The Company is the lessor in operating lease agreements with telecommunications companies under which cellular phone antennas are placed on the Company's property.

Allowance for credit losses

The Company measures expected credit losses for Customer Receivables, Other Receivables, and Unbilled Revenue on an aggregated level. These receivables are generally trade receivables due in one year or less or expected to be billed and collected in one year or less. The expected credit losses for Other Receivables and Unbilled Revenue are inconsequential. Customer receivables include receivables for water and wastewater services provided to residential customers, business, industrial, public authorities, and other customers. The expected credit losses for business, industrial, public authorities, and other customers are inconsequential. The overall risks related to the Company’s receivables are low as water and wastewater services are seen as essential services. The estimate for the allowance for credit losses is based on a historical loss ratio, in conjunction with a qualitative assessment of elements that impact the collectability of receivables to determine if the allowance for credit losses should be further adjusted in accordance with the accounting guidance for credit losses. Management contemplates available current information such as changes in economic factors, regulatory matters, industry trends, payment options and programs available to customers, and the methods that the Company is able to utilize to ensure payment.

~~Table of Contents~~

~~During the third quarter of 2020, the~~The Company reviewed its allowance for credit losses utilizing a quantitative assessment, which included trend analysis of customer billing and collection, aging by customer class, and unemployment rates since the outbreak of COVID-19 in the first quarter of 2020. The Company also utilized a qualitative assessment, which considered the future collectability on customer outstanding balances, management's estimate of the cash recovery, and a general assessment of the economic conditions of the locations the Company serves due to the outbreak of COVID-19. The Company is complying with the CPUC requirements to suspend customer disconnections for non-payment and ceased agency collection activities, and anticipates this situation will continue until ~~April 1, 2021.~~further notice. Based on the above assessments, the Company expects an increase in customer receivable write-offs as compared to historical experiences and adjusted its allowance for credit losses, accordingly.

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The following table presents the activity in the allowance for credit losses for the period ended ~~September 30,~~March 31, 2021 and December 31, 2020:


~~Allowance for credit losses~~	~~As of September 30, 2020~~
~~Beginning balance~~	~~771~~
~~Provision for credit loss expense~~	~~2,895~~
~~Write-offs~~	~~(1,317)~~
~~Recoveries~~	~~396~~
~~Total ending allowance balance~~	$	~~2,745~~


Allowance for credit losses	March 31, 2021		December 31, 2020
Beginning balance	5,246		771
Provision for credit loss expense	893		5,716
Write-offs	(579)		(1,730)
Recoveries	98		489
Total ending allowance balance	$	5,658	$	5,246

Cash, Cash Equivalents, and Restricted Cash

The following table provides a reconciliation of cash, cash equivalents, and restricted cash within the Condensed Consolidated Balance Sheets that sum to the total of the same such amounts shown on the Condensed Consolidated Statements of Cash Flows:


		September 30, 2020		December 31, 2019			March 31, 2021		December 31, 2020
Cash and cash equivalents	Cash and cash equivalents	113,312		42,653		Cash and cash equivalents	84,387		44,555
Restricted cash (included in "taxes, prepaid expenses and other assets")	Restricted cash (included in "taxes, prepaid expenses and other assets")	638		645		Restricted cash (included in "taxes, prepaid expenses and other assets")	765		574
Total cash, cash equivalents, and restricted cash shown in the statements of cash flows	Total cash, cash equivalents, and restricted cash shown in the statements of cash flows	$	113,950	$	43,298	Total cash, cash equivalents, and restricted cash shown in the statements of cash flows	$	85,152	$	45,129

Adoption of New Accounting Standards

In ~~June~~December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2019-12, Simplifying the Accounting for Income Taxes (Topic 740). ASU 2019-12 simplifies the accounting for income taxes by removing certain exceptions for performing intraperiod tax allocations, recognizing deferred taxes for investments, and calculating income taxes in interim periods. The guidance also simplifies the accounting for franchise taxes, transactions that result in a step-up in the tax basis of ~~2016,~~goodwill, and the ~~FASB issued ASU 2016-13,~~ ~~Financial Instruments - Credit Losses (Topic 326): Measurement~~effect of ~~Credit Losses on Financial Instruments~~, which changed the impairment model for certain financial assets that have a contractual right to receive cash, including trade and loan receivables. The new model required recognition based upon an estimation of expected credit losses rather than recognition of losses when it is probable that they have been incurred. ASU 2016-13 was effective for annual reporting periods beginning after December 15, 2019, with early adoption permitted.enacted changes in tax laws or rates in interim periods. The Company adopted ASU 2019-12 in the ~~standard utilizing the modified retrospective method for its trade receivables~~first quarter of 2021 and ~~unbilled revenue on January 1, 2020. Based on the composition of the Company’s trade receivables and unbilled revenue, and expected future losses,~~ the adoption ~~of ASU 2016-13~~ did not have a material impact ~~on its consolidated financial statements.~~

~~In January of 2017, the FASB issued ASU 2017-04,~~ ~~Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment~~, which eliminated the second step of the goodwill impairment test that required a hypothetical purchase price allocation to measure goodwill impairment. Under the new guidance, a goodwill impairment loss will be measured at the amount by which a reporting unit’s carrying amount exceeds its fair value, not to exceed the carrying amount of goodwill. ASU 2017-04 was effective for annual reporting periods beginning after December 15, 2019, with early adoption permitted for any impairment test performed on testing dates after January 1, 2017. The Company adopted the standard on January 1, 2020 and the adoption of the standard did not have a material impact on its consolidated financial statements.

~~In August of 2018, the FASB issued ASU 2018-13,~~ ~~Fair Value Measurement (Topic 820): Disclosure Framework - Changes~~ to the ~~Disclosure for Fair Value Measurement,~~ which modified the disclosure requirements on fair value measurements. The modifications in this update eliminated, amended, and added disclosure requirements for fair value measurements. ASU 2018-13 was effective for annual reporting periods beginning after December 15, 2019, with early adoption permitted. The Company adopted the standard in part prospectively and in part retrospectively, in accordance with the requirements of ASU 2018-13, on January 1, 2020. Since the Company does not have level 3 fair value measurements or transfers between level 1 and level 2 fair value measurements, the adoption of the standard did not have a material impact on its footnote disclosures.Company’s Condensed Consolidated Financial Statements.

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Note 3. Stock-based Compensation

~~Equity Incentive Plan~~The Company's equity incentive plan was approved and amended by stockholders on April 27, 2005 and May 20, 2014. The Company is authorized to issue awards up to 2,000,000 shares of common stock.

~~The following table lists~~During the ~~number~~first quarter of 2021, the Company granted Restricted Stock Awards (RSAs) ~~granted~~to Officers and ~~canceled during~~to members of the ~~three~~Board of Directors. An RSA share represents a restricted share of the Company's common stock and ~~nine months ended September 30, 2020 and 2019:~~

Three Months Ended September 30 Nine Months Ended September 30
2020 2019 2020 2019
RSAs granted 0 0 39,915 36,183
RSAs canceled 2,153 2,739 9,338 14,394

~~During~~is valued based on the ~~first nine months of 2020 and 2019, the RSAs granted were valued at $51.41 and $52.83 per share, respectively, based upon the~~ fair market value of the ~~Company’s~~Company's common stock onat the date of grant. RSAs granted to ~~officers~~Officers vest over 36 months with the first year cliff vesting. In general, RSAs granted to ~~directors generally cliff~~Board members vest at the end of 12 months. The RSAs are recognized as expense evenly over 36 months for the shares granted to Officers and 12 months for the shares granted to Board members. As of March 31, 2021, there was approximately $3.6 million of total unrecognized compensation cost related to RSAs. The cost is expected to be recognized over a weighted average period of 1.8 years.

~~The following table lists~~A summary of the ~~number~~status of the outstanding RSAs as of March 31, 2021 is presented below:


	Number of RSA Shares	Weighted-Average Grant-Date Fair Value
RSAs at January 1, 2021	51,561	$	50.92
Granted	49,960	53.84
Vested	(28,402)	50.16
Forfeited	0	0
RSAs at March 31, 2021	73,119	$	53.22

During the first quarter of 2021, the Company granted performance-based Restricted Stock ~~Unit Awards~~Units (RSUs) ~~granted, issued, and canceled during~~to Officers. An RSU represents the ~~three and nine months ended September 30, 2020 and 2019:~~

Three Months Ended September 30 Nine Months Ended September 30
2020 2019 2020 2019
RSUs granted 0 0 32,720 26,473
RSUs issued 0 0 41,731 62,726
RSUs canceled 0 0 22,936 31,177

right to receive a share of the Company's common stock. Each ~~RSU~~ award reflects a target number shares of ~~shares~~common stock that may be issued to the award recipient. The ~~2020 and 2019 RSUs granted~~2021 awards may be ~~issued~~earned upon the completion of a 3-year performance period. Whether RSUs are earned at the ~~three-year~~end of the performance period will be determined based on the achievement of certain performance objectives set by the Organization and Compensation Committee of the Board of Directors in connection with the issuance of the RSUs. The performance objectives are based on the Company's business plan covering the performance period. The performance objectives include achieving the budgeted return on equity, budgeted investment in utility plant, customer service standards, employee safety standards and water quality standards. Depending on the results achieved during the 3-year performance period, the actual number of shares that a grant recipient receives at the end of the performance period may range from 0% to 200% of the target shares granted, provided that the grantee is continuously employed by the Company through the vesting date. If prior to the vesting date employment is terminated by reason of death, disability or normal retirement, then a pro rata portion of this award will vest. RSUs are not included in diluted shares until earned. The RSUs are recognized as expense ratably over the 3-year performance period using a fair market value of ~~$51.41 per~~the Company's common share ~~and $52.83 per share, respectively,~~at the date of grant and an ~~estimate~~estimated number of RSUs earned during the performance period. As of March 31, 2021, there was approximately $3.2 million of total unrecognized compensation cost related to RSUs. The cost is expected to be recognized over a weighted average period of 2.0 years.

A summary of the status of the outstanding RSUs as of March 31, 2021 is presented below:


	Number of RSU Shares	Weighted-Average Grant-Date Fair Value
RSUs at January 1, 2021	87,787	$	46.62
Granted	31,749	53.96
Performance criteria adjustment	12,257	52.96
Vested	(38,897)	52.96
Forfeited	(1,954)	35.40
RSUs at March 31, 2021	90,942	$	52.71

The Company has recorded compensation costs for the RSAs and RSUs that are included in administrative and general operating expenses in the amount of ~~$1.8 million and $1.4~~$1.3 million for the ~~three months ended September 30, 2020~~first quarter of 2021 and ~~2019, respectively. For the nine months ended September 30, 2020 and 2019, the Company has recorded compensation costs~~$0.8 million for the ~~RSAs and RSUs in the amount~~first quarter of ~~$3.1 million and $5.3 million, respectively.~~2020.

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Note 4. Equity

The Company sold ~~432,420~~429,061 shares of common stock through its at-the-market equity program and raised proceeds of ~~$20.1~~$22.7 million net of $0.2 million in commissions paid under the equity distribution agreement during the three months ended ~~September 30, 2020.~~March 31, 2021. During the ~~nine~~three months ended ~~September 30,~~March 31, 2020, the Company sold ~~1,225,572~~115,834 shares of common stock through its at-the-market equity program and raised proceeds of ~~$57.3~~$6.0 million net of ~~$0.6~~$0.1 million in commissions paid under the equity distribution agreement.

~~Table of Contents~~

The Company’s changes in total common stockholders’ equity for the ~~nine~~three months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ were as follows:

Nine months ended September 30, 2020
Common Stock Additional
Paid-in
Capital Retained
Earnings Total
Stockholders'
Equity
Shares Amount
(In thousands)
Balance at January 1, 2020 48,532 $ 485 $ 362,275 $ 417,146 $ 779,906
Net loss (20,307) (20,307)
Issuance of common stock 210 2 7,227 7,229
Repurchase of common stock (28) — (1,373) (1,373)
Dividends paid on common stock ($0.2125 per share) (10,315) (10,315)
Balance at March 31, 2020 48,714 487 368,129 386,524 755,140
Net income 5,281 5,281
Issuance of common stock 686 7 32,056 32,063
Repurchase of common stock (2) — (105) (105)
Dividends paid on common stock ($0.2125 per share) (10,356) (10,356)
Balance at June 30, 2020 49,398 494 400,080 381,449 782,023
Net income 96,360 96,360
Issuance of common stock 444 4 22,410 22,414
Repurchase of common stock (2) — (99) (99)
Dividends paid on common stock ($0.2125 per share) (10,506) (10,506)
Balance at September 30, 2020 49,840 498 422,391 467,303 890,192


	Three months ended March 31, 2021
	Common Stock			Additional Paid-in Capital		Retained Earnings		Total Stockholders' Equity
	Shares	Amount
	(In thousands)
Balance at January 1, 2021	50,334	$	503	$	448,632	$	472,209	$	921,344
Net loss						(3,032)		(3,032)
Issuance of common stock	528	5		24,481				24,486
Repurchase of common stock	(27)	—		(1,415)				(1,415)
Dividends paid on common stock ($0.2300 per share)						(11,581)		(11,581)
Balance at March 31, 2021	50,835	508		471,698		457,596		929,802

Nine months ended September 30, 2019
Common Stock Additional
Paid-in
Capital Retained
Earnings Total
Stockholders'
Equity
Shares Amount
(In thousands)
Balance at January 1, 2019 48,065 $ 481 $ 337,623 $ 392,053 $ 730,157
Net loss (7,640) (7,640)
Issuance of common stock 109 — 3,179 3,179
Repurchase of common stock (40) — (2,074) (2,074)
Dividends paid on common stock ($0.1975 per share) (9,493) (9,493)
Balance at March 31, 2019 48,134 481 338,728 374,920 714,129
Net income 16,996 16,996
Issuance of common stock 8 — 1,675 1,675
Repurchase of common stock (2) — (129) (129)
Dividends paid on common stock ($0.1975 per share) (9,507) (9,507)
Balance at June 30, 2019 48,140 481 340,274 382,409 723,164
Net income 42,424 42,424
Issuance of common stock 9 — 1,866 — 1,866
Repurchase of common stock (4) — (152) — (152)
Dividends paid on common stock ($0.1975 per share) (9,507) (9,507)
Balance at September 30, 2019 48,145 481 341,988 415,326 757,795


	Three months ended March 31, 2020
	Common Stock			Additional Paid-in Capital		Retained Earnings		Total Stockholders' Equity
	Shares	Amount
	(In thousands)
Balance at January 1, 2020	48,532	$	485	$	362,275	$	417,146	$	779,906
Net loss						(20,307)		(20,307)
Issuance of common stock	210	2		7,227				7,229
Repurchase of common stock	(28)	—		(1,373)				(1,373)
Dividends paid on common stock ($0.2125 per share)						(10,315)		(10,315)
Balance at March 31, 2020	48,714	487		368,129		386,524		755,140

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Note 5. ~~Earnings~~Loss Per Share

The computations of basic and diluted ~~earnings~~loss per share are noted in the table below. Basic ~~earnings~~loss per share ~~are~~is computed by dividing the net ~~income~~loss available to common stockholders by the weighted average number of common shares outstanding during the period. RSAs are included in the weighted average common shares outstanding because the shares have all the same voting and dividend rights as issued and unrestricted common stock. RSUs are not included in diluted shares for financial reporting until authorized by the Organization & Compensation Committee of the Board of Directors.

Three Months Ended September 30
2020 2019
(In thousands, except per share data)
Net income available to common stockholders $ 96,360 $ 42,424
Weighted average common shares outstanding, basic 49,576 48,141
Weighted average common shares outstanding, dilutive 49,576 48,141
Earnings per share - basic $ 1.94 $ 0.88
Earnings per share - diluted $ 1.94 $ 0.88

Nine Months Ended September 30
2020 2019
(In thousands, except per share data)
Net income available to common stockholders $ 81,334 $ 51,780
Weighted average common shares outstanding, basic 49,034 48,121
Weighted average common shares outstanding, dilutive 49,034 48,121
Earnings per share - basic $ 1.66 $ 1.08
Earnings per share - diluted $ 1.66 $ 1.08


	Three Months Ended March 31
	2021		2020
	(In thousands, except per share data)
Net loss available to common stockholders	$	(3,032)	$	(20,307)
Weighted average common shares outstanding, basic	50,440		48,583
Weighted average common shares outstanding, dilutive	50,440		48,583
Loss per share - basic	$	(0.06)	$	(0.42)
Loss per share - diluted	$	(0.06)	$	(0.42)

Note 6. Pension Plan and Other Postretirement Benefits

The Company provides a qualified, defined-benefit, non-contributory pension plan for substantially all employees. The Company makes annual contributions to fund the amounts accrued for in the qualified pension plan. The Company also maintains an unfunded, non-qualified, supplemental executive retirement plan. The costs of the plans are charged to expense or are capitalized in utility plant as appropriate.

The Company offers medical, dental, vision, and life insurance benefits for retirees and their spouses and dependents. Participants are required to pay a premium, which offsets a portion of the cost.

Cash contributions made by the Company to the pension plans were ~~$25.8~~$9.4 million and ~~$12.5~~$7.9 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively. Cash contributions made by the Company to the other postretirement benefit plans were ~~$5.7~~$1.2 million and ~~$5.6~~$2.2 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively. The total ~~2020~~2021 estimated cash contribution to the pension plans and other postretirement benefits plans are expected to be approximately ~~$38.0~~$23.5 million and ~~$7.5~~$2.2 million, respectively.

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The following ~~tables list~~table lists components of net periodic benefit costs for the pension plans and other postretirement benefits. The data listed under “pension plan” includes the qualified pension plan and the non-qualified supplemental executive retirement plan. The data listed under “other benefits” is for all other postretirement benefits.


		Three Months Ended September 30									Three Months Ended March 31
		Pension Plan				Other Benefits					Pension Plan				Other Benefits
		2020		2019		2020		2019			2021		2020		2021		2020
Service cost	Service cost	$	9,378	$	6,910	$	1,746	$	2,082	Service cost	$	9,010	$	8,811	$	1,611	$	2,106
Interest cost	Interest cost	6,440		6,941		808		1,407		Interest cost	5,319		6,433		805		1,210
Expected return on plan assets	Expected return on plan assets	(8,284)		(7,581)		(1,804)		(1,475)		Expected return on plan assets	(9,866)		(8,265)		(2,192)		(1,811)
Amortization of prior service cost	Amortization of prior service cost	1,058		1,262		50		49		Amortization of prior service cost	253		1,057		49		49
Recognized net actuarial loss	Recognized net actuarial loss	3,208		1,821		(27)		214		Recognized net actuarial loss	1,924		3,196		(110)		14
Net periodic benefit cost	Net periodic benefit cost	$	11,800	$	9,353	$	773	$	2,277	Net periodic benefit cost	$	6,640	$	11,232	$	163	$	1,568

Nine Months Ended September 30
Pension Plan Other Benefits
2020 2019 2020 2019
Service cost $ 27,002 $ 20,039 $ 5,959 $ 5,606
Interest cost 19,306 20,225 3,229 4,081
Expected return on plan assets (24,815) (22,714) (5,427) (4,346)
Amortization of prior service cost 3,172 3,786 148 148
Recognized net actuarial loss 9,599 4,445 0 421
Net periodic benefit cost $ 34,264 $ 25,781 $ 3,909 $ 5,910

Service cost portion of the pension plan and other postretirement benefits is recognized in "administrative and general" expenses within the Condensed Consolidated Statements of ~~Income.~~Operations. Other components of net periodic benefit costs include interest costs, expected return on plan assets, amortization of prior service costs, and recognized net actuarial loss and are reported together as "other components of net periodic benefit cost" within the Condensed Consolidated Statements of ~~Income.~~Operations.

Note 7. Short-term and Long-term Borrowings

On March 29, 2019, the Company and Cal Water entered into certain syndicated credit agreements, which provide for unsecured revolving credit facilities of up to an initial aggregate amount of $550.0 million for a term of five years. The Company and subsidiaries that it designates may borrow up to $150.0 million under the Company’s revolving credit facility. Cal Water may borrow up to $400.0 million under its revolving credit facility. Additionally, the credit facilities may be increased by up to an incremental $150.0 million under the Cal Water facility and $50.0 million under the Company facility, subject in each case to certain conditions.

The revolving credit facilities contain affirmative and negative covenants and events of default customary for credit facilities of this type including, among other things, limitations and prohibitions relating to additional indebtedness, liens, mergers, and asset sales. Also, these unsecured credit agreements contain financial covenants governing the Company and its subsidiaries' consolidated total capitalization ratio and interest coverage ratio.

The outstanding borrowings on the Company line of credit were ~~$105.1~~$95.0 million and ~~$55.1~~$100 million as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively. There were ~~$270.0~~$340.0 million and ~~$120.0~~$270.0 million of borrowings on the Cal Water line of credit as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively. The average borrowing rate for borrowings on the Company and Cal Water lines of credit during the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 was ~~1.74%~~0.98% compared to ~~3.38%~~2.59% for the same period last year.

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Note 8. Income Taxes

The Company adjusts its effective tax rate each quarter to be consistent with the estimated annual effective tax rate. The Company also records the tax effect of unusual or infrequently occurring discrete items.

The provision for income taxes is shown in the ~~tables~~table below:

Three Months Ended September 30
2020 2019
Income tax expense $ 14,049 $ 11,864


	Three Months Ended March 31
	2021		2020
Income tax expense (benefit)	$	257	$	(4,850)

Nine Months Ended September 30
2020 2019
Income tax expense $ 10,641 $ 14,509

The income tax expense increased ~~$2.1~~$5.2 million to ~~$14.0~~$0.3 million ~~for~~in the ~~three months ended September 30, 2020~~first quarter of 2021 as compared to ~~$11.9~~$4.9 million ~~for~~income tax benefit in the ~~three months ended September 30, 2019.~~first quarter of 2020. The increase was mainly due to an increase in operating income, partially offset by ~~tax repair benefit and~~ amortization of excess deferred income tax as a result of the Tax Cuts and Jobs Acts (TCJA) in the 2018 GRC ~~proposed decision.~~

The income tax expense decreased $3.9 million to $10.6 million for the nine months ended September 30, 2020 as compared to income tax expense of $14.5 million for the nine months ended September 30, 2019. The decrease was mainly due to tax repair benefit and amortization of excess deferred income tax as a result of TCJA in the 2018 GRC proposed decision.

The Company’s effective tax rate was ~~11.6% and 21.9% for~~6.02% before discrete items in the ~~nine months ended September 30, 2020, and 2019, respectively.~~first quarter of 2021 as compared to 19.3% in the first quarter of 2020. The ~~lower~~difference in effective income tax rate ~~for the nine months ended September 30, 2020,~~ was ~~primarily~~primary due to the amortization of the excess deferred taxes as a result of the TCJA in the ~~proposed decision for the~~ 2018 ~~GRC.~~

The US federal income tax rate was lowered by TCJA to 21% in 2018 from 35% in 2017. For the year ended December 31, 2018, the Company recorded a re-measurement of its deferred tax balances. The final impact may differ from the recorded amounts, possibly materially, due to regulatory decisions that could differ from the Company’s determination of how the impacts of the TCJA are allocated between customers and shareholders. In addition, changes in interpretations, guidance on legislative intent, and any changes in accounting standards for income taxes in response to the TCJA could also impact the recorded amounts.

The Company is continuing to work with state regulators to finalize the excess deferred tax to ensure compliance with federal normalization rules and will record any adjustments based on state regulator's decisions.GRC decision.

The Company had unrecognized tax benefits of approximately ~~$12.9~~$14.1 million and ~~$10.6~~$11.7 million as of ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively. Included in the balance of unrecognized tax benefits as of March 31, 2021 and 2020, is ~~approximately $3.5~~$3.7 million and ~~$3.1~~$3.3 million, respectively, of tax benefits that, if recognized, would result in an adjustment to the Company’s effective tax rate. The Company does not expect its unrecognized tax benefits to change significantly within the next 12 months.

During the nine months ended September 30, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law. The CARES Act includes provisions relating to refundable payroll tax credits, deferral of certain payroll taxes, technical corrections to tax depreciation methods for qualified improvement property, net operating loss carryback periods, alternative minimum tax credit refunds and modifications to the net interest deduction limitations which are not expected to have a material impact to the Company’s consolidated financial statements. The Company evaluated the provisions of the CARES Act and determined that it did not have a material effect on the Company's consolidated financial statements as of September 30, 2020.

~~Note 9. Regulatory Assets and Liabilities~~

The CPUC follows a rate case plan which requires Cal Water to file a GRC for each of its regulated operating districts every three years. In a GRC proceeding, the CPUC not only considers the utility's rate setting requests, but may also consider other issues that affect the utility's rates and operations. The CPUC is generally required to issue its GRC decision prior to the first day of the test year or authorize interim rates. In accordance with the rate case plan, Cal Water filed its 2018 GRC application in July of 2018 requesting rate changes effective January 1, 2020. On October 8, 2019, Cal Water jointly filed a formal settlement agreement for its 2018 GRC with the Public Advocates Office of the CPUC covering the

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~~majority of open matters in the case. The key matters not included in the settlement,~~Note 9. Regulatory Assets and which were litigated, were continuation of the WRAM, MCBA, PCBA, and HCBA. On October 14, 2020, an Administrative Law Judge (ALJ) with the CPUC issued a proposed decision that is subject to adoption by the CPUC no earlier than the CPUC’s November 19, 2020 meeting. If adopted as proposed, the decision would approve the settlement reached in October of 2019 by Cal Water and the CPUC’s Public Advocates Office, allow Cal Water to continue its decoupling balancing accounts through 2022, and allow Cal Water to retain its PCBA and HCBA. Under this proposed decision, Cal Water would be authorized to invest $828.0 million in its districts throughout California through 2021. This includes $148 million of water system infrastructure upgrades that would be recovered via the CPUC’s advice letter procedure once those projects are completed. The proposed decision also authorizes total revenue of up to $698.7 million for 2020.

The Company determined that the proposed decision provides additional evidence about conditions that existed as of September 30, 2020. As of November 6, 2020, the Company believes it is probable the proposed decision will be adopted by the CPUC without any material variation and accordingly, the Company recorded regulatory assets and associated revenues resulting from the regulatory mechanisms approved in the proposed decision as of September 30, 2020. In the unlikely event that the CPUC does not approve the proposed decision as issued, the Company will need to adjust regulatory asset balances and revenues in the fourth quarter of 2020.Liabilities

Regulatory assets and liabilities were comprised of the following as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019:~~2020:


		Recovery Period	September 30, 2020		December 31, 2019			Recovery Period	March 31, 2021		December 31, 2020
Regulatory Assets	Regulatory Assets						Regulatory Assets
Pension and retiree group health	Pension and retiree group health	Indefinitely	$	207,828	$	208,321	Pension and retiree group health	Indefinitely	$	59,424	$	59,588
Property-related temporary differences (tax benefits flowed through to customers)	Property-related temporary differences (tax benefits flowed through to customers)	Indefinitely	107,962		104,931		Property-related temporary differences (tax benefits flowed through to customers)	Indefinitely	120,590		120,365
Other accrued benefits	Other accrued benefits	Indefinitely	21,434		20,030		Other accrued benefits	Indefinitely	22,192		21,692
Net WRAM and MCBA long-term accounts receivable	Net WRAM and MCBA long-term accounts receivable	1 - 2 years	40,036		25,465		Net WRAM and MCBA long-term accounts receivable	1 - 2 years	38,676		33,136
Asset retirement obligations, net	Asset retirement obligations, net	Indefinitely	21,018		19,567		Asset retirement obligations, net	Indefinitely	21,624		21,110
Interim rates long-term accounts receivable		1 year	21,672		4,642
IRMA long-term accounts receivable							IRMA long-term accounts receivable	1 year	10,962		14,705
Tank coating	Tank coating	10 years	14,209		13,535		Tank coating	10 years	13,777		14,018
Recoverable property losses	Recoverable property losses	10 years	4,775		5,000		Recoverable property losses	9 years	4,361		4,531
PCBA	PCBA	1 year	32,819		21,465		PCBA	1 year	21,210		19,647
Other components of net periodic benefit cost	Other components of net periodic benefit cost	Indefinitely	6,316		5,145		Other components of net periodic benefit cost	Indefinitely	5,988		6,736
General district balancing account receivable							General district balancing account receivable	1 year	724		1,830
Low-income rate assistance (LIRA) and Rate support fund (RSF) accounts receivable							Low-income rate assistance (LIRA) and Rate support fund (RSF) accounts receivable	1 year	6,202		5,310
Other regulatory assets	Other regulatory assets	Various	6,366		5,221		Other regulatory assets	Various	2,606		2,708
Total Regulatory Assets	Total Regulatory Assets		$	484,435	$	433,322	Total Regulatory Assets		$	328,336	$	325,376

Regulatory Liabilities	Regulatory Liabilities						Regulatory Liabilities
Future tax benefits due to customers	Future tax benefits due to customers		$	173,048	$	194,501	Future tax benefits due to customers		$	151,088	$	151,011
Retiree group health							Retiree group health		18,472		18,472
HCBA	HCBA		7,407		4,271		HCBA		7,165		5,320
CEBA	CEBA		2,926		2,742		CEBA		4,313		3,837
Net WRAM and MCBA long-term payable	Net WRAM and MCBA long-term payable		374		211		Net WRAM and MCBA long-term payable		1,397		479
Tax accounting memorandum account			711		806
Cost of capital memorandum account			15		151
1,2,3 trichloropropane (TCP) settlement proceeds			9,084		8,426
Other regulatory liabilities	Other regulatory liabilities		374		305		Other regulatory liabilities		1,162		1,599
Total Regulatory Liabilities	Total Regulatory Liabilities		$	193,939	$	211,413	Total Regulatory Liabilities		$	183,597	$	180,718

Short-term regulatory assets and liabilities are excluded from the above table.

The short-term regulatory assets were ~~$54.4~~$97.8 million as of ~~September 30, 2020~~March 31, 2021 and ~~$38.2~~$96.2 million as of December 31, ~~2019. As of September 30, 2020, the~~2020. These short-term regulatory assets primarily consist of net WRAM and MCBA, ~~receivables~~IRMA, and ~~IRMA receivables. As of December 31, 2019, the short-term regulatory assets primarily consist of net WRAM and MCBA receivables.~~

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PCBA receivables

The short-term portions of regulatory liabilities were ~~$11.0~~$34.2 million as of ~~September 30, 2020~~March 31, 2021 and ~~$4.5~~$34.6 million as of December 31, ~~2019.~~2020. The short-term regulatory liabilities as of ~~September 30,~~March 31, 2021 and December 31, 2020 primarily consist of ~~2015 GRC CEBA~~TCJA and HCBA refunds and ~~TCJA customer refunds. As of December 31, 2019, the short-term regulatory liabilities primarily consist of~~ TCP settlement proceeds ~~tax accounting memorandum account refunds, and cost of capital memorandum account refunds.~~

Note 10. Commitments and Contingencies

Commitments

The Company has significant commitments to purchase water from water wholesalers. The Company also has operating and finance leases for water systems, offices, land easements, licenses, equipment, and other facilities. These commitments and leases are described in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020.

As of ~~September 30, 2020,~~March 31, 2021, there were no significant changes in these commitments from December 31, ~~2019.~~2020.

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Contingencies

Groundwater Contamination

The Company has undertaken litigation against third parties to recover past and anticipated costs related to groundwater contamination in our service areas. The cost of litigation is expensed as incurred and any settlement is first offset against such costs. The CPUC’s general policy requires all proceeds from groundwater contamination litigation to be used first to pay transactional expenses, then to make customers whole for water treatment costs to comply with the CPUC’s water quality standards. The CPUC allows for a risk-based consideration of contamination proceeds which exceed the costs of the remediation described above and may result in some sharing of proceeds with the shareholder, determined on a case by case basis. The CPUC has authorized various memorandum accounts that allow the Company to track significant litigation costs and to request recovery of these costs in future filings.

Other Legal Matters

From time to time, the Company is involved in various disputes and litigation matters that arise in the ordinary course of business. The status of each significant matter is reviewed and assessed for potential financial exposure. If the potential loss from any claim or legal proceeding is considered probable and the amount of the range of loss can be estimated, a liability is accrued for the estimated loss in accordance with the accounting standards for contingencies. Legal proceedings are subject to uncertainties, and the outcomes are difficult to predict. Because of such uncertainties, accruals are based on the best information available at the time. While the outcome of these disputes and litigation matters cannot be predicted with any certainty, management does not believe when taking into account existing reserves the ultimate resolution of these matters will materially affect the Company’s financial position, results of operations, or cash flows. As of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, the Company recognized a liability of ~~$2.4~~$4.6 million and ~~$2.5~~$2.6 million, respectively, for known legal matters. The cost of litigation is expensed as incurred and any settlement is first offset against such costs. Any settlement in excess of the cost to litigate is accounted for on a case by case basis, dependent on the nature of the settlement.

Note 11. Fair Value of Financial Assets and Liabilities

The accounting guidance for fair value measurements and disclosures provides a single definition of fair value and requires certain disclosures about assets and liabilities measured at fair value. A hierarchical framework for disclosing the observability of the inputs utilized in measuring assets and liabilities at fair value is established by this guidance. The three levels in the hierarchy are as follows:

Level 1 - Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access.

Level 2 - Inputs to the valuation methodology include:

•Quoted market prices for similar assets or liabilities in active markets;

•Quoted prices for identical or similar assets or liabilities in inactive markets;

•Inputs other than quoted prices that are observable for the asset or liability; and

•Inputs that are derived principally from or corroborated by observable market data by correlation or other means.

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If the asset or liability has a specified (contractual) term, the level 2 input must be observable for substantially the full term of the asset or liability.

Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

Specific valuation methods include the following:

Accounts receivable and accounts payable carrying amounts approximated the fair value because of the short-term maturity of the instruments.

Long-term debt fair values were estimated using the published quoted market price of similar securities, if available, or the discounted cash flow analysis, based on the current rates available using a risk-free rate (a U.S. Treasury securities yield curve) plus a risk premium of 1.83%.

~~Advances for construction fair values were estimated using broker quotes from companies that frequently purchase these investments.~~

September 30, 2020
Fair Value
Cost Level 1 Level 2 Level 3 Total
Long-term debt, including current maturities, net $ 806,938 0 $ 991,973 0 $ 991,973
Advances for construction 196,853 0 82,150 0 82,150
Total $ 1,003,791 $ 0 $ 1,074,123 $ 0 $ 1,074,123

December 31, 2019
Fair Value
Cost Level 1 Level 2 Level 3 Total
Long-term debt, including current maturities, net $ 808,622 $ 0 $ 873,454 $ 0 $ 873,454
Advances for construction 191,062 0 79,550 0 79,550
Total $ 999,684 0 $ 953,004 $ 0 $ 953,004

~~Note 12. Condensed Consolidating Financial Statements~~

On November 17, 2010, Cal Water issued $100.0 million aggregate principal amount of 5.50% First Mortgage Bonds due 2040, all of which is fully and unconditionally guaranteed by the Company. As a result of this guarantee arrangement, the Company is required to present the following condensed consolidating financial information. The investments in affiliates are accounted for and presented using the “equity method” of accounting.

The following tables present the Condensed Consolidating Balance Sheets as of September 30, 2020 and December 31, 2019, the Condensed Consolidating Statements of Income for the three and nine months ended September 30, 2020 and 2019, and the Condensed Consolidating Statements of Cash Flows for the nine months ended September 30, 2020 and 2019 of (i) California Water Service Group, the guarantor of the First Mortgage Bonds and the parent company; (ii) California Water Service Company, the issuer of the First Mortgage Bonds and a 100% owned consolidated subsidiary of California Water Service Group; and (iii) the other 100% owned non-guarantor consolidated subsidiaries of California Water Service Group. No other subsidiary of the Company guarantees the securities.

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~~CALIFORNIA WATER SERVICE GROUP~~

~~CONDENSED CONSOLIDATING BALANCE SHEET~~

~~As of September 30, 2020~~

~~(In thousands)~~

Parent
Company Cal Water All Other
Subsidiaries Consolidating
Adjustments Consolidated
ASSETS
Utility plant:
Utility plant $ 1,318 $ 3,559,329 $ 281,744 $ (7,197) $ 3,835,194
Less accumulated depreciation and amortization (1,177) (1,151,266) (88,676) 2,239 (1,238,880)
Net utility plant 141 2,408,063 193,068 (4,958) 2,596,314
Current assets:
Cash and cash equivalents 16,679 85,877 10,756 0 113,312
Receivables and unbilled revenue, net 0 160,479 8,636 0 169,115
Receivables from affiliates 26,962 942 261 (28,165) 0
Other current assets 272 20,933 2,132 0 23,337
Total current assets 43,913 268,231 21,785 (28,165) 305,764
Other assets:
Regulatory assets 0 479,613 4,822 0 484,435
Investments in affiliates 917,901 0 0 (917,901) 0
Long-term affiliate notes receivable 32,659 0 0 (32,659) 0
Other assets 2,349 84,154 33,636 (218) 119,921
Total other assets 952,909 563,767 38,458 (950,778) 604,356
TOTAL ASSETS $ 996,963 $ 3,240,061 $ 253,311 $ (983,901) $ 3,506,434
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stockholders’ equity $ 890,192 $ 805,444 $ 117,633 $ (923,077) $ 890,192
Affiliate long-term debt 0 0 32,659 (32,659) 0
Long-term debt, net 0 784,715 340 0 785,055
Total capitalization 890,192 1,590,159 150,632 (955,736) 1,675,247
Current liabilities:
Current maturities of long-term debt, net 0 21,763 120 0 21,883
Short-term borrowings 105,100 270,000 0 0 375,100
Payables to affiliates 0 2,940 25,225 (28,165) 0
Accounts payable 0 123,129 4,029 0 127,158
Accrued expenses and other liabilities 31 73,913 5,738 0 79,682
Total current liabilities 105,131 491,745 35,112 (28,165) 603,823
Deferred income taxes 1,640 235,791 8,025 0 245,456
Pension and postretirement benefits other than pensions 0 261,081 0 0 261,081
Regulatory liabilities and other 0 251,230 5,824 0 257,054
Advances for construction 0 196,324 529 0 196,853
Contributions in aid of construction 0 213,731 53,189 0 266,920
TOTAL CAPITALIZATION AND LIABILITIES $ 996,963 $ 3,240,061 $ 253,311 $ (983,901) $ 3,506,434

2017

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~~CALIFORNIA WATER SERVICE GROUP~~

~~CONDENSED CONSOLIDATING BALANCE SHEET~~

~~As of December 31, 2019~~

~~(In thousands)~~


	March 31, 2021
			Fair Value
	Cost		Level 1	Level 2		Level 3	Total
Long-term debt, including current maturities, net	$	786,087	0	$	860,403	0	$	860,403

Parent
Company Cal Water All Other
Subsidiaries Consolidating
Adjustments Consolidated
ASSETS
Utility plant:
Utility plant $ 1,318 $ 3,332,331 $ 224,033 $ (7,197) $ 3,550,485
Less accumulated depreciation and amortization (1,107) (1,079,627) (65,561) 2,180 (1,144,115)
Net utility plant 211 2,252,704 158,472 (5,017) 2,406,370
Current assets:
Cash and cash equivalents 3,096 29,098 10,459 0 42,653
Receivables and unbilled revenue, net 0 114,999 4,350 0 119,349
Receivables from affiliates 25,803 3,621 209 (29,633) 0
Other current assets 90 20,615 2,005 0 22,710
Total current assets 28,989 168,333 17,023 (29,633) 184,712
Other assets:
Regulatory assets 0 428,639 4,683 0 433,322
Investments in affiliates 777,170 0 0 (777,170) 0
Long-term affiliate notes receivable 30,060 0 0 (30,060) 0
Other assets 409 81,591 5,125 (221) 86,904
Total other assets 807,639 510,230 9,808 (807,451) 520,226
TOTAL ASSETS $ 836,839 $ 2,931,267 $ 185,303 $ (842,101) $ 3,111,308
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stockholders’ equity $ 779,906 $ 700,784 81,604 $ (782,388) $ 779,906
Affiliate long-term debt 0 0 30,060 (30,060) 0
Long-term debt, net 0 786,310 444 0 786,754
Total capitalization 779,906 1,487,094 112,108 (812,448) 1,566,660
Current liabilities:
Current maturities of long-term debt, net 0 21,732 136 0 21,868
Short-term borrowings 55,100 120,000 0 0 175,100
Payables to affiliates 0 6,115 23,518 (29,633) 0
Accounts payable 0 104,419 4,044 0 108,463
Accrued expenses and other liabilities 313 50,569 2,408 0 53,290
Total current liabilities 55,413 302,835 30,106 (29,633) 358,721
Deferred income taxes 1,520 217,847 3,243 (20) 222,590
Pension and postretirement benefits other than pensions 0 258,907 0 0 258,907
Regulatory and other liabilities 0 264,434 7,397 0 271,831
Advances for construction 0 190,568 494 0 191,062
Contributions in aid of construction 0 209,582 31,955 0 241,537
TOTAL CAPITALIZATION AND LIABILITIES $ 836,839 $ 2,931,267 $ 185,303 $ (842,101) $ 3,111,308

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~~CALIFORNIA WATER SERVICE GROUP~~

~~CONDENSED CONSOLIDATING STATEMENT OF INCOME~~

~~For the three months ended September 30, 2020~~

~~(In thousands)~~

Parent
Company Cal Water All Other
Subsidiaries Consolidating
Adjustments Consolidated
Operating revenue $ 0 $ 287,820 $ 16,288 $ 0 $ 304,108
Operating expenses:
Operations:
Water production costs 0 82,829 2,515 0 85,344
Administrative and general 0 25,802 3,406 0 29,208
Other operations 0 27,312 2,579 (145) 29,746
Maintenance 0 6,872 257 0 7,129
Depreciation and amortization 23 22,984 1,712 (20) 24,699
Income tax (benefit) expense (113) 12,787 930 200 13,804
Property and other taxes 0 6,948 1,168 0 8,116
Total operating (income) expenses (90) 185,534 12,567 35 198,046
Net operating income 90 102,286 3,721 (35) 106,062
Other income and expenses:
Non-regulated revenue 549 3,588 492 (695) 3,934
Non-regulated expenses 0 (2,321) (544) 0 (2,865)
Other components of net periodic benefit cost 0 (1,016) 8 0 (1,008)
Allowance for equity funds used during construction 0 973 0 0 973
Income tax (expense) benefit on other income and expenses (152) (289) 2 194 (245)
Net other income (loss) 397 935 (42) (501) 789
Interest:
Interest expense 393 10,762 556 (549) 11,162
Allowance for borrowed funds used during construction 0 (631) (40) 0 (671)
Net interest expense 393 10,131 516 (549) 10,491
Equity earnings of subsidiaries 96,266 0 0 (96,266) 0
Net income $ 96,360 $ 93,090 $ 3,163 $ (96,253) $ 96,360

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~~CALIFORNIA WATER SERVICE GROUP~~

~~CONDENSED CONSOLIDATING STATEMENT OF INCOME~~

~~For the three months ended September 30, 2019~~

~~(In thousands)~~

Parent
Company Cal Water All Other
Subsidiaries Consolidating
Adjustments Consolidated
Operating revenue $ 0 $ 219,261 $ 13,276 $ 0 $ 232,537
Operating expenses:
Operations:
Water production costs 0 78,048 2,520 0 80,568
Administrative and general 0 24,498 2,281 0 26,779
Other operations 0 22,872 1,825 (147) 24,550
Maintenance 0 6,823 242 0 7,065
Depreciation and amortization 23 20,770 1,501 (21) 22,273
Income tax (benefit) expense (132) 11,332 779 215 12,194
Property and other taxes 0 6,620 921 0 7,541
Total operating (income) expenses (109) 170,963 10,069 47 180,970
Net operating income 109 48,298 3,207 (47) 51,567
Other income and expenses:
Non-regulated revenue 599 3,865 399 (745) 4,118
Non-regulated expenses 0 (3,907) (444) 0 (4,351)
Other components of net periodic benefit cost 0 (1,784) (73) 0 (1,857)
Allowance for equity funds used during construction 0 1,868 0 0 1,868
Income tax (expense) benefit on other income and expenses (168) 268 22 208 330
Net other income (loss) 431 310 (96) (537) 108
Interest:
Interest expense 450 9,820 608 (599) 10,279
Allowance for borrowed funds used during construction 0 (954) (74) 0 (1,028)
Net interest expense 450 8,866 534 (599) 9,251
Equity earnings of subsidiaries 42,334 0 0 (42,334) 0
Net income $ 42,424 $ 39,742 $ 2,577 $ (42,319) $ 42,424

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~~CALIFORNIA WATER SERVICE GROUP~~

~~CONDENSED CONSOLIDATING STATEMENT OF INCOME~~

~~For the nine months ended September 30, 2020~~

~~(In thousands)~~

Parent
Company Cal Water All Other
Subsidiaries Consolidating
Adjustments Consolidated
Operating revenue $ 0 $ 567,494 $ 37,661 $ 0 $ 605,155
Operating expenses:
Operations:
Water production costs 0 203,485 6,977 0 210,462
Administrative and general 0 77,025 8,802 0 85,827
Other operations 0 63,427 6,628 (437) 69,618
Maintenance 0 19,980 944 0 20,924
Depreciation and amortization 70 68,886 4,836 (59) 73,733
Income tax (benefit) expense (341) 9,054 1,176 600 10,489
Property and other taxes 0 19,618 2,852 0 22,470
Total operating (income) expenses (271) 461,475 32,215 104 493,523
Net operating income 271 106,019 5,446 (104) 111,632
Other income and expenses:
Non-regulated revenue 1,648 11,102 1,304 (2,085) 11,969
Non-regulated expenses 0 (10,864) (947) 0 (11,811)
Other components of net periodic benefit cost 0 (3,717) (53) 0 (3,770)
Allowance for equity funds used during construction 0 4,292 0 0 4,292
Income tax expense on other income and expenses (460) (179) (96) 583 (152)
Net other income 1,188 634 208 (1,502) 528
Interest:
Interest expense 1,161 32,402 1,658 (1,648) 33,573
Allowance for borrowed funds used during construction 0 (2,604) (143) 0 (2,747)
Net interest expense 1,161 29,798 1,515 (1,648) 30,826
Equity earnings of subsidiaries 81,036 0 0 (81,036) 0
Net income $ 81,334 $ 76,855 $ 4,139 $ (80,994) $ 81,334

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~~CALIFORNIA WATER SERVICE GROUP~~

~~CONDENSED CONSOLIDATING STATEMENT OF INCOME~~

~~For the nine months ended September 30, 2019~~

~~(In thousands)~~

Parent
Company Cal Water All Other
Subsidiaries Consolidating
Adjustments Consolidated
Operating revenue $ 0 $ 502,785 $ 34,894 $ 0 $ 537,679
Operating expenses:
Operations:
Water production costs 0 183,617 7,178 0 190,795
Administrative and general 23 73,908 7,379 0 81,310
Other operations 0 59,851 5,499 (437) 64,913
Maintenance 0 18,469 743 0 19,212
Depreciation and amortization 70 62,471 4,488 (62) 66,967
Income tax (benefit) expense (411) 12,019 1,265 651 13,524
Property and other taxes 0 19,431 2,471 0 21,902
Total operating (income) expenses (318) 429,766 29,023 152 458,623
Net operating income 318 73,019 5,871 (152) 79,056
Other income and expenses:
Non-regulated revenue 1,826 13,374 1,212 (2,263) 14,149
Non-regulated expenses 0 (9,610) (860) 0 (10,470)
Other components of net periodic benefit cost 0 (4,177) (131) 0 (4,308)
Allowance for equity funds used during construction 0 5,087 0 0 5,087
Income tax expense on other income and expenses (511) (1,028) (79) 633 (985)
Net other income 1,315 3,646 142 (1,630) 3,473
Interest:
Interest expense 1,376 32,141 1,841 (1,826) 33,532
Allowance for borrowed funds used during construction 0 (2,592) (191) 0 (2,783)
Net interest expense 1,376 29,549 1,650 (1,826) 30,749
Equity earnings of subsidiaries 51,523 0 0 (51,523) 0
Net income $ 51,780 $ 47,116 $ 4,363 $ (51,479) $ 51,780

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~~CALIFORNIA WATER SERVICE GROUP~~

~~CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS~~

~~For the nine months ended September 30, 2020~~

~~(In thousands)~~

Parent
Company Cal Water All Other
Subsidiaries Consolidating
Adjustments Consolidated
Operating activities:
Net income $ 81,334 $ 76,855 $ 4,139 $ (80,994) $ 81,334
Adjustments to reconcile net income to net cash provided by operating activities:
Equity earnings of subsidiaries (81,036) 0 0 81,036 0
Dividends received from affiliates 31,177 0 0 (31,177) 0
Depreciation and amortization 70 70,604 4,935 (59) 75,550
Changes in value of life insurance contracts 0 (621) 0 0 (621)
Allowance for equity funds used during construction 0 (4,292) 0 0 (4,292)
Changes in operating assets and liabilities (463) (17,633) (311) 0 (18,407)
Other changes in noncurrent assets and liabilities 3,262 (42,184) 2,005 17 (36,900)
Net cash provided by operating activities 34,344 82,729 10,768 (31,177) 96,664
Investing activities:
Utility plant expenditures 0 (212,288) (8,973) 0 (221,261)
Business acquisition, net of cash acquired (1,950) 0 (37,594) 0 (39,544)
Investment in affiliates (90,871) 0 0 90,871 0
Changes in affiliate advances 2,238 2,679 (145) (4,772) 0
Issuance of affiliate short-term borrowings (3,500) 0 0 3,500 0
Issuance of affiliate long-term borrowings (4,076) 0 0 4,076 0
Reduction of affiliates long-term debt 1,580 0 0 (1,580) 0
Purchase of life insurance contracts 0 (2,335) 0 0 (2,335)
Net cash used in investing activities (96,579) (211,944) (46,712) 92,095 (263,140)
Financing Activities:
Short-term borrowings 50,000 220,000 0 0 270,000
Repayment of short-term borrowings 0 (70,000) 0 0 (70,000)
Investment from affiliates 0 57,266 33,605 (90,871) 0
Changes in affiliate advances 0 (3,175) (1,597) 4,772 0
Proceeds from affiliate short-term borrowings 0 0 3,500 (3,500) 0
Proceeds from affiliate long-term borrowings 0 0 4,076 (4,076) 0
Repayment of affiliates long-term borrowings 0 0 (1,580) 1,580 0
Repayment of long-term debt 0 (1,415) (120) 0 (1,535)
Advances and contributions in aid of construction 0 19,735 127 0 19,862
Refunds of advances for construction 0 (7,015) (2) 0 (7,017)
Repurchase of common stock (1,578) 0 0 0 (1,578)
Issuance of common stock 58,573 0 0 0 58,573
Dividends paid to non-affiliates (31,177) 0 0 0 (31,177)
Dividends paid to affiliates 0 (29,461) (1,716) 31,177 0
Net cash provided by financing activities 75,818 185,935 36,293 (60,918) 237,128
Change in cash, cash equivalents, and restricted cash 13,583 56,720 349 0 70,652
Cash, cash equivalents, and restricted cash at beginning of period 3,096 29,679 10,523 0 43,298
Cash, cash equivalents, and restricted cash at end of period $ 16,679 $ 86,399 $ 10,872 0 $ 113,950

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~~CALIFORNIA WATER SERVICE GROUP~~

~~CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS~~

~~For the nine months ended September 30, 2019~~

~~(In thousands)~~

Parent
Company Cal Water All Other
Subsidiaries Consolidating
Adjustments Consolidated
Operating activities:
Net income $ 51,780 $ 47,116 $ 4,363 $ (51,479) $ 51,780
Adjustments to reconcile net income to net cash provided by operating activities:
Equity earnings of subsidiaries (51,523) 0 0 51,523 0
Dividends received from affiliates 28,507 0 0 (28,507) 0
Depreciation and amortization 70 63,975 4,539 (62) 68,522
Changes in value of life insurance contracts 0 (3,433) 0 0 (3,433)
Allowance for equity funds used during construction 0 (5,087) 0 0 (5,087)
Changes in operating assets and liabilities 194 (6,744) 1,509 0 (5,041)
Other changes in noncurrent assets and liabilities 5,239 14,560 1,785 18 21,602
Net cash provided by operating activities 34,267 110,387 12,196 (28,507) 128,343
Investing activities:
Utility plant expenditures 0 (185,883) (9,059) 0 (194,942)
Changes in affiliate advances (3,199) 3,534 (320) (15) 0
Issuance of affiliate short-term borrowings (4,300) 0 0 4,300 0
Reduction of affiliates long-term debt 1,462 0 0 (1,462) 0
Purchase of life insurance contracts 0 (2,216) 0 0 (2,216)
Net cash used in investing activities (6,037) (184,565) (9,379) 2,823 (197,158)
Financing Activities:
Short-term borrowings 0 210,000 0 0 210,000
Repayment of short-term borrowings 0 (120,000) 0 0 (120,000)
Changes in affiliate advances (17) 4,419 (4,417) 15 0
Proceeds from affiliate short-term borrowings 0 0 4,300 (4,300) 0
Repayment of affiliates long-term borrowings 0 0 (1,462) 1,462 0
Issuance of long-term debt, net of expenses 0 398,431 0 0 398,431
Repayment of long-term debt 0 (401,417) (213) 0 (401,630)
Advances and contributions in aid for construction 0 21,176 90 0 21,266
Refunds of advances for construction 0 (5,560) 0 0 (5,560)
Repurchase of common stock (2,355) 0 0 0 (2,355)
Issuance of common stock 1,278 0 0 0 1,278
Dividends paid to non-affiliates (28,507) 0 0 0 (28,507)
Dividends paid to affiliates 0 (27,419) (1,088) 28,507 0
Net cash (used in) provided by financing activities (29,601) 79,630 (2,790) 25,684 72,923
Change in cash, cash equivalents, and restricted cash (1,371) 5,452 27 0 4,108
Cash, cash equivalents, and restricted cash at beginning of period 3,779 34,238 9,698 0 47,715
Cash, cash equivalents, and restricted cash at end of period $ 2,408 $ 39,690 $ 9,725 0 $ 51,823

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~~Note 13. Acquisition~~

On March 27, 2020, the Company’s wholly owned subsidiary, Washington Water, received regulatory approval from the Washington Utilities and Transportation Commission (WUTC) for Washington Water's application for the sale and transfer of assets of Rainier View Water Company. Washington Water paid $37.6 million in cash to take control of the water system on June 1, 2020. The acquisition of Rainier View Water doubles the size of Washington Water’s operations and solidifies the Company’s position as the largest investor-owned water company in the state of Washington, regulated by the WUTC. Rainier View Water serves approximately 35,000 people in parts of Graham, Spanaway, Puyallup, Gig Harbor, and other nearby areas through approximately 18,500 customer connections in 27 water systems.

Assets acquired were $32.7 million, including utility plant of $31.1 million, and liabilities of $22.9 million were assumed, including $21.3 million of contributions in aid of construction. Goodwill of $27.7 million was recorded and consists largely of the synergies expected from combining the operations of Rainier View Water Company and Washington Water. In the third quarter of 2020, the Company finalized identifying the acquired assets and liabilities. The Company is still in the process of finalizing the valuation of certain intangible assets; therefore, the goodwill recorded is subject to further refinement upon completion.

~~The Company expects all the goodwill from the acquisition to be deductible for tax purposes.~~

~~Condensed balance sheets and pro forma results of operations for this acquisition have not been presented since the impact of the acquisition was not material.~~


	December 31, 2020
			Fair Value
	Cost		Level 1		Level 2		Level 3		Total
Long-term debt, including current maturities, net	$	786,227	$	0	$	944,447	$	0	$	944,447

Item 2

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Dollar amounts in thousands unless otherwise stated

FORWARD LOOKING STATEMENTS

This quarterly report, including all documents incorporated by reference, contains forward-looking statements within the meaning established by the Private Securities Litigation Reform Act of 1995. Forward-looking statements in this quarterly report are based on currently available information, expectations, estimates, assumptions and projections, and our management’s beliefs, assumptions, judgments and expectations about us, the water utility industry and general economic conditions, including statements regarding the anticipated impact on our business of the ongoing COVID-19 pandemic and related public health measures. These statements are not statements of historical fact. When used in our documents, statements that are not historical in nature, including words like “expects,” “intends,” “plans,” “believes,” “may,” “estimates,” “assumes,” “anticipates,” “projects,” “predicts,” “forecasts,” “should,” “seeks,” or variations of these words or similar expressions are intended to identify forward-looking statements. The forward-looking statements are not guarantees of future performance. They are based on numerous assumptions that we believe are reasonable, but they are open to a wide range of uncertainties and business risks. Consequently, actual results may vary materially from what is contained in a forward-looking statement.

Factors which may cause actual results to be different than those expected or anticipated include, but are not limited to:

•the outcome of the CPUC's decision on the proposed decision issued by an ALJ with respect to the litigated balancing accounts for Cal Water's 2018 GRC filing. Failure of the CPUC to accept the proposed decision could have a material effect on our results of operations. If the CPUC were to change the ALJ's proposed decision and discontinue the litigated balancing accounts effective December 31, 2019, the impact to the Company would be a material decrease in the Company's 2020, 2021, and 2022 operating revenue and net operating income;

•~~the~~ impact of the ongoing COVID-19 pandemic and related public health measures;

•our ability to invest or apply the proceeds from the issuance of common stock in an accretive manner;

•governmental and regulatory commissions' decisions, including decisions on proper disposition of property;

•consequences of eminent domain actions relating to our water systems;

•changes in regulatory commissions' policies and ~~procedures;~~procedures, such as the CPUC’s decision in 2020 to preclude companies from proposing fully decoupled WRAMs in their next GRC filing (which impacts our planned 2021 GRC filing related to our operations commencing in 2023);

•the outcome and timeliness of regulatory commissions' actions concerning rate relief and other actions;

•increased risk of inverse condemnation losses as a result of climate conditions;

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•our ability to renew leases to operate water systems owned by others on beneficial terms;

•changes in California State Water Resources Control Board water quality standards;

•changes in environmental compliance and water quality requirements;

•electric power interruptions, especially as a result of Public Safety Power Shutoff (PSPS) programs;

•housing and customer growth;

•the impact of opposition to rate increases;

•our ability to recover costs;

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•availability of water supplies;

•issues with the implementation, maintenance or security of our information technology systems;

•civil disturbances or terrorist threats or acts;

•the adequacy of our efforts to mitigate physical and cyber security risks and threats;

•the ability of our enterprise risk management processes to identify or address risks adequately;

•labor relations matters as we negotiate with the unions;

•changes in customer water use patterns and the effects of conservation;

•our ability to complete, successfully integrate and achieve anticipated benefits from announced acquisitions;

•the impact of weather, climate, natural disasters, and actual or threatened public health emergencies, including disease outbreaks, on our operations, water quality, water availability, water sales and operating results and the adequacy of our emergency preparedness;

•restrictive covenants in or changes to the credit ratings on our current or future debt that could increase our financing costs or affect our ability to borrow, make payments on debt or pay dividends;

•risks associated with expanding our business and operations geographically; and

•the risks set forth in “Risk Factors” included in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020.

In light of these risks, uncertainties and assumptions, investors are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this quarterly report or as of the date of any document incorporated by reference in this report, as applicable. When considering forward-looking statements, investors should keep in mind the cautionary statements in this quarterly report and the documents incorporated by reference. We are not under any obligation, and we expressly disclaim any obligation, to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise.

CRITICAL ACCOUNTING POLICIES

We maintain our accounting records in accordance with GAAP and as directed by the Commissions to which our operations are subject. The process of preparing financial statements in accordance with GAAP requires the use of estimates on the part of management. The estimates used by management are based on historic experience and an understanding of current facts and circumstances. Management believes that the following accounting policies are critical because they involve a higher degree of complexity and judgment, and can have a material impact on our results of operations, financial condition, and cash flows of the business. These policies and their key characteristics are discussed in detail in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020. They include:

•revenue recognition;

•regulated utility accounting;

•income taxes;

•pension and postretirement health care benefits;

For the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, there were no changes in the methodology for computing critical accounting estimates, no additional accounting estimates met the standards for critical accounting policies, and there were no material changes to the important assumptions underlying the critical accounting estimates.

COVID-19

~~Table~~During the course of ~~Contents~~

~~CAL WATER'S 2018 GRC~~

~~On October 14,~~ 2020 ~~an ALJ with~~and continuing into the CPUC issued a proposed decision for Cal Water's 2018 GRC filing. The proposed decision is subject to adoption by the CPUC no earlier than the CPUC’s November 19, 2020 meeting. Both Cal Water and the CPUC's Public Advocates Office have an opportunity to provide their feedback on the proposed decision. If adopted as proposed, the decision would approve the settlement reached in October of 2019 by Cal Water and the CPUC’s Public Advocates Office, allow Cal Water to continue its decoupling balancing accounts through 2022, and allow Cal Water to retain its PCBA and HCBA.

We determined that the proposed decision provides additional evidence about conditions that existed as of September 30, 2020. As of November 6, 2020, we also believe that it is probable that the proposed decision will be adopted by the CPUC without any material variation and accordingly, we recorded regulatory assets and associated revenues resulting from the regulatory mechanisms approved in the proposed decision as of September 30, 2020. In the unlikely event that the CPUC does not approve the proposed decision as issued, we will need to adjust regulatory asset balances and revenues in the fourthfirst quarter of ~~2020. Any such adjustment could result in a material decrease to our operating revenue and net operating income for full-year 2020.~~

~~COVID-19~~

At the end of 2019, a COVID-19 outbreak was reported to have surfaced in Wuhan, China, and has since spread to a large number of other countries, including the United States. In March of 2020, the World Health Organization characterized the outbreak2021, as a ~~pandemic. During~~result of the ~~month~~COVID-19 pandemic, shelter-in-place and social distancing ordinances of ~~March,~~varying durations and scope were implemented in all of the states in which we ~~operate enacted shelter-in-place and social distancing ordinances that~~operate. Such governmental orders resulted in temporary closures of non-essential businesses and self-quarantining ofon non-essential workers. ~~Although such measures have been partially rescinded in certain areas, public health restrictions remain in place in all of the states in which we operate.~~ As an “essential business” during times of emergencies pursuant to the U.S. Critical Infrastructures Protection Act of 2001, we are working to continue to provide high quality water and wastewater services to our two million customers. ~~For~~During 2020 and for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 and through ~~November 6, 2020,~~April 29, 2021, the COVID-19 pandemic has not had a significant impact on our business or operations. We have, however, increased our

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allowance for credit losses as we have ceased all shutoffs for non-payment during the pandemic and anticipate this situation will continue until ~~April 1, 2021.~~further notice. We are expecting segments of our customer base to continue to experience employment layoffs and business closures that negatively impact their ability to pay utility bills. We have also incurred costs to promote the health and safety of our employees and facilities.

If we need to close any of our facilities due to outbreaks of COVID-19 or if a critical number of our employees become too ill to work, our business operations could be materially adversely affected in a rapid manner. The impact of the COVID-19 pandemic is fluid and continues to evolve, and therefore, we cannot predict the extent to which our business, results of operations, financial condition or liquidity will ultimately be impacted.

RESULTS OF ~~THIRD~~FIRST QUARTER ~~2020~~2021 OPERATIONS

COMPARED TO ~~THIRD~~FIRST QUARTER ~~2019~~2020 OPERATIONS

Dollar amounts in thousands unless otherwise stated

Overview

Net ~~Income~~Loss

Net ~~income~~loss for the ~~three months ended September 30, 2020~~first quarter of 2021 was ~~$96.4~~$3.0 million or ~~$1.94 earnings~~$0.06 net loss per diluted common share, compared to net ~~income~~loss of ~~$42.4~~$20.3 million or ~~$0.88 earnings~~$0.42 net loss per diluted common share for the ~~three months ended September 30, 2019.~~first quarter of 2020.

The ~~$54.0~~$17.3 million ~~increase~~decrease in net ~~income~~loss was primarily due to ~~our determination that~~ the ~~October 14,~~December 2020 ~~proposed~~ decision by the CPUC for Cal Water’s 2018 GRC. The decision authorized rate increases and the continuation of regulatory mechanisms which Cal Water had not recorded in the first quarter of 2020. First quarter 2021 results included cumulative 2018 GRC and other rate relief of $6.4 million, representing 2020 and 2021 rate changes, and regulatory mechanism net revenue increases of $7.6 million. The decrease in net loss resulting from the adoption of the 2018 GRC was sufficient evidence to record regulatory assets and associated revenues for interim rate recovery as well as benefits balancing accounts and the decoupling mechanisms. In the third quarter of 2020, we recorded revenues of $37.6 million related to interim rate recovery regulatory assets, balancing account net revenue increases of $37.0 million, and customer refunds for 2017 excess deferred federal income taxes (TCJA) of $7.1 million for the nine months ended September 30, 2020. Included in the amounts above, there were $18.9 million of interim rate recovery, $11.5 million of balancing account net revenue increases, and $3.0 million of customer refunds for TCJA for the three months ended September 30, 2020. These increases were partially offset by increases in other operating expenses of $3.9 million, depreciation expense of $2.5 million and ~~amortization of $2.4 million, employee wages~~uninsured loss costs of ~~$2.2 million, income taxes of $1.6 million, bad debt expenses of $0.9 million, and outside service costs of $0.7~~$2.1 million.

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~~Additionally, certain~~Additional factors outside the ~~Company's~~Company’s immediate control ~~decreased~~contributed to the decrease in net ~~income,~~loss, including a ~~$2.6~~$5.1 million ~~reduction in accrued unbilled revenue, which was partially offset by a $1.2 million increase~~decrease in unrealized ~~gain~~loss on certain benefit plan ~~investments.~~investments and $3.6 million increase in accrued unbilled revenue. Seasonal weather patterns and the number of unbilled days are the primary drivers of accrued unbilled revenue.

Operating Revenue

Operating revenue increased ~~$71.6~~$22.2 million, or ~~30.8%~~17.7%, to ~~$304.1~~$147.7 million in the ~~third~~first quarter of ~~2020~~2021 as compared to the ~~third~~first quarter of ~~2019,~~2020, with such change attributed to the following:


Net change due to rate changes, usage, and other (1)	$	~~1,724~~11,900
WRAM Revenue (2)	~~(3,215)~~2,182
MCBA Revenue (3)	~~24,484~~4,056
IRMA Revenue (4)	~~37,623~~2,475
Other balancing account revenue (5)	~~4,459~~ (1,453)
Deferral of revenue (6)	~~6,496~~3,014
Net operating revenue increase	$	~~71,571~~22,174

1.The net change due to rate changes, usage, and other in the above table was mainly driven by ~~a $3.3 million increase in volumetric revenue due to a 6.0% increase in customer usage and~~ rate increases, the components of which are set forth in the table ~~below, partially offset by~~below. In addition, there was a ~~$2.6~~$3.6 million ~~decrease~~increase in accrued unbilled revenue.


General rate case	~~185~~$	1,814
Escalation rate increases	1,569
Purchased water and pump tax offsets	~~1,208~~1,267
Rate base offsets	~~883~~1,745
Total increase in rates	$	~~2,276~~6,395

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2.WRAM revenue is the variance between adopted volumetric revenues and actual billed volumetric revenues for metered accounts. ~~In October~~For the first quarter of ~~2020, Cal Water received a proposed decision that authorizes the continuation~~2021, we recognized $2.2 million of WRAM effective January 1, 2020; as a result, in the third quarter of 2020, we recorded an increase to revenue for the WRAM for the three and nine months ended September 30, 2020 of $8.4 million and $17.0 million, respectively. For the nine months ended September 30, 2020, actual billedrevenue. Actual volumetric revenue was lower than adopted volumetric ~~revenue.~~ Inbillings due to a shift in customer usage from nonresidential to residential usage. Due to the ~~third~~delay in the resolution of the 2018 GRC, WRAM revenue was not recorded in the first quarter of ~~2019, we recognized $20.2 million of WRAM revenue as actual billed volumetric revenue was lower than adopted volumetric revenue.~~2020.

3.MCBA revenue is the variance between adopted water production costs and actual water production costs. ~~In October~~For the first quarter of ~~2020, Cal Water received a proposed decision that authorizes the continuation~~2021, we recognized $4.1 million of MCBA effective January 1, 2020; as a result, in the third quarter of 2020, we recorded an increase to revenue for the MCBA for the three and nine months ended September 30, 2020 of $1.1 million and $11.8 million, respectively. ~~For the nine months ended September 30, 2020, actual~~revenue. Actual water production costs were higher than adopted production costs in the first quarter of 2021 due to a shift in water production ~~costs. In the third quarter~~mix from well water to purchased water in certain of ~~2019, we recognized a $12.7 million decrease to revenue as actual water production costs were lower than adopted water production costs.~~our service territories. As required by the MCBA mechanism, the ~~difference~~increase in actual water production costs ~~and~~relative to adopted water production costs in California isalso increased operating revenue for the same amount. Due to the delay in the resolution of the 2018 GRC, MCBA revenue was not recorded ~~to operating revenue.~~in the first quarter of 2020.

4.Due to the delay in the resolution of the 2018 GRC, the CPUC authorized Cal Water to track the effect of the delay on customer billings in an IRMA effective January 1, 2020. Variances between actual customer billings and those that would have been billed assuming the GRC had been effective January 1, 2020 are recorded as regulatory balancing account revenue. ~~In October~~The 2018 GRC was approved in December of 2020 ~~Cal Water received a proposed decision on its 2018 GRC~~ and ~~was able to determine if~~final rates for the 2018 GRC ~~had been resolved effective January~~were implemented as of February 1, ~~2020, we would have billed customers an additional $18.9 million and $37.6 million for the three and nine months ended September 30, 2020.~~

5.The other balancing account revenue consists of the pension, conservation and health care balancing account revenues. Pension and conservation balancing account revenues are the differences between actual expenses and adopted rate recovery. Health care balancing account revenue is 85% of the difference between actual health care expenses and adopted rate recovery. ~~In October of 2020, Cal Water received a proposed decision that authorizes the continuation of PCBA and HCBA effective January 1, 2020~~. We recorded an increase to revenue of $3.8 million and $11.4 million for the three and nine months ended September 30, 2020, respectively, for the PCBA and a decrease to revenue of $1.8 million and $3.1 million for the three and nine months ended September 30, 2020, respectively, for the HCBA in the third quarter of 2020. For the first nine months of 2020, actual pension costs were higher than adopted pension costs,

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while actual health care costs were lower than adopted health care costs. In the third quarter of 2019, actual pension costs were above the adopted pension costs, while actual health care costs were below the adopted health care costs. A net increase to revenue of $1.5 million was recognized for the differences. In addition, there was a decrease in actual conservation expenses relative to adopted costs in the third quarter of 2020 as compared to the third quarter 2019 of $2.3 million.

6.The deferral of revenue consists of amounts that are expected to be collected from customers beyond 24 months following the end of the accounting period in which these revenues were recorded. The deferral decreased in the third quarter of 2020 as compared to the third quarter of 2019 due to a decrease in the balancing account revenue expected to be collected beyond 24 months.

~~Total Operating Expenses~~

~~Total operating expenses increased $17.0 million, or 9.4%, to $198.0 million in the third quarter of 2020, as compared to $181.0 million in the third quarter of 2019.~~

Water production costs consists of purchased water, purchased power, and pump taxes. It represents the largest component of total operating expenses, accounting for approximately 43.1% of total operating expenses in the third quarter of 2020, as compared to 44.5% of total operating expenses in the third quarter of 2019. Water production costs increased 5.8% in the third quarter of 2020 as compared to the same period last year mainly due to increased rates from our purchased water wholesalers, changes in water production mix in certain of our service territories, and an increase in customer usage.

~~Sources of water as a percent of total water production are listed in the following table:~~

Three Months Ended September 30
2020 2019
Well production 47 % 44 %
Purchased 48 % 51 %
Surface 5 % 5 %
Total 100 % 100 %

~~The components of water production costs are shown in the table below:~~

Three Months Ended September 30
2020 2019 Change
Purchased water $ 70,398 $ 66,483 $ 3,915
Purchased power 11,983 10,633 1,350
Pump taxes 2,963 3,452 (489)
Total $ 85,344 $ 80,568 $ 4,776

Administrative and general and other operations expenses increased $7.7 million to $59.0 million in the third quarter of 2020, primarily due to a $5.4 million increase of costs associated with deferred WRAM revenue, a $2.2 million increase in employee wages, a $1.3 million increase in employee pension retirement benefit costs, a $0.9 million increase in bad debt expense, $0.7 million increase in outside service costs which were partially offset by decreases of $2.0 million in water conservation program costs. Changes in employee pension benefits and water conservation program costs for regulated California operations generally do not affect earnings, as the Company is allowed by the CPUC to record these costs in balancing accounts for future recovery, creating a corresponding change to revenue. Employee and retiree medical expenses are recovered up to 85% of the variance between adopted and recorded expenses. At September 30, 2020, there were 1,224 employees and at September 30, 2019, there were 1,194 employees.

~~Maintenance expense did not change in the third quarter of 2020 as compared to the third quarter of 2019.~~

Depreciation and amortization expense increased $2.4 million, or 10.9%, to $24.7 million in the third quarter of 2020, as compared to $22.3 million in the third quarter of 2019, due mostly to capital additions in 2019.

Income taxes increased $1.6 million, or 13.2%, to $13.8 million in the third quarter of 2020, as compared to $12.2 million in the third quarter of 2019. The increase was due to an increase in operating income in the third quarter of 2020, partially offset by amortization of the excess deferred taxes2021; as a result, ~~of the TCJA in the proposed decision of the 2018 GRC.~~

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Property and other taxes increased $0.6 million to $8.1 million in the third quarter of 2020, as compared to $7.5 million in the third quarter of 2019, mostly due to an increase in assessed property values.

~~Other Income and Expenses~~

Net other income increased $0.7 million in the third quarter of 2020, mostly due to a $1.2 million increase in unrealized gain on certain benefit plan investments and $0.8 million decrease in other components of net periodic benefit costs which was partially offset by a $0.9 million decrease in allowance for equity funds used during construction.

~~Interest Expense~~

Net interest expense increased $1.2 million, or 13.4%, to $10.5 million in the third quarter of 2020, as compared to $9.3 million in the third quarter of 2019. The increase was due primarily to increased average short term borrowing and decreased interest capitalized in the third quarter of 2020 as compared to the third quarter of 2019.

~~RESULTS OF THE NINE MONTHS ENDED SEPTEMBER 30, 2020 OPERATIONS~~

~~COMPARED TO THE NINE MONTHS ENDED SEPTEMBER 30, 2019 OPERATIONS~~

~~Dollar amounts in thousands unless otherwise stated~~

~~Overview~~

~~Net Income~~

Net income for the nine months ended September 30, 2020 was $81.3 million or $1.66 income per diluted common share, compared to net income of $51.8 million or $1.08 earnings per diluted common share for the nine months ended September 30, 2019.

The $29.5 million increase in net income was due to our determination that the October 14, 2020 proposed decision in the 2018 GRC was sufficient evidence to record regulatory assets and associated revenues for interim rate recovery. In the third quarter of 2020, weCal Water recorded revenues of $37.6 million related to interim rate recovery regulatory assets and customer refunds for TCJA of $7.1 million. These increases were partially offset by increases in depreciation and amortization of $6.8 million, employee wages costs of $1.8 million, maintenance expense of $1.7 million, bad debt expenses of $1.6 million, and outside service costs of $1.1 million.

Additionally, certain factors outside the Company's immediate control decreased net income, including a $2.8 million decrease in unrealized gain on certain benefit plan investments, which was partially offset by a $2.2 million increase in accrued unbilled revenue.

~~Operating Revenue~~

~~Operating revenue increased $67.5 million, or 12.5%, to $605.2 million in the first nine months of 2020 as compared to the first nine months of 2019, with such change attributed to the following:~~


~~Net change due to rate changes, usage, and other (1)~~	$	~~31,154~~
~~WRAM Revenue (2)~~	~~(52,362)~~
~~MCBA Revenue (3)~~	~~47,146~~
IRMA ~~Revenue (4)~~	~~37,623~~
~~Other balancing account revenue (5)~~	~~1,077~~
~~Deferral of revenue (6)~~	~~2,838~~
~~Net operating revenue increase~~	$	~~67,476~~

1.The net change due to rate changes, usage, and other in the above table was mainly driven by a $26.5 million increase in volumetric revenue due to a 6.0% increase in customer usage and rate increases, the components of which are set forth in the table below. In addition, there was a $2.2 million increase in accrued unbilled revenue.

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~~General rate case~~	$	~~470~~
~~Escalation rate increases~~	~~518~~
~~Purchased water and pump tax offsets~~	~~3,847~~
~~Rate base offsets~~	~~2,023~~
~~Total increase in rates~~	$	~~6,858~~

2.WRAM revenue is the variance between adopted volumetric revenues and actual billed volumetric revenues for metered accounts. For the first nine months of 2020, we recognized $17.0 million of WRAM revenue as compared to $69.4 million for the first nine months of 2019. The WRAM revenue decrease in the first nine months of 2020 as compared to the first nine months of 2019 resulted from an increase in actual billed volumetric revenue relative to adopted volumetric revenues. Actual consumption was closer to adopted consumption in the first nine months of 2020 as compared to the first nine months of 2019.

3.MCBA revenue is the variance between adopted water production costs and actual water production costs. For the first nine months of 2020, we recognized $11.8 million of MCBA revenue as compared to a decrease to revenue of $35.4 million for the first nine months of 2019. The MCBA revenue increase in the first nine months of 2020 as compared to the first nine months of 2019 resulted from an increase in actual water production costs relative to adopted water production costs. The actual water production costs increased relative to adopted water production costs in the first nine months of 2020 as compared to the first nine months of 2019 due to a shift in water production mix from well water to purchased water in certain of our service territories. As required by the MCBA mechanism, the increase in actual water production costs relative to adopted water production costs in California also increased operating revenue for ~~the same amount.~~

4.January 2021. Due to the delay in the resolution of the 2018 GRC, IRMA revenue was not recorded in the ~~CPUC authorized Cal Water to track the effect~~first quarter of the delay on customer billings in an IRMA effective January 1, 2020. Variances between actual customer billings and those that would have been billed assuming the GRC had been effective January 1, 2020 are recorded as regulatory balancing account revenue. In October of 2020, Cal Water received a proposed decision on its 2018 GRC and was able to determine if the 2018 GRC had been resolved effective January 1, 2020, we would have billed customers an additional $37.6 million for the nine months ended September 30, 2020.

5.The other balancing account revenue consists of the pension, conservation and health care balancing account revenues. Pension and conservation balancing account revenues are the differences between actual expenses and adopted rate recovery. Health care balancing account revenue is 85% of the difference between actual health care expenses and adopted rate recovery. For the first ~~nine months~~quarter of ~~2020,~~2021, we recognized ~~net~~a decrease to revenue of ~~$5.2~~$1.5 million for these balancing ~~accounts as compared to a net $4.1 million of revenue for the first nine months of 2019.~~accounts. The ~~increase~~decrease in revenue was mainly due to ~~an increase in actual pension expenses relative to adopted in the first nine months of 2020 as compared to the first nine months of 2019, which was partially offset by an~~a decrease in actual ~~conservation and~~ health care expenses relative to adopted in the first ~~nine months~~quarter of ~~2020 as compared~~2021. Due to the delay in the resolution of the 2018 GRC, PCBA and HCBA revenue were not recorded in the first ~~nine months~~quarter of ~~2019.~~2020.

6.The deferral of revenue consists of amounts that are expected to be collected from customers beyond 24 months following the end of the accounting period in which these revenues were recorded. The deferral decreased in the first ~~nine months~~quarter of ~~2020~~2021 as compared to the first ~~nine months~~quarter of ~~2019~~2020 due to a decrease in the balancing account revenue expected to be collected beyond 24 months.

Total Operating Expenses

Total operating expenses increased ~~$34.9~~$12.3 million, or ~~7.6%~~9.3%, to ~~$493.5~~$144.8 million in the first ~~nine months~~quarter of ~~2020,~~2021, as compared to ~~$458.6~~$132.5 million in the first ~~nine months~~quarter of ~~2019.~~2020.

Water production costs consists of purchased water, purchased power, and pump taxes. It represents the largest component of total operating expenses, accounting for approximately ~~42.6%~~37.9% of total operating expenses in the first ~~nine months~~quarter of ~~2020,~~2021, as compared to ~~41.6%~~40.7% of total operating expenses in the first ~~nine months~~quarter of ~~2019.~~2020. Water production costs increased ~~10.3%~~1.6% in the first ~~nine months~~quarter of ~~2020~~2021 as compared to the same period last year mainly due to an increase in customer usage, changes in water production mix in certain of our service territories, and an increase in rates from our purchased water wholesalers.

~~Table of Contents~~

Sources of water as a percent of total water production are listed in the following table:


		Nine Months Ended September 30					Three Months Ended March 31
		2020		2019			2021		2020
Well production	Well production	45	%	45	%	Well production	48	%	43	%
Purchased	Purchased	50	%	50	%	Purchased	47	%	52	%
Surface	Surface	5	%	5	%	Surface	5	%	5	%
Total	Total	100	%	100	%	Total	100	%	100	%

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The components of water production costs are shown in the table below:


		Nine Months Ended September 30							Three Months Ended March 31
		2020		2019		Change			2021		2020		Change
Purchased water	Purchased water	$	175,485	$	158,369	$	17,116	Purchased water	$	44,765	$	45,349	$	(584)
Purchased power	Purchased power	25,887		23,734		2,153		Purchased power	6,504		5,776		728
Pump taxes	Pump taxes	9,090		8,692		398		Pump taxes	3,557		2,851		706
Total	Total	$	210,462	$	190,795	$	19,667	Total	$	54,826	$	53,976	$	850

Administrative and general and other operations expenses increased ~~$9.2~~$4.6 million, or ~~6.3%~~10.6%, to ~~$155.4~~$48.3 million in the first ~~nine months~~quarter of ~~2020,~~2021, as compared to ~~$146.2~~$43.7 million in the first ~~nine months~~quarter of ~~2019.~~2020. The increase was primarily due to a ~~$5.7 million increase in employee pension retirement benefit costs, $2.4~~$2.7 million increase in costs associated with deferred WRAM revenue, ~~$1.8 million increase in employee wage cost, $1.6 million increase in bad debt expense, $1.1 million in outside service cost, $0.6 million increase in software maintenance cost, $0.5~~$2.1 million increase in uninsured loss costs, $0.5 million increase in ~~generator rent~~retirement benefits, $0.4 million increase in water treatment costs, ~~which~~and $0.4 million increase in bad debt expense. The cost increases were partially offset by ~~a $3.6 million decrease in water conservation program costs, $1.2 million decrease~~decreases in employee ~~healthcare~~and retiree health care costs of $0.9 million, travel costs of $0.5 million, and ~~$0.7 million decrease in travel costs.~~employee wages of $0.4 million. Changes in employee pension benefits and water conservation program costs for regulated California operations generally do not affect earnings, as the Company is allowed by the CPUC to record these costs in balancing accounts for future recovery, creating a corresponding change to revenue. Employee and retiree medical expenses are recovered up to 85% of the variance between adopted and recorded expenses.

Maintenance expense ~~increased $1.7~~decreased $0.3 million, or ~~8.9%~~4.3%, to ~~$20.9~~$6.8 million in the first ~~nine months~~quarter of ~~2020,~~2021, as compared to ~~$19.2~~$7.1 million in the first ~~nine months~~quarter of ~~2019,~~2020, mostly due to a reduction in repairs for services ~~mains, reservoirs,~~ and ~~tanks.~~mains.

Depreciation and amortization expense increased ~~$6.7~~$2.5 million, or ~~10.1%~~10.4%, to ~~$73.7~~$27.0 million in the first ~~nine months~~quarter of ~~2020,~~2021, as compared to ~~$67.0~~$24.5 million in the first ~~nine months~~quarter of ~~2019,~~2020, mostly due to capital additions in ~~2019.~~2020.

Income ~~taxes~~tax benefit decreased ~~$3.0~~$3.8 million ~~or 22.4%,~~ to ~~an income tax expense of $10.5~~$0.1 million in the first ~~nine months~~quarter of ~~2020,~~2021, as compared to $3.9 million income tax ~~expense of $13.5 million~~benefit in the first ~~nine months~~quarter of ~~2019.~~2020. The decrease was ~~mostly~~mainly due to a decrease in the loss from operations and a reduction in the 2021 estimated effective tax ~~repair benefit and amortization~~rate due to a $10.0 million increase in refund of ~~the~~ excess deferred federal income taxes in 2021 as ~~a result of the TCJA in the proposed decision of the 2018 GRC.~~compared to 2020.

Property and other taxes increased ~~$0.6~~$0.8 million to ~~$22.5~~$8.0 million in the ~~nine months~~first quarter of ~~2020,~~2021, as compared to ~~$21.9~~$7.2 million in the same period of ~~2019,~~2020, mostly due to an increase in assessed property values.

Other Income and Expenses

Net other income ~~decreased $3.0~~increased $7.5 million to ~~$0.5~~$4.0 million in the first ~~nine months~~quarter of ~~2020,~~2021, as compared to a net other ~~income~~loss of $3.5 million in the first ~~nine months~~quarter of ~~2019,~~2020, due primarily to a ~~$2.8~~$5.1 million decrease ~~from the~~in unrealized ~~gain from~~loss on certain benefit plan investments due to favorable market conditions and ~~$0.8~~a $4.4 million decrease in other components of net periodic benefit costs. The increase was partially offset by a $1.1 million decrease in allowance for equity funds used during ~~construction which was partially offset by a $0.5 million decrease in other components of net periodic benefit costs.~~construction.

Interest Expense

Net interest expense ~~increased $0.1 million, or 0.3%, to $30.8~~stayed the same at $9.9 million in the first ~~nine months~~quarter of ~~2020, as compared to $30.7 million~~2021 and in the first ~~nine months~~quarter of ~~2019. The increase was due to an increase in average short term borrowing which was offset by decreases in interest rates in the first nine months of 2020 as compared to the same period last year.~~2020.

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REGULATORY MATTERS

~~2020~~2021 California Regulatory Activity

~~2018~~California GRC Filing

On October 14, 2020, an ALJ with the CPUC issued a proposed decision for Cal Water's 2018 GRC ~~filing. The proposed decision is subject to adoption~~filing, which was approved by the CPUC no earlier than the CPUC’s November 19, 2020 meeting. If adopted as proposed, the decision would approve the settlement reached in October of 2019 by Cal Water and the CPUC’s Public Advocates Office, allowon December 4, 2020. The new rates were implemented on February 1, 2021.

The CPUC follows a rate case plan, which requires Cal Water to ~~continue~~file a GRC for each of its ~~decoupling balancing accounts through 2022,~~regulated operating districts (except Grand Oaks) every three years. In a GRC proceeding, the CPUC not only considers the utility's rate setting requests, but may also consider other issues that affect the utility's rates and ~~allow~~operations. The CPUC is generally required to issue its GRC decision prior to the first day of the test year or authorize interim rates. In accordance with the rate case plan, Cal Water expects to ~~retain~~file its ~~PCBA~~next GRC application in the second quarter of 2021.

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IRMA

The 2018 GRC was approved in December of 2020 and ~~HCBA. Under this proposed decision,~~final rates for the 2018 GRC were implemented as of February 1, 2021; as a result, Cal Water calculated and recorded a regulatory asset of $55.6 million and a corresponding increase to revenue for the difference between final rates and interim rates for the 13-month period January 1, 2020 to January 31, 2021. Cal Water also recorded a regulatory liability of $1.6 million and a corresponding decrease to regulatory assets for LIRA and RSF program credits that would behave been given to customers had the rate case been approved on time.

In April of 2021, Cal Water submitted an advice letter to request amortization of the IRMA. The new rates were implemented on April 15, 2021.

Escalation Increase Requests

As a part of the decision on the 2018 GRC, Cal Water was authorized to ~~invest $828.0 million in its~~request annual escalation rate increases for 2021 for those districts ~~throughout California through 2021. This includes $148 million~~that passed the earnings test. In December of water system infrastructure upgrades that would be recovered via the CPUC’s advice letter procedure once those projects are completed. The proposed decision also authorizes total revenue of up to $698.7 million for 2020.

2020, ~~Cost of Capital Application~~

~~On March 11, 2020, the CPUC granted~~ Cal Water ~~and three other large water companies an extension to May~~requested escalation rate increases for 2021 in 13 of its regulated districts. The annual adopted gross revenue associated with the December 2020 filing was $8.2 million. The new rates were implemented on February 1, ~~2021 to file their cost of capital application.~~2021.

Expense Offset Requests

Expense offsets are dollar-for-dollar increases in revenue to match increased expenses, and therefore do not affect net operating income. In December of ~~2019,~~2020, Cal Water submitted an advice ~~letters~~letter to request offsets for increases in purchased water costs and pump taxes in ~~six~~seven of its regulated districts totaling ~~$2.5~~$5.5 million. The new rates ~~became effective~~were implemented on February 1, ~~2020.~~2021.

Rate Base Offset Requests

For construction projects authorized in GRCs as advice letter projects, Cal Water is allowed to request rate base offsets to increase revenues after the project goes into service. In ~~the fourth quarter~~July of ~~2019,~~2020, Cal Water submitted an advice ~~letters~~letter to recover ~~$2.5~~$9.0 million of annual revenue ~~increases~~increase for a rate base ~~offsets~~offset in ~~all~~one of its regulated districts. The new rates ~~became effective~~were implemented on February 1, ~~2020.~~2021.

WRAM/MCBA Filings

In ~~March and~~ April of ~~2020,~~2021, Cal Water submitted advice letters to true up the revenue under-collections for the ~~2019~~2020 annual WRAMs/MCBAs of its regulated districts. A net under-collection of ~~$27.1~~$39.6 million is being ~~recovered from~~recovered/refunded from/to customers in the form of 12, 18, and 18greather-than-18-month surcharges and 6 and 12 month surcharges. Due to the COVID 19 pandemic, Cal Water elected to adjust the 2019 WRAM filing so that the new rates would only be implemented in districts where overall customer bills would not be increased. As a result, approximately $18.8 million of the $45.9 million of net WRAM/MCBA additions from 2019 were deferred to 2021.surcredits. The new rates incorporate net WRAM/MCBA balances that were previously approved for recovery, and ~~became effective in~~were implemented on April ~~of 2020.~~

~~Polyfluoroalkyl Substances Memorandum Account (PFAS MA)~~

Public water systems have been ordered by the State Water Resources Control Board to detect, monitor, and report perfluorooctanoic and perfluorooctanesulfonic acid in drinking water. Cal Water has begun sampling its wells for these contaminants, and anticipates incurring substantial costs in order to comply. In the first quarter of 2020, Cal Water submitted an advice letter to establish a PFAS MA that would give Cal Water the opportunity to track and recover incremental costs related to compliance with the order. In the third quarter of 2020, the CPUC approved by resolution a modified the PFAS MA effective March 4, 2020. The approved PFAS MA allows for cost recovery of certain incremental PFAS-related expense, but not capital costs, due to the current lack of a maximum contaminant level.

~~Low-Income Water Affordability Proceeding~~

On August 27, 2020, by a 4-1 vote, the CPUC approved a decision which applies to Cal Water, and other Class A water companies (Joint Parties). The decision precludes the Joint Parties from proposing full decoupling Water Revenue Adjustment Mechanisms in their next GRC filing. Cal Water expects it will be required to comply with the order in its 2021 GRC filing, with rates effective in 2023. Beginning in 2023, Cal Water expects it will experience more revenue volatility and that necessary changes to rate design to mitigate this volatility may dampen conservation price signals, potentially reducing customers’ incentives to pursue water efficiency measures. Cal Water will pursue legal and procedural appeal options to overturn this decision, which Cal Water believes will damage the state’s policy goals for water use efficiency based on an incomplete and insufficient analysis.

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~~2019 California Financing Authorization~~

~~On November 5, 2020, the CPUC approved Cal Water’s request for an additional $700 million of authorization for debt and equity financing to fund its capital improvement program through 2025~~.15, 2021.

Regulatory Activity - Other States

~~Rainier View Water Company (Washington Water)~~

On March 27, 2020, the Washington Utilities and Transportation Commission (WUTC) approved Washington Water's application for the sale and transfer of assets of Rainier View Water Company. Washington Water took control of the water system on June 1, 2020.

~~Kalaeloa Water Company (Hawaii Water)~~

On September 25, 2020, the Hawaii Public Utilities Commission (HPUC) approved Hawaii Water's application for the purchase of the Membership Interests of Kalaeloa Water Company, LLC. The transaction remains subject to customary closing conditions.

Kapalua Water Company and Kapalua Waste Treatment (Hawaii Water)

~~On June 4, 2020,~~In the first quarter of 2021, Hawaii Water ~~filed an application with~~Service received approval from the ~~HPUC for approval~~Hawaii Public Utilities Commission to acquire the assets of Kapalua Water Company ~~LTD.~~ and Kapalua Waste Treatment Company ~~LTD in connection with the December 2019 asset purchase agreement with~~from Maui Land and Pineapple Company.

~~Animas Valley Land and Water Co., LLC (New Mexico Water)~~

New Mexico Water signed a purchase agreement with Animas Valley Land and Water Co., LLC (AV Water) and court-appointed receiver C. Randel Lewis to acquire the Morning Star Water System assets of AV Water and provide regulated water utility service to its approximately 2,000 customer connections in northwest New Mexico. The ~~purchase is~~transaction remains subject to customary closing conditions including approvals of the San Juan County Court and the New Mexico Public Regulation Commission, as well as successful completion of AV Water’s pending rate case. If approved, the transaction is expected to close in early 2021.

LIQUIDITY

Cash flow from Operations

Cash flow from operations for the first ~~nine~~three months of ~~2020~~2021 was ~~$96.7~~$30.0 million compared to ~~$128.3~~$4.1 million for the same period in ~~2019.~~2020. Cash generated by operations varies during the year due to customer billings, and timing of collections and contributions to our benefit plans.

During the first ~~nine~~three months of ~~2020,~~2021, we made contributions of ~~$25.8~~$9.4 million to our employee pension plan compared to contributions of ~~$12.5~~$7.9 million during the first ~~nine~~three months of ~~2019.~~2020. During the first ~~nine~~three months of ~~2020,~~2021, we made contributions of ~~$5.7~~$1.2 million to the other postretirement benefit plans compared to contributions of ~~$5.6~~$2.2 million during the first ~~nine~~three months of ~~2019.~~2020. The full-year ~~2020~~2021 estimated cash contribution to the pension plans and other postretirement benefits plans are expected to be approximately ~~$38.0~~$23.5 million and ~~$7.5~~$2.2 million, respectively.

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The water business is seasonal. Billed revenue is lower in the cool, wet winter months when less water is used compared to the warm, dry summer months when water use is highest. This seasonality results in the possible need for short-term borrowings under the unsecured revolving credit facilities in the event cash is not available to cover operating and utility plant costs during the winter period. Due to the uncertainty of the effect of the COVID-19 pandemic, during the first quarter of 2020, we borrowed on our unsecured revolving credit facilities to provide substantial additional liquidity to manage our business (as described below under Financing Activities). The increase in cash flows during the summer allows short-term borrowings to be paid down. Customer water usage can be lower than normal in drought years and when greater-than-normal precipitation falls in our service areas or temperatures are lower than normal, especially in the summer months.

Investing Activities

During the first ~~nine~~three months of ~~2020~~2021 and ~~2019,~~2020, we used ~~$221.3~~$66.8 million and ~~$194.9~~$65.3 million, respectively, of cash for Company-funded and developer-funded utility plant expenditures. Annual expenditures fluctuate each year due to the availability of construction resources and our ability to obtain construction permits in a timely manner. For ~~2020,~~2021, we estimate utility plant expenditures to be between ~~$260.0~~$270.0 million and ~~$290.0~~$300.0 million. ~~We also paid $37.6 million for the acquisition of Rainier View Water Company during the second quarter of 2020.~~

~~Table of Contents~~

Financing Activities

Net cash provided by financing activities was ~~$237.1~~$78.8 million during the first ~~nine~~three months of ~~2020~~2021 compared to ~~$72.9~~$158.9 million of net cash provided by financing activities for the same period in ~~2019.~~2020. For ~~2020,~~2021, this includes ~~$270.0 million of short-term borrowings on~~ our ~~unsecured revolving credit facilities,~~ issuance of ~~$57.3~~$22.7 million of Company common stock through our at-the-market equity program, and ~~$1.3~~$0.5 million through our employee stock purchase plan.

During the first ~~nine~~three months of ~~2020~~2021 and ~~2019,~~2020, we borrowed ~~$270.0~~$105.0 million and ~~$210.0~~$170.0 million, respectively, on our unsecured revolving credit facilities. The borrowings on our unsecured revolving credit facilities in 2020 were to provide substantial additional liquidity to manage our business in connection with economic uncertainty and financial market volatility caused by the COVID-19 pandemic. We made a repayment on our unsecured revolving credit facilities of ~~$70.0~~$40.0 million and ~~$120.0~~$10.0 million during the first ~~nine~~three months of ~~2020~~2021 and ~~2019,~~2020, respectively.

The undercollected net WRAM and MCBA receivable balances were ~~$72.7~~$69.7 million and ~~$62.6~~$58.4 million as of ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively. The undercollected balances were primarily financed by Cal Water using short-term and long-term financing arrangements to meet operational cash requirements. Interest on the undercollected balances, which represents the interest recoverable from customers, is limited to the then-current 90-day commercial paper rates which typically are significantly lower than Cal Water’s short and long-term financing rates.

Short-Term and Long-Term Financing

During the first ~~nine~~three months of ~~2020,~~2021, we utilized cash generated from operations, borrowings on the unsecured revolving credit facilities, and cash received from the sale of Company common stock through our at-the-market equity program to fund operations and capital investments.

~~Bond principal and other long-term debt payments were $1.5 million and $401.6 million during the first nine months of 2020 and 2019, respectively.~~

In future periods, management anticipates funding our utility plant needs through a relatively balanced approach between debt and equity.

Short-term liquidity is provided by our unsecured revolving credit facilities and internally generated funds. Long-term financing is accomplished through the use of both debt and equity. However, the recent COVID-19 pandemic, which has caused disruption in the capital markets, could make financing more difficult and/or expensive. To mitigate this risk, we borrowed $100.0 million on our unsecured revolving credit facilities to provide substantial additional liquidity. The Company and subsidiaries that it designates may borrow up to $150.0 million under the Company’s revolving credit facility. Cal Water may borrow up to $400.0 million under its revolving credit facility; however, all borrowings must be repaid within 24 months unless a different period is required or authorized by the CPUC. The proceeds from the unsecured revolving credit facilities may be used for working capital purposes, including the short-term financing of utility plant projects.

As of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, there were short-term borrowings of ~~$375.1~~$435.0 million and ~~$175.1~~$370.0 million, respectively, outstanding on the unsecured revolving credit facilities.

Given our ability to access our lines of credit on a daily basis, cash balances are managed to levels required for daily cash needs and excess cash is invested in short-term or cash equivalent instruments. Minimal operating levels of cash are maintained for Washington Water, New Mexico Water, and Hawaii Water.

Both short-term credit agreements contain affirmative and negative covenants and events of default customary for credit facilities of this type including, among other things, limitations and prohibitions relating to additional indebtedness, liens, mergers, and asset sales. Also, these unsecured credit agreements contain financial covenants governing the Company and its subsidiaries’ consolidated total capitalization ratio not to exceed 66.7% and an interest coverage ratio of three or more. As of ~~September 30, 2020,~~March 31, 2021, we are in compliance with all of the covenant requirements and are eligible to use the full amount of the undrawn portion of our unsecured revolving credit facilities.

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Long-term financing, which includes First Mortgage Bonds, other debt securities, and common stock, has typically been used to replace short-term borrowings and fund utility plant expenditures. Internally generated funds, after making dividend payments, provide positive cash flow, but have not been at a level to meet the needs of our utility plant expenditure requirements. Management expects this trend to continue given our planned utility plant expenditures for the next five years. Some utility plant expenditures are funded by payments received from developers for contributions in aid of construction or advances for construction. Funds received for contributions in aid of construction are non-refundable, whereas funds classified as advances in construction are generally refundable over 40 years. Management believes long-term financing is available to meet our cash flow needs through issuances in both debt and equity instruments.

~~Table~~Summarized Financial Information for Guarantors and the Issuer of ~~Contents~~Guaranteed Securities.

On April 17, 2009, Cal Water (Issuer) issued $100.0 million aggregate principal amount of 5.500% First Mortgage Bonds due 2040, all of which are fully and unconditionally guaranteed by the Company (Guarantor). Certain subsidiaries of the Company do not guarantee the security and are referred to as Non-guarantors. The Guarantor fully, absolutely, irrevocably and unconditionally guarantees the due and punctual payment when due, whether at stated maturity, by acceleration, by notice of prepayment or otherwise, of the principal of, premium, if any, and interest on the bonds. The bonds rank equally among Cal Water's other first mortgage bonds.

The following tables present summarized financial information of the Issuer subsidiary and the Guarantor. The information presented below excludes eliminations necessary to arrive at the information on a consolidated basis. In presenting the summarized financial statements, the equity method of accounting has been applied to the Guarantor interests in the Issuer. The summarized information excludes financial information of the Non-issuers, including (loss) earnings from and investments in these entities.


Summarized Statement of Operations
(in thousands)	Three Months Ended March 31, 2021				Twelve Months Ended December 31, 2020
	Issuer		Guarantor		Issuer		Guarantor
Net sales	$	135,518	$	—	$	745,034	$	—
Gross profit	$	83,275	$	—	$	477,915	$	—
Income from operations	$	3,353	$	24	$	130,761	$	331
Equity in (loss) earnings of guarantor	$	—	$	(2,844)	$	—	$	92,244
Net loss (income)	$	(2,844)	$	(3,032)	$	92,244	$	92,760


Summarized Balance Sheet Information
(in thousands)	As of March 31, 2021				As of December 31, 2020
	Issuer		Guarantor		Issuer		Guarantor
Current assets	$	274,112	$	11,019	$	227,030	$	20,075
Intercompany receivable from non-issuer and issuer subsidiaries	$	1,513	$	22,351	$	4,905	$	20,022
Other assets	$	438,143	$	955,479	$	433,837	$	943,665
Long-term intercompany receivable from non-issuer subsidiaries	$	—	$	37,595	$	—	$	37,985
Net utility plant	$	2,494,040	$	94	$	2,459,992	$	117
Total assets	$	3,207,808	$	1,026,538	$	3,125,764	$	1,021,864

Current liabilities	$	552,316	$	95,045	$	481,247	$	100,124
Intercompany payable to guarantor and non-issuer subsidiary	$	550	$	—	$	402	$	—
Long-term debt	$	780,641	$	—	$	780,790	$	—
Other liabilities	$	1,036,267	$	1,870	$	1,034,098	$	1,725
Total Liabilities	$	2,369,774	$	96,915	$	2,296,537	$	101,849

Dividends

During the first ~~nine~~three months of ~~2020,~~2021, our quarterly common stock dividend payments were ~~$0.6375~~$0.2300 per share compared to ~~$0.5925~~$0.2125 per share during the first ~~nine~~three months of ~~2019.~~2020. For the full year ~~2019,~~2020, the payout ratio was ~~60.3%~~43.1% of net income. On a long-term basis, our goal is to achieve a dividend payout ratio of 60% of net income accomplished through future earnings growth.

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At the ~~October~~April 28, ~~2020~~2021 meeting, the Company's Board of Directors declared the ~~fourth~~second quarter dividend of ~~$0.2125~~$0.2300 per share payable on ~~November 20, 2020,~~May 21, 2021, to stockholders of record on ~~November 9, 2020.~~May 10, 2021. This was our ~~303rd~~305th consecutive quarterly dividend.

~~2020~~2021 Financing Plan

We intend to fund our utility plant needs in future periods through a relatively balanced approach between long-term debt and equity. The Company and Cal Water have a syndicated unsecured revolving line of credit of $150.0 million and $400.0 million, respectively, for short-term borrowings. As of ~~September 30, 2020,~~March 31, 2021, the Company’s and Cal Water’s availability on these unsecured revolving lines of credit was ~~$44.9~~$55.0 million and $60.0 million, respectively.

On February 25, 2021, Cal Water entered into a Bond Purchase Agreement which provides for the issuance of First Mortgage Bonds in an aggregate principal amount of $280.0 million. The bonds will be issued in two series: $130.0 million ~~respectively. As~~of 2.87% bonds due 2051, series ZZZ; and $150.0 million of 3.02% bonds due 2061, series 1 (Bonds). The Bonds are expected to be issued on May 11, 2021 pursuant to a Sixty-Third Supplemental Indenture. Interest on the ~~impact~~Bonds will accrue semi-annually and be payable in arrears on May 11 and November 11 of each year, commencing November 11, 2021. The Bonds will rank equally with all of Cal Water's other First Mortgage Bonds and will be secured by liens on Cal Water's properties, subject to certain exceptions and permitted liens. Cal Water plans to use the net proceeds from the sale of the ~~COVID-19 pandemic on the economy~~Bonds to refinance California Water Service Group’s existing indebtedness and ~~our operations evolves, we will continue to assess our financing needs.~~for general corporate purposes.

Book Value and Stockholders of Record

Book value per common share was ~~$17.86~~$18.29 at ~~September 30, 2020~~March 31, 2021 compared to ~~$16.07~~$18.30 at December 31, ~~2019.~~2020. There were approximately ~~1,955~~1,941 stockholders of record for our common stock as of ~~August 10, 2020.~~February 8, 2021.

Utility Plant Expenditures

During the first ~~nine~~three months of ~~2020,~~2021, utility plant expenditures totaled ~~$221.3~~$66.8 million for Company-funded and developer-funded projects. For ~~2020,~~2021, we estimate utility plant expenditures to be between ~~$260.0~~$270.0 million and ~~$290.0~~$300.0 million. We do not control third-party-funded utility plant expenditures and therefore are unable to estimate the amount of such projects for ~~2020.~~2021.

As of ~~September 30, 2020,~~March 31, 2021, construction work in progress was ~~$211.7~~$198.7 million. Construction work in progress includes projects that are under construction but not yet complete and placed in service.

WATER SUPPLY

Our source of supply varies among our operating districts. Certain districts obtain all of their supply from wells; some districts purchase all of their supply from wholesale suppliers; and other districts obtain supply from a combination of wells and wholesale suppliers. A small portion of supply comes from surface sources and is processed through Company-owned water treatment plants. To the best of management's knowledge, we are meeting water quality, environmental, and other regulatory standards for all Company-owned systems.

Historically, approximately half of our annual water supply is pumped from wells. State groundwater management agencies operate differently in each state. Some of our wells extract ground water from water basins under state ordinances. These are adjudicated groundwater basins, in which a court has settled the dispute between landowners or other parties over how much annual groundwater can be extracted by each party. All of our adjudicated groundwater basins are located in the State of California. Our annual groundwater extraction from adjudicated groundwater basins approximates ~~6.4~~5.8 billion gallons or ~~13.5%~~12.3% of our total annual water supply pumped from wells. Historically, we have extracted less than 100% of our annual adjudicated groundwater rights and have the right to carry forward up to 20% of the unused amount to the next annual period. All of our remaining wells extract ground water from managed or unmanaged water basins. There are no set limits for the ground water extracted from these water basins. Our annual groundwater extraction from managed groundwater basins approximates ~~28.1~~27.5 billion gallons or ~~59.2%~~58.0% of our total annual water supply pumped from wells. Our annual groundwater extraction from unmanaged groundwater basins approximates ~~12.9~~14.1 billion gallons or ~~27.3%~~29.7% of our total annual water supply pumped from wells. Most of the managed groundwater basins we extract water from have groundwater recharge facilities. We are required to pay well pump taxes to financially support these groundwater recharge facilities. ~~Well~~Our well pump taxes were ~~$3.0~~$3.6 million and ~~$3.5~~$2.9 million for the three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019, respectively. For the nine months ended September 30, 2020 and 2019, well pump taxes were $9.1 million and $8.7 million,~~ respectively. In 2014, the State of California enacted the Sustainable Groundwater Management Act of 2014. The law and its implementing regulations require most basins to select a sustainability agency by 2017, develop a sustainability plan by 2022, and show progress toward sustainability by 2027. We expect that after the act's provisions are fully implemented, substantially all the Company's California groundwater will be produced from sustainably managed and adjudicated basins.

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California's normal weather pattern yields little precipitation between mid-spring and mid-fall. The Washington Water service areas receive precipitation in all seasons, with the heaviest amounts during the winter. New Mexico Water's rainfall is heaviest in the summer monsoon season. Hawaii Water receives precipitation throughout the year, with the largest amounts in the winter months. Water usage in all service areas is highest during the warm and dry summers and declines in the cool winter months. Rain and snow during the winter months in California replenish underground water aquifers and fill reservoirs, providing the water supply for subsequent delivery to customers. As of ~~June 9, 2020,~~March 31, 2021, the State of California snowpack water content during the 2020-2021 water year ~~for the northern Sierra region~~ is 7%67% of long-term averages (per the California Department of Water Resources, ~~Daily Drought Information Summary)~~Northern Sierra Precipitation Accumulation report). The northern Sierra region is the most important for the state’s urban water supplies. The central and southern portions of the Sierras ~~also~~ have recorded 0%64% and 4%42%, respectively, of long-term averages. Management believes that, notwithstanding lower-than-average snowpack water content, supply pumped from underground aquifers and purchased from wholesale suppliers will be adequate to meet customer demand during ~~2020~~2021 and beyond. Long-term water supply plans are developed for each of our districts to help assure an adequate water supply under various operating and supply conditions. Some districts have unique challenges in meeting water quality standards, but management believes that supplies will meet current standards using ~~current~~currently available treatment processes.

On May 31, 2018, California's Governor ~~Brown~~ signed two bills (Assembly Bill 1668 and Senate Bill 606) into law that will establish long-term standards for water use efficiency. The bills revise and expand the existing urban water management plan requirements to include five year drought risk assessments, water shortage contingency plans, and annual water supply/demand assessments. By June 30, 2022, the California State Water Resources Control Board, in conjunction with the California Department of Water Resources, ~~will~~is expected to establish long-term water use standards for indoor residential use, outdoor residential use, water losses and other uses. Cal Water will also be required to calculate and report on urban water use target by November 1, 2023 and each November 1 thereafter that compares actual urban water use to the target. Management believes that Cal Water is well-positioned to comply with all ~~known regulations applicable to Cal Water.~~such regulations.

CONTRACTUAL OBLIGATIONS

During the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, there were no material changes in contractual obligations outside the normal course of business.

Item 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

We do not hold, trade in or issue derivative financial instruments and therefore are not exposed to risks these instruments present. Our market risk to interest rate exposure is limited because the cost of long-term financing and short-term bank borrowings, including interest costs, is covered in consumer water rates as approved by the Commissions. We do not have foreign operations; therefore, we do not have a foreign currency exchange risk. Our business is sensitive to commodity prices and is most affected by changes in purchased water and purchased power costs.

Historically, the CPUC’s balancing account or offsettable expense procedures allowed for increases in purchased water, pump tax, and purchased power costs to be flowed through to consumers. Traditionally, a significant percentage of our net income and cash flows come from California regulated operations; therefore the CPUC’s actions have a significant impact on our business. See Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Regulatory Matters.”

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Item 4.

CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure.

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In designing and evaluating the disclosure controls and procedures, management, including the Chief Executive Officer and Chief Financial Officer, recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Accordingly, our disclosure controls and procedures have been designed to provide reasonable assurance of achieving their objectives.

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of ~~September 30, 2020.~~March 31, 2021. Based on that evaluation, we concluded that our disclosure controls and procedures were effective at the reasonable assurance level.

(b) Changes to Internal Control over Financial Reporting

There was no change in our internal controls over financial reporting that occurred during the quarter ended ~~September 30, 2020,~~March 31, 2021, that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

PART II OTHER INFORMATION

Item 1.

LEGAL PROCEEDINGS

From time to time, the Company is involved in various disputes and litigation matters that arise in the ordinary course of business. The status of each significant matter is reviewed and assessed for potential financial exposure. If the potential loss from any claim or legal proceeding is considered probable and the amount of the range of loss can be reasonably estimated, a liability is accrued for the estimated loss in accordance with the accounting standards for contingencies. Legal proceedings are subject to uncertainties, and the outcomes are difficult to predict. Because of such uncertainties, accruals are based on the best information available at the time. While the outcome of these disputes and litigation matters cannot be predicted with any certainty, management does not believe when taking into account existing reserves the ultimate resolution of these matters will materially affect the Company’s financial position, results of operations, or cash flows. In the future, we may be involved in disputes and litigation related to a wide range of matters, including employment, construction, environmental issues and operations. Litigation can be time-consuming and expensive and could divert management’s time and attention from our business. In addition, if we are subject to additional lawsuits or disputes, we might incur significant legal costs and it is uncertain whether we would be able to recover the legal costs from customers or other third parties. For more information refer to note 10.

Item 1A.

RISK FACTORS

There have been no material changes to the Company’s risk factors set forth in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year-ended December 31, ~~2019~~2020 filed with the SEC on February 27, 2020, except for the additional risk factor set forth in Part II, Item 1A of the Company’s Quarterly Report on Form 10-Q for the quarter-ended March 31, 2020 filed with the SEC and for the additional risk factor set forth below.

~~The Adopted Decision for Cal Water's 2018 GRC May be Materially Different than What was Issued on October 14, 2020~~

We are unable to guarantee that the proposed decision for Cal Water's 2018 GRC that was issued on October 14, 2020, will be adopted as issued without material variation. Both Cal Water and the CPUC's Public Advocates Office have an opportunity to provide their feedback on the proposed decision. As of November 6, 2020, the proposed decision is subject to adoption by the CPUC no earlier than the CPUC’s meeting on November 19, 2020. Although historically proposed decisions affecting Cal

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Water have not materially varied between the proposed decision and the adopted decision, there can be no guarantee that there will not be changes made to the proposed decision. The Company believes that is it probable that the proposed decision will be adopted as issued without any material variation. As of September 30, 2020, the Company has applied accounting standards for recognized subsequent events and recorded regulatory assets and associated revenues for the regulatory mechanisms approved in the proposed decision. In the unlikely event that the CPUC does not approve the proposed decision as issued, the Company will need to adjust regulatory asset balances and revenues in the fourth quarter of 2020. Any such adjustment could result in a material decrease to our operating revenue and net operating income for full-year 2020.25, 2021.

Item 6.

EXHIBITS


Exhibit						Description
~~3.3~~						~~Amended and Restated Bylaws of California Water Service Group, as amended on September 30, 2020 (Exhibit 3.1 to the Current Report on Form 8-K filed October 5, 2020)~~

4.0						The Company agrees to furnish upon request to the Securities and Exchange Commission a copy of each instrument defining the rights of holders of long-term debt of the Company

31.1						Chief Executive Officer certification of financial statements pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2						Chief Financial Officer certification of financial statements pursuant to Section 302 of the Sarbanes- Oxley Act of 2002

32						Chief Executive Officer and Chief Financial Officer Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101						The following materials from this Quarterly Report on Form 10-Q formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of ~~Income,~~Operations, (iii) Condensed Consolidated Statements of Cash Flows, and (iv) the Notes to the Condensed Consolidated Financial Statements.

104						The cover page from this Quarterly Report on Form 10-Q formatted in iXBRL (included as exhibit 101)

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SIGNATURES

Pursuant to the requirement 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.


	CALIFORNIA WATER SERVICE GROUP
	Registrant

~~November 6, 2020~~April 29, 2021	By:	/s/ Thomas F. Smegal III
		Thomas F. Smegal III
		Vice President,
		Chief Financial Officer and Treasurer

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For the nine months ended	September 30, 2020		September 30, 2019
Operating revenue	$	605,155	$	537,679
Operating expenses:
Operations:
Water production costs	210,462		190,795
Administrative and general	85,827		81,310
Other operations	69,618		64,913
Maintenance	20,924		19,212
Depreciation and amortization	73,733		66,967
Income taxes	10,489		13,524
Property and other taxes	22,470		21,902
Total operating expenses	493,523		458,623
Net operating income	111,632		79,056
Other income and expenses:
Non-regulated revenue	11,969		14,149
Non-regulated expenses	(11,811)		(10,470)
Other components of net periodic benefit cost	(3,770)		(4,308)
Allowance for equity funds used during construction	4,292		5,087
Income taxes on other income and expenses	(152)		(985)
Net other income	528		3,473
Interest expense:
Interest expense	33,573		33,532
Allowance for borrowed funds used during construction	(2,747)		(2,783)
Net interest expense	30,826		30,749
Net income	$	81,334	$	51,780
Earnings per share:
Basic	$	1.66	$	1.08
Diluted	1.66		1.08
Weighted average shares outstanding:
Basic	49,034		48,121
Diluted	49,034		48,121


	Nine months ended September 30, 2020
	Common Stock			Additional Paid-in Capital		Retained Earnings		Total Stockholders' Equity
	Shares	Amount
	(In thousands)
Balance at January 1, 2020	48,532	$	485	$	362,275	$	417,146	$	779,906
Net loss						(20,307)		(20,307)
Issuance of common stock	210	2		7,227				7,229
Repurchase of common stock	(28)	—		(1,373)				(1,373)
Dividends paid on common stock ($0.2125 per share)						(10,315)		(10,315)
Balance at March 31, 2020	48,714	487		368,129		386,524		755,140
Net income						5,281		5,281
Issuance of common stock	686	7		32,056				32,063
Repurchase of common stock	(2)	—		(105)				(105)
Dividends paid on common stock ($0.2125 per share)						(10,356)		(10,356)
Balance at June 30, 2020	49,398	494		400,080		381,449		782,023
Net income						96,360		96,360
Issuance of common stock	444	4		22,410				22,414
Repurchase of common stock	(2)	—		(99)				(99)
Dividends paid on common stock ($0.2125 per share)						(10,506)		(10,506)
Balance at September 30, 2020	49,840	498		422,391		467,303		890,192


	Nine months ended September 30, 2019
	Common Stock			Additional Paid-in Capital		Retained Earnings		Total Stockholders' Equity
	Shares	Amount
	(In thousands)
Balance at January 1, 2019	48,065	$	481	$	337,623	$	392,053	$	730,157
Net loss						(7,640)		(7,640)
Issuance of common stock	109	—		3,179				3,179
Repurchase of common stock	(40)	—		(2,074)				(2,074)
Dividends paid on common stock ($0.1975 per share)						(9,493)		(9,493)
Balance at March 31, 2019	48,134	481		338,728		374,920		714,129
Net income						16,996		16,996
Issuance of common stock	8	—		1,675				1,675
Repurchase of common stock	(2)	—		(129)				(129)
Dividends paid on common stock ($0.1975 per share)						(9,507)		(9,507)
Balance at June 30, 2019	48,140	481		340,274		382,409		723,164
Net income						42,424		42,424
Issuance of common stock	9	—		1,866		—		1,866
Repurchase of common stock	(4)	—		(152)		—		(152)
Dividends paid on common stock ($0.1975 per share)						(9,507)		(9,507)
Balance at September 30, 2019	48,145	481		341,988		415,326		757,795


	Parent Company		Cal Water		All Other Subsidiaries		Consolidating Adjustments		Consolidated
ASSETS
Utility plant:
Utility plant	$	1,318	$	3,559,329	$	281,744	$	(7,197)	$	3,835,194
Less accumulated depreciation and amortization	(1,177)		(1,151,266)		(88,676)		2,239		(1,238,880)
Net utility plant	141		2,408,063		193,068		(4,958)		2,596,314
Current assets:
Cash and cash equivalents	16,679		85,877		10,756		0		113,312
Receivables and unbilled revenue, net	0		160,479		8,636		0		169,115
Receivables from affiliates	26,962		942		261		(28,165)		0
Other current assets	272		20,933		2,132		0		23,337
Total current assets	43,913		268,231		21,785		(28,165)		305,764
Other assets:
Regulatory assets	0		479,613		4,822		0		484,435
Investments in affiliates	917,901		0		0		(917,901)		0
Long-term affiliate notes receivable	32,659		0		0		(32,659)		0
Other assets	2,349		84,154		33,636		(218)		119,921
Total other assets	952,909		563,767		38,458		(950,778)		604,356
TOTAL ASSETS	$	996,963	$	3,240,061	$	253,311	$	(983,901)	$	3,506,434
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stockholders’ equity	$	890,192	$	805,444	$	117,633	$	(923,077)	$	890,192
Affiliate long-term debt	0		0		32,659		(32,659)		0
Long-term debt, net	0		784,715		340		0		785,055
Total capitalization	890,192		1,590,159		150,632		(955,736)		1,675,247
Current liabilities:
Current maturities of long-term debt, net	0		21,763		120		0		21,883
Short-term borrowings	105,100		270,000		0		0		375,100
Payables to affiliates	0		2,940		25,225		(28,165)		0
Accounts payable	0		123,129		4,029		0		127,158
Accrued expenses and other liabilities	31		73,913		5,738		0		79,682
Total current liabilities	105,131		491,745		35,112		(28,165)		603,823
Deferred income taxes	1,640		235,791		8,025		0		245,456
Pension and postretirement benefits other than pensions	0		261,081		0		0		261,081
Regulatory liabilities and other	0		251,230		5,824		0		257,054
Advances for construction	0		196,324		529		0		196,853
Contributions in aid of construction	0		213,731		53,189		0		266,920
TOTAL CAPITALIZATION AND LIABILITIES	$	996,963	$	3,240,061	$	253,311	$	(983,901)	$	3,506,434