AMERICAN STATES WATER COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, ~~2020~~2021 AND ~~2019~~2020

(Unaudited)


	Three Months Ended March 31,
(in thousands)	2021		2020
Cash Flows From Operating Activities:
Net income	$	19,268	$	14,072
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	9,656		8,892
Provision for doubtful accounts	255		273
Deferred income taxes and investment tax credits	(343)		574
Stock-based compensation expense	1,930		1,844
(Gain) loss on investments held in a trust	(628)		2,413
Other — net	104		110
Changes in assets and liabilities:
Accounts receivable — customers	5,711		(4,085)
Unbilled receivable	3,161		1,417
Other accounts receivable	1,386		64
Receivables from the U.S. government	(1,015)		704
Materials and supplies	(132)		(914)
Prepayments and other assets	(4,026)		(3,400)
Contract assets	(3,763)		(3,716)
Regulatory assets	(3,493)		(2,976)
Accounts payable	(7,267)		(4,112)
Income taxes receivable/payable	(274)		3,326
Contract liabilities	(751)		(492)
Accrued pension and other postretirement benefits	1,796		1,306
Other liabilities	3,101		354
Net cash provided	24,676		15,654

Cash Flows From Investing Activities:
Capital expenditures	(37,093)		(33,544)
Other investing activities	113		167
Net cash used	(36,980)		(33,377)

Cash Flows From Financing Activities:
Proceeds from stock option exercises	0		30
Receipt of advances for and contributions in aid of construction	2,016		3,522
Refunds on advances for construction	(569)		(591)
Retirement or repayments of long-term debt	(99)		(92)

Net change in notes payable to banks	(5,200)		27,000
Dividends paid	(12,361)		(11,242)
Other financing activities	(1,269)		(1,809)
Net cash (used) provided	(17,482)		16,818
Net change in cash and cash equivalents	(29,786)		(905)
Cash and cash equivalents, beginning of period	36,737		1,334
Cash and cash equivalents, end of period	$	6,951	$	429

Non-cash transactions:
Accrued payables for investment in utility plant	$	28,700	$	15,748
Property installed by developers and conveyed	$	2,761	$	856

Three Months Ended
March 31,
(in thousands) 2020 2019
Cash Flows From Operating Activities:

Net income $ 14,072
$ 12,852
Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization 8,892
10,890
Provision for doubtful accounts 273
157
Deferred income taxes and investment tax credits 574
(2,321 )
Stock-based compensation expense 1,844
1,998
Gain on sale of assets (4 ) —
Loss (gain) on investments held in a trust 2,413
(1,530 )
Other — net 114
52
Changes in assets and liabilities:

Accounts receivable — customers (4,085 ) 5,755
Unbilled receivable 1,417
7,957
Other accounts receivable 64
1,100
Receivables from the U.S. government 704
(2,322 )
Materials and supplies (914 ) (117 )
Prepayments and other assets (3,400 ) (1,329 )
Contract assets (3,716 ) (1,576 )
Regulatory assets (2,976 ) (3,987 )
Accounts payable (4,112 ) (6,131 )
Income taxes receivable/payable 3,326
5,572
Contract liabilities (492 ) 2,896
Accrued pension and other postretirement benefits 1,306
1,686
Other liabilities 354
(2,222 )
Net cash provided 15,654
29,380

Cash Flows From Investing Activities:

Capital expenditures (33,544 ) (40,562 )
Proceeds from sale of assets 46
—
Other investing activities 121
213
Net cash used (33,377 ) (40,349 )

Cash Flows From Financing Activities:

Proceeds from stock option exercises 30
75
Receipt of advances for and contributions in aid of construction 3,522
1,927
Refunds on advances for construction (591 ) (562 )
Retirement or repayments of long-term debt (92 ) (40,086 )
Net change in notes payable to banks 27,000
56,000
Dividends paid (11,242 ) (10,113 )
Other financing activities (1,809 ) (1,569 )
Net cash provided 16,818
5,672
Net change in cash and cash equivalents (905 ) (5,297 )
Cash and cash equivalents, beginning of period 1,334
7,141
Cash and cash equivalents, end of period $ 429
$ 1,844

Non-cash transactions:
Accrued payables for investment in utility plant $ 15,748
$ 27,207
Property installed by developers and conveyed $ 856
$ 678

The accompanying notes are an integral part of these consolidated financial statements

Table of Contents

GOLDEN STATE WATER COMPANY

BALANCE SHEETS

ASSETS

(Unaudited)


(in thousands)	March 31, 2021		December 31, 2020
Utility Plant
Utility plant, at cost	$	1,933,425	$	1,902,772
Less - Accumulated depreciation	(507,250)		(502,283)
Net utility plant	1,426,175		1,400,489

Other Property and Investments	33,736		33,240

Current Assets
Cash and cash equivalents	2,452		35,578
Accounts receivable-customers (less allowance for doubtful accounts of $5,887 in 2021 and $4,907 in 2020)	19,707		26,920
Unbilled receivable	17,805		19,330
Other accounts receivable (less allowance for doubtful accounts of $53 in 2021 and $53 in 2020)	1,792		3,255
Intercompany receivable	1,113		1,107

Materials and supplies, at average cost	3,926		3,659
Regulatory assets — current	10,291		11,325
Prepayments and other current assets	6,632		4,114
Total current assets	63,718		105,288

Other Assets
Note receivable from AWR parent	12,000		0
Operating lease right-of-use assets	10,573		11,103
Regulatory assets	5,939		1,048
Other	9,582		9,614
Total other assets	38,094		21,765

Total Assets	$	1,561,723	$	1,560,782

The accompanying notes are an integral part of these financial statements

Table of Contents

GOLDEN STATE WATER COMPANY

BALANCE SHEETS

CAPITALIZATION AND LIABILITIES

(Unaudited)

(in thousands) March 31,
2020 December 31,
2019
Utility Plant

Utility plant, at cost $ 1,946,662
$ 1,926,543
Less - Accumulated depreciation (535,905 ) (531,801 )
Net utility plant 1,410,757
1,394,742

Other Property and Investments 25,666
28,212

Current Assets

Cash and cash equivalents 431
401
Accounts receivable-customers (less allowance for doubtful accounts of $1,086 in 2020 and $857 in 2019) 24,599
20,907
Unbilled receivable 17,427
18,636
Other accounts receivable (less allowance for doubtful accounts of $59 in 2020 and 2019) 1,888
1,857
Income taxes receivable from Parent 5,041
7,727
Materials and supplies, at average cost 5,708
4,920
Regulatory assets — current 20,974
20,930
Prepayments and other current assets 7,248
4,497
Total current assets 83,316
79,875

Other Assets

Operating lease right-of-use assets 12,235
12,745
Other 6,885
6,880
Total other assets 19,120
19,625

Total Assets $ 1,538,859
$ 1,522,454


(in thousands, except number of shares)	March 31, 2021		December 31, 2020
Capitalization
Common Shares, 0 par value:
Authorized: 1,000 shares
Outstanding: 170 shares in 2021 and 2020	$	355,733	$	354,906
Earnings reinvested in the business	228,178		228,392
Total common shareholder’s equity	583,911		583,298
Long-term debt	440,326		440,348
Total capitalization	1,024,237		1,023,646

Current Liabilities

Long-term debt — current	364		358
Accounts payable	39,835		45,613
Accrued other taxes	8,333		10,382
Accrued employee expenses	14,639		12,351
Accrued interest	6,972		4,545
Income taxes payable to Parent	4,221		4,612
Operating lease liabilities	1,969		1,956
Other	9,408		9,403
Total current liabilities	85,741		89,220

Other Credits

Advances for construction	65,602		63,354
Contributions in aid of construction — net	139,732		138,691
Deferred income taxes	125,062		124,581

Unamortized investment tax credits	1,206		1,224
Accrued pension and other postretirement benefits	96,096		95,570
Operating lease liabilities	9,095		9,636
Other	14,952		14,860
Total other credits	451,745		447,916

Commitments and Contingencies (Note 9)	0		0

Total Capitalization and Liabilities	$	1,561,723	$	1,560,782

The accompanying notes are an integral part of these financial statements

Table of Contents

~~GOLDEN STATE WATER COMPANY~~

~~BALANCE SHEETS~~

~~CAPITALIZATION AND LIABILITIES~~

~~(Unaudited)~~

(in thousands, except number of shares) March 31,
2020 December 31, 2019
Capitalization

Common Shares, no par value:
Authorized: 1,000 shares
Outstanding: 165 shares in 2019 and 2018 $ 294,054
$ 293,754
Earnings reinvested in the business 257,340
257,434
Total common shareholder’s equity 551,394
551,188
Long-term debt 280,971
280,996
Total capitalization 832,365
832,184

Current Liabilities

Intercompany payable to Parent 182,447
158,845
Long-term debt — current 349
344
Accounts payable 36,341
45,756
Accrued other taxes 7,841
10,640
Accrued employee expenses 12,766
12,386
Accrued interest 6,127
2,736
Unrealized loss on purchased power contracts 4,280
3,171
Operating lease liabilities 1,614
1,612
Other 9,655
9,745
Total current liabilities 261,420
245,235

Other Credits

Advances for construction 63,925
63,989
Contributions in aid of construction — net 137,661
134,706
Deferred income taxes 128,926
127,806
Regulatory liabilities 19,107
23,380
Unamortized investment tax credits 1,274
1,295
Accrued pension and other postretirement benefits 69,213
68,469
Operating lease liabilities 11,080
11,588
Other 13,888
13,802
Total other credits 445,074
445,035

Commitments and Contingencies (Note 9)

Total Capitalization and Liabilities $ 1,538,859
$ 1,522,454

~~The accompanying notes are an integral part of these financial statements~~

~~Table of Contents~~

GOLDEN STATE WATER COMPANY

STATEMENTS OF INCOME

FOR THE THREE MONTHS ENDED

MARCH 31, ~~2020~~2021 AND ~~2019~~2020

(Unaudited)


	Three Months Ended March 31,							Three Months Ended March 31,
(in thousands)	2020			2019			(in thousands)	2021		2020
Operating Revenues							Operating Revenues
Water	$	71,424		$	64,723		Water	$	75,029	$	71,424
Electric	10,968			10,629
Electric (Note 11)							Electric (Note 11)	0		10,968
Total operating revenues	82,392			75,352			Total operating revenues	75,029		82,392

Operating Expenses
Operating Expenses (Note 11)							Operating Expenses (Note 11)
Water purchased	14,092			13,140			Water purchased	15,239		14,092
Power purchased for pumping	1,859			1,538			Power purchased for pumping	2,145		1,859
Groundwater production assessment	4,148			3,746			Groundwater production assessment	4,440		4,148
Power purchased for resale	3,043			3,704			Power purchased for resale	0		3,043
Supply cost balancing accounts	(2,165		)	(1,372		)	Supply cost balancing accounts	(2,920)		(2,165)
Other operation	6,630			6,860			Other operation	5,813		6,630
Administrative and general	16,838			16,094			Administrative and general	14,435		16,838
Depreciation and amortization	8,029			9,989			Depreciation and amortization	8,062		8,029
Maintenance	3,193			1,913			Maintenance	1,740		3,193
Property and other taxes	4,633			4,413			Property and other taxes	5,016		4,633

Total operating expenses	60,300			60,025			Total operating expenses	53,970		60,300

Operating Income	22,092			15,327
Operating Income (Note 11)							Operating Income (Note 11)	21,059		22,092

Other Income and Expenses							Other Income and Expenses
Interest expense	(5,777		)	(5,998		)	Interest expense	(5,798)		(5,777)
Interest income	318			408			Interest income	87		318
Other, net	(2,203		)	1,405			Other, net	651		(2,203)
Total other income and expenses, net	(7,662		)	(4,185		)	Total other income and expenses, net	(5,060)		(7,662)

Income before income tax expense	14,430			11,142			Income before income tax expense	15,999		14,430

Income tax expense	3,228			2,120			Income tax expense	3,768		3,228

Net Income	$	11,202		$	9,022
Net Income (Note 11)							Net Income (Note 11)	$	12,231	$	11,202

The accompanying notes are an integral part of these consolidated financial statements

GOLDEN STATE WATER COMPANY

STATEMENTS OF CHANGES

IN COMMON SHAREHOLDER'S EQUITY

(Unaudited)


	Three Months Ended March 31, 2021
	Common Shares			Reinvested
	Number			Earnings
	of			in the
(in thousands, except number of shares)	Shares	Amount		Business		Total
Balances at December 31, 2020	170	$	354,906	$	228,392	$	583,298
Add:
Net income				12,231		12,231
Stock-based compensation, net of taxes paid from shares withheld from employees related to net share settlements (Note 4)		782				782
Dividend equivalent rights on stock-based awards not paid in cash		45				45
Deduct:
Dividends on Common Shares				12,400		12,400
Dividend equivalent rights on stock-based awards not paid in cash				45		45
Balances at March 31, 2021	170	$	355,733	$	228,178	$	583,911


	Three Months Ended March 31, 2020
	Common Shares			Reinvested
	Number			Earnings
	of			in the
(in thousands, except number of shares)	Shares	Amount		Business		Total
Balances at December 31, 2019	165	$	293,754	$	257,434	$	551,188
Add:
Net income				11,202		11,202
Stock-based compensation, net of taxes paid from shares withheld from employees related to net share settlements (Note 4)		254				254
Dividend equivalent rights on stock-based awards not paid in cash		46				46
Deduct:
Dividends on Common Shares				11,250		11,250
Dividend equivalent rights on stock-based awards not paid in cash				46		46
Balances at March 31, 2020	165	$	294,054	$	257,340	$	551,394

Three Months Ended March 31, 2019
Common Shares Reinvested
Number Earnings
of in the
(in thousands, except number of shares) Shares Amount Business Total
Balances at December 31, 2018 165
$ 292,412
$ 211,163
$ 503,575
Add:

Net income 9,022
9,022
Stock-based compensation, net of taxes paid from shares withheld from employees related to net share settlements (Note 4) 572
572
Dividend equivalent rights on stock-based awards not paid in cash 60
60
Deduct:
Dividends on Common Shares 10,100
10,100
Dividend equivalent rights on stock-based awards not paid in cash 60
60
Balances at March 31, 2019 165
$ 293,044
$ 210,025
$ 503,069

The accompanying notes are an integral part of these ~~consolidated~~ financial ~~statements.~~

statements

Table of Contents

GOLDEN STATE WATER COMPANY

STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, ~~2020~~2021 AND ~~2019~~2020

(Unaudited)


	Three Months Ended March 31,							Three Months Ended March 31,
(in thousands)	2020			2019			(in thousands)	2021		2020
Cash Flows From Operating Activities:							Cash Flows From Operating Activities:
Net income	$	11,202		$	9,022		Net income	$	12,231	$	11,202
Adjustments to reconcile net income to net cash provided by operating activities:							Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	8,111			10,047			Depreciation and amortization	8,126		8,111
Provision for doubtful accounts	273			155			Provision for doubtful accounts	221		273
Deferred income taxes and investment tax credits	542			(2,849		)	Deferred income taxes and investment tax credits	(505)		542
Stock-based compensation expense	1,706			1,845			Stock-based compensation expense	1,790		1,706
Loss (gain) on investments held in a trust	2,413			(1,530		)

(Gain) loss on investments held in a trust							(Gain) loss on investments held in a trust	(628)		2,413
Other — net	70			75			Other — net	83		70
Changes in assets and liabilities:							Changes in assets and liabilities:
Accounts receivable — customers	(4,085		)	5,755			Accounts receivable — customers	6,033		(4,085)
Unbilled receivable	1,209			3,437			Unbilled receivable	1,525		1,209
Other accounts receivable	(31		)	835			Other accounts receivable	1,463		(31)
Materials and supplies	(788		)	116			Materials and supplies	(267)		(788)
Prepayments and other assets	(2,246		)	(331		)	Prepayments and other assets	(1,956)		(2,246)
Regulatory assets	(2,976		)	(3,987		)	Regulatory assets	(3,165)		(2,976)
Accounts payable	(1,427		)	(1,081		)	Accounts payable	(5,674)		(1,427)
Intercompany receivable/payable	(398		)	(641		)	Intercompany receivable/payable	8		(398)
Income taxes receivable/payable from/to Parent	2,686			4,969			Income taxes receivable/payable from/to Parent	(391)		2,686
Accrued pension and other postretirement benefits	1,306			1,686			Accrued pension and other postretirement benefits	1,760		1,306
Other liabilities	376			(1,657		)	Other liabilities	2,145		376
Net cash provided	17,943			25,866			Net cash provided	22,799		17,943

Cash Flows From Investing Activities:							Cash Flows From Investing Activities:
Capital expenditures	(32,013		)	(39,113		)	Capital expenditures	(31,824)		(32,013)
Note receivable from AWR parent							Note receivable from AWR parent	(23,000)		0
Receipt of payment of note receivable from AWR parent							Receipt of payment of note receivable from AWR parent	11,000		0

Other investing activities	121			213			Other investing activities	109		121
Net cash used	(31,892		)	(38,900		)	Net cash used	(43,715)		(31,892)

Cash Flows From Financing Activities:							Cash Flows From Financing Activities:
Receipt of advances for and contributions in aid of construction	3,522			1,927			Receipt of advances for and contributions in aid of construction	2,013		3,522
Refunds on advances for construction	(591		)	(562		)	Refunds on advances for construction	(569)		(591)
Retirement or repayments of long-term debt	(92		)	(40,086		)	Retirement or repayments of long-term debt	(99)		(92)

Net change in intercompany borrowings	24,000			59,500			Net change in intercompany borrowings	0		24,000
Dividends paid	(11,250		)	(10,100		)	Dividends paid	(12,400)		(11,250)
Other financing activities	(1,610		)	(1,308		)	Other financing activities	(1,155)		(1,610)
Net cash provided	13,979			9,371
Net cash (used) provided							Net cash (used) provided	(12,210)		13,979

Net change in cash and cash equivalents	30			(3,663		)	Net change in cash and cash equivalents	(33,126)		30
Cash and cash equivalents, beginning of period	401			4,187			Cash and cash equivalents, beginning of period	35,578		401
Cash and cash equivalents, end of period	$	431		$	524		Cash and cash equivalents, end of period	$	2,452	$	431

Non-cash transactions:							Non-cash transactions:
Accrued payables for investment in utility plant	$	15,748		$	27,197		Accrued payables for investment in utility plant	$	25,529	$	15,748
Property installed by developers and conveyed	$	856		$	678		Property installed by developers and conveyed	$	2,761	$	856

The accompanying notes are an integral part of these financial statements

Table of Contents

AMERICAN STATES WATER COMPANY AND SUBSIDIARIES

AND

GOLDEN STATE WATER COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 — Summary of Significant Accounting Policies

Nature of Operations: American States Water Company (“AWR”) is the parent company of Golden State Water Company (“GSWC”), Bear Valley Electric Service, Inc. ("BVESI"), and American States Utility Services, Inc. (“ASUS”) (and its ~~subsidiaries,~~wholly owned subsidiaries: Fort Bliss Water Services Company (“FBWS”), Terrapin Utility Services, Inc. (“TUS”), Old Dominion Utility Services, Inc. (“ODUS”), Palmetto State Utility Services, Inc. (“PSUS”), Old North Utility Services, Inc. (“ONUS”), Emerald Coast Utility Services, Inc. ("ECUS"), and Fort Riley Utility Services, Inc. ("FRUS")). The subsidiaries of ASUS are collectively referred to as the “Military Utility Privatization ~~Subsidiaries.”~~Subsidiaries”. On July 1, 2020, GSWC completed the transfer of the electric utility assets and liabilities from its electric division to BVESI, a separate legal entity and wholly owned subsidiary of AWR (Note 11). This reorganization did not result in any substantive changes to AWR's operations and business segments. AWR, through its wholly owned subsidiaries, serves over 1000000 people in 9 states.

GSWC and BVESI are both California public utilities. GSWC is ~~a public utility~~ engaged ~~principally~~ in the purchase, production, distribution and sale of water inthroughout California serving approximately ~~261,000~~262,000 customer connections. ~~GSWC also~~BVESI distributes electricity in several San Bernardino County mountain communities in California serving approximately ~~24,000~~24,500 customer ~~connections through its Bear Valley Electric Service (“BVES”) division.~~connections. The California Public Utilities Commission (“CPUC”) regulates GSWC’s ~~water~~ and ~~electric~~BVESI's businesses in matters including properties, rates, services, facilities, and transactions bybetween GSWC, ~~with its~~BVESI, and their affiliates. GSWC filed applications with the CPUC and the Federal Energy Regulatory Commission ("FERC") in December 2018 and July 2019, respectively, to transfer the assets and liabilities of the BVES division of GSWC to Bear Valley Electric Service, Inc., a newly created separate legal entity that will be a stand-alone subsidiary of AWR. The FERC and CPUC approved GSWC's application for reorganization in October and December of 2019, respectively. On April 30, 2020, the FERC also approved Bear Valley Electric Service, Inc.'s application for market-based rate authority with an accompanying tariff. The reorganization plan is pending the completion of certain closing procedures to effectuate the transfer of assets and liabilities. When completed, the reorganization plan is not expected to result in a substantive change to AWR's operations and business segments.

ASUS, through its wholly owned subsidiaries, operates, maintains and performs construction activities (including renewal and replacement capital work) on water and/or wastewater systems at various U.S. military bases pursuant to initial 50-year firm fixed-price contracts. These contracts are subject to annual economic price adjustments and modifications for changes in circumstances, changes in laws and regulations, and additions to the contract value for new construction of facilities at the military bases.

There is no direct regulatory oversight by the CPUC over AWR or the operations, rates or services provided by ASUS or any of its wholly owned subsidiaries.

Basis of Presentation: The consolidated financial statements and notes thereto are presented in a combined report filed by 2 separate Registrants: AWR and GSWC. References in this report to “Registrant” are to AWR and GSWC, collectively, unless otherwise specified. ~~Certain prior period amounts have been reclassified on the statements of cash flows to conform to current year presentation.~~ AWR owns all of the outstanding common shares of GSWC, BVESI and ~~ASUS and, upon completion of the reorganization plan, will own all the common shares of Bear Valley Electric Service, Inc.~~ASUS. ASUS owns all of the outstanding common stock of the Military Utility Privatization Subsidiaries. The consolidated financial statements of AWR include the accounts of AWR and its ~~subsidiaries, all of which are wholly owned.~~subsidiaries. These financial statements are prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP"). Intercompany transactions and balances have been eliminated in the AWR consolidated financial statements.

The consolidated financial statements included herein have been prepared by Registrant, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The December 31, ~~2019~~2020 condensed consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by GAAP. The preparation of the consolidated financial statements 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 date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from ~~those~~these estimates. In the opinion of management, all adjustments consisting of normal, recurring items, and estimates necessary for a fair statement of the results for the interim periods have been made. It is suggested that these consolidated financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in the Form 10-K for the year ended December 31, ~~2019~~2020 filed with the SEC.

Related Party Transactions and Financing Activities: GSWC, BVESI and ASUS provide and/or receive various support services to and from their parent, AWR, and among themselves. GSWC ~~also allocates~~has allocated certain corporate office administrative and general costs to its ~~affiliate,~~affiliates, BVESI and ASUS, using allocation factors approved by the CPUC. GSWC allocated corporate office administrative and general costs to BVESI of approximately $799,000 during the three months ended March 31, 2021. GSWC allocated corporate office administrative and general costs to ASUS of approximately ~~$1.4~~$1.5 million and ~~$1.1~~$1.4 million during the three ~~month periods~~months ended March 31, ~~2020~~2021 and ~~2019,~~2020, respectively.

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AWR borrows under a $200.0 million credit facility, which expires in May 2023, and provides funds to ~~its subsidiaries,~~ GSWC and ASUS in support of their operations. The interest rate charged to GSWC and ASUS is sufficient to cover AWR’s interest expense under the credit facility. InAs of March ~~2020, AWR amended~~31, 2021, there was $107.0 million outstanding under this facility. BVESI has a separate $35 million revolving credit facility, which expires in July 2023. Under the terms of the credit agreement, BVESI has the option to request an increase in the facility ~~to temporarily increase the borrowing capacity~~ by ~~$35.0 million to $260.0 million until December 31, 2020, at which point the commitment will be reduced to $200.0~~an additional $15 million. As of March 31, ~~2020,~~2021, there was ~~$232.0~~$22.0 million outstanding under this facility, of which $32.0 million has been reflected as a current liability on the consolidated balance sheet of AWR. Management intends to obtain additional financing during 2020 by issuing long-term debt at GSWC. GSWC intends to use the proceeds from any new long-term debt to reduce its intercompany borrowings and to partially fund capital expenditures. AWR intends to use any financing proceeds from GSWC to pay down the amounts outstanding under its credit facility. Furthermore, on April 24, 2020, the newly created entity, Bear Valley Electric Service, Inc., entered into a commitment letter with a bank that agreed to establish a $50.0 million revolving credit facility effective in June 2020 for a period of three years, subject to the execution and delivery of a definitive revolving credit agreement. Borrowings made under this facility will support the electric business operations and capital expenditures.

The CPUC requires GSWC to completely pay down all intercompany borrowings from AWR within a 24-month period. ~~In November 2018, GSWC paid down its intercompany borrowings owed to AWR.~~ The next 24-month period in which GSWC is required to completely pay down its intercompany borrowings ~~ends in November 2020. As a result, GSWC’s intercompany~~is at the end of March 2023 since GSWC had 0 borrowings ~~of $182.4 million~~from AWR as of March 31, 2021.

In October 2020, ~~have been classified~~AWR issued an interest bearing promissory note to GSWC, which expires in May 2023. Under the terms of the note, AWR may borrow from GSWC amounts up to $30 million for working capital purposes. AWR agrees to pay any unpaid principal amounts outstanding under this note, plus accrued interest. As of March 31, 2021, there was $12.0 million outstanding under this note reflected as a ~~current liability~~non-current asset on ~~GSWC’s~~GSWC's balance sheet.

COVID-19 Impact: ~~Recently, the outbreak of novel coronavirus (COVID-19) has become a global pandemic.~~ GSWC, ~~continues to operate as its~~BVESI and ASUS have continued their operations given that their water, wastewater, and electric utility services are deemed ~~essential services. GSWC's~~essential.AWR's responses take into account orders issued by the CPUC, and the guidance provided by federal, state, and local health authorities and other government officials to the COVID-19 pandemic.Some of the actions taken by GSWC and BVESI continue to include: (i) suspending service disconnections for nonpayment pursuant to CPUC and state orders, and (ii) telecommuting by employees.In February 2021, the CPUC adopted a resolution that extended the existing emergency customer protections previously established by the CPUC through June 30, 2021, including the suspension of service disconnections for non-payment by electric utility customers in response to the on-going COVID-19 ~~outbreak continues~~pandemic. For water utilities, the moratorium on service disconnections was implemented in response to ~~rapidly evolve and has included: (i) suspending through April 2021~~an order by the governor of California, which we believe would require another action by the governor to cease the moratorium on service disconnections for ~~nonpayments pursuant~~our water customers. It is expected that the CPUC will work with the governor’s office to ~~CPUC orders, which will remain in effect over other existing requirements governing disconnections; (ii) waiving reconnection or facilities fees~~coordinate the lifting of the moratorium for affected customers and suspending deposit requirements for affected customers who must reconnect to the system; (iii) the temporary closing of customer service offices; (iv) increasing the number of employees telecommuting; and (v) delaying some capital improvement projects at its water utility ~~services business.~~customers consistent with the electric customers. The ~~effects~~CPUC's February resolution did extend the COVID-19-related memorandum accounts established by GSWC and by BVESI to track incremental costs associated with complying with the resolution. In addition, the resolution required utilities in California to file transition plans to address the eventual discontinuance of the ~~continuing~~emergency customer protections.The goal of the transition plan is to effectively ease customers through a transition off the emergency customer protections by proactively communicating with customers to enroll in programs to manage their utility bills and informing them of the changes to programs in which they are already enrolled. GSWC and BVESI filed their respective transition plans with the CPUC on April 1, 2021.

Initially and throughout 2020, the pandemic ~~on the Company are still developing, but among other things, it has~~ caused significant ~~negative impacts~~volatility on financial ~~markets. This has resulted~~markets resulting in ~~significant~~ fluctuations in the fair value of plan assets in ~~the Company's~~GSWC's pension and other retirement ~~plans, which are likely to continue. Furthermore,~~plans.In addition, due to expected future credit losses on utility customer bills, GSWC ~~has~~and BVESI have increased ~~its~~their allowance for doubtful accounts as of March 31, 2020 and expects to increase intercompany borrowings as well as borrowings from outside sources due to the potential associated decrease in liquidity. Thus far, the COVID-19 pandemic has not had a material impact on ASUS's operations, as the water and wastewater services performed on the military bases are deemed essential services.accounts.

~~The extent to which COVID-19 may materially impact GSWC’s results is uncertain but will depend on future developments, which cannot be predicted at this time.~~ However, the CPUC has authorized GSWC and BVESI to track incremental costs, including bad debt expense in excess of what is included in ~~GSWC's~~their respective revenue ~~requirement,~~requirements, incurred as a result of the ~~COVID-19~~ pandemic in COVID-19-related memorandum accounts, such as a Catastrophic Event Memorandum Account ("CEMA"), to be filed with the CPUC for future recovery.

~~Recently Issued Accounting Pronouncements~~:GSWC and BVESI have recorded a total of approximately $5.7 million in these accounts as regulatory assets, as it is believed such amounts are probable of recovery.CEMA and other emergency-type memorandum accounts are established as a result of a state/federal declared emergency, and are therefore recognized as regulatory assets for future recovery. As a result, the amounts recorded in the COVID-19-related memorandum accounts have not impacted GSWC's and BVESI's earnings.GSWC's COVID-19 memorandum account is being addressed in its pending water general rate case, while BVESI intends to include the memorandum account for recovery in its next general rate case application expected to be filed in 2022. Thus far, the COVID-19 pandemic has not had a material impact on ASUS's operations.

Accounting Pronouncements Adopted in ~~2020 -~~ 2021:

In ~~June 2016,~~December 2019, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") ~~2016-13,~~ ~~Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,~~ and issued further guidance in November 2018 and May 2019, related to the impairment of financial instruments, effective January 1, 2020. The new guidance provides an impairment model, known as the current expected credit loss model, which is based on expected credit losses rather than incurred losses over the remaining life of most financial assets measured at amortized cost, including trade and other receivables. Registrant has increased its allowance for doubtful accounts for utility customer accounts receivable by $393,000 due to the Company's current estimate of the expected associated economic impact of the COVID pandemic (see Note 10).

~~Accounting Pronouncements to be Adopted in Future Periods~~

~~In August 2018, the FASB issued ASU 2018-14-Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic 715-20): Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans~~. This ASU removes disclosures to pension plans and other retirement plans that no longer are considered cost beneficial, clarifies the specific disclosure requirements and adds disclosure requirements deemed relevant. This ASU is effective for fiscal years ending after December 15, 2020 and will be applied by Registrant on a retrospective basis to all periods presented. Registrant is still evaluating the ASU and has not yet determined the effect on the Company's financial statements and disclosures.

~~In December 2019, the FASB issued ASU~~ No. 2019-12, Income Taxes (Topic 740)-—Simplifying the Accounting for Income Taxes. The amendments in this update simplify the accounting for income taxes by removing certain exceptions and clarifying certain requirements regarding franchise taxes, goodwill, consolidated tax expenses, and annual effective tax rate calculations. The ~~ASU is effective for fiscal years beginning after December 15, 2020. Early~~ adoption ~~is permitted. Registrant is evaluating the impact~~ of this ~~ASU~~guidance effective January 1, 2021 did not have a material impact on ~~its~~Registrant's financial statements.

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Note 2 — Revenues

Most of Registrant's revenues are derived from contracts with customers, including tariff-based revenues from its regulated ~~utilities.~~utilities at GSWC and BVESI. ASUS's initial 50-year firm fixed-price contracts with the U.S. government are considered service concession arrangements under ASC 853, Service Concession Arrangements. Accordingly, the services under these contracts are accounted for under Topic 606—Revenue from Contracts with Customers, and the water and/or wastewater systems are not recorded as Property, Plant and Equipment on Registrant’s balance ~~sheet.~~sheets.

Although GSWC ~~has~~and BVESI have a diversified base of residential, commercial, industrial, and other customers, revenues derived from residential and commercial customers generally account for approximately 90% of total water and electric revenues. The vast majority of ASUS's revenues are from the U.S. government. For the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, disaggregated revenues from contracts with customers by segment were as follows:

Three Months Ended March 31,
(dollar in thousands) 2020 2019
Water:
Tariff-based revenues $ 69,254
$ 59,575
Surcharges (cost-recovery activities) 734
291
Other 495
459
Water revenues from contracts with customers 70,483
60,325
WRAM under (over)-collection (alternative revenue program) 941
4,398
Total water revenues 71,424
64,723

Electric:
Tariff-based revenues 10,032
11,266
Surcharges (cost-recovery activities) 258
54
Electric revenues from contracts with customers 10,290
11,320
BRRAM under (over)-collection (alternative revenue program) 678
(691 )
Total electric revenues 10,968
10,629

Contracted services:
Water 14,701
13,355
Wastewater 11,984
13,026
Contracted services revenues from contracts with customers 26,685
26,381

Total revenues $ 109,077
$ 101,733


	Three Months Ended March 31,
(dollar in thousands)	2021		2020
Water:
Tariff-based revenues	$	74,288	$	69,254
Surcharges (cost-recovery activities)	534		734
Other	517		495
Water revenues from contracts with customers	75,339		70,483
WRAM (over) under-collection (alternative revenue program)	(310)		941
Total water revenues	75,029		71,424

Electric:
Tariff-based revenues	11,677		10,032
Surcharges (cost-recovery activities)	202		258
Electric revenues from contracts with customers	11,879		10,290
BRRAM (over) under-collection (alternative revenue program)	(340)		678
Total electric revenues	11,539		10,968

Contracted services:
Water	18,883		14,701
Wastewater	11,609		11,984
Contracted services revenues from contracts with customers	30,492		26,685

Total AWR revenues	$	117,060	$	109,077

The opening and closing balances of the receivable from the U.S. government, contract assets, and contract liabilities from contracts with customers, which are related entirely to ASUS, were as follows:

(dollar in thousands) March 31, 2020 December 31, 2019
Unbilled receivables $ 10,259
$ 10,467
Receivable from the U.S. government $ 63,619
$ 64,819
Contract assets $ 19,843
$ 15,631
Contract liabilities $ 10,675
$ 11,167


(dollar in thousands)	March 31, 2021		December 31, 2020
Unbilled receivables	$	13,302	$	14,924
Receivable from the U.S. government	$	75,979	$	74,670
Contract assets	$	13,726	$	10,257
Contract liabilities	$	1,049	$	1,800

Contract Assets - Contract assets are those of ASUS and consist of unbilled revenues recognized from work-in-progress construction projects, where the right to payment is conditional on something other than the passage of time. The classification of this asset as current or noncurrent is based on the timing of when ASUS expects to bill these amounts.

Contract Liabilities - Contract liabilities are those of ASUS and consist of billings in excess of revenue recognized. The classification of this liability as current or noncurrent is based on the timing of when ASUS expects to recognize revenue.

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~~Revenue~~Revenues for the three months ended March 31, ~~2020,~~2021, which were included in contract liabilities at the beginning of the period were ~~$7.6 million.~~$838,000. Contracted services revenues recognized during the three months ended March 31, ~~2020~~2021 from performance obligations satisfied in previous periods were not material.

As of March 31, ~~2020,~~2021, Registrant's aggregate remaining performance obligations, which are entirely for the contracted services segment, were $3.2 billion. Registrant expects to recognize revenue on these remaining performance obligations over the remaining term of each of the 50-year contracts, which range from 34 to 4847 years. Each of the contracts with the U.S. government is subject to termination, in whole or in part, prior to the end of its 50-year term for convenience of the U.S. government.

Note 3 — Regulatory Matters

In accordance with accounting principles for rate-regulated enterprises, ~~Registrant records~~GSWC and BVESI record regulatory assets, which represent probable future recovery of costs from customers through the ratemaking process, and regulatory liabilities, which represent probable future refunds that are to be credited to customers through the ratemaking process. At March 31, ~~2020, Registrant~~2021, GSWC and BVESI had approximately ~~$42.7~~$22.9 million of regulatory liabilities, net of regulatory assets, not accruing carrying costs. Of this amount, (i) ~~$79.5~~$78.0 million of regulatory liabilities are excess deferred income taxes arising from the lower federal income tax rate due to the Tax Cuts and Jobs Act ("Tax Act") enacted in December 2017 that are expected to be refunded to customers, (ii) ~~$12.2~~$9.7 million of regulatory liabilities are from flowed-through deferred income taxes, (iii) ~~$42.9~~$65.4 million of net regulatory assets relates to the underfunded position in ~~Registrant's~~GSWC's pension and other retirement obligations (not including the two-way pension balancing accounts), and (iv) ~~$4.3~~a $1.2 million of regulatory ~~assets relates~~liability related to a memorandum account authorized by the CPUC to track unrealized gains and losses on ~~BVES's~~BVESI's purchase power contracts over the term of the contracts. The remainder ~~of regulatory assets~~ relates to other items that do not provide for or incur carrying costs.

Regulatory assets represent costs incurred by GSWC and/or BVESI for which ~~it has~~they have received or ~~expects~~expect to receive rate recovery in the future. In determining the probability of costs being recognized in other periods, GSWC ~~considers~~and BVESI consider regulatory rules and decisions, past practices, and other facts or circumstances that would indicate if recovery is probable. If the CPUC determines that a portion of either GSWC’s or BVESI's assets are not recoverable in customer rates, ~~GSWC~~the applicable utility must determine if it has suffered an asset impairment that requires it to write down the asset's value. Regulatory assets are offset against regulatory liabilities within each ratemaking area. Amounts expected to be collected or refunded in the next twelve months have been classified as current assets and current liabilities by ratemaking area. Regulatory assets, less regulatory liabilities, included in the consolidated balance sheets are as follows:

(dollars in thousands) March 31,
2020 December 31,
2019
GSWC
Water Revenue Adjustment Mechanism and Modified Cost Balancing Account $ 25,011
$ 22,535
Costs deferred for future recovery on Aerojet case 8,097
8,292
Pensions and other post-retirement obligations (Note 8) 40,170
40,693
Derivative unrealized loss (Note 5) 4,280
3,171
General rate case memorandum accounts 3,551
4,820
Excess deferred income taxes (79,522 ) (79,886 )
Flow-through taxes, net (12,246 ) (12,439 )
Other regulatory assets 19,845
18,842
Various refunds to customers (7,319 ) (8,478 )
Total $ 1,867
$ (2,450 )


(dollars in thousands)	March 31, 2021		December 31, 2020
GSWC
Water Revenue Adjustment Mechanism and Modified Cost Balancing Account	$	16,580	$	13,741
Costs deferred for future recovery on Aerojet case	6,544		6,751
Pensions and other post-retirement obligations (Note 8)	64,693		65,576
COVID-19 memorandum accounts	5,140		4,119
Excess deferred income taxes	(73,926)		(74,185)
Flow-through taxes, net	(9,013)		(9,722)
Other regulatory assets	10,739		10,670
Various refunds to customers	(4,527)		(4,577)
Total GSWC	$	16,230	$	12,373
BVESI
Derivative unrealized (gain) loss (Note 5)	(1,224)		1,537
Other regulatory assets	3,257		2,629
Total AWR	$	18,263	$	16,539

Regulatory matters are discussed in the consolidated financial statements and the notes thereto included in the Company's Form 10-K for the year ended December 31, ~~2019~~2020 filed with the SEC. The discussion below focuses on significant matters and developments since December 31, ~~2019.~~2020.

Alternative-Revenue Programs:

GSWC records the difference between what it bills its water customers and that which is authorized by the CPUC using the Water Revenue Adjustment Mechanism ("WRAM") and the Modified Cost Balancing Account (“MCBA”) accounts approved by the CPUC. The over- or under-collection of the WRAM is aggregated with the MCBA over- or under-collection for the corresponding ratemaking area and bears interest at the current 90-day commercial paper rate.

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As required by the accounting guidance for alternative revenue programs, GSWC is required to collect its WRAM balances, net of its MCBA, within 24 months following the year in which an under-collection is recorded in order to recognize such amounts as revenue. The recovery periods for the majority of GSWC's WRAM/MCBA balances are primarily within 12 to

24 months. GSWC has ~~implemented surcharges to recover~~filed with the CPUC for recovery of its 2020 WRAM/MCBA ~~balances as of December 31, 2019.~~balances. For the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, surcharges (net of surcredits) of approximately ~~$2.2~~$1.9 million and ~~$2.8~~$2.2 million, respectively, were billed to customers to recover previously incurred net under-collections in the WRAM/MCBA accounts. During the three months ended March 31, ~~2020,~~2021, GSWC recorded additional net under-collections in the WRAM/MCBA accounts of approximately $4.7 million due primarily to ~~lower-than-adopted water usage, as well as~~ higher-than-adopted supply costs currently in billed customer rates. As of March 31, ~~2020,~~2021, GSWC had an aggregated regulatory asset of ~~$25.0~~$16.6 million, which is comprised of ~~an $11.2~~a $1.4 million under-collection in the WRAM accounts and a ~~$13.8~~$15.1 million under-collection in the MCBA accounts. ~~In February 2020, GSWC filed with the~~

COVID-19 Memorandum Accounts:

The CPUC ~~for recovery of the 2019 WRAM/MCBA balances.~~

~~Catastrophic Event Memorandum Account ("CEMA")~~

~~On April 3, 2020 the CPUC~~has approved GSWC's ~~request~~and BVESI's requests to activate COVID-19-related memorandum accounts, such as a Catastrophic Event Memorandum Account ("CEMA"), for ~~COVID-19. GSWC's~~the impact of the COVID-19 pandemic. The Company's response to the pandemic has included suspending service disconnections for nonpayment, ~~waiving reconnection or facilities fees for affected customers, and suspending deposit requirements for affected customers who must reconnect to~~which has significantly increased the ~~system.~~amount of delinquent customer accounts receivable during the COVID-19 pandemic. Costs incurred by GSWC and BVESI in response to the COVID-19 ~~outbreak,~~pandemic, including bad debt expense in excess of what is included in ~~GSWC's~~their respective revenue ~~requirement,~~requirements, are being included in the ~~CEMA account~~COVID-19-related memorandum accounts for future recovery. As of March 31, ~~2020,~~2021, a total of $5.7 million in COVID-19 related incremental costs have been recorded as regulatory assets as GSWC and BVESI believe their respective costs are probable of recovery. GSWC's COVID-19 memorandum account is being addressed in its pending water general rate case, while BVESI intends to include the memorandum account for recovery in its next general rate case application expected to be filed in 2022.

Other Regulatory Assets:

Other regulatory assets represent costs incurred by GSWC or BVESI for which it has received or expects to receive rate recovery in the future. These regulatory assets are supported by regulatory rules and decisions, past practices, and other facts or circumstances that indicate recovery is probable. If the CPUC determines that a portion of either GSWC’s or BVESI's assets are not recoverable in customer rates, the applicable entity must determine if it has suffered an asset impairment that requires it to write down the asset's value.

BVESI Other CEMA Regulatory Asset: BVESI activated a CEMA account to track the incremental costs incurred in response to a severe winter storm that occurred in February 2019 and which resulted in the declaration of an emergency by the governor of California. Incremental costs of $455,000 were included in the CEMA account ~~have~~and recorded as a regulatory asset. BVESI subsequently filed for recovery of these costs. In April 2021, the administrative law judge issued a proposed decision denying BVESI’s request for recovery, claiming that BVESI did not ~~been material, but are expected~~adequately demonstrate that the costs incurred were incremental and beyond costs already included in BVESI’s revenue requirement. The proposed decision does permit BVESI to ~~increase in future periods~~file a new application on the issue of incrementality should it wish to continue pursuing recovery. BVESI did file a response to the ~~extent that~~proposed decision supporting BVESI's position. BVESI believes the ~~COVID-19 pandemic continues.~~

~~Cost of Capital Proceeding~~

Instorm costs were incremental and beyond what was included in its revenue requirement, and therefore, will plan on filing a new application to continue pursuing recovery. As a result, the costs in this CEMA account remain as a regulatory asset at March ~~2018,~~31, 2021 as the ~~CPUC issued a final decision~~Company continues to believe the incremental costs were properly tracked and included in the ~~cost of capital proceeding~~CEMA account consistent with the CPUC's well-established past practices. The CPUC allows CEMA accounts to be established following a state/federal declared emergency, and are therefore recognized as regulatory assets for ~~GSWC and 3 other water utilities serving California~~future recovery. However, if BVESI does not ultimately prevail in obtaining recovery, it will result in a charge to earnings for the ~~years 2018 - 2020. Among other things,~~write-off of this CEMA regulatory asset totaling $455,000. Although BVESI believes it has provided the necessary evidence to support recovery of its requested incremental CEMA costs, at this time, management cannot predict the final ~~decision adopted for GSWC's water segment a return on equity~~outcome of ~~8.90%, with a return on rate base~~this matter.

Table of ~~7.91%.~~Contents

Investor-owned water utilities serving California are required to file their cost of capital applications on a triennial basis, with the next scheduled filing required to have taken place on May 1, 2020 and to be effective for the years 2021 - 2023. In January 2020, GSWC, along with the 3 other water utilities, requested an extension of the date by which each of them must file its 2020 cost of capital application. In March 2020, the CPUC approved the request, postponing the filing date by one year until May 1, 2021, with a corresponding effective date of January 1, 2022. GSWC’s current authorized rate of return on rate base of 7.91%, based on its weighted cost of capital, will continue in effect through December 31, 2021.

Note 4 — Earnings per Share/Capital Stock

In accordance with the accounting guidance for participating securities and earnings per share (“EPS”), Registrant uses the “two-class” method of computing EPS. The “two-class” method is an earnings allocation formula that determines EPS for each class of common stock and participating security. AWR has participating securities related to restricted stock units that earn dividend equivalents on an equal basis with AWR’s Common Shares, and that have been issued under AWR's stock incentive plans for employees and the non-employee directors stock plans. In applying the “two-class” method, undistributed earnings are allocated to both common shares and participating securities.

The following is a reconciliation of Registrant’s net income and weighted average Common Shares outstanding used for calculating basic net income per share:


Basic:	For The Three Months Ended March 31,
(in thousands, except per share amounts)	2021		2020
Net income	$	19,268	$	14,072
Less: (a) Distributed earnings to common shareholders	12,361		11,242
Distributed earnings to participating securities	37		37
Undistributed earnings	6,870		2,793

(b) Undistributed earnings allocated to common shareholders	6,850		2,784
Undistributed earnings allocated to participating securities	20		9

Total income available to common shareholders, basic (a)+(b)	$	19,211	$	14,026

Weighted average Common Shares outstanding, basic	36,898		36,860

Basic earnings per Common Share	$	0.52	$	0.38

Basic: For The Three Months Ended March 31,
(in thousands, except per share amounts) 2020 2019
Net income $ 14,072
$ 12,852
Less: (a) Distributed earnings to common shareholders 11,242
10,113
Distributed earnings to participating securities 37
47
Undistributed earnings 2,793
2,692

(b) Undistributed earnings allocated to common shareholders 2,784
2,679
Undistributed earnings allocated to participating securities 9
13
Total income available to common shareholders, basic (a)+(b) $ 14,026
$ 12,792

Weighted average Common Shares outstanding, basic 36,860
36,773
Basic earnings per Common Share $ 0.38
$ 0.35

Diluted EPS is based upon the weighted average number of Common Shares, including both outstanding shares and shares potentially issuable in connection with ~~stock options and~~ restricted stock units granted under AWR’s stock incentive plans for employees and the non-employee directors stock plans, and net income. There were 0 options outstanding as of March 31, ~~2020~~2021 and ~~there were 29,160 options outstanding as of March 31, 2019~~2020 under these plans. At March 31, ~~2020~~2021 and ~~2019,~~2020, there were ~~also~~120,973 and 129,637 ~~and 184,833~~ restricted stock units outstanding, respectively, including performance shares awarded to officers of the Registrant.

The following is a reconciliation of Registrant’s net income and weighted average Common Shares outstanding for calculating diluted net income per share:

Diluted: For The Three Months Ended March 31,
(in thousands, except per share amounts) 2020 2019
Common shareholders earnings, basic $ 14,026
$ 12,792
Undistributed earnings for dilutive stock-based awards 9
13
Total common shareholders earnings, diluted $ 14,035
$ 12,805

Weighted average common shares outstanding, basic 36,860
36,773
Stock-based compensation (1) 109
178
Weighted average common shares outstanding, diluted 36,969
36,951

Diluted earnings per Common Share $ 0.38
$ 0.35


Diluted:	For The Three Months Ended March 31,
(in thousands, except per share amounts)	2021		2020
Common shareholders earnings, basic	$	19,211	$	14,026
Undistributed earnings for dilutive stock-based awards	20		9
Total common shareholders earnings, diluted	$	19,231	$	14,035

Weighted average common shares outstanding, basic	36,898		36,860
Stock-based compensation (1)	95		109
Weighted average common shares outstanding, diluted	36,993		36,969

Diluted earnings per Common Share	$	0.52	$	0.38

(1) In applying the treasury stock method of reflecting the dilutive effect of outstanding stock-based compensation in the calculation of diluted EPS, 29,160 stock options at March 31, 2019, respectively, were deemed to be outstanding in accordance with accounting guidance on earnings per share. All of the ~~129,637~~120,973 and ~~184,833~~129,637 restricted stock units at March 31, ~~2020~~2021 and ~~2019,~~2020, respectively, were included in the calculation of diluted EPS for the three months ended March 31, ~~2020~~2021 and ~~2019.~~2020.

~~There were 0~~During the three months ended March 31, 2021, AWR issued 23,914 related to restricted stock ~~options outstanding at~~units. During the three months ended March 31, 2020, AWR issued 37,157 common shares related to restricted stock units and ~~there were 0~~ stock options ~~outstanding at March 31, 2019 that were anti-dilutive.~~

for approximately$30,000, under Registrant’s stock incentive plans for employees.

During the three months ended March 31, ~~2020~~2021 and ~~2019, AWR issued 37,157 and 37,376 common shares, for approximately $30,000 and $75,000, respectively, under Registrant’s stock incentive plans for employees.~~

~~During the three months ended March 31,~~ 2020, ~~and 2019,~~ AWR paid ~~$1.8~~$1.3 million and ~~$1.6~~$1.8 million, respectively, to taxing authorities on employees' behalf for shares withheld related to net share settlements. During the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, GSWC paid ~~$1.6~~$1.2 million and ~~$1.3~~$1.6 million, respectively, to taxing authorities on employees' behalf for

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shares withheld related to net share settlements. These payments are included in the stock-based compensation caption of the statements of equity.

During the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, AWR paid quarterly dividends of approximately $12.4 million, or $0.335 per share, and $11.2 million, or $0.305 ~~per share, and $10.1 million, or $0.275~~ per share, respectively. During the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, GSWC paid dividends of ~~$11.3~~$12.4 million and ~~$10.1~~$11.3 million, respectively, to ~~AWR.~~AWR during these periods.

Note 5 — Derivative Instruments

~~GSWC's electric division, BVES,~~BVESI purchases power under long-term contracts at a fixed cost depending on the amount of power and the period during which the power is purchased under such contracts. In August 2019, the CPUC approved an application that allowed BVES to enter into new long-term purchased power contracts with energy providers, which BVES executed in September 2019. BVES began taking power under these long-term contracts during the fourth quarter of 2019 to replace existing expiring contracts. The newThese contracts provide power at a fixed cost over approximately ~~three-~~three- and five-year terms depending on the amount of power and period during which the power is purchased under the contracts.

These purchase power contracts are subject to the accounting guidance for derivatives and require mark-to-market derivative accounting. Among other things, the CPUC ~~also~~ authorized ~~BVES to~~the use of a regulatory asset and liability memorandum account to offset the mark-to-market entries required by the accounting guidance. Accordingly, all unrealized gains and losses generated from the purchased power contracts are deferred on a monthly basis into a non-interest bearing regulatory memorandum account that tracks the changes in fair value of the derivative throughout the terms of the contracts. As a result, these unrealized gains and losses dodid not impact ~~GSWC’s~~AWR’s earnings. As of March 31, ~~2020,~~2021, there was a ~~$4.3~~$1.2 million unrealized ~~loss~~gain recorded as a regulatory ~~asset~~liability in the memorandum account for the purchased power contracts. The notional volume of derivatives remaining under these long-term contracts as of March 31, ~~2020~~2021 was ~~594,392~~445,573 megawatt hours.

The accounting guidance for fair value measurements applies to all financial assets and financial liabilities that are measured and reported on a fair value basis. Under the accounting guidance, ~~GSWC makes~~BVESI has made fair value measurements that are classified and disclosed in one of the following three categories:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2: Quoted prices in markets that are not active or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; or

Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

To value the contracts, Registrant utilizes various inputs that include quoted market prices for energy over the duration of the contracts. The market prices used to determine the fair value for this derivative instrument were estimated based on independent sources such as broker quotes and publications that are not observable in or corroborated by the market. When such inputs have a significant impact on the measurement of fair value, the instruments are categorized as Level 3. Accordingly, the valuation of the derivatives on Registrant’s purchased power contract has been classified as Level 3 for all periods presented.

The following table presents changes in the fair value of ~~GSWC’s~~the Level 3 derivatives for the three months ended March 31, ~~2020~~2021 and ~~2019:~~2020. The change in fair value was due to an increase in energy prices during the three months ended March 31, 2021.


	For The Three Months Ended March 31,
(dollars in thousands)	2021		2020
Fair value at beginning of the period	$	(1,537)	$	(3,171)
Unrealized gains (losses) on purchased power contracts	2,761		(1,109)
Fair value at end of the period	$	1,224	$	(4,280)

For The Three Months Ended March 31,
(dollars in thousands) 2020 2019
Fair value at beginning of the period $ (3,171 ) $ (311 )
Unrealized loss on purchased power contracts (1,109 ) (25 )
Fair value at end of the period $ (4,280 ) $ (336 )

Note 6 — Fair Value of Financial Instruments

For cash and cash equivalents, accounts receivable, accounts payable and short-term debt, the carrying amount is assumed to approximate fair value due to the short-term nature of these items.

Investments held in a Rabbi Trust for the supplemental executive retirement plan ("SERP") are measured at fair value and totaled ~~$19.1~~$26.5 million as of March 31, ~~2020.~~2021. All equity investments in the Rabbi Trust are Level 1 investments in mutual funds. The investments held in the Rabbi Trust are included in "Other Property and Investments" on Registrant's balance sheets.

The table below estimates the fair value of long-term debt held by GSWC. The fair values as of March 31, ~~2020~~2021 and December 31, ~~2019~~2020 were determined using rates for similar financial instruments of the same duration utilizing Level 2 methods and assumptions. ~~The interest rates used for the March 31, 2020 valuation increased as compared to December 31, 2019, decreasing the fair value of long-term debt as of March 31, 2020.~~ Changes in the assumptions will produce different results.

March 31, 2020 December 31, 2019
(dollars in thousands) Carrying Amount Fair Value Carrying Amount Fair Value
Financial liabilities:

Long-term debt—GSWC (1)
$ 284,607
$ 357,174
$ 284,699
$ 376,467

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	March 31, 2021				December 31, 2020
(dollars in thousands)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial liabilities:
Long-term debt—GSWC (1)	$	444,172	$	519,888	$	444,271	$	559,752

___________________

(1) Excludes debt issuance costs and redemption premiums.

Note 7 — Income Taxes

AWR's effective income tax rate (“ETR”) was ~~21.7%~~23.5% and ~~20.5%~~21.7% for the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, respectively. GSWC's ETR was ~~22.4%~~23.6% and ~~19.0%~~22.4% for the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, respectively.

The AWR and GSWC effective tax rates ~~differ~~differed from the federal corporate statutory tax rate of 21% primarily due to (i) state taxes; (ii) permanent differences, including the excess tax benefits from share-based payments, which were reflected in the income statements and resulted in a reduction to income tax expense during the three months ended March 31, ~~2020~~2021 and ~~2019;~~2020; (iii) the ~~continuing~~ongoing amortization of the excess deferred income tax ~~liability that commenced upon the lowering of the federal tax rate;~~liability; and (iv) differences between book and taxable income that are treated as flow-through adjustments in accordance with regulatory requirements (principally from plant, rate-case, and compensation ~~expenses)~~related items). As a regulated utility, GSWC treats certain temporary differences as flow-through in computing its income tax expense consistent with the income tax method used in its CPUC-jurisdiction ratemaking. Flow-through items either increase or decrease tax expense and thus impact the ETR.

Note 8 — Employee Benefit Plans

The components of net periodic benefit costs for Registrant’s pension plan, postretirement medical benefit plan, and SERP for the three months ended March 31, ~~2020~~2021 and ~~2019~~2020 were as follows:


	For The Three Months Ended March 31,																	For The Three Months Ended March 31,
	Pension Benefits						Other Postretirement Benefits						SERP					Pension Benefits				Other Postretirement Benefits				SERP
(dollars in thousands)	2020			2019			2020			2019			2020		2019		(dollars in thousands)	2021		2020		2021		2020		2021		2020
Components of Net Periodic Benefits Cost:																	Components of Net Periodic Benefits Cost:
Service cost	$	1,408		$	1,234		$	47		$	53		$	244	$	298	Service cost	$	1,625	$	1,408	$	40	$	47	$	348	$	244
Interest cost	1,954			2,131			56			80			247		267		Interest cost	1,712		1,954		31		56		229		247
Expected return on plan assets	(2,950		)	(2,593		)	(127		)	(112		)	—		—		Expected return on plan assets	(3,134)		(2,950)		(134)		(127)		0		0
Amortization of prior service cost	109			109			—			—			—		—		Amortization of prior service cost	109		109		0		0		0		0
Amortization of actuarial (gain) loss	442			359			(199		)	(150		)	211		118		Amortization of actuarial (gain) loss	993		442		(287)		(199)		419		211
Net periodic benefits costs under accounting standards	963			1,240			(223		)	(129		)	702		683		Net periodic benefits costs under accounting standards	1,305		963		(350)		(223)		996		702
Regulatory adjustment - deferred	(93		)	—			—			—			—		—		Regulatory adjustment - deferred	(351)		(93)		0		0		0		0
Total expense (benefit) recognized, before surcharges and allocation to overhead pool	$	870		$	1,240		$	(223	)	$	(129	)	$	702	$	683	Total expense (benefit) recognized, before surcharges and allocation to overhead pool	$	954	$	870	$	(350)	$	(223)	$	996	$	702

For the pension plan obligation, Registrant used a discount rate of 2.55% as of December 31, 2020 to determine the projected benefit obligation (“PBO”) of $272.8 million. Discount rates as of March 31, 2021 are approximately 65-basis points higher than those used as of December 31, 2020 based on recent changes in market interest-rate conditions. A 65-basis point increase in the assumed discount rate would have decreased the PBO as of December 31, 2020 by approximately 10% or $27.3 million. In ~~2020,~~2021, Registrant expects to contribute approximately ~~$3.7~~$3.6 million to its pension plan.

As authorized by the CPUC in the water and electric general rate case decisions, GSWC ~~utilizes~~and BVESI each utilize two-way balancing accounts ~~for its water and electric regions and the general office~~ to track differences between the forecasted annual pension expenses in rates, or expected to be in rates, and the actual annual expense recorded ~~by GSWC~~ in accordance with the accounting guidance for pension costs. During the three months ended March 31, 2021 and 2020, GSWC's actual pension expense was higher than the amounts included in water customer rates by ~~$93,000. During~~$351,000 and $93,000, respectively. BVESI's actual expense was lower than the ~~three months ended March 31, 2019, GSWC did not have any deferral of pension costs as billed water revenues were based on 2018 rates.~~amounts included in electric customer rates for all periods presented. As of March 31, ~~2020,~~2021, GSWC and BVESI had ~~a $2.7 million net over-collection~~over-collections in ~~the~~their two-way pension balancing accounts of $665,000 and $256,000, respectively, included as part of ~~the pension~~ regulatory ~~asset~~assets and liabilities (Note 3).

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Note 9 — Contingencies

Environmental Clean-Up and Remediation:

GSWC has been involved in environmental remediation and cleanup at aone of its plant ~~site ("Chadron Plant")~~sites that contained an underground storage tank which was used to store gasoline for its vehicles. This tank was removed from the ground in July 1990 along with the dispenser and ancillary piping. Since then, GSWC has been involved in various remediation activities at this site. Analysis indicates that off-site monitoring wells may be necessary to document effectiveness of remediation.

As of March 31, ~~2020,~~2021, the total amount spent to clean up and remediate GSWC’s plant facility was approximately ~~$6.3~~$6.4 million, of which $1.5 million has been paid by the State of California Underground Storage Tank Fund. Amounts paid by GSWC have been included in rate base and approved by the CPUC for recovery. As of March 31, ~~2020,~~2021, GSWC has a regulatory asset and an accrued liability for the estimated additional cost of $1.3 million to complete the cleanup at the site. The estimate includes costs for two years of continued activities of groundwater cleanup and monitoring, future soil treatment and site-closure-related activities. The ultimate cost may vary as there are many unknowns in remediation of underground gasoline spills and this is an estimate based on currently available information. Management also believes it is probable that the estimated additional costs will be approved in rate base by the CPUC.

Other Litigation:

Registrant is also subject to other ordinary routine litigation incidental to its business, some of which may include claims for compensatory and punitive damages. Management believes that rate recovery, proper insurance coverage and reserves are in place to insure against, among other things, property, general liability, employment, and workers’ compensation claims incurred in the ordinary course of business. Insurance coverage may not cover certain claims involving punitive damages. ~~However,~~ Registrant does not believe the outcome from any pending suits or administrative proceedings will have a material effect on Registrant's consolidated results of operations, financial position, or cash flows.

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Note 10 ~~— Allowance for Doubtful Accounts~~

~~Registrant adopted ASU 2016-13~~ ~~Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments~~ effective January 1, 2020. The guidance requires estimated credit losses on financial instruments, such as Registrant's trade and other receivable, be based on expected credit losses rather than incurred losses.

Registrant's allowance for doubtful account as of March 31, 2020 was developed based on observed effects of the economic impact of the COVID-19 pandemic on GSWC's aging of utility customer accounts receivable, as well as economic data such as unemployment rates and other considerations which may impact customers' ability to pay their bills. Management also took into consideration the impact of the CPUC's order to suspend through April 2021 service disconnections for nonpayments, which is expected to have the effect of increasing delinquent customer accounts receivable during the COVID-19 pandemic. However, the CPUC has authorized GSWC to track incremental costs, including bad debt expense in excess of what is included in GSWC's revenue requirement, incurred as a result of the COVID-19 pandemic in a CEMA account to be filed with the CPUC for future recovery. As a result, the adoption of ASU 2016-13 did not have a material earnings impact to Registrant.

~~The table below presents Registrant’s provision for doubtful accounts charged to expense and accounts written off, net of recoveries.~~

Three Months Ended March 31, 2020
(dollars in thousands) AWR GSWC
Balances at December 31, 2019 $ 916
$ 916
Increase to provision 393
393
Accounts written off, net of recoveries (164 ) (164 )
Balances at March 31, 2020 $ 1,145
$ 1,145

Allowance for doubtful accounts related to accounts receivable-customer $ 1,086
$ 1,086
Allowance for doubtful accounts related to receivable from U.S. government —
—
Allowance for doubtful accounts related to other accounts receivable 59
59
Total allowance for doubtful accounts $ 1,145
$ 1,145

~~Note 11~~ — Business Segments

AWR has 3 reportable ~~segments,~~segments: water, electric and contracted ~~services, whereas~~services. Prior to July 1, 2020, GSWC ~~has~~had 2 segments, water and electric. On July 1, 2020, GSWC completed the transfer of the electric utility assets and liabilities from its electric division to BVESI, a separate legal entity and now a wholly owned subsidiary of AWR (Note 11). On a stand-alone basis, AWR has no material assets other than its equity investments in its subsidiaries, ~~and~~ note ~~receivables therefrom,~~payables to its subsidiaries and deferred taxes.

All activities of GSWC ~~a rate-regulated utility,~~and BVESI are geographically located within California. Activities of ASUS and its subsidiaries are conducted in California, Florida, Georgia, ~~Florida,~~ Kansas, Maryland, New Mexico, North Carolina, South Carolina, Texas and Virginia. Each of ASUS’s wholly owned subsidiaries is regulated, if applicable, by the state in which the subsidiary primarily conducts water and/or wastewater operations. Fees charged for operations and maintenance and renewal and replacement services are based upon the terms of the contracts with the U.S. government, which have been filed, as appropriate, with the commissions in the states in which ASUS’s subsidiaries are incorporated.

The tables below set forth information relating to ~~GSWC’s~~AWR’s operating segments ~~ASUS~~ and ~~its subsidiaries and other matters. Total assets by segment are not presented below, as certain of Registrant’s assets are not tracked by segment.~~AWR Parent. The utility plant amounts are net of respective accumulated provisions for depreciation. Capital additions reflect capital expenditures paid in cash, excluding U.S. government- and third-party contractor-funded capital expenditures for ASUS and property installed by developers and conveyed to ~~GSWC.~~

GSWC or BVESI.


	As Of And For The Three Months Ended March 31, 2020													As Of And For The Three Months Ended March 31, 2021
	GSWC							AWR			Consolidated							Contracted		AWR		Consolidated
(dollars in thousands)	Water		Electric		ASUS			Parent			AWR		(dollars in thousands)	Water		Electric		Services		Parent		AWR
Operating revenues	$	71,424	$	10,968	$	26,685		$	—		$	109,077	Operating revenues	$	75,029	$	11,539	$	30,492	$	0	$	117,060
Operating income (loss)	18,605		3,487		3,609			(2		)	25,699		Operating income (loss)	21,059		3,448		5,824		(2)		30,329
Interest expense, net	5,133		326		(77		)	110			5,492		Interest expense, net	5,711		86		(229)		235		5,803
Utility plant	1,336,012		74,745		21,640			—			1,432,397
Net property, plant and equipment													Net property, plant and equipment	1,426,175		94,346		21,902		0		1,542,423
Depreciation and amortization expense (1)	7,422		607		782			—			8,811		Depreciation and amortization expense (1)	8,062		639		859		0		9,560
Income tax expense (benefit)	2,378		850		748			(75		)	3,901		Income tax expense (benefit)	3,768		884		1,391		(129)		5,914
Capital additions	28,459		3,554		1,531			—			33,544		Capital additions	31,824		4,782		487		0		37,093

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Note 11 - Completion of Electric Utility Reorganization Plan

On July 1, 2020, GSWC completed the transfer of approximately $71.3 million in net assets and equity (based on their recorded amounts) from its electric utility division to BVESI in exchange for common shares of BVESI of equal value. This was a non-cash transaction, and 0 gain or loss was recognized. GSWC then immediately distributed all of BVESI's common shares to AWR, whereupon BVESI became wholly owned directly by AWR. The reorganization did not result in any substantive changes to AWR's operations or business segments. In addition, pursuant to federal and state tax law, the exchange and distribution qualify as a tax-free reorganization; consequently, 0 income tax liability was triggered for the AWR consolidated group or any of its members.

The transfer between GSWC and BVESI, both wholly owned subsidiaries of AWR, was considered a common control transaction. Although the electric utility division was considered a separate business segment and component of GSWC, the transfer did not qualify as a discontinued operation based on management's assessment of the applicable accounting guidance. As a result of this transfer, from July 1, 2020 onward, operating results and cash flows of the electric segment, as well as its assets and liabilities, are no longer included in GSWC's financial statements, but continue to be included in AWR's consolidated financial statements. GSWC's statements of income and cash flows for the three months ended March 31, 2020 include the electric segment's results.

The table below sets forth selected information relating to the electric segment's results of operations for the three months ended March 31, 2021 and 2020, and its cash flows for the three months ended March 31, 2021 (in thousands):


	Three months ended March 31,
	2021		2020
	(Subsidiary of AWR)		(Division of GSWC)
Electric revenues	$	11,539	$	10,968
Operating expenses	8,091		7,482
Operating income	$	3,448	$	3,486

Net income	$	2,523	$	2,346


	Three Months Ended March 31, 2021
	(Subsidiary of AWR)
Net cash provided from operating activities	$	2,803

Net cash used in investing activities	(4,782)

Net cash provided from financing activities (1)	1,795

Net change in cash and cash equivalents	(184)
Cash and cash equivalents, beginning of period	367
Cash and cash equivalents, end of period	$	183

(1) Effective July 1, 2020, BVESI has a 3-year, $35 million revolving credit facility agreement.As of March 31, 2021, there was $22.0 million outstanding under this facility. Under the terms of the credit agreement, BVESI has the option to request an increase in the facility by an additional $15.0 million.

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Note 12 - Subsequent Event

GSWC's 9.56% private placement notes issued in the amount of $28.0 million and due in 2031 can be redeemed, in whole or in part, at the option of GSWC subject to redemption schedules embedded in the agreement. The 9.56% notes are subject to a make-whole premium based on 55 basis points above the applicable Treasury Yield if redeemed prior to May 15, 2021. After May 15, 2021, the maximum redemption premium is 3.0% of par value. On April 23, 2021, GSWC notified the note holders of its intent to redeem the notes on May 24, 2021. Pursuant to the agreement, the prepayment of the notes will include the redemption premium of 3.0% on par value, or $840,000. GSWC recovers redemption premiums in its embedded cost of debt as filed in cost of capital proceedings where the cost savings from redeeming high interest rate debt are passed on to customers.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

General

The following discussion and analysis provides information on AWR’s consolidated operations and assets, and includes specific references to AWR’s individual segments ~~and/or~~and its subsidiaries (GSWC, BVESI, and ASUS and its subsidiaries), and AWR (parent) where applicable.

Included in the following analysis is a discussion of water and electric gross margins. Water and electric gross margins are computed by subtracting total supply costs from total revenues. Registrant uses these gross margins as important measures in evaluating its operating results. Registrant believes these measures are useful internal benchmarks in evaluating the performance of ~~GSWC.~~GSWC and BVESI. The discussions and tables included in the following analysis also present Registrant’s operations in terms of earnings per share by business segment, which equals each business segment’s earnings divided by Registrant’s weighted average number of diluted common shares. Furthermore, the losses incurred during the first quarter of 2020 on the investments held to fund one of the Company's retirement plans resulting from the negative effects on the financial markets at the start of the COVID-19 pandemic have been excluded when communicating the results to help facilitate comparisons of the Company’s performance from period to period. All of these items are derived from consolidated financial information but are not presented in our financial statements that are prepared in accordance with Generally Accepted Accounting Principles (GAAP) in the United States. These items constitute "non-GAAP financial measures" under the Securities and Exchange Commission rules.

Registrant believes that the ~~disclosure~~disclosures of the water and electric gross margins, and earnings per share by business segment provide investors with clarity surrounding the performance of its ~~different services.~~segments. Registrant reviews these measurements regularly and compares them to historical periods and to its operating budget. However, these measures, which are not presented in accordance with ~~accounting principles generally accepted in the United States of America ("GAAP"),~~GAAP, may not be comparable to similarly titled measures used by other entities and should not be considered as an alternative to operating income or earnings per share, which are determined in accordance with GAAP. A reconciliation of water and electric gross margins to the most directly comparable GAAP measures is included in the table under the section titled “Operating Expenses: Supply Costs.” A reconciliation to AWR’s diluted earnings per share is included in the discussion under the sections titled “Summary of First Quarter Results by Segment.”

Overview

Factors affecting our financial performance are summarized ~~under~~ ~~Forward-Looking Information~~ ~~and~~ under “Risk Factors” in our Form 10-K for the period ended December 31, ~~2019.~~2020 filed with the SEC.

Water and Electric Segments:

GSWC's and BVESI's revenues, operating income, and cash flows ~~are~~have been earned primarily through delivering potable water to homes and businesses in California and ~~the delivery of~~ electricity in the City of Big Bear ~~area of~~Lake and surrounding areas in San Bernardino County, ~~California.~~California, respectively. Rates charged to GSWC and BVESI customers are determined by the CPUC. These rates are intended to allow recovery of operating costs and a reasonable rate of return on capital. GSWC ~~plans~~and BVESI plan to continue ~~to seek~~seeking additional rate increases in future years from the CPUC to recover operating and supply costs and receive reasonable returns on invested capital. Capital expenditures in future years at GSWC and BVESI are expected to remain at higher levels than depreciation expense. When necessary, GSWC ~~obtains~~and BVESI are able to obtain funds from external sources in the capital markets and through bank borrowings.

General Rate Case Filings and Other Matters:

Water GRC for years 2022 – 2024:

On July 15, 2020, GSWC filed a general rate case application for all of its water regions and its general office. This general rate case will determine new water rates for the years 2022 – 2024. Among other things, GSWC requested capital budgets in this application of approximately $450.6 million for the three-year rate cycle, and another $11.4 million of capital projects to be filed for revenue recovery only through advice letters when those projects are completed. A decision in the water general rate case is scheduled for the fourth quarter of 2021, with new rates to become effective January 1, 2022.

Water ~~Segment:~~General Rate Case for years 2019 – 2021:

In May 2019, the CPUC issued a final decision on GSWC's water general rate case, which ~~determines~~determined new rates for the years 2019 – 2021 with rates retroactive to January 1, 2019. Among other things, the final decision authorized GSWC to invest approximately $334.5 million over the rate cycle. The $334.5 million of infrastructure investment ~~includes~~included $20.4 million of capital projects to be filed for revenue recovery through advice letters when those projects are completed.

Due to changes in circumstances, not all the ~~delay in receiving a final CPUC decision on the water general~~anticipated advice letter projects have been completed during this rate ~~case, billed water revenues for the first three months~~cycle.

Table of 2019 were based on 2018 adopted rates, pending a final decision. As a result of the May 2019 CPUC final decision, GSWC recorded the impact of the final decision in the second quarter of 2019, including earnings of $0.08 per share that related to the first quarter of 2019. Contents

The final decision also allowed for a water gross margin ~~increase~~increases in 2020 and 2021, subject to an earnings test. ~~Effective January 1, 2020, GSWC received its full second-year step increase, which it achieved because of passing the earnings test at all of its ratemaking areas.~~ The full step increase ~~is expected to generate~~generated an additional $10.4 million in water gross margin for 2020. ~~The final decision will also allow for a potential~~Effective January 1, 2021,the CPUC approved all third-year rate increases, which GSWC achieved because of passing an earnings test at all of its ratemaking areas, and are expected to generate an additional increase in the water gross margin of approximately ~~$11.4~~$11.1 million in 2021 ~~subject~~as compared to 2020.

Final Decision on the ~~results~~First Phase of the Low-Income Affordability Rulemaking:

On August 27, 2020, the CPUC issued a final decision in the first phase of the CPUC’s Order Instituting Rulemaking evaluating the low income ratepayer assistance and affordability objectives contained in the CPUC’s 2010 Water Action Plan. This decision also addressed other issues, including the continued use of the Water Revenue Adjustment Mechanism ("WRAM") and the Modified Cost Balancing Account ("MCBA"). The MCBA is a full-cost balancing account used to track the difference between adopted and actual water supply costs (including the effects of changes in both rates and volume). Based on the final decision, any general rate case application filed by GSWC and the other California water utilities after August 27, 2020 may not include a proposal to continue the use of the WRAM or MCBA, but may instead include a proposal to use a limited price adjustment mechanism and an incremental supply cost balancing account.

The final decision will not have any impact on GSWC's WRAM or MCBA balances during the current rate cycle (2019 – 2021). Furthermore, in February 2021, a procedural hearing in the pending general rate case application that will set new rates for the years 2022 – 2024 was held, and the assigned administrative law judge in the proceeding clarified that GSWC is allowed to continue using the WRAM and MCBA through the year 2024. GSWC’s next general rate case application will be filed in 2023 to establish new rates for the years 2025 – 2027 and may not include the WRAM or MCBA for those years.

Since its implementation in 2008, the WRAM and MCBA have helped mitigate fluctuations in GSWC’s earnings ~~test~~due to changes in water consumption by its customers or changes in water supply mix. Replacing them with mechanisms recommended in the final decision will likely result in more volatility in GSWC’s future earnings and ~~changes~~could result in less than or more than full recovery of its authorized water gross margin. In October 2020, GSWC, the other California water utilities, and the California Water Association filed separate applications for rehearing on this matter. At this time, management cannot predict the outcome of this request for rehearing.

Cost of Capital Proceeding:

Investor-owned water utilities serving California are required to file their cost of capital applications on a triennial basis. GSWC, along with three other investor-owned water utilities in California, filed a joint request with the ~~forecasted inflationary index values.~~CPUC in January 2021 to postpone the cost of capital applications from May 1, 2021 to May 1, 2022, and to keep the current authorized cost of capital parameters in effect through 2022. In February 2021, the CPUC denied the request. GSWC intends to file its cost of capital application with the CPUC on May 3, 2021 (end of business day). A final decision on this proceeding is scheduled for the fourth quarter of 2021, with an effective date of January 1, 2022.

Electric ~~Segment:~~Segment General Rate Case:

InOn August 15, 2019, the CPUC issued a final decision on the electric general rate case. Among other things, the decision (i) extended the rate cycle by one year ~~(new rates were effective for 2018 - 2022);~~to include 2022; (ii) increased the electric gross margin for 2018 by approximately $2.3 million compared to the 2017 adopted electric gross margin, adjusted for ~~Tax Act~~tax reform changes;

(iii) ~~authorizes BVES~~allows the electric segment to construct all the capital projects requested in its application, which are dedicated to improving system safety and reliability and total approximately $44 million over the 5-year rate cycle; and (iv) ~~increases~~increased the adopted electric gross margin by $1.2 million for each of the years 2019 and 2020, by $1.1 million infor 2021, and by $1.0 million infor 2022. The rate increases for 2019 - 2022 are not subject to an earnings test. The decision ~~authorizes~~authorized a return on equity for ~~GSWC's~~the electric segment of ~~9.60%~~9.6% and ~~includes~~included a capital structure and debt cost that is consistent with those approved by the CPUC in March 2018 in connection with GSWC's water segment cost of capital proceeding.

~~Due to the delay in finalizing the electric general~~ The rate case ~~electric revenues recognized during the first three months of 2019 were based on 2017 adopted rates. Because the August 2019 CPUC final~~ decision ~~was retroactive~~continues to ~~January 1, 2018, the cumulative retroactive earnings impact of the decision was included in the third quarter results of 2019, including approximately $0.02 per share related~~apply to ~~the first quarter of 2019 had the new 2018 and 2019 rates been in place at that time.~~

~~Cost of Capital Proceeding:~~

Investor-owned water utilities serving California are required to file their cost of capital applications on a triennial basis, with the next scheduled filing required to have taken place on May 1, 2020 and to be effective for the years 2021 - 2023. In January 2020, GSWC, along with the three other water utilities, requested an extension of the date by which each of them must file its 2020 cost of capital application. In March 2020, the CPUC approved the request, postponing the filing date by one year until May 1, 2021, with a corresponding effective date of January 1, 2022. The CPUC also approved the joint parties’ request to leave the current Water Cost of Capital Mechanism in place, but there will be no changes to the companies’ rate of return on rate base during the one-year extension, regardless of what the mechanism might otherwise indicate.

GSWC’s current authorized rate of return on rate base is 7.91%, based on its weighted cost of capital, which will continue in effect through December 31, 2021. The 7.91% return on rate base includes a return on equity of 8.9%, an embedded cost of debt of 6.6%, and a capital structure with 57% equity and 43% debt.BVESI.

Contracted Services Segment:

ASUS's revenues, operating income and cash flows are earned by providing water and/or wastewater services, including operation and maintenance services and construction of facilities at the water and/or wastewater systems at various military installations, pursuant to 50-year firm fixed-price contracts. The contract price for each of these 50-year contracts is subject to annual economic price adjustments. Additional revenues generated by contract operations are primarily dependent on new construction activities under contract modifications with the U.S. government or agreements with other third-party prime contractors.

COVID-19:

~~Recently, the outbreak of novel coronavirus (COVID-19) has become a global pandemic.~~ GSWC, ~~continues to operate as its~~BVESI and ASUS have continued their operations given that their water, wastewater, and electric utility services are deemed ~~essential services. GSWC's~~essential. Our responses to the COVID-19 pandemic take into account orders issued by the CPUC, and the guidance provided by federal, state, and local health authorities and other government officials. The response of GSWC and BVESI continues to include: (i) suspending service disconnections for nonpayment pursuant to CPUC and state orders, and

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(ii) telecommuting by employees. In February 2021, the CPUC adopted a resolution that extended the existing emergency customer protections previously established by the CPUC through June 30, 2021, including the suspension of service disconnections for non-payment by electric utility customers in response to the on-going COVID-19 ~~outbreak continues~~pandemic. For water utilities, the moratorium on service disconnections was implemented in response to ~~rapidly evolve and has included: (i) suspending through April 2021~~an order by the governor of California, which we believe would require another action by the governor to cease the moratorium on service disconnections for ~~nonpayments pursuant~~our water customers. It is expected that the CPUC will work with the governor’s office to ~~CPUC orders, which will remain in effect over other existing requirements governing disconnections; (ii) waiving reconnection or facilities fees~~coordinate the lifting of the moratorium for affected customers and suspending deposit requirements for affected customers who must reconnect to the system; (iii) the temporary closing of customer service offices; (iv) increasing the number of employees telecommuting; and (v) delaying some capital improvement projects at its water utility ~~services business.~~

customers consistent with the electric customers. The ~~effects~~CPUC's February resolution did extend the COVID-19-related memorandum accounts established by GSWC and by BVESI to track incremental costs associated with complying with the resolution. In addition, the resolution required utilities in California to file transition plans to address the eventual discontinuance of the ~~continuing~~emergency customer protections.The goal of the transition plan is to effectively ease customers through a transition off the emergency customer protections by proactively communicating with customers to enroll in programs to manage their utility bills and informing them of the changes to programs in which they are already enrolled. GSWC and BVESI filed their respective transition plans with the CPUC on April 1, 2021.

Initially and throughout 2020, the pandemic ~~on the Company are still emerging, but among other things, it has~~ caused significant ~~negative impacts on~~volatility in financial ~~markets. This has resulted~~markets resulting in ~~significant~~ fluctuations in the fair value of plan assets in ~~the Company's~~GSWC's pension and other retirement ~~plans, which are likely to continue.~~plans. Furthermore, due to expected future credit losses on utility customer bills, GSWC ~~has~~and BVESI have increased ~~its~~their allowance for doubtful accounts as of March 31, 2020 and expects to increase intercompany borrowings as well as borrowings from outside sources due to the associated potential decrease in liquidity. Thus far, the COVID-19 pandemic has not had a material impact on ASUS's operations, as the water and wastewater services performed on the military bases are deemed essential services.

2021. The ~~extent to which COVID-19 may materially impact GSWC’s results is uncertain but will depend on future developments, which cannot be predicted at this time. However, the~~ CPUC has ~~approved~~authorized GSWC and BVESI to track incremental costs, including bad debt expense in excess of what is included in ~~GSWC's~~their respective revenue ~~requirement, incurred~~requirements, in COVID-19-related memorandum accounts, such as ~~a result of the COVID-19 pandemic in~~ a Catastrophic Event Memorandum Account ("CEMA") to be filed with the CPUC for future recovery. Through March 31, 2021, AWR has recorded approximately $5.7 million in these COVID-19-related memorandum accounts related to bad debt expense in excess of GSWC’s and BVESI's revenue requirement, personal protective equipment, printing costs and other incremental costs. By tracking these costs in memorandum accounts, utilities can later request authorization from the CPUC for recovery of these costs. GSWC's COVID-19 memorandum account is being addressed in its pending water general rate case, while BVESI intends to include the memorandum account for recovery in its next general rate case application expected to be filed in 2022.

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Summary of First Quarter Results by Segment

The table below sets forth the first quarter diluted earnings per share by business segment:


	Diluted Earnings per Share								Diluted Earnings per Share
	Three Months Ended								Three Months Ended
	3/31/2020		3/31/2019		CHANGE				3/31/2021		3/31/2020		CHANGE
Water	$	0.24	$	0.21	$	0.03		Water	$	0.33	$	0.24	$	0.09
Electric	0.06		0.03		0.03			Electric	0.07		0.06		0.01
Contracted services	0.08		0.11		(0.03		)	Contracted services	0.12		0.08		0.04
Consolidated diluted earnings per share	0.38		0.35		0.03			Consolidated diluted earnings per share	$	0.52	$	0.38	$	0.14

~~Management’s Discussion and Analysis~~ ~~- Results~~Table of ~~Operations for the Three Months Ended March 31, 2019 and March 31, 2018.”~~Contents

Critical Accounting Policies and Estimates

Critical accounting policies and estimates are those that are important to the portrayal of AWR’s financial condition, results of operations and cash flows and require the most difficult, subjective or complex judgments of AWR’s management. The need to make estimates about the effect of items that are uncertain is what makes these judgments difficult, subjective and/or complex. Management makes subjective judgments about the accounting and regulatory treatment of many items. These judgments are based on AWR’s historical experience, terms of existing contracts, AWR’s observance of trends in the industry, and information available from other outside sources, as appropriate. Actual results may differ from these estimates under different assumptions or conditions.

The critical accounting policies used in the preparation of the Registrant’s financial statements that it believes affect the more significant judgments and estimates used in the preparation of its consolidated financial statements presented in this report are described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Registrant’s Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020 filed with the SEC. There have been no material changes to Registrant’s critical accounting policies.

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Liquidity and Capital Resources

AWR

Registrant’s regulated business is capital intensive and requires considerable capital resources. A portion of these capital resources is provided by internally generated cash flows from operations. AWR anticipates that interest expense will increase in future periods due to the need for additional external capital to fund construction programs at its ~~construction program~~regulated utilities and ~~increases in~~as market interest ~~rates.~~rates increase. In addition, as the capital investment program continues to increase, coupled with the elimination of bonus depreciation for regulated utilities due to tax reform enacted in 2017, AWR and its subsidiaries anticipate they will need to access external financing more often. AWR believes that costs associated with capital used to fund construction at GSWC and BVESI will continue to be recovered through water and electric rates charged to customers.

AWR funds its operating expenses and pays dividends on its outstanding Common Shares primarily through dividends from its wholly owned subsidiaries. The ability of GSWC and BVESI to pay dividends to AWR is restricted by California law. Under these restrictions, approximately ~~$257.3~~$583.9 million was available ~~on March 31, 2020~~for GSWC to pay dividends to ~~AWR. The~~AWR on March 31, 2021. Approximately $65.4 million was available for BVESI to pay dividends to AWR as of March 31, 2021. ASUS's ability ~~of ASUS~~ to pay dividends to AWR is ~~also restricted by California law and by the~~dependent upon state laws in which each Military Utility Privatization Subsidiary operates, as well as ASUS's ability ~~of its subsidiaries~~ to pay dividends ~~to it.~~under California law.

When necessary, Registrant obtains funds from external sources inthrough the capital markets, ~~and through~~as well as from bank borrowings. Access to external financing on reasonable terms depends on the credit ratings of AWR and GSWC and current business conditions, including that of the water utility industry in general as well as conditions in the debt or equity capital markets.

AWR currently has access to a $200.0 million credit facility and borrows under ~~a credit~~this facility, which expires in May 2023, ~~and provides~~to provide funds to ~~its subsidiaries,~~ GSWC and ASUS in support of their operations. ~~In March 2020, AWR amended~~The interest rate charged to GSWC and ASUS is sufficient to cover AWR’s interest expense under the credit ~~facility to temporarily increase the borrowing capacity by $35 million to $260 million until December 31, 2020, at which point the commitment will be reduced to $200 million.~~facility. As of March 31, ~~2020,~~2021, there was ~~$232.0~~$107.0 million outstanding under this facility. ~~Management believes further increases to AWR's credit facility can be obtained until long-term financing can be issued.~~

~~On April 24, 2020, the newly created entity, Bear Valley Electric Service, Inc., entered into~~BVESI has a ~~commitment letter with a bank that agreed to establish a $50~~separate $35 million revolving credit facility, ~~effective~~which expires in ~~June 2020 for a period~~July 2023. As of ~~three years, subject to the execution and delivery of a definitive revolving credit agreement.~~March 31, 2021, there was $22.0 millionoutstanding under this facility. Borrowings made under this facility ~~will~~ support ~~the electric business~~BVESI's operations and capital expenditures. Under the terms of the credit agreement, BVESI has the option to request an increase in the facility by an additional $15.0 million.

~~The CPUC requires~~On April 23, 2021, GSWC notified holders of its 9.56% private placement notes totaling $28 million and due in 2031, of its intent to ~~completely pay down all~~redeem the notes on May 24, 2021. Pursuant to the note agreement, the prepayment of the notes will include a redemption premium of 3% on par value. GSWC will fund the redemption through intercompany borrowings from AWR ~~within a 24-month period. The end of~~parent, and plans to issue new debt in 2022. AWR will fund the ~~next 24-month period in which GSWC is required to completely pay down its~~ intercompany borrowings will be in November 2020. As a result, GSWC’s intercompany borrowings of $182.4 million as of March 31, 2020 have been classified as a current liability on GSWC’s balance sheet. GSWC intends to use the proceeds from any new long-term debt to reduceusing its ~~intercompany borrowings and to partially fund capital expenditures. AWR parent intends to use any financing proceeds from GSWC to pay down the amounts outstanding under its~~revolving credit facility.

As part of the response to the COVID-19 ~~outbreak,~~pandemic, GSWC ~~has~~and BVESI have suspended ~~through April 2021~~ service disconnections for ~~nonpayments~~non-payment pursuant to CPUC ~~orders, is waiving reconnection or facilities fees for~~orders. This has affected ~~customers, and is suspending deposit requirements for affected customers who must reconnect to the system. This is expected to reduce~~ Registrant's cash flows from operating activities and ~~increase borrowings~~increased the need to borrow under AWR's and BVESI's credit ~~facility. The magnitude~~facilities. In February 2021, the CPUC adopted a resolution requiring utilities in California to file transition plans to address the eventual discontinuance of the ~~reduction~~emergency customer protections by proactively communicating with customers to ~~cash flows is difficult~~enroll in programs to ~~predict at this time,~~manage their utility bills and ~~is dependent on variables such as how long stay-at-home orders issued by state~~informing them of the changes to programs in which they are already enrolled. On April 1, 2021, GSWC and ~~local governments will remain in place, how successful such measures will be in containing~~BVESI filed their respective transition plans with the ~~outbreak, and the nature and effectiveness of government assistance.~~CPUC.

In ~~December 2019,~~March 2021, Standard and Poor’s Global Ratings (“S&P”) affirmed an A+ credit rating ~~with a stable outlook on~~for both AWR and GSWC. S&P also revised its rating outlook to negative from stable for both companies. S&P’s debt ratings range from AAA (highest possible) to D (obligation is in default). In ~~May 2019,~~June 2020, Moody's Investors Service ("Moody's") ~~affirmed~~also reaffirmed its A2 rating with a ~~revised~~stable outlook ~~from positive to stable~~ for GSWC. Securities ratings are not recommendations to buy, sell or hold a security, and are subject to change or withdrawal at any time by the rating agencies. Registrant believes that AWR’s sound capital structure and A+ credit rating, combined with its financial discipline, will enable ~~AWR~~Registrant to access the debt and equity markets. Recent economic stimulus efforts by the federal government has provided additional liquidity to the financial markets, which management believes GSWC can access for future debt financing. However, unpredictable financial market conditions in the future may limit its access or impact the timing of when to access the market, in which case Registrant may choose to temporarily reduce its capital spending.

AWR’s ability to pay cash dividends on its Common Shares outstanding depends primarily upon cash flows from its subsidiaries. AWR intends to continue paying quarterly cash dividends on or about March 1, June 1, September 1 and December 1, subject to earnings and financial conditions, regulatory requirements and such other factors as the Board of Directors may deem relevant. ~~Registrant has paid common dividends for over 80 consecutive years.~~ On April 30, ~~2020,~~2021, AWR's Board of Directors approved a second quarter dividend of ~~$0.305~~$0.335 per share on AWR's Common Shares. Dividends on the Common Shares will be paid on June ~~1, 2020~~2, 2021 to shareholders of record at the close of business on May ~~15, 2020.~~17, 2021. AWR has paid common dividends every year since 1931, and has increased the dividends received by shareholders each calendar year for 66 consecutive years, which places it in an exclusive group of companies on the New York Stock Exchange that have achieved that result. AWR's current policy is to achieve a compound annual growth rate in the dividend of more than 7% over the long-term.

Registrant's current liabilities may at times exceed its current assets. Management believes that internally generated ~~funds,~~cash flows from operations, borrowings from AWR's and BVESI's credit ~~facility, as well as the new $50 million revolving credit facility at Bear Valley Electric~~

~~Service, Inc. expected~~facilities, and access to ~~be effective in June 2020,~~long-term financing from capital markets will be adequate to provide sufficient capital to maintain normal operations and to meet ~~its~~ capital and financing ~~requirements.~~requirements of AWR and its subsidiaries.

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Cash Flows from Operating Activities:

Cash flows from operating activities have generally provided sufficient cash to fund operating requirements, including a portion of construction expenditures at GSWC and BVESI, and construction expenses at ASUS, and to pay dividends. Registrant’s future cash flows from operating activities are expected to be affected by a number of factors, including utility regulation; changes in tax law; maintenance expenses; inflation; compliance with environmental, health and safety standards; production costs; customer growth; per-customer usage of water and electricity; weather and seasonality; conservation efforts; compliance with local governmental requirements, including mandatory restrictions on water use; the impact of the COVID-19 pandemic on its customers' ability to pay utility bills and required cash contributions to pension and post-retirement plans. Future cash flows from contracted services subsidiaries will depend on new business activities, existing operations, the construction of new and/or replacement infrastructure at military bases, timely economic price and equitable adjustment of prices, ~~and~~ timely collection of payments from the U.S. government and other prime contractors operating at the military bases and any adjustments arising out of an audit or investigation by federal governmental agencies.

ASUS funds its operating expenses primarily through internal operating sources, which include U.S. government funding under 50-year contracts for operations and maintenance costs and construction activities, as well as investments by, or loans from, AWR. ASUS, in turn, provides funding to its subsidiaries. ASUS's subsidiaries may also from time to time provide funding to ASUS or its subsidiaries.

Cash flows from operating activities are primarily generated by net income, adjusted for non-cash expenses such as depreciation and amortization, and deferred income taxes. Cash generated by operations varies during the year. Net cash provided by operating activities of Registrant was ~~$15.7~~$24.7 million for the three months ended March 31, ~~2020~~2021 as compared to ~~$29.4~~$15.7 million for the same period in ~~2019. There~~2020. This was ~~a decrease~~largely due to recent improvements in cash flows from accounts receivable from utility customers, ~~due to the economic impact associated with stay-at-home orders issued~~which were negatively impacted by ~~state and local governments in response to~~ the COVID-19 pandemic and the CPUC-mandated suspension of service disconnections to customers for nonpayment. There were also decreases in cash flows resulting from the timing in billing of and cash receipts for construction work at military bases during the three months ended March 31,throughout 2020. The billings (and cash receipts) for construction work at our contracted services segment generally occur at completion of the work or in accordance with a billing schedule contractually agreed to with the U.S. government and/or other prime contractors. Thus, cash flow from construction-related activities may fluctuate from period to period with such fluctuations representing timing differences of when the work is being performed and when the cash is received for payment of the work. The timing of cash receipts and disbursements related to other working capital items also affected the change in net cash provided by operating activities.

Cash Flows from Investing Activities:

Net cash used in investing activities was ~~$33.4~~$37.0 million for the three months ended March 31, ~~2020~~2021 as compared to ~~$40.3~~$33.4 million for the same period in ~~2019.~~2020 largely due to an increase in capital expenditures at the regulated utilities. Registrant invests capital to provide essential services to its regulated customer base, while working with ~~its regulators~~the CPUC to have the opportunity to earn a fair rate of return on investment. Registrant’s infrastructure investment plan consists of both infrastructure renewal programs (where infrastructure is replaced, as needed) and major capital investment projects (where new water treatment, supply and delivery facilities are constructed). ~~GSWC~~The regulated utilities may also be required from time to time to relocate existing infrastructure in order to accommodate local infrastructure improvement projects. Projected capital expenditures and other investments are subject to periodic review and revision. For fiscal 2021, the regulated utilities' company-funded capital expenditures are expected to be between $120 and $135 million.

Cash Flows from Financing Activities:

Registrant’s financing activities include primarily: (i) the ~~sale~~ proceeds from the issuance ~~of Common Shares and stock option exercises and the repurchase~~ of Common Shares, (ii) the issuance and repayment of long-term debt and notes payable to banks, and (iii) the payment of dividends on Common Shares. In order to finance new infrastructure, GSWC also receives customer advances (net of refunds) for, and contributions in aid of, construction. Borrowings on ~~Registrant's~~AWR's and BVESI's credit ~~facility~~facilities are used to fund GSWC and BVESI capital expenditures, respectively, until long-term financing is arranged. Overall debt levels are expected to increase to fund a portion of the costs of the capital expenditures that will be made by the regulated utilities.

Net cash ~~provided~~used by financing activities was ~~$16.8~~$17.5 million for the three months ended March 31, ~~2020~~2021 as compared to ~~$5.7~~cash provided of $16.8 million during the same period in ~~2019.~~2020. This ~~increase~~decrease in cash ~~provided from financing activities~~ was primarily due to ~~the repayment~~a pay down of ~~$40.0 million of GSWC's 6.70% senior note, which matured in March 2019. The funds for repayment of this note came from~~AWR's revolving credit facility ~~borrowings. There was no similar repayment made~~ during the three months ended March 31, 2021, as compared to an increase in net borrowings on the credit facility during the same period in 2020.

GSWC

GSWC funds its operating expenses, payments on its debt, dividends on its outstanding common shares, and a portion of its construction expenditures through internal sources. Internal sources of cash flow are provided primarily by retention of a portion of earnings from operating activities. Internal cash generation is influenced by factors such as weather patterns, conservation efforts, environmental regulation, litigation, changes in tax law and deferred taxes, changes in supply costs and

regulatory decisions affecting GSWC’s ability to recover these supply costs, timing of rate relief, increases in maintenance expenses and capital expenditures, surcharges authorized by the CPUC to enable GSWC to recover expenses previously incurred from customers, and CPUC requirements to refund amounts previously charged to customers. Internal cash flows may also be impacted ~~from~~by delays in receiving payments from GSWC customers due to the ~~associated~~ economic impact of the COVID-19 pandemic and ~~new~~ state legislation ~~issued regarding~~suspending customer ~~disconnection requirements.~~disconnections for non-payment.

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GSWC may, at times, utilize external sources ~~including~~for long-term financing, as well as obtain funds from equity investments and intercompany borrowings from AWR ~~and long-term debt~~ to help fund a portion of its operations and construction expenditures. In ~~March~~July 2020, GSWC completed the issuance of unsecured private placement notes totaling $160.0 million. AWR ~~amended its~~borrows under a revolving credit facility, which expires in May 2023, and provides funds to ~~temporarily increase~~GSWC in support of its operations under intercompany borrowing capacity to $260 million, effective through December 31, 2020. AWR’s borrowing capacity will decrease to $200 million on January 1, 2021. Under the terms of an intercompany agreement that may be amended if necessary, GSWC may borrow up to $222 million from AWR. Management intends to obtain additional financing during 2020 by issuing long-term debt at GSWC, pending CPUC approval of a finance application filed in November 2019. On April 27, 2020, the CPUC issued a proposed decision in GSWC's finance application approving the requested additional financing. A final decision on the finance application is expected to be issued during the second quarter of 2020. GSWC intends to use the proceeds from any additional long-term debt to reduce its intercompany borrowings and to partially fund capital expenditures. arrangements.

In addition, GSWC receives advances and contributions from customers, ~~homebuilders~~home builders and real estate developers to fund construction necessary to extend service to new areas. Advances for construction are generally refundable at a rate of 2.5% in equal annual installments over 40 years. Amounts that are no longer subject to refund are reclassified to contributions in aid of construction. Utility plant funded by advances and contributions is excluded from rate base. Generally, GSWC amortizes contributions in aid of construction at the same composite rate of depreciation ~~applicable to~~for the related property.

As is often the case with public utilities, GSWC’s current liabilities may at times exceed its current assets. Management believes that internally generated funds, along with the proceeds from the issuance of long-term debt, borrowings from AWR and common share issuances to AWR, will be adequate to provide sufficient capital to enable GSWC to maintain normal operations and to meet its capital and financing requirements pending recovery of costs in rates.

The CPUC requires GSWC to completely pay down all intercompany borrowings from AWR within a 24-month period. During the fourth quarter of 2020, GSWC paid down intercompany borrowings owed to AWR. The end of the next 24-month period in which GSWC is required to completely pay down its intercompany borrowings is at the end of March 2023 since GSWC had no borrowings from AWR as of March 31, 2021.

On July 1, 2020, GSWC completed the transfer of the net assets from its electric utility division to BVESI. As a result of this transfer, from July 1, 2020 onward, the cash flows of the electric segment are no longer included in GSWC's statement of cash flows, but continue to be included in AWR's consolidated statement of cash flows.

Cash Flows from Operating Activities:

Net cash provided by operating activities was ~~$17.9~~$22.8 million for the three months ended March 31, ~~2020~~2021 as compared to ~~$25.9~~$17.9 million for the same period in ~~2019. There~~2020. This was ~~a decrease~~largely due to recent improvements in cash flows from accounts receivable from utility customers, ~~due to the economic impact associated with stay-at-home orders issued~~which were negatively impacted by ~~state and local governments in response to~~ the COVID-19 pandemic ~~and the CPUC-mandated suspension of customer service disconnections for nonpayment.~~throughout 2020. The timing of cash receipts and disbursements related to other working capital items also affected the change in net cash provided by operating activities.

Cash Flows from Investing Activities:

Net cash used in investing activities was ~~$31.9~~$43.7 million for the three months ended March 31, ~~2020~~2021 as compared to ~~$38.9~~$31.9 million for the same period in ~~2019. Cash used~~2020. In October 2020, AWR issued an interest bearing promissory note to GSWC, which expires in May 2023. Under the terms of this note, AWR may borrow from GSWC amounts up to $30 million for working capital purposes. AWR agrees to pay any unpaid principal amounts outstanding under this note, plus accrued interest. During the first quarter of 2021, AWR had net borrowings of $12 million from GSWC under the terms of the note.

Furthermore, due to the electric utility reorganization effective July 1, 2020, GSWC's cash flows from investing activities during the three months ended March 31, 2021 do not include the electric segment's capital expenditures, ~~was $32.0 million~~whereas the cash flows for the three months ended March 31, 2020 ~~as compared to $39.1 million during~~include the ~~same period in 2019. During 2020, GSWC's company-funded~~electric segment's capital ~~expenditures are estimated to be approximately $115 - $130 million barring any delays resulting from changes in GSWC's capital improvements schedule due to the COVID-19 pandemic.~~expenditures.

Cash Flows from Financing Activities:

Net cash ~~provided by~~used in financing activities was ~~$14.0~~$12.2 million for the three months ended March 31, ~~2020~~2021 as compared to ~~$9.4~~$14.0 million net cash provided for the same period in ~~2019.~~2020. This ~~increase~~decrease in cash provided from financing activities was due to ~~the repayment of $40.0 million of GSWC's 6.70% senior note, which matured in March 2019. There was no similar repayment made~~net borrowings from AWR during the ~~three months ended March 31, 2020.~~first quarter of 2020, while there were no intercompany borrowings from AWR parent during the first quarter of 2021.

Contractual Obligations and Other Commitments

Registrant has various contractual obligations, which are recorded as liabilities in the consolidated financial statements. Other items, such as certain purchase commitments, are not recognized as liabilities in the consolidated financial statements but are required to be disclosed. In addition to contractual maturities, Registrant has certain debt instruments that contain an annual sinking fund or other principal payments. Registrant believes that it will be able to refinance debt instruments at their maturity through public issuance, or private placement, of debt or equity. Annual payments to service debt are generally made from cash flows from operations.

On April 24, 2020, the newly created entity, Bear Valley Electric Service, Inc., entered into a commitment letter with a bank that agreed to establish a $50 million revolving credit facility effective in June 2020 for a period of three years, subject to the execution and delivery of a definitive revolving credit agreement. Bear Valley Electric Service, Inc. intends to utilize the credit facility to fund its operations and capital expenditures.

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Contractual Obligations, Commitments and Off-Balance Sheet Arrangements” section of the Registrant’s Form 10-K for the year ended December 31, ~~2019~~2020 filed with the SEC for a detailed discussion of contractual obligations and other commitments.

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Contracted Services

Under the terms of the current and future utility privatization contracts with the U.S. government, each contract's price is subject to an economic price adjustment (“EPA”) on an annual basis. In the event that ASUS (i) is managing more assets at specific military bases than were included in the U.S. government’s request for proposal, (ii) is managing assets that are in substandard condition as compared to what was disclosed in the request for proposal, (iii) prudently incurs costs not contemplated under the terms of the utility privatization contract, and/or (iv) becomes subject to new regulatory requirements, such as more stringent water-quality standards, ASUS is permitted to file, and has filed, requests for equitable adjustment (“REAs”). The timely filing for and receipt of EPAs and/or REAs continues to be critical in order for the Military Utility Privatization Subsidiaries to recover increasing costs of operating, maintaining, renewing, and replacing the water and/or wastewater systems at the military bases it serves.

Under the Budget Control Act of 2011 (the “2011 Act”), substantial automatic spending cuts, known as "sequestration," have impacted the expected levels of Department of Defense budgeting. The Military Utility Privatization Subsidiaries have not experienced any earnings impact to their existing operations and maintenance and renewal and replacement services, as utility privatization contracts are an "excepted service" within the 2011 Act. While the ongoing effects of sequestration have been mitigated through the passage of various legislation, most recently the Bipartisan Budget Act of 2019 for fiscal years 2020 and 2021, similar issues may arise as part of fiscal uncertainty and/or future debt-ceiling limits imposed by Congress. However, any future impact on ASUS and its operations through the Military Utility Privatization Subsidiaries will likely be limited to (a) the timing of funding to pay for services rendered, (b) delays in the processing of EPAs and/or REAs, (c) the timing of the issuance of contract modifications for new construction work not already funded by the U.S. government, and/or (d) delays in the solicitation for and/or awarding of new contracts under the Department of Defense utility privatization program.

At times, the ~~DCAA~~Defense Contract Auditing Agency and/or the ~~DCMA~~Defense Contract Management Agency may, at the request of a contracting officer, perform audits/reviews of contractors for compliance with certain government guidance and regulations, such as the Federal Acquisition Regulations and Defense Federal Acquisition Regulation Supplements. Certain audit/review findings, such as system deficiencies for government-contract-business-system requirements, may result in delays in the resolution of filings submitted to and/or the ability to file new proposals with the U.S. government.

Regulatory Matters

Water Segment:

Recent Changes in Rates

The CPUC approved water rate increases effective January 1, ~~2020.~~2021. These increases are expected to generate an additional ~~$10.4~~$11.1 million in the adopted water gross margin for ~~2020~~2021 as compared to the adopted water gross margin in ~~2019. The CPUC final decision on the~~2020.

General Rate Case

On July 15, 2020, GSWC filed a general rate case ~~issued in May 2019 also allows~~application for ~~an additional increase~~all its water regions and the general office. This general rate case will determine new water rates for the years 2022 – 2024. Among other things, GSWC requested capital budgets of approximately $450.6 million for the three-year rate cycle, and another $11.4 million of capital projects to be filed for revenue recovery through advice letters when those projects are completed. A decision in the water general rate case is scheduled for the fourth quarter of 2021, ~~subject~~with new rates to become effective January 1, 2022.

Final Decision on the ~~results~~First Phase of the Low-Income Affordability Rulemaking

On August 27, 2020, the CPUC issued a final decision in the first phase of the CPUC’s Order Instituting Rulemaking evaluating the low income ratepayer assistance and affordability objectives contained in the CPUC’s 2010 Water Action Plan. Based on the final decision, any general rate case application filed by GSWC and the other California water utilities after August 27, 2020 may not include a proposal to continue the use of the WRAM or MCBA. Instead the utility may include a proposal to use a limited price adjustment mechanism and an incremental supply cost balancing account.

The final decision will not have any impact on GSWC's WRAM or MCBA balances during the current rate cycle (2019 – 2021). In February 2021, a procedural hearing in this pending general rate case was held, and the assigned administrative law judge in the proceeding clarified that GSWC may continue the use of the WRAM and MCBA through the year 2024. GSWC’s next general rate case application will be filed in 2023 to establish new rates for the years 2025 – 2027 and, based on the August 27, 2020 decision, may not include the WRAM or MCBA for those years. Since its implementation in 2008, the WRAM and MCBA have helped mitigate fluctuations in GSWC’s earnings ~~test~~due to changes in water consumption by its customers or changes in water supply mix. Replacing them with other more limited mechanisms recommended in the final decision would likely result in more volatility in GSWC’s future earnings and ~~changes to~~could result in less than or more than full recovery of its authorized water gross margin. In October 2020, GSWC, the ~~forecasted inflationary index values.~~other California water utilities, and the California Water Association filed separate applications for rehearing on this matter. At this time, management cannot predict the outcome of this matter.

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Cost of Capital Proceeding

Investor-owned water utilities serving California are required to file their cost of capital applications on a triennial ~~basis, with the next scheduled filing required to have taken place on May 1, 2020 and to be effective for the years 2021 - 2023. In January 2020,~~basis. GSWC, along with ~~the~~ three other investor-owned water utilities ~~requested an extension of~~in California, filed a joint request with the ~~date by which each of them must file its 2020~~CPUC in January 2021 to postpone the cost of capital ~~applications. In March 2020, the CPUC approved the request, postponing the filing date by one year until~~applications from May 1, 2021 to May 1, 2022, and to keep the current authorized cost of capital parameters in effect through 2022. In February 2021, the CPUC denied the request. GSWC intends to file its cost of capital application with ~~a corresponding~~the CPUC on May 3, 2021 (end of business day). A final decision on this proceeding is scheduled for the fourth quarter of 2021, with an effective date of January 1, 2022. The CPUC also approved the joint parties’ request to leave the current Water Cost of Capital Mechanism in place, but there will be no changes to the companies’ rate of return on rate base during the one-year extension, regardless of what the mechanism might otherwise indicate.

Finance Application

In November 2019, GSWC filed a finance application with the CPUC requesting, among other things, authorization to issue additional long-term debt and equity securities not to exceed $465 million to support its water operations. On ~~April 27,~~May 7, 2020, the ~~assigned administrative law judge at~~CPUC approved the ~~CPUC issued a proposed decision approving GSWC’s request. A final decision is expected during~~finance application. Following the ~~second quarter~~CPUC’s approval, on July 8, 2020, GSWC completed the issuance of ~~2020. Upon approval, GSWC expects to issue long-term debt and use the proceeds to pay down intercompany borrowings and to fund operations and capital expenditures.~~

unsecured private placement notes totaling $160.0 million.

Electric Segment:

Recent Changes in Rates

On August 15, 2019, the CPUC issued a final decision on athe electric segment's general rate case which, among other things, increases the adopted electric gross margin by ~~$1.2 million for 2020, by~~ $1.1 million for 2021, and by $1.0 million for ~~2022 (the~~2022. The rate case decision continues to apply for BVESI.

Wildfire Mitigation Plans and Safety Certification

California requires all investor-owned electric ~~rate increases are not subject~~utilities to submit an ~~earnings test).~~

~~Application~~annual wildfire mitigation plan (WMP) to ~~Transfer Electric Utility Operations~~the CPUC for approval. The WMP is to ~~New Subsidiary~~:

~~GSWC~~include a utility's plans on constructing, maintaining, and operating its electrical lines and equipment to minimize the risk of catastrophic wildfire. In February 2019, the electric segment filed ~~applications~~its first WMP, which was subsequently approved by the CPUC in June 2019. Among other things, the WMP approves capital projects and programs dedicated to improving system safety and reliability and, specifically, aimed at reducing the possibility of wildfires. Upon approval in June 2019, the electric segment commenced executing its WMP immediately. BVESI's second WMP filed with the CPUC in 2020 was approved in January 2021. The CPUC is currently reviewing BVESI's latest WMP submission. Capital expenditures and other costs incurred as a result of the ~~FERC~~WMP are subject to CPUC audit.

Additionally, the California legislature enacted Assembly Bill (AB) 1054 in ~~December 2018 and~~ July 2019, ~~respectively,~~which among other things, changed the burden of proof applicable in CPUC proceedings in which an electric utility with a valid safety certification seeks to ~~transfer~~recover wildfire costs. Traditionally, an electric utility seeking to recover costs had the ~~assets and liabilities~~burden to prove that it acted reasonably. Under AB 1054, if an electric utility has a valid safety certification, it will be presumed to have acted reasonably unless a party to the relevant proceeding creates a “serious doubt” as to the reasonableness of the ~~BVES division of~~utility’s conduct. GSWC to Bear Valley Electric Service, Inc., a newly created separate legal entity that will be a stand-alone subsidiary of AWR. Due to the differences in operations, regulations, and risks, management believes that operatingreceived an initial safety certification for its electric ~~business~~division from the CPUC in ~~a separate legal entity and stand-alone subsidiary of AWR is in~~February 2020. Following the ~~best interests of~~reorganization, the ~~customers, employees, and the communities served. The FERC and~~ CPUC approved GSWC's application for reorganization in October and December of 2019, respectively. On April 30, 2020, the FERC also approved Bear Valley Electric Service Inc.'s application for market-based rate authority with an accompanying tariff. The reorganization plan is pending the completion of certain closing procedures to effectuate the transfer of the safety certification to BVESI in August 2020. In February 2021, BVESI filed its 2021 safety certification to the CPUC. BVESI's current safety certification remains in effect while the CPUC reviews BVESI's 2021 safety certification filing.

BVESI CEMA Regulatory Asset

BVESI activated a CEMA account to track the incremental costs incurred in response to a severe winter storm that occurred in February 2019 and which resulted in the declaration of an emergency by the governor of California. Incremental costs of $455,000 were included in the CEMA account and recorded as a regulatory asset. BVESI subsequently filed for recovery of these costs. In April 2021, the administrative law judge issued a proposed decision denying BVESI’s request for recovery, claiming that BVESI did not adequately demonstrate that the costs incurred were incremental and beyond costs already included in BVESI’s revenue requirement. The proposed decision does permit BVESI to file a new application on the issue of incrementality should it wish to continue pursuing recovery. BVESI did file a response to the proposed decision supporting BVESI's position. BVESI believes the storm costs were incremental and beyond what was included in its revenue requirement, and therefore, will plan on filing a new application to continue pursuing recovery. As a result, the costs in this CEMA account remain as a regulatory asset at March 31, 2021 as the Company continues to believe the incremental costs were properly tracked and included in the CEMA account consistent with the CPUC's well-established past practices. The CPUC allows CEMA accounts to be established following a state/federal declared emergency, and are therefore recognized as regulatory assets ~~and liabilities. When completed, the reorganization plan is~~for future recovery. However, if BVESI does not ~~expected to~~ultimately prevail in obtaining recovery, it will result in a ~~substantive change~~charge to ~~AWR's operations~~earnings for the write-off of this CEMA regulatory asset totaling $455,000. Although BVESI believes it has provided the necessary evidence to support recovery of its requested incremental CEMA costs, at this time, management cannot predict the final outcome of this matter.

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COVID-19:

In February 2021, the CPUC adopted a resolution that extended the existing emergency customer protections previously established by the CPUC through June 30, 2021, including the suspension of service disconnections for non-payment by electric utility customers in response to the on-going COVID-19 pandemic. For water utilities, the moratorium on service disconnections was implemented in response to an order by the governor of California, which we believe would require another action by the governor to cease the moratorium on service disconnections for our water customers. It is expected that the CPUC will work with the governor’s office to coordinate the lifting of the moratorium for water utility customers consistent with the electric customers. The CPUC's February resolution did extend the COVID-19-related memorandum accounts established by GSWC and ~~business segments.~~by BVESI to track incremental costs associated with complying with the resolution. In addition, the resolution required utilities in California to file transition plans to address the eventual discontinuance of the emergency customer protections.The goal of the transition plan is to effectively ease customers through a transition off the emergency customer protections by proactively communicating with customers to enroll in programs to manage their utility bills and informing them of the changes to programs in which they are already enrolled. GSWC and BVESI filed their respective transition plans with the CPUC on April 1, 2021.

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Regulatory Matters” section of the Registrant’s Form 10-K for the year-ended December 31, ~~2019~~2020 filed with the SEC for a discussion of other regulatory matters.

Environmental Matters

GSWC is required to comply with the safe drinking water standards established by the U.S. Environmental Protection Agency (“US EPA”) and the Division of Drinking Water ("DDW"), under the State Water Resources Control Board (“SWRCB”). The US EPA regulates contaminants that may have adverse health effects that are known or likely to occur at levels of public health concern, and the regulation of which will provide a meaningful opportunity for health risk reduction. The DDW, acting on behalf of the US EPA, administers the US EPA’s program in California. Similar state agencies administer these rules in the other states in which Registrant operates.

GSWC currently tests its water supplies and water systems according to, among other things, requirements listed in the Federal Safe Drinking Water Act (“SDWA”). In compliance with the SDWA and to assure a safe drinking water supply to its customers, GSWC has incurred operating costs for testing to determine the levels, if any, of the constituents in its sources of supply and additional expense to treat contaminants in order to meet federal and state maximum contaminant level standards and consumer demands. GSWC expects to incur additional capital costs as well as increased operating costs to maintain or improve the quality of water delivered to its customers in light of anticipated stress on water resources associated with watershed and aquifer pollution, as well as to meet future water quality standards. The CPUC ratemaking process provides GSWC with the opportunity to recover prudently incurred capital and operating costs in future filings associated with achieving water quality standards. Management believes that such incurred and expected future costs will be authorized for recovery by the CPUC.

Drinking Water Notifications Levels:

In July 2018, DDW issued drinking water notification levels for certain fluorinated organic chemicals used to make certain fabrics and other materials, and used in various other industrial processes. These chemicals were also present in certain fire suppression agents. These chemicals are referred to as perfluoroalkyl substances ~~(PFAS)~~("PFAS"). Notification levels are health-based advisory levels established for contaminants in drinking water for which maximum contaminant levels have not been established. The US EPA has also established health advisory levels for these compounds. Notification to consumers is required when the advisory levels or notification levels are exceeded.

California Assembly Bill No. 756, signed into law in July 2019 and effective in January 2020 requires, among other things, additional notification requirements for water systems detecting levels of PFAS above certain levels. GSWC is in the process of collecting and analyzing samples for PFAS under the direction of DDW. GSWC has removed some wells from service and expects to incur additional costs to treat impacted wells. GSWC has provided customers with information regarding PFAS detection and provided updated information via its website. In February 2020, DDW established new response levels for two of the PFAS compounds - 10 parts per trillion for perfluorooctanoic acid ~~(PFOA)~~("PFOA") and 40 parts per trillion for perfluorooctanesulfonic acid ~~(PFOS)~~("PFOS"). In March 2021, DDW issued a notification level and response level of 0.5 parts per billion (ppb) and 5 ppb, respectively, for perfluorobutane sulfonic acid (PFBS). The CPUC has authorized GSWC to track incremental costs, including laboratory testing and monitoring costs, customer and public notification costs, and chemical and operating treatment costs, incurred as a result of PFAS contamination in a Polyfluoroalkyl Substances Memorandum Account ("PFASMA") to be filed with the CPUC for future recovery.

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See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Environmental Matters” section of the Registrant’s Form 10-K for the year-ended December 31, ~~2019~~2020 filed with the SEC for a discussion of environmental matters applicable to GSWC and ASUS and its subsidiaries.

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Water Supply

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—California Drought” section of the Registrant’s Form 10-K for the year-ended December 31, ~~2019~~2020 filed with the SEC for a discussion of water supply issues. The discussion below focuses on significant matters and changes since December 31, ~~2019.~~2020.

Drought Impact:

In May 2018, the California Legislature passed two bills that provide a framework for long-term water-use efficiency standards and drought planning and resiliency. The initial steps for implementing this legislation have been laid out in a summary document by the California Department of Water Resources ("DWR") and the State Water Resources Control Board ~~("SWRCB"~~(“SWRCB”). Over the next several years, State agencies, water suppliers and other entities will be working to meet the requirements and implement plans. A notable milestone is the establishment of an indoor water use standard of 55 gallons per capita per day (gpcd) until 2025, at which time the standard may be reduced to 52.5 gpcd or a new standard as recommended by DWR.

California's recent period of multi-year drought resulted in reduced recharge to the state's groundwater basins. GSWC utilizes groundwater from numerous groundwater basins throughout the state. Several of these basins, especially smaller basins, experienced lower groundwater levels because of the drought. Several of GSWC's service areas rely on groundwater as their only source of supply. Given the critical nature of the groundwater levels in California’s Central Coast area, GSWC implemented mandatory water restrictions in certain service areas, in accordance with CPUC procedures. In the event of water supply shortages beyond the locally available supply, GSWC would need to transport additional water from other areas, increasing the cost of water supply. Registrant's liquidity may be adversely impacted by changes in water supply costs.

~~Precipitation~~For the current 2020-2021 water year, precipitation and snow levels ~~to date in 2020~~ have been below ~~normal, with~~average. The April 1st snow survey showed levels around 59% of average for the Sierra snowpack and precipitation statewide ~~snowpack at about 64%~~is approximately 50% of ~~average.~~average for the water year. As a result, California is entering yet another concerning dry spell. As of April ~~28, 2020,~~27, 2021, the U.S. Drought Monitor reported that approximately ~~42%~~53% of California was considered in ~~a "Moderate~~"Extreme Drought" and approximately ~~20%~~88% of California was considered to be in ~~a "Severe Drought",~~“Severe Drought” as compared to ~~zero percent in both~~approximately 5% and 20% for those categories, respectively, one year ago. IfThese dry conditions

are more pronounced in northern and eastern portions of California, while the Coastal and Southern California areas continue to experience abnormally dry to moderate drought conditions. If these dry conditions continue or ~~get worse,~~worsen, the SWRCB or other regulatory agencies may impose emergency drought actions. On March 3, 2021 the United States Department of Agriculture declared a natural disaster for 50 counties in California, including those served by GSWC, due to drought impacts on agriculture. However, the State has not declared a similar proclamation and the DWR recently stated that implementation of State emergency powers is not necessary at this time. Due to local conditions, water-use restrictions and allocations remain in place for customers in some of GSWC’s service areas. GSWC ~~continues to assess~~has water supply ~~conditions~~contingency plans in place which address different actions to be taken based upon available water supply, and has increased customer communication regarding water conservation. GSWC must file with the CPUC before implementing any mandatory cut backs. Registrant's liquidity may be adversely impacted by water-use restrictions ~~in these service areas and will make appropriate adjustments as needed~~imposed on customers.

Metropolitan Water District/ State Water ~~Project~~:Project:

GSWC supplements groundwater production with wholesale purchases from the Metropolitan Water District of Southern California ("MWD") member agencies. Water supplies available to the MWD through the State Water Project ("SWP") vary from year to year based on several factors. Every year, the California Department of Water Resources ("DWR") establishes the SWP allocation for water deliveries to state water contractors. DWR generally establishes a percentage allocation of delivery requests based on several factors, including weather patterns, snow-pack levels, reservoir levels and biological diversion restrictions. The SWP is a major source of water for the MWD. In ~~January~~December 2020, DWR ~~adjusted~~set the initial SWP delivery allocation at 1510 percent of requests for the 2020 calendar year. Due to ongoing dry conditions, the delivery allocation was decreased to 5 percent in March 2021. However, MWD has stated that it currently has robust reserves in storage and is not currently projecting shortages in the current water year.

New Accounting Pronouncements

Registrant is subject to newly issued requirements as well as changes in existing requirements issued by the Financial Accounting Standards Board. See Note 1 of the Unaudited Notes to Consolidated Financial Statements.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

Registrant is exposed to certain market risks, including fluctuations in interest rates, commodity price risk primarily relating to changes in the market price of electricity at ~~GSWC's electric division,~~BVESI, and other economic conditions. Market risk is the potential loss arising from adverse changes in prevailing market rates and prices.

The quantitative and qualitative disclosures about market risk are discussed in Item 7A-Quantitative and Qualitative Disclosures About Market Risk, contained in Registrant’s Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020 filed with the SEC.

Item 4. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15(b) under the Securities and Exchange Act of 1934 (the “Exchange Act”), we have carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”), of the effectiveness, as of the end of the fiscal quarter covered by this report, of the design and operation of our “disclosure controls and procedures” as defined in Rule 13a-15(e) and 15d-15(e) promulgated by the SEC under the Exchange Act. Based upon that evaluation, the CEO and the CFO concluded that disclosure controls and procedures, as of the end of such fiscal quarter, were adequate and effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

(b) Changes in Internal Controls over Financial Reporting

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

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PART II

Item 1. Legal Proceedings

Registrant is subject to ordinary routine litigation incidental to its business, some of which may include claims for compensatory and punitive damages. No legal proceedings are pending, which are believed to be material. Management believes that rate recovery, proper insurance coverage and reserves are in place to insure against, among other things, property, general liability, employment, and workers’ compensation claims incurred in the ordinary course of business. Insurance coverage may not cover certain claims involving punitive damages.

Item 1A. Risk Factors

~~Except for risks associated with uncertainties arising from the COVID-19 pandemic, there~~There have been no significant changes in the risk factors disclosed in our ~~2019~~2020 Annual Report on Form ~~10-K. Some~~10-K filed with the SEC.

Table of ~~the risks due to the COVID-19 pandemic that have been identified by management to date include uncertainties arising out of:~~Contents

the impact of the COVID-19 pandemic on the ability of GSWC and the Military Privatization Subsidiaries to continue to operate, repair, maintain and improve their infrastructure and to provide utility services to their customers in the ordinary course while keeping their employees and customers and the communities and military bases on which they operate safe; the extent of this impact will depend, in part, on the degree to which federal, state and local governments restrict business and personal activities, the associated level of compliance by businesses and citizens and the degree to which “flattening the curve” is successful;

the impact of the COVID-19 pandemic on the ability of the supply chains of GSWC and the Military Privatization Subsidiaries to continue to provide necessary supplies and equipment to them and the ability of the subcontractors of GSWC and the Military Privatization Subsidiaries and other service providers to continue to provide services to them in the ordinary course; the extent of this impact will depend, in part, on the nature and effectiveness of government assistance to businesses and the length of time on which government restrictions on business activities remain in place and the extent of adverse health impacts on any affected businesses due to COVID-19;

~~the potential reduction to earnings and liquidity resulting from delinquent payments from utility customers affected by the economic slowdown caused by the COVID-19 pandemic;~~

~~the impact of COVID-19 on financial markets, which could negatively impact the ability of Registrant and its subsidiaries to obtain capital on reasonable terms and at reasonable rates;~~

~~the reduction in the fair value of plan assets in the pension and other retirement plans due to the significant negative impact of COVID-19 on financial markets;~~

possible increases in customer dissatisfaction due to the temporary closure of payment offices, increase in customer wait times due to increases in customer calls and general anxiety due to personal circumstances arising from the COVID-19 pandemic; and

uncertainties regarding actions that may be taken by the CPUC relating to such matters as recovery of amounts in the CEMA account, the recovery of costs of funding the pension and other retirement plans, delays in making capital improvements or changes in cost of capital.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The shareholders of AWR have approved the material features of all equity compensation plans under which AWR ~~directly~~ issues equity securities. The following table provides information about repurchases of Common Shares by AWR during the first quarter of ~~2020:~~

2021:

Period Total Number of
Shares
Purchased Average Price Paid
per Share Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs (1) Maximum Number
of Shares That May
Yet Be Purchased
under the Plans or
Programs (1)(3)
January 1 – 31, 2020 479
$ 87.42
—
—
February 1 – 29, 2020 311
$ 89.84
—
—
March 1 – 30, 2020 17,614
$ 76.83
—
—
Total 18,404
(2) $ 77.33
—


Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)	Maximum Number of Shares That May Yet Be Purchased under the Plans or Programs (1)(3)
January 1 – 31, 2021	294		$	81.10	—	—
February 1 – 28, 2021	546		$	78.15	—	—
March 1 – 31, 2021	3,074		$	72.52	—	—
Total	3,914	(2)	$	73.95	—

(1) None of the common shares were purchased pursuant to any publicly announced stock repurchase program.

(2) ~~Of this amount, 14,729~~All of these Common Shares were acquired on the open market for employees pursuant to the Company's 401(k) plan and the remainder was acquired on the open market for participants in the Common Share Purchase and Dividend Reinvestment Plan.

(3) Neither the 401(k) plan nor the Common Share Purchase and Dividend Reinvestment Plan contain a maximum number of ~~common shares~~Common Shares that may be purchased in the open market.

Item 3. Defaults Upon Senior Securities

None

Item 4. Mine Safety Disclosure

Not applicable

Item 5. Other Information


~~(a)~~	On April 30, 2020, AWR's Board of Directors approved a second quarter dividend of $0.305 per share on AWR's Common Shares. Dividends on the Common Shares will be paid on June 1, 2020 to shareholders of record at the close of business on May 15, 2020.


~~(b)~~	~~There have been no material changes during the first quarter of 2020 to the procedures by which shareholders may nominate persons to the Board of Directors of AWR.~~

(a) On April 30, 2021, AWR's Board of Directors approved a second quarter dividend of $0.335 per share on AWR's Common Shares. Dividends on the Common Shares will be paid on June 2, 2021 to shareholders of record at the close of business on May 17, 2021.

(b) There have been no material changes during the first quarter of 2021 to the procedures by which shareholders may nominate persons to the Board of Directors of AWR.

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Item 6. Exhibits

(a) The following documents are filed as Exhibits to this report:



3.1		By-Laws of American States Water Company incorporated by reference to Exhibit 3.1 of Registrant's Form 10-Q, filed August 6, 2012 (File No. 1-14431)

3.2		By-laws of Golden State Water Company incorporated by reference to Exhibit 3.2 of Registrant's Form 8-K filed May 13, 2011 (File No. 1-14431)

3.3		Amended and Restated Articles of Incorporation of American States Water Company, as amended, incorporated by reference to Exhibit 3.1 of Registrant's Form 8-K filed June 19, 2013

3.4		Restated Articles of Incorporation of Golden State Water Company, as amended, incorporated herein by reference to Exhibit 3.1 of Registrant's Form 10-Q for the quarter ended September 30, 2005 (File No. 1-14431)

4.1		Indenture, dated September 1, 1993 between Golden State Water Company and The Bank of New York Mellon Trust Company, N.A., as successor trustee, as supplemented, incorporated herein by reference to Exhibit 4.01 of Golden State Water Company Form S-3 filed December 12, 2008 (File No. 333-156112)

4.2		~~Indenture~~Note Purchase Agreement dated as of ~~December 1, 1998~~October 11, 2005 between ~~American States~~Golden State Water Company and ~~The Bank of New York Mellon Trust Company, N.A., as supplemented by the First Supplemental Indenture dated as of July 31, 2009~~Co-Bank, ACB incorporated ~~herein~~ by reference to Exhibit 4.1 of ~~American States Water Company's~~Registrant's Form ~~10-Q~~8-K filed October 13, 2005 (File No. 1-14431)

4.3		Description of Common Shares incorporated by reference to Exhibit 4.3 to Registrant's Form 10-K for the ~~quarter~~year ended ~~June 30, 2009 (File No. 1-14431)~~December 31, 2019

~~10.1~~4.4		Description of Debt Securities incorporated by reference to Exhibit 4.4 to Registrant's Form 10-K for the year ended December 31, 2019

10.1		Second Sublease dated October 5, 1984 between Golden State Water Company and Three Valleys Municipal Water District incorporated herein by reference to Registrant's Registration Statement on Form S-2, Registration No. 33-5151

10.2		Note Agreement dated as of May 15, 1991 between Golden State Water Company and Transamerica Occidental Life Insurance Company incorporated herein by reference to Registrant's Form 10-Q with respect to the quarter ended June 30, 1991 (File No. 1-14431)

10.3		Schedule of omitted Note Agreements, dated May 15, 1991, between Golden State Water Company and Transamerica Annuity Life Insurance Company, and Golden State Water Company and First Colony Life Insurance Company incorporated herein by reference to Registrant's Form 10-Q with respect to the quarter ended June 30, 1991 (File No. 1-14431)

10.4		Loan Agreement between California Pollution Control Financing Authority and Golden State Water Company, dated as of December 1, 1996 incorporated by reference to Exhibit 10.7 of Registrant's Form 10-K for the year ended December 31, 1998 (File No. 1-14431)

10.5		Agreement for Financing Capital Improvement dated as of June 2, 1992 between Golden State Water Company and Three Valleys Municipal Water District incorporated herein by reference to Registrant's Form 10-K with respect to the year ended December 31, 1992 (File No. 1-14431)

~~10.6~~	Water Supply Agreement dated as of June 1, 1994 between Golden State Water Company and Central Coast Water Authority incorporated herein by reference to Exhibit 10.15 of Registrant's Form 10-K with respect to the year ended December 31, 1994 (File No. 1-14431)

~~10.7~~10.6		2003 Non-Employee Directors Stock Purchase Plan, as amended, incorporated herein by reference to Exhibit 10.4 to Registrant's Form 8-K filed on May 20, 2015 (File No. 1-14431) (2)

~~10.8~~10.7		Dividend Reinvestment and Common Share Purchase Plan incorporated herein by reference to American States Water Company Registrant's Form S-3D filed November 12, 2008 (File No. 1-14431)

~~10.9~~10.8		Form of Amended and Restated Change in Control Agreement between American States Water Company or a subsidiary and certain executives incorporated herein by reference to Exhibit 10.4 to Registrant's Form 8-K filed on November 21, 2014 (File No. 1-14431) (2)

~~10.10~~10.9		Golden State Water Company Pension Restoration Plan, as amended, incorporated herein by reference to Exhibit 10.1 to the Registrant's Form 8-K filed on May 21, 2009 (File No. 1-14431) (2)

10.10
~~10.11~~	Amended and Restated Credit Agreement between American States Water Company dated June 3, 2005 with Wells Fargo Bank, N.A., as Administrative Agent, as amended , incorporated by reference to Exhibit 10.1 to Registrant's 8-K dated ~~March 18,~~June 29, 2020

~~10.12~~10.11		Form of Indemnification Agreement for executive officers incorporated by reference to Exhibit 10.21 to Registrant's Form 10-K for the year ended December 31, 2006 (File No. 1-14431) (2)

~~10.13~~	~~2008 Stock Incentive Plan, as amended, incorporated by reference to Exhibit 10.1 to Registrant's Form 8-K filed March 25, 2016 (2)~~



10.12
~~10.14~~		Form of Nonqualified Stock Option Agreement for officers and key employees for the 2008 Stock Incentive Plan incorporated herein by reference to Exhibit 10.3 to Registrant's Form 8-K filed November 21, 2014 (2)

~~10.15~~		Policy Regarding the Recoupment of Certain Performance-Based Compensation Payments incorporated herein by reference to Exhibit 10.3 to the Registrant's Form 8-K filed on April 2, 2014 (2)

Table of Contents


~~10.16~~10.13		~~Performance Incentive Plan incorporated herein by reference to Exhibit 10.1 to the Registrant's Form 8-K filed on May 20, 2015 (File No. 1-14431) (2)~~

~~10.17~~	Officer Relocation Policy incorporated herein by reference to Exhibit 10.5 to the Registrant's Form 8-K filed on July 31, 2009 (2)

~~10.18~~10.14		Form of Restricted Stock Unit Award Agreement for officers and key employees under the 2016 Stock Incentive Plan incorporated by reference to Exhibit 10.1 to Registrant's Form 8-K filed on February 6, 2017 (File No. 1-14431) (2)

~~10.19~~	Form of Indemnification Agreement for directors incorporated by reference herein to Exhibit 10.35 to the Registrant's Form 10-K for the period ended December 31, 2012 (1) (2)

~~10.20~~10.15		~~Performance Incentive Plan incorporated herein by reference to Exhibit 10.1 to the Registrant's Form 8-K filed on May 20, 2015 (File No. 1-14431) (2)~~

~~10.21~~	~~2019 Short-Term Incentive Program incorporated by reference herein to Exhibit 10.1 to Registrant’s Form 8-K filed on April 1, 2019 (2)~~

~~10.22~~	~~Form of 2019 Short-Term Incentive Award Agreement incorporated by reference to Exhibit 10.2 to the Registrant’s Form 8-K filed April 1, 2019 (2)~~

~~10.23~~	2016 Stock Incentive Plan incorporated by reference to Exhibit 10.1 to Registrant’s Form 8-K filed on May 19, 2016 (2)

~~10.24~~10.16		2013 Non-Employee Directors Plan incorporated by reference herein to Exhibit 10.2 to the Registrant's Form 8-K filed on March 25, 2016 (2)

~~10.25~~10.17		~~Form of Restricted Stock Unit Agreement for grants after December 31, 2014 under the 2008 Stock~~Performance Incentive Plan incorporated by reference to Exhibit 10.1 to Registrant’s Form 8-K filed ~~November 21, 2014~~on May 20, 2015 (2)

~~10.26~~10.18		Note Purchase Agreement dated July 8, 2020 incorporated by reference to Exhibit 10.1 to Registrant’s Form 8-K filed July 14, 2020

10.19		Form of ~~2016~~2019 Performance Award Agreement incorporated by reference to Exhibit 10.1 to Registrant's Form 8-K filed on February 1, 2019 (2)

10.20		Separation Agreement and General Release of All Claims incorporated by reference to Exhibit 10.24 to Registrant's Form 10-K filed on February 24, 2020 (2)

10.21		Form of 2020 Performance Award Agreement incorporated by reference to Exhibit 10.1 of Registrant's Form 8-K filed January ~~29, 2016~~31, 2020 (2)

~~10.27~~	~~Form of 2017 Performance Award Agreement incorporated by reference to Exhibit 10.2 of Registrant's Form 8-K filed on February 6, 2017 (2)~~

~~10.28~~	Form of Restricted Stock Award Agreement for officers with respect to time-vested restricted stock awards under the 2016 Stock Incentive Plan prior to January 1, 2018 incorporated by reference to Exhibit 10.1 of Form 8-K filed on February 6, 2017 ~~(2)~~

~~10.29~~10.22		Form of Restricted Stock Award Agreement for officers with respect to time-vested restricted stock awards under the 2016 Stock Incentive Plan after December 31, 2017 incorporated by reference to Exhibit 10.1 of Form 8-K filed on November 3, 2017 (2)

~~10.30~~10.23		Form of ~~2018~~2021 Performance Award Agreement incorporated by reference to Exhibit ~~10-1~~10.1 of ~~Registrant’s~~Registrant's Form 8-K filed February ~~2, 2018~~5, 2021 (2)

~~10.31~~10.24		~~2020~~2021 Short-Term Incentive Program incorporated by reference to Exhibit 10.1 of Registrant's Form 8-K filed on April 1, ~~2020~~2021 (2)

~~10.32~~10.25		Form of Award Agreement for the ~~2020~~2021 Short-Term Incentive Program incorporated by reference to Exhibit 10.2 of Registrant's Form 8-K filed on April 1, ~~2020~~2021 (2)

31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for AWR (1)

31.1.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for GSWC (1)

31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for AWR (1)

31.2.1		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for GSWC (1)

32.1		Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (3)

32.2		Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (3)



101.INS						XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH						XBRL Taxonomy Extension Schema (3)

101.CAL						XBRL Taxonomy Extension Calculation Linkbase (3)

101.DEF						XBRL Taxonomy Extension Definition Linkbase (3)

101.LAB						XBRL Taxonomy Extension Label Linkbase (3)

101.PRE						XBRL Taxonomy Extension Presentation Linkbase (3)

104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

(1) Filed concurrently herewith

(2) Management contract or compensatory arrangement

Table of Contents

(3) Furnished concurrently herewith

Table of Contents

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized and as its principal financial officer.


			AMERICAN STATES WATER COMPANY (“AWR”):

		By:	~~AMERICAN STATES WATER COMPANY (“AWR”):~~

~~By:~~	/s/ EVA G. TANG
			Eva G. Tang
			Senior Vice President - Finance, Chief Financial
			Officer, Corporate Secretary and Treasurer

			GOLDEN STATE WATER COMPANY (“GSWC”):

		By:	/s/ EVA G. TANG
			Eva G. Tang
			Senior Vice President - Finance, Chief Financial
			Officer and Secretary

		Date:	May ~~4, 2020~~3, 2021

5249


Part I		Financial Information		3

~~Part I~~Item 1:		Financial ~~Information~~Statements		3

~~Item 1:~~	~~Financial Statements~~		1

		Consolidated Balance Sheets of American States Water Company as of March 31, ~~2020~~2021 and December 31, ~~2019~~2020		52

		Consolidated Statements of Income of American States Water Company for the Three Months Ended March 31 ~~2020~~, 202 1 and ~~2019~~20 20		74

		Consolidated Statements of Changes in Common Shareholders' Equity - For the Three Months Ended March 31, ~~2020~~2021 and ~~2019~~2020		85

		Consolidated Statements of Cash Flows of American States Water Company for the Three Months Ended March 31, ~~2020~~2021 and ~~2019~~2020		96

		Balance Sheets of Golden State Water Company as of March 31, ~~2020~~2021 and December 31, ~~2019~~2020		107

		Statements of Income of Golden State Water Company for the Three Months Ended March ~~31, 2020~~3 1 , 202 1 and ~~2019~~20 20		129

		Statements of Changes in Common Shareholder's Equity - For the Three Months Ended March 31, ~~2020~~2021 and ~~2019~~2020		1310

		Statements of Cash Flows of Golden State Water Company for the ~~March~~Three Months Ended March ~~31, 2020~~3 1 , 202 1 and ~~2019~~20 20		1411

		Notes to Consolidated Financial Statements		1512

Item 2:		Management’s Discussion and Analysis of Financial Condition and Results of Operations		2624

Item 3:		Quantitative and Qualitative Disclosures About Market Risk		4643

Item 4:		Controls and Procedures		4643

Part II		Other Information

Item 1:		Legal Proceedings		4744

Item 1A:		Risk Factors		4744

Item 2:		Unregistered Sales of Equity Securities and Use of Proceeds		4845

Item 3:		Defaults Upon Senior Securities		4845

Item 4:		Mine Safety Disclosure		4845

Item 5:		Other Information		4845

Item 6:		Exhibits		4946

		Signatures		5249


(in thousands)	March 31, 2020			December 31, 2019			(in thousands)	March 31, 2021		December 31, 2020
Property, Plant and Equipment							Property, Plant and Equipment
Regulated utility plant, at cost	$	1,946,662		$	1,926,543		Regulated utility plant, at cost	$	2,080,048	$	2,043,791
Non-utility property, at cost	33,877			32,425			Non-utility property, at cost	37,053		36,578
Total	1,980,539			1,958,968			Total	2,117,101		2,080,369
Less - Accumulated depreciation	(548,142		)	(543,263		)	Less - Accumulated depreciation	(574,678)		(568,326)
Net property, plant and equipment	1,432,397			1,415,705			Net property, plant and equipment	1,542,423		1,512,043

Other Property and Investments							Other Property and Investments
Goodwill	1,116			1,116			Goodwill	1,116		1,116
Other property and investments	27,744			30,293			Other property and investments	35,811		35,318
Total other property and investments	28,860			31,409			Total other property and investments	36,927		36,434

Current Assets							Current Assets
Cash and cash equivalents	429			1,334			Cash and cash equivalents	6,951		36,737
Accounts receivable — customers (less allowance for doubtful accounts of $1,086 in 2020 and $857 in 2019)	24,599			20,907
Accounts receivable — customers (less allowance for doubtful accounts of $6,478 in 2021 and $5,263 in 2020)							Accounts receivable — customers (less allowance for doubtful accounts of $6,478 in 2021 and $5,263 in 2020)	22,016		29,162
Unbilled receivable	19,548			20,482			Unbilled receivable	23,315		25,836
Receivable from the U.S. government	20,879			22,613
Other accounts receivable (less allowance for doubtful accounts of $59 in 2020 and 2019)	3,032			3,096
Receivable from the U.S. government (Note 2)							Receivable from the U.S. government (Note 2)	23,606		25,182
Other accounts receivable (less allowance for doubtful accounts of $53 in 2021 and $53 in 2020)							Other accounts receivable (less allowance for doubtful accounts of $53 in 2021 and $53 in 2020)	2,574		3,960
Income taxes receivable	2,435			5,685			Income taxes receivable	68		103
Materials and supplies, at weighted average cost	7,343			6,429			Materials and supplies, at weighted average cost	8,751		8,619
Regulatory assets — current	20,974			20,930			Regulatory assets — current	10,628		13,088
Prepayments and other current assets	9,417			5,413			Prepayments and other current assets	10,028		5,555
Unrealized gains on purchased power contracts							Unrealized gains on purchased power contracts	1,224		0
Contract assets	18,749			15,567			Contract assets	9,751		8,873
Total current assets	127,405			122,456			Total current assets	118,912		157,115

Other Assets							Other Assets
Unbilled revenue- receivable from U.S. government	8,138			8,621			Unbilled revenue- receivable from U.S. government	9,305		9,945
Receivable from the U.S. government	42,740			42,206
Contract assets	1,094			64
Receivable from the U.S. government ( Note 2)							Receivable from the U.S. government ( Note 2)	52,373		49,488
Contract assets (Note 2)							Contract assets (Note 2)	3,975		1,384
Operating lease right-of-use assets	12,556			13,168			Operating lease right-of-use assets	10,718		11,146
Regulatory assets							Regulatory assets	7,635		3,451
Other	7,699			7,702			Other	10,553		10,597
Total other assets	72,227			71,761			Total other assets	94,559		86,011

Total Assets	$	1,660,889		$	1,641,331		Total Assets	$	1,792,821	$	1,791,603


						March 31,
	March 31,					2021		2020
	2020		2019
Total utility plant	$	1,432,397	$	1,325,502
Total net property, plant and equipment					Total net property, plant and equipment	1,542,423		$	1,432,397
Other assets	228,492		200,595		Other assets	250,398		228,492
Total consolidated assets	$	1,660,889	$	1,526,097	Total consolidated assets	$	1,792,821	$	1,660,889


	Three Months Ended March 31, 2021		Three Months Ended March 31, 2020		$ CHANGE		% CHANGE
OPERATING REVENUES
Water	$	75,029	$	71,424	$	3,605	5.0	%
Electric	11,539		10,968		571		5.2	%
Contracted services	30,492		26,685		3,807		14.3	%
Total operating revenues	117,060		109,077		7,983		7.3	%

OPERATING EXPENSES
Water purchased	15,239		14,092		1,147		8.1	%
Power purchased for pumping	2,145		1,859		286		15.4	%
Groundwater production assessment	4,440		4,148		292		7.0	%
Power purchased for resale	3,198		3,043		155		5.1	%
Supply cost balancing accounts	(2,427)		(2,165)		(262)		12.1	%
Other operation	8,217		8,486		(269)		(3.2)	%
Administrative and general	22,053		22,950		(897)		(3.9)	%
Depreciation and amortization	9,560		8,811		749		8.5	%
Maintenance	2,662		3,884		(1,222)		(31.5)	%
Property and other taxes	5,940		5,159		781		15.1	%
ASUS construction	15,704		13,111		2,593		19.8	%
Total operating expenses	86,731		83,378		3,353		4.0	%

OPERATING INCOME	30,329		25,699		4,630		18.0	%

OTHER INCOME AND EXPENSES
Interest expense	(6,258)		(6,050)		(208)		3.4	%
Interest income	455		558		(103)		(18.5)	%
Other, net	656		(2,234)		2,890		(129.4)	%
	(5,147)		(7,726)		2,579		(33.4)	%

INCOME BEFORE INCOME TAX EXPENSE	25,182		17,973		7,209		40.1	%

Income tax expense	5,914		3,901		2,013		51.6	%

NET INCOME	$	19,268	$	14,072	$	5,196	36.9	%

Basic earnings per Common Share	$	0.52	$	0.38	$	0.14	36.8	%

Fully diluted earnings per Common Share	$	0.52	$	0.38	$	0.14	36.8	%


	Three Months Ended March 31, 2020			Three Months Ended March 31, 2019			$ CHANGE			% CHANGE			Three Months Ended March 31, 2021		Three Months Ended March 31, 2020		$ CHANGE		% CHANGE
WATER OPERATING REVENUES (1)	$	71,424		$	64,723		$	6,701		10.4	%	WATER OPERATING REVENUES (1)	$	75,029	$	71,424	$	3,605	5.0	%
WATER SUPPLY COSTS:												WATER SUPPLY COSTS:
Water purchased (1)	$	14,092		$	13,140		$	952		7.2	%	Water purchased (1)	$	15,239	$	14,092	$	1,147	8.1	%
Power purchased for pumping (1)	1,859			1,538			321			20.9	%	Power purchased for pumping (1)	2,145		1,859		286		15.4	%
Groundwater production assessment (1)	4,148			3,746			402			10.7	%	Groundwater production assessment (1)	4,440		4,148		292		7.0	%
Water supply cost balancing accounts (1)	(2,274		)	(2,119		)	(155		)	7.3	%	Water supply cost balancing accounts (1)	(2,920)		(2,274)		(646)		28.4	%
TOTAL WATER SUPPLY COSTS	$	17,825		$	16,305		$	1,520		9.3	%	TOTAL WATER SUPPLY COSTS	$	18,904	$	17,825	$	1,079	6.1	%
WATER GROSS MARGIN (2)	$	53,599		$	48,418		$	5,181		10.7	%	WATER GROSS MARGIN (2)	$	56,125	$	53,599	$	2,526	4.7	%


ELECTRIC OPERATING REVENUES (1)	$	10,968		$	10,629		$	339		3.2	%	ELECTRIC OPERATING REVENUES (1)	$	11,539	$	10,968	$	571	5.2	%
ELECTRIC SUPPLY COSTS:												ELECTRIC SUPPLY COSTS:
Power purchased for resale (1)	$	3,043		$	3,704		$	(661	)	(17.8	)%	Power purchased for resale (1)	$	3,198	$	3,043	$	155	5.1	%
Electric supply cost balancing accounts (1)	109			747			(638		)	(85.4	)%	Electric supply cost balancing accounts (1)	493		109		384		352.3	%
TOTAL ELECTRIC SUPPLY COSTS	$	3,152		$	4,451		$	(1,299	)	(29.2	)%	TOTAL ELECTRIC SUPPLY COSTS	$	3,691	$	3,152	$	539	17.1	%
ELECTRIC GROSS MARGIN (2)	$	7,816		$	6,178		$	1,638		26.5	%	ELECTRIC GROSS MARGIN (2)	$	7,848	$	7,816	$	32	0.4	%



☒			Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934



☐			Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934


(in thousands, except number of shares)	March 31, 2020		December 31, 2019		(in thousands, except number of shares)	March 31, 2021		December 31, 2020
Capitalization					Capitalization
Common shares, no par value
Common shares, 0 par value					Common shares, 0 par value
Authorized: 60,000,000 shares					Authorized: 60,000,000 shares
Outstanding: 36,883,771 shares in 2020 and 36,846,614 shares in 2019	$	255,841	$	255,566
Outstanding: 36,913,017 shares in 2021 and 36,889,103 shares in 2020					Outstanding: 36,913,017 shares in 2021 and 36,889,103 shares in 2020	$	257,528	$	256,666
Earnings reinvested in the business	348,742		345,964		Earnings reinvested in the business	391,865		385,007
Total common shareholders’ equity	604,583		601,530		Total common shareholders’ equity	649,393		641,673
Long-term debt	280,971		280,996		Long-term debt	440,326		440,348
Total capitalization	885,554		882,526		Total capitalization	1,089,719		1,082,021

Current Liabilities					Current Liabilities
Notes payable to banks	32,000		5,000
Long-term debt — current	349		344		Long-term debt — current	364		358
Accounts payable	43,516		55,616		Accounts payable	57,360		63,788
Income taxes payable	171		95		Income taxes payable	6,474		6,783
Accrued other taxes	8,367		11,110		Accrued other taxes	9,888		11,902
Accrued employee expenses	14,681		14,255		Accrued employee expenses	18,138		15,122
Accrued interest	6,423		3,050		Accrued interest	7,277		4,832
Unrealized loss on purchased power contracts	4,280		3,171		Unrealized loss on purchased power contracts	0		1,537
Contract liabilities	10,675		11,167		Contract liabilities	1,049		1,800
Operating lease liabilities	1,815		1,849		Operating lease liabilities	2,010		2,013
Other	10,243		10,341		Other	10,450		10,437
Total current liabilities	132,520		115,998		Total current liabilities	113,010		118,572

Other Credits					Other Credits
Notes payable to bank	200,000		200,000		Notes payable to bank	129,000		134,200
Advances for construction	63,925		63,989		Advances for construction	65,622		63,374
Contributions in aid of construction - net	137,661		134,706		Contributions in aid of construction - net	141,366		140,332
Deferred income taxes	126,456		125,304		Deferred income taxes	131,894		131,172
Regulatory liabilities	19,107		23,380

Unamortized investment tax credits	1,274		1,295		Unamortized investment tax credits	1,206		1,224
Accrued pension and other postretirement benefits	69,213		68,469		Accrued pension and other postretirement benefits	96,201		95,639
Operating lease liabilities	11,174		11,739		Operating lease liabilities	9,159		9,636
Other	14,005		13,925		Other	15,644		15,433
Total other credits	642,815		642,807		Total other credits	590,092		591,010

Commitments and Contingencies (Note 9)					Commitments and Contingencies (Note 9)	0		0

Total Capitalization and Liabilities	$	1,660,889	$	1,641,331	Total Capitalization and Liabilities	$	1,792,821	$	1,791,603



	Three Months Ended March 31, 2019
	Common Shares			Reinvested
	Number			Earnings
	of			in the
(in thousands)	Shares	Amount		Business		Total
Balances at December 31, 2018	36,758	$	253,689	$	304,534	$	558,223
Add:
Net income				12,852		12,852
Exercise of stock options and other issuances of Common Shares	37	75				75
Stock-based compensation, net of taxes paid from shares withheld from employees related to net share settlements (Note 4)		463				463
Dividend equivalent rights on stock-based awards not paid in cash		70				70
Deduct:
Dividends on Common Shares				10,113		10,113
Dividend equivalent rights on stock-based awards not paid in cash				70		70
Balances at March 31, 2019	36,795	$	254,297	$	307,203	$	561,500



(dollar in thousands)	March 31, 2020		December 31, 2019
Unbilled receivables	$	10,259	$	10,467
Receivable from the U.S. government	$	63,619	$	64,819
Contract assets	$	19,843	$	15,631
Contract liabilities	$	10,675	$	11,167