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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
(Mark One)
 
☒Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
for the quarterly period ended JuneSeptember 30, 2020


or
☐Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
for the transition period from                    to                   
 
Commission file number   001-14431 
American States Water CompanyCompany
(Exact Name of Registrant as Specified in Its Charter)
 
California95-4676679
(State or Other Jurisdiction of Incorporation or Organization)(IRS Employer Identification No.)
630 E. Foothill BlvdSan DimasCA91773-1212
(Address of Principal Executive Offices)(Zip Code)
(909) (909) 394-3600
(Registrant’s Telephone Number, Including Area Code)
Not Applicable
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
Commission file number   001-12008 

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
Title of each classTrading symbolName of each exchange on which registered
Common sharesAWRNew York Stock Exchange
Golden State Water CompanyCompany
(Exact Name of Registrant as Specified in Its Charter)
California95-1243678
(State or Other Jurisdiction of Incorporation or Organization)(IRS Employer Identification No.)
630 E. Foothill BlvdSan DimasCA91773-1212
(Address of Principal Executive Offices)(Zip Code)
(909) (909) 394-3600
(Registrant’s Telephone Number, Including Area Code)
Not Applicable
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
 
Indicate by check mark whether Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.


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American States Water CompanyYes
x
No¨
Golden State Water CompanyYes
x
No¨
 
Indicate by check mark whether Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or such shorter period that the Registrant was required to submit and post such files).
American States Water CompanyYes
x
No¨
Golden State Water CompanyYes
x
No¨

 Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer”, “accelerated filer” and smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
American States Water Company
Large accelerated filerxAccelerated filer¨Non-accelerated filer¨Smaller reporting company☐Emerging growth company☐
Golden State Water Company
Large accelerated filer¨Accelerated filer¨Non-accelerated filerxSmaller reporting company☐Emerging growth company☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.¨
 Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)
American States Water CompanyYes☐Nox
Golden State Water CompanyYes☐Nox
As of JulyOctober 30, 2020, the number of Common Shares outstanding of American States Water Company was 36,883,87436,889,061 shares. As of JulyOctober 30, 2020, all of the 165 outstanding Common Shares of Golden State Water Company were owned by American States Water Company.
Golden State Water Company meets the conditions set forth in General Instruction (H)(1)(a) and (b) of Form 10-Q and is therefore filing this Form, in part, with the reduced disclosure format for Golden State Water Company.


AMERICAN STATES WATER COMPANY
and
GOLDEN STATE WATER COMPANY
FORM 10-Q
 
INDEX


3
3
Item 1:
Financial Statements
1
5
7
8
Consolidated Statements of Changes in Common Shareholders' Equity - For the Three and SixNine Months Ended JuneSeptember 30, 2020
98
109
1110
1211
1413
15
Statements of Changes in Common Shareholder's Equity - For the Three and SixNine Months Ended JuneSeptember 30, 2020
1614
1715
1816
1917
31
5958
5958
6059
6059
6160
6160
6160
6160
6261
6564


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PART I
Item 1. Financial Statements
General
 The basic financial statements included herein have been prepared by Registrant, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission.
 Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, all adjustments consisting of normal recurring items and estimates necessary for a fair statement of results for the interim period have been made.
 It is suggested that these financial statements be read in conjunction with the financial statements and notes thereto in the latest Annual Report on Form 10-K of American States Water Company and its wholly owned subsidiary, Golden State Water Company. 
Filing Format
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. and its subsidiaries ("ASUS"). On July 1, 2020, GSWC completed the transfer of the electric utility assets and liabilities from its electric division to BVESI, in exchange for common shares of BVESI. GSWC then immediately distributed all of BVESI's common shares to AWR, whereupon BVESI became wholly owned directly by AWR.
This quarterly report on Form 10-Q is a combined report being filed by two separate Registrants: AWR and GSWC. For more information, please see Note 1 of the Notes to Consolidated Financial Statements and the heading entitled "General" in "Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations." References in this report to “Registrant” are to AWR and GSWC collectively, unless otherwise specified. GSWC makes no representations as to the information contained in this report other than with respect to itself.
Forward-Looking Information
     This Form 10-Q and the documents incorporated herein contain forward-looking statements intended to qualify for the “safe harbor” from liability established by the Private Securities Litigation Reform Act of 1995.  Forward-looking statements are based on current estimates, expectations and projections about future events and assumptions regarding these events and include statements regarding management’s goals, beliefs, plans or current expectations, taking into account the information currently available to management.  Forward-looking statements are not statements of historical facts.  For example, when we use words such as “anticipate,” “believe,” “plan,” “estimate,” “expect,” “intend,” “may” and other words that convey uncertainty of future events or outcomes, we are making forward-looking statements.  We are not able to predict all the factors that may affect future results.  We caution you that any forward-looking statements made by us are not guarantees of future performance and the actual results may differ materially from those in our forward-looking statements.  Some of the factors that could cause future results to differ materially from those expressed or implied by our forward-looking statements or from historical results, include, but are not limited to: 
•the outcome of pending and future regulatory, legislative, or other proceedings,proceedings; investigations or audits, including decisions in GSWC's and BVESI's general rate casescases; and the results of independent audits of GSWC's construction contracting procurement practices or other independent audits of our costs;
•changes in the policies and procedures of the California Public Utilities Commission ("CPUC");
•timeliness of CPUC action on GSWC and BVESI rates;
•availability of GSWC's water supplies, which may be adversely affected by increases in the frequency and duration of droughts, changes in weather patterns, contamination, and court decisions or other governmental actions restricting the use of water from the Colorado River, the California State Water Project, and/or pumping of groundwater;
•BVESI liabilities of BVESI associated with the inherent risks of damage to private property and injuries to employees and the public if ourpersons or their property should either come into contact with electrical current or equipment;
•the potential of strict liability for damages caused by GSWC's or BVESI's property or equipment, even if neither was negligent in the operation and maintenance of that property or equipment, under a doctrine known as inverse condemnation;
•the impact of storms, high winds, earthquakes, floods, mudslides, drought, wildfires and similar natural disasters, contamination, or acts of terrorism or vandalism, that (i) affect water quality, and/supply, or supply, affect customer demand, that

demand; (ii) damage or
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disrupt facilities, operations, or information technology systems owned by us, our customerson which we rely; or third parties on whom we rely or that damage the property of our customers or other third parties or(iii) cause bodily injury or property damage resulting in liabilities that we may be unable to recover from insurance, other third parties, and/or the U.S. government, or that the CPUC or the courts do not permit us to recover from ratepayers;
•the economic impact of the COVID-19 pandemic on GSWC’s or BVESI's liquidity from (i) future credit losses on utility customer bills andor (ii) the value of its pension and other retirement plan assets anddue to possible declines in securities prices;
•the economic impact on the ability of GSWC, BVESI, and the subsidiaries of ASUS to continue to operate, maintain, repair and improve their infrastructure and to provide services to their customers in the ordinary course of business;
•the impact on water utility operations during high fire threat conditions as a result of the Public Safety Power Shut-Off program authorized by the CPUC and implemented by the electric utilities that serve GSWC facilities throughout the state, and our ability to get full cost recovery in rates for costs incurred in preparation of and during a Public Safety Power Shut-Off event;
liabilities of BVESI for•inability to recover costs resulting from wildfires caused by BVESI’s electrical equipment if BVES is unable to recover the costs and expenses associated with such liabilities from insurance or from ratepayers on a timely basis, if at all;
•penalties which may be assessed by the CPUC if BVESI shuts down power to its customers during high threat conditions under the Public Safety Power Shut-Off program authorized by the CPUC if the CPUC determines that the shutdown was not reasonably necessary or excessive in the circumstances;
our•BVESI's ability to implement BVESI'sits wildfire mitigation program and effectively implement Public Safety Power Shut-Offs when appropriate;
•costs incurred, and the ability to recover such costs from customers, associated with service disruptions as the result of a Public Safety Power Shut-Off program;
•risks associated with the effectiveness of California Assembly Bill No. 1054's effectiveness1054 in mitigating the risk faced by California investor-owned utilities related to liability for damages arising from catastrophic wildfires where utility facilities are a substantial cause, including BVESI's ability to obtain or maintain a valid safety certification and the CPUC's interpretation of and actions under California Assembly Bill No. 1054;
•the impact of rolling blackouts and other electric grid disruptions in California on our ability to provide water and electric service to our customers;
•the liquidity impact of California Senate Bill No. 998, which went into effect on February 1, 2020 and prohibits a water company from discontinuing residential water service for nonpayment until a payment by a customer has been delinquent for at least 60 days, and prohibits residential service from being discontinued under specified circumstances; 
•increases in the cost of obtaining insurance or in uninsured losses that may not be recovered in rates, or under our contracts with the U.S. government, including increases due to difficulties in obtaining insurance for certain risks, such as wildfires and earthquakes in California;
•increases in costs to reduce the risks associated with the increasing frequency of severe weather, including to improve the resiliency and reliability of our water production and delivery facilities and systems, and our electric transmission and distribution lines;
•increases in service disruptions if severe weather and wildfires, or threats of wildfire become more frequent as predicted by some scientists who study climate change;they have recently;
•the future impact to GSWC, including increased earnings volatility, from the CPUC's transitioning of the current water revenue adjustment mechanism ("WRAM") and the modified cost balancing account ("MCBA"), to a limited price adjustment mechanism and an incremental supply cost balancing account;
•our ability to forecast the costs of maintaining GSWC's and BVESI's aging infrastructure, to efficiently manage GSWC and BVESI's capital expenditures, and operating and maintenance expenses within CPUC authorizedCPUC-authorized levels, and to timely recover our costs through rates;
•the impact of opposition to GSWC and BVESI rate increases on our ability to recover our costs through rates, including costs associated with construction, and costs associated with damages to ourbodily injury and property and that of others and injuries to personsdamage arising out of more extreme weather events;
•the impact of opposition by GSWC customers to conservation rate design, including more stringent water-use restrictions iffrom persistent drought conditions in California, persists due to climate change, as well as future restrictions on water use mandated in California,water-use restrictions, which may decrease adopted usage and increase customer rates;
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•the impact of condemnation actions on future GSWC revenues and other aspects of our business if we do not receive adequate compensation for the assets taken, or recoveryrecover all of allthe associated charges, associated with the condemnation of such assets, as well as the impact on future revenues if we are no longer entitled to any portion of the revenues generated from such assets;
our ability to forecast the costs of maintaining GSWC’s aging water•GSWC's and electric infrastructure;

ourBVESI's ability to recover increases in permitting costs and other costs associated with negotiating and complying with the terms of ourits city and county franchise agreements, with cities and counties andincluding costs to meet other demands made upon us by the cities and counties in which GSWC and BVESI operate;local-government demands;
•changes in accounting valuations and estimates, including changes resulting from our assessment of anticipated recovery of GSWC's or BVESI's regulatory assets, settlement of liabilities and revenues subject to refund or regulatory disallowances and the timing of such recovery, and the amounts set aside for uncollectible accounts receivable, inventory obsolescence, pension and post-retirement liabilities, taxes, and uninsured losses and claims, including general liability and workers' compensation claims;
•changes in environmental laws, health and safety laws, and water and recycled water quality requirements, and increases in costs associated with complying with these laws and requirements, including costs associated with GSWC's upgrading and building new water treatment plants, GSWC's disposing of residuals from ourits water treatment plants, more stringent rules regarding pipeline repairs and installation, handling and storing hazardous chemicals, upgrading equipment to make it more resistant to extreme weather events, removal of vegetation near power lines, compliance-monitoring activities and, GSWC's securing alternative water supplies when necessary;
•changes in laboratory detection capabilities and drinking water notification and response levels for certain substances, such as perfluoroalkyl substances (PFAS)("PFAS") used to make certain fabrics and other materials, used in certain fire suppression agents and also used in various industrial processes; 
•our ability to obtain adequate, reliable and cost-effective services, chemical supplies, of chemicals, electricity, fuel, water, and other raw materials that are needed for our water and wastewater operations;
•our ability to attract, retain, train, motivate, develop, and transition key employees;
•our ability to recover the costs associated with any contamination of GSWC’s groundwater supplies from parties responsible for the contamination or through the ratemaking process, and the time and expense incurred by us in obtaining recovery of such costs;
•adequacy of BVESI's power supplies and the extent to which we can manage and respond to the volatility of electricity and natural gas prices;
•BVESI's ability to comply with the CPUC’s renewable energy procurement requirements;
•changes in GSWC's long-term customer demand due to changes in customer usage patterns as a result of conservation, efforts, regulatory changes affecting demand such as mandatory restrictions on water use, new landscaping or irrigation requirements, recycling of water by customers or purchase of recycled water supplied by other parties, unanticipated population growth or decline, changes in climate conditions, general economic and financial market conditions and cost increases, which may impact our long-term operating revenues if we are unable to secure rate increases in an amount sufficient to offset reduced demand;
•changes in accounting treatment for regulated utilities;
•effects of changes in, or interpretations of, tax laws, rates or policies;
•changes in estimates used in ASUS’s cost-to-cost method for revenue recognition of certain construction activities;
•termination, in whole or in part, of one or more of ASUS's military utility privatization contracts to provide water and/or wastewater services at military bases for the convenience of the U.S. government or for default;
•suspension or debarment of ASUS for a period of time from contracting with the government due to violations of laws or regulations in connection with military utility privatization activities;
•delays by the U.S. government in making timely payments to ASUS for water and/or wastewater services or construction activities at military bases because of fiscal uncertainties over the funding of the U.S. government or otherwise;
•delays in ASUS obtaining economic price or equitable adjustments to ourits prices on one or more of our contracts to provide water and/or wastewater services at military bases;
•disallowance of costs on any of ASUS's contracts to provide water and/or wastewater services at military bases because of audits, cost reviews or investigations by contracting agencies;
•inaccurate assumptions used by ASUS in preparing bids in our contracted services business;bids;
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•failure of wastewater systems that ASUS operates on military bases resulting in untreated wastewater or contaminants spilling into nearby properties, streams or rivers, a risk which may increase if flooding and rainfall become more frequent or severe as a result of climate change;
•failure to comply with the terms of our military privatization contracts;

•failure of any of our subcontractors to perform services for ASUS in accordance with the terms of our military privatization contracts;
•the impact on our growth from competition for new military or other privatization contracts;
•issues with the implementation, maintenance, or upgrading of our information technology systems;
•general economic conditions, which may impact our ability to recover infrastructure investments and operating costs from customers;
•explosions, fires, accidents, mechanical breakdowns, the disruption of information technology and telecommunication systems, human error, and similar events that may occur while operating and maintaining water and electric systems in California or operating and maintaining water and wastewater systems on military bases under varying geographic conditions;
•potential costs, lost revenues, or other consequences resulting from misappropriation of assets or sensitive information, corruption of data, or operational disruption due to a cyber-attack or other cyber incident;
•restrictive covenants in our debt instruments or changes to our credit ratings on current or future debt that may increase our financing costs or affect our ability to borrow or make payments on our debt; and
•our ability to access capital markets and other sources of credit in a timely manner on acceptable terms.
Please consider our forward-looking statements in light of these risks as you read this Form 10-Q.  We qualify all of our forward-looking statements by these cautionary statements.


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AMERICAN STATES WATER COMPANY
CONSOLIDATED BALANCE SHEETS
ASSETS
(Unaudited)


(in thousands) June 30,
2020		 December 31, 2019(in thousands)September 30,
2020		December 31, 2019
Property, Plant and Equipment  
  
Property, Plant and Equipment  
Regulated utility plant, at cost $1,975,085
 $1,926,543
Regulated utility plant, at cost$2,004,446 $1,926,543 
Non-utility property, at cost 35,309
 32,425
Non-utility property, at cost36,187 32,425 
Total 2,010,394
 1,958,968
Total2,040,633 1,958,968 
Less - Accumulated depreciation (553,996) (543,263)Less - Accumulated depreciation(561,523)(543,263)
Net property, plant and equipment 1,456,398
 1,415,705
Net property, plant and equipment1,479,110 1,415,705 
    
Other Property and Investments  
  
Other Property and Investments  
Goodwill 1,116
 1,116
Goodwill1,116 1,116 
Other property and investments 30,239
 30,293
Other property and investments31,326 30,293 
Total other property and investments 31,355
 31,409
Total other property and investments32,442 31,409 
    
Current Assets  
  
Current Assets  
Cash and cash equivalents 6,496
 1,334
Cash and cash equivalents8,127 1,334 
Accounts receivable — customers (less allowance for doubtful accounts of $1,603 in 2020 and $857 in 2019) 30,355
 20,907
Accounts receivable — customers (less allowance for doubtful accounts of $2,400 in 2020 and $857 in 2019)Accounts receivable — customers (less allowance for doubtful accounts of $2,400 in 2020 and $857 in 2019)33,729 20,907 
Unbilled receivable 21,975
 20,482
Unbilled receivable25,086 20,482 
Receivable from the U.S. government 21,903
 22,613
Receivable from the U.S. government27,144 22,613 
Other accounts receivable (less allowance for doubtful accounts of $59 in 2020 and 2019) 2,957
 3,096
Other accounts receivable (less allowance for doubtful accounts of $53 in 2020 and $59 in 2019)Other accounts receivable (less allowance for doubtful accounts of $53 in 2020 and $59 in 2019)3,433 3,096 
Income taxes receivable 155
 5,685
Income taxes receivable163 5,685 
Materials and supplies, at weighted average cost 8,168
 6,429
Materials and supplies, at weighted average cost8,699 6,429 
Regulatory assets — current 19,917
 20,930
Regulatory assets — current16,766 20,930 
Prepayments and other current assets 8,003
 5,413
Prepayments and other current assets6,541 5,413 
Contract assets 17,097
 15,567
Contract assets9,719 15,567 
Total current assets 137,026
 122,456
Total current assets139,407 122,456 
    
Other Assets  
  
Other Assets  
Unbilled revenue- receivable from U.S. government 7,660
 8,621
Unbilled revenue- receivable from U.S. government10,423 8,621 
Receivable from the U.S. government 42,496
 42,206
Receivable from the U.S. government42,962 42,206 
Contract assets 3,361
 64
Contract assets367 64 
Operating lease right-of-use assets 11,967
 13,168
Operating lease right-of-use assets11,516 13,168 
Other 7,705
 7,702
Other10,191 7,702 
Total other assets 73,189
 71,761
Total other assets75,459 71,761 
    
Total Assets $1,697,968
 $1,641,331
Total Assets$1,726,418 $1,641,331 
 
The accompanying notes are an integral part of these consolidated financial statements





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AMERICAN STATES WATER COMPANY
CONSOLIDATED BALANCE SHEETS
CAPITALIZATION AND LIABILITIES
(Unaudited)

(in thousands, except number of shares) June 30,
2020		 December 31,
2019		(in thousands, except number of shares)September 30,
2020		December 31,
2019
Capitalization  
  
Capitalization  
Common shares, no par value    Common shares, no par value
Authorized: 60,000,000 shares    Authorized: 60,000,000 shares
Outstanding: 36,883,874 shares in 2020 and 36,846,614 shares in 2019 $256,223
 $255,566
Outstanding: 36,889,061 shares in 2020 and 36,846,614 shares in 2019Outstanding: 36,889,061 shares in 2020 and 36,846,614 shares in 2019$256,622 $255,566 
Earnings reinvested in the business 363,065
 345,964
Earnings reinvested in the business377,198 345,964 
Total common shareholders’ equity 619,288
 601,530
Total common shareholders’ equity633,820 601,530 
Long-term debt 280,886
 280,996
Long-term debt440,343 280,996 
Total capitalization 900,174
 882,526
Total capitalization1,074,163 882,526 
    
Current Liabilities  
  
Current Liabilities  
Notes payable to banks 49,000
 5,000
Notes payable to banks0 5,000 
Long-term debt — current 359
 344
Long-term debt — current358 344 
Accounts payable 51,771
 55,616
Accounts payable53,644 55,616 
Income taxes payable 5,401
 95
Income taxes payable3,053 95 
Accrued other taxes 8,969
 11,110
Accrued other taxes11,560 11,110 
Accrued employee expenses 13,522
 14,255
Accrued employee expenses13,827 14,255 
Accrued interest 2,935
 3,050
Accrued interest7,245 3,050 
Unrealized loss on purchased power contracts 3,827
 3,171
Unrealized loss on purchased power contracts2,518 3,171 
Contract liabilities 10,569
 11,167
Contract liabilities8,670 11,167 
Operating lease liabilities 1,794
 1,849
Operating lease liabilities1,812 1,849 
Other 10,540
 10,341
Other10,769 10,341 
Total current liabilities 158,687
 115,998
Total current liabilities113,456 115,998 
    
Other Credits  
  
Other Credits  
Notes payable to bank 200,000
 200,000
Notes payable to bank92,000 200,000 
Advances for construction 62,699
 63,989
Advances for construction63,276 63,989 
Contributions in aid of construction - net 137,591
 134,706
Contributions in aid of construction - net139,754 134,706 
Deferred income taxes 127,953
 125,304
Deferred income taxes129,137 125,304 
Regulatory liabilities 13,881
 23,380
Regulatory liabilities20,064 23,380 
Unamortized investment tax credits 1,259
 1,295
Unamortized investment tax credits1,242 1,295 
Accrued pension and other postretirement benefits 69,953
 68,469
Accrued pension and other postretirement benefits66,924 68,469 
Operating lease liabilities 10,612
 11,739
Operating lease liabilities10,161 11,739 
Other 15,159
 13,925
Other16,241 13,925 
Total other credits 639,107
 642,807
Total other credits538,799 642,807 
    
Commitments and Contingencies (Note 9) 


 


Commitments and Contingencies (Note 9)
    
Total Capitalization and Liabilities $1,697,968
 $1,641,331
Total Capitalization and Liabilities$1,726,418 $1,641,331 
 
The accompanying notes are an integral part of these consolidated financial statements

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AMERICAN STATES WATER COMPANY
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND NINE MONTHS ENDED
JUNESEPTEMBER 30, 2020 AND 2019
(Unaudited)


 Three months ended June 30, Three months ended September 30,Nine months ended September 30,
(in thousands, except per share amounts) 2020 2019(in thousands, except per share amounts)2020201920202019
Operating Revenues  
  
Operating Revenues  
Water $87,074
 $88,140
Water$98,701 $95,249 $257,199 $248,112 
Electric 7,679
 7,408
Electric8,288 11,996 26,935 30,033 
Contracted services 26,525
 29,099
Contracted services26,699 27,251 79,909 82,731 
Total operating revenues 121,278
 124,647
Total operating revenues133,688 134,496 364,043 360,876 
    
Operating Expenses  
  
Operating Expenses  
Water purchased 18,754
 18,762
Water purchased23,445 23,361 56,291 55,263 
Power purchased for pumping 2,398
 1,982
Power purchased for pumping3,369 3,042 7,626 6,562 
Groundwater production assessment 5,030
 4,640
Groundwater production assessment5,962 5,634 15,140 14,020 
Power purchased for resale 1,967
 2,391
Power purchased for resale2,117 2,403 7,127 8,498 
Supply cost balancing accounts (1,802) 1,207
Supply cost balancing accounts(2,639)(2,680)(6,606)(2,845)
Other operation 7,959
 7,708
Other operation8,128 8,267 24,573 24,546 
Administrative and general 20,398
 19,529
Administrative and general20,644 20,626 63,992 61,827 
Depreciation and amortization 9,031
 6,655
Depreciation and amortization9,348 9,006 27,190 26,493 
Maintenance 4,094
 3,053
Maintenance4,246 4,109 12,224 9,728 
Property and other taxes 5,246
 4,870
Property and other taxes5,693 5,234 16,098 15,000 
ASUS construction 12,487
 14,532
ASUS construction13,573 12,894 39,175 39,671 
Gain on sale of assets —
 (112)Gain on sale of assets(5)(124)(9)(236)
Total operating expenses 85,562
 85,217
Total operating expenses93,881 91,772 262,821 258,527 
    
Operating Income 35,716
 39,430
Operating Income39,807 42,724 101,222 102,349 
    
Other Income and Expenses  
  
Other Income and Expenses  
Interest expense (5,322) (6,282)Interest expense(6,161)(6,279)(17,533)(18,878)
Interest income 490
 876
Interest income316 826 1,364 2,644 
Other, net 3,009
 591
Other, net1,613 140 2,388 2,073 
Total other income and expenses, net (1,823) (4,815)Total other income and expenses, net(4,232)(5,313)(13,781)(14,161)
    
Income before income tax expense 33,893
 34,615
Income before income tax expense35,575 37,411 87,441 88,188 
    
Income tax expense 8,281
 7,831
Income tax expense9,045 9,405 21,227 $20,546 
    
Net Income $25,612
 $26,784
Net Income$26,530 $28,006 $66,214 $67,642 
    
Weighted Average Number of Common Shares Outstanding 36,884
 36,804
Weighted Average Number of Common Shares Outstanding36,886 36,835 36,877 36,804 
Basic Earnings Per Common Share $0.69
 $0.72
Basic Earnings Per Common Share$0.72 $0.76 $1.79 $1.83 
    
Weighted Average Number of Diluted Shares 37,000
 36,963
Weighted Average Number of Diluted Shares37,002 36,996 36,990 36,960 
Fully Diluted Earnings Per Common Share $0.69
 $0.72
Fully Diluted Earnings Per Common Share$0.72 $0.76 $1.79 $1.83 
    
Dividends Declared Per Common Share $0.305
 $0.275
Dividends Declared Per Common Share$0.335 $0.305 $0.945 $0.855 
 
The accompanying notes are an integral part of these consolidated financial statements


7
Table of Contents
AMERICAN STATES WATER COMPANY
CONSOLIDATED STATEMENTS OF INCOME
FOR THE SIX MONTHS
ENDED JUNE 30, 2020 AND 2019
(Unaudited)

  Six Months Ended June 30,
(in thousands, except per share amounts) 2020 2019
Operating Revenues  
  
Water $158,498
 $152,863
Electric 18,647
 18,037
Contracted services 53,210
 55,480
Total operating revenues 230,355
 226,380
     
Operating Expenses  
  
Water purchased 32,846
 31,902
Power purchased for pumping 4,257
 3,520
Groundwater production assessment 9,178
 8,386
Power purchased for resale 5,010
 6,095
Supply cost balancing accounts (3,967) (165)
Other operation 16,445
 16,279
Administrative and general 43,348
 41,201
Depreciation and amortization 17,842
 17,487
Maintenance 7,978
 5,619
Property and other taxes 10,405
 9,766
ASUS construction 25,602
 26,777
Gain on sale of assets (4) (112)
Total operating expenses 168,940
 166,755
    

Operating Income 61,415
 59,625
     
Other Income and Expenses  
  
Interest expense (11,372) (12,599)
Interest income 1,048
 1,818
Other, net 775
 1,933
Total other income and expenses, net (9,549) (8,848)
     
Income before income tax expense 51,866
 50,777
     
Income tax expense 12,182
 11,141
     
Net Income $39,684
 $39,636
     
Weighted Average Number of Common Shares Outstanding 36,872
 36,788
Basic Earnings Per Common Share $1.07
 $1.07
     
Weighted Average Number of Diluted Shares 36,985
 36,942
Fully Diluted Earnings Per Common Share $1.07
 $1.07
     
Dividends Declared Per Common Share $0.610
 $0.550

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


8
AMERICAN STATES WATER COMPANY
CONSOLIDATED STATEMENTS OF CHANGES
IN COMMON SHAREHOLDERS' EQUITY
FOR THE THREE AND SIXNINE MONTHS ENDED JUNESEPTEMBER 30, 2020
(Unaudited)




Nine Months Ended September 30, 2020
 Common SharesReinvested 
 Number Earnings 
 of in the 
(in thousands)SharesAmountBusinessTotal
Balances at December 31, 201936,847 $255,566 $345,964 $601,530 
Add:    
Net income14,072 14,072 
Exercise of stock options and other issuances of Common Shares3730 30 
Stock-based compensation, net of taxes paid from shares withheld from employees related to net share settlements (Note 4)193 193 
Dividend equivalent rights on stock-based awards not paid in cash52 52 
Deduct: 
Dividends on Common Shares11,242 11,242 
Dividend equivalent rights on stock-based awards not paid in cash52 52 
Balances at March 31, 202036,884 $255,841 $348,742 $604,583 
Add:
  Net income25,612 25,612 
Stock-based compensation, net of taxes paid from shares withheld from employees related to net share settlements (Note 4)343 343 
  Dividend equivalent rights on stock-based awards not paid in cash39 39 
Deduct:
  Dividends on Common Shares11,250 11,250 
  Dividend equivalent rights on stock-based awards not paid in cash39 39 
Balances at June 30, 202036,884 $256,223 $363,065 $619,288 
Add:
  Net income26,530 26,530 
Exercise of stock options and other issuances of Common Shares50 0 
Stock-based compensation, net of taxes paid from shares withheld from employees related to net share settlements (Note 4)358358
  Dividend equivalent rights on stock-based awards not paid in cash4141
Deduct:
  Dividends on Common Shares12,356 12,356 
  Dividend equivalent rights on stock-based awards not paid in cash41 41 
Balances at September 30, 202036,889 $256,622 $377,198 $633,820 
The accompanying notes are an integral part of these consolidated financial statements.
  Three and Six Months Ended June 30, 2020
  Common Shares Reinvested  
  Number   Earnings  
  of   in the  
(in thousands) Shares Amount Business Total
Balances at December 31, 2019 36,847
 $255,566
 $345,964
 $601,530
Add:  
  
  
  
Net income     14,072
 14,072
Exercise of stock options and other issuances of Common Shares 37 30
   30
Stock-based compensation, net of taxes paid from shares withheld from employees related to net share settlements (Note 4)   193
   193
Dividend equivalent rights on stock-based awards not paid in cash   52
   52
Deduct:        
Dividends on Common Shares     11,242
 11,242
Dividend equivalent rights on stock-based awards not paid in cash     52
 52
Balances at March 31, 2020 36,884
 $255,841
 $348,742
 $604,583
         
Add:        
  Net income     25,612
 25,612
Stock-based compensation, net of taxes paid from shares withheld from employees related to net share settlements (Note 4)   343
   343
  Dividend equivalent rights on stock-based awards not paid in cash   39
   39
Deduct:        
  Dividends on Common Shares     11,250
 11,250
  Dividend equivalent rights on stock-based awards not paid in cash     39
 39
Balances at June 30, 2020 36,884
 $256,223
 $363,065
 $619,288
8
AMERICAN STATES WATER COMPANY
CONSOLIDATED STATEMENTS OF CHANGES
IN COMMON SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019
(Unaudited)
Nine Months Ended September 30, 2019
 Common SharesReinvested 
 Number Earnings 
 of in the 
(in thousands)SharesAmountBusinessTotal
Balances at December 31, 201836,758 $253,689 $304,534 $558,223 
Add:    
Net income12,852 12,852 
Exercise of stock options and other issuances of Common Shares3775 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 cash70 70 
Deduct: 
Dividends on Common Shares10,113 10,113 
Dividend equivalent rights on stock-based awards not paid in cash70 70 
Balances at March 31, 201936,795 $254,297 $307,203 $561,500 
Add:
  Net income26,784 26,784 
  Exercise of stock options and other issuances of Common Shares37 291 291 
Stock-based compensation, net of taxes paid from shares withheld from employees related to net share settlements (Note 4)331 331 
  Dividend equivalent rights on stock-based awards not paid in cash50 50 
Deduct:
  Dividends on Common Shares10,119 10,119 
  Dividend equivalent rights on stock-based awards not paid in cash50 50 
Balances at June 30, 201936,832 $254,969 $323,818 $578,787 
Add:
  Net income28,006 28,006 
  Exercise of stock options and other issuances of Common Shares7 50 50 
Stock-based compensation, net of taxes paid from shares withheld from employees related to net share settlements (Note 4)338 338 
  Dividend equivalent rights on stock-based awards not paid in cash51 51 
Deduct:
  Dividends on Common Shares11,234 11,234 
  Dividend equivalent rights on stock-based awards not paid in cash51 51 
Balances at September 30, 201936,839 $255,408 $340,539 $595,947 

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

9
AMERICAN STATES WATER COMPANY
CONSOLIDATED STATEMENTS OF CHANGES
IN COMMON SHAREHOLDERS' EQUITY
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2019
(Unaudited)



  Three and Six Months Ended June 30, 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
         
Add:        
  Net income     26,784
 26,784
  Exercise of stock options and other issuances of Common Shares 37
 291
   291
Stock-based compensation, net of taxes paid from shares withheld from employees related to net share settlements (Note 4)   331
   331
  Dividend equivalent rights on stock-based awards not paid in cash   50
   50
Deduct:        
  Dividends on Common Shares     10,119
 10,119
  Dividend equivalent rights on stock-based awards not paid in cash     50
 50
Balances at June 30, 2019 36,832
 $254,969
 $323,818
 $578,787

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

10
Table of Contents
AMERICAN STATES WATER COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIXNINE MONTHS ENDED JUNESEPTEMBER 30, 2020 AND 2019
(Unaudited)

 Nine Months Ended 
 September 30,
(in thousands)20202019
Cash Flows From Operating Activities:  
Net income$66,214 $67,642 
Adjustments to reconcile net income to net cash provided by operating activities:  
Depreciation and amortization27,441 26,727 
Provision for doubtful accounts873 471 
Deferred income taxes and investment tax credits1,767 2,242 
Stock-based compensation expense2,474 2,468 
Gain on sale of assets(9)(236)
Gain on investments held in a trust(1,266)(2,512)
Other — net25 144 
Changes in assets and liabilities:  
Accounts receivable — customers(14,759)(5,162)
Unbilled receivable(6,406)2,393 
Other accounts receivable(337)473 
Receivables from the U.S. government(4,834)(4,160)
Materials and supplies(2,270)(315)
Prepayments and other assets347 3,029 
Contract assets5,092 755 
Regulatory assets(367)(19,112)
Accounts payable2,657 2,043 
Income taxes receivable/payable8,480 3,585 
Contract liabilities(2,497)5,159 
Accrued pension and other postretirement benefits132 564 
Other liabilities5,086 (1,894)
Net cash provided87,843 84,304 
Cash Flows From Investing Activities:  
Capital expenditures(94,824)(111,088)
Proceeds from sale of assets51 137 
Other investing activities136 279 
Net cash used(94,637)(110,672)
Cash Flows From Financing Activities:  
Proceeds from stock option exercises30 416 
Receipt of advances for and contributions in aid of construction7,576 8,260 
Refunds on advances for construction(3,401)(4,679)
Retirement or repayments of long-term debt(335)(40,325)
Proceeds from the issuance of long-term debt, net of issuance costs159,422 0 
Net change in notes payable to banks(113,000)99,000 
Dividends paid(34,848)(31,466)
Other financing activities(1,857)(1,581)
Net cash provided13,587 29,625 
Net change in cash and cash equivalents6,793 3,257 
Cash and cash equivalents, beginning of period1,334 7,141 
Cash and cash equivalents, end of period$8,127 $10,398 
Non-cash transactions:
Accrued payables for investment in utility plant$20,407 $25,599 
Property installed by developers and conveyed$2,861 $1,376 
  Six Months Ended 
 June 30,
(in thousands) 2020 2019
Cash Flows From Operating Activities:  
  
Net income $39,684
 $39,636
Adjustments to reconcile net income to net cash provided by operating activities:  
  
Depreciation and amortization 18,008
 17,640
Provision for doubtful accounts 569
 281
Deferred income taxes and investment tax credits 1,234
 (1,703)
Stock-based compensation expense 2,127
 2,179
Gain on sale of assets (4) (112)
Gain on investments held in a trust (61) (2,187)
Other — net 161
 130
Changes in assets and liabilities:  
  
Accounts receivable — customers (10,514) (1,129)
Unbilled receivable (532) 5,524
Other accounts receivable 139
 36
Receivables from the U.S. government (2,587) (2,909)
Materials and supplies (1,739) (414)
Prepayments and other assets (1,400) 1,901
Contract assets (1,820) (2,934)
Regulatory assets (6,995) (13,932)
Accounts payable (27) 83
Income taxes receivable/payable 10,836
 3,363
Contract liabilities (598) 4,034
Accrued pension and other postretirement benefits 2,693
 3,116
Other liabilities (2,911) (7,936)
Net cash provided 46,263
 44,667
     
Cash Flows From Investing Activities:  
  
Capital expenditures (62,587) (81,155)
Proceeds from sale of assets 46
 102
Other investing activities 58
 184
Net cash used (62,483) (80,869)
     
Cash Flows From Financing Activities:  
  
Proceeds from stock option exercises 30
 366
Receipt of advances for and contributions in aid of construction 4,630
 6,290
Refunds on advances for construction (2,767) (4,074)
Retirement or repayments of long-term debt (210) (40,200)
Net change in notes payable to banks 44,000
 90,000
Dividends paid (22,492) (20,232)
Other financing activities (1,809) (1,573)
Net cash provided 21,382
 30,577
Net change in cash and cash equivalents 5,162
 (5,625)
Cash and cash equivalents, beginning of period 1,334
 7,141
Cash and cash equivalents, end of period $6,496
 $1,516
     
Non-cash transactions:    
Accrued payables for investment in utility plant $19,892
 $23,433
Property installed by developers and conveyed $1,535
 $1,241

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

10
11
Table of Contents
GOLDEN STATE WATER COMPANY
BALANCE SHEETS
ASSETS
(Unaudited)

(in thousands)September 30,
2020		December 31,
2019
Utility Plant  
Utility plant, at cost$1,870,208 $1,926,543 
Less - Accumulated depreciation(496,885)(531,801)
Net utility plant1,373,323 1,394,742 
Other Property and Investments29,253 28,212 
Current Assets  
Cash and cash equivalents4,073 401 
Accounts receivable-customers (less allowance for doubtful accounts of $2,264 in 2020 and $857 in 2019)31,959 20,907 
Unbilled receivable21,465 18,636 
Other accounts receivable (less allowance for doubtful accounts of $53 in 2020 and $59 in 2019)2,096 1,857 
Income taxes receivable from Parent445 7,727 
Materials and supplies, at average cost3,661 4,920 
Regulatory assets — current16,162 20,930 
Prepayments and other current assets4,874 4,497 
Total current assets84,735 79,875 
Other Assets  
Operating lease right-of-use assets11,336 12,745 
Other7,104 6,880 
Total other assets18,440 19,625 
Total Assets$1,505,751 $1,522,454 
(in thousands) June 30,
2020		 December 31,
2019
Utility Plant  
  
Utility plant, at cost $1,975,085
 $1,926,543
Less - Accumulated depreciation (541,071) (531,801)
Net utility plant 1,434,014
 1,394,742
     
Other Property and Investments 28,164
 28,212
     
Current Assets  
  
Cash and cash equivalents 1,446
 401
Accounts receivable-customers (less allowance for doubtful accounts of $1,603 in 2020 and $857 in 2019) 30,355
 20,907
Unbilled receivable 19,236
 18,636
Other accounts receivable (less allowance for doubtful accounts of $59 in 2020 and 2019) 1,966
 1,857
Income taxes receivable from Parent —
 7,727
Materials and supplies, at average cost 7,054
 4,920
Regulatory assets — current 19,917
 20,930
Prepayments and other current assets 6,411
 4,497
Total current assets 86,385
 79,875
     
Other Assets  
  
Operating lease right-of-use assets 11,720
 12,745
Other 6,885
 6,880
Total other assets 18,605
 19,625
     
Total Assets $1,567,168
 $1,522,454

The accompanying notes are an integral part of these financial statements

1211
Table of Contents
GOLDEN STATE WATER COMPANY
BALANCE SHEETS
CAPITALIZATION AND LIABILITIES
(Unaudited)

(in thousands, except number of shares) June 30,
2020		 December 31, 2019(in thousands, except number of shares)September 30,
2020		December 31, 2019
Capitalization  
  
Capitalization  
Common Shares, no par value:    Common Shares, no par value:
Authorized: 1,000 shares     Authorized: 1,000 shares
Outstanding: 165 shares in 2020 and 2019 $294,386
 $293,754
 Outstanding: 165 shares in 2020 and 2019$294,873 $293,754 
Earnings reinvested in the business 266,973
 257,434
Earnings reinvested in the business216,732 257,434 
Total common shareholder’s equity 561,359
 551,188
Total common shareholder’s equity (Note 12)
Total common shareholder’s equity (Note 12)
511,605 551,188 
Long-term debt 280,886
 280,996
Long-term debt440,343 280,996 
Total capitalization 842,245
 832,184
Total capitalization951,948 832,184 
    
Current Liabilities  
  
Current Liabilities  
Intercompany payable to Parent 199,235
 158,845
Intercompany payable to Parent34,095 158,845 
Long-term debt — current 359
 344
Long-term debt — current358 344 
Accounts payable 44,294
 45,756
Accounts payable40,517 45,756 
Accrued other taxes 8,595
 10,640
Accrued other taxes10,726 10,640 
Accrued employee expenses 11,648
 12,386
Accrued employee expenses11,492 12,386 
Accrued interest 2,661
 2,736
Accrued interest6,968 2,736 
Income taxes payable to Parent 1,207
 —
Unrealized loss on purchased power contracts 3,827
 3,171
Unrealized loss on purchased power contracts (Note 12)
Unrealized loss on purchased power contracts (Note 12)
0 3,171 
Operating lease liabilities 1,618
 1,612
Operating lease liabilities1,664 1,612 
Other 9,960
 9,745
Other9,588 9,745 
Total current liabilities 283,404
 245,235
Total current liabilities115,408 245,235 
    
Other Credits  
  
Other Credits  
Advances for construction 62,699
 63,989
Advances for construction63,256 63,989 
Contributions in aid of construction — net 137,591
 134,706
Contributions in aid of construction — net138,102 134,706 
Deferred income taxes 130,824
 127,806
Deferred income taxes123,240 127,806 
Regulatory liabilities 13,881
 23,380
Regulatory liabilities20,064 23,380 
Unamortized investment tax credits 1,259
 1,295
Unamortized investment tax credits1,242 1,295 
Accrued pension and other postretirement benefits 69,953
 68,469
Accrued pension and other postretirement benefits66,924 68,469 
Operating lease liabilities 10,571
 11,588
Operating lease liabilities10,161 11,588 
Other 14,741
 13,802
Other15,406 13,802 
Total other credits 441,519
 445,035
Total other credits438,395 445,035 
    
Commitments and Contingencies (Note 9) 


 


Commitments and Contingencies (Note 9)
    
Total Capitalization and Liabilities $1,567,168
 $1,522,454
Total Capitalization and Liabilities$1,505,751 $1,522,454 
 
The accompanying notes are an integral part of these financial statements

12
13
Table of Contents
GOLDEN STATE WATER COMPANY
STATEMENTS OF INCOME
FOR THE THREE AND NINE MONTHS ENDED
JUNESEPTEMBER 30, 2020 AND 2019
(Unaudited)


 Three Months Ended June 30, Three Months Ended September 30,Nine Months Ended September 30,
(in thousands) 2020 2019(in thousands)2020201920202019
Operating Revenues    Operating Revenues  
Water $87,074
 $88,140
Water$98,701 $95,249 $257,199 $248,112 
Electric 7,679
 7,408
Electric (Note 12)
Electric (Note 12)
0 11,996 18,647 30,033 
Total operating revenues 94,753
 95,548
Total operating revenues98,701 107,245 275,846 278,145 
    
Operating Expenses    
Operating Expenses (Note 12)Operating Expenses (Note 12)  
Water purchased 18,754
 18,762
Water purchased23,445 23,361 56,291 55,263 
Power purchased for pumping 2,398
 1,982
Power purchased for pumping3,369 3,042 7,626 6,562 
Groundwater production assessment 5,030
 4,640
Groundwater production assessment5,962 5,634 15,140 14,020 
Power purchased for resale 1,967
 2,391
Power purchased for resale0 2,403 5,010 8,498 
Supply cost balancing accounts (1,802) 1,207
Supply cost balancing accounts(3,019)(2,680)(6,986)(2,845)
Other operation 6,370
 6,054
Other operation6,185 6,729 19,185 19,643 
Administrative and general 15,733
 13,678
Administrative and general13,610 15,205 46,181 44,977 
Depreciation and amortization 8,209
 6,006
Depreciation and amortization7,835 8,359 24,073 24,354 
Maintenance 3,201
 2,452
Maintenance3,219 3,423 9,613 7,788 
Property and other taxes 4,718
 4,422
Property and other taxes4,946 4,787 14,297 13,622 
Gain on sale of assets —
 (83)Gain on sale of assets0 0 0 (83)
Total operating expenses 64,578
 61,511
Total operating expenses65,552 70,263 190,430 191,799 
    
Operating Income 30,175
 34,037
Operating Income (Note 12)Operating Income (Note 12)33,149 36,982 85,416 86,346 
    
Other Income and Expenses    Other Income and Expenses  
Interest expense (5,177) (6,001)Interest expense(5,911)(5,986)(16,865)(17,985)
Interest income 181
 543
Interest income105 546 604 1,497 
Other, net 3,049
 545
Other, net1,483 203 2,329 2,153 
Total other income and expenses, net (1,947) (4,913)Total other income and expenses, net(4,323)(5,237)(13,932)(14,335)
    
Income before income tax expense 28,228
 29,124
Income before income tax expense28,826 31,745 71,484 72,011 
    
Income tax expense 7,309
 6,826
Income tax expense7,683 8,383 18,220 17,329 
    
Net Income $20,919
 $22,298
Net Income (Note 12)Net Income (Note 12)$21,143 $23,362 $53,264 $54,682 
 
The accompanying notes are an integral part of these consolidated financial statements

1413
GOLDEN STATE WATER COMPANY
STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED
JUNE 30, 2020 AND 2019
(Unaudited)

  Six Months Ended June 30,
(in thousands) 2020 2019
Operating Revenues    
Water $158,498
 $152,863
Electric 18,647
 18,037
Total operating revenues 177,145
 170,900
     
Operating Expenses    
Water purchased 32,846
 31,902
Power purchased for pumping 4,257
 3,520
Groundwater production assessment 9,178
 8,386
Power purchased for resale 5,010
 6,095
Supply cost balancing accounts (3,967) (165)
Other operation 13,000
 12,914
Administrative and general 32,571
 29,772
Depreciation and amortization 16,238
 15,995
Maintenance 6,394
 4,365
Property and other taxes 9,351
 8,835
Gain on sale of assets —
 (83)
Total operating expenses 124,878
 121,536
     
Operating Income 52,267
 49,364
     
Other Income and Expenses    
Interest expense (10,954) (11,999)
Interest income 499
 951
Other, net 846
 1,950
Total other income and expenses, net (9,609) (9,098)
     
Income before income tax expense 42,658
 40,266
     
Income tax expense 10,537
 8,946
     
Net Income $32,121
 $31,320

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

15
GOLDEN STATE WATER COMPANY
STATEMENTS OF CHANGES
IN COMMON SHAREHOLDER'S EQUITY
FOR THE THREE AND SIXNINE MONTHS ENDED JUNESEPTEMBER 30, 2020
(Unaudited)


Nine Months Ended September 30, 2020
 Common SharesReinvested 
 Number Earnings 
 of in the 
(in thousands, except number of shares)SharesAmountBusinessTotal
Balances at December 31, 2019165$293,754 $257,434 $551,188 
Add:    
Net income11,202 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 cash46 46 
Deduct: 
Dividends on Common Shares11,250 11,250 
Dividend equivalent rights on stock-based awards not paid in cash46 46 
Balances at March 31, 2020165 $294,054 $257,340 $551,394 
Add:
Net income20,919 20,919 
Stock-based compensation, net of taxes paid from shares withheld from employees related to net share settlements (Note 4)296 296 
Dividend equivalent rights on stock-based awards not paid in cash36 36 
Deduct:
Dividends on Common Shares11,250 11,250 
Dividend equivalent rights on stock-based awards not paid in cash36 36 
Balances at June 30, 2020165 $294,386 $266,973 $561,359 
Add:
Net income21,143 21,143 
Stock-based compensation, net of taxes paid from shares withheld from employees related to net share settlements (Note 4)447 447 
Dividend equivalent rights on stock-based awards not paid in cash40 40 
Deduct:
Distribution of BVESI common shares to AWR parent (Note 12)71,344 71,344 
Dividend equivalent rights on stock-based awards not paid in cash40 40 
Balances at September 30, 2020165$294,873 $216,732 $511,605 
  Three and Six Months Ended June 30, 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
         
Add:        
Net income     20,919
 20,919
Stock-based compensation, net of taxes paid from shares withheld from employees related to net share settlements (Note 4)   296
   296
Dividend equivalent rights on stock-based awards not paid in cash   36
   36
Deduct:        
Dividends on Common Shares     11,250
 11,250
Dividend equivalent rights on stock-based awards not paid in cash     36
 36
Balances at June 30, 2020 165
 $294,386
 $266,973
 $561,359

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


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14
GOLDEN STATE WATER COMPANY
STATEMENTS OF CHANGES
IN COMMON SHAREHOLDER'S EQUITY
FOR THE THREE AND SIXNINE MONTHS ENDED JUNESEPTEMBER 30, 2019
(Unaudited)


Nine Months Ended September 30, 2019
 Common SharesReinvested 
 Number Earnings 
 of in the 
(in thousands, except number of shares)SharesAmountBusinessTotal
Balances at December 31, 2018165$292,412 $211,163 $503,575 
Add:    
Net income9,022 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 cash60 60 
Deduct: 
Dividends on Common Shares10,100 10,100 
Dividend equivalent rights on stock-based awards not paid in cash60 60 
Balances at March 31, 2019165 $293,044 $210,025 $503,069 
Add:
Net income22,298 22,298 
Stock-based compensation, net of taxes paid from shares withheld from employees related to net share settlements (Note 4)257 257 
Dividend equivalent rights on stock-based awards not paid in cash44 44 
Deduct:
Dividends on Common Shares10,100 10,100 
Dividend equivalent rights on stock-based awards not paid in cash44 44 
Balances at June 30, 2019165 $293,345 $222,179 $515,524 
Add:
Net income23,362 23,362 
Stock-based compensation, net of taxes paid from shares withheld from employees related to net share settlements (Note 4)268 268 
Dividend equivalent rights on stock-based awards not paid in cash45 45 
Deduct:
Dividend equivalent rights on stock-based awards not paid in cash45 45 
Balances at September 30, 2019165$293,658 $245,496 $539,154 
  Three and Six Months Ended June 30, 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
         
Add:        
Net income     22,298
 22,298
Stock-based compensation, net of taxes paid from shares withheld from employees related to net share settlements (Note 4)   257
   257
Dividend equivalent rights on stock-based awards not paid in cash   44
   44
Deduct:        
Dividends on Common Shares     10,100
 10,100
Dividend equivalent rights on stock-based awards not paid in cash     44
 44
Balances at June 30, 2019 165
 $293,345
 $222,179
 $515,524

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


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GOLDEN STATE WATER COMPANY
STATEMENTS OF CASH FLOWS
FOR THE SIXNINE MONTHS ENDED JUNESEPTEMBER 30, 2020 AND 2019
(Unaudited)

 Six Months Ended 
 June 30,		 Nine Months Ended 
 September 30,
(in thousands) 2020 2019(in thousands)20202019
Cash Flows From Operating Activities:  
  
Cash Flows From Operating Activities:  
Net income $32,121
 $31,320
Net income$53,264 $54,682 
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 16,403
 16,150
Depreciation and amortization24,293 24,588 
Provision for doubtful accounts 569
 279
Provision for doubtful accounts855 469 
Deferred income taxes and investment tax credits 1,603
 (2,432)Deferred income taxes and investment tax credits1,357 1,245 
Stock-based compensation expense 1,942
 1,952
Stock-based compensation expense2,375 2,169 
Gain on sale of property —
 (83)Gain on sale of property0 (83)
Gain on investments held in a trust (61) (2,187)Gain on investments held in a trust(1,266)(2,512)
Other — net 141
 147
Other — net296 219 
Changes in assets and liabilities:  
  
Changes in assets and liabilities:  
Accounts receivable — customers (10,514) (1,129)Accounts receivable — customers(14,330)(5,162)
Unbilled receivable (600) 658
Unbilled receivable(3,828)(2,407)
Other accounts receivable (109) 69
Other accounts receivable(239)505 
Materials and supplies (2,134) (235)Materials and supplies(2,168)(256)
Prepayments and other assets (894) 2,135
Prepayments and other assets144 2,584 
Regulatory assets (6,995) (13,932)Regulatory assets582 (19,112)
Accounts payable 2,432
 3,127
Accounts payable3,690 5,043 
Intercompany receivable/payable (1,610) —
Intercompany receivable/payable(1,730)(49)
Income taxes receivable/payable from/to Parent 8,934
 5,893
Income taxes receivable/payable from/to Parent7,282 7,037 
Accrued pension and other postretirement benefits 2,693
 3,116
Accrued pension and other postretirement benefits132 564 
Other liabilities (2,888) (6,607)Other liabilities4,384 (568)
Net cash provided 41,033
 38,241
Net cash provided75,093 68,956 
    
Cash Flows From Investing Activities:  
  
Cash Flows From Investing Activities:  
Capital expenditures (59,589) (76,660)Capital expenditures(87,665)(104,791)
Proceeds from sale of assets —
 83
Proceeds from sale of assets0 83 
Other investing activities 58
 184
Other investing activities136 279 
Net cash used (59,531) (76,393)Net cash used(87,529)(104,429)
    
Cash Flows From Financing Activities:  
  
Cash Flows From Financing Activities:  
Receipt of advances for and contributions in aid of construction 4,630
 6,290
Receipt of advances for and contributions in aid of construction7,576 8,260 
Refunds on advances for construction (2,767) (4,074)Refunds on advances for construction(3,401)(4,679)
Retirement or repayments of long-term debt (210) (40,200)Retirement or repayments of long-term debt(335)(40,325)
Proceeds from the issuance of long-term debt, net of issuance costsProceeds from the issuance of long-term debt, net of issuance costs159,422 0 
Net change in intercompany borrowings 42,000
 94,000
Net change in intercompany borrowings(123,000)94,000 
Dividends paid (22,500) (20,200)Dividends paid(22,500)(20,200)
Other financing activities (1,610) (1,310)Other financing activities(1,654)(1,317)
Net cash provided 19,543
 34,506
Net cash provided16,108 35,739 
    
Net change in cash and cash equivalents 1,045
 (3,646)Net change in cash and cash equivalents3,672 266 
Cash and cash equivalents, beginning of period 401
 4,187
Cash and cash equivalents, beginning of period401 4,187 
Cash and cash equivalents, end of period $1,446
 $541
Cash and cash equivalents, end of period$4,073 $4,453 
    
Non-cash transactions:    Non-cash transactions:
Accrued payables for investment in utility plant $19,815
 $23,433
Accrued payables for investment in utility plant$18,656 $25,599 
Property installed by developers and conveyed $1,535
 $1,241
Property installed by developers and conveyed$2,861 $1,376 
Transfer of electric segment net assets (net of cash) for BVESI common shares (Note 12)Transfer of electric segment net assets (net of cash) for BVESI common shares (Note 12)$71,324 $0 
Distribution of BVESI common shares to AWR parent (Note 12)Distribution of BVESI common shares to AWR parent (Note 12)$71,344 $0 
The accompanying notes are an integral part of these financial statements

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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, 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.” 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 12). This reorganization is not expected to 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 is aand BVESI are both California public utilityutilities, with GSWC engaged principally in the purchase, production, distribution and sale of water inthroughout California serving approximately 261,000261,500 customer connections.connections, while BVESI distributes electricity in several San Bernardino County mountain communities in California serving approximately 24,00024,500 customer connections. The California Public Utilities Commission (“CPUC”) regulates GSWC’s water and BVESI's electric businesses in matters including properties, rates, services, facilities, and transactions bybetween GSWC, and BVESI, withand their affiliates.
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. 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 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 thosethese 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 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 has also 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 $643,000 during the three months ended September 30, 2020. GSWC allocated corporate office administrative and general costs to ASUS of approximately $1.2 million and $1.3 million during each of the three months ended JuneSeptember 30, 2020 and 2019, respectively, and approximately $2.7$3.8 million and $2.4$3.5 million during the sixnine months ended JuneSeptember 30, 2020 and 2019 respectively.

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AWR borrows under a 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. In March 2020, AWR amended the credit facility to temporarily increase the borrowing capacity by

$35.0 $35.0 million to $260.0 million until December 31, 2020, at which point the commitment wouldwill be reduced to $200.0 million. As of JuneSeptember 30, 2020, there was $249.0$89.0 million outstanding under this facility, of which $49.0 million has been reflected as a current liability on the consolidated balance sheet of AWR.facility. Effective July 1, 2020, BVESI put in place and has access to a 3-year, $35 million revolving credit facility. Under the terms of the credit agreement, BVESI has the rightoption to request an increase in the facility by an additional $15 million. As of September 30, 2020, there was $3.0 million outstanding under this facility.
On July 8, 2020, GSWC completed the issuance of unsecured private placement notes totaling $160.0 million. In connection with this financing, GSWC issued (i) $85.0 million (Note 12).aggregate principal amount of Series A Senior Notes at a coupon rate of 2.17% due July 8, 2030, and (ii) $75.0 million aggregate principal amount of Series B Senior Notes at a coupon rate of 2.90% due July 8, 2040. Interest on the Notes is payable semiannually. The Notes are unsecured and rank equally with GSWC’s unsecured and unsubordinated debt. GSWC may, at its option, redeem all or portions of the Notes at any time upon written notice, subject to payment of a make-whole premium based on 50 basis points above the applicable treasury yield. Under the terms of the Notes, GSWC may not incur any additional indebtedness or pay any distributions to its parent, AWR, if after giving effect thereto, GSWC would have a total indebtedness to capitalization ratio of more than 0.6667:1.00. In addition, GSWC may not incur any additional indebtedness if, after giving effect thereto, it would have a total indebtedness to earnings before interest, taxes, depreciation and amortization ratio greater than 8.00:1.00.
    GSWC used the proceeds from thesethe new notes to pay down a majority of the $199.2 million intercompany borrowings from AWR parent. AWR used the proceeds received from GSWC to pay down borrowings on its revolving credit facility. Following the issuance of the notes and effective July 15, 2020, AWR reduced the aggregate borrowing capacity of its credit facility to $200.0 million pursuant to the terms of that credit facility agreement.
The CPUC requires GSWC to completely pay down all intercompany borrowings from AWR within a 24-month period. 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 borrowings of $199.2$34.1 million as of JuneSeptember 30, 2020 have been classified as a current liability on GSWC’s balance sheet.
COVID-19 Impact:
GSWC, BVESI, and BVESI continue to operate as itsASUS have continued their operations given that their water, wastewater, and electric utility services are deemed essential services, and continue monitoringessential.  The Company's responses take into account the guidance provided by federal, state, and local health authorities and other government officials.  GSWC's responseofficials to the COVID-19 outbreak has included:pandemic. Some of the actions taken by GSWC and BVESI include: (i) suspending, at least through April 2021, service disconnections for nonpaymentsnonpayment pursuant to CPUC orders, which will remain in effect over other existing requirements governing disconnections;orders; (ii) increasing the number of employees telecommuting; and (iii) delaying some capital improvement projects at itsthe water utility services business. At this time, neither GSWC nor BVESI is unable to predictThus far, the financialCOVID-19 pandemic has not had a material impact this situation may have on the remainder of 2020. However, theASUS's operations.
The pandemic has caused significant volatility on financial markets, resulting in significant fluctuations in the fair value of plan assets in GSWC's pension and other retirement plans. Management believes that this volatility is likely tomay continue duringthroughout the pandemic. Furthermore, due
Due to expected future credit losses on utility customer bills, GSWCRegistrant has increased its allowance for doubtful accounts as of JuneSeptember 30, 2020. However, the CPUC has authorized GSWC and BVESI to track incremental costs, including bad debt expense in excess of what is included in GSWC'stheir respective revenue requirement,requirements, incurred as a result of the COVID-19 pandemic in a Catastrophic Event Memorandum Account ("CEMA") to be filed with the CPUC for future recovery. GSWC hasand BVESI have recorded a total of approximately $1.4 million in the amounts in this CEMA accountaccounts as a regulatory asset,assets, as the Company believes such amounts are probable of recovery. 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.
Recently Issued Accounting Pronouncements:
Accounting Pronouncements Adopted in 2020 -
In June 2016, 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. For the three and sixnine months ended JuneSeptember 30, 2020, Registrant has increased its allowance for
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doubtful accounts for utility customer accounts receivable by $673,000$871,000 and $1.1$1.9 million, respectively, due to Registrant'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 2018-14-2018-14, Compensation-Retirement Benefits-DefinedBenefits—Defined Benefit Plans-General (Subtopic 715-20): Disclosure Framework-ChangesFramework—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 evaluatingdoes not believe the ASU and has not yet determined the effectwill have a material impact 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 ofdoes not believe this ASU will have a material impact on its 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. 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 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 and sixnine months ended JuneSeptember 30, 2020 and 2019, disaggregated revenues from contracts with customers by segment were as follows:
 Three Months Ended June 30, Six Months Ended June 30,
(dollar in thousands)2020 2019 2020 2019
Water:       
Tariff-based revenues$77,264
 $76,876
 $146,518
 $136,451
Surcharges (cost-recovery activities)962
 763
 1,696
 1,054
Other491
 461
 986
 920
Water revenues from contracts with customers78,717
 78,100
 149,200
 138,425
WRAM under-collection (alternative revenue program)8,357
 10,040
 9,298
 14,438
Total water revenues87,074
 88,140
 158,498
 152,863
        
Electric:       
Tariff-based revenues7,384
 7,698
 17,416
 18,964
Surcharges (cost-recovery activities)178
 43
 436
 97
Electric revenues from contracts with customers7,562
 7,741
 17,852
 19,061
BRRAM under (over)-collection (alternative revenue program)117
 (333) 795
 (1,024)
Total electric revenues7,679
 7,408
 18,647
 18,037
        
Contracted services:       
Water13,472
 14,620
 28,173
 27,975
Wastewater13,053
 14,479
 25,037
 27,505
Contracted services revenues from contracts with customers26,525
 29,099
 53,210
 55,480
        
Total AWR revenues$121,278
 $124,647

$230,355

$226,380

Three Months Ended September 30,Nine Months Ended September 30,
(dollar in thousands)2020201920202019
Water:
Tariff-based revenues$97,036 $89,050 $243,553 $225,501 
Surcharges (cost-recovery activities)1,217 1,900 2,913 2,954 
Other569 555 1,556 1,475 
Water revenues from contracts with customers98,822 91,505 248,022 229,930 
WRAM (over) under-collection (alternative revenue program)(121)3,744 9,177 18,182 
Total water revenues98,701 95,249 257,199 248,112 
Electric:
Tariff-based revenues8,531 9,729 25,948 28,693 
Surcharges (cost-recovery activities)188 51 624 148 
Electric revenues from contracts with customers8,719 9,780 26,572 28,841 
BRRAM (over) under-collection (alternative revenue program)(431)2,216 363 1,192 
Total electric revenues8,288 11,996 26,935 30,033 
Contracted services:
Water17,143 13,797 45,316 41,772 
Wastewater9,556 13,454 34,593 40,959 
Contracted services revenues from contracts with customers26,699 27,251 79,909 82,731 
Total AWR revenues$133,688 $134,496 $364,043 $360,876 
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) June 30, 2020 December 31, 2019
Unbilled receivables $10,399
 $10,467
Receivable from the U.S. government $64,399
 $64,819
Contract assets $20,458
 $15,631
Contract liabilities $10,569
 $11,167

(dollar in thousands)September 30, 2020December 31, 2019
Unbilled receivables$12,955 $10,467 
Receivable from the U.S. government$70,106 $64,819 
Contract assets$10,086 $15,631 
Contract liabilities$8,670 $11,167 
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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RevenueRevenues for the three and sixnine months ended JuneSeptember 30, 2020, which were included in contract liabilities at the beginning of the period were $6.7$7.1 million and $9.7$10.9 million, respectively. Contracted services revenues recognized during the three and sixnine months ended JuneSeptember 30, 2020 from performance obligations satisfied in previous periods were not material.
As of JuneSeptember 30, 2020, 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 48 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 recordsGSWC 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 JuneSeptember 30, 2020, RegistrantGSWC and BVESI had approximately $42.8$44.9 million of regulatory liabilities, net of regulatory assets, not accruing carrying costs. Of this amount, (i) $79.2$78.8 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) $11.8$11.5 million of regulatory liabilities are from flowed-through deferred income taxes, (iii) $42.2$41.7 million of net regulatory assets relates to the underfunded position in Registrant'sGSWC's pension and other retirement obligations (not including the two-way pension balancing accounts), and (iv) $3.8a $2.5 million of regulatory assetsasset relates to a memorandum account authorized by the CPUC to track unrealized gains and losses on 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 BVESI for which iteither has received or expects to receive rate recovery in the future. In determining the probability of costs being recognized in other periods, GSWC 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, itthe applicable entity 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) June 30,
2020		 December 31,
2019
GSWC    
Water Revenue Adjustment Mechanism and Modified Cost Balancing Account $29,495
 $22,535
Costs deferred for future recovery on Aerojet case 7,745
 8,292
Pensions and other post-retirement obligations (Note 8) 40,850
 40,693
Derivative unrealized loss (Note 5) 3,827
 3,171
General rate case memorandum accounts 2,035
 4,820
Excess deferred income taxes (79,158) (79,886)
Flow-through taxes, net (11,788) (12,439)
Other regulatory assets 19,752
 18,842
Various refunds to customers (6,722) (8,478)
Total $6,036
 $(2,450)

(dollars in thousands)September 30,
2020		December 31,
2019
GSWC
Water Revenue Adjustment Mechanism and Modified Cost Balancing Account$24,904 $22,535 
Costs deferred for future recovery on Aerojet case7,169 8,292 
Pensions and other post-retirement obligations (Note 8)40,606 40,693 
Derivative unrealized loss (Note 5)0 3,171 
General rate case memorandum accounts218 4,820 
Excess deferred income taxes(74,597)(79,886)
Flow-through taxes, net(10,809)(12,439)
Other regulatory assets12,227 18,842 
Various refunds to customers(3,620)(8,478)
Total GSWC$(3,902)$(2,450)
BVESI
Derivative unrealized loss (Note 5)2,5180 
Other regulatory assets1710 
Total AWR$(1,213)$(2,450)
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 filed with the SEC. The discussion below focuses on significant matters and developments since December 31, 2019.
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
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corresponding ratemaking area and bears interest at the current 90-day commercial paper rate.  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, which also addressed other issues including matters associated with the continued use of the WRAM by California water utilities. The final decision also addressed the continued use of the MCBA, which 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 the August 27, 2020 effective date of this decision, 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 (the Monterey-Style WRAM) and an incremental supply cost balancing account. On or prior to October 5, 2020, GSWC, 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.
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. In February 2020, GSWC filed with the CPUC for recovery of the 2019 WRAM/MCBA balances. Accordingly, GSWC has implemented surcharges to recover all of its WRAM/MCBA balances as of December 31, 2019. For the three months ended JuneSeptember 30, 2020 and 2019, surcharges (net of surcredits) of approximately $3.8$4.4 million and $832,000,$5.5 million, respectively, were billed to customers to recover previously incurred under-collections in the WRAM/MCBA accounts. For the sixnine months ended JuneSeptember 30, 2020 and 2019, surcharges (net of surcredits) of approximately $6.1$10.5 million and $3.6$9.1 million, respectively, were billed to customers to recover previously incurred under-collections in the WRAM/MCBA accounts. During the sixnine months ended JuneSeptember 30, 2020, GSWC recorded additional net under-collections in the WRAM/MCBA accounts of approximately $13.0$12.8 million due to lower-than-adopted water usage, as well as higher-than-adopted supply costs currently in billed customer rates. As of JuneSeptember 30, 2020, GSWC had an aggregated regulatory asset of $29.5$24.9 million, which is comprised of a $15.7$10.3 million under-collection in the WRAM accounts and a $13.8$14.6 million under-collection in the MCBA accounts.
Catastrophic Event Memorandum Account ("CEMA"):Account:
On April 3, 2020, theThe CPUC has approved GSWC's requestand BVESI's requests to activate a Catastrophic Event Memorandum Account ("CEMA") for COVID-19. GSWC'sthe impact of the COVID-19 pandemic. The Company's response to the pandemic has included suspending service disconnections for nonpayment. 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'stheir respective revenue requirement,requirements, are being included in the CEMA accountaccounts for future recovery. As of JuneSeptember 30, 2020, $669,000$1.4 million in COVID-19 related incremental costs have been recorded as a regulatory assetassets as the Company believes such amountsGSWC and BVESI believe their respective costs are probable of recovery.
Cost of Capital Proceeding:
In March 2018, the CPUC issued a final decision in the cost of capital proceeding for GSWC and 3 other water utilities serving California for the years 2018 -– 2020. Among other things, the final decision adopted for GSWC's water segment a return on equity of 8.90%, with a return on rate base of 7.91%.
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.

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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 June 30, For The Six Months Ended June 30,
(in thousands, except per share amounts) 2020 2019 2020 2019
Net income $25,612
 $26,784
 $39,684
 $39,636
Less: (a) Distributed earnings to common shareholders 11,250
 10,119
 22,492
 20,232
Distributed earnings to participating securities 40
 46
 77
 88
Undistributed earnings 14,322
 16,619
 17,115
 19,316
         
          (b) Undistributed earnings allocated to common shareholders 14,271
 16,543
 17,057
 19,232
Undistributed earnings allocated to participating securities 51
 76
 58
 84
Total income available to common shareholders, basic (a)+(b) $25,521
 $26,662
 $39,549
 $39,464
         
Weighted average Common Shares outstanding, basic 36,884
 36,804
 36,872
 36,788
Basic earnings per Common Share $0.69
 $0.72
 $1.07
 $1.07

Basic:For The Three Months Ended September 30,For The Nine Months Ended September 30,
(in thousands, except per share amounts)2020201920202019
Net income$26,530 $28,006 $66,214 $67,642 
Less: (a) Distributed earnings to common shareholders12,356 11,234 34,848 31,466 
Distributed earnings to participating securities43 50 116 137 
Undistributed earnings14,131 16,722 31,250 36,039 
          (b) Undistributed earnings allocated to common shareholders14,083 16,647 31,146 35,882 
Undistributed earnings allocated to participating securities48 75 104 157 
Total income available to common shareholders, basic (a)+(b)$26,439 $27,881 $65,994 $67,348 
Weighted average Common Shares outstanding, basic36,886 36,835 36,877 36,804 
Basic earnings per Common Share$0.72 $0.76 $1.79 $1.83 
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 JuneSeptember 30, 2020 and there were 11,5568,556 options outstanding as of JuneSeptember 30, 2019 under these plans. At JuneSeptember 30, 2020 and 2019, there were also 133,863127,234 and 170,372165,783 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 June 30, For The Six Months Ended June 30,
(in thousands, except per share amounts) 2020 2019 2020 2019
Common shareholders earnings, basic $25,521
 $26,662
 $39,549
 $39,464
Undistributed earnings for dilutive stock-based awards 51
 75
 58
 84
Total common shareholders earnings, diluted $25,572
 $26,737
 $39,607
 $39,548
         
Weighted average common shares outstanding, basic 36,884
 36,804
 36,872
 36,788
Stock-based compensation (1) 116
 159
 113
 154
Weighted average common shares outstanding, diluted 37,000
 36,963
 36,985
 36,942
         
Diluted earnings per Common Share $0.69
 $0.72
 $1.07
 $1.07
Diluted:For The Three Months Ended September 30,For The Nine Months Ended September 30,
(in thousands, except per share amounts)2020201920202019
Common shareholders earnings, basic$26,439 $27,881 $65,994 $67,348 
Undistributed earnings for dilutive stock-based awards48 75 104 157 
Total common shareholders earnings, diluted$26,487 $27,956 $66,098 $67,505 
Weighted average common shares outstanding, basic36,886 36,835 36,877 36,804 
Stock-based compensation (1)116 161 113 156 
Weighted average common shares outstanding, diluted37,002 36,996 36,990 36,960 
Diluted earnings per Common Share$0.72 $0.76 $1.79 $1.83 
(1)      In applying the treasury stock method of reflecting the dilutive effect of outstanding stock-based compensation in the calculation of diluted EPS, 11,5568,556 stock options at JuneSeptember 30, 2019, respectively, were deemed to be outstanding in accordance with accounting guidance on earnings per share.  All of the 133,863127,234 and 170,372165,783 restricted stock units at JuneSeptember 30, 2020 and 2019, respectively, were included in the calculation of diluted EPS for the three months ended JuneSeptember 30, 2020 and 2019.
There were 0 stock options outstanding at Juneeither September 30, 2020 and there were 0 stock options outstanding at Juneor September 30, 2019 that were anti-dilutive.

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During the sixnine months ended JuneSeptember 30, 2020 and 2019, AWR issued 37,26042,447 and 73,85481,459 common shares related to stock options and restricted stock units, for approximately $30,000 and $366,000,$416,000, respectively, under Registrant’s stock incentive plans for employees.
During the sixnine months ended JuneSeptember 30, 2020 and 2019, AWR paid $1.8$1.9 million and $1.6 million, respectively, to taxing authorities on employees' behalf for shares withheld related to net share settlements. During the sixnine months ended JuneSeptember 30, 2020 and 2019, GSWC paid $1.6$1.7 million and $1.3 million, respectively, to taxing authorities on employees' behalf for 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 JuneSeptember 30, 2020 and 2019, AWR paid quarterly dividends of approximately $11.3$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 sixnine months ended JuneSeptember 30, 2020 and 2019, AWR paid quarterly dividends of approximately $22.5$34.8 million, or $0.61$0.945 per share, and $20.2$31.5 million, or $0.550$0.855 per share, respectively.
During the three months ended JuneSeptember 30, 2020 and 2019, GSWC did not pay a dividend to AWR. Instead, ASUS paid dividends of $11.3$12.4 million and $10.1$12.3 million, respectively, to AWR.AWR during these periods. During the sixnine months ended JuneSeptember 30, 2020 and 2019, GSWC paid dividends of $22.5 million and $20.2 million, respectively, to AWR.
Note 5 — Derivative Instruments
GSWC's electric division purchasedBVESI 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 GSWC to enter into new long-term purchased power contracts with energy providers, which GSWC executed in September 2019. GSWC 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. BVESI assumed the obligations under these contracts on July 1, 2020.
These purchase power contracts are subject to the accounting guidance for derivatives and require mark-to-market derivative accounting. Among other things, the CPUC authorized GSWC tothe use of a regulatory asset and liability memorandum account to offset the mark-to-market entries required by the accounting guidance.  This accounting treatment also applies to BVESI.  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 did not impact GSWC’sRegistrant’s earnings. As of JuneSeptember 30, 2020, there was a $3.8$2.5 million unrealized loss recorded as a regulatory asset in the memorandum account for the purchased power contracts. The notional volume of derivatives remaining under these long-term contracts as of JuneSeptember 30, 2020 was 562,253528,442 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, GSWCBVESI 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 the Level 3 derivatives for the three and sixnine months ended JuneSeptember 30, 2020 and 2019:

For The Three Months Ended September 30,For The Nine Months Ended September 30,
(dollars in thousands)2020201920202019
Fair value at beginning of the period$(3,827)$(267)$(3,171)$(311)
Unrealized gains (losses) on purchased power contracts1,309 (2,755)653 (2,711)
Fair value at end of the period$(2,518)$(3,022)$(2,518)$(3,022)
  For The Three Months Ended June 30, For The Six Months Ended June 30,
(dollars in thousands) 2020 2019 2020 2019
Fair value at beginning of the period $(4,280) $(336) $(3,171) $(311)
Unrealized gains (losses) on purchased power contracts 453
 69
 (656) 44
Fair value at end of the period $(3,827) $(267) $(3,827) $(267)

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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 $21.6$22.8 million as of JuneSeptember 30, 2020. 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 JuneSeptember 30, 2020 and December 31, 2019 were determined using rates for similar financial instruments of the same duration utilizing Level 2 methods and assumptions. The interest rates used for the June 30, 2020 valuation increased as compared to December 31, 2019, decreasing the fair value of long-term debt as of June 30, 2020. Changes in the assumptions will produce different results.
September 30, 2020December 31, 2019
(dollars in thousands)Carrying AmountFair ValueCarrying AmountFair Value
Financial liabilities:    
Long-term debt—GSWC (1)
$444,349 $546,363 $284,699 $376,467 
  June 30, 2020 December 31, 2019
(dollars in thousands) Carrying Amount Fair Value Carrying Amount Fair Value
Financial liabilities:  
  
  
  
Long-term debt—GSWC (1)
 $284,489
 $386,284
 $284,699
 $376,467
___________________
(1) Excludes debt issuance costs and redemption premiums.

Note 7 — Income Taxes
AWR's effective income tax rate (“ETR”) was 24.4%25.4% and 22.6%25.1% for the three months ended JuneSeptember 30, 2020 and 2019, respectively, and was 23.5%24.3% and 21.9%23.3% for the sixnine months ended JuneSeptember 30, 2020 and 2019, respectively. GSWC's ETR was 25.9%26.7% and 23.4%26.4% for the three months ended JuneSeptember 30, 2020 and 2019, respectively, and was 24.7%25.5% and 22.2%24.1% for the sixnine months ended JuneSeptember 30, 2020 and 2019, respectively.
The AWR and GSWC effective tax rates differ from the federal statutory tax rate 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 and sixnine months ended JuneSeptember 30, 2020 and 2019; (iii) the continuing amortization of the excess deferred income tax liability that commenced upon the lowering of the federal tax rate; 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). 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.


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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 and sixnine months ended JuneSeptember 30, 2020 and 2019 were as follows:
 For The Three Months Ended June 30,For The Three Months Ended September 30,
 Pension Benefits 
Other
Postretirement
Benefits
 SERP Pension BenefitsOther
Postretirement
Benefits		SERP
(dollars in thousands) 2020 2019 2020 2019 2020 2019(dollars in thousands)202020192020201920202019
Components of Net Periodic Benefits Cost:  
  
  
  
  
  
Components of Net Periodic Benefits Cost:      
Service cost $1,372
 $986
 $47
 $53
 $244
 $298
Service cost$1,390 $1,110 $35 $53 $244 $298 
Interest cost 1,986
 2,133
 56
 80
 247
 267
Interest cost1,970 2,132 44 80 247 267 
Expected return on plan assets (2,950) (2,595) (127) (112) —
 —
Expected return on plan assets(2,950)(2,594)(130)(112)0 0 
Amortization of prior service cost 109
 109
 —
 —
 —
 —
Amortization of prior service cost109 109 0 0 0 0 
Amortization of actuarial (gain) loss 526
 351
 (199) (150) 211
 118
Amortization of actuarial (gain) loss484 355 (334)(150)211 118 
Net periodic benefits costs under accounting standards 1,043
 984
 (223) (129) 702
 683
Net periodic benefits costs under accounting standards1,003 1,112 (385)(129)702 683 
Regulatory adjustment - deferred (148) (342) —
 —
 —
 —
Regulatory adjustment - deferred(121)(160)0 0 0 0 
Total expense (benefit) recognized, before surcharges and allocation to overhead pool $895
 $642
 $(223) $(129) $702
 $683
Total expense (benefit) recognized, before surcharges and allocation to overhead pool$882 $952 $(385)$(129)$702 $683 
            
 For The Six Months Ended June 30,For The Nine Months Ended September 30,
 Pension Benefits Other
Postretirement
Benefits		 SERP Pension BenefitsOther
Postretirement
Benefits		SERP
(dollars in thousands) 2020 2019 2020 2019 2020 2019(dollars in thousands)202020192020201920202019
Components of Net Periodic Benefits Cost:  
  
  
  
  
  
Components of Net Periodic Benefits Cost:      
Service cost $2,780
 $2,220
 $94
 $106
 $488
 $596
Service cost$4,170 $3,330 $129 $159 $732 $894 
Interest cost 3,940
 4,264
 112
 160
 494
 534
Interest cost5,910 6,396 156 240 741 801 
Expected return on plan assets (5,900) (5,188) (254) (224) —
 —
Expected return on plan assets(8,850)(7,782)(384)(336)0 0 
Amortization of prior service cost 218
 218
 —
 —
 —
 —
Amortization of prior service cost327 327 0 0 0 0 
Amortization of actuarial (gain) loss 968
 710
 (398) (300) 422
 236
Amortization of actuarial (gain) loss1,452 1,065 (732)(450)633 354 
Net periodic benefits costs under accounting standards 2,006
 2,224
 (446) (258) 1,404
 1,366
Net periodic benefits costs under accounting standards3,009 3,336 (831)(387)2,106 2,049 
Regulatory adjustment - deferred (241) (342) —
 —
 —
 —
Regulatory adjustment - deferred(362)(502)0 0 0 0 
Total expense (benefit) recognized, before surcharges and allocation to overhead pool $1,765
 $1,882
 $(446) $(258) $1,404
 $1,366
Total expense (benefit) recognized, before surcharges and allocation to overhead pool$2,647 $2,834 $(831)$(387)$2,106 $2,049 
InDuring the nine months ended September 30, 2020, Registrant expects to contributecontributed approximately $3.7 million to its pension plan.
As authorized by the CPUC in the water and electric general rate case decisions, GSWC utilizesand BVESI utilize two-way balancing accounts for its water and electric regions and the general officeeach of their ratemaking areas, as applicable, 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 and sixnine months ended JuneSeptember 30, 2020, GSWC's actual pension expense was higher than the amounts included in water customer rates by $148,000$121,000 and $241,000,$362,000, respectively. During the three and sixnine ended JuneSeptember 30, 2019, GSWC's actual pension expense was higher than the amounts included in water customer rates by $342,000.$160,000 and $502,000, respectively. BVESI's actual expense was lower than the amounts included in electric customer rates for all periods presented. As of JuneSeptember 30, 2020, GSWC and BVESI had a $1.4 million net over-collectionover-collections in the two-way pension balancing accounts of $1.1 million and $166,000, respectively, included as part of the pension regulatory assetassets 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 a plant site ("Chadron Plant") 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 JuneSeptember 30, 2020, the total amount spent to clean up and remediate GSWC’s plant facility was approximately $6.3 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 JuneSeptember 30, 2020, 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,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.
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 receivables, be based on expected credit losses rather than incurred losses.
Registrant's allowance for doubtful accountaccounts as of JuneSeptember 30, 2020 was developed based on the observed effects of the economic impact offrom the COVID-19 pandemic on GSWC's and BVESI's aging of utility customer accounts receivable, as well as economic data such as unemployment rates and other considerations whichthat 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,nonpayment, which is expected to have the effect of increasing delinquent customer accounts receivable during the COVID-19 pandemic. However, the CPUC has authorized GSWC and BVESI to track incremental costs, including bad debt expense in excess of what is included in their respective revenue requirements, incurred as a result of the COVID-19 pandemic in CEMA accounts to be filed with the CPUC for future recovery. Other accounts receivable consist primarily of amounts due from third parties (non-utility customers) for various reasons, including amounts due from contractors, amounts due under settlement agreements, and amounts due from other third-party prime government contractors pursuant to agreements for construction of water and/or wastewater facilities for such third-party prime contractors. Thus far, the COVID-19 pandemic has not materially impacted the collectability of these other accounts receivable.    
The table below presents Registrant’s provision for doubtful accounts charged to expense and accounts written off, net of recoveries.
 Three Months Ended September 30, 2020Nine Months Ended September 30, 2020
(dollars in thousands)AWRGSWCAWRGSWC
Balances at beginning of the period$1,662 $1,662 $916 $916 
Increase to provision871 801 1,937 1,867 
Balance transfer to BVESI (Note 12)0 (79)0 (79)
Accounts written off, net of recoveries(80)(67)(400)(387)
Balances at end of the period$2,453 $2,317 $2,453 $2,317 
Allowance for doubtful accounts related to accounts receivable-customer$2,400 $2,264 $2,400 $2,264 
Allowance for doubtful accounts related to other accounts receivable53 53 53 53 
Total allowance for doubtful accounts$2,453 $2,317 $2,453 $2,317 
  Three Months Ended June 30, 2020 Six Months Ended June 30, 2020
(dollars in thousands) AWR GSWC AWR GSWC
Balances at beginning of the period $1,145
 $1,145
 $916
 $916
Increase to provision 673
 673
 1,066
 1,066
Accounts written off, net of recoveries (156) (156) (320) (320)
Balances at end of the period $1,662
 $1,662
 $1,662
 $1,662
         
Allowance for doubtful accounts related to accounts receivable-customer $1,603
 $1,603
 $1,603
 $1,603
Allowance for doubtful accounts related to receivable from U.S. government —
 —
 —
 —
Allowance for doubtful accounts related to other accounts receivable 59
 59
 59
 59
Total allowance for doubtful accounts $1,662
 $1,662
 $1,662
 $1,662
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Note 11 — Business Segments
AWR has 3 reportable segments,segments: water, electric and contracted services, whereas priorservices. Prior to July 1, 2020, GSWC 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. On a stand-alone basis, AWR has no material assets other than its equity investments in its subsidiaries and note receivables therefrom, and deferred taxes. 
All activities of GSWC and BVESI rate-regulated utilities, 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’sAWR’s operating segments ASUS and its subsidiaries and other matters.AWR Parent. Total assets by segment are not presented below, as certain of Registrant’s assets are not tracked by segment.  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 September 30, 2020
 ContractedAWRConsolidated
(dollars in thousands)WaterElectric ServicesParentAWR
Operating revenues$98,701 $8,288 $26,699 $0 $133,688 
Operating income (loss)33,149 1,865 4,794 (1)39,807 
Interest expense, net5,806 54 (74)59 5,845 
Net property, plant and equipment1,373,323 83,188 22,599 0 1,479,110 
Depreciation and amortization expense (1)7,835 626 887 0 9,348 
Income tax expense (benefit)7,683 533 1,150 (321)9,045 
Capital additions28,076 3,039 1,122 0 32,237 
 As Of And For The Three Months Ended September 30, 2019
 ContractedAWRConsolidated
(dollars in thousands)WaterElectricServicesParentAWR
Operating revenues$95,249 $11,996 $27,251 $0 $134,496 
Operating income (loss)31,310 5,672 5,745 (3)42,724 
Interest expense, net5,206 234 (144)157 5,453 
Net property, plant and equipment1,291,928 66,902 19,536 0 1,378,366 
Depreciation and amortization expense (1)7,690 669 647 0 9,006 
Income tax expense (benefit)6,720 1,663 1,391 (369)9,405 
Capital additions25,267 2,864 1,802 0 29,933 
 As Of And For The Nine Months Ended September 30, 2020
 ContractedAWRConsolidated
(dollars in thousands)WaterElectricServicesParentAWR
Operating revenues$257,199 $26,935 $79,909 $0 $364,043 
Operating income (loss)80,416 6,865 13,946 (5)101,222 
Interest expense, net15,796 519 (371)225 16,169 
Net property, plant and equipment1,373,323 83,188 22,599 0 1,479,110 
Depreciation and amortization expense (1)22,858 1,841 2,491 0 27,190 
Income tax expense (benefit)17,031 1,722 3,199 (725)21,227 
Capital additions78,611 12,093 4,120 0 94,824 
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 As Of And For The Three Months Ended June 30, 2020 As Of And For The Nine Months Ended September 30, 2019
 GSWC   AWR Consolidated ContractedAWRConsolidated
(dollars in thousands) Water Electric ASUS Parent AWR(dollars in thousands)WaterElectricServicesParentAWR
Operating revenues $87,074
 $7,679
 $26,525
 $—
 $121,278
Operating revenues$248,112 $30,033 $82,731 $0 $360,876 
Operating income (loss) 28,662
 1,513
 5,543
 (2) 35,716
Operating income (loss)77,835 8,511 16,010 (7)102,349 
Interest expense, net 4,857
 139
 (220) 56
 4,832
Interest expense, net15,555 933 (724)470 16,234 
Utility plant 1,353,671
 80,343
 22,384
 —
 1,456,398
Net property, plant and equipmentNet property, plant and equipment1,291,928 66,902 19,536 0 1,378,366 
Depreciation and amortization expense (1) 7,601
 608
 822
 —
 9,031
Depreciation and amortization expense (1)22,484 1,870 2,139 0 26,493 
Income tax expense (benefit) 6,970
 339
 1,301
 (329) 8,281
Income tax expense (benefit)15,205 2,124 3,816 (599)20,546 
Capital additions 22,076
 5,500
 1,467
 —
 29,043
Capital additions99,939 4,852 6,297 0 111,088 
  As Of And For The Three Months Ended June 30, 2019
  GSWC   AWR Consolidated
(dollars in thousands) Water Electric ASUS Parent AWR
Operating revenues $88,140
 $7,408
 $29,099
 $—
 $124,647
Operating income (loss) 33,259
 778
 5,395
 (2) 39,430
Interest expense, net 5,112
 346
 (219) 167
 5,406
Utility plant 1,273,962
 63,462
 18,239
 —
 1,355,663
Depreciation and amortization expense (1) 5,405
 601
 649
 —
 6,655
Income tax expense (benefit) 6,812
 14
 1,300
 (295) 7,831
Capital additions 36,293
 1,254
 3,046
 —
 40,593

  As Of And For The Six Months Ended June 30, 2020
  GSWC   AWR Consolidated
(dollars in thousands) Water Electric ASUS Parent AWR
Operating revenues $158,498
 $18,647
 $53,210
 $—
 $230,355
Operating income (loss) 47,267
 5,000
 9,152
 (4) 61,415
Interest expense, net 9,990
 465
 (297) 166
 10,324
Utility plant 1,353,671
 80,343
 22,384
 —
 1,456,398
Depreciation and amortization expense (1) 15,023
 1,215
 1,604
 


 17,842
Income tax expense (benefit) 9,348
 1,189
 2,049
 (404) 12,182
Capital additions 50,535
 9,054
 2,998
 


 62,587

  As Of And For The Six Months Ended June 30, 2019
  GSWC   AWR Consolidated
(dollars in thousands) Water Electric ASUS Parent AWR
Operating revenues $152,863
 $18,037
 $55,480
 $—
 $226,380
Operating income (loss) 46,525
 2,839
 10,265
 (4) 59,625
Interest expense, net 10,349
 699
 (580) 313
 10,781
Utility plant 1,273,962
 63,462
 18,239
 —
 1,355,663
Depreciation and amortization expense (1) 14,794
 1,201
 1,492
 —
 17,487
Income tax expense (benefit) 8,485
 461
 2,425
 (230) 11,141
Capital additions 74,672
 1,988
 4,495
 —
 81,155

(1)     Depreciation computed on GSWC’s and BVESI's transportation equipment is recorded in other operating expenses and totaled $83,000
$84,000 and $96,000$80,000 for the three months ended JuneSeptember 30, 2020 and 2019, respectively, and $165,000$249,000 and $154,000$234,000 for the sixnine months ended JuneSeptember 30, 2020 and 2019, respectively.

The following table reconciles total utilitynet property, plant and equipment (a key figure for ratemaking) to total consolidated assets (in thousands):
September 30,
 June 30, 20202019
 2020 2019
Total utility plant $1,456,398
 $1,355,663
Total net property, plant and equipmentTotal net property, plant and equipment1,479,110 $1,378,366 
Other assets 241,570
 211,620
Other assets247,308 226,015 
Total consolidated assets $1,697,968
 $1,567,283
Total consolidated assets$1,726,418 $1,604,381 

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Note 12 - Subsequent Events
Completion of Electric Utility Reorganization Plan and Financing Arrangement:
On July 1, 2020, GSWC completed the transfer of the electric utilityapproximately $71.3 million in net assets and liabilitiesequity (based on their recorded amounts) from its electric utility division to BVESI in exchange for common shares of BVESI.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 is not expected to result in any substantive changes to AWR's operations or business segments. In addition, effectivepursuant 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, is 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 statement of income for the nine months ended September 30, 2020 includes the electric segment's results through June 30, 2020.
The table below sets forth selected information relating to the electric segment's results of operations for the three months ended September 30, 2020 and 2019, and its cash flows for the three months ended September 30, 2020 (in thousands):
Three months ended September 30,
2020
2019 (1)
(Subsidiary of AWR)(Division of GSWC)
Electric revenues$8,288 $11,996 
Operating expenses6,423 6,324 
   Operating income$1,865 $5,672 
Net income$1,308 $3,779 

Three Months Ended September 30, 2020
(Subsidiary of AWR)
Net cash provided from operating activities$603 
Net cash used in investing activities(3,039)
Net cash provided from financing activities (2)
2,999 
Net change in cash and cash equivalents563 
Cash and cash equivalents, beginning of period20
Cash and cash equivalents, end of period$583 
(1)    Operating income for the three months ended September 30, 2019 included the retroactive impact of the CPUC's August 2019 final decision on the electric general rate case, which totaled approximately $3.7 million for periods prior to the third quarter of 2019.
(2)    Effective July 1, 2020, BVESI put in place and has access toentered into a 3-year, $35 million revolving credit facility agreement with a bank and began borrowing under this facility.As of September 30, 2020, there was $3.0 million outstanding under the new facility. Under the terms of the credit agreement, BVESI has the rightoption to request an increase in the facility by an additional $15 million.
Issuance



30
Table of Senior Unsecured Notes at GSWC (the "Notes"):Contents
On July 8, 2020, GSWC completed the issuance of unsecured private placement notes totaling $160.0 million. In connection with this financing, GSWC issued (i) $85.0 million aggregate principal amount of Series A Senior Notes at a coupon rate of 2.17% due July 8, 2030, and (ii) $75.0 million aggregate principal amount of Series B Senior Notes at a coupon rate of 2.90% due July 8, 2040. Interest on the Notes is payable semiannually. The Notes are unsecured and will rank equally with GSWC’s unsecured and unsubordinated debt. GSWC may, at its option, redeem all or portions of the Notes at any time upon written notice, subject to payment of a make-whole premium based on 50 basis points above the applicable treasury yield.
Under the terms of the Notes, GSWC may not incur any additional indebtedness or pay any distributions to its parent, AWR, if after giving effect thereto, GSWC would have a total indebtedness to capitalization ratio of more than 0.6667:1.00. In addition, GSWC may not incur any additional indebtedness if, after giving effect thereto, it would have a total indebtedness to earnings before interest, taxes, depreciation and amortization ratio greater than 8.00:1.00.
GSWC used the proceeds from the Notes to pay down the majority of its intercompany borrowings from AWR. AWR used the proceeds received from GSWC to pay down amounts outstanding under its credit facility. In March 2020, AWR had amended the credit facility to temporarily increase the borrowing capacity to $260.0 million. Following the issuance of the Notes, effective July 15, 2020 AWR reduced the aggregate borrowing capacity back down to $200.0 million pursuant to the terms of the revolving credit facility agreement.

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/orand its subsidiaries (GSWC, BVESI, and ASUS and its subsidiaries), and AWR (parent) where applicable.  On July 1, 2020, GSWC completed the transfer of the electric utility assets and liabilities from its electric division to Bear Valley Electric Service, Inc. (“BVESI”)BVESI in exchange for common shares of BVESI. GSWC then immediately distributed all of BVESI's common shares to AWR, whereupon BVESI became wholly owned directly by AWR. The reorganization is not expected to result in any substantive changes to AWR's operations or business segments.
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 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 retroactive impact related to the first quartersix months of 2019 and for fiscal 2018 resulting from the CPUC's final decision on the waterelectric general rate case issued in MayAugust 2019 has been excluded when communicating the water segment’s secondelectric segment's third quarter and year-to-date 2019 results to help facilitate comparisons of the Company’sRegistrant’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 disclosuredisclosures 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 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 SecondThird Quarter Results by Segment” and “Summary of Year-to-Date 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, 2019.2019 filed with the SEC.
Water and Electric Segments:
GSWC's and BVESI's revenues, operating income, and cash flows have been earned primarily through delivering potable water to homes and businesses in California and the delivery of electricity in the Big Bear area of San Bernardino County, 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 and BVESI plan to continue to seekseeking 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 and BVESI are able to obtain funds from external sources in the capital markets and through bank borrowings.
General Rate Case ("GRC") Filings and Other Matters:
Water Segment GRC: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's 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 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 General Rate Case for years 2019 – 2021:
In May 2019, the CPUC issued a final decision on GSWC's water general rate case, which 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 $20.4 million of capital projects to be filed for revenue recovery through advice letters when those projects are completed.
Due to the delay in receiving a final CPUC decision on the water general rate case, billed water revenues for the first quarter
31
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 increaseincreases 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 thean earnings test at all of its ratemaking areas. The full step increase is expected to generate an additional $10.4 million in water gross margin for 2020. The final decision also allows for a potential additional increase in the water gross margin of approximately $11.4 million in 2021, subject to the results of an earnings test and changes to the forecasted inflationary index values.
Electric Segment GRC:
In August 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); (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 changes; (iii) authorized GSWC's electric division 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) increased the adopted electric gross margin by $1.2 million for each of the years 2019 and 2020, by $1.1 million in 2021, and by $1.0 million in 2022. The rate increases for 2019 - 2022 are not subject to an earnings test. The decision authorized a return on equity for GSWC's electric segment of 9.60% and 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. The rate case decision continues to apply for BVESI.
Due to the delay in finalizing the electric general rate case, electric revenues recognized during the first six months of 2019 were based on 2017 adopted rates. Because the August 2019 CPUC final decision was retroactive to January 1, 2018, the cumulative retroactive earnings impact of the decision was included in the third quarter results of 2019, including approximately $0.03 per share related to the six months ended June 30, 2019, of which $0.01 per share related to the second quarter of 2019, had the new 2018 and 2019 rates been in place at that time.
Issuance of Senior Unsecured Notes at GSWC:
On July 8, 2020, GSWC completed the issuance of unsecured private placement notes totaling $160 million. In connection with this financing, GSWC issued $85 million in 2.17% senior notes which mature in 2030, and $75 million in 2.90% senior notes which mature in 2040. GSWC used the proceeds from the notes to pay down a majority of its intercompany borrowings from AWR. AWR used thesethe proceeds from GSWC to pay down amounts outstanding under its credit facility. In March 2020, AWR had amended its credit facility to temporarily increase the borrowing capacity to $260 million. Following the issuance of GSWC’s notes and effective July 15, 2020, AWR reduced the aggregate borrowing capacity back down to $200 million pursuant to the terms of the revolving credit facility agreement.
Proposed    Final Decision on Low-Income Affordability Rulemaking: 
On July 3,August 27, 2020, the CPUC issued a proposedfinal decision related toin 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, which also addressed other issues including matters associated with

the continued use of the water revenue adjustment mechanismWater Revenue Adjustment Mechanism ("WRAM") by California water utilities. The final decision also addressed the continued use of the Modified Cost Balancing Account ("MCBA"), which 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). If approved,Based on the final decision, any general rate case application filed by GSWC and the other California water utilities thatafter the August 27, 2020 effective date of this decision, may not include a proposal to continue the use full decouplingof the WRAM accounts, including GSWC, would be requiredor MCBA, but may instead include a proposal to replace their WRAM accounts withuse a limited price adjustment mechanism (the Monterey-Style Water Revenue Adjustment Mechanisms) in their next general rate case filing.  This proposedWRAM) and an incremental supply cost balancing account.
The final decision may be on the Commission’s agenda for a vote as early as August 6, 2020.  Management believes the proposed decision, if approved, shouldwill not have any impact on GSWC's WRAM or MCBA balances during the current rate cycle (2019 through– 2021).
SinceIn addition, the decision supports GSWC’s position that it does not apply to its implementation in 2008, the WRAM has helped mitigate fluctuations in GSWC’s revenues due to changes in water consumption by its customers.  Replacing the WRAM with the mechanism recommended in the proposed decision would undo the current decoupling mechanism, which could result in more volatility in GSWC’s future revenues and prevent full recovery of its authorized revenues.  GSWC filed comments to the proposed decision.  At this time, management cannot predict the outcome of this matter including its potential impact to the water general rate case application filed in July 2020, which will set new rates for the years 2022 -– 2024. However, at this time, management cannot predict the potential impact of this decision, if any, on the pending water general rate case. Since its implementation in 2008, the WRAM and MCBA have helped mitigate fluctuations in GSWC’s earnings due to changes in water consumption by its customers or changes in water supply mix. Replacing them with mechanisms recommended in the final decision would result in more volatility in GSWC’s future earnings and could prevent full recovery of its authorized water gross margin. On or prior to October 5, 2020, GSWC, 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.    
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.
    Electric Segment General Rate Case:
In August 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); (ii) increased the electric gross margin for 2018 by approximately $2.3 million compared to the 2017 adopted electric gross margin, adjusted for tax reform changes; (iii) authorized 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) increased the adopted electric gross margin by $1.2 million for each of the years 2019 and 2020, by $1.1 million in 2021, and by $1.0 million in 2022. The rate increases for 2019 – 2022 are not subject to an earnings test. The decision authorized a return on equity for the electric segment of 9.60% and 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. The rate case decision continues to apply to BVESI.
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Due to the delay in finalizing the electric general rate case, electric revenues recognized during the first six months of 2019 were based on 2017 adopted rates. Because the August 2019 CPUC final decision was retroactive to January 1, 2018, the cumulative retroactive earnings impact of the decision was included in the third quarter results of 2019, including approximately $0.03 per share for the six months ended June 30, 2019, and $0.04 per share for the full year ended December 31, 2018 had the new 2018 and 2019 rates been in place at those times.
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:    
GSWC, BVESI, and BVESI continue to operate as itsASUS have continued their operations given that their water, wastewater, and electric utility services are deemed essential services, and continueessential.  The Company's responses to monitorthe COVID-19 pandemic take into account the guidance provided by federal, state, and local health authorities and other government officials. GSWC'sThe response to the COVID-19 outbreakof GSWC and BVESI has included: (i) suspending, through April 2021, service disconnections for nonpaymentsnonpayment pursuant to CPUC orders, which will remain in effect over other existing requirements governing disconnections;orders; (ii) the temporary closing of customer service offices; (iii) increasing the number of employees telecommuting; and (iv)(iii) delaying some capital improvement projects at itsthe water utility services business. At this time, neither GSWC nor BVESI is able to predict the financial impact this situation may have on the remainder of 2020. However,Thus far, the COVID-19 pandemic has not had a material impact on ASUS's operations.
The pandemic has caused significant volatility onin financial markets, resulting in significant fluctuations in the fair value of plan assets in GSWC's pension and other retirement plans, which are likely to continue. Furthermore, due to expected future credit losses on utility customer bills, GSWC hasand BVESI have increased itstheir allowance for doubtful accounts as of JuneSeptember 30, 2020. However, the CPUC has authorized GSWC and BVESI to track incremental costs, including bad debt expense in excess of what is included in their respective revenue requirements, incurred 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 JuneSeptember 30, 2020, we haveAWR has recorded approximately $669,000$1.4 million in the CEMA regulatory asset accountaccounts related to bad debt expense in excess of GSWC’s and BVESI's revenue requirement, personal protective equipment, printing costs and other incremental miscellaneous costs. By tracking these costs in a CEMA, utilities can later ask for recovery of these costs from the CPUC. 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.
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Summary of SecondThird Quarter Results by Segment
The table below sets forth the secondthird quarter diluted earnings per share by business segment:
Diluted Earnings per Share
 Diluted Earnings per Share Three Months Ended 
 Three Months Ended   9/30/20209/30/2019CHANGE
 6/30/2020 6/30/2019 CHANGE
Water, excluding retroactive impact of CPUC decision on general rate case $0.54
 $0.51
 $0.03
Electric 0.03
 0.01
 0.02
WaterWater$0.57 $0.53 $0.04 
Electric (excluding retroactive impact of CPUC decision on general rate case)Electric (excluding retroactive impact of CPUC decision on general rate case)0.04 0.03 0.01 
Contracted services 0.12
 0.12
 —
Contracted services0.10 0.12 (0.02)
AWR (parent)AWR (parent)0.01 0.01 — 
Consolidated diluted earnings per share, adjusted 0.69
 0.64
 0.05
Consolidated diluted earnings per share, adjusted0.72 0.69 0.03 
Retroactive impact of CPUC decision in the water rate case for Q1 2019 —
 0.08
 (0.08)
Retroactive impact of CPUC decision in the electric general rate case for the first six months of 2019 and full year of 2018Retroactive impact of CPUC decision in the electric general rate case for the first six months of 2019 and full year of 2018— 0.07 (0.07)
Consolidated diluted earnings per share, as reported $0.69
 $0.72
 $(0.03)Consolidated diluted earnings per share, as reported$0.72 $0.76 $(0.04)
Water Segment:
Included in the water segment’s results for the three months ended June 30, 2019 was the impact of the May 2019 CPUC final decision in the water general rate case, which was retroactive to January 1, 2019 and resulted in $0.08 per share recorded during the second quarter of 2019 that related to the first three months of 2019. The $0.08 per share is shown in a separate line in the table above. In addition, the final May 2019 decision in the water general rate case approved the recovery of previously incurred costs that were being tracked in CPUC-authorized memorandum accounts, which resulted in a reduction to administrative and general expense of approximately $1.1 million, or $0.02 per share, and was also recorded during the second quarter of 2019. There was no similar item in 2020.
Furthermore, the COVID-19 pandemic has, among other things, resulted in increased volatility in the financial markets, which has resulted in significant fluctuations throughout 2020 in the fair value of investments held to fund one of the Company's retirement plans. Affecting the results and comparability between the two periods were gains of $2.5$1.2 million earned on these investments during the secondthird quarter of 2020 compared to gains of $657,000$325,000 recorded during the same period in 2019, increasing the water segment’s earnings by approximately $0.04$0.02 per share as compared to the secondthird quarter of 2019.
Excluding the effectseffect of the items discussed above,these gains, diluted earnings per share from the water segment for the three months ended JuneSeptember 30, 2020 increased by $0.01$0.02 per share as compared to the same period in 2019. The following items affected the comparability between the two periods (excluding the impact of billed surcharges, which have no effect on net earnings):
•An increase in the water gross margin of $2.8$3.1 million, or approximately $0.06 per share, as a result of new rates authorized by the CPUC. Effective January 1, 2020, GSWC received its full second-year step increase, which it achieved as a result of passing thean earnings test.  The full step increase is expected to generate an additional $10.4 million in water gross margin for 2020.  
•An overall increase in operating expenses (excluding supply costs), which negatively impacted earnings by $0.04$0.02 per share mainly due to increases in overall labor and other employee benefits, chemical and water treatment costs, unplanned maintenance expense,regulatory costs, property taxes, outside services and depreciation expense, for the three months ended June 30, 2020 as compared to the same period in 2019.expense.
•An overall decreaseincrease in interest expense (net of interest income and other income) favorably, which negatively impacted earnings by approximately $0.01 per share during the three months ended JuneSeptember 30, 2020 as compared to the same period in 2019 due primarily to a decrease$160 million of new long-term debt issued in short-termJuly 2020 as well as lower interest rates, partially offset by higher average intercompany borrowings from AWRincome earned on regulatory assets bearing interest at the current 90-day commercial paper rate, which has declined compared to fund operations and capital expenditures during the second quarter of 2020.same period in 2019.
Changes•An increase in the effective income tax rate resulting from certain flow-through taxes and permanent items for the three months ended JuneSeptember 30, 2020 as compared to the same period in 2019, which negatively impacted earnings at the water segment by approximately $0.02$0.01 per share.
Electric Segment:
Diluted earnings per share from the electric segment for the three months ended JuneSeptember 30, 2020 increased by $0.02was $0.04 per share as compared to $0.10 per share recorded for the same period in 2019 largely due to an increase in the electric gross margin resulting from new rates authorized by the2019. The CPUC in itsissued a final decision on the electric general rate case issued in August 2019 which werethat was retroactive to January 1, 2018. Due to the delay in receiving this final decision, billed electric revenues for the first six months of 2019 were based on 2017 adopted rates. Among other things, the final decision approved an increase in the electric gross margin for 2018 of approximately $2.3 million, and authorized increases in the adopted electric gross margin of $1.2 million for each of the years 2019 and 2020.

As a result, of the delay in finalizing the electric general rate case, the cumulative retroactive earnings impact of the final August 2019 decision was included in the third quarter results of 2019, including approximately $0.07 per share for periods prior to the third quarter of 2019. This retroactive impact is shown in a separate line in the table above.
Excluding the retroactive impact discussed above, earnings at the electric segment increased by $0.01 per share relatedfor the three months ended September 30, 2020 as compared to the second quartersame period in 2019. An increase in the electric gross margin resulting from new rates authorized in the final August 2019 decision was partially offset by increases in labor and outside service costs. The final August 2019 decision also approved the recovery of 2019 had the new 2018 and 2019 rates beenpreviously incurred incremental tree-trimming costs totaling $302,000, which resulted in place ata reduction to maintenance expense that time.was recorded in August 2019. There was no equivalent item in 2020.

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Contracted Services Segment:
For the three months ended JuneSeptember 30, 2020, and 2019, diluted earnings from the contracted services segment were $0.10 per share as compared to $0.12 per share. Anshare for the same period in 2019. This decrease was largely due to an overall decrease in construction activity resulting from weather delays and a slowdown in permitting for construction projects and government funding for new capital upgrades caused, in part, by the impact of COVID-19. The Company expects construction activity to pick up during the fourth quarter relative to the first three quarters barring any further delays due to weather conditions. The decrease in construction activity was partially offset by an increase in management fee revenues and overall decrease in operating expenses were mostly offset by a decrease in construction activity during the second quarter of 2020 compared to the same period in 2019.    lower travel-related costs.
Summary of Year-to-Date Results by Segment
The table below sets forth the year-to-date diluted earnings per share by business segment.
 Diluted Earnings per Share Diluted Earnings per Share
 Six Months Ended   Nine Months Ended
 June 30, 2020 June 30, 2019 Change 9/30/20209/30/2019Change
Water $0.78
 $0.80
 $(0.02)Water$1.35 $1.33 $0.02 
Electric 0.09
 0.05
 0.04
Electric (excluding retroactive impact of CPUC decision on general rate case)Electric (excluding retroactive impact of CPUC decision on general rate case)0.13 0.11 0.02 
Contracted services 0.20
 0.22
 (0.02)Contracted services0.30 0.34 (0.04)
Consolidated diluted earnings per share $1.07
 $1.07
 $—
AWR (parent)AWR (parent)0.01 0.01 — 
Consolidated diluted earnings per share, adjustedConsolidated diluted earnings per share, adjusted1.79 1.79 — 
Retroactive impact of CPUC decision in the electric general rate case for the full year of 2018Retroactive impact of CPUC decision in the electric general rate case for the full year of 2018— 0.04 (0.04)
Consolidated diluted earnings per share, as reportedConsolidated diluted earnings per share, as reported$1.79 $1.83 $(0.04)
Water Segment:
Diluted earnings per share from the water segment for the sixnine months ended JuneSeptember 30, 2020 decreased by $0.02increased to $1.35 per share as compared to $1.33 per share for the same period in 2019. TheAs previously discussed, the COVID-19 pandemic has, among other things, resulted in increased volatility in the financial markets, which has resulted in significant fluctuations in the fair value of investments held to fund one of the Company's retirement plans. Affecting the results and comparability between the two periods was a decrease in gains on investments during the sixnine months ended JuneSeptember 30, 2020 compared to the same period in 2019, which decreased the water segment’s earnings by approximately $0.04$0.02 per share. ModestThere were $1.2 million in investment gains were earned during the sixnine months ended JuneSeptember 30, 2020 as compared to gains of $2.1$2.5 million during the same period in 2019. In addition, the May 2019 CPUC final decision on the water general rate case approved the recovery of previously incurred costs that were being tracked in CPUC-authorized memorandum accounts, which resulted in a reduction to administrative and general expense of approximately $1.1 million, or $0.02 per share, and was recorded during the second quarter of 2019. There was no similarequivalent item in 2020.
Excluding the two items discussed above, earnings at the water segment for the sixnine months ended JuneSeptember 30, 2020 increased by $0.04$0.06 per share as compared to the same period in 2019. The following items affected the comparability between the two periods (excluding the impact of billed surcharges, which have no effect on net earnings):
•An increase in the water gross margin of $5.4$8.4 million, or approximately $0.10$0.16 per share, as a result of new rates authorized by the CPUC. As discussed in the quarterly results, GSWC received its full second-year step increasesincrease effective January 1, 2020, which areis expected to generate an additional $10.4 million in water gross margin for 2020.     
•An overall increase in operating expenses (excluding supply costs), which negatively impacted earnings by approximately $0.06$0.07 per share due in large part,primarily to an increaseincreases in overall labor costs and other employee benefits, chemical and water treatment costs, maintenance expense, compared to the same period in 2019. There were also increases in total laborregulatory costs, outside services, and property taxes as compared to the same period in 2019.taxes.
•An overall decrease in interest expense (net of interest income and other income) favorably impacted earnings by approximately $0.02 per share during the six months ended June 30, 2020 as compared to the same period in 2019 due primarily to the maturity of long-term debt in March 2019 as well as a decrease in short-term interest rates, partially offset by higher average intercompany borrowings from AWR to fund operations and capital expenditures during the first six months of 2020.
Changesincrease in the effective income tax rate resulting from certain flow-through taxes and permanent items for the sixnine months ended JuneSeptember 30, 2020 as compared to the same period in 2019, which negatively impacted earnings at the water segment by approximately $0.02$0.03 per share.

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Electric Segment:
Diluted earnings per share from the electric segment for the sixnine months ended JuneSeptember 30, 2020 increaseddecreased by $0.04$0.02 per share as compared to the recorded earnings during the same period in 2019 largely due to an increase in the electric gross margin resulting from new rates authorized by2019. As previously discussed, the CPUC in itsissued a final decision on the electric general rate case issued in August 2019 which werethat was retroactive to

January 1, 2018. As previously mentioned, billed electric revenues fora result, the first six monthscumulative retroactive earnings impact of the decision was included in the third quarter results of 2019, were based on 2017 adopted rates. including approximately $0.04 per share related to the full year 2018. This retroactive impact is shown in a separate line in the table above.
Among other things, the final decision approved an increase in the electric gross margin for 2018 of approximately $2.3 million, and authorized increases in the adopted electric gross margin of $1.2 million for each of the years 2019 and 2020.
As a result of Excluding the delayretroactive impact discussed above, electric earnings for the nine months ended September 30, 2020 increased by $0.02 per share due to an increase in finalizing the electric generalgross margin resulting from rate case, the cumulative retroactive earnings impact ofincreases approved in the final August 2019 decision, was includedas well as lower interest expense. These increases to earnings were partially offset by increases in labor and outside service costs as compared to the same period in 2019. As discussed in the third quarterquarterly results, the final decision also approved the recovery of 2019, including approximately $0.03 per share relatedpreviously incurred incremental tree-trimming costs totaling $302,000, which resulted in a reduction to the first six months of 2019 had the new 2018 and 2019 electric rates beenmaintenance expense that was recorded in place at that time.August 2019. There was no equivalent item in 2020.
Contracted Services Segment:
For the sixnine months ended JuneSeptember 30, 2020, diluted earnings from the contracted services segment decreased $0.02$0.04 per share as compared to the same period in 2019. Included in the results for the first quarter of 2019 were retroactive revenues resulting from the successful resolution of an economic price adjustment at one of the military bases served, which totaled approximately $0.01 per share and related to periods prior to 2019. Excluding this retroactive amount, diluted earnings from the contracted services segment were lower by $0.01$0.03 per share as compared to the same period in 2019 largely due to aan overall decrease in overall construction activity resulting from weather delays and a slowdown in permitting for construction projects and government funding for new capital upgrades caused, in part, by the impact of COVID-19. The Company expects construction activity to pick up during the fourth quarter relative to the first three quarters barring any further delays due to weather conditions. The decrease in construction activity was partially offset by an increase in management fee revenues.     revenues and lower overall operating expenses.     
The following discussion and analysis for the three and sixnine months ended JuneSeptember 30, 2020 and 2019 provides information on AWR’s consolidated operations and assets and, where necessary, includes specific references to AWR’s individual segments and subsidiaries: GSWC, BVESI, and ASUS and its subsidiaries.

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Consolidated Results of Operations — Three Months Ended JuneSeptember 30, 2020 and 2019 (amounts in thousands, except per share amounts):
 Three Months Ended 
 June 30, 2020		 Three Months Ended 
 June 30, 2019		 
$
CHANGE
 
%
CHANGE
Three Months Ended 
 September 30, 2020		Three Months Ended 
 September 30, 2019		$
CHANGE		%
CHANGE
OPERATING REVENUES  
  
  
  
OPERATING REVENUES    
Water $87,074
 $88,140
 $(1,066) (1.2)%Water$98,701 $95,249 $3,452 3.6 %
Electric 7,679
 7,408
 271
 3.7 %Electric8,288 11,996 (3,708)(30.9)%
Contracted services 26,525
 29,099
 (2,574) (8.8)%Contracted services26,699 27,251 (552)(2.0)%
Total operating revenues 121,278
 124,647
 (3,369) (2.7)%Total operating revenues133,688 134,496 (808)(0.6)%
        
OPERATING EXPENSES  
  
  
  
OPERATING EXPENSES    
Water purchased 18,754
 18,762
 (8) — %Water purchased23,445 23,361 84 0.4 %
Power purchased for pumping 2,398
 1,982
 416
 21.0 %Power purchased for pumping3,369 3,042 327 10.7 %
Groundwater production assessment 5,030
 4,640
 390
 8.4 %Groundwater production assessment5,962 5,634 328 5.8 %
Power purchased for resale 1,967
 2,391
 (424) (17.7)%Power purchased for resale2,117 2,403 (286)(11.9)%
Supply cost balancing accounts (1,802) 1,207
 (3,009) (249.3)%Supply cost balancing accounts(2,639)(2,680)41 (1.5)%
Other operation 7,959
 7,708
 251
 3.3 %Other operation8,128 8,267 (139)(1.7)%
Administrative and general 20,398
 19,529
 869
 4.4 %Administrative and general20,644 20,626 18 0.1 %
Depreciation and amortization 9,031
 6,655
 2,376
 35.7 %Depreciation and amortization9,348 9,006 342 3.8 %
Maintenance 4,094
 3,053
 1,041
 34.1 %Maintenance4,246 4,109 137 3.3 %
Property and other taxes 5,246
 4,870
 376
 7.7 %Property and other taxes5,693 5,234 459 8.8 %
ASUS construction 12,487
 14,532
 (2,045) (14.1)%ASUS construction13,573 12,894 679 5.3 %
Gain on sale of assets —
 (112) 112
 *
Gain on sale of assets(5)(124)119 *
Total operating expenses 85,562
 85,217
 345
 0.4 %Total operating expenses93,881 91,772 2,109 2.3 %
        
OPERATING INCOME 35,716
 39,430
 (3,714) (9.4)%OPERATING INCOME39,807 42,724 (2,917)(6.8)%
        
OTHER INCOME AND EXPENSES  
  
  
  
OTHER INCOME AND EXPENSES    
Interest expense (5,322) (6,282) 960
 (15.3)%Interest expense(6,161)(6,279)118 (1.9)%
Interest income 490
 876
 (386) (44.1)%Interest income316 826 (510)(61.7)%
Other, net 3,009
 591
 2,418
 *
Other, net1,613 140 1,473 *
 (1,823) (4,815) 2,992
 (62.1)% (4,232)(5,313)1,081 (20.3)%
        
INCOME BEFORE INCOME TAX EXPENSE 33,893
 34,615
 (722) (2.1)%INCOME BEFORE INCOME TAX EXPENSE35,575 37,411 (1,836)(4.9)%
        
Income tax expense 8,281
 7,831
 450
 5.7 %Income tax expense9,045 9,405 (360)(3.8)%
        
NET INCOME $25,612
 $26,784
 $(1,172) (4.4)%NET INCOME$26,530 $28,006 $(1,476)(5.3)%
        
Basic earnings per Common Share $0.69
 $0.72
 $(0.03) (4.2)%Basic earnings per Common Share$0.72 $0.76 $(0.04)(5.3)%
        
Fully diluted earnings per Common Share $0.69
 $0.72
 $(0.03) (4.2)%Fully diluted earnings per Common Share$0.72 $0.76 $(0.04)(5.3)%
* not meaningful


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Operating Revenues:
General
GSWC and BVESI rely upon approvals by the CPUC of rate increases to recover operating expenses and to provide for a return on invested and borrowed capital used to fund utility plant. RegistrantASUS relies on economic price and equitable adjustments by the U.S. government in order to recover operating expenses and provide a profit margin for ASUS.  Current operating revenues and earnings can be negatively impacted if the Military Privatization Subsidiaries do not receive adequate rate relief or adjustments in a timely manner.  ASUS’s earnings are also impacted by the level of additional construction projects at the Military Utility Privatization Subsidiaries, which may or may not continue at current levels in future periods.
Water
For the three months ended JuneSeptember 30, 2020, revenues from water operations decreased $1.1increased $3.5 million to $87.1$98.7 million as compared to the same period in 2019. Due to the delay in receiving a final decision on the water general rate case, the May 2019 CPUC decision was retroactive to January 1, 2019. Asas a result the cumulative retroactive impact of the CPUC decision was recorded during the second quarter of 2019, which included approximately $3.4 million in revenues that related to the first quarter of 2019. This decrease was partially offset by full second-year step increases for 2020 as a result of GSWC passing the earnings test. ThereThese increases were also revenue increasespartially offset by lower surcharges billed during the three months ended JuneSeptember 30, 2020 related to CPUC-approved surcharges to recover previously incurred costs. These surcharges are largely offset by corresponding increasesdecreases in operating expenses, resulting in no impact to earnings.
Billed water consumption for the secondthird quarter of 2020 increased slightly5% as compared to the same period in 2019. Currently, changes in consumption generally do not have a significant impact on recorded revenues due to the CPUC-approved Water Revenue Adjustment Mechanism ("WRAM")WRAM in place in all but one small rate-making area. GSWC records the difference between what it bills its water customers and that which is authorized by the CPUC in the WRAM accounts as regulatory assets or liabilities. As previously discussed, in JulyAugust 2020 the CPUC issued a proposedfinal decision, which among other things, addresseseliminates the continued use of the WRAM by California water utilities. GSWC has filed an application for rehearing on the decision. At this time, management cannot predict the outcome of this proposed decision.matter.
Electric
Electric revenues for the three months ended JuneSeptember 30, 2020 increased $271,000decreased $3.7 million to $7.7 million, due to new rates approved by$8.3 million. The cumulative impact of the CPUC and effective January 1, 2020. In addition, billed revenues for the second quarter ofAugust 2019 were based on 2017 adopted electric rates pending a CPUC final decision on the electric general rate case, which was not received until August 2019 and was retroactive to January 1, 2018.2018, was reflected in the results of the third quarter of 2019. Included in the $12.0 million of electric revenues for the three months ended September 30, 2019 was approximately $3.7 million relating to periods prior to the third quarter of 2019.
Billed electric usage during the three months ended JuneSeptember 30, 2020 decreasedincreased by approximately 2%11% as compared to the three months ended JuneSeptember 30, 2019.2019, largely due to a spike in tourism during the summer months in BVESI's service areas.  Due to the CPUC-approved Base Revenue Requirement Adjustment Mechanism, ("BRRAM"), which adjusts certain revenues to adopted levels authorized by the CPUC, changes in usage do not have a significant impact on earnings.
Contracted Services
Revenues from contracted services are composed of construction revenues (including renewal and replacements) and management fees for operating and maintaining the water and/or wastewater systems at various military bases.  For the three months ended JuneSeptember 30, 2020, revenues from contracted services decreased $2.6 million$552,000 to $26.5$26.7 million as compared to $29.1$27.3 million for the same period in 2019 due primarily to a decrease in construction activity resulting from weather delays and a slowdown in permitting for construction projects and government funding for new capital upgrades caused, in part, by the impact of COVID-19. The Company expects construction activity to pick up during the fourth quarter relative to the first three quarters barring any further delays due to weather conditions. The decrease in construction activity was partially offset by increases in management fees due to the successful resolution of various economic price adjustments.
ASUS subsidiaries continue to enter into U.S. government-awarded contract modifications and agreements with third-party prime contractors for new construction projects at the Military Utility Privatization Subsidiaries. During the sixnine months ended JuneSeptember 30, 2020, ASUS has been awarded approximately $6$13.7 million in new construction projects, some of which have been or are expected to be completed during 2020, and the remainder in 2021.
Earnings and cash flows from modifications to the original 50-year contracts with the U.S. government and agreements with third-party prime contractors for additional construction projects may or may not continue in future periods.
Operating Expenses:
Supply Costs
Supply costs for the water segment consist of purchased water, purchased power for pumping, groundwater production assessments and changes in the water supply cost balancing accounts. Supply costs for the electric segment consist primarily of purchased power for resale, the cost of natural gas used by BVESI’s generating unit, the cost of renewable energy credits and
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changes in the electric supply cost balancing account. Total supply costs comprise the largest segment of total operating

expenses. Supply costs accounted for approximately 30.8%34.4% and 34.0%34.6% of total operating expenses for the three months ended JuneSeptember 30, 2020 and 2019, respectively.
Water and electric gross margins are computed by subtracting total supply costs from total revenues. Registrant uses these gross margins and related percentages as an important measure in evaluating its operating results. Registrant believes these measures are useful internal benchmarks in evaluating the utility business performance within its water and electric 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 GAAP, may not be comparable to similarly titled measures used by other entities, and should not be considered as an alternative to operating income, which is determined in accordance with GAAP.
The table below provides the amounts (in thousands) of increases (decreases) and percent changes in water and electric revenues, supply costs and gross margin during the three months ended JuneSeptember 30, 2020 and 2019. There were increaseswas a decrease of $198,000 and $135,000 in surcharges recorded$682,000 in water surcharges, and an increase of $137,000 in electric revenues, respectively,surcharges to recover previously incurred costs, which did not impact earnings.costs. Surcharges to recover previously incurred costs are recorded to revenues when billed to customers and are offset by a corresponding amount in operating expenses, resulting in no impact to earnings. In addition, because of the delay in receiving the final CPUC decision in the waterelectric general rate case, the waterelectric gross margin for the secondthird quarter of 2019 included the recording of approximately $2.2$3.7 million in waterelectric gross margin impact related tofor the first quartersix months of 2019.2019 and all of fiscal 2018.
 Three Months Ended 
 June 30, 2020		 Three Months Ended 
 June 30, 2019		 
$
CHANGE
 
%
CHANGE
Three Months Ended 
 September 30, 2020		Three Months Ended 
 September 30, 2019		$
CHANGE		%
CHANGE
WATER OPERATING REVENUES (1)
 $87,074
 $88,140
 $(1,066) (1.2)%
WATER OPERATING REVENUES (1)
$98,701 $95,249 $3,452 3.6 %
WATER SUPPLY COSTS:  
  
  
  
WATER SUPPLY COSTS:    
Water purchased (1) $18,754
 $18,762
 $(8) — %Water purchased (1)$23,445 $23,361 $84 0.4 %
Power purchased for pumping (1) 2,398
 1,982
 416
 21.0 %Power purchased for pumping (1)3,369 3,042 327 10.7 %
Groundwater production assessment (1) 5,030
 4,640
 390
 8.4 %Groundwater production assessment (1)5,962 5,634 328 5.8 %
Water supply cost balancing accounts (1) (2,004) 691
 (2,695) (390.0)%Water supply cost balancing accounts (1)(3,019)(3,330)311 (9.3)%
TOTAL WATER SUPPLY COSTS $24,178
 $26,075
 $(1,897) (7.3)%TOTAL WATER SUPPLY COSTS$29,757 $28,707 $1,050 3.7 %
WATER GROSS MARGIN (2) $62,896
 $62,065
 $831
 1.3 %WATER GROSS MARGIN (2)$68,944 $66,542 $2,402 3.6 %

  
   
  
  
        
ELECTRIC OPERATING REVENUES (1) $7,679
 $7,408
 $271
 3.7 %ELECTRIC OPERATING REVENUES (1)$8,288 $11,996 $(3,708)(30.9)%
ELECTRIC SUPPLY COSTS:  
  
  
  
ELECTRIC SUPPLY COSTS:    
Power purchased for resale (1) $1,967
 $2,391
 $(424) (17.7)%Power purchased for resale (1)$2,117 $2,403 $(286)(11.9)%
Electric supply cost balancing accounts (1) 202
 516
 (314) (60.9)%Electric supply cost balancing accounts (1)380 650 (270)(41.5)%
TOTAL ELECTRIC SUPPLY COSTS $2,169
 $2,907
 $(738) (25.4)%TOTAL ELECTRIC SUPPLY COSTS$2,497 $3,053 $(556)(18.2)%
ELECTRIC GROSS MARGIN (2) $5,510
 $4,501
 $1,009
 22.4 %ELECTRIC GROSS MARGIN (2)$5,791 $8,943 $(3,152)(35.2)%
(1)   As reported on AWR’s Consolidated Statements of Income, except for supply cost balancing accounts. The sum of water and electric supply cost balancing accounts in the table above are shown in AWR’s Consolidated Statements of Income and totaled $(1,802,000)$(2,639,000) and $1,207,000$(2,680,000) for the three months ended JuneSeptember 30, 2020 and 2019, respectively. Revenues include surcharges, which increase both revenues and operating expenses by corresponding amounts, thus having no net earnings impact.
(2)   Water and electric gross margins do not include any depreciation and amortization, maintenance, administrative and general, property or other taxes or other operation expenses.
Two of the principal factors affecting water supply costs are the amount of water produced and the source of the water. Generally, the variable cost of producing water from wells is less than the cost of water purchased from wholesale suppliers. Under the CPUC-approved Modified Cost Balancing Account ("MCBA"),MCBA, GSWC tracks adopted and actual expense levels for purchased water, power purchased for pumping and pump taxes. GSWC records the variances (which include the effects of changes in both rate and volume) between adopted and actual purchased water, purchased power, and pump tax expenses. GSWC recovers from, or refunds to, customers the amount of such variances.  GSWC tracks these variances individually for each water ratemaking area.

The August 2020 CPUC decision previously discussed, which eliminates the continued use of the WRAM also eliminates the MCBA.
The overall actual percentages of purchased water for the three months ended JuneSeptember 30, 2020 and 2019 were approximately 43%45% and 45%47%, respectively, as compared to the authorized adopted percentages of 36%39% for the three months
39
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ended JuneSeptember 30, 2020 and 2019. The higher actual percentage of purchased water as compared to the adopted percentage resulted from a higher volume of purchased water costs due to several wells being out of service.  The increases in power purchased for pumping, as well as groundwater production assessments, were due to increases in electricity usage for pumping as well as increased rates and pump taxes as compared to the three months ended JuneSeptember 30, 2019.
For the three months ended JuneSeptember 30, 2020, the water supply cost balancing account had a $2.0$3.0 million under-collection as compared a $691,000 over-collection$3.3 million under-collection during the same period in 2019. Included in the second quarter of 2019 was a $1.7 million increase which related to the first quarter of 2019 to reflect new adopted supply costs retroactive to January 1, 2019. This resulted in an over-collection balance for the three months ended June 30, 2019. The remainder of the change in the water supply cost balancing accountvariance was due to higher-than-adoptedrate increases for certain rate-making areas to specifically cover increases in supply mix as well ascosts experienced in these areas, partially offset by higher costs for pumping and groundwater assessments.
For the three months ended JuneSeptember 30, 2020, the cost of power purchased for resale to GSWC'sBVESI's electric customers decreased to $2.0$2.1 million as compared to $2.4 million during the same period in 2019 due primarily to a decrease in customer usage and a lower average price per megawatt-hour. The average price per megawatt-hour, including fixed costs, decreased from $79.34$77.48 for the three months ended JuneSeptember 30, 2019 to $57.08$58.21 for the same period in 2020.  The over-collection in the electric supply cost balancing account decreased as compared to the three months ended JuneSeptember 30, 2019 due to an updated adopted supply cost approved in the CPUC's final decision in the electric general rate case received in August 2019.
Other Operation
The primary components of other operation expenses for GSWC include payroll, materials and supplies, chemicals and water treatment costs and outside service costs of operating the regulated water systems, including the costs associated with water transmission and distribution, pumping, water quality, meter reading, billing, and operations of district offices as well as the electric system.  Registrant’s contracted services operations incur many of the same types of expenses as well.  For the three months ended JuneSeptember 30, 2020 and 2019, other operation expenses by business segment consisted of the following (dollar amounts in thousands):
 Three Months Ended 
 June 30, 2020		 Three Months Ended 
 June 30, 2019		 
$
CHANGE
 
%
CHANGE
Three Months Ended 
 September 30, 2020		Three Months Ended 
 September 30, 2019		$
CHANGE		%
CHANGE
Water Services $5,678
 $5,433
 $245
 4.5 %Water Services$6,185 $6,203 $(18)(0.3)%
Electric Services 692
 621
 71
 11.4 %Electric Services432 526 (94)(17.9)%
Contracted Services 1,589
 1,654
 (65) (3.9)%Contracted Services1,511 1,538 (27)(1.8)%
Total other operation $7,959
 $7,708
 $251
 3.3 %Total other operation$8,128 $8,267 $(139)(1.7)%
For the three months ended JuneSeptember 30, 2020, other operation expensethere was a $543,000 decrease in surcharges related to the recovery of previously incurred costs at the water segment, increasedwith a corresponding decrease in other operation expenses, resulting in no impact to earnings. Excluding the impact of surcharges, there was a $525,000 increase in other operation-related expenses at the water segment primarily due to a $172,000 increase in bad debt expense as compared to the same period in 2019. The increase in bad debt expense is due to expected increases in delinquent customer payments as a result of the economic downturn associated with the stay-at-home orders in response to the COVID-19 pandemic. However, bad debt expense in excess of what is included in GSWC's revenue requirement has been included in the CPUC-approved catastrophic event memorandum account to be filed for future recovery. There was also an increase in outside service costs during the three months ended June 30, 2020.higher chemical and water treatment costs.
Administrative and General
Administrative and general expenses include payroll related to administrative and general functions, all employee-related benefits, insurance expenses, outside legal and consulting fees, regulatory-utility-commission expenses, expenses associated with being a public company and general corporate expenses charged to expense accounts. For the three months ended JuneSeptember 30, 2020 and 2019, administrative and general expenses by business segment, including AWR (parent), consisted of the following (dollar amounts in thousands): 

 Three Months Ended 
 June 30, 2020		 Three Months Ended 
 June 30, 2019		 
$
CHANGE
 
%
CHANGE
Three Months Ended 
 September 30, 2020		Three Months Ended 
 September 30, 2019		$
CHANGE		%
CHANGE
Water Services $13,700
 $11,685
 $2,015
 17.2 %Water Services$13,610 $13,473 $137 1.0 %
Electric Services 2,033
 1,993
 40
 2.0 %Electric Services2,359 1,732 627 36.2 %
Contracted Services 4,663
 5,849
 (1,186) (20.3)%Contracted Services4,674 5,418 (744)(13.7)%
AWR (parent) 2
 2
 —
 — %AWR (parent)1 3 (2)(66.7)%
Total administrative and general $20,398
 $19,529
 $869
 4.4 %Total administrative and general$20,644 $20,626 $18 0.1 %
For the three months ended JuneSeptember 30, 2020, administrative and general expenses atthere was a $165,000 decrease in billed surcharges related to the water segment increased by $2.0 million largely due to a $1.1 million reduction recorded during the second quarter of 2019 to reflect the CPUC's approval in May 2019 for recovery of previously incurred costs that were being tracked in CPUC-authorized memorandum accounts. There was also an increase of $152,000 in surcharges billed forat the recovery of previously incurred expenses as compared to the same period in 2019, which are offset bywater segment, with a corresponding increasesdecrease in administrative and general expenses, resulting in no impact to earnings. In addition, forExcluding this impact, administrative and general expenses at the three months ended June 30, 2020 there werewater segment increased $302,000 largely due to increases in labor and other employee-related benefits, as well as increases in outside servicesregulatory costs as compared toincurred in connection with the same periodprocessing of the water segment's general rate case application filed in 2019.July 2020.
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For the three months ended JuneSeptember 30, 2020, the increase at the electric segment included an $80,000 increase in surcharges surcharges related to the recovery of previously incurred administrative and general costs, with a corresponding increase in administrative and general costs, resulting in no impact to earnings. Excluding surcharges, administrative and general expenses at the electric segment increased $547,000 due primarily to increases in outside service costs related to regulatory matters as well as the electric segment reorganization, and increases in labor and other employee-related benefits.
For the three months ended September 30, 2020, the decrease in administrative and general expenses at the contracted services segment was due primarily to decreases in labor and employee-related benefit costs, legal and other outside services costs, and travel and related costs as compared to the same period in 2019. Legal and outside services tend to fluctuate from period to period, and are expected to continue to fluctuate.
Depreciation and Amortization
For the three months ended JuneSeptember 30, 2020 and 2019, depreciation and amortization by business segment consisted of the following (dollar amounts in thousands):
 Three Months Ended 
 June 30, 2020		 Three Months Ended 
 June 30, 2019		 
$
CHANGE
 
%
CHANGE
Three Months Ended 
 September 30, 2020		Three Months Ended 
 September 30, 2019		$
CHANGE		%
CHANGE
Water Services $7,601
 $5,405
 $2,196
 40.6%Water Services$7,835 $7,690 $145 1.9 %
Electric Services 608
 601
 7
 1.2%Electric Services626 669 (43)(6.4)%
Contracted Services 822
 649
 173
 26.7%Contracted Services887 647 240 37.1 %
Total depreciation and amortization $9,031
 $6,655
 $2,376
 35.7%Total depreciation and amortization$9,348 $9,006 $342 3.8 %
The May 2019 CPUC final decisionoverall increase in the water general rate case approved lower overall composite depreciation rates based on a revised depreciation study as comparedexpense resulted from additions to composite rates used during the first three months of 2019 pending a final decision.utility plant and other fixed assets. As a result of the MayAugust 2019 CPUC final decision on the electric general rate case, the cumulative retroactive impact of the CPUC decision was recorded during the secondthird quarter of 2019, which included a reduction of approximately $1.7 million inincluding depreciation expense at the electric segment related to the first threesix months of 2019.2019 and all of 2018. There was no similar reductionequivalent item in 2020. There was also an increase in depreciation expense resulting from the additions to utility plant and other fixed assets.
Maintenance
For the three months ended JuneSeptember 30, 2020 and 2019, maintenance expense by business segment consisted of the following (dollar amounts in thousands):
 Three Months Ended 
 June 30, 2020		 Three Months Ended 
 June 30, 2019		 
$
CHANGE
 
%
CHANGE
Three Months Ended 
 September 30, 2020		Three Months Ended 
 September 30, 2019		$
CHANGE		%
CHANGE
Water Services $2,819
 $2,195
 $624
 28.4%Water Services$3,219 $3,383 $(164)(4.8)%
Electric Services 382
 257
 125
 48.6%Electric Services193 40 153 382.5 %
Contracted Services 893
 601
 292
 48.6%Contracted Services834 686 148 21.6 %
Total maintenance $4,094
 $3,053
 $1,041
 34.1%Total maintenance$4,246 $4,109 $137 3.3 %
Maintenance expense at the water segment increaseddecreased primarily due to higherlower unplanned maintenance as compared to the same period in 2019. The increase in maintenance
Maintenance expense at the electric segment wasfor the third quarter of 2019 included a $302,000 reduction due to an increasethe CPUC's approval in tree trimming

costs and an increase in surcharges billed to collectthe August 2019 final decision on the electric general rate case for the recovery of previously incurred maintenanceincremental tree-trimming costs. There was no equivalent item in 2020.
The increase in maintenance at the contracted services segment is due to higher planned maintenance as compared to the same period in 2019.

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Table of Contents
Property and Other Taxes
For the three months ended JuneSeptember 30, 2020 and 2019, property and other taxes by business segment consisted of the following (dollar amounts in thousands):
 Three Months Ended 
 June 30, 2020		 Three Months Ended 
 June 30, 2019		 
$
CHANGE
 
%
CHANGE
Three Months Ended 
 September 30, 2020		Three Months Ended 
 September 30, 2019		$
CHANGE		%
CHANGE
Water Services $4,438
 $4,171
 $267
 6.4%Water Services$4,946 $4,483 $463 10.3 %
Electric Services 280
 251
 29
 11.6%Electric Services314 304 10 3.3 %
Contracted Services 528
 448
 80
 17.9%Contracted Services433 447 (14)(3.1)%
Total property and other taxes $5,246
 $4,870
 $376
 7.7%Total property and other taxes$5,693 $5,234 $459 8.8 %
Property and other taxes increased overall due mostly to capital additions at the water segment.segment and the associated higher assessed property values.
ASUS Construction
For the three months ended JuneSeptember 30, 2020, construction expenses for contracted services were $12.5$13.6 million, decreasing $2.0 millionincreasing $679,000 compared to the same period in 2019 due primarily to a decrease in overalladditional costs incurred on certain construction activity.projects.
Interest Expense
For the three months ended JuneSeptember 30, 2020 and 2019, interest expense by business segment, including AWR (parent), consisted of the following (dollar amounts in thousands):
 Three Months Ended 
 June 30, 2020		 Three Months Ended 
 June 30, 2019		 
$
CHANGE
 
%
CHANGE
Three Months Ended 
 September 30, 2020		Three Months Ended 
 September 30, 2019		$
CHANGE		%
CHANGE
Water Services $5,006
 $5,628
 $(622) (11.1)%Water Services$5,911 $5,652 $259 4.6 %
Electric Services 171
 373
 (202) (54.2)%Electric Services86 334 (248)(74.3)%
Contracted Services 86
 115
 (29) (25.2)%Contracted Services105 137 (32)(23.4)%
AWR (parent) 59
 166
 (107) (64.5)%AWR (parent)59 156 (97)(62.2)%
Total interest expense $5,322
 $6,282
 $(960) (15.3)%Total interest expense$6,161 $6,279 $(118)(1.9)%
The overall decrease in interest expense iswas primarily due to lower interest expense at the electric segment primarily toresulting from the recording of allowance for funds used during construction on certain construction projects. In addition, there was a decrease in short-term lower interest rates on the revolving credit facility as compared to 2019. In addition,These decreases were partially offset by an increase in interest expense for the three months ended June 30, 2019 included interest related toas a $7.2 million regulatory liability, which was refunded to water customers during the third quarterresult of 2019. On July 8, 2020, GSWC completed theGSWC's issuance of unsecured private placement notes totaling $160.0 million.million in July 2020. As a result, interest expense is expected to increase.
Interest Income
For the three months ended JuneSeptember 30, 2020 and 2019, interest income by business segment, including AWR (parent), consisted of the following (dollar amounts in thousands):
Three Months Ended 
 September 30, 2020		Three Months Ended 
 September 30, 2019		$
CHANGE		%
CHANGE
Water Services$105 $446 $(341)(76.5)%
Electric Services32 100 (68)(68.0)%
Contracted Services179 281 (102)(36.3)%
AWR (parent)— (1)1 (100.0)%
Total interest income$316 $826 $(510)(61.7)%
  Three Months Ended 
 June 30, 2020		 Three Months Ended 
 June 30, 2019		 
$
CHANGE
 
%
CHANGE
Water Services $149
 $516
 $(367) (71.1)%
Electric Services 32
 27
 5
 18.5 %
Contracted Services 306
 334
 (28) (8.4)%
AWR (parent) 3
 (1) 4
 (400.0)%
Total interest income $490
 $876
 $(386) (44.1)%
The decrease in interest income during the three months ended JuneSeptember 30, 2020 was largely due to lower interest earned on regulatory assets at the water and electric segments bearing interest at the current 90-day commercial paper rate, which has declined compared to the same period in 2019. There was also a decrease in interest income recognized on certain construction projects at the contracted services segment.


42

Table of Contents
Other Income and (Expense), net
For the three months ended JuneSeptember 30, 2020 and 2019, other income and (expense), net by business segment, including AWR (parent), consisted of the following (dollar amounts in thousands):
Three Months Ended 
 September 30, 2020		Three Months Ended 
 September 30, 2019		$
CHANGE		%
CHANGE
Water Services$1,483 $200 $1,283 641.5 %
Electric Services30 3 27 900.0 %
Contracted Services(34)(63)29 (46.0)%
AWR (parent)134 — 134 N/A
Total other income and (expense), net$1,613 $140 $1,473 *
  Three Months Ended 
 June 30, 2020		 Three Months Ended 
 June 30, 2019		 
$
CHANGE
 
%
CHANGE
Water Services $3,021
 $541
 $2,480
 458.4 %
Electric Services 28
 4
 24
 600.0 %
Contracted Services (40) (63) 23
 (36.5)%
AWR (parent) —
 109
 (109) (100.0)%
Total other income and (expense), net $3,009
 $591
 $2,418
 409.1 %
* not meaningful
For the three months ended JuneSeptember 30, 2020, other income (net of other expense) increased by $2.5 million due mostly toas a result of higher gains recorded on Registrant's investments held for a retirement benefit plan because of recent market conditions as compared to the same period in 2019. ThisThere was partially offset by increasesalso decreases in the non-service cost components of net periodic benefit costs related to Registrant's defined benefit pension plan and other retirement benefits. However, as a result of GSWC's and BVESI's pension balancing accountaccounts authorized by the CPUC, changes in net periodic benefit costs are mostly offset by corresponding changes in revenues, thus having no material impact to earnings.
Income Tax Expense
For the three months ended JuneSeptember 30, 2020 and 2019, income tax expense by business segment, including AWR (parent), consisted of the following (dollar amounts in thousands):
  Three Months Ended 
 June 30, 2020		 Three Months Ended 
 June 30, 2019		 
$
CHANGE
 
%
CHANGE
Water Services $6,970
 $6,812
 $158
 2.3%
Electric Services 339
 14
 325
 *
Contracted Services 1,301
 1,300
 1
 0.1%
AWR (parent) (329) (295) (34) 11.5%
Total income tax expense $8,281
 $7,831
 $450
 5.7%
* not meaningful
Three Months Ended 
 September 30, 2020		Three Months Ended 
 September 30, 2019		$
CHANGE		%
CHANGE
Water Services$7,683 $6,720 $963 14.3 %
Electric Services533 1,663 (1,130)(67.9)%
Contracted Services1,150 1,391 (241)(17.3)%
AWR (parent)(321)(369)48 (13.0)%
Total income tax expense$9,045 $9,405 $(360)(3.8)%
Consolidated income tax expense for the three months ended JuneSeptember 30, 2020 increaseddecreased by $450,000$360,000 due to a decrease in pretax income resulting primarily to an increasefrom the recording in the third quarter of 2019 of all of the retroactive impact from the August 2019 CPUC final decision on the electric general rate case. There was no equivalent retroactive item recorded in 2020. AWR's effective income tax rate ("ETR"). AWR's ETR was 24.4%25.4% and 22.6%25.1% for the three months ended JuneSeptember 30, 2020 and 2019, respectively. The increase was due primarily to the increase in GSWC's ETR, which was 25.9%26.7% and 23.4%26.4% for the three months ended JuneSeptember 30, 2020 and 2019, respectively, resulting primarily from changes in certain flow-through and permanent items.


43
Table of Contents
Consolidated Results of Operations — SixNine Months Ended JuneSeptember 30, 2020 and 2019 (amounts in thousands, except per share amounts):
Nine Months Ended 
 September 30, 2020		Nine Months Ended September 30, 2019$
CHANGE		%
CHANGE
OPERATING REVENUES    
Water$257,199 $248,112 $9,087 3.7 %
Electric26,935 30,033 (3,098)(10.3)%
Contracted services79,909 82,731 (2,822)(3.4)%
Total operating revenues364,043 360,876 3,167 0.9 %
OPERATING EXPENSES    
Water purchased56,291 55,263 1,028 1.9 %
Power purchased for pumping7,626 6,562 1,064 16.2 %
Groundwater production assessment15,140 14,020 1,120 8.0 %
Power purchased for resale7,127 8,498 (1,371)(16.1)%
Supply cost balancing accounts(6,606)(2,845)(3,761)132.2 %
Other operation24,573 24,546 27 0.1 %
Administrative and general63,992 61,827 2,165 3.5 %
Depreciation and amortization27,190 26,493 697 2.6 %
Maintenance12,224 9,728 2,496 25.7 %
Property and other taxes16,098 15,000 1,098 7.3 %
ASUS construction39,175 39,671 (496)(1.3)%
Gain on sale of assets(9)(236)227 (96.2)%
Total operating expenses262,821 258,527 4,294 1.7 %
OPERATING INCOME101,222 102,349 (1,127)(1.1)%
 
OTHER INCOME AND EXPENSES    
Interest expense(17,533)(18,878)1,345 (7.1)%
Interest income1,364 2,644 (1,280)(48.4)%
Other, net2,388 2,073 315 15.2 %
 (13,781)(14,161)380 (2.7)%
INCOME BEFORE INCOME TAX EXPENSE87,441 88,188 (747)(0.8)%
Income tax expense21,227 20,546 681 3.3 %
NET INCOME$66,214 $67,642 $(1,428)(2.1)%
Basic earnings per Common Share$1.79 $1.83 $(0.04)(2.2)%
Fully diluted earnings per Common Share$1.79 $1.83 $(0.04)(2.2)%



44
  Six Months Ended June 30, 2020 Six Months Ended June 30, 2019 
$
CHANGE
 
%
CHANGE
OPERATING REVENUES  
  
  
  
Water $158,498
 $152,863
 $5,635
 3.7 %
Electric 18,647
 18,037
 610
 3.4 %
Contracted services 53,210
 55,480
 (2,270) (4.1)%
Total operating revenues 230,355
 226,380
 3,975
 1.8 %
         
OPERATING EXPENSES  
  
  
  
Water purchased 32,846
 31,902
 944
 3.0 %
Power purchased for pumping 4,257
 3,520
 737
 20.9 %
Groundwater production assessment 9,178
 8,386
 792
 9.4 %
Power purchased for resale 5,010
 6,095
 (1,085) (17.8)%
Supply cost balancing accounts (3,967) (165) (3,802) 2,304.2 %
Other operation 16,445
 16,279
 166
 1.0 %
Administrative and general 43,348
 41,201
 2,147
 5.2 %
Depreciation and amortization 17,842
 17,487
 355
 2.0 %
Maintenance 7,978
 5,619
 2,359
 42.0 %
Property and other taxes 10,405
 9,766
 639
 6.5 %
ASUS construction 25,602
 26,777
 (1,175) (4.4)%
Gain on sale of assets (4) (112) 108
 (96.4)%
Total operating expenses 168,940
 166,755
 2,185
 1.3 %
         
OPERATING INCOME 61,415
 59,625
 1,790
 3.0 %
         
OTHER INCOME AND EXPENSES  
  
  
  
Interest expense (11,372) (12,599) 1,227
 (9.7)%
Interest income 1,048
 1,818
 (770) (42.4)%
Other, net 775
 1,933
 (1,158) (59.9)%
  (9,549) (8,848) (701) 7.9 %
         
INCOME BEFORE INCOME TAX EXPENSE 51,866
 50,777
 1,089
 2.1 %
Income tax expense 12,182
 11,141
 1,041
 9.3 %
         
NET INCOME $39,684
 $39,636
 $48
 0.1 %
         
Basic earnings per Common Share $1.07
 $1.07
 $—
 — %
         
Fully diluted earnings per Common Share $1.07
 $1.07
 $—
 — %
         
Table of Contents
* not meaningful




Operating Revenues:
 
Water
For the sixnine months ended JuneSeptember 30, 2020, revenues from water operations increased $5.6$9.1 million to $158.5$257.2 million as compared to the same period in 2019 as a result of new rates authorized by the CPUC. Effective January 1, 2020, GSWC received its full second-year step increase, which it achieved because of passing thean earnings test. The full step increase is expected to generate an additional $10.4 million in water gross margin for 2020. There were also revenue increases related to CPUC-approved rate surcharges that were in place to recover previously incurred costs. The decrease in surcharge revenues was offset by a corresponding decrease in operating expenses (primarily administrative and general), resulting in no impact to earnings.
Billed water consumption for the first sixnine months of 2020 increased approximately 5% as compared to the same period in 2019. Currently, changes in consumption generally do not have a significant impact on revenues due to the WRAM. As previously discussed, in JulyAugust 2020 the CPUC issued a proposedfinal decision, which among other things, addresses the continued use of the WRAM by California water utilities. GSWC has filed an application for rehearing on the decision. At this time, management cannot predict the outcome of this proposed decision.matter.
Electric
For the sixnine months ended JuneSeptember 30, 2020, revenues from electric operations were $18.6$26.9 million as compared to $18.0$30.0 million for the same period in 2019, due to new rates approved by the retroactive earnings impact resulting from the final CPUC and effective January 1, 2020. In addition, billed revenues fordecision issued in August 2019 in the first six monthselectric general rate case. The cumulative 2018 impact of the August 2019 were based on 2017 adopted electric rates pending a CPUC final decision on the electric general rate case, which was not received until August 2019 and was retroactive to January 1, 2018.reflected in the results of the third quarter of 2019.
Billed electric usage decreased by approximately 4%was flat during the sixnine months ended JuneSeptember 30, 2020 as compared to the sixnine months ended JuneSeptember 30, 2019.  Due to the CPUC-approved Base Revenue Requirement Adjustment Mechanism, which adjusts certain revenues to adopted levels authorized by the CPUC, changes in usage do not have a significant impact on earnings.
 Contracted Services
For the sixnine months ended JuneSeptember 30, 2020, revenues from contracted services decreased $2.3$2.8 million to $53.2$79.9 million as compared to $55.5$82.7 million for the same period in 2019 due primarily to an overall decrease in construction activity.activity resulting from weather delays and a slowdown in permitting for construction projects and government funding for new capital upgrades caused, in part, by the impact of COVID-19. The Company expects construction activity to pick up during the fourth quarter relative to the first three quarters barring any further delays due to weather conditions. In addition, included in the results for the first quarter of 2019 were retroactive revenues resulting from the successful resolution of an economic price adjustment at one of the military bases served, which totaled approximately $0.01 per share$500,000 and related to periods prior to 2019. There werewas no similar retroactive revenuesequivalent item during 2020. These decreases were partially offset by increases in ongoing management fees due to the successful resolution of various economic price adjustments.

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Operating Expenses:
Supply Costs
Total supply costs comprise the largest segment of total operating expenses. Supply costs accounted for approximately 28.0%30.3% and 29.8%31.5% of total operating expenses for the sixnine months ended JuneSeptember 30, 2020 and 2019, respectively. The table below provides the amount of increases (decreases) and percent changes in water and electric revenues, supply costs and gross margin during the sixnine months ended JuneSeptember 30, 2020 and 20182019 (dollar amounts in thousands). There was an increasea slight decrease in surcharges of $641,000 recorded in water revenues, which did not impact water earnings.and a $477,000 increase in electric surcharges recorded in electric revenues. Surcharges are recorded to revenues when billed to customers and are offset by a corresponding increase in operating expenses, resulting in no impact to earnings.

  Six Months Ended June 30, 2020 Six Months Ended June 30, 2019 
$
CHANGE
 
%
CHANGE
WATER OPERATING REVENUES (1) $158,498
 $152,863
 $5,635
 3.7 %
WATER SUPPLY COSTS:  
  
  
  
Water purchased (1) $32,846
 $31,902
 $944
 3.0 %
Power purchased for pumping (1) 4,257
 3,520
 737
 20.9 %
Groundwater production assessment (1) 9,178
 8,386
 792
 9.4 %
Water supply cost balancing accounts (1) (4,278) (1,428) (2,850) 199.6 %
TOTAL WATER SUPPLY COSTS $42,003
 $42,380
 $(377) (0.9)%
WATER GROSS MARGIN (2) $116,495
 $110,483
 $6,012
 5.4 %
       
  
         
ELECTRIC OPERATING REVENUES (1) $18,647
 $18,037
 $610
 3.4 %
ELECTRIC SUPPLY COSTS:  
  
  
  
Power purchased for resale (1) $5,010
 $6,095
 $(1,085) (17.8)%
Electric supply cost balancing accounts (1) 311
 1,263
 (952) (75.4)%
TOTAL ELECTRIC SUPPLY COSTS $5,321
 $7,358
 $(2,037) (27.7)%
ELECTRIC GROSS MARGIN (2) $13,326
 $10,679
 $2,647
 24.8 %
Nine Months Ended September 30, 2020Nine Months Ended September 30, 2019$
CHANGE		%
CHANGE
WATER OPERATING REVENUES (1)$257,199 $248,112 $9,087 3.7 %
WATER SUPPLY COSTS:    
Water purchased (1)$56,291 $55,263 $1,028 1.9 %
Power purchased for pumping (1)7,626 6,562 1,064 16.2 %
Groundwater production assessment (1)15,140 14,020 1,120 8.0 %
Water supply cost balancing accounts (1)(7,297)(4,758)(2,539)53.4 %
TOTAL WATER SUPPLY COSTS$71,760 $71,087 $673 0.9 %
WATER GROSS MARGIN (2)$185,439 $177,025 $8,414 4.8 %
  
ELECTRIC OPERATING REVENUES (1)$26,935 $30,033 $(3,098)(10.3)%
ELECTRIC SUPPLY COSTS:    
Power purchased for resale (1)$7,127 $8,498 $(1,371)(16.1)%
Electric supply cost balancing accounts (1)691 1,913 (1,222)(63.9)%
TOTAL ELECTRIC SUPPLY COSTS$7,818 $10,411 $(2,593)(24.9)%
ELECTRIC GROSS MARGIN (2)$19,117 $19,622 $(505)(2.6)%
(1)As reported on AWR’s Consolidated Statements of Income, except for supply cost balancing accounts. The sum of water and electric supply cost balancing accounts in the table above are shown on AWR’s Consolidated Statements of Income and totaled $(3,967,000.0)$(6,606,000) and $(165,000)$(2,845,000) for the sixnine months ended JuneSeptember 30, 2020 and 2019, respectively. Revenues include surcharges, which increase both revenues and operating expenses by corresponding amounts, thus having no net earnings impact.
(2)Water and electric gross margins do not include any depreciation and amortization, maintenance, administrative and general, property or other taxes or other operation expenses.
The overall actual percentage of purchased water for each of the sixnine month periods ended JuneSeptember 30, 2020 and 2019 waswere 44% and 45%, respectively, as compared to the adopted percentage of approximately 33%35% and 35%36% for the sixnine months ended JuneSeptember 30, 2020 and 2019, respectively. The higher actual percentages of purchased water as compared to adopted percentages resulted primarily from several wells being out of service.  Purchased water costs for the sixnine months ended JuneSeptember 30, 2020 increased to $32.8$56.3 million as compared to $31.9$55.3 million for the same period in 2019 primarily due to an increase in wholesale water costs as well as an increase in customer usage.
For the sixnine months ended JuneSeptember 30, 2020 and 2019, power purchased for pumping increased by $737,000$1.1 million due to an increase in electric rates. Groundwater production assessments increased $792,000$1.1 million due to an increase in the amount of water pumped as well as higher pump tax rates for the sixnine months ended JuneSeptember 30, 2020 as compared to the same period in 2019.
The under-collection in the water supply cost balancing account increased $2.9$2.5 million during the sixnine months ended JuneSeptember 30, 2020 as compared to the same period in 2019 mainly due to a higher than adopted supply mix.
For the sixnine months ended JuneSeptember 30, 2020, the cost of power purchased for resale to electric customers decreased by $1.1$1.4 million to $5.0$7.1 million as compared to $6.1$8.5 million for the same period in 2019 primarily due to a decrease in the average price per MWh, as well as a decrease in customer usage. The average price per MWh, including fixed costs, decreased from $78.50$77.90 for the sixnine months ended JuneSeptember 30, 2019 to $68.26$64.81 for the same period in 2020. The over-collection in the electric supply cost balancing account decreased by $1.0$1.2 million due to an updated adopted supply cost approved in the CPUC's final decision in the electric general rate case received in August 2019.

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Other Operation
For the sixnine months ended JuneSeptember 30, 2020 and 2019, other operation expenses by business segment consisted of the following (dollar amounts in thousands):
 Six Months Ended 
 June 30, 2020		 Six Months Ended 
 June 30, 2019		 
$
CHANGE
 
%
CHANGE
Nine Months Ended 
 September 30, 2020		Nine Months Ended 
 September 30, 2019		$
CHANGE		%
CHANGE
Water Services $11,497
 $11,478
 $19
 0.2%Water Services$17,682 $17,681 $1 — %
Electric Services 1,503
 1,436
 67
 4.7%Electric Services1,935 1,962 (27)(1.4)%
Contracted Services 3,445
 3,365
 80
 2.4%Contracted Services4,956 4,903 53 1.1 %
Total other operation $16,445
 $16,279
 $166
 1.0%Total other operation$24,573 $24,546 $27 0.1 %
For the nine months ended September 30, 2020, there was a $557,000 decrease in surcharges related to the recovery of previously incurred costs at the water segment, with a corresponding decrease in other operation expenses, resulting in no impact to earnings. Excluding the impact of surcharges, there was a $558,000 increase in other operation-related expenses at the water segment primarily due to higher chemical and water treatment costs, as well as an increase in bad debt expense due to expected increases in delinquent customer payments as a result of the COVID-19 pandemic. However, bad debt expense in excess of what is included in GSWC's water revenue requirement has been included in the CPUC-approved catastrophic event memorandum account to be filed for future recovery.
Administrative and General
For the sixnine months ended JuneSeptember 30, 2020 and 2019, administrative and general expenses by business segment, including AWR (parent), consisted of the following (dollar amounts in thousands):
 Six Months Ended 
 June 30, 2020		 Six Months Ended 
 June 30, 2019		 
$
CHANGE
 
%
CHANGE
Nine Months Ended 
 September 30, 2020		Nine Months Ended 
 September 30, 2019		$
CHANGE		%
CHANGE
Water Services $28,252
 $25,617
 $2,635
 10.3 %Water Services$41,862 $39,090 $2,772 7.1 %
Electric Services 4,319
 4,155
 164
 3.9 %Electric Services6,678 5,887 791 13.4 %
Contracted Services 10,773
 11,425
 (652) (5.7)%Contracted Services15,447 16,843 (1,396)(8.3)%
AWR (parent) 4
 4
 —
 — %AWR (parent)5 7 (2)(28.6)%
Total administrative and general $43,348
 $41,201
 $2,147
 5.2 %Total administrative and general$63,992 $61,827 $2,165 3.5 %
For the sixnine months ended JuneSeptember 30, 2020, administrative and general expenses at the water segment increased, due in part, to a $1.1 million reduction recorded during the second quarter of 2019 to reflect the CPUC's approval in May 2019 for recovery of previously incurred costs that were being tracked in CPUC-authorized memorandum accounts. There was also an increase of $362,000$197,000 in surcharges billed for the recovery of previously incurred expenses as compared to the same period in 2019, which are offset by corresponding increases in administrative and general expenses, resulting in no impact to earnings. In addition, there wereExcluding these two items, administrative and general expenses at the water segment increased by $1.5 million as a result of increases in labor costs and other employee-related benefits, as well as anand regulatory costs incurred in connection with the pending water general rate case.
The increase in administrative and general expenses at the electric segment included a $281,000 increase in billed surcharges, which have no impact to earnings. Excluding this increase in surcharges, the increase at the electric segment was $533,000 due to higher labor and employee-related benefits, and legal and other outside services.service costs.
For the sixnine months ended JuneSeptember 30, 2020, administrative and general expenses at the contracted services segment decreased due, in large part, to lower travel and related costs resulting from the impact of COVID-19, as well as lower employee-related benefit costs as compared to the same period in 2019.
Depreciation and Amortization
For the sixnine months ended JuneSeptember 30, 2020 and 2019, depreciation and amortization by business segment consisted of the following (dollar amounts in thousands):
 Six Months Ended 
 June 30, 2020		 Six Months Ended 
 June 30, 2019		 
$
CHANGE
 
%
CHANGE
Nine Months Ended 
 September 30, 2020		Nine Months Ended 
 September 30, 2019		$
CHANGE		%
CHANGE
Water Services $15,023
 $14,794
 $229
 1.5%Water Services$22,858 $22,484 $374 1.7 %
Electric Services 1,215
 1,201
 14
 1.2%Electric Services1,841 1,870 (29)(1.6)%
Contracted Services 1,604
 1,492
 112
 7.5%Contracted Services2,491 2,139 352 16.5 %
Total depreciation and amortization $17,842
 $17,487
 $355
 2.0%Total depreciation and amortization$27,190 $26,493 $697 2.6 %
Increases in depreciation expense resulted mostly from the additions to utility plant and other fixed assets.

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Maintenance
For the sixnine months ended JuneSeptember 30, 2020 and 2019, maintenance expense by business segment consisted of the following (dollar amounts in thousands):
Nine Months Ended 
 September 30, 2020		Nine Months Ended 
 September 30, 2019		$
CHANGE		%
CHANGE
Water Services$8,925 $7,237 $1,688 23.3 %
Electric Services881 551 330 59.9 %
Contracted Services2,418 1,940 478 24.6 %
Total maintenance$12,224 $9,728 $2,496 25.7 %
  Six Months Ended 
 June 30, 2020		 Six Months Ended 
 June 30, 2019		 
$
CHANGE
 
%
CHANGE
Water Services $5,706
 $3,854
 $1,852
 48.1%
Electric Services 688
 511
 177
 34.6%
Contracted Services 1,584
 1,254
 330
 26.3%
Total maintenance $7,978
 $5,619
 $2,359
 42.0%
Maintenance expense for water services increased due to a higher level of planned and unplanned maintenance as compared to the same period in 2019.
Maintenance expense at the electric segment increased primarilyfor the first nine months of 2019 included a $302,000 reduction due to an increasethe CPUC's approval in surcharges billed during the first six monthsAugust 2019 final decision for the recovery of 2020 to recover previously incurred incremental tree-trimming costs, which resulted in a reduction to maintenance costs. expense that was recorded in August 2019. There was no equivalent item in 2020.
The increase in maintenance at the contracted services segment is due to higher planned maintenance as compared to the same period in 2019.
Property and Other Taxes
For the sixnine months ended JuneSeptember 30, 2020 and 2019, property and other taxes by business segment consisted of the following (dollar amounts in thousands):
 Six Months Ended 
 June 30, 2020		 Six Months Ended 
 June 30, 2019		 
$
CHANGE
 
%
CHANGE
Nine Months Ended 
 September 30, 2020		Nine Months Ended 
 September 30, 2019		$
CHANGE		%
CHANGE
Water Services $8,751
 $8,298
 $453
 5.5%Water Services$13,697 $12,781 $916 7.2 %
Electric Services 600
 537
 63
 11.7%Electric Services914 841 73 8.7 %
Contracted Services 1,054
 931
 123
 13.2%Contracted Services1,487 1,378 109 7.9 %
Total property and other taxes $10,405
 $9,766
 $639
 6.5%Total property and other taxes$16,098 $15,000 $1,098 7.3 %
Property and other taxes increased overall during the sixnine months ended JuneSeptember 30, 2020 due primarily to capital additions and the associated higher assessed property values.
ASUS Construction
For the sixnine months ended JuneSeptember 30, 2020, construction expenses for contracted services were $25.6$39.2 million, decreasing $1.2 million$496,000 compared to the same period in 2019 due to a decrease in overall construction activity as compared to the same period in 2019.  
Interest Expense
For the sixnine months ended JuneSeptember 30, 2020 and 2019, interest expense by business segment, including AWR (parent) consisted of the following (dollar amounts in thousands):
Nine Months Ended 
 September 30, 2020		Nine Months Ended 
 September 30, 2019		$
CHANGE		%
CHANGE
Water Services$16,315 $16,897 $(582)(3.4)%
Electric Services636 1,088 (452)(41.5)%
Contracted Services352 426 (74)(17.4)%
AWR (parent)230 467 (237)(50.7)%
Total interest expense$17,533 $18,878 $(1,345)(7.1)%
  Six Months Ended 
 June 30, 2020		 Six Months Ended 
 June 30, 2019		 
$
CHANGE
 
%
CHANGE
Water Services $10,404
 $11,245
 $(841) (7.5)%
Electric Services 550
 754
 (204) (27.1)%
Contracted Services 247
 289
 (42) (14.5)%
AWR (parent) 171
 311
 (140) (45.0)%
Total interest expense $11,372
 $12,599
 $(1,227) (9.7)%
The overall decrease in interest expense is due, in large part, to GSWC's repayment of $40.0 million of its 6.70% senior notes that matureda decrease in March 2019 and which were not replaced at that time, as well as lowershort-term interest rates on the revolving credit facility as compared to 2019, and lower2019. In addition, the decrease in interest expense recordedat the electric segment is due, in part, to the recording of allowance for the first six months of 2019 related to a $7.2 million regulatory liability, which was refunded to water customersfunds used during the third quarter of 2019.construction on certain construction projects. These decreases were partially offset by higher average borrowingsthe net increase in interest on the line of credit as compared to the first six months of 2019. On July 8, 2020, GSWC completedlong-term debt resulting from the issuance in July 2020 of new unsecured long-term private placement notes totaling $160.0 million. As a result, interest expense is expected to increase.

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Table of Contents
Interest Income
For the sixnine months ended JuneSeptember 30, 2020 and 2019, interest income by business segment, including AWR (parent), consisted of the following (dollar amounts in thousands):
 Six Months Ended 
 June 30, 2020		 Six Months Ended 
 June 30, 2019		 
$
CHANGE
 
%
CHANGE
Nine Months Ended 
 September 30, 2020		Nine Months Ended 
 September 30, 2019		$
CHANGE		%
CHANGE
Water Services $414
 $896
 $(482) (53.8)%Water Services$519 $1,342 $(823)(61.3)%
Electric Services 85
 55
 30
 54.5 %Electric Services117 155 (38)(24.5)%
Contracted Services 544
 869
 (325) (37.4)%Contracted Services723 1,150 (427)(37.1)%
AWR (parent) 5
 (2) 7
 (350.0)%AWR (parent)5 (3)8 (266.7)%
Total interest income $1,048
 $1,818
 $(770) (42.4)%Total interest income$1,364 $2,644 $(1,280)(48.4)%
The decrease in interest income during the sixnine months ended JuneSeptember 30, 2020 was largely due to lower interest income earned on regulatory assets at the water segment and lowerbearing interest at the current 90-day commercial paper rate, which has declined compared to the same period in 2019. There was also a decrease in interest income recognized on certain initial construction projects performed forat the contracted services segment.
Other Income and (Expense), net
For the sixnine months ended JuneSeptember 30, 2020 and 2019, other income and (expense), net by business segment, including AWR (parent), consisted of the following (dollar amounts in thousands):
Nine Months Ended 
 September 30, 2020		Nine Months Ended 
 September 30, 2019		$
CHANGE		%
CHANGE
Water Services2,266 2,143 123 5.7 %
Electric Services93 10 83 830.0 %
Contracted Services(105)(189)84 (44.4)%
AWR (parent)134 109 25 22.9 %
Total other income and (expense), net2,388 2,073 315 15.2 %
  Six Months Ended 
 June 30, 2020		 Six Months Ended 
 June 30, 2019		 $
CHANGE		 %
CHANGE
Water Services 783
 1,943
 (1,160) (59.7)%
Electric Services 63
 7
 56
 800.0 %
Contracted Services (71) (126) 55
 (43.7)%
AWR (parent) —
 109
 (109) (100.0)%
Total other income and (expense), net 775
 1,933
 (1,158) (59.9)%
For the sixnine months ended JuneSeptember 30, 2020, other income (net of other expense) decreasedincreased by $1.2 million$315,000 due primarily to a decrease in the non-service cost components of net periodic benefit costs related to Registrant's defined benefit pension plans and other retirement benefits as compared to the same period in 2019. As a result of GSWC's and BVESI's pension balancing accounts authorized by the CPUC, changes in net periodic benefit costs are mostly offset by corresponding changes in revenues, having no material impact to earnings. The decrease in the non-service cost components was partially offset by lower gains recognized on investments held for a retirement benefit plan because of recent market conditions, as compared to the same period in 2019. There was also an increase in the non-service cost components of net periodic benefit costs related to GSWC's defined benefit pension plans and other retirement benefits as compared to the same period in 2019. As previously discussed, as a result of GSWC's pension balancing account authorized by the CPUC, changes in net periodic benefit costs are mostly offset by corresponding changes in revenues, having no material impact to earnings.
Income Tax Expense
For the sixnine months ended JuneSeptember 30, 2020 and 2019, income tax expense by business segment, including AWR (parent), consisted of the following (dollar amounts in thousands):
 Six Months Ended 
 June 30, 2020		 Six Months Ended 
 June 30, 2019		 
$
CHANGE
 
%
CHANGE
Nine Months Ended 
 September 30, 2020		Nine Months Ended 
 September 30, 2019		$
CHANGE		%
CHANGE
Water Services $9,348
 $8,485
 $863
 10.2 %Water Services$17,031 $15,205 $1,826 12.0 %
Electric Services 1,189
 461
 728
 157.9 %Electric Services1,722 2,124 (402)(18.9)%
Contracted Services 2,049
 2,425
 (376) (15.5)%Contracted Services3,199 3,816 (617)(16.2)%
AWR (parent) (404) (230) (174) 75.7 %AWR (parent)(725)(599)(126)21.0 %
Total income tax expense $12,182
 $11,141
 $1,041
 9.3 %Total income tax expense$21,227 $20,546 $681 3.3 %
Consolidated income tax expense for the sixnine months ended JuneSeptember 30, 2020 increased due to an increase in pretax income, as well as a higher overall effective income tax rate ("ETR"). AWR's consolidated ETR increased to 23.5%24.3% for the sixnine months ended JuneSeptember 30, 2020 as compared to 21.9%23.3% for the sixnine months ended JuneSeptember 30, 2019. The increase was due primarily to the increase in GSWC's ETR, which was 24.7%25.5% and 22.2%24.1% for the sixnine months ended JuneSeptember 30, 2020 and 2019, respectively, resulting primarily from changes in certain flow-through and permanent items.



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Table of 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, 2019.2019 filed with the SEC. There have been no material changes to Registrant’s critical accounting policies.

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Table of Contents
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 due to the need for additional external capital to fund its construction program. In July 2020, GSWC issued $160 million in new long-term debt. 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 future increases in market interest rates.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 $267.0$218.0 million was available on JuneSeptember 30, 2020 to pay dividends to AWR. The ability of ASUS to pay dividends to AWR is also restricted by California law and by the ability of its subsidiaries to pay dividends to it.
When necessary, Registrant obtains funds from external sources through the capital markets, 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. In addition, AWR borrows under a revolving credit facility, which expires in May 2023, and provides funds to its subsidiaries, GSWC and ASUS, in support of their operations.  As of JuneSeptember 30, 2020, there was $249.0$89.0 million outstanding under this facility.  BVESI has a 3-year, $35 million revolving credit facility with a bank. As of September 30, 2020, there was $3.0 millionoutstanding under this facility. Borrowings made under this facility support the electric business operations and capital expenditures. Under the terms of the credit agreement, BVESI may increase the facility by an additional $15 million. Furthermore, the CPUC issued a decision in December 2019 approving, among other things, BVESI's authority to issue long-term financing not to exceed $75 million.
On May 7, 2020, the CPUC approved GSWC’s finance application filed in November 2019 requesting authority to issue additional long-term debt and equity securities not to exceed $465 million to support its water operations. Following the CPUC's approval, on July 8, 2020, GSWC completed the issuance of unsecured private placement notes totaling $160.0 million. This financing consisted of GSWC issuing $85.0 million in 2.17% senior notes which mature in 2030, and $75.0 million in 2.90% senior notes which mature in 2040. GSWC used the proceeds from the notes to pay down a majority of its intercompany borrowings from AWR. AWR used the proceeds from GSWC to pay down amounts outstanding under its credit facility. In March 2020, AWR had amended the credit facility to temporarily increase the borrowing capacity to $260 million. Following the issuance of GSWC’s notes and effective July 15, 2020, AWR reduced the aggregate borrowing capacity back down to $200 million pursuant to the terms of the revolving credit facility agreement.
On July 1, 2020, GSWC completed the transfer of the electric utility assets and liabilities from its electric division to BVESI, now a wholly owned subsidiary of AWR. Effective July 1, 2020, BVESI also put in place and has access to a 3-year, $35 million revolving credit facility. Borrowings made under this facility will support the electric business operations and capital expenditures. Under the terms of the credit agreement, BVESI will be able to request an increase in the facility by an additional $15 million. Furthermore, the CPUC issued a decision in December 2019 approving, among other things, BVESI's authority to issue long-term financing not to exceed $75 million.
As part of the response to the COVID-19 outbreak,pandemic, GSWC and BVESI have suspended, through April 2021, service disconnections for nonpaymentsnon-payments pursuant to CPUC orders. This is expected to reduce Registrant's cash flows from operating activities and increase borrowings under AWR's and BVESI's credit facilities. The magnitude of the reduction to cash flows is difficult to predict at this time, and is dependent on variables such as how longthe duration of any stay-at-home orders issued by state and local governments, will remain in place, how successful such measures willwould be in containing the outbreak, and the nature and effectiveness of government assistance.
In June 2020, Standard and Poor’s Global Ratings (“S&P”) affirmed an A+ credit rating with a stable outlook on both AWR and GSWC. S&P’s debt ratings range from AAA (highest possible) to D (obligation is in default). In June 2020, Moody's Investors Service ("Moody's") also reaffirmed its A2 rating with a stable outlook 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 Registrant to access the debt and equity markets. 
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 July 28,October 27, 2020, AWR's Board of Directors approved a fourth quarter dividend of $0.335 per share on AWR's Common Shares. Dividends on the Common Shares will be paid on December 1, 2020 to shareholders of record at the close of business on November 16, 2020. AWR 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. Registrant's current policy is to achieve a compound annual growth rate in the dividend of more than 7% over the long-term. AWR's Board of Directors approved a 9.8% increase in the third quarter dividend, from $0.305 per share to $0.335 per share on AWR's Common Shares. Dividends on the Common Shares will be paid on September 1, 2020 to shareholders
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Registrant's current liabilities may at times exceed its current assets.  Management believes that internally generated cash flows from operations, borrowings from AWR's and BVESI's credit facilities, and access to 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.
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 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 $46.3$87.8 million for the sixnine months ended JuneSeptember 30, 2020 as compared to $44.7$84.3 million for the same period in 2019.  The increase in cash was due, in part, to deferralsthe refunding of certain payroll$7.2 million to water customers during the third quarter of 2019 related to the 2017 Tax Cuts and income tax paymentsJobs Act. There were no equivalent refunds made during the same period in 2020. There was also an increase in water customer usage during the nine months ended September 30, 2020, reducing the WRAM under-collection as a result of COVID-19 relief legislation. This increase wascompared the same period in 2019. These increases were partially offset by a decrease in cash flows from accounts receivable from utility customers due to the economic impact of the COVID-19 pandemic, and the CPUC-mandated suspension of service disconnections to customers for non-payment. 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 sixnine months ended JuneSeptember 30, 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 $62.5$94.6 million for the sixnine months ended JuneSeptember 30, 2020 as compared to $80.9$110.7 million for the same period in 2019 largely due to a decrease in capital expenditures at GSWC. Capital expenditures activity has been negatively affected by the COVID-19 pandemic, including among other things, local mandated restrictions on shutting off service as part of the response to the pandemic. This restriction hasThese restrictions have impacted pipeline replacement projects, which require temporary service shut-offs in order to complete. During 2020, the water and electric segments' company-funded capital expenditures are estimated to be approximately $105 - $120 million, barring any further delays resulting from changes in capital improvement schedules due to the COVID-19 pandemic. Registrant invests capital to provide essential services to its regulated customer base, while working with its regulators 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 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.
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'sAWR's and BVESI's credit facilityfacilities are used to fund capital expenditures until long-term financing is arranged.
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Net cash provided by financing activities was $21.4$13.6 million for the sixnine months ended JuneSeptember 30, 2020 as compared to $30.6$29.6 million during the same period in 2019. This decrease in cash provided from financing activities was due to higher borrowings needed under the pay down of AWR's revolving credit facility during the sixnine months ended JuneSeptember 30, 2019,2020, as compared to net borrowings on the credit facility during the same period in 2019. The pay down was made from the proceeds of the issuance of GSWC unsecured private placement notes totaling $160.0 million. GSWC used the proceeds from these notes to pay down a majority of the intercompany borrowings from AWR parent. AWR used the proceeds received from GSWC to pay down borrowings on its revolving credit facility. A portion of whichthe net borrowings from AWR's credit facility during the nine months ended September 2019, was used to fund the repayment of $40.0 million senior notes, which matured in March 2019.

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 delays in receiving payments from GSWC customers due to the associated economic impact of the COVID-19 pandemic and new state legislation issued regarding customer disconnection requirements.
GSWC may, at times, utilize external sources for long-term financing, as well as obtain funds from equity investments and intercompany borrowings from AWR to help fund a portion of its operations and construction expenditures.  As previously mentioned, on May 7, 2020, the CPUC approved GSWC’s finance application authorizing the issuance of additional long-term debt and equity securities not to exceed $465 million to support its water operations. Following this approval, onOn July 8, 2020, GSWC completed the issuance of unsecured private placement notes totaling $160.0 million. Furthermore, AWR borrows under a revolving credit facility, which expires in May 2023, and provides funds to GSWC in support of its operations. Under the terms of an intercompany note, as of June 30, 2020, GSWC was able to borrow up to $222 million from AWR. As a result, GSWC’s outstanding intercompany borrowings was $199.2 million as of June 30, 2020.
As previously mentioned, GSWC used the proceeds from the issuance of notes in July 2020 to pay down a majority of its intercompany borrowings from AWR, which in turn used the amounts received by GSWC to pay down outstanding balances under its credit facility. Following the issuance of GSWC's notes and effective July 15, 2020, AWR reduced the aggregate borrowing capacity back down to $200 million pursuant to the terms of the revolving credit facility agreement. Accordingly, the borrowing capacity under GSWC's intercompany note agreement was amended, and currently GSWC's water operations may borrow up to $150 million from AWR. The CPUC requires GSWC to completely pay down all intercompany borrowings from AWR within a 24-month period. As of JuneSeptember 30, 2020, the end of the next 24-month period in which GSWC is required to completely pay down its intercompany borrowings is in November 2020. As a result, GSWC’s intercompany borrowings of $199.2$34.1 million as of JuneSeptember 30, 2020 have been classified as a current liability on GSWC’s balance sheet.
In addition, GSWC receives advances and contributions from customers, homebuildershome 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 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 cash flows from operations, along with the proceeds from the issuance of long-term debt, intercompany 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.
Cash Flows from Operating Activities:
Net cash provided by operating activities was $41.0$75.1 million for the sixnine months ended JuneSeptember 30, 2020 as compared to $38.2$69.0 million for the same period in 2019.  The increase in cash was due, in part, to deferralsthe refunding of certain payroll$7.2 million to water customers during the third quarter of 2019 related to the 2017 Tax Cuts and income tax paymentsJobs Act. There were no equivalent refunds made during the same period in 2020. There was also an increase in water customer usage during the nine months ended September 30, 2020, reducing the WRAM under-collection as a result of COVID-19 relief legislation.compared the same period in 2019. This increase was partially offset by a decrease in cash flows from accounts receivable from utility customers due to the economic impact of the COVID-19 pandemic, and the CPUC-mandated suspension of customer service disconnections for nonpayment. 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 $59.5$87.5 million for the sixnine months ended JuneSeptember 30, 2020 as compared to $76.4$104.4 million for the same period in 2019. Cash used for capital expenditures was $59.6$87.7 million for the sixnine months ended JuneSeptember 30, 2020 as compared to $76.7$104.8 million during the same period in 2019. Capital expenditures activity has been negatively affected by the COVID-19 pandemic, including among other things, local mandated restrictions on shutting off
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service as part of the response to the pandemic. This restriction hasThese restrictions have impacted pipeline replacement projects, which require temporary service shut-offs in order to complete. During 2020, GSWC's company-funded capital expenditures are estimated to be approximately $105 - $120 million barring any further delays resulting from changes in GSWC's capital improvement schedules due to the COVID-19 pandemic.

Cash Flows from Financing Activities:
Net cash provided by financing activities was $19.5$16.1 million for the sixnine months ended JuneSeptember 30, 2020 as compared to $34.5$35.7 million for the same period in 2019.  TheThis decrease in cash provided from financing activities was due to higherthe pay down of intercompany borrowings neededfrom AWR parent during the first sixnine months of 2019ended September 30, 2020, as compared to fund the repayment of $40.0 million of GSWC's 6.70% senior notes, which matured in March 2019. There was no similar repayment madenet borrowings from AWR during the six months ended June 30, 2020.same period in 2019. The pay down in intercompany borrowings was made using proceeds from the issuance of GSWC unsecured private placement notes totaling $160.0 million.
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. 
Effective July 15, 2020, AWR reduced the aggregate borrowing capacity under its revolving credit facility from $260 million to $200 million pursuant to the terms of its revolving credit facility agreement.
On July 8, 2020, GSWC completed the issuance of unsecured private placement notes (the "Notes") totaling $160.0 million. In connection with this financing, GSWC issued (i) $85.0 million aggregate principal amount of Series A Senior Notes at a coupon rate of 2.17% due July 8, 2030, and (ii) $75.0 million aggregate principal amount of Series B Senior Notes at a coupon rate of 2.90% due July 8, 2040. Interest on the Notes is payable semiannually. The Notes are unsecured and will rank equally with GSWC’s unsecured and unsubordinated debt. GSWC may, at its option, redeem all or portions of the Notes at any time upon written notice, subject to payment of a make-whole premium based on 50 basis points above the applicable treasury yield. Under the terms of the Notes, GSWC may not incur any additional indebtedness or pay any distributions to its parent, AWR, if after giving effect thereto, GSWC would have a total indebtedness to capitalization ratio of more than 0.6667:1.00. In addition, GSWC may not incur any additional indebtedness if, after giving effect thereto, it would have a total indebtedness to earnings before interest, taxes, depreciation and amortization ratio greater than 8.00:1.00.
On July 1, 2020, GSWC completed the transfer of the electric utility assets and liabilities from its electric division to a separate and now wholly owned subsidiary of AWR, Bear Valley Electric Service, Inc. ("BVESI").BVESI. Effective July 1, 2020, BVESI also put in place and has access to a 3-year, $35 million revolving credit facility.facilitywith an option to increase the amount of the facility to $50 million.
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 for a detailed discussion of contractual obligations and other commitments.
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
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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 DCAADefense Contract Auditing Agency and/or the DCMADefense 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. These increases are expected to generate an additional $10.4 million in water gross margin for 2020 as compared to the adopted water gross margin in 2019. The CPUC final decision on the general rate case issued in May 2019 also allows for an additional increase of approximately $11.4 million in 2021, subject to the results of an earnings test and changes to the forecasted inflationary index values.
General Rate Case
On July 15, 2020, GSWC filed a general rate case application for all of its water regions and the general office.  This general rate case will determine new water rates for the years 2022 2023 and– 2024.  Among other things, GSWC's 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 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.
ProposedFinal Decision on Low-Income Affordability Rulemaking 
On July 3,August 27, 2020, the CPUC issued a proposedfinal decision related toin 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, which also addressed other issues including matters associated with the continued use of the WRAM by California water revenue adjustment mechanism ("WRAM")utilities. The final decision also addressed the continued use of the MCBA, which 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). If approved,Based on the final decision, any general rate case application filed by GSWC and the other California water utilities thatafter the August 27, 2020 effective date of this decision, may not include a proposal to continue the use full decouplingof the WRAM accounts, including GSWC, would be requiredor MCBA, but may instead include a proposal to replace their WRAM accounts withuse a limited price adjustment mechanism (the Monterey-Style Water Revenue Adjustment Mechanisms) in their next general rate case filing.  This proposedWRAM) and an incremental supply cost balancing account.
The final decision may be on the Commission’s agenda for a vote as early as August 6, 2020.  Management believes the proposed decision, if approved, shouldwill not have any impact on GSWC's WRAM or MCBA balances during the current rate cycle (2019 through– 2021).
SinceIn addition, the decision supports GSWC’s position that it does not apply to its implementation in 2008, the WRAM has helped mitigate fluctuations in GSWC’s revenues due to changes in water consumption by its customers.  Replacing the WRAM with the mechanism recommended in the proposed decision would undo the current decoupling mechanism, which could result in more volatility in GSWC’s future revenues and prevent full recovery of its authorized revenues.  GSWC filed comments to the proposed decision.  At this time, management cannot predict the outcome of this matter including its potential impact to the water general rate case application filed in July 2020, which will set new rates for the years 2022 -– 2024. However, at this time, management cannot predict the potential impact of this decision, if any, on the pending water general rate case. Since its implementation in 2008, the WRAM and MCBA have helped mitigate fluctuations in GSWC’s earnings due to changes in water consumption by its customers or changes in water supply mix. Replacing them with mechanisms recommended in the final decision would result in more volatility in GSWC’s future earnings and could prevent full recovery of its authorized water gross margin. On or prior to October 5, 2020, GSWC, 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.    
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 applications. 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.
Finance Application
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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 May 7, 2020, the CPUC approved the finance application. Following the CPUC’s approval, on July 8, 2020, GSWC completed the issuance of unsecured private placement notes totaling $160.0 million.
Electric Segment:
TransferCompletion of Electric Utility Operations to New Subsidiary:Reorganization Plan
GSWC filed applications with the CPUC and the FERC in December 2018 and July 2019, respectively, to transfer the

electric assets and liabilities of its electric division to BVESI, a separate legal entity and wholly owned subsidiary of AWR. Due to the differences in operations, regulations, and risks, management believes that operating its electric business in a separate legal entity and stand-alone subsidiary of AWR is in the best interests of the customers, employees, and the communities served. The FERC and CPUC approved GSWC's application for reorganization in October 2019 and December of 2019, respectively. On April 30, 2020, the FERC also approved BVESI's application for market-based rate authority with an accompanying tariff.
With all closing procedures finalized, on July 1, 2020, GSWC completed the transfer of the electric utility assets and liabilities from its electric division to BVESI in exchange for common shares of BVESI.GSWC then immediately distributed all of BVESI's common shares to AWR, whereupon BVESI became wholly owned directly by AWR. The reorganization is not expected to result in any substantive changes to AWR's operations andor business segments.
Recent Changes in Rates
On August 15, 2019, the CPUC issued a final decision on the 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 electric rate increases are not subject to an earnings test). The rate case decision continues to apply for BVESI.
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 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 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.  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"). 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
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 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 for a discussion of water supply issues. The discussion below focuses on significant matters and changes since December 31, 2019.
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.
Precipitation levels to date in 2020 have been below normal, with statewide snowpack at about 64% of average. As of July 28,October 27, 2020, the U.S. Drought Monitor reported that approximately 50%68% of California was considered in a "Moderate Drought" and approximately 22%36% in a "Severe Drought", as compared to 2% and zero percent in both categories one year ago.ago, respectively. Dry conditions are currently more pronounced in the northern half of the California. If dry conditions continue or get worse, the SWRCB or other regulatory agencies may impose emergency drought actions. 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 water supply conditions and water-use restrictions in these service areas and will make appropriate adjustments as neededneeded.
Metropolitan Water District/ State Water 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 2020, DWR set the initial SWP delivery allocation at 15 percent of requests for the 2020 calendar year. The delivery allocation was increased to 20 percent in May 2020 due to improved hydrology.
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 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.
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 JuneSeptember 30, 2020, 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 have been no significant changes in the risk factors disclosed in our 2019 Annual Report on Form 10-K. Some of the risks due to the COVID-19 pandemic that have been identified by management to date include uncertainties arising out of:
•the impact of the COVID-19 pandemic on the ability of GSWC, BVESI 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, BVESI, and the Military Privatization Subsidiaries to continue to provide necessary supplies and equipment to them and the ability of the subcontractors of GSWC, BVESI, 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 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.

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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 issues equity securities. The following table provides information about repurchases of Common Shares by AWR during the secondthird quarter of 2020:
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)
April 1 – 30, 2020 18,825
 $82.54
 —
 —
May 1 – 31, 2020 10,438
 $77.39
 —
 —
June 1 – 30, 2020 12,763
 $78.10
 —
 —
Total 42,026
(2)$79.91
 —
  
PeriodTotal 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)
July 1 – 31, 2020212  $79.54 — — 
August 1 – 31, 2020418  $79.41 — — 
September 1 – 30, 202012,073  $76.57 — — 
Total12,703 (2)$76.72 — 
(1)      None of the common shares were purchased pursuant to any publicly announced stock repurchase program.
(2)         Of this amount, 38,3099,282 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 sharesCommon 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 July 28, 2020, AWR's Board of Directors approved a 9.8% increase in the third quarter dividend, from $0.305 per share to $0.335 per share on AWR's Common Shares. Dividends on the Common Shares will be paid on September 1, 2020 to shareholders of record at the close of business on August 17,
(a)    On October 27, 2020, AWR's Board of Directors approved a fourth quarter dividend of $0.335 per share on AWR's Common Shares. Dividends on the Common Shares will be paid on December 1, 2020 to shareholders of record at the close of business on November 16, 2020.
(b)There have been no material changes during the second quarter of 2020 to the procedures by which shareholders may nominate persons to the Board of Directors of AWR.


(b)    There have been no material changes during the third quarter of 2020 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
3.2
3.3
3.4
4.1
4.2
4.3
4.4
10.1Second 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
10.2Note 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)
10.3Schedule 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
10.5
10.6
10.7
10.8
10.9
10.10
10.11

10.12
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10.13
10.14
10.15
10.16
10.17
10.18
10.19
10.20
10.21
10.22
10.23
10.24
10.25
10.26
10.27
10.28

10.29

31.1
31.1.1
31.2
31.2.1
32.1
32.2

101.INS
101.INSXBRL 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.SCHXBRL Taxonomy Extension Schema (3)
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101.CALXBRL Taxonomy Extension Calculation Linkbase (3)
101.DEFXBRL Taxonomy Extension Definition Linkbase (3)
101.LABXBRL Taxonomy Extension Label Linkbase (3)
101.PREXBRL Taxonomy Extension Presentation Linkbase (3)
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
(1)        Filed concurrently herewith 
(2)        Management contract or compensatory arrangement 
(3)        Furnished concurrently herewith


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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:August 3,November 2, 2020

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