UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

___________________________________________

FORM 10-Q

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

For the quarterly period ended ~~September 30, 2023~~March 31, 2024

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

For the transition period from to

Commission file number ~~1-8966~~001-8966

SJW GROUP

(Exact name of registrant as specified in its charter)

Delaware

77-0066628

(State or other jurisdiction of incorporation or organization)

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

110 West Taylor Street,

San Jose,

95110

(Address of principal executive offices)

(Zip Code)

(408) 279-7800

(Registrant’s telephone number, including area code)

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.001 per share

SJW

New York Stock Exchange LLC

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

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

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

Large accelerated filer ☒ Non-accelerated filer ☐

Accelerated filer ☐ Smaller reporting company ☐

Emerging growth company ☐

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

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

APPLICABLE ONLY TO CORPORATE ISSUERS:

As of ~~October 24, 2023,~~April 22, 2024, there were ~~31,933,003~~32,234,465 shares of the registrant’s Common Stock outstanding.

FORWARD-LOOKING STATEMENTS

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

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

•the effect of water, utility, environmental and other governmental policies and regulations, including regulatory actions concerning rates, authorized return on equity, authorized capital structures, capital expenditures, per- and polyfluroralkyl substances (“PFAS”) and other decisions;

•changes in demand for water and other services;

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

•the effect of the ~~impact~~impacts of climate change;

•unexpected costs, charges or expenses;

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

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

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

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

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

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

•legislative and general market and economic developments.

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

PART I. FINANCIAL INFORMATION

ITEM 1.FINANCIAL STATEMENTS

SJW ~~GROUP AND SUBSIDIARIES~~Group and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

(in thousands, except share and per share data)


		Three months ended September 30,			Nine months ended September 30,
		2023		2022	2023		2022
REVENUE		$	204,843	175,981	$	499,025	449,324
OPERATING EXPENSE:




Operating revenue
Operating revenue
Operating revenue
Operating expense:
Operating expense:
Operating expense:
Production Expenses:
Production Expenses:
Production Expenses:	Production Expenses:
Purchased water	Purchased water	46,044		38,744	101,054		84,313
Purchased water
Purchased water
Power
Power
Power	Power	2,785		3,913	7,363		10,387
Groundwater extraction charges	Groundwater extraction charges	21,398		19,059	46,751		51,347
Groundwater extraction charges
Groundwater extraction charges
Other production expenses
Other production expenses
Other production expenses	Other production expenses	12,415		11,888	36,379		33,607
Total production expenses	Total production expenses	82,642		73,604	191,547		179,654
Total production expenses
Total production expenses
Administrative and general
Administrative and general
Administrative and general	Administrative and general	23,888		23,909	71,759		71,374
Maintenance	Maintenance	6,457		7,065	18,813		20,651
Maintenance
Maintenance
Property taxes and other non-income taxes
Property taxes and other non-income taxes
Property taxes and other non-income taxes	Property taxes and other non-income taxes	8,795		8,354	25,092		24,242
Depreciation and amortization	Depreciation and amortization	26,455		25,529	78,872		78,342
Gain on sale of nonutility property		—		(82)	—		(5,532)
Depreciation and amortization
Depreciation and amortization

Total operating expense	Total operating expense	148,237		138,379	386,083		368,731
OPERATING INCOME		56,606		37,602	112,942		80,593
OTHER (EXPENSE) INCOME:

Total operating expense

Total operating expense
Operating income
Operating income
Operating income
Other (expense) income:
Other (expense) income:
Other (expense) income:
Interest on long-term debt and other interest expense	Interest on long-term debt and other interest expense	(16,744)		(14,190)	(48,913)		(42,160)
Pension non-service (cost) credit		(740)		970	(906)		2,860
Interest on long-term debt and other interest expense
Interest on long-term debt and other interest expense
Pension non-service credit (cost)
Pension non-service credit (cost)
Pension non-service credit (cost)

Other, net

Other, net

Other, net	Other, net	1,661		875	7,042		2,694
Income before income taxes	Income before income taxes	40,783		25,257	70,165		43,987
Income before income taxes
Income before income taxes
Provision for income taxes	Provision for income taxes	4,561		223	4,127		3,658
NET INCOME		36,222		25,034	66,038		40,329
Other comprehensive income (loss), net		318		(173)	420		(602)
COMPREHENSIVE INCOME		$	36,540	24,861	$	66,458	39,727
Provision for income taxes
Provision for income taxes
Net income
Net income
Net income
Other comprehensive (loss) income, net
Other comprehensive (loss) income, net
Other comprehensive (loss) income, net
Comprehensive income
Comprehensive income
Comprehensive income

EARNINGS PER SHARE
Earnings per share

Earnings per share

Earnings per share
Basic
Basic
Basic	Basic	$	1.14	0.83	$	2.10	1.33
Diluted	Diluted	$	1.13	0.82	$	2.09	1.33
DIVIDENDS PER SHARE		$	0.38	0.36	$	1.14	1.08
WEIGHTED AVERAGE SHARES OUTSTANDING
Diluted
Diluted
Dividends per share
Dividends per share
Dividends per share
Weighted average shares outstanding
Weighted average shares outstanding
Weighted average shares outstanding
Basic
Basic
Basic	Basic	31,862,518		30,269,462	31,436,077		30,246,201
Diluted	Diluted	31,934,636		30,392,295	31,526,732		30,358,268
Diluted
Diluted

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

SJW ~~GROUP AND SUBSIDIARIES~~Group and Subsidiaries

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(in thousands, except share and per share data)

September 30,
2023 December 31,
2022
ASSETS
Utility plant:
Land $ 41,427 39,982
Depreciable plant and equipment 3,879,507 3,661,285
Construction in progress 113,204 116,851
Intangible assets 35,946 35,959
Total utility plant 4,070,084 3,854,077
Less accumulated depreciation and amortization 1,305,134 1,223,760
Net utility plant 2,764,950 2,630,317
Nonutility properties and real estate investments 13,072 58,033
Less accumulated depreciation and amortization 192 17,158
Net nonutility properties and real estate investments 12,880 40,875
CURRENT ASSETS:
Cash and cash equivalents 21,067 12,344
Accounts receivable:
Customers, net of allowances for uncollectible accounts of $6,661 and $5,753 on September 30, 2023 and December 31, 2022, respectively 70,374 59,172
Other 4,381 5,560
Accrued unbilled utility revenue 62,253 45,722
Assets held for sale 40,850 —
Prepaid expenses 14,996 9,753
Current regulatory assets, net 8,573 16,068
Other current assets 6,277 6,095
228,771 154,714
OTHER ASSETS:
Net regulatory assets, less current portion 131,420 127,275
Investments 15,901 14,819
Other intangible asset 28,386 —
Goodwill 640,311 640,311
Other 20,809 24,313
836,827 806,718
$ 3,843,428 3,632,624


	March 31, 2024		December 31, 2023
Assets
Utility plant:
Land	$	41,415	41,415
Depreciable plant and equipment	4,005,195		3,967,911
Construction work in progress	133,369		106,980
Intangible assets	35,946		35,946
Total utility plant	4,215,925		4,152,252
Less accumulated depreciation and amortization	1,007,078		981,598
Net utility plant	3,208,847		3,170,654

Nonutility properties and real estate investments	13,377		13,350
Less accumulated depreciation and amortization	195		194
Net nonutility properties and real estate investments	13,182		13,156

Current assets:
Cash and cash equivalents	4,542		9,723

Accounts receivable:
Customers, net of allowances for uncollectible accounts of $6,198 and $6,551 on March 31, 2024 and December 31, 2023, respectively	62,649		67,870
Income tax	2,911		5,187
Other	2,199		3,684
Accrued unbilled utility revenue	44,345		49,543
Assets held for sale	40,850		40,850
Prepaid expenses	12,822		11,110
Current regulatory assets	1,850		4,276
Other current assets	5,914		6,146
Total current assets	178,082		198,389
Other assets:
Regulatory assets, less current portion	238,842		235,910
Investments	17,435		16,411
Postretirement benefit plans	34,244		33,794
Other intangible asset	28,386		28,386
Goodwill	640,311		640,311
Other	8,183		8,056
Total other assets	967,401		962,868
Total assets	$	4,367,512	4,345,067

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

SJW ~~GROUP AND SUBSIDIARIES~~Group and Subsidiaries

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(in thousands, except share and per share data)

September 30,
2023 December 31,
2022
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
Stockholders’ equity:
Common stock, $0.001 par value; authorized 70,000,000 shares; issued and outstanding shares 31,933,003 on September 30, 2023 and 30,801,912 on December 31, 2022
$ 32 31
Additional paid-in capital 729,740 651,004
Retained earnings 488,585 458,356
Accumulated other comprehensive income 1,896 1,477
Total stockholders’ equity 1,220,253 1,110,868
Long-term debt, less current portion 1,533,769 1,491,965
2,754,022 2,602,833
CURRENT LIABILITIES:
Lines of credit 128,433 159,578
Current portion of long-term debt 43,464 4,360
Accrued groundwater extraction charges, purchased water and power 33,170 19,707
Accounts payable 35,926 29,581
Accrued interest 19,165 13,907
Accrued payroll 11,264 11,908
Income tax payable 11,809 2,696
Other current liabilities 24,885 22,913
308,116 264,650
DEFERRED INCOME TAXES 234,558 218,155
ADVANCES FOR CONSTRUCTION 143,810 137,696
CONTRIBUTIONS IN AID OF CONSTRUCTION 328,633 323,668
POSTRETIREMENT BENEFIT PLANS 51,150 59,738
OTHER NONCURRENT LIABILITIES 23,139 25,884
COMMITMENTS AND CONTINGENCIES
$ 3,843,428 3,632,624


	March 31, 2024		December 31, 2023
Capitalization and liabilities
Capitalization:
Stockholders’ equity:
Common stock, $0.001 par value; authorized 70,000,000 shares; issued and outstanding shares 32,201,216 on March 31, 2024 and 32,023,004 on December 31, 2023	$	32	32
Additional paid-in capital	744,621		736,191
Retained earnings	494,249		495,383
Accumulated other comprehensive income	1,349		1,791
Total stockholders’ equity	1,240,251		1,233,397
Long-term debt, less current portion	1,550,298		1,526,699
Total capitalization	2,790,549		2,760,096

Current liabilities:
Lines of credit	210,748		171,500
Current portion of long-term debt	9,002		48,975
Accrued groundwater extraction charges, purchased water and power	17,205		24,479
Accounts payable	34,397		46,121
Accrued interest	19,056		15,816
Accrued payroll	8,818		12,229

Current regulatory liabilities	2,480		3,059
Other current liabilities	21,554		20,795
Total current liabilities	323,260		342,974

Deferred income taxes	239,960		238,528
Advances for construction	141,431		146,582
Contributions in aid of construction	331,869		326,451
Postretirement benefit plans	47,323		46,836
Regulatory liabilities, less current portion	469,953		461,108
Other noncurrent liabilities	23,167		22,492
Commitments and contingencies
Total capitalization and liabilities	$	4,367,512	4,345,067

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

SJW ~~GROUP AND SUBSIDIARIES~~Group and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(UNAUDITED)

(in thousands, except share and per share data)


		Common Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income			Total Stockholders’ Equity
		Number of Shares	Amount								Total Stockholders’ Equity
BALANCES, December 31, 2022		30,801,912	$	31	$	651,004	$	458,356	$	1,477		$	1,110,868
														Common Stock	Additional Paid-in Capital	Retained Earnings	Accumulated Other Comprehensive Income	Total Stockholders’ Equity

Balances, December 31, 2023
Balances, December 31, 2023
Balances, December 31, 2023
Net income	Net income	—	—		—		11,530		—			11,530
Unrealized gain on investment, net of taxes of $0		—	—		—		—		93			93
Unrealized loss on investment, net of tax of $163
Stock-based compensation	Stock-based compensation	—	—		1,199		(22)		—			1,177
Issuance of restricted and deferred stock units	Issuance of restricted and deferred stock units	38,776	—		(1,538)		—		—			(1,538)
Employee stock purchase plan	Employee stock purchase plan	16,410	—		1,080		—		—			1,080
Common stock issuance, net of costs	Common stock issuance, net of costs	570,026	—		40,997		—		—			40,997
Dividends paid ($0.38 per share)		—	—		—		(11,722)		—			(11,722)
BALANCES, March 31, 2023		31,427,124	31		692,742		458,142		1,570			1,152,485
Net income		—	—		—		18,286		—			18,286
Unrealized gain on investment, net of taxes of $(37)		—	—		—		—		8			8
Stock-based compensation		—	—		1,139		(17)					1,122
Issuance of restricted and deferred stock units		13,429	—		(20)		—		—			(20)
Common stock issuance, net of costs		290,477	1		22,781		—		—			22,782
Dividends paid ($0.38 per share)		—	—		—		(11,947)		—			(11,947)
BALANCES, June 30, 2023		31,731,030	32		716,642		464,464		1,578			1,182,716
Net income		—	—		—		36,222		—			36,222
Unrealized gain on investment, net of taxes of $193		—	—		—		—		318			318
Stock-based compensation		—	—		1,238		(8)		—			1,230
Issuance of restricted and deferred stock units		14,840	—		(706)		—		—			(706)
Employee stock purchase plan		17,712	—		1,061		—		—			1,061
Common stock issuance, net of costs		169,421	—		11,505		—		—			11,505
Dividends paid ($0.38 per share)		—	—		—		(12,093)		—			(12,093)
BALANCES, September 30, 2023		31,933,003	$	32��	$	729,740	$	488,585	$	1,896		$	1,220,253
Dividends paid ($0.40 per share)
Balances, March 31, 2024


	Common Stock			Additional Paid-in Capital	Retained Earnings	Accumulated Other Comprehensive Loss	Total Stockholders’ Equity
	Number of Shares	Amount
Balances, December 31, 2022	30,801,912	$	31	651,004	458,356	1,477	1,110,868
Net income	—	—		—	11,530	—	11,530
Unrealized gain on investment, net of taxes of $0	—	—		—	—	93	93
Stock-based compensation	—	—		1,199	(22)	—	1,177
Issuance of restricted and deferred stock units	38,776	—		(1,538)	—	—	(1,538)
Employee stock purchase plan	16,410	—		1,080	—	—	1,080
Common stock issuance, net of costs	570,026	—		40,997	—	—	40,997
Dividends paid ($0.38 per share)	—	—		—	(11,722)	—	(11,722)
Balances, March 31, 2023	31,427,124	$	31	692,742	458,142	1,570	1,152,485

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

~~SJW GROUP AND SUBSIDIARIES~~

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

~~(UNAUDITED)~~

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

Common Stock Additional
Paid-in
Capital Retained
Earnings Accumulated
Other
Comprehensive
Loss Total
Stockholders’
Equity
Number of
Shares Amount
BALANCES, December 31, 2021 30,181,348 $ 30 $ 606,392 $ 428,260 $ (163) $ 1,034,519
Net income — — — 3,737 — 3,737
Unrealized loss on investment, net of taxes of $67 — — — — (181) (181)
Stock-based compensation — — 1,552 (20) — 1,532
Issuance of restricted and deferred stock units 37,879 — (1,269) — — (1,269)
Employee stock purchase plan 17,918 — 1,049 — — 1,049
Common stock issuance, net of costs — — (87) — — (87)
Dividends paid ($0.36 per share) — — — (10,882) — (10,882)
BALANCES, March 31, 2022 30,237,145 30 607,637 421,095 (344) 1,028,418
Net income — — — 11,558 — 11,558
Unrealized loss on investment, net of taxes of $0 — — — — (248) (248)
Stock-based compensation — — 1,041 (23) 1,018
Issuance of restricted and deferred stock units 10,529 — (6) — — (6)
Common stock issuance, net of costs — — (6) — — (6)
Dividends paid ($0.36 per share) — — — (10,889) — (10,889)
BALANCES, June 30, 2022 30,247,674 30 608,666 421,741 (592) 1,029,845
Net income — — — 25,034 — 25,034
Unrealized loss on investment, net of taxes of $154 — — — — (173) (173)
Stock-based compensation — — 1,398 (23) — 1,375
Issuance of restricted and deferred stock units 1,316 — 13 — — 13
Employee stock purchase plan 18,667 — 1,042 — — 1,042
Common stock issuance, net of costs 47,608 — 3,107 — — 3,107
Dividends paid ($0.36 per share) — — — (10,896) — (10,896)
BALANCES, September 30, 2022 30,315,265 $ 30 $ 614,226 $ 435,856 $ (765) $ 1,049,347

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

SJW ~~GROUP AND SUBSIDIARIES~~Group and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in thousands)


		Nine months ended September 30,			Three months ended March 31,
		2023		2022	2024	2023
OPERATING ACTIVITIES:
Operating activities:
Net income
Net income
Net income	Net income	$	66,038	40,329
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
Depreciation and amortization
Depreciation and amortization	Depreciation and amortization	80,544		79,862
Deferred income taxes	Deferred income taxes	12,996		7,135
Stock-based compensation	Stock-based compensation	3,576		3,991
Allowance for equity funds used during construction	Allowance for equity funds used during construction	(1,649)		(1,324)

Gain on sale of nonutility asset		—		(5,532)

Changes in operating assets and liabilities:	Changes in operating assets and liabilities:

Changes in operating assets and liabilities:

Changes in operating assets and liabilities:
Accounts receivable and accrued unbilled utility revenue
Accounts receivable and accrued unbilled utility revenue
Accounts receivable and accrued unbilled utility revenue	Accounts receivable and accrued unbilled utility revenue	(26,782)		(22,511)
Accounts payable and other current liabilities	Accounts payable and other current liabilities	557		(1,475)
Accrued groundwater extraction charges, purchased water and power	Accrued groundwater extraction charges, purchased water and power	13,463		10,494
Tax receivable and payable, and other accrued taxes	Tax receivable and payable, and other accrued taxes	690		(1,851)
Postretirement benefits	Postretirement benefits	(1,851)		(2,719)
Regulatory assets and liabilities excluding income tax temporary differences, net and postretirement benefits		16,092		21,776
Up-front service concession payment		—		(1,600)
Regulatory assets and liabilities excluding cost of removal, income tax temporary differences, and postretirement benefits
Other changes, net	Other changes, net	(4,371)		2,774
NET CASH PROVIDED BY OPERATING ACTIVITIES		159,303		129,349
INVESTING ACTIVITIES:
Net cash provided by operating activities
Investing activities:
Additions to utility plant:
Additions to utility plant:
Additions to utility plant:	Additions to utility plant:
Company-funded	Company-funded	(195,937)		(160,515)
Company-funded
Company-funded
Contributions in aid of construction	Contributions in aid of construction	(13,604)		(17,773)
Additions to nonutility assets		(24,244)		(610)
Payments to retire utility plant, net of salvage		(908)		(2,432)
Proceeds from sale of nonutility properties		—		310
Payments for business acquisitions		(7,286)		(433)

Cost to retire utility plant, net of salvage
Cost to retire utility plant, net of salvage
Cost to retire utility plant, net of salvage

Other changes, net	Other changes, net	238		—
NET CASH USED IN INVESTING ACTIVITIES		(241,741)		(181,453)
FINANCING ACTIVITIES:

Other changes, net

Other changes, net
Net cash used in investing activities
Financing activities:
Borrowings on line of credit
Borrowings on line of credit
Borrowings on line of credit	Borrowings on line of credit	102,655		152,655
Repayments on line of credit	Repayments on line of credit	(133,800)		(16,481)
Long-term borrowings	Long-term borrowings	70,000		15,000
Repayments of long-term borrowings	Repayments of long-term borrowings	(3,062)		(87,757)
Issuance of common stock, net of issuance costs	Issuance of common stock, net of issuance costs	75,284		3,107

Dividends paid	Dividends paid	(35,762)		(32,667)
Dividends paid
Dividends paid
Receipts of advances and contributions in aid of construction	Receipts of advances and contributions in aid of construction	18,889		21,593
Refunds of advances for construction	Refunds of advances for construction	(2,148)		(2,177)
Other changes, net	Other changes, net	(895)		(98)
NET CASH PROVIDED BY FINANCING ACTIVITIES		91,161		53,175
NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH		8,723		1,071
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD		12,344		12,119
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD		21,067		13,190
LESS RESTRICTED CASH, END OF PERIOD		—		—
CASH AND CASH EQUIVALENTS, END OF PERIOD		$	21,067	13,190
Net cash provided by financing activities
Net change in cash and cash equivalents
Cash and cash equivalents, beginning of period

Cash and cash equivalents, end of period

Cash and cash equivalents, end of period

Cash and cash equivalents, end of period

Cash paid during the period for:	Cash paid during the period for:
Cash paid during the period for:
Cash paid during the period for:
Interest
Interest
Interest	Interest	$	44,132	42,473
Income taxes	Income taxes	818		572

Supplemental disclosure of non-cash activities:	Supplemental disclosure of non-cash activities:
Supplemental disclosure of non-cash activities:
Supplemental disclosure of non-cash activities:
Accrued payables for additions to utility plant
Accrued payables for additions to utility plant
Accrued payables for additions to utility plant	Accrued payables for additions to utility plant	$	26,315	22,044
Utility property installed by developers	Utility property installed by developers	1,295		976
Seller financing in asset acquisition, net of discount		15,400		—

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~SEPTEMBER 30, 2023~~MARCH 31, 2024

(in thousands, except share and per share data)

Note 1.General

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

The unaudited interim financial information has been prepared in accordance with accounting principles generally accepted in the United States of America and in accordance with the instructions for Form 10-Q and Rule 10-01 of Regulation S-X promulgated by the Securities and Exchange Commission. The Notes to Consolidated Financial Statements in SJW Group’s ~~2022~~2023 Annual Report on Form 10-K should be read in conjunction with the accompanying unaudited condensed consolidated financial statements.

SJW Group is a holding company with four wholly owned subsidiaries: San Jose Water Company (“SJWC”), SJWTX Holdings, Inc., SJW Land Company, and SJWNE LLC. SJWTX Holdings, Inc., is a holding company for its wholly owned subsidiaries, SJWTX, Inc., doing business as The Texas Water Company (“TWC”), Texas Water Operation Services, LLC, (“TWOS”) and Texas Water Resources, LLC (“TWR”). SJWNE LLC is the holding company for Connecticut Water Service, Inc. (“CTWS”) whose wholly owned subsidiaries are The Connecticut Water Company (“CWC”), The Maine Water Company (“MWC”), New England Water Utility Services, Inc. (“NEWUS”), and Chester Realty, Inc. SJWC, CWC, TWC, TWOS, TWR, MWC and NEWUS are referred to as “Water Utility ~~Services”.~~Services.” SJW Land Company and Chester Realty, Inc. are collectively referred to as “Real Estate Services.”

Revenue

Water sales are seasonal in nature and influenced by weather conditions. The timing of precipitation and climatic conditions can cause seasonal water consumption by customers to vary significantly. Due to the seasonal nature of the water business, the operating results for interim periods are not indicative of the operating results for a 12-month period. Revenue is generally higher in the warm, dry summer months when water usage and sales are greater, and lower in the winter months when cooler temperatures and increased precipitation curtail water usage resulting in lower sales.

~~The major streams of~~SJW Group’s revenue ~~for SJW Group~~components are as follows:
Three months ended September 30, Nine months ended September 30,
2023 2022 2023 2022
Revenue from contracts with customers $ 211,716 169,972 $ 507,276 440,406
Alternative revenue programs, net 957 3,172 (2,638) (1,737)
Other balancing and memorandum accounts, net (8,742) 1,857 (8,564) 6,719
Other regulatory mechanisms, net (518) (494) (1,342) (260)
Rental income 1,430 1,474 4,293 4,196
$ 204,843 175,981 $ 499,025 449,324


	Three months ended March 31,
	2024		2023
Revenue from contracts with customers	$	150,008	135,836
Alternative revenue programs, net	(1,837)		(1,391)
Other balancing and memorandum accounts and regulatory mechanisms, net	(564)		1,404
Rental income	1,775		1,447
	$	149,382	137,296

Nonutility Properties and Real Estate Investments

The major components of real estate investments and nonutility properties as of ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, are as follows:


		September 30, 2023		December 31, 2022
	March 31, 2024				March 31, 2024	December 31, 2023
Land	Land	$	4,137	12,615
Wholesale water supply assets	Wholesale water supply assets	8,465		—
Buildings and improvements	Buildings and improvements	470		45,418

Subtotal	Subtotal	13,072		58,033
Subtotal
Subtotal
Less: accumulated depreciation and amortization	Less: accumulated depreciation and amortization	192		17,158
Total	Total	$	12,880	40,875

In March 2023, SJW Land Company entered into a broker agreement to sell its warehouse, office buildings, and land property located in Knoxville, Tennessee. The company reclassified the Tennessee properties from held-and-used to held-for-sale at March 31, 2023. The company’s intention is to complete the sale of these assets within the next twelve months. The company

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

~~September 30, 2023~~March 31, 2024

(in thousands, except share and per share data)

~~2023. The company’s intention is to complete the sale of these assets within a twelve month period. The company recorded~~records the Tennessee properties at the lower of their carrying value or estimated fair value less cost to sell, and also stopped recording depreciation on assets held for sale. ~~The company's~~SJW Group's broker ~~provided~~provides the estimated fair value of the Tennessee properties. ~~The~~No impairment has been recorded as the estimated ~~costs~~fair value less cost to sell ~~was subtracted to estimate the fair~~exceeds carrying value. The ~~resulting net fair value~~property is classified as part of the ~~Tennessee properties exceeded their carrying value, and accordingly no impairment was recorded.~~Real Estate Services reportable segment.

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

In April 2024, SJW Land Company completed the sale of a warehouse building of the Tennessee properties for $27,000. The ~~Tennessee warehouse buildings and land property~~estimated pre-tax gain on the sale is ~~included in SJW Group’s “Real Estate Services” reportable segment in~~ ~~Note 9, “Segment and Non-Tariffed Business Reporting”.~~ $7,000.

The following represents the major components of the Tennessee warehouse ~~building~~buildings and land property recorded in assets held-for-sale on the condensed consolidated balance sheets as of ~~September 30, 2023:~~March 31, 2024:


	~~September 30,~~March 31, ~~2023~~2024
Land	$	13,170
Buildings and improvements	44,950

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

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

Fair Value Measurement

The following instruments are not measured at fair value on SJW Group’s condensed consolidated balance sheets as of ~~September 30, 2023,~~March 31, 2024, but require disclosure of their fair values: cash and cash equivalents, accounts receivable and accounts payable. The estimated fair value of such instruments as of ~~September 30, 2023~~March 31, 2024 approximates their carrying value as reported on the condensed consolidated balance sheets. There have been no changes in valuation techniques during the three ~~and nine~~ months ended ~~September 30, 2023.~~March 31, 2024. The fair value of these instruments would be categorized as Level 2 in the fair value hierarchy, with the exception of cash and cash equivalents, which would be categorized as Level 1.

The fair value of SJW Group’s long-term debt was ~~$1,299,114~~$1,355,609 and ~~$1,294,354~~$1,394,412 as of ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, respectively, and was determined using a discounted cash flow analysis, based on the current rates for similar financial instruments of the same duration and creditworthiness of the company. ~~The book value of long-term debt was $1,577,233 and $1,496,325 as of September 30, 2023 and December 31, 2022, respectively.~~ Of the total fair value of long-term debt~~$1,283,602~~ at March 31, 2024 and December 31, 2023, $1,339,659 and $1,378,683, respectively, would be categorized as Level 2 in the fair value hierarchy and ~~$15,512~~$15,950 and $15,729, respectively, would be categorized as Level 3 in the fair value hierarchy.

CTWS’s additional retirement benefits under the supplemental executive retirement plans and retirement contracts are funded by investment assets held by a Rabbi Trust. The fair value of the money market funds, mutual funds and fixed income investments in the Rabbi Trust was ~~$2,808~~$2,890 and ~~$2,809~~$2,833 as of ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, respectively, and are categorized as Level 1 in the fair value hierarchy.

Earnings per Share

Basic earnings per share is calculated using income available to common stockholders, divided by the weighted average number of shares outstanding during the period. Diluted earnings per share is calculated using income available to common stockholders divided by the weighted average number of shares of common stock including both shares outstanding and shares potentially issuable in connection with restricted common stock awards under SJW Group’s long-term incentive plans, shares potentially issuable under the performance stock plans assumed through the business combination with CTWS, and shares potentially issuable under SJW Group’s employee stock purchase plans. For the three months ended ~~September 30,~~March 31, 2024 and 2023, 12,221 and 2022, 1,826 and 2,416 anti-dilutive restricted common stock units were excluded from the diluted earnings per share calculation, respectively. For the nine months ended September 30, 2023 and 2022, 12,524 and 18,2408,855 anti-dilutive restricted common stock units were excluded from the diluted earnings per share calculation, respectively.

New Accounting Standards

In November 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-07, “Improvements to Reportable Segment Disclosures.” (“ASU 2023-07”). Among other changes, the ASU requires disclosure of significant segment expenses and extends certain annual disclosures to interim periods. The ASU is effective for SJW Group beginning with its annual financial

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

~~September 30, 2023~~March 31, 2024

(in thousands, except share and per share data)

statements for the year ending December 31, 2024. Early adoption is permitted. SJW Group is currently evaluating the requirements of ASU 2023-07.

In December 2023, the FASB issued ASU 2023-09, “Improvements to Income Tax Disclosures.” The ASU amends certain income tax disclosure requirements, including adding requirements to present the reconciliation of income tax expense computed at the statutory rate to actual income tax expense using both percentages and amounts and providing a disaggregation of income taxes paid. Further, certain disclosures are eliminated, including the current requirement to disclose information on changes in unrecognized tax benefits in the next 12 months. The ASU is effective for SJW Group beginning with its annual financial statements for the year ending December 31, 2025. Early adoption is permitted. SJW Group is currently evaluating the requirements of ASU 2023-09.

Note 2.Regulatory Matters

Regulatory assets ~~net~~and liabilities are comprised of the following as of ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022:~~2023:

September 30, 2023 December 31, 2022
Regulatory assets:
Income tax temporary differences, net $ 62,745 43,434
Postretirement pensions and other postretirement benefits 30,076 31,493
Business combinations debt premium, net 15,490 17,396
Monterey Water Revenue Adjustment Mechanism (“MWRAM”) 12,162 10,864
Water Conservation Memorandum Account (“WCMA”) (7,683) (5,039)
2022 General Rate Case Interim Memorandum Account 9,513 20,650
Cost recovery balancing and memorandum accounts 8,267 16,545
All other balancing and memorandum accounts 4,344 2,749
Water Revenue Adjustment (“WRA”) (5,428) (4,488)
Other, net 10,507 9,739
Total regulatory assets, net in Condensed Consolidated Balance Sheets 139,993 143,343
Less: current regulatory assets, net 8,573 16,068
Total regulatory assets, net, less current portion $ 131,420 127,275


	March 31, 2024		December 31, 2023
Regulatory assets:
Income tax temporary differences (a)	$	158,793	157,669
Unrecognized pensions and other postretirement benefits (b)	24,593		24,593
Business combinations debt premium (c)	14,219		14,855
Employee benefit costs (d)	9,158		9,815
Monterey Water Revenue Adjustment Mechanism (“MWRAM”) (e)	10,121		9,361
Customer Assistance Program (“CAP”) balancing account (f)	5,850		5,457
Catastrophic event memorandum accounts (“CEMA”) (g)	4,883		4,819
2022 general rate case interim memorandum account (h)	3,266		4,571
Water supply costs (i)	—		583
Other (j)	9,809		8,463
Total regulatory assets	240,692		240,186
Less: current regulatory assets (k)	1,850		4,276
Total regulatory assets, less current portion	$	238,842	235,910
Regulatory liabilities:
Cost of removal (l)	$	350,369	346,418
Future income tax benefits due to customers (m)	87,908		88,610
Unrecognized pensions and other postretirement benefits (b)	20,303		20,196
Revenue adjustment mechanisms (n)	6,165		5,536
Water supply costs (i)	4,392		—
Other (o)	3,296		3,407
Total regulatory liabilities	472,433		464,167
Less: current regulatory liabilities (p)	2,480		3,059
Total regulatory liabilities, less current portion	$	469,953	461,108

___________________________________

(a)Consists primarily of temporary income tax differences that are flowed through to customers, which will be recovered in future rates as these temporary differences reverse. The company expects to recover regulatory assets related to plant depreciation income tax temporary differences over the lives of the plant assets, which are between 4 to 100 years.

(b)Represents actuarial losses and gains and prior service cost that have not yet been recognized as components of net periodic benefit cost for certain pension and other postretirement benefit plans.

(c)Consists of debt fair value adjustments recognized through purchase accounting for the completed merger with CTWS in 2019.

(d)Includes deferrals of pension and other postretirement benefit expense and cost of accrued benefits for vacation.

(e)MWRAM is described in the following section.

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

March 31, 2024

(in thousands, except share and per share data)

(f)Represents costs associated with SJWC’s CAP.

(g)Primarily related to increased bad debt expenses associated with SJWC’s response to COVID-19. The California Public Utilities Commission (“CPUC”) has authorized water utilities to activate CEMA accounts in order to track savings and costs related to SJWC’s response to catastrophic events, which includes external labor and materials, increases in bad debt from suspension of shutoffs for non-payment, waived deposits and reconnection fees, and divergence from actual versus authorized usage.

(h)Represents the difference between revenues collected in interim rates in effect as of January 1, 2022 and revenues that would result from rates authorized in SJWC’s 2022 general rate case retroactive to January 1, 2022.

(i)Reflects differences in actual water supply costs compared to amounts assumed in base rates, including applicable changes and variations in costs and quantities that affect the overall mix of the water supply.

(j)Other includes other balancing and memorandum accounts and regulatory mechanisms, deferred costs for certain information technology activities, asset retirement obligations and rate case expenses.

(k)As of March 31, 2024 and December 31, 2023, primarily relates to the current portion of MWRAM.

(l)Represents amounts collected in rates from customers for estimated costs to retire assets at the end of their expected useful lives before the costs are incurred.

(m)On December 22, 2017 the Tax Act was signed into law. The Tax Act included a reduction in the federal income tax rate from 35% to 21%. The rate reduction was effective on January 1, 2018 and resulted in a regulatory liability for the excess deferred income taxes. The benefit of amortization of excess deferred income taxes flows back to the customers under current normalization rules and agreed upon methods with the commissions.

(n)Consists of Water Rate Adjustment mechanism (“WRA”) and WCMA, which are described in the following section.

(o)Other includes other balancing and memorandum accounts, other regulatory mechanisms and accrued tank painting costs.

(p)As of March 31, 2024 and December 31, 2023, primarily relates to the current portion of WRA.

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

SJWC also maintains memorandum accounts to track ~~revenue~~ impacts due to catastrophic events, certain unforeseen water quality expenses related to new federal and state water quality standards, energy efficiency, water conservation, water tariffs, and other approved activities or as directed by the CPUC. The WCMA allows SJWC to track lost revenue, net of related water costs, associated with reduced sales due to water conservation and associated calls for water use reductions. SJWC records the lost revenue captured in the WCMA balancing accounts. ~~Drought~~Applicable drought surcharges collected are used to offset the revenue losses tracked in the WCMA. Mandatory water conservation requirements from Santa Clara Valley Water District(“Valley Water”) ended on April 11, 2023, which also ended SJWC’s Mandatory Conservation Plan, that included drought allocations and surcharges. On October 2, 2023, the CPUC approved the continuation of WCMA and Water Conservation Expense Memorandum Account under the voluntary call for conservation effective April 20, 2023. All balancing accounts and memorandum accounts not included for recovery or refund in the current general rate case will be reviewed by the CPUC in SJWC’s next general rate case or at the time an individual account balance reaches a threshold of 2% of authorized revenue, whichever occurs first.

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

As of ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, SJW Group’s regulatory assets ~~net,~~ not earning a return primarily included ~~postretirement~~unrecognized pensions and ~~the unfunded amount of~~ other ~~medical~~postretirement benefits and business combination debt ~~premiums, net.~~premiums. The total amount of regulatory assets ~~net~~ not earning a return at ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, either by interest on the regulatory ~~asset/liability~~asset or as a component of rate base at the allowed rate of return, was ~~$48,954~~$42,598 and ~~$52,066,~~$43,141, respectively.

~~SJW GROUP AND SUBSIDIARIES~~

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

~~September 30, 2023~~

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

Note 3.Capitalization

In March 2023, SJW Group entered into Amendment No. 1 to the equity distribution agreement (the “Equity Distribution Agreement”), dated November 17, 2021, between SJW Group and J.P. Morgan Securities LLC, Janney Montgomery Scott LLC, RBC Capital Markets, LLC and Wells Fargo Securities, LLC, ~~(each a “Sales Agent” and, collectively, the “Sales Agents”),~~ pursuant to which ~~SJW Group increased~~ the ~~aggregate gross sales price of~~company may offer and sell shares of ~~SJW Group’s~~its common stock, $0.001 par value per share, ~~that may be sold under the Equity Distribution Agreement~~ from ~~$100,000~~time to time in “at-the-market” offerings, having an aggregate gross sales price of up to $240,000. For the three ~~and nine~~ months ended ~~September 30, 2023,~~March 31, 2024, SJW Group issued and sold a total of ~~169,421~~126,025 shares of

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

March 31, 2024

(in thousands, except share and ~~1,029,924 shares of~~ per share data)

common stock ~~respectively, at~~with a weighted average price of ~~$69.57 and $74.57~~$57.13 per share ~~respectively,~~ and received ~~$11,505 and $75,284~~$7,006 in net proceeds ~~respectively,~~ under the Equity Distribution Agreement. Since the inception of the Equity Distribution Agreement, SJW Group has issued and sold ~~1,914,775~~2,130,682 shares of common stock at a weighted average price of ~~$74.05~~$72.60 for a total net proceeds of ~~$138,716~~$151,004 and has ~~$98,209~~$85,309 remaining under the Equity Distribution Agreement to issue into shares.

Note 4.~~Bank Borrowings~~Lines of Credit and Long-Term Liabilities

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

Lines of ~~the advance deposit payments constitute an obligation of the respective entities.~~

~~Short-term Financing Agreements~~

~~In August 2023, SJW Group, SJWC, TWC, and CTWS entered into the First Amendment to~~ Credit ~~Agreement with JPMorgan Chase Bank which provided for, among other matters, an extension of the maturity date from August 2, 2027 to August 2, 2028.~~

The weighted-average interest rate on short-term borrowings outstanding at ~~September 30, 2023~~March 31, 2024, was ~~6.48%~~6.42% compared to ~~5.40%~~6.48% at December 31, ~~2022.~~2023.

Long-term Financing Agreements

~~In July 2022, SJWC~~On November 15, 2023, CWC entered into a note purchase agreement with certain affiliates of ~~New York~~American United Life Insurance, ~~Metropolitan~~The State Life Insurance, ~~Northwestern~~ Mutual of Omaha Insurance, and United of Omaha Life Insurance, ~~and John Hancock Life Insurance (collectively the “Purchasers”),~~ pursuant to which ~~SJWC will sell~~the company sold an aggregate principal amount of ~~$70,000~~$25,000 of its ~~4.85%~~6.46% Senior Notes, Series P2023 (“Series P2023 Notes”) ~~to the Purchasers.~~. The Series P2023 Notes are unsecured obligations of ~~SJWC~~CWC and are due on ~~February~~January 1, ~~2053.~~2054. Interest is payable semi-annually in arrears on ~~February 1st~~January 15th and ~~August 1st~~July 15th of each year. The ~~note purchase agreement contains customary affirmative and negative covenants for as long as the Series P Notes are outstanding. The Series P Notes are also subject to customary events of default. The~~ closing of the ~~note~~notes purchase agreement occurred onin January ~~25, 2023.~~

In August 2023, TWR closed on an asset acquisition from KT Water Resources L.P. which included of an obligation for a post-closing production payment of $29,000 to the seller over a period of up to 29 years. This obligation was recorded at its fair value of $15,400 as of the date of the acquisition. Please see ~~Note 10~~ ~~of “Notes to Condensed Consolidated Financial Statements” for additional information about this obligation.~~2024.

Note 5.Income Taxes

~~For the three and nine months ended September 30, 2023, income tax expense was $4,561 and $4,127, respectively.~~ Income tax expense for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2024 and 2023 was ~~$223~~$2,231 and ~~$3,658,~~$1,078, respectively. The effective consolidated income tax rates were ~~11%~~16% and 1%9% for the three months ended ~~September 30,~~March 31, 2024 and 2023, ~~and 2022, respectively, and 6% and 8% for the nine months ended September 30, 2023 and 2022,~~ respectively. The higher effective tax rate for the three months ended ~~September 30, 2023~~March 31, 2024 was primarily due to the tax ~~benefit relating to a tax accounting method change~~deficiencies recorded in the ~~third quarter 2022. There was no such benefit recorded in the third~~first quarter of ~~2023. The lower effective~~2024 for share-based payments and other discrete tax ~~rate for the nine months ended September 30, 2023 was primarily due to higher flow-through tax benefits.~~

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

~~SJW GROUP AND SUBSIDIARIES~~

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

~~September 30, 2023~~

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

items. SJW Group had unrecognized tax benefits, before the impact of deductions of state taxes, excluding interest and penalties, of approximately ~~$5,981~~$4,488 and ~~$9,004~~$4,511 as of ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, respectively.

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

Note 6.Commitments and Contingencies

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

Note 7.Benefit Plans

SJW Group maintains noncontributory defined benefit pension plans for its eligible employees. SJWC ~~and CTWS~~ employees hired before March 31, 2008 and CWC and MWC employees hired before January 1, 2009 ~~respectively,~~ are entitled to benefits under the pension plans based on the employee’s years of service and compensation. For SJWC employees hired on or after March 31, 2008, benefits are determined using a cash balance formula based upon compensation credits and interest credits for each employee. Starting in 2023, TWC employees are also eligible to participate under SJWC’s cash balance plan. Certain ~~CTWS~~ employees hired before March 1, 2012, and covered by a plan merged into the ~~CTWS~~CWC plan in 2013 are also entitled to benefits based on the employee’s years of service and compensation. CTWS employees hired on or after January 1, 2009, are entitled to an additional 1.5% of eligible compensation to their company sponsored savings plan. SJW Group does not have multi-employer plans.

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

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

March 31, 2024

(in thousands, except share and per share data)

The components of net periodic benefit costs for the defined benefit plans and other postretirement benefits for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2024 and 2023 ~~and 2022~~ are as follows:

Pension Benefits Other Benefits
Three months ended September 30,
2023 2022 2023 2022
Service cost $ 1,892 2,397 $ 160 255
Interest cost 3,557 2,642 317 218
Expected return on assets (3,442) (4,823) (217) (221)
Unrecognized actuarial loss 554 1,257 (87) (75)
Amortization of prior service cost 4 4 — —
Total $ 2,565 1,477 $ 173 177

~~SJW GROUP AND SUBSIDIARIES~~

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

~~September 30, 2023~~

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


		Pension Benefits			Other Benefits			Pension Benefits		Other Benefits
		Nine months ended September 30,
	Three months ended March 31,											Three months ended March 31,
		2023		2022	2023		2022	2024	2023		2024		2023
Service cost	Service cost	$	5,676	7,191	$	480	765
Interest cost	Interest cost	10,672		7,925	951		656
Expected return on assets	Expected return on assets	(11,580)		(14,469)	(651)		(663)
Unrecognized actuarial loss		1,662		3,772	(263)		(226)
Amortization of actuarial loss (gain)
Amortization of prior service cost	Amortization of prior service cost	11		12	—		—
Total	Total	$	6,441	4,431	$	517	532

In ~~2023,~~2024, SJW Group expects to make required and discretionary cash contributions of up to ~~$8,653~~$4,515 to the pension plans and other postretirement benefits. For the three ~~and nine~~ months ended ~~September 30, 2023,~~March 31, 2024, SJW Group has made ~~$3,567 and $7,627, respectively, of~~no contributions to such plans.

Note 8.Equity Plans

SJW Group’s long-term incentive plans provide employees, non-employee board members or the board of directors of any parent or subsidiary, consultants, and other independent advisors who provide services to the company or subsidiary the opportunity to acquire an equity interest in SJW Group. SJW Group also maintains stock plans in connection with its acquisition of CTWS which are no longer granting new stock awards. In addition, shares are issued to employees under SJW Group’s employee stock purchase ~~plan.~~plan (“ESPP”). As of ~~September 30, 2023, 150,882~~March 31, 2024, 181,280 shares are issuable upon the vesting of outstanding restricted stock units and deferred restricted stock units and an additional ~~1,136,979~~1,055,383 shares are available for award issuances under the long-term incentive ~~plans.~~

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

A summary of compensation costs charged to income, by award type, and proceeds from the ESPP, are presented below for the three ~~and nine~~ months ended ~~September 30, 2023~~March 31, 2024 and ~~2022:~~2023:






		Three months ended September 30,			Nine months ended September 30,
		2023		2022	2023		2022
Compensation costs charged to income:	Compensation costs charged to income:
Compensation costs charged to income:
Compensation costs charged to income:
ESPP
ESPP
ESPP	ESPP	$	187	184	$	378	369
Restricted stock and deferred restricted stock	Restricted stock and deferred restricted stock	1,051		1,214	3,198		3,622
Restricted stock and deferred restricted stock
Restricted stock and deferred restricted stock
Total compensation costs charged to income
Total compensation costs charged to income
Total compensation costs charged to income	Total compensation costs charged to income	$	1,238	1,398	$	3,576	3,991
ESPP proceeds	ESPP proceeds	$	1,061	1,042	$	2,141	2,091
ESPP proceeds
ESPP proceeds

Restricted Stock and Deferred Restricted Stock

For the three months ended ~~September 30,~~March 31, 2024 and 2023, ~~and 2022,~~ SJW Group granted ~~968~~37,520 and ~~1,723,~~27,732, respectively, one year and three year service-based restricted stock awards with a weighted-average grant date fair value per unit of ~~$63.96~~$61.10 and ~~$62.56,~~$77.88, respectively. For the nine months ended September 30, 2023 and 2022, SJW Group granted 38,310 and 45,726, respectively, one year and three year service-based restricted stock awards with a weighted-average grant date fair value per unit of $76.88 and $65.31, respectively.

~~SJW GROUP AND SUBSIDIARIES~~

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

~~September 30, 2023~~

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

For the three months ended ~~September 30,~~March 31, 2024 and 2023, ~~no performance-based or market-based restricted stock awards were granted. For the three months ended September 30, 2022,~~ SJW Group granted ~~2,193~~44,433 and 31,345 target units, respectively, of performance-based and market-based restricted stock awards with a weighted-average grant date fair value per unit of ~~$69.70. For the nine months ended September 30, 2023~~$53.69 and ~~2022, SJW Group granted 31,345 and 35,846 target units, respectively, performance-based and market-based restricted stock awards granted with a weighted-average grant date fair value per unit of~~ $80.05, ~~and $70.31,~~ respectively. Based upon actual attainment relative to the target performance metric, the number of shares issuable can range between 0% to 150% of the target number of shares for performance-based restricted stock awards, or between 0% and 200% of the target number of shares for market-based restricted stock awards.

As of ~~September 30, 2023,~~March 31, 2024, the total unrecognized compensation costs related to restricted and deferred restricted stock plans was ~~$5,734.~~$8,149. This cost is expected to be recognized over a weighted-average period of ~~1.81~~2.17 years.

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

March 31, 2024

(in thousands, except share and per share data)

Employee Stock Purchase Plan

SJW Group’s recorded expenses for its ESPP were ~~$81~~$97 and ~~$277~~$90 for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2024 and 2023, ~~respectively, and $94 and $276 for the three and nine months ended September 30, 2022,~~ respectively. The total unrecognized compensation costs related to the semi-annual offering period that ends ~~January~~July 31, 2024, for the employee stock purchase plan is approximately ~~$130.~~$141. This cost is expected to be recognized during the ~~fourth quarter~~second and third quarters of ~~2023.~~2024.

Note 9.Segment and Non-Tariffed Business Reporting

SJW Group is a holding company with four subsidiaries: (i) SJWC, (ii) SJWTX Holdings, Inc., a holding company for TWC, its consolidated variable interest entity, Acequia Water Supply Corporation, TWOS and TWR, (iii) SJW Land Company, and ~~its consolidated variable interest entity, 444 West Santa Clara Street, L.P., which operated commercial building rentals, and~~ (iv) SJWNE LLC, a holding company for CTWS and its subsidiaries, CWC, MWC, NEWUS and Chester Realty, Inc. The first segment provides water utility and utility-related services to its customers through SJW Group’s subsidiaries, SJWC, ~~SJWTX Holdings, Inc.~~CWC, TWC, MWC, and ~~SJWNE LLC~~NEWUS together referred to as “Water Utility Services.” Water Utility Services’ activities are water utility operations with both regulated and non-tariffed businesses. The second segment consists of property management and investment activity conducted by SJW Land Company and Chester Realty, Inc., referred to as “Real Estate Services.”

SJW Group’s reportable segments have been determined based on information used by the chief operating decision maker. SJW Group’s chief operating decision maker includes the Chairman, President and Chief Executive Officer, and his executive staff. The ~~first segment provides water utility~~executive staff reviews financial information presented on a consolidated basis that is accompanied by disaggregated information about operating revenue, net income and utility-related services to its customers through SJW Group’s subsidiaries, SJWC, CWC, TWC, MWC, and NEWUS together referred to as “Water Utility Services”. The second segment consists of property management and investment activity conductedtotal assets, by ~~SJW Land Company and Chester Realty, Inc., referred to as “Real Estate Services.”~~subsidiary.

The following tables set forth information relating to SJW Group’s reportable segments and distribution of regulated and non-tariffed business activities within the reportable segments. Certain allocated assets, such as goodwill, revenue and expenses have been included in the reportable segment amounts. Other business activity of SJW Group not included in the reportable segments is included in the “All Other” category.


	For Three Months Ended March 31, 2024
	Water Utility Services			Real Estate Services	All Other (1)	SJW Group
	Regulated		Non-tariffed	Non-tariffed	Non-tariffed	Regulated	Non-tariffed	Total
Operating revenue	$	144,915	2,692	1,775	—	144,915	4,467	149,382
Operating expense	117,781		1,610	726	1,352	117,781	3,688	121,469
Operating income (loss)	27,134		1,082	1,049	(1,352)	27,134	779	27,913
Net income (loss)	14,600		732	783	(4,416)	14,600	(2,901)	11,699
Depreciation and amortization	28,061		85	1	223	28,061	309	28,370
Interest on long-term debt and other interest expense	11,542		221	—	5,821	11,542	6,042	17,584
Provision (benefit) for income taxes	3,696		318	266	(2,049)	3,696	(1,465)	2,231

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

~~September 30, 2023~~March 31, 2024

(in thousands, except share and per share data)

For Three Months Ended September 30, 2023
Water Utility Services Real Estate Services All Other (1) SJW Group
Regulated Non-tariffed Non-tariffed Non-tariffed Regulated Non-tariffed Total
Operating revenue $ 199,537 3,876 1,430 — 199,537 5,306 204,843
Operating expense 144,102 2,337 691 1,107 144,102 4,135 148,237
Operating income (loss) 55,435 1,539 739 (1,107) 55,435 1,171 56,606
Net income (loss) 37,545 2,198 563 (4,084) 37,545 (1,323) 36,222
Depreciation and amortization 26,147 84 1 223 26,147 308 26,455
Interest on long-term debt and other interest expense 10,839 112 — 5,793 10,839 5,905 16,744
Provision (benefit) for income taxes 5,933 428 196 (1,996) 5,933 (1,372) 4,561
Assets 3,706,359 43,872 44,560 48,637 3,706,359 137,069 3,843,428
For Three Months Ended September 30, 2022
Water Utility Services Real Estate Services All Other (1) SJW Group
Regulated Non-tariffed Non-tariffed Non-tariffed Regulated Non-tariffed Total
Operating revenue 171,044 3,463 1,474 — 171,044 4,937 175,981
Operating expense 134,739 2,092 975 573 134,739 3,640 138,379
Operating income (loss) 36,305 1,371 499 (573) 36,305 1,297 37,602
Net income (loss) 29,176 (10) 367 (4,499) 29,176 (4,142) 25,034
Depreciation and amortization 24,919 84 302 224 24,919 610 25,529
Interest on long-term debt and other interest expense 9,111 — — 5,079 9,111 5,079 14,190
Provision (benefit) for income taxes 103 392 128 (400) 103 120 223
Assets 3,498,396 5,302 43,017 57,989 3,498,396 106,308 3,604,704


	For Three Months Ended March 31, 2023
	Water Utility Services			Real Estate Services	All Other (1)	SJW Group
	Regulated		Non-tariffed	Non-tariffed	Non-tariffed	Regulated	Non-tariffed	Total
Operating revenue	$	133,272	2,577	1,447	—	133,272	4,024	137,296
Operating expense	108,867		1,414	899	938	108,867	3,251	112,118
Operating income (loss)	24,405		1,163	548	(938)	24,405	773	25,178
Net income (loss)	13,222		618	425	(2,735)	13,222	(1,692)	11,530
Depreciation and amortization	25,686		84	303	223	25,686	610	26,296
Interest on long-term debt and other interest expense	10,547		—	—	5,225	10,547	5,225	15,772
Provision (benefit) for income taxes	2,724		323	142	(2,111)	2,724	(1,646)	1,078

For Nine Months Ended September 30, 2023
Water Utility Services Real Estate Services All Other (1) SJW Group
Regulated Non-tariffed Non-tariffed Non-tariffed Regulated Non-tariffed Total
Operating revenue 485,334 9,398 4,293 — 485,334 13,691 499,025
Operating expense 375,647 5,540 2,251 2,645 375,647 10,436 386,083
Operating income (loss) 109,687 3,858 2,042 (2,645) 109,687 3,255 112,942
Net income (loss) 71,277 3,412 1,532 (10,183) 71,277 (5,239) 66,038
Depreciation and amortization 77,644 253 305 670 77,644 1,228 78,872
Interest on long-term debt and other interest expense 32,232 112 — 16,569 32,232 16,681 48,913
Provision (benefit) for income taxes 8,759 1,071 581 (6,284) 8,759 (4,632) 4,127
Assets 3,706,359 43,872 44,560 48,637 3,706,359 137,069 3,843,428

~~SJW GROUP AND SUBSIDIARIES~~

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

~~September 30, 2023~~

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

For Nine Months Ended September 30, 2022
Water Utility Services Real Estate Services All Other (1) SJW Group
Regulated Non-tariffed Non-tariffed Non-tariffed Regulated Non-tariffed Total
Operating revenue 435,823 9,305 4,196 — 435,823 13,501 449,324
Operating expense 355,620 7,868 2,799 2,444 355,620 13,111 368,731
Operating income (loss) 80,203 1,437 1,397 (2,444) 80,203 390 80,593
Net income (loss) 51,656 441 998 (12,766) 51,656 (11,327) 40,329
Depreciation and amortization 73,888 2,821 903 730 73,888 4,454 78,342
Interest on long-term debt and other interest expense 27,676 — — 14,484 27,676 14,484 42,160
Provision (benefit) for income taxes 4,844 398 341 (1,925) 4,844 (1,186) 3,658
Assets 3,498,396 5,302 43,017 57,989 3,498,396 106,308 3,604,704

____________________

(1) The “All Other” category for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2024 and 2023, ~~and 2022,~~ includes the accounts of SJW Group, SJWNE LLC, CTWS and SJWTX Holdings, Inc. on a stand-alone basis.

SJW Group’s assets by segment are as follows:


	March 31, 2024		December 31, 2023
Water Utility Services:
Regulated	$	4,228,675	4,199,172
Non-tariffed	42,437		43,532
Total water utility services	4,271,112		4,242,704
Real Estate Services	43,506		44,222
All Other	52,894		58,141
Total assets	$	4,367,512	4,345,067

Regulated	$	4,228,675	4,199,172
Non-tariffed	138,837		145,895
Total assets	$	4,367,512	4,345,067

Note 10.Acquisitions

OnIn January ~~13,~~ 2023, TWC reached an agreement to acquire KT Water Development Ltd. (“KT Water Development”) and SJWTX Holdings, Inc. reached an agreement to acquire KT Water Resources, L.P. (“KT Water ~~Resources”~~Resources”). The agreement between SJWTX Holdings, Inc. and KT Water Resources ~~LP,~~ was assigned to TWR prior to closing. KT Water Development iswas an investor-owned water utility providing water to approximately 1,725 people through over 570 service connections in the Rockwall Ranch subdivision in southern Comal County, Texas. KT Water Resources ~~L.P. is~~was a wholesale groundwater resource supplier to KT Water Development formed to develop wholesale water supplies for the fast-growing utilities of Comal County, Texas. TheThe Public Utility Commission of Texas (“PUCT”) approved the proposed KT Water Development acquisition on July 24, 2023. The acquisition of KT Water Resources did not require PUCT approval. Both transactions closed on August 14, 2023. Further information regarding each of the acquisitions is set forth below.

KT Water Development

The purchase price of KT Water Development was $7,338, all of which was cash, and was determined in accordance with a fair market value process defined under the Texas Water Code. The transaction was accounted for as a business combination in accordance with Accounting Standards Codification (“ASC”) Topic 805—“Business Combinations.” ~~Based on the preliminary purchase price allocation, the~~The transaction

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

March 31, 2024

(in thousands, except share and per share data)

consideration was allocated to utility plant. The final purchase price allocation ~~will be~~was completed ~~within one year~~during the quarter ended March 31, 2024, with no change from the ~~acquisition date.~~preliminary purchase price allocation. Transaction costs were not material. The results of KT Water Development are included in SJW Group’s consolidated statements of comprehensive income since the acquisition date and were not material. Pro forma financial information has not been presented because the acquisition was not material to SJW Group’s consolidated financial statements.

KT Water Resources

The total purchase price of KT Water Resources of $39,891 and consisted of a $24,491 up-front cash payment and an obligation for a post-closing production payment with an acquisition date fair value of $15,400. Considering transaction costs of $170, the total cost of the acquisition was $40,061. The KT Water Resources acquisition was accounted for as an asset acquisition in accordance with ASC Topic 805.

The total cost was allocated as follows based on the fair values of the assets acquired: $28,386 to other intangible asset, $11,684 to nonutility property, and $9 to other current liabilities. The other intangible asset represents indefinite life water rights that will not be amortized, but instead will be tested for impairment annually, or more frequently if events or changes in circumstances indicate that it is more likely than not that the asset is impaired.rights. The nonutility property consists of wells, land, easements, and construction work in progress.

The post-closing production payment represents an obligation to pay a total amount of $29,000 to the seller over a period up to 29 years. The repayment schedule is based on the quantity of groundwater produced from the acquired wells, subject to certain provisions in the purchase agreement. The fair value of the post-closing payment as of the acquisition date was determined by discounting forecasted repayments based on management’s estimates of future groundwater production. The difference

~~SJW GROUP AND SUBSIDIARIES~~

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

~~September 30, 2023~~

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

between the fair value of $15,400 and the gross obligation of $29,000 iswas recorded as a debt discount and is being amortized as interest expense using the effective interest method over the life of the obligation. The post-closing production payment obligation is classified as long-term debt in the condensed consolidated balance sheets.

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

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

The information in this Item 2 should be read in conjunction with the financial information and the notes thereto included in Item 1 of this Form 10-Q and the condensed consolidated financial statements and notes thereto and the related “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in SJW Group’s Annual Report on Form 10-K for the year ended December 31, ~~2022.~~2023.

This report contains forward-looking statements within the meaning of the federal securities laws relating to future events and future results of SJW Group and its subsidiaries that are based on current expectations, estimates, forecasts, and projections about SJW Group and its subsidiaries and the industries in which SJW Group and its subsidiaries operate and the beliefs and assumptions of the management of SJW Group. Actual results may differ materially from those currently anticipated and expressed in such forward-looking statements as a result of a number of factors. For more information about such forward-looking statements, including some of the factors that may affect our actual results, please see our disclosures under “Forward-Looking Statements,” and elsewhere in this Form 10-Q, including Part II, Item 1A under “Risk Factors” as well as the disclosures under Part I, Item 1A in SJW Group’s Annual Report on Form 10-K for the year ended December 31, ~~2022~~2023 under “Risk Factors.”

General:

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

SJWC is a public utility in the business of providing water service to approximately ~~233,000~~232,000 connections that serve a population of approximately one million people in an area comprising approximately ~~139~~140 square miles in the metropolitan San Jose, California area. The principal business of SJWC consists of the production, purchase, storage, purification, distribution, wholesale, and retail sale of water. SJWC provides water service to customers in portions of the cities of San Jose and Cupertino and in the cities of Campbell, Monte Sereno, and Saratoga and the Town of Los Gatos, and adjacent unincorporated territories, all in the County of Santa Clara in the State of California. SJWC distributes water to customers in accordance with accepted water utility methods which include pumping from storage and gravity feed from high elevation reservoirs. SJWC also provides non-tariffed services under agreements with municipalities and other utilities. These non-tariffed services include water system operations, maintenance agreements, and antenna site leases.

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

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

SJWNE LLC is the holding company for Connecticut Water Service, Inc. (“CTWS”). CTWS, headquartered in Connecticut, serves as a holding company for water utility companies providing water service to approximately 142,000 connections that serve a population of approximately 462,000 people in 81 municipalities throughout Connecticut and Maine and more than 3,000 wastewater connections in Southbury, Connecticut. The subsidiaries held by CTWS that provide utility water services are The Connecticut Water Company (“CWC”) and The Maine Water Company (“MWC”). The remaining two CTWS subsidiaries are Chester Realty, Inc., a real estate company in Connecticut, and New England Water Utility Services, Inc., which provides contract water and sewer operations and other water related services.

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

~~In the third quarter of 2023, the corporate reorganization of our water services organization in Texas was completed.~~ SJWTX Holdings, Inc. is the holding company for SJWTX, Inc., doing business as The Texas Water Company (“TWC”), Texas Water Operation Services LLC (“TWOS”) and Texas Water Resources, LLC (“TWR”). TWC is a public utility in the business of providing water service to approximately 28,000 connections that serve approximately 85,000 people and approximately ~~900~~1,000 wastewater connections. TWC’s service area comprises more than 271 square miles in Bandera, Blanco, Comal, Hays,

Kendall, Medina and Travis Counties in the growing region between San Antonio and Austin, Texas. Comal, Kendall and Hays counties are three of the top five growth counties in the United States. TWC also holds a 25% equity interest

in Acequia Water Supply Corporation (“Acequia”). Acequia has been determined to be a variable interest entity within the scope of Accounting Standards Codification Topic 810 with TWC as the primary beneficiary. As a result, Acequia has been consolidated with TWC. TWOS was created for non-tariffed service operations and ~~Texas Water Resources, LLC (“TWR”)~~TWR was formed to hold wholesale water supply assets.

SJW Land Company and Chester Realty, Inc. own undeveloped land and operate commercial buildings in Tennessee, California and Connecticut. SJW Land Company and Chester Realty, Inc. owned the following real properties during the ~~nine~~three months ended ~~September 30, 2023:~~March 31, 2024:


					% for Nine months ended September 30, 2023 of Real Estate Services								% for Three months ended March 31, 2024 of Real Estate Services
Description	Description	Location	Acreage	Square Footage	Revenue		Expense		Description	Location	Acreage	Square Footage		Revenue			Expense
Warehouse building	Warehouse building	Knoxville, Tennessee	30	361,500	53	%	46	%	Warehouse building	Knoxville, Tennessee	30	361,500		61	%		52	%
Commercial building	Commercial building	Knoxville, Tennessee	15	135,000	46	%	54	%	Commercial building	Knoxville, Tennessee	15	135,000		38	%		47	%
Undeveloped land and parking lot	Undeveloped land and parking lot	Knoxville, Tennessee	10	N/A	N/A		N/A		Undeveloped land and parking lot	Knoxville, Tennessee	10					N/A
Undeveloped land	Undeveloped land	San Jose, California	101	N/A	N/A		N/A		Undeveloped land	San Jose, California	101					N/A
Commercial building	Commercial building	Clinton, CT	22	9,000	1	%	—	%	Commercial building	Clinton, CT	22	9,000		1	%		1	%
Commercial building	Commercial building	Guilford, CT	1	1,300	—	%	—	%	Commercial building	Guilford, CT	1	1,300		—	%		—	%

Business Strategy for Water Utility Services:

SJW Group focuses its business initiatives in three strategic areas:

(1)~~Regional~~Investing in regional regulated water utility operations to support the health, safety and quality of life of our customers;

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

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

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

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

Real Estate Services:

SJW Group’s real estate investment activity is conducted through SJW Land Company and Chester Realty, Inc. ~~As noted above,~~ SJW Land Company owns undeveloped land in California and Tennessee and owns and operates commercial buildings in Tennessee. Chester Realty, Inc. owns and operates land and commercial buildings in Connecticut. SJW Land Company and Chester Realty, Inc. manage their acquired income producing and other properties until such time a determination is made to reinvest proceeds from the sale of such properties.

2018

Critical Accounting Policies:

The discussion and analysis of our financial condition and results of operations is based on the accounting policies used and disclosed in our ~~2022~~2023 consolidated financial statements and accompanying notes that were prepared in accordance with accounting principles generally accepted in the United States of America and included as part of our annual report on Form 10-K for the year ended December 31, ~~2022,~~2023, that was filed with the Securities and Exchange Commission on February ~~24, 2023.~~23, 2024.

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

March 31, 2024.

New Accounting Pronouncements:

See Note 1 of “Notes to Unaudited Condensed Consolidated Financial Statements” for a discussion of new accounting pronouncements.

Results of Operations:

Water sales are seasonal in nature and influenced by weather conditions. The timing of precipitation and climatic conditions can cause seasonal water consumption by customers to vary significantly. Due to the seasonal nature of the water business, the operating results for interim periods are not indicative of the operating results for a 12-month period. Revenue is generally higher in the warm, dry summer months when water usage and sales are greater, and lower in the winter months when cooler temperatures and increased ~~rainfall~~precipitation curtail water usage and sales.

Overview

SJW Group’s consolidated net income for the three months ended ~~September 30, 2023~~March 31, 2024 was ~~$36,222,~~$11,699, an increase of ~~$11,188,~~$169, or approximately ~~45%~~1%, from ~~$25,034~~$11,530 for the same period in ~~2022.~~2023. The increase in net income was primarily driven by rate increases in California and Maine, ~~and~~increases in the ~~delay~~infrastructure recovery mechanism in ~~SJWC's 2022 General Rate Case~~Connecticut, and an increase from higher customer usage driven primarily by weather conditions and the end of California mandatory water conservation ~~requirements,~~requirements. These factors were offset by higher water production expenses, ~~increase in income tax expense, less earnings from regulatory mechanisms and higher debt interest expenses. SJW Group’s consolidated net income for the nine months ended September 30, 2023 was~~$66,038, an increase of $25,709, or approximately 64%, from $40,329 for the same period in 2022. The increase in net income was primarily driven by rate increases in California and Maine, and the delay in SJWC's 2022 General Rate Case, a decrease in income taxes due to the partial release of an uncertain tax position reserve, and a decrease inincreased depreciation and amortization ~~primarily due to a one-time impact related to amortization on certain Cupertino concession assets in 2022 net of increases in depreciation related to~~for new utility plant ~~additions, offset by~~placed in service, and higher ~~water production expenses, higher debt~~ interest ~~expenses,~~expense and ~~a one-time gain on sale of nonutility properties of $5,532 in 2022.~~compensation costs.

Operating Revenue

Operating Revenue by Segment
Three months ended September 30, Nine months ended September 30,
2023 2022 2023 2022
Water Utility Services $ 203,413 174,507 $ 494,732 445,128
Real Estate Services 1,430 1,474 4,293 4,196
Total operating revenue $ 204,843 175,981 $ 499,025 449,324


	Operating Revenue by Segment
	Three months ended March 31,
	2024		2023
Water Utility Services	$	147,607	135,849
Real Estate Services	1,775		1,447
Total operating revenue	$	149,382	137,296

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

Three months ended
September 30,
2023 vs. 2022 Nine months ended
September 30,
2023 vs. 2022
Increase/(decrease) Increase/(decrease)
Water Utility Services:
Consumption changes (including unbilled utility revenue) $ 8,307 5 % $ (7,338) (2) %
Increase in customers 1,075 1 % 2,978 1 %
Rate increases 22,624 12 % 54,728 12 %
Balancing and memorandum accounts:
Monterey Water Revenue Adjustment Mechanism (1,138) (1) % 448 — %
Water Conservation Memorandum Account (“WCMA”) (3,970) (2) % (2,569) — %
Other 210 — % 754 — %
Other regulatory mechanisms 1,731 1 % 586 — %
Other 67 — % 17 — %
Real Estate Services (44) — % 97 — %
Total change in operating revenue $ 28,862 16 % $ 49,701 11 %


	Three months ended March 31, 2024 vs. 2023
	Increase/(decrease)
Water Utility Services:
Consumption changes	$	1,797	1	%
Increase in customers	791		1	%
Rate increases	9,960		5	%






Regulatory mechanisms	(790)		—	%
Real Estate Services	328		—	%
Total change in operating revenue	$	12,086	7	%

Operating Expense




								Operating Expense by Segment

		Operating Expense by Segment
		Three months ended September 30,			Nine months ended September 30,
		2023		2022	2023		2022
Water Utility Services	Water Utility Services	$	146,439	136,831	$	381,187	363,488
Water Utility Services
Water Utility Services
Real Estate Services
Real Estate Services
Real Estate Services	Real Estate Services	691		975	2,251		2,799
All Other	All Other	1,107		573	2,645		2,444
All Other
All Other
Total operating expense	Total operating expense	$	148,237	138,379	$	386,083	368,731
Total operating expense
Total operating expense

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


		Three months ended September 30, 2023 vs. 2022				Nine months ended September 30, 2023 vs. 2022
		Increase/(decrease)				Increase/(decrease)


Increase/(decrease)
Increase/(decrease)
Water production expenses:
Water production expenses:
Water production expenses:	Water production expenses:
Change in surface water use	Change in surface water use	$	(1,143)	(1)	%	$	(11,187)	(3)	%
Change in surface water use
Change in surface water use
Change in usage and new customers
Change in usage and new customers
Change in usage and new customers	Change in usage and new customers	1,386		1	%	(9,899)		(3)	%
Purchased water and groundwater extraction charge, energy price change and other production expenses, net	Purchased water and groundwater extraction charge, energy price change and other production expenses, net	10,044		7	%	22,866		6	%
Purchased water and groundwater extraction charge, energy price change and other production expenses, net
Purchased water and groundwater extraction charge, energy price change and other production expenses, net
Balancing and memorandum accounts cost recovery
Balancing and memorandum accounts cost recovery
Balancing and memorandum accounts cost recovery	Balancing and memorandum accounts cost recovery	(1,249)		(1)	%	10,113		3	%
Total water production expenses	Total water production expenses	9,038		6	%	11,893		3	%
Total water production expenses
Total water production expenses
Administrative and general	Administrative and general	530		—	%	2,250		—	%
Balancing and memorandum account cost recovery		(551)		—	%	(1,865)		—	%
Administrative and general
Administrative and general
Maintenance
Maintenance
Maintenance	Maintenance	(608)		—	%	(1,838)		—	%
Property taxes and other non-income taxes	Property taxes and other non-income taxes	441		—	%	850		—	%
Property taxes and other non-income taxes
Property taxes and other non-income taxes
Depreciation and amortization	Depreciation and amortization	926		1	%	530		—	%
Gain on sale of nonutility properties		82		—	%	5,532		2	%
Depreciation and amortization
Depreciation and amortization
Total change in operating expense
Total change in operating expense
Total change in operating expense	Total change in operating expense	$	9,858	7	%	$	17,352	5	%

Sources of Water Supply

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

subject to a groundwater extraction charge paid to Valley Water. Surface supply, which during a normal rainfall year satisfies about 6% to 8% of SJWC’s annual water supply needs, provides approximately 1% of its water supply in a dry year and approximately 14% in a wet year. In dry years, the decrease in availability of water from surface run-off and diversion and the corresponding increase in purchased and pumped water increases production expenses substantially. The opposite is also true where water production expenses decrease in wet years. In both instances, the impacts of surface water, purchased water, groundwater charges and purchased power are ~~now~~ tracked in SJWC’s Full Cost Balancing Account authorized in the Decision No. 22-10-005 (“2022 GRC ~~Decision.~~Decision”).

AsThroughout the three months ended March 31, 2024, water conditions improved across the State of September 30, 2023, Santa Clara County’s drought classification remained at “None.” The classification has remained the same since the first quarter of 2023, when it changed from “Abnormally Dry” due to winter storms.California. As a result, ~~this year Valley~~the California Department of Water ~~received 100% allocations of water from~~Resources announced an increase in the State Water Project ~~(“SWP”)~~allocation from 15% to 30% of contract amount for 2024 and the U.S Bureau of ~~Reclamation’s~~Reclamation announced an increase in the Central Valley Project ~~(“CVP”)~~allocation from 65% to 75%. ~~In prior year period, SWP allocation was 5% of contracted amounts and the CVP allocation was reduced to the Public Health and Safety limit due to an exceptionally dry period beginning in 2022.~~ On ~~October~~April 1, ~~2023,~~2024, Valley Water’s 10 reservoirs were ~~29%~~37% of capacity, or ~~76%~~99% of restricted capacity, with ~~15.4~~20.2 billion gallons of water in storage. Valley Water’s largest reservoir, Anderson, remained drained for a dam seismic retrofit project. Valley Water also reported that the managed groundwater recharge from January to ~~June~~March in the Santa Clara Plain was ~~170%~~146% of the five-year average. The groundwater level in the Santa Clara Plain is approximately 23three feet higher than ~~September 2022.~~March 2023. According to Valley Water, the projected total groundwater storage at the end of ~~2023~~2024 is expected to be in the Normal Stage of the Water Shortage Contingency Plan.

As of ~~September 30, 2023,~~March 31, 2024, SJWC’s Lake Elsman was ~~77.4%~~100.8% of capacity with ~~1.55~~2.0 billion gallons of water, approximately ~~272.0%~~160.4% of the five-year seasonal average. In addition, the rainfall at SJWC’s Lake Elsman was measured at ~~0.15~~46.31 inches for the period from July 1, 2023 through ~~September 30, 2023,~~March 31, 2024, which is ~~40.5%~~106.7% of the five-year average. SJWC’s Montevina Water Treatment Plant treated ~~3.4~~1.3 billion gallons of water through the ~~third~~first quarter, which is ~~190.2%~~154.6% of the five-year average. SJWC’s Saratoga Water Treatment Plant ~~treated 0.1 billion gallons of water through the third quarter, which is 78% of the five-year average. The Saratoga Water Treatment Plant was taken out of service and will remain~~remains offline until the ~~next rain season.~~updated operations plan is granted approval by the California Division of

Drinking Water. SJWC believes that its various sources of water supply will be sufficient to meet customer demand through the remainder of ~~2023.~~

On April 11, 2023, Valley Water rescinded its water shortage emergency and 15% mandatory conservation target. Valley Water also established a 15% voluntary call for conservation and retained certain watering and water waste rules in recognition of precipitation volatility and reduced local storage. On the same day, SJWC ended its Mandatory Conservation Plan, which included drought allocations and surcharges, and lowered its drought response from Stage 3 to Stage 1. On October 2, 2023, SJWC’s request to continue its WCMA and Water Conservation Expense Memorandum Account (“WCEMA”) under the voluntary call for conservation was approved effective April 20, 2023. SJWC continues to work with Valley Water to promote conservation, educate customers on responsible water use practices, and collaborate on long-range water supply planning.2024.

CWC’s water sources vary among the individual systems, but overall, approximately 80% of the total dependable yield comes from surface water supplies and 20% from wells. In addition, CWC has water supply agreements to supplement its water supply with the South Central Connecticut Regional Water Authority and The Metropolitan District that expire in 2058 and 2053, respectively.

TWC’s water supply consists of groundwater from wells and purchased treated and untreated raw water from local water agencies. TWC has long-term agreements with the Guadalupe-Blanco River Authority (“GBRA”), which expire in 2037, 2040, 2044 and 2050. The agreements, which are take-or-pay contracts, provide TWC with an aggregate of 7,650 acre-feet of water per year from Canyon Lake at prices that may be adjusted periodically by GBRA. TWC also has raw water supply agreements with the Lower Colorado River Authority and West Travis Public Utility Agency expiring in 2059 and 2046, respectively, to provide for 350 acre-feet of water per year from Lake Austin and the Colorado River, respectively, at prices that may be adjusted periodically by the agencies. Forty active production wells located in a Comal Trinity Groundwater Conservation District, a regulated portion of the Trinity aquifer, are charged a groundwater pump tax based upon usage.

In August 2023, ~~TWOS~~SJWTX Holdings Inc.’s unregulated subsidiary, TWR acquired eight wells and the water rights of KT Water Resources LLC. These wells have been projected to yield an additional 6,000 acre-feet per year or more.

~~In July 2023,~~ TWC ~~implemented its Drought Management Plan as approved by~~staff is currently working on acquiring easements and routing of the ~~PUCT as a result of persistent drought conditions, decreasing~~waterline and infrastructure needed to get this water ~~levels in Canyon Lake~~into our Triple Peak water system to serve existing customers and ~~groundwater wells, and water production levels operating at near-capacity level.~~planned new developments.

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

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


		Three months ended September 30,			Increase/ (decrease)		% of Total Change				Nine months ended September 30,				Increase/ (decrease)		% of Total Change
		2023		2022					2023			2022


2024
2024
		(billion gallons)
		(billion gallons)
		(billion gallons)
Purchased water
Purchased water
Purchased water	Purchased water	6.7	7.1	7.1		(0.4)			(3)	%		15.4		16.1		(0.7)			(2)	%
Groundwater	Groundwater	4.8	2.9	4.9	(0.1)		(1)	%			10.0		13.8		(3.8)		(10)	%
Groundwater
Groundwater
Surface water
Surface water
Surface water	Surface water	3.1	4.9	2.9	0.2		1	%			10.0		8.2		1.8		5	%
Reclaimed water	Reclaimed water	0.4	0.3	0.3	0.1		1	%			0.6		0.7		(0.1)		—	%
		15.0	15.2	15.2	(0.2)		(2)	%			36.0		38.8		(2.8)		(7)	%
Reclaimed water
Reclaimed water
		9.0
		9.0
		9.0

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

SJWC’s unaccounted-for water on a 12-month-to-date basis for ~~September 30,~~March 31, 2024 and 2023 ~~and 2022~~ approximated 7.9% and ~~8.6%~~7.5%, respectively, as a percentage of total production. The unaccounted-for water estimate is based on the results of past experience and the impact of flows through the system, partially offset by SJWC’s main replacements and lost water reduction programs.

CTWS’s unaccounted-for water on a 12-month-to-date basis for ~~September 30,~~March 31, 2024 and 2023 approximated 13.4% and ~~2022 approximated 13.0% and 14.2% for each of the respective periods,~~13.9%, respectively, as a percentage of total production. The unaccounted-for water estimate is based on the results of past experience and the impact of flows through CTWS’s systems, unadjusted for any required system flushing, partially offset by Water Infrastructure Conservation Adjustment and Water Infrastructure Surcharge main replacement programs and lost water reduction initiatives.

Water Production Expenses

The change in water production expenses of ~~$9,038~~$4,775 for the three months ended ~~September 30, 2023,~~March 31, 2024, compared to the same period in ~~2022,~~2023, was primarily attributable to increases in ~~average per unit costs for purchased water, groundwater extraction, and other production expenses and increase in~~ customer usage, offset by decreases in SJWC’s regulatory Full Cost Balancing Account and an increase in available surface water for SJWC. Effective July 1, 2022, Valley Water increased the unit price of purchased water by approximately 14% and the groundwater extraction charge by approximately 15%.

~~The change in water production expenses of $11,893 for the nine months ended September 30, 2023, compared to the same period in 2022, was primarily attributable to increases in~~ average per unit costs for purchased water, groundwater extraction, and other production expenses and increases ~~in SJWC’s regulatory Full Cost Balancing Account, offset by an increase in available~~resulting to the surface water ~~for SJWC and a decrease in customer usage.~~mix net of regulatory adjustments. Effective July 1, ~~2022,~~2023, Valley Water increased the unit price of purchased water by approximately 14% and the groundwater extraction charge by approximately 15%.

Other Operating Expenses

Operating expenses, excluding water production expenses, increased ~~$820~~$4,576 for the three months ended ~~September 30, 2023,~~March 31, 2024, compared to the same period in ~~2022.~~2023. The increase was primarily attributable to ~~increases in depreciation related to new utility plant additions and~~ an increase ~~in taxes other than income taxes, offset by a decrease in maintenance expenses due to the timing of contract work and materials expenses.~~

Operating expenses, excluding water production expenses, increased $5,459 for the nine months ended September 30, 2023, compared to the same period in 2022. The increase was primarily attributable to the $5,450 gain on sale of nonutility properties recorded in the prior year, partially offset by decreases in depreciation and amortization ~~due to a $2,400 one-time impact related to amortization on certain Cupertino concession assets net of increases in depreciation related to~~for new utility plant ~~additions. In addition, there were decreases~~placed in ~~maintenance expenses due to the timing of contract work~~service and ~~materials expenses.~~increased compensation costs.

Other (Expense) Income

For the three months ended ~~September 30, 2023,~~March 31, 2024, compared to the same period in ~~2022,~~2023, the change in other (expense) income was primarily due to an increase in interest expense due to ~~an increase in long-term debt balances,~~ higher interest rates and higher average balances on lines of credit borrowings, and an increase in ~~pension non-service cost, offset by the changes in the Rabbi Trust and life insurance policy values.~~

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

cost.

Provision for Income Taxes

For the three ~~and nine~~ months ended ~~September 30, 2023,~~March 31, 2024, compared to the same period in ~~2022,~~2023, income tax expense increased ~~$4,338 and $469, respectively. The increase in income tax expense for the three months ended September 30, 2023 was primarily due to a higher pre-tax income.~~

by $1,153. The effective consolidated income tax rates were ~~11%~~16% and 1%9% for the three months ended ~~September 30,~~March 31, 2024 and 2023, ~~and 2022, respectively, and 6% and 8% for the nine months ended September 30, 2023 and 2022,~~ respectively. The higher income tax expense and effective tax rate for the three months ended ~~September 30, 2023 was~~March 31, 2024 were primarily due to ~~the~~ tax ~~benefit relating to a tax accounting method change~~deficiencies recorded in the ~~third~~first quarter of ~~2022. There was no such benefit recorded in the third quarter of 2023. The lower effective~~2024 for share-based payments and other discrete tax ~~rate for the nine months ended September 30, 2023 was primarily due to higher flow-through tax benefits.~~items.

Regulation and Rates

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

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

California Regulatory Affairs

~~On May 3,~~The CPUC approved the settlement in SJWC’s 2021 General Rate Case application on October 6, 2022 and issued 2022 GRC Decision on October 11, 2022. SJWC received authority for an increase of revenue requirement by $25,074 or 6.03% in 2022, $12,955 or 2.94% in 2023, and $16,102 or 3.56% in 2024. The application included requests to recover $18,174 from balancing and memorandum accounts and authorization for a $350,000 capital budget. Additionally, it further aligned authorized and actual consumption, particularly for business customers, addressed the water supply mix variability, and provided greater revenue recovery in the fixed charge.

SJWC filed ~~Application~~Advice Letter No. ~~21-05-004 requesting authority~~601 on October 13, 2023, to adjust its cost of capital for the period from January 1, 2022 through December 31, 2024. The request seeks a revenue increase of $6,418 or 1.61% in 2022. The application also proposes a rate of return of 8.11%, an increase from the current rate of 7.64%, a decrease in the average cost of debt rate from 6.20% to 5.48%, and a return of equity of 10.30% which is an increase from the current rate of 8.90%. In addition, the request seeks to adjust SJWC’s currently authorized capital structure of approximately 47% debt and 53% equity to approximately 45% debt and 55% equity. Intervenors in this proceeding, namely the Public Advocates Office and Water Rate Advocates for Transparency, Equity, and Sustainability, have suggested a lower return on equity while the latter has also suggested a higher cost of debt and different capital structure as part of their testimonies. On June 29, 2023,inform the CPUC approved Decision No. 23-06-025 in this proceeding. The decision authorizes a rate of return of 7.28% based on a return on equity of 8.80%, a cost of debt of 5.46%, and a capital structure of approximately 45% debt and 55% equity. The CPUC also authorized continuation ofthat the Water Cost of Capital Mechanism (“WCCM”) authorized in ~~the same decision.~~Decision No. 23-06-025 required an update to SJWC’s authorized rate of return effective January 1, 2024. The ~~WCCM provides for~~filing requested an adjustment in SJWC’s return on equity and cost of debt if the average Moody’s Aa utility bond index rate between October 1, 2021 and September 30, 2022 varies by more than 100 basis points when compared to the same period from the prior year. The index rate difference between those periods increased 103 basis points, thereby triggering the WCCM. Accordingly, SJWC filed a Tier 2 Advice Letter No. 598 on June 30, 2023, which was subsequently approved with an effective date of July 31, 2023. On July 31, 2023, SJWC filed a Tier 1 Advice Letter No. 599 to implement new rates. The new rates became effective prospectively on the date of the filing and reflect the WCCM-adjustedadjusted return on equity of ~~9.31%~~10.01%, a cost of debt of ~~5.26%~~5.28%, and ~~an overall~~a resulting authorized rate of return of ~~7.47%~~7.86%. Advice Letter No. 599 was approved with an effective date of July 31, 2023. Between October 1, 2022 and September 30, 2023, the index rate increased approximately 140 basis points, surpassing the required WCCM trigger. On October 13, 2023, SJWC filed Advice Letter No. 601 to trigger the WCCM for 2024. SJWC expects a WCCM-adjusted return on equity of approximately 10.01%, less a 20 basis point reduction due to the reimplementation of the WCMA and WCEMA, to become effective on January 1, 2024.

~~SJWC filed Advice Letter No. 585 on November 10, 2022, to recover $20,554 in the Interim Rates Memorandum Account in accordance with the 2022 GRC Decision. Advice Letter No. 585~~ was approved with an effective date of January 1, ~~2023.~~2024. Separate from the filing, the return on equity was further adjusted by a 20 bps reduction for the reimplementation of the Water Conservation Memorandum Account resulting in an overall rate of return of 7.75%.

SJWC filed Advice Letter No. ~~586~~603 on November ~~18, 2022,~~14, 2023, to ~~increase~~establish a Group Insurance Balancing Account to track the difference between the company’s authorized ~~revenue requirement by $18,418 or 4%~~versus actual costs for ~~the escalation year increase in accordance with the 2022 GRC Decision.~~medical, dental, and opt-out insurance expenses. Advice Letter No. ~~586~~603 was approved with an effective date of January 1, ~~2023.~~2024.

SJWC filed Advice Letter No. ~~590~~605 on April 6, 2023, to recover a $14,196 under-collection in its Monterey Water Revenue Adjustment Mechanism Balancing Account as of March 31, 2023. SJWC proposed that this amount be recovered via a 12-month volume surcharge. Advice Letter No. 590 was approved with an effective date of May 8, 2023.

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

SJWC filed Advice Letter No. 592 on April 20, 2023, to continue its WCMA and WCEMA under Valley Water’s voluntary call for 15% conservation. On October 2, 2023, Advice Letter No. 592 was approved with an effective date of April 20, 2023.

~~SJWC filed Advice Letter No. 596 on May 31,~~November 21, 2023, to increase the authorized revenue requirement by ~~$27,607 to offset~~$21,270 or 4.16% for the ~~increases to purchased potable water charges,~~attrition year increase in accordance with the ~~groundwater extraction fee,~~2022 GRC Decision and ~~purchased recycled water charges from its water wholesalers effective July 1, 2023.~~the adjusted Rate of Return approved in Advice Letter No. ~~596~~601. Advice Letter No. 605 was approved with an effective date of ~~July~~January 1, ~~2023.~~2024.

On December 15, 2023, SJWC, along with three other California water utilities, filed a joint request for one-year deferment on the cost of capital filings which would otherwise be due on May 1, 2024. Postponing the filing a year alleviates administrative processing costs on the utilities as well as the CPUC staff, and provide relief for both CPUC and utility resources already strained by numerous other proceedings. The request is conditioned on leaving the current WCCM in place such that any adjustments will be made to the respective utilities’ cost of capital during the one-year deferment based on the mechanism. The request was approved on February 2, 2024.

On January 2, 2024, SJWC filed General Rate Case Application No. 24-01-001 with the CPUC to increase rates charged for water service by $55,196 or 11.11% in 2025, by $22,041 or 3.99% in 2026, and by $25,809 or 4.49% in 2027. The application proposed a $540,000 three-year capital budget and includes requests to recover $23,462 from balancing and memorandum accounts, further alignment between actual and authorized usage, and a shift to greater revenue collection in the service charge. The application will undergo a year-long review process and new rates, if approved, are expected to be effective January 1, 2025.

Connecticut Regulatory Affairs

On January 26, 2023, CWC filed for a Water Infrastructure Conservation Adjustment (“WICA”) increase of $3,253 in annualized revenues for $27,775 in completed projects. PURA approved CWC’s application on March 22, 2023. On January 25, 2023, CWC filed its 2022 WICA reconciliation with PURA. The reconciliation, approved by PURA on March 29, 2023 and effective for 12 months beginning April 1, 2023, replaced the expiring 2021 reconciliation credit of 0.02% with a credit of 0.16%. The cumulative WICA surcharge as of April 1, 2023 is 6.19%, collecting $6,544 on an annual basis.

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

On July 27, 2023, CWC filed for a WICA increase of $1,259 in annualized revenues for $11,464 in completed projects. PURA approved the application, and effective October 1, 2023, the cumulative WICA surcharge is 7.38%.

On October 3, 2023, CWC filed an application with PURA to adjust customer rates. If PURA approves the request as proposed, annual revenues of CWC will increase by approximately $21,400, or 18.1%, over current authorized revenues and would be effective on or about July 1, 2024. A final decision is scheduled for June 28, 2024.

On November 14, 2023, CWC submitted an application to PURA for the approval to issue unsecured notes in the amount of

$25,000. A decision from PURA approving the application was received on January 10, 2024.

On February 26, 2024, CWC filed its 2023 Water Infrastructure Conservation Adjustment (“WICA”) reconciliation with PURA. The reconciliation, approved by PURA on March 27, 2024 and effective for 12 months beginning April 1, 2024, replaced the expiring 2022 reconciliation credit of 0.16% with a credit of 0.13%. The cumulative WICA surcharge as of April 1, 2024 is 7.41%, collecting $7,835 on an annual basis.

On February 28, 2024, CWC filed its 2023 Water Revenue Adjustment (“WRA”). The mechanism reconciles 2023 revenues as authorized in the CWC’s most recent rate case. The 2023 WRA, as approved by PURA on March 11, 2024 and effective for 12 months beginning on April 1, 2024, imposed a 2.11% sur-credit on customer bills to refund the 2022 revenues over-collection.

Texas Regulatory Affairs

TWC has no current general rate case pending. However, it filed its application to establish a System Improvement Charge (“SIC”) with the PUCT under Docket No. 54430 on December 30, 2022. ~~This filing will allow TWC~~SIC filings are used to ~~add~~include certain utility plant additions made since 2020 to its rate base, thereby increasing revenue and avoiding the immediate need for a general rate case. ~~The~~On March 21, 2024, the PUCT filed the final order approving TWC’s request to implement its SIC. As a result of the final order, the SIC is projected to increase TWC’s water revenue by ~~$1,596~~$1,574 and sewer revenue by ~~$29~~$28 within one year of the ~~approval from the PUCT. On October 17, 2023, the PUCT found the application administratively complete. Once the PUCT files the final order approving the SIC,~~approval. Additionally, TWC ~~will be~~is required to file a general rate case within four years. TWC will incrementally increase its SIC annually until its next rate case. ~~TWC expects to receive the final order during the first quarter of 2024.~~ Notwithstanding the SIC filing, TWC will continue to file its annual adjustments for the Water Pass-through Charges (“WPC”) for Canyon Lake, Deer Creek and Kendall West customers. All water supply cost increases are recoverable when the next annual WPC adjustment for each system is filed.

On April 10, 2023, TWC filed an application with the PUCT to acquire the Elm Ridge water system that serves 21 residential customers. TWC has asked for filed rate doctrine treatment, which allows the acquiring utility’s current rates to be applied at the time of acquisition. On December 12, 2023, the Administrative Law Judge filed Order No. 11, which allowed TWC ~~expects~~ to ~~receive the PUC’s approval to close on~~proceed and the acquisition closed on January 26, 2024. The final order, which transfers the Certificate of Convenience and Necessity (“CCN”) and allows filed rate doctrine, is expected to be approved during the ~~fourth~~second quarter of ~~2023.~~2024.

On May 17, 2023, TWC filed its application with the PUCT for an internal stock transfer. As part of an internal restructure, SJW Group would transfer 100% of the stock held in TWC to SJWTX Holdings, Inc. On September 18, 2023, the PUCT gave its approval for the transaction to proceed. SJW Group completed the transfer on September 18, 2023.

On July 24, 2023, the PUCT approved TWC's application to acquire KT Water Development Ltd. (“KT Water Development”). KT Water Development ~~Ltd.~~ provides service to approximately 570 residential water connections. On August 14, 2023, TWC closed on the acquisition. ~~The PUCT's~~On March 7, 2024, the PUCT filed the final ~~decision that transfers~~order which transferred the CCN to TWC, ~~is expected in~~approved the ~~fourth quarter of 2023, which is when we anticipate approval of our request for~~ fair market value, and allowed TWC to charge its existing rates to the customers of KT Water Development.

On January 5, 2024, TWC filed ~~rate doctrine treatment.~~an application with the PUCT to acquire the 3009 Water Company LLC water system that serves approximately 270 residential connections. TWC requested fair market value and to apply TWC’s existing rates to the customers being acquired. TWC expects to receive approval to close on the acquisition during the third quarter of 2024.

Maine Regulatory Affairs

The rates approved in the Biddeford Saco division by the April 5, 2022 stipulated agreement, which authorized a rate increase of $6,313, or 72.5% went into effect on July 1, 2022. The Saco River Drinking Water Resource Center began supplying the water distribution system on June 16, 2022. As part of the stipulated agreement, MWC agreed to file a final phase of the rate case by April 1, 2023. The third filing was submitted on March 31, 2023. Step 3 of the planned multi-year rate filings for the Saco River Drinking Water Resource Center was filed in accordance with the ~~Commission~~MPUC order on March 31, 2023. The filing requested an increase in revenue requirement of $2,949, or 19.9% and requested that the increase be implemented over two years with a 12% increase effective July 1, 2023 followed by a 9% increase effective July 1, 2024 with a slight decrease in year three to reach the overall 19.9% requested. On August 25, 2023, the ~~Commission~~MPUC issued an order granting a temporary rate increase of $1,495 or 10% while the case and the Company’s full request ~~are~~were litigated. ~~A final decision is expected in~~The company reached a settlement agreement with staff and the ~~fourth quarter~~Office of ~~2023.~~

~~On February 2, 2023, MWC received final decisions from~~the Public Advocate and filed a stipulated settlement agreement with the MPUC on ~~four general rate cases filed~~December 22, 2023. The MPUC approved the stipulation in ~~2022. The rate increases are retroactively~~deliberations on January 5, 2024, with an increase in authorized annual revenue of $2,603, or 17.6%, effective ~~for~~ January 1, ~~2023~~2024. The Biddeford and ~~authorize a $692~~Saco division’s increase in ~~annual revenues. On February 28, 2022, MWC filed requests~~rates is based on an authorized return on equity of 9.5% along with a capital structure of 49% debt and 51% equity. This return on equity and capital structure will be used for ~~general rate increases~~any future Water Infrastructure Surcharge (“WISC”) calculations for all divisions until the MPUC has authorized or approved a different return on equity structure in ~~the Camden-Rockland, Freeport, Millinocket and Oakland Divisions.~~a different proceeding.

On June 30, 2023, MWC filed a ~~Water Infrastructure Surcharge~~WISC for the Camden-Rockland division. The requested surcharge is 2.34% or $158. The ~~Commission is expected to issue a decision regarding~~MPUC issued an order approving the surcharge on March 22, 2024.

Other Regulatory Matters

In April 2024, the U.S. Environmental Protection Agency issued final new national primary drinking water regulations for six PFAS. The regulations impose maximum contaminant levels and monitoring requirements for the nation’s water systems for six PFAS chemicals under the Safe Drinking Water Act. The final regulation requires water systems to comply with PFAS monitoring and reporting requirements by 2027, and to comply with the maximum contaminant levels by 2029. SJW Group

estimates capital expenditures of approximately $230,000 for treatment based on the maximum contaminant levels in ~~November 2023.~~the previously proposed regulation. See discussion below under “Liquidity” for additional information on capital expenditures.

Liquidity:

Cash Flow from Operating Activities

During the ~~nine~~three months ended ~~September 30, 2023,~~March 31, 2024, SJW Group generated cash flows from operations of approximately ~~$159,300,~~$51,200, compared to approximately ~~$129,300~~$50,600 for the same period in ~~2022.~~2023. Cash flow from operations is primarily generated by net income from revenue producing activities, adjusted for non-cash expenses for depreciation and amortization, deferred income taxes, stock-based compensation, allowance for equity funds used during construction, gains or losses on the sale of assets, and changes in working capital items. Cash flow from operations increased by approximately ~~$30,000.~~$600. This increase was the result of a combination of the following factors: (1) ~~general working capital~~an increase in collections from accounts receivable and ~~net income, adjusted for non-cash items,~~accrued unbilled utility revenue of $3,700, and (2) increased tax accruals of $2,400 compared to the prior period, offset by ~~$37,100, (2)~~(3) a decrease of $2,800 attributable to changes in payments of amounts previously invoiced and accrued including accrued production costs, ~~of $5,000, and (3) increased tax accruals of $2,500 compared to the prior period, offset by~~ (4) a decrease of ~~$5,700~~$2,600 attributable to changes in regulatory assets ~~primarily due to~~and liabilities, including the effect of lower surcharge collections on balancing and memorandum accounts, and (5) ~~a decrease in collections~~general working capital and net income, adjusted for non-cash items, decreased by $100.

As of March 31, 2024, Water Utility Services’ write-offs for uncollectible accounts represented less than 1% of its total revenue, which decreased from 2% as of March 31, 2023. Management believes that the collection rate will continue for its accounts ~~receivable and accrued unbilled utility revenue of $4,300, and (6) a decrease of $4,600 in other changes primarily due~~receivables as service disconnections return to ~~prior funds received from~~normal operations. On December 28, 2023, SJWC submitted the application to receive $10,237 through the State of California Water and Wastewater Arrearages Payment Program ~~and the partial release of uncertain tax position reserve.~~

~~As of September 30, 2023, Water Utility Services’ write-offs~~to relieve outstanding payment delinquencies for ~~uncollectible~~customer accounts ~~represented 1% of its total revenue, increased from less~~greater than 1%60-days past due as of ~~September 30,~~December 31, 2022. ~~Management believes that~~We anticipate the ~~collection rate for its accounts receivables will increase as service disconnections gradually return~~funds to ~~normal operations.~~be received in the second quarter of 2024 after the State of California Water and Wastewater Arrearages Payment Program completes the review of this application.

Cash Flow from Investing Activities

During the ~~nine~~three months ended ~~September 30, 2023,~~March 31, 2024, SJW Group used cash flows from investing activities of approximately ~~$241,700,~~$74,300, compared to approximately ~~$181,500~~$55,000 for the same period in ~~2022.~~2023. This increase was primarily driven by additions to utility plant. SJW Group used approximately: (1) ~~$195,900~~$68,900 of cash for company-funded utility capital expenditures and (2) ~~$24,200 for nonutility properties, real estate investments and other intangible asset, (3) $13,600~~$4,600 for developer-funded utility capital expenditures ~~and (4) $7,300 for business acquisitions~~ during the ~~nine~~three months ended ~~September 30, 2023.~~March 31, 2024. For the same period in 2023, SJW Group used approximately: (1) 52,384 of cash for company-funded utility capital expenditures and (2) 2,703 for developer-funded utility capital expenditures.

Water Utility Services’ estimated utility capital expenditures for ~~2023,~~2024, exclusive of capital expenditures financed by customer contributions and advances, are anticipated to be approximately ~~$255,000.~~$332,000. As of ~~September 30, 2023,~~March 31, 2024, approximately ~~$195,900~~$68,900 or ~~77%~~21% of the ~~$255,000~~$332,000 has been invested.

Water Utility Services’ capital expenditures are incurred in connection with normal upgrading and expansion of existing facilities and to comply with environmental regulations. Over the next five years, Water Utility Services expects to incur approximately ~~$1,630,000~~$1,621,000 in capital expenditures, which includes replacement of pipes and mains, maintaining water systems, and installing PFAS treatment. A significant portion of this amount is subject to future respective state regulatory utility commissions’ approval. Capital expenditures have the effect of increasing utility plant rate base on which Water Utility Services earns a return. Water Utility Services actual capital expenditures may vary from their projections due to changes in the expected demand for services, weather patterns, actions by governmental agencies, and general economic conditions. Total additions to utility plant normally exceed company-financed additions as a result of new facilities construction funded with advances from developers and contributions in aid of construction.

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

Cash Flow from Financing Activities

Net cash provided by financing activities for the ~~nine~~three months ended ~~September 30, 2023~~March 31, 2024 increased by approximately ~~$38,000~~$2,500 from the same period in the prior year, primarily as a result of (1) an increase in net borrowings and repayments on our lines of credit of $125,500, offset by (2) a decrease in net borrowings and repayments on long-term debt of ~~$139,700,~~$85,000, and ~~(2) an increase~~(3) a decrease in net proceeds from our common stock equity offerings of $72,200, offset by (3) a decrease in net borrowings and repayments on our lines of credit of $167,300, (4) $3,100 increase in dividends paid to stockholders, and (5) $2,700 decrease in net cash receipts from advances and contributions in aid of construction.$34,000.

2724

Sources of Capital:

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

Short-term Financing Agreements

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

A summary of the line of credit agreements as of ~~September 30, 2023~~March 31, 2024 are as follows:


		Maturity Date		Line Limit		Amounts Outstanding	Unused Portion
	Maturity Date							Maturity Date	Line Limit	Amounts Outstanding	Unused Portion

Syndicated credit agreement:	Syndicated credit agreement:	August 2, 2028
Syndicated credit agreement:
Syndicated credit agreement:
SJW Group
SJW Group
SJW Group	SJW Group			$	50,000	—	50,000
SJWC	SJWC			140,000		42,000	98,000
CTWS	CTWS			90,000		40,000	50,000
TWC	TWC			20,000		—	20,000
Total syndicated credit agreement	Total syndicated credit agreement			300,000		82,000	218,000
CTWS credit agreement	CTWS credit agreement	August 2, 2028		10,000		6,433	3,567
CTWS credit agreement	CTWS credit agreement	May 25, 2025		40,000		40,000	—
				$	350,000	128,433	221,567
			$

For the ~~nine~~three months ended ~~September 30, 2023,~~March 31, 2024, cost of borrowing on the lines of credit averaged ~~6.16%~~6.54% compared to ~~2.79%~~5.74% in the same period in ~~2022.~~2023.

All of SJW Group’s and ~~subsidiaries~~subsidiaries’ lines of credit contain customary representations, warranties and events of default, as well as certain restrictive covenants customary for facilities of this type, including restrictions on indebtedness, liens, acquisitions and investments, restricted payments, asset sales, and fundamental changes. All of the lines of credit also include certain customary financial covenants such as a funded debt to capitalization ratio and a minimum interest coverage ratio. As of ~~September 30, 2023,~~March 31, 2024, SJW Group and its subsidiaries were in compliance with all covenants on their lines of credit.

Long-term Financing Agreements

On ~~July 14, 2022, SJWC~~November 15, 2023, CWC entered into a note purchase agreement with certain affiliates of ~~New York~~American United Life Insurance, ~~Metropolitan~~The State Life Insurance, ~~Northwestern~~ Mutual of Omaha Insurance, and United of Omaha Life Insurance, ~~and John Hancock Life Insurance (collectively the “Purchasers”),~~ pursuant to which the company ~~will sell~~sold an aggregate principal amount of ~~$70,000~~$25,000 of its ~~4.85%~~6.46% Senior Notes, Series P2023 (“Series P2023 Notes”) ~~to the Purchasers.~~. The Series P2023 Notes are unsecured obligations of ~~SJWC~~CWC and are due on ~~February~~January 1, ~~2053.~~2054. Interest is payable semi-annually in arrears on ~~February 1st~~January 15th and ~~August 1st~~July 15th of each year. The ~~note purchase agreement contains customary affirmative and negative covenants for as long as the Series P Notes are outstanding. The Series P Notes are also subject to customary events of default. The~~ closing of the ~~note~~notes purchase agreement occurred on January ~~25, 2023.~~22, 2024.

The debt and credit agreements of SJW Group and its subsidiaries contain various financial and other covenants. Non-compliance with these covenants could result in accelerated due dates and termination of the agreements. In addition, the credit agreements contain customary representations and warranties and are subject to customary events of default, which may result in the outstanding debt becoming immediately due and payable. As of ~~September 30, 2023,~~March 31, 2024, SJW Group and its subsidiaries were in compliance with all covenants in their long-term debt agreements.

Equity Financing Arrangements

On March 1, 2023, SJW Group entered into Amendment No. 1 to the equity distribution agreement (the “Equity Distribution Agreement”), dated November 17, 2021, between SJW Group and J.P. Morgan Securities LLC, Janney Montgomery Scott LLC, RBC Capital Markets, LLC and Wells Fargo Securities, LLC (each a “Sales Agent” and, collectively, the “Sales Agents”), pursuant to which SJW Group increased the aggregate gross sales price of shares of SJW Group’s common stock, $0.001 par value per share, that may be sold under the Equity Distribution Agreement from $100,000 to $240,000. For the three ~~and nine~~ months ended ~~September 30, 2023,~~March 31, 2024, SJW Group issued and sold a total of ~~169,421 and 1,029,924~~126,025 shares of common stock ~~respectively,~~ with a weighted average price of ~~$69.57 and $74.57~~$57.13 per share ~~respectively,~~ and received ~~$11,505 and $75,284~~$7,006 in net proceeds ~~respectively,~~ under the Equity Distribution Agreement. Since the inception of the Equity

Distribution Agreement, SJW Group has issued and sold ~~1,914,775~~2,130,682 shares of common stock with a weighted average

price of ~~$74.05~~$72.60 for a total net proceeds of ~~$138,716~~$151,004 and has ~~$98,209~~$85,309 remaining to issue from the sale of shares as of ~~September 30, 2023~~March 31, 2024 under the Equity Distribution Agreement.

Credit Rating

The condition of the capital and credit markets or the strength of financial institutions could impact SJW Group’s ability to draw on its lines of credit, issue long-term debt, sell its equity or earn interest income. In addition, government policies, the state of the credit markets and other factors could result in increased interest rates, which would increase SJW Group’s cost of capital. While our ability to obtain financing will continue to be a risk, we believe that based on our ~~2023~~2024 and ~~2022~~2023 activities, we will have access to the external funding sources necessary to implement our ~~on-going~~ongoing capital investment programs in the future. SJW Group, CTWS and CWC were put on negative watch on September 19, 2023. Standard & Poor’s noted the change in outlook is due to recent regulatory and legislative developments in Connecticut that are not consistent with Standard & Poor’s view of the regulatory framework for investor owned utilities.

The following table are the current Standard & Poor’s Rating Service assigned company ratings:

Entity

Rating

Outlook

SJW Group

A-

Negative

SJWC

Stable

CTWS

A-

Negative

CWC

A-

Negative

ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

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

ITEM 4. CONTROLS AND PROCEDURES

SJW Group’s management, with the participation of its Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of SJW Group’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, the “Exchange Act”), as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that SJW Group’s disclosure controls and procedures as of the end of the period covered by this report have been designed and are functioning effectively to provide reasonable assurance that the information required to be disclosed by SJW Group in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. SJW Group believes that a control system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the control system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

There has been no change in internal control over financial reporting during the ~~third~~first fiscal quarter of ~~2023~~2024 that has materially affected, or is reasonably likely to materially affect, the internal controls over financial reporting of SJW Group.

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PART II. OTHER INFORMATION

ITEM 1.LEGAL PROCEEDINGS

SJW Group is subject to ordinary routine litigation incidental to its business. In October 2023, The Connecticut Water Company, a subsidiary of SJW Group, was named as a defendant in a class action lawsuit alleging that the water provided by Connecticut Water contained contaminants.Connecticut Water intends to vigorously defend itself in this lawsuit.There are no pending legal proceedings to which SJW Group or any of its subsidiaries is a party, or to which any of its properties is the subject, that are expected to have a material effect on SJW Group’s business, financial position, results of operations or cash flows.

ITEM 1A.RISK FACTORS

In addition to the other information set forth in this report, you should carefully consider the factors discussed in the “Risk Factors” in SJW Group’s annual report on Form 10-K for the year ended December 31, ~~2022~~2023 and our other public filings, which could materially affect our business, financial condition or future results. There ~~has~~have been no material changes from risk factors previously disclosed in “Risk Factors” in SJW Group’s annual report on Form 10-K for the year ended December 31, ~~2022.~~2023.

ITEM 5.OTHER INFORMATION

Quarterly Dividend

On ~~October 25, 2023,~~April 24, 2024, the Board of Directors of SJW Group declared the regular quarterly dividend of ~~$0.38~~$0.40 per share of common stock. The dividend will be paid on ~~December 1, 2023,~~June 3, 2024, to stockholders of record as of the close of business on ~~November~~May 6, ~~2023.~~2024.

Insider Trading Arrangements:

In the quarter ended March 31, 2024, none of our directors or officers (as defined in Rule 16a-1(f) of the Exchange Act) adopted or terminated a plan for the purchase or sale of our securities intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or a non-Rule 10b5-1 trading arrangement for the purchase or sale of our securities, within the meaning of Item 408 of Regulation S-K.

Information Web Sites

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

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ITEM 6.EXHIBITS


Exhibit Number						Description

~~10.1~~						~~Transition and~~ S ~~eparation Agreement and Release, dated July 6, 2023, by Andrew R. Gere and San Jose Water Company. Incorporated by reference to~~ ~~Exhibit 10.1 to~~ ~~Form 8-K filed on July 7,~~ ~~2023.~~

~~10.2~~						F ~~irst Amendment to Credit~~ ~~Agreement, dated August 2, 2023, between SJW Group, San Jose Water Company, SJWTX, Inc., Connecticut Water Service, Inc., JPMorgan Chase Bank, N.A., as administrative agent and a lender, and the other lenders party thereto. Incorporated by reference to~~ ~~Exhibit 10.1~~ to ~~Form 8-K~~ ~~filed on August 2, 2023.~~

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

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

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

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

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

101.SCH						XBRL Taxonomy Extension Schema Document

101.CAL						XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF						XBRL Taxonomy Extension Definition Linkbase Document

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(1)Filed currently herewith.

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SIGNATURES

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

SJW GROUP

~~DATE:~~Date:

~~October 30, 2023~~April 26, 2024

By:

/s/ ANDREW F. WALTERS

Andrew F. Walters

Chief Financial Officer and Treasurer
(Principal financial officer)

3229


	September 30, 2023		December 31, 2022
Regulatory assets:
Income tax temporary differences, net	$	62,745	43,434
Postretirement pensions and other postretirement benefits	30,076		31,493
Business combinations debt premium, net	15,490		17,396
Monterey Water Revenue Adjustment Mechanism (“MWRAM”)	12,162		10,864
Water Conservation Memorandum Account (“WCMA”)	(7,683)		(5,039)
2022 General Rate Case Interim Memorandum Account	9,513		20,650
Cost recovery balancing and memorandum accounts	8,267		16,545
All other balancing and memorandum accounts	4,344		2,749
Water Revenue Adjustment (“WRA”)	(5,428)		(4,488)
Other, net	10,507		9,739
Total regulatory assets, net in Condensed Consolidated Balance Sheets	139,993		143,343
Less: current regulatory assets, net	8,573		16,068
Total regulatory assets, net, less current portion	$	131,420	127,275