SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
(Mark One)
 
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
for the quarterly period ended September 30, 2021March 31, 2022

or
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
for the transition period from                    to                   
 
Commission file number   001-14431 
American States Water Company
(Exact Name of Registrant as Specified in Its Charter)
 
California 95-4676679
(State or Other Jurisdiction of Incorporation or Organization) (IRS Employer Identification No.)
630 E. Foothill BlvdSan DimasCA91773-1212
(Address of Principal Executive Offices)(Zip Code)
(909) 394-3600
(Registrant’s Telephone Number, Including Area Code)
Not Applicable
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
Commission file number   001-12008 

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
Title of each classTrading symbolName of each exchange on which registered
Common sharesAWRNew York Stock Exchange
Golden State Water Company
(Exact Name of Registrant as Specified in Its Charter)
California 95-1243678
(State or Other Jurisdiction of Incorporation or Organization) (IRS Employer Identification No.)
630 E. Foothill BlvdSan DimasCA91773-1212
(Address of Principal Executive Offices)(Zip Code)
(909) 394-3600
(Registrant’s Telephone Number, Including Area Code)
Not Applicable
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
 
Indicate by check mark whether Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.



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

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.¨
 Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)
American States Water Company YesNox
Golden State Water Company YesNox
As of October 29, 2021,April 28, 2022, the number of Common Shares outstanding of American States Water Company was 36,936,25236,955,756 shares. As of October 29, 2021,April 28, 2022, all of the 170 outstanding Common Shares of Golden State Water Company were owned by American States Water Company.
Golden State Water Company meets the conditions set forth in General Instruction (H)(1)(a) and (b) of Form 10-Q and is therefore filing this Form, in part, with the reduced disclosure format for Golden State Water Company.



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

 

 
 
 
 
 
 
 
 
 



Table of Contents
PART I
Item 1. Financial Statements
General
 The basic financial statements included herein have been prepared by Registrant, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission.Commission ("SEC").
 Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, all adjustments consisting of normal recurring items and estimates necessary for a fair statement of results for the interim period have been made.
 It is suggested that these financial statements be read in conjunction with the financial statements and notes thereto in the latest Annual Report on Form 10-K of American States Water Company and its wholly owned subsidiary, Golden State Water Company. 
Filing Format
American States Water Company (“AWR”) is the parent company of Golden State Water Company (“GSWC”), Bear Valley Electric Service, Inc. ("BVESI"), and American States Utility Services, Inc. and its subsidiaries ("ASUS"). On July 1, 2020, GSWC completed the transfer of the electric utility assets and liabilities from its electric division to BVESI, in exchange for common shares of BVESI. GSWC then immediately distributed all of BVESI's common shares to AWR, whereupon BVESI became wholly owned directly by AWR. This reorganization did not result in any substantive changes to AWR's operations and business segments.
This quarterly report on Form 10-Q is a combined report being filed by two separate Registrants: AWR and GSWC. For more information, please see Note 1 of the Notes to Consolidated Financial Statements and the heading entitled "General" in "Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations." References in this report to “Registrant” are to AWR and GSWC collectively, unless otherwise specified. GSWC makes no representations as to the information contained in this report other than with respect to itself.
Forward-Looking Information
This Form 10-Q and the documents incorporated herein contain forward-looking statements intended to qualify for the “safe harbor” from liability established by the Private Securities Litigation Reform Act of 1995.  Forward-looking statements are based on current estimates, expectations and projections about future events and assumptions regarding these events and include statements regarding management’s goals, beliefs, plans or current expectations, taking into account the information currently available to management.  Forward-looking statements are not statements of historical facts.  For example, when we use words such as “anticipate,” “believe,” “plan,” “estimate,” “expect,” “intend,” “may” and other words that convey uncertainty of future events or outcomes, we are making forward-looking statements.  We are not able to predict all the factors that may affect future results.  We caution you that any forward-looking statements made by us are not guarantees of future performance and the actual results may differ materially from those in our forward-looking statements. 
Factors affecting our financial performance are summarized under Forward-Looking Information and under “Risk Factors” in our Form 10-K for the period ended December 31, 20202021 filed with the SEC. Please consider our forward-looking statements in light of these risks as you read this Form 10-Q.  We qualify all of our forward-looking statements by these cautionary statements.

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Table of Contents
AMERICAN STATES WATER COMPANY
CONSOLIDATED BALANCE SHEETS
ASSETS
(Unaudited)

(in thousands)(in thousands)September 30,
2021
December 31, 2020(in thousands)March 31,
2022
December 31, 2021
Property, Plant and EquipmentProperty, Plant and Equipment  Property, Plant and Equipment  
Regulated utility plant, at costRegulated utility plant, at cost$2,144,543 $2,043,791 Regulated utility plant, at cost$2,205,801 $2,183,183 
Non-utility property, at costNon-utility property, at cost37,717 36,578 Non-utility property, at cost37,268 37,085 
TotalTotal2,182,260 2,080,369 Total2,243,069 2,220,268 
Less - Accumulated depreciationLess - Accumulated depreciation(587,714)(568,326)Less - Accumulated depreciation(593,210)(594,264)
Net property, plant and equipmentNet property, plant and equipment1,594,546 1,512,043 Net property, plant and equipment1,649,859 1,626,004 
Other Property and InvestmentsOther Property and Investments  Other Property and Investments  
GoodwillGoodwill1,116 1,116 Goodwill1,116 1,116 
Other property and investmentsOther property and investments37,287 35,318 Other property and investments39,018 40,806 
Total other property and investmentsTotal other property and investments38,403 36,434 Total other property and investments40,134 41,922 
Current AssetsCurrent Assets  Current Assets  
Cash and cash equivalentsCash and cash equivalents7,141 36,737 Cash and cash equivalents10,126 4,963 
Accounts receivable — customers (less allowance for doubtful accounts of $9,074 in 2021 and $5,263 in 2020)33,251 29,162 
Accounts receivable — customers (less allowance for doubtful accounts of $6,615 in 2022 and $3,516 in 2021)Accounts receivable — customers (less allowance for doubtful accounts of $6,615 in 2022 and $3,516 in 2021)23,353 34,416 
Unbilled receivableUnbilled receivable25,517 25,836 Unbilled receivable25,500 27,147 
Receivable from the U.S. government (Note 2)Receivable from the U.S. government (Note 2)29,103 25,182 Receivable from the U.S. government (Note 2)21,834 27,827 
Other accounts receivable (less allowance for doubtful accounts of $53 in 2021 and $53 in 2020)4,895 3,960 
Other accounts receivable (less allowance for doubtful accounts of $53 in 2022 and $53 in 2021)Other accounts receivable (less allowance for doubtful accounts of $53 in 2022 and $53 in 2021)3,043 6,510 
Income taxes receivableIncome taxes receivable124 103 Income taxes receivable45 236 
Materials and supplies, at weighted average costMaterials and supplies, at weighted average cost10,240 8,619 Materials and supplies, at weighted average cost11,943 12,163 
Regulatory assets — currentRegulatory assets — current13,026 13,088 Regulatory assets — current9,054 8,897 
Prepayments and other current assetsPrepayments and other current assets7,049 5,555 Prepayments and other current assets11,223 5,317 
Unrealized gains on purchased power contractsUnrealized gains on purchased power contracts7,875 — Unrealized gains on purchased power contracts7,020 4,441 
Contract assets5,438 8,873 
Contract assets (Note 2)Contract assets (Note 2)7,715 6,135 
Total current assetsTotal current assets143,659 157,115 Total current assets130,856 138,052 
Other AssetsOther Assets  Other Assets  
Unbilled revenue — receivable from U.S. governmentUnbilled revenue — receivable from U.S. government7,700 9,945 Unbilled revenue — receivable from U.S. government8,867 9,671 
Receivable from the U.S. government (Note 2)Receivable from the U.S. government (Note 2)52,751 49,488 Receivable from the U.S. government (Note 2)50,610 51,991 
Contract assets (Note 2)Contract assets (Note 2)5,310 1,384 Contract assets (Note 2)4,856 3,452 
Operating lease right-of-use assetsOperating lease right-of-use assets11,072 11,146 Operating lease right-of-use assets10,008 10,479 
Regulatory assetsRegulatory assets10,662 3,451 Regulatory assets3,289 3,182 
OtherOther10,697 10,597 Other15,453 16,230 
Total other assetsTotal other assets98,192 86,011 Total other assets93,083 95,005 
Total AssetsTotal Assets$1,874,800 $1,791,603 Total Assets$1,913,932 $1,900,983 
 
The accompanying notes are an integral part of these consolidated financial statements



2

Table of Contents
AMERICAN STATES WATER COMPANY
CONSOLIDATED BALANCE SHEETS
CAPITALIZATION AND LIABILITIES
(Unaudited)
(in thousands, except number of shares)(in thousands, except number of shares)September 30,
2021
December 31,
2020
(in thousands, except number of shares)March 31,
2022
December 31,
2021
CapitalizationCapitalization  Capitalization  
Common shares, no par valueCommon shares, no par valueCommon shares, no par value
Authorized: 60,000,000 sharesAuthorized: 60,000,000 sharesAuthorized: 60,000,000 shares
Outstanding: 36,936,252 shares in 2021 and 36,889,103 shares in 2020$258,264 $256,666 
Outstanding: 36,955,633 shares in 2022 and 36,936,285 shares in 2021Outstanding: 36,955,633 shares in 2022 and 36,936,285 shares in 2021$259,284 $258,442 
Earnings reinvested in the businessEarnings reinvested in the business420,671 385,007 Earnings reinvested in the business428,141 427,505 
Total common shareholders’ equityTotal common shareholders’ equity678,935 641,673 Total common shareholders’ equity687,425 685,947 
Long-term debtLong-term debt412,093 440,348 Long-term debt412,150 412,176 
Total capitalizationTotal capitalization1,091,028 1,082,021 Total capitalization1,099,575 1,098,123 
Current LiabilitiesCurrent Liabilities  Current Liabilities  
Notes payable to bankNotes payable to bank28,000 — Notes payable to bank32,000 31,000 
Long-term debt — currentLong-term debt — current377 358 Long-term debt — current382 377 
Accounts payableAccounts payable67,952 63,788 Accounts payable67,490 65,902 
Income taxes payableIncome taxes payable3,569 6,783 Income taxes payable2,879 4,662 
Accrued other taxesAccrued other taxes12,174 11,902 Accrued other taxes14,983 17,137 
Accrued employee expensesAccrued employee expenses15,680 15,122 Accrued employee expenses18,293 16,256 
Accrued interestAccrued interest6,242 4,832 Accrued interest6,320 4,545 
Unrealized losses on purchased power contracts— 1,537 
Contract liabilities (Note 2)Contract liabilities (Note 2)555 1,800 Contract liabilities (Note 2)210 257 
Regulatory liabilitiesRegulatory liabilities3,821 — Regulatory liabilities3,642 1,896 
Operating lease liabilitiesOperating lease liabilities2,079 2,013 Operating lease liabilities1,991 2,044 
OtherOther10,671 10,437 Other11,964 11,498 
Total current liabilitiesTotal current liabilities151,120 118,572 Total current liabilities160,154 155,574 
Other CreditsOther Credits  Other Credits  
Notes payable to bankNotes payable to bank162,000 134,200 Notes payable to bank189,500 174,500 
Advances for constructionAdvances for construction66,505 63,374 Advances for construction66,469 66,727 
Contributions in aid of construction - netContributions in aid of construction - net147,510 140,332 Contributions in aid of construction - net146,186 147,482 
Deferred income taxesDeferred income taxes136,531 131,172 Deferred income taxes142,661 140,290 
Regulatory liabilitiesRegulatory liabilities24,193 32,979 
Unamortized investment tax creditsUnamortized investment tax credits1,170 1,224 Unamortized investment tax credits1,135 1,153 
Accrued pension and other postretirement benefitsAccrued pension and other postretirement benefits93,671 95,639 Accrued pension and other postretirement benefits61,594 61,365 
Operating lease liabilitiesOperating lease liabilities9,433 9,636 Operating lease liabilities8,497 8,920 
OtherOther15,832 15,433 Other13,968 13,870 
Total other creditsTotal other credits632,652 591,010 Total other credits654,203 647,286 
Commitments and Contingencies (Note 9)Commitments and Contingencies (Note 9)00Commitments and Contingencies (Note 9)00
Total Capitalization and LiabilitiesTotal Capitalization and Liabilities$1,874,800 $1,791,603 Total Capitalization and Liabilities$1,913,932 $1,900,983 
 
The accompanying notes are an integral part of these consolidated financial statements
3

Table of Contents
AMERICAN STATES WATER COMPANY
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30,MARCH 31, 2022 AND 2021 AND 2020
(Unaudited)

Three Months Ended September 30,Nine Months Ended September 30, Three Months Ended March 31,
(in thousands, except per share amounts)(in thousands, except per share amounts)2021202020212020(in thousands, except per share amounts)20222021
Operating RevenuesOperating Revenues  Operating Revenues
WaterWater$102,768 $98,701 $269,430 $257,199 Water$73,906 $75,029 
ElectricElectric8,564 8,288 28,211 26,935 Electric11,892 11,539 
Contracted servicesContracted services25,423 26,699 84,588 79,909 Contracted services22,772 30,492 
Total operating revenuesTotal operating revenues136,755 133,688 382,229 364,043 Total operating revenues108,570 117,060 
Operating ExpensesOperating Expenses  Operating Expenses
Water purchasedWater purchased24,093 23,445 60,248 56,291 Water purchased17,848 15,239 
Power purchased for pumpingPower purchased for pumping3,584 3,369 8,590 7,626 Power purchased for pumping2,374 2,145 
Groundwater production assessmentGroundwater production assessment5,185 5,962 14,845 15,140 Groundwater production assessment4,211 4,440 
Power purchased for resalePower purchased for resale2,875 2,117 8,203 7,127 Power purchased for resale5,166 3,198 
Supply cost balancing accountsSupply cost balancing accounts(2,446)(2,639)(7,959)(6,606)Supply cost balancing accounts(6,343)(2,427)
Other operationOther operation9,414 8,128 26,165 24,573 Other operation8,667 8,217 
Administrative and generalAdministrative and general20,255 20,644 62,938 63,992 Administrative and general22,972 22,053 
Depreciation and amortizationDepreciation and amortization9,826 9,348 29,156 27,190 Depreciation and amortization10,114 9,560 
MaintenanceMaintenance2,979 4,246 8,908 12,224 Maintenance3,140 2,662 
Property and other taxesProperty and other taxes6,052 5,693 17,265 16,098 Property and other taxes5,853 5,940 
ASUS constructionASUS construction12,154 13,568 42,910 39,166 ASUS construction10,203 15,704 
Total operating expensesTotal operating expenses93,971 93,881 271,269 262,821 Total operating expenses84,205 86,731 
Operating IncomeOperating Income42,784 39,807 110,960 101,222 Operating Income24,365 30,329 
Other Income and ExpensesOther Income and Expenses  Other Income and Expenses
Interest expenseInterest expense(5,553)(6,161)(17,843)(17,533)Interest expense(5,606)(6,258)
Interest incomeInterest income333 316 1,136 1,364 Interest income283 455 
Other, netOther, net467 1,613 2,998 2,388 Other, net(419)656 
Total other income and expenses, netTotal other income and expenses, net(4,753)(4,232)(13,709)(13,781)Total other income and expenses, net(5,742)(5,147)
Income before income tax expenseIncome before income tax expense38,031 35,575 97,251 87,441 Income before income tax expense18,623 25,182 
Income tax expenseIncome tax expense9,878 9,045 23,254 21,227 Income tax expense4,461 5,914 
Net IncomeNet Income$28,153 $26,530 $73,997 $66,214 Net Income$14,162 $19,268 
Weighted Average Number of Common Shares OutstandingWeighted Average Number of Common Shares Outstanding36,933 36,886 36,916 36,877 Weighted Average Number of Common Shares Outstanding36,944 36,898 
Basic Earnings Per Common ShareBasic Earnings Per Common Share$0.76 $0.72 $2.00 $1.79 Basic Earnings Per Common Share$0.38 $0.52 
Weighted Average Number of Diluted SharesWeighted Average Number of Diluted Shares37,025 37,002 37,004 36,990 Weighted Average Number of Diluted Shares37,019 36,993 
Fully Diluted Earnings Per Common ShareFully Diluted Earnings Per Common Share$0.76 $0.72 $2.00 $1.79 Fully Diluted Earnings Per Common Share$0.38 $0.52 
Dividends Paid Per Common ShareDividends Paid Per Common Share$0.365 $0.335 $1.035 $0.945 Dividends Paid Per Common Share$0.365 $0.335 
 
The accompanying notes are an integral part of these consolidated financial statements

4

AMERICAN STATES WATER COMPANY
CONSOLIDATED STATEMENTS OF CHANGES
IN COMMON SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
(Unaudited)



Nine Months Ended September 30, 2021Three Months Ended March 31, 2022
Common SharesReinvested  Common SharesReinvested 
Number Earnings  Number Earnings 
of in the  of in the 
(in thousands)(in thousands)SharesAmountBusinessTotal(in thousands)SharesAmountBusinessTotal
Balances at December 31, 202036,889 $256,666 $385,007 $641,673 
Balances at December 31, 2021Balances at December 31, 202136,936 $258,442 $427,505 $685,947 
Add:Add:    Add:    
Net incomeNet income19,268 19,268 Net income14,162 14,162 
Exercise of stock options and other issuances of Common SharesExercise of stock options and other issuances of Common Shares24— — Exercise of stock options and other issuances of Common Shares20— — 
Stock-based compensation, net of taxes paid from shares withheld from employees related to net share settlements (Note 4)Stock-based compensation, net of taxes paid from shares withheld from employees related to net share settlements (Note 4)813 813 Stock-based compensation, net of taxes paid from shares withheld from employees related to net share settlements (Note 4)801 801 
Dividend equivalent rights on stock-based awards not paid in cashDividend equivalent rights on stock-based awards not paid in cash49 49 Dividend equivalent rights on stock-based awards not paid in cash41 41 
Deduct:Deduct: Deduct: 
Dividends on Common SharesDividends on Common Shares12,361 12,361 Dividends on Common Shares13,485 13,485 
Dividend equivalent rights on stock-based awards not paid in cashDividend equivalent rights on stock-based awards not paid in cash49 49 Dividend equivalent rights on stock-based awards not paid in cash41 41 
Balances at March 31, 202136,913$257,528 $391,865 $649,393 
Balances at March 31, 2022Balances at March 31, 202236,956$259,284 $428,141 $687,425 
Add:
Net income26,576 26,576 
Exercise of stock options and other issuances of Common Shares19— — 
Stock-based compensation, net of taxes paid from shares withheld from employees related to net share settlements (Note 4)531 531 
Dividend equivalent rights on stock-based awards not paid in cash42 42 
Deduct:
Dividends on Common Shares12,366 12,366 
Dividend equivalent rights on stock-based awards not paid in cash42 42 
Balances at June 30, 202136,932$258,101 $406,033 $664,134 
Add:
Net income28,153 28,153 
Exercise of stock options and other issuances of Common Shares4— — 
Stock-based compensation, net of taxes paid from shares withheld from employees related to net share settlements (Note 4)128 128 
Dividend equivalent rights on stock-based awards not paid in cash35 35 
Deduct:
Dividends on Common Shares13,480 13,480 
Dividend equivalent rights on stock-based awards not paid in cash35 35 
Balances at September 30, 202136,936$258,264 $420,671 $678,935 

The accompanying notes are an integral part of these consolidated financial statements.
5
Three Months Ended March 31, 2021
 Common SharesReinvested 
 Number Earnings 
 of in the 
(in thousands)SharesAmountBusinessTotal
Balances at December 31, 202036,889 $256,666 385,007 $641,673 
Add:    
Net income19,268 19,268 
Exercise of stock options and other issuances of Common Shares24— — 
Stock-based compensation, net of taxes paid from shares withheld from employees related to net share settlements (Note 4)813 813 
Dividend equivalent rights on stock-based awards not paid in cash49 49 
Deduct: 
Dividends on Common Shares12,361 12,361 
Dividend equivalent rights on stock-based awards not paid in cash49 49 
Balances at March 31, 202136,913 $257,528 $391,865 $649,393 

AMERICAN STATES WATER COMPANY
CONSOLIDATED STATEMENTS OF CHANGES
IN COMMON SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020
(Unaudited)
Nine Months Ended September 30, 2020
 Common SharesReinvested 
 Number Earnings 
 of in the 
(in thousands)SharesAmountBusinessTotal
Balances at December 31, 201936,847$255,566 $345,964 $601,530 
Add:    
Net income14,072 14,072 
Exercise of stock options and other issuances of Common Shares3730 30 
Stock-based compensation, net of taxes paid from shares withheld from employees related to net share settlements (Note 4)193 193 
Dividend equivalent rights on stock-based awards not paid in cash52 52 
Deduct: 
Dividends on Common Shares11,242 11,242 
Dividend equivalent rights on stock-based awards not paid in cash52 52 
Balances at March 31, 202036,884 $255,841 $348,742 $604,583 
Add:
Net income25,612 25,612 
Stock-based compensation, net of taxes paid from shares withheld from employees related to net share settlements (Note 4)343 343 
Dividend equivalent rights on stock-based awards not paid in cash39 39 
Deduct:
Dividends on Common Shares11,250 11,250 
Dividend equivalent rights on stock-based awards not paid in cash39 39 
Balances at June 30, 202036,884 $256,223 $363,065 $619,288 
Add:
Net income26,530 26,530 
Exercise of stock options and other issuances of Common Shares5— — 
Stock-based compensation, net of taxes paid from shares withheld from employees related to net share settlements (Note 4)358 358 
Dividend equivalent rights on stock-based awards not paid in cash41 41 
Deduct:
Dividends on Common Shares12,356 12,356 
Dividend equivalent rights on stock-based awards not paid in cash41 41 
Balances at September 30, 202036,889 $256,622 $377,198 $633,820 


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

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Table of Contents
AMERICAN STATES WATER COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINETHREE MONTHS ENDED SEPTEMBER 30,MARCH 31, 2022 AND 2021 AND 2020
(Unaudited)
Nine Months Ended 
 September 30,
Three Months Ended 
 March 31,
(in thousands)(in thousands)20212020(in thousands)20222021
Cash Flows From Operating Activities:Cash Flows From Operating Activities:  Cash Flows From Operating Activities:  
Net incomeNet income$73,997 $66,214 Net income$14,162 $19,268 
Adjustments to reconcile net income to net cash provided by operating activities: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 amortizationDepreciation and amortization29,440 27,441 Depreciation and amortization10,208 9,656 
Provision for doubtful accountsProvision for doubtful accounts873 873 Provision for doubtful accounts258 255 
Deferred income taxes and investment tax creditsDeferred income taxes and investment tax credits1,205 1,767 Deferred income taxes and investment tax credits1,552 (343)
Stock-based compensation expenseStock-based compensation expense2,456 2,474 Stock-based compensation expense1,905 1,930 
Gain on investments held in a trust(2,313)(1,266)
Loss (gain) on investments held in a trustLoss (gain) on investments held in a trust1,653 (628)
Other — netOther — net273 16 Other — net83 104 
Changes in assets and liabilities:Changes in assets and liabilities:  Changes in assets and liabilities:  
Accounts receivable — customersAccounts receivable — customers(8,748)(14,759)Accounts receivable — customers7,627 5,711 
Unbilled receivableUnbilled receivable2,564 (6,406)Unbilled receivable2,451 3,161 
Other accounts receivableOther accounts receivable(935)(337)Other accounts receivable3,467 1,386 
Receivables from the U.S. governmentReceivables from the U.S. government(7,847)(4,834)Receivables from the U.S. government4,589 (1,015)
Materials and suppliesMaterials and supplies(1,621)(2,270)Materials and supplies220 (132)
Prepayments and other assetsPrepayments and other assets(1,139)347 Prepayments and other assets(4,584)(4,026)
Contract assetsContract assets172 5,092 Contract assets(199)(3,763)
Regulatory assetsRegulatory assets(8,319)(367)Regulatory assets(5,713)(3,493)
Accounts payableAccounts payable2,924 2,657 Accounts payable341 (7,267)
Income taxes receivable/payableIncome taxes receivable/payable(3,235)8,480 Income taxes receivable/payable(1,592)(274)
Contract liabilitiesContract liabilities(1,245)(2,497)Contract liabilities(47)(751)
Accrued pension and other postretirement benefitsAccrued pension and other postretirement benefits1,416 132 Accrued pension and other postretirement benefits71 1,796 
Other liabilitiesOther liabilities2,005 5,086 Other liabilities1,574 3,101 
Net cash providedNet cash provided81,923 87,843 Net cash provided38,026 24,676 
Cash Flows From Investing Activities:Cash Flows From Investing Activities:  Cash Flows From Investing Activities:  
Capital expendituresCapital expenditures(106,721)(94,824)Capital expenditures(35,170)(37,093)
Other investing activitiesOther investing activities229 187 Other investing activities121 113 
Net cash usedNet cash used(106,492)(94,637)Net cash used(35,049)(36,980)
Cash Flows From Financing Activities:Cash Flows From Financing Activities:  Cash Flows From Financing Activities:  
Proceeds from stock option exercises— 30 
Receipt of advances for and contributions in aid of constructionReceipt of advances for and contributions in aid of construction10,636 7,576 Receipt of advances for and contributions in aid of construction1,795 2,016 
Refunds on advances for constructionRefunds on advances for construction(3,613)(3,401)Refunds on advances for construction(833)(569)
Retirement or repayments of long-term debtRetirement or repayments of long-term debt(28,356)(335)Retirement or repayments of long-term debt(103)(99)
Proceeds from the issuance of long-term debt, net of issuance costs— 159,422 
Net change in notes payable to banksNet change in notes payable to banks55,800 (113,000)Net change in notes payable to banks16,000 (5,200)
Dividends paidDividends paid(38,207)(34,848)Dividends paid(13,485)(12,361)
Other financing activitiesOther financing activities(1,287)(1,857)Other financing activities(1,188)(1,269)
Net cash (used) provided(5,027)13,587 
Net cash provided (used)Net cash provided (used)2,186 (17,482)
Net change in cash and cash equivalentsNet change in cash and cash equivalents(29,596)6,793 Net change in cash and cash equivalents5,163 (29,786)
Cash and cash equivalents, beginning of periodCash and cash equivalents, beginning of period36,737 1,334 Cash and cash equivalents, beginning of period4,963 36,737 
Cash and cash equivalents, end of periodCash and cash equivalents, end of period$7,141 $8,127 Cash and cash equivalents, end of period$10,126 $6,951 
Non-cash transactions:Non-cash transactions:Non-cash transactions:
Accrued payables for investment in utility plantAccrued payables for investment in utility plant$29,101 $20,407 Accrued payables for investment in utility plant$34,101 $28,700 
Property installed by developers and conveyedProperty installed by developers and conveyed$6,093 $2,861 Property installed by developers and conveyed$130 $2,761 

The accompanying notes are an integral part of these consolidated financial statements
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GOLDEN STATE WATER COMPANY
BALANCE SHEETS
ASSETS
(Unaudited)
(in thousands)(in thousands)September 30,
2021
December 31,
2020
(in thousands)March 31,
2022
December 31,
2021
Utility PlantUtility Plant  Utility Plant  
Utility plant, at costUtility plant, at cost$1,988,948 $1,902,772 Utility plant, at cost$2,043,851 $2,022,417 
Less - Accumulated depreciationLess - Accumulated depreciation(517,208)(502,283)Less - Accumulated depreciation(520,186)(522,672)
Net utility plantNet utility plant1,471,740 1,400,489 Net utility plant1,523,665 1,499,745 
Other Property and InvestmentsOther Property and Investments35,218 33,240 Other Property and Investments36,874 38,659 
Current AssetsCurrent Assets  Current Assets  
Cash and cash equivalentsCash and cash equivalents2,959 35,578 Cash and cash equivalents4,677 525 
Accounts receivable — customers (less allowance for doubtful accounts of $8,493 in 2021 and $4,907 in 2020)31,147 26,920 
Accounts receivable — customers (less allowance for doubtful accounts of $5,992 in 2022 and $3,168 in 2021)Accounts receivable — customers (less allowance for doubtful accounts of $5,992 in 2022 and $3,168 in 2021)21,244 31,870 
Unbilled receivableUnbilled receivable21,126 19,330 Unbilled receivable16,342 20,525 
Other accounts receivable (less allowance for doubtful accounts of $53 in 2021 and $53 in 2020)2,607 3,255 
Intercompany receivable— 1,107 
Other accounts receivable (less allowance for doubtful accounts of $53 in 2022 and $53 in 2021)Other accounts receivable (less allowance for doubtful accounts of $53 in 2022 and $53 in 2021)1,847 3,791 
Materials and supplies, at average costMaterials and supplies, at average cost3,921 3,659 Materials and supplies, at average cost4,587 5,384 
Regulatory assets — currentRegulatory assets — current13,026 11,325 Regulatory assets — current9,054 8,897 
Prepayments and other current assetsPrepayments and other current assets5,088 4,114 Prepayments and other current assets8,039 4,223 
Total current assetsTotal current assets79,874 105,288 Total current assets65,790 75,215 
Other AssetsOther Assets  Other Assets  
Operating lease right-of-use assetsOperating lease right-of-use assets10,965 11,103 Operating lease right-of-use assets9,977 10,439 
Regulatory assets10,615 1,048 
OtherOther9,702 9,614 Other14,415 14,424 
Total other assetsTotal other assets31,282 21,765 Total other assets24,392 24,863 
Total AssetsTotal Assets$1,618,114 $1,560,782 Total Assets$1,650,721 $1,638,482 

The accompanying notes are an integral part of these financial statements
87

Table of Contents
GOLDEN STATE WATER COMPANY
BALANCE SHEETS
CAPITALIZATION AND LIABILITIES
(Unaudited)
(in thousands, except number of shares)(in thousands, except number of shares)September 30,
2021
December 31, 2020(in thousands, except number of shares)March 31,
2022
December 31, 2021
CapitalizationCapitalization  Capitalization  
Common Shares, no par value:Common Shares, no par value:Common Shares, no par value:
Authorized: 1,000 shares Authorized: 1,000 shares Authorized: 1,000 shares
Outstanding: 170 shares in 2021 and 2020$356,403 $354,906 
Outstanding: 170 shares in 2022 and 2021 Outstanding: 170 shares in 2022 and 2021$357,311 $356,530 
Earnings reinvested in the businessEarnings reinvested in the business245,961 228,392 Earnings reinvested in the business254,184 259,156 
Total common shareholder’s equityTotal common shareholder’s equity602,364 583,298 Total common shareholder’s equity611,495 615,686 
Long-term debtLong-term debt412,093 440,348 Long-term debt412,150 412,176 
Total capitalizationTotal capitalization1,014,457 1,023,646 Total capitalization1,023,645 1,027,862 
Current LiabilitiesCurrent Liabilities  Current Liabilities  
Long-term debt — currentLong-term debt — current377 358 Long-term debt — current382 377 
Accounts payableAccounts payable53,178 45,613 Accounts payable55,296 50,627 
Accrued other taxesAccrued other taxes10,432 10,382 Accrued other taxes13,257 14,960 
Accrued employee expensesAccrued employee expenses12,750 12,351 Accrued employee expenses14,446 12,867 
Accrued interestAccrued interest5,964 4,545 Accrued interest5,980 4,210 
Income taxes payable to ParentIncome taxes payable to Parent4,045 4,612 Income taxes payable to Parent1,181 2,972 
Operating lease liabilitiesOperating lease liabilities2,056 1,956 Operating lease liabilities1,977 2,029 
OtherOther9,695 9,403 Other10,893 10,505 
Total current liabilitiesTotal current liabilities98,497 89,220 Total current liabilities103,412 98,547 
Other CreditsOther Credits  Other Credits  
Intercompany payable to ParentIntercompany payable to Parent44,522 — Intercompany payable to Parent67,683 49,280 
Advances for constructionAdvances for construction66,485 63,354 Advances for construction66,449 66,707 
Contributions in aid of construction — netContributions in aid of construction — net145,869 138,691 Contributions in aid of construction — net146,186 145,848 
Deferred income taxesDeferred income taxes129,091 124,581 Deferred income taxes134,349 132,314 
Regulatory liabilitiesRegulatory liabilities24,193 32,979 
Unamortized investment tax creditsUnamortized investment tax credits1,170 1,224 Unamortized investment tax credits1,135 1,153 
Accrued pension and other postretirement benefitsAccrued pension and other postretirement benefits93,494 95,570 Accrued pension and other postretirement benefits61,364 61,170 
Operating lease liabilitiesOperating lease liabilities9,393 9,636 Operating lease liabilities8,479 8,891 
OtherOther15,136 14,860 Other13,826 13,731 
Total other creditsTotal other credits505,160 447,916 Total other credits523,664 512,073 
Commitments and Contingencies (Note 9)Commitments and Contingencies (Note 9)00Commitments and Contingencies (Note 9)00
Total Capitalization and LiabilitiesTotal Capitalization and Liabilities$1,618,114 $1,560,782 Total Capitalization and Liabilities$1,650,721 $1,638,482 
 
The accompanying notes are an integral part of these financial statements
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GOLDEN STATE WATER COMPANY
STATEMENTS OF INCOME
FOR THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30,MARCH 31, 2022 AND 2021 AND 2020
(Unaudited)

Three Months Ended September 30,Nine Months Ended September 30, Three Months Ended March 31,
(in thousands)(in thousands)2021202020212020(in thousands)20222021
Operating RevenuesOperating Revenues  Operating Revenues
WaterWater$102,768 $98,701 $269,430 $257,199 Water$73,906 $75,029 
Electric (Note 11)— — — 18,647 
Total operating revenuesTotal operating revenues102,768 98,701 269,430 275,846 Total operating revenues73,906 75,029 
Operating Expenses (Note 11)  
Operating ExpensesOperating Expenses
Water purchasedWater purchased24,093 23,445 60,248 56,291 Water purchased17,848 15,239 
Power purchased for pumpingPower purchased for pumping3,584 3,369 8,590 7,626 Power purchased for pumping2,374 2,145 
Groundwater production assessmentGroundwater production assessment5,185 5,962 14,845 15,140 Groundwater production assessment4,211 4,440 
Power purchased for resale— — — 5,010 
Supply cost balancing accountsSupply cost balancing accounts(2,114)(3,019)(8,445)(6,986)Supply cost balancing accounts(5,067)(2,920)
Other operationOther operation7,287 6,185 19,476 19,185 Other operation6,354 5,813 
Administrative and generalAdministrative and general13,677 13,610 41,973 46,181 Administrative and general15,596 14,435 
Depreciation and amortizationDepreciation and amortization8,272 7,835 24,547 24,073 Depreciation and amortization8,545 8,062 
MaintenanceMaintenance2,140 3,219 6,236 9,613 Maintenance2,156 1,740 
Property and other taxesProperty and other taxes5,185 4,946 14,665 14,297 Property and other taxes4,890 5,016 
Total operating expensesTotal operating expenses67,309 65,552 182,135 190,430 Total operating expenses56,907 53,970 
Operating Income (Note 11)35,459 33,149 87,295 85,416 
Operating IncomeOperating Income16,999 21,059 
Other Income and ExpensesOther Income and Expenses  Other Income and Expenses
Interest expenseInterest expense(5,184)(5,911)(16,625)(16,865)Interest expense(5,236)(5,798)
Interest incomeInterest income86 105 352 604 Interest income91 87 
Other, netOther, net429 1,483 2,684 2,329 Other, net(598)651 
Total other income and expenses, netTotal other income and expenses, net(4,669)(4,323)(13,589)(13,932)Total other income and expenses, net(5,743)(5,060)
Income before income tax expenseIncome before income tax expense30,790 28,826 73,706 71,484 Income before income tax expense11,256 15,999 
Income tax expenseIncome tax expense7,993 7,683 17,718 18,220 Income tax expense2,689 3,768 
Net Income (Note 11)$22,797 $21,143 $55,988 $53,264 
Net IncomeNet Income$8,567 $12,231 
 
The accompanying notes are an integral part of these consolidated financial statements
109

GOLDEN STATE WATER COMPANY
STATEMENTS OF CHANGES
IN COMMON SHAREHOLDER'S EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
(Unaudited)
Three Months Ended March 31, 2022
Common SharesReinvested 
Number Earnings 
of in the 
(in thousands, except number of shares)(in thousands, except number of shares)SharesAmountBusinessTotal
Balances at December 31, 2021Balances at December 31, 2021170$356,530 $259,156 $615,686 
Add:Add:    
Net incomeNet income8,567 8,567 
Stock-based compensation, net of taxes paid from shares withheld from employees related to net share settlements (Note 4)Stock-based compensation, net of taxes paid from shares withheld from employees related to net share settlements (Note 4)742 742 
Dividend equivalent rights on stock-based awards not paid in cashDividend equivalent rights on stock-based awards not paid in cash39 39 
Deduct:Deduct: 
Dividends on Common SharesDividends on Common Shares13,500 13,500 
Dividend equivalent rights on stock-based awards not paid in cashDividend equivalent rights on stock-based awards not paid in cash39 39 
Balances at March 31, 2022Balances at March 31, 2022170 $357,311 $254,184 $611,495 
Nine Months Ended September 30, 2021Three Months Ended March 31, 2021
Common SharesReinvested Common SharesReinvested
Number Earnings NumberEarnings
of in the ofin the
(in thousands, except number of shares)(in thousands, except number of shares)SharesAmountBusinessTotal(in thousands, except number of shares)SharesAmountBusinessTotal
Balances at December 31, 2020Balances at December 31, 2020170$354,906 $228,392 $583,298 Balances at December 31, 2020170$354,906 $228,392 $583,298 
Add:Add:    Add:
Net incomeNet income12,231 12,231 Net income12,231 12,231 
Stock-based compensation, net of taxes paid from shares withheld from employees related to net share settlements (Note 4)Stock-based compensation, net of taxes paid from shares withheld from employees related to net share settlements (Note 4)782 782 Stock-based compensation, net of taxes paid from shares withheld from employees related to net share settlements (Note 4)782 782 
Dividend equivalent rights on stock-based awards not paid in cashDividend equivalent rights on stock-based awards not paid in cash45 45 Dividend equivalent rights on stock-based awards not paid in cash45 45 
Deduct:Deduct: Deduct:
Dividends on Common SharesDividends on Common Shares12,400 12,400 Dividends on Common Shares12,400 12,400 
Dividend equivalent rights on stock-based awards not paid in cashDividend equivalent rights on stock-based awards not paid in cash45 45 Dividend equivalent rights on stock-based awards not paid in cash45 45 
Balances at March 31, 2021Balances at March 31, 2021170 $355,733 $228,178 $583,911 Balances at March 31, 2021170 $355,733 $228,178 $583,911 
Add:
Net income20,960 20,960 
Stock-based compensation, net of taxes paid from shares withheld from employees related to net share settlements (Note 4)479 479 
Dividend equivalent rights on stock-based awards not paid in cash39 39 
Deduct:
Dividends on Common Shares12,400 12,400 
Dividend equivalent rights on stock-based awards not paid in cash39 39 
Balances at June 30, 2021170 $356,251 $236,699 $592,950 
Add:
Net income22,797 22,797 
Stock-based compensation, net of taxes paid from shares withheld from employees related to net share settlements (Note 4)117 117 
Dividend equivalent rights on stock-based awards not paid in cash35 35 
Deduct:
Dividends on Common Shares13,500 13,500 
Dividend equivalent rights on stock-based awards not paid in cash35 35 
Balances at September 30, 2021170 $356,403 $245,961 $602,364 



The accompanying notes are an integral part of these financial statements
11

GOLDEN STATE WATER COMPANY
STATEMENTS OF CHANGES
IN COMMON SHAREHOLDER'S EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020
(Unaudited)

Nine Months Ended September 30, 2020
 Common SharesReinvested 
 Number Earnings 
 of in the 
(in thousands, except number of shares)SharesAmountBusinessTotal
Balances at December 31, 2019165$293,754 $257,434 $551,188 
Add:    
Net income11,202 11,202 
Stock-based compensation, net of taxes paid from shares withheld from employees related to net share settlements (Note 4)254 254 
Dividend equivalent rights on stock-based awards not paid in cash46 46 
Deduct: 
Dividends on Common Shares11,250 11,250 
Dividend equivalent rights on stock-based awards not paid in cash46 46 
Balances at March 31, 2020165 $294,054 $257,340 $551,394 
Add:
Net income20,919 20,919 
Stock-based compensation, net of taxes paid from shares withheld from employees related to net share settlements (Note 4)296296 
Dividend equivalent rights on stock-based awards not paid in cash36 36
Deduct:
Dividends on Common Shares11,250 11,250 
Dividend equivalent rights on stock-based awards not paid in cash36 36 
Balances at June 30, 2020165 $294,386 $266,973 $561,359 
Add:
Net income21,143 21,143 
Stock-based compensation, net of taxes paid from shares withheld from employees related to net share settlements (Note 4)447447 
Dividend equivalent rights on stock-based awards not paid in cash40 40
Deduct:
Distribution of BVESI common shares to AWR parent (Note 11)71,344 71,344 
Dividend equivalent rights on stock-based awards not paid in cash40 40 
Balances at September 30, 2020165 $294,873 $216,732 $511,605 

The accompanying notes are an integral part of these financial statements
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Table of Contents
GOLDEN STATE WATER COMPANY
STATEMENTS OF CASH FLOWS
FOR THE NINETHREE MONTHS ENDED SEPTEMBER 30,MARCH 31, 2022 AND 2021 AND 2020
(Unaudited)
Nine Months Ended 
 September 30,
Three Months Ended 
 March 31,
(in thousands)(in thousands)20212020(in thousands)20222021
Cash Flows From Operating Activities:Cash Flows From Operating Activities:  Cash Flows From Operating Activities:  
Net incomeNet income$55,988 $53,264 Net income$8,567 $12,231 
Adjustments to reconcile net income to net cash provided by operating activities: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 amortizationDepreciation and amortization24,741 24,293 Depreciation and amortization8,610 8,126 
Provision for doubtful accountsProvision for doubtful accounts789 855 Provision for doubtful accounts222 221 
Deferred income taxes and investment tax creditsDeferred income taxes and investment tax credits578 1,357 Deferred income taxes and investment tax credits1,305 (505)
Stock-based compensation expenseStock-based compensation expense2,249 2,375 Stock-based compensation expense1,751 1,790 
Gain on investments held in a trust(2,313)(1,266)
Loss (gain) on investments held in a trustLoss (gain) on investments held in a trust1,653 (628)
Other — netOther — net248 296 Other — net84 83 
Changes in assets and liabilities:Changes in assets and liabilities:  Changes in assets and liabilities:  
Accounts receivable — customersAccounts receivable — customers(8,555)(14,330)Accounts receivable — customers7,499 6,033 
Unbilled receivableUnbilled receivable(1,796)(3,828)Unbilled receivable4,183 1,525 
Other accounts receivableOther accounts receivable648 (239)Other accounts receivable1,944 1,463 
Materials and suppliesMaterials and supplies(262)(2,168)Materials and supplies797 (267)
Prepayments and other assetsPrepayments and other assets(469)144 Prepayments and other assets(3,268)(1,956)
Regulatory assetsRegulatory assets(7,316)582 Regulatory assets(5,135)(3,165)
Accounts payableAccounts payable5,799 3,690 Accounts payable2,886 (5,674)
Intercompany receivable/payableIntercompany receivable/payable694 (1,730)Intercompany receivable/payable428 
Income taxes receivable/payable from/to ParentIncome taxes receivable/payable from/to Parent(567)7,282 Income taxes receivable/payable from/to Parent(1,791)(391)
Accrued pension and other postretirement benefitsAccrued pension and other postretirement benefits1,308 132 Accrued pension and other postretirement benefits36 1,760 
Other liabilitiesOther liabilities1,563 4,384 Other liabilities1,494 2,145 
Net cash providedNet cash provided73,327 75,093 Net cash provided31,265 22,799 
Cash Flows From Investing Activities:Cash Flows From Investing Activities:  Cash Flows From Investing Activities:  
Capital expendituresCapital expenditures(90,299)(87,665)Capital expenditures(31,465)(31,824)
Note receivable from AWR parentNote receivable from AWR parent(23,000)— Note receivable from AWR parent— (23,000)
Receipt of payment of note receivable from AWR parentReceipt of payment of note receivable from AWR parent23,000 — Receipt of payment of note receivable from AWR parent— 11,000 
Other investing activitiesOther investing activities181 136 Other investing activities117 109 
Net cash usedNet cash used(90,118)(87,529)Net cash used(31,348)(43,715)
Cash Flows From Financing Activities:Cash Flows From Financing Activities:  Cash Flows From Financing Activities:  
Receipt of advances for and contributions in aid of constructionReceipt of advances for and contributions in aid of construction10,604 7,576 Receipt of advances for and contributions in aid of construction1,759 2,013 
Refunds on advances for constructionRefunds on advances for construction(3,613)(3,401)Refunds on advances for construction(833)(569)
Retirement or repayments of long-term debtRetirement or repayments of long-term debt(28,356)(335)Retirement or repayments of long-term debt(103)(99)
Proceeds from the issuance of long-term debt, net of issuance costs— 159,422 
Net change in intercompany borrowingsNet change in intercompany borrowings45,000 (123,000)Net change in intercompany borrowings18,000 — 
Dividends paidDividends paid(38,300)(22,500)Dividends paid(13,500)(12,400)
Other financing activitiesOther financing activities(1,163)(1,654)Other financing activities(1,088)(1,155)
Net cash (used) provided(15,828)16,108 
Net cash provided (used)Net cash provided (used)4,235 (12,210)
Net change in cash and cash equivalentsNet change in cash and cash equivalents(32,619)3,672 Net change in cash and cash equivalents4,152 (33,126)
Cash and cash equivalents, beginning of periodCash and cash equivalents, beginning of period35,578 401 Cash and cash equivalents, beginning of period525 35,578 
Cash and cash equivalents, end of periodCash and cash equivalents, end of period$2,959 $4,073 Cash and cash equivalents, end of period$4,677 $2,452 
Non-cash transactions:Non-cash transactions:Non-cash transactions:
Accrued payables for investment in utility plantAccrued payables for investment in utility plant$27,399 $18,656 Accrued payables for investment in utility plant$32,439 $25,529 
Property installed by developers and conveyedProperty installed by developers and conveyed$6,093 $2,861 Property installed by developers and conveyed$130 $2,761 
Transfer of electric segment net assets (net of cash) for BVESI common shares (Note 11)$— $71,324 
Distribution of BVESI common shares to AWR parent (Note 11)$— $71,344 

The accompanying notes are an integral part of these financial statements
1311

Table of Contents
AMERICAN STATES WATER COMPANY AND SUBSIDIARIES
AND
GOLDEN STATE WATER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)





Note 1 — Summary of Significant Accounting Policies
 
Nature of Operations: American States Water Company (“AWR”) is the parent company of Golden State Water Company (“GSWC”), Bear Valley Electric Service, Inc. ("BVESI"), and American States Utility Services, Inc. (“ASUS”) (and its wholly owned subsidiaries: Fort Bliss Water Services Company (“FBWS”), Terrapin Utility Services, Inc. (“TUS”), Old Dominion Utility Services, Inc. (“ODUS”), Palmetto State Utility Services, Inc. (“PSUS”), Old North Utility Services, Inc. (“ONUS”), Emerald Coast Utility Services, Inc. ("ECUS"), and Fort Riley Utility Services, Inc. ("FRUS")).  The subsidiaries of ASUS are collectively referred to as the “Military Utility Privatization Subsidiaries”. On July 1, 2020, GSWC completed the transfer of the electric utility assets and liabilities from its electric division to BVESI, a separate legal entity and wholly owned subsidiary of AWR (Note 11). This reorganization did not result in any substantive changes to AWR's operations and business segments. AWR, through its wholly owned subsidiaries, serves over 1000000 people in 9 states.
 GSWC and BVESI are both California public utilities. GSWC is engaged in the purchase, production, distribution and sale of water throughout California serving approximately 262,500262,900 customer connections. BVESI distributes electricity in several San Bernardino County mountain communities in California serving approximately 24,60024,700 customer connections. The California Public Utilities Commission (“CPUC”) regulates GSWC’s and BVESI's businesses in matters including properties, rates, services, facilities, and transactions between GSWC, BVESI, and their affiliates.
ASUS, through its wholly owned subsidiaries, operates, maintains and performs construction activities (including renewal and replacement capital work) on water and/or wastewater systems at various U.S. military bases pursuant to initial 50-year firm fixed-price contracts. These contracts are subject to annual economic price adjustments and modifications for changes in circumstances, changes in laws and regulations, and additions to the contract value for new construction of facilities at the military bases.
There is no direct regulatory oversight by the CPUC over AWR or the operations, rates or services provided by ASUS or any of its wholly owned subsidiaries.
Basis of Presentation: The consolidated financial statements and notes thereto are presented in a combined report filed by 2 separate Registrants: AWR and GSWC. References in this report to “Registrant” are to AWR and GSWC, collectively, unless otherwise specified. AWR owns all of the outstanding common shares of GSWC, BVESI and ASUS. ASUS owns all of the outstanding common stock of the Military Utility Privatization Subsidiaries. The consolidated financial statements of AWR include the accounts of AWR and its subsidiaries. These financial statements are prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP"). Intercompany transactions and balances have been eliminated in the AWR consolidated financial statements.
The consolidated financial statements included herein have been prepared by Registrant, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).  The December 31, 20202021 condensed consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by GAAP. The preparation of the consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. In the opinion of management, all adjustments consisting of normal, recurring items, and estimates necessary for a fair statement of the results for the interim periods have been made. It is suggested that these consolidated financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in the Form 10-K for the year ended December 31, 20202021 filed with the SEC.
Related Party Transactions and Financing Activities: GSWC, BVESI and ASUS provide and/or receive various support services to and from their parent, AWR, and among themselves. GSWC has allocated certain corporate office administrative and general costs to its affiliates, BVESI and ASUS, using allocation factors approved by the CPUC. GSWC allocated corporate office administrative and general costs to the electric segmentBVESI of approximately $653,000$794,000 and $643,000$799,000 during the three months ended September 30,March 31, 2022 and 2021, and 2020, respectively and $2.1 million and $2.2 million during the nine months ended September 30, 2021 and 2020, respectively. GSWC allocated corporate office administrative and general costs to ASUS of approximately $1.2$1.6 million and $1.5 million during each of the three months ended September 30,March 31, 2022 and 2021, and 2020, and $4.0 million and $3.8 million during the nine months ended September 30, 2021 and 2020, respectively.

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AWR borrows under a $200.0 million credit facility and provides funds to GSWC and ASUS in support of their operations.  On April 22, 2022, the credit facility was amended to increase the borrowing capacity from $200.0 million to $280.0 million.  The amendment also changed the benchmark interest rate from the London Interbank Offered Rate ("LIBOR") to the Secured Overnight Financing Rate ("SOFR"). This credit agreement expires in May 2023. Registrant does not believe the change in benchmark rates will have a material impact on its financing costs. The interest rate charged to GSWC and ASUS is sufficient to cover AWR’s interest expense under the credit facility. As of September 30, 2021,March 31, 2022, there was $162.0$189.5 million outstanding under this facility. Registrant expects to issue long-term debt through GSWC prior to May 2023, and use the debt proceeds to pay off borrowings under this facility.
BVESI has a separate $35 million revolving credit facility, which was amended in December 2021 to support its operationsreduce the interest rate and capital expenditures. BVESI's credit facility expires infees charged, as well as to extend the maturity date by a year to July 2023.1, 2024.As of March 31, 2022, there was $32.0 million outstanding under this facility. Under the terms of the credit agreement, BVESI has the option to request an increase in the facility ofby an additional $15 million, which is subject to approval by the financial institution. As of September 30, 2021, there was $28.0 million outstandinglender approval.Interest rates under this facility.facility are generally based on LIBOR.Under the terms of the December 2021 amendment, upon discontinuation of a benchmark rate such as LIBOR, the lender may replace LIBOR with a benchmark rate replacement such as SOFR.Registrant does not believe the change from LIBOR to a new benchmark rate will have a material impact on its financing costs.Registrant does not have any other borrowings or debt indexed to LIBOR.
GSWC’s intercompany borrowing agreement with AWR and BVESI’s revolving credit facility are considered short-term debt arrangements by the CPUC. Both GSWC and BVESI have been authorized by the CPUC to borrow under these arrangements for a term of up to 24 months. Borrowings under these arrangements are, therefore, required to be fully paid off within a 24-month period. GSWC’s next pay-off period for its intercompany borrowings from AWR ends in May 2023, and BVESI’s pay-off period for its credit facility ends in July 2022. Accordingly, as of September 30, 2021,March 31, 2022, the $28.0$32.0 million outstanding under BVESI's credit facility has been classified as a current liability in AWR's Consolidated Balance Sheet.
On May 24, 2021, GSWC redeemed early its 9.56%April 28, 2022, BVESI completed the issuance of $35 million in unsecured private placement notes in the amountconsisting of $28.0$17.5 million which pursuantat a coupon rate of 4.548% due April 28, 2032, and $17.5 million at a coupon rate of 4.949% due April 28, 2037. The covenant requirements under these notes are similar to the note agreement included a redemption premium of 3.0% on par value, or $840,000. GSWC recovers redemption premiums in its embedded cost of debt as filed in cost of capital proceedings where the cost savings from redeeming higher interest rate debt are passed on to customers. Accordingly, the redemption premium has been deferred as a regulatory asset. GSWC funded the redemption by borrowing from AWR parent. AWR, in turn, funded from its revolving credit facility.
In October 2020, AWR issued an interest bearing promissory note to GSWC, which expires in May 2023. Under the terms of BVESI's revolving credit facility. BVESI used the note, AWR may borrow amounts up to $30 million for working capital purposes. AWR agreesproceeds to pay any unpaid principaldown amounts outstanding under this note, plus accrued interest. The borrowing and repayment activity of this note is reflected on GSWC's statements of cash flows under investing activities. There were no amounts outstanding under this note as of September 30, 2021.its credit facility, thus complying with the CPUC's 24-month rule.
COVID-19 Impact: GSWC, BVESI and ASUS have continued their operations throughout the COVID-19 pandemic given that their water, wastewater and electric utility services are deemed essential. AWR's responses take into account orders issued by the CPUC, andThe Company continues to monitor the guidance provided by federal, state, and local health authorities and other government officials for the COVID-19 pandemic. Some of the actions taken by GSWC and BVESI continueofficials. Due to include suspending service disconnections for nonpayment pursuant to CPUC and state orders, and telecommuting by employees. The suspension of water- service disconnections at GSWC was implementedfalling transmission rates in response to an executive order from the governor of California. On July 15, 2021, the CPUC issued a final decision in the second phase of the Low-Income Affordability Rulemaking which, among other things, extended the moratorium on water-service disconnections due to non-payment of past-due amounts billed to residential customers until the earlier of February 1, 2022 or pursuant to further CPUC guidance on the matter. On June 24, 2021, the CPUC issued a final decision to extend the moratorium on electric customer service disconnections until September 30, 2021. Under the terms of CPUC-adopted payment plans, actual electric service disconnections for non-payment will occur no earlier than December 1, 2021.
The pandemic has caused volatility on financial markets resulting in fluctuations in the fair value of plan assets in GSWC's pensionCalifornia and other retirement plans. Furthermore, as discussed above, GSWC's and BVESI's responsevariables, employees have begun returning to the pandemic required the suspension of service disconnections for nonpayment, which has significantly increased the amount of delinquent customer accounts receivable during the COVID-19 pandemic. Due to the expected future credit losses on utility customer bills, GSWC and BVESI have increased their allowance for doubtful accounts for past due customer receivables. However, thecompany offices.
The CPUC has authorized GSWC and BVESI to track incremental costs, including bad debt expense, in excess of what is included in their respective revenue requirements incurred as a result of the pandemic in COVID-19-related memorandum accounts, such as a Catastrophic Event Memorandum Account ("CEMA"), which is to be filed with the CPUC for future recovery. As of March 31, 2022, GSWC and BVESI have recorded a combined totalhad approximately $4.5 million and $576,000, respectively, in regulatory asset accounts related to bad debt expense in excess of approximately $8.5 million in these accounts as regulatory assets, as it is believed such amounts are probabletheir revenue requirements, the purchase of recovery.personal protective equipment, additional incurred printing costs, and other incremental COVID-19-related costs. CEMA and other emergency-type memorandum accounts are well-established cost recovery mechanisms authorized as a result of a state/federal declared emergency, and are therefore recognized as regulatory assets for future recovery. As a result, the amounts recorded in the COVID-19-related memorandum accounts have not impacted GSWC's or BVESI's earnings. Thus far, the COVID-19 pandemic has not had a material impact on ASUS's current operations.
GSWC and BVESI continue to experience delinquent customer accounts receivable due to the lingering effects of the COVID-19 pandemic, resulting in both GSWC and BVESI increasing their allowances for doubtful accounts during the three months ended March 31, 2022. However, the CPUC's moratoriums on service disconnections for nonpayment for water and electric customers have ended, and service disconnections due to nonpayment for commercial customers have resumed. In accordance with Senate Bill 998 guidelines, service disconnections due to nonpayment for residential customers are set to resume in May 2022. Furthermore, in January 2022, GSWC received $9.5 million in COVID relief funds through the California Water and Wastewater Arrearage Payment Program to provide assistance to customers for their water debt accrued during the COVID-19 pandemic by remitting federal funds that the state received from the American Rescue Plan Act of 2021 to the utility on behalf of eligible customers. GSWC applied these funds to its delinquent customers' eligible balances. In February 2022, BVESI received $321,000 from the state of California for similar customer relief funding for unpaid electric customer bills incurred during the pandemic.
The CPUC requires that amounts tracked in GSWC's and BVESI's COVID-19 memorandum accounts for unpaid customer bills be first offset by any (i) federal and state relief for water or electric utility bill debt, and (ii) customer payments through payment plan arrangements, prior to receiving recovery from customers.customers at large. After these offsets are made, GSWC will file with the CPUC for recovery of the remaining balance. BVESI intends to include the remaining balance in its COVID-19 memorandum account for recovery in its next general rate case application expected to be filed in 2022. On July 12, 2021, the governor of California approved SB-129 Budget Act of 2021, which includes almost $1 billion in relief funding for overdue water customer bills, and almost $1 billion in relief funding for overdue electric customer bills. The water utility relief funding is being managed by the
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State Water Resources Control Board through the California Water and Wastewater Arrearage Payment Program to provide direct assistance to community water systems to credit customer accounts for water debt accrued during the COVID-19 pandemic. The electric utility relief funding is being managed by the California Department of Community Services and Development through the California Arrearage Payment Program. Both GSWC and BVESI intend to seek recovery of overdue amounts from all available funding sources. Funds for both water and electric utility relief are expected to be distributed to utilities during the fourth quarter of 2021 or the first quarter ofJune 2022.
Accounting Pronouncements to Be Adopted in 20212022:
In December 2019,November 2021, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2019-12,2021-10 Income TaxesGovernment Assistance (Topic 740)—Simplifying the Accounting for Income Taxes832): Disclosures by Business Entities about Government Assistance. The
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amendments in this Update require disclosures about transactions with a government such as government grants or assistance. The amendments in this update simplify the accountingUpdate are effective for income taxes by removing certain exceptions and clarifying certain requirements regarding franchise taxes, goodwill, consolidated tax expenses, andall entities within their scope for financial statements issued for annual effective tax rate calculations. The adoption ofperiods beginning after December 15, 2021. Registrant does not expect this guidance effective January 1, 2021 did notto have a material impact on Registrant's financial statements.statement disclosures.
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Note 2 — Revenues
Most of Registrant's revenues are derived from contracts with customers, including tariff-based revenues of its regulated utilities, GSWC and BVESI. ASUS's initial 50-year firm fixed-price contracts with the U.S. government are considered service concession arrangements under ASC 853, Service Concession Arrangements. Accordingly, the services under these contracts are accounted for under Topic 606—Revenue from Contracts with Customers, and the water and/or wastewater systems are not recorded as Property, Plant and Equipment on Registrant’s balance sheets.
Although GSWC and BVESI have a diversified base of residential, commercial, industrial, and other customers, revenues derived from residential and commercial customers generally account for approximately 90% of total water and electric revenues. Almost all of ASUS's revenues are from the U.S. government. For the three and nine months ended September 30,March 31, 2022 and 2021, and 2020, disaggregated revenues from contracts with customers by segment were as follows:
Three Months Ended September 30,Nine Months Ended September 30,Three Months Ended March 31,
(dollar in thousands)(dollar in thousands)2021202020212020(dollar in thousands)20222021
Water:Water:Water:
Tariff-based revenuesTariff-based revenues$100,256 $97,036 $261,231 $243,553 Tariff-based revenues$72,498 $74,288 
Surcharges (cost-recovery activities)Surcharges (cost-recovery activities)1,095 1,217 2,604 2,913 Surcharges (cost-recovery activities)549 534 
OtherOther586 569 1,626 1,556 Other518 517 
Water revenues from contracts with customersWater revenues from contracts with customers101,937 98,822 265,461 248,022 Water revenues from contracts with customers73,565 75,339 
WRAM under (over)-collection (alternative revenue program)WRAM under (over)-collection (alternative revenue program)831 (121)3,969 9,177 WRAM under (over)-collection (alternative revenue program)341 (310)
Total water revenuesTotal water revenues102,768 98,701 269,430 257,199 Total water revenues73,906 75,029 
Electric:Electric:Electric:
Tariff-based revenuesTariff-based revenues8,791 8,531 28,798 25,948 Tariff-based revenues12,552 11,677 
Surcharges (cost-recovery activities)Surcharges (cost-recovery activities)32 188 278 624 Surcharges (cost-recovery activities)27 202 
Electric revenues from contracts with customersElectric revenues from contracts with customers8,823 8,719 29,076 26,572 Electric revenues from contracts with customers12,579 11,879 
BRRAM (over) under-collection (alternative revenue program)(259)(431)(865)363 
BRRAM over-collection (alternative revenue program)BRRAM over-collection (alternative revenue program)(687)(340)
Total electric revenuesTotal electric revenues8,564 8,288 28,211 26,935 Total electric revenues11,892 11,539 
Contracted services:Contracted services:Contracted services:
WaterWater15,454 17,143 53,102 45,316 Water13,546 18,883 
WastewaterWastewater9,969 9,556 31,486 34,593 Wastewater9,226 11,609 
Contracted services revenues from contracts with customersContracted services revenues from contracts with customers25,423 26,699 84,588 79,909 Contracted services revenues from contracts with customers22,772 30,492 
Total AWR revenuesTotal AWR revenues$136,755 $133,688 $382,229 $364,043 Total AWR revenues$108,570 $117,060 
The opening and closing balances of ASUS's unbilled receivables, receivable from the U.S. government, contract assets, and contract liabilities from contracts with customers which are related entirely to ASUS, were as follows:    
(dollar in thousands)(dollar in thousands)September 30, 2021December 31, 2020(dollar in thousands)March 31, 2022December 31, 2021
Unbilled receivablesUnbilled receivables$11,041 $14,924 Unbilled receivables$16,378 $14,835 
Receivable from the U.S. governmentReceivable from the U.S. government$81,854 $74,670 Receivable from the U.S. government$72,444 $79,818 
Contract assetsContract assets$10,748 $10,257 Contract assets$12,571 $9,587 
Contract liabilitiesContract liabilities$555 $1,800 Contract liabilities$210 $257 
Contract Assets - Contract assets are those of ASUS and consist of unbilled revenues recognized from work-in-progress construction projects, where the right to payment is conditional on something other than the passage of time. The classification of this asset as current or noncurrent is based on the timing of when ASUS expects to bill these amounts.
Contract Liabilities - Contract liabilities are those of ASUS and consist of billings in excess of revenue recognized. The classification of this liability as current or noncurrent is based on the timing of when ASUS expects to recognize revenue.
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Revenues for the ninethree months ended September 30, 2021, whichMarch 31, 2022 that were included in contract liabilities at the beginning of the period totaled $838,000. There were no revenues recorded during the three months ended September 30, 2021 that were
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included in contract liabilities at the beginning of the period.not material. Contracted services revenues recognized during the three and nine months ended September 30, 2021March 31, 2022 from performance obligations satisfied in previous periods were not material.
As of September 30, 2021,March 31, 2022, Registrant's aggregate remaining performance obligations, which are entirely for the contracted services segment, were $3.3 billion. Registrant expects to recognize revenue on these remaining performance obligations over the remaining term of each of the 50-year contracts, which range from 33 to 4746 years. Each of the contracts with the U.S. government is subject to termination, in whole or in part, prior to the end of its 50-year term for convenience of the U.S. government.
Note 3 — Regulatory Matters
In accordance with accounting principles for rate-regulated enterprises, GSWC and BVESI record regulatory assets, which represent probable future recovery of costs from customers through the ratemaking process; and regulatory liabilities, which represent probable future refunds that are to be credited to customers through the ratemaking process. At September 30, 2021,March 31, 2022, GSWC and BVESI had approximately $28.2$63.1 million of regulatory liabilities, net of regulatory assets, not accruing carrying costs. Of this amount, (i) $77.4$76.7 million of regulatory liabilities are excess deferred income taxes arising from the lower federal income tax rate due to the Tax Cuts and Jobs Act ("Tax Act") enacted in December 2017 that are expected to be refunded to customers, (ii) $7.2$5.8 million of regulatory liabilities are from flowed-throughflow-through deferred income taxes, (iii) $63.2$25.1 million of net regulatory assets relates to the underfunded position in GSWC's pension and other retirement obligations (not including the two-way pension balancing accounts), and (iv) a $7.9$7.0 million regulatory liability related to a memorandum account authorized by the CPUC to track unrealized gains and losses on BVESI's purchase power contracts over the term of the contracts. The remainder relates to other items that do not provide for or incur carrying costs.
Regulatory assets represent costs incurred by GSWC and/or BVESI for which they have received or expect to receive rate recovery in the future. In determining the probability of costs being recognized in other periods, GSWC and BVESI consider regulatory rules and decisions, past practices, and other facts or circumstances that would indicate if recovery is probable. If the CPUC determines that a portion of either GSWC’s or BVESI's assets are not recoverable in customer rates, the applicable utility must determine if it has suffered an asset impairment that requires it to write down the asset's value. Regulatory assets are offset against regulatory liabilities within each ratemaking area. Amounts expected to be collected or refunded in the next twelve months have been classified as current assets and current liabilities by ratemaking area. Regulatory assets,liabilities, less regulatory liabilities,assets, included in the consolidated balance sheets are as follows:
(dollars in thousands)(dollars in thousands)September 30,
2021
December 31,
2020
(dollars in thousands)March 31,
2022
December 31,
2021
GSWCGSWCGSWC
Water Revenue Adjustment Mechanism and Modified Cost Balancing AccountWater Revenue Adjustment Mechanism and Modified Cost Balancing Account$19,609 $13,741 Water Revenue Adjustment Mechanism and Modified Cost Balancing Account$19,530 $13,326 
Costs deferred for future recovery on Aerojet caseCosts deferred for future recovery on Aerojet case5,557 6,751 Costs deferred for future recovery on Aerojet case4,994 5,210 
Pensions and other post-retirement obligations (Note 8)Pensions and other post-retirement obligations (Note 8)63,149 65,576 Pensions and other post-retirement obligations (Note 8)24,975 25,212 
COVID-19 memorandum accountsCOVID-19 memorandum accounts7,912 4,119 COVID-19 memorandum accounts4,471 1,663 
Excess deferred income taxesExcess deferred income taxes(73,409)(74,185)Excess deferred income taxes(72,765)(73,000)
Flow-through taxes, netFlow-through taxes, net(6,620)(9,722)Flow-through taxes, net(5,075)(5,552)
Other regulatory assetsOther regulatory assets11,372 10,670 Other regulatory assets12,513 11,739 
Various refunds to customersVarious refunds to customers(3,929)(4,577)Various refunds to customers(3,782)(2,680)
Total GSWCTotal GSWC$23,641 $12,373 Total GSWC$(15,139)$(24,082)
BVESIBVESIBVESI
Derivative unrealized (gain) loss (Note 5)(7,875)1,537
Derivative unrealized gain (Note 5)Derivative unrealized gain (Note 5)(7,020)(4,441)
Other regulatory assetsOther regulatory assets4,1012,629Other regulatory assets15,68313,916
Various refunds to customersVarious refunds to customers(9,016)(8,189)
Total AWRTotal AWR$19,867 $16,539 Total AWR$(15,492)$(22,796)
Regulatory matters are discussed in the consolidated financial statements and the notes thereto included in the Registrant's Form 10-K for the year ended December 31, 20202021 filed with the SEC. The discussion below focuses on significant matters and developments since December 31, 2020.2021.
Water General Rate Case:
In July 2020, GSWC filed a general rate case application for all of its water regions and its general office.This general rate case will determine new water rates for the years 2022–2024.In November 2021, GSWC and the Public Advocates Office at the CPUC ("Public Advocates") filed with the CPUC a joint motion to adopt a settlement agreement between GSWC and Public Advocates on this general rate case application.The settlement agreement, if approved, resolves all issues related to the 2022
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annual revenue requirement in the general rate case application, leaving only 3 unresolved issues.Due to the delay in finalizing the water general rate case, water revenues billed and recorded for the first quarter of 2022 were based on 2021 adopted rates, pending a final decision by the CPUC in this general rate case application. When approved, the new rates will be retroactive to January 1, 2022, and cumulative adjustments will be recorded in the quarter the new rates are approved by the CPUC.
Cost of Capital Proceeding:
GSWC filed a cost of capital application with the CPUC in May 2021. A final decision on this proceeding, once issued by the CPUC, is expected to have an effective date retroactive to January 1, 2022. The cost of debt of 5.1% requested in this application is lower than the cost of debt of 6.6% included in 2021 rates currently being billed to water customers, pending a final decision in the water general rate case. GSWC expects the impact of the new cost of capital, once approved by the CPUC, will include an adjustment of the cost of debt from 6.6% to approximately 5.1%. As a result, for the three months ended March 31, 2022, GSWC reduced revenues by $1.4 million to reflect the effect of this lower cost of debt and recorded a corresponding regulatory liability for revenues subject to refund. A proposed decision on the cost of capital proceeding is expected in the second half of 2022.
Alternative-Revenue Programs:
GSWC records the difference between what it bills its water customers and that which is authorized by the CPUC using the Water Revenue Adjustment Mechanism ("WRAM") and the Modified Cost Balancing Account (“MCBA”) accounts approved by the CPUC.  The over- or under-collection of the WRAM is aggregated with the MCBA over- or under-collection for the corresponding ratemaking area, and bears interest at the current 90-day commercial paper rate. 
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TableDuring the three months ended March 31, 2022, GSWC recorded additional net under-collections in the WRAM/MCBA accounts of Contents
approximately $8.8 million, based on 2021 authorized amounts, pending a final decision on the water general rate case. Once the CPUC issues a final decision on the general rate case, the WRAM and MCBA amounts recorded in 2022 will be updated to reflect the authorized 2022 amounts. In April 2022, surcharges were implemented to recover 2021 WRAM/MCBA under-collections. As required by the accounting guidance for alternative revenue programs, GSWC is required to collect its WRAM balances within 24 months following the year in which an under-collection is recorded in order to recognize such amounts as revenue.  The recovery periods for the majority of GSWC's WRAM/MCBA balances are primarily within 12 to 24 months. During the nine months ended September 30, 2021, GSWC recorded additional net under-collections in the WRAM/MCBA accounts of approximately $10.7 million due primarily to higher-than-adopted supply costs currently in billed customer rates. recorded. As of September 30, 2021, GSWC had an aggregated regulatory asset of $19.6 million, which is comprised of a $3.4 million under-collection in theMarch 31, 2022, there were no WRAM accounts and a $16.2 million under-collection in the MCBA accounts.under-collections that were estimated to be collected over more than 24 months.
COVID-19 Memorandum AccountsBVESI CEMA Regulatory Asset:
The CPUC approved GSWC's and BVESI's requestsBVESI activated a CEMA account to activate COVID-19-related memorandum accounts fortrack the impact of the COVID-19 pandemic. GSWC's and BVESI's response to the pandemic has included suspending service disconnections for nonpayment, which has significantly increased the amount of delinquent customer accounts receivable during the COVID-19 pandemic. Costsincremental costs incurred by GSWC and BVESI in response to a severe winter storm that occurred in February 2019 and which resulted in the COVID-19 pandemic, including bad debt expense, in excessdeclaration of what is included in their respective revenue requirements are beingan emergency by the governor of California. Incremental costs of approximately $448,000 were included in the COVID-19-related memorandum accountsCEMA account and recorded as a regulatory asset. BVESI subsequently filed for futurerecovery of these costs. In May 2021, the CPUC issued a decision denying BVESI’s request for recovery, claiming that BVESI did not adequately demonstrate that the costs incurred were incremental and beyond costs already included in BVESI’s revenue requirement. The decision allowed BVESI to file a new application on the issue of incrementality. BVESI believes the storm costs were incremental and beyond what was included in its revenue requirement, and in October 2021 filed a new application to continue pursuing recovery. As of September 30, 2021, GSWCa result, the costs in this CEMA account remain a regulatory asset at March 31, 2022 since the Company continues to believe the incremental costs were properly tracked and BVESI have recorded a total of $8.5 millionincluded in these accounts as regulatory assets, as it is believed such amountsthe CEMA account and, therefore, are probable of recovery. The CPUC requires that amounts trackedIf BVESI does not ultimately prevail in GSWC's and BVESI's COVID-19 memorandum accountsobtaining recovery, it will result in a charge to earnings from the write-off of this CEMA regulatory asset of approximately $448,000. Hearings on this matter are scheduled for unpaid customer bills be offset by any (i) federal and state relief for water utility bill debt, and (ii) customer payments through payment plan arrangements, prior to receiving recovery from customers. After these offsets are made, GSWC will file with the CPUC for recovery of the remaining balance. BVESI intends to include the remaining balance in its COVID-19 memorandum account for recovery in its next general rate case application expected to be filed inMay 2022.
Other Regulatory Assets:
Other regulatory assets represent costs incurred by GSWC or BVESI for which they have received or expect to receive rate recovery in the future. These regulatory assets are supported by regulatory rules and decisions, past practices, and other facts or circumstances that indicate recovery is probable. If the CPUC determines that a portion of either GSWC’s or BVESI's assets are not recoverable in customer rates, the applicable entity must determine if it has suffered an asset impairment that requires it to write down the asset's value. Included in other regulatory assets are CPUC-approved memorandum accounts to track the costs incurred in connection with the development and implementation of BVESI’s wildfire mitigation plans (“WMPs”), which are required by California legislation to be submitted annuallyasset to the CPUC for approval. The CPUC’s Wildfire Safety Division (now partamount that is probable of the California Natural Resources Agency effective July 1, 2021) has engaged an independent accounting firm to conduct examinations of the expenses and capital investments identified in the 2019 and 2020 WMPs for each of the investor-owned electric utilities, including BVESI. As of September 30, 2021, BVESI has approximately $2.2 million related to expenses accumulated in its WMPs memorandum accounts that have been recognized as regulatory assets for future recovery. BVESI’s examination of these expenses, as well as the capital investments incurred for its WMPs, is currently in progress and at this time, management cannot predict the outcome or recommendations that may result from this examination.
BVESI Other CEMA Regulatory Asset: BVESI activated a CEMA account to track the incremental costs incurred in response to a severe winter storm that occurred in February 2019 and which resulted in the declaration of an emergency by the governor of California. Incremental costs of approximately $455,000 were included in the CEMA account and recorded as a regulatory asset. BVESI subsequently filed for recovery of these costs. In May 2021, the CPUC issued a final decision denying BVESI’s request for recovery, claiming that BVESI did not adequately demonstrate that the costs incurred were incremental and beyond costs already included in BVESI’s revenue requirement. The decision permits BVESI to file a new application on the issue of incrementality should it wish to continue pursuing recovery. BVESI believes the storm costs were incremental and beyond what was included in its revenue requirement, and in October 2021 filed a new application to continue pursuing recovery. As a result, the costs in this CEMA account remain a regulatory asset at September 30, 2021 as the Company continues to believe the incremental costs were properly tracked and included in the CEMA account consistent with the CPUC's well-established past practices. If BVESI does not ultimately prevail in obtaining recovery, it will result in a charge to earnings from a write-off of this CEMA regulatory asset of approximately $455,000. Management cannot currently predict the final outcome of this matter.

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Note 4 — Earnings per Share/Capital Stock
In accordance with the accounting guidance for participating securities and earnings per share (“EPS”), Registrant uses the “two-class” method of computing EPS. The “two-class” method is an earnings allocation formula that determines EPS for each class of common stock and participating security. AWR has participating securities related to restricted stock units that earn dividend equivalents on an equal basis with AWR’s Common Shares, and that have been issued under AWR's stock incentive plans for employees and the non-employee directors stock plans.  In applying the “two-class” method, undistributed earnings are allocated to both common shares and participating securities.
The following is a reconciliation of Registrant’s net income and weighted average Common Shares outstanding used for calculating basic net income per share:
Basic:Basic: For The Three Months Ended 
 September 30,
 For The Nine Months Ended 
 September 30,
Basic: For The Three Months Ended 
 March 31,
(in thousands, except per share amounts)(in thousands, except per share amounts)2021202020212020(in thousands, except per share amounts)20222021
Net incomeNet income$28,153 $26,530 $73,997 $66,214 Net income$14,162 $19,268 
Less: (a) Distributed earnings to common shareholdersLess: (a) Distributed earnings to common shareholders13,480 12,356 38,207 34,848 Less: (a) Distributed earnings to common shareholders13,485 12,361 
Distributed earnings to participating securitiesDistributed earnings to participating securities37 43 100 116 Distributed earnings to participating securities31 37 
Undistributed earningsUndistributed earnings14,636 14,131 35,690 31,250 Undistributed earnings646 6,870 
(b) Undistributed earnings allocated to common shareholders (b) Undistributed earnings allocated to common shareholders14,596 14,083 35,597 31,146  (b) Undistributed earnings allocated to common shareholders644 6,850 
Undistributed earnings allocated to participating securitiesUndistributed earnings allocated to participating securities40 48 93 104 Undistributed earnings allocated to participating securities20 
Total income available to common shareholders, basic (a)+(b)Total income available to common shareholders, basic (a)+(b)$28,076 $26,439 $73,804 $65,994 Total income available to common shareholders, basic (a)+(b)$14,129 $19,211 
Weighted average Common Shares outstanding, basicWeighted average Common Shares outstanding, basic36,933 36,886 36,916 36,877 Weighted average Common Shares outstanding, basic36,944 36,898 
Basic earnings per Common ShareBasic earnings per Common Share$0.76 $0.72 $2.00 $1.79 Basic earnings per Common Share$0.38 $0.52 

Diluted EPS is based upon the weighted average number of Common Shares, including both outstanding shares and shares potentially issuable in connection with restricted stock units granted under AWR’s stock incentive plans for employees and the non-employee directors stock plans, and net income. There were no options outstanding as of September 30,March 31, 2022 and 2021 and 2020 under these plans. At September 30,March 31, 2022 and 2021, and 2020, there were 101,26796,586 and 127,234120,973 restricted stock units outstanding, respectively, including performance shares awarded to officers of the Registrant.
The following is a reconciliation of Registrant’s net income and weighted average Common Shares outstanding for calculating diluted net income per share:
Diluted:Diluted:
For The Three Months Ended 
 September 30,
 For The Nine Months Ended 
 September 30,
Diluted: For The Three Months Ended 
 March 31,
(in thousands, except per share amounts)(in thousands, except per share amounts)2021202020212020(in thousands, except per share amounts)20222021
Common shareholders earnings, basicCommon shareholders earnings, basic$28,076 $26,439 $73,804 $65,994 Common shareholders earnings, basic$14,129 $19,211 
Undistributed earnings for dilutive stock-based awardsUndistributed earnings for dilutive stock-based awards40 48 93 104 Undistributed earnings for dilutive stock-based awards20 
Total common shareholders earnings, dilutedTotal common shareholders earnings, diluted$28,116 $26,487 $73,897 $66,098 Total common shareholders earnings, diluted$14,131 $19,231 
Weighted average common shares outstanding, basicWeighted average common shares outstanding, basic36,933 36,886 36,916 36,877 Weighted average common shares outstanding, basic36,944 36,898 
Stock-based compensation (1)
Stock-based compensation (1)
92 116 88 113 
Stock-based compensation (1)
75 95 
Weighted average common shares outstanding, dilutedWeighted average common shares outstanding, diluted37,025 37,002 37,004 36,990 Weighted average common shares outstanding, diluted37,019 36,993 
Diluted earnings per Common ShareDiluted earnings per Common Share$0.76 $0.72 $2.00 $1.79 Diluted earnings per Common Share$0.38 $0.52 
(1)     All of the 101,26796,586 and 127,234120,973 restricted stock units at September 30,March 31, 2022 and 2021, and 2020, respectively, were included in the calculation of diluted EPS for the three and ninemonths ended September 30, 2021March 31, 2022 and 2020.2021.
During the ninethree months ended September 30, 2021,March 31, 2022, AWR issued 47,14919,348 common shares related to restricted stock units. During the ninethree months ended September 30, 2020,March 31, 2021, AWR issued 42,44723,914 common shares related to restricted stock units and stock options for approximately$30,000, under Registrant’s stock incentive plans for employees.employees and the non-employee directors' plans.
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During the ninethree months ended September 30,March 31, 2022 and 2021, and 2020, AWR paid $1.3$1.2 million and $1.9$1.3 million, respectively, to taxing authorities on employees' behalf for shares withheld related to net share settlements. During the ninethree months ended September 30,March 31, 2022 and 2021, and 2020, GSWC paid $1.2$1.1 million and $1.7$1.2 million, respectively, to taxing authorities on employees' behalf for shares withheld related to net share settlements. These payments are included in the stock-based compensation caption of the statements of equity.
During the three months ended September 30,March 31, 2022 and 2021, and 2020, AWR paid quarterly dividends of approximately $13.5 million, or $0.365 per share, and $12.4 million, or $0.335 per share, respectively. During the nine months ended September 30, 2021 and 2020, AWR paid quarterly dividends of approximately $38.2 million, or $1.035 per share, and $34.8 million, or $0.945 per share, respectively.
During the three months ended September 30, 2021,March 31, 2022, GSWC paid dividends of $13.5 million to AWR. GSWC did not pay a dividend to AWR during the three months ended September 30, 2020. During the nine months ended September 30, 2021 and 2020, GSWC paid dividends of $38.3 million and $22.5$12.4 million, respectively, to AWR during these periods.
Note 5 — Derivative Instruments
BVESI purchases power under long-term contracts at a fixed cost depending on the amount of power and the period during which the power may be purchased under such contracts.  These contracts provide power at a fixed cost over approximately three- and five-year terms depending on the amount of power and period during which the power is purchased under the contracts.terms.
BVESI's purchase power contracts are subject to the accounting guidance for derivatives and require mark-to-market derivative accounting. Among other things, the CPUC authorized the use of a regulatory asset and liability memorandum account to offset the mark-to-market entries required by the accounting guidance.  Accordingly, all unrealized gains and losses generated from the purchased power contracts are deferred on a monthly basis into a non-interest bearing regulatory memorandum account that tracks the changes in fair value of the derivative throughout the terms of the contracts. As a result, these unrealized gains and losses diddo not impact AWR’s earnings. As of September 30, 2021,March 31, 2022, there was a $7.9$7.0 million unrealized gain recorded as a regulatory liability in the memorandum account for the purchased power contracts. The notional volume of derivatives remaining under these long-term contracts as of September 30, 2021March 31, 2022 was 387,821311,163 megawatt hours.
The accounting guidance for fair value measurements applies to all financial assets and financial liabilities that are measured and reported on a fair value basis. Under the accounting guidance, BVESI has made fair value measurements that are classified and disclosed in one of the following three categories:
Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2: Quoted prices in markets that are not active or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; or
Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).
To value the contracts, Registrant utilizes various inputs that include quoted market prices for energy over the duration of the contracts. The market prices used to determine the fair value for this derivative instrument were estimated based on independent sources such as broker quotes and publications that are not observable in or corroborated by the market.  When such inputs have a significant impact on the measurement of fair value, the instruments are categorized as Level 3. Accordingly, the valuation of the derivatives on Registrant’s purchased power contract has been classified as Level 3 for all periods presented.
The following table presents changes in the fair value of the Level 3 derivatives for the three and nine months ended September 30, 2021March 31, 2022 and 2020.2021. The changechanges in fair value wasduring the three months ended March 31, 2022 and 2021were due to an increase in energy prices during the three and nine months ended September 30, 2021.
 For The Three Months Ended 
 September 30,
 For The Nine Months Ended 
 September 30,
(dollars in thousands)2021202020212020
Fair value at beginning of the period$2,810 $(3,827)$(1,537)$(3,171)
Unrealized gains on purchased power contracts5,065 1,309 9,412 653 
Fair value at end of the period$7,875 $(2,518)$7,875 $(2,518)
prices.
 For The Three Months Ended 
 March 31,
(dollars in thousands)20222021
Fair value at beginning of the period$4,441 $(1,537)
Unrealized gains on purchased power contracts2,579 2,761 
Fair value at end of the period$7,020 $1,224 

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Note 6 — Fair Value of Financial Instruments
For cash and cash equivalents, accounts receivable, accounts payable and short-term debt, the carrying amount is assumed to approximate fair value due to the short-term nature of these items.
Investments held in a Rabbi Trust for Registrant's supplemental executive retirement plan ("SERP") are measured at fair value and totaled $28.2$29.8 million as of September 30, 2021.March 31, 2022. All equity investments in the Rabbi Trust are Level 1 (as described in Note 5) investments in mutual funds. The investments held in the Rabbi Trust are included in "Other Property and Investments" on Registrant's balance sheets.
The table below estimates the fair value of long-term debt held by GSWC. The fair values as of September 30, 2021March 31, 2022 and December 31, 20202021 were determined using rates for similar financial instruments of the same duration utilizing Level 2 (as described in Note 5) methods and assumptions. Changes in the assumptions will produce different results.
September 30, 2021December 31, 2020March 31, 2022December 31, 2021
(dollars in thousands)(dollars in thousands)Carrying AmountFair ValueCarrying AmountFair Value(dollars in thousands)Carrying AmountFair ValueCarrying AmountFair Value
Financial liabilities:Financial liabilities:    Financial liabilities:    
Long-term debt—GSWC (1)
Long-term debt—GSWC (1)
$415,788 $501,974 $444,271 $559,752 
Long-term debt—GSWC (1)
$415,685 $450,975 $415,788 $490,852 
___________________
(1) ExcludesExcluding debt issuance costs.

Note 7 — Income Taxes
AWR's effective income tax rate (“ETR”) was 26.0%24.0% and 25.4%23.5% for the three months ended September 30,March 31, 2022 and 2021, and 2020, respectively, and was 23.9% and 24.3% for the nine months ended September 30, 2021 and 2020, respectively. GSWC's ETR was 26.0%23.9% and 26.7%23.6% for the three months ended September 30,March 31, 2022 and 2021, and 2020, respectively, and was 24.0% and 25.5% for the nine months ended September 30, 2021 and 2020, respectively.
The AWR and GSWC effective tax rates differed from the federal corporate statutory tax rate of 21% primarily due to (i) state taxes; (ii) permanent differences, including the excess tax benefits from share-based payments, which were reflected in the income statements and resulted in a reduction to income tax expense during the three and nine months ended September 30, 2021March 31, 2022 and 2020;2021; (iii) the ongoing amortization of the excess deferred income tax liability; and (iv) differences between book and taxable income that are treated as flow-through adjustments in accordance with regulatory requirements (principally from plant, rate-case, and compensation related items). As a regulated utility, GSWC treats certain temporary differences as flow-through in computing its income tax expense consistent with the income tax method used in its CPUC-jurisdiction ratemaking. Flow-through items either increase or decrease tax expense and thus impact the ETR.
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Note 8 — Employee Benefit Plans
The components of net periodic benefit costs for Registrant’s pension plan, postretirement medical benefit plan and SERP for the three and nine months ended September 30,March 31, 2022 and 2021 and 2020 were as follows:
For The Three Months Ended September 30,For The Three Months Ended March 31,
Pension BenefitsOther
Postretirement
Benefits
SERPPension BenefitsOther
Postretirement
Benefits
SERP
(dollars in thousands)(dollars in thousands)202120202021202020212020(dollars in thousands)202220212022202120222021
Components of Net Periodic Benefits Cost:Components of Net Periodic Benefits Cost:      Components of Net Periodic Benefits Cost:
Service costService cost$1,487 $1,390 $31 $35 $348 $244 Service cost$1,480 $1,625 $33 $40 $298 $348 
Interest costInterest cost1,700 1,970 22 44 229 247 Interest cost1,844 1,712 16 31 256 229 
Expected return on plan assetsExpected return on plan assets(3,137)(2,950)(134)(130)— — Expected return on plan assets(3,292)(3,134)(147)(134)— — 
Amortization of prior service costAmortization of prior service cost109 109 — — — — Amortization of prior service cost109 109 — — — — 
Amortization of actuarial (gain) lossAmortization of actuarial (gain) loss876 484 (488)(334)419 211 Amortization of actuarial (gain) loss— 993 (412)(287)145 419 
Net periodic benefits costs under accounting standardsNet periodic benefits costs under accounting standards1,035 1,003 (569)(385)996 702 Net periodic benefits costs under accounting standards141 1,305 (510)(350)699 996 
Regulatory adjustment - deferredRegulatory adjustment - deferred(254)(121)— — — — Regulatory adjustment - deferred— (351)— — — — 
Total expense (benefit) recognized, before surcharges and allocation to overhead poolTotal expense (benefit) recognized, before surcharges and allocation to overhead pool$781 $882 $(569)$(385)$996 $702 Total expense (benefit) recognized, before surcharges and allocation to overhead pool$141 $954 $(510)$(350)$699 $996 
For The Nine Months Ended September 30,
Pension BenefitsOther
Postretirement
Benefits
SERP
(dollars in thousands)202120202021202020212020
Components of Net Periodic Benefits Cost:
Service cost$4,737 $4,170 $111 $129 $1,044 $732 
Interest cost5,124 5,910 84 156 687 741 
Expected return on plan assets(9,405)(8,850)(402)(384)— — 
Amortization of prior service cost327 327 — — — — 
Amortization of actuarial (gain) loss2,862 1,452 (1,062)(732)1,257 633 
Net periodic benefits costs under accounting standards3,645 3,009 (1,269)(831)2,988 2,106 
Regulatory adjustment - deferred(956)(362)— — — — 
Total expense (benefit) recognized, before surcharges and allocation to overhead pool$2,689 $2,647 $(1,269)$(831)$2,988 $2,106 
For the pension plan obligation, Registrant used a discount rate of 2.89% as of December 31, 2021 to determine the projected benefit obligation (“PBO”) of $259.8 million. Discount rates as of March 31, 2022 are approximately 89-basis points higher than those used as of December 31, 2021 based on recent changes in market interest-rate conditions. An 89-basis point
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increase in the assumed discount rate would have decreased the PBO as of December 31, 2021 by approximately 12% or $30.4 million. In September 2021,2022, Registrant contributedexpects to contribute approximately $3.5$3.1 million to its pension plan.
As authorized by the CPUC in the water and electric general rate case decisions, GSWC and BVESI each utilize two-way balancing accounts to track differences between the forecasted annual pension expensesexpense in rates, or expected to be in rates, and the actual annual expense recorded in accordance with the accounting guidance for pension costs. 
During the three months ended September 30,March 31, 2022, GSWC's actual pension expense was lower than the amounts included in water customer rates. During the three months ended March 31, 2021, and 2020, GSWC's actual pension expense was higher than the amounts included in water customer rates by $254,000 and $121,000, respectively. During the nine months ended September 30, 2021 and 2020, GSWC's actual pension expense was higher than the amounts included in water customer rates by $956,000 and $362,000, respectively.351,000. BVESI's actual expense was lower than the amounts included in electric customer rates for all periods presented. As of September 30, 2021,March 31, 2022, GSWC and BVESI had over-collections in their two-way pension balancing accounts of $60,000$134,000 and $184,000$372,000, respectively, included as part of regulatory assets and liabilities (Note 3).
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Note 9 — Contingencies
Environmental Clean-Up and Remediation:
GSWC has been involved in an environmental remediation and cleanup at one1 of its plant sites that contained an underground storage tank that was used to store gasoline for its vehicles. The tank was removed from the ground in July 1990 along with its dispenser and ancillary piping. Since then, GSWC has been involved in various remediation activities at the site.  Analysis indicates that off-site monitoring wells may be necessary to document effectiveness of remediation.
As of September 30, 2021,March 31, 2022, the total amount spent to clean up and remediate GSWC’s plant facility was approximately $6.1 million, of which $1.5 million has been paid by the State of California Underground Storage Tank Fund. Amounts paid by GSWC have been included in rate base and approved by the CPUC for recovery. As of September 30, 2021,March 31, 2022, GSWC has a regulatory asset and an accrued liability for the estimated additional cost of $1.3 million to complete the cleanup at the site. The estimate includes costs for two years of continued activities of groundwater cleanup and monitoring, future soil treatment and site-closure-related activities. The ultimate cost may vary as there are many unknowns in remediation of underground gasoline spills, and this is an estimate based on currently available information. Management also believes it is probable that the estimated additional costs will be approved in rate base by the CPUC.
Other Litigation:
Registrant is also subject to other ordinary routine litigation incidental to its business, some of which may include claims for compensatory and punitive damages. Management believes that rate recovery, proper insurance coverage and reserves are in place to insure against, among other things, property, general liability, employment, and workers’ compensation claims incurred in the ordinary course of business. Insurance coverage may not cover certain claims involving punitive damages. Registrant does not believe the outcome from any currently pending suits or administrative proceedings will have a material effect on Registrant's consolidated results of operations, financial position, or cash flows.
Note 10 — Business Segments
AWR has 3 reportable segments: water, electric and contracted services. Prior to JulyGSWC has 1 2020, GSWC had 2 segments, water and electric. On July 1, 2020, GSWC completed the transfer of the electric utility assets and liabilities from its electric division to BVESI, a separate legal entity and now a wholly owned subsidiary of AWR (Note 11).segment, water. On a stand-alone basis, AWR has no material assets or liabilities other than its equity investments in its subsidiaries, note payables to its subsidiaries and deferred taxes. 
All of GSWC's and BVESI's business activities of GSWC and BVESI are geographically located withinconducted in California. Activities of ASUS and its subsidiaries are conducted in California, Florida, Georgia, Kansas, Maryland, New Mexico, North Carolina, South Carolina, Texas and Virginia.  Each of ASUS’s wholly owned subsidiaries is regulated, if applicable, by the state in which the subsidiary primarily conducts water and/or wastewater operations.  Fees charged for operations and maintenance and renewal and replacement services are based upon the terms of the contracts with the U.S. government, which have been filed, as appropriate, with the commissions in the states in which ASUS’s subsidiaries are incorporated.
The tables below set forth information relating to AWR’s operating segments and AWR Parent. The utility plant amounts are net of respective accumulated provisions for depreciation. Capital additions reflect capital expenditures paid in cash, excluding U.S. government- and third-party contractor-funded capital expenditures for ASUS, and property installed by developers and conveyed to GSWC or BVESI.
 As Of And For The Three Months Ended September 30, 2021
 ContractedAWRConsolidated
(dollars in thousands)WaterElectric ServicesParentAWR
Operating revenues$102,768 $8,564 $25,423 $— $136,755 
Operating income (loss)35,459 2,053 5,273 (1)42,784 
Interest expense, net5,098 101 (141)162 5,220 
Net property, plant and equipment1,471,740 101,952 20,854 — 1,594,546 
Depreciation and amortization expense (1)
8,272 644 910 — 9,826 
Income tax expense7,993 537 1,265 83 9,878 
Capital additions26,490 3,941 143 — 30,574 
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 As Of And For The Three Months Ended September 30, 2020
 ContractedAWRConsolidated
(dollars in thousands)WaterElectricServicesParentAWR
Operating revenues$98,701 $8,288 $26,699 $— $133,688 
Operating income (loss)33,149 1,865 4,794 (1)39,807 
Interest expense, net5,806 54 (74)59 5,845 
Net property, plant and equipment1,373,323 83,188 22,599 — 1,479,110 
Depreciation and amortization expense (1)
7,835 626 887 — 9,348 
Income tax expense (benefit)7,683 533 1,150 (321)9,045 
Capital additions28,076 3,039 1,122 — 32,237 
As Of And For The Nine Months Ended September 30, 2021 As Of And For The Three Months Ended March 31, 2022
ContractedAWRConsolidated ContractedAWRConsolidated
(dollars in thousands)(dollars in thousands)WaterElectric ServicesParentAWR(dollars in thousands)WaterElectric ServicesParentAWR
Operating revenuesOperating revenues$269,430 $28,211 $84,588 $— $382,229 Operating revenues$73,906 $11,892 $22,772 $— $108,570 
Operating income (loss)Operating income (loss)87,295 7,296 16,375 (6)110,960 Operating income (loss)16,999 3,598 3,770 (2)24,365 
Interest expense, netInterest expense, net16,273 275 (458)617 16,707 Interest expense, net5,145 113 (135)200 5,323 
Net property, plant and equipmentNet property, plant and equipment1,471,740 101,952 20,854 — 1,594,546 Net property, plant and equipment1,523,665 107,114 19,080 — 1,649,859 
Depreciation and amortization expense (1)
Depreciation and amortization expense (1)
24,547 1,925 2,684 — 29,156 
Depreciation and amortization expense (1)
8,545 654 915 — 10,114 
Income tax expense (benefit)Income tax expense (benefit)17,718 1,879 3,927 (270)23,254 Income tax expense (benefit)2,689 952 944 (124)4,461 
Capital additionsCapital additions90,299 15,139 1,283 — 106,721 Capital additions31,465 3,468 237 — 35,170 

As Of And For The Nine Months Ended September 30, 2020 As Of And For The Three Months Ended March 31, 2021
ContractedAWRConsolidated ContractedAWRConsolidated
(dollars in thousands)(dollars in thousands)WaterElectric ServicesParentAWR(dollars in thousands)WaterElectric ServicesParentAWR
Operating revenuesOperating revenues$257,199 $26,935 $79,909 $— $364,043 Operating revenues$75,029 $11,539 $30,492 $— $117,060 
Operating income (loss)Operating income (loss)80,416 6,865 13,946 (5)101,222 Operating income (loss)21,059 3,448 5,824 (2)30,329 
Interest expense, netInterest expense, net15,796 519 (371)225 16,169 Interest expense, net5,711 86 (229)235 5,803 
Net property, plant and equipmentNet property, plant and equipment1,373,323 83,188 22,599 — 1,479,110 Net property, plant and equipment1,426,175 94,346 21,902 — 1,542,423 
Depreciation and amortization expense (1)
Depreciation and amortization expense (1)
22,858 1,841 2,491 — 27,190 
Depreciation and amortization expense (1)
8,062 639 859 — 9,560 
Income tax expense (benefit)Income tax expense (benefit)17,031 1,722 3,199 (725)21,227 Income tax expense (benefit)3,768 884 1,391 (129)5,914 
Capital additionsCapital additions78,611 12,093 4,120 — 94,824 Capital additions31,824 4,782 487 — 37,093 
(1)     Depreciation computed on GSWC’s and BVESI's transportation equipment is recorded in other operating expenses and totaled $94,000 and $84,000$95,000 for the three months ended September 30,March 31, 2022 and 2021, and 2020, respectively, and totaled $283,000 and $249,000 for the nine months ended September 30, 2021 and 2020, respectively.
The following table reconciles total net property, plant and equipment (a key figure for ratemaking) to total consolidated assets (in thousands):
September 30, March 31,
20212020 20222021
Total net property, plant and equipmentTotal net property, plant and equipment1,594,546 $1,479,110 Total net property, plant and equipment1,649,859 $1,542,423 
Other assetsOther assets280,254 247,308 Other assets264,073 250,398 
Total consolidated assetsTotal consolidated assets$1,874,800 $1,726,418 Total consolidated assets$1,913,932 $1,792,821 
Note 11 - Completion of Electric Utility Reorganization Plan
On July 1, 2020, GSWC completed the transfer of approximately $71.3 million in net assets and equity (based on their recorded amounts) from its electric utility division to BVESI in exchange for common shares of BVESI of equal value. This was a non-cash transaction, and no gain or loss was recognized. GSWC then immediately distributed all of BVESI's common shares to AWR, whereupon BVESI became wholly owned directly by AWR. The reorganization did not result in any substantive changes to AWR's operations or business segments. In addition, pursuant to federal and state tax law, the exchange and distribution
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qualify as a tax-free reorganization; consequently, no income tax liability was triggered for the AWR consolidated group or any of its members.
The transfer between GSWC and BVESI, both wholly owned subsidiaries of AWR, was considered a common control transaction. Although the electric utility division was considered a separate business segment and component of GSWC, the transfer did not qualify as a discontinued operation based on management's assessment of the applicable accounting guidance. As a result of this transfer, from July 1, 2020 onward, operating results and cash flows of the electric segment, as well as its assets and liabilities, are no longer included in GSWC's financial statements, but continue to be included in AWR's consolidated financial statements. GSWC's statements of income and cash flows for the three and six months ended June 30, 2020 include the electric segment's results.
The table below sets forth selected information relating to the electric segment's results of operations for the nine months ended September 30, 2021 as a subsidiary of AWR, and for the six months ended June 30, 2020 while a division of GSWC plus the three months ended September 30, 2020 as a new subsidiary of AWR:
Nine Months EndedSix Months EndedThree Months Ended
September 30, 2021June 30, 2020September 30, 2020Nine Months Ended
(in thousands)(Subsidiary of AWR)(Division of GSWC)(Subsidiary of AWR)September 30, 2020
Electric revenues$28,211 $18,647 $8,288 $26,935 
Operating expenses20,915 13,647 6,423 20,070 
   Operating income7,296 5,000 1,865 6,865 
Net income$5,310 $3,409 $1,308 $4,717 

The table below sets forth the electric segment's post-spinoff cash flows for the nine months ended September 30, 2021, and for the three months ended September 30, 2020.
Nine Months Ended September 30, 2021Three Months Ended September 30, 2020
(in thousands)(Subsidiary of AWR)(Subsidiary of AWR)
Net cash provided from operating activities$7,215 $603 
Net cash used in investing activities(15,139)(3,039)
Net cash provided from financing activities (1)
7,824 2,999 
Net change in cash and cash equivalents(100)563 
Cash and cash equivalents, beginning of period36720
Cash and cash equivalents, end of period$267 $583 
(1)    Effective July 1, 2020, BVESI has a 3-year, $35 million revolving credit facility agreement.As of September 30, 2021, there was $28.0 million outstanding under this facility. Under the terms of the credit agreement, BVESI has the option to request an increase in the facility of an additional $15.0 million subject to approval by the financial institution.



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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
General
The following discussion and analysis provides information on AWR’s consolidated operations and assets, and includes specific references to AWR’s individual segments and its subsidiaries (GSWC, BVESI, and ASUS and its subsidiaries), and AWR (parent) where applicable. 
Included in the following analysis is a discussion about "operating revenues less supply costs" at AWR's water and electric segments. Operating revenues less supply costs are computed by subtracting water supply costs from water operating revenues, and by subtracting electric supply costs from electric operating revenues.  Registrant believes these measures are useful supplemental data in that they remove the effects of pass-through supply costs that, due to regulatory mechanisms in place, do not impact the profitability of GSWC or BVESI. The discussions and tables included in the following analysis also present Registrant’s operations in terms of diluted earnings per share by business segment and AWR (parent), which equals each business segment’s net incomesegment's earnings divided by Registrant’sRegistrant's weighted average number of diluted common shares. Furthermore, the gains generated on the investments held to fund one of the Company's retirement plans during the three-and nine-month periods ended September 30, 2021 and 2020 have been excluded when communicating the results to help facilitate comparisons of the Company’s performance from period to period. All of these items areThis item is derived from consolidated financial information but areis not presented in our financial statements that are prepared in accordance with Generally Accepted Accounting Principles (GAAP) in the United States. These items constituteThis item constitutes a "non-GAAP financial measures"measure" under the Securities and Exchange Commission rules.
Registrant believes that the disclosuresdisclosure of "operating revenues less supply costs" for its water and electric segments, and diluted earnings per share by each business segment provideprovides investors with clarity surrounding the performance of its segments. Registrant reviews these measurementsthis measurement regularly and compares themit to historical periods and to its operating budget.However, these measures arethis measure, which is not presented in accordance with GAAP, and may not be comparable to similarly titled measures used by other entitiesenterprises and therefore, should not be considered as an alternative to "operating revenues" or "fully diluted earnings per common share",share, which areis determined in accordance with GAAP and presented in Registrant's consolidated statements of income. Registrant has provided the computations and reconciliations of its non-GAAP measures to the most directly comparable GAAP measures. Calculations of "operating revenues less supply costs" for the water and electric segments are included in the tables under the sections titled “Operating Expenses: Supply Costs.”GAAP. A computation and reconciliation ofto AWR’s consolidated diluted earnings per share from the measure of operating income by business segment (as disclosed in this Form 10-Q in Note 10 to the Unaudited Consolidated Financial Statements), to AWR’s consolidated fully diluted earnings per common share is included in the discussion under the sectionssection titled “Summary of ThirdFirst Quarter Results by Segment" and “Summary of Year-to-Date Results by Segment.
Overview
Factors affecting our financial performance are summarized under “Risk Factors” in our Form 10-K for the period ended December 31, 20202021 filed with the SEC.
Water and Electric Segments:
GSWC's and BVESI's revenues, operating income, and cash flows have beenare earned primarily through delivering potable water to homes and businesses in California and electricity in the City of Big Bear Lake and surrounding areas inarea of San Bernardino County, California, respectively.Rates charged to GSWC and BVESI customers are determined by the CPUC.These rates are intended to allow recovery of operating costs and a reasonable rate of return on capital. GSWC and BVESI plan to continue seeking additional rate increases in future years from the CPUC to recover operating and supply costs, and receive reasonable returns on invested capital.Capital expenditures in future years at GSWC and BVESI are expected to remain at substantially higher levels than depreciation expense.When necessary, GSWC and BVESI are able tomay obtain funds from external sources in the capital markets and through bank borrowings.
General Rate Case Filings and Other Matters:
Water General Rate Case for the years 20222024:
OnIn July 15, 2020, GSWC filed a general rate case application for all of its water regions and theits general office. This general rate case will determine new water rates for the years 2022 – 2022–2024. Among other things, GSWC requested capital budgets in this application of approximately $450.6 million for the three-year rate cycle, and another $11.4 million of capital projects to be filed for revenue recovery only through advice letters when those projects are completed.In November 2021, GSWC and the Public Advocates Office at the CPUC have reached("Public Advocates") filed with the CPUC a joint motion to adopt a settlement in principleagreement between GSWC and Public Advocates on nearly all of the items in this general rate case application. The unsettled matterssettlement agreement, if approved, resolves all issues related to the 2022 annual revenue requirement in the general rate case application, leaving only three unresolved issues. Among other things, the settlement authorizes GSWC to invest approximately $404.8 million in capital infrastructure over the three-year cycle. The settlement also authorizes GSWC to complete certain advice letter capital projects approved in the last general rate case, which have recently been completed for a total capital investment of $9.4 million. The additional annual revenue requirements generated from these capital investments total $1.2 million and became effective February 15, 2022. Advice letter projects are filed for revenue recovery only when the projects are completed. Excluding the advice letter project revenues, the amounts included in the settlement agreement would increase the 2022 adopted revenues by approximately $30.3 million as compared to the 2021 adopted revenues, and increase the 2022 adopted supply costs by $9.7 million as compared to the 2021 adopted supply costs. The settlement agreement also allows for potential additional increases in adopted revenues for 2023 and 2024 subject to an earnings test and changes to the forecasted inflationary index values.
The three remaining unresolved issues relate to GSWC's requests for: (i) a medical cost balancing account, (ii) a general liability insurance cost balancing account, and (iii) the consolidation of two of GSWC's customer service areas. The date to file a Joint Motion for Approval of Settlement Agreement toGSWC and Public Advocates have filed briefs with the CPUC has beenon these unsettled issues. A proposed for November 23, 2021. As a result of this proposed timing,decision is expected in mid-2022, and would address the three unresolved issues along with the settlement agreement filed by GSWC and Public Advocates. Pending a final decision from the CPUC on this general rate case application, is not expected byGSWC filed with the endCPUC for interim rates, which will make new 2022 rates, once approved in a CPUC final decision, effective January 1, 2022. Due to the delay in finalizing the water general rate case, water revenues billed and recorded for the first quarter of 2021. For2022 were based on 2021 adopted rates, pending a final decision issued after 2021,by the CPUC in this general rate case application. When approved, the new rates adopted in the case will be effective retroactivelyretroactive to January 1, 2022.


2022 and cumulative adjustments will be recorded in the quarter the new rates are approved by the CPUC.
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Water General Rate Case for the years 2019 2021:
In May 2019, the CPUC issued a final decision in GSWC's water general rate case for the years 2019 – 2021, with rates retroactive to January 1, 2019. Among other things, the final decision authorized GSWC to invest approximately $334.5 million over the rate cycle. The $334.5 million of infrastructure investment included $20.4 million of capital projects to be filed for revenue recovery through advice letters when those projects are completed. Due to changes in circumstances, not all the anticipated advice letter projects have been completed during this rate cycle.
The final decision also allowed for increases in water's operating revenues less water supply costs ("RLWSC") for 2020 and 2021, subject to an earnings test. The full second-year step increases generated an additional $10.4 million in water's RLWSC for 2020. Effective January 1, 2021, the CPUC also approved all third-year rate increases, which GSWC achieved as a result of passing the earnings test. The third-year rate increases are expected to generate an additional increase in water's RLWSC of approximately $11.1 million in 2021 as compared to 2020.
Final Decision in the First Phase of the Low-Income Affordability Rulemaking: 
OnIn August 27, 2020, the CPUC issued a final decision in the first phase of the CPUC’s Order Instituting Rulemaking evaluating the low income ratepayer assistance and affordability objectives contained in the CPUC’s 2010 Water Action Plan. This decision also addressed other issues, including the continueddiscontinued use of the Water Revenue Adjustment Mechanism ("WRAM") and the Modified Cost Balancing Account ("MCBA"). The MCBA is a full-cost balancing account used to track the difference between adopted and actual water supply costs (including the effects of changes in both rates and volume). Based on the final decision, any general rate case application filed by GSWC and the other California water utilities after August 27, 2020 may not include a proposal to continue the use of the WRAM or MCBA, but may instead include a proposal to use a limited price adjustment mechanism and an incremental supply cost balancing account.
The final decision will not have any impact on GSWC's WRAM or MCBA balances during For GSWC, the current rate cycle (2019 – 2021). In February 2021, the assigned administrative law judge in the pending general rate case proceeding confirmed that GSWC may continue usingdiscontinuance of the WRAM and MCBA throughaccounts would be effective for the year 2024. GSWC’s next general rate case application will be filed in 2023 to establish new rates for the years 2025 – 2027, which may not include the WRAM or MCBA for those years.and onward.
Since its implementation in 2008, the WRAM and MCBA have helped mitigate fluctuations in GSWC’s earnings due to changes in water consumption by its customers or changes in water supply mix. Replacing them with mechanisms recommended in the final decision will likely result in more volatility in GSWC’s future earnings and could result in less than, or more than, full recovery of its authorized RLWSC.revenue and supply costs. In October 2020, GSWC, certain other California water utilities, and the California Water Association filed separate applications for rehearing on this matter. Due to the delay in the CPUC issuing a decision on any of these applications for rehearing, GSWC filed a petition for writ of review to the California Supreme Court in May 2021, requesting the Court to review the CPUC's final decision on this matter. In response, theThe CPUC requested that the Court hold GSWC’s request in abeyance until such time as the case, pending a CPUC decisionacts on the October 2020 applicationspending request for rehearing, and the Court granted the request.rehearing. In September 2021, the CPUC issued a decision denying all the October 2020 applications for rehearing. In October 2021, GSWC re-filed its writ of review to the California Supreme Court, requesting the Court to review the CPUC's final decision on this matter. Certain other California water utilities, and the California Water Association also filed separate writs of review with the Court. On January 28, 2022, the CPUC served its response to GSWC’s and the other parties' petitions including requesting the Court to deny the requests. On March 28, 2022, GSWC and the other parties filed a reply to the CPUC's January 2022 filing with the California Supreme Court. The Court has not yet determined whether it will review the CPUC's August 2020 decision. Management cannot currently predict the final outcome of this matter.
Final Decision in the Second Phase of the Low-Income Affordability Rulemaking:
On July 15, 2021, the CPUC issued a final decision in the second phase of the Low-Income Affordability Rulemaking. Among other things, the decision extended the suspension of water-service disconnection implemented during the COVID-19 pandemic due to non-payment of past-due amounts billed to residential customers until the earlier of February 1, 2022 or pursuant to further CPUC guidance on this matter. The final decision also requires that amounts tracked in GSWC's COVID-19 Catastrophic Event Memorandum Account ("CEMA") account for unpaid customer bills be first offset by any (i) federal andor state relief for watercustomers' utility bill debt, and (ii) customer payments through payment planpayment-plan arrangements prior to receiving recovery from customers.customers at large. In January 2022, GSWC received $9.5 million of relief funding from the state of California for customers' unpaid water bills incurred during the pandemic, which it applied to its delinquent customers' eligible balances as discussed later under the section titled COVID-19. In August 2021, GSWC, in addition to three other parties, filed separate applications to the CPUC for rehearing on certain aspects of this final decision. In March 2022, the California Water Association filed a petition for writ of review to the California Supreme Court, urging the Court to review the CPUC's final decision on the second phase of the Low-Income Affordability Rulemaking. The Court has granted a CPUC request to hold the California Water Association’s petition until such time as the CPUC acts on the pending applications for rehearing. Management cannot currently predict the final outcome of this matter.
Cost of Capital Proceeding:
Investor-owned water utilities serving California are required to file their cost of capital applications on a triennial basis. GSWC filed a cost of capital application with the CPUC in May 2021 requesting a capital structure of 57% equity and 43% debt, a return on equity of 10.5%, an embedded cost of debt of 5.1%, and a return on rate base of 8.18%. A final decision on this proceeding, once issued by the CPUC, is expected during the first half of 2022, withto have an effective date retroactive to January 1, 2022. GSWC's current authorizedThe cost of debt of 5.1% requested in this application is lower than the cost of debt of 6.6% included in 2021 rates currently being billed to water customers, pending a final decision in the water general rate case. GSWC expects the impact of returnthe new cost of capital, once approved by the CPUC, will include an adjustment of the cost of debt from 6.6% to approximately 5.1%. As a result, for the three months ended March 31, 2022, GSWC reduced revenues by $1.4 million to reflect the effect of revenues subject to refund from this lower cost of debt. The lower cost of debt of 5.1% is expected to lower 2022 adopted water revenues by approximately $7.5 million, or $0.15 per share, as compared to 2021 adopted water revenues at the cost of debt of 6.6%. At this time, management cannot predict the outcome of the other items in the cost of capital application. Hearings on rate basethis proceeding are scheduled for the second quarter of 7.91% will remain2022. A proposed decision on this proceeding is expected in effect through December 31, 2021.the second half of 2022.
Electric Segment General Rate Case:Segment:
On August 15, 2019, the CPUC issued a final decision inon the electric general rate case. Among other things, the decision (i) extended the rate cycle by one year to include 2022; (ii) increased electric's operating revenues less electric supply costs ("RLESC")(new rates were effective for 2018 by approximately $2.3 million compared to its 2017 adopted RLESC, adjusted for tax reform changes;
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(iii)- 2022); (ii) allows the electric segment to construct all the capital projects of approximately $44 million over the 5-year rate cycle, all ofrequested in its application, which are dedicated to improving system safety and reliability;reliability and (iv)total approximately $44 million over the 5-year rate cycle; and (iii) increased electric's RLESCthe adopted electric revenues by $1.2 million for each of the years 2019 and 2020, by $1.1 million forin 2021, and by $1.0 million forin 2022. The rate increases for 2019 - 2019–2022 are not
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subject to an earnings test. The decision authorized a return on equity for the electric segment of 9.6% and included a capital structure and a debt cost that isare consistent with those approved by the CPUC in March 2018 in connection with GSWC's water segment cost of capital proceeding. TheBVESI intends to file its next general rate case decision continuesapplication in June 2022 to apply to BVESI.set new rates for the years 2023 through 2026.
Contracted Services Segment:
ASUS's revenues, operating income and cash flows are earned by providing water and/or wastewater services, including operation and maintenance services and construction of facilities atfor the water and/or wastewater systems at various military installations, pursuant to 50-year firm fixed-price contracts. The contract price for each of these 50-year contracts is subject to annual economic price adjustments. Additional revenues generated by contract operations are primarily dependent on annual economic price adjustments, and new construction activities under contract modifications with the U.S. government or agreements with other third-party prime contractors.
COVID-19:
GSWC, BVESI and ASUS have continued their operations throughout the COVID-19 pandemic given that their water, wastewater and electric utility services are deemed essential. AWR's responses take into account orders issued by the CPUC, andThe Company continues to monitor the guidance provided by federal, state, and local health authorities and other government officials for theofficials. Due to falling transmission rates in California and other variables, employees that have been telecommuting due to COVID-19 pandemic. Some of the actions taken by have begun returning to company offices.
GSWC and BVESI continue to include suspending service disconnections for nonpayment pursuant to CPUC and state orders, and telecommuting by employees. The suspension of water-service disconnections at GSWC was implemented in response to an executive order from the governor of California. On July 15, 2021, the CPUC issued a final decision in the second phase of the Low-Income Affordability Rulemaking which, among other things, extended the moratorium on water-service disconnections due to non-payment of past-due amounts billed to residential customers until the earlier of February 1, 2022 or pursuant to further CPUC guidance on the matter. On June 24, 2021, the CPUC issued a final decision to extend the moratorium on electric customer service disconnections until September 30, 2021. Under the terms of CPUC-adopted payment plans, actual electric-service disconnections for non-payment will occur no earlier than December 1, 2021
The pandemic has caused volatility in financial markets resulting in fluctuations in the fair value of plan assets in GSWC's pension and other retirement plans. Furthermore, as discussed above, GSWC's and BVESI's response to the pandemic required the suspension of service disconnections for nonpayment, which has significantly increased the amount ofexperience delinquent customer accounts receivable duringdue to the lingering effects of the COVID-19 pandemic. Due to the expected future credit losses on utility customer bills,pandemic, resulting in both GSWC and BVESI have increasedincreasing their allowance for doubtful accounts as of September 30, 2021 for past due customer receivables.during the three months ended March 31, 2022. The CPUC has authorized GSWC and BVESI to track incremental costs, including bad debt expense, in excess of what is included in their respective revenue requirements incurred as a result of the pandemic in COVID-19-related memorandum accounts, such as a Catastrophic Event Memorandum Account ("CEMA"), which is to be filed with the CPUC for future recovery. Through September 30, 2021, AWR has recordedAs of March 31, 2022, GSWC and BVESI had approximately $8.5$4.5 million and $576,000, respectively, in these COVID-19-related memorandumregulatory asset accounts related to bad debt expense in excess of their revenue requirements, the purchase of personal protective equipment, additional incurred printing costs, and other incremental costs in excess of GSWC’sCOVID-19-related costs. CEMA and BVESI's revenue requirements. By tracking these costs in memorandum accounts, utilities can later request authorization from the CPUC for recovery of them. Emergency-typeother emergency-type memorandum accounts are well-established cost recovery mechanisms authorized by the CPUC as a result of a state/federal declared emergency, and are therefore recognized as regulatory assets for future recovery. As a result, the amounts recorded in the COVID-19-related memorandum accounts have not impacted GSWC's andor BVESI's earnings. Thus far, the COVID-19 pandemic has not had a material impact on ASUS's current operations. On September 9,
The CPUC's moratoriums on service disconnections for nonpayment for water and electric customers have ended, and service disconnections due to non-payment for commercial customers have resumed. In accordance with Senate Bill 998 guidelines, service disconnections due to non-payment for residential customers are set to resume in May of 2022. Furthermore, in January 2022, GSWC received $9.5 million in COVID relief funds through the California Water and Wastewater Arrearage Payment Program to provide assistance to customers for their water debt accrued during the COVID-19 pandemic by remitting federal funds that the state received from the American Rescue Plan Act of 2021 to the presidentutility on behalf of eligible customers. GSWC applied these funds to its delinquent customers' eligible balances. In February 2022, BVESI received $321,000 from the United States issued orders and instructions on mandatory COVID-19 vaccinationstate of all federal employees, federal contractors and employees of companies with 100 or more employees. The effects of mandatory vaccination on Registrant’s workforce are unknown given that federal vaccine-mandate guidance has yet to be issued.California for similar customer relief funding for unpaid electric customer bills incurred during the pandemic.
The CPUC requires that amounts tracked in GSWC's and BVESI's COVID-19 memorandum accounts for unpaid customer bills be first offset by any (i) federal and state relief for water or electric utility bill debt, and (ii) customer payments through payment plan arrangements, prior to receiving recovery from customers.customers at large. After these offsets are made, GSWC will file with the CPUC for future recovery of the remaining balance. BVESI intends to include the remaining balance in its COVID-19 memorandum account for recovery in its next general rate case application expected to be filed in 2022. On July 12, 2021, the governor of California approved SB-129 Budget Act of 2021, which includes almost $1 billion in relief funding for overdue water customer bills, and almost $1 billion in relief funding for overdue electric customer bills. The water utility relief funding is being managed by the State Water Resources Control Board through the California Water and Wastewater Arrearage Payment Program to provide direct assistance to community water systems to credit customer accounts for water debt accrued during the COVID-19 pandemic. The electric utility relief funding is being managed by the California Department of Community Services and Development through the California Arrearage Payment Program. Both GSWC and BVESI intend to seek recovery of overdue amounts from all available funding sources. Funds for both water and electric utility relief are expected to be distributed to utilities during the fourth quarter of 2021 or the first quarter ofJune 2022.
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Summary of ThirdFirst Quarter Results by Segment
The table below sets forth the thirdfirst quarter diluted earnings per share by business segment:
Diluted Earnings per Share Diluted Earnings per Share
Three Months Ended  Three Months Ended 
9/30/20219/30/2020CHANGE 3/31/20223/31/2021CHANGE
WaterWater$0.62 $0.57 $0.05 Water$0.23 $0.33 $(0.10)
ElectricElectric0.04 0.04 — Electric0.07 0.07 — 
Contracted servicesContracted services0.11 0.10 0.01 Contracted services0.08 0.12 (0.04)
AWR (parent)(0.01)0.01 (0.02)
Consolidated fully diluted earnings per share, as reported (GAAP)$0.76 $0.72 $0.04 
Consolidated fully diluted earnings per share, as reportedConsolidated fully diluted earnings per share, as reported$0.38 $0.52 $(0.14)
The following is a computation and reconciliation of diluted earnings per share from the measure of operating income by business segment as disclosed in Note 10 to the Unaudited Consolidated Financial Statements, to AWR’s consolidated fully diluted earnings per common share, for the three months ended September 30, 2021March 31, 2022 and 2020:2021:
WaterElectricContracted ServicesAWR (Parent)Consolidated (GAAP)WaterElectricContracted ServicesAWR (Parent)Consolidated (GAAP)
In 000's except per share amountsQ3 2021Q3 2020Q3 2021Q3 2020Q3 2021Q3 2020Q3 2021Q3 2020Q3 2021Q3 2020
(in thousands, except per share amounts)(in thousands, except per share amounts)Q1 2022Q1 2021Q1 2022Q1 2021Q1 2022Q1 2021Q1 2022Q1 2021Q1 2022Q1 2021
Operating income (Note 10)Operating income (Note 10)$35,459 $33,149 $2,053 $1,865 $5,273 $4,794 $(1)$(1)$42,784 $39,807 Operating income (Note 10)$16,999 $21,059 $3,598 $3,448 $3,770 $5,824 $(2)$(2)$24,365 $30,329 
Other income and expenseOther income and expense4,669 4,323 33 24 (111)(40)162 (75)4,753 4,232 Other income and expense5,743 5,060 (30)40 (171)(188)200 235 5,742 5,147 
Income tax expense (benefit)Income tax expense (benefit)7,993 7,683 537 533 1,265 1,150 83 (321)9,878 9,045 Income tax expense (benefit)2,689 3,768 952 884 944 1,391 (124)(129)4,461 5,914 
Net incomeNet income$22,797 $21,143 $1,483 $1,308 $4,119 $3,684 $(246)$395 $28,153 $26,530 Net income$8,567 $12,231 $2,676 $2,524 $2,997 $4,621 $(78)$(108)$14,162 $19,268 
Weighted Average Number of Diluted SharesWeighted Average Number of Diluted Shares37,025 37,002 37,025 37,002 37,025 37,002 37,025 37,002 37,025 37,002 Weighted Average Number of Diluted Shares37,019 36,993 37,019 36,993 37,019 36,993 37,019 36,993 37,019 36,993 
Diluted earnings per shareDiluted earnings per share$0.62 $0.57 $0.04 $0.04 $0.11 $0.10 $(0.01)$0.01 $0.76 $0.72 Diluted earnings per share$0.23 $0.33 $0.07 $0.07 $0.08 $0.12 $— $— $0.38 $0.52 
Water Segment:
For the three months ended September 30, 2021,March 31, 2022, diluted earnings from the water utility segment were $0.62$0.23 per share, as compared to $0.57$0.33 per share for the same period in 2020, an increase2021, a decrease of $0.05$0.10 per share. IncludedDue to the delay in finalizing the water general rate case, which will set new rates for the years 2022 through 2024, water revenues billed and recorded for the first quarter of 2022 were based on 2021 adopted rates, pending a final decision by the CPUC in this general rate case application. When approved, the new rates will be retroactive to January 1, 2022 and cumulative adjustments will be recorded in the quarter the new rates are approved by the CPUC. Had new rates been approved and implemented on January 1, 2022 consistent with the settlement agreement between GSWC and Public Advocates, GSWC would have recorded additional revenues of approximately $6.3 million, or $0.12 per share, and additional water supply costs of approximately $1.6 million, or $0.03 per share, for the first quarter of 2022. Furthermore, for the three months ended March 31, 2022, GSWC recorded a reduction to revenues of $1.4 million, or $0.03 per share, to reflect revenues subject to refund from the estimated impact of a lower cost of debt of approximately 5.1% included in GSWC's pending cost of capital proceeding, as compared to a 6.6% cost of debt in rates currently billed to water customers. A final decision on the cost of capital application, once issued by the CPUC, is expected to have an effective date retroactive to January 1, 2022.
In addition, included in the results for the thirdfirst quarter of 20212022 were minimal gainslosses of $1.7 million, or approximately $0.03 per share, on investments held to fund one of the Company's retirement plans, as compared to gains of $1.2 million,$628,000, or approximately $0.02$0.01 per share, for the same period in 20202021, largely due to volatility in the financial markets resulting, in part, from the COVID-19 pandemic.markets. Excluding the gains and losses on investments from both periods, adjusted diluted earnings at the water segment for the thirdfirst quarter of 20212022 were $0.62$0.26 per share, as compared to adjusted earnings of $0.55$0.32 per share for the thirdfirst quarter of 2020,2021, an adjusted increasedecrease of $0.07$0.06 per share due to the following items:
An increaseA decrease in water'swater operating revenues less water supply costs ("RLWSC") of $3.1$1.1 million largely as a result of newthe lower cost of debt included in the pending May 2021 cost of capital application as previously discussed. Furthermore, water revenues billed and recorded for the first quarter of 2022 were based on 2021 adopted rates, authorizedpending a final decision by the CPUC. Effective January 1,CPUC on the general rate case application.
An increase in water supply costs of $462,000, which consist of purchased water, purchased power for pumping, groundwater production assessments and changes in the water supply cost balancing accounts. Adopted supply costs for the first quarter of 2022 were based on 2021 GSWC received its full third-year stepauthorized amounts, pending a final decision by the CPUC in the water general rate case application. Actual water supply costs are tracked and passed through to customers on a dollar-for-dollar basis by way of the CPUC-approved water supply cost balancing accounts. The increase which it achieved asin water supply costs results in a resultcorresponding increase in water operating revenues and has no net impact on the water segment’s profitability.
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Table of passing an earnings test.  The higher water rates are expected to increase water's RLWSC by $11.1 million for 2021.  Contents
An overall increase in operating expenses of $1.8 million (excluding supply costs) of $766,000,costs and fluctuations in pension costs which, due to a CPUC-authorized pension balancing account, have no impact to earnings), which negatively impacted earnings and was mainly due to increases in water treatment costs, conservation costs,spending, insurance, depreciation and depreciation expense, partially offset by a decrease in maintenance expense.expenses.
A decrease in interest expense (net of interest and other income) of $754,000, which favorably impacted earnings and resulted primarily$566,000 resulting from lower overall interestborrowing rates due in part, to the early redemption of GSWC's 9.56% private placement notes in the amount of $28 million in May 2021.2021, partially offset by an overall increase in total borrowing levels to support, among other things, GSWC’s capital expenditures program.
A decreaseAn increase in the effective income tax rate, which favorablynegatively impacted net earnings andat the water segment. The increase resulted primarily from changes in certain flow-through taxes and permanent items during the three months ended September 30, 2021, as compared to the same period in 2020.items. As a regulated utility, GSWC treats certain temporary differences as flow-through in computing its income tax expense consistent with the income tax method used in its CPUC-jurisdiction ratemaking.Changes in the magnitude of flow-through items either increase or decrease tax expense, thereby affecting diluted earnings per share.



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Electric Segment:
Diluted earnings from the electric utility segment were $0.04$0.07 per share for the three months ended September 30, 2021March 31, 2022 and 2020.2021. An increase in electric'selectric operating revenues less electric supply costs ("RLESC") was largely offset by higher operating expenses.
Contracted Services Segment:
Diluted earnings from the contracted services segment decreased $0.04 per share for the three months ended September 30, 2021 increased $0.01 per sharefirst quarter of 2022 as compared to the same period in 2020,2021, largely due to a decrease in overall operating expenses.
AWR (parent):
Diluted earnings from AWR (parent) for the three months ended September 30, 2021 decreased $0.02 per share due to changes in state unitary taxes.
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Summary of Year-to-Date Results by Segment
The table below sets forth the year-to-date diluted earnings per share by business segment:
 Diluted Earnings per Share
 Nine  Months Ended 
 9/30/20219/30/2020CHANGE
Water$1.51 $1.35 $0.16 
Electric0.14 0.13 0.01 
Contracted services0.35 0.30 0.05 
AWR (parent)— 0.01 (0.01)
Consolidated fully diluted earnings per share, as reported (GAAP)$2.00 $1.79 $0.21 
The following is a computation and reconciliation of diluted earnings per share from the measure of operating income by business segment as disclosed in Note 10 to the Unaudited Consolidated Financial Statements, to AWR’s consolidated fully diluted earnings per common share for the nine months ended September 30, 2021 and 2020:
WaterElectricContracted ServicesAWR (Parent)Consolidated (GAAP)
In 000's except per share amountsYTD 2021YTD 2020YTD 2021YTD 2020YTD 2021YTD 2020YTD 2021YTD 2020YTD 2021YTD 2020
Operating income (Note 10)$87,295 $80,416 $7,296 $6,865 $16,375 $13,946 $(6)$(5)$110,960 $101,222 
Other income and expense13,589 13,530 107 426 (346)(266)359 91 13,709 13,781 
Income tax expense (benefit)17,718 17,031 1,879 1,722 3,927 3,199 (270)(725)23,254 21,227 
Net income$55,988 $49,855 $5,310 $4,717 $12,794 $11,013 $(95)$629$73,997 66,214 
Weighted Average Number of Diluted Shares37,004 36,990 37,004 36,990 37,004 36,990 37,004 36,990 37,004 36,990 
Diluted earnings per share$1.51 $1.35 $0.14 $0.13 $0.35 $0.30 $— $0.01 $2.00 $1.79 
Water Segment:
For the nine months ended September 30, 2021, diluted earnings from the water segment were $1.51 per share as compared to $1.35 per share for the same period in 2020, an increase of $0.16 per share. Included in the results for the nine months ended September 30, 2021 were gains on investments held to fund one of the Company's retirement plans totaling $2.3 million, or $0.04 per share, as compared to $1.3 million, or $0.02 per share, in gains generated during the same period in 2020 largely due to volatility in the financial markets. Excluding these gains from both periods, adjusted diluted earnings at the water segment for the nine months ended September 30, 2021 were $1.47 per share as compared to adjusted diluted earnings of $1.33 per share for the same period in 2020. This adjusted increase of $0.14 per share was due to the following items:
An increase in water's RLWSC of $8.8 million as a result of new rates authorized by the CPUC. GSWC received its full third-year step increase effective January 1, 2021, which is expected to increase water's RLWSC by $11.1 million for 2021.
An overall increase in operating expenses (excluding supply costs) of $1.9 million, which negatively impacted earnings and wasconstruction activity primarily due to increases in water treatment costs, conservation costs, regulatory costs, insurance premiums, depreciation expense, and property and other non-income taxes as compared to the same period in 2020, partially offset by a decrease in maintenance expense.
An overall increase in interest expense (net of interest and other income) of $1.1 million, which negatively impacted earnings and was primarily due to an overall increase in interest rates at the water segment compared to the same period in 2020 due, in part, to the issuance of long-term debt in July 2020. GSWC used the proceeds to pay down its intercompany borrowings (as required by the CPUC); intercompany borrowings bear lower short-term rates.
A decrease in the effective income tax rate, which favorably impacted earnings and resulted primarily from changes in certain flow-through taxes and permanent items during the nine months ended September 30, 2021 as compared to the same period in 2020. As a regulated utility, GSWC treats certain temporarytiming differences, as flow-through in computing its income tax expense consistent with the income tax method used in its CPUC-jurisdiction ratemaking.Changes in the magnitude of flow-through items either increase or decrease tax expense, thereby affecting diluted earnings per share.

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Electric Segment:
Diluted earnings from the electric segment for the nine months ended September 30, 2021 increased by $0.01 per share as compared to the same period in 2020. Increases in electric's RLESC resulting from new rates authorized by the CPUC, as well as a decrease in interest expense, were partially offset by an increase in management fees, as well as lower overall operating expenses.
Contracted Services Segment:
Diluted earnings from the The contracted services segment for the nine months ended September 30, 2021 increased by $0.05 per share as compared to the same period in 2020 primarily due to an overall increase in construction activity and management fee revenue, as well as a decrease in overall operating expenses including lower legal and other outside services costs, labor costs and maintenance expense. The increase in construction activity was largely due to timing differences of when work was performed as compared to the first nine months of 2020. We expect the contracted services segmentis expected to contribute $0.45 to $0.49 per share for the year 2021.
AWR (parent):
Diluted earnings from AWR (parent) for the nine months ended September 30, 2021 decreased $0.01 per share due to changes in state unitary taxes.full 2022 year.
The following discussion and analysis for the three and nine months ended September 30,March 31, 2022 and 2021 and 2020 provides information on AWR’s consolidated operations and assets and, where necessary, includes specific references to AWR’s individual segments and subsidiaries: GSWC, BVESI, and ASUS and its subsidiaries.
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Consolidated Results of Operations — Three Months Ended September 30,March 31, 2022 and 2021 and 2020 (amounts in thousands, except per share amounts):
Three Months Ended 
 September 30, 2021
Three Months Ended 
 September 30, 2020
$
CHANGE
%
CHANGE
Three Months Ended 
 March 31, 2022
Three Months Ended 
 March 31, 2021
$
CHANGE
%
CHANGE
OPERATING REVENUESOPERATING REVENUES    OPERATING REVENUES    
WaterWater$102,768 $98,701 $4,067 4.1 %Water$73,906 $75,029 $(1,123)(1.5)%
ElectricElectric8,564 8,288 276 3.3 %Electric11,892 11,539 353 3.1 %
Contracted servicesContracted services25,423 26,699 (1,276)(4.8)%Contracted services22,772 30,492 (7,720)(25.3)%
Total operating revenuesTotal operating revenues136,755 133,688 3,067 2.3 %Total operating revenues108,570 117,060 (8,490)(7.3)%
OPERATING EXPENSESOPERATING EXPENSES    OPERATING EXPENSES    
Water purchasedWater purchased24,093 23,445 648 2.8 %Water purchased17,848 15,239 2,609 17.1 %
Power purchased for pumpingPower purchased for pumping3,584 3,369 215 6.4 %Power purchased for pumping2,374 2,145 229 10.7 %
Groundwater production assessmentGroundwater production assessment5,185 5,962 (777)(13.0)%Groundwater production assessment4,211 4,440 (229)(5.2)%
Power purchased for resalePower purchased for resale2,875 2,117 758 35.8 %Power purchased for resale5,166 3,198 1,968 61.5 %
Supply cost balancing accountsSupply cost balancing accounts(2,446)(2,639)193 (7.3)%Supply cost balancing accounts(6,343)(2,427)(3,916)161.4 %
Other operationOther operation9,414 8,128 1,286 15.8 %Other operation8,667 8,217 450 5.5 %
Administrative and generalAdministrative and general20,255 20,644 (389)(1.9)%Administrative and general22,972 22,053 919 4.2 %
Depreciation and amortizationDepreciation and amortization9,826 9,348 478 5.1 %Depreciation and amortization10,114 9,560 554 5.8 %
MaintenanceMaintenance2,979 4,246 (1,267)(29.8)%Maintenance3,140 2,662 478 18.0 %
Property and other taxesProperty and other taxes6,052 5,693 359 6.3 %Property and other taxes5,853 5,940 (87)(1.5)%
ASUS constructionASUS construction12,154 13,568 (1,414)(10.4)%ASUS construction10,203 15,704 (5,501)(35.0)%
Total operating expensesTotal operating expenses93,971 93,881 90 0.1 %Total operating expenses84,205 86,731 (2,526)(2.9)%
OPERATING INCOMEOPERATING INCOME42,784 39,807 2,977 7.5 %OPERATING INCOME24,365 30,329 (5,964)(19.7)%
OTHER INCOME AND EXPENSESOTHER INCOME AND EXPENSES    OTHER INCOME AND EXPENSES    
Interest expenseInterest expense(5,553)(6,161)608 (9.9)%Interest expense(5,606)(6,258)652 (10.4)%
Interest incomeInterest income333 316 17 5.4 %Interest income283 455 (172)(37.8)%
Other, netOther, net467 1,613 (1,146)(71.0)%Other, net(419)656 (1,075)(163.9)%
(4,753)(4,232)(521)12.3 % (5,742)(5,147)(595)11.6 %
INCOME BEFORE INCOME TAX EXPENSEINCOME BEFORE INCOME TAX EXPENSE38,031 35,575 2,456 6.9 %INCOME BEFORE INCOME TAX EXPENSE18,623 25,182 (6,559)(26.0)%
Income tax expenseIncome tax expense9,878 9,045 833 9.2 %Income tax expense4,461 5,914 (1,453)(24.6)%
NET INCOMENET INCOME$28,153 $26,530 $1,623 6.1 %NET INCOME$14,162 $19,268 $(5,106)(26.5)%
Basic earnings per Common ShareBasic earnings per Common Share$0.76 $0.72 $0.04 5.6 %Basic earnings per Common Share$0.38 $0.52 $(0.14)(26.9)%
Fully diluted earnings per Common ShareFully diluted earnings per Common Share$0.76 $0.72 $0.04 5.6 %Fully diluted earnings per Common Share$0.38 $0.52 $(0.14)(26.9)%

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Operating Revenues:
General
GSWC and BVESI rely upon approvals by the CPUC of rate increases to recover operating expenses and to provide for a return on invested and borrowed capital used to fund utility plant. ASUS relies on economic price and equitable adjustments by the U.S. government in order to recover operating expenses and provide a profit margin for ASUS.  Current operating revenues and earnings may be negatively impacted if the Military Utility Privatization Subsidiaries do not receive adequate rate relief or adjustments in a timely manner.  ASUS’s earnings are also impacted by the level of additional construction projects at the Military Utility Privatization Subsidiaries, which may or may not continue at current levels in future periods.
Water
For the three months ended September 30, 2021,March 31, 2022, revenues from water operations increaseddecreased by $4.1$1.1 million to $102.8$73.9 million as compared to the same period in 2020 due primarily to full third-year step increases for 2021 approvedas a result of the lower cost of debt included in the pending May 2021 cost of capital application. Once a final decision is issued by the CPUC.CPUC, the updated cost capital is expected to have a lower cost of debt than that which is included in 2021 rates, resulting in a decrease in revenues. Furthermore, due to the delay in the CPUC issuing a final decision on the water general rate case, billed water revenues for the first quarter of 2022 were based on 2021 adopted rates, pending a CPUC final decision in this general rate case application.
Billed water consumption for the thirdfirst quarter of 20212022 was slightly lower as compared to the same period in 2020.2021. Currently, changes in consumption generally do not have a significant impact on recorded revenues due to the CPUC-approved WRAM in place in all but one small rate-making area. GSWC records the difference between what it bills its water customers and that which is authorized by the CPUC in the WRAM accounts as regulatory assets or liabilities. The August 2020 CPUC decision on the First Phase of the Low-Income Affordability Rulemaking eliminates the continued use of the WRAM for GSWC beginning in the year 2025.
Electric
Electric revenues for the three months ended September 30, 2021first quarter of 2022 increased by $276,000$353,000 to $8.6$11.9 million as a result of new CPUC-approved electric rates effective January 1, 2021.2022. Electric usage during the thirdfirst quarter of 2021 decreased 3%2022 increased 7% as compared to the same period in 2020.2021. Due to the CPUC-approved Base Revenue Requirement Adjustment Mechanism, which adjusts certain revenues to adopted levels authorized by the CPUC, changes in usage do not have a significant impact on earnings.
Contracted Services
Revenues from contracted services are composed of construction revenues (including renewal and replacements) and management fees for operating and maintaining water and/or wastewater systems at various military bases.  ForDuring the three months ended September 30, 2021,first quarter of 2022, revenues from contracted services decreased $1.3$7.7 million to $25.4$22.8 million as compared to $26.7$30.5 million for the same period in 2020.2021. The decrease was due primarily to lower construction activity resulting from timing differences of when such work was performed as compared to the first quarter of 2021, partially offset by increases in management fees due to the successful resolution of various economic price adjustments.
ASUS subsidiaries continue to enter into U.S. government-awarded contract modifications and agreements with third-party prime contractors for new construction projects at the Military Utility Privatization Subsidiaries. During the nine months ended September 30, 2021, ASUS has been awarded approximately $16.2 million in new construction projects, some of which have been or are expected to be completed during 2021. The majority of the remainder are expected to be completed in 2022. Furthermore, in September 2021, ASUS received a contract modification that provided for additional infrastructure assets located at Joint Base Andrews to be operated and maintained by ASUS under its utility privatization contract with the U.S. government. The operation and maintenance, and renewal and replacement of these assets is expected to contribute additional revenue of approximately $41.0 million over the remaining life of the 50-year contract, through January 2056. Earnings and cash flows from modifications to the original 50-year contracts with the U.S. government and agreements with third-party prime contractors for additional construction projects may or may not continue in future periods.
Operating Expenses:
Supply Costs
Supply costs for the water segment consist of purchased water, purchased power for pumping, groundwater production assessments and changes in the water supply cost balancing accounts. Supply costs for the electric segment consist primarily of purchased power for resale, the cost of natural gas used by BVESI’s generating unit, the cost of renewable energy credits and changes in the electric supply cost balancing account.Total supply costs comprise the largest segment of total operating expenses. Supply costs accounted for approximately 35.4%27.6% and 34.4%26.1% of total operating expenses for the three months ended September 30,March 31, 2022 and 2021, and 2020, respectively.
Registrant uses "Operating Revenues Less Supply Costs" presented in the following table for its water and electric segments as important measures in evaluating its operating results. Registrant believes these measures are useful supplemental data in that they remove the effects of pass-throughWater segment supply costs that, due to regulatory mechanisms in place, do not impact profitability. Registrant reviews these measurements regularly and compares them to historical periods and to its operating budget. However, these measures are not presented in accordance with GAAP and may not be comparable to similarly titled measures used by other entities and, therefore, should not be considered as an alternative to Operating Revenues, which are determined in accordance with GAAP and presented in Registrant's consolidated statements of income.

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The table below provides the amounts (in thousands) of increases (decreases) and percent changes in water and electric operating revenues, water and electric supply costs, and operating revenues less supply costs during the three months ended September 30, 2021 and 2020. There was a $123,000 decrease in water surcharges and a $156,000 decrease in electric surcharges to recover previously incurred costs. Surcharges to recover previously incurred costs are recorded to revenues when billed to customers and are offset by a corresponding amount in operating expenses, resulting in no impact to earnings.
Three Months Ended 
 September 30, 2021
Three Months Ended 
 September 30, 2020
$
CHANGE
%
CHANGE
WATER OPERATING REVENUES (GAAP) (1)$102,768 $98,701 $4,067 4.1 %
WATER SUPPLY COSTS:    
Water purchased (1)$24,093 $23,445 $648 2.8 %
Power purchased for pumping (1)3,584 3,369 215 6.4 %
Groundwater production assessment (1)5,185 5,962 (777)(13.0)%
Water supply cost balancing accounts (1)(2,114)(3,019)905 (30.0)%
TOTAL WATER SUPPLY COSTS$30,748 $29,757 $991 3.3 %
WATER OPERATING REVENUES LESS WATER SUPPLY COSTS (NON-GAAP)$72,020 $68,944 $3,076 4.5 %
  
ELECTRIC OPERATING REVENUES (GAAP) (1)$8,564 $8,288 $276 3.3 %
ELECTRIC SUPPLY COSTS:    
Power purchased for resale (1)$2,875 $2,117 $758 35.8 %
Electric supply cost balancing accounts (1)(332)380 (712)(187.4)%
TOTAL ELECTRIC SUPPLY COSTS$2,543 $2,497 $46 1.8 %
ELECTRIC OPERATING REVENUES LESS ELECTRIC SUPPLY COSTS (NON-GAAP)$6,021 $5,791 $230 4.0 %
(1)   As reported on AWR’s GAAP Consolidated Statements of Income, except for supply cost balancing accounts. The sum of water and electric supply cost balancing accounts in the table above are shown in AWR’s GAAP Consolidated Statements of Income and totaled $(2,446,000) and $(2,639,000) for the three months ended September 30, 2021 and 2020, respectively. Revenues include surcharges, which increase both revenues and operating expenses by corresponding amounts, thus having no net earnings impact.
Two of the principal factors affecting water supply costs are the amount of water produced and the source of the water. Generally, the variable cost of producing water from wells is less than the cost of water purchased from wholesale suppliers. The overall actual percentages of purchased water for the three months ended March 31, 2022 and 2021 were approximately 48% and 43%, respectively, as compared to the authorized adopted percentages of 30.3% for the three months ended March 31, 2022 and 2021. The higher actual percentage of purchased water as compared to the adopted percentage resulted from a higher volume of purchased water costs due to several wells being out of service.  Due to the delay in finalizing the water general rate case, which will set new rates for the years 2022 through 2024, adopted supply costs for the first quarter of 2022 were based on 2021 authorized amounts, pending a final decision by the CPUC in this general rate case application.
Under the CPUC-approved Modified Cost Balancing Account ("MCBA"), GSWC tracks adopted and actual expense levels for purchased water, power purchased for pumping and pump taxes. GSWC records the variances (which include the effects of changes in both rate and volume) between adopted and actual purchased water, purchased power and pump tax
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expenses. GSWC recovers from, or refunds to, customers the amount of such variances.  GSWC tracks these variances individually for each water rate-makingratemaking area. The August 2020 CPUC decision on the First Phase of the Low-Income Affordability Rulemaking, which eliminates the continued use of the WRAM, will also eliminate the MCBA for GSWC beginning in the year 2025.
The overall actual percentagesSupply costs for the water segment consist of purchased water, purchased power for pumping, groundwater production assessments and changes in the water supply cost balancing accounts. For the three months ended March 31, 2022 and 2021, water supply costs consisted of the following amounts (in thousands):
Three Months Ended 
 March 31, 2022
Three Months Ended 
 March 31, 2021
CHANGECHANGE
Water purchased$17,848 $15,239 $2,609 17.1 %
Power purchased for pumping2,374 2,145 229 10.7 %
Groundwater production assessment4,211 4,440 (229)-5.2 %
Water supply cost balancing accounts *(5,067)(2,920)(2,147)73.5 %
Total water supply costs$19,366 $18,904 $462 2.4 %
* The sum of water and electric supply-cost balancing accounts are shown on AWR’s Consolidated Statements of Income and totaled $(6,343,000) and $(2,427,000) for the three months ended September 30,March 31, 2022 and 2021, and 2020 were approximately 47% and 45%, respectively,respectively.
Purchased water costs for the first quarter of 2022 increased to $17.8 million as compared to the authorized adopted percentages of 37%$15.2 million for the three months ended September 30,same period in 2021 and 2020. Theprimarily due to the higher actual percentagemix of purchased water as compared to the adopted percentage resulted from a higher volume of purchasedpumped water, costs due to several wells being out of service.and an increase in wholesale water costs. The increase in power purchased for pumping was due to increases in electricity provider rates incurred for pumping. Groundwater production assessments decreased due to a higher amount of purchased water versus pumped water as compared to the three months ended September 30, 2020.March 31, 2021.
For the three months ended September 30, 2021,March 31, 2022, the water supply cost balancing account had a $2.1$5.1 million under-collection as compared to a $3.0$2.9 million under-collection during the same period in 2020.2021. This variance was due to higher costs related to purchased water, partially offset by rate increases for certain rate-making areas to specifically cover increases in supply costs experienced in these areas, partially offsetareas.
Electric segment supply costs
Supply costs for the electric segment consist primarily of purchased power for resale, the cost of natural gas used by higherBVESI’s generating unit, the cost of renewable energy credits and changes in the electric supply cost balancing account. For the three months ended March 31, 2022 and 2021, electric supply costs related to purchased water.consisted of the following amounts (in thousands):
Three Months Ended 
 March 31, 2022
Three Months Ended 
 March 31, 2021
CHANGECHANGE
Power purchased for resale$5,166 $3,198 $1,968 61.5 %
Electric supply cost balancing account *(1,276)493 (1,769)-358.8 %
Total electric supply costs$3,890 $3,691 $199 5.4 %
* The sum of water and electric supply-cost balancing accounts are shown on AWR’s Consolidated Statements of Income and totaled $(6,343,000) and $(2,427,000) for the three months ended March 31, 2022 and 2021, respectively.
For the three months ended September 30, 2021,March 31, 2022, the cost of power purchased for resale to BVESI's electric customers increased to $2.9$5.2 million as compared to $2.1$3.2 million during the same period in 20202021 due to a higher average price per megawatt-hour.megawatt-hour, as well as higher customer usage. The average price per megawatt-hour, including fixed costs, increased from $58.21$76.14 for the three months ended September 30, 2020March 31, 2021 to $79.03$141.21 for the same period in 2021.2022.  The under-collection in the electric supply cost balancing account
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increased as compared to an over-collection during the three months ended September 30, 2020March 31, 2021 was due to an updated adopted supply cost effective January 1,the increase in energy prices experienced since the first quarter of 2021.
Other Operation
The primary components of other operation expenses include payroll costs, materials and supplies, chemicals and water treatment costs and outside service costs of operating the regulated water systems, including the costs associated with water transmission and distribution, pumping, water quality, meter reading, billing, and operations of district offices, as well as the electric system.  Registrant’s contracted services operations incur many of the same types of expenses.  For the three months ended September 30,March 31, 2022 and 2021, and 2020, other operation expenses by business segment consisted of the following (dollar amounts in thousands):
Three Months Ended 
 September 30, 2021
Three Months Ended 
 September 30, 2020
$
CHANGE
%
CHANGE
Water Services$7,287 $6,185 $1,102 17.8 %
Electric Services705 432 273 63.2 %
Contracted Services1,422 1,511 (89)(5.9)%
Total other operation$9,414 $8,128 $1,286 15.8 %
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Three Months Ended 
 March 31, 2022
Three Months Ended 
 March 31, 2021
$
CHANGE
%
CHANGE
Water Services$6,354 $5,813 $541 9.3 %
Electric Services876 771 105 13.6 %
Contracted Services1,437 1,633 (196)(12.0)%
Total other operation$8,667 $8,217 $450 5.5 %
For the three months ended September 30, 2021,March 31, 2022, the $1.1 million$541,000 increase in other operation expenses at the water segment was due primarily to higher outside service costs associated with water treatment processes, as well as higherand conservation costs.
For the three months ended September 30, 2021, the $273,000 increase in other operation expenses at the electric segment was due to higher labor, transportation-related and supply costs.
Administrative and General
Administrative and general expenses include payroll costs related to administrative and general functions, all employee-related benefits, insurance expenses, outside legal and consulting fees, regulatory-utility-commission expenses, expenses associated with being a public company and general corporate expenses charged to expense accounts. For the three months ended September 30,March 31, 2022 and 2021, and 2020, administrative and general expenses by business segment, including AWR (parent), consisted of the following (dollar amounts in thousands): 
Three Months Ended 
 September 30, 2021
Three Months Ended 
 September 30, 2020
$
CHANGE
%
CHANGE
Three Months Ended 
 March 31, 2022
Three Months Ended 
 March 31, 2021
$
CHANGE
%
CHANGE
Water ServicesWater Services$13,677 $13,610 $67 0.5 %Water Services$15,596 $14,435 $1,161 8.0 %
Electric ServicesElectric Services2,039 2,359 (320)(13.6)%Electric Services2,166 2,429 (263)(10.8)%
Contracted ServicesContracted Services4,538 4,674 (136)(2.9)%Contracted Services5,208 5,187 21 0.4 %
AWR (parent)AWR (parent)— — %AWR (parent)— — %
Total administrative and generalTotal administrative and general$20,255 $20,644 $(389)(1.9)%Total administrative and general$22,972 $22,053 $919 4.2 %
Administrative and general expenses increased at the water segment largely due to increases in labor and employee-related benefits including the service cost component of GSWC's defined benefit pension and other retirement plans. As a result of GSWC's two-way pension balancing account authorized by the CPUC, increases in pension costs are fully recovered in customer rates; thus having no material impact to earnings. There was also an increase in insurance costs.
Administrative and general expenses decreased at the electric segment due, in part, to a decrease of $99,000 in surcharges billed to customers for the recovery of previously incurred costs, which had a corresponding decrease in administrative and general expenses, resulting in no impact to earnings. Excluding surcharges, administrative and general expenses at the electric segment decreased by $221,000 largely due to lower legal and other outside service costs.
Depreciation and Amortization
For the three months ended September 30, 2021 and 2020, depreciation and amortization by business segment consisted of the following (dollar amounts in thousands):
Three Months Ended 
 September 30, 2021
Three Months Ended 
 September 30, 2020
$
CHANGE
%
CHANGE
Water Services$8,272 $7,835 $437 5.6 %
Electric Services644 626 18 2.9 %
Contracted Services910 887 23 2.6 %
Total depreciation and amortization$9,826 $9,348 $478 5.1 %
The overall increase in depreciation expense resulted from additions to utility plant and other fixed assets since the third quarter of 2020.

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Maintenance
For the three months ended September 30, 2021 and 2020, maintenance expense by business segment consisted of the following (dollar amounts in thousands):
Three Months Ended 
 September 30, 2021
Three Months Ended 
 September 30, 2020
$
CHANGE
%
CHANGE
Water Services$2,140 $3,219 $(1,079)(33.5)%
Electric Services158 193 (35)(18.1)%
Contracted Services681 834 (153)(18.3)%
Total maintenance$2,979 $4,246 $(1,267)(29.8)%
Maintenance expense decreased at the water segment due to lower unplanned maintenance incurred as compared to the same period in 2020.
The decrease in maintenance expense at the contracted services segment is largely due to timing differences of when the work was performed as compared to the same period in 2020.
Property and Other Taxes
For the three months ended September 30, 2021 and 2020, property and other taxes by business segment consisted of the following (dollar amounts in thousands):
Three Months Ended 
 September 30, 2021
Three Months Ended 
 September 30, 2020
$
CHANGE
%
CHANGE
Water Services$5,185 $4,946 $239 4.8 %
Electric Services422 314 108 34.4 %
Contracted Services445 433 12 2.8 %
Total property and other taxes$6,052 $5,693 $359 6.3 %
Property and other taxes increased overall due mostly to capital additions at the water and electric segment and the associated higher assessed property values.
ASUS Construction
For the three months ended September 30, 2021, construction expenses for contracted services were $12.2 million, decreasing $1.4 million compared to the same period in 2020 due to a decrease in construction activity.
Interest Expense
For the three months ended September 30, 2021 and 2020, interest expense by business segment, including AWR (parent), consisted of the following (dollar amounts in thousands):
Three Months Ended 
 September 30, 2021
Three Months Ended 
 September 30, 2020
$
CHANGE
%
CHANGE
Water Services$5,184 $5,911 $(727)(12.3)%
Electric Services131 86 45 52.3 %
Contracted Services78 105 (27)(25.7)%
AWR (parent)160 59 101 171.2 %
Total interest expense$5,553 $6,161 $(608)(9.9)%
Registrant's borrowings consist of bank debts under revolving credit facilities and long-term debt issuances at GSWC. Consolidated interest expense decreased as compared to the same period in 2020 primarily as a result of the early redemption in May 2021 of GSWC's 9.56% private placement notes in the amount of $28 million.

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Interest Income
For the three months ended September 30, 2021 and 2020, interest income by business segment, including AWR (parent), consisted of the following (dollar amounts in thousands):
Three Months Ended 
 September 30, 2021
Three Months Ended 
 September 30, 2020
$
CHANGE
%
CHANGE
Water Services$86 $105 $(19)(18.1)%
Electric Services30 32 (2)(6.3)%
Contracted Services219 179 40 22.3 %
AWR (parent)(2)— (2)N/A
Total interest income$333 $316 $17 5.4 %
Other Income and (Expense), net
For the three months ended September 30, 2021 and 2020, other income and (expense), net by business segment, consisted of the following (dollar amounts in thousands):
Three Months Ended 
 September 30, 2021
Three Months Ended 
 September 30, 2020
$
CHANGE
%
CHANGE
Water Services$429 $1,483 $(1,054)(71.1)%
Electric Services68 30 38 126.7 %
Contracted Services(30)(34)(11.8)%
AWR (parent)— 134 (134)(100.0)%
Total other income and (expense), net$467 $1,613 $(1,146)(71.0)%
For the three months ended September 30, 2021, other income (net of other expense) decreased mostly as a result of lower gains generated and recorded on investments held to fund one of Registrant's retirement plans as compared to the same period in 2020 due to volatility in the financial markets.
Income Tax Expense
For the three months ended September 30, 2021 and 2020, income tax expense by business segment, including AWR (parent), consisted of the following (dollar amounts in thousands):
Three Months Ended 
 September 30, 2021
Three Months Ended 
 September 30, 2020
$
CHANGE
%
CHANGE
Water Services$7,993 $7,683 $310 4.0 %
Electric Services537 533 0.8 %
Contracted Services1,265 1,150 115 10.0 %
AWR (parent)83 (321)404 (125.9)%
Total income tax expense$9,878 $9,045 $833 9.2 %
Consolidated income tax expense for the three months ended September 30, 2021 increased by $833,000 primarily due to an increase in pretax income as compared to the same period in 2020, and an increase in income tax expense at AWR (parent). AWR's overall effective income tax rate ("ETR") was 26.0% and 25.4% for the three months ended September 30, 2021 and 2020, respectively. GSWC's ETR was 26.0% and 26.7% for the three months ended September 30, 2021 and 2020, respectively. The increase in income tax expense at AWR (parent) was due primarily to changes in state unitary taxes.
For a comparison of the financial results for the third quarter of 2020 to 2019, see “Consolidated Results of Operations-Three Months Ended September 30, 2020 and September 30, 2019” in Registrant’s Form 10-Q for the period ended September 30, 2020 filed with the SEC.
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Consolidated Results of Operations — Nine Months Ended September 30, 2021 and 2020 (amounts in thousands, except per share amounts):
Nine Months Ended September 30, 2021Nine Months Ended September 30, 2020$
CHANGE
%
CHANGE
OPERATING REVENUES    
Water$269,430 $257,199 $12,231 4.8 %
Electric28,211 26,935 1,276 4.7 %
Contracted services84,588 79,909 4,679 5.9 %
Total operating revenues382,229 364,043 18,186 5.0 %
OPERATING EXPENSES    
Water purchased60,248 56,291 3,957 7.0 %
Power purchased for pumping8,590 7,626 964 12.6 %
Groundwater production assessment14,845 15,140 (295)(1.9)%
Power purchased for resale8,203 7,127 1,076 15.1 %
Supply cost balancing accounts(7,959)(6,606)(1,353)20.5 %
Other operation26,165 24,573 1,592 6.5 %
Administrative and general62,938 63,992 (1,054)(1.6)%
Depreciation and amortization29,156 27,190 1,966 7.2 %
Maintenance8,908 12,224 (3,316)(27.1)%
Property and other taxes17,265 16,098 1,167 7.2 %
ASUS construction42,910 39,166 3,744 9.6 %
Total operating expenses271,269 262,821 8,448 3.2 %
OPERATING INCOME110,960 101,222 9,738 9.6 %
OTHER INCOME AND EXPENSES    
Interest expense(17,843)(17,533)(310)1.8 %
Interest income1,136 1,364 (228)(16.7)%
Other, net2,998 2,388 610 25.5 %
 (13,709)(13,781)72 (0.5)%
INCOME BEFORE INCOME TAX EXPENSE97,251 87,441 9,810 11.2 %
Income tax expense23,254 21,227 2,027 9.5 %
NET INCOME$73,997 $66,214 $7,783 11.8 %
Basic earnings per Common Share$2.00 $1.79 $0.21 11.7 %
Fully diluted earnings per Common Share$2.00 $1.79 $0.21 11.7 %

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Operating Revenues:
General
GSWC and BVESI rely upon approvals by the CPUC of rate increases to recover operating expenses and to provide for a return on invested and borrowed capital used to fund utility plant. ASUS relies on economic price and equitable adjustments by the U.S. government in order to recover operating expenses and provide a profit margin for ASUS.  Current operating revenues and earnings can be negatively impacted if the Military Utility Privatization Subsidiaries do not receive adequate rate relief or adjustments in a timely manner.  ASUS’s earnings are also impacted by the level of additional construction projects at the Military Utility Privatization Subsidiaries, which may or may not continue at current levels in future periods.
Water
For the nine months ended September 30, 2021, revenues from water operations increased by $12.2 million to $269.4 million as compared to the same period in 2020 due primarily to full third-year step increases for 2021 approved by the CPUC. These increases were partially offset by lower surcharges billed during the nine months ended September 30, 2021 related to CPUC-approved surcharges to recover previously incurred costs. These surcharges are largely offset by corresponding decreases in operating expenses, resulting in no impact to earnings.
Billed water consumption for the first nine months of 2021 increased 4% as compared to the same period in 2020 due, in part, to warmer and drier than normal weather conditions experienced in California. Currently, changes in consumption generally do not have a significant impact on recorded revenues due to the CPUC-approved WRAM in place in all but one small rate-making area. GSWC records the difference between what it bills its water customers and that which is authorized by the CPUC in the WRAM accounts as regulatory assets or liabilities.
Electric
Electric revenues for the nine months ended September 30, 2021 increased by $1.3 million to 28.2 million as a result of new CPUC-approved electric rates effective January 1, 2021, as well as a 5% increase in electric usage as compared to the same period in 2020. The higher usage was due to an increase in tourist activity experienced in the Big Bear Lake area as the economy continues to reopen. Due to the CPUC-approved Base Revenue Requirement Adjustment Mechanism, which adjusts certain revenues to adopted levels authorized by the CPUC, changes in usage do not have a significant impact on earnings.
Contracted Services
Revenues from contracted services are composed of construction revenues (including renewal and replacements) and management fees for operating and maintaining the water and/or wastewater systems at various military bases.  For the nine months ended September 30, 2021, revenues from contracted services increased $4.7 million to $84.6 millionas compared to $79.9 million for the same period in 2020. This was primarily due to timing differences of when construction work was performed as compared to the first nine months of 2020. In addition, there were increases in management fees due to the successful resolution of various economic price adjustments.
ASUS subsidiaries continue to enter into U.S. government-awarded contract modifications and agreements with third-party prime contractors for new construction projects at the Military Utility Privatization Subsidiaries. Earnings and cash flows from modifications to the original 50-year contracts with the U.S. government and agreements with third-party prime contractors for additional construction projects may or may not continue in future periods.
Operating Expenses:
Supply Costs
Supply costs for the water segment consist of purchased water, purchased power for pumping, groundwater production assessments and changes in the water supply cost balancing accounts. Supply costs for the electric segment consist primarily of purchased power for resale, the cost of natural gas used by BVESI’s generating unit, the cost of renewable energy credits and changes in the electric supply cost balancing account. Total supply costs comprise the largest segment of total operating expenses. Supply costs accounted for approximately 30.9% and 30.3% of total operating expenses for the nine months ended September 30, 2021 and 2020, respectively.
Registrant uses "Operating Revenues, Less Supply Costs" presented in the following table for its water and electric segments as important measures in evaluating its operating results. Registrant believes these measures are useful supplemental data in that they remove the effects of pass-through supply costs that, due to regulatory mechanisms in place, do not impact profitability. Registrant reviews these measurements regularly and compares them to historical periods and to its operating budget. However, these measures are not presented in accordance with GAAP and may not be comparable to similarly titled measures used by other entities and, therefore, should not be considered as an alternative to Operating Revenues, which are determined in accordance with GAAP and presented in Registrant's consolidated statements of income.
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The table below provides the amounts (in thousands) of increases (decreases) and percent changes in water and electric operating revenues, water and electric supply costs, and operating revenues less supply costs during the nine months ended September 30, 2021 and 2020. There was a decrease of $309,000 in water surcharges and a decrease of $346,000 in electric surcharges to recover previously incurred costs. Surcharges to recover previously incurred costs are recorded to revenues when billed to customers and are offset by a corresponding amount in operating expenses, resulting in no impact to earnings.
Nine Months Ended September 30, 2021Nine Months Ended September 30, 2020$
CHANGE
%
CHANGE
WATER OPERATING REVENUES (GAAP) (1)$269,430 $257,199 $12,231 4.8 %
WATER SUPPLY COSTS:    
Water purchased (1)$60,248 $56,291 $3,957 7.0 %
Power purchased for pumping (1)8,590 7,626 964 12.6 %
Groundwater production assessment (1)14,845 15,140 (295)(1.9)%
Water supply cost balancing accounts (1)(8,445)(7,297)(1,148)15.7 %
TOTAL WATER SUPPLY COSTS$75,238 $71,760 $3,478 4.8 %
WATER OPERATING REVENUES, LESS WATER SUPPLY COSTS (NON-GAAP)$194,192 $185,439 $8,753 4.7 %
  
ELECTRIC OPERATING REVENUES (GAAP) (1)$28,211 $26,935 $1,276 4.7 %
ELECTRIC SUPPLY COSTS:    
Power purchased for resale (1)$8,203 $7,127 $1,076 15.1 %
Electric supply cost balancing accounts (1)486 691 (205)(29.7)%
TOTAL ELECTRIC SUPPLY COSTS$8,689 $7,818 $871 11.1 %
ELECTRIC OPERATING REVENUES, LESS ELECTRIC SUPPLY COSTS (NON-GAAP)$19,522 $19,117 $405 2.1 %
(1)   As reported on AWR’s GAAP Consolidated Statements of Income, except for supply cost balancing accounts. The sum of water and electric supply cost balancing accounts in the table above are shown in AWR’s GAAP Consolidated Statements of Income and totaled $(7,959,000) and $(6,606,000) for the nine months ended September 30, 2021 and 2020, respectively. Revenues include surcharges, which increase both revenues and operating expenses by corresponding amounts, thus having no net earnings impact.
The overall actual percentages of purchased water for the nine month periods ended September 30, 2021 and 2020 was approximately 45% and 44%, respectively, as compared to the authorized adopted percentages of 35% for the nine months ended September 30, 2021 and 2020. The higher actual percentage of purchased water as compared to the adopted percentage resulted from a higher volume of purchased water costs due to several wells being out of service. The increase in power purchased for pumping was due to increases in electricity provider rates incurred for pumping. Groundwater production assessments decreased due to a higher amount of purchased water versus pumped water as compared to the nine months ended September 30, 2020.
For the nine months ended September 30, 2021, the water supply cost balancing account had a $8.4 million under-collection as compared to a $7.3 million under-collection during the same period in 2020. This variance was due to the higher than adopted supply mix, as well as higher costs for purchased water and power purchased for pumping.
For the nine months ended September 30, 2021, the cost of power purchased for resale to BVESI's electric customers increased to $8.2 million as compared to $7.1 million during the same period in 2020 due primarily to a higher average price per megawatt-hour. The average price per megawatt-hour, including fixed costs, increased from $64.81 for the nine months ended September 30, 2020 to $72.04 for the same period in 2021.  The over-collection in the electric supply cost balancing account decreased as compared to the nine months ended September 30, 2020 due to an updated adopted supply cost effective January 1, 2021, as well as the increase in the cost of power as compared to 2020.
Other Operation
The primary components of other operation expenses include payroll costs, materials and supplies, chemicals and water treatment costs and outside service costs of operating the regulated water systems, including the costs associated with water transmission and distribution, pumping, water quality, meter reading, billing, and operations of district offices as well as the electric system.  Registrant’s contracted services operations incur many of the same types of expenses.  For the nine months
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ended September 30, 2021 and 2020, other operation expenses by business segment consisted of the following (dollar amounts in thousands):
Nine Months Ended September 30, 2021Nine Months Ended September 30, 2020$
CHANGE
%
CHANGE
Water Services$19,476 $17,682 $1,794 10.1 %
Electric Services2,114 1,935 179 9.3 %
Contracted Services4,575 4,956 (381)(7.7)%
Total other operation$26,165 $24,573 $1,592 6.5 %
For the nine months ended September 30, 2021, the increase in other operation expense at the water segment was primarily due to higher outside service costs associated with water treatment processes, as well as water conservation costs.
For the nine months ended September 30, 2021, the decrease at the contracted services segment was primarily due to lower outside services and pre-contract costs.
Administrative and General
Administrative and general expenses include payroll costs related to administrative and general functions, all employee-related benefits, insurance expenses, outside legal and consulting fees, regulatory-utility-commission expenses, expenses associated with being a public company and general corporate expenses charged to expense accounts. For the nine months ended September 30, 2021 and 2020, administrative and general expenses by business segment, including AWR (parent), consisted of the following (dollar amounts in thousands): 
Nine Months Ended September 30, 2021Nine Months Ended September 30, 2020$
CHANGE
%
CHANGE
Water Services$41,973 $41,862 $111 0.3 %
Electric Services6,533 6,678 (145)(2.2)%
Contracted Services14,426 15,447 (1,021)(6.6)%
AWR (parent)20.0 %
Total administrative and general$62,938 $63,992 $(1,054)(1.6)%
For the nine months ended September 30, 2021, the decrease in administrative and general expenses at the electric segment was largely due to a decrease of $151,000$175,000 in surcharges billed to customers for the recovery of previously incurred costs, which had a corresponding decrease in administrative and general expenses, resulting in no impact to earnings.
For the nine months ended September 30, 2021, the decrease in administrative and general expenses at the contracted services segment was primarily related to decreases in legal and other outside service costs as compared to the same period in 2020. Legal and outside services tend to fluctuate from period to period.
Depreciation and Amortization
For the ninethree months ended September 30,March 31, 2022 and 2021, and 2020, depreciation and amortization by business segment consisted of the following (dollar amounts in thousands):
Nine Months Ended September 30, 2021Nine Months Ended September 30, 2020$
CHANGE
%
CHANGE
Three Months Ended 
 March 31, 2022
Three Months Ended 
 March 31, 2021
$
CHANGE
%
CHANGE
Water ServicesWater Services$24,547 $22,858 $1,689 7.4 %Water Services$8,545 $8,062 $483 6.0 %
Electric ServicesElectric Services1,925 1,841 84 4.6 %Electric Services654 639 15 2.3 %
Contracted ServicesContracted Services2,684 2,491 193 7.7 %Contracted Services915 859 56 6.5 %
Total depreciation and amortizationTotal depreciation and amortization$29,156 $27,190 $1,966 7.2 %Total depreciation and amortization$10,114 $9,560 $554 5.8 %
The overall increase in depreciation expense resulted from additions to utility plant and other fixed assets since September 2020.the first quarter of 2021.

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Maintenance
For the ninethree months ended September 30,March 31, 2022 and 2021, and 2020, maintenance expense by business segment consisted of the following (dollar amounts in thousands):
Nine Months Ended September 30, 2021Nine Months Ended September 30, 2020$
CHANGE
%
CHANGE
Three Months Ended 
 March 31, 2022
Three Months Ended 
 March 31, 2021
$
CHANGE
%
CHANGE
Water ServicesWater Services$6,236 $8,925 $(2,689)(30.1)%Water Services$2,156 $1,740 $416 23.9 %
Electric ServicesElectric Services565 881 (316)(35.9)%Electric Services250 208 42 20.2 %
Contracted ServicesContracted Services2,107 2,418 (311)(12.9)%Contracted Services734 714 20 2.8 %
Total maintenanceTotal maintenance$8,908 $12,224 $(3,316)(27.1)%Total maintenance$3,140 $2,662 $478 18.0 %
Maintenance expense decreasedincreased at the water segment due to lowerhigher unplanned and planned maintenance incurred as compared to the same period in 2020.
Maintenance expense decreased at the electric segment due, in part, to a decrease of $195,000 in surcharges billed to customers for the recovery of previously incurred maintenance costs, which had a corresponding decrease in maintenance expense, resulting in no impact to earnings. Excluding surcharges, maintenance expense at the electric segment decreased by $121,000 largely due to timing differences of when the work was performed as compared to the same period in 2020.
Maintenance expense at the contracted services segment decreased largely due to timing differences of when the work was performed as compared to the same period in 2020.2021.
Property and Other Taxes
For the ninethree months ended September 30,March 31, 2022 and 2021, and 2020, property and other taxes by business segment consisted of the following (dollar amounts in thousands):
Nine Months Ended September 30, 2021Nine Months Ended September 30, 2020$
CHANGE
%
CHANGE
Water Services$14,665 $13,697 $968 7.1 %
Electric Services1,090 914 176 19.3 %
Contracted Services1,510 1,487 23 1.5 %
Total property and other taxes$17,265 $16,098 $1,167 7.2 %
Property and other taxes increased overall due mostly to capital additions and the associated higher assessed property values.
Three Months Ended 
 March 31, 2022
Three Months Ended 
 March 31, 2021
$
CHANGE
%
CHANGE
Water Services$4,890 $5,016 $(126)(2.5)%
Electric Services458 353 105 29.7 %
Contracted Services505 571 (66)(11.6)%
Total property and other taxes$5,853 $5,940 $(87)(1.5)%
ASUS Construction
For the ninethree months ended September 30, 2021,March 31, 2022, construction expenses for contracted services were $42.9$10.2 million, increasing $3.7decreasing $5.5 million compared to the same period in 2020,2021 primarily due largely to timing differences of when work was performed as compared to the same period last year.in construction activity.
Interest Expense
For the ninethree months ended September 30,March 31, 2022 and 2021, and 2020, interest expense by business segment, including AWR (parent), consisted of the following (dollar amounts in thousands):
Nine Months Ended September 30, 2021Nine Months Ended September 30, 2020$
CHANGE
%
CHANGE
Three Months Ended 
 March 31, 2022
Three Months Ended 
 March 31, 2021
$
CHANGE
%
CHANGE
Water ServicesWater Services$16,625 $16,315 $310 1.9 %Water Services$5,236 $5,798 $(562)(9.7)%
Electric ServicesElectric Services364 636 (272)(42.8)%Electric Services112 116 (4)(3.4)%
Contracted ServicesContracted Services296 352 (56)(15.9)%Contracted Services62 109 (47)(43.1)%
AWR (parent)AWR (parent)558 230 328 142.6 %AWR (parent)196 235 (39)(16.6)%
Total interest expenseTotal interest expense$17,843 $17,533 $310 1.8 %Total interest expense$5,606 $6,258 $(652)(10.4)%
Registrant's borrowings consist of bank debts under revolving credit facilities and long-term debt issuances at GSWC. Consolidated interest expense increaseddecreased as compared to the same period in 2020 resulting from2021 primarily as a result of the early redemption in May 2021 of GSWC's 9.56% private placement notes in the amount of $28 million. This was partially offset by an overall increase in total borrowing levels to support, among other things, the capital expenditures program at the regulated utilities. In July 2020, GSWC issued unsecured private placement notes totaling $160.0 million. The increase in borrowing levels was partially offset by an overall decrease in interest rates, which included the early redemption in May 2021 of GSWC's 9.56% private placement notes in the amount of $28 million.
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Interest Income
For the ninethree months ended September 30,March 31, 2022 and 2021, and 2020, interest income by business segment, including AWR (parent), consisted of the following (dollar amounts in thousands):
Nine Months Ended September 30, 2021Nine Months Ended September 30, 2020$
CHANGE
%
CHANGE
Water Services$352 $519 $(167)(32.2)%
Electric Services89 117 (28)(23.9)%
Contracted Services754 723 31 4.3 %
AWR (parent)(59)(64)*
Total interest income$1,136 $1,364 $(228)(16.7)%
* not meaningful
Three Months Ended 
 March 31, 2022
Three Months Ended 
 March 31, 2021
$
CHANGE
%
CHANGE
Water Services$91 $87 $4.6 %
Electric Services(1)30 (31)(103.3)%
Contracted Services197 338 (141)(41.7)%
AWR (parent)(4)— (4)N/A
Total interest income$283 $455 $(172)(37.8)%
The overall decrease in interest income during the nine months ended September 30, 2021 was largelymainly due to lower interest earnedincome recognized on regulatory assetscertain construction projects at the water and electric segments bearing interest at the current 90-day commercial paper rate, which has decreasedcontracted services segment as compared to the same period in 2020.first quarter of 2021.
Other Income and (Expense), net
For the ninethree months ended September 30,March 31, 2022 and 2021, and 2020, other income and (expense), net by business segment, consisted of the following (dollar amounts in thousands):
Nine Months Ended September 30, 2021Nine Months Ended September 30, 2020$
CHANGE
%
CHANGE
Three Months Ended 
 March 31, 2022
Three Months Ended 
 March 31, 2021
$
CHANGE
%
CHANGE
Water ServicesWater Services$2,684 $2,266 $418 18.4 %Water Services$(598)$651 $(1,249)(191.9)%
Electric ServicesElectric Services168 93 75 80.6 %Electric Services143 46 97 210.9 %
Contracted ServicesContracted Services(112)(105)(7)6.7 %Contracted Services36 (41)77 (187.8)%
AWR (parent)258 134 124 92.5 %
Total other income and (expense), netTotal other income and (expense), net$2,998 $2,388 $610 25.5 %Total other income and (expense), net$(419)$656 $(1,075)(163.9)%
For the ninethree months ended September 30, 2021,March 31, 2022, other income (net of other expense) increaseddecreased mostly as a result of larger gains generated and recordedlosses incurred on investments held to fund one of Registrant's retirement plans as compared to gains generated during the same period in 20202021 due to volatility in the financial markets. This was partially offset by a decrease in the non-service cost components of net periodic benefit costs related to Registrant's defined benefit pension plans and other retirement benefits. However, as a result of GSWC's and BVESI's two-way pension balancing accounts authorized by the CPUC, changes in total net periodic benefit costs have no material impact to earnings.
Income Tax Expense
For the ninethree months ended September 30,March 31, 2022 and 2021, and 2020, income tax expense by business segment, including AWR (parent), consisted of the following (dollar amounts in thousands):
Nine Months Ended September 30, 2021Nine Months Ended September 30, 2020$
CHANGE
%
CHANGE
Three Months Ended 
 March 31, 2022
Three Months Ended 
 March 31, 2021
$
CHANGE
%
CHANGE
Water ServicesWater Services$17,718 $17,031 $687 4.0 %Water Services$2,689 $3,768 $(1,079)(28.6)%
Electric ServicesElectric Services1,879 1,722 157 9.1 %Electric Services952 884 68 7.7 %
Contracted ServicesContracted Services3,927 3,199 728 22.8 %Contracted Services944 1,391 (447)(32.1)%
AWR (parent)AWR (parent)(270)(725)455 (62.8)%AWR (parent)(124)(129)(3.9)%
Total income tax expenseTotal income tax expense$23,254 $21,227 $2,027 9.5 %Total income tax expense$4,461 $5,914 $(1,453)(24.6)%
Consolidated income tax expense for the ninethree months ended September 30, 2021 increasedMarch 31, 2022 decreased by $2.0$1.5 million primarily due to an increasea decrease in pretax income partially offset by a decreaseas compared to the same period in 2021. AWR's overall effective income tax rate ("ETR") was 24.0% and 23.5% for the overall ETR. AWR'sthree months ended March 31, 2022 and 2021, respectively. GSWC's ETR was 23.9% and 24.3%23.6% for the ninethree months ended September 30,March 31, 2022 and 2021, and 2020, respectively. The decrease in ETR resulted primarily from net changes in certain flow-through and permanent items at GSWC. GSWC's ETR was 24.0% and 25.5% for the nine months ended September 30, 2021 and 2020, respectively. The decrease in the income tax benefit at AWR (parent) was due primarily to changes in state unitary taxes.
For a comparison of the financial results for the first nine monthsquarter of 20202021 to 2019,2020, see “Consolidated Results of Operations-NineOperations-Three Months Ended September 30,March 31, 2021 and March 31, 2020 and September 30, 2019” in Registrant’s Form 10-Q for the period ended September 30, 2020March 31, 2021 filed with the SEC.
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Critical Accounting Policies and Estimates
Critical accounting policies and estimates are those that are important to the portrayal of AWR’s financial condition, results of operations and cash flows and require the most difficult, subjective or complex judgments of AWR’s management. The need to make estimates about the effect of items that are uncertain is what makes these judgments difficult, subjective and/or complex. Management makes subjective judgments about the accounting and regulatory treatment of many items. These judgments are based on AWR’s historical experience, terms of existing contracts, AWR’s observance of trends in the industry, and information available from other outside sources, as appropriate. Actual results may differ from these estimates under different assumptions or conditions. 
The critical accounting policies used in the preparation of the Registrants' financial statements that it believes affect the more significant judgments and estimates used in the preparation of its consolidated financial statements presented in this report are described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Registrant’s Annual Report on Form 10-K for the year ended December 31, 20202021 filed with the SEC. There have been no material changes to Registrant’s critical accounting policies.
Liquidity and Capital Resources
AWR
Registrant’s regulated business is capital intensive and requires considerable capital resources. A portion of these capital resources is provided by internally generated cash flows from operations. AWR anticipates that interest expense will increase in future periods due to the need for additional external capital to fund construction programs at its regulated utilities and as market interest rates increase. In addition, as the capital investment program continues to increase, coupled with the elimination of bonus depreciation for regulated utilities due to tax reform enacted in 2017, AWR and its subsidiaries anticipate they will need to access external financing more often. AWR believes that costs associated with capital used to fund construction at GSWC and BVESI will continue to be recovered through water and electric rates charged to customers.
AWR funds its operating expenses and pays dividends on its outstanding Common Shares primarily through dividends from its wholly owned subsidiaries. The ability of GSWC and BVESI to pay dividends to AWR is restricted by California law. Under these restrictions, approximately $602.4$611.5 million was available for GSWC to pay dividends to AWR on September 30, 2021.March 31, 2022. Approximately $68.2$73.4 million was available for BVESI to pay dividends to AWR as of September 30, 2021.March 31, 2022. ASUS's ability to pay dividends to AWR is dependent upon state laws in which each Military Utility Privatization Subsidiary operates, as well as ASUS's ability to pay dividends under California law.
When necessary, Registrant obtains funds from external sources through the capital markets, as well as from bank borrowings. Access to external financing on reasonable terms depends on the credit ratings of AWR and GSWC and current business conditions, including that of the water utility industry in general as well as conditions in the debt or equity capital markets.
AWR currently has access toborrows under a $200.0 million credit facility and borrows under this facility to provideprovides funds to GSWC and ASUS in support of their operations.  On April 22, 2022, the credit facility was amended to increase the borrowing capacity from $200.0 million to $280.0 million. The amendment also changed the benchmark interest rate from the London Interbank Offered Rate ("LIBOR") to the Secured Overnight Financing Rate ("SOFR"). This credit agreement expires in May 2023. Registrant does not believe the change in benchmark rates will have a material impact on its financing costs. The interest rate charged to GSWC and ASUS is sufficient to cover AWR’s interest expense under the credit facility. As of September 30, 2021,March 31, 2022, there was $162.0$189.5 millionoutstanding under this facility. This facility expires inRegistrant expects to issue long-term debt through GSWC prior to May 2023.2023, and use the debt proceeds to pay off borrowings under this facility.
BVESI has a separate $35 million revolving credit facility, which expireswas amended in December 2021 to reduce the interest rate and fees charged, as well as to extend the maturity date by one year to July 2023. As of September 30, 2021, there was $28.0 million1, 2024. As of March 31, 2022, there was $32.0 million outstanding under this facility. Borrowings under this facility support BVESI's operations and capital expenditures. Under the terms of the credit agreement, BVESI has the option to request an increase in the facility ofby an additional $15.0$15 million, subject to approval bylender approval. Interest rates under this facility are generally based on LIBOR. Under the financial institution. terms of the December 2021 amendment, upon discontinuation of a benchmark rate such as LIBOR, the lender may replace LIBOR with a benchmark interest rate such as SOFR. Registrant does not believe the change from LIBOR to a new benchmark rate will have a material impact on its financing costs. Registrant does not have any other borrowings or debt indexed to LIBOR.
The CPUC requires BVESI to completely pay off all borrowings under its revolving credit facility within a 24-month period. The next 24-month period in which BVESI is required to pay off its borrowings from the facility ends in July 2022. Accordingly, the $28.0$32.0 million outstanding under BVESI's credit facility has been classified as a current liability in AWR's Consolidated Balance Sheet as of September 30, 2021.
March 31, 2022. On May 24, 2021, GSWC redeemed early its 9.56%April 28, 2022, BVESI completed the issuance of $35 million in unsecured private placement notes inconsisting of $17.5 million at a coupon rate of 4.548% due April 28, 2032, and $17.5 million at a coupon rate of 4.949% due April 28, 2037. BVESI used the amount of $28.0 million, which pursuantproceeds to pay down amounts outstanding under its credit facility, thus complying with the note agreement included a redemption premium of 3.0%CPUC's 24-month rule. Interest on par value, or $840,000. GSWC recovers redemption premiums in its embedded cost of debt as filed in cost of capital proceedings where the cost savings from redeeming higher interest rate debt are passed on to customers. Accordingly, the redemption premium has been deferred as a regulatory asset. Prior to May 15, 2021, thethese notes were subject to a make whole premium. GSWC funded the redemption by borrowing from AWR parent. AWR, in turn, funded this borrowing from its revolving credit facility.is payable semiannually.
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As part of the response to the COVID-19 pandemic, GSWC and BVESI have suspended service disconnections for non-payment pursuantcontinue to CPUC and state orders. This suspension has significantly increased the amount ofexperience delinquent customer accounts receivable due to the lingering effects of the COVID-19 pandemic, resulting in both GSWC and BVESI increasing their allowance for doubtful accounts during the three months ended March 31, 2022. However, the moratoriums on service disconnections for nonpayment for water and electric customers have ended, and service disconnections due to nonpayment for commercial customers have resumed. In accordance with Senate Bill 998 guidelines, water service disconnections due to nonpayment for residential customers are set to resume in May of 2022. Furthermore, in January 2022, GSWC received $9.5 million in COVID relief funds through the California Water and Wastewater Arrearage Payment Program to provide assistance to customers for their water debt accrued during the COVID-19 pandemic by remitting federal funds that the state received from the American Rescue Plan Act of 2021 to the utility on behalf of eligible customers. GSWC applied these funds to its delinquent customers' eligible balances. In February 2022, BVESI received $321,000 from the state of California for similar customer relief funding for unpaid electric customer bills incurred during the pandemic. ThisThus far, the COVID-19 pandemic has affected cash flows from operating activities at the regulated utilities and has increased the need to borrow under AWR's and BVESI's credit facilities. On July 15, 2021, the CPUC issuednot had a final decision in the second phase of the Low-Income Affordability Rulemaking which, among other things, extends the suspension of water-service disconnections due to non-payment of past-due amounts billed to residential customers until the earlier of February 1, 2022 or pursuant to further CPUC guidancematerial impact on the matter. On June 24, 2021, the CPUC issued a final decision to extend the moratorium on electric-service disconnections until September 30, 2021. Under the terms of CPUC-adopted payment plans, actual electric-service disconnections for non-payment will occur no earlier than December 1, 2021.ASUS's current operations.
In March 2021, Standard and Poor’s Global Ratings (“S&P”) affirmed an A+ credit rating for both AWR and GSWC. S&P also revised its rating outlook to negative from stable for both companies. S&P’s debt ratings range from AAA (highest possible) to D (obligation is in default). In JuneNovember 2021, Moody's Investors Service ("Moody's") retainedaffirmed its A2 rating with a stable outlook for GSWC. Securities ratings are not recommendations to buy, sell or hold a security, and are subject to change or withdrawal at any time by the rating agencies. Management believes that AWR’s sound capital structure and A+ credit rating, combined with its financial discipline, will enable Registrant to access the debt and equity markets. However, unpredictable financial market conditions in the future may limit its access or impact the timing of when to access the market, in which case Registrant may choose to temporarily reduce its capital spending. 
AWR’s ability to pay cash dividends on its Common Shares outstanding depends primarily upon cash flows from its subsidiaries. AWR intends to continue paying quarterly cash dividends on or about March 1, June 1, September 1 and December 1, subject to earnings and financial conditions, regulatory requirements and such other factors as the Board of Directors may deem relevant. On October 26, 2021,April 28, 2022, AWR's Board of Directors approved a fourthsecond quarter dividend of $0.365 per share on AWR's Common Shares. Dividends on the Common Shares will be paid on DecemberJune 1, 20212022 to shareholders of record at the close of business on November 15, 2021.May 16, 2022. AWR has paid common dividends every year since 1931, and has increased the dividends received by shareholders each calendar year for 67 consecutive years, which places it in an exclusive group of companies on the New York Stock Exchange that have achieved that result. AWR's current policy is to achieve a compound annual growth rate in the dividend of more than 7% over the long-term.
AWR'sRegistrant's current liabilities may at times exceed its current assets.Management believes that internally generated cash flows from operations, borrowings from AWR's and BVESI's credit facilities, and access to long-term financing from capital markets will be adequate to provide sufficient capital to maintain normal operations and to meet its capital and financing requirements of AWR and its subsidiaries.requirements.
Cash Flows from Operating Activities:
Cash flows from operating activities have generally provided sufficient cash to fund operating requirements, including a portion of construction expenditures at GSWC and BVESI, and construction expenses at ASUS, and to pay dividends. Registrant’s future cash flows from operating activities are expected to be affected by a number of factors, including utility regulation; changes in tax law; maintenance expenses; inflation; compliance with environmental, health and safety standards; production costs; customer growth; per-customer usage of water and electricity; weather and seasonality; conservation efforts; compliance with local governmental requirements, including mandatory restrictions on water use; the impact of the COVID-19 pandemic on its customers' ability to pay utility billsbills; and required cash contributions to pension and post-retirement plans.Future cash flows from contracted services subsidiaries will depend on new business activities, existing operations, the construction of new and/or replacement infrastructure at military bases, timely economic price and equitable adjustment of prices, and timely collection of payments from the U.S. government and other prime contractors operating at the military bases, and any adjustments arising out of an audit or investigation by federal governmental agencies.
ASUS funds its operating expenses primarily through internal operating sources, which include U.S. government funding under 50-year contracts for operations and maintenance costs and construction activities, as well as investments by, or loans from, AWR.ASUS, in turn, provides funding to its subsidiaries.ASUS's subsidiaries may also from time to time provide funding to ASUS or its subsidiaries.
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Cash flows from operating activities are primarily generated by net income, adjusted for non-cash expenses such as depreciation and amortization, and deferred income taxes.  Cash generated by operations varies during the year. Net cash provided by operating activities of Registrant was $81.9$38.0 million for the ninefirst three months ended September 30, 2021March 31, 2022 as compared to $87.8$24.7 million for the same period in 2020.2021.  During the first quarter of 2022, GSWC and BVESI received $9.5 million and $321,000, respectively, in COVID-19 relief funds from the state of California to provide assistance to customers for delinquent water and electric customer bills incurred during the pandemic. The decrease in operating cash flow was due, in part, to different timing of income tax installment payments between the two periods. In addition, there was a decrease in billed surcharges to recover under-collections recorded in GSWC's water revenue adjustment mechanism and modified cost balancing accounts. The decreaseincrease in operating cash flow was also due to differences in the timing of vendor payments as compared to the first three months of 2021, as well as differences in the timing of billing of and cash receipts for construction work at military bases. The billings (and cash receipts) for this construction work generally occur at completion of the work or in accordance with a billing schedule contractually agreed to with the U.S. government and/or other prime contractors. Thus, cash flow from construction-related activities may fluctuate from period to period with such fluctuations representing timing differences of when the work is being performed and when the cash is received for payment of the work. These decreases were partially offset by an improvement in cash from accounts receivable related to utility customers due, in part, to improved economic conditions as compared to the first nine months of 2020, which were more affected by the COVID-19 pandemic. There was also an increase in customer rates and consumption. The timing of cash receipts and disbursements related to other working capital items also affected the change in net cash provided by operating activities. The delay in the water general rate case has negatively affected cash flows from operating activities, as year-to-date billed revenues have been based on 2021's adopted customer rates.
Cash Flows from Investing Activities:
Net cash used in investing activities was $106.5$35.0 million for the ninethree months ended September 30, 2021March 31, 2022 as compared to $94.6$37.0 million for the same period in 2020 largely due to an increase in capital expenditures at the regulated utilities.2021. Registrant invests capital to provide essential services to its regulated customer base, while working with the CPUC to have the opportunity to earn a fair rate of return on investment. Registrant’s infrastructure investment plan consists of both infrastructure renewal programs (where infrastructure is replaced, as needed) and major capital investment projects (where new water treatment, supply and delivery facilities are constructed). The regulated utilities may also be required from time to time to relocate existing infrastructure in order to accommodate local infrastructure improvement projects.
During 2022, the regulated utilities' company-funded capital expenditures are expected to be between $140 million and $160 million, barring any delays resulting from changes in capital improvement schedules due to supply chain issues or the continued effects of the COVID-19 pandemic.Projected capital expenditures and other investments are subject to periodic review and revision. For the year 2021, the regulated utilities' company-funded capital expenditures are expected to be between $130 and $140 million.
Cash Flows from Financing Activities:
Registrant’s financing activities include primarily: (i) the proceeds from the issuance of Common Shares, (ii) the issuance and repayment of long-term debt and notes payable to banks, and (iii) the payment of dividends on Common Shares. In order to finance new infrastructure, GSWC also receives customer advances (net of refunds) for, and contributions in aid of, construction. Borrowings on AWR's and BVESI's credit facilities are used to fund GSWC and BVESI capital expenditures, respectively, until long-term financing is arranged. Overall debt levels are expected to increase to fund a portion of the costs of the capital expenditures that will be made by the regulated utilities.
Net cash usedprovided by financing activities was $5.0$2.2 million for the ninethree months ended September 30, 2021March 31, 2022 as compared to cash providedused of $13.6$17.5 million during the same period in 2020.2021. During the ninethree months ended September 30, 2021, GSWC redeemed earlyMarch 31, 2022, AWR had a net increase in borrowings on its 9.56% private placement notes in the amountcredit facility of $28.0$16.0 million. GSWC funded the redemption by borrowing from AWR parent. AWR, in turn, funded from its revolving credit facility. During the ninethree months ended September 30, 2020, GSWC completed the issuance of new unsecured private placement notes totaling $160.0 million. GSWC used the proceeds from the notes to pay downMarch 31, 2021, AWR had a majority of its intercompanynet decrease in borrowings from AWR. AWR used the proceeds from GSWC to pay down amounts outstanding underon its credit facility.facility of $5.2 million.
GSWC
GSWC funds its operating expenses, payments on its debt, dividends on its outstanding common shares, and a portion of its construction expenditures through internal sources. Internal sources of cash flow are provided primarily by retention of a portion of earnings from operating activities. Internal cash generation is influenced by factors such as weather patterns, conservation efforts, environmental regulation, litigation, changes in tax law and deferred taxes, changes in supply costs and regulatory decisions affecting GSWC’s ability to recover these supply costs, timing of rate relief, increases in maintenance expenses and capital expenditures, surcharges authorized by the CPUC to enable GSWC to recover expenses previously incurred from customers, and CPUC requirements to refund amounts previously charged to customers. Internal cash flows may also be impacted by delays in receiving payments from GSWC customers due to the economic impact of the COVID-19 pandemic and state legislation suspending customer disconnections for non-payment.pandemic.
GSWC may, at times, utilize external sources for long-term financing, as well as obtain funds from equity investments and intercompany borrowings from its parent, AWR, to help fund a portion of its operations and construction expenditures. In July 2020, GSWC completed the issuance of long-term unsecured private placement notes totaling $160.0 million. In addition, AWR borrows under a revolving credit facility and provides funds to GSWC in support of its operations under intercompany borrowing arrangements. This credit facility expires in May 2023. However, the CPUC requires GSWC to completely pay off all intercompany borrowings it has from AWR within a 24-month period. The next 24-month period in which GSWC is required to pay off its intercompany borrowings from AWR ends in May 2023.

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Table GSWC intends to issue long term debt prior to May 2023, and use the proceeds to pay off its intercompany borrowings to be in compliance with this CPUC requirement. As of Contents
March 31, 2022, GSWC had outstanding intercompany borrowings from AWR of approximately $67.7 million.
In addition, GSWC receives advances and contributions from customers, home builders and real estate developers to fund construction necessary to extend service to new areas. Advances for construction are generally refundable at a rate of 2.5% in equal annual installments over 40 years. Utility plant funded by advances and contributions is excluded from rate base. Generally, GSWC amortizes contributions in aid of construction at the same composite rate of depreciation for the related
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property.
As is often the case with public utilities, GSWC’s current liabilities may at times exceed its current assets. Management believes that internally generated funds, along with the proceeds from the issuance of long-term debt, borrowings from AWR and common share issuances to AWR, will be adequate to provide sufficient capital to enable GSWC to maintain normal operations and to meet its capital and financing requirements pending recovery of costs in rates.
On July 1, 2020, GSWC completed the transfer of the net assets from its electric utility division to BVESI. As a result of this transfer, from July 1, 2020 onward, the cash flows of the electric segment are no longer included in GSWC's statement of cash flows, but continue to be included in AWR's consolidated statement of cash flows.
Cash Flows from Operating Activities:
Net cash provided by operating activities was $73.3$31.3 million for the ninethree months ended September 30, 2021March 31, 2022 as compared to $75.1$22.8 million for the same period in 2020.2021.  During the first quarter of 2022, GSWC received $9.5 million in COVID-19 relief funds from the state of California to provide assistance to customers for delinquent water customer bills incurred during the pandemic. The decreaseincrease in operating cash flow was also due to differences in part, to differentthe timing of income tax installmentvendor payments between the two periods. In addition, there was a decrease in billed surcharges to recover under-collections recorded in GSWC's water revenue adjustment mechanism and modified cost balancing accounts. These decreases were partially offset by an improvement in cash from accounts receivable related to utility customers due, in part, to improved economic conditions as compared to the first ninethree months of 2020, which were more affected by the COVID-19 pandemic.2021. The timing of cash receipts and disbursements related to other working capital items also affected the change in net cash provided by operating activities. The delay in the water general rate case has negatively affected cash flows from operating activities, as year-to-date billed revenues have been based on 2021's adopted customer rates.
Cash Flows from Investing Activities:
Net cash used in investing activities was $90.1$31.3 million for the ninethree months ended September 30, 2021March 31, 2022 as compared to $87.5$43.7 million for the same period in 2020. Due2021. Capital expenditures for the three months ended March 31, 2022 totaled $31.5 million as compared to the electric utility reorganization effective July 1, 2020, GSWC's cash flows from investing activities$31.8 million during the nine months ended September 30, 2021 do not include the electric segment's capital expenditures, whereas the cash flows for the nine months ended September 30, 2020 include the electric segment's capital expenditures through June 30, 2020.same period in 2021.
In October 2020, AWR issued an interest bearing promissory note to GSWC, which expires in May 2023. Under the terms of this note, AWR may borrow amounts up to $30 million for working capital purposes. AWR agrees to pay any unpaid principal amounts outstanding under this note, plus accrued interest. During the first ninethree months of 2021, AWR borrowed $23 million from GSWC, and subsequently repaid $23$11 million to GSWC under the terms of the note.
Cash Flows from Financing Activities:
Net cash used inprovided by financing activities was $15.8$4.2 million for the ninethree months ended September 30, 2021March 31, 2022 as compared to $16.1$12.2 million of net cash providedused for the same period in 2020.2021.  During the ninethree months ended September 30, 2021,March 31, 2022, GSWC redeemed early its 9.56% private placement noteshad an increase in the amountnet intercompany borrowings of $28.0 million. GSWC funded the redemption through intercompany borrowings$18.0 million from AWR parent. During the ninethree months ended September 30, 2020,March 31, 2021, GSWC completed the issuance of new unsecured private placement notes totaling $160.0 million. GSWC used the proceeds from the notes to pay down a majority of itsdid not have any intercompany borrowings from AWR. The CPUC requires GSWC to completely pay off all intercompany borrowings it has from AWR within a 24-month period. The next 24-month period in which GSWC is required to pay off its intercompany borrowings from AWR ends in May 2023.

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Contractual Obligations and Other Commitments
Registrant has various contractual obligations, which are recorded as liabilities in the consolidated financial statements. Other items, such as certain purchase commitments, are not recognized as liabilities in the consolidated financial statements but are required to be disclosed. In addition to contractual maturities, Registrant has certain debt instruments that contain an annual sinking fund or other principal payments. Registrant believes that it will be able to refinance debt instruments at their maturity through public issuance, or private placement, of debt or equity. Annual payments to service debt are generally made from cash flows from operations. 
On April 28, 2022, Registrant's electric segment issued $35 million in unsecured private placement notes consisting of $17.5 million at a coupon rate of 4.548% due April 28, 2032, and $17.5 million at a coupon rate of 4.949% due April 28, 2037. Interest on these notes is payable semiannually.
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Contractual Obligations, CommitmentsLiquidity and Off-Balance Sheet Arrangements”Capital Resources” section of the Registrant’s Form 10-K for the year ended December 31, 20202021 filed with the SEC for a detailed discussion of contractual obligations and other commitments.
Contracted Services
Under the terms of the current and future utility privatization contracts with the U.S. government, each contract's price is subject to an economic price adjustment (“EPA”) on an annual basis.In the event that ASUS (i) is managing more assets at specific military bases than were included in the U.S. government’s request for proposal, (ii) is managing assets that are in substandard condition as compared to what was disclosed in the request for proposal, (iii) prudently incurs costs not contemplated under the terms of the utility privatization contract, and/or (iv) becomes subject to new regulatory requirements, such as more stringent water-quality standards, ASUS is permitted to file, and has filed, requests for equitable adjustment (“REAs”).The timely filing for and receipt of EPAs and/or REAs continues to be critical in order for the Military Utility Privatization Subsidiaries to recover increasing costs of operating, maintaining, renewing and replacing the water and/or wastewater systems at the military bases it serves.
Under the Budget Control Act of 2011 (the “2011 Act”), substantial automatic spending cuts, known as "sequestration," have impacted the expected levels of Department of Defense budgeting.The Military Utility Privatization Subsidiaries have not experienced any earnings impact to their existing operations and maintenance and renewal and replacement services, as utility privatization contracts are an "excepted service" within the 2011 Act.With the expiration of the 2011 Act at the end of the government'sgovernment fiscal year 2021, there are currently no discretionary spending caps in fiscal year 2022 and beyond.However, similar issues may arise as part of the fiscal uncertainty and/or future debt-ceiling limits imposed by Congress. Management believes that anyAny future impact on ASUS and its operations through the Military Utility Privatization Subsidiaries will likely be limited to (a) the timing of funding to pay for services rendered, (b) delays in the processing of EPAs and/or REAs, (c) the timing of the issuance of contract modifications for new construction work not already funded by the U.S. government,Government, and/or (d) delays in the solicitation for and/or awarding of new contracts under the Department of Defense utility privatization program.
At times, the Defense Contract Auditing AgencyDCAA and/or the Defense Contract Management AgencyDCMA may, at the request of a contracting officer, perform audits/reviews of contractors for compliance with certain government guidance and regulations, such as the Federal Acquisition Regulations and Defense Federal Acquisition Regulation Supplements.Certain audit/review findings, such as system deficiencies for government-contract-business-system requirements, may result in delays in the resolution of filings submitted to and/or the ability to file new proposals with the U.S. government.
Regulatory Matters
An update on various regulatory matters is included in the discussion under the section titled “Overview” in this Form 10-Q's "Management’s Discussion and Analysis of Financial Condition and Results of Operations". The discussion below focuses on other regulatory matters and developments.
Water Segment:
Changes in Rates
Rates that GSWC is authorized to charge are determined by the CPUC in general rate cases. The last approved general rate case covered new water rates for the years 2019 – 2021. Effective January 1, 2021, the CPUC approved GSWC's full third-year step increase, which it achieved as a result of passing an earnings test. The higher water rates are expected to increase water's RLWSC by $11.1 million for 2021 as compared to its adopted RLWSC in 2020. GSWC has a pending general rate case that will determine new water rates for the years 2022–2024. In November 2021, GSWC and Public Advocates filed with the CPUC a joint motion to adopt a settlement agreement between GSWC and Public Advocates on this general rate case application.Among other things, the settlement authorizes GSWC to complete certain advice letter capital projects approved in the last general rate case, which have recently been completed for a total capital investment of $9.4 million.The additional annual revenue requirements generated from these capital investments total $1.2 million and became effective February 15, 2022.
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A proposed decision on the pending general rate case is expected in mid-2022. Pending a final decision on this general rate case, GSWC filed with the CPUC for interim rates, which will make new 2022 – 2024.rates, once approved in a CPUC final decision, effective January 1, 2022. Due to the delay in finalizing the water general rate case, water revenues billed and recorded for the first three months of 2022 were based on 2021 adopted rates, pending a final decision by the CPUC on this general rate case application. When approved, the new rates will be retroactive to January 1, 2022 and cumulative adjustments will be recorded in the quarter the new rates are approved by the CPUC.
Electric Segment:
Changes in Rates
OnIn August 15, 2019, the CPUC issued a final decision on the electric segment's general rate case which, among other things, increases the electric's adopted RLESC by $1.1 million for 2021, andrevenues by $1.0 million for 2022. The rate case decision continues to apply to BVESI. BVESI is expected to file its next general rate case application in June 2022 withto determine new rates beginning in 2023.for the years 2023–2026.
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Vegetation Management, Wildfire Mitigation Plans and Safety CertificationLegislation
The August 2019 final decision also authorized BVESI to record incremental costs related to vegetation management, such as costs for increased minimum clearances around electric power lines, in a CPUC-approved account for future recovery. As of March 31, 2022, BVESI has approximately $6.3 million in incremental vegetation management costs recorded as a regulatory asset. BVESI will seek future recovery of the costs accumulated in this memorandum account in its next general rate case filing.
California legislation enacted in September 2018 requires all investor-owned electric utilities to submit an annual wildfire mitigation plan (WMP) to the CPUC for approval. The WMP must include a utility's plans on constructing, maintaining, and operating its electrical lines and equipment to minimize the risk of catastrophic wildfire. In September 2021, the CPUC approved BVESI's most recent WMP submission. Capital expenditures and other costs incurred as a result of the WMP are subject to CPUC audit. As a result, the CPUC’s Wildfire Safety Division (now part of the California Natural Resources Agency effective July 1, 2021) engaged an independent accounting firm to conduct examinations of the expenses and capital investments identified in the 2019 and 2020 WMPs for each of the investor-owned electric utilities, including BVESI. As of September 30, 2021,March 31, 2022, BVESI has approximately $2.2$3.0 million related to expenses accumulated in its WMPsWMP memorandum accounts that have been recognized as regulatory assets for future recovery. BVESI’s examinationAll capital expenditures and other costs incurred through March 31, 2022 as a result of these expenses, as well as the capital investments incurred for itsBVESI's WMPs isare not currently in progressrates and at this time, management cannot predict the outcome or recommendations that may result from this examination.are expected to be filed for future recovery in BVESI's next general rate case application.
Additionally, the governor of California approved Assembly Bill ("AB") 1054 in July 2019, which among other things, changed the burden of proof applicable in CPUC proceedings in which an electric utility with a valid safety certification seeks to recover wildfire costs. Previously, an electric utility seeking to recover costs had the burden to prove that it acted reasonably. Under AB 1054, if an electric utility has a valid safety certification, it will be presumed to have acted reasonably unless a party to the relevant proceeding creates a “serious doubt” as to the reasonableness of the utility’s conduct. In September 2021, the Office of Energy Infrastructure Safety under the California Natural Resources Agency approved BVESI's latest safety certification filing, which is valid through September 2022.
BVESI CEMA Regulatory Asset
BVESI activated a CEMA account to track the incremental costs incurred in response to a severe winter storm that occurred in February 2019 and which resulted in the declaration of an emergency by the governor of California. Incremental costs of approximately $455,000 were included in the CEMA account and recorded as a regulatory asset. BVESI subsequently filed for recovery of these costs. In May 2021, the CPUC issued a final decision denying BVESI’s request for recovery, claiming that BVESI did not adequately demonstrate that the costs incurred were incremental and beyond costs already included in BVESI’s revenue requirement. The decision permits BVESI to file a new application on the issue of incrementality should it wish to continue pursuing recovery. BVESI believes the storm costs were incremental and beyond what was included in its revenue requirement, and in October 2021 filed a new application to continue pursuing recovery. As a result, the costs in this CEMA account remain a regulatory asset at September 30, 2021 as the Company continues to believe the incremental costs were properly tracked and included in the CEMA account consistent with the CPUC's well-established past practices. If BVESI does not ultimately prevail in obtaining recovery, it will result in a charge to earnings from a write-off of this CEMA regulatory asset of approximately $455,000. Management cannot currently predict the final outcome of this matter.
See also “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Regulatory Matters” section of the Registrant’s Form 10-K for the year-ended December 31, 20202021 filed with the SEC for a discussion of other regulatory matters.
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Environmental Matters
AWR’s subsidiaries are subject to stringent environmental regulations.GSWC is required to comply with the safe drinking water standards established by the U.S. Environmental Protection Agency (“USU.S. EPA”) and the Division of Drinking Water ("DDW"), under the State Water Resources Control Board (“SWRCB”("SWRCB").The USU.S. EPA regulates contaminants that may have adverse health effects that are known or likely to occur at levels of public health concern, and the regulation of which will provide a meaningful opportunity for health risk reduction.The DDW, acting on behalf of the USU.S. EPA, administers the USU.S. EPA’s program in California.Similar state agencies administer these rules in the other states in which Registrant operates.
GSWC currently tests its water supplies and water systems according to, among other things, requirements listed in the Federal Safe Drinking Water Act. In complianceAct (“SDWA”). GSWC works proactively with this Act,third parties and governmental agencies to address issues relating to known contamination threatening GSWC has incurredwater sources. GSWC also incurs operating costs for testing to determine the levels, if any, of the constituents in its sources of supply, and additional expense to treat contaminants in order to meet the federal and state maximum contaminant level standards and consumer demands. GSWC expects to incur additional capital costs as well as increased operating costs to maintain or improve the quality of water delivered to its customers in light of anticipated stress on water resources associated with watershed and aquifer pollution, drought impacts, as well as to meet future water quality standards.standards and consumer expectations. The CPUC rate-makingratemaking process provides GSWC with the opportunity to recover prudently incurred capital and operating costs in future filings associated with achieving water quality standards. Management believes that such incurred and expected future costs willshould be authorized for recovery by the CPUC.
Drinking Water Notifications Levels:
In July 2018, DDW issued drinking water notification levels for certain fluorinated organic chemicals used to make certain fabrics and other materials, and used in various industrial processes. These chemicals were also present in certain fire suppression agents. These chemicals are referred to as perfluoroalkyl substances ("PFAS")(PFAS). Notification levels are health-based advisory levels established for contaminants in drinking water for which maximum contaminant levels have not been established. The US EPA has also established health advisory levels for these compounds. Notification to consumers and stakeholders is required when the advisory levels or notification levels are exceeded.
California Assembly Bill No. 756, signed into law in July 2019 and effective in January 2020, requires, among other things, additional notification requirements for water systems detecting levels of PFAS above certainresponse levels. GSWC is in the process of collecting and analyzing samples for PFAS under the direction of DDW. GSWC has removed some wells from service, and expects to incur additional treatment costs to treat wells impacted by PFAS.wells. GSWC has provided customers with information regarding PFAS detectiondetections, and provided updated information via its website.
In February 2020, DDW established new response levels for two of the PFAS compounds -compounds: 10 parts per trillion for perfluorooctanoic acid ("PFOA")(PFOA) and 40 parts per trillion for perfluorooctanesulfonic acid ("PFOS")(PFOS). InOn March 5, 2021, DDW issued a drinking water notification level and response level of 0.5 parts per billion (ppb) and 5 ppb, respectively for perfluorobutane sulfonic acid (PFBS).
Lead and Copper Rule Revisions:
On December 16, 2021, the U.S. EPA announced the Lead and Copper Rule Revisions under an executive order, which will go into effect effective immediately with a compliance date of October 16, 2024. Additionally, the EPA announced its intention to develop a new proposed rule, the Lead and Copper Rule Improvements (LCRI) that will further strengthen the regulatory framework prior to the October 2024 compliance date. There are still many unknowns regarding the implementation of the rule. The CPUC has authorized GSWC to track incremental costs, including laboratory testing and monitoring costs, customer and public notification costs, and chemical and operating treatment costs, incurred as a resultdetails of PFAS contamination in a Polyfluoroalkyl Substances Memorandum Account tothe requirements will be filed withbetter understood over the CPUC for future recovery.next year once the LCRI is published.
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Environmental Matters” section of the Registrant’s Form 10-K for the year-ended December 31, 20202021 filed with the SEC for a discussion of environmental matters applicable to GSWC and ASUS and its subsidiaries.
Water Supply
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—California Drought���Drought” section of the Registrant’s Form 10-K for the year-ended December 31, 20202021 filed with the SEC for a discussion of water supply issues. The discussion below focuses on significant matters and changes since December 31, 2020.2021.
Drought Impact:
In May 2018, the California Legislature passed two bills that provide a framework for long-term water-use efficiency standards and drought planning and resiliency.The initial steps for implementingin implementation of this legislation are summarizedhave been laid out in a summary document by the California Department of Water Resources ("DWR") and the State Water Resources Control Board (“SWRCB”("SWRCB").Over the next several years, State agencies, water suppliers and other entities will be working to meet the requirements and implement plans.timelines of plan implementation. A notable milestone is the establishment of an indoor water use standard of 55 gallons per capita per day (gpcd) until 2025, at which time the standard may be reduced to 52.5 gpcd and reduced further to 50 gpcd by 2030. DWR may consider those standards to be reduced further.
The 2021 "water year", which ended on October 1, 2021, was the second driest on record with precipitation and snow levels well below average. Due to warmer temperatures, especially in the northern portions of California, below normal runoff from winter snowpack resulted in low reservoir levels throughout the state of California, which include surface water diversion curtailments for several watersheds within GSWC's service areas. As of October 26, 2021, the U.S. Drought Monitor reported that 83% of California is considered to be in extreme drought,or other standard as compared to only 13% one year ago. These dry conditions are
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more pronouncedrecommend by DWR.A recent report prepared by DWR for the California legislature, recommends reducing the standard to 42 gpcd by 2030.Legislation has been introduced in northern, central and eastern portionsthe current legislative session to reduce the standard to this value.
California's recent period of California. Southern California areas continue to experience moderate to severe drought conditions. California's multi-year drought has resulted in reduced recharge to the state's groundwater basins. GSWC utilizes groundwater from numerous groundwater basins throughout the state. Several of these basins, especially smaller basins, experienced lower groundwater levels because of the drought. Several of GSWC's service areas rely on groundwater as their only source of supply. Given the critical nature of the groundwater levels in California’s Central Coast area, GSWC implemented mandatory water restrictions in certain service areas in accordance with CPUC procedures. In the event of water supply shortages from the locally available supply, GSWC would need to transport additional water from other areas, increasing the cost of water supply.
On March 3, 2021,As of April 26, 2022, the United States Department of Agriculture declared a natural disaster for 50 counties in California, including some of those served by GSWC, due to drought impacts on agriculture. The governorU.S. Drought Monitor reported that 41% of California has proclaimed a state of emergency for all 58 countieswas considered in California. In addition, the governor of California signed an executive order asking all Californians to voluntarily reduce water usage by 15 percent"Extreme Drought" as compared to 2020 usage due to the persisting dry conditions. In addition, the CPUC has called on all investor-owned water utilities to implement voluntary conservation measures to achieve this 15 percent level. Additional mandates directed by the state53% one year ago, and 95% of California are possible should drywas considered in “Severe Drought” as compared to 88% a year ago. California is experiencing a record drought in 2022, with precipitation from January to March as the driest on record for this three month period. Due to deteriorating conditions, persist.
AsDWR reduced the resultallocation of ongoing drought conditions, on September 19, 2021, the CPUC approved GSWC’s staged water conservation and mandatory water rationing framework that allows GSWC to implement water conservation and rationing protocols to address drought-related water-supply challenges. In response to the governor's executive order requesting all Californians reduce water usage by 15%, and the CPUC’s call on all investor-owned water utilities to implement voluntary conservation measures to achieve a 15% reduction in water usage, the first stage of water rationing has been implemented in all of GSWC water systems, with the exception of several water systems in the Central Coastal area. The first stage is the voluntary conservation phase that requests all customers to reduce monthly usage by 15% from the 2020 baseline water usage year. For customers in some of GSWC’s Coastal service areas that have been under water use restrictions and allocations from the previous drought, the second stage of the water-rationing framework has been implemented. The second stage implements water-use restrictions and requires a mandatory 20% reduction in water usage from the 2020 baseline water usage year. Registrant's liquidity may be adversely impacted by mandatory water-use restrictions imposed on customers. GSWC established a Water Conservation Memorandum Account with the CPUC that will track incremental drought-related costs for future recovery.
The most recent seasonal drought outlook information provided by the National Weather Service’s Climate Prediction Center is predicting an 87% chance of a La Niña condition from December 2021 through February 2022. A La Niña condition is a complex weather pattern that occurs as a result of variations in ocean temperatures in the equatorial band of the Pacific Ocean, and typically results in higher-than-normal precipitation in the Pacific Northwest, but lower-than-normal precipitation in the Southwest and Southeast, which includes most of California.
Metropolitan Water District/ State Water Project:
GSWC supplements groundwater production with wholesale purchasesProject water from 15% to 5% on March 18, 2022. This change in SWP allocation will result in several areas of the Metropolitan Water District of Southern California ("MWD") member agencies.that depend on SWP water to receive only “health and safety (H&S)” supplies of 55 gpcd beginning in June 2022 should demand reduction actions not result in adequate water savings. On April 26, 2022, MWD declared a Water supplies available to the MWD through the State Water Project ("SWP") vary from year to year based on several factors. Every year, the California Department of Water Resources ("DWR") establishesSupply Emergency Condition for the SWP allocation fordependent areas that will impact GSWC’s Simi Valley and Claremont service areas, which utilize a portion of their supply from the SWP. This action also includes a phased Emergency Conservation Program that limits outdoor watering in those areas to one day per week. Should necessary demand reductions not be realized, MWD will move to zero outdoor watering days later in the summer. In addition, on March 28, 2022, the governor of California issued an executive order calling on all urban water deliveriessuppliers to statereduce water contractors. DWR generally establishes a percentage allocation of delivery requests based on several factors, including weather patterns, snow-pack levels, reservoir levelsuse by 20–30 percent. GSWC is working with its local suppliers to assess water supply conditions and biological diversion restrictions. The SWP is a major source of water forwater-use restrictions in its service areas and intends to make appropriate adjustments as needed.
In 2021, the MWD. DWR set the SWP allocation at 5 percent of requests for the 2021 water year, the lowest allocation on record. DueCPUC authorized GSWC to ongoing dry conditions, the projected initial SWP delivery allocations for 2022 may be set at an even lower allocation of zero. MWD is considering submitting a critical needs request to DWR should the allocation be set at zero.

MWD also relies on Colorado River supplies. The Colorado River Basin is also experiencing prolonged dry conditions, which are influencing Lake Mead water levels.This has resultedtrack incremental drought-related costs in a first ever lower Basin shortage condition forecastedmemorandum account for 2022. However, MWD has stated that it currently has robust reserves in storage through 2022 and is not currently projecting shortages in the 2022 water year. However, on August 17, 2021, in anticipation of potential shortages, MWD entered into a "Water Supply Alert" under their Water Shortage Contingency Plan.future recovery.
New Accounting Pronouncements
Registrant is subject to newly issued requirements as well as changes in existing requirements issued by the Financial Accounting Standards Board. See Note 1 of the Unaudited Notes to Consolidated Financial Statements.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
Registrant is exposed to certain market risks, including fluctuations in interest rates, commodity price risk primarily relating to changes in the market price of electricity at BVESI, and other economic conditions. Market risk is the potential loss arising from adverse changes in prevailing market rates and prices.
The quantitative and qualitative disclosures about market risk are discussed in Item 7A-Quantitative and Qualitative Disclosures About Market Risk, contained in Registrant’s Annual Report on Form 10-K for the year ended December 31, 20202021 filed with the SEC.
Item 4. Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures
As required by Rule 13a-15(b) under the Securities and Exchange Act of 1934 (the “Exchange Act”), we have carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”), of the effectiveness, as of the end of the fiscal quarter covered by this report, of the design and operation of our “disclosure controls and procedures” as defined in Rule 13a-15(e) and 15d-15(e) promulgated by the SEC under the Exchange Act. Based upon that evaluation, the CEO and the CFO concluded that disclosure controls and procedures, as of the end of such fiscal quarter, were adequate and effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.
(b) Changes in Internal Controls over Financial Reporting
There has been no change in our internal control over financial reporting during the quarter ended September 30, 2021,March 31, 2022, that has materially affected or is reasonably likely to materially affect our internal control over financial reporting.
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PART II

Item 1. Legal Proceedings
Registrant is subject to ordinary routine litigation incidental to its business, some of which may include claims for compensatory and punitive damages. No legal proceedings are pending whichthat are believed to be material. Management believes that rate recovery, proper insurance coverage and reserves are in place to insure against, among other things, property, general liability, employment, and workers’ compensation claims incurred in the ordinary course of business. Insurance coverage may not cover certain claims involving punitive damages.  
Item 1A. Risk Factors
There have been no significant changes in the risk factors disclosed in our 20202021 Annual Report on Form 10-K filed with the SEC.
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The shareholders of AWR have approved the material features of all equity compensation plans under which AWR issues equity securities. The following table provides information about repurchases of Common Shares by AWR during the thirdfirst quarter of 2021:2022:
PeriodTotal Number of
Shares
Purchased
 Average Price Paid
per Share
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs (1)
Maximum Number
of Shares That May
Yet Be Purchased
under the Plans or
Programs (1)(3)
July 1 – 31, 2021484  $84.31 — — 
August 1 – 31, 2021315  $89.80 — — 
September 1 – 30, 20212,402  $92.25 — — 
Total3,201 (2)$90.81 — 
PeriodTotal Number of
Shares
Purchased
 Average Price Paid
per Share
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs (1)
Maximum Number
of Shares That May
Yet Be Purchased
under the Plans or
Programs (1)(3)
January 1–31, 2022361  $94.44 — — 
February 1–28, 2022331  $86.08 — — 
March 1–31, 20222,748  $85.25 — — 
Total3,440 (2)$86.29 — 
(1)      None of the common shares were purchased pursuant to any publicly announced stock repurchase program.
(2)         These Common Shares were acquired on the open market for employees pursuant to GSWC's 401(k) plan and for participants in the Common Share Purchase and Dividend Reinvestment Plan. 
(3)        Neither the 401(k) plan nor the Common Share Purchase and Dividend Reinvestment Plan contain a maximum number of Common Shares that may be purchased in the open market.
Item 3. Defaults Upon Senior Securities
None
Item 4. Mine Safety Disclosure
Not applicable
Item 5. Other Information
(a)    On October 26, 2021,April 28, 2022, AWR's Board of Directors approved a fourthsecond quarter dividend of $0.365 per share on AWR's Common Shares. Dividends on the Common Shares will be paid on DecemberJune 1, 20212022 to shareholders of record at the close of business on November 15, 2021.May 16, 2022.
(b)    There have been no material changes during the thirdfirst quarter of 20212022 to the procedures by which shareholders may nominate persons to the Board of Directors of AWR.

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Item 6. Exhibits
(a) The following documents are filed as Exhibits to this report: 
3.1
3.2
3.3
3.4
4.1
4.2
4.3
4.4
10.1Second Sublease dated October 5, 1984 between Golden State Water Company and Three Valleys Municipal Water District incorporated herein by reference to Registrant's Registration Statement on Form S-2, Registration No. 33-5151
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
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10.12
10.13
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10.14
10.15
10.16
10.1610.17
10.1710.18
10.1810.19
10.1910.20
10.2010.21
10.2110.22
10.22
10.23
10.24
10.25
10.26
10.27
10.28
10.29
31.1
31.1.1
31.2
31.2.1
32.1
32.2
101.INSXBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCHXBRL Taxonomy Extension Schema (3)
101.CALXBRL Taxonomy Extension Calculation Linkbase (3)
101.DEFXBRL Taxonomy Extension Definition Linkbase (3)
101.LABXBRL Taxonomy Extension Label Linkbase (3)
101.PREXBRL Taxonomy Extension Presentation Linkbase (3)
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104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
_______________________
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(1)        Filed concurrently herewith 
(2)        Management contract or compensatory arrangement 
(3)        Furnished concurrently herewith

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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized and as its principal financial officer.
   AMERICAN STATES WATER COMPANY (“AWR”):
  By:/s/ EVA G. TANG
Eva G. Tang
   Senior Vice President - Finance, Chief Financial
   Officer, Corporate Secretary and Treasurer
   GOLDEN STATE WATER COMPANY (“GSWC”):
  By:/s/ EVA G. TANG
Eva G. Tang
   Senior Vice President - Finance, Chief Financial
   Officer and Secretary
  Date:November 1, 2021May 2, 2022
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