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 March 31,September 30, 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 April 28,November 4, 2022, the number of Common Shares outstanding of American States Water Company was 36,955,75636,960,897 shares. As of April 28,November 4, 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



3
 
 
Consolidated Statements of Changes in Common Shareholders' Equity for the Nine Months Ended September 30, 2021
 
 
 
 
 
 
 



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 ("SEC").Commission.
 Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, all adjustments consisting of normal recurring items and estimates necessary for a fair statement of results for the interim period have been made.
 It is suggested that these financial statements be read in conjunction with the financial statements and notes thereto in the latest Annual Report on Form 10-K of American States Water Company and its wholly owned subsidiary, Golden State Water Company. 
Filing Format
American States Water Company (“AWR”) is the parent company of Golden State Water Company (“GSWC”), Bear Valley Electric Service, Inc. ("BVESI"(“BVESI”), and American States Utility Services, Inc. and its subsidiaries ("ASUS"(“ASUS”).
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"“General” in "Item“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, 2021 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)March 31,
2022
December 31, 2021(in thousands)September 30,
2022
December 31,
2021
Property, Plant and EquipmentProperty, Plant and Equipment  Property, Plant and Equipment  
Regulated utility plant, at costRegulated utility plant, at cost$2,205,801 $2,183,183 Regulated utility plant, at cost$2,284,066 $2,183,183 
Non-utility property, at costNon-utility property, at cost37,268 37,085 Non-utility property, at cost37,838 37,085 
TotalTotal2,243,069 2,220,268 Total2,321,904 2,220,268 
Less - Accumulated depreciationLess - Accumulated depreciation(593,210)(594,264)Less - Accumulated depreciation(603,752)(594,264)
Net property, plant and equipmentNet property, plant and equipment1,649,859 1,626,004 Net property, plant and equipment1,718,152 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 investments39,018 40,806 Other property and investments34,113 40,806 
Total other property and investmentsTotal other property and investments40,134 41,922 Total other property and investments35,229 41,922 
Current AssetsCurrent Assets  Current Assets  
Cash and cash equivalentsCash and cash equivalents10,126 4,963 Cash and cash equivalents2,258 4,963 
Accounts receivable — customers (less allowance for doubtful accounts of $6,615 in 2022 and $3,516 in 2021)23,353 34,416 
Accounts receivable — customers (less allowance for doubtful accounts of $6,598 in 2022 and $3,516 in 2021)Accounts receivable — customers (less allowance for doubtful accounts of $6,598 in 2022 and $3,516 in 2021)31,829 34,416 
Unbilled receivableUnbilled receivable25,500 27,147 Unbilled receivable25,165 27,147 
Receivable from the U.S. government (Note 2)Receivable from the U.S. government (Note 2)21,834 27,827 Receivable from the U.S. government (Note 2)25,493 27,827 
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 Other accounts receivable (less allowance for doubtful accounts of $53 in 2022 and $53 in 2021)3,369 6,510 
Income taxes receivableIncome taxes receivable45 236 Income taxes receivable91 236 
Materials and supplies, at weighted average costMaterials and supplies, at weighted average cost11,943 12,163 Materials and supplies, at weighted average cost13,444 12,163 
Regulatory assets — currentRegulatory assets — current9,054 8,897 Regulatory assets — current13,048 8,897 
Prepayments and other current assetsPrepayments and other current assets11,223 5,317 Prepayments and other current assets7,292 5,317 
Unrealized gains on purchased power contractsUnrealized gains on purchased power contracts7,020 4,441 Unrealized gains on purchased power contracts7,569 4,441 
Contract assets (Note 2)Contract assets (Note 2)7,715 6,135 Contract assets (Note 2)9,232 6,135 
Total current assetsTotal current assets130,856 138,052 Total current assets138,790 138,052 
Other AssetsOther Assets  Other Assets  
Unbilled revenue — receivable from U.S. government8,867 9,671 
Unbilled revenue — receivable from the U.S. governmentUnbilled revenue — receivable from the U.S. government7,260 9,671 
Receivable from the U.S. government (Note 2)Receivable from the U.S. government (Note 2)50,610 51,991 Receivable from the U.S. government (Note 2)48,992 51,991 
Contract assets (Note 2)Contract assets (Note 2)4,856 3,452 Contract assets (Note 2)4,348 3,452 
Operating lease right-of-use assetsOperating lease right-of-use assets10,008 10,479 Operating lease right-of-use assets9,172 10,479 
Regulatory assetsRegulatory assets3,289 3,182 Regulatory assets5,291 3,182 
OtherOther15,453 16,230 Other15,341 16,230 
Total other assetsTotal other assets93,083 95,005 Total other assets90,404 95,005 
Total AssetsTotal Assets$1,913,932 $1,900,983 Total Assets$1,982,575 $1,900,983 
 
The accompanying notes are an integral part of these consolidated financial statementsstatements.



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)March 31,
2022
December 31,
2021
(in thousands, except number of shares)September 30,
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: 36,955,633 shares in 2022 and 36,936,285 shares in 2021$259,284 $258,442 
Outstanding: 36,960,897 shares in 2022 and 36,936,285 shares in 2021Outstanding: 36,960,897 shares in 2022 and 36,936,285 shares in 2021$260,011 $258,442 
Earnings reinvested in the businessEarnings reinvested in the business428,141 427,505 Earnings reinvested in the business445,493 427,505 
Total common shareholders’ equityTotal common shareholders’ equity687,425 685,947 Total common shareholders’ equity705,504 685,947 
Long-term debtLong-term debt412,150 412,176 Long-term debt446,817 412,176 
Total capitalizationTotal capitalization1,099,575 1,098,123 Total capitalization1,152,321 1,098,123 
Current LiabilitiesCurrent Liabilities  Current Liabilities  
Notes payable to bankNotes payable to bank32,000 31,000 Notes payable to bank238,500 31,000 
Long-term debt — currentLong-term debt — current382 377 Long-term debt — current399 377 
Accounts payableAccounts payable67,490 65,902 Accounts payable69,982 65,902 
Income taxes payableIncome taxes payable2,879 4,662 Income taxes payable5,464 4,662 
Accrued other taxesAccrued other taxes14,983 17,137 Accrued other taxes15,760 17,137 
Accrued employee expensesAccrued employee expenses18,293 16,256 Accrued employee expenses15,529 16,256 
Accrued interestAccrued interest6,320 4,545 Accrued interest7,234 4,545 
Regulatory liabilitiesRegulatory liabilities4,821 1,896 
Contract liabilities (Note 2)Contract liabilities (Note 2)210 257 Contract liabilities (Note 2)1,253 257 
Regulatory liabilities3,642 1,896 
Operating lease liabilitiesOperating lease liabilities1,991 2,044 Operating lease liabilities1,892 2,044 
OtherOther11,964 11,498 Other12,345 11,498 
Total current liabilitiesTotal current liabilities160,154 155,574 Total current liabilities373,179 155,574 
Other CreditsOther Credits  Other Credits  
Notes payable to bankNotes payable to bank189,500 174,500 Notes payable to bank3,000 174,500 
Advances for constructionAdvances for construction66,469 66,727 Advances for construction65,210 66,727 
Contributions in aid of construction - netContributions in aid of construction - net146,186 147,482 Contributions in aid of construction - net146,711 147,482 
Deferred income taxesDeferred income taxes142,661 140,290 Deferred income taxes142,726 140,290 
Regulatory liabilitiesRegulatory liabilities24,193 32,979 Regulatory liabilities17,609 32,979 
Unamortized investment tax creditsUnamortized investment tax credits1,135 1,153 Unamortized investment tax credits1,099 1,153 
Accrued pension and other postretirement benefitsAccrued pension and other postretirement benefits61,594 61,365 Accrued pension and other postretirement benefits58,835 61,365 
Operating lease liabilitiesOperating lease liabilities8,497 8,920 Operating lease liabilities7,721 8,920 
OtherOther13,968 13,870 Other14,164 13,870 
Total other creditsTotal other credits654,203 647,286 Total other credits457,075 647,286 
Commitments and Contingencies (Note 9)Commitments and Contingencies (Note 9)00Commitments and Contingencies (Note 9)
Total Capitalization and LiabilitiesTotal Capitalization and Liabilities$1,913,932 $1,900,983 Total Capitalization and Liabilities$1,982,575 $1,900,983 
 
The accompanying notes are an integral part of these consolidated financial statementsstatements.
3

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

Three Months Ended March 31, Three Months Ended September 30,Nine Months Ended September 30,
(in thousands, except per share amounts)(in thousands, except per share amounts)20222021(in thousands, except per share amounts)2022202120222021
Operating RevenuesOperating RevenuesOperating Revenues  
WaterWater$73,906 $75,029 Water$100,799 $102,768 $265,561 $269,430 
ElectricElectric11,892 11,539 Electric8,919 8,564 29,028 28,211 
Contracted servicesContracted services22,772 30,492 Contracted services25,266 25,423 71,572 84,588 
Total operating revenuesTotal operating revenues108,570 117,060 Total operating revenues134,984 136,755 366,161 382,229 
Operating ExpensesOperating ExpensesOperating Expenses  
Water purchasedWater purchased17,848 15,239 Water purchased20,304 24,093 58,115 60,248 
Power purchased for pumpingPower purchased for pumping2,374 2,145 Power purchased for pumping3,878 3,584 9,182 8,590 
Groundwater production assessmentGroundwater production assessment4,211 4,440 Groundwater production assessment5,650 5,185 14,726 14,845 
Power purchased for resalePower purchased for resale5,166 3,198 Power purchased for resale2,673 2,875 9,186 8,203 
Supply cost balancing accountsSupply cost balancing accounts(6,343)(2,427)Supply cost balancing accounts640 (2,446)(6,160)(7,959)
Other operationOther operation8,667 8,217 Other operation9,696 9,414 28,028 26,165 
Administrative and generalAdministrative and general22,972 22,053 Administrative and general21,594 20,255 65,030 62,938 
Depreciation and amortizationDepreciation and amortization10,114 9,560 Depreciation and amortization10,117 9,826 30,402 29,156 
MaintenanceMaintenance3,140 2,662 Maintenance3,408 2,979 10,120 8,908 
Property and other taxesProperty and other taxes5,853 5,940 Property and other taxes5,942 6,052 17,247 17,265 
ASUS constructionASUS construction10,203 15,704 ASUS construction10,742 12,154 31,263 42,910 
Total operating expensesTotal operating expenses84,205 86,731 Total operating expenses94,644 93,971 267,139 271,269 
Operating IncomeOperating Income24,365 30,329 Operating Income40,340 42,784 99,022 110,960 
Other Income and ExpensesOther Income and ExpensesOther Income and Expenses  
Interest expenseInterest expense(5,606)(6,258)Interest expense(7,331)(5,553)(19,246)(17,843)
Interest incomeInterest income283 455 Interest income667 333 1,387 1,136 
Other, netOther, net(419)656 Other, net338 467 (2,370)2,998 
Total other income and expenses, netTotal other income and expenses, net(5,742)(5,147)Total other income and expenses, net(6,326)(4,753)(20,229)(13,709)
Income before income tax expenseIncome before income tax expense18,623 25,182 Income before income tax expense34,014 38,031 78,793 97,251 
Income tax expenseIncome tax expense4,461 5,914 Income tax expense8,360 9,878 19,026 23,254 
Net IncomeNet Income$14,162 $19,268 Net Income$25,654 $28,153 $59,767 $73,997 
Weighted Average Number of Common Shares OutstandingWeighted Average Number of Common Shares Outstanding36,944 36,898 Weighted Average Number of Common Shares Outstanding36,958 36,933 36,953 36,916 
Basic Earnings Per Common ShareBasic Earnings Per Common Share$0.38 $0.52 Basic Earnings Per Common Share$0.69 $0.76 $1.61 $2.00 
Weighted Average Number of Diluted SharesWeighted Average Number of Diluted Shares37,019 36,993 Weighted Average Number of Diluted Shares37,042 37,025 37,034 37,004 
Fully Diluted Earnings Per Common ShareFully Diluted Earnings Per Common Share$0.38 $0.52 Fully Diluted Earnings Per Common Share$0.69 $0.76 $1.61 $2.00 
Dividends Paid Per Common ShareDividends Paid Per Common Share$0.365 $0.335 Dividends Paid Per Common Share$0.3975 $0.365 $1.1275 $1.035 
 
The accompanying notes are an integral part of these consolidated financial statementsstatements.

4

AMERICAN STATES WATER COMPANY
CONSOLIDATED STATEMENTS OF CHANGES
IN COMMON SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022
(Unaudited)



Three Months Ended March 31, 2022Nine Months Ended September 30, 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, 2021Balances at December 31, 202136,936 $258,442 $427,505 $685,947 Balances at December 31, 202136,936 $258,442 $427,505 $685,947 
Add:Add:    Add:    
Net incomeNet income14,162 14,162 Net income14,162 14,162 
Exercise of stock options and other issuances of Common SharesExercise of stock options and other issuances of Common Shares20— — 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)801 801 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 cash41 41 Dividend equivalent rights on stock-based awards not paid in cash41 41 
Deduct:Deduct: Deduct: 
Dividends on Common SharesDividends on Common Shares13,485 13,485 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 cash41 41 Dividend equivalent rights on stock-based awards not paid in cash41 41 
Balances at March 31, 2022Balances at March 31, 202236,956$259,284 $428,141 $687,425 Balances at March 31, 202236,956$259,284 $428,141 $687,425 
Add:Add:
Net incomeNet income19,951 19,951 
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)338 338 
Dividend equivalent rights on stock-based awards not paid in cashDividend equivalent rights on stock-based awards not paid in cash34 34 
Deduct:Deduct:
Dividends on Common SharesDividends on Common Shares13,489 13,489 
Dividend equivalent rights on stock-based awards not paid in cashDividend equivalent rights on stock-based awards not paid in cash34 34 
Balances at June 30, 2022Balances at June 30, 202236,956$259,656 $434,569 $694,225 
Add:Add:
Net incomeNet income25,654 25,654 
Exercise of stock options and other issuances of Common SharesExercise 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)Stock-based compensation, net of taxes paid from shares withheld from employees related to net share settlements (Note 4)315 315 
Dividend equivalent rights on stock-based awards not paid in cashDividend equivalent rights on stock-based awards not paid in cash40 40 
Deduct:Deduct:
Dividends on Common SharesDividends on Common Shares14,690 14,690 
Dividend equivalent rights on stock-based awards not paid in cashDividend equivalent rights on stock-based awards not paid in cash40 40 
Balances at September 30, 2022Balances at September 30, 202236,961$260,011 $445,493 $705,504 


The accompanying notes are an integral part of these consolidated financial statements.
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 
5


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, 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 
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.

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Table of Contents
AMERICAN STATES WATER COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREENINE MONTHS ENDED MARCH 31,SEPTEMBER 30, 2022 AND 2021
(Unaudited)
Three Months Ended 
 March 31,
Nine Months Ended 
 September 30,
(in thousands)(in thousands)20222021(in thousands)20222021
Cash Flows From Operating Activities:Cash Flows From Operating Activities:  Cash Flows From Operating Activities:  
Net incomeNet income$14,162 $19,268 Net income$59,767 $73,997 
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 amortization10,208 9,656 Depreciation and amortization30,688 29,440 
Provision for doubtful accountsProvision for doubtful accounts258 255 Provision for doubtful accounts833 873 
Deferred income taxes and investment tax creditsDeferred income taxes and investment tax credits1,552 (343)Deferred income taxes and investment tax credits(1,098)1,205 
Stock-based compensation expenseStock-based compensation expense1,905 1,930 Stock-based compensation expense2,439 2,456 
Loss (gain) on investments held in a trustLoss (gain) on investments held in a trust1,653 (628)Loss (gain) on investments held in a trust6,445 (2,313)
Other — netOther — net83 104 Other — net263 273 
Changes in assets and liabilities:Changes in assets and liabilities:  Changes in assets and liabilities:  
Accounts receivable — customersAccounts receivable — customers7,627 5,711 Accounts receivable — customers(1,760)(8,748)
Unbilled receivableUnbilled receivable2,451 3,161 Unbilled receivable4,393 2,564 
Other accounts receivableOther accounts receivable3,467 1,386 Other accounts receivable3,179 (935)
Receivables from the U.S. governmentReceivables from the U.S. government4,589 (1,015)Receivables from the U.S. government5,333 (7,847)
Materials and suppliesMaterials and supplies220 (132)Materials and supplies(1,281)(1,621)
Prepayments and other assetsPrepayments and other assets(4,584)(4,026)Prepayments and other assets520 (1,139)
Contract assetsContract assets(199)(3,763)Contract assets(3,993)172 
Regulatory assetsRegulatory assets(5,713)(3,493)Regulatory assets(14,065)(8,319)
Accounts payableAccounts payable341 (7,267)Accounts payable(575)2,924 
Income taxes receivable/payableIncome taxes receivable/payable(1,592)(274)Income taxes receivable/payable947 (3,235)
Contract liabilitiesContract liabilities(47)(751)Contract liabilities996 (1,245)
Accrued pension and other postretirement benefitsAccrued pension and other postretirement benefits71 1,796 Accrued pension and other postretirement benefits(3,070)1,416 
Other liabilitiesOther liabilities1,574 3,101 Other liabilities(28)2,005 
Net cash providedNet cash provided38,026 24,676 Net cash provided89,933 81,923 
Cash Flows From Investing Activities:Cash Flows From Investing Activities:  Cash Flows From Investing Activities:  
Capital expendituresCapital expenditures(35,170)(37,093)Capital expenditures(122,056)(106,721)
Other investing activitiesOther investing activities121 113 Other investing activities321 229 
Net cash usedNet cash used(35,049)(36,980)Net cash used(121,735)(106,492)
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 construction1,795 2,016 Receipt of advances for and contributions in aid of construction5,489 10,636 
Refunds on advances for constructionRefunds on advances for construction(833)(569)Refunds on advances for construction(3,941)(3,613)
Retirement or repayments of long-term debt(103)(99)
Repayments of long-term debtRepayments of long-term debt(377)(28,356)
Proceeds from the issuance of long-term debt, net of issuance costsProceeds from the issuance of long-term debt, net of issuance costs34,826 — 
Net change in notes payable to banksNet change in notes payable to banks16,000 (5,200)Net change in notes payable to banks36,000 55,800 
Dividends paidDividends paid(13,485)(12,361)Dividends paid(41,664)(38,207)
Other financing activitiesOther financing activities(1,188)(1,269)Other financing activities(1,236)(1,287)
Net cash provided (used)Net cash provided (used)2,186 (17,482)Net cash provided (used)29,097 (5,027)
Net change in cash and cash equivalentsNet change in cash and cash equivalents5,163 (29,786)Net change in cash and cash equivalents(2,705)(29,596)
Cash and cash equivalents, beginning of periodCash and cash equivalents, beginning of period4,963 36,737 Cash and cash equivalents, beginning of period4,963 36,737 
Cash and cash equivalents, end of periodCash and cash equivalents, end of period$10,126 $6,951 Cash and cash equivalents, end of period$2,258 $7,141 
Non-cash transactions:Non-cash transactions:Non-cash transactions:
Accrued payables for investment in utility plantAccrued payables for investment in utility plant$34,101 $28,700 Accrued payables for investment in utility plant$37,510 $29,101 
Property installed by developers and conveyedProperty installed by developers and conveyed$130 $2,761 Property installed by developers and conveyed$511 $6,093 

The accompanying notes are an integral part of these consolidated financial statementsstatements.
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GOLDEN STATE WATER COMPANY
BALANCE SHEETS
ASSETS
(Unaudited)
(in thousands)(in thousands)March 31,
2022
December 31,
2021
(in thousands)September 30,
2022
December 31,
2021
Utility PlantUtility Plant  Utility Plant  
Utility plant, at costUtility plant, at cost$2,043,851 $2,022,417 Utility plant, at cost$2,112,923 $2,022,417 
Less - Accumulated depreciationLess - Accumulated depreciation(520,186)(522,672)Less - Accumulated depreciation(528,035)(522,672)
Net utility plantNet utility plant1,523,665 1,499,745 Net utility plant1,584,888 1,499,745 
Other Property and InvestmentsOther Property and Investments36,874 38,659 Other Property and Investments31,975 38,659 
Current AssetsCurrent Assets  Current Assets  
Cash and cash equivalentsCash and cash equivalents4,677 525 Cash and cash equivalents386 525 
Accounts receivable — customers (less allowance for doubtful accounts of $5,992 in 2022 and $3,168 in 2021)21,244 31,870 
Accounts receivable — customers (less allowance for doubtful accounts of $6,315 in 2022 and $3,168 in 2021)Accounts receivable — customers (less allowance for doubtful accounts of $6,315 in 2022 and $3,168 in 2021)29,431 31,870 
Unbilled receivableUnbilled receivable16,342 20,525 Unbilled receivable18,181 20,525 
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 Other accounts receivable (less allowance for doubtful accounts of $53 in 2022 and $53 in 2021)2,068 3,791 
Materials and supplies, at average costMaterials and supplies, at average cost4,587 5,384 Materials and supplies, at average cost5,323 5,384 
Regulatory assets — currentRegulatory assets — current9,054 8,897 Regulatory assets — current13,048 8,897 
Prepayments and other current assetsPrepayments and other current assets8,039 4,223 Prepayments and other current assets5,642 4,223 
Total current assetsTotal current assets65,790 75,215 Total current assets74,079 75,215 
Other AssetsOther Assets  Other Assets  
Operating lease right-of-use assetsOperating lease right-of-use assets9,977 10,439 Operating lease right-of-use assets8,804 10,439 
OtherOther14,415 14,424 Other14,427 14,424 
Total other assetsTotal other assets24,392 24,863 Total other assets23,231 24,863 
Total AssetsTotal Assets$1,650,721 $1,638,482 Total Assets$1,714,173 $1,638,482 

The accompanying notes are an integral part of these financial statementsstatements.
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GOLDEN STATE WATER COMPANY
BALANCE SHEETS
CAPITALIZATION AND LIABILITIES
(Unaudited)
(in thousands, except number of shares)(in thousands, except number of shares)March 31,
2022
December 31, 2021(in thousands, except number of shares)September 30,
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 2022 and 2021 Outstanding: 170 shares in 2022 and 2021$357,311 $356,530  Outstanding: 170 shares in 2022 and 2021$357,970 $356,530 
Earnings reinvested in the businessEarnings reinvested in the business254,184 259,156 Earnings reinvested in the business275,429 259,156 
Total common shareholder’s equityTotal common shareholder’s equity611,495 615,686 Total common shareholder’s equity633,399 615,686 
Long-term debtLong-term debt412,150 412,176 Long-term debt411,985 412,176 
Total capitalizationTotal capitalization1,023,645 1,027,862 Total capitalization1,045,384 1,027,862 
Current LiabilitiesCurrent Liabilities  Current Liabilities  
Intercompany payable to ParentIntercompany payable to Parent112,235 — 
Long-term debt — currentLong-term debt — current382 377 Long-term debt — current399 377 
Accounts payableAccounts payable55,296 50,627 Accounts payable60,033 50,627 
Accrued other taxesAccrued other taxes13,257 14,960 Accrued other taxes13,879 14,960 
Accrued employee expensesAccrued employee expenses14,446 12,867 Accrued employee expenses12,430 12,867 
Accrued interestAccrued interest5,980 4,210 Accrued interest6,052 4,210 
Income taxes payable to ParentIncome taxes payable to Parent1,181 2,972 Income taxes payable to Parent6,169 2,972 
Operating lease liabilitiesOperating lease liabilities1,977 2,029 Operating lease liabilities1,780 2,029 
OtherOther10,893 10,505 Other11,410 10,505 
Total current liabilitiesTotal current liabilities103,412 98,547 Total current liabilities224,387 98,547 
Other CreditsOther Credits  Other Credits  
Intercompany payable to ParentIntercompany payable to Parent67,683 49,280 Intercompany payable to Parent— 49,280 
Advances for constructionAdvances for construction66,449 66,707 Advances for construction65,190 66,707 
Contributions in aid of construction — netContributions in aid of construction — net146,186 145,848 Contributions in aid of construction — net146,711 145,848 
Deferred income taxesDeferred income taxes134,349 132,314 Deferred income taxes133,762 132,314 
Regulatory liabilitiesRegulatory liabilities24,193 32,979 Regulatory liabilities17,609 32,979 
Unamortized investment tax creditsUnamortized investment tax credits1,135 1,153 Unamortized investment tax credits1,099 1,153 
Accrued pension and other postretirement benefitsAccrued pension and other postretirement benefits61,364 61,170 Accrued pension and other postretirement benefits58,535 61,170 
Operating lease liabilitiesOperating lease liabilities8,479 8,891 Operating lease liabilities7,477 8,891 
OtherOther13,826 13,731 Other14,019 13,731 
Total other creditsTotal other credits523,664 512,073 Total other credits444,402 512,073 
Commitments and Contingencies (Note 9)Commitments and Contingencies (Note 9)00Commitments and Contingencies (Note 9)
Total Capitalization and LiabilitiesTotal Capitalization and Liabilities$1,650,721 $1,638,482 Total Capitalization and Liabilities$1,714,173 $1,638,482 
 
The accompanying notes are an integral part of these financial statementsstatements.
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GOLDEN STATE WATER COMPANY
STATEMENTS OF INCOME
FOR THE THREE AND NINE MONTHS ENDED
MARCH 31,SEPTEMBER 30, 2022 AND 2021
(Unaudited)

Three Months Ended March 31, Three Months Ended September 30,Nine Months Ended September 30,
(in thousands)(in thousands)20222021(in thousands)2022202120222021
Operating RevenuesOperating RevenuesOperating Revenues  
WaterWater$73,906 $75,029 Water$100,799 $102,768 $265,561 $269,430 
Total operating revenuesTotal operating revenues73,906 75,029 Total operating revenues100,799 102,768 265,561 269,430 
Operating ExpensesOperating ExpensesOperating Expenses  
Water purchasedWater purchased17,848 15,239 Water purchased20,304 24,093 58,115 60,248 
Power purchased for pumpingPower purchased for pumping2,374 2,145 Power purchased for pumping3,878 3,584 9,182 8,590 
Groundwater production assessmentGroundwater production assessment4,211 4,440 Groundwater production assessment5,650 5,185 14,726 14,845 
Supply cost balancing accountsSupply cost balancing accounts(5,067)(2,920)Supply cost balancing accounts885 (2,114)(5,682)(8,445)
Other operationOther operation6,354 5,813 Other operation7,273 7,287 20,908 19,476 
Administrative and generalAdministrative and general15,596 14,435 Administrative and general14,362 13,677 43,945 41,973 
Depreciation and amortizationDepreciation and amortization8,545 8,062 Depreciation and amortization8,475 8,272 25,573 24,547 
MaintenanceMaintenance2,156 1,740 Maintenance2,526 2,140 7,193 6,236 
Property and other taxesProperty and other taxes4,890 5,016 Property and other taxes4,995 5,185 14,440 14,665 
Total operating expensesTotal operating expenses56,907 53,970 Total operating expenses68,348 67,309 188,400 182,135 
Operating IncomeOperating Income16,999 21,059 Operating Income32,451 35,459 77,161 87,295 
Other Income and ExpensesOther Income and ExpensesOther Income and Expenses  
Interest expenseInterest expense(5,236)(5,798)Interest expense(5,950)(5,184)(16,650)(16,625)
Interest incomeInterest income91 87 Interest income325 86 562 352 
Other, netOther, net(598)651 Other, net(70)429 (3,070)2,684 
Total other income and expenses, netTotal other income and expenses, net(5,743)(5,060)Total other income and expenses, net(5,695)(4,669)(19,158)(13,589)
Income before income tax expenseIncome before income tax expense11,256 15,999 Income before income tax expense26,756 30,790 58,003 73,706 
Income tax expenseIncome tax expense2,689 3,768 Income tax expense6,831 7,993 14,623 17,718 
Net IncomeNet Income$8,567 $12,231 Net Income$19,925 $22,797 $43,380 $55,988 
 
The accompanying notes are an integral part of these consolidated financial statementsstatements.
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GOLDEN STATE WATER COMPANY
STATEMENTS OF CHANGES
IN COMMON SHAREHOLDER'S EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022
(Unaudited)
Three Months Ended March 31, 2022
 Common SharesReinvested 
 Number Earnings 
 of in the 
(in thousands, except number of shares)SharesAmountBusinessTotal
Balances at December 31, 2021170$356,530 $259,156 $615,686 
Add:    
Net income8,567 8,567 
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 cash39 39 
Deduct: 
Dividends on Common Shares13,500 13,500 
Dividend equivalent rights on stock-based awards not paid in cash39 39 
Balances at March 31, 2022170 $357,311 $254,184 $611,495 
Three Months Ended March 31, 2021
Common SharesReinvested
NumberEarnings
ofin the
(in thousands, except number of shares)SharesAmountBusinessTotal
Balances at December 31, 2020170$354,906 $228,392 $583,298 
Add:
Net income12,231 12,231 
Stock-based compensation, net of taxes paid from shares withheld from employees related to net share settlements (Note 4)782 782 
Dividend equivalent rights on stock-based awards not paid in cash45 45 
Deduct:
Dividends on Common Shares12,400 12,400 
Dividend equivalent rights on stock-based awards not paid in cash45 45 
Balances at March 31, 2021170 $355,733 $228,178 $583,911 

Nine Months Ended September 30, 2022
 Common SharesReinvested 
 Number Earnings 
 of in the 
(in thousands, except number of shares)SharesAmountBusinessTotal
Balances at December 31, 2021170$356,530 $259,156 $615,686 
Add:    
Net income8,567 8,567 
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 cash39 39 
Deduct: 
Dividends on Common Shares13,500 13,500 
Dividend equivalent rights on stock-based awards not paid in cash39 39 
Balances at March 31, 2022170 $357,311 $254,184 $611,495 
Add:
Net income14,888 14,888 
Stock-based compensation, net of taxes paid from shares withheld from employees related to net share settlements (Note 4)274 274 
Dividend equivalent rights on stock-based awards not paid in cash31 31 
Deduct:
Dividends on Common Shares13,500 13,500 
Dividend equivalent rights on stock-based awards not paid in cash31 31 
Balances at June 30, 2022170 $357,616 $255,541 $613,157 
Add:
Net income19,925 19,925 
Stock-based compensation, net of taxes paid from shares withheld from employees related to net share settlements (Note 4)317 317 
Dividend equivalent rights on stock-based awards not paid in cash37 37 
Deduct:
Dividend equivalent rights on stock-based awards not paid in cash37 37 
Balances at September 30, 2022170 $357,970 $275,429 $633,399 


The accompanying notes are an integral part of these financial statementsstatements.
1011

GOLDEN STATE WATER COMPANY
STATEMENTS OF CHANGES
IN COMMON SHAREHOLDER'S EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
(Unaudited)
Nine Months Ended September 30, 2021
 Common SharesReinvested 
 Number Earnings 
 of in the 
(in thousands, except number of shares)SharesAmountBusinessTotal
Balances at December 31, 2020170$354,906 $228,392 $583,298 
Add:    
Net income12,231 12,231 
Stock-based compensation, net of taxes paid from shares withheld from employees related to net share settlements (Note 4)782 782 
Dividend equivalent rights on stock-based awards not paid in cash45 45 
Deduct: 
Dividends on Common Shares12,400 12,400 
Dividend equivalent rights on stock-based awards not paid in cash45 45 
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.
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GOLDEN STATE WATER COMPANY
STATEMENTS OF CASH FLOWS
FOR THE THREENINE MONTHS ENDED MARCH 31,SEPTEMBER 30, 2022 AND 2021
(Unaudited)
Three Months Ended 
 March 31,
Nine Months Ended 
 September 30,
(in thousands)(in thousands)20222021(in thousands)20222021
Cash Flows From Operating Activities:Cash Flows From Operating Activities:  Cash Flows From Operating Activities:  
Net incomeNet income$8,567 $12,231 Net income$43,380 $55,988 
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 amortization8,610 8,126 Depreciation and amortization25,773 24,741 
Provision for doubtful accountsProvision for doubtful accounts222 221 Provision for doubtful accounts784 789 
Deferred income taxes and investment tax creditsDeferred income taxes and investment tax credits1,305 (505)Deferred income taxes and investment tax credits(1,433)578 
Stock-based compensation expenseStock-based compensation expense1,751 1,790 Stock-based compensation expense2,194 2,249 
Loss (gain) on investments held in a trustLoss (gain) on investments held in a trust1,653 (628)Loss (gain) on investments held in a trust6,445 (2,313)
Other — netOther — net84 83 Other — net248 248 
Changes in assets and liabilities:Changes in assets and liabilities:  Changes in assets and liabilities:  
Accounts receivable — customersAccounts receivable — customers7,499 6,033 Accounts receivable — customers(1,678)(8,555)
Unbilled receivableUnbilled receivable4,183 1,525 Unbilled receivable2,344 (1,796)
Other accounts receivableOther accounts receivable1,944 1,463 Other accounts receivable1,723 648 
Materials and suppliesMaterials and supplies797 (267)Materials and supplies61 (262)
Prepayments and other assetsPrepayments and other assets(3,268)(1,956)Prepayments and other assets163 (469)
Regulatory assetsRegulatory assets(5,135)(3,165)Regulatory assets(12,549)(7,316)
Accounts payableAccounts payable2,886 (5,674)Accounts payable3,918 5,799 
Intercompany receivable/payableIntercompany receivable/payable428 Intercompany receivable/payable25 694 
Income taxes receivable/payable from/to ParentIncome taxes receivable/payable from/to Parent(1,791)(391)Income taxes receivable/payable from/to Parent3,197 (567)
Accrued pension and other postretirement benefitsAccrued pension and other postretirement benefits36 1,760 Accrued pension and other postretirement benefits(3,175)1,308 
Other liabilitiesOther liabilities1,494 2,145 Other liabilities(152)1,563 
Net cash providedNet cash provided31,265 22,799 Net cash provided71,268 73,327 
Cash Flows From Investing Activities:Cash Flows From Investing Activities:  Cash Flows From Investing Activities:  
Capital expendituresCapital expenditures(31,465)(31,824)Capital expenditures(107,668)(90,299)
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 parent— 11,000 Receipt of payment of note receivable from AWR parent— 23,000 
Other investing activitiesOther investing activities117 109 Other investing activities224 181 
Net cash usedNet cash used(31,348)(43,715)Net cash used(107,444)(90,118)
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 construction1,759 2,013 Receipt of advances for and contributions in aid of construction5,489 10,604 
Refunds on advances for constructionRefunds on advances for construction(833)(569)Refunds on advances for construction(3,941)(3,613)
Retirement or repayments of long-term debt(103)(99)
Repayments of long-term debtRepayments of long-term debt(377)(28,356)
Net change in intercompany borrowingsNet change in intercompany borrowings18,000 — Net change in intercompany borrowings63,000 45,000 
Dividends paidDividends paid(13,500)(12,400)Dividends paid(27,000)(38,300)
Other financing activitiesOther financing activities(1,088)(1,155)Other financing activities(1,134)(1,163)
Net cash provided (used)Net cash provided (used)4,235 (12,210)Net cash provided (used)36,037 (15,828)
Net change in cash and cash equivalentsNet change in cash and cash equivalents4,152 (33,126)Net change in cash and cash equivalents(139)(32,619)
Cash and cash equivalents, beginning of periodCash and cash equivalents, beginning of period525 35,578 Cash and cash equivalents, beginning of period525 35,578 
Cash and cash equivalents, end of periodCash and cash equivalents, end of period$4,677 $2,452 Cash and cash equivalents, end of period$386 $2,959 
Non-cash transactions:Non-cash transactions:Non-cash transactions:
Accrued payables for investment in utility plantAccrued payables for investment in utility plant$32,439 $25,529 Accrued payables for investment in utility plant$36,144 $27,399 
Property installed by developers and conveyedProperty installed by developers and conveyed$130 $2,761 Property installed by developers and conveyed$511 $6,093 

The accompanying notes are an integral part of these financial statementsstatements.
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AMERICAN STATES WATER COMPANY AND SUBSIDIARIES
AND
GOLDEN STATE WATER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)





Note 1 — Summary of Significant Accounting Policies
 
Nature of Operations: American States Water Company (“AWR”) is the parent company of Golden State Water Company (“GSWC”), Bear Valley Electric Service, Inc. ("BVESI"(“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"(“ECUS”), and Fort Riley Utility Services, Inc. ("FRUS"(“FRUS”)).  The subsidiaries of ASUS are collectively referred to as the “Military Utility Privatization Subsidiaries”. AWR, through its wholly owned subsidiaries, serves over 1000000one million people in 9nine 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 262,900263,000 customer connections. BVESI distributes electricity in several San Bernardino County mountain communities in California serving approximately 24,700 customer connections. The California Public Utilities Commission (“CPUC”) regulates GSWC’s and BVESI'sBVESI’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 theretohereto are presented in a combined report filed by 2two 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"(“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, 2021 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, 2021 filed with the SEC.
Related Party Transactions: As discussed below under Liquidity and Financing ActivitiesPlans:, AWR borrows under a credit facility and provides funds to GSWC and ASUS in support of their operations.  Furthermore, 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 BVESIthe electric segment of approximately $794,000$663,000 and $799,000$653,000 during the three months ended March 31,September 30, 2022 and 2021, respectively.respectively, and $2.1 million during each of the nine month periods ended September 30, 2022 and 2021. GSWC allocated corporate office administrative and general costs to ASUS of approximately $1.6$1.3 million and $1.5$1.2 million during the three months ended March 31,September 30, 2022 and 2021, respectively.respectively, and $4.0 million during each of the nine months ended September 30, 2022 and 2021.

Liquidity and Financing Plans
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: AWR borrows under a revolving credit facility and provides funds to GSWC and ASUS in support of their operations.  operations through intercompany borrowing agreements.  AWR's credit agreement expires in May 2023 and all intercompany borrowing agreements will expire concurrent with the expiration of AWR's credit facility. AWR intends to execute new intercompany borrowing agreements with its subsidiaries consistent with a new credit facility.
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On April 22, 2022, theAWR’s 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"(“LIBOR”) to the Secured Overnight Financing Rate ("SOFR"(“SOFR”). This credit agreement expires in May 2023. Registrant does not believe theThe change in benchmark rates will havehas not had 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.
Given that AWR’s credit agreement will expire in May 2023, the outstanding borrowings under the credit facility of $238.5 million as of September 30, 2022 have been classified as a current liability on AWR’s Consolidated Balance Sheet, thus creating a negative working-capital condition for AWR of $234.4 million. Additionally, as of September 30, 2022, the $112.2 million of outstanding intercompany borrowings of GSWC from AWR have been classified as a current liability on GSWC’s Consolidated Balance Sheet, also creating a negative working-capital condition for GSWC of $150.3 million. As of March 31,November 7, 2022, there was $189.5 million outstanding under this facility.neither AWR nor GSWC have sufficient liquidity or capital resources to repay their credit facility or intercompany borrowings, respectively, without issuing new debt or equity.
Management plans to renew and extend AWR’s credit facility prior to its expiration date, and is confident, given Registrant's history in obtaining revolving credit facilities to meet its working-capital needs, that AWR will successfully renew or extend its facility or obtain a new facility with the needed borrowing capacities required to run its operations. In addition, Registrant expects to issue long-term debt through GSWC prior to May 2023,during the fourth quarter of 2022, and use the debt proceeds to pay off outstanding borrowings under thisthe intercompany borrowing arrangement with AWR. AWR intends to use the proceeds to pay off portions of the outstanding borrowings under its credit facility. Management believes that execution of its plan is probable based on Registrant’s ability to generate consistent cash flows, its A+ credit ratings, its relationships with lenders, and its history of successfully raising debt necessary to fund its operations. Accordingly, management has concluded that Registrant will be able to satisfy its obligations, including those under its credit facility, for at least the next twelve months from the issuance date of these financial statements. However, Registrant’s ability to access the capital markets or to otherwise obtain sufficient financing may be affected by future conditions and, accordingly, no assurances can be made that Registrant will be successful in implementing its plan.
BVESI has a separate $35$35.0 million revolving credit facility without a parent guaranty, which was amended in December 2021 to reduce the interest rate and fees charged, as well as to extend the maturity date by a year to July 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 increase the facility by an additional $15$15.0 million, subject to lender approval.Interest rates under this facility are generallycurrently based on LIBOR.Under the terms of the December 2021 amendment, upon discontinuation of athe LIBOR benchmark rate such as LIBOR,in 2023, the lender may replace LIBOR with a benchmark interest rate replacement such as SOFR.Registrant BVESI 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 The CPUC requires BVESI to completely pay off all borrowings or debt indexed to LIBOR.
GSWC’s intercompany borrowing agreement with AWR and BVESI’sunder its 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 March 31, 2022, the $32.0 million outstanding under BVESI's credit facility has been classified as a current liability in AWR's Consolidated Balance Sheet.
On April 28, 2022, BVESI completed the issuance of $35$35.0 million in unsecured private placementprivate-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. TheBVESI used the proceeds from the notes to pay down all amounts under its revolving credit facility outstanding at the time of issuing the notes. Interest on these notes is payable semiannually, and the covenant requirements under these notes are similar to the terms of BVESI'sBVESI’s revolving credit facility. BVESI used the proceeds to pay down amountsAs of September 30, 2022, there were $3.0 million outstanding borrowings under its credit facility, thus complying with the CPUC's 24-month rule.this facility.
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. The Company continuesAWR and its subsidiaries continue to monitor the guidance provided by federal, state, and local health authorities and other government officials. DueWhile continuing to fallingmonitor transmission rates in California and other variables, employees have begun returningreturned to company 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,During 2022, GSWC and BVESI had approximately $4.5 million and $576,000, respectively, in regulatory asset accounts relatedcontinue to bad debt expenseincur incremental costs in excess of their revenue requirements, primarily related to delinquent customer accounts receivable, due to the purchaselingering effects of personal protective equipment, additional incurred printing costs, and other incrementalthe pandemic that are being tracked in 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 recognizedrecorded as regulatory assets for future recovery.(Note 3). As a result, the amounts recorded in the COVID-19-related memorandum accounts have not impacted GSWC'sGSWC’s or BVESI'sBVESI’s earnings. Thus far, the COVID-19 pandemic has not had a material impact on ASUS'sASUS’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 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 June 2022.
Accounting Pronouncements to Be Adopted in 2022:
In November 2021, the Financial Accounting Standards Board ("FASB"(“FASB”) issued Accounting Standards Update ("ASU"(“ASU”) No. 2021-10 Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance. The
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amendments in this Updateupdate require disclosures about transactions with a government such as government grants or assistance. The amendments in this Update arewere effective for all applicable entities within their scope for financial statements issued for annual periods beginning after December 15, 2021. Registrant does not expectanticipate that this guidance toupdate will have a material impact on Registrant'sits financial statement disclosures.
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Note 2 — Revenues
Most of Registrant'sRegistrant’s revenues are derived from contracts with customers, including tariff-based revenues offrom its regulated utilities at GSWC and BVESI. ASUS'sASUS’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 the Registrant’s balance sheets.
Although GSWC and BVESI have a diversified customer 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 allMost of ASUS'sASUS’s revenues are derived from the U.S. government. For the three and nine months ended March 31,September 30, 2022 and 2021, disaggregated revenues from contracts with customers by segment were as follows:
Three Months Ended March 31,Three Months Ended September 30,Nine Months Ended September 30,
(dollar in thousands)20222021
(dollars in thousands)(dollars in thousands)2022202120222021
Water:Water:Water:
Tariff-based revenuesTariff-based revenues$72,498 $74,288 Tariff-based revenues$90,998 $100,256 $247,108 $261,231 
Surcharges (cost-recovery activities)Surcharges (cost-recovery activities)549 534 Surcharges (cost-recovery activities)672 1,095 2,018 2,604 
OtherOther518 517 Other625 586 1,714 1,626 
Water revenues from contracts with customersWater revenues from contracts with customers73,565 75,339 Water revenues from contracts with customers92,295 101,937 250,840 265,461 
WRAM under (over)-collection (alternative revenue program)341 (310)
WRAM under-collection (alternative revenue program)WRAM under-collection (alternative revenue program)8,504 831 14,721 3,969 
Total water revenuesTotal water revenues73,906 75,029 Total water revenues100,799 102,768 265,561 269,430 
Electric:Electric:Electric:
Tariff-based revenuesTariff-based revenues12,552 11,677 Tariff-based revenues8,891 8,791 29,824 28,798 
Surcharges (cost-recovery activities)Surcharges (cost-recovery activities)27 202 Surcharges (cost-recovery activities)29 32 88 278 
Electric revenues from contracts with customersElectric revenues from contracts with customers12,579 11,879 Electric revenues from contracts with customers8,920 8,823 29,912 29,076 
BRRAM over-collection (alternative revenue program)BRRAM over-collection (alternative revenue program)(687)(340)BRRAM over-collection (alternative revenue program)(1)(259)(884)(865)
Total electric revenuesTotal electric revenues11,892 11,539 Total electric revenues8,919 8,564 29,028 28,211 
Contracted services:Contracted services:Contracted services:
WaterWater13,546 18,883 Water16,142 15,454 43,862 53,102 
WastewaterWastewater9,226 11,609 Wastewater9,124 9,969 27,710 31,486 
Contracted services revenues from contracts with customersContracted services revenues from contracts with customers22,772 30,492 Contracted services revenues from contracts with customers25,266 25,423 71,572 84,588 
Total AWR revenuesTotal AWR revenues$108,570 $117,060 Total AWR revenues$134,984 $136,755 $366,161 $382,229 
The opening and closing balances of ASUS's unbilled receivables,the receivable from the U.S. government, contract assets, and contract liabilities from contracts with customers, which are related entirely to ASUS, were as follows:    
(dollar in thousands)March 31, 2022December 31, 2021
(dollars in thousands)(dollars in thousands)September 30, 2022December 31, 2021
Unbilled receivablesUnbilled receivables$16,378 $14,835 Unbilled receivables$13,087 $14,835 
Receivable from the U.S. governmentReceivable from the U.S. government$72,444 $79,818 Receivable from the U.S. government$74,485 $79,818 
Contract assetsContract assets$12,571 $9,587 Contract assets$13,580 $9,587 
Contract liabilitiesContract liabilities$210 $257 Contract liabilities$1,253 $257 
Contract Assets - Contract assets are thoseassets 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 thoseliabilities 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 three and nine months ended March 31,September 30, 2022, thatwhich were included in contract liabilities at the beginning of the period were not material. Contracted services revenues recognized during the three and nine months ended March 31,September 30, 2022 from performance obligations satisfied in previous periods were not material.
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As of March 31,September 30, 2022, Registrant'sAWR’s aggregate remaining performance obligations, which are entirely for the contracted services segment, were $3.3$3.5 billion. RegistrantAWR expects to recognize revenue on these remaining performance obligations over the remaining term of each of the 50-year contracts, which range from 3332 to 46 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;process, and regulatory liabilities, which represent probable future refunds that are to be credited to customers through the ratemaking process. At March 31,September 30, 2022, GSWC and BVESI had approximately $63.1$60.4 million of regulatory liabilities, net of regulatory assets, not accruing carrying costs. Of this amount, (i) $76.7$76.2 million of regulatory liabilities are excess deferred income taxes arising from the lower federal income tax rate due tounder the Tax Cuts and Jobs Act ("Tax Act") enacted in December 2017 that are expected to bebeing refunded to customers, (ii) $5.8$3.7 million of regulatory liabilities are from flow-throughflowed-through deferred income taxes, (iii) $25.1$25.5 million of net regulatory assets relates to the underfunded position in GSWC'sRegistrant's pension and other retirement obligations (not including the two-way pension balancing accounts), and (iv) a $7.0$7.6 million regulatory liability related to a memorandum account authorized by the CPUC to track unrealized gains and losses on BVESI'sBVESI’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'sBVESI’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'sasset’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 liabilities,assets, less regulatory assets,liabilities, included in the consolidated balance sheets are as follows:
(dollars in thousands)(dollars in thousands)March 31,
2022
December 31,
2021
(dollars in thousands)September 30,
2022
December 31,
2021
GSWCGSWCGSWC
Water Revenue Adjustment Mechanism and Modified Cost Balancing AccountWater Revenue Adjustment Mechanism and Modified Cost Balancing Account$19,530 $13,326 Water Revenue Adjustment Mechanism and Modified Cost Balancing Account$30,869 $13,326 
Costs deferred for future recovery on Aerojet case4,994 5,210 
Pensions and other post-retirement obligations (Note 8)Pensions and other post-retirement obligations (Note 8)24,975 25,212 Pensions and other post-retirement obligations (Note 8)24,406 25,212 
COVID-19 memorandum accountsCOVID-19 memorandum accounts4,471 1,663 COVID-19 memorandum accounts5,090 1,663 
Excess deferred income taxesExcess deferred income taxes(72,765)(73,000)Excess deferred income taxes(72,296)(73,000)
Flow-through taxes, netFlow-through taxes, net(5,075)(5,552)Flow-through taxes, net(3,429)(5,552)
Other regulatory assetsOther regulatory assets12,513 11,739 Other regulatory assets16,342 16,949 
Various refunds to customers(3,782)(2,680)
Other regulatory liabilitiesOther regulatory liabilities(5,543)(2,680)
Total GSWCTotal GSWC$(15,139)$(24,082)Total GSWC$(4,561)$(24,082)
BVESIBVESIBVESI
Derivative unrealized gain (Note 5)Derivative unrealized gain (Note 5)(7,020)(4,441)Derivative unrealized gain (Note 5)(7,569)(4,441)
Other regulatory assetsOther regulatory assets15,68313,916Other regulatory assets17,160 13,916 
Various refunds to customers(9,016)(8,189)
Other regulatory liabilitiesOther regulatory liabilities(9,121)(8,189)
Total AWRTotal AWR$(15,492)$(22,796)Total AWR$(4,091)$(22,796)
Regulatory matters are discussed in the consolidated financial statements and the notes thereto included in the Registrant'sCompany’s Form 10-K for the year ended December 31, 2021 filed with the SEC. The discussion below focuses on significant matters and developments since December 31, 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"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 3three unresolved issues.Due to the delay in finalizing the water general rate case, water revenues billed and recorded for the first quarter ofnine months ended September 30, 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 in which the new rates are
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approved by the CPUC. In October 2022, the CPUC issued a decision approving an extension of the statutory deadline for a final decision in the water general rate case proceeding to February 14, 2023.
Cost of Capital Proceeding:
GSWC filed a cost of capital application with the CPUC in May 2021. A final decision2021 currently pending CPUC approval. Hearings on this proceeding once issued by the CPUC, is expectedoccurred in May 2022 and briefs were filed in June 2022. Based on management’s analysis of this regulatory proceeding and associated accounting 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 and nine months ended March 31,September 30, 2022, GSWC reduced revenues by $1.4$1.9 million to reflect the effect of this lower cost of debtand $5.0 million, respectively, and recorded a corresponding regulatory liability for revenues subject to refund. A proposed decisionrefund based on its best estimate, which relates to the impact of GSWC’s lower cost of debt requested in its application. However, at this time, management cannot predict the ultimate outcome of the cost of capital application and the associated impact on 2022 revenues. Changes in estimates will be made, if necessary, as more information in this proceeding is expected in the second half of 2022.becomes available.
Alternative-Revenue Programs:
GSWC currently 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"(“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 papercommercial-paper rate. 
During the threenine months ended March 31,September 30, 2022, GSWC recorded additional net under-collections in the WRAM/MCBA accounts of approximately $8.8$20.7 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 wereSurcharges and surcredits have been implemented to recover 2021for all pre-2022 WRAM/MCBA under-collections. balances.
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. As of March 31,September 30, 2022, there were no WRAM under-collections that were estimated to be collected over more thanbeyond this 24 months.month period.
COVID-19 Emergency Memorandum Accounts:
During 2022, 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 nine months ended September 30, 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 emergency-related memorandum accounts, which GSWC and BVESI intend to file with the CPUC for future recovery.
As of September 30, 2022, GSWC and BVESI had approximately $5.1 million and $454,000, respectively, in regulatory 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 COVID-19-related costs. Emergency-related 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 emergency-related memorandum accounts have not impacted GSWC’s or BVESI’s earnings.
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 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 once all alternative sources of funding have been exhausted and credited to eligible customer accounts.
The CPUC’s moratoriums on service disconnections for nonpayment for water and electric customers have ended. As a result, service disconnections due to nonpayment have resumed with disconnections for delinquent residential customers having resumed in June 2022.
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Other BVESI Regulatory Assets:
Vegetation Management, Wildfire Mitigation Plans and Legislation
In August 2019, the CPUC issued a final decision on the electric general rate case, which set new rates through the year 2022. Among other things, the decision 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 memorandum account for future recovery. As of September 30, 2022, BVESI had approximately $7.9 million in incremental vegetation management costs recorded as a regulatory asset, which has been included in its general rate case application filed with the CPUC in August 2022 for future recovery. The incremental costs related to vegetation management included in the memorandum account will be subject to review during the general rate case proceeding.
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, 2022, BVESI has approximately $4.0 million related to expenses accumulated in its WMP memorandum accounts that have been recognized as regulatory assets for future recovery. In December 2021, the independent accounting firm issued its final examination report, which contains the auditors' results and recommendations. While the final report did not identify any findings of inappropriate costs included in the WMP memorandum accounts under review, the report suggested that the CPUC should evaluate whether some of the costs recorded in the WMP memorandum accounts are incremental to what is being recovered in customer rates in its general rate case proceeding. At this time, BVESI considers the auditor's examination complete and does not expect further developments.
All capital expenditures and other costs incurred through September 30, 2022 as a result of BVESI's WMPs are not currently in rates and have been filed for future recovery in BVESI's general rate case application. These costs will be subject to review during the general rate case proceeding and the CPUC may refer to the recommendations of the independent auditor’s report at that time.
BVESI CEMAWinter Storm Regulatory Asset:
BVESI activated a CEMAcatastrophic emergency memorandum account (“CEMA”) 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 $448,000$452,000 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 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. In October 2021, BVESI filed a new application to continue pursuing recovery since BVESI believes the storm costs were incremental and beyond what was included in its revenue requirement, and in October 2021 filedrequirement. On November 3, 2022, the CPUC adopted a new applicationfinal decision authorizing BVESI’s request to continue pursuing recovery. As a result,recover the costsfull amount included in this CEMA account remainthrough a regulatory asset at March 31, 2022 since the Company continues to believe the incremental costs were properly tracked and included in the CEMA account and, therefore, are probable of recovery. If BVESI does not ultimately prevail in obtaining recovery, it will result in a charge to earnings from the write-off oftwelve-month surcharge, which resolves this CEMA regulatory asset of approximately $448,000. Hearings on this matter are scheduled for May 2022.matter.
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. TheseRegistrant believes that 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'sBVESI’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 regulatory asset to the amount that is probable of recovery.


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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'sAWR’s stock incentive plans for employees and the non-employee directors stock plans.  In applying the “two-class” method, undistributed earnings are allocated to both common shares and participating securities.
The following is a reconciliation of Registrant’s net income and weighted average Common Shares outstanding used for calculating basic net income per share:
Basic: For The Three Months Ended 
 March 31,
(in thousands, except per share amounts)20222021
Net income$14,162 $19,268 
Less: (a) Distributed earnings to common shareholders13,485 12,361 
Distributed earnings to participating securities31 37 
Undistributed earnings646 6,870 
          (b) Undistributed earnings allocated to common shareholders644 6,850 
Undistributed earnings allocated to participating securities20 
Total income available to common shareholders, basic (a)+(b)$14,129 $19,211 
Weighted average Common Shares outstanding, basic36,944 36,898 
Basic earnings per Common Share$0.38 $0.52 

Basic: For The Three Months Ended 
 September 30,
 For The Nine Months Ended 
 September 30,
(in thousands, except per share amounts)2022202120222021
Net income$25,654 $28,153 $59,767 $73,997 
Less: (a) Distributed earnings to common shareholders14,690 13,480 41,664 38,207 
Distributed earnings to participating securities38 37 104 100 
Undistributed earnings10,926 14,636 17,999 35,690 
          (b) Undistributed earnings allocated to common shareholders10,897 14,596 17,955 35,597 
Undistributed earnings allocated to participating securities29 40 44 93 
Total income available to common shareholders, basic (a)+(b)$25,587 $28,076 $59,619 $73,804 
Weighted average Common Shares outstanding, basic36,958 36,933 36,953 36,916 
Basic earnings per Common Share$0.69 $0.76 $1.61 $2.00 
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 March 31,September 30, 2022 and 2021 under these plans. At March 31,September 30, 2022 and 2021, there were 96,58696,629 and 120,973101,267 restricted stock units outstanding, respectively, including performance shares awarded to officers of the Registrant.
The following is a reconciliation of Registrant’s net income and weighted average Common Shares outstanding for calculating diluted net income per share:
Diluted: For The Three Months Ended 
 September 30,
 For The Nine Months Ended 
 September 30,
(in thousands, except per share amounts)2022202120222021
Common shareholders earnings, basic$25,587 $28,076 $59,619 $73,804 
Undistributed earnings for dilutive stock-based awards29 40 44 93 
Total common shareholders earnings, diluted$25,616 $28,116 $59,663 $73,897 
Weighted average common shares outstanding, basic36,958 36,933 36,953 36,916 
Stock-based compensation (1)84 92 81 88 
Weighted average common shares outstanding, diluted37,042 37,025 37,034 37,004 
Diluted earnings per Common Share$0.69 $0.76 $1.61 $2.00 
Diluted: For The Three Months Ended 
 March 31,
(in thousands, except per share amounts)20222021
Common shareholders earnings, basic$14,129 $19,211 
Undistributed earnings for dilutive stock-based awards20 
Total common shareholders earnings, diluted$14,131 $19,231 
Weighted average common shares outstanding, basic36,944 36,898 
Stock-based compensation (1)
75 95 
Weighted average common shares outstanding, diluted37,019 36,993 
Diluted earnings per Common Share$0.38 $0.52 
.
(1)     All of the 96,58696,629 and 120,973101,267 restricted stock units at March 31,September 30, 2022 and 2021, respectively, were included in the calculation of diluted EPS for the three and nine months ended March 31,September 30, 2022 and 2021.
During the threenine months ended March 31,September 30, 2022 AWR issued 19,348 common shares related to restricted stock units. During the three months ended March 31,and 2021, AWR issued 23,91424,612 and 47,149 of common shares related to restricted stock units, under Registrant’s stock incentive plans for employees and the non-employee directors' plans.
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During the threenine months ended March 31,September 30, 2022 and 2021, AWR paid $1.2 million and $1.3 million, respectively, to taxing authorities on employees'employees’ behalf for shares withheld related to net share settlements. During the threenine months ended March 31,September 30, 2022 and 2021, GSWC paid $1.1 million and $1.2 million, respectively, to taxing authorities on employees'employees’ behalf
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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 March 31,September 30, 2022 and 2021, AWR paid quarterly dividends of approximately $14.7 million, or $0.3975 per share, and $13.5 million, or $0.365 per share, respectively. During the nine months ended September 30, 2022 and $12.42021, AWR paid quarterly dividends of approximately $41.7 million, or $0.335$1.1275 per share, and $38.2 million, or $1.035 per share, respectively.
During the three months ended March 31, 2022,September 30, 2021, GSWC paid dividends of $13.5 million to AWR. During the three months ended September 30, 2022, GSWC did not pay a dividend to AWR. Instead, ASUS paid a $14.7 million dividend to AWR during this period. During the nine months ended September 30, 2022 and $12.42021, GSWC paid dividends of $27.0 million and $38.3 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.terms depending on the amount of power and period during which the power is purchased under the contracts.
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 dodid not impact AWR’s earnings. As of March 31,September 30, 2022, there was a $7.0$7.6 million unrealized gain recorded as an asset with a corresponding regulatory liability in the same amount recorded in the memorandum account for the purchased power contracts. The notional volume of derivatives remaining under these long-term contracts as of March 31,September 30, 2022 was 311,163254,022 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 March 31,September 30, 2022 and 2021. The changeschange in fair value was due to the change in market energy prices during the three and nine months ended March 31, 2022 and 2021were due to an increase in energy 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 
September 30, 2022.
 For The Three Months Ended 
 September 30,
 For The Nine Months Ended 
 September 30,
(dollars in thousands)2022202120222021
Fair value at beginning of the period$8,114 $2,810 $4,441 $(1,537)
Unrealized (losses) gains on purchased power contracts(545)5,065 3,128 9,412 
Fair value at end of the period$7,569 $7,875 $7,569 $7,875 

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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'sthe supplemental executive retirement plan ("SERP"(“SERP”) are measured at fair value and totaled $29.8totaled $25.0 million as of September 30, 2022 and $31.5 million as of MarchDecember 31, 2022.2021. 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 AWR and GSWC, respectively. At September 30, 2022, the outstanding long-term debt held by AWR includes $35.0 million of new debt issued in April 2022 by BVESI. As of December 31, 2021, all outstanding long-term debt was held by GSWC. The fair values as of March 31,September 30, 2022 and December 31, 2021 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.
March 31, 2022December 31, 2021September 30, 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)
$415,685 $450,975 $415,788 $490,852 
Long-term debt—AWR (1)
Long-term debt—AWR (1)
$450,373 $416,999 $415,788 $490,852 
September 30, 2022December 31, 2021
(dollars in thousands)(dollars in thousands)Carrying AmountFair ValueCarrying AmountFair Value
Financial liabilities:Financial liabilities:
Long-term debt—GSWC (2)
Long-term debt—GSWC (2)
$415,373 $384,685 $415,788 $490,852 
_____________________________________
(1) ExcludingExcludes debt issuance costs.costs of approximately $3.2 million.

(2)
Excludes debt issuance costs of approximately $3.0 million.
Note 7 — Income Taxes
AWR'sAWR’s effective income tax rate (“ETR”) was 24.0%24.6% and 23.5%26.0% for the three months ended March 31,September 30, 2022 and 2021, respectively, and was 24.1% and 23.9% for the nine months ended September 30, 2022 and 2021, respectively. GSWC'sGSWC’s ETR was 23.9%25.5% and 23.6%26.0% for the three months ended March 31,September 30, 2022 and 2021, respectively, and was 25.2% and 24.0% for the nine months ended September 30, 2022 and 2021, respectively.
The AWR and GSWC effective tax ratesETRs 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 March 31,September 30, 2022 and 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 relatedcompensation-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.rate making. 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 March 31,September 30, 2022 and 2021 were as follows:
For The Three Months Ended March 31,For The Three Months Ended September 30,
Pension BenefitsOther
Postretirement
Benefits
SERP Pension BenefitsOther
Postretirement
Benefits
SERP
(dollars in thousands)(dollars in thousands)202220212022202120222021(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$1,480 $1,625 $33 $40 $298 $348 Service cost$1,411 $1,487 $30 $31 $298 $348 
Interest costInterest cost1,844 1,712 16 31 256 229 Interest cost1,850 1,700 13 22 256 229 
Expected return on plan assetsExpected return on plan assets(3,292)(3,134)(147)(134)— — Expected return on plan assets(3,291)(3,137)(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) loss— 993 (412)(287)145 419 Amortization of actuarial (gain) loss— 876 (478)(488)145 419 
Net periodic benefits costs under accounting standardsNet periodic benefits costs under accounting standards141 1,305 (510)(350)699 996 Net periodic benefits costs under accounting standards79 1,035 (582)(569)699 996 
Regulatory adjustment - deferredRegulatory adjustment - deferred— (351)— — — — Regulatory adjustment - deferred— (254)— — — — 
Total expense (benefit) recognized, before surcharges and allocation to overhead poolTotal expense (benefit) recognized, before surcharges and allocation to overhead pool$141 $954 $(510)$(350)$699 $996 Total expense (benefit) recognized, before surcharges and allocation to overhead pool$79 $781 $(582)$(569)$699 $996 
For The Nine Months Ended September 30,
Pension BenefitsOther
Postretirement
Benefits
SERP
(dollars in thousands)(dollars in thousands)202220212022202120222021
Components of Net Periodic Benefits Cost:Components of Net Periodic Benefits Cost:
Service costService cost$4,233 $4,737 $96 $111 $894 $1,044 
Interest costInterest cost5,550 5,124 45 84 768 687 
Expected return on plan assetsExpected return on plan assets(9,873)(9,405)(441)(402)— — 
Amortization of prior service costAmortization of prior service cost327 327 — — — — 
Amortization of actuarial (gain) lossAmortization of actuarial (gain) loss— 2,862 (1,302)(1,062)435 1,257 
Net periodic benefits costs under accounting standardsNet periodic benefits costs under accounting standards237 3,645 (1,602)(1,269)2,097 2,988 
Regulatory adjustment - deferredRegulatory adjustment - deferred— (956)— — — — 
Total expense (benefit) recognized, before surcharges and allocation to overhead poolTotal expense (benefit) recognized, before surcharges and allocation to overhead pool$237 $2,689 $(1,602)$(1,269)$2,097 $2,988 
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,September 30, 2022 are approximately 89-basis261-basis points higher than those used as of December 31, 2021 based on recent changes in market interest-rate conditions. An 89-basisA 261-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%28% or $30.4 million.$73.6 million, which decreases the underfunded status of the pension plan. However, this decrease in the underfunded status caused by the higher discount rate would be largely offset by the decrease in the fair value of plan assets since December 31, 2021 resulting from current market conditions and related volatility experienced thus far in 2022. In September 2022, Registrant expects to contributecontributed approximately $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 expenseexpenses 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 March 31, 2022, GSWC'sGSWC’s actual pension expense was lower than the amounts included in water customer rates.rates for the three and nine months ended September 30, 2022. During the three and nine months ended March 31,September 30, 2021, GSWC'sGSWC’s actual pension expense was higher than the amounts included in water customer rates by $351,000. BVESI's$254,000 and $956,000, respectively. BVESI’s actual expense was lower than the amounts included in electric customer rates for all periods presented. As of March 31,September 30, 2022, GSWC and BVESI had over-collections in their two-way pension balancing accounts of $134,000$1,087,000 and $372,000,$370,000, respectively, included as part of regulatory assets and liabilities (Note 3).
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Note 9 — Contingencies
Environmental Clean-Up and Remediation at GSWC:
GSWC has been involved in an environmental remediation and cleanup at 1one of its plant sites that contained an underground storage tank thatwhich was used to store gasoline for its vehicles. TheThis tank was removed from the ground in July 1990 along with itsthe dispenser and ancillary piping. Since then, GSWC has been involved in various remediation activities at thethis site.  Analysis indicates that off-site monitoring wells may be necessary to document effectiveness of remediation.
As of March 31,September 30, 2022, the total amount spent to clean up and remediate GSWC’s plant facility was approximately $6.1$6.2 million, of which $1.5 million has been paid by the State of California Underground Storage Tank Fund. Amounts paid by GSWC have been included in rate base and approved by the CPUC for recovery. As of March 31,September 30, 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.
Contracted Services:
ASUS’s utility privatization contract services are provided to the U.S. government pursuant to the terms of 50-year firm, fixed-price contracts subject to annual economic price adjustments. Entering into contracts with the U.S. government subjects ASUS to potential government audits or investigations of its business practices and compliance with government procurement statutes and regulations. ASUS is currently under a civil government investigation over bidding and estimating practices used in certain capital upgrade projects. ASUS is cooperating fully with the investigation and management does not currently believe that the investigation will have a material adverse effect on its consolidated results of operations, financial condition, or liquidity. However, at this time, management cannot predict the final outcome or recommendations that may result from the investigation or determine the amount, if any, of penalties and damages that may be assessed.
Other Litigation: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.
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Note 10 — Business Segments
AWR has 3three reportable segments: water, electric and contracted services. GSWC has 1one 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'sGSWC’s and BVESI'sBVESI’s business activities are conducted 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. EachSome of ASUS’s wholly owned subsidiaries isare 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.BVESI, and U.S. government- and third-party contractor-funded capital expenditures for ASUS.
 As Of And For The Three Months Ended September 30, 2022
 ContractedAWRConsolidated
(dollars in thousands)WaterElectric ServicesParentAWR
Operating revenues$100,799 $8,919 $25,266 $— $134,984 
Operating income (loss)32,451 2,337 5,553 (1)40,340 
Interest expense (income), net5,625 355 (27)711 6,664 
Net property, plant and equipment1,584,888 115,379 17,885 — 1,718,152 
Depreciation and amortization expense (1)
8,475 709 933 — 10,117 
Income tax expense (benefit)6,831 478 1,347 (296)8,360 
Capital additions40,684 4,711 109 — 45,504 
 As Of And For The Three Months Ended September 30, 2021
 ContractedAWRConsolidated
(dollars in thousands)WaterElectricServicesParentAWR
Operating revenues$102,768 $8,564 $25,423 $— $136,755 
Operating income (loss)35,459 2,053 5,273 (1)42,784 
Interest expense (income), 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 
 As Of And For The Nine Months Ended September 30, 2022
 ContractedAWRConsolidated
(dollars in thousands)WaterElectric ServicesParentAWR
Operating revenues$265,561 $29,028 $71,572 $— $366,161 
Operating income (loss)77,161 7,973 13,894 (6)99,022 
Interest expense (income), net16,088 763 (264)1,272 17,859 
Net property, plant and equipment1,584,888 115,379 17,885 — 1,718,152 
Depreciation and amortization expense (1)
25,573 2,049 2,780 — 30,402 
Income tax expense (benefit)14,623 1,645 3,399 (641)19,026 
Capital additions107,668 13,485 903 — 122,056 

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 As Of And For The Three Months Ended March 31, 2022
 ContractedAWRConsolidated
(dollars in thousands)WaterElectric ServicesParentAWR
Operating revenues$73,906 $11,892 $22,772 $— $108,570 
Operating income (loss)16,999 3,598 3,770 (2)24,365 
Interest expense, net5,145 113 (135)200 5,323 
Net property, plant and equipment1,523,665 107,114 19,080 — 1,649,859 
Depreciation and amortization expense (1)
8,545 654 915 — 10,114 
Income tax expense (benefit)2,689 952 944 (124)4,461 
Capital additions31,465 3,468 237 — 35,170 

As Of And For The Three Months Ended March 31, 2021 As Of And For The Nine Months Ended September 30, 2021
ContractedAWRConsolidated ContractedAWRConsolidated
(dollars in thousands)(dollars in thousands)WaterElectric ServicesParentAWR(dollars in thousands)WaterElectric ServicesParentAWR
Operating revenuesOperating revenues$75,029 $11,539 $30,492 $— $117,060 Operating revenues$269,430 $28,211 $84,588 $— $382,229 
Operating income (loss)Operating income (loss)21,059 3,448 5,824 (2)30,329 Operating income (loss)87,295 7,296 16,375 (6)110,960 
Interest expense, net5,711 86 (229)235 5,803 
Interest expense (income), netInterest expense (income), net16,273 275 (458)617 16,707 
Net property, plant and equipmentNet property, plant and equipment1,426,175 94,346 21,902 — 1,542,423 Net property, plant and equipment1,471,740 101,952 20,854 — 1,594,546 
Depreciation and amortization expense (1)
Depreciation and amortization expense (1)
8,062 639 859 — 9,560 
Depreciation and amortization expense (1)
24,547 1,925 2,684 — 29,156 
Income tax expense (benefit)Income tax expense (benefit)3,768 884 1,391 (129)5,914 Income tax expense (benefit)17,718 1,879 3,927 (270)23,254 
Capital additionsCapital additions31,824 4,782 487 — 37,093 Capital additions90,299 15,139 1,283 — 106,721 
(1)     Depreciation computed on GSWC’s and BVESI'sBVESI’s transportation equipment is recorded in other operating expenses and totaled $94,000$97,000 and $95,000$94,000 for the three months ended March 31,September 30, 2022 and 2021, respectively, and totaled $286,000 and $283,000 for the nine months ended September 30, 2022 and 2021, respectively.
The following table reconciles total net property, plant and equipment (a key figure for ratemaking) to total consolidated assets (in thousands):
March 31, September 30,
20222021 20222021
Total net property, plant and equipmentTotal net property, plant and equipment1,649,859 $1,542,423 Total net property, plant and equipment$1,718,152 $1,594,546 
Other assetsOther assets264,073 250,398 Other assets264,423 280,254 
Total consolidated assetsTotal consolidated assets$1,913,932 $1,792,821 Total consolidated assets$1,982,575 $1,874,800 
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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. The subsidiaries of ASUS are collectively referred to as the “Military Utility Privatization Subsidiaries”.
Included in the following analysis is a discussion of Registrant’sAWR’s operations in terms of earnings per share by business segment and AWR (parent), which equals each business segment's earnings divided by Registrant'sAWR’s weighted average number of diluted common shares. This item isFurthermore, the gains and losses generated on the investments held to fund one of the Company’s retirement plans during the three and nine months ended September 30, 2022 and 2021 have been excluded when communicating the results to help facilitate comparisons of AWR’s performance from period to period. Also, the retroactive impact of new 2022 water rates not yet recorded due to the delay in receiving a final decision from the CPUC, which will be retroactive to January 1, 2022 when approved, have been included when communicating AWR’s consolidated and its water segment’s results for the three and nine months ended September 30, 2022 to help facilitate comparisons of AWR’s performance from period to period. All of these measures are derived from consolidated financial information but isare not presented in our financial statements that are prepared in accordance with Generally Accepted Accounting Principles (GAAP) in the United States.This item constitutes a "non-GAAP These items constitute “non-GAAP financial measure"measures” under the Securities and Exchange Commission rules.rules, which supplement our GAAP disclosures but should not be considered as an alternative to the respective GAAP measures. Furthermore, the non-GAAP financial measures may not be comparable to similarly titled non-GAAP financial measures of other registrants.
Registrant believes that the disclosure ofAWR uses earnings per share by business segment as an important measure in evaluating its operating results and believes it provides investors with clarity surrounding the performance of its segments. RegistrantAWR reviews this measurement regularly and compares it to historical periods and to its operating budget.However, this measure, which is not presented in accordance with GAAP, may not be comparable to similarly titled measures used by other enterprises and should not be considered as an alternative to earnings per share, which is determined in accordance with GAAP.A reconciliation to AWR’s consolidated diluted earnings per share prepared in accordance with GAAP is included in the discussion under the section titled “Summary of FirstThird Quarter Results by Segmentand “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, 2021 filed with the SEC.
Water and Electric Segments:Segments:
GSWC'sGSWC’s and BVESI'sBVESI’s revenues, operating income, and cash flows are earned primarily through delivering potable water to homes and businesses in California and electricity in the Big Bear area of San Bernardino County, California, respectively.Rates charged to GSWC and BVESI customers are determined by the CPUC.These rates are intended to allow recovery of operating costs and a reasonable rate of return on capital. GSWC and BVESI plan to continue 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 may 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:
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 2022–2022 – 2024. In November 2021, GSWC and the Public Advocates Office at the CPUC ("(“Public Advocates"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 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, or $0.59 per share, as compared to the 2021 adopted revenues, and increase the 2022 adopted supply costs by $9.7 million, or $0.19 per share, as compared to the 2021 adopted supply costs.costs, which combined is $0.40 per share. The settlement agreement also allows for the potential of additional increases in adopted revenues for 2023 and 2024 subject to an earnings test and changes to the forecasted inflationary index values.
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The three remaining unresolved issues relate to GSWC'sGSWC’s requests for: (i) a medical insurance cost balancing account, (ii) a general liability insurance cost balancing account, and (iii) the consolidation of two of GSWC'sGSWC’s customer service areas. GSWC and Public Advocates have filed briefs with the CPUC on these unsettled issues. A proposed decision is expected in mid-2022, and wouldwill address the three unresolved issues along with the settlement agreement filed by GSWC and Public Advocates. Pending a final decision on this general rate case application, GSWC filed with the CPUC for interim rates whichthat will make the new 2022 rates, once approved in a CPUC final decision, effective January 1, 2022. In October 2022, the CPUC issued a decision approving an extension of the statutory deadline for a final decision in the water general rate case proceeding to February 14, 2023.
Due to the delay in finalizing the water general rate case, water revenues billed and recorded for the first quarternine months of 2022 were based on 2021 adopted rates, pending a final decision by the CPUC in this general rate case application.CPUC. When approved, the new rates will be retroactive to January 1, 2022 and cumulative adjustments will be recorded in the quarter in which the new rates are approved by the CPUC.
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TableHad the new 2022 water rates been approved and effective January 1, 2022 consistent with the settlement agreement between GSWC and Public Advocates, for the three months ended September 30, 2022, GSWC would have recorded additional revenues of Contents$8.7 million, or $0.17 per share, and additional water supply costs of $3.4 million, or $0.07 per share, which together is $0.10 per share higher than what was actually recorded for the third quarter of 2022. For the nine months ended September 30, 2022, GSWC would have recorded additional revenues of $22.7 million, or $0.44 per share, and additional water supply costs of $7.7 million, or $0.15 per share, which together is $0.29 per share higher than what was actually recorded for the first nine months of 2022.
Final Decision in the First Phase of the Low-Income Affordability Rulemaking: 
In August 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 discontinued use of the Water Revenue Adjustment Mechanism ("WRAM"(“WRAM”) and the Modified Cost Balancing Account ("MCBA"(“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. For GSWC, the discontinuance of the WRAM and MCBA accounts would be effective for the year 2025 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 revenue and supply costs.
As a result of the August 2020 decision, the discontinuation of the WRAM and MCBA for GSWC would be effective for years after 2024. However, on September 30, 2022, the governor of California signed Senate Bill (“SB”) 1469. Effective January 1, 2023, SB 1469 allows Class A water utilities, including GSWC, to continue requesting the use of the WRAM in their next general rate case. With the passage of SB 1469, GSWC will be able to request the continued use of the WRAM in its next general rate case to be filed in 2023 that will establish new rates for the years 2025 – 2027. GSWC’s request to continue using the WRAM in its next general rate case will be subject to CPUC approval.
In October 2020, GSWC, certainthree other Californiainvestor-owned water utilities (“IOWUs”) operating in California, and the California Water Association (“CWA”) filed separate applications with the CPUC for rehearing on this matter. Due to the delay indiscontinuation of the WRAM and MCBA, which the CPUC issuingdenied in September 2021. GSWC, the three other IOWUs and CWA each separately filed a petition with the California Supreme Court (“Court”) to review the CPUC’s decision on anyrevoking prior authorization of these applications for rehearing, GSWC filed athe WRAM and MCBA. In May 2022, the Court granted the petition for writ of reviewreview. The Court has ordered GSWC, along with the other IOWUs and CWA, to file opening briefs, which were filed on September 1. The CPUC’s answer to the California Supreme Courtopening brief is due by November 15 and reply briefs are due by December 15. However, as a result of SB 1469, in May 2021, requestingOctober 2022 the CPUC filed a motion to dismiss the IOWUs and CWA’s petition with the Court, to review the CPUC's final decision on this matter. The CPUCand also requested that the Court hold GSWC’s request in abeyancesuspend the proceeding schedule until such time as the CPUC actsit rules on the pendingmotion to dismiss. The Court granted the CPUC’s request for rehearing. In September 2021,to suspend the CPUC issued a decision denying all the October 2020 applicationsproceeding schedule. There is no timeline 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 oncomplete their review. At 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. Managementtime, 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. The final decision requires that amounts tracked in GSWC'sGSWC’s COVID-19 Catastrophic Event Memorandum Account ("CEMA"(“CEMA”) account for unpaid customer bills be first offset by any (i) federal or state relief for customers' utility bill debt, and (ii) customer payments through payment-plan arrangements prior to receiving recovery from 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. balances.
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.decision, which the CPUC denied in May 2022. In March 2022, the California Water AssociationCWA filed a petition for writ of review to the California Supreme Court, urging the Court to review the CPUC'sCPUC’s final decision on the second phase of the Low-IncomeLow-
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Income Affordability Rulemaking. The Court has granted a CPUC requestCWA amended its petition to holdreflect the California Water Association’s petition until such time asCPUC’s decision denying the CPUC acts on the pending applicationsrequests for rehearing. Management cannot currently predictIn September 2022, the final outcomeSupreme Court denied CWA’s amended petition for writ of this matter.review.
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 requestingcurrently pending approval, which requested 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 decisionHearings on this proceeding once issuedoccurred in May 2022 and briefs were filed in June 2022. Based on management's analysis of this regulatory proceeding and associated accounting to date, for the three and nine months ended September 30, 2022, GSWC reduced revenues by $1.9 million and $5.0 million, respectively, and recorded a corresponding regulatory liability for revenues subject to refund based on its best estimate at this time, which includes the CPUC, is expected to have an effective date retroactive to January 1, 2022. Theimpact of GSWC’s lower cost of debt of 5.1% requested in this application is lower thanits application. However, management cannot predict 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 adjustmentultimate outcome of the cost of debt from 6.6% to approximately 5.1%. As a result, forcapital application and the three months ended March 31,associated impact on 2022 GSWC reduced revenues by $1.4 million to reflect the effect of revenues subject to refund fromrevenues. Changes in estimates will be made, if necessary, as more information in this lower cost of debt.proceeding becomes available. 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 currently authorized cost of debt of 6.6%. At that is presently being billed to water customers until a final decision is issued in this time, management cannot predictproceeding.
In the outcome of the other items in thepending cost of capital application. Hearingsproceeding, GSWC requested authorization to continue the Water Cost of Capital Mechanism (“WCCM”). The WCCM adjusts return on this proceeding are scheduled forequity and rate of return on rate base between the second quarterthree-year cost of 2022. A proposed decisioncapital proceedings only if there is a positive or negative change of more than 100 basis points in the average of the Moody’s Aa utility bond rate as measured over the period October 1 through September 30. If there is a positive or negative change of more than 100 basis points, the return on this proceedingequity is adjusted by one half of the difference. For the period from October 1, 2021 through September 30, 2022, the Moody’s rate increased by more than 100 basis points from the benchmark, which triggered the WCCM adjustment. The WCCM is expected to be addressed by the CPUC in the second half of 2022.pending proposed decision.
Electric Segment:General Rate Cases:
On August 15, 2019, the CPUC issued a final decision on the electric general rate case.case that set new rates for the years 2018 – 2022. Among other things, the decision (i) extended the rate cycleincreased adopted electric revenues by one year (new rates were effective for 2018 - 2022); (ii) allows the electric segment$1.0 million in 2022 not subject to an earnings test. The decision also allowed BVESI to construct all the capital projects requested in its application, which are dedicated to improving system safety and reliability and total approximately $44 million over the 5-year rate cycle; and (iii) increased the adopted electric revenues by $1.2 million for each of the years 2019 and 2020, by $1.1 million in 2021, and by $1.0 million in 2022. The rate increases for 2019–2022 are not
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subject to an earnings test.cycle. The decision authorized a return on equity for the electric segment of 9.6% and included a capital structure and a debt cost that are consistent with those approved by the CPUC in March 2018 in connection with GSWC's water segment cost of capital proceeding.
On August 30, 2022, BVESI intends to file its nextfiled a general rate case application in June 2022 to setthat will determine new electric rates for the years 2023 – 2026. Among other things, BVESI requested (i) capital budgets of approximately $62 million for the four-year rate cycle, and another $6.2 million for a large line replacement capital project to be filed for revenue recovery through 2026.an advice letter when the project is completed, and (ii) a capital structure for BVESI of 61.8% equity and 38.2% debt, a return on equity of 11.25%, an embedded cost of debt of 5.1%, and a return on rate base of 9.05%. Furthermore, included in the general rate case application is a request for recovery of all capital expenditures and other costs incurred over the last few years in connection with BVESI’s wildfire mitigation plans that are currently not in customer rates. These costs will be subject to review by the CPUC during the general rate case proceeding. A pre-hearing conference has been scheduled for December 16, 2022 at which time the scope of issues and schedule for the proceeding will be determined. On November 2, 2022, BVESI filed a motion to request a general rate case memorandum account that would make the new 2023 rates, once approved in a CPUC final decision, effective and retroactive to January 1, 2023.
Contracted Services Segment:
ASUS'sASUS’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 for 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.
Entering into contracts with the U.S. government subjects ASUS to potential government audits or investigations of its business practices and compliance with government procurement statutes and regulations. ASUS is currently under a civil government investigation over bidding and estimating practices used in certain capital upgrade projects. ASUS is cooperating fully with the investigation and management does not currently believe that the investigation will have a material adverse effect on its consolidated results of operations, financial condition, or liquidity. However, at this time, management cannot predict the final outcome or recommendations that may result from the investigation or determine the amount, if any, of penalties and damages that may be assessed.
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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. The Company continuesAWR and its subsidiaries continue to monitor the guidance provided by federal, state, and local health authorities and other government officials. DueWhile continuing to fallingmonitor transmission rates in California and other variables, employees that have been telecommuting due to COVID-19 have begun returningreturned to company offices. Thus far, the COVID-19 pandemic has not had a material impact on ASUS's current operations.
During 2022, 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 allowance for doubtful accounts during the threenine months ended March 31,September 30, 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-relatedCOVID-19 emergency-related memorandum accounts, such as a Catastrophic Event Memorandum Account ("CEMA"), which isGSWC and BVESI intend to be filedfile with the CPUC for future recovery. As of March 31,September 30, 2022, GSWC and BVESI had approximately $4.5$5.1 million and $576,000,$454,000, respectively, in regulatory 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 COVID-19-related costs. CEMA and other emergency-typeEmergency-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-relatedCOVID-19 emergency-related memorandum accounts have not impacted GSWC'sGSWC’s or BVESI'sBVESI’s earnings. Thus far, the COVID-19 pandemic has not had a material impact on ASUS's current operations.
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 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'sGSWC’s and BVESI'sBVESI’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 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 expectedonce all alternative sources of funding have been exhausted and credited to be filedeligible customer accounts.
The CPUC’s moratoriums on service disconnections for nonpayment for water and electric customers have ended. As a result, service disconnections due to nonpayment have resumed with disconnections for delinquent residential customers having resumed in June 2022.
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Summary of FirstThird Quarter Results by Segment
The table below sets forth the firstthird quarter diluted earnings per share by business segment:segment and for the parent company:
 Diluted Earnings per Share
 Three Months Ended 
 9/30/20229/30/2021CHANGE
Water$0.54 $0.62 $(0.08)
Electric0.04 0.04 — 
Contracted services0.12 0.11 0.01 
AWR (parent)(0.01)(0.01)— 
Consolidated diluted earnings per share, as recorded$0.69 $0.76 $(0.07)
 Diluted Earnings per Share
 Three Months Ended 
 3/31/20223/31/2021CHANGE
Water$0.23 $0.33 $(0.10)
Electric0.07 0.07 — 
Contracted services0.08 0.12 (0.04)
Consolidated fully diluted earnings per share, as reported$0.38 $0.52 $(0.14)
For the three months ended September 30, 2022, AWR’s recorded consolidated diluted earnings were $0.69 per share, as compared to $0.76 per share for the same period in 2021, a decrease of $0.07 per share. Included in the results for the third quarter ended September 30, 2022 were losses totaling $1.3 million, or approximately $0.03 per share, on investments held to fund one of the Company’s retirement plans, as compared to gains of $104,000 for the same period in 2021, both due to financial market conditions. Furthermore, due to the delay in receiving a final decision from the CPUC on GSWC’s pending water general rate case that will set new rates beginning in 2022, water revenues billed and recorded for the third quarter of 2022 were based on 2021 adopted rates, pending a final decision. When approved, the new rates will be retroactive to January 1, 2022 and cumulative adjustments will be recorded in the quarter in which the new rates are approved by the CPUC. Had the new 2022 water rates been approved and effective January 1, 2022 consistent with the settlement agreement reached between GSWC and Public Advocates, GSWC would have recorded additional revenues of $8.7 million, or $0.17 per share, and additional water supply costs of $3.4 million, or $0.07 per share, which combined would have been $0.10 per share higher than what was actually recorded for the third quarter of 2022.
Excluding the gains and losses on investments from both periods, and including the additional revenues and water supply costs in the results for the third quarter of 2022 had the water general rate case not been delayed, adjusted consolidated diluted earnings for the third quarter of 2022 were $0.82 per share as compared to adjusted diluted earnings of $0.76 per share for the same period in 2021, an adjusted increase of $0.06 per share, or a 7.9% increase.
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 (as recorded), for the three months ended March 31,September 30, 2022 and 2021:
WaterElectricContracted ServicesAWR (Parent)Consolidated (GAAP)WaterElectricContracted ServicesAWR (Parent)Consolidated (GAAP)
(in thousands, except per share amounts)(in thousands, except per share amounts)Q1 2022Q1 2021Q1 2022Q1 2021Q1 2022Q1 2021Q1 2022Q1 2021Q1 2022Q1 2021(in thousands, except per share amounts)Q3 2022Q3 2021Q3 2022Q3 2021Q3 2022Q3 2021Q3 2022Q3 2021Q3 2022Q3 2021
Operating income (Note 10)Operating income (Note 10)$16,999 $21,059 $3,598 $3,448 $3,770 $5,824 $(2)$(2)$24,365 $30,329 Operating income (Note 10)$32,451 $35,459 $2,337 $2,053 $5,553 $5,273 $(1)$(1)$40,340 $42,784 
Other income and expenseOther income and expense5,743 5,060 (30)40 (171)(188)200 235 5,742 5,147 Other income and expense5,695 4,669 243 33 (65)(111)453 162 6,326 4,753 
Income tax expense (benefit)Income tax expense (benefit)2,689 3,768 952 884 944 1,391 (124)(129)4,461 5,914 Income tax expense (benefit)6,831 7,993 478 537 1,347 1,265 (296)83 8,360 9,878 
Net incomeNet income$8,567 $12,231 $2,676 $2,524 $2,997 $4,621 $(78)$(108)$14,162 $19,268 Net income$19,925 $22,797 $1,616 $1,483 $4,271 $4,119 $(158)$(246)$25,654 $28,153 
Weighted Average Number of Diluted SharesWeighted Average Number of Diluted Shares37,019 36,993 37,019 36,993 37,019 36,993 37,019 36,993 37,019 36,993 Weighted Average Number of Diluted Shares37,042 37,025 37,042 37,025 37,042 37,025 37,042 37,025 37,042 37,025 
Diluted earnings per shareDiluted earnings per share$0.23 $0.33 $0.07 $0.07 $0.08 $0.12 $— $— $0.38 $0.52 Diluted earnings per share$0.54 $0.62 $0.04 $0.04 $0.12 $0.11 $(0.01)$(0.01)$0.69 $0.76 
Water Segment:Segment:
For the three months ended March 31,September 30, 2022, recorded diluted earnings from the water utility segment were $0.23$0.54 per share, as compared to $0.33$0.62 per share for the same period in 2021, a decrease of $0.10$0.08 per share. DueAs discussed above, the decrease was partly due 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 first quarter of 2022 were losses of $1.7totaling $1.3 million, or approximately $0.03 per share, incurred during the third quarter of 2022 on investments held to fund one of the Company's retirement plans, as compared to nominal gains of $628,000, or approximately $0.01 per share,recorded for the same period in 2021, largely due to volatility2021. Furthermore, and also discussed above, the water segment's third quarter 2022 results would have included an additional $0.10 per share had there been no delay in receiving a final decision in the financial markets. water general rate case that approved the new 2022 rates effective January 1, 2022.
Excluding the gains and losses on investments from both periods, and including the additional revenues and water supply costs in the results for the third quarter of 2022 had the water general rate case not been delayed, adjusted diluted earnings for the third quarter of 2022 at the water segment were $0.67 per share as compared to adjusted diluted earnings of $0.62 per share for the same period in 2021, an adjusted increase at the water segment of $0.05 per share, or an 8.1% increase, despite a $0.04 per share reduction in 2022's third quarter earnings as a result of the lower cost of debt in the pending cost of capital proceeding discussed below.
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Excluding only the gains and losses on investments from both periods discussed above, adjusted diluted earnings at the water segment for the firstthird quarter of 2022 were $0.26$0.57 per share, as compared to adjusted earnings of $0.32$0.62 per share for the firstthird quarter of 2021, an adjusted decrease of $0.06$0.05 per share due primarily to the following items:
A decrease in water operating revenues of $1.1$2.0 million largely as a result of the lower cost of debt included in the pending May 2021cost of capital application. GSWC recorded a reduction to revenues of $1.9 million, or $0.04 per share, to reflect management's best estimate at this time of revenues subject to refund from the pending cost of capital proceeding, which includes the impact of GSWC’s lower cost of debt requested in its application. However, management cannot predict the ultimate outcome of the cost of capital application and the associated impact on 2022 revenues. Changes in estimates will be made, if necessary, as more information in this proceeding becomes available. As discussed previously, discussed. Furthermore, water revenues billed and recorded forduring the firstthird quarter of 2022 were based on 2021 adopted rates, pending a final decision by the CPUC on the general rate case application.

An increaseA decrease in water supply costs of $462,000,$31,000, 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 firstthird quarter of 2022 were based on 2021 authorized 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. A decrease in water supply costs results in a corresponding decrease in water operating revenues and has no net impact on the water segment’s profitability.
An overall increase in operating expenses of $1.1 million (excluding supply costs), which negatively impacted earnings and was mainly due to increases in (i) administrative and general expenses resulting from higher employee-related benefits and insurance costs, (ii) depreciation and amortization expenses resulting from additions to utility plant, and (iii) maintenance expenses.
An increase in interest expense (net of interest income) of $527,000 resulting primarily from an overall increase in total borrowing levels to support, among other things, the capital expenditures program at GSWC.
An overall increase in other income (net of other expenses) of $880,000 due primarily from a decrease in the non-service cost components related to GSWC’s benefit plans resulting from lower actuarial losses recognized during the third quarter of 2022 as compared to the same period in 2021.
Electric Segment:
Diluted earnings from the electric utility segment were $0.04 per share for the three months ended September 30, 2022 and 2021. An increase in electric operating revenues resulting from CPUC-approved rate increases effective January 1, 2022 and a lower effective income tax rate at the electric segment due to changes in flow-through taxes were mostly offset by higher operating and interest expenses. In April 2022, BVESI completed the issuance of $35.0 million in unsecured private-placement notes consisting of 10 and 15 year term notes. BVESI used the proceeds to pay down all outstanding borrowings under its credit facility as required by the CPUC. Borrowings under the credit facility bear lower short-term rates.
Contracted Services Segment:
Diluted earnings from the contracted services segment increased $0.01 per share for the three months ended September 30, 2022 as compared to the same period in 2021, largely due to an increase in management fee revenue resulting from resolution of various economic price adjustments, partially offset by higher overall operating expenses as compared to the same period of 2021.

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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 and for the parent company:
 Diluted Earnings per Share
 Nine Months Ended 
 9/30/20229/30/2021CHANGE
Water$1.17 $1.51 $(0.34)
Electric0.16 0.14 0.02 
Contracted services0.29 0.35 (0.06)
AWR (Parent)(0.01)— (0.01)
Consolidated diluted earnings per share, as recorded$1.61 $2.00 $(0.39)
For the nine months ended September 30, 2022, AWR’s recorded consolidated diluted earnings were $1.61 per share, as compared to $2.00 per share for the same period in 2021, a decrease of $0.39 per share. Included in the results for the nine months ended September 30, 2022 were losses totaling $6.4 million, or $0.13 per share, on investments held to fund one of the Company's retirement plans as compared to gains of $2.3 million, or $0.04 per share, for the same period in 2021, a net decrease in earnings of $0.17 per share, both due to financial market conditions. Furthermore, and as previously discussed, due to the delay in finalizing the water general rate case, water revenues billed and recorded for the nine months ended September 30, 2022 were based on 2021 adopted rates, pending a final decision by the CPUC in this general rate case application. Had the new 2022 water rates been approved by the CPUC effective January 1, 2022, GSWC would have recorded additional revenues of $22.7 million, or $0.44 per share, and additional water supply costs of $7.7 million, or $0.15 per share, which combined would have been $0.29 per share higher than what was actually recorded for the nine months ended September 30, 2022.
Excluding the gains and losses on investments from both periods, and including the additional revenues and water supply costs in the results for the nine months ended September 30, 2022 had the water general rate case not been delayed, adjusted consolidated diluted earnings for the nine months ended September 30, 2022 were $2.03 per share as compared to adjusted diluted earnings of $1.96 per share for the same period in 2021, an adjusted increase of $0.07 per share.
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, 2022 and 2021:
WaterElectricContracted ServicesAWR (Parent)Consolidated (GAAP)
(in thousands, except per share amounts)YTD 2022YTD 2021YTD 2022YTD 2021YTD 2022YTD 2021YTD 2022YTD 2021YTD 2022YTD 2021
Operating income (Note 10)$77,161 $87,295 $7,973 $7,296 $13,894 $16,375 $(6)$(6)$99,022 $110,960 
Other income and expense19,158 13,589 431 107 (374)(346)1,014 359 20,229 13,709 
Income tax expense (benefit)14,623 17,718 1,645 1,879 3,399 3,927 (641)(270)19,026 23,254 
Net income$43,380 $55,988 $5,897 $5,310 $10,869 $12,794 $(379)$(95)$59,767 $73,997 
Weighted Average Number of Diluted Shares37,034 37,004 37,034 37,004 37,034 37,004 37,034 37,004 37,034 37,004 
Diluted earnings per share$1.17 $1.51 $0.16 $0.14 $0.29 $0.35 $(0.01)$— $1.61 $2.00 
Water Segment:
For the nine months ended September 30, 2022, recorded diluted earnings from the water utility segment were $1.17 per share, as compared to $1.51 per share for the same period in 2021, a decrease of $0.34 per share. As discussed above, the decrease at the water segment was partly due to losses of $0.13 per share incurred during the nine months ended September 30, 2022 on investments held to fund a retirement plan, as compared to gains of $0.04 per share for the same period in 2021, a net decrease in earnings of $0.17 per share. Furthermore, and also discussed above, the water segment’s results for the nine months ended September 30, 2022 would have included an additional $0.29 per share had there been no delay in receiving a final decision in the water general rate case that approved the new 2022 rates effective January 1, 2022.
Excluding the gains and losses on investments from both periods, and including the additional revenues and water supply costs in the results for the nine months ended September 30, 2022 had the water general rate case not been delayed, adjusted diluted earnings for the nine months ended September 30, 2022 at the water segment were $1.59 per share as compared to adjusted diluted earnings of $1.47 per share for the same period in 2021, an adjusted increase at the water segment of $0.12 per share, or an 8.2% increase, despite a $0.10 per share reduction in earnings during the nine months ended September 30, 2022 as a result of the lower cost of debt in the pending cost of capital proceeding discussed below.
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Excluding only the gains and losses on investments from both periods discussed above, adjusted diluted earnings at the water segment for the nine months ended September 30, 2022 were $1.30 per share, as compared to adjusted earnings of $1.47 per share for the same period in 2021, an adjusted decrease of $0.17 per share due to the following items:
A decrease in water operating revenues of $3.9 million largely as a result of the lower cost of debt included in the pending cost of capital application. GSWC recorded a reduction to revenues during the nine months ended September 30, 2022 of $5.0 million, or $0.10 per share, to reflect management's best estimate at this time of revenues subject to refund from the pending cost of capital proceeding, which includes the impact of GSWC’s lower cost of debt requested in its application. However, management cannot predict the ultimate outcome of the cost of capital application and the associated impact on 2022 revenues. Changes in estimates will be made, if necessary, as more information in this proceeding becomes available. This decrease was partially offset by an increase in revenues from advice letter projects that became effective February 15, 2022, as well as mid-year increases implemented in July 2021 to reflect higher water supply costs. Due to regulatory mechanisms in place for water supply costs, the increase in operating revenues includes the full recovery of the increases in supply costs discussed below. As discussed previously, water revenues billed and recorded for the nine months ended September 30, 2022 were based on 2021 adopted rates, pending a final decision by the CPUC on the general rate case application.
An increase in water supply costs of $1.1 million, 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 nine months ended September 30, 2022 were based on 2021 authorized 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. An increase in water supply costs results in a corresponding increase in water operating revenues and has no net impact on the water segment’s profitability.
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An overall increase in operating expenses of $1.8$5.2 million (excluding supply costs and fluctuations in pension costs which, due to a CPUC-authorized pension balancing account, have no impact to earnings)costs), which negatively impacted earnings and was mainly due to increases in (i) operation-related expenses resulting from higher chemical and water treatment costs, transportation expenses, and conservation spending, (ii) administrative and general expenses resulting from higher insurance costs and employee-related benefits, (iii) depreciation and amortization expenses resulting from additions to utility plant, and (iv) maintenance expenses.
AAn overall increase in other income (net of other expenses) of $3.0 million due primarily from a decrease in interest expense (net of interest income) of $566,000the non-service cost components related to GSWC’s benefit plans resulting from lower overall borrowing rates dueactuarial losses recognized during the first nine months of 2022 as compared to the early redemption of GSWC's 9.56% private placement notessame period in the amount of $28 million in May 2021, partially offset by an overall increase in total borrowing levels to support, among other things, GSWC’s capital expenditures program.2021.
An increase in the effective income tax rate, which negatively impacted net earnings at the water segment. The increase resulted primarily from changes in certain flow-through taxes and permanent 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.
Electric Segment:
Diluted earnings from the electric utility segment were $0.07increased $0.02 per share for the threenine months ended March 31,September 30, 2022 and 2021. Anas compared to the same period in 2021, largely due to an increase in electric operating revenues wasresulting from CPUC-approved rate increases effective January 1, 2022 and a lower effective income tax rate at the electric segment due to changes in flow-through taxes, partially offset by higher operating and interest expenses. In April 2022, BVESI completed the issuance of $35.0 million in unsecured private-placement notes consisting of 10 and 15 year term notes. BVESI used the proceeds to pay down all outstanding borrowings under its credit facility as required by the CPUC. Borrowings under the credit facility bear lower short-term rates.
Contracted Services Segment:
Diluted earnings from the contracted services segment decreased $0.04$0.06 per share for the first quarter ofnine months ended September 30, 2022 as compared to the same period in 2021, largely due to a decrease in construction activity primarily dueresulting from timing differences of when such work was performed as compared to timing differences,the same period of 2021, as well as a slowdown caused by longer materials supply-chain lead-times, weather conditions, and other delays. There was also an increase in overall operating expenses. These decreases to earnings at the contracted services segment were partially offset by an increase in management fees, as well as lower overall operating expenses. Thefees. As it continues to experience challenges in its construction activity, the contracted services segment is expected to contribute $0.45$0.43 to $0.49$0.47 per share for the full 2022 year.

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AWR (Parent):
For the nine months ended September 30, 2022, diluted earnings from AWR (parent) decreased $0.01 per share compared to the same period in 2021 due primarily to an increase in interest expense resulting from higher short-term interest rates on borrowings made under AWR's revolving credit facility.
The following discussion and analysis for the three and nine months ended March 31,September 30, 2022 and 2021 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 March 31,September 30, 2022 and 2021 (amounts in thousands, except per share amounts):
Three Months Ended 
 March 31, 2022
Three Months Ended 
 March 31, 2021
$
CHANGE
%
CHANGE
Three Months Ended 
 September 30, 2022
Three Months Ended 
 September 30, 2021
$
CHANGE
%
CHANGE
OPERATING REVENUESOPERATING REVENUES    OPERATING REVENUES    
WaterWater$73,906 $75,029 $(1,123)(1.5)%Water$100,799 $102,768 $(1,969)(1.9)%
ElectricElectric11,892 11,539 353 3.1 %Electric8,919 8,564 355 4.1 %
Contracted servicesContracted services22,772 30,492 (7,720)(25.3)%Contracted services25,266 25,423 (157)(0.6)%
Total operating revenuesTotal operating revenues108,570 117,060 (8,490)(7.3)%Total operating revenues134,984 136,755 (1,771)(1.3)%
OPERATING EXPENSESOPERATING EXPENSES    OPERATING EXPENSES    
Water purchasedWater purchased17,848 15,239 2,609 17.1 %Water purchased20,304 24,093 (3,789)(15.7)%
Power purchased for pumpingPower purchased for pumping2,374 2,145 229 10.7 %Power purchased for pumping3,878 3,584 294 8.2 %
Groundwater production assessmentGroundwater production assessment4,211 4,440 (229)(5.2)%Groundwater production assessment5,650 5,185 465 9.0 %
Power purchased for resalePower purchased for resale5,166 3,198 1,968 61.5 %Power purchased for resale2,673 2,875 (202)(7.0)%
Supply cost balancing accountsSupply cost balancing accounts(6,343)(2,427)(3,916)161.4 %Supply cost balancing accounts640 (2,446)3,086 (126.2)%
Other operationOther operation8,667 8,217 450 5.5 %Other operation9,696 9,414 282 3.0 %
Administrative and generalAdministrative and general22,972 22,053 919 4.2 %Administrative and general21,594 20,255 1,339 6.6 %
Depreciation and amortizationDepreciation and amortization10,114 9,560 554 5.8 %Depreciation and amortization10,117 9,826 291 3.0 %
MaintenanceMaintenance3,140 2,662 478 18.0 %Maintenance3,408 2,979 429 14.4 %
Property and other taxesProperty and other taxes5,853 5,940 (87)(1.5)%Property and other taxes5,942 6,052 (110)(1.8)%
ASUS constructionASUS construction10,203 15,704 (5,501)(35.0)%ASUS construction10,742 12,154 (1,412)(11.6)%
Total operating expensesTotal operating expenses84,205 86,731 (2,526)(2.9)%Total operating expenses94,644 93,971 673 0.7 %
OPERATING INCOMEOPERATING INCOME24,365 30,329 (5,964)(19.7)%OPERATING INCOME40,340 42,784 (2,444)(5.7)%
OTHER INCOME AND EXPENSESOTHER INCOME AND EXPENSES    OTHER INCOME AND EXPENSES    
Interest expenseInterest expense(5,606)(6,258)652 (10.4)%Interest expense(7,331)(5,553)(1,778)32.0 %
Interest incomeInterest income283 455 (172)(37.8)%Interest income667 333 334 100.3 %
Other, netOther, net(419)656 (1,075)(163.9)%Other, net338 467 (129)(27.6)%
(5,742)(5,147)(595)11.6 % (6,326)(4,753)(1,573)33.1 %
INCOME BEFORE INCOME TAX EXPENSEINCOME BEFORE INCOME TAX EXPENSE18,623 25,182 (6,559)(26.0)%INCOME BEFORE INCOME TAX EXPENSE34,014 38,031 (4,017)(10.6)%
Income tax expenseIncome tax expense4,461 5,914 (1,453)(24.6)%Income tax expense8,360 9,878 (1,518)(15.4)%
NET INCOMENET INCOME$14,162 $19,268 $(5,106)(26.5)%NET INCOME$25,654 $28,153 $(2,499)(8.9)%
Basic earnings per Common ShareBasic earnings per Common Share$0.38 $0.52 $(0.14)(26.9)%Basic earnings per Common Share$0.69 $0.76 $(0.07)(9.2)%
Fully diluted earnings per Common ShareFully diluted earnings per Common Share$0.38 $0.52 $(0.14)(26.9)%Fully diluted earnings per Common Share$0.69 $0.76 $(0.07)(9.2)%

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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
Due to the delay in the CPUC issuing a final decision on the water general rate case, billed water revenues for the three months ended September 30, 2022 were based on 2021 adopted rates, pending a CPUC final decision on GSWC’s general rate case application. For the three months ended March 31,September 30, 2022, revenues from water operations decreased by $1.1$2.0 million to $73.9$100.8 million as compared to the same period in 2021 as a result of the lower cost of debt included in the pending May 2021 cost of capital application. OnceGSWC recorded a final decision is issued byreduction to water revenues of $1.9 million to reflect management's best estimate at this time of revenues subject to refund from the CPUC,pending cost of capital proceeding, which includes the updated cost capital is expected to have aimpact of GSWC’s lower cost of debt than that which is includedrequested 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 caseits application.
Billed water consumption for the firstthird quarter of 2022 was slightly lower by approximately 10.1% as compared to the same period in 2021. Currently, changes in consumption generally do not have a significant impact on recorded revenues due to the CPUC-approved WRAM that is 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 three months ended September 30, 2022 increased by $355,000 to $8.9 million as a result of new CPUC-approved electric rates effective January 1, 2022, partially offset by a 4.5% decrease in electric usage as compared to the same period in 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.  For the three months ended September 30, 2022, revenues from contracted services decreased $157,000 to $25.3 million as compared to $25.4 million for the same period in 2021. The decrease was due to lower construction activity resulting, in part, from timing differences of when such work was performed as compared to the same period of 2021, as well as a slowdown caused by longer materials supply-chain lead-times, weather conditions, and other delays. This decrease was largely offset by increases in management fees due to the successful resolution of various economic price adjustments.
ASUS’s 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 bases served. As of September 30, 2022, ASUS has been awarded approximately $31.1 million in new construction projects for completion in 2022 through 2025. 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
Total supply costs at the regulated utilities comprise the largest segment of total consolidated operating expenses. Supply costs accounted for approximately 35.0% and 35.4% of total operating expenses for the three months ended September 30, 2022 and 2021, respectively.
Water segment supply costs
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 actual percentages of purchased water for the three months ended September 30, 2022 and 2021 were approximately 44% and 47%, respectively, as compared to the authorized adopted percentages of 37% for the three months ended September 30, 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
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case, which will set new rates for the years 2022 through 2024, adopted supply costs for the third quarter of 2022 were based on 2021 authorized amounts, pending a final decision by the CPUC on GSWC’s general rate case application.
Under the current 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 expenses. GSWC recovers from, or refunds to, customers the amount of such variances.  GSWC tracks these variances individually for each water ratemaking area.
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. For the three months ended September 30, 2022 and 2021, water supply costs consisted of the following amounts (in thousands):
Three Months Ended 
 September 30, 2022
Three Months Ended 
 September 30, 2021
$
CHANGE
%
CHANGE
Water purchased$20,304 $24,093 $(3,789)-15.7 %
Power purchased for pumping3,878 3,584 294 8.2 %
Groundwater production assessment5,650 5,185 465 9.0 %
Water supply cost balancing accounts *885 (2,114)2,999 -141.9 %
Total water supply costs$30,717 $30,748 $(31)-0.1 %
* The sum of the water and electric supply-cost balancing accounts are shown on AWR’s Consolidated Statements of Income and totaled $640,000 and $(2,446,000) for the three months ended September 30, 2022 and 2021, respectively.
Purchased water costs for the third quarter of 2022 decreased to $20.3 million as compared to $24.1 million for the same period in 2021 primarily due to decreases in water consumption and production that are being driven by drought conditions and rationing, as well as a lower mix of purchased water compared to the same period in 2021, partially offset by increases in wholesale water costs. The increase in power purchased for pumping was due to increases in electricity provider rates. Groundwater production assessments increased due to a higher mix of pumped water compared to the three months ended September 30, 2021.
For the three months ended September 30, 2022, the water supply cost balancing account had an $885,000 over-collection as compared to a $2.1 million under-collection during the same period in 2021. The decrease in the under-collection was primarily due to the effect of rate increases implemented mid-year 2021 at certain rate-making areas to specifically cover increases in supply costs experienced in these areas, thereby decreasing the under-collection, partially offset by increases in wholesale water costs.
Electric segment supply costs
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. For the three months ended September 30, 2022 and 2021, electric supply costs consisted of the following amounts (in thousands):
Three Months Ended 
 September 30, 2022
Three Months Ended 
 September 30, 2021
$
CHANGE
%
CHANGE
Power purchased for resale$2,673 $2,875 $(202)-7.0 %
Electric supply cost balancing account *(245)(332)87 -26.2 %
Total electric supply costs$2,428 $2,543 $(115)-4.5 %
* The sum of the water and electric supply-cost balancing accounts are shown on AWR’s Consolidated Statements of Income and totaled $640,000 and $(2,446,000) for the three months ended September 30, 2022 and 2021, respectively.
For the three months ended September 30, 2022, the cost of power purchased for resale to BVESI’s electric customers decreased by $202,000 to $2.7 million as compared to $2.9 million during the same period in 2021 due to a decrease in customer usage and lower average prices per megawatt-hour that include all fixed costs. The average price per megawatt-hour, including fixed costs, decreased from $79.03 for the three months ended September 30, 2021 to $77.47 for the same period in 2022. The under-collection in the electric supply cost balancing account decreased by $87,000 as compared to the three months ended September 30, 2021 due to lower customer usage.

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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 and the electric system.  Registrant’s contracted services operations incur many of the same types of expenses.  For the three months ended September 30, 2022 and 2021, other operation expenses by business segment consisted of the following (dollar amounts in thousands):
Three Months Ended 
 September 30, 2022
Three Months Ended 
 September 30, 2021
$
CHANGE
%
CHANGE
Water Services$7,273 $7,287 $(14)(0.2)%
Electric Services814 705 109 15.5 %
Contracted Services1,609 1,422 187 13.2 %
Total other operation$9,696 $9,414 $282 3.0 %
For the three months ended September 30, 2022, the increase in other operation expenses at the electric segment was due primarily to higher transportation and outside-service costs. The increase at the contracted services segment was due primarily to higher operation-related labor, transportation, and chemical costs. Transportation costs were higher due, in part, to increases in fuel costs compared to the same period in 2021.
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, 2022 and 2021, administrative and general expenses by business segment, including AWR (parent), consisted of the following (dollar amounts in thousands): 
Three Months Ended 
 September 30, 2022
Three Months Ended 
 September 30, 2021
$
CHANGE
%
CHANGE
Water Services$14,362 $13,677 $685 5.0 %
Electric Services2,026 2,039 (13)(0.6)%
Contracted Services5,205 4,538 667 14.7 %
AWR (parent)— — %
Total administrative and general$21,594 $20,255 $1,339 6.6 %
Administrative and general expenses increased at the water segment largely due to an increase in insurance costs and employee-related benefits, partially offset by a decrease in outside-service costs. The increase at the contracted services segment is mainly due to higher outside services, insurance and travel expenses.
Depreciation and Amortization
For the three months ended September 30, 2022 and 2021, depreciation and amortization by business segment consisted of the following (dollar amounts in thousands):
Three Months Ended 
 September 30, 2022
Three Months Ended 
 September 30, 2021
$
CHANGE
%
CHANGE
Water Services$8,475 $8,272 $203 2.5 %
Electric Services709 644 65 10.1 %
Contracted Services933 910 23 2.5 %
Total depreciation and amortization$10,117 $9,826 $291 3.0 %
The overall increase in depreciation and amortization expenses resulted from additions to utility plant and other fixed assets since the third quarter of 2021.



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Maintenance
For the three months ended September 30, 2022 and 2021, maintenance expense by business segment consisted of the following (dollar amounts in thousands):
Three Months Ended 
 September 30, 2022
Three Months Ended 
 September 30, 2021
$
CHANGE
%
CHANGE
Water Services$2,526 $2,140 $386 18.0 %
Electric Services131 158 (27)(17.1)%
Contracted Services751 681 70 10.3 %
Total maintenance$3,408 $2,979 $429 14.4 %
Maintenance expense increased at the water and contracted services segments due to higher unplanned maintenance expenses as compared to the same period in 2021.
Property and Other Taxes
For the three months ended September 30, 2022 and 2021, property and other taxes by business segment consisted of the following (dollar amounts in thousands):
Three Months Ended 
 September 30, 2022
Three Months Ended 
 September 30, 2021
$
CHANGE
%
CHANGE
Water Services$4,995 $5,185 $(190)(3.7)%
Electric Services474 422 52 12.3 %
Contracted Services473 445 28 6.3 %
Total property and other taxes$5,942 $6,052 $(110)(1.8)%
Property and other taxes decreased at the water segment mostly due to changes in assessed property values and tax rates.
ASUS Construction
For the three months ended September 30, 2022, construction expenses for contracted services were $10.7 million, decreasing $1.4 million compared to the same period in 2021 primarily due to a decrease in construction activity resulting from timing differences of when such work was performed as compared to the same period of 2021, as well as a slowdown caused by longer materials supply-chain lead-times, weather conditions, and other delays.
Interest Expense
For the three months ended September 30, 2022 and 2021, interest expense by business segment, including AWR (parent), consisted of the following (dollar amounts in thousands):
Three Months Ended 
 September 30, 2022
Three Months Ended 
 September 30, 2021
$
CHANGE
%
CHANGE
Water Services$5,950 $5,184 $766 14.8 %
Electric Services474 131 343 261.8 %
Contracted Services205 78 127 162.8 %
AWR (parent)702 160 542 338.8 %
Total interest expense$7,331 $5,553 $1,778 32.0 %
AWR’s borrowings consist of bank debt under revolving credit facilities and long-term debt issuances at GSWC and BVESI. Consolidated interest expense increased as compared to the same period in 2021 resulting primarily from an increase in total borrowing levels to support, among other things, the capital expenditures program at the regulated utilities, as well as an overall increase in average interest rates. In April 2022, BVESI issued $35.0 million in unsecured private-placement notes consisting of 10 and 15 year term notes with interest rates at 4.548% and 4.949%, respectively.

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Interest Income
For the three months ended September 30, 2022 and 2021, interest income by business segment, including AWR (parent), consisted of the following (dollar amounts in thousands):
Three Months Ended 
 September 30, 2022
Three Months Ended 
 September 30, 2021
$
CHANGE
%
CHANGE
Water Services$325 $86 $239 277.9 %
Electric Services119 30 89 296.7 %
Contracted Services232 219 13 5.9 %
AWR (parent)(9)(2)(7)350.0 %
Total interest income$667 $333 $334 100.3 %
For the three months ended September 30, 2022, overall interest income increased by $334,000 as compared to the same period in 2021 due primarily to higher interest income earned on regulatory assets at the water segment bearing interest at the current 90-day commercial-paper rate, which increased compared to 2021.
Other Income and (Expense), net
For the three months ended September 30, 2022 and 2021, other income and (expense), net by business segment, consisted of the following (dollar amounts in thousands):
Three Months Ended 
 September 30, 2022
Three Months Ended 
 September 30, 2021
$
CHANGE
%
CHANGE
Water Services$(70)$429 $(499)(116.3)%
Electric Services112 68 44 64.7 %
Contracted Services38 (30)68 (226.7)%
AWR (parent)258 — 258 N/A
Total other income and (expense), net$338 $467 $(129)(27.6)%
For the three months ended September 30, 2022, other income (net of other expense) decreased mostly as a result of losses incurred on investments held to fund one of the Company’s retirement plans, as compared to gains generated during the same period in 2021, both due to financial market conditions. This was partially offset by a decrease in the non-service cost components of net periodic benefit costs related to the Company's defined-benefit pension plan and other retirement benefits resulting from lower actuarial losses recognized during the third quarter of 2022 as compared to the same period in 2021. 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 related to the pension plan have no material impact to earnings.
Income Tax Expense
For the three months ended September 30, 2022 and 2021, income tax expense by business segment, including AWR (parent), consisted of the following (dollar amounts in thousands):
Three Months Ended 
 September 30, 2022
Three Months Ended 
 September 30, 2021
$
CHANGE
%
CHANGE
Water Services$6,831 $7,993 $(1,162)(14.5)%
Electric Services478 537 (59)(11.0)%
Contracted Services1,347 1,265 82 6.5 %
AWR (parent)(296)83 (379)(456.6)%
Total income tax expense$8,360 $9,878 $(1,518)(15.4)%
Consolidated income tax expense for the three months ended September 30, 2022 decreased by $1.5 million primarily due to a decrease in pretax income as compared to the same period in 2021, as well as a decrease in the consolidated effective income tax rate (“ETR”). AWR’s ETR was 24.6% and 26.0% for the three months ended September 30, 2022 and 2021, respectively. GSWC’s ETR was 25.5% and 26.0% for the three months ended September 30, 2022 and 2021, respectively. The decrease in GSWC’s ETR was primarily due to net changes in certain flow-through and permanent items. The tax benefit recorded at AWR (parent) during the three months ended September 30, 2022 was primarily due to changes in state unitary taxes, as well as an increase in pretax loss at AWR (parent) resulting from higher interest expense.
For a comparison of the financial results for the third quarter of 2021 to 2020, see “Consolidated Results of Operations-Three Months Ended September 30, 2021 and September 30, 2020” in Registrant’s Form 10-Q for the period ended September 30, 2021 filed with the SEC.
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Consolidated Results of Operations — Nine Months Ended September 30, 2022 and 2021 (amounts in thousands, except per share amounts):
Nine Months Ended September 30, 2022Nine Months Ended September 30, 2021$
CHANGE
%
CHANGE
OPERATING REVENUES    
Water$265,561 $269,430 $(3,869)(1.4)%
Electric29,028 28,211 817 2.9 %
Contracted services71,572 84,588 (13,016)(15.4)%
Total operating revenues366,161 382,229 (16,068)(4.2)%
OPERATING EXPENSES    
Water purchased58,115 60,248 (2,133)(3.5)%
Power purchased for pumping9,182 8,590 592 6.9 %
Groundwater production assessment14,726 14,845 (119)(0.8)%
Power purchased for resale9,186 8,203 983 12.0 %
Supply cost balancing accounts(6,160)(7,959)1,799 (22.6)%
Other operation28,028 26,165 1,863 7.1 %
Administrative and general65,030 62,938 2,092 3.3 %
Depreciation and amortization30,402 29,156 1,246 4.3 %
Maintenance10,120 8,908 1,212 13.6 %
Property and other taxes17,247 17,265 (18)(0.1)%
ASUS construction31,263 42,910 (11,647)(27.1)%
Total operating expenses267,139 271,269 (4,130)(1.5)%
OPERATING INCOME99,022 110,960 (11,938)(10.8)%
OTHER INCOME AND EXPENSES    
Interest expense(19,246)(17,843)(1,403)7.9 %
Interest income1,387 1,136 251 22.1 %
Other, net(2,370)2,998 (5,368)(179.1)%
 (20,229)(13,709)(6,520)47.6 %
INCOME BEFORE INCOME TAX EXPENSE78,793 97,251 (18,458)(19.0)%
Income tax expense19,026 23,254 (4,228)(18.2)%
NET INCOME$59,767 $73,997 $(14,230)(19.2)%
Basic earnings per Common Share$1.61 $2.00 $(0.39)(19.5)%
Fully diluted earnings per Common Share$1.61 $2.00 $(0.39)(19.5)%

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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
Due to the delay in the CPUC issuing a final decision on the water general rate case, billed water revenues for the first nine months of 2022 were based on 2021 adopted rates, pending a CPUC final decision on GSWC’s general rate case application. For the nine months ended September 30, 2022, revenues from water operations decreased by $3.9 million to $265.6 million as compared to the same period in 2021 as a result of the lower cost of debt included in the pending cost of capital application. GSWC recorded a reduction to water revenues of $5.0 million to reflect management's best estimate at this time of revenues subject to refund from the pending cost of capital proceeding, which includes the impact of GSWC’s lower cost of debt requested in its application. This decrease was partially offset by an increase in revenues from advice letter projects that became effective February 15, 2022, as well as mid-year increases implemented in July 2021 to reflect higher water supply costs.
Billed water consumption for the first nine months of 2022 was lower by 5.6% as compared to the same period in 2021. Currently, changes in consumption generally do not have a significant impact on recorded revenues due to the CPUC-approved WRAM that is 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 first quarter ofnine months ended September 30, 2022 increased by $353,000$817,000 to $11.9$29.0 million as a result of new CPUC-approved electric rates effective January 1, 2022. ElectricThere was a minimal change in electric usage during the first quarter of 2022 increased 7% as compared to the same period in 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 the water and/or wastewater systems at various military bases.  DuringFor the first quarter ofnine months ended September 30, 2022, revenues from contracted services decreased $7.7$13.0 million to $22.8$71.6 millionas compared to $30.5$84.6 million for the same period in 2021. The decrease was due to lower construction activity resulting, in part, from timing differences of when such work was performed as compared to the first quartersame period of 2021, as well as a slowdown primarily caused by longer materials supply-chain lead-times, weather conditions, and other delays. This decrease was partially offset by increases in management fees due to the successful resolution of various economic price adjustments.
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
Total supply costs at the regulated utilities comprise the largest segment of total consolidated operating expenses. Supply costs accounted for approximately 27.6%31.8% and 26.1%30.9% of total operating expenses for the threenine months ended March 31,September 30, 2022 and 2021, respectively.
Water segment supply costs
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 threenine months ended March 31,September 30, 2022 and 2021 were approximately 48% and 43%45%, respectively, as compared to the authorized adopted percentages of 30.3%35% for the threenine months ended March 31,September 30, 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 quarternine months of 2022 were based on 2021 authorized amounts, pending a final decision by the CPUC in thison GSWC’s general rate case application.
Under the current CPUC-approved Modified Cost Balancing Account ("MCBA"(“MCBA”), GSWC tracks adopted and actual expense levels for purchased water, power purchased for pumping and pump taxes. GSWC records the variances (which include the effects of changes in both rate and volume) between adopted and actual purchased water, purchased power and pump tax
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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 ratemaking 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.
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. For the threenine months ended March 31,September 30, 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
CHANGECHANGENine Months Ended September 30, 2022Nine Months Ended September 30, 2021$
CHANGE
%
CHANGE
Water purchasedWater purchased$17,848 $15,239 $2,609 17.1 %Water purchased$58,115 $60,248 $(2,133)-3.5 %
Power purchased for pumpingPower purchased for pumping2,374 2,145 229 10.7 %Power purchased for pumping9,182 8,590 592 6.9 %
Groundwater production assessmentGroundwater production assessment4,211 4,440 (229)-5.2 %Groundwater production assessment14,726 14,845 (119)-0.8 %
Water supply cost balancing accounts *Water supply cost balancing accounts *(5,067)(2,920)(2,147)73.5 %Water supply cost balancing accounts *(5,682)(8,445)2,763 -32.7 %
Total water supply costsTotal water supply costs$19,366 $18,904 $462 2.4 %Total water supply costs$76,341 $75,238 $1,103 1.5 %
* The sum of the water and electric supply-cost balancing accounts are shown on AWR’s Consolidated Statements of Income and totaled $(6,343,000)$(6,160,000) and $(2,427,000)$(7,959,000) for the threenine months ended March 31,September 30, 2022 and 2021, respectively.
Purchased water costs forduring the first quarter ofnine months ended September 30, 2022 increaseddecreased to $17.8$58.1 million as compared to $15.2$60.2 million for the same period in 2021 primarily due to the higher mix of purchaseddecreases in water as compared to pumped water,consumption and an increaseproduction that are being driven by drought conditions and rationing, partially offset by increases in wholesale water costs. The increaseincrease in power purchased for pumping was due to increases in electricity provider rates incurred for pumping.electric rates. Groundwater production assessments decreased due to a higher amount of purchaseddecrease in water versus pumped waterusage, partially offset by increases in pump tax rates during the nine months ended September 30, 2022 as compared to the three months ended March 31,same period in 2021.
For the threenine months ended March 31,September 30, 2022, the water supply cost balancing account had a $5.1$5.7 million under-collection as compared to a $2.9$8.4 million under-collection during the same period in 2021. This varianceThe decrease in under-collection was primarily due to higher costs related to purchased water, partially offset bythe effect of rate increases forimplemented mid-year 2021 at certain rate-making areas to specifically cover increases in supply costs experienced in these areas.areas, thereby reducing their under-collections.
Electric segment supply costs
Supply costs for the electric segment consist primarily of purchased power for resale, the cost of natural gas used by BVESI’s generating unit, the cost of renewable energy credits and changes in the electric supply cost balancing account. For the threenine months ended March 31,September 30, 2022 and 2021, electric supply costs consisted of the following amounts (in thousands):
Three Months Ended 
 March 31, 2022
Three Months Ended 
 March 31, 2021
CHANGECHANGENine Months Ended September 30, 2022Nine Months Ended September 30, 2021$
CHANGE
%
CHANGE
Power purchased for resalePower purchased for resale$5,166 $3,198 $1,968 61.5 %Power purchased for resale$9,186 $8,203 $983 12.0 %
Electric supply cost balancing account *Electric supply cost balancing account *(1,276)493 (1,769)-358.8 %Electric supply cost balancing account *(478)486 (964)-198.4 %
Total electric supply costsTotal electric supply costs$3,890 $3,691 $199 5.4 %Total electric supply costs$8,708 $8,689 $19 0.2 %
* The sum of the water and electric supply-cost balancing accounts are shown on AWR’s Consolidated Statements of Income and totaled $(6,343,000)$(6,160,000) and $(2,427,000)$(7,959,000) for the threenine months ended March 31,September 30, 2022 and 2021, respectively.
For the threenine months ended March 31,September 30, 2022, the cost of power purchased for resale to BVESI'sBVESI’s electric customers increased to $5.2$9.2 million as compared to $3.2$8.2 million during the same period in 2021 primarily due to a higher average price per megawatt-hour, as well as higher customer usage.megawatt-hour. The average price per megawatt-hour, including fixed costs, increased from $76.14$72.04 for the threenine months ended March 31,September 30, 2021 to $141.21$88.01 for the same period in 2022.  The under-collection in the electric supply cost balancing account asduring the nine months ended September 30, 2022 compared to an over-collection during the threenine months ended March 31,September 30, 2021 was due primarily to 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 serviceoutside-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 asand the electric system.  Registrant’s contracted services operations incur many of the same types of expenses.  For the threenine months ended March 31,September 30, 2022 and 2021, other operation expenses by business segment consisted of the following (dollar amounts in thousands):
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Three Months Ended 
 March 31, 2022
Three Months Ended 
 March 31, 2021
$
CHANGE
%
CHANGE
Nine Months Ended September 30, 2022Nine Months Ended September 30, 2021$
CHANGE
%
CHANGE
Water ServicesWater Services$6,354 $5,813 $541 9.3 %Water Services$20,908 $19,476 $1,432 7.4 %
Electric ServicesElectric Services876 771 105 13.6 %Electric Services2,330 2,114 216 10.2 %
Contracted ServicesContracted Services1,437 1,633 (196)(12.0)%Contracted Services4,790 4,575 215 4.7 %
Total other operationTotal other operation$8,667 $8,217 $450 5.5 %Total other operation$28,028 $26,165 $1,863 7.1 %
For the threenine months ended March 31,September 30, 2022, the $541,000 increase in other operation expensesexpense at the water segment was due primarily to higher water treatment and conservationchemical costs, as well as transportation costs. The increase at the electric segment was due primarily to higher operation-related outside-service costs. The increase at the contracted services segment was due primarily to higher operation-related labor, transportation and chemical costs. Transportation costs were higher due, in part, to increases in fuel 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 threenine months ended March 31,September 30, 2022 and 2021, administrative and general expenses by business segment, including AWR (parent), consisted of the following (dollar amounts in thousands): 
Three Months Ended 
 March 31, 2022
Three Months Ended 
 March 31, 2021
$
CHANGE
%
CHANGE
Nine Months Ended September 30, 2022Nine Months Ended September 30, 2021$
CHANGE
%
CHANGE
Water ServicesWater Services$15,596 $14,435 $1,161 8.0 %Water Services$43,945 $41,973 $1,972 4.7 %
Electric ServicesElectric Services2,166 2,429 (263)(10.8)%Electric Services5,995 6,533 (538)(8.2)%
Contracted ServicesContracted Services5,208 5,187 21 0.4 %Contracted Services15,084 14,426 658 4.6 %
AWR (parent)AWR (parent)— — %AWR (parent)— — %
Total administrative and generalTotal administrative and general$22,972 $22,053 $919 4.2 %Total administrative and general$65,030 $62,938 $2,092 3.3 %
Administrative and general expenses increased at the water segment largely due to increases in labor and employee-related benefits, including an increase of $965,000 related to the service cost component of GSWC's defined benefitGSWC’s defined-benefit pension and other retirement plans.plan. As a result of GSWC'sGSWC’s two-way pension balancing account authorized by the CPUC, increases in pension costs are fully recovered in customer rates;rates, thus having no material impact to earnings. There was also an increase in insurance costs, partially offset by decreases in regulatory and other outside-service costs.
Administrative and general expenses decreased at the electric segment largely due, in part, to a decrease of $175,000$190,000 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. There was also a decrease in other outside-service costs that tend to fluctuate from period to period.
Administrative and general expenses increased at the contracted services segment due to an increase in outside services, insurance and travel expenses.
Depreciation and Amortization
For the threenine months ended March 31,September 30, 2022 and 2021, depreciation and amortization by business segment consisted of the following (dollar amounts in thousands):
Three Months Ended 
 March 31, 2022
Three Months Ended 
 March 31, 2021
$
CHANGE
%
CHANGE
Nine Months Ended September 30, 2022Nine Months Ended September 30, 2021$
CHANGE
%
CHANGE
Water ServicesWater Services$8,545 $8,062 $483 6.0 %Water Services$25,573 $24,547 $1,026 4.2 %
Electric ServicesElectric Services654 639 15 2.3 %Electric Services2,049 1,925 124 6.4 %
Contracted ServicesContracted Services915 859 56 6.5 %Contracted Services2,780 2,684 96 3.6 %
Total depreciation and amortizationTotal depreciation and amortization$10,114 $9,560 $554 5.8 %Total depreciation and amortization$30,402 $29,156 $1,246 4.3 %
The overall increase in depreciation expenseand amortization expenses resulted from additions to utility plant and other fixed assets since the firstthird quarter of 2021.


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Maintenance
For the threenine months ended March 31,September 30, 2022 and 2021, maintenance expense by business segment consisted of the following (dollar amounts in thousands):
Three Months Ended 
 March 31, 2022
Three Months Ended 
 March 31, 2021
$
CHANGE
%
CHANGE
Nine Months Ended September 30, 2022Nine Months Ended September 30, 2021$
CHANGE
%
CHANGE
Water ServicesWater Services$2,156 $1,740 $416 23.9 %Water Services$7,193 $6,236 $957 15.3 %
Electric ServicesElectric Services250 208 42 20.2 %Electric Services622 565 57 10.1 %
Contracted ServicesContracted Services734 714 20 2.8 %Contracted Services2,305 2,107 198 9.4 %
Total maintenanceTotal maintenance$3,140 $2,662 $478 18.0 %Total maintenance$10,120 $8,908 $1,212 13.6 %
Maintenance expense increased at each of the water segmentthree segments due to higher unplanned and planned maintenance expenses incurred as compared to the same period in 2021.
Property and Other Taxes
For the threenine months ended March 31,September 30, 2022 and 2021, property and other taxes by business segment consisted of the following (dollar amounts in thousands):
Three Months Ended 
 March 31, 2022
Three Months Ended 
 March 31, 2021
$
CHANGE
%
CHANGE
Nine Months Ended September 30, 2022Nine Months Ended September 30, 2021$
CHANGE
%
CHANGE
Water ServicesWater Services$4,890 $5,016 $(126)(2.5)%Water Services$14,440 $14,665 $(225)(1.5)%
Electric ServicesElectric Services458 353 105 29.7 %Electric Services1,351 1,090 261 23.9 %
Contracted ServicesContracted Services505 571 (66)(11.6)%Contracted Services1,456 1,510 (54)(3.6)%
Total property and other taxesTotal property and other taxes$5,853 $5,940 $(87)(1.5)%Total property and other taxes$17,247 $17,265 $(18)(0.1)%
Property and other taxes decreased at the water segment primarily due to a decrease in franchise fees offset by an increase in property taxes at the electric segment resulting from an increase in capital additions and higher assessed property values.
ASUS Construction
For the threenine months ended March 31,September 30, 2022, construction expenses for contracted services were $10.2$31.3 million, decreasing $5.5$11.6 million compared to the same period in 2021 primarily due to a decrease in construction activity resulting from timing differences in construction activity.of when such work was performed as compared to the same period of 2021, as well as a slowdown caused by longer materials supply-chain lead-times, weather conditions, and other delays.
Interest Expense
For the threenine months ended March 31,September 30, 2022 and 2021, interest expense by business segment, including AWR (parent), consisted of the following (dollar amounts in thousands):
Three Months Ended 
 March 31, 2022
Three Months Ended 
 March 31, 2021
$
CHANGE
%
CHANGE
Nine Months Ended September 30, 2022Nine Months Ended September 30, 2021$
CHANGE
%
CHANGE
Water ServicesWater Services$5,236 $5,798 $(562)(9.7)%Water Services$16,650 $16,625 $25 0.2 %
Electric ServicesElectric Services112 116 (4)(3.4)%Electric Services970 364 606 166.5 %
Contracted ServicesContracted Services62 109 (47)(43.1)%Contracted Services371 296 75 25.3 %
AWR (parent)AWR (parent)196 235 (39)(16.6)%AWR (parent)1,255 558 697 124.9 %
Total interest expenseTotal interest expense$5,606 $6,258 $(652)(10.4)%Total interest expense$19,246 $17,843 $1,403 7.9 %
Registrant'sAWR’s borrowings consist of bank debtsdebt under revolving credit facilities and long-term debt issuances at GSWC.GSWC and BVESI. Consolidated interest expense decreasedincreased as compared to the same period in 2021 resulting 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 byfrom an overall increase in total borrowing levels to support, among other things, the capital expenditures program at the regulated utilities. This includes BVESI’s issuance of $35.0 million in unsecured private-placement notes in April 2022 consisting of 10 and 15 year term notes with interest rates at 4.548% and 4.949%, respectively. The increase in overall borrowing levels was partially offset by a decrease in overall interest rates primarily from 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 threenine months ended March 31,September 30, 2022 and 2021, interest income by business segment, including AWR (parent), consisted of the following (dollar amounts in thousands):
Three Months Ended 
 March 31, 2022
Three Months Ended 
 March 31, 2021
$
CHANGE
%
CHANGE
Nine Months Ended September 30, 2022Nine Months Ended September 30, 2021$
CHANGE
%
CHANGE
Water ServicesWater Services$91 $87 $4.6 %Water Services$562 $352 $210 59.7 %
Electric ServicesElectric Services(1)30 (31)(103.3)%Electric Services207 89 118 132.6 %
Contracted ServicesContracted Services197 338 (141)(41.7)%Contracted Services635 754 (119)(15.8)%
AWR (parent)AWR (parent)(4)— (4)N/AAWR (parent)(17)(59)42 (71.2)%
Total interest incomeTotal interest income$283 $455 $(172)(37.8)%Total interest income$1,387 $1,136 $251 22.1 %
The overall decreaseincrease in interest income was mainly due primarily to higher interest income earned on regulatory assets at the water and electric segments bearing interest at the current 90-day commercial-paper rates which have increased since 2021, partially offset by lower interest income recognized on certain construction projects at the contracted services segment as compared to the first quarter ofsame period in 2021.
Other Income and (Expense), net
For the threenine months ended March 31,September 30, 2022 and 2021, other income and (expense), net by business segment, consisted of the following (dollar amounts in thousands):
Three Months Ended 
 March 31, 2022
Three Months Ended 
 March 31, 2021
$
CHANGE
%
CHANGE
Nine Months Ended September 30, 2022Nine Months Ended September 30, 2021$
CHANGE
%
CHANGE
Water ServicesWater Services$(598)$651 $(1,249)(191.9)%Water Services$(3,070)$2,684 $(5,754)(214.4)%
Electric ServicesElectric Services143 46 97 210.9 %Electric Services332 168 164 97.6 %
Contracted ServicesContracted Services36 (41)77 (187.8)%Contracted Services110 (112)222 (198.2)%
AWR (parent)AWR (parent)258 258 — — %
Total other income and (expense), netTotal other income and (expense), net$(419)$656 $(1,075)(163.9)%Total other income and (expense), net$(2,370)$2,998 $(5,368)(179.1)%
For the threenine months ended March 31,September 30, 2022, other income (net of other expense) decreased mostly as a result of significant losses incurred on investments held to fund one of Registrant'sthe Company's retirement plans, as compared to gains generated during the same period in 2021, both due to volatility in the financial markets.market conditions. This was partially offset by a decrease in the non-service cost components of net periodic benefit costs related to Registrant's defined benefitthe Company’s defined-benefit pension plansplan and other retirement benefits.benefits resulting from lower actuarial losses recognized during the first nine months of 2022, as compared to the same period in 2021. However, as a result of GSWC'sGSWC’s and BVESI'sBVESI’s two-way pension balancing accounts authorized by the CPUC, changes in total net periodic benefit costs related to the pension plan have no material impact to earnings.
Income Tax Expense
For the threenine months ended March 31,September 30, 2022 and 2021, income tax expense by business segment, including AWR (parent), consisted of the following (dollar amounts in thousands):
Three Months Ended 
 March 31, 2022
Three Months Ended 
 March 31, 2021
$
CHANGE
%
CHANGE
Nine Months Ended September 30, 2022Nine Months Ended September 30, 2021$
CHANGE
%
CHANGE
Water ServicesWater Services$2,689 $3,768 $(1,079)(28.6)%Water Services$14,623 $17,718 $(3,095)(17.5)%
Electric ServicesElectric Services952 884 68 7.7 %Electric Services1,645 1,879 (234)(12.5)%
Contracted ServicesContracted Services944 1,391 (447)(32.1)%Contracted Services3,399 3,927 (528)(13.4)%
AWR (parent)AWR (parent)(124)(129)(3.9)%AWR (parent)(641)(270)(371)137.4 %
Total income tax expenseTotal income tax expense$4,461 $5,914 $(1,453)(24.6)%Total income tax expense$19,026 $23,254 $(4,228)(18.2)%
Consolidated income tax expense for the threenine months ended March 31,September 30, 2022 decreased by $1.5$4.2 million primarily due to a decrease in pretax income as compared to the same period in 2021. AWR's overall effective income tax rate ("ETR")2021, partially offset by an increase in the consolidated ETR. AWR’s ETR was 24.0%24.1% and 23.5%23.9% for the threenine months ended March 31,September 30, 2022 and 2021, respectively. GSWC'sGSWC’s ETR was 23.9%25.2% and 23.6%24.0% for the threenine months ended March 31,September 30, 2022 and 2021, respectively. The increase in GSWC’s ETR was primarily due to net changes in certain flow-through and permanent items. The increase in AWR (parent)’s tax benefit was primarily due to an increase in pretax loss resulting from higher interest expense and changes in state unitary taxes.
For a comparison of the financial results for the first quarternine months of 2021 to 2020, see “Consolidated Results of Operations-ThreeOperations-Nine Months Ended March 31,September 30, 2021 and March 31,September 30, 2020” in Registrant’s Form 10-Q for the period ended March 31,September 30, 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'Registrant’s financial statements that it believes affect the more significant judgments and estimates used in the preparation of its consolidated financial statements presented in this report are described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Registrant’s Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC. There have been no material changes to Registrant’s critical accounting policies.
Liquidity and Capital Resources
AWR
Registrant’sAWR’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 $611.5$633.4 million was available for GSWC to pay dividends to AWR on March 31,September 30, 2022. Approximately $73.4$76.6 million was available for BVESI to pay dividends to AWR as of March 31,September 30, 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'sASUS’s ability to pay dividends under California law.
When necessary, RegistrantAWR obtains funds from external sources through the capital markets as well asand 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 borrows under a revolving credit facility and provides funds to GSWC and ASUS in support of their operations.operations through intercompany borrowing agreements.  AWR's credit agreement expires in May 2023 and all intercompany borrowing agreements will expire concurrent with the expiration of AWR's credit facility. AWR intends to execute new intercompany borrowing agreements with its subsidiaries consistent with a new credit facility. On April 22, 2022, theAWR's 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"(“LIBOR”) to the Secured Overnight Financing Rate ("SOFR"(“SOFR”). This credit agreement expires in May 2023. Registrant does not believe theThe change in benchmark rates will havehas not had 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.
Given that AWR’s credit agreement will expire in May 2023, the outstanding borrowings under the credit facility of $238.5 million as of September 30, 2022 have been classified as a current liability on AWR’s Consolidated Balance Sheet, thus creating a negative working-capital condition for AWR of $234.4 million. Additionally, as of September 30, 2022, the$112.2 million of outstanding intercompany borrowings of GSWC from AWR have been classified as a current liability on GSWC’s Consolidated Balance Sheet, also creating a negative working-capital condition for GSWC of$150.3 million. As of March 31,November 7, 2022, there was $189.5 million outstanding under this facility.neither AWR nor GSWC have sufficient liquidity or capital resources to repay their credit facility or intercompany borrowings, respectively, without issuing new debt or equity.
Management plans to renew and extend AWR’s credit facility prior to its expiration date, and is confident, given Registrant's history in obtaining revolving credit facilities to meet its working-capital needs, that AWR will successfully renew or extend its facility or obtain a new facility with the needed borrowing capacities required to run its operations. In addition, Registrant expects to issue long-term debt through GSWC prior to May 2023,during the fourth quarter of 2022, and use the debt proceeds to pay off outstanding borrowings under thisthe intercompany borrowing arrangement with AWR. AWR intends to use the proceeds to pay off portions of the outstanding borrowings under its credit facility. Management believes that execution of its plan is probable based on Registrant’s ability to generate consistent cash flows, its A+ credit ratings, its relationships with lenders, and its history of successfully raising debt necessary to fund its operations. Accordingly, management has concluded that Registrant will be able to
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satisfy its obligations, including those under its credit facility, for at least the next twelve months from the issuance date of these financial statements. However, Registrant’s ability to access the capital markets or to otherwise obtain sufficient financing may be affected by future conditions and, accordingly, no assurances can be made that Registrant will be successful in implementing its plan.
BVESI has a separate $35$35.0 million revolving credit facility without a parent guaranty, which was amended in December 2021 to reduce the interest rate and fees charged, as well as to extend the maturity date by onea year to July 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 increase the facility by an additional $15$15.0 million, subject to lender approval. Interest rates under this facility are generallycurrently based on LIBOR. Under the terms of the December 2021 amendment, upon discontinuation of athe LIBOR benchmark rate such as LIBOR,in 2023, the lender may replace LIBOR with a benchmark interest rate such as SOFR. RegistrantBVESI 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 $32.0 million outstanding under BVESI's credit facility has been classified as a current liability in AWR's Consolidated Balance Sheet as of March 31, 2022.
On April 28, 2022, BVESI completed the issuance of $35$35.0 million in unsecured private placementprivate-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. BVESI used the proceeds from the notes to pay down all amounts outstanding under its revolving credit facility thus complying withoutstanding at the CPUC's 24-month rule.time of issuing the notes. Interest on these notes is payable semiannually.semiannually, and the covenant requirements under these notes are similar to the terms of BVESI’s revolving credit facility. As of September 30, 2022, there were $3.0 million outstanding borrowings under this facility.
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During 2022, GSWC and BVESI continue to experience delinquent customer accounts receivable due to the lingering effects of the COVID-19 pandemic resultingthat has affected cash flows from operations and resulted in both GSWC and BVESI increasing their allowance for doubtful accounts during the threenine months ended March 31,September 30, 2022. However, the moratoriums on service disconnections for nonpayment forfrom water and electric customers have ended and service disconnections due to nonpayment have resumed, with disconnections for commercial customers have resumed. In accordance with Senate Bill 998 guidelines, water service disconnections due to nonpayment fordelinquent residential customers are set to resumeresuming in May ofJune 2022. Furthermore, inThus far, the COVID-19 pandemic has not had a material impact on ASUS’s current operations.
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. Thus far, the COVID-19 pandemic has not had a material impact on ASUS's current operations.
In March 2021,June 2022, Standard and Poor’s Global Ratings (“S&P”) affirmed an A+ credit rating for both AWR and GSWC. S&P also revisedaffirmed its ratingnegative 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 November 2021, Moody'sMoody’s Investors Service ("Moody's"(“Moody’s”) affirmed 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 and GSWC’s sound capital structurestructures and A+ credit rating,ratings, combined with its financial discipline, will enable RegistrantAWR 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 RegistrantAWR 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 April 28,November 1, 2022, AWR's Board of Directors approved a secondfourth quarter dividend of $0.365$0.3975 per share on AWR's Common Shares. Dividends on the Common Shares will be paid on JuneDecember 1, 2022 to shareholders of record at the close of business on May 16,November 15, 2022. AWR has paid common dividends every year since 1931, and has increased the dividends received by shareholders each calendar year for 6768 consecutive years, which places it in an exclusive group of companies on the New York Stock Exchange that have achieved that result. AWR'sAWR has achieved a 9.2% compound annual growth rate in its annual dividend payments from 2012 – 2022. AWR’s current policy is to achieve a compound annual growth rate in the dividend of more than 7% over the long-term.
Registrant's current liabilities may at times exceed its current assets.Management believes that internally generated cash flows from operations, borrowings from AWR's and BVESI's credit facilities, and access to long-term financing from capital markets will be adequate to provide sufficient capital to maintain normal operations and to meet its capital and financing requirements.
Cash Flows from Operating Activities:
Cash flows from operating activities have generally provided sufficient cash to fund operating requirements, including a portion of construction expenditures at GSWC and BVESI, and construction expenses at ASUS, and to pay dividends. Registrant’sAWR’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 impactlingering effects of the COVID-19 pandemic on its customers'customers’ ability to pay utility bills; and required cash contributions to pension and post-retirement plans.Future cash
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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 ASUS’s subsidiaries may also from time to time provide funding to ASUS or its subsidiaries.
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ASUS.
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 RegistrantAWR was $38.0$89.9 million for the first threenine months ended March 31,September 30, 2022 as compared to $24.7$81.9 million for the same period in 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 increase in operating cash flow was also due to differences in the timing of vendorincome tax installment payments as compared tobetween the first three months of 2021,two periods, 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.
The increases in cash flows from operations discussed above were partially offset by a decrease in customer cash collections resulting from decreased water consumption brought about by drought conditions and rationing. These under-collections are being captured in the 2022 WRAM. Furthermore, the delay in the water general rate case decision has negatively affected cash flows from operating activities as year-to-date billed revenues have been based on 2021’s adopted customer rates while operating expenses have continued to increase.
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 $35.0$121.7 million for the threenine months ended March 31,September 30, 2022 as compared to $37.0$106.5 million for the same period in 2021. Registrant2021, which is mostly related to capital expenditures at the regulated utilities. AWR 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’sAWR’s infrastructure investment plan consists of both infrastructure renewal programs (where(to replace infrastructure, is replaced, as needed)including those to mitigate wildfire risk) and major capital investment projects (where(to construct new water treatment, supply and delivery facilities are constructed)facilities). The regulated utilities may also be required from time to time to relocate existing infrastructure in order to accommodate local infrastructure improvement projects. Projected capital expenditures and other investments are subject to periodic review and revision.
DuringFor the year 2022, the regulated utilities' company-funded capital expenditures are expected to be between $140$145 million and $160 million, barring any delays resulting from changes in capital improvement schedules due to supply chainsupply-chain issues or the continued effects of the COVID-19 pandemic.Projected capital expenditures and other investments are subject to periodic review and revision.
Cash Flows from Financing Activities:
Registrant’sAWR’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'sAWR’s and BVESI'sBVESI’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 provided by financing activities was $2.2$29.1 million for the threenine months ended March 31,September 30, 2022 as compared to cash used of $17.5$5.0 million during the same period in 2021. The increase in cash provided by financing activities in 2022 was due, in part, to the issuance by BVESI of new unsecured private-placement notes totaling $35.0 million. The proceeds were used to pay down outstanding borrowings under BVESI’s credit facility. In addition, during 2021, cash was used for the early redemption of GSWC’s 9.56% private-placement notes in the amount of $28.0 million in May 2021. During the threenine months ended March 31,September 30, 2022, AWR had a net increase in borrowings on its credit facilityfacilities of $16.0 million.$36.0 million to support operations and capital expenditures. During the threenine months ended March 31,September 30, 2021, AWR had a net decreaseincrease in borrowings on its credit facilityfacilities of $5.2$55.8 million.
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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 impactlingering effects of the COVID-19 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 addition, AWR borrows under a revolving credit facility and provides funds to GSWC in support of its operations under intercompany borrowing arrangements. ThisOn April 22, 2022, the AWR credit facility expireswas amended to increase the borrowing capacity from $200.0 million to $280.0 million, which provided an increase in GSWC’s borrowing capacity under its intercompany borrowing agreement. All intercompany borrowing agreements expire concurrent with the expiration of AWR’s credit facility in May 2023. However,AWR intends to execute a new intercompany borrowing agreement with GSWC consistent with a new credit facility. Additionally, as of September 30, 2022, the CPUC requires GSWC to completely pay off all$112.2 million of outstanding intercompany borrowings it hasof GSWC from AWR withinhave been classified as a 24-month period. The next 24-month period in whichcurrent liability on GSWC’s Consolidated Balance Sheet, also creating a negative working-capital condition for GSWC is requiredof$150.3 million. As of November 7, 2022, GSWC does not have sufficient liquidity or capital resources to pay offrepay its intercompany borrowings from AWR ends in May 2023.without issuing new debt. GSWC intendsexpects to issue long termlong-term debt prior to May 2023,during the fourth quarter of 2022 and use the proceeds to pay offdown its intercompany borrowings to be in compliance with this CPUC requirement. As of March 31, 2022, GSWC had outstanding intercompany borrowings from AWR of approximately $67.7 million.AWR.
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.
Cash Flows from Operating Activities:
Net cash provided by operating activities was $31.3$71.3 million for the threenine months ended March 31,September 30, 2022 as compared to $22.8$73.3 million for the same period in 2021.The overall decrease in GSWC’s cash flows from operations was largely due to a decrease in customer cash collections resulting from decreased water consumption brought about drought conditions and rationing. These under-collections are being captured in the 2022 WRAM balances. Furthermore, the delay in the water general rate case decision has negatively affected cash flows from operating activities as year-to-date billed revenues have been based on 2021’s adopted customer rates while operating expenses have continued to increase. These decreases were partially offset by state relief funds. 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 increase in operating cash flowdecrease was also due topartially offset by differences in the timing of vendorincome tax installment payments as compared to AWR parent between the first three months of 2021.two periods. 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 $31.3$107.4 million for the threenine months ended March 31,September 30, 2022 as compared to $43.7$90.1 million for the same period in 2021. Capital expenditures for the three months ended March 31, 2022 totaled $31.5 million as compared2021, which is mostly related to $31.8 million during the same periodspending under GSWC’s infrastructure investment plans that are consistent with capital budgets authorized in 2021.its general rate cases.
In October 2020, AWR issued an interest bearinginterest-bearing promissory note to GSWC whichthat expires in May 2023. Under the terms of this note,2023, and that allows AWR mayto borrow amounts up to $30 million for working capitalworking-capital purposes. AWR agrees to pay any unpaid principal amounts outstanding under this note, plus accrued interest. During the first threenine months of 2021, AWR borrowed and subsequently repaid $23 million from GSWC, and repaid $11 million to GSWC under the terms of the note. During 2022, there were no borrowings under this arrangement.
Cash Flows from Financing Activities:
Net cash provided by financing activities was $4.2$36.0 million for the threenine months ended March 31,September 30, 2022 as compared to $12.2$15.8 million of net cash used for the same period in 2021.  The higher cash used for financing activities in 2021 was largely due to the early redemption of GSWC’s 9.56% private-placement notes in the amount of $28.0 million in May 2021. During the threenine months ended March 31,September 30, 2022 , GSWC had an increase in net intercompany borrowings of $18.0$63.0 million from AWR parent.parent to support its operations and capital expenditures. During the threenine months ended March 31,September 30, 2021, GSWC did not have anyhad an increase in net intercompany borrowings of $45.0 million from AWR.AWR parent. The CPUC requires GSWC to completelyfully pay off all intercompany borrowings it has from AWR within a 24-month period. The next 24-month period inby which the end of GSWC is required to payhave paid off its intercompany borrowings from AWR ends in MayApril 2023.

GSWC expects to issue long-term debt during the fourth quarter of 2022 and use the proceeds to pay down its intercompany borrowings from AWR.
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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'sAWR’s electric segment issued $35 million in unsecured private placementprivate-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—LiquidityContractual Obligations, Commitments and Capital Resources”Off-Balance Sheet Arrangements” section of the Registrant’s Form 10-K for the year ended December 31, 2021 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,"“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"“excepted service” within the 2011 Act.With While the expirationongoing effects of sequestration have been mitigated through the 2011 Act at the endpassage of government fiscal year 2021, there are currently no discretionary spending caps in fiscal year 2022 and beyond.However,various legislations, similar issues, including the recent executive order issued on March 28, 2022 to adopt sequestration pursuant to the Balanced Budget and Emergency Deficit Control Act of 1985, may arise as part of the fiscal uncertainty and/or future debt-ceiling limits imposed by Congress.Any However, any future impact on ASUS and its operations through the Military Utility Privatization Subsidiaries will likely be limited to (a) the timing of funding to pay for services rendered, (b) delays in the processing of EPAs and/or REAs, (c) the timing of the issuance of contract modifications for new construction work not already funded by the U.S. Government,government, and/or (d) delays in the solicitation for and/or awarding of new contracts under the Department of Defense utility privatization program.
At times, the DCAADefense Contract Auditing Agency and/or the DCMADefense Contract Management Agency may, at the request of a contracting officer, perform audits/reviews of contractors for compliance with certain government guidance and regulations, such as the Federal Acquisition Regulations and Defense Federal Acquisition Regulation Supplements.Certain audit/review findings, such as system deficiencies for government-contract-business-system requirements, may result in delays in the resolution of filings submitted to and/or the ability to file new proposals with the U.S. government.
Regulatory Matters
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"Operations. The discussion below focuses on other regulatory matters and developments.
Water Segment:
Recent Changes in Rates
Rates that GSWC is authorized to charge are determined by the CPUC in general rate cases. 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 the 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 forduring the first threenine months ofended September 30, 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
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will be retroactive to January 1, 2022 and cumulative adjustments will be recorded in the quarter in which the new rates are approved by the CPUC.
Among other things, the settlement authorizes GSWC to complete certain advice letter capital projects approved in the last general rate case, which have 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.
Pending Cost of Capital Proceeding
GSWC also has a pending cost of capital proceeding that will determine a new return on rate base for the years 2022 – 2024. While this proceeding is pending, the previously authorized return is presently being billed to water customers during 2022 until a final decision is issued in this proceeding. However, based on management's analysis of this regulatory proceeding and associated accounting to date, for the three and nine months ended September 30, 2022, GSWC reduced revenues by $1.9 million and $5.0 million, respectively, and recorded a corresponding regulatory liability for revenues subject to refund based on its best estimate at this time, which includes the impact of GSWC’s lower cost of debt requested in its application. However, management cannot predict the ultimate outcome of the cost of capital application and the associated impact on 2022 revenues. Changes in estimates will be made, if necessary, as more information in this proceeding becomes available.
In the pending cost of capital proceeding, GSWC requested authorization to continue the Water Cost of Capital Mechanism (“WCCM”). The WCCM adjusts return on equity and rate of return on rate base between the three-year cost of capital proceedings only if there is a positive or negative change of more than 100 basis points in the average of the Moody’s Aa utility bond rate as measured over the period October 1 through September 30. If there is a positive or negative change of more than 100 basis points, the return on equity is adjusted by one half of the difference. For the period from October 1, 2021 through September 30, 2022, the Moody’s rate increased by more than 100 basis points from the benchmark, which triggered the WCCM adjustment. The WCCM is expected to be addressed by the CPUC in the pending proposed decision.
Electric Segment:
Recent Changes in Rates
In August 2019, the CPUC issued a final decision on the electric segment'ssegment’s general rate case which, among other things, increases adopted revenues by $1.0 million for 2022. On August 30, 2022, BVESI is expected to file its nextfiled a new general rate case application in June 2022with the CPUC to determine new rates for the years 2023–2023 – 2026. BVESI is expected to file a motion in the fourth quarter of 2022 to request interim rates, which will make new 2023 rates, once approved in a CPUC final decision, effective January 1, 2023.
Vegetation Management, Wildfire Mitigation Plans and Legislation
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 memorandum account for future recovery. As of March 31,September 30, 2022, BVESI hashad approximately $6.3$7.9 million in incremental vegetation management costs recorded as a regulatory asset. As part of its general rate case application filing with the CPUC in August 2022, BVESI will seek futurerequested recovery of the costs accumulated in this memorandum account in its next general rate case filing.account.
California legislation enacted in September 2018 requires all investor-owned electric utilities to submit an annualhave a wildfire mitigation plan (WMP) to(“WMP”) approved by the CPUC for approval.Office of Energy Infrastructure Safety (“OEIS”) and ratified by the CPUC. The WMP must include a utility'sutility’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 recentratified BVESI’s current WMP. BVESI submitted an update to its WMP submission.in May 2022 to OEIS for approval prior to going to the CPUC for ratification. In October 2022, OEIS issued a draft decision of approval to BVESI for its 2022 WMP update. As of March 31,September 30, 2022, BVESI has approximately $3.0$4.0 million related to expenses accumulated in its WMP memorandum accounts that have been recognized as regulatory assets for future recovery. All capital expenditures and other costs incurred through March 31,September 30, 2022 as a result of BVESI's WMPs are not currently in rates and are expected to behave been filed for future recovery in BVESI's nextBVESI’s general rate case application.application in August 2022.
Additionally, the governor of California approved Assembly Bill ("AB"(“AB”) 1054 in July 2019 whichthat, 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 SafetyOEIS under the California Natural Resources Agency approved BVESI'sBVESI’s latest safety certification filing, which is valid throughuntil BVESIs pending safety certification is approved or disapproved. In September 2022.2022, BVESI filed with OEIS its request for renewal of its safety certification.
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, 2021 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 (“U.S. EPA”) and the Division of Drinking Water ("DDW"(“DDW”), under the State Water Resources Control Board ("SWRCB"(“SWRCB”).The U.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 U.S. EPA, administers the U.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 (“SDWA”). GSWC works proactively with third parties and governmental agencies to address issues relating to known contamination threatening GSWC water 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 and consumer expectations. The CPUC ratemaking process provides GSWC with the opportunity to recover prudently incurred capital and operating costs in future filings associated with achieving water quality standards. Management believes that such incurred and expected future costs should be authorized for recovery by the CPUC.
Drinking Water NotificationsNotification 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 USU.S. 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. Assembly Bill 756, signed into law in July 2019 and effective in January 2020, requires, among other things, additional notification requirements fornotifications by water systems detectingwhen they detect levels of PFAS above response 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 impacted wells. GSWC has provided customers with information regarding PFAS detections,detection, and provided updated information via its website. In February 2020, DDW established new response levels for two of the PFAS compounds: 10 parts per trillion (“ppt”) for perfluorooctanoic acid (PFOA)(“PFOA”) and 40 parts per trillionppt for perfluorooctanesulfonic acid (PFOS)(“PFOS”). OnIn March 5, 2021, DDW issued a drinking waterdrinking-water notification level and response levellevels of 0.5 parts per billion (ppb)("ppb") and 5 ppb, respectively, for perfluorobutane sulfonic acid (PFBS)(“PFBS”). In June 2022, the U.S. EPA issued interim updated drinking-water health advisories for PFOA and PFOS, and also issued final health advisories for PFBS and other compounds known as GenX chemicals. Through these health advisories, the U.S. EPA has set levels at extremely low amounts, especially for PFOA and PFOS. This potentially may have an impact on the final maximum contaminant levels (“MCL”) that the U.S. EPA may require in the near future. Lower MCL levels are expected to increase GSWC's water treatment and other operating costs.
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)(“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 details of the requirements will be better understood over the next year once the LCRI is published.published and a final rule is approved.
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, 2021 filed with the SEC for a discussion of environmental matters applicable to GSWC and ASUSAWR and its subsidiaries.

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Water Supply
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—California Drought” section of the Registrant’s Form 10-K for the year-ended December 31, 2021 filed with the SEC for a discussion of water supply issues. The discussion below focuses on significant matters and changes since December 31, 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 in implementation of this legislation have been laid out in a summary document by the California Department of Water Resources ("DWR"(“DWR”) and 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 timelines of plan implementation. A notable milestone is the establishment of an indoor water use standard of 55 gallons per capita per day (gpcd)(“gpcd”) until 2025, at which time2025. Legislation signed by the Governor into law in September 2022 has set more stringent indoor standard may be reduced to 52.5 gpcd or other standard as
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recommend by DWR.targets than initially set forth in the 2018 legislation. A recent report prepared by DWR for the California legislature, recommends reducing theThe indoor standard will now be set at 47 gpcd in 2025 and then reduced to 42 gpcd by 2030.Legislation hasin 2030 (previously had been introduced in the current legislative session to reduce the standard to this value.set at 52.5 gpcd and 50 gpcd, respectively).
California's recent period of multi-year drought has resulted in reduced recharge to the state'sstate’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'sGSWC’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.
As of April 26,November 1, 2022, the U.S. Drought Monitor reported that 41%43% of California was considered in "Extreme Drought"“Extreme Drought” as compared to 53%83% one year ago, and 95%92% of California was considered in “Severe Drought” as compared to 88%94% a year ago. California is potentially entering into a fourth year of drought after experiencing a record drought invery dry 2022 Water Year, beginning October 1, 2021 to September 30, 2022, with precipitation fromthe driest January to March asin 100 years and the period of 2020 to 2022 being the driest 3-year period on record for this three month period. record.
Due to deterioratingthe ongoing dry conditions in 2022, DWR reducedset the allocation of State Water Project water from 15%allocation to only 5% onin March 18, 2022. This change in SWP allocation will result in several areas ofIn April 2022, the Metropolitan Water District of Southern California that depend(“MWD”) declared a water supply emergency condition for areas of their service area dependent 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 Supply Emergency Condition for the SWP dependent areas that will impactsupplies. This has impacted 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 Programemergency conservation program that limits outdoor watering in those areas to one day per week. ShouldIf the necessary demand reductions are not be realized, MWD will move to zero outdoor watering days any time after September 1st and could move to only “health and human safety” supplies of 55 gpcd later in the summer. In addition, onyear should demand reduction actions not result in adequate water savings. Should dry conditions continue into the winter, initial SWP allocations for 2023 are expected to be set low once again and the SWP dependent area water emergency conditions may be extended.
On March 28, 2022, the governor of California issued an executive order calling on all urban water suppliers to reduce water use by 20–20 – 30 percent. In June 2022, GSWC is workingmoved all of its water systems to the second stage of its water-rationing plan that limits outdoor watering to two days per week (except for the Claremont and Simi Systems, which are restricted to one day per week). GSWC will continue to work with its local suppliers to assess water supply conditions and water-use restrictions in its service areas and intends to make appropriate adjustments as needed.
In 2021, the CPUC authorized GSWC to track incremental drought-related costs in a memorandum account for future recovery.
Prolonged drought conditions also exist on the Colorado River System, which is experiencing historically low reservoir levels in Lake Mead. Urgent action to reduce water demand on the river by 2 to 4 million acre feet annually has been requested by the US Bureau of Reclamation (the "Bureau"). Under the drought contingency plan on the river, the lower basin states (except California) will experience reductions in volume deliveries in 2023. However, on-going negotiations among the basin states to reach a consensus on how to share reductions called by the Bureau may result in proactive actions in 2023 by MWD. This may include region-wide water supply allocations put in place by MWD in 2023 to reduce demand on the river.
Other Climate Change Matters
Climate change is one area that we focus on as we develop and execute our business strategy and financial planning, both in the short- and long-term. The risks posed by climate variability increase the need for us to plan for and address supply resiliency. Climate change has also impacted electric utilities in California increasing wildfire risks and requiring the need to develop robust wildfire mitigation plans. We address these and other climate change risks by planning, assessing, mitigating, and investing in our infrastructure for the long-term benefit of our communities. See “Item 1. Business Overview” section of Registrant’s Form 10-K for the year-ended December 31, 2021 filed with the SEC for a discussion of climate change planning, risks and opportunities.
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Cybersecurity Matters
The increase in cyberattacks results in a greater threat to water, wastewater and electric utility systems and thereby the safety and security of our communities. We continue to increase our investments in information technology to monitor and address these threats and attempted cyber-attacks, and to improve our posture in addressing security vulnerabilities. See “Item 1. Business Overview” section of Registrant’s Form 10-K for the year-ended December 31, 2021 filed with the SEC for a discussion of cybersecurity matters.
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, 2021 filed with the SEC.
Item 4. Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures
As required by Rule 13a-15(b) under the Securities and Exchange Act of 1934 (the “Exchange Act”), we have carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”), of the effectiveness, as of the end of the fiscal quarter covered by this report, of the design and operation of our “disclosure controls and procedures” as defined in Rule 13a-15(e) and 15d-15(e) promulgated by the SEC under the Exchange Act. Based upon that evaluation, the CEO and the CFO concluded that disclosure controls and procedures, as of the end of such fiscal quarter, were adequate and effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.
(b) Changes in Internal Controls over Financial Reporting
There has been no change in our internal control over financial reporting during the quarter ended March 31,September 30, 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, thatwhich 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 2021 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 firstthird quarter of 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)
January 1–31, 2022361  $94.44 — — 
February 1–28, 2022331  $86.08 — — 
March 1–31, 20222,748  $85.25 — — 
Total3,440 (2)$86.29 — 
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, 2022377  $81.76 — — 
August 1 – 31, 2022236  $87.97 — — 
September 1 – 30, 20229,057  $84.25 — — 
Total9,670 (2)$84.24 — 
(1)      None of the common sharesCommon 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 the 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 April 28,November 1, 2022, AWR'sAWR’s Board of Directors approved a secondfourth quarter dividend of $0.365$0.3975 per share on AWR'sAWR’s Common Shares. Dividends on the Common Shares will be paid on JuneDecember 1, 2022 to shareholders of record at the close of business on May 16,November 15, 2022.
(b)    There have been no material changes during the firstthird quarter of 2022 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
10.12
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10.13
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10.14
10.15
10.16
10.17
10.18
10.19
10.2010.19
10.21
10.2210.20
10.23
10.2410.21
10.2510.22
10.2610.23
10.2710.24
10.2810.25
10.2910.26
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:May 2,November 7, 2022
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