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, ~~2022~~2023


☐			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 Blvd

San Dimas

91773-1212

(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 class

Trading symbol

Name of each exchange on which registered

Common shares

AWR

New 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 Blvd

San Dimas

91773-1212

(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 Company

Yes

Golden State Water Company

Yes

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 Company

Yes

Golden State Water Company

Yes

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 filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

☐

Emerging growth company

☐

Golden State Water Company

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

☐

Emerging growth company

☐

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

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)

American States Water Company

Yes

☐

Golden State Water Company

Yes

☐

As of ~~April 28, 2022,~~May 9, 2023, the number of Common Shares outstanding of American States Water Company was ~~36,955,756~~36,976,400 shares. As of ~~April 28, 2022,~~May 9, 2023, all of the ~~170~~171 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


Part I	Financial Information	3

Item 1:	Financial Statements	1

	Consolidated Balance Sheets of American States Water Company as of March 3 1 , 202 23 and December 31, ~~202~~20 12 2	2

	Consolidated Statements of Income of American States Water Company for the Three Months Ended March 313 1 , 202 23 and ~~202~~20 12 2	4

	Consolidated Statements of Changes in Common Shareholders' Equity ~~- For~~for the Three Months Ended March 31, ~~2022~~2023 and ~~2021~~2022	5

	Consolidated Statements of Cash Flows of American States Water Company for the Three Months Ended Ma ~~rch~~March 3 1 , 202 23 and 202 12	6

	Balance Sheets of Golden State Water Company as of March 3 131 , 202 23 and December 31, 202 12	7

	Statements of Income of Golden State Water Company for the Three ~~Months~~M onths Ended March 3 1,~~202~~2 31, 2023 and ~~202~~12022	9

	Statements of Changes in Common Shareholder's Equity ~~- For~~for the Three Months Ended March 31, 3 1 ~~, 202~~22023 and ~~2021~~2022	10

	Statements of Cash Flows of Golden State Water Company for the Three Months Ended March 31, ~~2022~~2023 and ~~2021~~2022	11

	Notes to Consolidated Financial Statements	12

Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2124

Item 3:	Quantitative and Qualitative Disclosures About Market Risk	4148

Item 4:	Controls and Procedures	4148

Part II	Other Information

Item 1:	Legal Proceedings	4249

Item 1A:	Risk Factors	4249

Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	4350

Item 3:	Defaults Upon Senior Securities	4350

Item 4:	Mine Safety Disclosure	4350

Item 5:	Other Information	4350

Item 6:	Exhibits	4451

	Signatures	4753

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"~~(“BVES”), 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~~2022 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.

Table of Contents

AMERICAN STATES WATER COMPANY

CONSOLIDATED BALANCE SHEETS

ASSETS

(Unaudited)


(in thousands)	(in thousands)	March 31, 2022		December 31, 2021		(in thousands)	March 31, 2023		December 31, 2022
Property, Plant and Equipment	Property, Plant and Equipment					Property, Plant and Equipment
Regulated utility plant, at cost	Regulated utility plant, at cost	$	2,205,801	$	2,183,183	Regulated utility plant, at cost	$	2,357,966	$	2,321,712
Non-utility property, at cost	Non-utility property, at cost	37,268		37,085		Non-utility property, at cost	38,898		38,285
Total	Total	2,243,069		2,220,268		Total	2,396,864		2,359,997
Less - Accumulated depreciation	Less - Accumulated depreciation	(593,210)		(594,264)		Less - Accumulated depreciation	(616,403)		(606,231)
Net property, plant and equipment	Net property, plant and equipment	1,649,859		1,626,004		Net property, plant and equipment	1,780,461		1,753,766

Other Property and Investments	Other Property and Investments					Other Property and Investments
Goodwill	Goodwill	1,116		1,116		Goodwill	1,116		1,116
Other property and investments	Other property and investments	39,018		40,806		Other property and investments	38,408		36,907
Total other property and investments	Total other property and investments	40,134		41,922		Total other property and investments	39,524		38,023

Current Assets	Current Assets					Current Assets
Cash and cash equivalents	Cash and cash equivalents	10,126		4,963		Cash and cash equivalents	2,126		5,997
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 $4,364 in 2023 and $4,387 in 2022)						Accounts receivable — customers (less allowance for doubtful accounts of $4,364 in 2023 and $4,387 in 2022)	21,293		26,206
Unbilled receivable	Unbilled receivable	25,500		27,147		Unbilled receivable	22,444		20,663
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)	41,091		34,974
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 2023 and $53 in 2022)						Other accounts receivable (less allowance for doubtful accounts of $53 in 2023 and $53 in 2022)	3,391		4,215
Income taxes receivable	Income taxes receivable	45		236		Income taxes receivable	35		3,901
Materials and supplies, at weighted average cost	Materials and supplies, at weighted average cost	11,943		12,163		Materials and supplies, at weighted average cost	16,282		14,623
Regulatory assets — current	Regulatory assets — current	9,054		8,897		Regulatory assets — current	11,032		14,028
Prepayments and other current assets	Prepayments and other current assets	11,223		5,317		Prepayments and other current assets	11,690		5,450
Unrealized gains on purchased power contracts		7,020		4,441
Purchase power contract derivative at fair value (Note 5)						Purchase power contract derivative at fair value (Note 5)	6,669		11,847
Contract assets (Note 2)	Contract assets (Note 2)	7,715		6,135		Contract assets (Note 2)	3,637		9,390
Total current assets	Total current assets	130,856		138,052		Total current assets	139,690		151,294

Other Assets	Other Assets					Other Assets
Unbilled revenue — receivable from U.S. government		8,867		9,671
Unbilled revenue — receivable from the U.S. government (Note 2)						Unbilled revenue — receivable from the U.S. government (Note 2)	7,790		6,456
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)	50,207		50,482
Contract assets (Note 2)	Contract assets (Note 2)	4,856		3,452		Contract assets (Note 2)	9,836		5,592
Operating lease right-of-use assets	Operating lease right-of-use assets	10,008		10,479		Operating lease right-of-use assets	8,990		9,535
Regulatory assets	Regulatory assets	3,289		3,182		Regulatory assets	10,474		5,694
Other	Other	15,453		16,230		Other	13,400		13,532
Total other assets	Total other assets	93,083		95,005		Total other assets	100,697		91,291

Total Assets	Total Assets	$	1,913,932	$	1,900,983	Total Assets	$	2,060,372	$	2,034,374

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

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)	March 31, 2023		December 31, 2022
Capitalization	Capitalization					Capitalization
Common shares, no par value	Common shares, no par value					Common shares, no par value
Authorized: 60,000,000 shares	Authorized: 60,000,000 shares					Authorized: 60,000,000 shares
Outstanding: 36,955,633 shares in 2022 and 36,936,285 shares in 2021		$	259,284	$	258,442
Earnings reinvested in the business		428,141		427,505
Outstanding: 36,976,284 shares in 2023 and 36,962,241 shares in 2022						Outstanding: 36,976,284 shares in 2023 and 36,962,241 shares in 2022	$	261,792	$	260,158
Retained earnings						Retained earnings	469,056		449,391
Total common shareholders’ equity	Total common shareholders’ equity	687,425		685,947		Total common shareholders’ equity	730,848		709,549
Long-term debt	Long-term debt	412,150		412,176		Long-term debt	576,431		446,547
Total capitalization	Total capitalization	1,099,575		1,098,123		Total capitalization	1,307,279		1,156,096

Current Liabilities	Current Liabilities					Current Liabilities
Notes payable to bank		32,000		31,000
Notes payable to banks						Notes payable to banks	175,500		255,500
Long-term debt — current	Long-term debt — current	382		377		Long-term debt — current	404		399
Accounts payable	Accounts payable	67,490		65,902		Accounts payable	65,705		84,849
Income taxes payable	Income taxes payable	2,879		4,662		Income taxes payable	10,855		1,848
Accrued other taxes	Accrued other taxes	14,983		17,137		Accrued other taxes	14,257		16,257
Accrued employee expenses	Accrued employee expenses	18,293		16,256		Accrued employee expenses	17,390		13,996
Accrued interest	Accrued interest	6,320		4,545		Accrued interest	8,411		5,308
Regulatory liabilities						Regulatory liabilities	2,097		4,574
Contract liabilities (Note 2)	Contract liabilities (Note 2)	210		257		Contract liabilities (Note 2)	560		903
Regulatory liabilities		3,642		1,896
Operating lease liabilities	Operating lease liabilities	1,991		2,044		Operating lease liabilities	1,906		1,892
Other	Other	11,964		11,498		Other	10,605		10,996
Total current liabilities	Total current liabilities	160,154		155,574		Total current liabilities	307,690		396,522

Other Credits	Other Credits					Other Credits
Notes payable to bank		189,500		174,500
Notes payable to banks						Notes payable to banks	25,000		22,000
Advances for construction	Advances for construction	66,469		66,727		Advances for construction	64,097		64,351
Contributions in aid of construction - net	Contributions in aid of construction - net	146,186		147,482		Contributions in aid of construction - net	148,456		147,918
Deferred income taxes	Deferred income taxes	142,661		140,290		Deferred income taxes	148,138		149,677
Regulatory liabilities	Regulatory liabilities	24,193		32,979		Regulatory liabilities	1,783		40,602
Unamortized investment tax credits	Unamortized investment tax credits	1,135		1,153		Unamortized investment tax credits	1,064		1,082
Accrued pension and other postretirement benefits	Accrued pension and other postretirement benefits	61,594		61,365		Accrued pension and other postretirement benefits	34,796		33,636
Operating lease liabilities	Operating lease liabilities	8,497		8,920		Operating lease liabilities	7,559		8,090
Other	Other	13,968		13,870		Other	14,510		14,400
Total other credits	Total other credits	654,203		647,286		Total other credits	445,403		481,756

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

Total Capitalization and Liabilities	Total Capitalization and Liabilities	$	1,913,932	$	1,900,983	Total Capitalization and Liabilities	$	2,060,372	$	2,034,374

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

Table of Contents

AMERICAN STATES WATER COMPANY

CONSOLIDATED STATEMENTS OF INCOME

FOR THE THREE MONTHS ENDED

MARCH 31, ~~2022~~2023 AND ~~2021~~2022

(Unaudited)


		Three Months Ended March 31,					Three Months Ended March 31,
(in thousands, except per share amounts)	(in thousands, except per share amounts)	2022		2021		(in thousands, except per share amounts)	2023		2022
Operating Revenues	Operating Revenues					Operating Revenues
Water	Water	$	73,906	$	75,029	Water	$	112,712	$	73,906
Electric	Electric	11,892		11,539		Electric	12,904		11,892
Contracted services	Contracted services	22,772		30,492		Contracted services	35,807		22,772
Total operating revenues	Total operating revenues	108,570		117,060		Total operating revenues	161,423		108,570

Operating Expenses	Operating Expenses					Operating Expenses
Water purchased	Water purchased	17,848		15,239		Water purchased	14,304		17,848
Power purchased for pumping	Power purchased for pumping	2,374		2,145		Power purchased for pumping	2,354		2,374
Groundwater production assessment	Groundwater production assessment	4,211		4,440		Groundwater production assessment	3,833		4,211
Power purchased for resale	Power purchased for resale	5,166		3,198		Power purchased for resale	4,986		5,166
Supply cost balancing accounts	Supply cost balancing accounts	(6,343)		(2,427)		Supply cost balancing accounts	11,566		(6,343)
Other operation	Other operation	8,667		8,217		Other operation	10,116		8,667
Administrative and general	Administrative and general	22,972		22,053		Administrative and general	23,547		22,972
Depreciation and amortization	Depreciation and amortization	10,114		9,560		Depreciation and amortization	11,203		10,114
Maintenance	Maintenance	3,140		2,662		Maintenance	3,150		3,140
Property and other taxes	Property and other taxes	5,853		5,940		Property and other taxes	6,295		5,853
ASUS construction	ASUS construction	10,203		15,704		ASUS construction	18,904		10,203
Total operating expenses	Total operating expenses	84,205		86,731		Total operating expenses	110,258		84,205

Operating Income	Operating Income	24,365		30,329		Operating Income	51,165		24,365

Other Income and Expenses	Other Income and Expenses					Other Income and Expenses
Interest expense	Interest expense	(5,606)		(6,258)		Interest expense	(9,481)		(5,606)
Interest income	Interest income	283		455		Interest income	1,864		283
Other, net	Other, net	(419)		656		Other, net	1,611		(419)
Total other income and expenses, net	Total other income and expenses, net	(5,742)		(5,147)		Total other income and expenses, net	(6,006)		(5,742)

Income before income tax expense	Income before income tax expense	18,623		25,182		Income before income tax expense	45,159		18,623

Income tax expense	Income tax expense	4,461		5,914		Income tax expense	10,752		4,461

Net Income	Net Income	$	14,162	$	19,268	Net Income	$	34,407	$	14,162

Weighted Average Number of Common Shares Outstanding	Weighted Average Number of Common Shares Outstanding	36,944		36,898		Weighted Average Number of Common Shares Outstanding	36,968		36,944
Basic Earnings Per Common Share	Basic Earnings Per Common Share	$	0.38	$	0.52	Basic Earnings Per Common Share	$	0.93	$	0.38

Weighted Average Number of Diluted Shares	Weighted Average Number of Diluted Shares	37,019		36,993		Weighted Average Number of Diluted Shares	37,047		37,019
Fully Diluted Earnings Per Common Share	Fully Diluted Earnings Per Common Share	$	0.38	$	0.52	Fully Diluted Earnings Per Common Share	$	0.93	$	0.38

Dividends Paid Per Common Share	Dividends Paid Per Common Share	$	0.365	$	0.335	Dividends Paid Per Common Share	$	0.3975	$	0.365

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

AMERICAN STATES WATER COMPANY

CONSOLIDATED STATEMENTS OF CHANGES

IN COMMON SHAREHOLDERS' EQUITY

(Unaudited)

Three Months Ended March 31, 2022
Common Shares Reinvested
Number Earnings
of in the
(in thousands) Shares Amount Business Total
Balances at December 31, 2021 36,936 $ 258,442 $ 427,505 $ 685,947
Add:
Net income 14,162 14,162
Exercise of stock options and other issuances of Common Shares 20 — —
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 cash 41 41
Deduct:
Dividends on Common Shares 13,485 13,485
Dividend equivalent rights on stock-based awards not paid in cash 41 41
Balances at March 31, 2022 36,956 $ 259,284 $ 428,141 $ 687,425

Three Months Ended March 31, 2021
Common Shares Reinvested
Number Earnings
of in the
(in thousands) Shares Amount Business Total
Balances at December 31, 2020 36,889 $ 256,666 385,007 $ 641,673
Add:
Net income 19,268 19,268
Exercise of stock options and other issuances of Common Shares 24 — —
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 cash 49 49
Deduct:
Dividends on Common Shares 12,361 12,361
Dividend equivalent rights on stock-based awards not paid in cash 49 49
Balances at March 31, 2021 36,913 $ 257,528 $ 391,865 $ 649,393


	Three Months Ended March 31, 2023
	Common Shares
	Number
	of			Retained
(in thousands)	Shares	Amount		Earnings		Total
Balances at December 31, 2022	36,962	$	260,158	$	449,391	$	709,549
Add:
Net income				34,407		34,407
Exercise of stock options and other issuances of Common Shares	14	—				—
Stock-based compensation, net of taxes paid from shares withheld from employees related to net share settlements (Note 4)		1,587				1,587
Dividend equivalent rights on stock-based awards not paid in cash		47				47
Deduct:
Dividends on Common Shares				14,695		14,695
Dividend equivalent rights on stock-based awards not paid in cash				47		47
Balances at March 31, 2023	36,976	$	261,792	$	469,056	$	730,848


	Three Months Ended March 31, 2022
	Common Shares
	Number
	of			Retained
(in thousands)	Shares	Amount		Earnings		Total
Balances at December 31, 2021	36,936	$	258,442	$	427,505	$	685,947
Add:
Net income				14,162		14,162
Exercise of stock options and other issuances of Common Shares	20	—				—
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 cash		41				41
Deduct:
Dividends on Common Shares				13,485		13,485
Dividend equivalent rights on stock-based awards not paid in cash				41		41
Balances at March 31, 2022	36,956	$	259,284	$	428,141	$	687,425

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

Table of Contents

AMERICAN STATES WATER COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, ~~2022~~2023 AND ~~2021~~2022

(Unaudited)


		Three Months Ended March 31,					Three Months Ended March 31,
(in thousands)	(in thousands)	2022		2021		(in thousands)	2023		2022
Cash Flows From Operating Activities:	Cash Flows From Operating Activities:					Cash Flows From Operating Activities:
Net income	Net income	$	14,162	$	19,268	Net income	$	34,407	$	14,162
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 amortization	Depreciation and amortization	10,208		9,656		Depreciation and amortization	11,572		10,208
Provision for doubtful accounts	Provision for doubtful accounts	258		255		Provision for doubtful accounts	458		258
Deferred income taxes and investment tax credits	Deferred income taxes and investment tax credits	1,552		(343)		Deferred income taxes and investment tax credits	(3,286)		1,552
Stock-based compensation expense	Stock-based compensation expense	1,905		1,930		Stock-based compensation expense	2,254		1,905
Loss (gain) on investments held in a trust		1,653		(628)
(Gain) loss on investments held in a trust						(Gain) loss on investments held in a trust	(1,630)		1,653
Other — net	Other — net	83		104		Other — net	(71)		83
Changes in assets and liabilities:	Changes in assets and liabilities:					Changes in assets and liabilities:
Accounts receivable — customers	Accounts receivable — customers	7,627		5,711		Accounts receivable — customers	4,455		7,627
Unbilled receivable	Unbilled receivable	2,451		3,161		Unbilled receivable	(3,115)		2,451
Other accounts receivable	Other accounts receivable	3,467		1,386		Other accounts receivable	824		3,467
Receivables from the U.S. government	Receivables from the U.S. government	4,589		(1,015)		Receivables from the U.S. government	(5,842)		4,589
Materials and supplies	Materials and supplies	220		(132)		Materials and supplies	(1,659)		220
Prepayments and other assets	Prepayments and other assets	(4,584)		(4,026)		Prepayments and other assets	(5,656)		(4,584)
Contract assets	Contract assets	(199)		(3,763)		Contract assets	1,509		(199)
Regulatory assets		(5,713)		(3,493)
Regulatory assets/liabilities						Regulatory assets/liabilities	(35,863)		(5,713)
Accounts payable	Accounts payable	341		(7,267)		Accounts payable	(8,542)		341
Income taxes receivable/payable	Income taxes receivable/payable	(1,592)		(274)		Income taxes receivable/payable	12,873		(1,592)
Contract liabilities	Contract liabilities	(47)		(751)		Contract liabilities	(343)		(47)
Accrued pension and other postretirement benefits	Accrued pension and other postretirement benefits	71		1,796		Accrued pension and other postretirement benefits	1,020		71
Other liabilities	Other liabilities	1,574		3,101		Other liabilities	3,599		1,574
Net cash provided		38,026		24,676
Net cash provided by						Net cash provided by	6,964		38,026

Cash Flows From Investing Activities:	Cash Flows From Investing Activities:					Cash Flows From Investing Activities:
Capital expenditures	Capital expenditures	(35,170)		(37,093)		Capital expenditures	(49,337)		(35,170)
Other investing activities	Other investing activities	121		113		Other investing activities	172		121
Net cash used		(35,049)		(36,980)
Net cash used in						Net cash used in	(49,165)		(35,049)

Cash Flows From Financing Activities:	Cash Flows From Financing Activities:					Cash Flows From Financing Activities:

Receipt of advances for and contributions in aid of construction	Receipt of advances for and contributions in aid of construction	1,795		2,016		Receipt of advances for and contributions in aid of construction	2,064		1,795
Refunds on advances for construction	Refunds on advances for construction	(833)		(569)		Refunds on advances for construction	(712)		(833)
Retirement or repayments of long-term debt		(103)		(99)
Repayments of long-term debt						Repayments of long-term debt	(109)		(103)
Proceeds from the issuance of long-term debt, net of issuance costs						Proceeds from the issuance of long-term debt, net of issuance costs	129,665		—
Net change in notes payable to banks	Net change in notes payable to banks	16,000		(5,200)		Net change in notes payable to banks	(77,000)		16,000
Dividends paid	Dividends paid	(13,485)		(12,361)		Dividends paid	(14,695)		(13,485)
Other financing activities	Other financing activities	(1,188)		(1,269)		Other financing activities	(883)		(1,188)
Net cash provided (used)		2,186		(17,482)
Net cash provided by						Net cash provided by	38,330		2,186
Net change in cash and cash equivalents	Net change in cash and cash equivalents	5,163		(29,786)		Net change in cash and cash equivalents	(3,871)		5,163
Cash and cash equivalents, beginning of period	Cash and cash equivalents, beginning of period	4,963		36,737		Cash and cash equivalents, beginning of period	5,997		4,963
Cash and cash equivalents, end of period	Cash and cash equivalents, end of period	$	10,126	$	6,951	Cash and cash equivalents, end of period	$	2,126	$	10,126

Non-cash transactions:	Non-cash transactions:					Non-cash transactions:
Accrued payables for investment in utility plant	Accrued payables for investment in utility plant	$	34,101	$	28,700	Accrued payables for investment in utility plant	$	29,746	$	34,101
Property installed by developers and conveyed	Property installed by developers and conveyed	$	130	$	2,761	Property installed by developers and conveyed	$	364	$	130

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

Table of Contents

GOLDEN STATE WATER COMPANY

BALANCE SHEETS

ASSETS

(Unaudited)


(in thousands)	(in thousands)	March 31, 2022		December 31, 2021		(in thousands)	March 31, 2023		December 31, 2022
Utility Plant	Utility Plant					Utility Plant
Utility plant, at cost	Utility plant, at cost	$	2,043,851	$	2,022,417	Utility plant, at cost	$	2,177,606	$	2,147,643
Less - Accumulated depreciation	Less - Accumulated depreciation	(520,186)		(522,672)		Less - Accumulated depreciation	(539,575)		(530,925)
Net utility plant	Net utility plant	1,523,665		1,499,745		Net utility plant	1,638,031		1,616,718

Other Property and Investments	Other Property and Investments	36,874		38,659		Other Property and Investments	36,159		34,655

Current Assets	Current Assets					Current Assets
Cash and cash equivalents	Cash and cash equivalents	4,677		525		Cash and cash equivalents	813		370
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 $4,111 in 2023 and $4,143 in 2022)						Accounts receivable — customers (less allowance for doubtful accounts of $4,111 in 2023 and $4,143 in 2022)	18,697		23,107
Unbilled receivable	Unbilled receivable	16,342		20,525		Unbilled receivable	13,399		15,006
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 2023 and $53 in 2022)						Other accounts receivable (less allowance for doubtful accounts of $53 in 2023 and $53 in 2022)	2,316		2,721
Intercompany receivable						Intercompany receivable	—		621
Income taxes receivable from Parent						Income taxes receivable from Parent	—		1,692
Materials and supplies, at average cost	Materials and supplies, at average cost	4,587		5,384		Materials and supplies, at average cost	6,338		6,120
Regulatory assets — current	Regulatory assets — current	9,054		8,897		Regulatory assets — current	11,032		14,028
Prepayments and other current assets	Prepayments and other current assets	8,039		4,223		Prepayments and other current assets	8,347		4,464
Total current assets	Total current assets	65,790		75,215		Total current assets	60,942		68,129

Other Assets	Other Assets					Other Assets

Operating lease right-of-use assets	Operating lease right-of-use assets	9,977		10,439		Operating lease right-of-use assets	8,703		9,208

Other	Other	14,415		14,424		Other	12,535		12,598
Total other assets	Total other assets	24,392		24,863		Total other assets	21,238		21,806

Total Assets	Total Assets	$	1,650,721	$	1,638,482	Total Assets	$	1,756,370	$	1,741,308

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

Table of Contents

GOLDEN STATE WATER COMPANY

BALANCE SHEETS

CAPITALIZATION AND LIABILITIES

(Unaudited)


(in thousands, except number of shares)	(in thousands, except number of shares)	March 31, 2022		December 31, 2021		(in thousands, except number of shares)	March 31, 2023		December 31, 2022
Capitalization	Capitalization					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		$	357,311	$	356,530
Earnings reinvested in the business		254,184		259,156
Outstanding: 171 shares in 2023 and 170 in 2022						Outstanding: 171 shares in 2023 and 170 in 2022	$	369,770	$	358,123
Retained earnings						Retained earnings	288,502		285,783
Total common shareholder’s equity	Total common shareholder’s equity	611,495		615,686		Total common shareholder’s equity	658,272		643,906
Long-term debt	Long-term debt	412,150		412,176		Long-term debt	541,627		411,748
Total capitalization	Total capitalization	1,023,645		1,027,862		Total capitalization	1,199,899		1,055,654

Current Liabilities	Current Liabilities					Current Liabilities

Intercompany payable						Intercompany payable	428		—
Intercompany note payable						Intercompany note payable	45,000		—
Long-term debt — current	Long-term debt — current	382		377		Long-term debt — current	404		399
Accounts payable	Accounts payable	55,296		50,627		Accounts payable	47,860		65,944
Accrued other taxes	Accrued other taxes	13,257		14,960		Accrued other taxes	12,248		14,501
Accrued employee expenses	Accrued employee expenses	14,446		12,867		Accrued employee expenses	13,841		11,233
Accrued interest	Accrued interest	5,980		4,210		Accrued interest	7,144		4,364
Income taxes payable to Parent	Income taxes payable to Parent	1,181		2,972		Income taxes payable to Parent	10,394		—
Operating lease liabilities	Operating lease liabilities	1,977		2,029		Operating lease liabilities	1,794		1,788
Other	Other	10,893		10,505		Other	9,754		10,152
Total current liabilities	Total current liabilities	103,412		98,547		Total current liabilities	148,867		108,381

Other Credits	Other Credits					Other Credits
Intercompany payable to Parent		67,683		49,280

Intercompany note payable						Intercompany note payable	—		129,000
Advances for construction	Advances for construction	66,449		66,707		Advances for construction	64,077		64,331
Contributions in aid of construction — net	Contributions in aid of construction — net	146,186		145,848		Contributions in aid of construction — net	148,456		147,918
Deferred income taxes	Deferred income taxes	134,349		132,314		Deferred income taxes	135,921		138,788
Regulatory liabilities	Regulatory liabilities	24,193		32,979		Regulatory liabilities	1,783		40,602
Unamortized investment tax credits	Unamortized investment tax credits	1,135		1,153		Unamortized investment tax credits	1,064		1,082
Accrued pension and other postretirement benefits	Accrued pension and other postretirement benefits	61,364		61,170		Accrued pension and other postretirement benefits	34,556		33,421
Operating lease liabilities	Operating lease liabilities	8,479		8,891		Operating lease liabilities	7,397		7,878
Other	Other	13,826		13,731		Other	14,350		14,253
Total other credits	Total other credits	523,664		512,073		Total other credits	407,604		577,273

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

Total Capitalization and Liabilities	Total Capitalization and Liabilities	$	1,650,721	$	1,638,482	Total Capitalization and Liabilities	$	1,756,370	$	1,741,308

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

Table of Contents

GOLDEN STATE WATER COMPANY

STATEMENTS OF INCOME

FOR THE THREE MONTHS ENDED

MARCH 31, ~~2022~~2023 AND ~~2021~~2022

(Unaudited)


		Three Months Ended March 31,					Three Months Ended March 31,
(in thousands)	(in thousands)	2022		2021		(in thousands)	2023		2022
Operating Revenues	Operating Revenues					Operating Revenues
Water	Water	$	73,906	$	75,029	Water	$	112,712	$	73,906
Total operating revenues	Total operating revenues	73,906		75,029		Total operating revenues	112,712		73,906

Operating Expenses	Operating Expenses					Operating Expenses
Water purchased	Water purchased	17,848		15,239		Water purchased	14,304		17,848
Power purchased for pumping	Power purchased for pumping	2,374		2,145		Power purchased for pumping	2,354		2,374
Groundwater production assessment	Groundwater production assessment	4,211		4,440		Groundwater production assessment	3,833		4,211
Supply cost balancing accounts	Supply cost balancing accounts	(5,067)		(2,920)		Supply cost balancing accounts	12,625		(5,067)
Other operation	Other operation	6,354		5,813		Other operation	7,271		6,354
Administrative and general	Administrative and general	15,596		14,435		Administrative and general	15,381		15,596
Depreciation and amortization	Depreciation and amortization	8,545		8,062		Depreciation and amortization	9,606		8,545
Maintenance	Maintenance	2,156		1,740		Maintenance	1,960		2,156
Property and other taxes	Property and other taxes	4,890		5,016		Property and other taxes	5,139		4,890

Total operating expenses	Total operating expenses	56,907		53,970		Total operating expenses	72,473		56,907

Operating Income	Operating Income	16,999		21,059		Operating Income	40,239		16,999

Other Income and Expenses	Other Income and Expenses					Other Income and Expenses
Interest expense	Interest expense	(5,236)		(5,798)		Interest expense	(6,922)		(5,236)
Interest income	Interest income	91		87		Interest income	1,428		91
Other, net	Other, net	(598)		651		Other, net	1,628		(598)
Total other income and expenses, net	Total other income and expenses, net	(5,743)		(5,060)		Total other income and expenses, net	(3,866)		(5,743)

Income before income tax expense	Income before income tax expense	11,256		15,999		Income before income tax expense	36,373		11,256

Income tax expense	Income tax expense	2,689		3,768		Income tax expense	8,910		2,689

Net Income	Net Income	$	8,567	$	12,231	Net Income	$	27,463	$	8,567

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

GOLDEN STATE WATER COMPANY

STATEMENTS OF CHANGES

IN COMMON SHAREHOLDER'S EQUITY

(Unaudited)

Three Months Ended March 31, 2022
Common Shares Reinvested
Number Earnings
of in the
(in thousands, except number of shares) Shares Amount Business Total
Balances at December 31, 2021 170 $ 356,530 $ 259,156 $ 615,686
Add:
Net income 8,567 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 cash 39 39
Deduct:
Dividends on Common Shares 13,500 13,500
Dividend equivalent rights on stock-based awards not paid in cash 39 39
Balances at March 31, 2022 170 $ 357,311 $ 254,184 $ 611,495
Three Months Ended March 31, 2021
Common Shares Reinvested
Number Earnings
of in the
(in thousands, except number of shares) Shares Amount Business Total
Balances at December 31, 2020 170 $ 354,906 $ 228,392 $ 583,298
Add:
Net income 12,231 12,231
Stock-based compensation, net of taxes paid from shares withheld from employees related to net share settlements (Note 4) 782 782
Dividend equivalent rights on stock-based awards not paid in cash 45 45
Deduct:
Dividends on Common Shares 12,400 12,400
Dividend equivalent rights on stock-based awards not paid in cash 45 45
Balances at March 31, 2021 170 $ 355,733 $ 228,178 $ 583,911


	Three Months Ended March 31, 2023
	Common Shares
	Number
	of			Retained
(in thousands, except number of shares)	Shares	Amount		Earnings		Total
Balances at December 31, 2022	170	$	358,123	$	285,783	$	643,906
Add:
Net income				27,463		27,463
Issuance of Common Share to Parent	1	10,000				10,000
Stock-based compensation, net of taxes paid from shares withheld from employees related to net share settlements (Note 4)		1,603				1,603
Dividend equivalent rights on stock-based awards not paid in cash		44				44
Deduct:
Dividends on Common Shares				24,700		24,700
Dividend equivalent rights on stock-based awards not paid in cash				44		44
Balances at March 31, 2023	171	$	369,770	$	288,502	$	658,272


	Three Months Ended March 31, 2022
	Common Shares
	Number
	of			Retained
(in thousands, except number of shares)	Shares	Amount		Earnings		Total
Balances at December 31, 2021	170	$	356,530	$	259,156	$	615,686
Add:
Net income				8,567		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 cash		39				39
Deduct:
Dividends on Common Shares				13,500		13,500
Dividend equivalent rights on stock-based awards not paid in cash				39		39
Balances at March 31, 2022	170	$	357,311	$	254,184	$	611,495

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

Table of Contents

GOLDEN STATE WATER COMPANY

STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, ~~2022~~2023 AND ~~2021~~2022

(Unaudited)


		Three Months Ended March 31,					Three Months Ended March 31,
(in thousands)	(in thousands)	2022		2021		(in thousands)	2023		2022
Cash Flows From Operating Activities:	Cash Flows From Operating Activities:					Cash Flows From Operating Activities:
Net income	Net income	$	8,567	$	12,231	Net income	$	27,463	$	8,567
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 amortization	Depreciation and amortization	8,610		8,126		Depreciation and amortization	9,947		8,610
Provision for doubtful accounts	Provision for doubtful accounts	222		221		Provision for doubtful accounts	420		222
Deferred income taxes and investment tax credits	Deferred income taxes and investment tax credits	1,305		(505)		Deferred income taxes and investment tax credits	(4,348)		1,305
Stock-based compensation expense	Stock-based compensation expense	1,751		1,790		Stock-based compensation expense	2,190		1,751

Loss (gain) on investments held in a trust		1,653		(628)
(Gain) loss on investments held in a trust						(Gain) loss on investments held in a trust	(1,630)		1,653
Other — net	Other — net	84		83		Other — net	(105)		84
Changes in assets and liabilities:	Changes in assets and liabilities:					Changes in assets and liabilities:
Accounts receivable — customers	Accounts receivable — customers	7,499		6,033		Accounts receivable — customers	3,990		7,499
Unbilled receivable	Unbilled receivable	4,183		1,525		Unbilled receivable	1,607		4,183
Other accounts receivable	Other accounts receivable	1,944		1,463		Other accounts receivable	405		1,944
Materials and supplies	Materials and supplies	797		(267)		Materials and supplies	(218)		797
Prepayments and other assets	Prepayments and other assets	(3,268)		(1,956)		Prepayments and other assets	(3,380)		(3,268)
Regulatory assets		(5,135)		(3,165)
Regulatory assets/liabilities						Regulatory assets/liabilities	(34,059)		(5,135)
Accounts payable	Accounts payable	2,886		(5,674)		Accounts payable	(7,831)		2,886
Intercompany receivable/payable	Intercompany receivable/payable	428		8		Intercompany receivable/payable	1,077		428
Income taxes receivable/payable from/to Parent	Income taxes receivable/payable from/to Parent	(1,791)		(391)		Income taxes receivable/payable from/to Parent	12,086		(1,791)
Accrued pension and other postretirement benefits	Accrued pension and other postretirement benefits	36		1,760		Accrued pension and other postretirement benefits	1,004		36
Other liabilities	Other liabilities	1,494		2,145		Other liabilities	2,259		1,494
Net cash provided		31,265		22,799
Net cash provided by						Net cash provided by	10,877		31,265

Cash Flows From Investing Activities:	Cash Flows From Investing Activities:					Cash Flows From Investing Activities:
Capital expenditures	Capital expenditures	(31,465)		(31,824)		Capital expenditures	(42,005)		(31,465)
Note receivable from AWR parent		—		(23,000)
Receipt of payment of note receivable from AWR parent		—		11,000

Other investing activities	Other investing activities	117		109		Other investing activities	171		117
Net cash used		(31,348)		(43,715)
Net cash used in						Net cash used in	(41,834)		(31,348)

Cash Flows From Financing Activities:	Cash Flows From Financing Activities:					Cash Flows From Financing Activities:
Proceeds from issuance of Common Shares to Parent						Proceeds from issuance of Common Shares to Parent	10,000		—
Receipt of advances for and contributions in aid of construction	Receipt of advances for and contributions in aid of construction	1,759		2,013		Receipt of advances for and contributions in aid of construction	2,064		1,759
Refunds on advances for construction	Refunds on advances for construction	(833)		(569)		Refunds on advances for construction	(712)		(833)
Retirement or repayments of long-term debt		(103)		(99)

Repayments of long-term debt						Repayments of long-term debt	(109)		(103)
Proceeds from the issuance of long-term debt, net of issuance costs						Proceeds from the issuance of long-term debt, net of issuance costs	129,665		—
Net change in intercompany borrowings	Net change in intercompany borrowings	18,000		—		Net change in intercompany borrowings	(84,000)		18,000
Dividends paid	Dividends paid	(13,500)		(12,400)		Dividends paid	(24,700)		(13,500)
Other financing activities	Other financing activities	(1,088)		(1,155)		Other financing activities	(808)		(1,088)
Net cash provided (used)		4,235		(12,210)
Net cash provided by						Net cash provided by	31,400		4,235

Net change in cash and cash equivalents	Net change in cash and cash equivalents	4,152		(33,126)		Net change in cash and cash equivalents	443		4,152
Cash and cash equivalents, beginning of period	Cash and cash equivalents, beginning of period	525		35,578		Cash and cash equivalents, beginning of period	370		525
Cash and cash equivalents, end of period	Cash and cash equivalents, end of period	$	4,677	$	2,452	Cash and cash equivalents, end of period	$	813	$	4,677

Non-cash transactions:	Non-cash transactions:					Non-cash transactions:
Accrued payables for investment in utility plant	Accrued payables for investment in utility plant	$	32,439	$	25,529	Accrued payables for investment in utility plant	$	28,363	$	32,439
Property installed by developers and conveyed	Property installed by developers and conveyed	$	130	$	2,761	Property installed by developers and conveyed	$	364	$	130

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

Table of Contents

AMERICAN STATES WATER COMPANY AND SUBSIDIARIES

AND

GOLDEN STATE WATER COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 — Summary of Significant Accounting Policies

Nature of Operations: American States Water Company (“AWR”) is the parent company of Golden State Water Company (“GSWC”), Bear Valley Electric Service, Inc. ~~("BVESI"~~(“BVES”), 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 ~~1000000~~one million people in 9nine states.

GSWC and ~~BVESI~~BVES are both California public utilities. GSWC is engaged in the purchase, production, distribution and sale of water throughout California serving approximately ~~262,900~~263,400 customer connections. ~~BVESI~~BVES 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's~~BVES’s businesses in matters including properties, rates, services, facilities, and transactions between GSWC, ~~BVESI,~~BVES, 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 an initial 50-year firm fixed-price ~~contracts.~~contracts with the U.S. government. 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.~~the Military Utility Privatization Subsidiaries.

Basis of Presentation: The consolidated financial statements and notes ~~thereto~~hereto 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~~BVES 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~~2022 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~~2022 filed with the SEC.

Related Party and Intercompany Transactions: As discussed below under Liquidity and Financing ~~Activities~~Plans~~: 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 BVESI of approximately $794,000 and $799,000 during the three months ended March 31, 2022 and 2021, respectively. GSWC allocated corporate office administrative and general costs to ASUS of approximately $1.6 million and $1.5 million during the three months ended March 31, 2022 and 2021, respectively.

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~~AWR~~currently borrows under a credit facility and provides funds to GSWC and ASUS in support of their operations. ~~On April 22,~~Furthermore, GSWC, BVES and ASUS provide and/ or receive various support service to and from their parent, AWR, and among themselves. GSWC also allocates certain corporate office administrative and general costs to its affiliates, BVES and ASUS, using allocation factors approved by the CPUC. During the three months ended March 31, 2023 and 2022, GSWC allocated corporate office administrative and general costs to BVES of approximately $1.3 million and $794,000, respectively. During the three months ended March 31, 2023 and 2022, GSWC allocated corporate office administrative and general costs to ASUS of approximately $1.5 million and $1.6 million, respectively.

In January 2023, the Board of Directors approved the issuance of one GSWC Common Share to AWR for $10.0 million. GSWC used the proceeds from the issuance of equity to AWR and from the issuance of $130.0 million in unsecured long-term notes on January 13, 2023 to pay-off all intercompany borrowings from AWR. The CPUC requires GSWC to fully pay-off all intercompany borrowings it has from AWR within a 24-month period.

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Liquidity and Financing Plans: AWR borrows under a revolving credit facility with a current borrowing capacity of $280.0 million and provides funds to GSWC and ASUS in support of their operations through intercompany borrowing agreements on terms that are similar to that of the credit facility was amended to increase the borrowing capacity from $200.0 million to $280.0 million. The amendment also changed the benchmark interest rate from the London Interbank Offered Rate ("LIBOR") to the Secured Overnight Financing Rate ("SOFR"). This credit agreement expires in May 2023. Registrant does not believe the change in benchmark rates will have a material impact on its financing costs. facility. The interest rate charged to GSWC and ASUS is ~~sufficient~~comparable to ~~cover AWR’s~~the interest ~~expense~~rate AWR pays under the credit facility. ~~As of March 31, 2022, there~~AWR's credit agreement was ~~$189.5 million outstanding under this facility. Registrant expects~~set to ~~issue long-term debt through GSWC prior to~~expire on May 23, 2023. On May 8, 2023, ~~and use~~ the ~~debt proceeds to pay off borrowings under this facility.~~

~~BVESI has a separate $35 million revolving~~ credit facility ~~which~~ was amended ~~in December 2021 to reduce the interest rate and fees charged, as well as~~ to extend the maturity date by two-months to provide adequate time to put in place a ~~year~~new credit agreement. The amendment extends the maturity date of the existing credit agreement to July 23, 2023 or an earlier date on which the credit agreement is either terminated or cancelled when superseded by a new agreement. All intercompany borrowing agreements will expire concurrent with the expiration of AWR’s credit facility. Therefore, the outstanding borrowings under the credit facility of $175.5 million as of March 31, 2023 have been classified as current liabilities on AWR’s Consolidated Balance Sheet, thus creating a negative working-capital condition for AWR of $168.0 million. Additionally, as of March 31, 2023, the $45.0 million of outstanding intercompany borrowings of GSWC from AWR have been classified as current liabilities on GSWC's Balance Sheet, also creating a negative working-capital condition for GSWC of $87.9 million. As of May 10, 2023, neither AWR nor GSWC have sufficient liquidity or capital resources to repay its credit facility or intercompany borrowings, respectively, without either extending its existing credit facility, entering into a new credit facility, or issuing new debt or equity.

AWR is confident and believes it is probable that it will be able to execute a new credit facility agreement with the needed borrowing capacities required to repay its existing credit facility and to run its operations given Registrant's ability to generate consistent cash flows, its A+ credit ratings, and its history in obtaining revolving credit facilities to meet its working-capital needs, as well as its history of successfully raising debt as recently done with GSWC's issuance of $130.0 million in unsecured long-term notes on January 13, 2023. In addition, management is considering a separate credit facility for GSWC to support its standalone water utility operations. Alternatively, AWR may enter into a new intercompany borrowing agreement with GSWC. Accordingly, management has concluded that Registrant will be able to satisfy its obligations, including those under its current 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 financing plans.

BVES has a separate $35.0 million revolving credit facility without a parent guaranty that matures on July 1, 2024.As of March 31, ~~2022,~~2023, there was ~~$32.0~~$25.0 million outstanding borrowing under this credit facility. Under the terms of the credit agreement, ~~BVESI~~BVES has the option to increase the facility by an additional ~~$15~~$15.0 million, subject to lender approval.Interest rates under this facility are ~~generally~~currently based on LIBOR. Effective July 1, 2023, all new borrowings under this credit agreement will be based on the ~~Under the terms of the December 2021 amendment, upon discontinuation of a benchmark rate such as LIBOR, the lender may replace LIBOR with a benchmark rate replacement such as SOFR.~~Secured Overnight Financing Rate ("~~Registrant~~SOFR"). BVES does not believe the change from LIBOR to a new benchmark rate such as SOFR will have a material impact on its financing costs.~~Registrant does not have any other borrowings or debt indexed to LIBOR.~~

GSWC’s intercompany borrowing agreement with AWR and BVESI’s revolving credit facility are considered short-term debt arrangements by the CPUC. Both GSWC and BVESI have been authorized by the CPUC to borrow under these arrangements for a term of up to 24 months. Borrowings under these arrangements are, therefore, required to be fully paid off within a 24-month period. GSWC’s next pay-off period for its intercompany borrowings from AWR ends in May 2023, and BVESI’s pay-off period for its credit facility ends in July 2022. Accordingly, as of 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 million in unsecured private placement notes consisting of $17.5 million at a coupon rate of 4.548% due April 28, 2032, and $17.5 million at a coupon rate of 4.949% due April 28, 2037. The covenant requirements under these notes are similar to the terms of BVESI's revolving credit facility. BVESI used the proceeds to pay down amounts outstanding under its credit facility, thus complying with the CPUC's 24-month rule.

COVID-19 Impact: ~~GSWC, BVESI~~AWR 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 continues~~its subsidiaries continue to monitor the guidance provided by federal, state, and local health authorities and other government officials. On April 10, 2023, the Biden Administration terminated the COVID-19 national emergency. The COVID-19 emergency-related memorandum accounts for GSWC and BVES expired when the COVID-19 national emergency ended. Thus far, the COVID-19 pandemic has not had a material impact on ASUS's current operations.

During the first quarter of 2023, GSWC and BVES continue to incur some incremental costs in excess of their revenue requirements due to the lingering effects of the pandemic that are being tracked in COVID-19-related memorandum accounts and recorded as regulatory assets (Note 3).

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Note 2 — Revenues

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

Although GSWC and BVES 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. Most of ASUS’s revenues are derived from contracts with the U.S. government. For the three months ended March 31, 2023 and 2022, disaggregated revenues from contracts with customers by segment were as follows:


	Three Months Ended March 31,
(dollars in thousands)	2023		2022
Water:
Tariff-based revenues	$	100,541	$	72,498
Surcharges (cost-recovery activities)	317		549
Other	737		518
Water revenues from contracts with customers	101,595		73,565
WRAM under/(over) collection (alternative revenue program)	11,117		341
Total water revenues (1)	112,712		73,906

Electric:
Tariff-based revenues	13,063		12,552
Surcharges (cost-recovery activities)	149		27
Electric revenues from contracts with customers	13,212		12,579
BRRAM under/(over) collection (alternative revenue program)	(308)		(687)
Total electric revenues	12,904		11,892

Contracted services:
Water	22,488		13,546
Wastewater	13,319		9,226
Contracted services revenues from contracts with customers	35,807		22,772

Total AWR revenues	$	161,423	$	108,570

(1) Water revenues for the three months ended March 31, 2023 includes approximately $30 million, which represents the impact of the retroactive new rates for the full year of 2022 as a result of a proposed decision issued by the CPUC in April 2023 on GSWC’s general rate case (Note 3).

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


(dollars in thousands)	March 31, 2023		December 31, 2022
Unbilled receivables	$	15,167	$	10,125
Receivable from the U.S. government	$	91,298	$	85,456
Contract assets	$	13,473	$	14,982
Contract liabilities	$	560	$	903

Unbilled receivables and Receivable from the U.S. government represent receivables where the right to payment is conditional only by the passage of time.

Contract Assets - Contract assets are assets 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 liabilities 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 months ended March 31, 2023, which were included in contract liabilities at the beginning of the period were not material. Contracted services revenues recognized during the three months ended March 31, 2023 from performance obligations satisfied in previous periods were not material.

As of March 31, 2023, AWR’s aggregate remaining performance obligations, which are entirely for the contracted services segment, were $3.5 billion. AWR expects to recognize revenue on these remaining performance obligations over the remaining term of each of the 50-year contracts, which range from 32 to 45 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 BVES record regulatory assets, which represent probable future recovery of costs from customers through the rate making process, and regulatory liabilities, which represent probable future refunds that are to be credited to customers through the rate making process. At March 31, 2023, GSWC and BVES had approximately $77.6 million of regulatory liabilities, net of regulatory assets, not accruing carrying costs. Of this amount, (i) $75.2 million of regulatory liabilities are excess deferred income taxes arising from the lower federal income tax rate under the Tax Cuts and Jobs Act enacted in December 2017 that are being refunded to customers, (ii) $2.3 million of regulatory assets relates to the underfunded position in Registrant's pension and other retirement obligations (not including the two-way pension balancing accounts), and (iii) $6.7 million regulatory liability related to a memorandum account authorized by the CPUC to track unrealized gains and losses on BVES’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 including flowed-through deferred income taxes.

Regulatory assets represent costs incurred by GSWC and/or BVES 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 BVES 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 BVES’s assets are not recoverable in customer rates, the applicable utility must determine if it has suffered an asset impairment that requires it to write down the asset’s value. Regulatory assets are offset against regulatory liabilities within each rate making area. Amounts expected to be collected or refunded in the next twelve months have been classified as current assets and current liabilities by rate making area. Regulatory liabilities, less regulatory assets, included in the consolidated balance sheets are as follows:


(dollars in thousands)	March 31, 2023		December 31, 2022
GSWC
2022/2023 general rate case memorandum accounts (unbilled revenue)	$	38,419	$	—
Water revenue adjustment mechanism, net of the modified cost balancing account	29,069		31,803
COVID-19 memorandum account	3,540		3,478
Excess deferred income taxes	(71,418)		(71,870)
Flowed-through income taxes	447		(1,134)
Other regulatory assets	22,390		19,964
Other regulatory liabilities	(13,198)		(8,815)
Total GSWC	$	9,249	$	(26,574)
BVES
Derivative instrument memorandum account (Note 5)	(6,669)		(11,847)
Wildfire mitigation and other fire prevention related costs memorandum accounts	14,131		13,007
Other regulatory assets	9,480		7,965
Other regulatory liabilities	(8,565)		(8,005)
Total AWR	$	17,626	$	(25,454)

Regulatory matters are discussed in the consolidated financial statements and the notes thereto included in the Company’s Form 10-K for the year ended December 31, 2022 filed with the SEC. The discussion below focuses on significant matters and developments since December 31, 2022.

Pending Water General Rate Case and the 2022/2023 General Rate Case Memorandum Accounts:

In July 2020, GSWC filed a general rate case application for all of its water regions and its general office. This general rate case determines new water rates for the years 2022–2024. On April 13, 2023, GSWC received a proposed decision on this application from the assigned administrative law judge at the CPUC. Among other things, the proposed decision approves and adopts in its entirety the settlement agreement between GSWC and the Public Advocates Office at the CPUC (“Public Advocates”) that had been filed with the CPUC in November 2021, and resolves all issues related to the 2022 annual revenue requirement in the general rate case application and allows for additional increases in adopted revenues for 2023. The new rates

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for 2022 and 2023 are effective and retroactive to January 1, 2022 and January 1, 2023, respectively. As a result of receiving a proposed decision that approves the settlement agreement in its entirety, the impact of retroactive rates for the full year of 2022 and the estimated second-year rate increases for the three months ended March 31, 2023 have been reflected in the 2023 first quarter results as it became probable that the approved retroactive rates for the full year of 2022 and the first three months of 2023 would be permitted to be billed to customers in the future. GSWC expects to receive a final decision during the second quarter of 2023.

Due to ~~falling transmission~~the delay in finalizing the water general rate case, water revenues billed to customers for the year ended December 31, 2022 and for the three months ended March 31, 2023 were based on 2021 adopted rates, pending a final decision by the CPUC. GSWC has been authorized to create general rate case memorandum accounts to track the revenue differences between the 2021 adopted rates and the new 2022 and 2023 rates authorized by the CPUC. As of March 31, 2023, there is an aggregate cumulative amount of $38.4 million in the general rate case memorandum accounts that relates to water revenues recorded during the three months ended March 31, 2023, and which represent the difference between the 2021 adopted rates billed to customers and the rates authorized in the proposed decision for the full year of 2022 and the estimated increases for the period ended March 31, 2023. Additional increases in adopted revenues for 2023 are subject to an earnings test and changes to the forecasted inflationary index values. The best estimate of 2023 rate increases have been computed at this time using inflationary index values as of March 31, 2023. Actual increases for 2023 will be determined when the filings to implement the new rate increases are approved by the CPUC, and will be calculated using the inflationary index values at that time. GSWC will file for the 2023 increases once the CPUC approves the final decision. Once a final decision is issued by the CPUC, GSWC will also request recovery through a surcharge of the cumulative amounts included in the general rate case memorandum accounts.

Furthermore, the proposed decision addressed the three remaining unresolved issues related to GSWC'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’s customer service areas. The proposed decision approved both balancing accounts and denied GSWC’s consolidation of its two customer service areas. The proposed decision also approved the recovery of previously incurred costs that were being tracked in other CPUC-authorized memorandum accounts. GSWC recorded the amounts tracked in the balancing and memorandum accounts that are being approved in the proposed decision, the net impact of which was not material to 2023 first quarter results.

Alternative-Revenue Programs:

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

During the three months ended March 31, 2023, GSWC recorded net under-collections in the WRAM/MCBA accounts of approximately $9.5 million due to lower-than-adopted water usage and to reflect the authorized 2023 amounts. In addition, GSWC recorded a net reduction of $9.8 million of under-collection during the first quarter of 2023 to reflect the cumulative full-year impact of 2022 based on authorized 2022 amounts for both WRAM/MCBA accounts as a result of receiving the proposed water general rate case decision. Surcharges for the 2022 WRAM/ MCBA balance is expected to be requested after the final CPUC-decision is received on GSWC's general rate case. Surcharges and surcredits have been implemented for all pre-2022 WRAM/MCBA balances. As of March 31, 2023, GSWC had an aggregated regulatory asset of $29.1 million, which is comprised of a $28.9 million under-collection in the WRAM accounts and a $189,000 under-collection in the MCBA accounts.

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, 2023, there were no material WRAM under-collections that were estimated to be collected over more than 24 months.

Cost of Capital Proceeding:

GSWC filed a cost of capital application in May 2021 currently pending CPUC approval. Hearings on this proceeding occurred in May 2022 and briefs were filed in June 2022. On May 9, 2023, GSWC received a proposed decision from the assigned administrative law judge at the CPUC on the cost of capital proceeding. Among other things, the proposed decision (i) adopts GSWC’s requested capital structure and cost of debt filed in the application; (ii) adopts a return on equity of 8.85% for GSWC as compared to 8.9% previously authorized; (iii) allows for the continuation of the Water Cost of Capital Mechanism (“WCCM”); and (iv) adopts the new cost of capital for the three-year period commencing January 1, 2022, through December 31, 2024. Comments on the proposed decision are due on May 30. In March 2023, the CPUC issued a decision that approved an extension of the statutory deadline for a final decision in the cost of capital proceeding to August 10, 2023.

Based on management’s analysis of this regulatory proceeding and the associated accounting to date, for the three months ended March 31, 2023 and 2022, GSWC reduced revenues by $1.8 million, and $1.4 million, respectively, and recorded a corresponding regulatory liability for revenues subject to refund based on its best estimate, which relates to the impact of GSWC’s lower cost of debt requested in its application and adopted in the proposed decision. Also, an additional reduction to revenues of $1.1 million was recorded during the first quarter of 2023 to reflect the incremental impact of revenues subject to refund from the new 2022 rates in ~~California~~the proposed water general rate case decision that results from the lower cost of debt in the

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pending cost of capital proceeding. As of March 31, 2023, GSWC had an aggregated regulatory liability of $9.3 million for the estimated revenues subject to refund from the pending cost of capital proceeding. However, at this time, management cannot predict the ultimate outcome and ~~other variables, employees have begun returning~~any changes that may be made to ~~company offices.~~the final decision in the cost of capital application, and the associated impact on 2022 and 2023 revenues. Changes in estimates will be made, if necessary, as more information in this proceeding becomes available.

Furthermore, the proposed decision continues the WCCM for the years 2023 and 2024, which adjusts the 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 103 basis points from the benchmark, which triggers the WCCM adjustment. GSWC recognized revenues for the first quarter of 2023 and all of 2022 based on the previously authorized return of equity of 8.9% that is presently being billed to water customers pending a final decision in the cost of capital proceeding.

COVID-19 Emergency Memorandum Accounts:

The CPUC has authorized GSWC and ~~BVESI~~BVES 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. During the first quarter of 2023, GSWC and BVES incurred some incremental costs in excess of their revenue requirements due to the lingering effects of the pandemic that are being tracked in COVID-19-related memorandum accounts ~~such~~and recorded as ~~a Catastrophic Event Memorandum Account ("CEMA"),~~regulatory assets, which isGSWC and BVES intend to ~~be filed~~file with the CPUC for future recovery. As of March 31, ~~2022,~~2023, GSWC and ~~BVESI~~BVES had approximately ~~$4.5~~$3.5 million and ~~$576,000,~~$500,000, 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-type~~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-related~~COVID-19 emergency-related memorandum accounts have not impacted ~~GSWC's~~GSWC’s or ~~BVESI's~~BVES’s earnings. ~~Thus far,~~On April 10, 2023, the Biden Administration terminated the COVID-19 ~~pandemic has not had a material impact on ASUS's current operations.~~

national emergency. The COVID-19 emergency-related memorandum accounts for GSWC and ~~BVESI continue to experience delinquent customer accounts receivable due to the lingering effects of~~BVES expired when 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 havenational emergency 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 resumeno additional amounts will be included 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.memorandum accounts.

The CPUC requires that amounts tracked in ~~GSWC's~~GSWC’s and ~~BVESI's~~BVES’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~~BVES 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 from delinquent residential customers resumed in ~~its next~~June 2022.

Other BVES Regulatory Assets:

Wildfire Mitigation and Other Fire Prevention Related Costs Memorandum Accounts

The CPUC adopted regulations intended to enhance the fire safety of overhead electric power lines. Those regulations included increased minimum clearances around electric power lines. BVES was authorized to track incremental costs incurred to implement the regulations in a fire hazard prevention memorandum account for the purpose of obtaining cost recovery in a future general rate case. 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 BVES to record incremental costs related to vegetation management, such as costs for increased minimum clearances around electric power lines, in the CPUC-approved memorandum account for future recovery. As of March 31, 2023, BVES had approximately $9.3 million in incremental vegetation management costs recorded as a regulatory asset, which has been included in the new general rate case application ~~expected~~filed with the CPUC in August 2022 for future recovery. The incremental costs related to vegetation management included in the memorandum account will be ~~filed~~subject to review during the general rate case proceeding.

California legislation enacted in ~~June 2022.~~

~~Accounting Pronouncements~~September 2018 requires all investor-owned electric utilities to ~~Be Adopted~~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 December 2022, the Office of Energy Infrastructure Safety under the California Natural Resources Agency approved BVES's 2022 WMP update. In February 2023, the CPUC ratified BVES’s current WMP. As of March 31, 2023, BVES has approximately $4.8 million related to expenses accumulated in ~~2022~~:

~~In November 2021, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2021-10~~ ~~Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance. The~~its WMP memorandum accounts that have been recognized as regulatory assets for future recovery.

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~~amendments in this Update require disclosures about transactions with~~All capital expenditures and other costs incurred through March 31, 2023 as a government such as government grants or assistance. The amendments in this Update are effective for all entities within their scope for financial statements issued for annual periods beginning after December 15, 2021. Registrant does not expect this guidance to have a material impact on Registrant's financial statement disclosures.

~~Note 2 — Revenues~~

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

~~Although GSWC and BVESI~~ have ~~a diversified base of residential, commercial, industrial, and other customers, revenues derived from residential and commercial customers generally account~~been filed for approximately 90% of total water and electric revenues. Almost all of ASUS's revenues are from the U.S. government. For the three months ended March 31, 2022 and 2021, disaggregated revenues from contracts with customers by segment were as follows:

Three Months Ended March 31,
(dollar in thousands) 2022 2021
Water:
Tariff-based revenues $ 72,498 $ 74,288
Surcharges (cost-recovery activities) 549 534
Other 518 517
Water revenues from contracts with customers 73,565 75,339
WRAM under (over)-collection (alternative revenue program) 341 (310)
Total water revenues 73,906 75,029
Electric:
Tariff-based revenues 12,552 11,677
Surcharges (cost-recovery activities) 27 202
Electric revenues from contracts with customers 12,579 11,879
BRRAM over-collection (alternative revenue program) (687) (340)
Total electric revenues 11,892 11,539
Contracted services:
Water 13,546 18,883
Wastewater 9,226 11,609
Contracted services revenues from contracts with customers 22,772 30,492
Total AWR revenues $ 108,570 $ 117,060

~~The opening and closing balances of ASUS's unbilled receivables, receivable from the U.S. government, contract assets, and contract liabilities from contracts with customers were as follows:~~

(dollar in thousands) March 31, 2022 December 31, 2021
Unbilled receivables $ 16,378 $ 14,835
Receivable from the U.S. government $ 72,444 $ 79,818
Contract assets $ 12,571 $ 9,587
Contract liabilities $ 210 $ 257

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

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

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Revenues for the three months ended March 31, 2022 that were included in contract liabilities at the beginning of the period were not material. Contracted services revenues recognized during the three months ended March 31, 2022 from performance obligations satisfied in previous periods were not material.

As of March 31, 2022, Registrant's aggregate remaining performance obligations, which are entirely for the contracted services segment, were $3.3 billion. Registrant expects to recognize revenue on these remaining performance obligations over the remaining term of each of the 50-year contracts, which range from 33 to 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; and regulatory liabilities, which represent probable future refunds that are to be credited to customers through the ratemaking process. At March 31, 2022, GSWC and BVESI had approximately $63.1 million of regulatory liabilities, net of regulatory assets, not accruing carrying costs. Of this amount, (i) $76.7 million of regulatory liabilities are excess deferred income taxes arising from the lower federal income tax rate due to the Tax Cuts and Jobs Act ("Tax Act") enacted in December 2017 that are expected to be refunded to customers, (ii) $5.8 million of regulatory liabilities are from flow-through deferred income taxes, (iii) $25.1 million of net regulatory assets relates to the underfunded position in GSWC's pension and other retirement obligations (not including the two-way pension balancing accounts), and (iv) a $7.0 million regulatory liability related to a memorandum account authorized by the CPUC to track unrealized gains and losses on BVESI's purchase power contracts over the term of the contracts. The remainder relates to other items that do not provide for or incur carrying costs.

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

(dollars in thousands) March 31,
2022 December 31,
2021
GSWC
Water Revenue Adjustment Mechanism and Modified Cost Balancing Account $ 19,530 $ 13,326
Costs deferred for future recovery on Aerojet case 4,994 5,210
Pensions and other post-retirement obligations (Note 8) 24,975 25,212
COVID-19 memorandum accounts 4,471 1,663
Excess deferred income taxes (72,765) (73,000)
Flow-through taxes, net (5,075) (5,552)
Other regulatory assets 12,513 11,739
Various refunds to customers (3,782) (2,680)
Total GSWC $ (15,139) $ (24,082)
BVESI
Derivative unrealized gain (Note 5) (7,020) (4,441)
Other regulatory assets 15,683 13,916
Various refunds to customers (9,016) (8,189)
Total AWR $ (15,492) $ (22,796)

Regulatory matters are discussed in the consolidated financial statements and the notes thereto included in the Registrant's Form 10-K for the year ended December 31, 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") filed with the CPUC a joint motion to adopt a settlement agreement between GSWC and Public Advocates on this general rate case application.~~The settlement agreement, if approved, resolves all issues related to the 2022~~

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~~annual revenue requirement in the general rate case application, leaving only 3 unresolved issues.~~Due to the delay in finalizing the water general rate case, water revenues billed and recorded for the first quarter of 2022 were based on 2021 adopted rates, pending a final decision by the CPUC in thisBVES's general rate case application. ~~When approved, the new rates~~These costs will be ~~retroactive to January 1, 2022, and cumulative adjustments will be recorded in the quarter the new rates are approved by the CPUC.~~

~~Cost of Capital Proceeding:~~

GSWC filed a cost of capital application with the CPUC in May 2021. A final decision on this proceeding, once issued by the CPUC, is expected to have an effective date retroactive to January 1, 2022. The cost of debt of 5.1% requested in this application is lower than the cost of debt of 6.6% included in 2021 rates currently being billed to water customers, pending a final decision in the water general rate case. GSWC expects the impact of the new cost of capital, once approved by the CPUC, will include an adjustment of the cost of debt from 6.6% to approximately 5.1%. As a result, for the three months ended March 31, 2022, GSWC reduced revenues by $1.4 million to reflect the effect of this lower cost of debt and recorded a corresponding regulatory liability for revenues subject to ~~refund. A proposed decision on the cost of capital proceeding is expected in the second half of 2022.~~

~~Alternative-Revenue Programs:~~

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

During the three months ended March 31, 2022, GSWC recorded additional net under-collections in the WRAM/MCBA accounts of approximately $8.8 million, based on 2021 authorized amounts, pending a final decision on the water general rate case. Once the CPUC issues a final decision on thereview during BVES's general rate case the WRAM and MCBA amounts recorded in 2022 will be updated to reflect the authorized 2022 amounts. In April 2022, surcharges were implemented to recover 2021 WRAM/MCBA under-collections. As required by the accounting guidance for alternative revenue programs, GSWC is required to collect its WRAM balances within 24 months following the year in which an under-collection is recorded. As of March 31, 2022, there were no WRAM under-collections that were estimated to be collected over more than 24 months.proceeding.

~~BVESI CEMA~~2023 Winter Storm Other Regulatory Asset:

~~BVESI~~BVES activated a ~~CEMA~~catastrophic emergency memorandum account (“CEMA”) to track the incremental costs incurred in response to a severe winter storm that occurred ~~in February 2019 and~~during the first quarter of 2023, which resulted in the declaration of an emergency by the governor of California. Incremental costs of approximately ~~$448,000~~$810,000 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. BVESI believes the storm costs were incremental and beyond what was included in its revenue requirement, and in October 2021 filed a new application to continue pursuing recovery. As a result, the costs in this CEMA account remain a regulatory asset at March 31, 2022 since the Company continues to believe the incremental costs were properly tracked and included in the CEMA account, which has been recorded as a regulatory asset as of March 31, 2023 for future recovery. The incremental costs included in the CEMA account will be subject to review and approval by the CPUC. CEMA accounts are well-established cost recovery mechanisms authorized as a result of a state/federal declared emergency, and are therefore ~~are probable of~~recognized as regulatory assets for future recovery. ~~If BVESI does not ultimately prevail~~As a result, the amounts recorded in ~~obtaining recovery, it will result in a charge to earnings from the write-off of~~ this CEMA ~~regulatory asset of approximately $448,000. Hearings on this matter are scheduled for May 2022.~~account did not impact BVES’s earnings.

Other Regulatory Assets:

Other regulatory assets represent costs incurred by GSWC or ~~BVESI~~BVES for which they have received or expect to receive rate recovery in the future. ~~These~~Registrant 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's~~BVES’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's~~AWR’s stock incentive plans for employees and the non-employee directors stock plans. In applying the “two-class” method, undistributed earnings are allocated to both common shares and participating securities.

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


Basic:	Basic:	For The Three Months Ended March 31,				Basic:	For The Three Months Ended March 31,
(in thousands, except per share amounts)	(in thousands, except per share amounts)	2022		2021		(in thousands, except per share amounts)	2023		2022
Net income	Net income	$	14,162	$	19,268	Net income	$	34,407	$	14,162
Less: (a) Distributed earnings to common shareholders	Less: (a) Distributed earnings to common shareholders	13,485		12,361		Less: (a) Distributed earnings to common shareholders	14,695		13,485
Distributed earnings to participating securities	Distributed earnings to participating securities	31		37		Distributed earnings to participating securities	37		31
Undistributed earnings	Undistributed earnings	646		6,870		Undistributed earnings	19,675		646

(b) Undistributed earnings allocated to common shareholders	(b) Undistributed earnings allocated to common shareholders	644		6,850		(b) Undistributed earnings allocated to common shareholders	19,625		644
Undistributed earnings allocated to participating securities	Undistributed earnings allocated to participating securities	2		20		Undistributed earnings allocated to participating securities	50		2

Total income available to common shareholders, basic (a)+(b)	Total income available to common shareholders, basic (a)+(b)	$	14,129	$	19,211	Total income available to common shareholders, basic (a)+(b)	$	34,320	$	14,129

Weighted average Common Shares outstanding, basic	Weighted average Common Shares outstanding, basic	36,944		36,898		Weighted average Common Shares outstanding, basic	36,968		36,944

Basic earnings per Common Share	Basic earnings per Common Share	$	0.38	$	0.52	Basic earnings per Common Share	$	0.93	$	0.38

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, ~~2022~~2023 and ~~2021~~2022 under these plans. At March 31, ~~2022~~2023 and ~~2021,~~2022, there were 106,817 and 96,586 ~~and 120,973~~ restricted stock units outstanding, respectively, including performance shares awarded to officers of the Registrant.

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

Diluted: For The Three Months Ended
March 31,
(in thousands, except per share amounts) 2022 2021
Common shareholders earnings, basic $ 14,129 $ 19,211
Undistributed earnings for dilutive stock-based awards 2 20
Total common shareholders earnings, diluted $ 14,131 $ 19,231
Weighted average common shares outstanding, basic 36,944 36,898
Stock-based compensation (1)
75 95
Weighted average common shares outstanding, diluted 37,019 36,993
Diluted earnings per Common Share $ 0.38 $ 0.52


Diluted:	For The Three Months Ended March 31,
(in thousands, except per share amounts)	2023		2022
Common shareholders earnings, basic	$	34,320	$	14,129
Undistributed earnings for dilutive stock-based awards	50		2
Total common shareholders earnings, diluted	$	34,370	$	14,131

Weighted average common shares outstanding, basic	36,968		36,944
Stock-based compensation (1)	79		75
Weighted average common shares outstanding, diluted	37,047		37,019

Diluted earnings per Common Share	$	0.93	$	0.38

(1) All of the 106,817 and 96,586 ~~and 120,973~~ restricted stock units at March 31, ~~2022~~2023 and ~~2021,~~2022, respectively, were included in the calculation of diluted EPS for the three months ended March 31, ~~2022~~2023 and ~~2021.~~2022.

During the three months ended March 31, 2023 and 2022, AWR issued 14,043 and 19,348 of common shares related to restricted stock ~~units.~~ units, respectively.

During the three months ended March 31, ~~2021, AWR issued 23,914 common shares related to restricted stock units under Registrant’s stock incentive plans for employees~~2023 and ~~the non-employee directors' plans.~~

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~~During the three months ended March 31,~~ 2022, ~~and 2021,~~ AWR paid ~~$1.2 million~~$883,000 and ~~$1.3~~$1.2 million, respectively, to taxing authorities on ~~employees'~~employees’ behalf for shares withheld related to net share settlements. During the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, GSWC paid ~~$1.1 million~~$808,000 and ~~$1.2~~$1.1 million, respectively, to taxing authorities on ~~employees'~~employees’ behalf for shares withheld related to net share settlements. These payments are included in the stock-based compensation caption of the statements of equity.

During the three months ended March 31, ~~2022 and 2021,~~2023, GSWC issued one Common Share to AWR ~~paid quarterly dividends~~for $10.0 million. Proceeds from the stock issuance were used to pay down a portion of ~~approximately $13.5 million, or $0.365 per share, and $12.4 million, or $0.335 per share, respectively.~~ intercompany borrowings owed to AWR.

During the three months ended March 31, 2023 and 2022, 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 three months ended March 31, 2023 and 2022, GSWC paid dividends of ~~$13.5~~$24.7 million and ~~$12.4~~$13.5 million, respectively, to AWR during these periods.

Note 5 — Derivative Instruments

~~BVESI purchases~~BVES has purchased power under long-term contracts at a fixed cost over three- and five-year terms depending on the amount of power and ~~the~~ period during which the power ~~may be~~is purchased under ~~such~~the contracts. These ~~contracts provide power at a fixed cost over approximately~~ ~~three- and five-year terms.~~

~~BVESI's purchase power~~long-term 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 do not impact ~~AWR’s~~Registrant’s earnings. As of March 31, ~~2022,~~2023, there was a ~~$7.0~~$6.7 million ~~unrealized gain recorded as~~derivative asset with a corresponding regulatory liability in the derivative instrument memorandum account for the purchased power ~~contracts.~~contract as a result of fixed prices being lower than future energy prices. The notional volume of derivatives remaining under these long-term contracts as of March 31, ~~2022~~2023 was ~~311,163~~184,979 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~~BVES 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

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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 months ended March 31, ~~2022~~2023 and ~~2021.~~2022. The ~~changes~~change in fair value was due to the change in market energy prices during the three months ended March 31, ~~2022~~2023 and ~~2021were due to an increase in energy prices.~~
For The Three Months Ended
March 31,
(dollars in thousands) 2022 2021
Fair value at beginning of the period $ 4,441 $ (1,537)
Unrealized gains on purchased power contracts 2,579 2,761
Fair value at end of the period $ 7,020 $ 1,224
2022.


	For The Three Months Ended March 31,
(dollars in thousands)	2023		2022
Fair value at beginning of the period	$	11,847	$	4,441
Unrealized (losses) gains on purchased power contracts	(5,178)		2,579
Fair value at end of the period	$	6,669	$	7,020

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Note 6 — Fair Value of Financial Instruments

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

Investments held in a Rabbi Trust for ~~Registrant's~~the supplemental executive retirement plan ~~("SERP"~~(“SERP”) are measured at fair value and ~~totaled $29.8~~totaled $29.2 million as of March 31, 2023 and $27.5 million as of ~~March~~December 31, 2022. All equity investments in the Rabbi Trust are Level 1 ~~(as described in Note 5)~~ investments in mutual funds. The investments held in the Rabbi Trust are included in "Other Property and Investments" on Registrant's balance sheets.

The table below estimates the fair value of long-term debt held by ~~GSWC.~~ AWR and GSWC, respectively. The fair values as of March 31, ~~2022~~2023 and December 31, ~~2021~~2022 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, 2022				December 31, 2021					March 31, 2023				December 31, 2022
(dollars in thousands)	(dollars in thousands)	Carrying Amount		Fair Value		Carrying Amount		Fair Value		(dollars in thousands)	Carrying Amount		Fair Value		Carrying Amount		Fair 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)	$	580,264	$	564,605	$	450,373	$	424,151

											March 31, 2023				December 31, 2022
(dollars in thousands)										(dollars in thousands)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial liabilities:										Financial liabilities:
Long-term debt—GSWC (2)										Long-term debt—GSWC (2)	$	545,264	$	530,671	$	415,373	$	391,198

~~___________________~~__________________

(1) ~~Excluding~~Excludes debt issuance ~~costs.~~costs of approximately $3.4 million as of March 31, 2023 and December 31, 2022.

(2)Excludes debt issuance costs of approximately $3.2 million as of March 31, 2023 and December 31, 2022.

Note 7 — Income Taxes

~~AWR's~~AWR’s effective income tax rate (“ETR”) was ~~24.0%~~23.8% and ~~23.5%~~24.0% for the three months ended March 31, 2023 and 2022, ~~and 2021,~~ respectively. ~~GSWC's~~GSWC’s ETR was ~~23.9%~~24.5% and ~~23.6%~~23.9% for the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, respectively.

The AWR and GSWC ~~effective tax rates~~ETRs differed from the federal corporate statutory tax rate of 21% primarily due to (i) state taxes; (ii) permanent differences, including ~~the excess~~certain tax ~~benefits~~effects from ~~share-based payments, which were reflected in the income statements and resulted in a reduction to income tax expense during the three months ended March 31, 2022 and 2021;~~stock compensation; (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~~flowed-through adjustments in accordance with regulatory requirements (principally from plant, rate-case, and ~~compensation related~~compensation-related items). As a regulated utility, GSWC treats certain temporary differences as ~~flow-through~~being flowed-through in computing its income tax expense consistent with the income tax method used in its CPUC-jurisdiction ~~ratemaking. Flow-through~~rate making. Flowed-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 months ended March 31, ~~2022~~2023 and ~~2021~~2022 were as follows:


		For The Three Months Ended March 31,													For The Three Months Ended March 31,
		Pension Benefits				Other Postretirement Benefits				SERP					Pension Benefits				Other Postretirement Benefits				SERP
(dollars in thousands)	(dollars in thousands)	2022		2021		2022		2021		2022		2021		(dollars in thousands)	2023		2022		2023		2022		2023		2022
Components of Net Periodic Benefits Cost:	Components of Net Periodic Benefits Cost:													Components of Net Periodic Benefits Cost:
Service cost	Service cost	$	1,480	$	1,625	$	33	$	40	$	298	$	348	Service cost	$	846	$	1,480	$	33	$	33	$	312	$	298
Interest cost	Interest cost	1,844		1,712		16		31		256		229		Interest cost	2,513		1,844		25		16		411		256
Expected return on plan assets	Expected return on plan assets	(3,292)		(3,134)		(147)		(134)		—		—		Expected return on plan assets	(2,623)		(3,292)		(120)		(147)		—		—
Amortization of prior service cost	Amortization of prior service cost	109		109		—		—		—		—		Amortization of prior service cost	108		109		—		—		—		—
Amortization of actuarial (gain) loss	Amortization of actuarial (gain) loss	—		993		(412)		(287)		145		419		Amortization of actuarial (gain) loss	—		—		(240)		(412)		(8)		145
Net periodic benefits costs under accounting standards	Net periodic benefits costs under accounting standards	141		1,305		(510)		(350)		699		996		Net periodic benefits costs under accounting standards	844		141		(302)		(510)		715		699
Regulatory adjustment - deferred		—		(351)		—		—		—		—
Regulatory adjustment - deferred cost														Regulatory adjustment - deferred cost	(92)		—		—		—		—		—
Total expense (benefit) recognized, before surcharges and allocation to overhead pool	Total 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	$	752	$	141	$	(302)	$	(510)	$	715	$	699

For the pension plan obligation, Registrant used a discount rate of 2.89% as of December 31, 2021 to determine the projected benefit obligation (“PBO”) of $259.8 million. Discount rates as of March 31, 2022 are approximately 89-basis points higher than those used as of December 31, 2021 based on recent changes in market interest-rate conditions. An 89-basis point

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~~increase in the assumed discount rate would have decreased the PBO as of December 31, 2021 by approximately 12% or $30.4 million.~~ In ~~2022,~~2023, Registrant expects to contribute approximately ~~$3.1~~$3.0 million to its pension plan.

As authorized by the CPUC in the water and electric general rate case decisions, GSWC and ~~BVESI~~BVES each utilize two-way balancing accounts to track differences between the forecasted annual pension ~~expense~~expenses 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's actual pension expense was lower than the amounts included in water customer rates. During the three months ended March 31, 2021, GSWC's~~GSWC’s actual pension expense was higher than the amounts included in water customer rates by $92,000 for the three months ended March 31, 2023. ~~$351,000. BVESI's~~During the three months ended March 31, 2022, GSWC’s actual pension expense was lower than the amounts included in water customer rates. BVES’s actual expense was lower than the amounts included in electric customer rates for all periods presented. As of March 31, ~~2022,~~2023, GSWC and ~~BVESI~~BVES had net over-collections inin their two-way pension balancing accounts of ~~$134,000~~$1,227,000 and ~~$372,000~~,$574,000, respectively, included as part of regulatory assets and liabilities (Note 3).

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 ~~that~~which was used to store gasoline for its vehicles. ~~The~~This tank was removed from the ground in July 1990 along with ~~its~~the dispenser and ancillary piping. Since then, GSWC has been involved in various remediation activities at ~~the~~this site. Analysis indicates that off-site monitoring wells may be necessary to document effectiveness of remediation.

As of March 31, ~~2022,~~2023, 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, ~~2022,~~2023, 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 the initial 50-year firm, fixed-price contract and additional 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.

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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.

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, notes payable to bank, deferred taxes and intercompany note ~~payables to~~receivables with its ~~subsidiaries and deferred taxes.~~ subsidiaries.

All of ~~GSWC's~~GSWC’s and ~~BVESI's~~BVES’s business activities are conducted in California. Activities of ASUS and ~~its subsidiaries~~the Military Utility Privatization Subsidiaries are conducted in California, Florida, Georgia, Kansas, Maryland, New Mexico, North Carolina, South Carolina, Texas and Virginia. ~~Each~~Some 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~~balance are net of respective accumulated provisions for depreciation. Capital additions reflect capital expenditures paid in cash ~~excluding~~and exclude U.S. ~~government-~~government-funded and third-party ~~contractor-funded~~prime funded capital expenditures for ASUS and property installed by developers and conveyed to GSWC ~~or BVESI.~~and BVES.


	As Of And For The Three Months Ended March 31, 2023
					Contracted		AWR		Consolidated
(dollars in thousands)	Water		Electric		Services		Parent		AWR
Operating revenues	$	112,712	$	12,904	$	35,807	$	—	$	161,423
Operating income (loss)	40,239		3,631		7,296		(1)		51,165
Interest expense, net	5,494		573		227		1,323		7,617
Net property, plant and equipment	1,638,031		125,093		17,337		—		1,780,461
Depreciation and amortization expense (1)	9,606		748		849		—		11,203
Income tax expense (benefit)	8,910		701		1,685		(544)		10,752
Capital additions	42,005		6,652		680		—		49,337


	As Of And For The Three Months Ended March 31, 2022
					Contracted		AWR		Consolidated
(dollars in thousands)	Water		Electric		Services		Parent		AWR
Operating revenues	$	73,906	$	11,892	$	22,772	$	—	$	108,570
Operating income (loss)	16,999		3,598		3,770		(2)		24,365
Interest expense (income), net	5,145		113		(135)		200		5,323
Net property, plant and equipment	1,523,665		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 additions	31,465		3,468		237		—		35,170

(1) Depreciation computed on GSWC’s and BVES’s transportation equipment is recorded in other operation expenses and totaled $368,000 and $94,000 for the three months ended March 31, 2023 and 2022, respectively. For the three months ended March 31, 2023, approximately $212,000 of additional depreciation expense on GSWC's transportation equipment was recorded that relates to the cumulative retroactive impact for the full year of 2022 approved in the CPUC proposed decision that resulted from an increase to the transportation equipment composite depreciation rates that are retroactive to January 1, 2022.

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As Of And For The Three Months Ended March 31, 2022
Contracted AWR Consolidated
(dollars in thousands) Water Electric Services Parent AWR
Operating revenues $ 73,906 $ 11,892 $ 22,772 $ — $ 108,570
Operating income (loss) 16,999 3,598 3,770 (2) 24,365
Interest expense, net 5,145 113 (135) 200 5,323
Net property, plant and equipment 1,523,665 107,114 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 additions 31,465 3,468 237 — 35,170

As Of And For The Three Months Ended March 31, 2021
Contracted AWR Consolidated
(dollars in thousands) Water Electric Services Parent AWR
Operating revenues $ 75,029 $ 11,539 $ 30,492 $ — $ 117,060
Operating income (loss) 21,059 3,448 5,824 (2) 30,329
Interest expense, net 5,711 86 (229) 235 5,803
Net property, plant and equipment 1,426,175 94,346 21,902 — 1,542,423
Depreciation and amortization expense (1)
8,062 639 859 — 9,560
Income tax expense (benefit) 3,768 884 1,391 (129) 5,914
Capital additions 31,824 4,782 487 — 37,093

~~(1)~~ Depreciation computed on GSWC’s and BVESI's transportation equipment is recorded in other operating expenses and totaled $94,000 and $95,000 for the three months ended March 31, 2022 and 2021, respectively.

The following table reconciles total net property, plant and equipment (a key figure for ~~ratemaking)~~rate making) to total consolidated assets (in thousands):


		March 31,					March 31,
		2022		2021			2023		2022
Total net property, plant and equipment	Total net property, plant and equipment	1,649,859		$	1,542,423	Total net property, plant and equipment	$	1,780,461	$	1,649,859
Other assets	Other assets	264,073		250,398		Other assets	279,911		264,073
Total consolidated assets	Total consolidated assets	$	1,913,932	$	1,792,821	Total consolidated assets	$	2,060,372	$	1,913,932

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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,~~BVES, 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’s~~AWR’s operations in terms of earnings per share by business segment and AWR (parent), which equals each business segment's earnings divided by ~~Registrant's~~AWR’s weighted average number of diluted common shares. ~~This item is~~Furthermore, the gains and losses generated on the investments held to fund one of the Company’s retirement plans during the three months ended March 31, 2023 and 2022 have been excluded when communicating the results to help facilitate comparisons of AWR’s performance from period to period. Also, the impact of retroactive new rates related to the full year 2022 recorded in the three months ended March 31, 2023 resulting from the proposed decision on the water general rate case has been excluded when communicating AWR’s consolidated and water segment’s results for the three months ended March 31, 2023 and 2022 to help facilitate comparisons of AWR’s performance from period to period. Diluted earnings per share by business segment and adjusted diluted earnings per share constitute “non-GAAP financial measures” under the Securities and Exchange Commission 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. All of these measures are derived from consolidated financial information of the Registrant, 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 financial measure" under the Securities and Exchange Commission rules.~~GAAP.

~~Registrant believes that the disclosure of~~AWR 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. ~~Registrant~~AWR 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 First Quarter 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~~2022 filed with the SEC.

Water and Electric ~~Segments~~:Segments:

~~GSWC's~~GSWC’s and ~~BVESI's~~BVES’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~~BVES 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~~BVES 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~~BVES are expected to remain at substantially higher levels than depreciation expense.When necessary, GSWC and ~~BVESI~~BVES may obtain funds from external sources in the capital markets and through bank borrowings.

Pending General Rate Case Filings and Other Matters:

Water General Rate Case for the ~~years~~Years 2022–2024:

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~~determines new water rates for the years ~~2022–~~2022 – 2024. ~~In November 2021,~~On April 13, 2023, GSWC received a proposed decision from the assigned administrative law judge at the CPUC on GSWC's water general rate case with rates retroactive to January 1, 2022. Among other items, the proposed decision approves and adopts in its entirety the settlement agreement between GSWC and the Public Advocates Office at the CPUC ("(“Public ~~Advocates"~~Advocates”) that had been filed with the CPUC ~~a joint motion to adopt a settlement agreement between GSWC~~in November 2021, 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~~and allows for additional increases in adopted revenues for 2023. The new rates for 2022 and 2023 are effective and retroactive to January 1, 2022 and 2023, respectively. As a result of receiving a proposed decision that approves the settlement agreement in its entirety, the impact of retroactive new rates for the full year of 2022 and the estimated second-year rate increases for the three ~~unresolved issues. Among other things,~~months ended March 31, 2023 have been reflected in the 2023 first quarter results as it became probable that the approved retroactive rates for the full year of 2022 and first three months of 2023 would be permitted to be billed to customers in the future. GSWC expects to receive a final decision during the second quarter of 2023.

The settlement agreement approved in the proposed decision (i) authorizes GSWC to invest approximately $404.8 million in capital infrastructure over the three-year ~~cycle. The settlement also authorizes GSWC to complete certain~~cycle (excluding advice letter ~~capital projects approved in~~projects); (ii) increases 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. Excluding2022 adopted revenues (excluding the advice letter project ~~revenues, the amounts included in the settlement agreement would increase the 2022 adopted revenues~~revenues) by approximately ~~$30.3~~$30.3 million, or $0.59 per share, as compared to the 2021 adopted revenues, and ~~increase~~increases the 2022 adopted supply costs by ~~$9.7~~$9.6 million, or $0.19 per share, as compared to the 2021

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adopted supply ~~costs. The settlement agreement also~~costs, which combined is an increase of $0.40 per share; (iii) adopts new operating expense levels for 2022 including a higher depreciation expense resulting from overall higher composite depreciation rates based on a new depreciation study adopted in the proposed decision; and (iv) allows for ~~potential~~ additional increases in adopted revenues for 2023 and 2024 subject to an earnings test and changes to the forecasted inflationary index values.

Due to the delay in finalizing the water general rate case, water revenues billed to customers for the year ended December 31, 2022 and for the three months ended March 31, 2023 were based on 2021 adopted rates, pending a final decision by the CPUC. As a result of receiving a proposed decision that approves the settlement agreement in its entirety, the impact of retroactive new rates for the full year of 2022 of $0.36 per share has been reflected in the 2023 first quarter results and included primarily (i) the increase in 2022’s adopted revenues and supply costs that is consistent with the settlement agreement, or $0.40 per share as discussed above; (ii) a reduction to revenues of $1.1 million, or $0.02 per share, to reflect the incremental impact of revenues subject to refund from the new 2022 rates as a result of the lower cost of debt in the pending cost of capital proceeding; and (iii) higher overall depreciation expense for 2022 of approximately $790,000, or $0.02 per share, resulting from updated composite depreciation rates adopted in the proposed decision and which are reflected in the 2022 adopted revenue requirement.

The estimated second-year increases for 2023 have also been reflected in the 2023 first quarter results for the three months ended March 31, 2023. This included increases in revenues of approximately $8.7 million, or $0.17 per share, compared to the adopted 2021 rates currently being billed, and increases in supply costs of approximately $1.6 million, or $0.03 per share, which combined is an increase of $0.14 per share for the three months ended March 31, 2023. The best estimate of 2023 rates have been computed at this time using inflationary index values as of March 31, 2023. Actual increases for 2023 will be determined when the filings to implement the new rate increases are approved by the CPUC, and will be calculated using the inflationary index values at that time. GSWC will file for the 2023 increases once the CPUC approves the final decision.

As of March 31, 2023, there is an aggregate cumulative amount of $38.4 million in CPUC-approved general rate case memorandum accounts that relates to water revenues recorded during the three months ended March 31, 2023, and which represent the difference between the 2021 adopted rates billed to customers and the rates authorized in the proposed decision for the full year of 2022 and estimated increases for the three months ended March 31, 2023. Once a final decision is issued by the CPUC, GSWC will request recovery through a surcharge of the cumulative amounts included in the general rate case memorandum accounts.

Furthermore, the proposed decision addressed the three remaining unresolved issues ~~relate~~related to ~~GSWC's~~GSWC’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's~~GSWC’s customer service areas. The proposed decision approved both balancing accounts and denied GSWC’s consolidation of its two customer service areas. The proposed decision also approved the recovery of previously incurred costs that were being tracked in other CPUC-authorized memorandum accounts. As a result, GSWC recorded the cumulative amounts tracked in these balancing and ~~Public Advocates have~~memorandum accounts that are being approved in the proposed decision, the net impact of which was not material to 2023 first quarter results.

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 ~~briefs~~a cost of capital application with the CPUC in May 2021 currently pending final approval, which requested a capital structure of 57% equity and 43% debt, a return on ~~these unsettled issues. A~~equity of 10.5%, an embedded cost of debt of 5.1%, and a return on rate base of 8.18%. Hearings on this proceeding occurred in May 2022 and briefs were filed in June 2022. On May 9, 2023, GSWC received a proposed decision from the assigned administrative law judge at the CPUC on the cost of capital proceeding. Among other things, the proposed decision (i) adopts GSWC’s requested capital structure and cost of debt filed in the application; (ii) adopts a return on equity of 8.85% for GSWC as compared to 8.9% previously authorized; (iii) allows for the continuation of the Water Cost of Capital Mechanism (“WCCM”); and (iv) adopts the new cost of capital for the three-year period commencing January 1, 2022, through December 31, 2024. Comments on the proposed decision are due on May 30. In March 2023, the CPUC issued a decision that approved an extension of the statutory deadline for a final decision in the cost of capital proceeding to August 10, 2023.

The 5.1% cost of debt adopted in the proposed decision is lower than the previously authorized amount of 6.6%. The new cost of debt is expected ~~in mid-2022,~~to lower 2023 and ~~would address~~2022 adopted water revenues by approximately $8.2 million, or $0.16 per share, and $7.5 million, or $0.15 per share, respectively, as compared to 2021 adopted water revenues at the ~~three unresolved issues along with the settlement agreement filed by GSWC and Public Advocates. Pending~~currently authorized cost of debt of 6.6% that is presently being billed to water customers until a final decision is issued in this proceeding. Based on management's analysis of this ~~general rate case application,~~regulatory proceeding and the associated accounting in 2022 and through March 31, 2023, GSWC ~~filed with~~has reduced revenues and recorded a corresponding regulatory liability for revenues subject to refund based on its best estimate at this time, which includes the ~~CPUC for interim rates, which will make~~impact of GSWC’s lower cost of debt adopted in the proposed decision. For the three months ended March 31, 2023 and 2022, GSWC reduced revenues by $1.8 million and $1.4 million, respectively, that are subject to refund. Furthermore, an additional reduction to revenues of $1.1 million, or $0.02 per share, related to the full year of 2022 was recorded during the first quarter of 2023 to reflect the incremental impact of revenues subject to refund from the new 2022 rates ~~once~~ approved in ~~a CPUC final decision, effective January 1, 2022. Due to~~ the ~~delay in finalizing the~~proposed water general rate case ~~water revenues billed and recorded for the first quarter~~decision. As of ~~2022 were based on 2021 adopted rates, pending~~March 31, 2023, GSWC had 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.~~regulatory liability of $9.3

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million for the estimated revenues subject to refund from the pending cost of capital proceeding covering the period January 1, 2022 through March 31, 2023. However, management cannot predict the ultimate outcome and any changes that may be made to the final decision in the cost of capital application, and the associated impact on 2023 and 2022 revenues. Changes in estimates will be made, if necessary, as more information in this proceeding becomes available.

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.

The August 2020 decision provides that the WRAM and MCBA for GSWC would be discontinued 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, ~~certain~~three other ~~California~~investor-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 in~~discontinuation of the WRAM and MCBA, which the CPUC ~~issuing~~denied 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 any~~revoking prior authorization of ~~these applications for rehearing, GSWC filed a~~the WRAM and MCBA. In May 2022, the Court granted the petition for writ of ~~review~~review. The Court ordered GSWC, along with the other IOWUs and CWA, to file opening briefs, which were filed on September 1, 2022. The CPUC’s answer to the ~~California Supreme Court~~opening brief was originally due on November 15, 2022 and reply briefs were due on December 15, 2022. However, as a result of SB 1469, in ~~May 2021, requesting~~October 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 CPUC~~and also requested that the Court ~~hold GSWC’s~~suspend the proceeding schedule until it rules on the motion to dismiss. The Court granted the CPUC’s request ~~in abeyance~~to suspend the proceeding schedule until ~~such time as~~it ruled on the motion to dismiss. In November 2022, the Court denied the motion to dismiss resulting in the CPUC ~~acts~~filing their answer brief on ~~the pending request~~December 9, 2022 and reply briefs were filed on January 13, 2023. There is no timeline for rehearing. In September 2021, the CPUC issued a decision denying all the October 2020 applications for rehearing. In October 2021, GSWC re-filed its writ of review to the California Supreme Court, requesting the Court to ~~review the CPUC's final decision on~~complete 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~~Electric General Rate Case for the years 2023–2026:

On August 30, 2022, BVES filed a general rate case application that will determine new electric rates for the years 2023 – 2026. In December 2022, a pre-hearing conference was held to discuss the scope of issues and schedule for the proceeding. In February 2023, a scoping memo and ruling that set the final schedule and scope of issues in BVES’s general rate case proceeding was issued by the CPUC. Based on the schedule, a proposed decision is expected in the ~~Second Phase~~fourth quarter of ~~the Low-Income Affordability Rulemaking:~~

2023. On ~~July~~December 15, ~~2021,~~2022, the CPUC ~~issued~~approved a ~~final~~ decision infor BVES to establish a general rate case memorandum account that makes the ~~second phase~~new 2023 rates effective and retroactive to January 1, 2023.

Among other things, BVES requested (i) capital budgets of approximately $62.0 million for the ~~Low-Income Affordability Rulemaking. The final decision requires that amounts tracked in GSWC's COVID-19 Catastrophic Event Memorandum Account ("CEMA") account~~four-year rate cycle, and another $6.2 million for ~~unpaid customer bills~~a large line replacement capital project to be ~~first offset by any (i) federal or state relief~~filed for ~~customers' utility bill debt,~~revenue recovery through an advice letter when the project is completed, 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~~. In August 2021, GSWC, in addition to three other parties, filed separate applications to the CPUC for rehearing on certain aspects of this final decision. In March 2022, the California Water Association filed a petition for writ of review to the California Supreme Court, urging the Court to review the CPUC's final decision on the second phase of the Low-Income Affordability Rulemaking. The Court has granted a CPUC request to hold the California Water Association’s petition until such time as the CPUC acts on the pending applications for rehearing. Management cannot currently predict the final outcome of this matter.

~~Cost of Capital Proceeding:~~

Investor-owned water utilities serving California are required to file their cost of capital applications on a triennial basis. GSWC filed a cost of capital application with the CPUC in May 2021 requesting a capital structure for BVES of ~~57%~~61.8% equity and ~~43%~~38.2% debt, a return on equity of ~~10.5%~~11.25%, an embedded cost of debt of ~~5.1%~~5.51%, and a return on rate base of ~~8.18%~~9.05%. ~~A final decision on this proceeding, once issued~~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 BVES’s wildfire mitigation plans that are currently not in customer rates. These costs will be subject to review by the CPUC ~~is expected to have an effective date retroactive to January 1, 2022. The cost of debt of 5.1% requested in this application is lower than~~during the ~~cost of debt of 6.6% included in 2021 rates currently being billed to water customers, pending a final decision in the water~~ general rate case. GSWC expects the impact of the new cost of capital, once approved by the CPUC, will include an adjustment of the cost of debt from 6.6% to approximately 5.1%. As a result, for the three months ended March 31, 2022, GSWC reduced revenues by $1.4 million to reflect the effect of revenues subject to refund from this lower cost of debt. The lower cost of debt of 5.1% is expected to lower 2022 adopted water revenues by approximately $7.5 million, or $0.15 per share, as compared to 2021 adopted water revenues at the cost of debt of 6.6%. At this time, management cannot predict the outcome of the other items in the cost of capital application. Hearings on this proceeding are scheduled for the second quarter of 2022. A proposed decision on this proceeding is expected in the second half of 2022.

~~Electric Segment:~~

On August 15, 2019, the CPUC issued a final decision on the electric general rate case. Among other things, the decision (i) extended the rate cycle by one year (new rates were effective for 2018 - 2022); (ii) allows the electric segment to construct all the capital projects requested in its application, which are dedicated to improving system safety and reliability and total approximately $44 million over the 5-year rate cycle; and (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 notcase proceeding.

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subject to an earnings test. The decision authorized a return on equity for the electric segment of 9.6% and included a capital structure and a debt cost that are consistent with those approved by the CPUC in March 2018 in connection with GSWC's water segment cost of capital proceeding. BVESI intends to file its next general rate case application in June 2022 to set new rates for the years 2023 through 2026.

Contracted Services Segment:

~~ASUS's~~ASUS’s revenues, operating income and cash flows are earned by providing water and/or wastewater services, including operation and maintenance services and construction of facilities for the water and/or wastewater systems at various military installations, pursuant to an initial 50-year firm fixed-price contract and additional 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.

COVID-19:

~~GSWC, BVESI~~AWR 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 continues~~its subsidiaries continue to monitor the guidance provided by federal, state, and local health authorities and other government officials. ~~Due to falling transmission rates in California and other variables, employees that have been telecommuting due to~~Thus far, the COVID-19 ~~have begun returning to company offices.~~pandemic has not had a material impact on ASUS’s current operations.

During 2023, GSWC and ~~BVESI continue to experience delinquent customer accounts receivable~~BVES incurred some incremental costs in excess of their revenue requirements due to the lingering effects of the ~~COVID-19~~ pandemic ~~resulting~~that are being tracked in ~~both GSWC~~COVID-19-related memorandum accounts and ~~BVESI increasing their allowance for doubtful accounts during the three months ended March 31, 2022.~~recorded as regulatory assets. The CPUC has authorized GSWC and ~~BVESI~~BVES 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~~COVID-19 emergency-related memorandum accounts, ~~such as a Catastrophic Event Memorandum Account ("CEMA"),~~ which isGSWC and BVES intend to ~~be filed~~file with the CPUC for future recovery. As of March 31, ~~2022,~~2023, GSWC and ~~BVESI~~BVES had approximately ~~$4.5~~$3.5 million and ~~$576,000,~~$500,000, 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-type~~Emergency-type memorandum accounts are well-established cost recovery mechanisms authorized as a result of a state/federal declared emergency, and are therefore recognized as regulatory assets for future recovery. As a result, the amounts recorded in the ~~COVID-19-related~~COVID-19 emergency-related memorandum accounts have not impacted ~~GSWC's~~GSWC’s or ~~BVESI's~~BVES’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.

On April 10, 2023, the Biden Administration terminated the COVID-19 national emergency. The COVID-19 emergency-related memorandum accounts for GSWC and BVES expired when the COVID-19 national emergency ended and no additional amounts will be included in ~~its next general rate case application expected to be filed in June 2022.~~these memorandum accounts.

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Summary of First Quarter Results by Segment

The table below sets forth the first quarter diluted earnings per share by business ~~segment:~~segment and for the parent company:


	Diluted Earnings per Share
	Three Months Ended
	3/31/2023		3/31/2022		CHANGE
Water, adjusted (2023 excludes the impact of retroactive rates related to 2022 from the CPUC proposed decision in the general rate case)	$	0.38	$	0.23	$	0.15
Electric	0.06		0.07		(0.01)
Contracted services	0.15		0.08		0.07
AWR (parent)	(0.02)		—		(0.02)
Consolidated diluted earnings per share, as adjusted	0.57		0.38		0.19
Impact of retroactive rates related to the full year of 2022 from the proposed decision in the water general rate case (approximately $0.08 per share relates to first quarter of 2022)	0.36		—		0.36
Consolidated diluted earnings per share, as recorded	$	0.93	$	0.38	$	0.55

Diluted Earnings per Share
Three Months Ended
3/31/2022 3/31/2021 CHANGE
Water $ 0.23 $ 0.33 $ (0.10)
Electric 0.07 0.07 —
Contracted services 0.08 0.12 (0.04)
Consolidated fully diluted earnings per share, as reported $ 0.38 $ 0.52 $ (0.14)
For the three months ended March 31, 2023, AWR’s recorded consolidated diluted earnings were $0.93 per share, as compared to $0.38 per share for the same period in 2022, an increase of $0.55 per share, which includes the impact of retroactive new rates related to the full 2022 year of $0.36 per share that was recorded in the first quarter 2023 as a result of receiving the proposed decision in April 2023 on the water general rate case. The impact of retroactive rates related to the full year of 2022 is shown separately in the table above and included primarily: (i) the increase in 2022’s adopted revenues and supply costs that is consistent with the settlement agreement, or $0.40 per share as previously discussed; (ii) a reduction to revenues of $1.1 million, or $0.02 per share, to reflect the incremental impact of revenues subject to refund from the new 2022 rates as a result of the lower cost of debt in the pending cost of capital proceeding; and (iii) higher overall depreciation expense for 2022 of approximately $790,000, or $0.02 per share, resulting from higher composite depreciation rates adopted in the proposed decision and which are reflected in the 2022 adopted revenue requirement.

Excluding the impact of retroactive rates related to the full 2022 year of $0.36 per share that was recorded in the first quarter of 2023 and is shown on a separate line in the table above, adjusted consolidated diluted earnings for the three months ended March 31, 2023 were $0.57 per share. The proposed decision on the water general rate case set new rates for 2022 and 2023, retroactive to January 1, 2022 and January 1, 2023, respectively, and cumulative adjustments were recorded in the first quarter of 2023 to reflect the impact of retroactive rates to the full year 2022 and the three months ended March 31, 2023.

Also included in the results for the first quarter ended March 31, 2023 were gains totaling $1.6 million, or approximately $0.03 per share, on investments held to fund one of the Company’s retirement plans, as compared to losses of $1.7 million, or approximately $0.03 per share, for the same period in 2022, both due to financial market conditions. Excluding the gains and losses on investments from both periods, and excluding the impact of retroactive rates related to the full year of 2022 of $0.36 per share recorded in the three months ended March 31, 2023, adjusted consolidated diluted earnings for the first quarter of 2023 were $0.54 per share as compared to adjusted diluted earnings of $0.41 per share for the same period in 2022, an adjusted increase of $0.13 per share largely due to the 2023 estimated second-year rate increases recorded as a result of receiving a proposed decision in GSWC’s general rate case proceeding.

The following is a computation and reconciliation of recorded 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, ~~2022~~2023 and ~~2021:~~2022:


		Water				Electric				Contracted Services				AWR (Parent)				Consolidated (GAAP)					Water				Electric				Contracted Services				AWR (Parent)				Consolidated (GAAP)
(in thousands, except per share amounts)	(in thousands, except per share amounts)	Q1 2022		Q1 2021		Q1 2022		Q1 2021		Q1 2022		Q1 2021		Q1 2022		Q1 2021		Q1 2022		Q1 2021		(in thousands, except per share amounts)	Q1 2023		Q1 2022		Q1 2023		Q1 2022		Q1 2023		Q1 2022		Q1 2023		Q1 2022		Q1 2023		Q1 2022
Operating income (Note 10)		$	16,999	$	21,059	$	3,598	$	3,448	$	3,770	$	5,824	$	(2)	$	(2)	$	24,365	$	30,329
Other income and expense		5,743		5,060		(30)		40		(171)		(188)		200		235		5,742		5,147
Operating income (loss) (Note 10)																						Operating income (loss) (Note 10)	$	40,239	$	16,999	$	3,631	$	3,598	$	7,296	$	3,770	$	(1)	$	(2)	$	51,165	$	24,365
Other (income) and expense																						Other (income) and expense	3,866		5,743		560		(30)		257		(171)		1,323		200		6,006		5,742
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)	8,910		2,689		701		952		1,685		944		(544)		(124)		10,752		4,461
Net income		$	8,567	$	12,231	$	2,676	$	2,524	$	2,997	$	4,621	$	(78)	$	(108)	$	14,162	$	19,268
Net income (loss)																						Net income (loss)	$	27,463	$	8,567	$	2,370	$	2,676	$	5,354	$	2,997	$	(780)	$	(78)	$	34,407	$	14,162
Weighted Average Number of Diluted Shares	Weighted Average Number of Diluted Shares	37,019		36,993		37,019		36,993		37,019		36,993		37,019		36,993		37,019		36,993		Weighted Average Number of Diluted Shares	37,047		37,019		37,047		37,019		37,047		37,019		37,047		37,019		37,047		37,019
Diluted earnings per share	Diluted earnings per share	$	0.23	$	0.33	$	0.07	$	0.07	$	0.08	$	0.12	$	—	$	—	$	0.38	$	0.52	Diluted earnings per share	$	0.74	$	0.23	$	0.06	$	0.07	$	0.15	$	0.08	$	(0.02)	$	—	$	0.93	$	0.38

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Water ~~Segment~~:Segment:

For the three months ended March 31, ~~2022,~~2023, recorded diluted earnings from the water utility segment were ~~$0.23~~$0.74 per share, as compared to ~~$0.33~~$0.23 per share for the same period in ~~2021, a decrease~~2022, an increase of ~~$0.10~~$0.51 per ~~share. Due to~~share, which includes (i) the ~~delay in finalizing the water general rate case, which will set~~impact of retroactive new rates for the ~~years~~full year of 2022 ~~through 2024, water revenues billed~~of $0.36 per share that was recorded in the first quarter 2023 and ~~recorded for~~is shown separately in the table above, and (ii) gains totaling $1.6 million, or approximately $0.03 per share, incurred during the first quarter of ~~2022 were based~~2023 on ~~2021 adopted rates, pending a final decision by~~investments held to fund one of 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,Company’s retirement plans, 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 $1.7 million, or approximately $0.03 per share, ~~on investments held to fund one of the Company's retirement plans, as compared to gains of $628,000, or approximately $0.01 per share,~~recorded for the same period in ~~2021, largely due to volatility in the financial markets.~~ 2022.

Excluding the gains and losses on investments from both periods, and excluding the impact of retroactive rates related to the full year of 2022 recorded in the first quarter of 2023, adjusted diluted earnings ~~at the water segment~~ for the first quarter of ~~2022~~2023 at the water segment were ~~$0.26~~$0.35 per share as compared to adjusted diluted earnings of ~~$0.32~~$0.26 per share for the ~~first quarter of 2021,~~same period in 2022, an adjusted ~~decrease~~increase at the water segment of ~~$0.06~~$0.09 per share due primarily to the following items:

•~~A decrease~~An increase in water operating revenues of ~~$1.1~~approximately $9.0 million largely as a result of the ~~lower cost~~estimated second-year rate increases for 2023 that will be effective as of ~~debt included~~January 1, 2023 and have been reflected in the ~~pending May 2021 cost of capital application as previously discussed. Furthermore,~~2023 first quarter results. Approved 2023 rates will be subject to an earnings test and changes to inflationary index values. Because water revenues ~~billed and~~ recorded ~~for~~during the ~~first quarter of~~three months ended March 31, 2022 were based on 2021 adopted rates, ~~pending a final decision by~~ the ~~CPUC on~~increase in water revenues during the ~~general~~first quarter of 2023 represents the difference from the 2021 adopted rates and the 2023 estimated second-year rate ~~case application.~~increases for the three months period ended March 31, 2023.

•An increase in water supply costs of ~~$462,000,~~$1.6 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 first quarter of ~~2022~~2023 were based on ~~2021~~2023 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. The 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.

~~Table of Contents~~

•An overall increase in operating expenses of ~~$1.8~~$1.3 million (excluding supply ~~costs and fluctuations in pension costs which, due to a CPUC-authorized pension balancing account, have no impact to earnings), which negatively impacted earnings and was~~costs) mainly due to increases in (i) overall labor costs, (ii) other operation expenses resulting primarily from higher water treatment and transportation costs, ~~conservation spending, insurance,~~(iii) administrative and general expenses largely from higher employee-related expenses and outside-service costs, and (iv) depreciation and ~~maintenance expenses.~~amortization expenses resulting from additions to utility plant and the higher composite depreciation rates based on a revised depreciation study approved in the proposed decision on the water general rate case.

•~~A decrease~~An increase in interest expense (net of interest income) of ~~$566,000~~$1.1 million resulting primarily from ~~lower overall borrowing~~an increase in interest rates, ~~due to the early redemption of GSWC's 9.56% private placement notes in the amount of $28 million in May 2021, partially offset by~~as well as an overall increase in total borrowing levels to support, among other things, ~~GSWC’s~~the capital expenditures ~~program.~~program at GSWC, partially offset by higher interest income earned on regulatory assets bearing interest at the current 90-day commercial-paper rate, which increased compared to 2022’s rates, as well as an increase in the level of regulatory assets recorded resulting, in large part, from the proposed decision on the water general rate case.

•An overall increase in other expenses (net of other income) of $1.1 million due primarily to an increase in the ~~effective income tax rate, which negatively impacted net earnings at the water segment. The increase resulted primarily~~non-service cost components related to GSWC’s benefit plans resulting from changes in actuarial assumptions including expected returns on plan assets. However, as a result of GSWC’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.

•Changes in certain ~~flow-through~~flowed-through taxes and permanent ~~items.~~items included in GSWC’s income tax expense for the three months ended March 31, 2023 as compared to the same period in 2022 that favorably impacted water earnings. As a regulated utility, GSWC treats certain temporary differences as ~~flow-through~~being flowed-through in computing its income tax expense consistent with the income tax method used in its CPUC-jurisdiction ~~ratemaking.~~rate making. Changes in the magnitude of ~~flow-through~~flowed-through items either increase or decrease tax expense, thereby affecting diluted earnings per share.

Electric Segment:

Diluted earnings from the electric utility segment ~~were $0.07~~decreased by $0.01 per share for the three months ended March 31, 2023 as compared to the same period in 2022, largely resulting from not having new rates in 2023 while awaiting the processing of the pending electric general rate case that will set new rates for 2023 – 2026, while also experiencing continued increases in overall operating expenses and ~~2021. An increase~~interest costs. When a decision is issued in the electric ~~operating revenues was offset by higher operating expenses.~~general rate case, new rates are expected to be retroactive to January 1, 2023 and cumulative adjustments will be recorded at that time.

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Contracted Services Segment:

Diluted earnings from the contracted services segment ~~decreased $0.04~~increased by $0.07 per share for the ~~first quarter of 2022~~three months ended March 31, 2023 as compared to the same period in ~~2021,~~2022, largely due to ~~a decrease~~an increase in construction activity ~~primarily~~ due to timing differences ~~partially offset by~~of when construction work was performed in 2023 as compared to the same period in 2022, and an increase in management ~~fees, as well as lower~~fee revenue resulting from the resolution of various economic price adjustments, partially offset by higher overall operating ~~expenses.~~expenses and interest costs as compared to the same period of 2022. The contracted services segment is expected to contribute $0.45 to $0.49 per share for the full 2023 year.

AWR (Parent):

For the three months ended March 31, 2023, diluted earnings from AWR (parent) decreased $0.02 per share compared to the same period in 2022 ~~year.~~due primarily to an increase in interest expense resulting from higher short-term interest rates on borrowings made under AWR’s revolving credit facility, as well as changes in state unitary taxes.

The following discussion and analysis for the three months ended March 31, 2023 and 2022 ~~and 2021 provides~~provide information on AWR’s consolidated operations and assets and, where necessary, includes specific references to AWR’s individual segments and subsidiaries: GSWC, ~~BVESI,~~BVES and ASUS and its subsidiaries.

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Consolidated Results of Operations — Three Months Ended March 31, ~~2022~~2023 and ~~2021~~2022 (amounts in thousands, except per share amounts):


		Three Months Ended March 31, 2022		Three Months Ended March 31, 2021		$ CHANGE		% CHANGE			Three Months Ended March 31, 2023		Three Months Ended March 31, 2022		$ CHANGE		% CHANGE
OPERATING REVENUES	OPERATING REVENUES									OPERATING REVENUES
Water	Water	$	73,906	$	75,029	$	(1,123)	(1.5)	%	Water	$	112,712	$	73,906	$	38,806	52.5	%
Electric	Electric	11,892		11,539		353		3.1	%	Electric	12,904		11,892		1,012		8.5	%
Contracted services	Contracted services	22,772		30,492		(7,720)		(25.3)	%	Contracted services	35,807		22,772		13,035		57.2	%
Total operating revenues	Total operating revenues	108,570		117,060		(8,490)		(7.3)	%	Total operating revenues	161,423		108,570		52,853		48.7	%

OPERATING EXPENSES	OPERATING EXPENSES									OPERATING EXPENSES
Water purchased	Water purchased	17,848		15,239		2,609		17.1	%	Water purchased	14,304		17,848		(3,544)		(19.9)	%
Power purchased for pumping	Power purchased for pumping	2,374		2,145		229		10.7	%	Power purchased for pumping	2,354		2,374		(20)		(0.8)	%
Groundwater production assessment	Groundwater production assessment	4,211		4,440		(229)		(5.2)	%	Groundwater production assessment	3,833		4,211		(378)		(9.0)	%
Power purchased for resale	Power purchased for resale	5,166		3,198		1,968		61.5	%	Power purchased for resale	4,986		5,166		(180)		(3.5)	%
Supply cost balancing accounts	Supply cost balancing accounts	(6,343)		(2,427)		(3,916)		161.4	%	Supply cost balancing accounts	11,566		(6,343)		17,909		*
Other operation	Other operation	8,667		8,217		450		5.5	%	Other operation	10,116		8,667		1,449		16.7	%
Administrative and general	Administrative and general	22,972		22,053		919		4.2	%	Administrative and general	23,547		22,972		575		2.5	%
Depreciation and amortization	Depreciation and amortization	10,114		9,560		554		5.8	%	Depreciation and amortization	11,203		10,114		1,089		10.8	%
Maintenance	Maintenance	3,140		2,662		478		18.0	%	Maintenance	3,150		3,140		10		0.3	%
Property and other taxes	Property and other taxes	5,853		5,940		(87)		(1.5)	%	Property and other taxes	6,295		5,853		442		7.6	%
ASUS construction	ASUS construction	10,203		15,704		(5,501)		(35.0)	%	ASUS construction	18,904		10,203		8,701		85.3	%
Total operating expenses	Total operating expenses	84,205		86,731		(2,526)		(2.9)	%	Total operating expenses	110,258		84,205		26,053		30.9	%

OPERATING INCOME	OPERATING INCOME	24,365		30,329		(5,964)		(19.7)	%	OPERATING INCOME	51,165		24,365		26,800		110.0	%

OTHER INCOME AND EXPENSES	OTHER INCOME AND EXPENSES									OTHER INCOME AND EXPENSES
Interest expense	Interest expense	(5,606)		(6,258)		652		(10.4)	%	Interest expense	(9,481)		(5,606)		(3,875)		69.1	%
Interest income	Interest income	283		455		(172)		(37.8)	%	Interest income	1,864		283		1,581		558.7	%
Other, net	Other, net	(419)		656		(1,075)		(163.9)	%	Other, net	1,611		(419)		2,030		*
		(5,742)		(5,147)		(595)		11.6	%		(6,006)		(5,742)		(264)		4.6	%

INCOME BEFORE INCOME TAX EXPENSE	INCOME BEFORE INCOME TAX EXPENSE	18,623		25,182		(6,559)		(26.0)	%	INCOME BEFORE INCOME TAX EXPENSE	45,159		18,623		26,536		142.5	%

Income tax expense	Income tax expense	4,461		5,914		(1,453)		(24.6)	%	Income tax expense	10,752		4,461		6,291		141.0	%

NET INCOME	NET INCOME	$	14,162	$	19,268	$	(5,106)	(26.5)	%	NET INCOME	$	34,407	$	14,162	$	20,245	143.0	%

Basic earnings per Common Share	Basic earnings per Common Share	$	0.38	$	0.52	$	(0.14)	(26.9)	%	Basic earnings per Common Share	$	0.93	$	0.38	$	0.55	144.7	%

Fully diluted earnings per Common Share	Fully diluted earnings per Common Share	$	0.38	$	0.52	$	(0.14)	(26.9)	%	Fully diluted earnings per Common Share	$	0.93	$	0.38	$	0.55	144.7	%

* not meaningful

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Operating Revenues:

General

GSWC and ~~BVESI~~BVES rely upon approvals by the CPUC offor rate increases to recover operating expenses and to provide for a return on invested and borrowed capital used to fund utility plant. ASUS relies on economic price and equitable adjustments by the U.S. government in order to recover operating expenses and provide a profit margin for ASUS. Current operating revenues and earnings may be negatively impacted if the Military Utility Privatization Subsidiaries do not receive adequate rate relief or adjustments in a timely manner. ASUS’s earnings are also impacted by the level of additional construction projects at the Military Utility Privatization Subsidiaries, which may or may not continue at current levels in future periods.

Water

For the three months ended March 31, ~~2022,~~2023, revenues from water operations ~~decreased~~increased by ~~$1.1~~$38.8 million to ~~$73.9~~$112.7 million as compared to the same period in ~~2021~~2022. The increase in water revenues was largely as a result of ~~the lower cost of debt included~~receiving in April 2023 a proposed decision in the pending May 2021 cost of capital application. Once a final decision is issued by the CPUC, the updated cost capital is expected to have a lower cost of debt than that which is included in 2021 rates, resulting in a decrease in revenues. Furthermore, due to the delay in the CPUC issuing a final decision on the water general rate case ~~billed water revenues~~application. As a result of receiving a proposed decision that approves the November 2021 settlement agreement in its entirety, the impact of retroactive new adopted rates for the full year of 2022 of $30.3 million and the estimated 2023 revenue increases for the three months ended March 31, 2023 of $8.7 million were recorded during the first quarter of ~~2022 were based on 2021 adopted rates, pending a CPUC final decision in this general rate case application.~~2023.

Billed water consumption for the first quarter of ~~2022~~2023 was ~~slightly~~ lower by approximately 17% as compared to the same period in ~~2021.~~ 2022 due primarily to above average rainfall in California in the first quarter of 2023 compared to the same period in 2022, which was the driest on record for this three month period.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~~rate making area. GSWC records the difference ~~between~~between what it bills its water customers and ~~that which~~what 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 of 2022~~three months ended March 31, 2023 increased by ~~$353,000~~$1.0 million to ~~$11.9~~$12.9 million due, in large part, to the proposed decision issued in the water general rate case proceeding that updates the costs allocated from the general corporate office to the electric segment. The proposed decision authorizes an increase in the allocation ratio to the electric segment. The increase in general corporate office expenses allocated to the electric segment, as discussed later, also includes a ~~result of new CPUC-approved~~corresponding and offsetting increase in adopted electric ~~rates effective January 1, 2022.~~ revenues as provided in BVES’s last general rate case proceeding, resulting in no impact to earnings. There was also an increase in electric revenues from an advice letter filing related to a completed capital project.

Electric usage ~~during~~for the first quarter of ~~2022 increased 7%~~ 2023 was lower by 2.5% as compared to the same period in ~~2021.~~2022. 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. ~~During~~For the ~~first quarter of 2022,~~three months ended March 31, 2023, revenues from contracted services ~~decreased $7.7~~increased $13.0 million to ~~$22.8~~$35.8 million as compared to ~~$30.5~~$22.8 million for the same period in ~~2021.~~2022. The ~~decrease~~increase was largely due to ~~lower~~higher construction activity ~~resulting~~and an increase in management fee revenue from ~~timing differences of when such work was performed~~annual economic price adjustments as compared to the ~~first quarter~~same period of ~~2021, partially offset by increases~~2022.

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. During the three months ended March 31, 2023, ASUS has been awarded approximately $4.6 million in ~~management fees due~~new construction projects for completion in 2023 through 2025. This is in addition to ~~the successful resolution~~$34.4 million of ~~various economic price adjustments.~~

new construction projects awarded in 2022, which are being completed from late 2022 through 2025. Earnings and cash flows from modifications to the ~~original~~initial 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%~~33.6% and ~~26.1%~~27.6% of total operating expenses for the three months ended March 31, 2023 and 2022, ~~and 2021,~~ respectively.

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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 three months ended March 31, ~~2022~~2023 and ~~2021~~2022 were approximately ~~48%~~42% and ~~43%~~48%, respectively, as compared to the authorized adopted percentages of ~~30.3%~~38% and 30% for the three months ended March 31, 2023 and 2022, and 2021. The higher actual percentage of purchased water as compared to the adopted percentage resulted from a higher volume of purchased water costs due to several wells being out of service. Due to the delay in finalizing the water general rate case, which will set new rates for the years 2022 through 2024, adopted supply costs for the first quarter of 2022 were based on 2021 authorized amounts, pending a final decision by the CPUC in this general rate case application.respectively.

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

~~Table of Contents~~

expenses. GSWC recovers from, or refunds to, customers the amount of such variances. GSWC tracks these variances individually for each water ~~ratemaking~~rate making 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 three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, water supply costs consisted of the following amounts (in thousands):


		Three Months Ended March 31, 2022		Three Months Ended March 31, 2021		CHANGE		CHANGE			Three Months Ended March 31, 2023		Three Months Ended March 31, 2022		$ CHANGE		% CHANGE
Water purchased	Water purchased	$	17,848	$	15,239	$	2,609	17.1	%	Water purchased	$	14,304	$	17,848	$	(3,544)	-19.9	%
Power purchased for pumping	Power purchased for pumping	2,374		2,145		229		10.7	%	Power purchased for pumping	2,354		2,374		(20)		-0.8	%
Groundwater production assessment	Groundwater production assessment	4,211		4,440		(229)		-5.2	%	Groundwater production assessment	3,833		4,211		(378)		-9.0	%
Water supply cost balancing accounts *	Water supply cost balancing accounts *	(5,067)		(2,920)		(2,147)		73.5	%	Water supply cost balancing accounts *	12,625		(5,067)		17,692		**
Total water supply costs	Total water supply costs	$	19,366	$	18,904	$	462	2.4	%	Total water supply costs	$	33,116	$	19,366	$	13,750	71.0	%

* 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)~~$11,566,000 and ~~$(2,427,000)~~$(6,343,000) for the three months ended March 31, 2023 and 2022, ~~and 2021,~~ respectively.

** not meaningful

Purchased water costs for the first quarter of ~~2022 increased~~2023 decreased to ~~$17.8~~$14.3 million as compared to ~~$15.2~~$17.8 million for the same period in ~~2021~~2022 primarily due to ~~the higher~~decreases in water consumption and production that was driven by above-average rainfall in 2023 and drought conditions experienced in 2022 that resulted in related water use restrictions, as well as a lower mix of purchased water as compared to ~~pumped water, and an increase~~the same period in 2022, all partially offset by increases in wholesale water costs. ~~The increase in power purchased for pumping was due to increases in electricity provider rates incurred for pumping.~~ Groundwater production assessments decreased largely due to a ~~higher amount of purchased~~decrease in water ~~versus pumped water as~~consumption and production compared to the three months ended March 31, ~~2021.~~2022 due primarily to above-average rainfall in 2023.

For the three months ended March 31, ~~2022,~~2023, the water supply cost balancing account had a ~~$5.1~~$12.6 million ~~under-collection~~over-collection as compared to a ~~$2.9~~$5.1 million under-collection during the same period in ~~2021. This variance~~2022. The increase in the over-collection was primarily due to ~~higher costs related to purchased water, partially offset by rate increases for certain rate-making areas to specifically cover increases in~~updated adopted supply costs ~~experienced~~from the proposed decision received in ~~these areas.~~April 2023 in the water general rate case proceeding. This increase includes largely the full year impact of 2022 to reflect new adopted supply costs retroactive to January 1, 2022, with a corresponding and offsetting increase in adopted water revenues, resulting in no impact to earnings.

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~~BVES’s generating unit, the cost of renewable energy credits and changes in the electric supply cost balancing account. For the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, electric supply costs consisted of the following amounts (in thousands):


		Three Months Ended March 31, 2022		Three Months Ended March 31, 2021		CHANGE		CHANGE			Three Months Ended March 31, 2023		Three Months Ended March 31, 2022		$ CHANGE		% CHANGE
Power purchased for resale	Power purchased for resale	$	5,166	$	3,198	$	1,968	61.5	%	Power purchased for resale	$	4,986	$	5,166	$	(180)	-3.5	%
Electric supply cost balancing account *	Electric supply cost balancing account *	(1,276)		493		(1,769)		-358.8	%	Electric supply cost balancing account *	(1,059)		(1,276)		217		-17.0	%
Total electric supply costs	Total electric supply costs	$	3,890	$	3,691	$	199	5.4	%	Total electric supply costs	$	3,927	$	3,890	$	37	1.0	%

* The sum of the water and electric supply-cost balancing accounts are shown on AWR’s Consolidated Statements of Income and totaled $11,566,000 and $(6,343,000) for the three months ended March 31, 2023 and ~~$(2,427,000)~~2022, respectively.

For the three months ended March 31, 2023, the cost of power purchased for resale to BVES’s electric customers decreased by $180,000 to $5.0 million as compared to $5.2 million during the same period in 2022 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 $141.21 for the three months ended March 31, 2022 ~~and 2021, respectively.~~

~~For the three months ended March 31, 2022, the cost of power purchased for resale~~ to BVESI's electric customers increased to $5.2 million as compared to $3.2 million during the same period in 2021 due to a higher average price per megawatt-hour, as well as higher customer usage. The average price per megawatt-hour, including fixed costs, increased from $76.14 for the three months ended March 31, 2021 to $141.21$94.73 for the same period in ~~2022.~~2023. The decrease in average price per megawatt-hour resulted in a decrease in the under-collection in the electric supply cost balancing account, which decreased by $217,000 as compared to ~~an over-collection during~~ the three months ended March 31, ~~2021 was due to the increase in energy prices experienced since the first quarter~~2022.

Table of ~~2021.~~Contents

Other Operation

The primary components of other operation expenses include payroll costs, materials and supplies, chemicals and water treatment costs and ~~outside service~~outside-service costs of operating the regulated water systems, including the costs associated with water transmission and distribution, pumping, water quality, meter reading, billing, and operations of district offices ~~as well as~~and the electric system. Registrant’s contracted services operations incur many of the same types of expenses. For the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, other operation expenses by business segment consisted of the following (dollar amounts in thousands):

~~Table of Contents~~


		Three Months Ended March 31, 2022		Three Months Ended March 31, 2021		$ CHANGE		% CHANGE			Three Months Ended March 31, 2023		Three Months Ended March 31, 2022		$ CHANGE		% CHANGE
Water Services	Water Services	$	6,354	$	5,813	$	541	9.3	%	Water Services	$	7,271	$	6,354	$	917	14.4	%
Electric Services	Electric Services	876		771		105		13.6	%	Electric Services	1,059		876		183		20.9	%
Contracted Services	Contracted Services	1,437		1,633		(196)		(12.0)	%	Contracted Services	1,786		1,437		349		24.3	%
Total other operation	Total other operation	$	8,667	$	8,217	$	450	5.5	%	Total other operation	$	10,116	$	8,667	$	1,449	16.7	%

For the three months ended March 31, ~~2022,~~2023, the ~~$541,000~~ increase in other operation expenses at the water segment was due primarily to higher operation-related labor, water treatment, and ~~conservation~~vehicle and equipment costs. As a result of receiving the proposed decision in the water general rate case, the increase at the water segment also included a cumulative depreciation adjustment for 2022 of $212,000 on GSWC’s transportation equipment, which is recorded in other operation expenses.

The increase in electric segment was due primarily to operation-related labor and transportation expense. The increase at the contracted services segment was due primarily to higher operation-related labor and outside services. Transportation costs were higher due, in part, to increases in fuel and maintenance costs compared to the same period in 2022.

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 March 31, ~~2022~~2023 and ~~2021,~~2022, 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			Three Months Ended March 31, 2023		Three Months Ended March 31, 2022		$ CHANGE		% CHANGE
Water Services	Water Services	$	15,596	$	14,435	$	1,161	8.0	%	Water Services	$	15,381	$	15,596	$	(215)	(1.4)	%
Electric Services	Electric Services	2,166		2,429		(263)		(10.8)	%	Electric Services	2,673		2,166		507		23.4	%
Contracted Services	Contracted Services	5,208		5,187		21		0.4	%	Contracted Services	5,492		5,208		284		5.5	%
AWR (parent)	AWR (parent)	2		2		—		—	%	AWR (parent)	1		2		(1)		(50.0)	%
Total administrative and general	Total administrative and general	$	22,972	$	22,053	$	919	4.2	%	Total administrative and general	$	23,547	$	22,972	$	575	2.5	%

Administrative and general expenses decreased for the water segment due, in large part, to a reduction of approximately $447,000 to reflect the April 2023 proposed decision on the water general rate case for recovery of previously incurred costs that were tracked in CPUC-authorized memorandum accounts. This was offset by an increase in outside-service costs, labor and employee-related expenses, partially offset by a decrease in the service cost component of GSWC’s defined-benefit pension plan. Due to GSWC’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.

Administrative and general expenses increased at the ~~water~~electric segment ~~largely~~primarily due to ~~increases~~an increase in ~~labor and employee-related benefits including~~costs allocated from the ~~service cost component of GSWC's defined benefit pension and other retirement plans. As~~general corporate office as a result of ~~GSWC's two-way pension balancing account~~the allocation ratio update authorized byin the ~~CPUC, increases in pension costs are fully recovered in customer rates; thus having no material impact to earnings. There was also an~~proposed decision on the water general rate case. The increase in ~~insurance costs.~~

~~Administrative and~~ general corporate office expenses ~~decreased at~~allocated to the electric segment ~~largely due to a decrease of $175,000 in surcharges billed to customers for the recovery of previously incurred costs, which had~~also includes a corresponding ~~decrease~~and offsetting increase in ~~administrative and general expenses,~~adopted electric revenues, resulting in no impact to earnings.

Administrative and general expenses increased at the contracted services segment mainly due to higher labor and outside services.

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Depreciation and Amortization

For the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, 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			Three Months Ended March 31, 2023		Three Months Ended March 31, 2022		$ CHANGE		% CHANGE
Water Services	Water Services	$	8,545	$	8,062	$	483	6.0	%	Water Services	$	9,606	$	8,545	$	1,061	12.4	%
Electric Services	Electric Services	654		639		15		2.3	%	Electric Services	748		654		94		14.4	%
Contracted Services	Contracted Services	915		859		56		6.5	%	Contracted Services	849		915		(66)		(7.2)	%
Total depreciation and amortization	Total depreciation and amortization	$	10,114	$	9,560	$	554	5.8	%	Total depreciation and amortization	$	11,203	$	10,114	$	1,089	10.8	%

The water general rate case proposed decision issued in April 2023 approves overall higher composite depreciation rates based on a revised depreciation study. The increase in composite depreciation rates increases the adopted water revenue requirement, with a corresponding increase in adopted depreciation expense, resulting in no impact to net earnings. Therefore, the overall increase in depreciation ~~expense resulted from~~and amortization expenses at the water segment included the retroactive impact for the full year of 2022 of approximately $576,000. There was also an increase in depreciation at the water and electric segments due to additions to utility plant and other fixed assets since the first quarter of ~~2021.~~

~~Table of Contents~~

2022.

Maintenance

For the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, 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			Three Months Ended March 31, 2023		Three Months Ended March 31, 2022		$ CHANGE		% CHANGE
Water Services	Water Services	$	2,156	$	1,740	$	416	23.9	%	Water Services	$	1,960	$	2,156	$	(196)	(9.1)	%
Electric Services	Electric Services	250		208		42		20.2	%	Electric Services	321		250		71		28.4	%
Contracted Services	Contracted Services	734		714		20		2.8	%	Contracted Services	869		734		135		18.4	%
Total maintenance	Total maintenance	$	3,140	$	2,662	$	478	18.0	%	Total maintenance	$	3,150	$	3,140	$	10	0.3	%

Maintenance expense decreased for the water segment due, in part, to a reduction of approximately $98,000 to reflect the April 2023 proposed decision on the water general rate case for recovery of previously incurred costs that were tracked in CPUC-authorized memorandum accounts. Maintenance expense also decreased at the water segment due to timing of maintenance activities compared to the same period in 2022.

Maintenance expense increased at the ~~water segment~~electric and contracted services segments due to higher maintenance planned and unplanned ~~and planned maintenance incurred~~activities as compared to the same period in ~~2021.~~2022.

Property and Other Taxes

For the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, 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			Three Months Ended March 31, 2023		Three Months Ended March 31, 2022		$ CHANGE		% CHANGE
Water Services	Water Services	$	4,890	$	5,016	$	(126)	(2.5)	%	Water Services	$	5,139	$	4,890	$	249	5.1	%
Electric Services	Electric Services	458		353		105		29.7	%	Electric Services	545		458		87		19.0	%
Contracted Services	Contracted Services	505		571		(66)		(11.6)	%	Contracted Services	611		505		106		21.0	%
Total property and other taxes	Total property and other taxes	$	5,853	$	5,940	$	(87)	(1.5)	%	Total property and other taxes	$	6,295	$	5,853	$	442	7.6	%

The increase to property and other taxes was primarily attributed to an increase in franchise fees at the water segment resulting from higher water revenues recognized in 2023 compared to 2022.

ASUS Construction

For the three months ended March 31, ~~2022,~~2023, construction expenses for contracted services were ~~$10.2~~$18.9 million, ~~decreasing $5.5~~increasing $8.7 million compared to the same period in ~~2021~~2022 primarily due to an increase in construction activity resulting from timing differences of when such work was performed in ~~construction activity.~~2023 as compared to the same period of 2022.

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Interest Expense

For the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, 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			Three Months Ended March 31, 2023		Three Months Ended March 31, 2022		$ CHANGE		% CHANGE
Water Services	Water Services	$	5,236	$	5,798	$	(562)	(9.7)	%	Water Services	$	6,922	$	5,236	$	1,686	32.2	%
Electric Services	Electric Services	112		116		(4)		(3.4)	%	Electric Services	834		112		722		644.6	%
Contracted Services	Contracted Services	62		109		(47)		(43.1)	%	Contracted Services	416		62		354		571.0	%
AWR (parent)	AWR (parent)	196		235		(39)		(16.6)	%	AWR (parent)	1,309		196		1,113		567.9	%
Total interest expense	Total interest expense	$	5,606	$	6,258	$	(652)	(10.4)	%	Total interest expense	$	9,481	$	5,606	$	3,875	69.1	%

~~Registrant's~~AWR’s borrowings consist of bank ~~debts~~debt under revolving credit facilities and long-term debt issuances at ~~GSWC.~~GSWC and BVES. Consolidated interest expense ~~decreased~~increased as compared to the same period in ~~2021~~2022 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 by~~from an ~~overall~~ increase in total borrowing levels to support, among other things, the capital expenditures program at the regulated ~~utilities.~~

utilities, as well as an overall increase in average interest rates both short- and long-term. On January 13, 2023, GSWC issued $130.0 million~~Table~~ unsecured private-placement notes consisting of: $100.0 million in aggregate notes at a coupon rate of ~~Contents~~5.12% due January 31, 2033, and $30.0 million in aggregate notes at a coupon rate of 5.22% due January 31, 2038. In April 2022, BVES 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.

Interest Income

For the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, 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			Three Months Ended March 31, 2023		Three Months Ended March 31, 2022		$ CHANGE		% CHANGE
Water Services	Water Services	$	91	$	87	$	4	4.6	%	Water Services	$	1,428	$	91	$	1,337	*
Electric Services	Electric Services	(1)		30		(31)		(103.3)	%	Electric Services	261		(1)		262		*
Contracted Services	Contracted Services	197		338		(141)		(41.7)	%	Contracted Services	189		197		(8)		(4.1)	%
AWR (parent)	AWR (parent)	(4)		—		(4)		N/A		AWR (parent)	(14)		(4)		(10)		*
Total interest income	Total interest income	$	283	$	455	$	(172)	(37.8)	%	Total interest income	$	1,864	$	283	$	1,581	*

~~The~~*not meaningful

For the three months ended March 31, 2023, overall ~~decrease in~~ interest income ~~was mainly due to lower interest income recognized on certain construction projects at the contracted services segment~~increased by $1.6 million as compared to the ~~first quarter~~same period in 2022 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 have increased compared to 2022’s rates, as well as an overall increase in recorded regulatory assets as a result of ~~2021.~~the proposed decision in the water general rate case received in April 2023.

Other Income and (Expense), net

For the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, 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			Three Months Ended March 31, 2023		Three Months Ended March 31, 2022		$ CHANGE		% CHANGE
Water Services	Water Services	$	(598)	$	651	$	(1,249)	(191.9)	%	Water Services	$	1,628	$	(598)	$	2,226	*
Electric Services	Electric Services	143		46		97		210.9	%	Electric Services	13		143		(130)		(90.9)	%
Contracted Services	Contracted Services	36		(41)		77		(187.8)	%	Contracted Services	(30)		36		(66)		*

Total other income and (expense), net	Total other income and (expense), net	$	(419)	$	656	$	(1,075)	(163.9)	%	Total other income and (expense), net	$	1,611	$	(419)	$	2,030	*

* not meaningful

For the three months ended March 31, ~~2022,~~2023, other income (net of other expense) ~~decreased~~increased mostly as a result of ~~losses incurred~~gains of $1.6 million recorded on investments held to fund one of ~~Registrant's~~the Company’s retirement plans, as compared to ~~gains~~losses of $1.7 million generated during the same period in ~~2021~~2022, both due to ~~volatility in the~~ financial ~~markets.~~market conditions. This was partially offset by ~~a decrease~~an increase in the non-service cost components of net periodic benefit costs related to ~~Registrant's defined benefit~~the Company’s defined-benefit pension ~~plans~~plan and other retirement benefits. However, as a result of ~~GSWC's~~GSWC’s and ~~BVESI's~~BVES’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.

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Income Tax Expense

For the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, 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			Three Months Ended March 31, 2023		Three Months Ended March 31, 2022		$ CHANGE		% CHANGE
Water Services	Water Services	$	2,689	$	3,768	$	(1,079)	(28.6)	%	Water Services	$	8,910	$	2,689	$	6,221	231.3	%
Electric Services	Electric Services	952		884		68		7.7	%	Electric Services	701		952		(251)		(26.4)	%
Contracted Services	Contracted Services	944		1,391		(447)		(32.1)	%	Contracted Services	1,685		944		741		78.5	%
AWR (parent)	AWR (parent)	(124)		(129)		5		(3.9)	%	AWR (parent)	(544)		(124)		(420)		338.7	%
Total income tax expense	Total income tax expense	$	4,461	$	5,914	$	(1,453)	(24.6)	%	Total income tax expense	$	10,752	$	4,461	$	6,291	141.0	%

Consolidated income tax expense for the three months ended March 31, ~~2022 decreased~~2023 increased by ~~$1.5~~$6.3 million primarily due to ~~a decrease~~an increase in pretax income as compared to the same period in ~~2021. AWR's overall~~2022, partially offset by a decrease in the consolidated effective income tax rate ~~("ETR"~~(“ETR”). AWR’s ETR was ~~24.0%~~23.8% and ~~23.5%~~24.0% for the three months ended March 31, 2023 and 2022, ~~and 2021,~~ respectively. ~~GSWC's~~GSWC’s ETR was ~~23.9%~~24.5% and ~~23.6%~~23.9% for the three months ended March 31, 2023 and 2022, respectively. GSWC’s income tax expense was affected by net changes in certain flowed-through and ~~2021, respectively.~~permanent items. The increase in the tax benefit recorded at AWR (parent) during the three months ended March 31, 2023 compared to the same period in 2022 was primarily due to an increase in pretax loss at AWR (parent) resulting from higher interest expense, as well as changes in state unitary taxes.

For a comparison of the financial results for the first quarter of ~~2021~~2022 to ~~2020,~~2021, see “Consolidated Results of Operations-Three Months Ended March 31, ~~2021~~2022 and March 31, ~~2020~~2021” in Registrant’s Form 10-Q for the period ended March 31, ~~2021~~2022 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~~2022 filed with the SEC. There have been no material changes to Registrant’s critical accounting policies.

Liquidity and Capital Resources

AWR

~~Registrant’s~~AWR’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~~BVES 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~~BVES to pay dividends to AWR is restricted by California law. Under these restrictions, approximately ~~$611.5~~$658.3 million was available for GSWC to pay dividends to AWR on March 31, ~~2022.~~2023. Approximately ~~$73.4~~$67.2 million was available for ~~BVESI~~BVES to pay dividends to AWR as of March 31, ~~2022. ASUS's~~2023. ASUS’s ability to pay dividends to AWR is dependent upon state laws in which each Military Utility Privatization Subsidiary operates, as well as ~~ASUS's~~ASUS’s ability to pay dividends under California law.

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

AWR currently borrows under a revolving credit facility with a current borrowing capacity of $280.0 million and provides funds to GSWC and ASUS in support of their ~~operations. On April 22, 2022,~~operations through intercompany borrowing agreements on terms that are similar to that of the credit facility was amended to increase the borrowing capacity from $200.0 million to $280.0 million. The amendment also changed the benchmark interest rate from the London Interbank Offered Rate ("LIBOR") to the Secured Overnight Financing Rate ("SOFR"). This credit agreement expires in May 2023. Registrant does not believe the change in benchmark rates will have a material impact on its financing costs.facility. The interest rate charged to GSWC and ASUS is ~~sufficient~~comparable to ~~cover AWR’s~~the interest ~~expense~~rate AWR pays under the credit facility. ~~As of March 31, 2022, there~~AWR’s credit agreement was ~~$189.5 million outstanding under this facility. Registrant expects~~set to ~~issue long-term debt through GSWC prior to~~expire on May 23, 2023. On May 8, 2023, ~~and use~~ the ~~debt proceeds to pay off borrowings under this facility.~~

~~BVESI has a separate $35 million revolving~~ credit facility ~~which~~ was amended ~~in December 2021 to reduce the interest rate and fees charged, as well as~~ to extend the maturity date by ~~one year~~two-months to provide adequate time to put in place a new credit agreement. The amendment extends the maturity date of the existing credit agreement to July 23, 2023 or an earlier date on which the credit agreement is either terminated or cancelled when superseded by a new agreement. All intercompany borrowing agreements will expire concurrent with the expiration of AWR’s credit facility. Therefore, the outstanding borrowings under the credit facility of $175.5 million as of March 31, 2023 have been classified as current liabilities on AWR’s Consolidated Balance Sheet, thus creating a negative working-capital condition for AWR of $168.0 million. Additionally, as of March 31, 2023, the $45.0 million of outstanding intercompany borrowings of GSWC from AWR have been classified as current liabilities on GSWC's Balance Sheet, also creating a negative working-capital condition for GSWC of $87.9 million. As of May 10, 2023, neither AWR nor GSWC have sufficient liquidity or capital resources to repay its credit facility or intercompany borrowings, respectively, without either extending its existing credit facility, entering into a new credit facility, or issuing new debt or equity.

AWR is confident and believes it is probable that it will be able to execute a new credit facility agreement with the needed borrowing capacities required to repay its existing credit facility and to run its operations given Registrant's ability to generate consistent cash flows, its A+ credit ratings, and its history in obtaining revolving credit facilities to meet its working-capital needs, as well as its history of successfully raising debt as recently done with GSWC’s issuance of $130 million in unsecured long-term notes on January 13, 2023. In addition, management is considering a separate credit facility for GSWC to support its standalone water utility operations. Alternatively, AWR may enter into a new intercompany borrowing agreement with GSWC. Accordingly, management has concluded that Registrant will be able to satisfy its obligations, including those under its current 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 financing plans.

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BVES has a separate $35.0 million revolving credit facility without a parent guaranty that matures on July 1, 2024.As of March 31, ~~2022,~~2023, there ~~was $32.0~~were $25.0 million of outstanding borrowings under this facility. Under the terms of the credit agreement, ~~BVESI~~BVES has the option to increase the facility by an additional ~~$15~~$15.0 million, subject to lender approval. Interest rates under this facility are ~~generally~~currently based on LIBOR. ~~Under the terms of the December 2021 amendment, upon discontinuation of a benchmark rate such as LIBOR, the lender may replace LIBOR with a benchmark interest rate such as~~Effective July 1, 2023, all new borrowings under this credit agreement will be based on SOFR. ~~Registrant~~BVES does not believe the change from LIBOR to a new benchmark rate such as SOFR 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 million in unsecured private placement notes consisting of $17.5 million at a coupon rate of 4.548% due April 28, 2032, and $17.5 million at a coupon rate of 4.949% due April 28, 2037. BVESI used the proceeds to pay down amounts outstanding under its credit facility, thus complying with the CPUC's 24-month rule. Interest on these notes is payable semiannually.

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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 three months ended March 31, 2022. However, the moratoriums on service disconnections for nonpayment for water and electric customers have ended, and service disconnections due to nonpayment for commercial customers have resumed. In accordance with Senate Bill 998 guidelines, water service disconnections due to nonpayment for residential customers are set to resume in May of 2022. Furthermore, in January 2022, GSWC received $9.5 million in COVID relief funds through the California Water and Wastewater Arrearage Payment Program to provide assistance to customers for their water debt accrued during the COVID-19 pandemic by remitting federal funds that the state received from the American Rescue Plan Act of 2021 to the utility on behalf of eligible customers. GSWC applied these funds to its delinquent customers' eligible balances. In February 2022, BVESI received $321,000 from the state of California for similar customer relief funding for unpaid electric customer bills incurred during the pandemic. 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 ~~revised~~affirmed its ~~rating~~negative 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's~~January 2023, Moody’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 ~~structure~~structures and A+ credit ~~rating,~~ratings, combined with its financial discipline, will enable ~~Registrant~~AWR to access the debt and equity markets. However, unpredictable financial market conditions in the future may limit its access or impact the timing of when to access the market, in which case ~~Registrant~~AWR 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, 2022, AWR's~~May 8, 2023, AWR’s Board of Directors approved a second quarter dividend of ~~$0.365~~$0.3975 per share on ~~AWR's~~AWR’s Common Shares. Dividends on the Common Shares will be paid on June 1, ~~2022~~2023 to shareholders of record at the close of business on May ~~16, 2022.~~19, 2023. 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's~~AWR 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,~~BVES, and construction expenses at ASUS, and to pay dividends. ~~Registrant’s~~AWR’s future cash flows from operating activities are expected to be affected by a number of factors, including utility regulation; changes in tax law; maintenance expenses; inflation; compliance with environmental, health and safety standards; production costs; customer growth; per-customer usage of water and electricity; weather and seasonality; conservation efforts; compliance with local governmental requirements, including mandatory restrictions on water use; the ~~impact~~lingering 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 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 with the U.S. government 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.~~

~~Table~~other subsidiaries of ~~Contents~~

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 ~~Registrant~~AWR was ~~$38.0~~$7.0 million for the ~~first~~ three months ended March 31, ~~2022~~2023 as compared to ~~$24.7~~$38.0 million for the same period in ~~2021.~~2022. During the first quarter of 2022, GSWC and ~~BVESI~~BVES 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. There were no relief funds received during the first quarter of 2023.

The ~~increase~~decrease in operating cash ~~flow~~flows was also due to a 17% decrease in billed water consumption, as well as the continued delay in receiving the water general rate case final decision as billed water revenues in 2022 and 2023 were based on 2021 adopted rates pending a final CPUC decision, while operating expenses continued to rise due to inflation. On April 13, 2023, GSWC received a proposed decision on its water general rate case with 2022 and 2023 rates retroactive to January 1, 2022 and 2023, respectively. A final decision by the CPUC is expected during the second quarter of 2023. Once a final decision is received, GSWC will request recovery through a surcharge of all revenues accumulated since 2022 with retroactive new rates, and will also file for the 2023 second-year rate increases. Furthermore, decreases in operating cash flows was also due to differences in the timing of vendor payments, ~~as compared to the first three months of 2021, as well as differences in~~and 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~~construction-

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related activities may fluctuate from period to period with such fluctuations representing timing differences of when the work is being performed and when the cash is received for payment of the work. The timing of cash receipts and disbursements related to other working capital items also affected the change in net cash provided by operating activities.

The ~~delay~~timing of cash receipts and disbursements related to other working capital items also affected the change in ~~the water general rate case has negatively affected~~net cash ~~flows from~~provided by operating ~~activities, as year-to-date billed revenues have been based on 2021's adopted customer rates.~~activities.

Cash Flows from Investing Activities:

Net cash used in investing activities was ~~$35.0~~$49.2 million for the three months ended March 31, ~~2022~~2023 as compared to ~~$37.0~~$35.0 million for the same period in ~~2021. Registrant~~2022, which is mostly related to capital expenditures at the regulated utilities for both periods. 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’s~~AWR’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.

~~During 2022,~~For the year 2023, the regulated ~~utilities'~~utilities’ company-funded capital expenditures are expected to be between $140 million and $160 million, barring any delays resulting from changes in capital improvement schedules due to ~~supply chain issues or the continued effects of the COVID-19 pandemic.Projected capital expenditures and other investments are subject to periodic review and revision.~~supply-chain issues.

Cash Flows from Financing Activities:

~~Registrant’s~~AWR’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)~~(ii) the payment of dividends on Common Shares. In order to finance new infrastructure, GSWC also receives customer advances (net of refunds) for, and contributions in aid of, construction. Borrowings on ~~AWR's~~AWR’s and ~~BVESI's~~BVES’s credit facilities are used to fund GSWC and ~~BVESI~~BVES 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~~$38.3 million for the three months ended March 31, ~~2022~~2023 as compared to ~~cash used of $17.5~~$2.2 million during the same period in ~~2021.~~2022. The increase in net cash provided by financing activities in 2023 was due primarily to an increase in total borrowing levels necessary to support operations affected by a significant decrease in cash flows from operating activities and to support, among other things, the capital expenditures program at the regulated utilities. In January 2023, GSWC issued $130.0 million of unsecured private-placement notes and used the proceeds to pay down the majority of its outstanding intercompany borrowings from AWR, which in turn used the proceeds to pay down outstanding borrowings under the AWR credit facility. During the three months ended March 31, 2023, AWR had net payments on its credit facilities of $77.0 million, while during the three months ended March 31, 2022, AWR had a net increase in borrowings on its credit ~~facility~~facilities of $16.0 ~~million. During the three months ended March 31, 2021, AWR had a net decrease in borrowings on its credit facility of $5.2 million.~~million to support operations and capital expenditures.

GSWC

GSWC funds its operating expenses, payments on its debt, dividends on its outstanding common shares, and a portion of its construction expenditures through internal sources. Internal sources of cash flow are provided primarily by retention of a portion of earnings from operating activities. Internal cash generation is influenced by factors such as weather patterns, conservation efforts, environmental regulation, litigation, changes in tax law and deferred taxes, changes in supply costs and regulatory decisions affecting GSWC’s ability to recover these supply costs, timing of rate relief, increases in maintenance expenses and capital expenditures, surcharges authorized by the CPUC to enable GSWC to recover expenses previously incurred from customers, and CPUC requirements to refund amounts previously charged to customers. Internal cash flows may also be impacted by delays in receiving payments from GSWC customers due to the ~~economic impact~~lingering 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. ~~This~~On April 22, 2022, the AWR credit facility ~~expires~~was 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 concurrently with the expiration of AWR’s credit facility in July 2023. Upon the expiration of GSWC's intercompany borrowing agreement with AWR, GSWC intends to either execute a new intercompany borrowing agreement consistent with a new credit facility at AWR, or enter into its own separate credit facility. As of March 31, 2023, GSWC had $45.0 million outstanding under its intercompany borrowing arrangement with AWR that has been classified as a current liability on GSWC’s Balance Sheet, creating a negative working-capital condition for GSWC of $87.9 million. As of May ~~2023. However, the CPUC requires~~10, 2023, GSWC does not have sufficient liquidity or capital resources to ~~completely pay off all intercompany borrowings it has from AWR within a 24-month period. The next 24-month period in which GSWC is required to pay off~~repay its intercompany borrowings from AWR ~~ends in May 2023.~~without either issuing new long-term debt, or entering into a new short-term borrowing arrangement, which is confident it will be

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able to achieve. On January 13, 2023, GSWC ~~intends to issue long term debt prior to May 2023, and use~~issued unsecured private placement notes totaling $130.0 million. GSWC used the proceeds to pay off ~~its~~the majority of outstanding borrowings under the intercompany ~~borrowings to be in compliance~~borrowing arrangement 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~~$10.9 million for the three months ended March 31, ~~2022~~2023 as compared to ~~$22.8~~$31.3 million for the same period in ~~2021.~~2022. 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. There were no relief funds received during the first quarter of 2023. The ~~increase~~decrease in operating cash flow was also due to a 17% decrease in billed water consumption, as well as the continued delay in receiving the final water general rate case decision as billed water revenues in 2022 and 2023 were based on 2021 adopted rates pending a final CPUC decision, while operating expenses continued to rise due to inflation. On April 13, 2023, GSWC received a proposed decision on its water general rate case with 2022 and 2023 rates retroactive to January 1, 2022 and 2023, respectively. A final decision by the CPUC is expected during the second quarter of 2023. Once a final decision is received, GSWC will request recovery through a surcharge of all revenues accumulated since 2022 with retroactive new rates, and will also file for 2023 second-year rate increases. Furthermore, decreases in operating cash flows was also due to differences in the timing of vendor ~~payments as compared to the first three months of 2021.~~ payments.

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~~$41.8 million for the three months ended March 31, ~~2022~~2023 as compared to ~~$43.7~~$31.3 million for the same period in ~~2021. Capital expenditures for the three months ended March 31,~~ 2022, ~~totaled $31.5 million as compared~~which is mostly related to ~~$31.8 million during the same period~~spending under GSWC’s infrastructure investment plans that are consistent with capital budgets authorized in ~~2021.~~

In October 2020, AWR issued an interest bearing promissory note to GSWC, which expires in May 2023. Under the terms of this note, AWR may borrow amounts up to $30 million for working capital purposes. AWR agrees to pay any unpaid principal amounts outstanding under this note, plus accrued interest. During the first three months of 2021, AWR borrowed $23 million from GSWC, and repaid $11 million to GSWC under the terms of the note.its general rate cases.

Cash Flows from Financing Activities:

Net cash provided by financing activities was ~~$4.2~~$31.4 million for the three months ended March 31, ~~2022~~2023 as compared to ~~$12.2~~$4.2 million ~~of net cash used~~ for the same period in ~~2021.~~2022. In January 2023, GSWC issued $130.0 million of unsecured private-placement notes and also issued $10 million of equity to AWR. GSWC used the proceeds from its issuance of private-placement notes and the issuance of equity to pay-off all its outstanding intercompany borrowings from AWR. The CPUC requires GSWC to fully pay-off all intercompany borrowings it has from AWR within a 24-month period. As a result, during the three months ended March 31, 2023, GSWC had net payments on intercompany borrowings of $84.0 million. During the three months ended March 31, 2022, GSWC had an increase in net intercompany borrowings of $18.0 million from AWR parent. During the three months ended March 31, 2021, GSWC did not have any intercompany borrowings from AWR. The CPUC requires GSWC to completely pay off all intercompany borrowings it has from AWR within a 24-month period. The next 24-month period in which GSWC is required to pay off its intercompany borrowings from AWR ends in May 2023.

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Contractual Obligations and Other Commitments

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

On April 28, 2022, Registrant's electric segment issued $35 million in unsecured private placement notes consisting of $17.5 million at a coupon rate of 4.548% due April 28, 2032, and $17.5 million at a coupon rate of 4.949% due April 28, 2037. Interest on these notes is payable semiannually.

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—~~Liquidity~~Contractual Obligations, Commitments and ~~Capital Resources”~~Off-Balance Sheet Arrangements” section of the Registrant’s Form 10-K for the year ended December 31, ~~2021~~2022 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~~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~~During sequestration or automatic spending cuts, ~~known as "sequestration," have impacted~~ the ~~expected levels of Department of Defense budgeting.The~~ Military Utility Privatization Subsidiaries ~~have~~did not ~~experienced~~experience any earnings impact to their existing operations and maintenance and renewal and replacement services, as utility privatization contracts are an ~~"excepted service" within the 2011 Act.~~“excepted service.” With the expiration of ~~the 2011 Act at the end of government fiscal year 2021, there are currently no discretionary spending caps in fiscal year 2022 and beyond.However,~~sequestration, similar issues including further sequestration pursuant to the Balanced Budget and Emergency Deficit Control Act may arise as part of the fiscal uncertainty and/or future debt-ceiling limits imposed by Congress. Any future impact on ASUS and its operations through the Military Utility Privatization Subsidiaries will likely be limited to (a) the timing of funding to pay for services rendered, (b) delays in the processing of EPAs and/or REAs, (c) the timing of the issuance of contract modifications for new construction work not already funded by the U.S. Government, and/or (d) delays in solicitation for and/or awarding of new contracts under the Department of Defense utility privatization program.

At times, the DCAA and/or the DCMA 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 "~~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. Water revenues billed to customers for the three months ended March 31, 2023 and 2022 were based on 2021 adopted rates, pending a final decision by the CPUC. GSWC has a pending general rate case that will determine new water rates for the years 2022–2024. ~~In November 2021,~~On April 13, 2023, GSWC ~~and Public Advocates filed with~~received a proposed decision from the assigned administrative law judge at the CPUC ~~a joint motion~~on GSWC's water general rate case with rates retroactive to ~~adopt a~~January 1, 2022. Among other items, the proposed decision approves and adopts in its entirety the settlement agreement between GSWC and Public Advocates ~~on this~~in November 2021 that had been filed with the CPUC, and resolves all issues related to the 2022 annual revenue requirement in the general rate case application. The settlement agreement also allows for additional increases in adopted revenues for 2023 and 2024 subject to an earnings test and changes to the forecasted inflationary index values. ~~Among other things,~~As a result of receiving a proposed decision that approves the settlement ~~authorizes GSWC to complete certain advice letter capital projects approved~~agreement in its entirety, the impact of retroactive new rates for the full year of 2022 and the estimated second-year rate increases for the three months ended March 31, 2023 have been reflected 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.~~2023 first quarter results.

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~~A proposed decision on the pending general rate case is expected in mid-2022. Pending~~GSWC expects to receive a final decision ~~on this general~~during the second quarter of 2023. Once a final decision is issued, GSWC will request recovery of the cumulative amounts related to 2022 rate ~~case, GSWC filed with~~increases through a surcharge. Actual increases for 2023 will be determined when the filings to implement the new rate increases are approved by the CPUC, and will be calculated using the inflationary index values at that time. GSWC will file for ~~interim rates,~~the 2023 increases once the CPUC approves the final decision.

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. On May 9, 2023, GSWC received a proposed decision from the assigned administrative law judge at the CPUC on the cost of capital proceeding. Among other things, the proposed decision (i) adopts GSWC’s requested capital structure and cost of debt filed in the application; (ii) adopts a return on equity of 8.85% for GSWC as compared to 8.9% previously authorized; (iii) allows for the continuation of the Water Cost of Capital Mechanism (“WCCM”); and (iv) adopts the new cost of capital for the three-year period commencing January 1, 2022, through December 31, 2024. Comments on the proposed decision are due on May 30. In March 2023, the CPUC issued a decision that approved an extension of the statutory deadline for a final decision in the cost of capital proceeding to August 10, 2023.

While this proceeding is pending, the previously authorized return, which ~~will make~~includes a cost of debt of 6.6%, has been and is presently being billed to water customers during 2022 and 2023 until a final decision is issued in this proceeding. In the pending cost of capital proceeding, GSWC requested an updated cost of debt of 5.1%, which is being adopted in the proposed decision. Based on management's analysis of this regulatory proceeding and the associated accounting in 2022 and through March 31, 2023, GSWC has reduced revenues 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 adopted in the proposed decision. For the three months ended March 31, 2023 and 2022, GSWC reduced revenues by $1.8 million and $1.4 million, respectively, that are subject to refund. An additional reduction to revenues of $1.1 million was recorded during the first quarter of 2023 to reflect the incremental impact of revenues subject to refund from the new 2022 rates ~~once approved in~~recorded as a ~~CPUC final decision, effective January 1, 2022. Due to~~result of the ~~delay in finalizing the~~proposed water general rate case ~~water~~decision. As of March 31, 2023, GSWC had an aggregated regulatory liability of $9.3 million for the estimated revenues ~~billed~~subject to refund from the pending cost of capital proceeding. However, at this time, management cannot predict the ultimate outcome and ~~recorded~~any changes that may be made to the final decision in the cost of capital application, and the associated impact on 2022 and 2023 revenues. Changes in estimates will be made, if necessary, as more information in this proceeding becomes available.

Furthermore, the proposed decision continues the WCCM for the years 2023 and 2024, which adjusts the 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 103 basis points from the benchmark, which triggers the WCCM adjustment. GSWC recognized revenues for the first ~~three months~~quarter of 2023 and all of 2022 ~~were~~ based on ~~2021 adopted rates,~~the previously authorized return of equity of 8.9% that is presently being billed to water customers pending a final decision ~~by the CPUC on this general rate case application. When approved, the new rates will be retroactive to January 1, 2022 and cumulative adjustments will be recorded~~ in the ~~quarter the new rates are approved by the CPUC.~~cost of capital proceeding.

Electric Segment:

Recent Changes in Rates

InOn August ~~2019, the CPUC issued~~30, 2022, BVES filed a ~~final decision on the electric segment's general rate case which, among other things, increases adopted revenues by $1.0 million for 2022. BVESI is expected to file its next~~new general rate case application ~~in June 2022~~with the CPUC to determine new rates for the years 2023–2026. On December 15, 2022, the CPUC approved a decision for BVES to establish a general rate case memorandum account that makes the new 2023 rates effective and retroactive to January 1, 2023. Based on the established schedule in this proceeding, a proposed decision is expected in the fourth quarter of 2023.

Vegetation Management, Wildfire Mitigation Plans and Legislation

The CPUC adopted regulations intended to enhance the fire safety of overhead electric power lines. Those regulations included increased minimum clearances around electric power lines. BVES was authorized to track incremental costs incurred to implement the regulations in a fire hazard prevention memorandum account for the purpose of obtaining cost recovery in a future general rate case. The August 2019 final decision also authorized ~~BVESI~~BVES to record incremental costs related to vegetation management, such as costs for increased minimum clearances around electric power lines, in athe CPUC-approved memorandum account for future recovery. As of March 31, ~~2022, BVESI has~~2023, BVES had approximately ~~$6.3~~$9.3 million in incremental vegetation management costs recorded as a regulatory asset. ~~BVESI will seek future~~As part of its general rate case application filing with the CPUC in August 2022, BVES requested recovery of the costs accumulated in this memorandum account, ~~in its next general rate case filing.~~which will be subject to CPUC review.

California legislation enacted in September 2018 requires all investor-owned electric utilities to ~~submit an annual~~have 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's~~utility’s plans on constructing, maintaining, and operating its electrical lines and equipment to minimize the risk of catastrophic wildfire. BVES submitted an update to its WMP in May 2022 to OEIS for approval prior to going to the

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CPUC for ratification. In ~~September 2021,~~December 2022, OEIS issued a final decision of approval to BVES for its 2022 WMP update. In February 2023, the CPUC ~~approved BVESI's most recent WMP submission.~~ratified BVES’s current WMP. As of March 31, ~~2022, BVESI~~2023, BVES has approximately ~~$3.0~~$4.8 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, ~~2022~~2023 as a result of ~~BVESI's~~BVES’s WMPs are not currently in rates and ~~are expected to be~~have been filed for future recovery in ~~BVESI's next~~BVES’s general rate case ~~application.~~application in August 2022, which will be subject to CPUC review.

Additionally, the governor of California approved Assembly Bill ~~("AB"~~(“AB”) 1054 in July 2019 ~~which~~that, among other things, changed the burden of proof applicable in CPUC proceedings in which an electric utility with a valid safety certification seeks to recover wildfire costs. Previously, an electric utility seeking to recover costs had the burden to prove that it acted reasonably. Under AB 1054, if an electric utility has a valid safety certification, it will be presumed to have acted reasonably unless a party to the relevant proceeding creates a “serious doubt” as to the reasonableness of the utility’s conduct. In September 2021, ~~the Office of Energy Infrastructure Safety~~OEIS under the California Natural Resources Agency approved ~~BVESI's~~BVES’s latest safety certification filing. In December 2022, OEIS issued a renewal of its safety certification to BVES.

2023 Winter Storm Other Regulatory Asset

BVES activated a catastrophic emergency memorandum account (“CEMA”) to track the incremental costs incurred in

response to a severe winter storm that occurred during the first quarter of 2023, which ~~is valid through September 2022.~~resulted in the declaration of an emergency by the governor of California. Incremental costs of approximately $810,000 were incurred and included in the CEMA account, which has been recorded as a regulatory asset as of March 31, 2023 for future recovery. The incremental costs included in the CEMA account will be subject to review and approval by the CPUC. CEMA 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 this CEMA account did not impact BVES’s earnings.

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~~2022 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~~rate making 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 ~~Notifications~~Notification Levels and proposed Maximum Contamination 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 for~~notifications by water systems ~~detecting~~when 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, installed treatment in some wells 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,~~

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To date, DDW has established ~~new~~advisory drinking water notification and response levels for ~~two~~four individual PFAS chemicals namely, perfluorooctanoic acid (“PFOA”), perfluorooctane sulfonate (“PFOS”), perfluorobutane sulfonate (“PFBS”), and perfluorohexane sulfonate (“PFHxS”).

In March 2023, the U.S. EPA proposed maximum contaminant levels (“MCLs”) for six specific PFAS compounds in drinking water. The proposed rule addresses PFOS and PFOA as individual constituents and addresses the other four PFAS constituents as a mixture of ~~the PFAS compounds: 10~~chemicals. The proposed MCLs are 4 parts per trillion for ~~perfluorooctanoic~~PFOA and PFOS and a hazard index of 1 for PFBS, PFHxS, perfluorononanoic acid ~~(PFOA)~~(“PFNA”) and ~~40 parts per trillion~~GenX chemicals.

When finalized, the proposed regulation will require public water systems to monitor and treat for ~~perfluorooctanesulfonic acid (PFOS). On March 5, 2021, DDW issued~~these chemicals. It will also require water systems to notify the customers and reduce the levels if it exceeds the regulatory standards. The U.S. EPA anticipates finalizing and adopting this rule by the end of 2023. Once the rule is finalized, water systems will be required to comply with the MCLs after a ~~drinking~~specified implementation period, which is currently anticipated to be three years from the rule-adoption date. These proposed MCLs, once finalized, are expected to increase GSWC’s water ~~notification level~~treatment and ~~response level of 0.5 parts per billion (ppb) and 5 ppb, respectively for perfluorobutane sulfonic acid (PFBS).~~other operating costs.

Lead and Copper Rule Revisions:

On December 16, 2021, the U.S. EPA announced the ~~Lead~~lead and ~~Copper Rule Revisions~~copper rule revisions under an executive order ~~which will go into effect effective immediately~~ with a compliance date of October 16, 2024. Additionally, the U.S. 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~~2022 filed with the SEC for a discussion of environmental matters applicable to ~~GSWC and ASUS~~AWR 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~~2022 filed with the SEC for a discussion of water supply issues. The discussion below focuses on significant matters and changes since December 31, ~~2021.~~2022.

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. Legislation signed by the Governor into law in September 2022 has set more stringent indoor standard targets than initially set forth in the 2018 legislation. The indoor standard will now be set at 47 gpcd in 2025 ~~at which time the standard may be~~and then reduced ~~to 52.5 gpcd or other standard as~~

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~~recommend by DWR.A recent report prepared by DWR for the California legislature, recommends reducing the standard~~ to 42 gpcd ~~by 2030.Legislation has~~in 2030 (previously had been ~~introduced~~set at 52.5 gpcd and 50 gpcd, respectively). The SWRCB will begin a formal rulemaking process in the ~~current legislative session to reduce~~next several months and consider adoption of a final regulation for overall conservation standards by the end of this year that will include the indoor standard ~~to this value.~~as well as outdoor use standards.

~~California's recent period~~California started the 2023 water year, beginning on October 1, 2022, as a potentially fourth driest consecutive year of ~~multi-year drought resulted in reduced recharge~~drought. However, a series of nine atmospheric storm events between January and March 2023 have delivered a promising outlook to the state's groundwater basins. GSWC utilizes groundwater from numerous groundwater basins throughout the state. Several of these basins, especially smaller basins, experienced lower groundwater levels because of the drought. Several of GSWC's service areas rely on groundwater as their only source of supply. Given the critical nature of the groundwater levels in California’s Central Coast area, GSWC implemented mandatory water restrictions in certain service areas in accordance with CPUC procedures. In the event of waterState’s supply ~~shortages from the locally available supply, GSWC would need to transport additional water from other areas, increasing the cost of water supply.~~

conditions. As of ~~April 26, 2022,~~May 2, 2023, the U.S. Drought Monitor reported that ~~41%~~none of California was ~~considered~~ in ~~"Extreme Drought"~~“Extreme Drought” as compared to ~~53%~~41% one year ago, and ~~95%~~none of California ~~was considered~~is in “Severe Drought” as compared to ~~88% a~~33% just three months ago and 95% one year ago. ~~California~~On April 27, 2023, the DWR reported that the statewide snowpack is ~~experiencing a record drought in 2022, with precipitation from January to March as~~at 211% of average for April 1 and 54 inches of snow water equivalent making this year’s snowpack one of the ~~driest on record for this three month period. Due to deteriorating conditions,~~largest since the 1950’s.

At the start of 2023, DWR ~~reduced~~initially set the ~~allocation of~~California State Water Project ~~water from 15%~~(“SWP”) allocations at 5%. However, due to ~~5% on March 18, 2022. This change in~~improved precipitation and snow levels experienced state-wide, DWR increased the SWP allocation ~~will~~to 75%, and as a result, ~~in several areas of~~ the Metropolitan Water District of Southern California (“MWD”) lifted restrictions that depend on SWP water to receive only “health and safety (H&S)” supplies of 55 gpcd beginning in June 2022 should demand reduction actions not result in adequate water savings. On April 26, 2022, MWD declared a Water Supply Emergency Condition for thehad impacted SWP dependent service areas ~~that will impact GSWC’s~~of Simi Valley and Claremont ~~service areas,~~that had been in place since mid-2022. DWR again increased the SWP allocation to 100% on April 20, 2023, which ~~utilize a portion of their supply from~~is the SWP. This action also includes a phased Emergency Conservation Program that limits outdoor watering in those areas to one day per week. Should necessary demand reductions not be realized, MWD will move to zero outdoor watering days later infirst time the ~~summer. In addition, on~~full contracted SWP allocation has been at this level since 2006.

On March ~~28, 2022,~~15, 2023, the governor of California issued an executive order ~~calling on all urban water suppliers to reduce~~modifying the drought restrictions that were issued in March 2022. The order ended the voluntary water use ~~by 20–30 percent.~~requirement as well as the required stage 2 implementation of the water supply contingency plans but did not end all water use restrictions. GSWC ~~is working~~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,~~response to improving supply conditions in much of the State, GSWC has made an advice letter filing with the CPUC ~~authorized GSWC~~ to ~~track incremental drought-related costs~~move from stage 2 to stage 1 effective on May 14, 2023 in all of GSWC's service areas except for three coastal systems that are still experiencing depressed groundwater water levels.

Prolonged drought conditions still exist on the Colorado River System, which is experiencing historically low reservoir levels in Lake Mead and Lake Powell. Urgent action to reduce water demand on the lower river by 2 to 4 million acre feet annually has been requested by the US Bureau of Reclamation (the “Bureau”). The Bureau prepared a supplemental environmental impact statement with options that may result in modifications to current agreements. This may result in water delivery cuts by all of the lower states including California.

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, 2022 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 ~~memorandum account~~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 ~~future recovery.~~the year-ended December 31, 2022 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. There are no current accounting pronouncements that Registrant believes will significantly impact it. See Note 1 of the Unaudited Notes to Consolidated Financial ~~Statements~~.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,~~BVES, 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~~2022 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, ~~2022,~~2023, 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, ~~that~~which are believed to be material. Management believes that rate recovery, proper insurance coverage and reserves are in place to insure against, among other things, property, general liability, employment, and workers’ compensation claims incurred in the ordinary course of business. Insurance coverage may not cover certain claims involving punitive damages.

Item 1A. Risk Factors

There have been no significant changes in the risk factors disclosed in our ~~2021~~2022 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 first quarter of ~~2022:~~2023:

Period Total Number of
Shares
Purchased Average Price Paid
per Share Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs (1) Maximum Number
of Shares That May
Yet Be Purchased
under the Plans or
Programs (1)(3)
January 1–31, 2022 361 $ 94.44 — —
February 1–28, 2022 331 $ 86.08 — —
March 1–31, 2022 2,748 $ 85.25 — —
Total 3,440 (2) $ 86.29 —


Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)	Maximum Number of Shares That May Yet Be Purchased under the Plans or Programs (1)(3)
January 1 – 31, 2023	296		$	93.57	—	—
February 1 – 28, 2023	227		$	94.17	—	—
March 1 – 31, 2023	8,857		$	86.05	—	—
Total	9,380	(2)	$	86.48	—

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

(2) ~~These~~ Of these amounts, 6,204 Common Shares were acquired on the open market for employees pursuant to ~~GSWC's~~the 401(k) ~~plan and~~Plan. The remainder of the shares were acquired on the open market for participants in the Common Share Purchase and Dividend Reinvestment Plan.

(3) Neither the 401(k) plan nor the Common Share Purchase and Dividend Reinvestment Plan contain a maximum number of Common Shares 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, 2022, AWR's~~May 8, 2023, AWR’s Board of Directors approved a second quarter dividend of ~~$0.365~~$0.3975 per share on ~~AWR's~~AWR’s Common Shares. Dividends on the Common Shares will be paid on June 1, ~~2022~~2023 to shareholders of record at the close of business on May ~~16, 2022.~~19, 2023.

(b) There have been no material changes during the first quarter of ~~2022~~2023 to the procedures by which shareholders may nominate persons to the Board of Directors of AWR.

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Item 6. Exhibits
(a) The following documents are filed as Exhibits to this report:

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

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

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

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

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

4.2						Note Purchase Agreement dated as of October 11, 2005 between Golden State Water Company and Co-Bank, ACB incorporated by reference to Exhibit 4.1 of Registrant's Form 8-K filed October 13, 2005 (File No. 1-14431)

4.3						Description of Common Shares incorporated by reference to Exhibit 4.3 to Registrant's Form 10-K for the year ended December 31, 2019

4.4						Description of Debt Securities incorporated by reference to Exhibit 4.4 to Registrant's Form 10-K for the year ended December ~~31, 2021~~31,2021

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

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

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

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

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

10.6						~~Form of Amended and Restated~~ Change in Control Agreement between American States Water Company or a subsidiary and certain executives incorporated herein by reference to Exhibit ~~10.4~~10.6 to Registrant's Form ~~8-K filed on November 21, 2014 (File No. 1-14431)~~ 10-K for the year ended December 31, 2022 (2)

10.7						Golden State Water Company Supplemental Executive Retirement Plan, amended and restated, ~~(1)~~incorporated herein by reference to Exhibit 10.7 to Registrant’s Form 10-Q filed on May 2, 2022 (2)

10.8						Amended and Restated Credit Agreement between American States Water Company dated June 3, 2005 with Wells Fargo Bank, N.A., as Administrative Agent, as amended,, incorporated by reference herein to Exhibit ~~10.1~~10.8 to Registrant's ~~8-K dated June 21, 2021~~Form 10-Q for the quarter ended March 31, 2023 (1)

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

~~10.10~~						Policy Regarding the Recoupment of Certain Performance-Based Compensation Payments incorporated herein by reference to Exhibit 10.3 to the Registrant's Form 8-K filed on April 2, 2014 (2)

~~10.11~~10.10						Officer Relocation Policy incorporated herein by reference to Exhibit 10.5 to the Registrant's Form 8-K filed on July 31, 2009 (2)

~~10.12~~10.11						Form of Indemnification Agreement for directors incorporated by reference herein to Exhibit 10.35 to the Registrant's Form 10-K for the period ended December 31, 2012 ~~(1)~~ (2)

~~10.13~~10.12						2016 Stock Incentive Plan incorporated by reference to Exhibit 10.1 to Registrant’s Form 8-K filed on May 19, 2016 (2)

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~~10.14~~10.13						2013 Non-Employee Directors Plan incorporated by reference herein to Exhibit 10.2 to the Registrant's Form 8-K filed on March 25, 2016 (2)

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~~10.15~~10.14						Form of Restricted Stock Award Agreement for officers with respect to time-vested restricted stock awards under the 2016 Stock Incentive Plan after December 31, 2017 incorporated by reference to Exhibit 10.1 of Form 8-K filed on November 3, 2017 (2)

~~10.16~~						~~Performance Incentive Plan incorporated by reference to Exhibit 10.1 to Registrant’s Form 8-K filed on May 20, 2015 (2~~)

~~10.17~~10.15						Note Purchase Agreement dated July 8, 2020 incorporated by reference to Exhibit 10.1 to Registrant’s Form 8-K filed July 14, 2020

~~10.18~~						~~Form of 2019 Performance Award Agreement incorporated by reference to Exhibit 10.1 to Registrant's Form 8-K filed on February 1, 2019 (2)~~

~~10.19~~						~~Separation Agreement and General Release of All Claims incorporated by reference to Exhibit 10.24 to Registrant's Form 10-K filed on February 24, 2020 (2)~~

~~10.20~~10.16						Form of 2020 Performance Award Agreement incorporated by reference to Exhibit 10.1 of Registrant's Form 8-K filed January 31, 2020 (2)

~~10.21~~						Form of Restricted Stock Award Agreement for officers with respect to time-vested restricted stock awards under the 2016 Stock Incentive Plan after December 31, 2017 incorporated by reference to Exhibit 10.1 of Form 8-K filed on November 3, 2017 (2)

~~10.22~~10.17						Form of 2021 Performance Award Agreement incorporated by reference to Exhibit 10.1 of Registrant's Form 8-K filed February 5, 2021 (2)

~~10.23~~						~~Form of Award Agreement for the 2021 Short-Term Incentive Program incorporated by reference to Exhibit 10.2 of Registrant's Form 8-K filed on April 1, 2021 (2)~~

~~10.24~~						~~Contract for Professional Services effective July 10, 2021 incorporated by reference from Exhibit 10.1 to Form 8-K filed on July 15, 2021 (2)~~

~~10.25~~10.18						Separation Agreement and General Release of Claims dated August 10, 2021 incorporated by reference to Exhibit 10.1 to Registrant’s Form 8-K filed on August 13, 2021 (2)

~~10.26~~10.19						Retirement Agreement and General Release of Claims effective January 14, 2022, incorporated by reference to Exhibit 10.1 to Registrant's Form 8-K filed on January 21, 2022 (2)

~~10.27~~10.20						Contract for Professional Services effective January 15, 2022, incorporated by reference to Exhibit 10.2 to Registrant's Form 8-K filed on January 21, 2022 (2)

~~10.28~~10.21						Form of 2022 Performance Award Agreement incorporated by reference to Exhibit 10.1 of Registrant's Form 8-K filed February 4, 2022 (2)

~~10.29~~10.22						~~2022 Short-Term Incentive Program~~Form of 2023 Performance Award Agreement incorporated by reference to Exhibit 10.1 of Registrant's Form 8-K filed February 10, 2023 (2)

10.23						Form of Indemnification Agreement for directors and officers incorporated by reference herein to Exhibit 10.24 to the Registrant's Form 10-K for the year ended December 31, 2022 (2)

10.24						Short-Term Incentive Program incorporated by reference to Exhibit 10.1 of Registrant’s Form 8-K filed on ~~April 1, 2022~~March 31, 2023 (2)

10.25						Form of 2023 Short-Term Incentive Program Award Agreement incorporated by reference to Exhibit 10.2 of Registrant’s Form 8-K filed on March 31, 2023 (2)

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

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

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

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

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

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

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

101.SCH						XBRL Taxonomy Extension Schema (3)

101.CAL						XBRL Taxonomy Extension Calculation Linkbase (3)

101.DEF						XBRL Taxonomy Extension Definition Linkbase (3)

101.LAB						XBRL Taxonomy Extension Label Linkbase (3)

101.PRE						XBRL Taxonomy Extension Presentation Linkbase (3)

~~Table of Contents~~



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

~~_______________________~~

(1) Filed concurrently herewith

(2) Management contract or compensatory arrangement

(3) Furnished concurrently herewith

4652

Table of Contents

SIGNATURE

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


									AMERICAN STATES WATER COMPANY (“AWR”):

						By:			/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, 2022~~10, 2023

4753


	Three Months Ended March 31, 2022
	Common Shares			Reinvested
	Number			Earnings
	of			in the
(in thousands)	Shares	Amount		Business		Total
Balances at December 31, 2021	36,936	$	258,442	$	427,505	$	685,947
Add:
Net income				14,162		14,162
Exercise of stock options and other issuances of Common Shares	20	—				—
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 cash		41				41
Deduct:
Dividends on Common Shares				13,485		13,485
Dividend equivalent rights on stock-based awards not paid in cash				41		41
Balances at March 31, 2022	36,956	$	259,284	$	428,141	$	687,425


	Three Months Ended March 31, 2021
	Common Shares			Reinvested
	Number			Earnings
	of			in the
(in thousands)	Shares	Amount		Business		Total
Balances at December 31, 2020	36,889	$	256,666	385,007		$	641,673
Add:
Net income				19,268		19,268
Exercise of stock options and other issuances of Common Shares	24	—				—
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 cash		49				49
Deduct:
Dividends on Common Shares				12,361		12,361
Dividend equivalent rights on stock-based awards not paid in cash				49		49
Balances at March 31, 2021	36,913	$	257,528	$	391,865	$	649,393


	Three Months Ended March 31,
(dollar in thousands)	2022		2021
Water:
Tariff-based revenues	$	72,498	$	74,288
Surcharges (cost-recovery activities)	549		534
Other	518		517
Water revenues from contracts with customers	73,565		75,339
WRAM under (over)-collection (alternative revenue program)	341		(310)
Total water revenues	73,906		75,029

Electric:
Tariff-based revenues	12,552		11,677
Surcharges (cost-recovery activities)	27		202
Electric revenues from contracts with customers	12,579		11,879
BRRAM over-collection (alternative revenue program)	(687)		(340)
Total electric revenues	11,892		11,539

Contracted services:
Water	13,546		18,883
Wastewater	9,226		11,609
Contracted services revenues from contracts with customers	22,772		30,492

Total AWR revenues	$	108,570	$	117,060