In accordance with accounting principles for rate-regulated enterprises, GSWC and BVES record regulatory assets, which represent probable future recovery of incurred 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 June 30, 2025, GSWC and BVES had $38.0 million of net regulatory assets on the balance sheets, which included $144.3 million of regulatory assets net of $106.3 million of regulatory liabilities. As authorized by the CPUC, the majority of the regulatory assets and liabilities accrue interest at the current 90-day commercial-paper rate. There are approximately $32.5 million of regulatory assets not accruing a carrying cost, which included $18.3 million related to flowed-through deferred income taxes including the gross-up portion on the deferred tax resulting from the excess deferred income tax regulatory liability, and $11.2 million related to memorandum accounts authorized by the CPUC to track unrealized gains and losses on BVES’s purchase power contracts over the term of the contracts. The remaining $3.0 million relates to other regulatory assets that do not provide for a carrying cost. Furthermore, there are $90.5 million of regulatory liabilities not incurring interest that consisted of $67.3 million related to 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, and $23.2 million related to the net over funded positions in Registrant’s pension and other retirement obligations (not including the two-way pension balancing accounts, which accrues interest).

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 regulatory 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.


(dollars in thousands)	June 30, 2025		December 31, 2024
GSWC
2025 general rate case memorandum account (unbilled revenue)	$	3,910	$	—
2022/2023 general rate case memorandum accounts (unbilled revenue)	30,687		37,711
Water revenue adjustment mechanism, net of modified cost balancing account	18,341		29,738
Asset retirement obligations	7,820		7,501
Flowed-through deferred income taxes, net	16,139		12,506
Low income rate assistance balancing accounts	10,231		8,834
Other regulatory assets	11,590		11,352
Excess deferred income taxes	(63,537)		(63,682)
Pensions and other post-retirement obligations	(24,363)		(25,179)
Per-and Polyfluoroalkyl Substances (“PFAS”) Contamination Litigation Proceeds Memorandum Account	(12,500)		—
Other regulatory liabilities	(1,357)		(608)
Total GSWC	$	(3,039)	$	18,173
BVES
Derivative instrument memorandum account (Note 5)	$	11,244	$	8,823
2023/2024 general rate case memorandum accounts (unbilled revenue)	9,574		9,777
Wildfire mitigation and other fire prevention related costs memorandum accounts	13,954		14,681
Other regulatory assets	10,775		8,853
Other regulatory liabilities	(4,507)		(5,628)
Total BVES	$	41,040	$	36,506

Total AWR	$	38,001	$	54,679

On January 30, 2025, the CPUC issued a final decision in connection with GSWC’s general rate case that adopted a settlement agreement between GSWC and Cal Advocates and set new rates for 2025 – 2027. GSWC continued to bill its customers based on the existing adopted 2024 rates until the new 2025 rates were approved and implemented effective February 1, 2025. GSWC filed with the CPUC to establish a memorandum account to track interim rates, which made the new 2025 rates retroactive to January 1, 2025. As of June 30, 2025, there is an aggregate cumulative balance of $3.9 million under-collection recorded as a regulatory asset for retroactive water revenues. On April 14, 2025, GSWC filed an advice letter to recover the cumulative retroactive amounts related to January 2025 with a 12-month surcharge effective May 1, 2025.

In June 2023, the CPUC adopted a final decision in GSWC’s general rate case application that determined new water rates for the years 2022–2024, with new rates retroactive to January 1, 2022. Upon receiving the final decision, GSWC filed for the implementation of 2023 rate increases that went into effect on July 31, 2023. 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 period from January 1, 2023 to July 30, 2023 were based on 2021 adopted rates. GSWC was authorized to create general rate case memorandum accounts to track the revenue differences between the 2021 adopted rates and the 2022 and 2023 rates authorized by the CPUC for future recovery. In October 2023, surcharges were implemented to recover the cumulative retroactive rate differences over 36 months. As of June 30, 2025, there is an aggregate cumulative amount of $30.7 million under-collection in the general rate case memorandum account that GSWC has recorded as a regulatory asset for retroactive water revenues.

Since 2008 and through December 31, 2024, GSWC recorded 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”) 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. As of June 30, 2025, GSWC had an aggregated regulatory asset of $18.3 million, which is comprised of an $18.0 million under-collection in the WRAM accounts and a $0.3 million under-collection in the MCBA accounts, both related to pre-2025 revenue and supply cost activity. The surcharges for all pre-2025 WRAM/MCBA balances were implemented on May 1, 2025, with the majority of the balances to be recovered within 18 months.

The CPUC’s final decision in connection with the most recent GRC setting rates for the years 2025 - 2027 rejected GSWC’s request for the continuation of the WRAM and MCBA, and instead orders GSWC to transition to a modified rate adjustment mechanism (a Monterey-style WRAM or “M-WRAM”) and an incremental cost balancing account (“ICBA”) for supply costs. The new M-WRAM tracks the difference between the revenue based on actual metered sales through a tiered volumetric rate and the revenue that would have been received with the same actual metered sales if a standard quantity rate had been in effect. The new ICBA for supply costs tracks differences between the CPUC-authorized per-unit prices of water production costs and actual per-unit prices of water production costs. Both the M-WRAM and the ICBA were effective January 1, 2025. During the three and six months ended June 30, 2025, the balances recorded in the new M-WRAM and ICBA were not material.

As required by the accounting guidance for alternative revenue programs, GSWC is required to collect its WRAM and M-WRAM balances within 24 months following the year in which an under-collection is recorded. As of June 30, 2025, there were no significant WRAM or M-WRAM under-collections that were estimated to be collected over more than a 24 month period.

GSWC has been a plaintiff in class action lawsuits related to PFAS contamination affecting public water systems. Pursuant to a class settlement agreement, during the second quarter of 2025, GSWC was notified that it will receive from 3M Company approximately $19 million, net of legal fees. In June 2025, 3M Company paid a portion of this amount into a qualified settlement fund totaling approximately $12.5 million to be administered by a custodian for the benefit of GSWC. This amount is expected to be disbursed to GSWC during the third and fourth quarter of 2025, with the first payment received in August 2025. The class settlement agreement among 3M Company and the class of eligible public water systems was entered into on June 22, 2023 and resolved any claims for PFAS contamination with 3M Company. The class settlement agreement between the parties was approved by an order issued by the Federal District Court of South Carolina on March 29, 2024. Accordingly, in the second quarter of 2025, GSWC recognized a $12.5 million receivable along with a corresponding regulatory liability (as discussed below) as the amount was realizable and collection is virtually certain. Based on the settlement agreement with 3M Company, GSWC expects to be paid the remaining amount during 2026 – 2033, however, collectability is not virtually certain in order to recognize this amount as a receivable and corresponding regulatory liability as of June 30, 2025.

Settlement proceeds received by GSWC may be used for future capital investments or operations and maintenance expenses related to PFAS water contamination to its water systems or any PFAS related litigation against its water systems, which benefit GSWC’s customers. The CPUC has authorized GSWC to track in a memorandum account the settlement payments received by GSWC from lawsuits related to PFAS contamination in its water systems, which include the proceeds received for participation in the 3M Company class action lawsuit. The amounts in the memorandum account as of June 30, 2025 have been recorded as a regulatory liability to be used in the future to offset the incremental investments in replacement and treatment of property, as well as operations and maintenance expenses related to PFAS contamination.

GSWC continues to monitor contaminant levels for PFAS compounds in accordance with final U.S. EPA regulations. Proceeds received from 3M Company may not be sufficient to pay for all PFAS-related liabilities that will ultimately be incurred by GSWC, whether related to capital investments, operation and maintenance expenses, or litigation brought against GSWC. However, the CPUC has also authorized GSWC to track incremental expenses, including laboratory testing and monitoring costs, customer and public notification costs and chemical and operating treatment costs, incurred as a result of PFAS contamination in a separate memorandum account to be filed with the CPUC for future recovery.

On January 16, 2025, the CPUC adopted a final decision that, among other things, set the new rates for the years 2023 – 2026 and adopted a settlement agreement in its entirety. BVES was authorized by the CPUC to establish a general rate case memorandum account that made the new rates retroactive to January 1, 2023 with new 2025 rates implemented effective March 1, 2025. Because of the delay in finalizing the electric general rate case, billed electric revenues for the years of 2023, 2024 and through February 2025, were based on 2022 adopted rates. The general rate case memorandum account tracks the revenue differences between the 2022 adopted rates and the 2023 and 2024 rates authorized by the CPUC for future recovery. As of June 30, 2025, the aggregate cumulative under-collection in retroactive revenues related to the full year of 2023 and 2024 amounted to $9.6 million. On February 28, 2025, BVES filed an advice letter to recover the cumulative retroactive amounts related to 2023 and 2024 through a surcharge to be collected over a 36-month period. The surcharge was implemented and made effective on April 1, 2025. Furthermore, the impact of the new rates related to the months of January and February 2025 have been added to the Base Revenue Requirement Adjustment Mechanism balancing account for future recovery.

Among other things, the settlement agreement adopted in the final decision also approved for recovery the requested capital expenditures and other incremental operating costs already incurred prior to 2023 in connection with BVES’s wildfire mitigation plans (“WMP”s) that were not included in customer rates prior to receiving a final CPUC decision on its recent general rate case. The decision approved BVES’s recovery of incremental vegetation management costs and other wildfire mitigation and prevention costs incurred prior to 2023 that were being tracked in memorandum accounts for future recovery and were recorded as regulatory assets. As of June 30, 2025, BVES had a total of approximately $14.0 million in regulatory assets related to these memorandum accounts. During the first quarter of 2025, BVES filed advice letters to recover all pre-2023 costs included in the vegetation management and other WMP memorandum accounts, which will be recovered over a period of 24 to 36 months through surcharges that were implemented on March 1, 2025 and April 1, 2025.