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 March 31, 2026, GSWC and BVES had $0.1 million of net regulatory assets on the balance sheets, which included $122.5 million of regulatory assets net of $122.4 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 $44.7 million of regulatory assets not accruing a carrying cost, which included $25.8 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 $15.7 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 $3.2 million relates to other regulatory assets that do not provide for a carrying cost. Furthermore, there are $118.3 million of regulatory liabilities not incurring interest that consisted of $66.9 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, $41.0 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), and $10.4 million related to the PFAS contamination litigation proceeds memorandum account that also does not accrue 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)	March 31, 2026		December 31, 2025
GSWC
2022/2023 general rate case memorandum accounts (unbilled revenue)	$	18,814	$	22,107
Flowed-through deferred income taxes, net	22,286		20,932
Low income rate assistance balancing accounts	11,502		10,582
Other regulatory assets	23,370		28,405
Excess deferred income taxes	(63,152)		(63,223)
Pensions and other post-retirement obligations	(43,984)		(43,479)
Per- and Polyfluoroalkyl Substances (“PFAS”) Contamination Litigation Proceeds Memorandum Account	(10,406)		(10,987)
Other regulatory liabilities	(218)		(1,331)
Total GSWC	$	(41,788)	$	(36,994)
BVES
Derivative instrument memorandum account (Note 5)	$	15,708	$	15,503
2023/2024 general rate case memorandum accounts (unbilled revenue)	7,237		8,221
Wildfire mitigation and other fire prevention related costs memorandum accounts	9,877		11,336
Other regulatory assets	13,682		15,213
Other regulatory liabilities	(4,624)		(4,015)
Total BVES	$	41,880	$	46,258

Total AWR	$	92	$	9,264

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, 2025 filed with the SEC. There were no significant changes during the three months ended March 31, 2026 except for routine and recurring activity including the recovery of regulatory assets through surcharges currently in place.

GSWC has been a plaintiff in various class action lawsuits related to PFAS contamination affecting public water systems. A class settlement agreement among Tyco Fire Products LP (“Tyco”) and the class of eligible public water systems was entered into on April 12, 2024 that resolved any claims for PFAS contamination with Tyco. The class settlement agreement between the parties was approved by an order issued by the Federal District Court of South Carolina on November 22, 2024. As a result of the settlement, GSWC was notified on April 8, 2026 that it will receive from Tyco $2.2 million, net of legal fees.