Regulatory Matters (Tables)

Regulatory assets and liabilities are comprised of the following as of:


	June 30, 2026		December 31, 2025
	(In thousands)
Regulatory assets:
Income tax temporary differences (a) (r)	$	211,958	204,384
Monterey Water Revenue Adjustment Mechanism (“M-WRAM”) (b)	14,017		8,553
Business combinations debt premium (c) (r)	8,501		9,772
Employee benefit costs (d) (r)	6,127		5,823
Catastrophic event memorandum accounts (“CEMA”) (e)	—		127
Revenue adjustment mechanisms (f) (r)	6,826		7,931
Customer Assistance Program (“CAP”) balancing account (g)	4,410		3,696

Water supply costs (h)	—		847
Ground Water Regulation Legal Expenses memorandum account (“GWRLEMA”) (i)	225		—
Other (j)	11,484		13,729
Total regulatory assets	263,548		254,862
Less: current portion of regulatory assets (k)	19,610		8,315
Total regulatory assets, less current portion	$	243,938	246,547
Regulatory liabilities:
Cost of removal (l)	410,935		394,391
Future income tax benefits due to customers (m)	81,480		82,285
Unrecognized pensions and other postretirement benefits (n)	31,420		32,996
Per- and Polyfluoroalkyl substances (“PFAS”) legal settlement proceeds (o)	36,112		24,682
Employee benefit costs (d)	11,335		8,771
Water supply costs (h)	3,615		—
Revenue adjustment mechanisms (f)	1,067		—
Other (p)	2,445		3,672
Total regulatory liabilities	578,409		546,797
Less: current portion of regulatory liabilities (q)	1		—
Total regulatory liabilities, less current portion	$	578,408	546,797

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(a)Consists primarily of temporary income tax differences that are flowed through to customers, which will be recovered in future rates as these temporary differences reverse. The company expects to recover regulatory assets related to plant depreciation income tax temporary differences over the lives of the plant assets, which are between 5 to 100 years.

(b)M-WRAM is described in the following section.

(c)Consists of debt fair value adjustments recognized through purchase accounting for the completed merger with CTWS in 2019.

(d)Includes deferrals of pension and other postretirement benefit expense and cost of accrued benefits for vacation, and group health insurance.

(e)The California Public Utilities Commission (“CPUC”) has authorized water utilities to activate CEMA accounts in order to track savings and costs related to SJWC’s response to catastrophic events, which includes external labor and materials, increases in bad debt from suspension of shutoffs for non-payment, waived deposits and reconnection fees, and divergence from actual versus authorized usage. The balances primarily relate to expenses associated with SJWC’s response to COVID-19, including bad debt.

(f)Primarily relates to Water Rate Adjustment mechanism (“WRA”). WRA and Water Conservation Memorandum Account (“WCMA”) are described in the following section.

(g)Represents costs associated with SJWC’s CAP.

(h)Reflects primarily SJWC’s Full Cost Balancing Account (“FCBA”), which tracks differences in actual water supply costs compared to amounts assumed in base rates, including applicable changes and variations in costs and quantities that affect the overall mix of the water supply.

(i)Represents legal and related expenses associated with litigation and consensus-building activities related to SJWC’s water rights. The GWRLEMA was re-established in November 2025 to track these costs.

(j)Other includes other balancing and memorandum accounts and regulatory mechanisms, deferred costs for certain information technology activities, asset retirement obligations, tank painting, well reconditioning, rate case expenses and acquisition costs.

(k)Primarily relates to SJWC’s balancing and memorandum account surcharge in accordance with Decision No. 24-12-077 and the current portion of CWC’s WRA, deferred well redevelopment, carbon filters and rate case costs.

(l)Represents amounts collected in rates from customers for estimated costs to retire assets at the end of their expected useful lives before the costs are incurred.

(m)On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) was signed into law. The Tax Act included a reduction in the federal income tax rate from 35% to 21%. The rate reduction was effective on January 1, 2018 and resulted in a regulatory liability for the excess deferred income taxes. The benefit of amortization of excess deferred income taxes flows back to the customers under current normalization rules and agreed upon methods with the commissions.

(n)Represents actuarial losses and gains and prior service cost that have not yet been recognized as components of net periodic benefit cost for certain pension and other postretirement benefit plans.

(o)Primarily relates to legal settlements received by SJWC and CWC from ongoing PFAS water contamination litigation against manufacturers which will be used to offset future costs incurred, recorded as Contributions in Aid of Construction (“CIAC”), or returned to customers through future rates. The Water Contamination Litigation Memorandum Account (“WCLMA”) has been established to track net proceeds and costs resulting from water contamination litigation related to SJWC.

(p)Primarily relates to MWC’s accrued tank painting costs.

(q)Primarily relates to the current portion of WRA.

(r)Generally, not earning a return either by interest on the regulatory asset or as a component of rate base at the allowed rate of return.