10-Q 1 cwt-20220930.htm 10-Q cwt-20220930
0001035201FALSE--12-312022Q300010352012022-01-012022-09-3000010352012022-09-30xbrli:sharesiso4217:USD00010352012021-12-31iso4217:USDxbrli:shares00010352012022-07-012022-09-3000010352012021-07-012021-09-3000010352012021-01-012021-09-3000010352012020-12-3100010352012021-09-30cwt:segment0001035201cwt:BVRTWaterCompanyMember2022-09-30xbrli:pure0001035201cwt:ResidentialMember2022-07-012022-09-300001035201cwt:ResidentialMember2021-07-012021-09-300001035201cwt:BusinessMember2022-07-012022-09-300001035201cwt:BusinessMember2021-07-012021-09-300001035201cwt:MultipleResidentialMember2022-07-012022-09-300001035201cwt:MultipleResidentialMember2021-07-012021-09-300001035201cwt:IndustrialMember2022-07-012022-09-300001035201cwt:IndustrialMember2021-07-012021-09-300001035201cwt:PublicAuthoritiesMember2022-07-012022-09-300001035201cwt:PublicAuthoritiesMember2021-07-012021-09-300001035201us-gaap:ServiceOtherMember2022-07-012022-09-300001035201us-gaap:ServiceOtherMember2021-07-012021-09-300001035201cwt:ResidentialMember2022-01-012022-09-300001035201cwt:ResidentialMember2021-01-012021-09-300001035201cwt:BusinessMember2022-01-012022-09-300001035201cwt:BusinessMember2021-01-012021-09-300001035201cwt:MultipleResidentialMember2022-01-012022-09-300001035201cwt:MultipleResidentialMember2021-01-012021-09-300001035201cwt:IndustrialMember2022-01-012022-09-300001035201cwt:IndustrialMember2021-01-012021-09-300001035201cwt:PublicAuthoritiesMember2022-01-012022-09-300001035201cwt:PublicAuthoritiesMember2021-01-012021-09-300001035201us-gaap:ServiceOtherMember2022-01-012022-09-300001035201us-gaap:ServiceOtherMember2021-01-012021-09-300001035201cwt:OperatingAndMaintenanceMember2022-07-012022-09-300001035201cwt:OperatingAndMaintenanceMember2021-07-012021-09-300001035201cwt:OtherNonRegulatedServiceMember2022-07-012022-09-300001035201cwt:OtherNonRegulatedServiceMember2021-07-012021-09-300001035201cwt:NonRegulatedServicesMember2022-07-012022-09-300001035201cwt:NonRegulatedServicesMember2021-07-012021-09-300001035201cwt:OperatingAndMaintenanceMember2022-01-012022-09-300001035201cwt:OperatingAndMaintenanceMember2021-01-012021-09-300001035201cwt:OtherNonRegulatedServiceMember2022-01-012022-09-300001035201cwt:OtherNonRegulatedServiceMember2021-01-012021-09-300001035201cwt:NonRegulatedServicesMember2022-01-012022-09-300001035201cwt:NonRegulatedServicesMember2021-01-012021-09-300001035201cwt:InsuranceProgramsMember2022-01-012022-09-3000010352012021-01-012021-12-310001035201srt:OfficerMemberus-gaap:RestrictedStockMember2022-01-012022-09-300001035201us-gaap:RestrictedStockMembersrt:DirectorMember2022-01-012022-09-300001035201us-gaap:RestrictedStockMember2022-09-300001035201us-gaap:RestrictedStockMember2022-01-012022-09-300001035201us-gaap:RestrictedStockMember2021-12-310001035201cwt:PerformanceBasedRestrictedStockUnitAwardsRSUsMember2022-01-012022-09-300001035201cwt:PerformanceBasedRestrictedStockUnitAwardsRSUsMembersrt:MinimumMember2022-01-012022-09-300001035201cwt:PerformanceBasedRestrictedStockUnitAwardsRSUsMembersrt:MaximumMember2022-01-012022-09-300001035201cwt:PerformanceBasedRestrictedStockUnitAwardsRSUsMember2022-09-300001035201us-gaap:RestrictedStockUnitsRSUMember2021-12-310001035201us-gaap:RestrictedStockUnitsRSUMember2022-01-012022-09-300001035201us-gaap:RestrictedStockUnitsRSUMember2022-09-3000010352012022-04-2900010352012022-04-292022-04-2900010352012022-07-2500010352012022-07-260001035201us-gaap:CommonStockMember2021-12-310001035201us-gaap:AdditionalPaidInCapitalMember2021-12-310001035201us-gaap:RetainedEarningsMember2021-12-310001035201us-gaap:NoncontrollingInterestMember2021-12-310001035201us-gaap:RetainedEarningsMember2022-01-012022-03-310001035201us-gaap:NoncontrollingInterestMember2022-01-012022-03-3100010352012022-01-012022-03-310001035201us-gaap:CommonStockMember2022-01-012022-03-310001035201us-gaap:AdditionalPaidInCapitalMember2022-01-012022-03-310001035201us-gaap:CommonStockMember2022-03-310001035201us-gaap:AdditionalPaidInCapitalMember2022-03-310001035201us-gaap:RetainedEarningsMember2022-03-310001035201us-gaap:NoncontrollingInterestMember2022-03-3100010352012022-03-310001035201us-gaap:RetainedEarningsMember2022-04-012022-06-300001035201us-gaap:NoncontrollingInterestMember2022-04-012022-06-3000010352012022-04-012022-06-300001035201us-gaap:CommonStockMember2022-04-012022-06-300001035201us-gaap:AdditionalPaidInCapitalMember2022-04-012022-06-300001035201us-gaap:CommonStockMember2022-06-300001035201us-gaap:AdditionalPaidInCapitalMember2022-06-300001035201us-gaap:RetainedEarningsMember2022-06-300001035201us-gaap:NoncontrollingInterestMember2022-06-3000010352012022-06-300001035201us-gaap:RetainedEarningsMember2022-07-012022-09-300001035201us-gaap:NoncontrollingInterestMember2022-07-012022-09-300001035201us-gaap:CommonStockMember2022-07-012022-09-300001035201us-gaap:AdditionalPaidInCapitalMember2022-07-012022-09-300001035201us-gaap:CommonStockMember2022-09-300001035201us-gaap:AdditionalPaidInCapitalMember2022-09-300001035201us-gaap:RetainedEarningsMember2022-09-300001035201us-gaap:NoncontrollingInterestMember2022-09-300001035201us-gaap:CommonStockMember2020-12-310001035201us-gaap:AdditionalPaidInCapitalMember2020-12-310001035201us-gaap:RetainedEarningsMember2020-12-310001035201us-gaap:NoncontrollingInterestMember2020-12-310001035201us-gaap:RetainedEarningsMember2021-01-012021-03-3100010352012021-01-012021-03-310001035201us-gaap:CommonStockMember2021-01-012021-03-310001035201us-gaap:AdditionalPaidInCapitalMember2021-01-012021-03-310001035201us-gaap:CommonStockMember2021-03-310001035201us-gaap:AdditionalPaidInCapitalMember2021-03-310001035201us-gaap:RetainedEarningsMember2021-03-310001035201us-gaap:NoncontrollingInterestMember2021-03-3100010352012021-03-310001035201us-gaap:RetainedEarningsMember2021-04-012021-06-300001035201us-gaap:NoncontrollingInterestMember2021-04-012021-06-3000010352012021-04-012021-06-300001035201us-gaap:CommonStockMember2021-04-012021-06-300001035201us-gaap:AdditionalPaidInCapitalMember2021-04-012021-06-300001035201us-gaap:CommonStockMember2021-06-300001035201us-gaap:AdditionalPaidInCapitalMember2021-06-300001035201us-gaap:RetainedEarningsMember2021-06-300001035201us-gaap:NoncontrollingInterestMember2021-06-3000010352012021-06-300001035201us-gaap:RetainedEarningsMember2021-07-012021-09-300001035201us-gaap:NoncontrollingInterestMember2021-07-012021-09-300001035201us-gaap:CommonStockMember2021-07-012021-09-300001035201us-gaap:AdditionalPaidInCapitalMember2021-07-012021-09-300001035201us-gaap:CommonStockMember2021-09-300001035201us-gaap:AdditionalPaidInCapitalMember2021-09-300001035201us-gaap:RetainedEarningsMember2021-09-300001035201us-gaap:NoncontrollingInterestMember2021-09-300001035201us-gaap:PensionPlansDefinedBenefitMember2022-01-012022-09-300001035201us-gaap:PensionPlansDefinedBenefitMember2021-01-012021-09-300001035201us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember2022-01-012022-09-300001035201us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember2021-01-012021-09-300001035201us-gaap:PensionPlansDefinedBenefitMember2022-09-300001035201us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember2022-09-300001035201us-gaap:PensionPlansDefinedBenefitMember2022-07-012022-09-300001035201us-gaap:PensionPlansDefinedBenefitMember2021-07-012021-09-300001035201us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember2022-07-012022-09-300001035201us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember2021-07-012021-09-300001035201us-gaap:SecuredDebtMember2021-05-110001035201cwt:SeriesZZZMortgageBondsMemberus-gaap:SecuredDebtMember2021-05-110001035201cwt:SeriesZZZMortgageBondsMemberus-gaap:SecuredDebtMember2021-05-112021-05-110001035201cwt:Series1MortgageBondsMemberus-gaap:SecuredDebtMember2021-05-110001035201cwt:Series1MortgageBondsMemberus-gaap:SecuredDebtMember2021-05-112021-05-110001035201us-gaap:RevolvingCreditFacilityMember2019-03-290001035201us-gaap:RevolvingCreditFacilityMember2019-03-292019-03-290001035201us-gaap:RevolvingCreditFacilityMembersrt:ParentCompanyMember2019-03-290001035201cwt:CalWaterMemberus-gaap:RevolvingCreditFacilityMember2019-03-290001035201srt:ParentCompanyMember2022-09-300001035201srt:ParentCompanyMember2021-12-310001035201cwt:CalWaterMember2021-12-310001035201cwt:CalWaterMember2022-09-300001035201us-gaap:RevolvingCreditFacilityMember2022-01-012022-09-300001035201us-gaap:RevolvingCreditFacilityMember2021-01-012021-09-300001035201cwt:PensionAndPostRetirementBenefitsMember2022-09-300001035201cwt:PensionAndPostRetirementBenefitsMember2021-12-310001035201us-gaap:DeferredIncomeTaxChargesMember2022-09-300001035201us-gaap:DeferredIncomeTaxChargesMember2021-12-310001035201cwt:OtherAccruedBenefitsMember2022-09-300001035201cwt:OtherAccruedBenefitsMember2021-12-310001035201srt:MinimumMembercwt:AccountsReceivableNetWRAMAndMCBAAccountsReceivableMember2022-01-012022-09-300001035201srt:MaximumMembercwt:AccountsReceivableNetWRAMAndMCBAAccountsReceivableMember2022-01-012022-09-300001035201cwt:AccountsReceivableNetWRAMAndMCBAAccountsReceivableMember2022-09-300001035201cwt:AccountsReceivableNetWRAMAndMCBAAccountsReceivableMember2021-12-310001035201us-gaap:AssetRetirementObligationCostsMember2022-09-300001035201us-gaap:AssetRetirementObligationCostsMember2021-12-310001035201srt:MinimumMembercwt:InterimRatesLongTermAccountsReceivableMember2022-01-012022-09-300001035201srt:MaximumMembercwt:InterimRatesLongTermAccountsReceivableMember2022-01-012022-09-300001035201cwt:InterimRatesLongTermAccountsReceivableMember2022-09-300001035201cwt:InterimRatesLongTermAccountsReceivableMember2021-12-310001035201cwt:TankCoatingMember2022-01-012022-09-300001035201cwt:TankCoatingMember2022-09-300001035201cwt:TankCoatingMember2021-12-310001035201cwt:RecoverablePropertyLossesMember2022-09-300001035201cwt:RecoverablePropertyLossesMember2021-12-310001035201cwt:PensionBalancingAccountMember2022-01-012022-09-300001035201cwt:PensionBalancingAccountMember2022-09-300001035201cwt:PensionBalancingAccountMember2021-12-310001035201us-gaap:PostretirementBenefitCostsMember2022-09-300001035201us-gaap:PostretirementBenefitCostsMember2021-12-310001035201cwt:GeneralDistrictBalanceAccountReceivableMember2022-01-012022-09-300001035201cwt:GeneralDistrictBalanceAccountReceivableMember2022-09-300001035201cwt:GeneralDistrictBalanceAccountReceivableMember2021-12-310001035201cwt:LowIncomeRateAssistanceAndRateSupportFundAccountsReceivableMember2022-01-012022-09-300001035201cwt:LowIncomeRateAssistanceAndRateSupportFundAccountsReceivableMember2022-09-300001035201cwt:LowIncomeRateAssistanceAndRateSupportFundAccountsReceivableMember2021-12-310001035201cwt:OtherRegulatoryAssetsMember2022-09-300001035201cwt:OtherRegulatoryAssetsMember2021-12-310001035201us-gaap:DeferredIncomeTaxChargesMember2022-09-300001035201us-gaap:DeferredIncomeTaxChargesMember2021-12-310001035201us-gaap:DefinedBenefitPostretirementHealthCoverageMember2022-09-300001035201us-gaap:DefinedBenefitPostretirementHealthCoverageMember2021-12-310001035201cwt:HealthCareBalancingAccountMember2022-09-300001035201cwt:HealthCareBalancingAccountMember2021-12-310001035201cwt:ConservationProgramLiabilityMember2022-09-300001035201cwt:ConservationProgramLiabilityMember2021-12-310001035201cwt:NetWRAMandMCBALongtermPayableMember2022-09-300001035201cwt:NetWRAMandMCBALongtermPayableMember2021-12-310001035201cwt:OtherComponentsOfNetPeriodicBenefitCostMember2022-09-300001035201cwt:OtherComponentsOfNetPeriodicBenefitCostMember2021-12-310001035201us-gaap:OtherRegulatoryAssetsLiabilitiesMember2022-09-300001035201us-gaap:OtherRegulatoryAssetsLiabilitiesMember2021-12-310001035201us-gaap:SupplyCommitmentMembercwt:CaminoRealMember2022-08-160001035201us-gaap:SupplyCommitmentMembercwt:CaminoRealMember2022-07-012022-09-300001035201us-gaap:CarryingReportedAmountFairValueDisclosureMember2022-09-300001035201us-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:FairValueInputsLevel1Member2022-09-300001035201us-gaap:FairValueInputsLevel2Memberus-gaap:EstimateOfFairValueFairValueDisclosureMember2022-09-300001035201us-gaap:FairValueInputsLevel3Memberus-gaap:EstimateOfFairValueFairValueDisclosureMember2022-09-300001035201us-gaap:EstimateOfFairValueFairValueDisclosureMember2022-09-300001035201us-gaap:CarryingReportedAmountFairValueDisclosureMember2021-12-310001035201us-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:FairValueInputsLevel1Member2021-12-310001035201us-gaap:FairValueInputsLevel2Memberus-gaap:EstimateOfFairValueFairValueDisclosureMember2021-12-310001035201us-gaap:FairValueInputsLevel3Memberus-gaap:EstimateOfFairValueFairValueDisclosureMember2021-12-310001035201us-gaap:EstimateOfFairValueFairValueDisclosureMember2021-12-31

UNITED STATES
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 September 30, 2022
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from               to              
Commission File Number 1-13883
CALIFORNIA WATER SERVICE GROUP
(Exact name of registrant as specified in its charter)
Delaware 77-0448994
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)  
1720 North First Street
San Jose, California 95112
(Address of principal executive offices)
408-367-8200
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class:Trading Symbol(s)Name of Each Exchange on Which Registered:
Common Stock, $0.01 par value per shareCWTNew York Stock Exchange
Indicate by check mark whether the 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 the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý  No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit). Yes ý  No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller 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. o  

Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act) Yes   No 
 
As of September 30, 2022 — there were approximately 54,824,000 shares of common stock outstanding.
1

TABLE OF CONTENTS
 
 Page
2

PART I FINANCIAL INFORMATION
Item 1.
FINANCIAL STATEMENTS
The condensed consolidated financial statements presented in this filing on Form 10-Q have been prepared by management and are unaudited.
CALIFORNIA WATER SERVICE GROUP
CONDENSED CONSOLIDATED BALANCE SHEETS
Unaudited (In thousands, except per share data)
 September 30,
2022
December 31,
2021
ASSETS
Utility plant:
Utility plant$4,422,312 $4,197,344 
Less accumulated depreciation and amortization(1,434,700)(1,350,482)
Net utility plant2,987,612 2,846,862 
Current assets:
Cash and cash equivalents90,458 78,380 
Restricted cash22,984 2,273 
Receivables:
Customers, net79,239 60,785 
Regulatory balancing accounts54,654 78,597 
Other, net22,496 18,452 
Unbilled revenue, net43,417 32,760 
Materials and supplies at weighted average cost10,994 9,511 
Taxes, prepaid expenses, and other assets14,923 19,700 
Total current assets339,165 300,458 
Other assets:
Regulatory assets298,362 285,692 
Goodwill36,814 36,814 
Other assets144,445 153,445 
Total other assets479,621 475,951 
TOTAL ASSETS$3,806,398 $3,623,271 
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock, $0.01 par value; 136,000 shares authorized, 54,824 and 53,716 outstanding in 2022 and 2021, respectively
$548 $537 
Additional paid-in capital711,004 651,121 
Retained earnings561,907 525,936 
Noncontrolling interests4,873 5,386 
Total equity1,278,332 1,182,980 
Long-term debt, net1,053,944 1,055,794 
Total capitalization2,332,276 2,238,774 
Current liabilities:
Current maturities of long-term debt, net5,790 5,192 
Short-term borrowings70,000 35,000 
Accounts payable157,911 144,369 
Regulatory balancing accounts9,684 17,547 
Accrued interest17,338 6,542 
Accrued expenses and other liabilities61,824 47,926 
Total current liabilities322,547 256,576 
Deferred income taxes312,193 298,945 
Pension96,063 92,287 
Regulatory liabilities and other256,611 252,938 
Advances for construction199,277 198,086 
Contributions in aid of construction287,431 285,665 
Commitments and contingencies (Note 10)
TOTAL CAPITALIZATION AND LIABILITIES$3,806,398 $3,623,271 
See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements
3

CALIFORNIA WATER SERVICE GROUP
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited (In thousands, except per share data)
For the three months endedSeptember 30,
2022
September 30,
2021
Operating revenue$266,307 $256,723 
Operating expenses:  
Operations:  
Water production costs88,750 84,951 
Administrative and general33,328 30,712 
Other operations26,676 24,686 
Maintenance8,433 7,739 
Depreciation and amortization28,844 27,232 
Income taxes5,890 1,705 
Property and other taxes9,440 8,546 
Total operating expenses201,361 185,571 
Net operating income64,946 71,152 
Other income and expenses:  
Non-regulated revenue4,573 5,813 
Non-regulated expenses(6,905)(5,779)
Other components of net periodic benefit credit 3,737 1,853 
Allowance for equity funds used during construction1,004 898 
Income tax expense on other income and expenses(353)(207)
Net other income2,056 2,578 
Interest expense:  
Interest expense11,891 11,737 
Allowance for borrowed funds used during construction(572)(506)
Net interest expense11,319 11,231 
Net income55,683 62,499 
Net (loss) income attributable to noncontrolling interests(189)70 
Net income attributable to California Water Service Group$55,872 $62,429 
Earnings per share of common stock:
Basic$1.03 $1.20 
Diluted$1.03 $1.20 
Weighted average shares outstanding:  
Basic54,007 51,823 
Diluted54,042 51,823 
 See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements

4

CALIFORNIA WATER SERVICE GROUP
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited (In thousands, except per share data)
For the nine months endedSeptember 30,
2022
September 30,
2021
Operating revenue$645,494 $617,583 
Operating expenses:  
Operations:  
Water production costs221,195 214,688 
Administrative and general99,425 92,837 
Other operations81,945 63,318 
Maintenance23,389 21,118 
Depreciation and amortization86,387 81,516 
Income taxes5,927 3,576 
Property and other taxes25,853 24,213 
Total operating expenses544,121 501,266 
Net operating income101,373 116,317 
Other income and expenses:  
Non-regulated revenue16,772 16,759 
Non-regulated expenses(22,432)(12,354)
Other components of net periodic benefit credit11,516 7,520 
Allowance for equity funds used during construction3,021 2,290 
Income tax expense on other income and expenses(1,210)(1,077)
Net other income7,667 13,138 
Interest expense:  
Interest expense34,972 33,165 
Allowance for borrowed funds used during construction(1,724)(1,253)
Net interest expense33,248 31,912 
Net income75,792 97,543 
Net loss attributable to noncontrolling interests(650)(79)
Net income attributable to California Water Service Group$76,442 $97,622 
Earnings per share of common stock:  
Basic$1.41 $1.91 
Diluted$1.41 $1.91 
Weighted average shares outstanding:  
Basic54,063 51,119 
Diluted54,104 51,119 
 See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements

5

CALIFORNIA WATER SERVICE GROUP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited (In thousands)
For the nine months endedSeptember 30,
2022
September 30,
2021
Operating activities:  
Net income$75,792 $97,543 
Adjustments to reconcile net income to net cash provided by operating activities:  
Depreciation and amortization88,488 83,673 
Change in value of life insurance contracts9,319 (2,097)
Allowance for equity funds used during construction(3,021)(2,290)
Changes in operating assets and liabilities:  
Receivables and unbilled revenue(67,277)(43,220)
Water Arrearages Payment Program cash received20,836  
Water Arrearages Payment Program cash returned(3,609) 
Accounts payable1,055 (2,914)
Other current assets3,293 1,654 
Other current liabilities22,447 16,541 
Other changes in noncurrent assets and liabilities52,518 30,268 
Net cash provided by operating activities199,841 179,158 
Investing activities:  
Utility plant expenditures(222,088)(207,748)
Life insurance proceeds6,688  
Purchase of life insurance contracts(6,688)(2,335)
Business acquisition, net of cash acquired (6,451)
Asset acquisition(6,319) 
Return of investment 1,000 
Net cash used in investing activities(228,407)(215,534)
Financing activities:  
Short-term borrowings95,000 180,000 
Repayment of short-term borrowings(60,000)(430,000)
Issuance of long-term debt, net of debt issuance costs of $0 for 2022 and $1,064 for 2021
 278,936 
Repayment of long-term debt(1,575)(1,522)
Advances and contributions in aid of construction18,785 21,663 
Refunds of advances for construction(6,854)(8,204)
Repurchase of common stock(1,891)(1,593)
Issuance of common stock, net58,709 128,507 
Dividends paid(40,471)(35,146)
Distribution to noncontrolling interest(348) 
Net cash provided by financing activities61,355 132,641 
Change in cash, cash equivalents, and restricted cash32,789 96,265 
Cash, cash equivalents, and restricted cash at beginning of period80,653 45,129 
Cash, cash equivalents, and restricted cash at end of period$113,442 $141,394 
Supplemental information:  
Cash paid for interest (net of amounts capitalized)$19,178 $20,162 
Supplemental disclosure of non-cash activities:  
Accrued payables for investments in utility plant$61,944 $63,047 
Utility plant contribution by developers$15,476 $22,666 

 See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements
6

CALIFORNIA WATER SERVICE GROUP
Notes to Unaudited Condensed Consolidated Financial Statements
September 30, 2022
Dollar amounts in thousands unless otherwise stated
Note 1. Organization and Operations and Basis of Presentation
 
California Water Service Group (Company) is a holding company that provides water utility and other related services in California, Washington, New Mexico, Hawaii, and Texas through its wholly-owned and non-wholly owned subsidiaries. California Water Service Company (Cal Water), Washington Water Service Company (Washington Water), New Mexico Water Service Company (New Mexico Water), and Hawaii Water Service Company, Inc. (Hawaii Water), provide regulated utility services under the rules and regulations of their respective state’s regulatory commissions (jointly referred to as the Commissions). CWS Utility Services and HWS Utility Services LLC provide non-regulated water utility and utility-related services. TWSC, Inc. (Texas Water) holds regulated and contracted wastewater utilities.
 
The Company operates in one reportable segment, providing water and related utility services.
 
Basis of Presentation
 
The unaudited condensed consolidated interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X promulgated by the Securities and Exchange Commission (SEC) and therefore do not contain all of the information and footnotes required by GAAP and the SEC for annual financial statements. Interim financial information includes the Company's accounts and those of its wholly and non-wholly owned subsidiaries. The non-wholly owned subsidiary was consolidated using the voting interest model as the Company owns a majority of the voting interests in the non-wholly owned subsidiary and includes the Company's accounts and those of its wholly and non-wholly owned subsidiaries. The interim unaudited condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2021 as filed with the SEC on February 24, 2022.
 
The preparation of the Company’s unaudited condensed consolidated interim financial statements in accordance with GAAP 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 balance sheet dates and the reported amounts of revenues and expenses for the periods presented. These include, but are not limited to, estimates and assumptions used in determining the Company’s regulatory asset and liability balances based upon probability assessments of regulatory recovery, revenues earned but not yet billed, asset retirement obligations, allowance for credit losses, pension and other employee benefit plan liabilities, and income tax-related assets and liabilities. Actual results could differ from these estimates.
 
In the opinion of management, the accompanying unaudited condensed consolidated interim financial statements reflect all adjustments, consisting of normal recurring transactions that are necessary to provide a fair presentation of the results for the periods covered.
Due to the seasonal nature of the water business, the results for interim periods are not indicative of the results for a 12-month period. Revenue and income are generally higher in the warm, dry summer months when water usage and sales are greater. Revenue and income are generally lower in the winter months when cooler temperatures and rainfall curtail water usage and sales.
Noncontrolling Interests
Noncontrolling interests in the Company’s condensed consolidated financial statements represents an 8.3% interest not owned by Texas Water in a consolidated subsidiary. Texas Water obtained control over the subsidiary on May 1, 2021. Since the Company controls this subsidiary, its financial statements are consolidated with those of the Company, and the noncontrolling owner’s 8.3% share of the subsidiary’s net assets and results of operations is deducted and reported as noncontrolling interests on the condensed consolidated balance sheet and as net income or loss attributable to noncontrolling interests in the condensed consolidated statement of operations. The Company reports noncontrolling interests in consolidated entities as a component of equity separate from the Company’s equity. The Company’s net income attributable to California Water Service Group excludes a net (loss) income attributable to the noncontrolling interests.

7

Note 2. Summary of Significant Accounting Policies
Operating revenue
The following tables disaggregate the Company’s operating revenue by source for the three and nine months ended September 30, 2022 and 2021:
Three Months Ended September 30
20222021
Revenue from contracts with customers$238,268 $238,352 
Regulatory balancing account revenue28,039 18,371 
Total operating revenue$266,307 $256,723 
Nine Months Ended September 30
20222021
Revenue from contracts with customers$595,860 $597,337 
Regulatory balancing account revenue49,634 20,246 
Total operating revenue$645,494 $617,583 
Revenue from contracts with customers
The Company principally generates operating revenue from contracts with customers by providing regulated water and wastewater services at tariff-rates authorized by the Commissions in the states in which they operate and non-regulated water and wastewater services at rates authorized by contracts with government agencies. Revenue from contracts with customers reflects amounts billed for the volume of consumption at authorized per unit rates, for a service charge, and for other authorized charges.
The Company satisfies its performance obligation to provide water and wastewater services over time as services are rendered. The Company applies the invoice practical expedient and recognizes revenue from contracts with customers in the amount for which the Company has a right to invoice. The Company has a right to invoice for the volume of consumption, for the service charge, and for other authorized charges.
The measurement of sales to customers is generally based on the reading of their meters, which occurs on a systematic basis throughout the month. At the end of each month, the Company estimates consumption since the date of the last meter reading and a corresponding unbilled revenue is recognized. The estimate is based upon the number of unbilled days that month and the average daily customer billing rate from the previous month (which fluctuates based upon customer usage).
Contract terms are generally short-term and at will by customers and, as a result, no separate financing component is recognized for the Company's collections from customers, which generally require payment within 30 days of billing. The Company applies judgment, based principally on historical payment experience, in estimating its customers’ ability to pay.
Certain customers are not billed for volumetric consumption, but are instead billed a flat rate at the beginning of each monthly service period. The amount billed is initially deferred and subsequently recognized over the monthly service period, as the performance obligation is satisfied. The deferred revenue balance or contract liability, which is included in "accrued expenses and other liabilities" on the unaudited condensed consolidated balance sheets, is inconsequential.







8

In the following tables, revenue from contracts with customers is disaggregated by class of customers for the three and nine months ended September 30, 2022 and 2021:
Three Months Ended September 30
20222021
Residential$140,585 $147,407 
Business44,031 43,450 
Multiple residential17,333 16,904 
Industrial8,086 7,347 
Public authorities13,441 14,126 
Other (a)14,792 9,118 
Total revenue from contracts with customers$238,268 $238,352 
Nine Months Ended September 30
20222021
Residential$348,965 $354,971 
Business115,472 106,902 
Multiple residential48,343 45,682 
Industrial20,174 19,409 
Public authorities31,310 30,886 
Other (a)31,596 39,487 
Total revenue from contracts with customers$595,860 $597,337 
(a) Other includes accrued unbilled revenue.
Regulatory balancing account revenue
The Company’s ability to recover revenue requirements authorized by the California Public Utilities Commission (CPUC) in its triennial general rate case (GRC) is decoupled from the volume of the sales. Regulatory balancing account revenue is revenue related to rate mechanisms authorized in California by the CPUC, which allow the Company to recover the authorized revenue and are not considered contracts with customers. These mechanisms include the following:
The Water Revenue Adjustment Mechanism (WRAM) allows the Company to recognize the adopted level of volumetric revenues. The variance between adopted volumetric revenues and actual billed volumetric revenues for metered accounts is recorded as regulatory balancing account revenue.
Cost-recovery rates, such as the Modified Cost Balancing Account (MCBA), Conservation Expense Balancing Account (CEBA), Pension Cost Balancing Account (PCBA), and Health Cost Balancing Account (HCBA), generally provide for recovery of the adopted levels of expenses for purchased water, purchased power, pump taxes, water conservation program costs, pension, and health care. Variances between adopted and actual costs are recorded as regulatory balancing account revenue.
Each district's WRAM and MCBA regulatory assets and liabilities are allowed to be netted against one another. The Company recognizes regulatory balancing account revenues that have been authorized for rate recovery, are objectively determinable and probable of recovery, and are expected to be collected within 24 months. To the extent that regulatory balancing account revenue is estimated to be collectible beyond 24 months, recognition is deferred.
The CPUC issued a decision effective August 27, 2020 requiring that Class A companies submitting GRC filings after the effective date to be (i) precluded from proposing the use of a full decoupling WRAM in their next GRCs and (ii) allowed the use of Monterey-Style Water Revenue Adjustment Mechanisms (MWRAM). Incremental Cost Balancing Accounts (ICBA), which are authorized by statute, would replace the MCBA. The MWRAM tracks the difference between the revenue received for actual metered sales through the tiered volumetric rate and the revenue that would have been received with the same actual metered sales if a uniform rate would have been in effect. The ICBA tracks differences between the authorized per-unit prices of water production costs and actual per-unit prices of water production costs. Cal Water has complied with this decision in its recent 2021 GRC filing.

9

Non-regulated Revenue
The following tables disaggregate the Company’s non-regulated revenue by source for the three and nine months ended September 30, 2022 and 2021:
Three Months Ended September 30
20222021
Operating and maintenance revenue$3,184 $4,110 
Other non-regulated revenue720 894 
Non-regulated revenue from contracts with customers3,904 5,004 
Lease revenue669 809 
Total non-regulated revenue$4,573 $5,813 
Nine Months Ended September 30
20222021
Operating and maintenance revenue$9,822 $12,122 
Other non-regulated revenue4,951 2,550 
Non-regulated revenue from contracts with customers14,773 14,672 
Lease revenue1,999 2,087 
Total non-regulated revenue$16,772 $16,759 
Operating and maintenance services are provided for non-regulated water and wastewater systems owned by private companies and municipalities. The Company negotiates formal agreements with the customers, under which they provide operating, maintenance and customer billing services related to the customers’ water system. The formal agreements outline the fee schedule for the services provided. The agreements typically call for a fee-per-service or a flat-rate amount per month. The Company satisfies its performance obligation of providing operating and maintenance services over time as services are rendered; as a result, the Company employs the invoice practical expedient and recognizes revenue in the amount that it has the right to invoice. Contract terms are generally short-term and, as a result, no separate financing component is recognized for its collections from customers, which generally require payment within 30 days of billing.
Other non-regulated revenue primarily relates to services for the design and installation of water mains and other water infrastructure for customers outside the regulated service areas and insurance program administration. During the first nine months of 2022, the Company recorded a gain of $2.7 million related to company owned life insurance.
Lease revenue is not considered revenue from contracts with customers and is recognized following operating lease standards. The Company is the lessor in operating lease agreements with telecommunications companies under which cellular phone antennas are placed on the Company's property.
Allowance for credit losses
The Company measures expected credit losses for Customer Receivables, Other Receivables, and Unbilled Revenue on an aggregated level. These receivables are generally trade receivables due in one year or less or expected to be billed and collected in one year or less. The expected credit losses for Other Receivables and Unbilled Revenue are inconsequential. Customer receivables include receivables for water and wastewater services provided to residential customers, business, industrial, public authorities, and other customers. The expected credit losses for business, industrial, public authorities, and other customers are inconsequential. The overall risks related to the Company’s receivables are low as water and wastewater services are seen as essential services. The estimate for the allowance for credit losses is based on a historical loss ratio, in conjunction with a qualitative assessment of elements that impact the collectability of receivables to determine if the allowance for credit losses should be further adjusted in accordance with the accounting guidance for credit losses. Management contemplates available current information such as changes in economic factors, regulatory matters, industry trends, payment options and programs available to customers, and the methods that the Company is able to utilize to ensure payment.
The Company reviewed its allowance for credit losses utilizing a quantitative assessment, which included trend analysis of customer billing and collection, aging by customer class, and unemployment rates since the outbreak of COVID-19 in the first quarter of 2020. The Company also utilized a qualitative assessment, which considered the future collectability on customer outstanding balances, management's estimate of the cash recovery, and a general assessment of the economic conditions of the locations the Company serves due to the outbreak of COVID-19. The Company has resumed shutoffs for
10

non-payment in all of the Company's regulated utilities. The Company also received and applied funds to customer accounts from the California Water and Wastewater Arrearage Payment Program (Program). The Program was created by the California Legislature, is administered by the State Water Resources Control Board and provided relief to community water and wastewater systems for unpaid bills – arrearages – related to the COVID-19 pandemic. Based on the above assessments, the Company adjusted its allowance for credit losses accordingly.
The following table presents the activity in the allowance for credit losses for the 9-month period ended September 30, 2022 and 12-month period ended December 31, 2021:
Allowance for credit lossesSeptember 30, 2022December 31, 2021
Beginning balance$3,743 $5,246 
Provision for credit loss expense3,725 1,088 
Write-offs(2,253)(3,113)
Recoveries295 522 
Total ending allowance balance$5,510 $3,743 
Cash, Cash Equivalents, and Restricted Cash
The following table provides a reconciliation of cash, cash equivalents, and restricted cash within the Condensed Consolidated Balance Sheets that sum to the total of the same such amounts shown on the Condensed Consolidated Statements of Cash Flows (see Note 10 for further details on restricted cash):
 September 30, 2022December 31, 2021
Cash and cash equivalents$90,458 $78,380 
Restricted cash22,984 2,273 
Total cash, cash equivalents, and restricted cash shown in the statements of cash flows$113,442 $80,653 
Accounting Standards Issued But Not Yet Adopted
In October of 2021, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. In a business combination, an acquirer generally recognizes assets acquired and liabilities assumed, including contract assets and contract liabilities, at their respective fair value on the acquisition date. ASU 2021-08 requires that in a business combination, an acquirer should recognize and measure contract assets acquired and contract liabilities assumed in a business combination in accordance with Topic 606, Revenue from Contracts with Customers. The guidance provides certain practical expedients for acquirers when recognizing and measuring acquired contract assets and contract liabilities from revenue contracts with customers in a business combination. The guidance is effective for annual reporting periods beginning after December 15, 2022, including interim periods within those fiscal years. ASU 2021-08 should be applied prospectively for acquisitions occurring on or after the effective date of the amendments, and early adoption is permitted. The Company will adopt the standard prospectively and does not expect that the guidance will have a material impact on the Company's financial statements and footnote disclosures upon adoption.
Note 3. Stock-based Compensation
The Company's equity incentive plan was approved and amended by stockholders on April 27, 2005 and May 20, 2014, respectively. The Company is authorized to issue awards up to 2,000,000 shares of common stock.
During the first nine months of 2022, the Company granted Restricted Stock Awards (RSAs) to Officers and to members of the Board of Directors. An RSA share represents a restricted share of the Company's common stock and is valued based on the fair market value of the Company's common stock at the date of grant. RSAs granted to Officers vest over 36 months with the first year cliff vesting. In general, RSAs granted to Board members vest at the end of 12 months. The RSAs are recognized as expense evenly over 36 months for the shares granted to Officers and 12 months for the shares granted to Board members. As of September 30, 2022, there was approximately $2.2 million of total unrecognized compensation cost related to RSAs. The cost is expected to be recognized over a weighted average period of 1.7 years.

11

A summary of the status of the outstanding RSAs as of September 30, 2022 is presented below:
Number of RSA SharesWeighted-Average Grant-Date Fair Value
RSAs at January 1, 202262,691 $53.49 
Granted42,057 56.42 
Vested(47,137)53.55 
Forfeited(1,650)56.42 
RSAs at September 30, 202255,961 $55.56 
During the first nine months of 2022, the Company granted performance-based Restricted Stock Units (RSUs) to Officers. An RSU represents the right to receive a share of the Company's common stock. Each award reflects a target number shares of common stock that may be issued to the award recipient. The 2022 awards may be earned upon the completion of a 3-year performance period. Whether RSUs are earned at the end of the performance period will be determined based on the achievement of certain performance objectives set by the Organization and Compensation Committee of the Board of Directors in connection with the issuance of the RSUs. The performance objectives are based on the Company's business plan covering the performance period. The performance objectives include achieving the budgeted return on equity, budgeted investment in utility plant, customer service standards, employee safety standards and water quality standards. Depending on the results achieved during the 3-year performance period, the actual number of shares that a grant recipient receives at the end of the performance period may range from 0% to 200% of the target shares granted, provided that the grantee is continuously employed by the Company through the vesting date. If prior to the vesting date employment is terminated by reason of death, disability or normal retirement, then a pro rata portion of this award will vest. The RSUs are recognized as expense ratably over the 3-year performance period using a fair market value of the Company's common share at the date of grant and an estimated number of RSUs earned during the performance period. As of September 30, 2022, there was approximately $2.7 million of total unrecognized compensation cost related to RSUs. The cost is expected to be recognized over a weighted average period of 1.5 years.
A summary of the status of the outstanding RSUs as of September 30, 2022 is presented below:
Number of RSU SharesWeighted-Average Grant-Date Fair Value
RSUs at January 1, 202290,942 $52.71 
Granted35,911 56.42 
Performance criteria adjustment12,173 58.63 
Vested(32,913)58.63 
Forfeited(5,733)52.83 
RSUs at September 30, 2022100,380 $54.01 
The Company has recorded compensation costs for the RSAs and RSUs that are included in administrative and general operating expenses in the amount of $1.6 million and $1.9 million for the three months ended September 30, 2022 and 2021, respectively. For the nine months ended September 30, 2022 and 2021, the Company has recorded compensation costs for the RSAs and RSUs in the amount of $3.5 million and $4.5 million, respectively.
12

Note 4. Equity
On April 29, 2022, the Company entered into an equity distribution agreement to sell shares of its common stock having an aggregate gross sales price of up to $350.0 million from time to time depending on market conditions through an at-the-market equity program over the next three years. The Company intends to use the net proceeds from these sales, after deducting commissions on such sales and offering expenses, for general corporate purposes, which may include working capital, construction and acquisition expenditures, investments and repurchases, and redemptions of securities. The Company sold 461,034 shares of common stock through its at-the-market equity program and raised proceeds of $26.9 million net of $0.3 million in commissions paid under the equity distribution agreement during the three months ended September 30, 2022. During the nine months ended September 30, 2022, the Company sold 1,035,668 shares of common stock through its at-the-market equity program and raised proceeds of $57.1 million net of $0.6 million in commissions paid under the equity distribution agreement. The Company also incurred $0.1 million of equity issuance costs during the nine months ended September 30, 2022.
As approved by the Company's stockholders at the 2022 Annual Meeting, effective July 26, 2022, the aggregate number of common shares of stock which the corporation shall have authority to issue was increased from 68.0 million common shares to 136.0 million common shares. All of said 136.0 million common shares shall be of one and the same series, namely common shares with par value of $0.01 per common share.
The Company’s changes in total equity for the nine months ended September 30, 2022 and 2021 were as follows:
Nine months ended September 30, 2022
 Common StockAdditional
Paid-in
Capital
Retained
Earnings
Noncontrolling InterestsTotal Equity
 SharesAmount
 (In thousands)
Balance at January 1, 202253,716 $537 $651,121 $525,936 $5,386 $1,182,980 
Net income (loss)1,086 (192)894 
Issuance of common stock85 1 1,106 — 1,107 
Repurchase of common stock(28)— (1,674)— (1,674)
Dividends paid on common stock ($0.2500 per share)
(13,429)— (13,429)
Investment in business with noncontrolling interest
(54)— 54  
Balance at March 31, 202253,773 538 650,499 513,593 5,248 1,169,878 
Net income (loss)19,484 (269)19,215 
Issuance of common stock585 6 32,118 32,124 
Repurchase of common stock(2)— (111)(111)
Dividends paid on common stock ($0.2500 per share)
(13,452)(13,452)
Investment in business with noncontrolling interest
(153)153  
Distribution to noncontrolling interest(348)(348)
Balance at June 30, 202254,356 544 682,353 519,625 4,784 1,207,306 
Net income (loss)55,872 (189)55,683 
Issuance of common stock470 4 29,034 29,038 
Repurchase of common stock(2)— (105)(105)
Dividends paid on common stock ($0.2500 per share)
(13,590)(13,590)
Investment in business with noncontrolling interest
(278)278  
Balance at September 30, 202254,824 $548 $711,004 $561,907 $4,873 $1,278,332 
13

Nine months ended September 30, 2021
 Common StockAdditional
Paid-in
Capital
Retained
Earnings
Noncontrolling InterestsTotal
Equity
 SharesAmount
 (In thousands)
Balance at January 1, 202150,334 $503 $448,632 $472,209 $ $921,344 
Net loss(3,032)— (3,032)
Issuance of common stock528 5 24,481 24,486 
Repurchase of common stock(27)— (1,415)(1,415)
Dividends paid on common stock ($0.2300 per share)
(11,581)— (11,581)
Balance at March 31, 202150,835 508 471,698 457,596  929,802 
Net income (loss)38,225 (149)38,076 
Issuance of common stock702 7 40,895 40,902 
Repurchase of common stock(2)— (109)(109)
Dividends paid on common stock ($0.2300 per share)
(11,702)— (11,702)
Acquisition of business with noncontrolling interest
— — 5,294 5,294 
Balance at June 30, 202151,535 515 512,484 484,119 5,145 1,002,263 
Net income62,429 70 62,499 
Issuance of common stock1,075 11 67,819 67,830 
Repurchase of common stock(2)— (69)(69)
Dividends paid on common stock ($0.2300 per share)
(11,863)(11,863)
Investment in business with noncontrolling interest
526 (526) 
Balance at September 30, 202152,608 $526 $580,760 $534,685 $4,689 $1,120,660 
14

Note 5. Earnings Per Share of Common Stock
The computations of basic and diluted earnings per share of common stock are noted in the table below. Basic earnings per share of common stock is computed by dividing the net income attributable to California Water Service Group by the weighted average number of common shares outstanding during the period. RSAs are included in the weighted average common shares outstanding because the shares have all the same voting and dividend rights as issued and unrestricted common stock.
 Three Months Ended September 30
 20222021
(In thousands, except per share data)
Net income$55,683 $62,499 
Net (loss) income attributable to noncontrolling interests$(189)$70 
Net income attributable to California Water Service Group$55,872 $62,429 
Weighted average common shares outstanding, basic54,007 51,823 
Weighted average common shares outstanding, dilutive54,042 51,823 
Earnings per share of common stock - basic$1.03 $1.20 
Earnings per share of common stock - diluted $1.03 $1.20 
 Nine Months Ended September 30
 20222021
(In thousands, except per share data)
Net income$75,792 $97,543 
Net loss attributable to noncontrolling interests$(650)$(79)
Net income attributable to California Water Service Group$76,442 $97,622 
Weighted average common shares outstanding, basic54,063 51,119 
Weighted average common shares outstanding, dilutive54,104 51,119 
Earnings per share of common stock - basic$1.41 $1.91 
Earnings per share of common stock - diluted$1.41 $1.91 
15

Note 6. Pension Plan and Other Postretirement Benefits
The Company provides a qualified, defined-benefit, non-contributory pension plan for substantially all employees. The Company makes annual contributions to fund the amounts accrued for in the qualified pension plan. The Company also maintains an unfunded, non-qualified, supplemental executive retirement plan. The costs of the plans are charged to expense or are capitalized in utility plant as appropriate.
 
The Company offers medical, dental, vision, and life insurance benefits for retirees and their spouses and dependents. Participants are required to pay a premium, which offsets a portion of the cost.
 
Cash contributions made by the Company to the pension plans were $12.4 million and $18.9 million for the nine months ended September 30, 2022 and 2021, respectively. Cash contributions made by the Company to the other postretirement benefit plans were $0.5 million and $1.9 million for the nine months ended September 30, 2022 and 2021, respectively. The total 2022 estimated cash contribution to the pension plans and other postretirement benefits plans are expected to be approximately $16.1 million and $0.7 million, respectively.
The following tables list components of net periodic benefit costs for the pension plans and other postretirement benefits. The data listed under “pension plan” includes the qualified pension plan and the non-qualified supplemental executive retirement plan. The data listed under “other benefits” is for all other postretirement benefits.
 Three Months Ended September 30
 Pension PlanOther Benefits
 2022202120222021
Service cost$9,235 $8,308 $1,683 $1,332 
Interest cost6,329 5,608 1,008 802 
Expected return on plan assets(11,307)(9,873)(2,482)(2,194)
Amortization of prior service cost242 248 39 48 
Recognized net actuarial loss999 2,881 (228)(145)
Net periodic benefit cost$5,498 $7,172 $20 $(157)
 Nine Months Ended September 30
 Pension PlanOther Benefits
 2022202120222021
Service cost$27,704 $26,329 $5,048 $4,554 
Interest cost18,986 16,245 3,024 2,413 
Expected return on plan assets(33,920)(29,605)(7,445)(6,577)
Amortization of prior service cost727 755 117 145 
Recognized net actuarial loss2,997 6,729 (685)(365)
Net periodic benefit cost$16,494 $20,453 $59 $170 
Service cost portion of the pension plan and other postretirement benefits is recognized in "administrative and general" expenses within the Condensed Consolidated Statements of Operations. Other components of net periodic benefit costs include interest costs, expected return on plan assets, amortization of prior service costs, and recognized net actuarial loss and are reported together as "other components of net periodic benefit cost" within the Condensed Consolidated Statements of Operations.
Note 7. Short-term and Long-term Borrowings
On May 11, 2021, Cal Water completed the sale and issuance of $280.0 million in aggregate principal amount of First Mortgage Bonds (the Bonds) in a private placement. The Bonds consist of $130.0 million of 2.87% bonds, series ZZZ, maturing May 11, 2051, and $150.0 million of 3.02% bonds, series 1, maturing May 11, 2061. Interest on the bonds will accrue semi-annually and be payable in arrears on May 11 and November 11 of each year, commencing on November 11, 2021. The Bonds will rank equally with all of Cal Water’s other First Mortgage Bonds and will be secured by liens on Cal Water’s properties, subject to certain exceptions and permitted liens. Cal Water used the net proceeds from the sale of the Bonds to refinance existing indebtedness and for general corporate purposes. The Bonds were not registered under the Securities Act of 1933 and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.
16

On March 29, 2019, the Company and Cal Water entered into certain syndicated credit agreements, which provide for unsecured revolving credit facilities of up to an initial aggregate amount of $550.0 million for a term of five years. The Company and subsidiaries that it designates may borrow up to $150.0 million under the Company’s revolving credit facility. Cal Water may borrow up to $400.0 million under its revolving credit facility. Additionally, the credit facilities may be increased by up to an incremental $150.0 million under the Cal Water facility and $50.0 million under the Company facility, subject in each case to certain conditions.
The revolving credit facilities contain affirmative and negative covenants and events of default customary for credit facilities of this type including, among other things, limitations and prohibitions relating to additional indebtedness, liens, mergers, and asset sales. Also, these unsecured credit agreements contain financial covenants governing the Company and its subsidiaries' consolidated total capitalization ratio and interest coverage ratio. As of September 30, 2022, the Company is in compliance with all of the covenant requirements and is eligible to use the full amount of the undrawn portion of the Company's unsecured revolving credit facilities.
The outstanding borrowings on the Company line of credit were $70.0 million and $35.0 million as of September 30, 2022 and December 31, 2021, respectively. There were no borrowings on the Cal Water line of credit as of September 30, 2022 and December 31, 2021, respectively. The average borrowing rate for borrowings on the Company and Cal Water lines of credit during the nine months ended September 30, 2022 was 2.18% compared to 0.98% for the same period last year.
Note 8. Income Taxes
The Company adjusts its effective tax rate each quarter to be consistent with the estimated annual effective tax rate. The Company also records the tax effect of unusual or infrequently occurring discrete items.
The provision for income taxes is shown in the tables below:
 Three Months Ended September 30
 20222021
Income tax expense$6,243 $1,913 
 Nine Months Ended September 30
 20222021
Income tax expense$7,137 $4,654 
Income tax expense increased $4.3 million to $6.2 million in the third quarter of 2022 primarily due to a decrease in the refunds of excess deferred income taxes.
Income tax expense increased $2.5 million to $7.1 million in the first nine months of 2022 primarily due to a decrease in the refunds of excess deferred income taxes.
The Company’s effective tax rate was 11.4% before discrete items as of September 30, 2022 and 4.3% as of September 30, 2021. The increase in the effective tax rate was primarily due to a decrease in the refunds of excess deferred income taxes.
The Company had unrecognized tax benefits of approximately $16.9 million and $14.9 million as of September 30, 2022 and 2021, respectively. Included in the balance of unrecognized tax benefits as of September 30, 2022 and 2021, is $4.2 million and $3.9 million, respectively, of tax benefits that, if recognized, would result in an adjustment to the Company’s effective tax rate. The Company does not expect its unrecognized tax benefits to change significantly within the next 12 months.
17

Note 9. Regulatory Assets and Liabilities
Regulatory assets and liabilities were comprised of the following as of September 30, 2022 and December 31, 2021:
 Recovery PeriodSeptember 30, 2022December 31, 2021
Regulatory Assets  
Pension and retiree group healthIndefinitely$17,114 $17,607 
Property-related temporary differences (tax benefits flowed through to customers)Indefinitely132,843 130,565 
Other accrued benefitsIndefinitely24,094 23,280 
Net WRAM and MCBA long-term accounts receivable
1 - 2 years
46,037 29,789 
Asset retirement obligations, netIndefinitely24,568 22,935 
Interim rates memorandum account (IRMA) long-term accounts receivable
1 - 3 years
7,539 9,032 
Tank coating10 years16,494 13,680 
Recoverable property lossesVarious