SJW GROUP [SJW] Filings

10-Q 1 sjw-20220930.htm 10-Q sjw-20220930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

___________________________________________

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022

☐ 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 1-8966

SJW GROUP

(Exact name of registrant as specified in its charter)

Delaware

77-0066628

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

110 West Taylor Street,

San Jose,

95110

(Address of principal executive offices)

(Zip Code)

(408) 279-7800

(Registrant’s telephone number, including area code)

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, par value $0.001 per share

SJW

New York Stock Exchange LLC

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 ☒ No ☐

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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

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 definitions of “large accelerated filer,” “accelerated filer,” “non-accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒ Non-accelerated filer ☐

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). Yes ☐ No x

APPLICABLE ONLY TO CORPORATE ISSUERS:

As of October 24, 2022, there were 30,319,317 shares of the registrant’s Common Stock outstanding.

FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements within the meaning of the federal securities laws relating to future events and future results of SJW Group and its subsidiaries that are based on current expectations, estimates, forecasts, and projections about SJW Group and its subsidiaries and the industries in which SJW Group and its subsidiaries operate and the beliefs and assumptions of the management of SJW Group. Some of these forward-looking statements can be identified by the use of forward-looking words such as “believes,” “expects,” “may,” “will,” “should,” “seeks,” “approximately,” “intends,” “plans,” “estimates,” “projects,” “strategy,” or “anticipates,” or the negative of those words or other comparable terminology. These forward-looking statements are only predictions and are subject to risks, uncertainties and assumptions that are difficult to predict.

The accuracy of such statements is subject to a number of risks, uncertainties and assumptions including, but not limited to, the following factors:

•the effect of water, utility, environmental and other governmental policies and regulations, including actions concerning rates, authorized return on equity, authorized capital structures, capital expenditures and other decisions;

•changes in demand for water and other services;

•the impact of the Coronavirus (“COVID-19”) pandemic on our business operation and financial results;

•unanticipated weather conditions and changes in seasonality including those affecting water supply and customer usage;

•climate change and the effects thereof;

•unexpected costs, charges or expenses;

•our ability to successfully evaluate investments in new business and growth initiatives;

•contamination of our water supplies and damage or failure of our water equipment and infrastructure;

•the risk of work stoppages, strikes and other labor-related actions;

•catastrophic events such as fires, earthquakes, explosions, floods, ice storms, tornadoes, hurricanes, terrorist acts, physical attacks, cyber-attacks, epidemic or other similar occurrences;

•changes in general economic, political, business and financial market conditions;

•the ability to obtain financing on favorable terms, which can be affected by various factors, including credit ratings, changes in interest rates, compliance with regulatory requirements, compliance with the terms and conditions of our outstanding indebtedness and general market and economic conditions; and

•legislative and general market and economic developments.

Results for a quarter are not indicative of results for a full year due to seasonality and other factors. In addition, actual results are subject to other risks and uncertainties that relate more broadly to our overall business, including those more fully described in our filings with the SEC, including our most recent reports on Form 10-K, Form 10-Q and Form 8-K. Forward-looking statements are not guarantees of performance, and speak only as of the date made, and we undertake no obligation to update or revise any forward-looking statements except as required by law.

PART I. FINANCIAL INFORMATION

ITEM 1.FINANCIAL STATEMENTS

SJW GROUP AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

(in thousands, except share and per share data)


	Three months ended September 30,			Nine months ended September 30,
	2022		2021	2022		2021
REVENUE	$	175,981	166,923	$	449,324	433,949
OPERATING EXPENSE:
Production Expenses:
Purchased water	38,744		33,121	84,313		76,434
Power	3,913		4,179	10,387		10,573
Groundwater extraction charges	19,059		23,736	51,347		59,419
Other production expenses	11,888		11,069	33,607		30,302
Total production expenses	73,604		72,105	179,654		176,728
Administrative and general	23,909		22,713	71,374		64,932
Maintenance	7,065		6,369	20,651		19,221
Property taxes and other non-income taxes	8,354		8,125	24,242		22,789
Depreciation and amortization	25,529		23,837	78,342		70,787
Gain on sale of nonutility properties	(82)		—	(5,532)		—
Total operating expense	138,379		133,149	368,731		354,457
OPERATING INCOME	37,602		33,774	80,593		79,492
OTHER (EXPENSE) INCOME:
Interest on long-term debt and other interest expense	(14,190)		(13,535)	(42,160)		(40,655)
Pension non-service cost	970		334	2,860		999
Gain on sale of Texas Water Alliance	—		—	—		3,000

Other, net	875		1,244	2,694		4,782
Income before income taxes	25,257		21,817	43,987		47,618
Provision for income taxes	223		2,749	3,658		5,159
NET INCOME	25,034		19,068	40,329		42,459
Other comprehensive (loss) income, net	(173)		(12)	(602)		133
COMPREHENSIVE INCOME	$	24,861	19,056	$	39,727	42,592
EARNINGS PER SHARE
Basic	$	0.83	0.64	$	1.33	1.44
Diluted	$	0.82	0.64	$	1.33	1.43
DIVIDENDS PER SHARE	$	0.36	0.34	$	1.08	1.02
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic	30,269,462		29,816,736	30,246,201		29,496,533
Diluted	30,392,295		29,952,477	30,358,268		29,625,784

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

SJW GROUP AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(in thousands, except share and per share data)


	September 30, 2022		December 31, 2021
ASSETS
Utility plant:
Land	$	39,885	39,004
Depreciable plant and equipment	3,596,198		3,381,908
Construction in progress	127,528		176,427
Intangible assets	35,960		36,276
	3,799,571		3,633,615
Less accumulated depreciation and amortization	1,206,690		1,136,116
	2,592,881		2,497,499
Real estate investments and nonutility properties	58,012		57,632
Less accumulated depreciation and amortization	16,855		15,951
	41,157		41,681
CURRENT ASSETS:
Cash and cash equivalents:
Cash	13,190		10,908
Restricted cash	—		1,211
Accounts receivable:
Customers, net of allowances for uncollectible accounts of $5,665 and $4,600 on September 30, 2022 and December 31, 2021, respectively	63,760		53,699
Income tax	—		2,308
Other	7,300		4,735
Accrued unbilled utility revenue	53,682		44,026
Prepaid expenses	12,964		9,667
Current regulatory assets, net	738		2,629
Other current assets	6,266		4,902
	157,900		134,085
OTHER ASSETS:
Net regulatory assets, less current portion	145,945		151,992
Investments	14,438		15,784
Goodwill	640,311		640,471
Other	12,072		10,883
	812,766		819,130
	$	3,604,704	3,492,395

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

SJW GROUP AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(in thousands, except share and per share data)


	September 30, 2022		December 31, 2021
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
Stockholders’ equity:
Common stock, $0.001 par value; authorized 70,000,000 shares; issued and outstanding shares 30,315,265 on September 30, 2022 and 30,181,348 on December 31, 2021	$	30	30
Additional paid-in capital	614,226		606,392
Retained earnings	435,856		428,260
Accumulated other comprehensive income	(765)		(163)
Total stockholders’ equity	1,049,347		1,034,519
Long-term debt, less current portion	1,453,748		1,492,935
	2,503,095		2,527,454
CURRENT LIABILITIES:
Line of credit	199,170		62,996
Current portion of long-term debt	4,340		39,106
Accrued groundwater extraction charges, purchased water and power	27,694		17,200
Accounts payable	29,765		30,391
Accrued interest	17,905		14,174

Accrued payroll	11,524		11,583
Income tax payable	3,859		—
Other current liabilities	24,453		27,821
	318,710		203,271
DEFERRED INCOME TAXES	208,130		200,451
ADVANCES FOR CONSTRUCTION	140,842		130,693
CONTRIBUTIONS IN AID OF CONSTRUCTION	319,866		316,479
POSTRETIREMENT BENEFIT PLANS	89,610		89,998

OTHER NONCURRENT LIABILITIES	24,451		24,049
COMMITMENTS AND CONTINGENCIES
	$	3,604,704	3,492,395

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

SJW GROUP AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(UNAUDITED)

(in thousands, except share and per share data)


	Common Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income		Total Stockholders’ Equity
	Number of Shares	Amount
BALANCES, December 31, 2021	30,181,348	$	30	$	606,392	$	428,260	$	(163)	$	1,034,519
Net income	—	—		—		3,737		—		3,737
Unrealized loss on investment, net of tax benefit of $67	—	—		—		—		(181)		(181)
Stock-based compensation	—	—		1,552		(20)		—		1,532
Issuance of restricted and deferred stock units	37,879	—		(1,269)		—		—		(1,269)
Employee stock purchase plan	17,918	—		1,049		—		—		1,049
Common stock issuance costs	—	—		(87)		—		—		(87)
Dividends paid ($0.36 per share)	—	—		—		(10,882)		—		(10,882)
BALANCES, March 31, 2022	30,237,145	30		607,637		421,095		(344)		1,028,418
Net income	—	—		—		11,558		—		11,558
Unrealized loss on investment, net of tax of $0	—	—		—		—		(248)		(248)
Stock-based compensation	—	—		1,041		(23)				1,018
Issuance of restricted and deferred stock units	10,529	—		(6)		—		—		(6)
Common stock issuance costs	—	—		(6)		—		—		(6)
Dividends paid ($0.36 per share)	—	—		—		(10,889)		—		(10,889)
BALANCES, June 30, 2022	30,247,674	30		608,666		421,741		(592)		1,029,845
Net income	—	—		—		25,034		—		25,034
Unrealized loss on investment, net of tax benefit of $154	—	—		—		—		(173)		(173)
Stock-based compensation	—	—		1,398		(23)		—		1,375
Issuance of restricted and deferred stock units	1,316	—		13		—		—		13
Employee stock purchase plan	18,667	—		1,042		—		—		1,042
Common stock issuance, net of costs	47,608	—		3,107		—		—		3,107
Dividends paid ($0.36 per share)	—	—		—		(10,896)		—		(10,896)
BALANCES, September 30, 2022	30,315,265	$	30	$	614,226	$	435,856	$	(765)	$	1,049,347

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

SJW GROUP AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(UNAUDITED)

(in thousands, except share and per share data)


	Common Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income		Total Stockholders’ Equity
	Number of Shares	Amount
BALANCES, December 31, 2020	28,556,605	$	29	$	510,158	$	408,037	$	(1,064)	$	917,160
Net income	—	—		—		2,616		—		2,616
Unrealized income on investment, net of taxes of $14	—	—		—		—		38		38
Stock-based compensation	—	—		1,280		(32)		—		1,248
Issuance of restricted and deferred stock units	30,547	—		(964)		—		—		(964)
Employee stock purchase plan	18,235	—		1,026		—		—		1,026
Common stock issuance, net of costs	1,184,500	1		66,895		—		—		66,896
Dividends paid ($0.34 per share)	—	—		—		(9,724)		—		(9,724)
BALANCES, March 31, 2021	29,789,887	30		578,395		400,897		(1,026)		978,296
Net income	—	—		—		20,775		—		20,775
Unrealized gain on investment, net of tax of $39	—	—		—		—		107		107
Stock-based compensation	—	—		791		(28)		—		763
Issuance of restricted and deferred stock units	15,040	—		(9)		—		—		(9)
Common stock issuance, net of costs	—	—		(120)		—		—		(120)
Dividends paid ($0.34 per share)	—	—		—		(10,133)		—		(10,133)
BALANCES, June 30, 2021	29,804,927	30		579,057		411,511		(919)		989,679
Net income	—	—		—		19,068		—		19,068
Unrealized loss on investment, net of tax benefit of $4	—	—		—		—		(12)		(12)
Stock-based compensation	—	—		1,130		(29)		—		1,101
Issuance of restricted and deferred stock units	186	—		14		—		—		14
Employee stock purchase plan	17,069	—		1,000		—		—		1,000
Dividends paid ($0.34 per share)	—	—		—		(10,139)		—		(10,139)
BALANCES, September 30, 2021	29,822,182	$	30	$	581,201	$	420,411	$	(931)	$	1,000,711

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

SJW GROUP AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in thousands)


	Nine months ended September 30,
	2022		2021
OPERATING ACTIVITIES:
Net income	$	40,329	42,459
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	79,862		71,912
Deferred income taxes	7,135		4,140
Stock-based compensation	3,991		3,201
Allowance for equity funds used during construction	(1,324)		(1,490)

Gain on sale of nonutility properties and Texas Water Alliance	(5,532)		(3,000)
Changes in operating assets and liabilities:
Accounts receivable and accrued unbilled utility revenue	(22,511)		(19,647)
Accounts payable and other current liabilities	(1,475)		3,697
Accrued groundwater extraction charges, purchased water and power	10,494		9,846
Tax receivable and payable, and other accrued taxes	(1,851)		832
Postretirement benefits	(2,719)		265
Regulatory assets and liabilities excluding income tax temporary differences, net and postretirement benefits	21,776		(12,418)
Up-front service concession payment	(1,600)		—
Other changes, net	2,774		458
NET CASH PROVIDED BY OPERATING ACTIVITIES	129,349		100,255
INVESTING ACTIVITIES:
Additions to utility plant:
Company-funded	(160,515)		(169,238)
Contributions in aid of construction	(17,773)		(12,520)
Additions to real estate investments	(610)		(606)
Payments to retire utility plant, net of salvage	(2,432)		(3,535)
Proceeds from sale of nonutility properties and Texas Water Alliance	310		3,000
Payments for business acquisitions	(433)		—
NET CASH USED IN INVESTING ACTIVITIES	(181,453)		(182,899)
FINANCING ACTIVITIES:
Borrowings on line of credit	152,655		67,099
Repayments on line of credit	(16,481)		(120,120)
Long-term borrowings	15,000		137,000
Repayments of long-term borrowings	(87,757)		(52,700)
Issuance of common stock, net of issuance costs	3,107		66,775

Dividends paid	(32,667)		(29,996)
Receipts of advances and contributions in aid of construction	21,593		23,585
Refunds of advances for construction	(2,177)		(2,179)
Other changes, net	(98)		132
NET CASH PROVIDED BY FINANCING ACTIVITIES	53,175		89,596
NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH	1,071		6,952
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD	12,119		9,269
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD	13,190		16,221
LESS RESTRICTED CASH, END OF PERIOD	—		2,202
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	13,190	14,019

Cash paid during the period for:
Interest	$	42,473	39,533
Income taxes	572		7,643
Supplemental disclosure of non-cash activities:
Accrued payables for additions to utility plant	$	22,044	26,628
Utility property installed by developers	976		1,527

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2022

(in thousands, except share and per share data)

Note 1.General

In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting only of normal, recurring adjustments) necessary for a fair presentation of the results for the interim periods.

The unaudited interim financial information has been prepared in accordance with accounting principles generally accepted in the United States of America and in accordance with the instructions for Form 10-Q and Rule 10-01 of Regulation S-X promulgated by the Securities and Exchange Commission. The Notes to Consolidated Financial Statements in SJW Group’s 2021 Annual Report on Form 10-K should be read with the accompanying unaudited condensed consolidated financial statements.

SJW Group is a holding company with five wholly-owned subsidiaries: San Jose Water Company (“SJWC”), SJWNE LLC, SJWTX, Inc., SJW Land Company, and SJWTX Holdings, Inc. SJWNE LLC is the holding company for Connecticut Water Service, Inc. (“CTWS”) whose wholly-subsidiaries are The Connecticut Water Company (“Connecticut Water”), The Maine Water Company (“Maine Water”), New England Water Utility Services, Inc. (“NEWUS”), and Chester Realty, Inc. SJWC, Connecticut Water, SJWTX, Inc. doing business as Canyon Lake Water Service Company (“CLWSC”), Maine Water and NEWUS are referred to as “Water Utility Services.” SJW Land Company and Chester Realty, Inc. are collectively referred to as “Real Estate Services.”

Revenue

Water sales are seasonal in nature and influenced by weather conditions. The timing of precipitation and climatic conditions can cause seasonal water consumption by customers to vary significantly. Due to the seasonal nature of the water business, the operating results for interim periods are not indicative of the operating results for a 12-month period. Revenue is generally higher in the warm, dry summer months when water usage and sales are greater, and lower in the winter months when cooler temperatures and increased precipitation curtail water usage resulting in lower sales.

The major streams of revenue for SJW Group are as follows:


	Three months ended September 30,			Nine months ended September 30,
	2022		2021	2022		2021
Revenue from contracts with customers	$	169,972	163,103	$	440,406	422,545
Alternative revenue programs, net	3,172		2,216	(1,737)		4,984
Other balancing and memorandum accounts, net	1,857		639	6,719		3,637
Other regulatory mechanisms, net	(494)		(438)	(260)		(1,284)
Rental income	1,474		1,403	4,196		4,067
	$	175,981	166,923	$	449,324	433,949

Real Estate Investments and Nonutility Properties

The major components of real estate investments and nonutility properties as of September 30, 2022, and December 31, 2021, are as follows:


	September 30, 2022		December 31, 2021
Land	$	12,615	12,615
Buildings and improvements	45,397		45,017

Subtotal	58,012		57,632
Less: accumulated depreciation and amortization	16,855		15,951
Total	$	41,157	41,681

On October 29, 2021, SJWC sold two nonutility properties located in San Jose, California for $13,150. SJW Group recognized a pre-tax gain on the sale of nonutility properties of $7,230, after selling expenses of $277 for one of the properties sold, and a gain of $5,442, after selling expenses of $178, was deferred on the other nonutility property pending California Public Utilities

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2022

(in thousands, except share and per share data)

Commission (“CPUC”) review for the year ended December 31, 2021. On February 15, 2022, the CPUC review was completed and $5,442 was recognized as gain on sale of the second nonutility property.

A former wholly owned subsidiary of SJW Group, Texas Water Alliance Limited, was sold to Guadalupe-Blanco River Authority (“GBRA”) in 2017. The sales agreement with GBRA included a holdback amount of $3,000 to be paid to SJW Group on June 30, 2021, subject to reduction under certain conditions. SJW Group received the holdback amount without reduction from the GBRA on June 29, 2021, and recognized a pre-tax gain on sale of $3,000.

Fair Value Measurement

The following instruments are not measured at fair value on SJW Group’s condensed consolidated balance sheets as of September 30, 2022, but require disclosure of their fair values: cash and cash equivalents, accounts receivable and accounts payable. The estimated fair value of such instruments as of September 30, 2022, approximates their carrying value as reported on the condensed consolidated balance sheets. The estimated fair value of such financial instruments were determined using the income approach based on the present value of estimated future cash flows. There have been no changes in valuation techniques during the three and nine months ended September 30, 2022. The fair value of these instruments would be categorized as Level 2 in the fair value hierarchy, with the exception of cash and cash equivalents, which would be categorized as Level 1.

The fair value of SJW Group’s long-term debt was approximately $1,247,530 and $1,651,825 as of September 30, 2022, and December 31, 2021, respectively, and was determined using a discounted cash flow analysis, based on the current rates for similar financial instruments of the same duration and creditworthiness of the company. The book value of long-term debt was $1,458,088 and $1,532,041 as of September 30, 2022, and December 31, 2021, respectively. The fair value of long-term debt would be categorized as Level 2 in the fair value hierarchy.

CTWS’s additional retirement benefits under the supplemental executive retirement plans and retirement contracts are funded by investment assets held by a Rabbi Trust. The fair value of the money market funds, mutual funds and fixed income investments in the Rabbi Trust was $2,790 and $3,797 as of September 30, 2022, and December 31, 2021, respectively, and are categorized as Level 1 in the fair value hierarchy.

Earnings per Share

Basic earnings per share is calculated using income available to common stockholders, divided by the weighted average number of shares outstanding during the period. Diluted earnings per share is calculated using income available to common stockholders divided by the weighted average number of shares of common stock including both shares outstanding and shares potentially issuable in connection with restricted common stock awards under SJW Group’s Long-Term Incentive Plan (as amended, the “Incentive Plan”), shares potentially issuable under the performance stock plans assumed through the business combination with CTWS, and shares potentially issuable under the Employee Stock Purchase Plan (“ESPP”). For the three months ended September 30, 2022 and 2021, 2,416 and 1,558 anti-dilutive restricted common stock units were excluded from the dilutive earnings per share calculation, respectively. For the nine months ended September 30, 2022 and 2021, 18,240 and 14,441 anti-dilutive restricted common stock units were excluded from the dilutive earnings per share calculation, respectively.

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2022

(in thousands, except share and per share data)

Note 2.Regulatory Matters

Regulatory assets, net are comprised of the following as of September 30, 2022, and December 31, 2021:


	September 30, 2022		December 31, 2021
Regulatory assets:
Income tax temporary differences, net	$	33,811	22,420
Postretirement pensions and other postretirement benefits	64,934		62,197
Business combinations debt premium, net	18,031		19,937
Balancing and memorandum accounts, net	22,583		38,334
Water Rate Adjustment	(2,800)		2,588
Other, net	10,124		9,145
Total regulatory assets, net in Condensed Consolidated Balance Sheets	146,683		154,621
Less: current regulatory assets, net	738		2,629
Total regulatory assets, net, less current portion	$	145,945	151,992

As of September 30, 2022, and December 31, 2021, SJW Group’s regulatory assets, net, not earning a return primarily included postretirement pensions and the unfunded amount of other medical benefits, and business combination debt premiums, net. The total amount of regulatory assets, net not earning a return at September 30, 2022, and December 31, 2021, either by interest on the regulatory asset/liability or as a component of rate base at the allowed rate of return was $86,113 and $84,887, respectively.

Balancing and Memorandum Accounts

SJWC has established balancing accounts for the purpose of tracking the under-collection or over-collection associated with expense changes and revenue authorized by the CPUC to offset those expense changes. SJWC also maintains memorandum accounts to track revenue impacts due to catastrophic events, certain unforeseen water quality expenses related to new federal and state water quality standards, energy efficiency, water conservation, water tariffs, and other approved activities or as directed by the CPUC. The Monterey Water Revenue Adjustment Mechanism (“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 Water Conservation Memorandum Account (“WCMA”) allows SJWC to track lost revenue, net of related water costs, associated with reduced sales due to water conservation and associated calls for water use reductions. SJWC records the lost revenue captured in the WCMA balancing accounts. Drought surcharges collected are used to offset the revenue losses tracked in the WCMA. On October 11, 2022, the CPUC issued General Rate Case Decision No. 22-10-005, which approved a recovery of $18,174 in balancing and memorandum accounts from customers.

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2022

(in thousands, except share and per share data)

Balancing and memorandum accounts recorded to regulatory assets, net for the three and nine months ended September 30, 2022, and 2021 are as follows:


	Three months ended September 30, 2022				Three months ended September 30, 2021
	Beginning Balance		Regulatory Asset Increase (Decrease)	Refunds (Collections) Adjustments	Ending Balance	Beginning Balance		Regulatory Asset Increase (Decrease)	Refunds (Collections) Adjustments	Ending Balance
Revenue accounts:
MWRAM	$	21,096	1,381	—	22,477	$	15,278	363	—	15,641
WCMA	(14,961)		3,868	(8,708)	(19,801)	668		—	—	668
Cost of capital memorandum account	(1,568)		(8)	—	(1,576)	(1,562)		—	—	(1,562)
All others	417		590	—	1,007	(1,164)		397	—	(767)
Total revenue accounts	4,984		5,831	(8,708)	2,107	13,220		760	—	13,980
Cost-recovery accounts:
Water supply costs	11,111		391	—	11,502	9,895		388	—	10,283
Pension	5,069		59	—	5,128	4,210		366	—	4,576
Hydro Generation Research, Development and Demonstration Memorandum Account (“PRVMA”)	543		3	(106)	440	928		—	(121)	807
COVID-19 Catastrophic Event Memorandum Account (“CEMA”)	2,586		420	—	3,006	2,618		567	—	3,185
All others	479		(79)	—	400	446		—	—	446
Total cost-recovery accounts	19,788		794	(106)	20,476	18,097		1,321	(121)	19,297

Total	$	24,772	6,625	(8,814)	22,583	$	31,317	2,081	(121)	33,277


	Nine months ended September 30, 2022				Nine months ended September 30, 2021
	Beginning Balance		Regulatory Asset Increase (Decrease)	Refunds (Collections) Adjustments	Ending Balance	Beginning Balance		Regulatory Asset Increase (Decrease)	Refunds (Collections) Adjustments	Ending Balance
Revenue accounts:
MWRAM	$	16,866	5,610	1	22,477	$	12,077	3,563	1	15,641
WCMA	3,534		2,768	(26,103)	(19,801)	666		—	2	668
Cost of capital memorandum account	(1,563)		(13)	—	(1,576)	(1,561)		(1)	—	(1,562)
All others	(386)		1,392	1	1,007	(1,139)		369	3	(767)
Total revenue accounts	18,451		9,757	(26,101)	2,107	10,043		3,931	6	13,980
Cost-recovery accounts:
Water supply costs	10,545		957	—	11,502	8,123		2,159	1	10,283
Pension	4,941		187	—	5,128	3,478