Regulatory Assets and Liabilities

9 Months Ended

Sep. 30, 2020

Regulatory Assets and LiabilitiesThe CPUC follows a rate case plan which requires Cal Water to file a GRC for each of its regulated operating districts every three years. In a GRC proceeding, the CPUC not only considers the utility's rate setting requests, but may also consider other issues that affect the utility's rates and operations. The CPUC is generally required to issue its GRC decision prior to the first day of the test year or authorize interim rates. In accordance with the rate case plan, Cal Water filed its 2018 GRC application in July of 2018 requesting rate changes effective January 1, 2020. On October 8, 2019, Cal Water jointly filed a formal settlement agreement for its 2018 GRC with the Public Advocates Office of the CPUC covering the

majority of open matters in the case. The key matters not included in the settlement, and which were litigated, were continuation of the WRAM, MCBA, PCBA, and HCBA. On October 14, 2020, an Administrative Law Judge (ALJ) with the CPUC issued a proposed decision that is subject to adoption by the CPUC no earlier than the CPUC’s November 19, 2020 meeting. If adopted as proposed, the decision would approve the settlement reached in October of 2019 by Cal Water and the CPUC’s Public Advocates Office, allow Cal Water to continue its decoupling balancing accounts through 2022, and allow Cal Water to retain its PCBA and HCBA. Under this proposed decision, Cal Water would be authorized to invest $828.0 million in its districts throughout California through 2021. This includes $148 million of water system infrastructure upgrades that would be recovered via the CPUC’s advice letter procedure once those projects are completed. The proposed decision also authorizes total revenue of up to $698.7 million for 2020.

The Company determined that the proposed decision provides additional evidence about conditions that existed as of September 30, 2020. As of November 6, 2020, the Company believes it is probable the proposed decision will be adopted by the CPUC without any material variation and accordingly, the Company recorded regulatory assets and associated revenues resulting from the regulatory mechanisms approved in the proposed decision as of September 30, 2020. In the unlikely event that the CPUC does not approve the proposed decision as issued, the Company will need to adjust regulatory asset balances and revenues in the fourth quarter of 2020.

Regulatory assets and liabilities were comprised of the following as of September 30, 2020 and December 31, 2019:


	Recovery Period	September 30, 2020		December 31, 2019
Regulatory Assets
Pension and retiree group health	Indefinitely	$	207,828	$	208,321
Property-related temporary differences (tax benefits flowed through to customers)	Indefinitely	107,962		104,931
Other accrued benefits	Indefinitely	21,434		20,030
Net WRAM and MCBA long-term accounts receivable	1 - 2 years	40,036		25,465
Asset retirement obligations, net	Indefinitely	21,018		19,567
Interim rates long-term accounts receivable	1 year	21,672		4,642
Tank coating	10 years	14,209		13,535
Recoverable property losses	10 years	4,775		5,000
PCBA	1 year	32,819		21,465
Other components of net periodic benefit cost	Indefinitely	6,316		5,145
Other regulatory assets	Various	6,366		5,221
Total Regulatory Assets		$	484,435	$	433,322

Regulatory Liabilities
Future tax benefits due to customers		$	173,048	$	194,501
HCBA		7,407		4,271
CEBA		2,926		2,742
Net WRAM and MCBA long-term payable		374		211
Tax accounting memorandum account		711		806
Cost of capital memorandum account		15		151
1,2,3 trichloropropane (TCP) settlement proceeds		9,084		8,426
Other regulatory liabilities		374		305
Total Regulatory Liabilities		$	193,939	$	211,413

Short-term regulatory assets and liabilities are excluded from the above table.

The short-term regulatory assets were $54.4 million as of September 30, 2020 and $38.2 million as of December 31, 2019. As of September 30, 2020, the short-term regulatory assets primarily consist of net WRAM and MCBA receivables and IRMA receivables. As of December 31, 2019, the short-term regulatory assets primarily consist of net WRAM and MCBA receivables.

The short-term portions of regulatory liabilities were $11.0 million as of September 30, 2020 and $4.5 million as of December 31, 2019. The short-term regulatory liabilities as of September 30, 2020, primarily consist of 2015 GRC CEBA refunds and TCJA customer refunds. As of December 31, 2019, the short-term regulatory liabilities primarily consist of TCP settlement proceeds, tax accounting memorandum account refunds, and cost of capital memorandum account refunds.