REGULATORY ASSETS AND LIABILTIES

12 Months Ended

Dec. 31, 2025

REGULATORY ASSETS AND LIABILITIES

Regulatory assets and liabilities were comprised of the following as of December 31:


	Recovery Period	2025		2024
Regulatory Assets
Property-related temporary differences (tax benefits flowed through to customers)	Indefinite	$	199,465	$	178,279
Asset retirement obligations, net	Indefinite	30,073		28,883
Other accrued benefits	Indefinite	26,263		25,439
IRMA long-term accounts receivable	Various	22,077		46,278
Tank coating	Various	19,495		21,477
MWRAM long-term regulatory asset	1-2 years	12,876		16,353
General district balancing account receivable	Various	9,844		9,393
Incremental Cost Balancing Accounts (ICBA)	1 year	4,722		8,251
Net WRAM and MCBA long-term accounts receivable	Various	4,078		3,633
Customer Assistance Program (CAP) and Rate Support Fund (RSF) accounts receivable	1 year	2,651		9,910
Recoverable property losses	Various	2,051		2,633
Other regulatory assets	Various	6,270		6,877
Total Regulatory Assets		$	339,865	$	357,406
Regulatory Liabilities
Cost of removal		$	523,813	$	483,108
Pension and retiree group health		219,133		174,708
Future tax benefits due to customers		103,662		106,184
PFAS settlement proceeds		25,193		—
Other components of net periodic benefit cost		24,248		18,287
Pension Cost Balancing Account (PCBA)		17,837		14,143
Conservation Expense Balancing Account (CEBA)		5,202		3,294
Health Cost Balancing Account (HCBA)		4,149		3,630
Net WRAM and MCBA long-term payable		3,117		3,064
ICBA		2,144		6,003
Other regulatory liabilities		1,316		2,130
Total Regulatory Liabilities		$	929,814	$	814,551

Short-term regulatory assets and liabilities are excluded from the above table. The short-term regulatory assets as of December 31, 2025 and 2024 were $72.5 million and $55.9 million, respectively. The short-term regulatory assets, as of December 31, 2025 primarily consisted of IRMA, MWRAM, and ICBA receivables. As of December 31, 2024, the short-term regulatory assets primarily consisted of IRMA and MWRAM receivables.

The short-term portion of regulatory liabilities as of December 31, 2025 and 2024 were $25.5 million and $22.6 million, respectively. The short-term regulatory liabilities as of December 31, 2025 primarily consisted of TCJA regulatory liabilities, ICBA regulatory liabilities, and PFAS settlement proceeds (see Note 15 of the Notes to Consolidated Financial Statements). As of December 31, 2024, the short-term regulatory liabilities primarily consisted of TCJA regulatory liabilities, ICBA regulatory liabilities, and IRMA regulatory liabilities.

The property-related temporary differences are primarily due to: (i) the difference between book and federal income tax depreciation on utility plant that was placed in service before the Commissions adopted normalization for rate making purposes;

and (ii) certain (state) deferred taxes for which flow through accounting continues to be applied to originating deferred taxes. The regulatory asset will be recovered in rates in future periods as the tax effects of the temporary differences previously flowed-through to customers reverse.

The asset retirement obligation regulatory asset represents the difference between costs associated with asset retirement obligations for wells and amounts collected in rates.

Other accrued benefits are accrued benefits for vacation, self-insured workers’ compensation, and directors’ retirement benefits.

The IRMA long-term accounts receivables is the additional amount the Company would have billed customers in 2023 and 2024 had the 2021 CA GRC been approved on time.

Tank coating represents the maintenance costs for tank coating projects that are recoverable from customers.

The MWRAM regulatory asset represents 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 had been in effect.

The general district balancing account represents the residual balances from memorandum and balancing accounts that have been aggregated into one balancing account for future recovery.

The ICBA tracks differences between the authorized prices of water production costs and actual prices of water production costs by ratemaking area.

The net WRAM and MCBA long-term accounts receivable is the undercollected portion of recorded revenues that are not expected to be collected from customers within the next 12 months.

The CAP and RSF are two programs offered by Cal Water that assist qualifying customers with their monthly water bill. The programs are funded by the customers who do not qualify for the assistance. The CAP and RSF regulatory assets represent the amounts due from customers to fund the CAP and RSF credits that were provided to assist qualifying customers.

Cost of removal represents the cumulative differences between the recorded costs to remove assets and amounts collected in rates for expected costs to remove assets at the end of their estimated useful life and does not include the asset retirement obligation for wells.

The pension and retiree group health regulatory liability represents the over funded obligation of the Company’s postretirement benefit plans which the Company expects to refund to customers in the future. These plans are discussed in further detail in Note 11 of the Notes to Consolidated Financial Statements.

The future tax benefits due to customers primarily resulted from federal tax law changes enacted by the TCJA on December 22, 2017. The TCJA reduced the federal corporate income tax rate from 35 percent to 21 percent beginning on January 1, 2018, and GAAP requires the Company to re-measure all existing deferred income tax assets and liabilities to reflect the reduction in the federal tax rate on the enactment date.

The PFAS settlement proceeds represent amounts the Company expects to reclassify to CIAC beyond the next 12 months. The Company is required by the Commissions to provide the benefit of the PFAS settlement proceeds to customers through CIAC once PFAS related remediation projects are placed in service. Since the Company is required to provide the benefit of the settlement proceeds to customers, the Company recorded the PFAS settlement proceeds as a regulatory liability and will reclassify them to CIAC once the related projects are placed in service. See Note 15 of the Notes to Consolidated Financial Statements for further details.

The other components of net periodic benefit cost regulatory liabilities are authorized by the Commissions and are probable for customer refund through the capital program.

The PCBA regulatory liability, the HCBA regulatory liability, and CEBA regulatory liability represent incurred pension, healthcare, and conservation costs that were below the cost recovery in rates and the amounts refundable to customers.