Regulatory Matters

9 Months Ended

Sep. 30, 2024

Regulatory assets and liabilities are comprised of the following as of September 30, 2024 and December 31, 2023:


	September 30, 2024		December 31, 2023
Regulatory assets:
Income tax temporary differences (a)	$	173,671	157,669
Unrecognized pensions and other postretirement benefits (b)	24,593		24,593
Business combinations debt premium (c)	12,948		14,855
Employee benefit costs (d)	5,433		9,815
Monterey Water Revenue Adjustment Mechanism (“MWRAM”) (e)	10,327		9,361
Customer Assistance Program (“CAP”) balancing account (f)	6,683		5,457
Catastrophic event memorandum accounts (“CEMA”) (g)	975		4,819
2022 general rate case interim memorandum account (h)	3,354		4,571
Revenue adjustment mechanisms (n)	2,528		—
Water supply costs (i)	—		583
Other (j)	13,478		8,463
Total regulatory assets	253,990		240,186
Less: current regulatory assets (k)	828		4,276
Total regulatory assets, less current portion	$	253,162	235,910
Regulatory liabilities:
Cost of removal (l)	360,176		346,418
Future income tax benefits due to customers (m)	85,966		88,610
Unrecognized pensions and other postretirement benefits (b)	20,515		20,196
Revenue adjustment mechanisms (n)	1,770		5,536
Water supply costs (i)	3,648		—
Other (o)	3,594		3,407
Total regulatory liabilities	475,669		464,167
Less: current regulatory liabilities (p)	1,770		3,059
Total regulatory liabilities, less current portion	$	473,899	461,108

___________________________________

(a)Consists primarily of temporary income tax differences that are flowed through to customers, which will be recovered in future rates as these temporary differences reverse. The company expects to recover regulatory assets related to plant depreciation income tax temporary differences over the lives of the plant assets, which are between 4 to 100 years.

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

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

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

(e)MWRAM is described in the following section.

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

(g)The California Public Utilities Commission (“CPUC”) has authorized water utilities to activate CEMA accounts in order to track savings and costs related to SJWC’s response to catastrophic events, which includes external labor and materials, increases in bad debt from suspension of shutoffs for non-payment, waived deposits and reconnection fees, and divergence from actual versus authorized usage. At December 31, 2023, the balance primarily relates to increased bad debt expenses associated with SJWC’s response to COVID-19.

(h)Represents the difference between revenues collected in interim rates in effect as of January 1, 2022 and revenues that would result from rates authorized in SJWC’s 2022 general rate case retroactive to January 1, 2022.

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

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

(k)As of September 30, 2024, primarily relates to the current portion of CWC’s deferred well redevelopment and rate case costs. As of December 31, 2023, primarily relates to the current portion of MWRAM.

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

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

(n)Consists of Water Rate Adjustment mechanism (“WRA”) and Water Conservation Memorandum Account (“WCMA”),which are described in the following section.

(o)Other includes other balancing and memorandum accounts, other regulatory mechanisms and accrued tank painting costs.

(p)As of September 30, 2024 and December 31, 2023, primarily relates to the current portion of WRA.

SJWC has established balancing accounts for the purpose of tracking the under-collection or over-collection associated with expense changes and the revenue authorized by the CPUC to offset those expense changes. SJWC has been authorized for the use of the Full Cost Balancing Account to track water supply costs and energy consumption. The MWRAM balancing account 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.

SJWC also maintains memorandum accounts to track 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 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, both mandatory and voluntary. SJWC records the lost revenue captured in the WCMA balancing accounts. Applicable drought surcharges collected are used to offset the revenue losses tracked in the WCMA. All balancing accounts and memorandum accounts not included for recovery or refund in the current general rate case will be reviewed by the CPUC in SJWC’s next general rate case or at the time an individual account balance reaches a threshold of 2% of authorized revenue, whichever occurs first.

CWC has been authorized by the Connecticut Public Utilities Regulatory Authority (“PURA”) to utilize a WRA, a decoupling mechanism, to mitigate risk associated with changes in demand. The WRA is used to reconcile actual water demands with the demands projected in the most recent general rate case and allows the company to implement a surcharge or sur-credit as necessary to recover or refund the revenues approved in the general rate case. The WRA allows the company to defer, as a regulatory asset or liability, the amount by which actual revenues deviate from the revenues allowed in the most recent general rate proceedings.

As of September 30, 2024 and December 31, 2023, SJW Group’s regulatory assets not earning a return primarily included unrecognized pensions and other postretirement benefits and business combination debt premiums. The total amount of regulatory assets not earning a return at September 30, 2024 and December 31, 2023, either by interest on the regulatory asset or as a component of rate base at the allowed rate of return, was $41,962 and $43,141, respectively.