Regulatory Matters

6 Months Ended

Jun. 30, 2026

In accordance with accounting principles for rate-regulated enterprises, GSWC and BVES record regulatory assets, which represent probable future recovery of incurred costs from customers through the ratemaking process, and regulatory liabilities, which represent probable future refunds that are to be credited to customers through the ratemaking process. At June 30, 2026, GSWC and BVES had $14.0 million of net regulatory liabilities on the balance sheets, which included $114.9 million of regulatory assets net of $128.9 million of regulatory liabilities. As authorized by the CPUC, the majority of the regulatory assets and liabilities accrue interest at the current 90-day commercial-paper rate. There are $45.8 million of regulatory assets not accruing a carrying cost, which included $27.9 million related to flowed-through deferred income taxes including the gross-up portion on the deferred tax resulting from the excess deferred income tax regulatory liability, and $14.6 million related to memorandum accounts authorized by the CPUC to track unrealized gains and losses on BVES’s purchase power contracts over the term of the contracts. The remaining $3.3 million relates to other regulatory assets that do not provide for a carrying cost. Furthermore, there are $124.3 million of regulatory liabilities not incurring interest that consisted of $66.8 million related to excess deferred income taxes arising from the lower federal income tax rate under the Tax Cuts and Jobs Act enacted in December 2017 that are being refunded to customers, $40.6 million related to the net over funded positions in Registrant’s pension and other retirement obligations (not including the two-way pension balancing accounts, which accrues interest), and $16.9 million related to the Per- and Polyfluoroalkyl Substances (“PFAS”) contamination litigation proceeds memorandum account that also does not accrue interest.

Regulatory assets represent costs incurred by GSWC and/or BVES for which they have received or expect to receive rate recovery in the future. In determining the probability of costs being recognized in other periods, GSWC and BVES consider regulatory rules and decisions, past practices, and other facts or circumstances that would indicate if recovery is probable. If the CPUC determines that a portion of either GSWC’s or BVES’s regulatory assets are not recoverable in customer rates, the applicable utility must determine if it has suffered an asset impairment that requires it to write down the asset’s value. Regulatory assets are offset against regulatory liabilities within each ratemaking area. Amounts expected to be collected or refunded in the next twelve months have been classified as current assets and current liabilities by ratemaking area.

Regulatory assets, less regulatory liabilities, included in the consolidated balance sheets are as follows:


(dollars in thousands)	June 30, 2026		December 31, 2025
GSWC
2022/2023 general rate case memorandum accounts (unbilled revenue)	$	14,632	$	22,107
Flowed-through deferred income taxes, net	24,260		20,932
Low income rate assistance balancing accounts	11,881		10,582
Other regulatory assets	20,210		28,405
Excess deferred income taxes	(63,081)		(63,223)
Pensions and other post-retirement obligations	(44,502)		(43,479)
PFAS Contamination Litigation Proceeds Memorandum Account	(16,851)		(10,987)
Other regulatory liabilities	(212)		(1,331)
Total GSWC	$	(53,663)	$	(36,994)
BVES
Derivative instrument memorandum account (Note 5)	$	14,631	$	15,503
2023/2024 general rate case memorandum accounts (unbilled revenue)	6,624		8,221
Wildfire mitigation and other fire prevention related costs memorandum accounts	8,967		11,336
Other regulatory assets	13,676		15,213
Other regulatory liabilities	(4,206)		(4,015)
Total BVES	$	39,692	$	46,258

Total AWR	$	(13,971)	$	9,264

Regulatory matters are discussed in the consolidated financial statements and the notes thereto included in the Company’s Form 10-K for the year ended December 31, 2025 filed with the SEC. There were no significant changes during the six months ended June 30, 2026 except for routine and recurring activity, including the recovery of regulatory assets through surcharges currently in place.

PFAS Contamination Litigation Proceeds Memorandum Account:

GSWC has been a class member in various class action lawsuits related to PFAS contamination affecting public water systems. A class settlement agreement among Tyco Fire Products LP (“Tyco”) and the class of eligible public water systems was entered into on April 12, 2024 that resolved any claims for PFAS contamination with Tyco. The class settlement agreement

between the parties was approved by an order issued by the Federal District Court of South Carolina on November 22, 2024. As a result of the settlement, GSWC received from Tyco $2.2 million, net of legal and other fees, during the second quarter of 2026. In addition to the class settlement with Tyco, in June 2026, GSWC received a settlement payment of $0.9 million, net of legal and other fees, from BASF Corporation (“BASF”) pursuant to a class settlement agreement entered into on May 20, 2024 that resolved any claims for PFAS contamination with BASF. The proceeds received from both settlement agreements have been included in the PFAS contamination litigation proceeds memorandum account and are reflected as regulatory liabilities as of June 30, 2026.

Also, in connection with GSWC’s class settlement agreement entered into with 3M Company in 2023, on June 23, 2026 GSWC was notified that the scheduled and third legal settlement payment of $3.3 million, net of legal and other fees, was paid by 3M Company to a qualified settlement fund and administered by a custodian for the benefit of GSWC. The funds are expected to be disbursed to GSWC in the third quarter of 2026. Accordingly, a $3.3 million receivable has been recognized along with a corresponding regulatory liability as the amount was realizable and collection was virtually certain as of June 30, 2026. Subsequent to quarter-end, on July 23, 2026, GSWC received the third settlement payment of $3.3 million from 3M.

Settlement proceeds received by GSWC have been and may be used for future capital investments or operations and maintenance expenses related to PFAS water contamination to its water systems or any PFAS related litigation against its water systems, which benefit GSWC’s customers. The CPUC has authorized GSWC to track in a memorandum account the settlement payments received by GSWC from lawsuits related to PFAS contamination in its water systems, which include the proceeds received for participation in class action lawsuits. The amounts in the memorandum account have been recorded as a regulatory liability and have been used, and will continue to be used in the future, to offset the incremental investments in replacement and treatment of property, as well as operations and maintenance expenses and other direct expenses related to PFAS contamination.