AWR 10-K & 10-Q changes, risk factors and insider trading

All of our utility privatization contract services are provided to the U.S. government pursuant to the terms of firm-fixed-price contracts subject to annual economic price adjustments. ASUS may also, from time to time, perform construction services on military bases as a subcontractor or pursuant to task order agreements. These contracts may be terminated or services suspended at any time for convenience of the U.S. government. We are subject to penalties for failure to conform or comply with U.S. government regulations and the terms of our contracts, and may be suspended or debarred for such failure to comply. The fees that we may charge are adjusted annually and in response to our requests for equitable adjustments. We have experienced delays in obtaining price and equitable adjustments, as well as delays in being paid by the U.S. government.

We may be subject to financial losses, penalties and other liabilities if we fail to operate and maintain safe work sites, equipment and facilities, includingor experience losses, damages, penalties and other liabilities arising from natural disasters such as wildfires, other natural disasters and cybersecurity andincidents or terrorist activities. We may not be able to recover all these losses from insurance or from ratepayers or may experience delays in obtaining recovery for these losses.

•Failure to attract, train, develop and transition key employees with the necessary skills to replace employees who are retiring or otherwise terminate employment or to fill new positions needed to respond to the increase in public utility and environmental regulations and overall needs of our operations and continued capital investments;

•Volatility in economic conditions such as changes to inflation, short-term interest rate volatility, tariffs, and other market conditions may adversely impact our financial performance;

Climate change has resulted in increased frequency and duration of droughts, volatility in rainfall, potential degradation of water quality, and changes in demand for services. More frequent and extended California drought conditions may cause increased stress on surface water supplies and groundwater basins, as well as allocations of water from the State Water Project and the Colorado River. Wholesale water suppliers may not have adequate supply during extended periods of drought, which may result in increases in prices for water delivered to us. In addition, GSWC could experience an increased use of reclaimed or recycled water by GSWC customers, in lieu of GSWC supplying potable water to these customers. Reclaimed water generally has lower tariff rates than potable water and may be provided by other companies or government entities in GSWC’s service territory. Prolonged droughts may also result in state-ordered mandatory or voluntary conservation efforts by customers, changes in customer conservation patterns and imposition of new regulations impacting such things as landscaping and irrigation patterns.

Drought conditions have contributed to increases in wildfires, which has resulted in new California legislation requiring electric utilities to adopt and implement wildfire mitigation plans.plans and water utilities to enhance plans to ensure water infrastructure remains functional during wildfire events. GSWC and BVES isare incurring increased capital expenditures andand, when applicable, other operating costs related to the creation, implementation and tomaintenance maintainof ongoing requirements of these plans. We anticipate that the costs of capital improvements necessary to sustain this program will continue to increase. BVES is also required to implement a public safety power shut-off program during high wildfire threat conditions. Shut-offs can reduce BVES’s liquidity and decrease customer satisfaction. Abnormal weather patterns created by climate change can also impact electricity demand at BVES. The demand for electricity at our electric segment is greatly affected by winter snow levels. An increase in winter snow levels reduces the use of snow-making machines at ski resorts in the Big Bear area and, as a result, also reduces BVES’s liquidity. Likewise, unseasonably warm weather during a skiing season may result in temperatures too high for snow making conditions, which also reduces our liquidity.

More extreme weather events which may result in significant rainfall, flash flooding, mudslides, high winds and wildfires could damage our infrastructure and our customers’ and/or suppliers’ property. The wildfires of recent wildfiresyears that devastated communities in southern California may result in legislative and regulatory actions that may impose additional reporting requirements,requirements and capital investment requirements for our regulated utilities and water system operation requirements.requirements for GSWC. For instance, recent California legislation has required electric utilities to adopt and implement wildfire mitigation plans, and certain local counties in California have required water utilities to enhance plans to ensure water infrastructure remains functional during wildfire events. As a result of such events, it may increase our cost of maintaining our infrastructure and adversely impact our ability to provide water or electric service to our customers. The cost of damage to our infrastructure may be somewhat mitigated if the CPUC permits us to establish a catastrophic emergency memorandum account that enables us to recover the costs incurred. Furthermore, potential future legislative efforts to ban gas powered power plants as a response to climate change may require usBVES to replace our currentits 8.4 MW natural gas-powered generator before its useful life is completed.

OnIn August 27, 2020, the CPUC issued a final decision in the first phase of the CPUC’s Order Instituting Rulemaking evaluating the low income ratepayer assistance and affordability objectives contained in the CPUC’s 2010 Water Action Plan, addressing the continued use of the WRAM and the MCBA by California water utilities. As a result of this decision, these mechanisms implemented by GSWC in 2008 would be discontinued for years after 2024. In response to the CPUC’s order, GSWC, three other investor-owned water utilities and the California Water Association each separately filed a petition in 2021 with the California Supreme Court (the “Court”) to review the CPUC’s decision-making processes that resulted in discontinuing the use of the WRAM and MCBA. On July 8, 2024, the Court issued a ruling that set aside the previously issued order by the CPUC and vacated the portions of the CPUC’s August 2020 decision related to the discontinued use of the WRAM and MCBA used by water utilities and its accompanying findings and conclusions. Furthermore, in September 2022, the governor of California signed Senate Bill (“SB”) 1469, which allowed Class A water utilities, including GSWC, to continue requesting the use of a revenue decoupling mechanism in their next general rate case.

Accordingly, GSWC requested the continued use of the WRAM and MCBA in its general rate case application filed in August 2023 that establishes new rates for the years 2025 – 2027. In January 2025, GSWC received a final decision that rejected GSWC’s request for continuation of the WRAM and MCBA and instead ordered GSWC to transition to a modified rate adjustment mechanism (a Monterey-style WRAM or “M-WRAM”) and an incremental cost balancing account for supply costs. The final CPUC decision alsodid approvedapprove GSWC’s request for the continuation of a sales reconciliation mechanism, which would allow GSWC to adjust its sales forecast throughout the general rate case cycle to address significant fluctuations in consumption. However, without the continuation of a full revenue decoupling mechanism such as the WRAM and a full supply cost decoupling balancing account for water supply such as the MCBA, Registrant may be subject to future volatility in revenues and earnings as a result of fluctuations in water consumption by our customers and changes in water supply cost mix.

Our regulated utilities'utilities’ ongoing financial results depend on their ability to recover costs from itstheir customers, including costs such as water or electricity purchased for its customers, through rates charged and billed to its customers as approved by the CPUC. Both GSWC’s and BVES’s financial results depend on its ability to earn a reasonable return on capital, from its credit facilities, long-term debt and equity as well as the recovery of costs such as operations and maintenance expense that are incurred. Our ability to recover costs and earn a reasonable rate of return can be affected by time lags or delays in receiving approvals on general rate case decisions from the CPUC to authorize recovery of customers’ rates and differences between authorized rates and the actual costs incurred, due to increased levels of inflation, which each could adversely impact our financial condition and cash flows. In addition, our regulated utilities may be prevented from cost-recovery by the CPUC as a result of customer affordability concerns and desires to avoid rate increases.

We have been experiencing increasingexperienced delays in obtaining CPUC approval of our general rate cases. As a result, we have previously needed, and may need in the future, to undertake capital improvements described in our rate case filings before we receive CPUC approval to recover these costs in rates. BVES is required to file wildfire mitigation plans with OEIS for regulatory approval by the OEIS and the CPUC and, once approved, for BVES to make the capital improvements described in the wildfire mitigation plan. However, the CPUC does not approve recovery of any of the costs of implementing approved wildfire mitigation plans until it approves the next general rate case filed by BVES after the approval of the wildfire mitigation plans. As a result, there may be a delay in recovering costs associated with capital improvements required to be made by wildfire mitigation plans, and the CPUC may not approve all costs incurred in connection with the implementation of these plans that are incurred prior to obtaining CPUC approval of these costs in a general rate case.

Regulatory agencies may also change their rules and policies, which may adversely affect our profitability and cash flows. We are subject to regulations under U.S. federal and state regulations and policies including from the CPUC, Federal Energy Regulatory Commission and other regulatory agencies. Regulations and laws affect almost all aspects of our businesses and changes to such regulations are continuous and ongoing. There can be no assurance that laws, regulations and policies of regulatory agencies will not be changed in ways that will not materially impact our results of operations, financial position or cash flows.

We may also be subject to fines or penalties if a regulatory agency or the U.S. government determine that we have failed to comply with laws, regulations or orders applicable to our businesses, unless we successfully appeal such an adverse determination. Regulatory agencies may disallow recovery of certain costs if they determine they may no longer be recovered in rates, or if audit findings determine that we have failed to comply with our policies and procedures for procurement or other practices. Additional information regarding water quality regulations is discussed in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the section titled “Environmental Matters.”

Some of our infrastructure in California is aging. We have experienced leaks and mechanical problems in some of these older systems. In addition, infrastructure maintenance expenses are affected by labor and material costs, inflationary or tariff changes impacting such costs, supply chain disruptions and more stringent environmental regulations. Our electrical systems have also required upgrades due to aging and new wildfire safety and other compliance requirements. While we spend significant amounts on maintenance each year, these costs can increase substantially and unexpectedly. There could be an increase in infrastructure damage if California experiences more extreme weather events resulting in damage to our property.

It is possible that wildfires may occur more frequently, be of longer duration or impact larger areas as a result of drought-damaged plants and trees, lower humidity or higher winds that may occur as result of changing weather patterns. Our liquidity, earnings and operations may be materially and adversely affected by wildfires. We may be required to (i) incur greater costs to relocate lines or increase our trimming of trees and other plants near our electric or water facilities to avoid wildfires, (ii) make significant additional capital expenditures to fund the projects in BVES’s wildfire and safety mitigation plans, and (iii) bear the costs of damages to property or injuries to the public if it is determined that our power lines or other electrical or water equipment was a cause of such damages or injuries. In addition, wildfires may result in reduced demand if structures are destroyed or unusable following a wildfire and may adversely affect our ability to provide water or electric service in our service areas due to public safety power shutdowns or if any of our water or electric utility infrastructure is damaged by a wildfire.

Utilities in California may be held strictly liable, in certain circumstances, for damages caused by their property, such as mains, fire hydrants, power lines and other equipment, even though they were not negligent in the operation and maintenance of that property, under a doctrine known as inverse condemnation. Furthermore, the wildfires of recent years have increased the focus on water utilities and their ability to provide adequate services during such an event. Water utilities may be held strictly liable under inverse condemnation claims for fire damage in the event the water system did not operate as designed, including being damaged by the fire itself, even if the fire is no fault of the water utility. Our liquidity, earnings and operations may be adversely affected if we are unable to recover the costs of paying claims for damages caused by the non-negligent operation and maintenance of our property from customers or through insurance.

Electricity is dangerous for employees and the general public should they come in contact with electrical current or equipment, including through downed power lines, sparking during high-wind events or equipment malfunctions. Injuries and property damage caused by such events may subject BVES to significant liabilities that may not be covered or fully covered by insurance. Additionally, the CPUC has delegated to its staff the authority to issue citations, which carry a fine of $50,000 per-violation per day, to electric utilities subject to its jurisdiction for violations of safety rules found in statutes, regulations, and the General OrdersOrders, rules and regulations, of the CPUC.

As our operations support a Critical Infrastructure Sector of the United States, one that is vital to the United States where disruption in any of the sectors could have a debilitating effect on security, national economic security, or national public health or safety, terrorists could seek to disrupt service to our customers by targeting our assets through physical or cybersecurity events. We also may be prevented from providing water and/or wastewater services at the military bases we serve in times of military crisis affecting these bases. WeIf our operations were the subject of a terrorist or cybersecurity attack, it could have investeda inmaterial additionaladverse securityeffect for facilities throughouton our regulatedbusiness, service areas to mitigate the risksresults of terrorist activities. In addition, we continue to increase our investment in information technology to monitoroperations and addressfinancial cyber threats and attempted cyber-attacks, and to improve our posture in addressing security vulnerabilities.condition.

Capital and operating costs at GSWC are expected to increase substantially as a result of increases in environmental regulation arising from increases in the cost of upgrading and building new water treatment plants, disposing of residuals from our water treatment plants, handling and storing hazardous chemicals, compliance-monitoring and testing activities and securing alternative supplies when necessary. GSWC may be able to recover these costs from customers through the ratemaking process. We may also be able to recover a portion of these costs from certain third parties under settlement and contractual arrangements. During 2025, GSWC expectsreceived class settlement payments associated with class action claims related to incurPFAS additionalcontamination, as discussed further in Item 7, “Environmental Matters.” These funds may be used for future capital costsinvestments or operations and operatingmaintenance costsexpenses related to maintain and improve the quality ofPFAS water deliveredcontamination to its customers in light of anticipated stress on water resources associated with watershed and aquifer pollution, drought impacts, as well as to meet future water quality standards and consumer expectations. The CPUC ratemaking process provides GSWC with the opportunity to recover prudently incurred capital and operating costs in future filings associated with achieving water quality standards.systems.

During 2024, the U.S. EPA announced several final regulations that include established maximum contaminant levels (“MCLs”) for six perfluoroalkyl substances (“PFAS”) compounds in drinking water, designation of PFOA and PFOS as CERCLA hazardous substances, and Lead and Copper Rule Improvements,Improvements and California State Division of Drinking Water adopted a MCL of 10 parts per billion for Hexavalent Chromium, as further describeddescribed, along with additional information regarding other changes to water quality regulations, in Item 7, “Environmental Matters.” Such regulations are expected to increase GSWC’s capital investments and operations and maintenance expenses over the next decade. In addition, due to the volatility of the supply chain and demand for PFAS or other treatment components, both the capital investments and operations and maintenance expenses are likely to further increase. In May 2025, U.S. EPA announced its intention to extend the deadline for drinking water systems to comply with the new PFAS maximum contaminant levels by two years to 2031, but it has not yet issued regulations to put this extension into effect. Separately, in September 2025, U.S. EPA requested the D.C. Circuit vacate the maximum contaminant levels that were established for four PFAS compounds, which the D.C. Circuit Court has unanimously rejected in January 2026. Each of these potential changes to the regulations, if enacted, could affect the cost or timing of GSWC’s associated capital investments and operations and maintenance expenses.

Our operations can be impacted by groundwater contamination in certainour service territories. Historically, we have taken a number of steps to address contamination, including the removal of wells from service, decreasing the amount of groundwater pumped from wells in order to facilitate remediation of plumes of contaminated water, constructing water treatment facilities and securing alternative sources of supply from other areas not affected by the contamination. In emergency situations, we have supplied our customers with bottled water until the emergency situation has been resolved.

•rainfall, groundwater basin replenishment, flood control, snowpack levels in California and the West, reservoir levels and availability of reservoir storage;

Although there have been improvements in drought conditions over this past year, California drought conditions in recent years and historically and changes in weather patterns have caused an increased stress on surface water supplies and groundwater basins. In addition, low or no allocations of water from the State Water Project and court-ordered pumping restrictions on water obtained from the Sacramento-San Joaquin Delta decrease or eliminate the amount of water that the Metropolitan Water District of Southern California (“MWD”) and other state water contractors are able to import from northern California.

We have implemented tiered rates and other practices, as appropriate, in order to encourage water conservation. We have also implemented programs to assist customers in complying with water usage reductions. Over the long term, we are acting to secure additional supplies, which may include supplies from desalination anddesalination, increased use of reclaimed water, and direct potable re-use where appropriate and feasible. We cannot predict the extent to which these efforts to reduce stress on our water supplies will be successful or sustainable, or the extent to which these efforts will enable us to continue to satisfy all of the water needs of our customers. Water shortages at GSWC may:

Since 2008, GSWC implemented a modified supply cost balancing account, the MCBA, to track andthe recoverdifference costsbetween fromactual supply mix changescost and ratethe changessupply bycost adopted in water rates. The MCBA is a full decoupling balancing account for supply cost. It tracks the difference between actual and adopted supply cost due to change in supply mix, wholesale suppliers,suppliers’ asrates, authorizedand byproduction the CPUC.volume. However, cash flows from operations can be significantly affected since much of the balance we recognize in the MCBA iswas collected from or refunded to customers primarily through surcharges or surcredits, respectively, generally over twelve- to twenty-four-months. Beginning in 2025, the MCBA willwas bediscontinued. discontinued and GSWC will no longer be able to recover costs from supply mix changes in the MCBA as a result of theThe final decision issued on January 30, 2025 in GSWC'sGSWC’s recentlatest general rate case application. The final decisionapplication rejected GSWC’s request to continue the use of WRAM and MCBA. Instead of a full supply cost balancing account such asMCBA, the MCBA,Commission and instead directsdirected GSWC to implement an incremental cost balancing account, as further described in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the heading “Overview.” However, withoutWithout a full decoupling supply cost balancing account, Registrant’s earnings may be subject to future volatility as a result of changes in water supply cost mix. In addition, cash flows from operations can be affected since much of the balance we recognize in the ICBA may be collected from or refunded to customers through surcharges or surcredits in future periods based on CPUC approval.

•recycling of water by our customers; and

•mandated water-use restrictions.restrictions; and

These types of changes may result in short term as well as permanent decreases in demand even if our water supplies are sufficient to meet higher levels of demand after a drought ends. In addition, governmental restrictions on water usage during drought conditions may result in a decreased demand for water, even if our sources of supply are sufficient to serve our customers during such drought conditions. California has established long-term indoor and outdoor water use standards to address the impact of climate change on California water resources and mandate water conservation requirements on all Californians. These standards will require all urban water retailers to meet certain water use standards on a system-by-system basis.

SinceFrom 2008,2008 until 2024, we have implemented the CPUC-approved WRAM at GSWC, which hashad the effect of stabilizing revenues at the adopted level thereby reducing the potential adverse earnings impact of our customers’ conservation efforts. Cash flows from operations can be significantly affected since much of the balance we recognize in the WRAM account is collected from or refunded to customers generally over twelve-, eighteen- or twenty-four-month periods. The final decisiondecision, issued January 30, 2025, in the recent water general rate case rejected GSWC’s request for the continued use of a full sales and revenue decoupling mechanism such as the WRAM and orders GSWC to transition to a modified rate adjustment mechanism, M-WRAM, which tracks the difference between the revenue based on actual metered sales through a tiered volumetric rate and the revenue that would have been received with the same actual metered sales if a blended tier standard single quantity rate had been in effect. The final decision also approved GSWC’s request for the continuation of a sales reconciliation mechanism, which would allow GSWC to adjust its sales forecast throughout the general rate case cycle to address significant fluctuations in customer water consumption. However, without the continuation of a full revenue decoupling mechanism such as the WRAM, Registrant may be subject to future volatility in revenues and earnings as a result of fluctuations in water consumption by our customers.

Drought conditions in recent years and historically as well as shifting weather patterns in California as a result of climate change have created dry vegetation and higher risks of wildfire in California. Severe wildfires can pose a material risk for BVES in the event of the occurrence of a wildfire. There is no assurance that losses incurred through a wildfire event will not exceed the coverage limits of BVES’s insurance coverage. Any losses not fully insured by BVES’s insurance coverage may not be approved by the CPUC for future cost recovery.recovery and may have a material adverse effect on our business, results of operations, and financial condition.

BVES is required to adopt and implement a wildfire mitigation plan (“WMP”) that is submitted periodically to, and subject to the approval of, the CPUC. In JanuaryNovember 2025, the CPUC ratified BVES’s 2025 wildfire mitigation plan update which was also approved by the Office of Energy Infrastructure Safety approved BVES’s 2026-2028 Base WMP. The CPUC is expected to ratify this WMP in the fourthfirst quarter of 2024.2026. The recovery of costs incurred to implement the plan and its update are not approved by the CPUC at the time of its approval of the plan but will only be approved by the CPUC in a subsequent general rate case. We anticipate that the costs of capital improvements necessary to implement this program will increase substantially.

We purchase most of the electric energy sold to customers in our electric customer service area from others under purchased power contracts. In addition to purchased power contracts, we purchase additional energy from the spot market to meet peak demand and following the expiration of purchased power contracts if there are delays in obtaining CPUC authorization of new purchasepurchased power contracts. We may sell surplus power to the spot market during times of reduced energy demand. As a result, our cash flow may be affected by increases in spot market prices of electricity purchased and decreases in spot market prices for electricity sold. However, BVES has implemented a CPUC-approved supply-cost balancing account to mitigate the impact to earnings from fluctuations in supply costs.

We may experience delays in receiving payments for services rendered in military bases due to delays in Congressional appropriation billsbills, extended government shutdowns, or other factors affecting the available funds to pay contractors. During 2025, the U.S. government experienced the longest government shutdown in its history. In the event the U.S. government shuts down for a longer period, our liquidity and earnings could be impacted.

While it is the responsibility of the U.S. government to provide the source of water supply to meet ASUS’s subsidiaries water distribution system requirements under their contracts with the U.S. government, ASUS’s subsidiaries, as the water system permit holders for most of the bases they serve, are responsible for ensuring the continued compliance of the provided source of supply with all federal, state and local regulations, including water quality regulations. We believe, however, that the terms of the contracts between ASUS’s subsidiaries and the U.S. government provide the opportunity for us to recover costs incurred in the treatment or remediation of any quality issue that arises from the source of water supply. We may also be subject to fines and penalties if found negligent and non-compliant to federal, state, and local regulations.

The trading price of our Common Shares may fluctuate in the future because of the volatility of the stock market and a variety of other factors, many of which are beyond our control. Factors that could cause fluctuations in the trading price of our Common Shares include: changes in interest rates; regulatory developments, decisions and delays of decisions; general economic conditions and trends; price and volume fluctuations in the overall stock market; actual or anticipated changes or fluctuations in our results of operations; actual or anticipated changes in the expectations of investors or securities analysts; actual or anticipated developments in other utilities’ businesses or the general competitive landscape; litigation involving us or our industry; major catastrophic events; sales of large blocks of our stock and the other risks described herein.

Included in the following analysis is a discussion of Registrant’s operations in terms of earnings per share by business segment and AWR (parent), which equals each business segment’s recorded earnings and adjusted earnings (if applicable) divided by AWR’s weighted average number of diluted Common Shares. The impact of retroactivea ratesone-time relatedtax to the full year of 2022benefit recorded duringin the2024 year ended December 31, 2023 resulting from the final decision inat the water generalsegment rate case approved in June 2023 and the impact from the reversal of revenues subject to refund recorded in 2022 due to a change in estimates recorded in 2023 following the receipt of a final cost of capital decision in June 2023 havehas been excluded in thisthe analysis when communicating AWR’s consolidated and water segment results for the years ended December 31, 20242025 and 20232024. This adjustment has been excluded from the analysis to help facilitate comparisons of Registrant’sAWR’s performance from period to period.

AWR uses earnings per share by business segment,segment and AWR (parent), a non-GAAP financial measure, as an important measure in evaluating its operating results and believes it provides investors with clarity surrounding the performance of its segments. AWR reviews this measurement regularly and compares it to historical periods and to its operating budget. AReconciliations reconciliationof this measure and of diluted earnings per share as adjusted to AWR’s consolidated diluted earnings per share prepared in accordance with GAAP isare included in the discussion under the section titled “Summary Results by Segment.”

TheOn settlementJanuary agreement30, approved in2025, the CPUC issued a final decision resolved most of the issues related to the calculation of the 2025 annual revenue requirement in theGSWC’s general rate case application leavingfor onlyall twoits unresolvedwater issues.regions and the general office, which determines new water rates for the years 2025 - 2027. Among other things, the approvedfinal decision adopted a settlement authorizesagreement between GSWC and the Public Advocates Office at the CPUC, which authorized GSWC to invest approximately $573.1 million in capital infrastructure over the three-year capital cycle. The $573.1 million of infrastructure investment includes $17.7 million of advice letter capital investments to be filed for revenue recovery during the secondsecond- and third yearthird-year attrition increases when those projects are completed. In addition, the approved settlement agreement includes $58.2 million of advice letter capital investments that began construction in 2023 that we expect to filebe filed for revenue recovery during the secondsecond- and third yearthird-year attrition increases when those projects are completed. ForUnder the approved settlement agreement, beginning in 2025, all of the advice letter projects,projects GSWC will bewere allowed to accrue in a memorandum account (i) interest during the construction period at theGSWC’s adopted cost of debt until the assets are in service, and recover(ii) the full rate of return,return includingthat includes a debt and equity component and all applicable components of the revenue requirement afterfor the projects from the period the assets are placed in service up until the assetsdate areof placedthe inattrition customer rates.filings.

Excluding revenues for all of the advice letter capital projects discussed above, under the terms of the approved settlement agreement (i)agreement, GSWC’s adopted operating revenues less water supply costs for 2025 will increaseincreased by approximately $23 million as compared to the 2024 adopted operating revenues less water supply costs,costs. andIn (ii)December, there2025, areGSWC potentialreceived additionalapproval revenuefrom increasesthe CPUC to implement its full second-year rate increases, effective January 1, 2026, that will result in higher adopted operating revenues less water supply cost for 2026 of approximately $20$32.0 million forcompared eachto of2025’s adopted operating revenues less water supply cost. Included in the years 2026 andincrease 2027is basednearly on$11 inflationmillion factors used at the time of the application filing in August 2023. The increases in 2026 and 2027 are subjectrelated to the resultsadvice ofletter ancapital earningsprojects testpreviously discussed. The assets from the advice letter projects and changesthe related amounts in the memorandum account were added to the forecastedadopted inflationaryrate index values. Actual increasesbase for 2026inclusion and 2027 will be determined whenin the CPUCrevenue approvesrequirement theeffective filingsJanuary to1, implement the new rate increases, using inflationary index values applicable at that time.2026.

The two remaining 2025 revenue requirement issues that were not resolved in the approved settlement agreement were related to the sales forecast and supply mix. The final decision adoptsalso GSWC’s recommended sales forecast and adopts a supply mix that splits the difference between GSWC’s and Cal Advocates’ forecasts. In addition, certain items related toaddressed GSWC’s request for various regulatory mechanisms that were litigated that were also addressed induring the finalproceeding. decision.Among Withother regards to these requests,things, the final decision (i) rejectsrejected GSWC’s request for the continuation of a full sales and revenue decoupling mechanism such as the WRAM and a full cost balancing account for water supply such as the MCBA, and instead ordersordered GSWC to transition to a modified rate adjustment mechanism (a Monterey-style WRAM or “M-WRAM”) and an incremental cost balancing account (“ICBA”) for supply costs, (ii) accepts GSWC’s sales reconciliation mechanism, (iii) rejects GSWC’s supply mix adjustment mechanism, and (iv) rejects GSWC’s request to modify the existing per- and polyfluoroalkyl substances (“PFAS”) memorandum account to track carrying costs on capital investments needed to comply with the new PFAS maximum contaminant levels established by the U.S. EPA (with monitoring and reporting required effective 2027), and instead orders GSWC to file for recovery of PFAS-related capital projects through a separate application or future general rate case.costs. The final decision also adopted GSWC’s M-WRAM rate design proposal,proposal authorizing GSWC to increase the revenue requirement recovery in its fixed service charges to between 45-48% of the revenue requirement depending on the ratemaking area representing approximately 65% of GSWC’s fixed costs in aggregate.aggregate, and approved GSWC’s request for the continuation of a sales reconciliation mechanism that would allow GSWC to adjust its sales forecast throughout the general rate case cycle to address significant fluctuations in consumption. The M-WRAM tracks the difference between the revenue based on actual metered sales through a tiered volumetric rate and the revenue that would have been received with the same actual metered sales if a blendedstandard tier standardsingle quantity rate had been in effect. The ICBA for supply costs tracks differences between the authorized per-unit prices of water production costs and actual per-unit prices offor watereach productionsupply costs.cost (purchased water, pump tax, and purchased power). The M-WRAM and ICBA arewere effective January 1, 2025.

Water Cost of Capital (“COC”) ProceedingsProceeding

Investor-owned water utilities serving California are required to file their cost of capital applications on a triennial basis. AfterIn receiving an extension in February 2024, GSWC’s next cost of capital application was scheduled to be filed on May 1, 2025 effective for the years 2026 - 2028. On January 14,November 2025, the CPUC approved a request to defer the cost of capital application by another year. In December 2024, GSWC, along with three other investor-owned California water utilities, requested a further extension of the date by which each of them must file their cost of capital applications. In November 2025, the CPUC approved the request to defer the cost of capital application by another year. The CPUC’s approval postponed thisthe filing date by one year until May 1, 2026,2027, with a corresponding effective date of January 1, 2027.2028. The CPUC also approved the joint parties’ request to leave the current Water Cost of Capital Mechanism (“WCCM”) in place through the one-year deferral period. GSWC’s current authorized rate of return on rate base is 7.93%, based on its weighted cost of capital, which will continue in effect through December 31, 2026.2027. The 7.93% return on rate base includes a return on equity of 10.06%, an embedded cost of debt of 5.1%, and a capital structure with 57% equity and 43% debt.

Electric General Rate Case for the years 2023–2026Cases:

On January 16, 2025, the CPUC adopted a final decision in BVES’s general rate case proceeding that set new electric rates retroactive to January 1, 2023 and approved the settlement agreement reached between BVES, Cal Advocates and another intervenor in its entirety. Among other things, the settlement agreement, (i) settlessettled and adoptsadopted the revenue requirements for each of the four years 2023 through 2026, and the rate increases for 2024 through 2026 are not subject to an earnings test, (ii) authorizesauthorized BVES to invest approximately $52.5 million in capital infrastructure included in base rates over the four-year rate cycle and at least an additional $23.1 million (plus an allowance for funds used during construction, or “AFUDC”) to be filed for revenue recovery through advice letters when the projects are completed; (iii) adoptsadopted a cost of capital that increasesincreased BVES’s adopted return on equity from 9.6% to 10.0%, lowerslowered the cost of debt from 6.6% to 5.51%, and maintainsmaintained the capital structure of 57% equity and 43% debt, and (iv) approvesapproved for recovery the requested capital expenditures and other incremental operating costs already incurred prior to 2023 in connection with BVES’s wildfire mitigation plans that were previously not included in customer rates.

Because of receiving a proposed decision in December 2024 followed by a final decision in January 2025, both of which approved the settlement agreement in its entirety, the impact of retroactive rates for the full year of 2023 and the 2024 second-year rate increases have been reflected in the 2024 fourth quarter results as it became probable that the approved retroactive rates for 2023 and 2024 would be permitted to be billed to customers in the future. The new electric rates arewere expected to go into effectimplemented on March 1, 2025. BVES was also authorized by the CPUC to establish a general rate case memorandum account that made the new rates retroactive to January 1, 2023. Due to the delay in finalizing the electric general rate case, billed electric revenues for the years of 2023 and 2024, were based on 2022 adopted rates. The general rate case memorandum account trackstracked the revenue differences between the 2022 adopted rates and the 2023 and 2024 new rates authorized by the CPUC for future recovery. Accordingly, asAs of December 31, 2024,2025, anthe aggregate cumulative under-collection amount of $9.8 million in retroactive revenues related to the full year of 2023 and 2024 was recorded during the fourth quarter of 2024 along with a corresponding increaseamounted to BVES’s$8.2 regulatorymillion. assetsOn forApril future1, recovery from customers. Within 90 days from the effective date of the final decision,2025, BVES willimplemented filesurcharges forto recoveryrecover ofthe retroactive amounts accumulated related to the new rates, as well as recovery of incremental operating costs incurred prior to 2023 in connection with BVES’s wildfire mitigation plans that were being tracked in memorandum accounts prior to the new rate cycle.

ASUS’s revenues, operating income and cash flows are earned by providing water and/or wastewater services, including operation and maintenance services and construction of facilities for the water and/or wastewater systems at various military installations, pursuant to an initial 50-year, firm fixed-pricefirm-fixed-price contract, additional firm fixed-pricefirm-fixed-price contracts, task order agreements and subcontracts with third party prime contractors on military bases. Currently, ASUS has one subsidiary that has entered into a task order agreement with the U.S. government that has a term of 15 years. The contract priceprices for each of the contracts and recurring task order agreements isare subject to annual economic price adjustments. Additional revenues generated by contract operations are primarily dependent on annual economic price adjustments, and new construction activities under contract modifications with the U.S. government or agreements with other third-party prime contractors. ASUS’s subsidiaries continue to enter into U.S. government-awarded contract modifications and agreements with third-party prime contractors for new construction projects at the military bases served.

During 2024,2025, ASUS has beenwas awarded approximately $56.5$29.4 million in new construction projectsprojects, forsome completionof beginningwhich were completed in 20242025 and the remainder of which are expected to be completed through 2027.2028. EarningsASUS’s andsubsidiaries cash flows from modificationsexpect to thecontinue initialto 50-yearenter contracts, additional contracts thereafter with theinto U.S. governmentgovernment-awarded contract modifications and agreements with third-party prime contractors for additionalnew construction projects mayat orthe maymilitary notbases continue in future periods.served.

Furthermore, includedIncluded in the consolidated results for 2024 was a tax benefit of $5$5.0 million, or $0.13 per share, resulting from the final decision issued by the CPUC on January 30, 2025 in connection with GSWC’s recentlatest general rate case proceeding. The final decision adopted a settlement agreement between GSWC and Cal Advocates, which excluded from customer rates certain excess deferred income tax balances generated by activities outside of ratemaking that were previously recorded as regulatory liabilities as a result of the 2017 Tax Cuts and Jobs Act that reduced the corporate income tax rate from 35% to 21%. Because of the final CPUC decision, and the alternate proposed decision received in December 2024, both of which approved the settlement agreement in its entirety, GSWC recorded the tax benefit to reflect a change in estimate that decreased its regulatory liabilities associated with excess deferred income tax balances as of December 31, 2024. In addition, AWR’s consolidated diluted earnings in 2024 were negatively impacted by approximately $0.04 per share due to the dilutive effects from the issuance of equity under AWR’s ATM offering program.

For the year ended December 31, 2024,2025, recorded diluted earnings from the water utility segment were $2.51$2.61 per share, as compared to $2.77$2.51 per share for 2023,2024, aan decreaseincrease of $0.26$0.10 per share, which includes: (i) the impact from the final decision in the water general rate case recorded in 2023 that included retroactive new rates related to the full 2022 year of $0.38 per share, and (ii) the impact of thea finalone-time costtax benefit of capital decision that resulted in the reversal of estimated water revenues subject to refund previously recorded in 2022 of $6.4 million, or $0.13 per share.share as previously discussed above. Excluding the impact of thesethis two itemsitem from 2023,2024, adjusted diluted earnings at the water segment would be $2.26$2.38 per share for 20232024 as compared to adjusted and recorded diluted earnings of $2.51$2.61 per share for 2024,2025, an adjusted net increase at the water segment of $0.25$0.23 per shareshare. dueThe primarilydiscussion tobelow presents the followingmajor itemsvariances in earnings for the two periods:

•An overall increase in operating expenses of $8.9$10.0 million (excluding supply costs) mainly due to increases in (i) overall labor costs and other employee-related benefits,costs, (ii) administrativemaintenance andexpense, general expenses resulting largely from higher outside-services costs related to the general rate case application and other regulatory filings, and an increase in(iii) insurance-related costs, and (iiiiv) depreciation and amortization expenses as well as property taxes, both ofexpenses, which are impacted by the increasing capital expendituresadditions placed in service and are reflected and recovered in customer rates.rates, Theseand increases(v) werenon-income taxes; partially offset by decreasesa decrease in other operation-related costs including lower chemicals and maintenancewater expenses.treatment costs, administrative and general expenses (excluding labor) primarily due to lower outside services costs including those related to regulatory filings as compared to 2024, and property taxes resulting from favorable true-ups in assessed property values. Lastly, as a result of receiving a final decision on its general rate case, GSWC was authorized to recover certain costs through various memorandum accounts that were recorded in 2024 and did not recur in 2025.

•AnExcluding the one-time tax benefit of $5.0 million recorded in 2024, an overall decrease in the effective income tax rate due to (i) a tax benefit of $5 million, or $0.13 per share, resulting from the final decision in GSWC’s latest general rate case proceeding as previously discussed, and (ii) changes in certain flowed-through income taxes and permanent items included in GSWC’s income tax expense for the year ended December 31, 20242025 as compared to 2023 that2024 favorably impacted the water segment'ssegment’s earnings. As a regulated utility, GSWC treats certain temporary differences as being flowed-through in computing its income tax expense consistent with the income tax method used in its CPUC-jurisdiction rate making. Changes in the magnitude of flowed-through items either increase or decrease tax expense, thereby affecting diluted earnings per share.

•A decrease in earnings of approximately $0.03$0.07 per share due to the dilutive effects from the issuance of equity under AWR’s ATM offering program. Under the program, AWR may offer and sell its Common Shares, with an aggregate gross offering price of up to $200 million, from time to time at its sole discretion.discretion, with $40.7 million currently remaining available for sale. Through December 31, 2024,2025, AWR has sold 1,145,2192,048,988 Common Shares through this ATM offering program.

Diluted earnings from the contracted services segment increased $0.05$0.06 per share for the year ended December 31, 20242025 as compared to 2023,2024, largely due to (i) an increase in management fee revenues resulting from the commencement of operationoperations in April 2024 at the new bases (Naval Air Station Patuxent River and Joint Base Cape Cod) and the resolution of various economic price adjustments, (ii) an increase in construction activities, and (iii) lower interest expense resulting from lower borrowing levels and interest rates; partially offset by higher overall operating expenses (excluding construction expenses) from the new bases as compared to 2023,, and a decrease in earnings of approximately $0.01$0.02 per share due to the dilutive effects on ASUS from the issuance of equity under AWR’s ATM offering program.

Electric revenues for the year ended December 31, 20242025 increased $9.8by $5.6 million to $51.6$57.2 million due,largely resulting from an increase in largerevenues part,from tothird-year theelectric finalrate decisionincreases implemented in the electric general rate case proceeding that set rates for 2023 - 2026, and was retroactive to January 1, 2023. The retroactive revenues for the full year of 2023 and the second-year increases for 2024 have been reflected in 2024 as previously discussed.2025.

Electric usage for the year ended December 31, 20242025 was consistent1.1% withlower 2023.than 2024. Due to the CPUC-approved Base Revenue Requirement Adjustment Mechanism,BRRBA, which adjusts certain revenues to adopted levels authorized by the CPUC, changes in usage do not have a significant impact on earnings.

Revenues from contracted services are composed of construction revenues (including renewal and replacements) and management fees for operating and maintaining the water and/or wastewater systems at various military bases. For the year ended December 31, 2024,2025, revenues from contracted services increased $6.0$10.3 million to $126.4$136.7 million as compared to $120.4$126.4 million for 2023.2024. The increase was largelyprimarily due to an increase in management fee revenue from the commencement of operations at the new bases and the resolution of annual economic price adjustments,adjustments partiallyand offsetthe bynew loweroperations overallat Joint Base Cape Cod and Naval Air Station Patuxent River and an increase in construction activity resulting from timing differences of when construction work was performed in 2024 as compared to the same period in 2023.activities.

ASUS’s subsidiaries continue to enter into U.S. government-awarded contract modifications and agreements with third-party prime contractors for new construction projects at the military bases served. During 2024, ASUS was awarded approximately $56.5 million in new construction projects for completion in 2024 through 2027. Earnings and cash flows from modifications to the initial 50-year contracts50- and additional15-year contracts with the U.S. government and agreements with third-party prime contractors for additional construction projects may or may not continue at current levels in future periods.

There have been no significantmaterial changes into the risk factors from what was previously disclosed in our 2025Registrant’s Annual Report on Form 10-K for the year ended December 31, 2025 filed with the SEC.

AWR uses earnings per share by business segment and AWR (parent) as an important measure in evaluating its operating results and believes it provides investors with clarity surrounding the performance of its business segments and the parent company. AWR reviews this measurement regularly and compares it to historical periods and to its operating budget. A reconciliation to AWR’s consolidated diluted earnings per share prepared in accordance with GAAP is included in the discussiondiscussions under the sectionsections titled “Summary of FirstSecond Quarter Results by Segment” and “Summary of Year-to-Date Results by Segment.”

Although Registrant operates solely in the U.S., geopolitical developments abroad, such as the ongoing U.S. military operation in Iran, could indirectly affect our business through volatility in commodity prices, inflationary pressures, supply chain and operating cost impacts, and potential disruptions in banking systems and capital markets. Management is actively engaged with vendors and business partners to monitor and mitigate financial risks of global uncertainties; however, the scope and duration of any impacts remain uncertain. As of the date of this filing, geopolitical developments during the first quarterhalf of 2026 have not had a material impact on the Company.

General Rate Case Filings and Other Matters:

In December 2025, GSWC received approval from the CPUC to implement its full second-year rate increases, effective January 1, 2026, that will result in higher adopted operating revenues less water supply cost for 2026 of approximately $32.0 million compared to 2025’s adopted operating revenues less water supply cost. Included in the 2026 increase is nearlyapproximately $11 million related to the advice letter capital projects previously discussed. The assets from the advice letter projects and the related amounts in the memorandum account were added to the adopted rate base for inclusion in the revenue requirement effective January 1, 2026.

The new 2026 rates have been reflected in GSWC’s earnings for the threesix months ended MarchJune 31,30, 2026 resulting in an increase in recorded revenues of $11.1$22.5 million largely from the second-year rates and advice letter filings, and an increase in recorded water supply costs of $4.8$5.6 million, which combined is ana net increase of $6.3$16.9 million, compared to the same period in 2025. AsDue ato resulttransitioning of the discontinuation offrom the WRAM to the M-WRAM and from the MCBA to the ICBA effective January 1, 2025, GSWC’s earnings have been and will continue to be subject to future volatility asfrom a result ofsignificant fluctuations in consumptioncustomer consumption, as well as from favorable and/or unfavorable changes in the water supply source mix compared to the adopted levels.mix. Significant changes in customer consumption are primarily driven by weather conditions, including from such events known as El Niño or La Niña that can result in above average or below average annual precipitation, which significantly impacts outdoor water usage. Water supply mix changes can occur due to various circumstances, including but not limited to, unforeseen changes in groundwater quality and operating conditions of groundwater basins and associated pumping facilities.

Water General Rate Case for the Years 20232028–20262030

Electric General Rate Case for the Years 2027–2030

Early in 2026, the U.S. government experienced partial shutdowns affecting mainly the Department of Homeland Security and other federal departments. Amid the recent U.S. government shutdown,shutdowns, the subsidiaries of ASUS have not experienced and are not expected to experience any earnings impact to their existing operations and maintenance and renewal and replacement services, as utility privatization contracts are an “excepted service.” Management expects that any impact of any future impactgovernment shutdowns on ASUS and its operations through its subsidiaries will likely be limited to (a) the timing of funding to pay for services rendered, (b) delays in the processing of economic price adjustments (“EPAs”) and/or requests for equitable adjustments (“REAs”), (c) the timing of the issuance of contract modifications for new construction work not already funded by the U.S. government, (d) the timing of construction work associated with delays in receiving construction permits from furloughs at government agencies, and/or (e) delays in solicitation for and/or awarding of new contracts under the Department of Defense contracting programs. In the event thea U.S. government shutdown extends for an unprecedented and much longer period,period than that experienced in early 2026, ASUS’s liquidity and earnings could be impacted.

Summary of FirstSecond Quarter Results by Segment

The table below sets forth a comparison of the firstsecond quarter of 2026 diluted earnings per share contribution reported by business segment and for the parent company with amounts reported during the same period in 2025.

For the three months ended MarchJune 31,30, 2026, AWR’s recorded consolidated diluted earnings were $0.76$1.09 per share, as compared to $0.70$0.87 per share for the same period in 2025, an increase of $0.06$0.22 per share or 8.6%,25.3%, primarily generated from higher earnings at the water and electric utility segmentssegment resulting fromlargely from, among other factors, the implementation of new customer rate increases approved by the CPUC,CPUC. andIn higheraddition, there was an increase in construction activities that resulted in higher earnings at the contracted services segment. AWR’s consolidated diluted earnings for the first quarter of 2026 were negatively impacted by $0.02 per share from the higher number of dilutive shares in the first quarter of 2026 compared to the same period 2025 due to the continued dilutive effects from the issuance of equity under AWR’s at-the-market (“ATM”) offering program.

The following is a computation and reconciliation of diluted earnings per share from the measure of net income (loss) by business segment and for the parent company (as disclosed in Note 10 to the Unaudited Consolidated Financial Statements) to AWR’s consolidated fully diluted earnings per commonCommon shareShare (as recorded), for the three months ended MarchJune 31,30, 2026 and 2025:

•An increase in water operating revenues of $11.1$11.4 million was largely as a result of (i) the CPUC-authorized second-year rate increases andeffective January 1, 2026, (ii) additional revenues for the recovery of capital projects approved in various advice letter filings, both of which werefilings effective January 1, 2026.2026, Water(iii) additional revenues for increases in the per-unit water supply costs incurred, which, as noted below, result in no net impact to earnings, and (iv) an increase in water consumption for the three months ended MarchJune 31,30, 2026 wasof consistentapproximately with4% favorably impacting net earnings when compared to the same period in 20252025. andThese adoptedincreases levels.were However,partially asoffset by a resultdecrease of transitioning$1.6 frommillion ain fullbilled revenuesurcharges. decouplingCPUC-approved mechanismsurcharges are billed to thecustomers M-WRAMto effectiverecover Januarypreviously 1,incurred 2025,costs. GSWC’sChanges in billed surcharge revenues andare earningsoffset willby continueequal changes in operating expenses, resulting in no net impact to be subject to future volatility from significant fluctuations in customer consumption.earnings.

•An increase in water supply costs of $4.8$0.7 million, which consist of purchased water, purchased power for pumping, groundwater production assessments and changes in the water supply cost balancing accounts. The increase in water supply costs compared to the same period in 2025 iswas largely because of (i) an overall increase in the per-unit purchasedwater watersupply costs that are covered in current ratesrates, as noted above, resulting in no net impact to net earnings, and (ii) an increase in purchasedthe production of water volume compared to the same period in 2025 resulting from certain wells being temporarily offline in a fewhigher customer serviceconsumption. areas.These Asincreases awere result,partially GSWC’soffset earnings forby the threeimpact months ended March 31, 2026 were impacted byof an actual water supply source mix that included moreless purchased water thanduring inthe second quarter of 2026 as compared to the same period ofin 2025.2025 Duedue primarily to transitioningwells frombeing abrought fullback cost balancing account for water supply to the ICBA effective January 1, 2025, GSWC’s earnings have been and will be subject to future volatility from favorable and unfavorable changesonline in thecertain watercustomer supplyservice source mix compared to the adopted mix incorporated in the revenue requirement.areas.

•An overall increase in operating expenses of $2.4$0.2 million (excluding supply costs) due primarilylargely to increases in (i) overall labor costs and other employee-related benefits,costs, (ii) overall operation-related costs including lab fees for water quality testing and conservation spending, (iii) depreciation and amortization expenses, which are impacted by increasing capital additions placed in service and are reflected and recovered in customer rates, and (iviii) property and other non-income taxes.taxes; partially offset by a decrease in surcharges of $1.6 million. As noted above, changes in billed surcharge revenues are offset by equal changes in operating expenses, resulting in no net impact to earnings.

•An overall increase in interest expense (net of interest income) of $0.9 million resulting largely from (i) the impact of capitalizing debt costs related to certain advice letter projects approved by the CPUC in the latest general rate case effective January 1, 2025, as previously discussed,2025 that was recorded in 2025 with no similar item in 2026, and (ii) a decrease in interest income earned on regulatory assets due to decreasing regulatory balances as GSWC recovers the amounts through surcharges; partially offset by decreases in overall borrowing levels and average interest rates.surcharges. The advice letter projects discussed are now included in adopted rate base and are part of the rate increases effective January 1, 2026.

•An overall increase in other expenseincome (net of other incomeexpense) of $0.2$2.0 million due largely to lossesgains totaling $1.3$4.3 million generated on investments held to fund one of the company’sCompany’s retirement plans during the three months ended MarchJune 31,30, 2026, as compared to lossesgains on investments of $0.6$2.7 million recorded during the same period in 2025 due to financial market conditions;conditions, partially offset byand a decrease in the non-service cost components related to GSWC’s benefit plans resulting from changes in actuarial assumptions. However, as a result of GSWC’s two-way pension balancing accounts authorized by the CPUC, changes in total net periodic benefits costs related to the pension plan have no material impact to earnings.

•Changes in certain flowed-through income taxes and permanent items included in GSWC’s income tax expense for the three months ended MarchJune 31,30, 2026 as compared to the same period in 2025 unfavorably impacted the water segment’s earnings. As a regulated utility, GSWC treats certain temporary differences as being flowed-through in computing its income tax expense consistent with the income tax method used in its CPUC-jurisdiction rate making. Changes in the magnitude of flowed-through items either increase or decrease tax expense, thereby affecting diluted earnings per share.

Diluted earnings from the electric utility segment increased $0.01 per share for the firstsecond quarter of 2026 as compared to the same period in 2025 largely resulting from an increase of $3.7$0.7 million in electric revenues due to the CPUC-authorized fourth-year rate increases in 2026 and additional revenues approved largely after the firstsecond quarter of 2025 to recover the cost plus AFUDC of certain advice letter capital projects,projects. This increase was partially offset by ana increasedecrease in electricbilled supply costssurcharges of $0.3$0.4 million,million. whichAs combinedpreviously isdiscussed, anchanges increasein ofbilled approximatelysurcharge $3.4revenues millionare comparedoffset by equal changes in operating expenses, resulting in no net impact to the same period in 2025.earnings.

Diluted earnings from the contracted services segment increased $0.02$0.03 per share for the firstsecond quarter of 2026 when compared to the same period in 2025 largely resulting from (i) an increase in construction activities, (ii) an increase in management fee revenues resulting from the resolution of various economic price adjustments, and (iii) a decrease in interest expense (net of interest income) due to lower average borrowing levels and average interest rates. These favorable variances were partially offset by an increase in overall operating expenses (excluding construction expenses). The contracted services segment is expected to contribute $0.63 to $0.67 per share for the full year of 2026.

Consolidated Results of Operations — Three Months Ended MarchJune 31,30, 2026 and 2025 (amounts in thousands, except per share amounts):

For the three months ended MarchJune 31,30, 2026, revenues from water operations increased by $11.1$11.4 million to $113.1$131.1 million as compared to the same period in 2025. The increase in water revenues during the firstsecond quarter of 2026 is primarily a result of (i) the CPUC-approved second-year rate increases effective January 1, 20262026, and, as previously discussed,(ii) additional revenues approved to recover the advice letter capital projects that were added to adopted rate base for inclusion in the revenue requirement effective January 1, 2026.2026, (iii) additional revenues for increases in the per-unit water supply costs incurred, which result in no net impact to earnings, and (iv) an increase in water consumption as further described below. These increases were partially offset by a decrease in billed surcharges of $1.6 million compared to the same period in 2025. CPUC-approved surcharges are billed to customers to recover previously incurred costs. Changes in billed surcharge revenues are offset by equal changes in operation expenses, resulting in no impact to earnings.