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

In evaluating our business, you should carefully consider the following discussion of material risks, events, and uncertainties that make an investment in us speculative or risky in addition to the other information in this annual report on Form 10-K. A manifestation of any of the following risks and uncertainties could, in circumstances we may or may not be able to accurately predict, materially and adversely affect our business, growth, reputation, prospects, operating and financial results, financial condition, cash flows, liquidity, and stock price. We note these factors for investors as permitted by the Private Securities Litigation Reform Act of 1995. It is not possible to predict or identify all such factors; our operations could also be affected by factors, eventsevents, or uncertainties that are not presently known to us or that we currently do not consider to present significant risks to our operations. Therefore, you should not consider the following risks to be a complete statement of all the potential risks or uncertainties that we face. Moreover, some of the factors, events, and contingencies discussed below may have occurred in the past, but the disclosures below are not representations as to whether or not the factors, events, or contingencies have occurred in the past, and instead reflect our beliefs and opinions as to the factors, events, or contingencies that could materially and adversely affect us in the future.

Cal Water, New Mexico Water, Washington Water, and Hawaii Water are regulated public utilities, which provide water and water-related service to our customers. Additionally, Hawaii Water and Texas Water own in whole or in part other companies which are regulated public utilities. The rates that we charge our water and wastewater customers are subject to the jurisdiction of the regulatory Commissions in the states in which we operate. These Commissions may set water and water-related rates for each operating district independently because the systems are not interconnected. The Commissions authorize us to charge rates that they consider sufficient to recover normal operating expenses, to provide funds for adding new or replacing water infrastructure, and to allow us the opportunity to earn what the Commissions consider to be a fair and reasonable return on invested capital.

We periodically file rate increase applications with the Commissions. The ensuing administrative and hearing process may be lengthy and costly. The decisions of the Commissions are beyond our control and we can provide no assurances that our rate increase requests will be granted by the Commissions. Even if approved, there is no guarantee that approval will be given in a timely manner or at a sufficient level to cover our expenses and provide a reasonable return on our investment. Our earnings have in the past been and may in the future be adversely affected when rate increase decisions are delayed or approved at a level that is lower than what we have requested. For example, the CPUC didhas not issueissued its final decision on our 20212024 GRCCA until March 2024, over a year later than expected,GRC, which has caused uncertainty aroundaround, and may cause volatility inin, our financial and operating results untilfor thatour time.Company.

Regulatory agencies have in the past and may in the future change their rules and policies for various reasons, including changes in the local political environment. Regulators are appointed by popular vote or are appointed by elected officials, and the election of a new administration or the appointment of new officials due to the results of elections may result in dramatic change to the long-established rules and policies of an agency. For example, in 2020 regulation regarding full decoupling WRAMs temporarily changed in California. Since 2008, the CPUC allowed full decoupling WRAMs. However, in 2020, the CPUC precluded companies from proposing full decoupling WRAMs in their next GRC filings. As a result, we were precluded from requesting a full decoupling WRAM from the time ofin the 2021 GRCCA application until the California Supreme Court’s decision on July 8, 2024 voiding the WRAM provisions in the August 27, 2020 CPUC decision.GRC. In addition, the recent change incurrent U.S. federal administration has ledeffected and is expected to continue to leadseek to effect, propose, or threaten changes in the leadership of various U.S. federal regulatory agencies and changes or proposed or threatened changes to U.S. federal government policypolicy, thatwhich havehas led to, in some cases, legal challenges as well as uncertainty around the funding, functioning and policy priorities of U.S. federal regulatory agencies and the status of current and future regulations. U.S. federal government policy changes have included seekingefforts to temporarilymodify broadlyor haltrestrict federal funding, seeking to aggressively downsize the U.S.restructure federal government’sagency operations or workforce and instructing federal agencies to reprioritizeadjust, delay, or suspend the implementation or enforcement of certain laws or regulations or to cease operating or enforcing certain laws or regulations.operating. We are unable to predict the extent to which the current U.S. federal administration may continue to impose or seek to impose leadership or policy changes at the U.S. federal regulatory agencies responsible for regulating our business, including changes or proposed changes at the EPA or SEC, or changes or proposed changes to rules and policies impacting our operations. Any such changes couldmay impose additional costs, require the attention of senior managementcost or result in other changes to or limitations on our business.

Finally, state and local jurisdictions may impose new ordinances, laws, fees, and regulations that could increase costs or limit our operations, which affect future operating results. For example, as a result of the recent wildfires that devastated communities in southern California, the Governor of California signed Assembly Bill 367 into law that went into effect on January 1, 2026. The bill creates additional requirements for water utilities in Ventura County, or our Westlake district, related to fire protection. Cal Water is required to have access to sufficient backup energy to operate wells and water pumps that are critical for supplying water for fire suppression in the high or very high fire hazard severity zone beginning July 1, 2030. Cal Water is also required to prepare an emergency preparedness plan for responding to red flag warnings, extreme weather events, and major power outages. Cities may impose or amend franchise requirements, impose conditions on underground construction or land use, impose various taxes and fees, or restrict our hours for construction, among other things. In the last decade, moreMore cities haveare imposedimposing excavation moratoria or paving rules, which has resulted in delays and required more costly construction than anticipated.

Past events in the utility sector, including those relating to drinking water contamination in Flint, Michigan and those related to safety and wildfire-related compliance failures at Pacific Gas and Electric Company in California, show that failure to meet one or more water quality, environmental, or safety standards can have severe effects on customer trust, reputation, regulatory treatment, or civil and criminal liability.

We are subject to water quality standards set by federal, state,federal and localstate authorities that have the power to issue new regulations. Compliance with new regulations that are more stringent than current regulations could increase our operating costs and capital expenditures, including requirements for increased monitoring, additional treatment of surface water and groundwater supplies, fluoridation of all supplies, more stringent performance standards for treatment plants, additional procedures to further reduce levels of disinfection by-products, and more comprehensive measures to monitor, reduce or eliminate known or newly identified contaminants. There are currently limited regulatory mechanisms and procedures available to us for the recovery of such costs and there can be no assurance that such costs will be fully recovered and failure to do so may adversely affect our operating results.

For example, in April of 2024, the EPA finalized MCLs,MCLs for six PFAS in drinking water. Under the PFAS regulation, water utilities across the country are required to complete initial PFAS monitoring by 2027 and to implement treatment for sources exceeding the MCL by 2029. In May of 2025, the EPA announced its intention to rescind the regulations for four of the PFAS compounds, and to extend the compliance date to 2031. On January 20, 2026, a three-judge panel of the U.S. Court of Appeals for the District of Columbia unanimously denied an EPA request to vacate and remove MCLs on four PFAS. Multi-party litigation continues with regard to PFAS MCLs. We estimate a capital investment of approximately $226.0$269.1 million will be required to comply with the currently effective regulation, but this amount could be higher or lower depending on factors out of our control such as unforeseen supply issues that may arise as public water systems across the country compete to procure necessary treatment supplies. Some of the capital investment requirements are offset and will continue to be offset by settlement and grant proceeds we have received and expect to continue to receive (see “Water Supply” above for more details).

Future legislation or regulation regarding climate change may restrict our operations or impose new costs on our business. Our operations depend on power provided by other public utilities and, in emergencies, power generated by our portable and fixed generators. If future legislation or regulationregulations limitslimit emissions from the power generation process, our cost of power may increase. Although any increase in the cost of power would be expected to be passed along to our California customers through the ICBA or included in our cost of service paid by our customers as requested in our GRC filings in California, we can give no assurance that such costs would be passed along to our California customers or that the CPUC would approve rate increases to enable us to recover such expenditures or costs.

Legislation and regulation regarding greenhouse gas emissions may also impose new costs on our business. For example, in October 2023, California enacted legislation addressing the disclosure of greenhouse gas emissions, climate-related risks, environmental claims, and the use or sale of voluntary carbon offsets.offsets, although certain of these law are being challenged in litigation. New and future laws and regulations, including related uncertainty from modifications to or reversals of such regulations, or inconsistency between requirements in different jurisdictions, could increase the complexity of and costs associated with compliance with such regulations, which could have a material adverse effect on our business, results of operations, and financial condition.

The number of environmentalEnvironmental and service-related lawsuits have frequently been filed against other water utilities has increased in frequency in recent years.utilities. If we are subject to additional environmental or service-related lawsuits, we mightcould incur significant legal costscosts, and it is uncertain whether we would be able to recover the legal costs from customers or other third parties. In addition, if current California law regarding CPUC’s preemptive jurisdiction over regulated public utilities for claims about compliance with California State Water Resources Control Board and United States EPA water quality standards changes, our legal exposure maycould beincrease significantly increased.significantly.

The California constitution may allow compensation to property owners for a public utility taking or damaging private property, even when damage occurs through no fault of the utility and regardless of whether the damage could be foreseen by the utility. As a result, thisThis doctrine, which is known as inverse condemnation and is routinely invoked in California, imposes strict liability for damages, including legal fees, because of the design, construction, maintenance and operation of utility facilities. In addition to claims that our water or wastewater systems damaged property, Cal Water has been and could in the future be sued under inverse condemnation, including pursuant to allegations or claims that our facilities or operations damage private property, or that we are unable to timely deliver sufficient quantities of water for firefighting because of system capacity limitations or water supply disruptions, including as a result of action taken by an electric utility pursuant to a PSPS program or other loss of power. For example, accelerated land movement in Cal Water’s Rancho Dominguez District in southern California has given rise to claims and lawsuits against Cal Water, including among other allegations, inverse condemnation. Although the imposition of liability is premised on the assumption that utilities have the ability to recover these costs from their customers, there is no assurance that the CPUC would allow Cal Water to recover any such damage awards from customers. For example, in December 2017, the CPUC denied recovery of costs that San Diego Gas & Electric Company incurred because of inverse condemnation, holding that the inverse condemnation principles of strict liability are not relevant to the CPUC’s prudent manager standard.

The effects of natural disasters, attacks by third parties, or poor water quality or contamination to our water supply or wastewater services may result in disruption in our services and litigation, which could adversely affect our business, operating resultsresults, financial condition, and financial condition.reputation.

We operate in areas that are prone to earthquakes, urban fires, wildfires, landslides, mudslides, and other natural disasters. A significant seismic event, urban or wildfire outbreak, or other natural disaster in California where our operations are concentrated could adversely affect our ability to deliver water and adversely affect our costs of operations. A major disaster could damage or destroy substantial capital assets. We may not have sufficient insurance coverage to avoid adverse impacts to our operating results or financial condition from damage to our facilities or an interruption in our business. For example, wildfires in our service areas may have significant impacts on water supply and water system reliability. In addition, our infrastructure faces risks from landslides in our service areas, which can lead to leaks in water mains, impact our ability to deliver water and result in litigation. For example, in Cal Water’s Rancho Dominguez District in southern California, land movement in the City of Rancho Palos Verdes has adversely impacted utility infrastructure including electric power poles and lines, natural gas mains and services and water mains and services. This land movement has impacted Cal Water assets, as well as structural, road and other property damage. The area is an active landslide complex with decades of land movement, and the Company and Cal Water believe that the recent accelerated rate of land movement is a result of an unusual and significant amount of rainfall in the area. Certain homeowners in this area have alleged Cal Water assets have contributed to ground oversaturation and land movement resulting in home and property damage. Some of these homeowners have brought claims and lawsuits against Cal Water as well as other defendants alleging inverse condemnation, among other things, and it is anticipated that other homeowners may bring similar claims in the future.

Our water supplies are subject to contamination, including contamination from the development of naturally-occurring compounds, chemicals in groundwater systems, pollution resulting from fabricated sources, such as 1,2,3-Trichloropropane (TCP) and PFAS, seawater intrusion, and possible terrorist and other third-party attacks, including physical attacks, terrorist attacks, and cyber-attacks. If our water supply is contaminated, we may have to interrupt the use of that water supply until we are able to substitute the flow of water from an uncontaminated water source. In addition, we may incur significant costs in order to treat the contaminated source through expansion of our current treatment facilities, or development of new treatment methods. If we are unable to substitute water supply from an uncontaminated water source, or if we are unable to adequately treat the contaminated water source in a cost-effective manner, there may be an adverse effect on our revenues, operating results, financial condition, and financial condition.reputation. The costs we incur to decontaminate a water source or an underground water system could be significant and may not be recoverable in rates. We could also be held liable for consequences arising out of human exposure to hazardous substances in our water supplies or other environmental damage. For example, private plaintiffs have the right to bring personal injury or other toxic tort claims arising from the presence of hazardous substances in our drinking water supplies. Our insurance policies may not be sufficient to cover the costs of these claims.

We have taken steps to increase security measures at our facilities and heighten employee awareness of threats to our water supply,supply to protect against the third-party attacks,attacks includingdescribed physical attacks, terrorist attacks, and cyber-attacks.above. We have also improved our security measures regarding the delivery and handling of certain chemicals used in our business. We have and will continue to bear increased costs for security precautions to protect our facilities, operations, and supplies. These costs may be significant. Despite these improved security measures, we may not be able to prevent or deter third-party attacks or be in a position to control the outcome of third-party attacks should they occur.

We operate over 7,000 miles of underground pipeline. SomeCertain failures of underground pipelines could release disinfection chemicals into the environment, which have a negative impact on sensitive habitats.

We rely on our information technology (IT), operational technology (OT), and a number of complex business systems to assist with the management of ourcritical business and customer and supplier relationships,functions and a disruption of these systems, including from cyber-attacks, could adversely affect our business.

Our IT and OT systems are an integral part of our business, and a serious disruption of these systems could significantly limit our ability to manage and operate our business efficiently, which, in turn, could cause our business and competitive position to suffer and adversely affect our results of operations. We rely on our IT and OT networks and applications to bill customers, process orders, provide customer service, manage construction projects, manage our financial records, track assets, remotely monitor certaintreatment offacilities, oursupport plantshuman and facilitiesresources, and manage human resources, inventory and accounts receivable collections.receivable. Our systems also enable us to purchase products from our suppliers and bill customers on a timely basis, maintain cost-effective operations, and provide service to our customers. Some of our mission and business critical systems are older and the steps we have taken to protect our systems may be insufficient to protect them from damage or interruption from:

•power loss, computer systems failures, including hardware equipment and software applications,application failures, and internet,internet or telecommunications or data network failuresoutages;

•physical and electronic loss of customer data due to security breaches, cyber-attacks, misappropriation, acts of violence, war or terrorism, andor similar events;

•intentional security breaches, hacking, denial of services actions, misappropriation of data, andor similar events, including intentional cybersecurity breaches aimed at disrupting and interfering with water treatment processes; and

•earthquakes, floods, fires, mudslides,landslides, and other natural disasters or physical attacks.

These events may result in physical and/or electronic loss or compromise of customercustomer, employee, operational, or financial data; security breaches; misappropriation; disruption of service to our customers; loss of revenues, response costs, and other financial loss; disruption of electronic monitoring and control of operational systems, disruption in normal system operations, loss of management time, attention, and resources from our regular business operations; damage to our reputation; and other adverse consequences, including liability or regulatory penalties under data privacy laws and regulations. In addition, the lack of redundancy for certain of our IT systems, including billing systems,systems could exacerbate the impact of any of these events on us, all of which could have a negative impact on our business, results of operations, and cash flows. These types of events, either impacting our facilities or the industry in general, could also cause us to incur additional security and insurance related costs. In addition, in the ordinary course of business, we collect and retain sensitive information, including personally identifiable information, about our customers, employees, and vendors. We must comply with federal and state privacy laws that have been passed or may be passed in the future, and they may have potential compliance obligations that impact our operations depending on whether we fall under their scope. Any actual or perceived noncompliance with applicable data privacy laws may lead to investigations, claims, and proceedings by governmental entities and private parties, damages for breach, and cause us to incur other significant costs, penalties, and other liabilities, as well as harm to our reputation. In many cases, we outsource the administration of certain functions to vendors that have been and will continue to be targets of cyber-attacks. Any theft, loss or fraudulent use of customer, employee, vendor, or proprietary data as a result of a cyber-attack on us or a vendor could also subject us to significant litigation, liability, and costs, as well as adversely impact our reputation with customers and regulators, among others. These risks may escalate during periods of heightened geopolitical tension or conflict.

In addition, we may not be successful in developing or acquiring technology that is competitive and responsive to the needs of our business, and we might lack sufficient resources to make the necessary upgrades or replacements of our outdated existing technology to allow us to continue to operate at our current level of efficiency, all of which could adversely impact our business and competitive position. The use of artificial intelligence by cybercriminals may increase the frequency and severity of cybersecurity attacks, including against us or our third-party vendors. We maintain cybersecurity insurance to provide coverage for a portion of the losses and damages that may result from a security breach, but such insurance is subject to a number of exclusions and may not cover the total loss caused by a breach. Other costs associated with cyber events may not be covered by insurance or recoverable in rates. The market for cybersecurity insurance continues to evolve and may affect the future availability of cybersecurity insurance at reasonable rates.

We have entered into long-term water supply agreements, which commit us to making certain minimum payments whether or not we purchase any water. Therefore, if demand were insufficient to use our required purchases we would have to pay for water we did not receive.use.

We may or may not be able to recover increased operating and construction costs on a timely basis, or at all, for our regulated systems through the ratemaking process. We can give no assurance,assurance as to whether we may be able to recover certain of these costs from third parties that may be responsible, or potentially responsible, for any groundwater contamination.

There is strong scientific consensus that human activity includinggenerates carbongreenhouse andgas methaneemissions, emissionswhich iscan impacting manyimpact planetary systemssystems, such as the heat-trapping capacity of the atmosphere; ocean temperature, circulation, acidity, and volume; weather patterns including the severity and frequency of severe weather events; ambient temperatures; and planetary ice cover. Because scientific investigations have been focused globally, thereThere is tremendous uncertainty over the timing, extent, and types of impacts global climate change may have on our service areas and in our water supplies. Moreover, studies of tree ring data show long periods of drought conditions have occurred prior to significant human impacts in California and prior to our operation. Finally, in the last fifty years, California has experienced at least three severe multi-year droughts. We can give no assurance that any of our plans for water reliability and water shortages, including incorporating projected and potential climate change risks into our water supply planning activities, will be adequate or capable of effectively addressing any droughts or longer periods of drought conditions or other conditions affecting water quality and availability. ImmediateAcute physical risks could affect our operations and intensify over time as climate change worsens. MoreFlooding frequent(surface flooding,water, coastal, river, or groundwater), wildfires, sea level rise, rising or falling groundwater levels,storms, and unevenextreme ground level sinkingheat, could disrupt our operations or damage our assets, including pressurized mains and other pipelines, wells, treatment facilities, and other infrastructure. Wildfires and changes in rainfallflooding may also affect water quality, and bothextreme higher temperaturesheat and wildfires can pose risks to employee safety. Farther into the mid-century and late-century horizon, temperaturechanging increasestemperatures (air temperature, freshwater, or marine) may cause increased algal blooms and eutrophication. Water stress, characterized by declines in snowpack storage,storage and droughtsdroughts, could decrease surface water supply availability and groundwater recharge while causing increased outdoor demands, which,potentially increasing operational expenses and causing challenges in eachmaintaining case,affordable couldand adverselyreliable impactwater ourservice. abilityWe may also experience increased exposure to sourcelitigation adequateassociated with water supplyquality toimpacts meetor theinverse needscondemnation ofevents ourresulting customers.from physical climate change risks.

Additional climate-related risks may influence our approach as we support the transition to a low-carbon economy. Transition risks include changes in thecustomer market and consumer demands,behavior, such as differencesresidential inand generationalnon-residential behaviors, shifts in population locations due to different weather patterns,relocations and variations in water needs andby customer groups. Regulatory risks, such as carbon pricing mechanisms, like emission trading systems andor carbon taxes, may also financially affect our business. Additionally, federalevolving regulations impacting air, water, land use, wildlife conservation, and statewaste regulationsdisposal presentdue to climate change, may increase compliance costs and restrict operations, which could lead to higher operational burdens and reduced flexibility in delivering existing services. Transitioning to lower emissions technology or implementing fleet electrification requirements forcould managinglead waterto suppliesincreased operational costs. Slow responses to physical or transitional climate risks may also affect our reputation and limitingincrease impactspressure onto localdeliver wildlife,affordable while regional plans and legislation may directly affect how we address water issues.water.

In the event that some outside factorfactor, such as a wildfire, flood, landslide, changedextreme heat, storms, or changing climate pattern,patterns, actual or threatened public health emergency, or change in the local economy reduces or eliminates our customer base in a service area, or negatively affects the ability of a customer to pay, we could face unrecoverable costs. In those circumstances, the remaining customers might not be able to pay for the operating costs or capital costs of the water system. We may not be able to recover capital costs of property that is no longer used or useful in utility service. For example, in 2024, the California Governor proclaimed the Rancho Palos Verdes landslide a state of emergency following an increase in ground movement due to significant rainfall over the pastprior two years, and the Federal Emergency Management Agency and the California Governor’s Office of Emergency Services instituted a voluntary property buyout program for impacted homeowners. We may also encounter an increase in bad debt expense in times of economic difficulty. For example, we experienced an increase in bad debt expense in 2022, which we believe was due to the economic impact of the COVID-19 pandemic. Although we would likely seek permission to recover any such future costs through rate increases on remaining customers or in statewide rates, we can give no assurance that the Commissions would approve rate increases to enable us to recover these costs.

Wastewater collection and treatment involve many risks associated with damage to the environment, and we anticipate that wastewater collection and treatment will become an increasingincreasingly significant part of our business. If collection or treatment systems fail or do not operate properly, untreated or partially treated wastewater could discharge onto property or into nearby streams and rivers, causing damage or injury to property, aquatic life, or human life. Our results of operations and financial condition could be materially and adversely affected by liabilities resulting from such damage.

Demand for our water is subject to various factors and is affected by seasonal fluctuations.fluctuations and conservation efforts.

The cost to obtain water for delivery to our customers varies depending on the sources of supply, wholesale suppliers’ prices, the quality of water required to be treated and the quantity of water produced to fulfill customer water demand. Our source of supply varies among our operating districts. Certain operating subsidiaries and districts obtain all of their supply from wells; some districts purchase all of their supply from wholesale suppliers; and other districtsothers obtain their supply from a combination of wells and wholesale suppliers. A small portion of supply comes from surface sources and is processed through Company-owned water treatment plants. On average, slightly more than half of the water we deliver to our customers is pumped from wells or received from a surface supply with the remainder purchased from wholesale suppliers. Water purchased from suppliers usually costs us more than surface supplied or well pumped water. The cost of purchased water for delivery to customers represented 29.7%30.5% and 31.2%29.7% of our total operating costs in 20242025 and 2023,2024, respectively. Water purchased from suppliers will require renewal of our contracts upon expiration and may result in significant price increases under any such renewed contracts.

Wholesale water suppliers may increase their prices for water delivered to us based on factors that affect their operating costs. Purchased water rate increases are beyond our control. In California, our ability to recover increases in the cost of purchased water changed with the adoption of the ICBA, which was approved as part of the 2021 CA GRC. With this change, actual per-unit purchased water costs are compared to authorized per-unit purchased water costs, with variances added to or netted against the variances in purchased power and pump taxes being recorded as a cost recovery. The balance in the ICBA is collected/refunded in the future by billing the ICBA accounts receivable/payable balances over future periods, which may have a short-term negative impact on cash flow.

Our ability to access the capital markets is affected by the ratings of certain of our debt securities. Standard & Poor’s Rating Agency issues a rating on the Company and Cal Water’s ability to repay certain debt obligations. The credit rating agency could downgrade our credit ratingratings based on reviews of our financial performance and projections or upon the occurrence of other events that could affect our business outlook. Lower ratings by the agency could restrict our ability to access equity and debt capital. We can give no assurance that the rating agency will maintain ratings that allow us to borrow under advantageous conditions and at reasonable interest rates. A future downgrade by the agency could also increase our cost of capital by causing potential investors to require a higher interest rate due to a perceived risk related to our ability to repay outstanding debt obligations.

We rely on our current credit facilities to fund short-term liquidity needs if internal funds are not available from operations. Specifically, given the seasonal fluctuations in demand for our water we commonly draw on our credit facilities to meet our cash requirements at times in the year when demand is relatively low. We also may occasionally use letters of credit issued under our revolving credit facilities. Disruptions in the capital and credit markets could adversely affect our ability to draw on our credit facilities. Our access to funds under our credit facilities is dependent on the ability of our banks to meet their funding commitments.

Many of our customers and suppliers also have exposure to risks that could affect their ability to meet payment and supply commitments. We operate in geographic areas that may be particularly susceptible to declines in the price of real property, which could result in significant declines in demand for our products and services. In the event that any of our significant customers or suppliers, or a significant number of smaller customers and suppliers, are adversely affected by these risks, we may face disruptions in supply, significant reductions in demand for our products and services, inability of customers to pay invoices when due, and other adverse effects that could negatively affect our financial condition, results of operations and/or cash flows.

We seek to acquire or invest in other companies, technologies, services, or productscompanies that complement our business from time to time. For example, in February of 2026, we entered into an agreement to purchase Nexus’ Nevada and Oregon water and wastewater systems, which remains subject to regulatory approvals and other customary closing conditions. The execution of our growth strategy exposes us to different risks than those associated with our utility operations. We can give no assurance that we will succeed in finding attractive acquisition candidates or investments, or that we would be able to reach mutually agreeable terms with such parties. In addition, as consolidation becomes more prevalent in the water and wastewater industries,industries and competition from other regulated utilities, governmental entities and other strategic and financial buyers continues to increase, the prices for suitable acquisition candidates may increase to unacceptable levels and limit our ability to grow through acquisitions. Consummation of any proposed acquisition at any time may also be subject to various conditions to closing as well as regulatory approvals, and there can be no assurance that we will be able to complete proposed transactions on a timely basis or at all. If we are unable to find acquisition candidates or investments, complete acquisitions of suitable candidates on attractive terms or realize the expected benefits from proposed transactions, our ability to grow may be limited.

Acquisition and investment transactions may result in the issuance of our equity securities that could be dilutive if the acquisition or business opportunity does not develop in accordance with our business plan. They may also result in significant write-offswrite-offs, a decrease in liquidity and an increase in our debt. The occurrence of any of these events could have a material adverse effect on our business, financial condition, and results of operations.

•problems integrating the acquired operations, personnel, technologies, physical and cybersecurity processes, orwater productsquality, services, and systems with our existing businesses and services;

•liabilities inherited from the acquired companies’ prior business operationsoperations, including liabilities that were unknown or undisclosed at the time of acquisition;

In addition, the businesses and other assets we acquire may not achieve the salesexpected sales, profitability or any other perceived benefits. State laws on acquisition treatment or Commissions’ interpretation thereof may affect our ability to recover costs associated with our investments in newly-acquired water and profitabilitywastewater expected.systems. The occurrence of one or more of these events may have a material adverse effect on our business. There can be no assurance that we will be successful in overcoming these or any other significant risks encountered.

Our billed revenues and cash flows from operations will decrease if a significant business or industrial customer terminates or materially reduces its use of our water. Approximately $210.4$223.6 million, or 23.2%, of our 20242025 water utility revenues was derived from business and industrial customers. In Hawaii, we serve a number of large resorts, which if their water usage was reduced or ceased could have a material impact to our Hawaii operation.operations. The delay between such date and the effective date of the rate reliefrelief, if any, may be significant and could adversely affect our operating results and cash flows.

Our operating costcosts and costs of providing services may rise faster than our revenues.

We believe that stockholders invest in public utility stocks, in part, because they seek reliable dividend payments. If there is an over-supply of stock of public utilities in the market relative to demand by such investors, the trading price of our securities could decrease. Additionally, if interest rates rise above the dividend yield offered by our equity securities, demand for our stock, and consequently its market price, may decrease. Additional factors that could cause fluctuations in the trading price of our stock include regulatory developments, such as the delay in the CPUC’s final decision regarding the 20212024 CA GRC, general economic conditions and trends, including inflationarythose pressures,discussed generalunder economic“Our slowdownbusiness orand afinancial recession,performance changesmay inbe monetaryadversely policy,affected adverseby capitalhigh marketsinflation activityand orother macroeconomic conditions as a result of geopolitical conflicts, and the prospect of a shutdown of the U.S. federal government”; 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 competitive landscape generally; litigation involving us or our industry; major catastrophic events,events; or sales of large blocks of our stock. A decline in demand for our stock may have a negative impact on our ability to finance capital projects.

Although we own facilities in a number of states, 92.3%91.2% of our total consolidated operating revenue was generated by our operations located in California in 2024.2025. As a result, we are largely subject to political, regulatory, economic, water supply, weather,climate, labor, and energy cost risks affecting California.

We may also be similarly impacted by stagnating or worsening business and economic conditions, including general economic slowdown or a recession, changes in or uncertainty regarding tariff policy, including tariffs on U.S. imports, such as thoseimports recently implemented on steel and aluminum, higherthe interest ratesrate for a prolonged period of time, instability of certain financial institutions,environment, changes in monetary policy, adverse capital markets activity or macroeconomic conditions as a result of geopolitical conflicts, and theactions prospector ofchanges effected, proposed or threatened by, or a shutdown ofof, the U.S. federal government.

State statutes allow municipalities, water districts and other public agencies to own and operate water systems. These agencies are empowered to condemn water systems or real property owned by privately owned public utilities in certain circumstances and in compliance with Californiastate and federal law. Additionally, whenever a public agency constructs facilities to extend its utility system into the service area of a privately owned public utility, such an act may constitute the taking of property and require reimbursement to the privately owned public utility for its loss. If a public agency were to file an eminent domain lawsuit against us, we would incur substantial legal fees, consultant and expert fees, and other costs in considering a challenge to the right to take our utility property and/or its valuation for just compensation, as well as such fees and costs in any subsequent litigation if necessary. If the public agency prevailed and acquired our utility property, we would be entitled to just compensation for our loss, but we would no longer have access to the condemned property or water system. Neither would we be entitled to any portion of revenue generated from the use of such asset going forward. Furthermore, if public agencies succeed in acquiring our assets, there is a risk that we will not receive adequate compensation for the assets taken or be able to recover all charges associated with the condemnation of such assets, which may adversely affect our business operations and financial conditions.

Our success depends significantly on the continued individual and collective contributions of our management team. The loss of the services of any member of our management team could have an adverse effect on our business as our management team has knowledge of our industry and customers and would be difficult to replace.replace as there is significant competition for such personnel in our industry. We believe we offer competitive compensation and benefits as well as provide opportunities for continued development. There can be no assurance, however, that we will continue to be successful in retaining the members of our management team.

We evaluate our risks and insurance coverage annually or more frequently if circumstances dictate. Our evaluation considers the costs, risks, and benefits of retaining versus insuring various risks as well as the availability of certain types of insurance coverage. Accordingly, we have determined or may determine to self-insure or to not obtain insurance in certain cases, or insurance may not be available at commercially acceptable terms or at all. Furthermore, we are also affected by increases in prices for insurance coverage; in particular, we have been, and will continue to be, affected by rising health insurance costs. Retained risks are associated with deductible limits, partial self-insurance programs, and insurance policy coverage ceilings. If we suffer an uninsured loss, we may be unable to pass all or anya portion of the loss on to customers, because our rates are regulated by Commissions. Consequently, uninsured losses may negatively affect our financial condition, liquidity, and results of operations. There can be no assurance that we will not face uninsured losses pertaining to the risks we have retained.

•regulatory recovery of regulatory assets;

In addition, we must estimate accrued and unbilled revenues and costs as of the end of each accounting period. If our estimates are not accurate, we would be required to make an adjustment in a future period. Accounting rules permit us to use Commission authorized expense balancing accounts and memorandum accounts that include cost changes to us that are different from amounts incorporated into the rates approved by the Commissions. These accounts result in expenses and revenues being recognized in periods other than in which they occurred.

OurStakeholder commitmentsexpectations and stakeholderevolving expectationslegal and regulatory requirements relating to environmental, social, and governance (ESG)sustainability considerations may expose us to liabilities, increased costs, reputational harm, and other adverse effects on our business.

We have announced, and may from time to time announce, certain initiatives, including goals, targets, and other objectives, related to ESGsustainability matters. These statements reflect our current plans and do not constitute a guarantee that they will be achieved.achieved or maintained. Our failure or perceived failure to accomplish or accurately track and report on these goalsgoals, oncomply awith timelyevolving basis,standards, or atsatisfy all,reporting requirements could adversely affect our reputation, financial performance, and growth, and expose us to increased scrutiny from the investment community as well as enforcement authorities. In addition, statements about our sustainability goals, targets, and other objectives, and progress against those goals, targets, and other objectives, are or may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve, and assumptions that are subject to change in the future. Our selection of voluntary disclosure frameworks and standards, and the interpretation or application of those frameworks and standards, have changed and may change from time to time, or differ from those of others. Methodologies for reporting this data have been and may from time to time be updated and previously reported data has been or may be adjusted, as applicable, to reflect improvement in availability and quality of third-party data, changing assumptions, changes in the nature and scope of our operations, and other changes in circumstances, which could result in significant revisions to our current goals, reported progress in achieving such goals, or ability to achieve such goals in the future.

InvestorIn addition, stakeholder expectations, legal and politicalregulatory advocacy groups, certain institutional investors, investment funds, other market participants, stockholders,requirements, and customersstandards havefor focusedtracking increasinglyand reporting on ESGsustainability initiatives,matters includingremain theinconsistent. goals, targets, and objectives that we announce, and our methodologies and timelines for pursuing them. At the same time, stakeholders and regulatorsRegulators have increasingly expressed or pursued opposing views, legislation, and investment expectations with respect to sustainability initiatives, including the enactment or proposal of “anti-ESG” legislationlegislation, enforcement actions, or policies.investigations, which may expose us to additional legal, financial, or reputational risks and unpredictable reporting obligations or business requirements. Implementing our ESGsustainability programs and responding to changes in regulations and investor preferences involves risks and uncertainties, some of which are outside our control, including increased costs, required investments and often depends on third-party performance or data that is outside our control.investments. For example, as a regulated utility, we must obtain approval from our Commissions for our cost structure and capital investments, including capital expenditures for implementing ESGsustainability-related programs,programs. and anyAny changes that may affect customer rates need to be approved within the rate case process with the Commissions. In our experience, U.S. state utilities commissions have prioritized water affordability and physical climate change risk adaptation over change mitigation actions, like greenhouse gas emissions reductions. Additionally, in many areas, purchased water, which is a contributor to our greenhouse gas emissions inventory, is the only available water source, and a large majority of these single-source suppliers have not published emission reduction targets. We cannot guarantee that we will achieve our announced ESG targets and commitments, satisfy all stakeholder expectations,expectations orin that the benefitslight of implementing or achieving these goalsvaried and initiativessometimes willconflicting notviews surpassregarding theirsustainability projected costs.matters. Any failure, or perceived failure, to achieve ESG goals and initiatives, as well as to manage ESGsustainability risks, adhere to public statements, comply with federal or state ESGsustainability laws and regulations or meet evolving and varied stakeholder expectations and standards could result in legal and regulatory proceedings against us and materially adversely affect our business, reputation, results of operations, financial condition, and stock price. Even if we achieve our goals, targets, and objectives, we may not realize all of the benefits that we expected at the time they were established.

In 20242025 and 2023,2024, net income attributable to California Water Service Group was $190.8$128.2 million and $51.9$190.8 million, respectively. Earnings per diluted common share increaseddecreased $2.34$1.10 from $0.91$3.25 to $3.25$2.15, or 257.1%33.8%, in 2024.2025.

The $138.9$62.6 million increasedecrease in net income was primarily due to ana increasedecrease in operating revenue of $242.2$36.7 million primarily as a result of a decrease in customer usage of $12.7 million and the cumulative adjustment for the impacts of the 2021 CA GRC, retroactive to January 1, 2023, and higher rates and increased consumption. The revenue increasethat was recorded in 2024, partially offset by an increase in totalrates of $69.6 million. Total operating expenses ofalso $94.3increased by $18.0 million. The total operating expense increase was primarily due to an increase in water production costs,costs whichof include$11.5 purchasedmillion, water,an purchasedincrease power,in administrative and pumpgeneral tax expenses,expenses of $22.1$2.1 million, increasesan increase in other operations expenses of $6.0 million, an increase in income tax expense of $51.1$11.6 million, an increase in depreciation and amortization expenses of $10.7$12.5 million, and an increase in property and other taxes of $4.3$3.7 million. These increases were partially offset by a decrease in income tax expense of $24.7 million. Additionally, net other income decreased by $1.5 million and net interest expense increased by $7.7$9.1 million.million due to higher average outstanding borrowings, partially offset by lower interest rates.

The net income benefit of the 2021 CA GRC from 2023 interim rate relief was approximately $64.0 millionmillion, or $1.09 earnings per diluted common share, that is included in 2024 results.

We account for income taxes using the asset and liability method. Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. We measure deferred tax assets and liabilities at enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. We recognize the effect on the deferred tax assets and liabilities of a change in tax rate in the period that includes the enactment date. We also assess the likelihood that deferred tax assets will be recovered in future taxable income and, to the extent recovery is not probable, a valuation allowance would beis recorded.

On June 27, 2024, California Senate Bill 167 (SB 167) was enacted into law. SB 167 provides for a three-year suspension of net operating losses under the California Corporation tax. Among other things, this new law temporarily disallows the use of state net operating losses for years beginning in 2024 through 2026.

On December 22, 2017, the U.S. government enacted expansive tax legislation commonly referred to as the TCJA.Tax Cuts and Jobs Act (TCJA). Among other provisions, the TCJA reduces the federal income tax rate from 35 percent to 21 percent beginning on January 1, 2018 and eliminated bonus depreciation for utilities. The TCJA required the Company to re-measure all existing deferred income tax assets and liabilities to reflect the reduction in the federal tax rate.

We incur costs associated with our pensions and PBOP plans. To measure the expense of these benefits, our management must estimate compensation increases, mortality rates, future health cost increases and discount rates used to value related liabilities and to determine appropriate funding. Different estimates used by our management could result in significant variances in the cost recognized for pension and PBOP plans. The estimates used are based on historical experience, current facts, future expectations, and recommendations from independent advisors and actuaries. We use an investment advisor to provide advice in managing the plans’ investments. We anticipate any increases in funding for the pension, except for the SERP for Cal Water, and PBOP plans will be recovered in future rate filings, thereby mitigating the financial impact. We believe it is probable that future non-SERP costs will be recovered in future rates and therefore have recorded a regulatory asset in accordance with generally accepted accounting principles. As a result of Cal Water’sthe 2021 CA GRC decision that was issued in March of 2024, SERP expenses were disallowed to be recovered from our customers. At this time, we believe it is not probable that SERP costs will be recovered in rates for the three-year period in which the 2021 CA GRC is in effect. As a result, we haverecord reclassifiedthe ourchanges in the funded status for the SERP regulatory asset, net of associated deferred income taxes, for Cal Water to accumulated other comprehensive loss in accordance with generally accepted accounting principles.

______________________________________________________________________________ 1.The(1) The cost of living adjustment was assumed at 2.20%2.40% and has a floor of 2.0%.

Operating revenue in 2025 was $1,000.1 million, a decrease of $36.7 million, or 3.5%, over 2024. Operating revenue in 2024 was $1,036.8 million, an increase of $242.2 million, or 30.5%, over 2023. Operating revenue in 2023 was $794.6 million, a decrease of $51.8 million, or 6.1%, over 2022. The sources of change in operating revenue were:

(1)In 2024,2025, the net change due to rate changes, usage,changes and other items in the above table was primarily due to rate increases of $98.5 million and an increase in consumption and new customers of $17.5$69.6 million.

(2)Due to the delay in the resolution of the 2021 CA GRC, the CPUC authorized Cal Water to track in an IRMA the variances between actual customer billings and those that would have been billed assuming the 2021 CA GRC had been effective January 1, 2023. Such variances arewere recorded as regulatory balancing account revenue. The 2021 CA GRC was approved in March of 2024 and final rates for the 2021 CA GRC were implemented on May 31, 2024. As a result Cal Water recorded IRMA revenue of $88.6 million in 2024, of which $67.6 million is attributable to 2023. No IRMA revenue was recorded in 2025.

(3)MWRAM revenue is the variance between actual metered sales billed 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. In March of 2024, Cal Water received approval of the 2021 CA GRC which authorized the use of the MWRAM effective January 1, 2023. AsFor a2025 result,and 2024, Cal Water recorded MWRAM revenue of $26.3 million and $35.3 million, respectively. Of the $35.3 million of MWRAM revenue recorded for 2024 of which2024, $17.4 million is attributable to 2023.

(4)Deferred revenue consists of amounts that are expected to be collected from customers beyond 24 months following the end of the accounting period in which the sales transaction has already occurred. Deferred revenue for 20242025 increaseddecreased due to ana increasedecrease in the balancing account revenue expected to be collected beyond 24 months.

The principal factors affecting water production costs are the quantity, price, and source of the water. Generally, water pumped from wells costs less than water purchased from wholesale suppliers. TheCal 2021Water GRChas an approved an ICBA for purchased water, purchased power, and pump taxes. The ICBA mechanism is designed to recover changes in supplier prices from authorized amounts and has been recorded as part of the associated water production expense type.

For 2024,2025, the $17.4$11.7 million increase in purchased water expenses is mostly due to a blended purchased water wholesaler rate increase of 8.2%6.9% partially offset by a 0.4%1.9% decrease in purchased quantities. In 2024, Cal Water recorded $8.3 million of ICBA expense, of which $6.9 million was attributable to 2023.

For 2024,2025, the $2.8$2.4 million increase in pump taxes is primarily due to increases in pump tax rates. In 2024, Cal Water recorded a reduction to pump taxes of $0.8 million for the ICBA, of which $0.1 million was attributable to 2023.

Purchased power expenses are affected by the quantity of water pumped from wells and moved through the distribution system, rates charged by electric utility companies, and rate structures applied to usage during peak and non-peak times of the day or season. In 2024,2025, purchased power expenses increaseddecreased $2.0 million to $47.7$2.6 million mainly due to ana increasedecrease in rates from our power providers. In 2024, Cal Water recorded a reduction to purchased power of $4.8 million for the ICBA, of which $0.3 million was attributable to 2023.production.

Changes associated with climate change regulations could increase the cost of power that in turn would result in an increase in the rates our power suppliers charge us. Any change in pricing of our purchased power in California would be recovered from our customers through the ICBA mechanism. Any change in power costs in other states would be requested to be recovered byfrom the customers in those states. The impact of such regulations is dependent upon the enacted date, the factors that affect our suppliers’ cost structure, and their ability to pass the costs to us in their approved tariffs. These items are not known at this time.

For 2024,2025, other operations expense increased $6.0$11.6 million, or 5.3%,9.8%, compared to 2023.2024. The increase was primarily due to ana $2.8 million increase in employeelabor wageexpense, expense$2.5 ofmillion $2.3increase million,in bad debt expense, $1.8 million increase in software expenses, a $1.8 million increase in miscellaneous office expenses, $1.3 million increase in conservation expenses, and a $1.0 million increase in water treatment costscosts. The increase in bad debt expense was primarily due to lower bad debt expense in 2024 as a result of $1.8applying millionarrearage primarily relatedfunds to theeligible, HOHpreviously Waterwritten-off Utilities system acquisition that closed in December of 2023, and software licensing fees of $1.3 million.accounts.

For 2024,2025, income tax expense increaseddecreased $51.1$24.7 million, or 336.6%,68.8%, to $35.9$11.2 million compared to an income tax benefitexpense of $15.2$35.9 million for 2023.2024. The increasedecrease in 20242025 was primarily due to ana increasedecrease in pre-tax operating incomeincome, inwhich 2024resulted attributable to the recognition of income related tofrom the 2021 CA GRC decision in 2024.

For 2024,2025, property and other taxes increased $4.3$3.7 million, or 11.8%,9.2%, compared to 2023.2024. The increase was mostlyprimarily due to an increase in our assessed property values for utility plant placed in service duringin the year.2024.

For 2024,2025, net other income and expenses decreasedincreased $1.5$1.6 million, or 6.1%,7.1%, to $22.6$24.2 million compared to 2023.2024. The decreaseincrease was due primarily to a $4.4$2.4 million decreaseincrease in other components of net periodic benefit credit and a $1.3 million decrease in the unrealized gains from certain non-qualified benefit plan investments due to market conditions, which was partially offset by a $1.4$0.8 million increase in allowance for equity funds used during constructionconstruction, andwhich anwas partially offset by a $1.3 million increase in interestincome tax expense on other income ofand $1.0 million.expenses.

For 2024,2025, net interest expense increased $7.7$9.1 million, or 15.5%,15.9%, compared to 2023.2024. The increase was primarily due to higher average short-term borrowing rates and higher outstanding borrowingsborrowings, onpartially ouroffset short-termby creditlower facilities.interest rates.

During 20242025 and 2023,2024, we used $470.8$517.0 million and $383.7$470.8 million, respectively, of cash for capital expenditures, both Company-funded and developer-funded.developer-funded utility capital expenditures. Cash used in investing activities fluctuates each year largely due to the availability of construction resources and our ability to obtain construction permits in a timely manner.

At theIn January 2025 meeting,2026, the Board declared the quarterly dividend, increasing it for the 58th59th consecutive year, and a one-time special dividend in the amount of $0.04 per common share.year. The quarterly dividend was raised from $0.28$0.30 to $0.30$0.335 per common share. This represents an indicated annual rate of $1.24$1.34 per common share. Dividends have been paid for 7980 consecutive years. The annual dividends paid per common share in 2025, 2024, 2023, and 20222023 were $1.12,$1.24, $1.04$1.12 and $1.00,$1.04, respectively. The 2025 annual dividend included a one-time special dividend of $0.04 per common share. Earnings not paid as dividends are reinvested in the business for the benefit of stockholders.business. The dividend payout ratio was 57.6% in 2025, 34.3% in 2024, and 113.8% in 2023, and 56.5% in 20222023 for an average of 68.2%68.6% over the 3-year period. Our long-term targeted dividend payout ratio is 60%.

Short-term liquidity is provided by the bankCompany’s linesunsecured ofrevolving credit describedfacility above(the Company facility) and the Cal Water unsecured revolving credit facility (the Cal Water facility) and by internally generated funds. As of December 31, 2024,2025, there were borrowings of $205.0$130.0 million outstanding on our unsecured revolving lines of credit, compared to $180.0$205.0 million outstanding on our unsecured revolving lines of credit as of December 31, 2023.2024.

The Company and subsidiaries that it designates may borrow up to $200.0 million under the Company facility. Cal Water may borrow up to $400.0 million under the Cal Water facility; however, all of Cal Water’s borrowings under the Cal Water facility must be repaid within 24 months as authorized by the CPUC. The proceeds from the Company and Cal Water facilities may be used for working capital or general corporate purposes.

The Company and Cal Water facilities contain affirmative and negative covenants and events of default customary for credit facilities of this type including, among other things, limitations and prohibitions relating to additional indebtedness, liens, mergers, and asset sales. Also, the Company and Cal Water facilities contain financial covenants that require the Company and its subsidiaries’ debt portion of the Company’s consolidated total capitalization ratio not to exceed 66.7% and an interest coverage ratio of three or more to one (each as defined in the respective credit agreements). As of December 31, 2024,2025, our consolidated total capitalization ratio was 45.8%48.8% and the interest coverage ratio was greater than sevenfive to one. In summary, as of such date, we are in compliance with all of the covenant requirements and are eligible to use the full amount of the undrawn portion of the Company and Cal Water facilities.

On AprilMay 29,14, 2022,2025, we entered into an equity distribution agreement to sell shares of our common stock having an aggregate gross sales price of up to $350.0 million (2025 Equity Agreement) from time to time depending on market conditions through an at-the-market equity program over the next three years. The 2025 Equity Agreement replaced the previous agreement that ended in the second quarter of 2025. We intend to use the net proceeds from these sales, after deducting commissions and offering expenses, for general corporate purposes, which may include working capital, construction and acquisition expenditures, investments and repurchases, and redemptions of securities. Additional information regarding this program is presented in Note 6 of the Notes to Consolidated Financial Statements.

The following table summarizes our contractual obligations as of December 31, 2024.2025. We generally expect to satisfy these commitments with cash on hand and cash provided by operating activities. In 2025, we expect to issueissued First Mortgage Bonds and Senior Unsecured Notes to payrefinance offexisting bondsindebtedness, maturingto duringfund thecapital year.expenditures, and for general corporate purposes.

A majority of capital expenditures waswere associated with mains and water treatment equipment.

For 2025,2026, the Company is estimating its capital expenditures to be between $450.0$580.0 million and $550.0$640.0 million based on the 2024 CA GRC in California and normal capital needs in the other subsidiaries. This range includes an estimated PFAS compliance cost of $79.2 million. See “Water Supply” in Part I - Item 1 above for details on the currently effective regulation. We expect our annual capital expenditureexpenditures to increase during the next five years due to increasing needs to replace and maintain infrastructure.

Total equity was $1,692.0 million at December 31, 2025, compared to $1,638.3 million at December 31, 2024, compared to $1,430.3 million at December 31, 2023.2024. The Company sold 1,638,97733,497 and 2,025,8911,638,977 shares of its common stock in 20242025 and 2023,2024, respectivelyrespectively, through its at-the-market equity program.

Total capitalization, including the current portion of long-term debt, was $3,166.2 million at December 31, 2025 and $2,815.3 million at December 31, 2024 and $2,483.8 million at December 31, 2023.2024. In future periods, the Company intends to issue common stock and long-term debt to finance our operations. The capitalization ratios will vary depending upon the method we choose to finance our operations.

This quarterly report, including all documents incorporated by reference, contains forward-looking statements within the meaning established by the Private Securities Litigation Reform Act of 1995 (the PSLRA). The forward-looking statements are intended to qualify under provisions of the federal securities laws for “safe harbor” treatment established by the PSLRA. Forward-looking statements in this quarterly report are based on currently available information, expectations, estimates, assumptions and projections, and our management’s beliefs, assumptions, judgments and expectations about us, the water utility industry and general economic conditions. These statements are not statements of historical fact. When used in our documents, statements that are not historical in nature, including words like “will,” “would,” “expects,” “intends,” “plans,” “believes,” “may,” “could,” “estimates,” “assumes,” “anticipates,” “projects,” “progress,” “predicts,” “hopes,” “targets,” “forecasts,” “should,” “seeks,” “indicates,” or variations of these words or similar expressions are intended to identify forward-looking statements. Examples of forward-looking statements in this quarterly report include, but are not limited to, statements describing our intention, indication or expectation regarding our financial performance, dividends or targeted payout ratio, our expectations, anticipations or beliefs regarding governmental, legislative, judicial, administrative or regulatory timelines, regulatory compliance, decisions, approvals, authorizations, requirements or other actions, including plans and proposals pursuant to and timing and impact of regulatory commissions’ actions related to the California Water Service Company (Cal Water)’s general rate case (GRC) filed on July 8, 2024 (2024 CA GRC) and the GRCs filed by our other subsidiaries, the anticipated closing and timing of acquisition of Nexus Water Group’s (Nexus) Nevada and Oregon utilities,systems, and the remaining membership interests in BVRT Utility Holding Company LLC (BVRT) and expected benefits resulting from such transactions, rate amounts, cost recovery or refunds, expected impact of certain per- and polyfluoroalkyl substances (PFAS) regulations, our expected or estimated revenue, our intentions regarding recovery billing, our expectations regarding regulatory asset and operating revenue recognition, estimates of, or expectations regarding, capital expenditures, funding needs or other capital requirements, obligations, contingencies or commitments, our expectations regarding water sources, our beliefs regarding adequacy of water supplies, our anticipation regarding renewing water supply contracts and estimated water prices, estimates and assumptions relating to our significant accounting policies, such as deferred revenue or assets or refund of advances, our expectations or assumptions regarding employee benefit plans and stock-based compensation and estimated contributions to our pension plans and other postretirement benefit plans, our estimated annual effective tax rate and expectations regarding tax benefits, our intentions regarding use of net proceeds from any future equity or debt issuances or borrowings, our expectations, intentions or anticipations regarding our sources of funding, capital structure, including authorized return on equity, cost of debt and rate of return, or capital allocation plans, our intentions regarding growth opportunities or our expectations regarding the amount, timing, and use of settlement proceeds relating to certain PFAS-contamination claims. The forward-looking statements are not guarantees of future performance. They are based on numerous assumptions that we believe are reasonable, but they are open to a wide range of uncertainties and business risks. Consequently, actual results or outcomes may vary materially from what is contained in a forward-looking statement.

•the outcome and timeliness of regulatory commissions’ actions concerning rate relief and other matters, including with respect to the 2024 CA GRC and the GRCs of our other subsidiariesmatters;

•changes in environmental compliance and water quality requirements, such as the United States Environmental Protection Agency’s (EPA) finalization of and changes to a National Primary Drinking Water Regulation establishing legally enforceable maximum contaminant levels (MCL) for PFAS in drinking water in 2024 as well as legal challenges to such MCLs;

•our ability to complete, in a timely manner or at all, successfully integrate, and achieve anticipated benefits from announced acquisitions, including the NexusNevada and Oregon systems and BVRT acquisitions;

•the impact of stagnating or worsening business and economic conditions, including inflationary pressures, general economic slowdown or a recession, changes in tariff policy, the interest rate environment, changes in monetary policy, adverse capital markets activity or macroeconomic conditions as a result of geopolitical conflicts, including ongoing conflicts in the Middle East, and the prospect of shutdowns of the U.S. federal government;

For the threesix months ended MarchJune 31,30, 2026, there were no material changes in the methodology for computing critical accounting estimates, no additional accounting estimates met the standards for critical accounting policies, and there were no material changes to the important assumptions underlying the critical accounting estimates.

Net income attributable to California Water Service Group for the three months ended MarchJune 31,30, 2026 was $4.0$56.5 million or $0.07$0.93 earnings per diluted common share, compared to net income of $13.3$42.2 million or $0.22$0.71 earnings per diluted common share for the three months ended MarchJune 31,30, 2025. The $9.3$14.3 million decreaseincrease in net income was primarily due to an increase in totaloperating revenue of $43.6 million primarily as a result of the cumulative adjustment for the impacts of California Water Service Company’s (Cal Water) general rate case (GRC) filed on July 8, 2024 (2024 CA GRC), retroactive to January 1, 2026 and rate increases. The operating revenue increase was partially offset by an increase in operating expenses of $14.8$24.6 million. The total operating expense increase was primarily due to increases in water production costs of $8.3$6.3 million, depreciationadministrative and amortizationgeneral expensesexpense of $4.0$2.9 million, and other operations expense of $2.4$13.4 million, and income tax expense of $7.0 million. The increase in expenses was partially offset by an increase inThese operating revenue of $10.6 million primarily due to rateexpense increases were partially offset by a decrease in customerdepreciation usage.and amortization expenses of $6.5 million. Additionally, net other income decreased by $2.1$1.5 million and net interest expense increased $2.9by $3.2 million.

For the three months ended MarchJune 31,30, 2026, operating revenue increased $10.6$43.6 million, or 5.2%,16.5%, to $214.6$308.6 million as compared to $204.0$265.0 million for the three months ended MarchJune 31,30, 2025.

1.The net change due to rate changes, MWRAM,M-WRAM, and other for the three months ended MarchJune 31,30, 2026 was primarily due to rate increases of $9.2$11.6 million. For the six months ended June 30, 2026, the net change due to rate changes, M-WRAM, and other was primarily due to rate increases of $23.3 million and an increase in accrued and unbilled revenue of $4.9$3.9 million.

2.Deferred3.Deferred revenue consists of amounts that are expected to be collected from customers beyond 24 months following the end of the accounting period in which the sales transaction occurred. Deferred revenue for the three and six months ended MarchJune 31,30, 2026 increased and revenue decreased due to a changechanges in the amount expected to be collected beyond 24 months.months as new surcharges have been implemented to collect previously deferred balances.

For the three months ended MarchJune 31,30, 2026, total operating expenses increased $14.8$24.6 million, or 8.1%,11.5%, to $196.4$237.7 million, as compared to $181.6$213.1 million for the three months ended MarchJune 31,30, 2025. The increase was primarily due to increases in water production costs, other operations expense, and depreciation and amortization expense.

WaterAdministrative productionand costsgeneral expenses increased $8.3$2.9 million, or 13.2%,million for the three months ended MarchJune 31,30, 2026 as compared to the same period in 20252025. The increase was primarily due to ana $1.6 million increase in wholesaleconsulting rates.services and a $1.7 million increase in other general corporate expenses.

Other operations expenses increased $2.4$13.4 million for the three months ended MarchJune 31,30, 2026 as compared to the same period in 2025. The increase was primarily due to athe $0.7recognition of $7.9 million of costs associated with recognized deferred revenue, an increase inof software expenses, a $0.6$2.1 million increase in conservation program expenses, aan $0.5increase of $0.7 million increase in watermiscellaneous treatmentoffice expenses, a $0.4 millionan increase related to obsolete inventory, and a $0.4 million increase in labor expense. These increases were partially offset by a $0.6 million decrease in bad debt expense of $0.7 million, an increase of $0.6 million in software expenses, and an increase of $0.6 million in labor expense.

Depreciation and amortization expense increaseddecreased $4.0$6.5 million and $2.5 million for the three and six months ended MarchJune 31,30, 2026, respectively, as compared to the same periodperiods in 2025. The increasedecreases waswere primarily due to utilitylower plantdepreciation placedrates in serviceCalifornia, which were approved in 2025.the 2024 CA GRC.

Net other income decreased $2.1$1.5 million for the three months ended MarchJune 31,30, 2026, as compared to the same period in 2025. The decrease was primarily due to a $2.3 million reduction in other components of net periodic benefit credit and an increase of $1.3$1.4 million in acquisition-related expensesexpenses. andThese decreases in net other income were partially offset by a $0.7$1.5 million reductiongain associated with our non-qualified benefit plan investments.investments and a $0.6 million gain associated with our Company-owned life insurance.

Net interest expense increased $2.9$3.2 million and $6.1 million for the three and six months ended MarchJune 31,30, 2026, respectively, as compared to the same periodperiods in 2025. The increaseincreases waswere primarily due to higher average outstanding borrowings partially offset by lower interest rates.

OnThe April 29, 2026, the ALJ issued a revised PD in response to the requested changes, which authorizes rate increases that add $90.5 million of revenue in 2026, or an increase of 10.9%. Itdecision also authorizes revenue increases of $43.2 million, or 4.7%, in 2027, and $48.9 million, or 5.1%, in 2028. The revised PD authorizes key revenue stabilization mechanisms, including continuation of the MWRAM,M-WRAM, a higher percentage of revenue collected in fixed charges, and a new annual Sales Reconciliation Mechanism. In addition, it includes provisions that allow for recovery of certain costs through balancing accounts and other regulatory mechanisms designed to mitigate volatility in customer usage and uncertain costs.

In June of 2025, Cal Water filed a motion requesting authority to increase rates by inflation on January 1, 2026 (interim rates) and for the establishment of an IRMA in the event the CPUC did not issue a final decision for the 2024 CA GRC in time for new rates to be implemented on January 1, 2026. In October of 2025, the ALJCPUC granted Cal Water’s motion for interim rates and the establishment of the IRMA. In November of 2025, Cal Water filed an advice letter implementing a three percent increase in interim rates for most districts, and creation of the IRMAIRMA, as of January 1, 2026. The IRMA tracks the difference between interim rates and the final rates that will ultimately bewere approved pursuant to the CPUC’s final decision on the 2024 CA GRC.

For construction projects authorized in the 2021 and 2024 CA GRCGRCs as advice letter projects, Cal Water iswas allowed to request rate base offsets to increase revenues after the project goes into service. In November of 2025, Cal Water submitted a $12.3 million rate base offset advice letter to recover $1.5 million of annual revenue increases for 6 of its regulated districts. The new rates were implemented on January 1, 2026.

In MarchNovember of 2026,2025, Cal Water submitted ana $8.9$12.3 million rate base offset advice letter to recover $1.5 million of annual revenue increases for 2 of its regulated districts.increases. The new rates are expected to bewere implemented on JulyJanuary 1, 2026.

Expense offsets are dollar-for-dollar increases in revenue to match increased expenses, and therefore do not affect net operating income. In November of 2025, Cal Water submitted an advice letter to request expense offsets for increases in purchased water, pump tax, and purchased power costs in 18most of its regulated Class A districts totaling $15.7 million. The new rates were implemented on January 1, 2026.

Washington Water Service Company (Washington Water) – 2025 East Pierce and Legacy Water Systems General Rate Case On September 25, 2025, Washington Water filed a tariff update with the Washington Utilities and Transportation Commission (UTC) for the East Pierce and Legacy water systems to increase revenues by $4.9 million. The general rate increase, whichincrease includes recovery of expenses,expenses and capital expendituresexpenditures. A settlement with UTC staff and PFAS-relatedthe expensesWashington incurredPublic Counsel was reached and filed before the UTC in 2023May andof 2024,2026. A final decision is expected to be implemented in the second half of 2026.

In DecemberFebruary of 2023,2022, Camino Real Utility filed a new waterwastewater Certificate of Convenience and Necessity (CCN)and Sale, Transfer, or Merger application with the PUCT to transfer an existing sewer service area and establish a waternew sewer service area that initially covers 229.16,216 acres in Caldwell County.and OnTravis DecemberCounties. 30,PUCT 2025,has set a Noticeyear-end of2026 Approvalschedule wasto received fromcomplete the PUCT establishing the CCN and initial water tariff rates.application.

On March 6, 2026, a change of control application was filed with the PUCT to acquire the remaining membership interests of BVRT. TheOn July 2, 2026, the ALJ granteddeemed PUCTthe staffapplication anadministratively extensioncomplete toand reviewestablished untila Mayprocedural 6,schedule 2026.for continued processing of the application.