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Summary of Significant Accounting Policies | 9 Months Ended
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Sep. 30, 2023
Accounting Policies [Abstract] |
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Operating revenue The following tables disaggregate the Company’s operating revenue by source for the three and nine months ended September 30, 2023 and 2022:
| Three Months Ended September 30
| 2023 |  | 2022
Revenue from contracts with customers | $ | 253,337 |  |  | $ | 238,268 |
Regulatory balancing account revenue | 1,639 |  |  | 28,039 |
Total operating revenue | $ | 254,976 |  |  | $ | 266,307 |
| Nine Months Ended September 30
| 2023 |  | 2022
Revenue from contracts with customers | $ | 592,768 |  |  | $ | 595,860 |
Regulatory balancing account revenue | (12,648) |  |  | 49,634 |
Total operating revenue | $ | 580,120 |  |  | $ | 645,494 |
Revenue from contracts with customers The Company principally generates operating revenue from contracts with customers by providing regulated water and wastewater services at tariff-rates authorized by the Commissions in the states in which they operate and non-regulated water and wastewater services at rates authorized by contracts with government agencies. Revenue from contracts with customers reflects amounts billed for the volume of consumption at authorized per unit rates, for a service charge, and for other authorized charges. The Company satisfies its performance obligation to provide water and wastewater services over time as services are rendered. The Company applies the invoice practical expedient and recognizes revenue from contracts with customers in the amount for which the Company has a right to invoice. The Company has a right to invoice for the volume of consumption, for the service charge, and for other authorized charges. The measurement of sales to customers is generally based on the reading of their meters, which occurs on a systematic basis throughout the month. At the end of each month, the Company estimates consumption since the date of the last meter reading and the corresponding unbilled revenue is recognized. The estimate is based upon the number of unbilled days that month and the average daily customer billing rate from the previous month (which fluctuates based upon customer usage). Contract terms are generally short-term and at will by customers and, as a result, no separate financing component is recognized for the Company's collections from customers, which generally require payment within 30 days of billing. The Company applies judgment, based principally on historical payment experience, in estimating its customers’ ability to pay. Certain customers are not billed for volumetric consumption, but are instead billed a flat rate at the beginning of each monthly service period. The amount billed is initially deferred and subsequently recognized over the monthly service period, as the performance obligation is satisfied. The deferred revenue balance or contract liability, which is included in "accrued expenses and other liabilities" on the unaudited condensed consolidated balance sheets, is inconsequential. In the following tables, revenue from contracts with customers is disaggregated by class of customers for the three and nine months ended September 30, 2023 and 2022:
| Three Months Ended September 30
| 2023 |  | 2022
Residential | $ | 150,031 |  |  | $ | 140,585 |
Business | 47,707 |  |  | 44,031 |
Multiple residential | 18,778 |  |  | 17,333 |
Industrial | 8,165 |  |  | 8,086 |
Public authorities | 14,522 |  |  | 13,441 |
Other (a) | 14,134 |  |  | 14,792 |
Total revenue from contracts with customers | $ | 253,337 |  |  | $ | 238,268 |
| Nine Months Ended September 30
| 2023 |  | 2022
Residential | $ | 342,806 |  |  | $ | 348,965 |
Business | 117,527 |  |  | 115,472 |
Multiple residential | 50,280 |  |  | 48,343 |
Industrial | 19,672 |  |  | 20,174 |
Public authorities | 29,938 |  |  | 31,310 |
Other (a) | 32,545 |  |  | 31,596 |
Total revenue from contracts with customers | $ | 592,768 |  |  | $ | 595,860 |
(a) Other includes accrued unbilled revenue. Regulatory balancing account revenue Regulatory balancing account revenue is revenue related to revenue mechanisms authorized in California by the California Public Utilities Commission (CPUC), which allow the Company to recognize revenue when it is objectively determinable, probable of recovery and expected to be collected within 24 months following the end of the accounting period, and are not considered contracts with customers and are not included in the total revenue from contracts with customers in the table above. To the extent that revenue is estimated to be collectible beyond 24 months, recognition is deferred. Due to a delay in resolution of the most recent Cal Water General Rate Case (GRC) filing (2021 GRC Filing), the Company did not recognize a benefit from any regulatory revenue mechanisms in the first nine months of 2023. For 2022, the Company's authorized regulatory revenue mechanisms included the Water Revenue Adjustment Mechanism (WRAM). The WRAM decoupled revenue from the volume of the sales and allowed the Company to recognize the adopted level of volumetric revenues. The variance between adopted volumetric revenues and actual billed volumetric revenues for metered accounts was recorded as regulatory balancing account revenue. The WRAM concluded on December 31, 2022. Regulatory balancing accounts also includes revenue that is recognized for balancing accounts when it is probable that future recovery of previously incurred costs or future refunds that are to be credited to customers will occur through the ratemaking process. These mechanisms, such as the Modified Cost Balancing Account (MCBA), Conservation Expense Balancing Account (CEBA), Pension Cost Balancing Account (PCBA), and Health Cost Balancing Account (HCBA), generally provide for recovery of the adopted levels of expenses for purchased water, purchased power, pump taxes, water conservation program costs, pension, and health care. Variances between adopted and actual costs were recorded as regulatory balancing account revenue in 2022. In 2023, in connection with the CPUC's decision to discontinue the use of the WRAM, the variances for CEBA, HCBA, and PCBA are recorded against the originating expense. The MCBA concluded on December 31, 2022. The CPUC issued a decision effective August 27, 2020 requiring that Class A companies submitting GRC filings after the effective date be (i) precluded from proposing the use of a full decoupling WRAM in their next GRCs and (ii) allowed the use of Monterey-Style Water Revenue Adjustment Mechanisms (MWRAM). In addition, the CPUC's decision allowed for Incremental Cost Balancing Accounts (ICBAs) to replace the MCBA. The MWRAM tracks the difference between the revenue received for actual metered sales through the tiered volumetric rate and the revenue that would have been received with the same actual metered sales if a uniform rate had been in effect. The ICBA tracks differences between the authorized per-unit prices of water production costs and actual per-unit prices of water production costs. Cal Water complied with this decision in its 2021 GRC Filing and expects the MWRAM and ICBAs to be approved and effective retroactive to January 1, 2023. For the first nine months of 2023, the Company did not record a regulatory asset or regulatory liability for the MWRAM or ICBAs. Non-regulated Revenue The following tables disaggregate the Company’s non-regulated revenue by source for the three and nine months ended September 30, 2023 and 2022:
| Three Months Ended September 30
| 2023 |  | 2022
Operating and maintenance revenue | $ | 2,918 |  |  | $ | 3,184 |
Other non-regulated revenue | 972 |  |  | 720 |
Non-regulated revenue from contracts with customers | 3,890 |  |  | 3,904 |
Lease revenue | 645 |  |  | 669 |
Total non-regulated revenue | $ | 4,535 |  |  | $ | 4,573 |
| Nine Months Ended September 30
| 2023 |  | 2022
Operating and maintenance revenue | $ | 9,229 |  |  | $ | 9,822 |
Other non-regulated revenue | 2,553 |  |  | 4,951 |
Non-regulated revenue from contracts with customers | 11,782 |  |  | 14,773 |
Lease revenue | 1,861 |  |  | 1,999 |
Total non-regulated revenue | $ | 13,643 |  |  | $ | 16,772 |
Operating and maintenance services are provided for non-regulated water and wastewater systems owned by private companies and municipalities. The Company negotiates formal agreements with the customers, under which they provide operating, maintenance and customer billing services related to the customers’ water system. The formal agreements outline the fee schedule for the services provided. The agreements typically call for a fee-per-service or a flat-rate amount per month. The Company satisfies its performance obligation of providing operating and maintenance services over time as services are rendered; as a result, the Company employs the invoice practical expedient and recognizes revenue in the amount that it has the right to invoice. Contract terms are generally short-term and, as a result, no separate financing component is recognized for its collections from customers, which generally require payment within 30 days of billing. Other non-regulated revenue primarily relates to services for the design and installation of water mains and other water infrastructure for customers outside the regulated service areas and insurance program administration. During the first nine months of 2022, the Company recorded a gain of $2.7 million related to company owned life insurance. Lease revenue is not considered revenue from contracts with customers and is recognized following operating lease standards. The Company is the lessor in operating lease agreements with telecommunications companies under which cellular phone antennas are placed on the Company's property. Allowance for credit losses The Company measures expected credit losses for Customer Receivables, Other Receivables, and Unbilled Revenue on an aggregated level. These receivables are generally trade receivables due in one year or less or expected to be billed and collected in one year or less. The expected credit losses for Other Receivables and Unbilled Revenue are inconsequential. Customer receivables include receivables for water and wastewater services provided to residential customers, business, industrial, public authorities, and other customers. The expected credit losses for business, industrial, public authorities, and other customers are inconsequential. The overall risks related to the Company’s receivables are low as water and wastewater services are seen as essential services. The estimate for the allowance for credit losses is based on a historical loss ratio, in conjunction with a qualitative assessment of elements that impact the collectability of receivables to determine if the allowance for credit losses should be further adjusted. Management's assessment contemplates available current information such as changes in economic factors, regulatory matters, industry trends, payment options and programs available to customers, and the methods that the Company is able to utilize to ensure payment. The Company reviews its allowance for credit losses utilizing a quantitative assessment, which includes a trend analysis of customer billings and collections, agings by customer class, and unemployment rates. The Company also utilizes a qualitative assessment, which considers the future collectability on customer outstanding balances, management's estimate of the cash recovery, and a general assessment of the economic conditions in the locations the Company serves. Based on these assessments, the Company adjusts its allowance for credit losses. The following table presents the activity in the allowance for credit losses for the 9-month period ended September 30, 2023 and 12-month period ended December 31, 2022:
Allowance for credit losses | September 30, 2023 |  | December 31, 2022
Beginning balance | $ | 5,629 |  |  | $ | 3,743 |
Provision for credit loss expense | 3,274 |  |  | 5,887 |
Write-offs | (4,527) |  |  | (4,380) |
Recoveries | 413 |  |  | 379 |
Total ending allowance balance | $ | 4,789 |  |  | $ | 5,629 |
Cash, Cash Equivalents, and Restricted Cash The following table provides a reconciliation of cash, cash equivalents, and restricted cash within the Condensed Consolidated Balance Sheets that sum to the total of the same such amounts shown on the Condensed Consolidated Statements of Cash Flows (see Note 10 for further details on restricted cash):
| September 30, 2023 |  | December 31, 2022
Cash and cash equivalents | $ | 34,735 |  |  | $ | 62,100 |
Restricted cash | 34,315 |  |  | 22,925 |
Total cash, cash equivalents, and restricted cash shown in the statements of cash flows | $ | 69,050 |  |  | $ | 85,025 |

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