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Summary of Significant Accounting Policies | 3 Months Ended
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Mar. 31, 2025
Accounting Policies [Abstract] |
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Operating Revenue The following table disaggregates the Company’s operating revenue by source for the three months ended March 31, 2025 and 2024:
|  |  | Three Months Ended March 31,
|  |  |  |  | 2025 |  | 2024
Revenue from contracts with customers |  |  |  |  | $ | 182,701 |  |  | $ | 154,900 |
Regulatory balancing account revenue |  |  |  |  | 21,272 |  |  | 115,849 |
Total operating revenue |  |  |  |  | $ | 203,973 |  |  | $ | 270,749 |
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 and other third parties. 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 a corresponding accrued and 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. In the following table, revenue from contracts with customers is disaggregated by class of customers for the three months ended March 31, 2025 and 2024:
|  |  | Three Months Ended March 31,
|  |  |  |  | 2025 |  | 2024
Residential |  |  |  |  | $ | 105,433 |  |  | $ | 92,492 |
Business |  |  |  |  | 40,548 |  |  | 34,549 |
Multiple residential |  |  |  |  | 19,203 |  |  | 16,869 |
Industrial |  |  |  |  | 6,405 |  |  | 6,640 |
Public authorities |  |  |  |  | 9,245 |  |  | 6,962 |
Other (a) |  |  |  |  | 1,867 |  |  | (2,612) |
Total revenue from contracts with customers |  |  |  |  | $ | 182,701 |  |  | $ | 154,900 |
(a) Other includes changes to accrued and 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). For certain revenue mechanisms, the Company recognizes revenue when it is objectively determinable, probable of recovery and expected to be collected within 24 months following the end of the accounting period. To the extent that revenue is estimated to be collectible beyond 24 months, recognition is deferred. These mechanisms include the Monterey-Style Water Revenue Adjustment Mechanism (MWRAM), which was approved in Cal Water’s 2021 General Rate Case (GRC) filing (2021 GRC) in March of 2024. 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 MWRAM fluctuates with the seasonality of the water business. During the warm, dry summer months when water use is typically highest, the MWRAM will reflect an overcollection of revenue compared to an undercollection in the cool, wet winter months when less water is typically used. These mechanisms also include the Water Revenue Adjustment Mechanism (WRAM), which decoupled revenue from the volume of 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; however, the Company has a net WRAM receivable balance for which the Company continues to defer revenue recognition for amounts estimated to be collected beyond 24 months following the end of the accounting period. Regulatory balancing accounts also include revenue that is recognized 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. As a result of the delay in the approval of the 2021 GRC, the CPUC authorized Cal Water to track the effect of the delay on customer billings in an Interim Rates Memorandum Account (IRMA). Variances between actual customer billings and those that would have been billed assuming the 2021 GRC had been implemented on January 1, 2023 were recorded as regulatory balancing account revenue. The 2021 GRC was approved in March of 2024 and final authorized rates were implemented effective May 31, 2024; as a result, for the first three months of 2024, Cal Water calculated and recorded the IRMA for all of 2023 and the first three months of 2024. The IRMA for April 2024 and May 2024 were calculated and recorded during the second quarter of 2024. Cal Water determined that the IRMA met regulatory asset recognition criteria under accounting standards for regulated utilities. Non-Regulated Revenue The following table disaggregates the Company’s non-regulated revenue by source for the three months ended March 31, 2025 and 2024:
|  |  | Three Months Ended March 31,
|  |  |  |  | 2025 |  | 2024
Operating and maintenance revenue |  |  |  |  | $ | 3,267 |  |  | $ | 3,248 |
Other non-regulated revenue |  |  |  |  | 1,248 |  |  | 1,229 |
Non-regulated revenue from contracts with customers |  |  |  |  | 4,515 |  |  | 4,477 |
Lease revenue |  |  |  |  | 566 |  |  | 621 |
Total non-regulated revenue |  |  |  |  | $ | 5,081 |  |  | $ | 5,098 |
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 the Company provides operating, maintenance and customer billing services related to the customers’ water system. The formal agreements outline a 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. 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 Accrued 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 Accrued 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 in accordance with the applicable accounting guidance. Management 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 use to encourage 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 of 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, accordingly. The following table presents the activity in the allowance for credit losses for the three months ended March 31, 2025 and twelve months ended December 31, 2024:
| March 31, 2025 |  | December 31, 2024
Beginning balance | $ | 4,128 |  |  | $ | 2,854 |
Provision for credit loss expense | 1,358 |  |  | 5,890 |
Write-offs | (1,371) |  |  | (5,054) |
Recoveries | 120 |  |  | 438 |
Total ending allowance balance | $ | 4,235 |  |  | $ | 4,128 |
Cash, Cash Equivalents, and Restricted Cash The following table provides a reconciliation of cash, cash equivalents, and restricted cash within the unaudited Condensed Consolidated Balance Sheets that sum to the total of the same such amounts shown on the unaudited Condensed Consolidated Statements of Cash Flows (see Note 9 for further details on restricted cash):
| March 31, 2025 |  | December 31, 2024
Cash and cash equivalents | $ | 44,460 |  |  | $ | 50,121 |
Restricted cash | 45,675 |  |  | 45,566 |
Total cash, cash equivalents, and restricted cash shown in the statements of cash flows | $ | 90,135 |  |  | $ | 95,687 |
Earnings per Share Basic earnings per share of common stock is computed by dividing the net income attributable to California Water Service Group by the weighted average number of common shares outstanding during the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts were exercised or converted into common stock. Restricted Stock Awards (RSAs) are included in the common shares outstanding because the shares all have the same voting and dividend rights as issued and unrestricted common stock. New Accounting Standards In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures to expand the disclosure requirements for income taxes, specifically related to the rate reconciliation and paid income taxes. ASU 2023-09 is effective for the Company's annual periods beginning January 1, 2025, with early adoption permitted. The guidance is applied prospectively with the option of retrospective application for each period presented. The Company is currently evaluating the potential effect that the updated standard will have on its financial statement disclosures and does not expect to adopt the standard early. In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses, which requires disaggregation of certain Consolidated Statement of Operations’ expense captions into specified categories in disclosures within the footnotes to the financial statements. ASU 2024-03 is effective for the Company’s annual periods beginning January 1, 2027, with early adoption permitted. The guidance is applied prospectively with the option of retrospective application for each period presented. The Company is evaluating the requirements of the guidance to determine the impact on its financial statement disclosures upon adoption and does not expect to adopt the standard early.

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