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Summary of Significant Accounting Policies | 12 Months Ended
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Dec. 31, 2014
Accounting Policies [Abstract] |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | Summary of Significant Accounting Policies The accompanying consolidated financial statements include the accounts of SJW Corp., its wholly owned subsidiaries, and two variable interest entities in which two SJW Corp. subsidiaries are the primary beneficiaries. All intercompany transactions and balances have been eliminated in consolidation. SJW Corp.'s principal subsidiary, San Jose Water Company, is a regulated California water utility providing water service to approximately one million people in the greater metropolitan San Jose area. San Jose Water Company's accounting policies comply with the applicable uniform system of accounts prescribed by the CPUC and conform to generally accepted accounting principles for rate-regulated public utilities. Approximately 93% of San Jose Water Company's revenues are derived from the sale of water to residential and business customers. SJWTX, Inc., a wholly owned subsidiary of SJW Corp., is incorporated in the State of Texas and is doing business as Canyon Lake Water Service Company (“CLWSC”). CLWSC is a public utility in the business of providing water service to approximately 36,000 people. CLWSC's service area comprises more than 240 square miles in western Comal County and southern Blanco County in the growing region between San Antonio and Austin, Texas. SJWTX, Inc. has a 25% interest in Acequia Water Supply Corporation. Acequia has been determined to be a variable interest entity within the scope of ASC Topic 810 with SJWTX, Inc. as the primary beneficiary. As a result, Acequia has been consolidated with SJWTX, Inc. SJW Land Company owns commercial properties, several undeveloped real estate properties, and warehouse properties in the states of California, Arizona, and Tennessee and holds a 70% limited partnership interest in 444 West Santa Clara Street, L.P. 444 West Santa Clara Street, L.P. has been determined to be a variable interest entity within the scope of ASC Topic 810 with SJW Land Company as the primary beneficiary. As a result, 444 West Santa Clara Street L.P. has been consolidated with SJW Land Company (see Note 9). Texas Water Alliance Limited, a wholly owned subsidiary of SJW Corp., is undertaking activities that are necessary to develop a water supply project in Texas. In connection with the project, TWA applied for groundwater production and transportation permits to meet the future water needs in the Canyon Lake Water Service Company's service area and to the central Texas hill country communities and utilities adjacent to this area. In January of 2013, TWA's permits were approved by the groundwater district in Gonzales County. The permits were subsequently received in March 2013. Use of Estimates The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Utility Plant The cost of additions, replacements and betterments to utility plant is capitalized. The amount of interest capitalized in 2014, 2013 and 2012 was $1,112, $905 and $913, respectively. Construction in progress was $23,208 and $30,846 at December 31, 2014 and 2013, respectively. As of December 31, 2014 and 2013, the Company had $16,838 and $10,418, respectively, of land used in utility operations. The increase in 2014 was primarily due to purchase of land for future wells sites. The major components of depreciable plant and equipment as of December 31, 2014 and 2013 are as follows:
| 2014 |  | 2013
Equipment | $ | 242,383 |  |  | 226,557 |
Transmission and distribution | 1,042,794 |  |  | 967,031 |
Office buildings and other structures | 68,595 |  |  | 60,998 |
Total depreciable plant and equipment | $ | 1,353,772 |  |  | 1,254,586 |
Depreciation is computed using the straight-line method over the estimated service lives of the assets, ranging from 5 to 75 years. The estimated service lives of depreciable plant and equipment are as follows:
| Useful Lives
Equipment | 5 to 35 years
Transmission and distribution plant | 35 to 75 years
Office buildings and other structures | 7 to 50 years
For the years 2014, 2013 and 2012, depreciation expense as a percent of the beginning of the year balance of depreciable plant was approximately 3.4%, 3.4% and 3.5%, respectively. A portion of depreciation expense is allocated to administrative and general expense. For the years 2014, 2013 and 2012, the amounts allocated to administrative and general expense were $1,586, $1,556 and $1,531, respectively. Depreciation expense for utility plant for the years ended December 31, 2014, 2013 and 2012 was $35,424, $32,616 and $31,005, respectively. The cost of utility plant retired, including retirement costs (less salvage), is charged to accumulated depreciation and no gain or loss is recognized. Utility Plant Intangible Assets All intangible assets are recorded at cost and are amortized using the straight-line method over the legal or estimated economic life of the asset, ranging from 5 to 70 years (see Note 6). Real Estate Investments Real estate investments are recorded at cost and consist primarily of land and buildings. Net gains and losses from the sale of real estate investments are recorded as a component of other (expense) income in the Consolidated Statements of Comprehensive Income. Nonutility property in Water Utility Services is also classified in real estate investments and not separately disclosed on the balance sheet based on the immateriality of the amount. Nonutility property is property that is neither used nor useful in providing water utility services to customers and is excluded from the rate base for rate-setting purposes. San Jose Water Company recognizes gain/loss on disposition of nonutility property in accordance with CPUC Code Section 790, whereby the net proceeds are reinvested back into property that is useful in providing water utility services to customers. There is no depreciation associated with nonutility property as it is all land. The major components of real estate investments as of December 31, 2014 and 2013 are as follows:
| 2014 |  | 2013
Land | $ | 17,297 |  |  | 18,892 |
Buildings and improvements | 56,168 |  |  | 59,256 |
Intangibles | 329 |  |  | 329 |
Total real estate investment | $ | 73,794 |  |  | 78,477 |
Depreciation on real estate investments is computed using the straight-line method over the estimated useful lives of the assets, ranging from 5 to 39 years. On August 1, 2014, San Jose Water Company sold a nonutility property located in San Jose, California for $300. The Company recognized a pre-tax gain on the sale of real estate investment of $281, after selling expense of $10. On June 30, 2014, SJW Land Company sold its retail building located in El Paso, Texas for $4,450. The Company recognized a pre-tax gain on the sale of real estate investment of $273, after selling expenses of $169. On February 1, 2013, SJW Land Company sold its warehouse building located in Windsor, Connecticut for $9,200. The Company recognized a pre-tax gain on the sale of real estate investment of $1,063, after selling expenses of $369. On August 2, 2012, SJW Land Company sold its warehouse building located in Orlando, Florida for $5,821. The Company recognized a pre-tax gain on the sale of real estate investment of $910, after selling expenses of $304. Real estate investments include $72,402 and $77,082 as of December 31, 2014 and 2013, respectively, of assets that are leased or available for lease. The following schedule shows the future minimum rental payments to be received from third parties under operating leases that have remaining noncancelable lease terms in excess of one year as of December 31, 2014:
Year ending December 31: | Rental Revenue
2015 | $ | 5,345 |
2016 | 5,514 |
2017 | 5,612 |
2018 | 4,789 |
2019 | 3,753 |
Thereafter | 13,691 |
Impairment of Long-Lived Assets In accordance with the requirements of FASB ASC Topic 360—“Property, Plant and Equipment,” the long-lived assets of SJW Corp. are reviewed for impairment when changes in circumstances or events require adjustments to the carrying values of the assets. When such changes in circumstances or events occur, the Company assesses recoverability by determining whether the carrying value of such assets will be recovered through the undiscounted expected future cash flows. To the extent an impairment exists, the asset is written down to its estimated fair value with a corresponding charge to operations in the period in which the impairment is identified. Long-lived assets consist primarily of utility plant in service, real estate investments, intangible assets, and regulatory assets. In addition, the Company tests unamortized intangible assets, which primarily relate to water rights, at least annually or more frequently if events or changes in circumstances indicate that this asset may be impaired. The Company first performs a qualitative assessment to determine whether it is necessary to perform the quantitative impairment test. In assessing the qualitative factors, the Company considers the impact of these key factors: change in industry and competitive environment, financial performance, and other relevant Company-specific events. If the Company determines that as a result of the qualitative assessment it is more likely than not (> 50% likelihood) that the fair value is less than carrying amount, then a quantitative test is performed. No impairments occurred during 2014 or 2013. Financial Instruments The following instruments are not measured at fair value on the Company's consolidated balance sheets but require disclosure of fair values: cash and cash equivalents, accounts receivable and accounts payable. The estimated fair value of such instruments approximates their carrying value as reported on the consolidated balance sheets. The fair value of such financial instruments are determined using the income approach based on the present value of estimated future cash flows. The fair value of these instruments would be categorized as Level 2 in the fair value hierarchy, with the exception of cash and cash equivalents, which would be categorized as Level 1. The fair value of long-term debt is discussed in Note 4, pension plan assets in Note 10 and investment in California Water Service Group Stock in Note 13. Investment in California Water Service Group SJW Corp.'s investment in California Water Service Group is accounted for under FASB ASC Topic 320—“Investments—Debt and Equity Securities,” as an available-for-sale marketable security. The investment is recorded on the Consolidated Balance Sheet at its quoted market price with the change in unrealized gain or loss reported, net of tax, as a component of other comprehensive income (loss) (see Note 13). Regulatory Rate Filings On February 28, 2014, San Jose Water Company submitted Advice Letter No. 456. In the advice letter, San Jose Water Company notified the CPUC that San Jose Water Company was implementing conservation Tariff Rule 14.1. The CPUC's Tariff Rule 14.1 provides voluntary conservation measures for customers, focusing primarily on outdoor water use which accounts for 50% of a typical customer's water usage. In addition, San Jose Water Company requested the implementation of a Mandatory Conservation Memorandum Account (“MCMA”) to track all operational and administrative costs associated with the implementation of Rule 14.1 and implementation of a Mandatory Conservation Revenue Adjustment Memorandum Account (“MCRAMA”) to track any revenue shortfall associated with the implementation of SCVWD's 20% conservation goal. The advice letter was approved on March 21, 2014 and the Rule 14.1 voluntary conservation measures, the MCMA, and MCRAMA all went into effect on March 31, 2014. San Jose Water Company will record the impact of the MCRAMA and MCMA regulatory accounts once probability of recovery can be determined and collection can be assured within 24 months of the year-end in which the revenue is recorded. As of December 31, 2014, no amounts have been recorded related to the MCMA and MCRAMA. On August 14, 2014, the CPUC issued Decision No. 14-08-006 in San Jose Water Company's General Rate Case filing for the years 2013-2015. This Decision resolved all issues in San Jose Water Company's General Rate Case and closed the proceeding. The Decision authorized an increase of revenue of $22,102, or 9.81%, for 2013 and $13,274, or 5.21% for 2014, and provided San Jose Water Company authorization to file to increase rates for 2015 in November 2014. The increases for 2013 and 2014 became effective on August 15, 2014 (via Advice Letter No. 463) and September 29, 2014 (via Advice Letter No. 464), respectively. Additionally, due to the nearly 20-month delay in receiving the Decision, San Jose Water Company was authorized to file for a surcharge to true-up the difference between interim rates (i.e. rates that were actually in effect since January 1, 2013) and authorized rates (i.e. rates that should have been in effect since January 1, 2013). On August 29, 2014, San Jose Water Company filed Advice Letter No. 465, seeking recovery of the $46,697 balance accrued in the 2013 General Rate Case Interim Rates Memorandum Account over a three-year period via a $0.2888 per CCF surcharge applied to all customer usage as authorized in the General Rate Case decision. In this filing, San Jose Water Company sought to recover the revenue which was not collected over the period of January 1, 2013 through August 14, 2014 due to the delayed decision in San Jose Water Company's General Rate Case Application. The retroactive adjustment reflects the impact of actual usage compared to what was authorized in the Decision for 2013 and the combined impact of 2013 and 2014 rate increases for 2014. This recovery was authorized in Decision No. 14-08-006. The request was approved by the CPUC and the surcharge became effective September 29, 2014. On November 7, 2014, San Jose Water Company filed Advice Letter No. 467 seeking authorization to increase rates by $8,042, or 2.91%, via a step rate increase for the escalation year 2015. Subsequent to this filing, due to changes in escalation factors, San Jose Water Company filed Advice Letter No. 467A revising the requested increase to $8,135, or 2.94%. The revised request was approved by the CPUC and became effective on January 1, 2015. On January 5, 2015, San Jose Water Company filed General Rate Case Application 15-01-002 requesting authority for an increase of $34,928, or 12.22%, in 2016, $9,954, or 3.11%, in 2017, and $17,567, or 5.36%, in 2018. This General Rate Case filing also includes several “special requests”, including but not limited to: (1) recovery of the under-collected balance of $4,752 in the balancing account, (2) disbursement of the over-collected balance of $976 accrued in various memorandum accounts, and (3) implementation of a full revenue decoupling Water Revenue Adjustment Mechanism and associated Modified Cost Balancing Account. A General Rate Case is a year-long proceeding before the CPUC that involves a discovery phase led by the CPUC's Office of Ratepayer Advocates and customer intervenors that are assigned party status, settlement meetings, as well as possible evidentiary hearings. A final decision is likely to occur in the second half of 2015 with new rates becoming effective at the beginning of 2016. If a decision is not reached by the end of 2015, the CPUC has mechanisms in place that will allow San Jose Water Company to request interim rates, effective January 1, 2016, until such time a decision is adopted. On October 3, 2013, CLWSC filed a rate case with the TCEQ. The filing contained a request for an average system-wide rate increase of 23.1%, or $2,400. With the exception of customers served within the City of Bulverde, the new rates became effective on December 2, 2013. Subsequently, effective March 1, 2014, a rate settlement agreement was reached with the City of Bulverde with rate increases being phased-in over a 28-month period. On December 18, 2014, the PUCT voted unanimously to approve a final order in the case. As approved, the final decision settles all issues with the Coalition for Equitable Water Rates (a customer intervenor group), the PUCT and the Office of Public Utility Counsel regarding the 2013 rate case for all customers located outside the City of Bulverde's jurisdiction. The decision authorized the requested average system-wide rate increase to be phased-in annually beginning January 1, 2015 through January 1, 2018. The decision further provides that no refunds or credits will be owed to customers for rates in effect between December 2, 2013 and December 31, 2014. It also allows for the filing of additional applications to recover increases in purchased water supply costs for such customers. As part of the settlement, CLWSC has the option to file a general rate case application after September 1, 2017 to establish a new rate increase. If the Company elects this option prior to December 31, 2017, the January 1, 2018 scheduled rate increase in the decision will not become effective. As part of the settlement of the rate case, CLWSC agreed to drop its appeal of the 2010 rate case final order. Therefore, upon motion of CLWSC, such appeal was subsequently dismissed by the District Court of Travis County on January 16, 2015. Balancing and Memorandum Accounts For California, the CPUC has established a balancing account mechanism for the purpose of tracking the under-collection or over-collection associated with expense changes and the revenue authorized by the CPUC to offset those expense changes. The Company also maintains memorandum accounts to track revenue impacts due to catastrophic events, certain unforeseen water quality expenses related to new federal and state water quality standards, energy efficiency, cost of capital, and other approved activities or as directed by the CPUC. Balancing and memorandum accounts are recognized in revenue by San Jose Water Company 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. In addition, in the case of special revenue programs such as the MCRAMA, collection of the account balance must occur within 24 months of the year-end the revenue is recorded. In assessing the probability criteria for balancing and memorandum accounts between general rate cases, the Company considers evidence that may exist prior to CPUC authorization that would satisfy ASC Topic 980, subtopic 340-25 recognition criteria. Such evidence may include regulatory rules and decisions, past practices, and other facts and circumstances that would indicate that recovery or refund is probable. When such evidence provides sufficient support for balance recognition, the balances are recorded in the Company's financial statements. San Jose Water Company met the recognition requirements for certain of its balancing and memorandum accounts and certain amounts subject to balancing and memorandum accounts and recorded revenue and regulatory assets as follows:
| For the year ended December 31, 2014
Beginning Balance |  | Revenue Increase (Reduction) |  | Refunds (Collections) |  | Ending Balance
Memorandum accounts | $ | (1,896 | ) |  | 341 |  |  | 178 |  |  | (1,377 | )
Balancing accounts: |  |  |  |  |  |  |
Water supply costs | (2,378 | ) |  | 3,353 |  |  | (85 | ) |  | 890 |
Pension | 9,734 |  |  | (7,705 | ) |  | (617 | ) |  | 1,412 |
2012 General Rate Case true-up | — |  |  | 46,456 |  |  | (2,056 | ) |  | 44,400 |
All others | 2,229 |  |  | (447 | ) |  | (46 | ) |  | 1,736 |
Total balancing accounts | $ | 9,585 |  |  | 41,657 |  |  | (2,804 | ) |  | 48,438 |
Total | $ | 7,689 |  |  | 41,998 |  |  | (2,626 | ) |  | 47,061 |
| For the year ended December 31, 2013
Beginning Balance |  | Revenue Increase (Reduction) |  | Refunds (Collections) |  | Ending Balance
Memorandum accounts | $ | (1,887 | ) |  | 869 |  |  | (878 | ) |  | (1,896 | )
Balancing accounts: |  |  |  |  |  |  |
Water supply costs | (1,590 | ) |  | (788 | ) |  | — |  |  | (2,378 | )
Pension | 6,657 |  |  | 3,077 |  |  | — |  |  | 9,734 |
2012 General Rate Case true-up | — |  |  | — |  |  | — |  |  | — |
All others | 369 |  |  | 1,860 |  |  | — |  |  | 2,229 |
Total balancing accounts | $ | 5,436 |  |  | 4,149 |  |  | — |  |  | 9,585 |
Total | $ | 3,549 |  |  | 5,018 |  |  | (878 | ) |  | 7,689 |
| For the year ended December 31, 2012
Beginning Balance |  | Revenue Increase (Reduction) |  | Refunds (Collections) |  | Ending Balance
Memorandum accounts | $ | 5,739 |  |  | (2,832 | ) |  | (4,794 | ) |  | (1,887 | )
Balancing accounts: |  |  |  |  |  |  |
Water supply costs | — |  |  | (1,590 | ) |  | — |  |  | (1,590 | )
Pension | — |  |  | 6,657 |  |  | — |  |  | 6,657 |
2012 General Rate Case true-up | — |  |  | — |  |  | — |  |  | — |
All others | — |  |  | 369 |  |  | — |  |  | 369 |
Total balancing accounts | $ | — |  |  | 5,436 |  |  | — |  |  | 5,436 |
Total | $ | 5,739 |  |  | 2,604 |  |  | (4,794 | ) |  | 3,549 |
On September 29, 2014, the CPUC approved a surcharge to true-up the difference between interim rates and authorized rates of $46,697 to be recovered over a three-year period as well as one-time refunds of $241 as authorized in the 2012 General Rate Case decision. The net amount of $46,456 has been recorded in the 2012 General Rate Case true-up row in the table above. This amount includes $2,800 related to water supply and pension balancing accounts that have previously been recorded and have been deducted from the appropriate row in the table above. As of December 31, 2014, the total balance in San Jose Water Company's balancing and memorandum accounts combined, including interest, that has not been recorded into the financial statements was a net under-collection of $8,294, of which the majority relates to the MCMA and MCRAMA. All balancing accounts and memorandum-type accounts not included for recovery or refund in the current general rate case will be reviewed by the CPUC in San Jose Water Company's next general rate case or at the time an individual account reaches a threshold of 2% of authorized revenue, whichever occurs first. Regulatory Assets and Liabilities Generally accepted accounting principles for water utilities include the recognition of regulatory assets and liabilities as permitted by ASC Topic 980. In accordance with ASC Topic 980, Water Utility Services, to the extent applicable, records deferred costs and credits on the balance sheet as regulatory assets and liabilities when it is probable that these costs and credits will be recognized in the ratemaking process in a period different from when the costs and credits are incurred. Accounting for such costs and credits is based on management's judgment and prior historical ratemaking practices, and it occurs when management determines that it is probable that these costs and credits will be recognized in the future revenue of Water Utility Services through the ratemaking process. The regulatory assets and liabilities recorded by Water Utility Services, in particular, San Jose Water Company, primarily relate to the recognition of deferred income taxes for ratemaking versus tax accounting purposes, balancing and memorandum accounts, the 2012 General Rate Case true-up, postretirement pension benefits, medical costs, accrued benefits for vacation and asset retirement obligations that have not yet been passed through in rates. The Company adjusts the related asset and liabilities for these items through its regulatory asset and liability accounts at year-end, except for certain postretirement benefit costs and balancing and memorandum accounts which are adjusted monthly. The Company expects to recover regulatory assets related to plant depreciation income tax temporary differences over the average lives of the plant assets of between 5 to 75 years. Rate-regulated enterprises are required to charge a regulatory asset to earnings if and when that asset no longer meets the criteria for being recorded as a regulatory asset. San Jose Water Company continually evaluates the recoverability of regulatory assets by assessing whether the amortization of the balance over the remaining life can be recovered through expected and undiscounted future cash flows. Regulatory assets and liabilities are comprised of the following as of December 31:
| 2014 |  | 2013
Regulatory assets, net: |  |  |
Income tax temporary differences, net | $ | 6,731 |  |  | 8,220 |
Postretirement pensions and other medical benefits | 115,494 |  |  | 62,949 |
Balancing and memorandum accounts, net | 47,061 |  |  | 7,689 |
Other, net | 5,577 |  |  | 4,685 |
Total regulatory assets, net in Consolidated Balance Sheets | $ | 174,863 |  |  | 83,543 |
Less: current regulatory asset, net | 16,853 |  |  | — |
Total regulatory assets, net, less current portion | $ | 158,010 |  |  | 83,543 |
Income Taxes Income taxes are accounted for using the asset and liability method. Deferred tax assets and liabilities are recognized for the effect of temporary differences between financial and tax reporting. Deferred tax assets and liabilities are measured using current tax rates in effect. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that includes the enactment date. To the extent permitted by the CPUC, investment tax credits resulting from utility plant additions are deferred and amortized over the estimated useful lives of the related property. Advances for Construction and Contributions in Aid of Construction In California, advances for construction received after 1981 are refunded ratably over 40 years. Estimated refunds for the next five years and thereafter are shown below:
| Estimated Refunds
2015 | $ | 2,508 |
2016 | 2,508 |
2017 | 2,508 |
2018 | 2,508 |
2019 | 2,508 |
Thereafter | 60,763 |
Contributions in aid of construction represent funds received from developers that are not refundable under applicable regulations. Depreciation applicable to utility plant constructed with these contributions is charged to contributions in aid of construction. Customer advances and contributions in aid of construction received subsequent to 1986 and prior to June 12, 1996 generally must be included in federal taxable income. Taxes paid relating to advances and contributions are recorded as deferred tax assets for financial reporting purposes and are amortized over 40 years for advances, and over the tax depreciable life of the related asset for contributions. Receipts subsequent to June 12, 1996 are generally exempt from federal taxable income, unless specifically prescribed under treasury regulations. Advances and contributions received subsequent to 1991 and prior to 1997 are included in California state taxable income. Asset Retirement Obligation SJW Corp.'s asset retirement obligation is recorded as a liability included in other non-current liabilities. It reflects principally the retirement costs of wells and other anticipated clean-up costs, which by law, must be remediated upon retirement. Retirement costs have historically been recovered through rates at the time of retirement. As a result, the liability is offset by a regulatory asset. For the years ended December 31, 2014 and 2013, the asset retirement obligation is as follows:
| 2014 |  | 2013
Retirement obligation | $ | 4,355 |  |  | 4,612 |
Discount rate | 6 | % |  | 6 | %
Present value, recorded as a liability | 1,994 |  |  | 1,733 |
Deferred tax | 1,371 |  |  | 1,192 |
Regulatory asset | $ | 3,365 |  |  | 2,925 |
Revenue SJW Corp. recognizes its regulated and non-tariffed revenue when services have been rendered, in accordance with ASC Topic 605. Metered revenue of Water Utility Services includes billing to customers based on meter readings plus an estimate of water used between the customers' last meter reading and the end of the accounting period. Water Utility Services read the majority of its customers' meters on a bi-monthly basis and records its revenue based on its meter reading results. Unbilled revenue from the last meter reading date to the end of the accounting period is estimated based on the most recent usage patterns, production records and the effective tariff rates. Actual results could differ from those estimates, which may result in an adjustment to the operating revenue in the period which the revision to Water Utility Services' estimates is determined. San Jose Water Company also recognizes balancing and memorandum accounts in its revenue 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. Revenues also include a surcharge collected from regulated customers that is paid to the CPUC. This surcharge is recorded both in operating revenues and administrative and general expenses. For the years ended December 31, 2014, 2013 and 2012, the surcharge was $3,872, $3,741 and $3,862, respectively. Revenue from San Jose Water Company's non-tariffed utility operations, maintenance agreements or antenna leases are recognized when services have been rendered. Non-tariffed operating revenue in 2014, 2013 and 2012 includes $6,175, $5,882 and $5,523, respectively, from the operation of the City of Cupertino municipal water system. Revenue from SJW Land Company properties is recognized ratably over the term of the leases. Share-Based Payment SJW Corp. utilizes the Black-Scholes option-pricing model to calculate the fair value of restricted stock awards. The Black-Scholes option-pricing model requires the use of subjective assumptions, to compute the fair value of options at the grant date, and is the basis for share-based compensation for financial reporting purposes. In addition, SJW Corp. estimates forfeitures for share-based awards that are not expected to vest. SJW Corp. utilizes the Monte Carlo valuation model, which requires the use of subjective assumptions, to compute the fair value of market performance-vesting restricted stock units. The compensation cost charged to income is recognized on a straight-line basis over the requisite service period, which is the vesting period. Maintenance Expense Planned major maintenance projects are charged to expense as incurred. Earnings per Share Basic earnings per share is calculated using income available to common shareholders, divided by the weighted average number of shares outstanding during the year. The two-class method in computing basic earnings per share is not used because the number of participating securities as defined in FASB ASC Topic 260—“Earnings Per Share” is not significant. The two-class method is an earnings allocation formula that determines earnings per share for each class of common stock and participating security. Diluted earnings per share is calculated using income available to common shareholders divided by the weighted average number of shares of common stock including both shares outstanding and shares potentially issuable in connection with stock options, deferred restricted common stock awards under SJW Corp.'s Long-Term Incentive Plan and shares potentially issuable under the Employee Stock Purchase Plans. Restricted common stock units and stock options of 2,791, 3,071 and 6,557 as of December 31, 2014, 2013 and 2012, respectively, were excluded from the dilutive earnings per share calculation as their effect would have been anti-dilutive.

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