Balancing and Memorandum Account Recovery Procedures

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. San Jose Water Company also maintains memorandum accounts to track revenue impacts due to catastrophic events, unforeseen water quality expenses related to new federal and state water quality standards, energy efficiency, cost of capital, any revenue requirement impact of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, 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 in which the revenue is recorded. In assessing the probability criteria for balancing and memorandum accounts between general rate cases, San Jose Water Company considers evidence that may exist prior to CPUC authorization that would satisfy FASB ASC Topic 980 - “Regulated Operations,” 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 SJW Corp.'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 revenue and regulatory assets changed as follows:



	Three months ended March 31, 2015									Three months ended March 31, 2014
	Beginning Balance			Revenue Increase(Reduction)		Refunds (Collections)		Ending Balance		Beginning Balance			Revenue Increase(Reduction)		Refunds (Collections)	Ending Balance

Memorandum accounts	$	(1,377	)	423		165		(789	)	$	(1,896	)	197		—	(1,699	)

Balancing accounts:
Water supply costs	890			(12	)	(53	)	825		(2,378		)	(394	)	—	(2,772	)
Pension	1,412			(606	)	(383	)	423		9,734			31		—	9,765
2012 General Rate Case true-up	44,400			1,876		(2,759	)	43,517		—			—		—	—
All others	1,736			(114	)	(29	)	1,593		2,229			(244	)	—	1,985
Total balancing accounts	$	48,438		1,144		(3,224	)	46,358		$	9,585		(607	)	—	8,978

Total	$	47,061		1,567		(3,059	)	45,569		$	7,689		(410	)	—	7,279

On March 27, 2015, the CPUC issued Decision No. 15-03-048 granting a limited rehearing and modifying Decision No. 14-08-006 to extend the interim rate period to end on the effective date of 2014 rates. San Jose Water Company filed for the recovery of this additional interim true-up early in the second quarter of 2015. As of March 31, 2015, the probability criteria for revenue recognition had been met. As such, San Jose Water Company recorded $1,876 of revenue which has been included in the 2012 General Rate Case true-up row in the table above.

As of March 31, 2015, 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 $8,115, of which the majority relates to the MCRAMA and MCMA. 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. On March 26, 2015, San Jose Water Company filed Advice Letter No. 468 with the CPUC requesting authorization to recover the $9,567 under-collection accumulated in the MCRAMA during the period April 1, 2014 through December 31, 2014. For further discussion, please see Note 8.