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Summary of Significant Accounting Policies | 12 Months Ended
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Dec. 31, 2016
Accounting Policies [Abstract] |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | Summary of Significant Accounting Policies The accompanying consolidated financial statements include the accounts of SJW Group, its wholly owned subsidiaries, and two variable interest entities in which two SJW Group subsidiaries are the primary beneficiaries. All intercompany transactions and balances have been eliminated in consolidation. On November 15, 2016, SJW Corp. changed its state of incorporation from the state of California to the state of Delaware and changed its name to SJW Group. The reincorporation was effected by means of a merger pursuant to the terms of the agreement and plan of merger, dated November 14, 2016, between SJW Corp. and SJW Group, Inc., a Delaware corporation and a wholly owned subsidiary of SJW Corp., which was formed solely for the purpose of effecting the reincorporation. Under the Merger Agreement, SJW Corp. merged with and into SJW Group, Inc., and SJW Corp. ceased to exist and SJW Group, Inc. became the surviving entity following the effectiveness of the merger. Concurrently with the consummation of the merger, SJW Group, Inc. changed its name to SJW Group. As part of the reincorporation, SJW Group changed its par value for common stock and preferred stock, SJW Group recast stockholder’s equity in the Consolidated Balance Sheet as of December 31, 2015 and Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2015 and 2014 to reflect the reincorporation. There were no changes to the historical number of shares issued and outstanding or earnings per share as a result of the reincorporation. See also Note 2, “Capitalization.” SJW Group’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 California Public Utilities Commission (“CPUC”) and conform to generally accepted accounting principles for rate-regulated public utilities. Approximately 92% 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 Group, 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 39,000 people. CLWSC’s service area comprises more than 244 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 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, “Partnership Interest”). Texas Water Alliance Limited, a wholly owned subsidiary of SJW Group, is undertaking activities that are necessary to develop a water supply project in Texas. In connection with the project, TWA has water lease arrangements with certain landowners in Gonzales County, Texas and has obtained groundwater production and transportation permits from the groundwater district in Gonzales County. On February 22, 2016, SJW Group entered into an agreement with the GBRA, pursuant to which SJW Group agreed to sell all of its equity interest in TWA to GBRA for $31,000 in cash (the “TWA Agreement”). The TWA Agreement is subject to specified closing conditions, including the completion of a financing by GBRA to fund the purchase price. See Note 13, “Texas Water Alliance Limited.” In November 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash, a consensus of the FASB Emerging Issues Task Force,” which provides guidance on the presentation of restricted cash or restricted cash equivalents in the statement of cash flows. ASU 2016-18 is effective for public business entities in fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. SJW Group early adopted this ASU during the quarter ended December 31, 2016. The adoption of the ASU did not have an impact on the consolidated financial statements in prior periods. 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 2016, 2015 and 2014 was $2,188, $1,188 and $1,112, respectively. Construction in progress was $70,453 and $45,573 at December 31, 2016 and 2015, respectively. The major components of depreciable plant and equipment as of December 31, 2016 and 2015 are as follows:
| 2016 |  | 2015
Equipment | $ | 269,734 |  |  | 254,940 |
Transmission and distribution | 1,204,520 |  |  | 1,108,659 |
Office buildings and other structures | 79,762 |  |  | 74,722 |
Total depreciable plant and equipment | $ | 1,554,016 |  |  | 1,438,321 |
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 2016, 2015 and 2014, depreciation expense as a percent of the beginning of the year balance of depreciable plant was approximately 3.5%, 3.4% and 3.4%, respectively. A portion of depreciation expense was allocated to administrative and general expense. For the years 2016, 2015 and 2014, the amounts allocated to administrative and general expense were $1,670, $1,590 and $1,586, respectively. Depreciation expense for utility plant for the years ended December 31, 2016, 2015 and 2014 was $42,659, $38,722 and $35,918, 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 estimated useful life of the asset, ranging from 5 to 70 years (see Note 6, “Intangible Assets”). In January 2014, the FASB issued ASU 2014-05 - “Service Concession Arrangements” which became effective for the Company during the first quarter of 2015. ASU 2014-05 specifies that an operating entity should not account for a service concession arrangement as a lease in accordance with FASB ASC Topic 840 - “Leases.” An operating entity should refer to other accounting guidance topics as applicable to account for various aspects of a service concession arrangement. ASU 2014-05 also specifies that infrastructure constructed by an operator in a service concession arrangement should not be recognized as property, plant, and equipment of the operator. ASU 2014-05 required application on a modified retrospective basis to service concession arrangements that existed at January 1, 2015. San Jose Water Company operates the City of Cupertino’s municipal water system under a service concession arrangement. Upon adoption of this standard, SJW Group reclassified $1,859 of Depreciable Plant and Equipment for infrastructure related to the Cupertino service concession arrangement to intangible assets and the related accumulated depreciation of $377 to accumulated amortization. In addition, the Company recognized a cumulative effect adjustment of $436, net of tax, to the opening balance of retained earnings. 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, 2016 and 2015 are as follows:
| 2016 |  | 2015
Land | $ | 15,218 |  |  | 17,297 |
Buildings and improvements | 46,826 |  |  | 57,015 |
Intangibles | 149 |  |  | 149 |
Total real estate investment | $ | 62,193 |  |  | 74,461 |
Depreciation on real estate investments is computed using the straight-line method over the estimated useful lives of the assets, ranging from 7 to 39 years. The estimated service lives of depreciable real estate investments are as follows:
| Useful Lives
Buildings and improvements | 7 to 39 years
Intangibles | 7 to 12 years
In 2015, SJW Land Company was notified by the Arizona Department of Transportation that in order to achieve their goals of developing a new freeway extension, they, in conjunction with the Federal Highway Commission, would be exercising their powers of eminent domain for SJW Land Company’s warehouse building located in Phoenix, Arizona. On September 8, 2016, SJW Land Company sold the Arizona warehouse building and received a settlement value of $20,000. Title to the property transferred on October 13, 2016 upon the recording of the court’s Final Order of Condemnation. SJW Group recognized a pre-tax gain on sale of real estate investments of $9,981, after selling expenses of $112. On January 10, 2017, 444 West Santa Clara Street, L.P. entered a purchase and sale agreement for the sale of all of its interests in the commercial building and land the partnership owns and operates for a purchase price of $11,000. The Company anticipates the sale to close in the first quarter of 2017. On August 14, 2015, San Jose Water Company sold five nonutility properties located in San Jose, California for $2,015. SJW Group recognized a pre-tax gain on the sale of real estate investments of $1,886, after selling expenses of $91. 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. Real estate investments include $61,179 and $73,658 as of December 31, 2016 and 2015, 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, 2016:
Year ending December 31: | Rental Revenue
2017 | $ | 4,753 |
2018 | 3,924 |
2019 | 3,609 |
2020 | 3,302 |
2021 | 2,441 |
Thereafter | 7,947 |
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 Group 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 the 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 2016, 2015 or 2014. 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 14. Investment in California Water Service Group SJW Group’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 14). Regulatory Rate Filings On January 5, 2015, San Jose Water Company filed General Rate Case Application No. 15-01-002 requesting authority for an increase of revenue of $34,928, or 12.22%, in 2016, $9,954, or 3.11%, in 2017 and $17,567, or 5.36%, in 2018. On June 9, 2016, the CPUC issued Decision 16-06-004 approving two partial settlements, resolving disputed issues and adopting revenue requirements for San Jose Water Company. The decision authorizes an increase of 8.6% in authorized revenue requirement effective January 1, 2016. Updated rates were implemented on June 14, 2016. Rates and revenue for 2017 and 2018 are determined based on the forecasted change in the consumer price index from the preceding year. The decision also approved the requested recovery of the net under-collected balance of $3,776 accumulated in various balancing and memorandum accounts. This balance was previously recorded by the Company as revenue through the balancing and memorandum accounts in prior periods in accordance with San Jose Water Company’s revenue recognition policy. Since a decision was not reached by the end of 2015, the CPUC authorized San Jose Water Company to implement a surcharge to true-up the difference between interim rates for the period January 1, 2016 to the implementation date of updated rates on June 14, 2016. On June 28, 2016, San Jose Water Company filed Advice Letter 492 seeking recovery of $8,767 which was not collected over the period January 1, 2016 through June 13, 2016 due to the delayed decision. Subsequently, under the CPUC staff’s direction, this filing was amended to include previously uncollected revenue from the prior general rate case in the amount of $524, for a total recovery of $9,291. San Jose Water Company’s request was approved and a surcharge of $0.1832 per CCF was implemented effective July 9, 2016 to recover this balance. On July 30, 2015, San Jose Water Company filed Application No. 15-07-027 with the CPUC seeking the authorization to implement a reincorporation of San Jose Water Company’s parent holding company, SJW Corp., from its present form as a California corporation to a Delaware corporation. On May 26, 2016, the CPUC issued Decision 16-05-037 authorizing the reincorporation. On December 15, 2015, San Jose Water Company filed Advice Letter No. 481 with the CPUC requesting authorization to re-implement a previously existing surcharge of $0.0492 per CCF to amortize the remaining uncollected balancing account recovery authorized in General Rate Case Decision 14-08-006. In Decision No. 14-08-006 the CPUC authorized San Jose Water Company to recover the $2,599 under-collection in various balancing accounts over a 12-month period beginning in August of 2014. However, at the end of the 12-month period $590 of the originally authorized $2,599 remained uncollected. This under-collection is due primarily to actual sales being substantially lower than the commission authorized sales estimate which was used to calculate the surcharge level. The advice letter was approved and effective on January 15, 2016. On February 5, 2016, San Jose Water Company filed Advice Letter No. 482 with the CPUC. With this advice letter, San Jose Water Company requested authorization to recover the $7,668 balance accumulated in the Water Conservation Memorandum Account (“WCMA”) during the period January 1, 2015 through December 31, 2015. The WCMA is used to track the revenue impact of mandatory conservation upon San Jose Water Company’s quantity revenue resulting from mandatory conservation instituted by the State of California and the SCVWD. The requested $7,668 recovery is the net amount of the total drought related revenue reduction calculated in the WCMA offset by the drought surcharges collected during 2015. On April 21, 2016, the CPUC passed Resolution W-5095 approving San Jose Water Company’s requested recovery. The under-collection will be recovered via a surcharge of $0.1441 per CCF on the existing quantity rate for a period of 12 months from the date of CPUC approval. On February 25, 2016, the CPUC passed Resolution W-5074 which affirmed San Jose Water Company’s Water Shortage Contingency Plan in Schedule 14.1 with water allocations and drought surcharges. Schedule 14.1 is the tariff that includes the drought allocations and drought surcharges in effect for residential customers and for dedicated landscape services. San Jose Water Company originally implemented Schedule 14.1 in June 2015 in response to the Governor’s Executive Order B-29-15, and by orders of the State Water Board and the CPUC. Subsequently, with the current improved water supply outlook, the allocation and drought surcharge program was suspended effective February 1, 2017. On February 29, 2016, San Jose Water Company filed Advice Letter No. 483 with the CPUC. This advice letter requested authorization to increase revenue requirement by $1,659 via a rate base offset for 2015 calendar year plant additions related to the Montevina Water Treatment Plant Upgrade Project. With this increase, the bill for a residential customer using 15 CCF per month increased by $0.46, or 0.55% per month. This requested increase was approved and became effective March 30, 2016. On June 10, 2016, San Jose Water Company filed Advice Letter No. 490 with the CPUC requesting authorization to increase revenues by $21,439, or approximately 6.72%. This increase is intended to recover increased costs for purchased water and ground water production charged by the SCVWD. As directed by the CPUC’s Water Division, the revenue increase is recovered via surcharges on the existing quantity rate. The request was authorized and effective on July 1, 2016. San Jose Water Company filed Advice Letters 491 and 493 on June 24, 2016 and June 30, 2016, respectively, with the CPUC to revise the existing Tariff Rule 14.1 which is a water shortage contingency plan with mandatory water usage reductions and drought surcharges. The applicable tariffs were revised to reflect SCVWD conservation standard of a 20% reduction from 2013 usage levels. With these advice letters, San Jose Water Company proposed to ease the existing drought allocations and existing drought rules. San Jose Water Company’s requested changes were approved by the CPUC with an effective date of July 1, 2016. Subsequently, with the current improved water supply outlook, the allocation and drought surcharge program was suspended effective February 1, 2017. Effective September 15, 2016, the Cupertino City Council authorized San Jose Water Company to implement a 8.6% general rate increase and a 2016 Interim Rate True-Up Surcharge of $0.1832 per CCF to be collected over a 12-month period from customers in the Cupertino leased water system San Jose Water Company operates. The new rates match those previously approved by the CPUC in San Jose Water Company’s most recent general rate case decision effective January 1, 2016. On November 15, 2016, San Jose Water Company filed Advice Letter No. 498 with the CPUC requesting a revenue increase of $13,205, or 3.8%, for the 2017 escalation year. This request was approved and the new rates became effective on January 1, 2017. On January 6, 2017, San Jose Water Company filed Advice Letter No. 501 with the CPUC requesting authorization to implement a sales reconciliation mechanism to conform water forecasts authorized in the last general rate case to recorded consumption for the period of October 2015 through September 2016. The CPUC has ordered all Class A and B water utilities that have a five percent or greater divergence between authorized and actual sales during declared drought years to request a sales reconciliation mechanism to conform water forecasts authorized in the last general rate case to recorded consumption. If the CPUC authorizes this request, the resulting monthly bill for a typical residential customer using 15 CCF per month will increase by $3.66, or 3.65%. If approved, the requested rate increase would be effective around March 15, 2017. San Jose Water Company filed Advice Letter No. 505 on January 27, 2017 with the CPUC to suspend its allocation program and all drought surcharges in Schedule 14.1, Water Shortage Contingency Plan with Staged Mandatory Reductions and Drought Surcharges. However, Schedule 14.1, and all of the water use restrictions defined therein, will remain in effect in light of the call for continued conservation by the SCVWD and the State Water Resources Control Board. The allocations and drought surcharges were suspended effective February 1, 2017. On February 17, 2017, San Jose Water Company filed Advice Letter No. 506 with the CPUC requesting authorization to increase its revenue requirement by $5,339 via a rate base offset for calendar year 2016 plant additions related to the Montevina Water Treatment Plant upgrade project. If approved, the bill for a residential customer using 15 CCF per month will increase by $1.52, or 1.5% per month. San Jose Water Company has requested that the rate increase become effective on or about March 18, 2017. Effective September 1, 2014, CLWSC became subject to the economic regulation of the Public Utilities Commission of Texas (“PUCT”). Prior to that time, CLWSC was subject to economic regulation by the Texas Commission on Environmental Quality (“TCEQ”). Both the PUCT and TCEQ authorize rate increases after the filing of an Application for a Rate/Tariff Change. Rate cases may be filed as they become necessary, provided there is no current rate case outstanding. Further, rate cases may not be filed more frequently than once every 12 months. On September 16, 2015, CLWSC filed an application with the PUCT requesting approval of the reincorporation of SJW Group from a California corporation to a Delaware corporation. A decision was issued on March 24, 2016 approving the reincorporation. 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, WCMA, drought surcharges, Monterey Water Revenue Adjustment Mechanism, and other approved activities or as directed by the CPUC. Balancing and memorandum accounts are recognized 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 WCMA, San Jose Water Company follows the requirements of ASC Topic 980-605-25—“Alternative Revenue Programs” in determining revenue recognition, including the requirement that such revenues will be collected within 24 months of the year-end in which the revenue is recorded. A reserve is recorded for amounts SJW Group estimates will not be collected within the 24-month period. This reserve is based on an estimate of actual usage over the recovery period, offset by applicable drought surcharges. 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 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, the balances are recorded in SJW Group’s financial statements. On June 28, 2016, San Jose Water Company filed Advice Letter 492 for a surcharge of $8,767 to true-up the difference between interim rates and 2015 General Rate Case authorized rates, which is expected to be collected during a 12-month recovery period once approved. The $8,767 of revenue was recorded in the 2015 General Rate Case true-up row for the year ended December 31, 2016 in the table below. This amount includes $185 related to water supply accounts that have previously been recorded and have been deducted from the appropriate row in the year ended December 31, 2016 in the table below. Based on ASC Topic 980-605-25, San Jose Water Company recognized regulatory assets of $16,708 due to lost revenues accumulated in the 2016 WCMA account for year ended December 31, 2016. These regulatory assets were offset by a regulatory liability in the amount of $16,708 for year ended December 31, 2016 created by Tariff Rule 14.1 drought surcharges collected during the same period as allowed for in Advice Letter 473A which was approved by the CPUC and became effective June 15, 2015. These amounts have been recorded in the 2016 WCMA row shown in the tables below. On December 3, 2015, the CPUC approved a surcharge to recover lost revenues for the period of April 1, 2014 through December 31, 2014 related to the ongoing drought and the associated calls for water use reduction from the SCVWD. The resolution authorized San Jose Water Company to recover $4,259 of lost revenues tracked through the WCMA account over a twelve month period via a surcharge of $0.08 per CCF beginning December 9, 2015. A reserve was recorded of $1,278 for the estimated amount that may not be collected within 24 months of December 31, 2015, the year-end of the period in which the revenue is being recorded, in accordance with FASB ASC Topic 980-605-25—“Alternative Revenue Programs”. The reserve was determined based on the difference between authorized usage in the last general rate case decision and an estimate of actual usage over the recovery period, offset by applicable drought surcharges. The net amount of $2,981 had been recorded into the 2014 WCMA row in the table below for the year ended December 31, 2015. As of December 31, 2016, the reserve balance for the 2014 WCMA was $1,089 which has been netted from the balances below. Based on FASB ASC Topic 980-605-25—“Alternative Revenue Programs,” San Jose Water Company also recognized in revenue $19,854 of lost revenues accumulated in the WCMA account for the year ended December 31, 2015 less a $2,343 reserve for the estimated amount that may not be collected within the 24 month period defined in the guidance. The regulatory asset was offset with the regulatory liability amount of $12,139 representing Tariff Rule 14.1 drought surcharges collected for the same period as allowed for in Advice Letter 473A which was approved by the CPUC and became effective June 15, 2015. The net amount of $5,372 had been recorded as a revenue addition in the 2015 WCMA row in the table below. As of December 31, 2016, the reserve balance for the 2015 WCMA was $2,112 which has been netted from the balances below. 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, 2016
Beginning Balance |  | Revenue Increase (Reduction) |  | Refunds (Collections) |  | Surcharge Offset |  | Ending Balance
Memorandum accounts: |  |  |  |  |  |  |  |  |
2014 WCMA | $ | 2,944 |  |  | 188 |  |  | (3,132 | ) |  | — |  |  | — |
2015 WCMA | 5,372 |  |  | 211 |  |  | (3,994 | ) |  | — |  |  | 1,589 |
2016 WCMA | — |  |  | 16,708 |  |  | — |  |  | (16,708 | ) |  | — |
All others | 594 |  |  | 1,756 |  |  | 418 |  |  | — |  |  | 2,768 |
Total memorandum accounts | $ | 8,910 |  |  | 18,863 |  |  | (6,708 | ) |  | (16,708 | ) |  | 4,357 |
Balancing accounts: |  |  |  |  |  |  |  |  |
Water supply costs | 2,771 |  |  | 1,620 |  |  | 799 |  |  | — |  |  | 5,190 |
Drought surcharges | (359 | ) |  | — |  |  | (24,037 | ) |  | 16,708 |  |  | (7,688 | )
Pension | (552 | ) |  | 1,120 |  |  | (2,577 | ) |  | — |  |  | (2,009 | )
2012 General Rate Case true-up | 33,070 |  |  | — |  |  | (12,388 | ) |  | — |  |  | 20,682 |
2015 General Rate Case true-up | — |  |  | 8,767 |  |  | (3,239 | ) |  | — |  |  | 5,528 |
All others | 1,366 |  |  | (483 | ) |  | (1,034 | ) |  | — |  |  | (151 | )
Total balancing accounts | $ | 36,296 |  |  | 11,024 |  |  | (42,476 | ) |  | 16,708 |  |  | 21,552 |
Total | $ | 45,206 |  |  | 29,887 |  |  | (49,184 | ) |  | — |  |  | 25,909 |
| For the year ended December 31, 2015
Beginning Balance |  | Revenue Increase (Reduction) |  | Refunds (Collections) |  | Surcharge Offset |  | Ending Balance
Memorandum accounts: |  |  |  |  |  |  |  |  |
2014 WCMA | $ | — |  |  | 2,981 |  |  | (37 | ) |  | — |  |  | 2,944 |
2015 WCMA | — |  |  | 17,511 |  |  | — |  |  | (12,139 | ) |  | 5,372 |
All others | (1,377 | ) |  | 1,494 |  |  | 477 |  |  | — |  |  | 594 |
Total memorandum accounts | $ | (1,377 | ) |  | 21,986 |  |  | 440 |  |  | (12,139 | ) |  | 8,910 |
Balancing accounts: |  |  |  |  |  |  |  |  |
Water supply costs | 890 |  |  | 2,025 |  |  | (144 | ) |  | — |  |  | 2,771 |
Drought surcharges | — |  |  | — |  |  | (12,498 | ) |  | 12,139 |  |  | (359 | )
Pension | 1,412 |  |  | (924 | ) |  | (1,040 | ) |  | — |  |  | (552 | )
2012 General Rate Case true-up | 44,400 |  |  | 1,937 |  |  | (13,267 | ) |  | — |  |  | 33,070 |
All others | 1,736 |  |  | (293 | ) |  | (77 | ) |  | — |  |  | 1,366 |
Total balancing accounts | $ | 48,438 |  |  | 2,745 |  |  | (27,026 | ) |  | 12,139 |  |  | 36,296 |
Total | $ | 47,061 |  |  | 24,731 |  |  | (26,586 | ) |  | — |  |  | 45,206 |
| For the year ended December 31, 2014
Beginning Balance |  | Revenue Increase (Reduction) |  | Refunds (Collections) |  | Surcharge Offset |  | Ending Balance
Memorandum accounts: |  |  |  |  |  |  |  |  |
All others | $ | (1,896 | ) |  | 341 |  |  | 178 |  |  | — |  |  | (1,377 | )
Total 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 |
As of December 31, 2016, 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 $3,173. 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, 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:
| 2016 |  | 2015
Regulatory assets: |  |  |
Income tax temporary differences, net | $ | 10,139 |  |  | 8,184 |
Postretirement pensions and other medical benefits | 109,795 |  |  | 109,168 |
Balancing and memorandum accounts, net | 25,909 |  |  | 45,206 |
Other, net | 5,930 |  |  | 6,005 |
Total regulatory assets, net in Consolidated Balance Sheets | $ | 151,773 |  |  | 168,563 |
Less: current regulatory asset, net | 16,064 |  |  | 16,542 |
Total regulatory assets, net, less current portion | $ | 135,709 |  |  | 152,021 |
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
2017 | $ | 2,726 |
2018 | 2,726 |
2019 | 2,726 |
2020 | 2,726 |
2021 | 2,726 |
Thereafter | 54,251 |
As of December 31, 2016, advances for construction was $84,815 of which $16,934 was related to non-refundable advances for construction. 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 Group’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, 2016 and 2015, the asset retirement obligation is as follows:
| 2016 |  | 2015
Retirement obligation | $ | 4,835 |  |  | 4,249 |
Discount rate | 6 | % |  | 6 | %
Present value, recorded as a liability | 1,966 |  |  | 1,961 |
Deferred tax | 1,352 |  |  | 1,348 |
Regulatory asset | $ | 3,318 |  |  | 3,309 |
Revenue SJW Group 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. 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 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 SJW Group’s financial statements. In addition, in the case of special revenue programs such as the WCMA, San Jose Water Company follows the requirements of ASC Topic 980-605-25 in determining revenue recognition, including the requirement that such revenues will be collected within 24 months of the year-end the revenue is recorded. A reserve will be recorded for amounts which we estimate will not be collected within the 24 month criteria. This reserve will be based on an estimate of actual usage over the recovery period, offset by applicable drought surcharges. Revenue also includes 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, 2016, 2015 and 2014, the surcharge was $3,807, $4,605 and $3,872, respectively. Revenue from San Jose Water Company’s non-tariffed utility operations, maintenance agreements or antenna site leases are recognized when services have been rendered. Non-tariffed operating revenue in 2016, 2015 and 2014 includes $6,451, $6,145 and $6,175, 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 related leases. Share-Based Payment SJW Group calculates the fair value of restricted stock awards based on the grant date fair market value of the company’s stock price reduced by the present value of the dividends expected to be declared on outstanding shares. In addition, SJW Group estimates forfeitures for share-based awards that are not expected to vest. SJW Group utilizes the Monte Carlo valuation model, which requires the use of subjective assumptions, to compute the fair value of market-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 stockholders, 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 stockholders 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 Group’s Long-Term Incentive Plan and shares potentially issuable under the Employee Stock Purchase Plans. Restricted common stock units and stock options of 6,689, 1,978 and 2,791 as of December 31, 2016, 2015 and 2014, respectively, were excluded from the dilutive earnings per share calculation as their effect would have been anti-dilutive.

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