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Summary of Significant Accounting Policies | 12 Months Ended
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Dec. 31, 2017
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. 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 42,000 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 a commercial property, an undeveloped real estate property, and a warehouse property in the state of Tennessee. SJW Land Company also 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, formerly a wholly owned subsidiary of SJW Group, was undertaking activities that were necessary to develop a water supply project in Texas. In connection with the project, TWA had water lease arrangements with certain landowners in Gonzales County, Texas and had 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 interests in TWA to GBRA for $31,000 in cash (the “TWA Agreement”). The TWA Agreement was subject to specified closing conditions, including the completion of a financing by GBRA to fund the purchase price. The transaction closed with GBRA on November 16, 2017. See Note 13, “Texas Water Alliance.” On December 22, 2017, the Tax Cuts and Jobs Act (H.R. 1) (the “Tax Act”) was signed into law. Among other things, the Tax Act permanently lowers the corporate tax rate to 21% from the existing maximum rate of 35%, effective for tax years including or commencing January 1, 2018. As a result of the reduction of the corporate tax rate to 21%, U.S. Generally Accepted Accounting Principles require companies to revalue their deferred tax assets and liabilities as of the date of enactment, with resulting tax effects accounted for in the reporting period of the enactment. See Note 5, “Income Taxes” for discussion on the effect of the tax reform act on the consolidated balance sheets as of December 31, 2017 and the related consolidated statements of comprehensive income. 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 2017, 2016 and 2015 was $2,807, $2,188 and $1,188, respectively. Construction in progress was $45,851 and $70,453 at December 31, 2017 and 2016, respectively. The major components of depreciable plant and equipment as of December 31, 2017 and 2016 are as follows:
| 2017 |  | 2016
Equipment | $ | 307,938 |  |  | 269,734 |
Transmission and distribution | 1,295,690 |  |  | 1,204,520 |
Office buildings and other structures | 110,600 |  |  | 79,762 |
Total depreciable plant and equipment | $ | 1,714,228 |  |  | 1,554,016 |
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 2017, 2016 and 2015, depreciation expense as a percent of the beginning of the year balance of depreciable plant was approximately 3.6%, 3.5% and 3.4%, respectively. A portion of depreciation expense was allocated to administrative and general expense. For the years 2017, 2016 and 2015, the amounts allocated to administrative and general expense were $2,209, $1,670 and $1,590, respectively. Depreciation expense for utility plant for the years ended December 31, 2017, 2016 and 2015 was $46,456, $42,659 and $38,722, 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”). 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, 2017 and 2016 are as follows:
| 2017 |  | 2016
Land | $ | 13,262 |  |  | 15,218 |
Buildings and improvements | 42,951 |  |  | 46,826 |
Intangibles | — |  |  | 149 |
Total real estate investment | $ | 56,213 |  |  | 62,193 |
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
On April 6, 2017, 444 West Santa Clara Street, L.P. sold all of its interests in the commercial building and land the partnership owned and operated for $11,000. 444 West Santa Clara Street, L.P. recognized a pre-tax gain on sale of real estate investments of $6,323, after selling expenses of $1,157. SJW Land Company holds a 70% limited interest in 444 West Santa Clara Street, L.P. SJW Land Company and the noncontrolling interest recognized a pre-tax gain on sale of real estate investments of $4,427 and $1,896, respectively, on the transaction. In addition, SJW Land Company sold undeveloped land located in San Jose, California for $1,350 on April 6, 2017. SJW Land Company recognized a pre-tax gain on sale of real estate investments of $580 on the transaction, after selling expenses of $14. 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 in the fourth quarter of 2016 of $9,981, after selling expenses of $112. 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. Real estate investments include $55,966 and $61,179 as of December 31, 2017 and 2016, 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, 2017:
Year ending December 31: | Rental Revenue
2018 | $ | 4,351 |
2019 | 4,432 |
2020 | 4,513 |
2021 | 2,644 |
2022 | 1,184 |
Thereafter | 6,763 |
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. SJW Group 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 2017, 2016 or 2015. 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 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. 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. 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 improved water supply outlook, the allocation and drought surcharge program was suspended effective February 1, 2017. 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 included in the 2015 General Rate Case. 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 better conform to water forecasts authorized in the last general rate case to recorded consumption for the period of October 2015 through September 2016. The CPUC had 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 consider requesting a sales reconciliation mechanism to better conform to sale forecasts authorized in the last general rate case to recorded consumption. On May 3, 2017, the CPUC rejected the filing citing the end of the drought and the improved California water supply conditions. On May 10, 2017, San Jose Water Company formally requested the CPUC’s review of the rejection. The request was rejected by the CPUC on January 11, 2018, due to the improved water supply conditions. 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, 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. The bill for a residential customer using 15 CCF per month will increase by $1.52, or 1.5% per month. The advice letter was approved and new rates became effective March 20, 2017. As required by the CPUC, on April 3, 2017 San Jose Water Company filed an application requesting authority to increase its authorized Cost of Capital for the period from January 1, 2018 through December 31, 2020. The cost of capital determination is a triannual regulatory process in which the CPUC determines a regulated water utility’s cost of long-term debt and common stock and the components of its authorized capital structure. If approved by the CPUC as originally filed, San Jose Water Company’s annual revenues would have increased by approximately $7,550 or about 2.1% in 2018. On February 6, 2018, the CPUC issued a proposed decision. The proposed decision provides for a reduction to San Jose Water Company’s authorized return on equity from 9.43% to 8.30% and its overall return on rate base from 8.09% to 7.19%. The proposal is subject to change until a final CPUC decision is determined at the full CPUC meeting currently scheduled for March 22, 2018. If the proposal is approved without change, the reduction in authorized revenue requirement would be approximately $10,000 for 2018 which could have a material adverse impact on SJW Group’s net income. On May 2, 2017, San Jose Water Company filed Advice Letter No. 508 with the CPUC to reinstate surcharges to recover the remaining $996 balance from the 2014 Mandatory Conservation Revenue Adjustment Memorandum Account (“MCRAMA”) and to recover the remaining $2,233 balance from the 2015 Water Conservation Memorandum Account (“WCMA”). The under-collections will be recovered via surcharges of $0.08 per CCF and $0.1441 per CCF on the existing quantity rate for the 2014 MCRAMA and the 2015 WCMA, respectively. This request was approved on June 1, 2017. San Jose Water Company anticipates collection of the remaining amounts in less than 12 months. On May 26, 2017, San Jose Water Company filed Advice Letter No. 509 with the CPUC requesting authorization to increase revenues by $12,407, or approximately 3.46%. The increase is intended to offset the increases to purchased potable water, ground water production, and purchased recycled water charges implemented by San Jose Water Company’s water wholesaler effective July 1, 2017. This request was approved on June 26, 2017. On June 6, 2017, San Jose Water Company filed Advice Letter No. 510 with the CPUC requesting authorization to issue a surcredit totaling $1,794 to refund service charge rate changes as a result of a change in billing practice effective January 1, 2017. The refund period covers prorated service charge rate changes that occurred from January 1, 2014, through December 31, 2016. On August 11, 2017, the CPUC rejected Advice Letter No. 510 citing the formal complaint filed by some customers and served to San Jose Water Company by the CPUC over the same issue. A pre-hearing conference was held on the formal complaint on September 12, 2017, where the parties agreed to suspend the proceeding. On September 29, 2017, San Jose Water Company filed Advice Letter No. 512 with the CPUC requesting authorization to re-implement a surcharge to recover the under-collected balance of $11,474 remaining from the 2012 General Rate Case true-up due to the delayed 2012 General Rate Case Application decision. Actual sales were substantially lower than the CPUC authorized sales estimate used to calculate the surcharge amount over the three-year recovery period. San Jose water Company is seeking to recover the remaining under-collected balance. This request was withdrawn on January 5, 2018, and the recovery of the remaining under-collected balance was requested as part of our 2018 General Rate Case Application. On November 15, 2017, San Jose Water Company filed Advice Letter No. 513/513A with the CPUC requesting a revenue increase of $15,670, or 4.22%, for the 2018 escalation year included in the 2015 General Rate Case. This request was approved and the new rates became effective on January 1, 2018. On November 29, 2017, San Jose Water Company filed Advice Letter No. 514 with the CPUC requesting to adjust the Utilities Reimbursement Account User Fees as directed by CPUC Resolution M-4832. The reimbursement fee was reduced from 1.44% to 1.40%. This request was approved and the new fee became effective on January 1, 2018. San Jose Water Company filed Advice Letter No. 515 on December 28, 2017 with the CPUC requesting authorization to establish the 2018 Tax Accounting Memorandum Account. This memorandum account will capture any changes to revenue requirement resulting from the impact of the Tax Act signed into law December 22, 2017. This request became effective on January 1, 2018. On January 4, 2018, San Jose Water Company filed General Rate Case Application No. 18-01-004 requesting authority for an increase of revenue of $34,288, or 9.76%, in 2019, $14,232, or 3.70%, in 2020 and $20,582, or 5.17%, in 2021. The application also includes requests to recover $20,725 from balancing and memorandum accounts, the establishment of a Water Revenue Adjustment Mechanism and Sales Reconciliation Mechanism, and a shift to greater revenue collection in the service charge. The application is a year-long review process and the new rates, if approved, are expected to be effective January 1, 2019. CLWSC is subject to the economic regulation of the Public Utilities Commission of Texas (“PUCT”). The PUCT 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. 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. San Jose Water 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, water conservation, water tariffs, and other approved activities or as directed by the CPUC such as the memorandum account for the Tax Act. 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. Based on ASC Topic 980-605-25, San Jose Water Company recognized regulatory assets of $13,699 due to lost revenues accumulated in the 2017 WCMA account for the year ended December 31, 2017. These regulatory assets were partially offset by a regulatory liability in the amount of $6,041 created by Tariff Rule 14.1 drought surcharges collected as allowed for in Advice Letter 473A. At the end of the second quarter of 2017, there was no longer a balance of drought surcharges collected to fully offset the 2017 WCMA account. The remaining balance of $961 in the drought surcharge account at June 30, 2017 is related to amounts collected outside of the California regulated entity. San Jose Water Company reclassified the balance to other noncurrent liabilities on the Consolidated Balance Sheets as of December 31, 2017. Of the $13,699 recognized in the 2017 WCMA account for the year ended December 31, 2017, $7,658 was not covered by drought surcharges and was recognized as revenue for the year ended December 31, 2017, less $1,169 recorded for reserve which is the estimated amount that may not be collected within the 24-month period defined in the guidance. These amounts have been recorded in the 2017 WCMA balance shown in the table below. In the first quarter of 2017, San Jose Water Company updated the allocation of new customer accounts between residential and business customers to align closer to the current residential and business statistics for the year ended December 31, 2016. The reallocation resulted in a recalculation of the 2016 WCMA account and a recognition of additional regulatory assets of $1,371 for the three months ended March 31, 2017. Based on quantitative as well as qualitative factors, the SJW Group determined that this amount was not material to quarterly or annual net income and earnings per share in 2016, quarterly net income and earnings per share in the first quarter of 2017, and was not material to the 2017 annual financial results. As such, SJW Group corrected the error in the first quarter of 2017. In addition, recorded interest related to the 2016 WCMA balance as of December 31, 2017 was $196. The amount recorded as a regulatory asset was offset by a regulatory liability in the amount of $1,452 during the year ended December 31, 2017 previously created by Tariff Rule 14.1 drought surcharges. These amounts have been recorded in the 2016 WCMA row shown in the table 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 in the table below for the year ended December 31, 2015. As of December 31, 2017 and 2016, there was $0 and $1,090 reserve balance, respectively, 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, 2017 and 2016, the reserve balance for the 2015 WCMA was $0 and $2,115, respectively, 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, 2017
Beginning Balance |  | Revenue Increase (Reduction) |  | Refunds (Collections) |  | Surcharge Offset and Other |  | Ending Balance
Memorandum accounts: |  |  |  |  |  |  |  |  |
2014 WCMA | $ | — |  |  | 1,090 |  |  | (1,047 | ) |  | — |  |  | 43 |
2015 WCMA | 1,589 |  |  | 2,101 |  |  | (3,657 | ) |  | — |  |  | 33 |
2016 WCMA | — |  |  | 1,567 |  |  | — |  |  | (1,452 | ) |  | 115 |
2017 WCMA | — |  |  | 12,530 |  |  | — |  |  | (6,041 | ) |  | 6,489 |
All others | 2,768 |  |  | 1,762 |  |  | 453 |  |  | — |  |  | 4,983 |
Total memorandum accounts | $ | 4,357 |  |  | 19,050 |  |  | (4,251 | ) |  | (7,493 | ) |  | 11,663 |
Balancing accounts: |  |  |  |  |  |  |  |  |
Water supply costs | 5,190 |  |  | 2,921 |  |  | 568 |  |  | — |  |  | 8,679 |
Drought surcharges | (7,688 | ) |  | — |  |  | (765 | ) |  | 8,453 |  |  | — |
Pension | (2,009 | ) |  | 894 |  |  | (1,344 | ) |  | — |  |  | (2,459 | )
2012 General Rate Case true-up | 20,682 |  |  | — |  |  | (9,363 | ) |  | — |  |  | 11,319 |
2015 General Rate Case true-up | 5,528 |  |  | — |  |  | (5,413 | ) |  | — |  |  | 115 |
All others | (151 | ) |  | (678 | ) |  | (638 | ) |  | 75 |  |  | (1,392 | )
Total balancing accounts | $ | 21,552 |  |  | 3,137 |  |  | (16,955 | ) |  | 8,528 |  |  | 16,262 |
Total | $ | 25,909 |  |  | 22,187 |  |  | (21,206 | ) |  | 1,035 |  |  | 27,925 |
| 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 |
As of December 31, 2017, 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 $3,738. 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. For a discussion on the effects of the revaluation of deferred tax assets and liabilities resulting from the Tax Act and the change in the tax gross-up on regulatory assets and liabilities as of December 31, 2017, see Note 5, “Income Taxes.” Regulatory assets and liabilities are comprised of the following as of December 31:
| 2017 |  | 2016
Regulatory assets: |  |  |
Income tax temporary differences, net | $ | — |  |  | 10,139 |
Postretirement pensions and other medical benefits | 68,556 |  |  | 109,795 |
Balancing and memorandum accounts, net | 27,925 |  |  | 25,909 |
Other, net | 3,073 |  |  | 5,930 |
Total regulatory assets, net in Consolidated Balance Sheets | $ | 99,554 |  |  | 151,773 |
Less: current regulatory asset, net | — |  |  | 16,064 |
Total regulatory assets, net, less current portion | $ | 99,554 |  |  | 135,709 |
Regulatory liability: |  |  |
Income tax temporary differences, net | $ | 62,476 |  |  | — |
Total regulatory liability in Consolidated Balance Sheets | $ | 62,476 |  |  | — |
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. See Note 5, “Income Taxes” for discussion on the effect of the Tax Act on the consolidated balance sheets as of December 31, 2017 and the related consolidated statements of comprehensive income. 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
2018 | $ | 2,766 |
2019 | 2,766 |
2020 | 2,766 |
2021 | 2,766 |
2022 | 2,766 |
Thereafter | 52,338 |
As of December 31, 2017, advances for construction was $83,695 of which $17,527 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 a discussion on the change in the tax gross-up related to the asset retirement obligation as of December 31, 2017, see Note 5, “Income Taxes.” For the years ended December 31, 2017 and 2016, the asset retirement obligation is as follows:
| 2017 |  | 2016
Retirement obligation | $ | 5,231 |  |  | 4,835 |
Discount rate | 6 | % |  | 6 | %
Present value, recorded as a liability | 1,184 |  |  | 1,966 |
Deferred tax | — |  |  | 1,352 |
Regulatory asset | $ | 1,184 |  |  | 3,318 |
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, if any. 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, 2017, 2016 and 2015, the surcharge was $5,235, $3,807 and $4,605, 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 2017, 2016 and 2015 includes $7,419, $6,451 and $6,145, 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. 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. In March 2016, the FASB issued ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting.” This ASU affects entities that issue share-based payment awards to their employees. ASU 2016-09 identifies areas for simplification involving several aspects of accounting for share-based payment transactions, including income tax consequences, classification of awards as either equity or liabilities, classifications on the statement of cash flows and forfeiture rate calculations. SJW Group adopted this standard as of the first quarter of 2017. ASU 2016-09 requires recognition of excess tax benefits and deficiencies in the income statement, which resulted in the recognition of $500 in income tax benefit for the three months ended March 31, 2017. Prior to adoption, these amounts were recognized as additional paid-in capital. SJW Group did not have any unrecognized excess tax benefits to reclassify upon adoption of this standard. The ASU also requires excess tax benefits and deficiencies to be prospectively excluded from assumed future proceeds in the calculation of diluted shares when calculating diluted earnings per shares using the treasury stock method. The effect of this change on diluted earnings per share was immaterial. In addition, excess income tax benefits from share-based compensation are now classified as cash flows from operating activities on the consolidated statements of cash flows. Further, ASU 2016-09 requires, on a retrospective basis, that employee taxes paid for withheld shares be classified as cash flows from financing activities rather than cash flows from operating activities. As such, the consolidated statements of cash flows for SJW Group for the periods presented have been reclassified to reflect this change. The change resulted in an increase to cash flows from operating activities and a decrease to cash flows from financing activities of $818, $499, and $897 for the years ended December 31, 2017, 2016 and 2015, respectively. SJW Group has elected to account for actual forfeitures as they occur upon adoption of the new guidance. Management determined that the cumulative effect adjustment required under the new guidance was immaterial and therefore SJW Group did not record an adjustment. 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 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 of 4,474, 6,689 and 1,978 as of December 31, 2017, 2016 and 2015, respectively, were excluded from the dilutive earnings per share calculation as their effect would have been anti-dilutive.

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