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Summary of Significant Accounting Policies | 12 Months Ended
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Dec. 31, 2025
Accounting Policies [Abstract] |
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Use of Estimates The preparation of the consolidated financial statements in conformity with GAAP 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. Depreciable Utility Plant and Equipment The major components of depreciable plant and equipment as of December 31, 2025 and 2024 are as follows:
| 2025 |  | 2024
Source of supply | $ | 243,335 |  |  | 228,621 |
Pumping plant | 331,134 |  |  | 301,280 |
Water treatment plant | 396,061 |  |  | 367,836 |
Transmission and distribution plant | 3,323,482 |  |  | 3,015,978 |
General plant | 394,632 |  |  | 335,599 |
Total depreciable plant and equipment | $ | 4,688,644 |  |  | 4,249,314 |
Depreciation is computed using the straight-line method over the estimated remaining service lives of groups of assets. The estimated service lives of depreciable plant and equipment are as follows:
| Useful Lives
Source of supply | 20 to 100 years
Pumping plant | 5 to 70 years
Water treatment plant | 5 to 62 years
Transmission and distribution plant | 10 to 100 years
General plant | 5 to 68 years
For the years 2025, 2024 and 2023, depreciation expense as a percentage of the beginning of the year balance of depreciable plant was 2.75%, 2.9% and 2.9%, respectively. Depreciation expense for utility plant for the years ended December 31, 2025, 2024 and 2023 was $114,265, $111,575 and $104,325, respectively. The cost of utility plant retired (less salvage) is charged to accumulated depreciation and no gain or loss is recognized. To the extent H2O America recovers retirement costs through rates during the life of the associated asset and before the costs are incurred, these amounts result in a regulatory liability being reported based on the amounts previously recovered through customer rates until the costs to retire those assets are incurred. Allowance For Funds Used During Construction (“AFUDC”) AFUDC represents the capitalized costs of borrowed funds or a return on equity funds used to finance utility plant under construction and is capitalized as part of construction work in progress. AFUDC is recorded to the extent approved by the respective states’ utility regulators and is recovered through water rates as the utility plant depreciates. The amount of AFUDC debt capitalized in 2025, 2024 and 2023 was $7,335, $3,524 and $2,900, respectively. Interest on long-term debt is presented net of AFUDC debt capitalized on the Consolidated Statements of Comprehensive Income. The amount of AFUDC equity capitalized in 2025, 2024 and 2023 was $6,237, $2,362 and $2,114, respectively, reflected in “Other, net” on the Consolidated Statements of Comprehensive Income. Intangible Assets Finite-lived intangible assets are recorded at cost and are amortized using the straight-line method over the estimated useful life of the asset, ranging from 3 to 70 years. Indefinite-lived intangibles assets are not amortized, but instead are tested for impairment annually, or more frequently if events or changes in circumstances indicate that it is more likely than not that the asset is impaired. (see Note 8, “Intangible Assets”). Nonutility Properties and Real Estate Investments Nonutility properties and real estate investments are recorded at cost and consist primarily of land and buildings. Net gains and losses from the sale of nonutility properties and real estate investments are recorded as a component of other (expense) income and operating expense, respectively, in the Consolidated Statements of Comprehensive Income. Nonutility property is property that is neither used nor useful in providing water utility services to customers and is excluded from rate base for rate-setting purposes. SJWC recognizes gain or loss on the disposition of nonutility property in accordance with California Public Utilities Commission (“CPUC”) Code Section 790, whereby the net proceeds are reinvested back into property that is useful in providing water utility services to customers. CTWS and TWC do not have regulatory restrictions on the use of proceeds from the sale of nonutility property. There is no depreciation associated with Water Utility Services nonutility property as it is all undeveloped land. The major components of nonutility properties and real estate investments are as follows as of December 31:
| 2025 |  | 2024
Land | $ | 914 |  |  | 915 |
Wholesale water supply assets | — |  |  | — |
Buildings and improvements | 769 |  |  | 399 |
Subtotal | 1,683 |  |  | 1,314 |
Less: accumulated depreciation and amortization | 103 |  |  | 98 |
Total | $ | 1,580 |  |  | 1,216 |
Depreciation on buildings and improvements for real estate investments is computed using the straight-line method over the estimated useful lives of the assets, ranging from 7 to 39 years. Business Combinations and Asset Acquisitions H2O America applies the provisions of Financial Accounting Standards Board (“FASB”) ASC Topic 805—“Business Combinations” for the accounting related to business and asset acquisitions. First, H2O America applies the guidance in Topic 805 to determine whether a transaction represents a business combination or an acquisition of assets. If the transaction is a business combination, Topic 805 requires H2O America to recognize separately from goodwill the assets acquired and the liabilities assumed at the acquisition date fair values. Goodwill as of the acquisition date is measured as the excess of consideration transferred over the net of the acquisition date fair values of the assets acquired and the liabilities assumed. If the transaction is an acquisition of assets, the cost of the transaction, including transaction costs, is allocated to the individual assets acquired and liabilities assumed on a relative fair value basis without recognition of goodwill. While H2O America uses best available estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date, such estimates are inherently uncertain and subject to refinement. For business combinations, Topic 805 provides for a measurement period from the acquisition date of up to one year, during which we may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to the Consolidated Statements of Comprehensive Income. Accounting for business combinations and asset acquisitions requires H2O America to make significant estimates and assumptions, especially at the acquisition date, including estimates for intangible assets, contractual obligations assumed and pre-acquisition contingencies. Although H2O America believes that the assumptions and estimates we make are reasonable and appropriate, they are based in part on historical experience and information obtained from the acquired company’s management and are inherently uncertain. Events and circumstances may occur that may affect the accuracy or validity of such assumptions, estimates or actual results. Examples of critical estimates in valuing certain of the intangible assets we have acquired include, but are not limited to: future expected cash flows from services; historical and expected customer attrition rates and anticipated growth in revenue from acquired customers; the expected use of the acquired assets; and discount rates. See Note 14, “Acquisitions” for further information on business combinations and asset acquisitions. Impairment of Long-Lived Assets and Goodwill In accordance with the requirements of FASB ASC Topic 360—“Property, Plant and Equipment,” the long-lived assets of H2O America, including property, plant and equipment and finite-lived intangible assets, are reviewed for impairment when changes in circumstances or events indicate that the carrying amount of the assets may not be recoverable. In assessing qualitative factors, H2O America considers the impact of these key factors: change in industry and competitive environment, financial performance, and other relevant company-specific events. 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. No impairments occurred during 2025 and 2024. Goodwill is not amortized but is tested for impairment annually on October 1st or more frequently if an event occurs or circumstances change that would, more likely than not, reduce the fair value of a reporting unit below its carrying amount. Indefinite-lived intangible assets, other than goodwill, are not amortized but are tested for impairment annually on October 1 st or more frequently if an event occurs or circumstances change that would, more likely than not, reduce the fair value of indefinite-lived intangible assets below their carrying amount. In performing impairment tests of goodwill and indefinite-lived intangible assets, H2O America first performs a qualitative assessment to determine whether it is necessary to perform the quantitative impairment test. In assessing the qualitative factors, H2O America considers the impact of these key factors: change in industry and competitive environment, financial performance, macroeconomic conditions, and other relevant Company-specific events. If H2O America 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. As of October 1, 2025, H2O America performed qualitative assessments of both goodwill and indefinite-lived intangible assets and found no indicators of impairment and therefore did not perform quantitative impairment tests. No impairments of goodwill or indefinite-lived intangible assets occurred during 2025, 2024 or 2023. Cash and Cash Equivalents Cash and cash equivalents primarily consisted of cash on deposit with banks and short-term, highly liquid investments with original maturities of three months or less. Accounts Receivable Accounts receivable are recorded at the invoiced amounts. The allowance for uncollectible accounts is H2O America’s best estimate of credit losses in its existing accounts receivable and is determined based on current expected losses. The estimate is based on historical loss information adjusted for current conditions. Accounts balances are written off against the allowance when it is probable the receivable will not be recovered or is over a certain number of days outstanding. During the second quarter of 2024, H2O America recorded a reduction to its allowance for credit losses of $7,822, of which $3,960 resulted in a reduction to regulatory assets and $3,862 was recorded through administrative and general expense. Financial Instruments and Investments 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, accounts payable, and lines of credit. 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 6, “Long-Term Debt” and pension plan assets in Note 11, “Benefit Plans.” H2O America has investments in company owned life insurance which are valued at cash surrender value of the policies as reported by the insurer. The value of these contracts is based principally on a referenced pool of investment funds that actively redeem shares, are observable and measurable, and are presented in “Investments” on H2O America’s Consolidated Balance Sheets. As of December 31, 2025 and 2024, the value of the company owned life insurance was $9,870 and $8,944, respectively, of which $4,852 and $4,294, respectively, was related to assets to fund CTWS’ supplemental retirement plan agreements. See discussion on pension plans in Note 11, “Benefit Plans.” 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 regulators, investment tax credits resulting from public utility plant additions are deferred and amortized over the estimated useful lives of the related property. In addition, investment tax credits resulting from other asset additions are recognized in the year the property is put in service. Advances for Construction and Contributions in Aid of Construction In California, advances for construction received after 1981 are primarily refunded ratably over 40 years. In Connecticut and Maine, advances for construction are refunded as services are connected to the main over periods not exceeding 15 years and in Texas advances for construction are primarily non-refundable. Estimated refunds for the next five years and thereafter are shown below:
| Estimated Refunds
2026 | $ | 2,569 |
2027 | 2,535 |
2028 | 2,615 |
2029 | 2,592 |
2030 | 2,549 |
Thereafter | 45,627 |
As of December 31, 2025, advances for construction totaled $201,413 including $108,311 in non-refundable advances and $34,615 in advances that will be refunded based on service connections made, though the timing of these refunds cannot be estimated. As of December 31, 2024, advances for construction totaled $155,397 including $64,920 in non-refundable advances and $31,983 in advances that will be refunded based on service connections made, though the timing of these refunds cannot be estimated. As of December 31, 2025 and 2024, the fair value of the advances for construction refunded ratably over 40 years is $51,356 and $43,718, respectively. Contributions in aid of construction represent funds or property 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. Asset Retirement Obligation H2O America’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. As of December 31, 2025 and 2024, the asset retirement obligation is as follows:
| 2025 |  | 2024
Estimated future retirement costs | $ | 4,220 |  |  | 4,303 |
Discount rate | 6 | % |  | 6 | %
Retirement obligation, present value | $ | 930 |  |  | 887 |
Revenue H2O America recognizes revenue under ASC Topic 606—“Revenue from Contracts with Customers” for metered revenue of Water Utility Services, which includes billings 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. H2O America satisfies its performance obligation upon delivery of water to the customer at which time the customer consumes the benefits provided by the company. The customer is generally billed on a quarterly, monthly, or bi-monthly basis after water delivery has occurred. The customer is charged both a service charge which is based upon meter size and covers a portion of the fixed costs of furnishing water to the customer and a consumption charge based on actual water usage. 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. As the company has the right to bill for services that it has provided, H2O America estimates the dollar value of deliveries during the unbilled period and recognizes the associated revenue. Actual results could differ from those estimates, which may result in an adjustment to revenue when billed in a subsequent period. H2O America also recognizes revenue under ASC Topic 980-605-25—“Alternative Revenue Programs.” Under programs established by the CPUC and Public Utilities Regulatory Authority of Connecticut (“PURA”), allowing for automatic adjustment of future rates, the company recognizes revenue when it is objectively determinable, probable of recovery and expected to be collected within 24 months of the year-end in which the revenue is recognized. A reserve, based on an estimate of actual usage over the recovery period, is recorded for any amounts H2O America estimates will not be collected within the 24-month period. H2O America’s alternative revenue programs include SJWC’s Water Conservation Memorandum Account (“WCMA”) and CWC’s Water Rate Adjustment mechanism (“WRA”). See further discussion on WCMA and WRA in Note 3, “Regulatory Matters.” H2O America’s revenues also reflect the impact of other balancing and memorandum accounts and other regulatory mechanisms that are accounted for under FASB ASC Topic 980—“Regulated Operations.” Balancing and memorandum accounts are recognized when it is probable that future recovery of previously incurred costs or future refunds that are to be credited to customers will occur through the ratemaking process. See further discussion in Note 3, “Regulatory Matters.” H2O America also recognizes revenue from rental income, which represents lease rental income. Tenants pay monthly in accordance with lease agreements and H2O America recognizes the income ratably over the lease term as this is the most representative of the pattern in which the benefit is expected to be derived from H2O Americas underlying asset. Detail of H2O America’s revenue components are as follows for the years ended December 31:
| 2025 |  | 2024 |  | 2023
Revenue from contracts with customers | $ | 805,594 |  |  | 736,326 |  |  | 678,168 |
Alternative revenue programs, net | 6,672 |  |  | 6,181 |  |  | 3,634 |
Other balancing and memorandum accounts and regulatory mechanisms, net | (11,919) |  |  | (153) |  |  | (17,123) |
Rental income | 243 |  |  | 6,085 |  |  | 5,684 |
| $ | 800,590 |  |  | 748,439 |  |  | 670,363 |
Revenue also includes a surcharge collected from regulated customers that is paid to the CPUC. This surcharge is recorded both in operating revenue and administrative and general expenses. For the years ended December 31, 2025, 2024 and 2023, the surcharge was $3,927, $3,668 and $4,085, respectively. Share-Based Compensation H2O America calculates the fair value of service-based and performance-based restricted stock awards based on the grant date fair value of the company’s stock price reduced by the present value of the dividends expected to be declared on outstanding shares. H2O America 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 for service-based restricted stock awards is charged to income on a straight-line basis over the requisite service period, which is the vesting period. For performance-based stock awards, compensation expense is charged to income on a straight-line basis over the requisite service period based on expected attainment of performance targets. Changes in the estimates of the expected attainment of performance targets will result in a change in the number of shares that are expected to vest which may cause a cumulative catch up for the amount of share-based compensation expense during each reporting period in which such estimates are altered. Forfeitures are accounted for as they occur. 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 period. 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 restricted common stock awards under H2O America’s long-term incentive plans, shares potentially issuable under the performance stock plans assumed through the business combination with CTWS, and shares potentially issuable under H2O America’s employee stock purchase plans. Restricted common stock units of 40,452, 8,075 and 14,193 as of December 31, 2025, 2024 and 2023, respectively, were excluded from the diluted earnings per share calculation as their effect would have been antidilutive. Related-Party Transaction The Force for Good Foundation, established in 2024, is a non-consolidated not-for-profit corporation funded by H2O America that has made and continues to make contributions to selected charitable organizations. H2O America made contributions of $4,400 and $3,000 in 2025 and 2024 respectively, which are included as an expense in the “Other, net” line of the Consolidated Statements of Comprehensive Income. New Accounting Standards
Standard |  | Description |  | Date of Adoption |  | Application |  | Effect on the Consolidated Financial Statements
ASU 2023-09 “Improvements to Income Tax Disclosures” |  | The ASU amends certain income tax disclosure requirements, including adding requirements to present the reconciliation of income tax expense computed at the statutory rate to actual income tax expense using both percentages and amounts and providing a disaggregation of income taxes paid. Further, certain disclosures are eliminated, including the current requirement to disclose information on changes in unrecognized tax benefits in the next 12 months. |  | The ASU was adopted with the annual financial statements for the year ended December 31, 2025. |  | Prospective, with retrospective application also permitted. |  | The standard only resulted in updates to disclosure and did not have a material impact on the Company’s financial position and results of operations.
Standard |  | Description |  | Date of Adoption |  | Application |  | Effect on the Consolidated Financial Statements
ASU 2024-03 “Disaggregation of Income Statement Expenses” |  | The ASU requires disclosure, in the notes to the financial statements, of specified information about certain costs and expenses. The ASU requires disclosure of purchases of inventory, employee compensation, depreciation, and intangible asset amortization in interim and annual reporting periods. Further, other amounts already required to be disclosed in accordance with current U.S. GAAP would be included in the same disclosure as the other disaggregation requirements. Additionally, the ASU requires qualitative descriptions of amounts remaining in relevant expense captions that are not separately disaggregated quantitatively as well as disclosure of selling expenses in annual periods and an entity’s definition of selling expenses. |  | The ASU is effective for H2O America for its annual financial statements for the year ending December 31, 2027 and for interim reporting periods for the year ending December 31, 2028. Early adoption is permitted. |  | Prospective, with retrospective application also permitted. |  | The standard is expected to only result in updates to disclosure and is not expected to have a material impact on the Company’s financial position and results of operations.
ASU 2025-06 “Intangibles-Goodwill and Other-Internal-Use Software (subtopic 350-40)” |  | The ASU updates the accounting for internal-use software by removing project stage references and introduces a new capitalization threshold based on management authorization and project completion probability. The guidance requires evaluation of significant development uncertainty, including novel functionality and unresolved performance requirements. ASU 2025-06 clarifies that capitalized internal-use software costs are subject to the property, plant and equipment disclosure requirements under ASC 360-10. |  | The ASU is effective for H2O America for its annual financial statements for the year ending December 31, 2028 and for interim reporting periods for the year ending December 31, 2028. |  | Prospective, retrospective or on a modified transition approach with early adoption permitted. |  | H2O America is currently evaluating the impact of ASU 2025-06 on its financial statements and will adopt ASU 2025-06 in fiscal year ended December 31, 2028.
Standard |  | Description |  | Date of Adoption |  | Application |  | Effect on the Consolidated Financial Statements
ASU 2025-10 “Government Grants (Topic 832)” |  | The ASU establishes accounting for government grants received by business entities and includes guidance for (1) a grant related to an asset and (2) a grant related to income. The ASU requires that a government grant should not be recognized until it is probable that a business entity will comply with the conditions attached to the grant and the grant will be received. Additionally, the ASU requires that a grant related to an asset be recognized on the balance sheet as the business entity incurs the related costs for which the grant is intended to compensate either as deferred income or an adjustment to the cost basis of the related asset. A grant related to income or a grant recognized as deferred income should be recognized in earnings on a systematic and rational basis over the periods in which the related costs are incurred that the grant is intended to compensate. |  | The ASU is effective for H2O America for annual reporting periods beginning after December 15, 2028 and interim reporting periods within those annual reporting periods. Early adoption is permitted. |  | Retrospective adoption with modified prospective and modified retrospective application also permitted. |  | H2O America is currently evaluating the impact of ASU 2025-10 on its financial statements and will adopt ASU 2025-10 in fiscal year ended December 31, 2029.
ASU 2025-11 “Interim Reporting (Topic 270)” |  | The ASU provides clarity about the current requirements, rather than evaluate whether to expand or reduce interim disclosure requirements. The ASU includes a disclosure principle that requires entities to disclose events since the end of the last annual reporting period that have a material impact on the entity. The intent of the disclosure principle, which is modeled after a previous SEC disclosure requirement, is to help entities determine whether disclosures not specified in Topic 270 should be provided in interim reporting periods. |  | The ASU is effective for H2O America for interim reporting periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. |  | Prospective, with retrospective application also permitted. |  | H2O America is currently evaluating the disclosure impact of ASU 2025-11; however, the standard is not expected to impact the consolidated financial position, results of operations or cash flows.

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