Q3 2023 American States Water Co Earnings Call

Speaker 1: Ladies and gentlemen, thank you for standing by. Welcome to the American States Water Company conference called discussing the company's third quarter 2023 results.

Ladies and gentlemen, thank you for standing by and welcome to the American States Water Company Conference call discussing the company's third quarter 2023 results.

Speaker 1: This call is being recorded. If you'd like to listen to the replay of this call, it will begin this afternoon at 5 p.m. Eastern Time and run through Tuesday, November 14, 2023, on the company's website, www.aswater.com. The slides that the company will be referring to are also available on the website.

This call is being recorded.

If you'd like to listen to the replay of this call. It will begin this afternoon at five P. M. Eastern time and run through Tuesday November 14th 2023, one of the company's web site Www Dot a S water dot com the slides that the company will be referring to are also available on the website.

Speaker 1: Should you need assistance? Please signal a conference special by President Starkey followed by zero. This call will be limited to an hour. Presenting today from American States Water Company, our Bob Sprouls, President and Chief Executive Officer and Eva Tang, Senior Vice President of Finance and Chief Financial Officer.

Should you need assistance. Please signal a conference specialist by pressing Starkey followed by zero. This call will be limited to an hour.

Presenting today from American States water company are Bob Sprowls, President and Chief Executive Officer, and Eva Tang Senior Vice President of Finance and Chief Financial Officer. As a reminder, certain matters discussed during this conference call may be forward looking statements intended to qualify for the safe Harbor from liability established.

Speaker 1: As a reminder, certain matters to discuss during this conference, called may be for looking statements intended to qualify for the safe harbor from liability established by the Private Security Lidigation Reform Act of 1995.

<unk> by the private Securities Litigation Reform Act of 1995.

Speaker 1: Please review a description of the company's risks and uncertainties in our most-recented recent form, 10K and form 10Q on file with the Security and Exchange Commission.

Please review a description of the company's risks and uncertainties in our most recent recent Form 10-K and Form 10-Q on file with the Securities and Exchange Commission.

Speaker 1: In addition, this conference call will include a discussion of certain measures that are not prepared in accordance with general accepted accounting principles or gap in the United States and constitute non- GAAP financial measures under SEC rules.

In addition, this conference call will include a discussion of certain measures that are not prepared in accordance with general accepted accounting principles or GAAP in the United States and constitute non-GAAP financial measures under SEC rules.

Speaker 1: These non-GaF financial measures are derived from confolidated financial information that are not presented in our financial statements that are prepared in accordance with GAP. For more details, please refer to the press release.

non-GAAP financial measures are derived from consolidated financial information, but are not presented in our financial statements that are prepared in accordance with GAAP for more details. Please refer to the press release.

Speaker 1: At this time, I will turn the call over to Bob Sprowls, President and Chief Executive Officer of American States Water Company.

At this time I will turn the call over to Bob Sprowls, President and Chief Executive Officer of American States water company.

Thank you Jason.

Speaker 2: Welcome everyone and thank you for joining us today. I'll begin with some brief comments on the quarter. Even we'll then discuss some financial details.

Welcome everyone and thank you for joining us today.

I'll begin with some brief comments on the quarter Eva will then discuss some financial details.

Speaker 2: And then I'll wrap it up with updates on regulatory activity, ASUS, dividends, and then we'll take your questions. Let's breathe.

And then I'll wrap it up with updates on regulatory activity.

U S dividends and then we will take your questions.

Let's briefly discuss our quarterly earnings.

Speaker 2: recorded diluted earnings for the quarter increased by 16 cents per share from last year or 12 cents per share excluding a favorable variance of 4 cents per share resulting from the receipt of a final decision in the cost of capital proceeding.

We recorded diluted earnings for the quarter increased by <unk> 16 per share from last year.

Or <unk> 12 per share excluding a favorable variance of <unk> <unk> per share, resulting from the receipt of a final decision in the cost of capital proceeding.

Speaker 2: in June 2023 at our water utility. That evil.

June 2023 at our water utility.

Eva will discuss later.

Speaker 2: The higher adjusted earnings of $0.12 per share was largely due to the new 2023 water rates approved in Golden State Waters Final General Rate Case decision.

The higher adjusted earnings of <unk> 12 per share.

Largely due to the new 2023 water rates approved in Golden State Water's final general rate case decision.

Speaker 2: On the regulatory front, we've had some significant events at Golden State Water.

On the regulatory front, we've had some significant events at Golden State water.

Speaker 2: We filed a new General Rate Case in August to put the California Public Utilities Commission or CPUC to set new rates for the years 2025 through 2027.

We filed a new general rate case in August with the California, Public Utilities Commission or CPUC.

To set new rates for the years 2025 through 2027.

Speaker 2: The filing included a request for capital investment of $611.4 million over the rate cycle.

The filing included a request for capital investment of $611 $4 million.

Over the rate cycle.

Speaker 2: In addition, as a result of triggering our existing water cost of capital mechanism, we filed an advice letter with the CPUC to increase our authorized return on equity from 9.36%.

In addition, as a result of triggering our existing water cost of capital mechanism we.

We filed an advice letter with the CPUC to increase our authorized return on equity from 936%.

Speaker 2: 10.06 percent, which has been approved and will be effective on January 1, 2024.

To 10.06%, which has been approved and will be effective on January one 2024.

Speaker 2: From an operations perspective, it's been business as usual for our subsidiaries.

From an operations perspective, it's been business as usual for our subsidiaries.

Speaker 2: providing reliable water, electric and wastewater services to our regulated water and electric utility customers, as well as on the military.

Providing reliable water electric and wastewater services to our regulated water and electric utility customers.

As well as on the military bases we serve.

Speaker 2: plan to spend $150,000,000 to $170,000,000 this year in infrastructure investments at our regulated utility.

We plan to spend 155 million to $170 million this year in infrastructure investments at our regulated utilities.

Speaker 2: We are very pleased that ASUS was awarded two contracts by the US government in the third quarter to operate, maintain and provide construction management services for the water distribution and wastewater collection facilities on two military bases.

We're very pleased that <unk> was awarded two contracts by the US government in the third quarter to operate maintain and provide construction management services for the water distribution and wastewater collection facilities on two military bases.

Speaker 2: First was the Navy contract we were awarded for naval air station, Patuxent River or PAX River, located in Maryland, which is our first Navy contract.

The first was the Navy contract we were awarded for Naval Air Station Protection River or Pax River located in Maryland.

Which is our first navy contract.

Speaker 2: The initial value of the contract is estimated at $349 million over a 50-year period.

The initial value of the contract is estimated at $349 million.

Over a 50 year period.

Speaker 2: This contract is similar informed to our eight other military privatization contracts.

This contract is similar in form to our eight other military privatization contracts.

Speaker 2: In addition, ASUS was awarded a new 15-year contract at Joint Base Cape Cod located in Massachusetts that is different than our existing 50-year contract.

In addition, <unk> was awarded a new 15 year contract at joint base Cape Cod located in Massachusetts that is.

It's different than our existing 50 year contracts.

Speaker 2: Under this contract, ASUS will have the opportunity to perform work through the periodic issuance of task orders by the US government.

Under this contract <unk> will have the opportunity to perform work through the periodic issuance of task orders by the U S government.

Speaker 2: We're up to a maximum initial value of $45 million over a 15 year period.

We're up to a maximum initial value of $45 million.

Over a 15 year period.

Speaker 2: Both new contracts are subject to annual economic price adjustment.

Both new contracts are subject to annual economic price adjustments.

Speaker 2: We take great pride in our strong relationship with the US government and their continued confidence in our expertise in managing water and wastewater systems on military bases.

We take great pride in our strong relationship with the U S government and their continued confidence in our expertise in managing water and wastewater systems.

Military bases.

Speaker 2: And we feel we are well positioned to continue competing for new contracts in the future.

And we feel we are well positioned to continue competing for new contracts in the future.

Speaker 2: Eva will discuss the quarterly earnings and liquidity and I'll turn the call over to her.

Eva will discuss the quarterly earnings and liquidity and I'll turn the call over to her.

Speaker 3: Thank you, Bob. Hello, everyone. Let me start with our third quarter result.

Thank you Bob Hello, everyone.

In this quarter.

Doug.

Speaker 3: Consolidated earnings as reported were 85 cents per year for the quarter, but compared to 69 cents per year for the third quarter of 2022. An increase of 16 cents per year.

I mean ethylene pointed.

Thanks, Chris, Yes, like a quarter, that's compared to 69%.

Sure.

Thanks, Tim.

Sure.

Speaker 3: In last year's third quarter, Golden State Water recorded a decrease in earnings of 4 cents per year for revenue subject to refund based on its cost of capital fighting in 2021.

Okay.

Caught Ed Gordo Y daily Cologuard to a decrease.

<unk> revenue to be fact based.

Based on its cost of capital.

Why.

Speaker 3: As a result of receiving the final decision in the cost of capital proceeding in June , that sets the cost of capital prospectively.

Accurately Alex ultimately feeding the final decision in the cost of capital proceeding in June.

Our cost of capital prospectively.

Speaker 3: The 4th sense per share recorded in Q3 2022 was re-verbed in the second quarter of this year.

Absolutely.

Recall that in Q3 2010 to slide to ebay, Inc. Second quarter next year.

Speaker 3: Excuseing this item, adjusted consolidated earnings for the third quarter of 2023, or 85 cents per share, as compared to adjusted earnings of 73 cents per share for the third quarter of last year. That includes 12 cents per share.

Excluding this item.

Consolidated.

<unk> 85 per share as compared to <unk>.

Great. Thanks, Mike.

Fourth quarter of last year.

Sure.

Speaker 3: For our water utility go to the water, reported the earning worth 72 cents per share as compared to 54 cents per share for the quarter of 2022. And 18 cents per share include.

Well what are your kind of Golden state water.

Kevin just perfect for sure Okay.

54 cents per share per quarter of <unk>.

True.

Okay.

Okay.

Speaker 3: Jett ovat Seeing

I guess Scott effective at.

Water segment.

Speaker 3: So factoring in the same fact from the two items.

Factoring in all the same.

Perfect.

Ed.

Speaker 3: I just earned it for the third quarter at Wattacman or 72 cents per year.

Hi, Jeff.

Third quarter at the water segment were 70% for this year.

Speaker 3: which was an increase of 14 cents per share as compared to adjust the earnings of 58 cents per share for the third quarter of 20.

With an increase of 14 cents per share.

As compared to a cash offer.

58 per share.

Third quarter after 2022.

Speaker 3: The 14th and 4th year increase in 2023 adjust the earnings largely represents the difference from the 2020-21 adopt rates and 2023 that the year increase.

<unk> per share increasing train train three I guess the earnings.

<unk> pre sac.

France is a different time that 'twenty one adopted rate.

<unk> III second year, increasing.

Speaker 3: partially offset by increases in operating and intrinsic

Partially offset by increases in operating and interest expenses.

Our electric segment.

Quarter. This year were four cents per share.

<unk> was flat compared to Q2.

Too long.

Gradually recovering from not having the right track for train three.

As we await the Penguin electric geography.

New rates for train train three and train six.

Speaker 3: while also experiencing continued increases in overall operating expenses and interest costs.

Also experiencing continued to increase.

Our operating expenses and interest costs.

Speaker 3: The increase in expenses were mostly asked by favorable changes of certain flow.

The increase expenses were mostly offset by favorable changes.

Flow through income taxes.

Speaker 3: One of the decisions issued in the electric DRC, new raids are expected to be retroactive January 2023, and cumulative adjustment will be recorded at the time.

Krishna shared electric.

Electric GIC and you're right I expect it to be richer.

Trying to train three and cumulative cash that will be required at the pack.

Speaker 3: Ernie from our contact is the department ward 12th. We're here for this quarter. The same as the Ernie from St.Pierre in 2022.

Contact at <unk> 12 cents per share for this quarter. This time.

Thank you.

Yes.

Speaker 3: Consolidated revenues for the third quarter increase by $16.7 million as compared to the same period in 2022.

Consolidated revenue.

<unk> increased by $16 $7 million as compared to the same period.

In Q2.

Speaker 3: Revenues for the water segment increased by $15.4 million, largely representing the difference from the 2021 adopted rates recorded in 2022 and 2023 rates approved in June .

Revenue for the water segment increased by $15 $4 million.

To date, representing a different content <unk> got the rates recorded in 2022 and 2023 rate approved in June.

Speaker 3: partially upset by a decreasing revenue reduction from the cost of capital decision effective July .

They should be offset by increasing revenue.

The cost of capital application effective July.

Speaker 3: 31, 2023, which included the fact of a reduction in the cost of debt recovered in rates partially offset by a higher authorized return on app.

They'll get way technically.

Which included the effect of capturing the cost of that Capex in rate, partially offset by a higher authorized.

Accurate.

Speaker 3: In addition, the revenue were lower in the third quarter of 2022, $1.9 million due to the recording of an estimated growth 2-2-3, the 2016 Republic expired foridelity's

In addition, five year revenue quarter off plan.

One 9 million downloads.

The recording of an estimate of vessels that had some effect at the time.

Speaker 3: The electric revenues for three months end in September 30, 2023 have remained flat compared to same period in 2022, as new rates for 2023 has yet to be.

Electric revenue slipped three months ended September 32023 have remained flat compared to the same period in time.

As new rates three has the equity.

Speaker 3: In addition, there was an increasing revenues of $1.2 million from our contract to service segments due to an increasing management fees revenue from annual economic raise of funds, and high vieradons construction.

In addition scale with increasing revenue of $5 2 million dollar.

Contracted services.

Due to an increase in management fee revenue from annual economic price adjustment at.

Higher catastrophe activity.

Speaker 3: Turning to slide 9 and looking at total operating expenses other than supply costs.

Turning to slide nine and look.

Total operating expenses aggregate supply costs.

Speaker 3: Consolidate expenses increased $1.99 dollars as compared to last year's third quarter

Consolidated expenses increased $1 $9 million as compared to last years third quarter.

Speaker 3: The input was largely related to higher construction costs and our contract is there with this segment. And higher other operations and maintenance expenses across all business segments during this third quarter.

The increase was largely related to higher construction cost at our contracted services segment.

Higher other operations and maintenance expenses across our business segments during the third quarter.

Speaker 3: This increases were partially offset by lower and straight up internal expense.

These increases were partially offset by lower and the trade desk and general expenses.

Speaker 3: Interest expense, net of interest income, increased by $2.9 million due to higher average interest rate during the quarter and increases in overall borrowing level.

Interest expense net of interest income increased by $2 $9 million due to higher average interest rates during the quarter and increases in overall volume level.

Speaker 3: Other expenses, net of other income increased by $1.4 million due primarily to an increase in the non-service cost component for Golden State Waters Benefit Plan.

Other expenses other expense net of other income increased by $1 $4 million.

My mother nature, increasing and now service cost control and forego that bit watered benefit plan.

Speaker 3: resulting from changes in actual aerial assumptions in the plant.

In fact changes.

Actuarial assumptions and the client assets.

Speaker 3: However, as the result of go-dancy waters to weigh balancing accounts authorized by the CPC, changes in total net periodic pension costs related to the pension plan have no mature impact to earn.

However, as a result of Golden state water to wait balancing accounts authorized by the CPUC.

Okay.

Total net periodic pension costs related to the pension plan has no material impact.

Speaker 3: Slide 10 shows the adjusted ETS bridge compared to the third quarter of 2023 and 2022.

Slide 10.

The I guess, the ETF rates compared to the third quarter up 20 competitive comparing the third quarters of 'twenty, two 'twenty three and 'twenty two.

Slide 11.

Speaker 3: This light reflects our year-to-day earnings per year by segment, as reported and adjusted.

This slide reflects our year to date earnings per share by segment as reported and adjusted.

Speaker 3: The early days of the year reported for the 9 months and September 30, 2023 were $2.82 of compared to $1.61 per cent, but cent serious in 2022. and increase of $1.21 per year.

Fully diluted as reported for the nine months ended September 32023 to.

$2 eight <unk> as compared to $1 50 license, but same period in 2022.

An increase of $1 <unk> per share.

Speaker 3: Included in year today, 2023 results were 38 cents per year related to the impact of retroactive rates from the decision the water generated for the four year of 2022.

Included in year to date trends Street retail.

But the AE.

<unk> 38 per share related to the impact of retroactively patented decisioning the water general rate case for the full year of 2022.

Speaker 3: of which 30 cents per share relates to the first nine months of 2020.

<unk> per.

Per share relates to the first nine months of 2010 two.

Speaker 3: In addition, as the result of the full cost of capital decision, of the final cost of capital decision, the 2020-23 year today results include 13 cents per share related to the reversal of the recording of a lower cost of debt in 2022, of which 10 cents per share was recorded during the nine months and September 30, 2020.

In addition.

As a result of the full cost of capital decision of the final excuse me the final cost of capital decision that.

<unk> year to date retailer include <unk> 17 per share related to the reversal of the recording of a lower cost of debt in 2022.

<unk> 10 per share recorded during the nine months ended September 32.

Two.

Speaker 3: A $1.21 per share increase was also included a favorable variance of $0.17 per share from investment held to fund a retirement plan.

Yeah, $1 21 per share an increase also included a favorable variance of <unk> 17 per share on investments held to fund a retirement plan.

Speaker 3: The exclusion that the three items mentioned above had tested consolidated earnings for the nine months and in September 13, 2023, worth $2.27 per year.

Excluding the three items mentioned above.

<unk> consolidated earnings for the nine months ended September 32023.

$2, 27%.

Speaker 3: as compared to a just earning of $1.84 per share for the same period in 2022, an increase of $0.43 per share.

As compared to.

$1 84 per share for the same period and try and train two.

An increase of 43.

Sure.

Turning to liquidity on slide 12.

Speaker 3: Net cash provided by operating activities was $56.5 million through September of this year, as compared to $89.9 million for year-to-date 2022.

Net cash provided by our operating activities.

$56 $5 million through September of this year as compared to $89 9 million for year to date Prime time too.

Speaker 3: During the first nine months of last year, our regulated utilities receive.

During the first nine months of last year.

Accolated utilities received.

Speaker 3: $9.8 million in COVID-19 relief fund from the state of California to provide assistance to customers for the Lynquard Water and Electric Customer Beals in curving the pandemic.

$9 $8 million in COVID-19 relief funds from.

The state of California to provide assistance to customers first electric water and electric customer bills.

During the pandemic.

Speaker 3: There has been no refund received that's far in 2023.

There has been no refund received thus far in 2023.

Speaker 3: The decrease in operating cash flow was also a result of lower water consumption.

The decrease in operating cash flow was also a result of lower water consumption.

Speaker 3: and the delay in receiving water GRC final decision.

And the delays in receiving what Herc final decision.

Speaker 3: Go To Sea Water has implemented the new 2023 rate that took effect on July 31st.

So to say why that has implemented the new 2023 rate that took effect on July 31.

Speaker 3: So charges to recover with proactive among accumulated food to light-cery these has also been implemented in October .

Surcharges to recover retroactive amount accumulated to cause I have.

<unk> has also being implemented in October.

Speaker 3: In addition, Passflow Fund construction related activity as SUS decreased this year representing time in differences when the work is being performed and when the cash is received for the payment of the work.

In addition, cash flow from construction related activity at <unk> decreased this year with <unk>.

<unk> timing differences.

That work is being performed and when the cash is in BC.

Payment of that work.

Speaker 3: For investing activities, our regulated utility invested $126 million on company-funded capital projects during the first nine months of 2023. And we project company-funded capital expenditure at our regulated utilities to be $135 to $177 million this year.

While you're investing activity a regulated utility invested $126 million.

On company funded capital projects during the first nine.

Nine months of 2023.

And we will protect the company funded capital expenditure at our regulated utilities.

$125 million to $107 million this year.

Speaker 3: Yesterday, we executed an amendment to American State Water's credit facility that allowed for the addition of a new bank joining the existing syndicate group.

Yesterday, we execute it.

The amendment to American States Water's credit facility that allows for the addition of a new bank joining the existing syndicate group.

Speaker 3: We're pleased to expand our banking group, which also increased the HRBR's bond capacity from $150 million to $165 million.

We're pleased to expand our banking group, which also increased AWS bound capacity highway $50 million to $165 million.

Speaker 3: that will provide addition support to the operations of ASUS and AWRP.

That will provide additional support to the operation of <unk> and <unk>.

Speaker 3: In addition, American state water may seek additional capital of $250 million over the next three years, beginning in 2024. Potentially through an ad market common equity program to fund business operations and pay down.

In addition, American states why they may seek additional capital of $150 million to $200 million over the next three years beginning.

Beginning in 2024.

Potentially.

At the market common equity program to fund.

Business operations and pay down credit facilities.

Speaker 3: I will turn the call over to Bob now. Thank you.

I will turn the call.

Over to Bob now thank you.

Speaker 2: Thank you Eva. I will discuss a few key regulatory matters.

Thank you Eva I.

Now I will discuss a few key regulatory matters.

Speaker 2: As discussed last quarter, and to provide you a recap of key points in the decision,

As discussed last quarter and to provide you a recap of key points in the decision.

Speaker 2: The water utility rate case final decision issued on June 29th of this year set new rates for 2022 through 2024.

Water utility rate case final decision issued on June 29 of this year set.

Set new rates for 2022 through 2024.

Speaker 2: Authorizes a capital infrastructure budget of four hundred and four point eight million dollars over the three-year cycle Adopts new

Authorizes capital infrastructure budget of $404 $8 million over the three year cycles.

Adopt new operating expense levels.

Speaker 2: and allows for additional increases in adopted revenues for 2023 and 2024, subject to an earnings test and changes to the Inflation Index values.

It allows for additional increases and adopted revenues for 2023, and 2024 subject to an earnings test and changes to the inflation index values.

Speaker 2: As mentioned earlier, on August 14th, Goldmustay Water filed its Water General Rate Case for Water Rage for the years 2025 through 2027.

As I mentioned earlier on August 14th Golden State water filed its water general rate case for water rates for the years 2025 through 2027.

Speaker 2: Among other things, Golden State Water requested capital budgets in this application of $611.4 million over the rate cycle.

Among other things Golden State water requested capital budgets in this application of 611 $4 million over the rate cycle.

Speaker 2: We also requested the continuation of mechanisms to accommodate fully decoupled revenues and sales and track differences between recorded and CPUC authorized supply related expenses.

We also requested the continuation of mechanisms to accommodate fully decoupled revenues in sales.

And track differences between recorded and CPUC authorized supply related expenses.

Speaker 2: A decision in the water general rate case is scheduled for the fourth quarter of 2024 with new rates to become effective January 1st, 2025.

A decision in the water general rate case is scheduled for the fourth quarter of 2024 with new rates to become effective January one 2025.

Speaker 2: Also in June , the CPUC adopted the final decision in the cost of capital proceeding to set the new cost of capital for 2022 through 2024.

Also in June the CPUC adopt a final decision in the cost of capital proceeding to set the new cost of capital for 2022 through 2024.

Speaker 2: The decision adopts a requested capital structure of 57% equity and 43% debt.

The decision adopts our requested capital structure of 57% equity and 43% debt.

Speaker 2: A requested cost of debt, 5.1%.

Our requested cost of cost of debt of five 1%.

Speaker 2: and an authorized return on equity of 8.85%.

And an authorized return on equity of 885%.

Speaker 2: It also allows for the continuation of the water cost of capital mechanisms.

It also allows for the continuation of the water cost of capital mechanism.

Okay.

Speaker 2: In addition, based on the final decision, all adjustments to rates are prospective and not retroactive.

In addition, based on the final decision.

All adjustments to rates or a prospective not retroactive.

Speaker 2: Old State Water filed an advice letter that implemented the new cost of capital effective July 31st, 2023.

Golden State water filed an advice letter that implemented the new cost of capital.

<unk> July 31 2023.

Speaker 2: As I just mentioned, the decision allowed for the continuation of the water cost of capital mechanisms.

As I just mentioned the decision allowed for the continuation of the water cost of capital mechanism.

Speaker 2: For the period from October 1, 2021 through September 30, 2022, the Moody's AA utility bond rate increased by 102.8 basis points from the benchmark.

For the period from October one 2021 through September 32022, the Moody's double a utility bond rates increased by 102 eight basis points from the benchmark.

Speaker 2: which triggered the water cost of capital mechanism adjustment of 51 basis points.

Which triggered the water cost of capital mechanism adjustment of 51 basis points.

Speaker 2: Because the recently authorized cost of capital is prospective.

Because the recently authorized cost of capital is prospective.

Speaker 2: Golden State Waters adopted return on equity increased from 8.85% to 9.3%, 9.36%.

Golden State waters adopted return on equity.

Increased from 885% to 9393, 6%.

Speaker 2: and it's caused the debt decreased from 6.6 percent to 5.1 percent.

And its cost of debt decreased from six 6% to five 1%.

Speaker 2: Both effective July 31st, 2023.

Both effective July 31 2023.

Speaker 2: Additionally, for the period from October 1, 2022 through September 30, 2023, the Moody WAA utility bond rate increased by 139.7 base points from the benchmark.

Additionally for the period from October one 2022 through September 32023 <unk>.

The Moody's double AA utility bond rate increased by 139 seven basis points from the benchmark.

Speaker 2: which triggered another water cost of capital mechanism adjustment.

Which triggered another water cost of capital mechanism adjustment.

Speaker 2: In October , Golden State Water filed an advice letter to establish the water cost of capital mechanism for 2024.

In October at Golden State water filed an advice letter to establish the water cost of capital mechanism for 2024.

Speaker 2: which was approved last week on November the 2nd, to increase the 9.36% adopted return on equity.

Which was approved last week on November the second to.

To increase the 936% adopted return on equity.

Speaker 2: 10.06% effective January 1st, 2024.

The 10.06% effective January one 2024.

Moving on to slide 15.

Speaker 2: Our electric use utility subsidiary filed its general rate case on August 30th, 2022.

Our electric utility subsidiary filed its general rate case on August 32022.

Speaker 2: for new rates for the period 2023 through 2026.

New rates for the period 2023 through 2026.

Speaker 2: The application includes additional capital expenditures for the four-year rate cycle and a new cost to capital.

The application includes additional capital expenditures for the four year rate cycle, and a new cost of capital.

Speaker 2: We have also requested the recovery of more than $22 million in capital already spent related to the wildfire mitigation plan.

We have also requested recovery of more than $22 million in capital already spent related to the wildfire mitigation plans.

Speaker 2: CPUC has approved a decision for a general rate case memorandum account that will make new rates once approved in a CPUC final decision.

The CPUC has approved the decision for a general rate case memorandum account that will make new rates once approved and the CPUC final decision.

Speaker 2: effective January 1st, 2023.

Effective January one 2023.

Speaker 2: Turning our attention to slide 16, we present the growth in Golden State Waters adopted average water rate base from 2018 to 2012.

Turning our attention to slide 16, we present the growth in Golden State Water's adopted average water rate base from 2018 to 2024.

Speaker 2: Old state waters adopted average rate based increases from $752.2 million in 2018.

Golden State waters adopted average rate base increases from $752 $2 million in 2018.

Speaker 2: to $1,357.5 million in 2024.

To $1 357 $5 million in 2024.

Speaker 2: That's a compound annual growth rate of 10.3% for the six-year period.

That's a compound annual growth rate of 10, 3%.

For the six year period.

Let's continue to <unk>.

Speaker 2: ASUS contributed earnings of 12 cents per share for the third quarter for both 2023 and 2022.

The issue has contributed earnings of <unk> 12 per share.

For the third quarter for both 2023 and 2022.

Speaker 2: For the year to date, 2023, ASUS's earnings were 38 cents per share.

For the year to date 2023.

<unk> earnings were <unk> 38 per share.

Speaker 2: An increase of 9 cents per share compared to 29 cents per share for the same period of 2022.

An increase of <unk> <unk> per share compared to 29 per share for the same period of 2022.

Speaker 2: The year today's increase was largely due to an increase in construction activity due to timing differences of when construction work was performed.

The year to date increase was largely due to an increase in construction activity due to timing differences of when construction work was performed.

Speaker 2: and an increase in management fee revenue resulting from the resolution of various economic price adjustments.

And an increase in management fee revenue, resulting from the resolution of various economic price adjustments.

Speaker 2: RC offset by higher overall operating expenses and interest costs has compared to the same period of 2022.

Partially offset by higher overall operating expenses and interest costs.

Compared to the same period of 2022.

Speaker 2: The US is on target to contribute 45 cents to 49 cents per share for the year.

<unk> is on target to contribute 45 to <unk> 49 per share for the year.

Speaker 2: As previously highlighted, ASUS had two contract award wins during the quarter.

As previously highlighted <unk> had two contract award wins during the quarter.

Speaker 2: With the award of the estimated $349 million contract value over a 50-year period, ASUS will assume operations at Naval Air Station Pax River following the completion of a six-month transition period.

With the award of the estimated $349 million contract value over a 50 year period.

<unk> will assume operations at Naval Air Station Pax River following the completion of the six month transition period.

Speaker 2: The SUS was also awarded a new 15-year contract to serve joint base Cape Cod.

<unk> was also awarded a new 15 year contract to serve joint base Cape Cod.

Speaker 2: Under this contract, ASUS will have the opportunity to perform work through the periodic issuance of task orders by the US government.

Under this contract <unk> will have the opportunity to perform work through the periodic issuance of task orders by the U S government.

Speaker 2: for up to a maximum initial value of $45 million over a 15-year period, subject to annual economic

For up to a maximum initial value of $45 million over a 15 year period.

Subject to annual economic price adjustments.

Speaker 2: In September , the first task order was issued with a value of $2.3 million.

In September the first task order was issued with a value of $2 million to $3 million.

Speaker 2: We perform evaluation, construction, and transition services that are scheduled for completion in 2024.

We performed evaluation construction and transition services that are scheduled for completion in 2024.

Speaker 2: We project that ASUS will contribute 48 cents to 52 cents per share for 2024.

We project that <unk> will contribute 48 to 52 per share for 2024.

Speaker 2: We remain confident that we can effectively compete for new military base contract awards based on our proven track record of managing water and wastewater related services for military bases since 2004. I'd like to turn our attention to dividends.

We remain confident that we can effectively compete for new military base contract awards based on our proven track record of managing water and wastewater related services for military basis since 2004.

I'd like to turn our attention to dividends.

Which remain a compelling part of our investment story.

Speaker 2: Our quarterly dividend rate has grown at a compound annual growth rate of 9.4% over the last five years. From 2018 through two-

Our quarterly dividend rate has grown at a compound annual growth rate of nine 4% over the last five years from 2018.

Through 2023.

Speaker 2: These increases are consistent with our policy to achieve a compound annual growth rate in the dividend of more than 7% over the long term.

These increases are consistent with our policy to achieve a compound annual growth rate in the dividend of more than 7% over the long term.

Speaker 2: Our strong dividend history is something that the company is proud of and is a continuing asset shareholder.

Our strong dividend history is something that the company is proud of.

And as our continuing asset shareholders.

Speaker 2: I'd like to conclude our prepared remarks by thanking you for your interest in American States water. And we'll now turn the call over to the operator for questions.

I would like to conclude our prepared remarks by thanking you for your interest in American States water and.

And I will now turn the call over to the operator for questions.

Speaker 1: Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your touch tone phone.

Thank you we will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.

Speaker 1: If you're using a speaker phone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we'll pause momentarily to assemble a roster.

If youre using a speakerphone please pick up your handset before pressing the keys to withdraw your question. Please press Star then two at.

At this time, we'll pause momentarily to assemble our roster.

Again Thats Star then one to ask a question.

Speaker 1: Our first question comes from Jonathan Reader from Wells Fargo. Please go ahead.

Our first question comes from Jonathan Reeder from Wells Fargo. Please go ahead.

Hey, Bob and Eva how are you guys today.

Speaker 4: Doing good, Jonathan. How about you? Not too bad. Thanks for asking. Want to start first the CAPEX budget. I think earlier in the year, you're expecting like 140 to 160 million. And you've increased it to 155 to 170. Can you expand on what drove the increase and does it at all reflect, you know, the substantially higher CAPEX budget requested in the recently filed GRC?

Doing good Jonathan how about you.

Not too bad thanks for asking.

I wanted to start first the Capex budget I think earlier in the year youre expecting like $140 million to $160 million.

You've increased one.

55 to 170 can you expand on what drove that.

Bruce.

At all reflect the substantially higher Capex budget requested in the recently filed JRC.

Speaker 2: Yeah, Jonathan, we're just a little bit of head schedule on our projects. We do have a pretty substantial step up in our request with the new rate case that we filed, and it's real important that we continue to spend capital on time. So our team is doing a great job.

Yeah, Jonathan just a little bit ahead of schedule on our projects.

We do have.

Pretty substantial step up in our request.

With the new rate case that we filed and it's real important that we continue to spend capital on time. So our our team is doing a great job.

Okay.

Yeah.

Speaker 4: Okay. Can you talk about what the annual rate increases were that were requested under the recently filed GRC, you know, based on that higher proposed CAPEX budget and, you know, I guess just how does that interplay with, you know, maintaining rate payer affordability? You know, is that something that's becoming like an increasing challenge for you guys?

Okay can you can you talk about what the annual rate increases.

That were requested under the recently filed JRC.

Based on that higher proposed Capex budget, I guess, how does that interplay with.

Maintaining great pair of affordability.

And Thats, becoming.

Like an increasing challenge for you guys.

Speaker 2: Yeah, so Don says you know we have eight different rate making areas, but the overall

Yes, so Jonathan.

Jonathan as you know, we have eight different ratemaking areas, but the overall.

Speaker 2: collective rate increase and under PUC rules, you sort of have to measure your requested increase versus...

Collective rate increase in.

Under PUC rules, you sort of have to measure your a requested increase versus.

Speaker 2: two years ago, so it's, you know, our requested increase for 2025 in comparison to 2023 rates.

Two years ago.

Our requested increase for 2025 in comparison to 2023 rates is in the neighborhood of 23% to 24%.

Speaker 2: is in the neighborhood of 23 to 24% for all the, you know, as an aggregate of all the eight rate-making areas. So some rate-making areas will be higher and some will be lower.

For all all of the.

As an aggregate of all of the.

Eight ratemaking areas, some ratemaking areas will be higher and some will be lower.

Speaker 2: Yeah, I know affordability is always something we need to keep an eye on and have been. We do have a substantial step up in the CapEx. We are pretty comfortable we're not going to get 100% of what we asked for, but we think all of the projects are needed, and I think it's really important that we have a...

Yes, I know affordability is always something we need to keep an eye on and have been.

We do.

Have a substantial step up in the Capex.

We're pretty comfortable were not going to get the 100% of what we asked for but.

We think all of the projects are needed and I think it's really important.

<unk> that we have.

Speaker 2: a very reliable system for our customers. So we do balance that with affordability.

A very reliable system.

For our customers, so we do balance that with affordability.

Speaker 3: Jonathan, if I may add, another big factor of the increase is really supply costs. We expect that we may take some wealth down because of meeting the new requirement of the PFAS. So we do expect supply costs will increase in the next rate case cycle. That directly impacts the revenue increase for the rate case cycle.

Got it.

If I may add one off.

And that's a big factor of the increase in supply costs.

We expect that will may take some wells down because of meeting the newly acquired <unk> health.

So we do expect.

Supply cost.

Well increase in the next rate case cycle that.

<unk> directly impact that revenue increase for the rate case cycle.

Speaker 4: Yeah, sure. Does, uh, does any of that CapEx just reflect also, like, PFAS, you know, CapEx, um, compliance costs too, or?

Yes sure.

Is any of that Capex just read.

Alright.

With US you know.

Capex.

Compliance costs to her.

Speaker 2: I mean, there are some dollars in there for PFAS, but it's...

I mean, there are some dollars in there for P for P fast, but it's.

Speaker 2: Yeah, I would say it's not a big amount associated with the overall request.

I would say it's not a.

A big amount associated with the overall request.

Speaker 2: And Jonathan, just the cost of everything is really increased since the last rate request.

And you know Jonathan just the cost of everything has really increased since the last.

The rate request.

Sure.

Speaker 4: Okay, and then Eva, just to clarify one of your statements, with the $150 to $200 million of additional capital comment, does that relate just to potential equity needs over the 2024 to 2026 period?

Okay, and then just to clarify one of your statements with the $150 million to $200 million of additional capital comment.

Does that relate just to potential equity needs over the 2024 to 2026 periods.

Yeah, some small systems that we're looking into, it does include that, and also fund the current business, because we haven't issued equity since 2009, as you may recall, Jonathan. So it's been 14 years that we haven't gone to the market for this, and, you know, we try to build a very strong balance sheet, and we'll continue to do so. So it's important we try to maintain a certain equity ratio, consolidate the basis as well. Yeah.

Yes, some smart system that we're looking into.

It does include that.

Also the current business.

We haven't issued equity since 2009 you.

Got it.

14 years that we haven't gone through the market.

We try to do.

They are very strong balance sheet and we'll continue to do so so it's important to maintain a certain equity ratio.

Consolidated basis as well.

It's all equity. The $150,000 to $200,000 is all equity. Okay. And it's over 2024 to 2026.

So it's okay, but it's all equity the $1 50 to 200 is all equity yet.

Okay, and it's over 2024 to 2026.

Yes.

A client right now.

Okay. And then maybe help me understand the joint base Cape Cod contract. And I guess how it differs from the traditional 50 year contracts. Is it basically, you know, just cover construction work on the base over the next 15 years and no, oh, and component. Oh, no.

Okay, and then maybe help me understand the joint base, Cape Cod contract and I guess, how it differs from the traditional <unk>.

50 year contracts is it basically just cover construction work on the base over the next 15 years and no O&M component.

No not necessarily.

<unk>.

So the different branches of the Department of Defense are looking for.

So it's a different branches of the department of defense are looking for.

Perhaps alternatives to the 50-year privatization contract.

Perhaps alternatives to the 50 year privatization contract.

Our company has sort of been out on the leading edge here working to try to

Our company has sort of been out on the leading edge here working to try to.

I guess create, I would say, a second model for privatization.

I guess create.

I would say a second model for <unk>.

Privatization.

And so we have this contract at Joint Base Cape Cod, or JBCC. And as we mentioned earlier, Jonathan, it's you have these annual task orders that you get approved. And so we're working through this process. But this is a very new contract type.

And so we have this contract it.

Base, Cape Cod or JBC and.

As we mentioned earlier Jonathan it's.

Do you have these annual task orders that you.

Get approved.

And so we're working through this process, but this is a this is a very new contract type.

It's possible this could be used other places. We're very excited about this contract.

It's possible this could be used other places.

We're very excited about this contract.

It's.

not perhaps as easy to understand as the standard utility privatization contract, which we think is also just a very effective way to improve the facilities for the military base.

Not perhaps as easy to understand as the standard utility privatization contract, which we which we think is also just very.

Effective way to improve the facilities for the military bases.

Okay, so are you actually, though, going to be on that base, like, operating the system in addition to doing some of these, like,

Okay. So are you actually that was going to be on that base like operating the system and additional to doing some of these like.

task orders, which are, I mean, are the task orders like capital projects or?

Task orders, which are I mean, our the task orders like capital projects are.

Right, so Jonathan, we're sort of in this transition phase at the base.

Right. So Jonathan we're sort of in this transition phase at the base.

Hum.

You know, although we, you know, we've got, hasn't been approved yet, but the plan is for us to.

Although we.

Got it.

It Hasnt been approved yet, but the plan is for us to.

operate, maintain, operate and maintain the system, do capital improvements, do renewal and replacement, et cetera.

Operate maintain operate and maintain the system do capital improvements through renewal and replacement et cetera.

But it would be one of these approaches where each year we would get sort of approval to go ahead and move forward with that year's projects.

But it would be one of these approaches where.

Each year, we would get approval to go ahead and move forward with that years.

<unk>.

O&M, capital improvements, et cetera. So it's.

O&M capital improvements et cetera, so it's.

I would say it's similar work to what we do under the 50-year contracts, it's just the contracting vehicles is a bit different. Okay, so...

I would say, it's similar work to what we do under the 50 year contracts just the contracting vehicles is a bit different.

Okay. So.

Each year you get like.

a new contractor or dollar amount and that would reflect both O&M work as well as renewal and replacement.

A new contractor or dollar amount and that would reflect both O&M work as well as renewal and replacement.

Yes, that's that's how we think it'll work. Although, you know, we're again the first ones doing this, but that's that's how we think it'll work

Yes, that's that's how we think it will work although we are again the first one is doing this but that's how we think it will work.

Okay, interesting. Do you expect to be, is this going to be the model that...

Okay interesting.

Do you expect I mean is this going to be the model that.

you know, any new bases that come up for grabs or are gonna be under this 15 year versus the 50 year because I mean, you know, certainly from

Any new basins that come up for grabs here are going to be under this 15 year versus that 50 year, because I mean certainly from.

from our regulated investor kind of standpoint, I mean, the 50 year seems to provide, you know, longer term certainty around the stability of the business.

From a regulated investor kind of standpoint, I mean, the 50 year seems to provide.

Longer term certainty around.

The stability of the business.

It I would say it's an alternative to the for those folks that are those departments that

I would say, it's an alternative to the for those folks that are those departments that.

aren't completely sold on the 50 year privatization, it is an alternative.

Arent completely sold on the 50 year privatization. It is it is an alternative.

Gotcha, Okay, Alright I appreciate.

I Should've mentioned that.

The government will.

Basically turnover the system too.

You know to a different owner and so we'll be working with that owner on this particular.

To a different owner.

So we'll be working with that owner.

This particular project.

So.

So what does that mean? Does it, that means it might be a, you know, I don't want you sitting there thinking, well, it's easy for the government to take this thing back. You should think that, okay, it's, although not as easy to take it back as under the 50-year version, it is, it still will be difficult for them to take the system back. And they're, you know, they typically don't privatize things until it's,

So what does that mean that means that might be.

I don't want you sitting there thinking well, it's easy for the government to take this thing back.

You should think that okay, it's although not as easy to take it back is under the 50 year.

<unk> it.

It is still will be difficult for them to take the system back in there.

Typically don't prioritize things until it's.

until you're in need of repair and capital improvement.

Until you need you are in need of repair.

Capital improvements.

So we're, I mean, we're super excited about working with the folks at JBCC on this project and consider it sort of an innovative contracting method.

So we're I mean, we're super excited.

Cited about working with the folks at JBC on this project and consider it sort of an innovative contracting method.

Gotcha. Okay. No, I I look forward to learning a little more about it next time we get together. So appreciate that. Appreciate the details

Gotcha, Okay, Alright, I look forward to learn more about it next time, we get together so.

Great.

To date the details.

Again, if you have a question. Please press Star then one.

There are no more questions in the queue. This concludes our question and answer session. I'd like to turn the conference back over to Bob Sprowls for any closing remarks.

There are no more questions in the queue.

This concludes our question and answer session I would like to turn the conference back over to Bob Sprowls for any closing remarks.

Yes, thank you Jason. I just want to thank everybody today for your participation and let you know we look forward to speaking with you the next quarter and wish you all happy holiday season. Thank you.

Yes. Thank you Jason I just wanted to thank everybody today for your participation and led to note. We look forward to speaking with you.

The next quarter and wish you all happy holiday season. Thank you.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

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Ladies and gentlemen, thank you for standing by. Welcome to the American State's Water Company conference called discussing the company's third quarter 2023 results.

Ladies and gentlemen, thank you for standing by and welcome to the American States Water Company Conference call discussing the company's third quarter 2023 results.

This call is being recorded. If you'd like to listen to the replay of this call, it will begin this afternoon at 5 p.m. Eastern Time and run through Tuesday, November 14th, 2023 on the company's website www.aswater.com. The slides that the company will be referring to are also available on the website.

This call is being recorded.

You'd like to listen to the replay of this call. It will begin this afternoon at five P. M. Eastern time and run through Tuesday November 14th 2023 on the company's website www dot a S water dot com the slides that the company will be referring to are also available on the website.

Should you need assistance? Please sign a conference special by President Starkey followed by zero. This call will be limited to an hour. Presenting today from American States Water Company, our Bob Sprouls, President and Chief Executive Officer and Eva Tang, Senior Vice President of Finance and Chief Financial Officer.

Should you need assistance. Please signal a conference specialist by pressing star key followed by zero. This call will be limited to an hour.

Presenting today from American States water company are Bob Sprowls, President and Chief Executive Officer, and Eva Tang Senior Vice President of Finance and Chief Financial Officer. As a reminder, certain matters discussed during this conference call may be forward looking statements intended to qualify for the safe Harbor from liability established.

As a reminder, certain matters to discuss during this conference, called may be for looking statements intended to qualify for the safe harbor from liability established by the Private Security Lidigation Reform Act of 1995.

At least by the private Securities Litigation Reform Act of 1995.

Please review a description of the company's risks and uncertainties in our most recent Form 10-K and Form 10-Q on file with the Securities and Exchange Commission.

Please review a description of the company's risks and uncertainties in our most recent recent Form 10-K and Form 10-Q on file with the Securities and Exchange Commission.

In addition, this conference call will include a discussion of certain measures that are not prepared in accordance with General Accepted Accounting Principles, or GAP, in the United States and constitute non- GAAP financial measures under SEC rules.

In addition, this conference call will include a discussion of certain measures that are not prepared in accordance with general accepted accounting principles or GAAP in the United States and constitute non-GAAP financial measures under SEC rules.

These non- GAAP financial measures are derived from consolidated financial information, but are not presented in our financial statements that are prepared in accordance with GAP. For more details, please refer to the press release.

non-GAAP financial measures are derived from consolidated financial information, but are not presented in our financial statements that are prepared in accordance with GAAP for more details. Please refer to the press release.

At this time, I will turn the call over to Bob Sprouse, President and Chief Executive Officer of American States Water Company.

At this time I will turn the call over to Bob Sprowls, President and Chief Executive Officer of American States water company.

Thank you Jason.

Welcome everyone, and thank you for joining us today. I'll begin with some brief comments on the quarter. Eva will then discuss some financial details.

Welcome everyone and thank you for joining us today.

I'll begin with some brief comments on the quarter Eva will then discuss some financial details.

And then I'll wrap it up with updates on regulatory activity, ASUS, dividends, and then we'll take your questions. Let's brief...

And then I'll wrap it up with updates on regulatory activity.

U S dividends and then we'll take your questions.

Let's briefly discuss our quarterly earnings.

recorded diluted earnings for the quarter increased by $0.16 per share from last year or $0.12 per share, excluding a favorable variance of $0.04 per share, resulting from the receipt of a final decision in the cost of capital proceeding.

We recorded diluted earnings for the quarter increased by <unk> 16 per share from last year.

Or <unk> 12 per share excluding a favorable variance of <unk> <unk> per share, resulting from the receipt of a final decision in the cost of capital proceeding.

in June 2023 at our water utility that Eva will...

June 2023 at our water utility.

Eva will discuss later.

The higher adjusted earnings of 12 cents per share was largely due to the new 2023 water rates approved in Golden State Water's final general rate case decision.

The higher adjusted earnings of <unk> 12 per share largely due to the new 2023 water rates approved in Golden State Water's final general rate case decision.

On the regulatory front, we've had some significant events at Golden State Water.

On the regulatory front, we've had some significant events at Golden State water.

We filed a new general rate case in August with the California Public Utilities Commission, or CPUC, to set new rates for the years 2025 through 2027.

We filed a new general rate case in August with the California, Public Utilities Commission or CPUC.

Set new rates for the years 2025 through 2027.

The filing included a request for capital investment of $611.4 million over the rate cycle.

The filing included a request for capital investment of $611 $4 million over the rate cycle.

In addition, as a result of triggering our existing water cost of capital mechanism, we filed an advice letter with the CPUC to increase our authorized return on equity from 9.36%.

In addition, as a result of triggering our existing water cost of capital mechanism.

We filed an advice letter with the CPUC to increase our authorized return on equity from 936%.

10.06%, which has been approved and will be effective on January 1st, 2024.

To 10.06%, which has been approved and will be effective on January one 2024.

From an operations perspective, it's been business as usual for our subsidiaries.

From an operations perspective, it's been business as usual for our subsidiaries.

providing reliable water, electric, and wastewater services to our regulated water and electric utility customers, as well as on the military.

Providing reliable water electric and wastewater services to our regulated water and electric utility customers.

As well as on the military bases we serve.

We plan to spend $155 million to $170 million this year in infrastructure investments at our regulated utilities.

We plan to spend 155 million to $170 million this year in infrastructure investments at our regulated utilities.

We're very pleased that ASUS was awarded two contracts by the U.S. government in the third quarter to operate, maintain, and provide construction management services for the water distribution and wastewater collection facilities on two military bases.

We're very pleased that <unk> was awarded two contracts by the U S government in the third quarter to operate maintain and provide construction management services for the water distribution and wastewater collection facilities on two military bases.

The first was the Navy contract we were awarded for Naval Air Station Protection River, Our Pax River located in Maryland, which is our first Navy contract.

First was the Navy contract we were awarded for Naval Air Station Patuxent River or Pax River located in Maryland, which is our first Navy contract.

The initial value of the contract is estimated at $349 million over a 50-year period.

The initial value of the contract is estimated at $349 million over a 50 year period.

This contract is similar in form to our eight other military privatization contracts.

This contract is similar in form to our eight other military privatization contracts.

In addition, ASUS was awarded a new 15-year contract at Joint Base Cape Cod, located in Massachusetts, that is different than our existing 50-year contract.

In addition, <unk> was awarded a new 15 year contract at joint base Cape Cod located in Massachusetts that is different than our existing 50 year contracts.

Under this contract, ASUS will have the opportunity to perform work through the periodic issuance of task orders by the U.S. government.

Under this contract <unk> will have the opportunity to perform work through the periodic issuance of task orders by the U S government.

or up to a maximum initial value of $45 million over a 15-year period.

We're up to a maximum initial value of $45 million over a 15 year period.

Both new contracts are subject to annual economic price adjustment.

Both new contracts are subject to annual economic price adjustments.

We take great pride in our strong relationship with the US government and their continued confidence in our expertise in managing water and wastewater systems on military bases.

We take great pride in our strong relationship with the U S government and their continued confidence in our expertise in managing water and wastewater systems.

On military bases.

And we feel we are well positioned to continue competing for new contracts in the future.

And we feel we are well positioned to continue competing for new contracts in the future.

Eva will discuss the quarterly earnings and liquidity, and I'll turn the call over to her.

Eva will discuss the quarterly earnings and liquidity and I'll turn the call over to her.

Thank you, Bob. Hello everyone. Let me start with our third quarter results.

Hello, everyone.

Let me start with.

Hello.

Consolidated earnings as reported were $0.85 per share for the quarter as compared to $0.69 per share for the third quarter of 2022, an increase of $0.16 per share.

Consolidated.

SME point at 80.

Thanks, Chris, Yes, like a quarter, that's compared to 69 cents per share.

What I'm trying to think again, an increase of 16 <unk> per share.

In last year's third quarter, Golden State Water recorded a decrease in earnings of $0.04 per share for revenue subject to refund based on its cost of capital filing in 2021.

Okay.

Caught Ed Gordo Y daily Cologuard to AEP clean hanging out.

Well I think revenue can be based on <unk> cost of capital.

I can tell you why.

as a result of receiving the final decision in the cost of capital proceeding in June that sets the cost of capital prospectively.

Currently pellet ultimately feeding a final decision in the cost of capital proceeding in June.

Our cost of capital effectively.

The $0.04 per share recorded in Q3 2022 was reversed in the second quarter this year.

Therefore, I cannot recall any bank here between 2000 10-Q, what.

What do ebay, Inc. Second quarter next year.

Excluding this item, adjusted consolidated earnings for the third quarter of 2023 were $0.85 per share as compared to adjusted earnings of $0.73 per share for the third quarter of last year, an increase of $0.12 per share.

Excluding this item I guess.

Consolidated.

Third quarter of 2000 tactically.

<unk> per share as compared to <unk>.

Great. Thanks.

Slide 10 quarter of last year.

It wont crank out a trough here.

For our water utility, Golden State Water reported the earnings were $0.72 per share as compared to $0.54 per share for the third quarter of 2022, an $0.18 per share increase.

Well what are your kind of Golden state water.

Okay perfect per share as compared to 54 cents per share and core client came true.

Okay.

Locally.

Both Ivan and I just discussed affected earnings at the water segment.

I think I guess, Scott affecting earnings while at Beckman.

So factoring in the same effect from the two items.

So factoring.

Affect cognitive.

Adjust the earnings for the third quarter at water segment or 72 cents per share

I guess the earnings credit third quarter.

For the water segment were 70% for this year.

which was an increase of $0.14 per share as compared to just the earnings of $0.58 per share for the third quarter of 2020.

Which was an increase of <unk> 10 per share.

Compared to our guests.

58 per share.

The third quarter of 2022.

The $0.14 per share increase in 2023 Adjusted Earnings largely represents the difference from the 2021 adopted rates and 2023 second year increase.

And <unk> <unk> per share increasing train train three I guess.

Any large I think you represent.

At different times that 'twenty, one adopted rate.

<unk> III second year, increasing price.

Partially offset by increases in operating and intrinsic

Surety offset by increases in operating and interest expenses.

Our electric segment earnings for the third quarter this year were $0.04 per share, which were flat compared to the same period in 2022, largely resulting from not having new rates in effect for 2023 as we await the pending electric GRC that will set new rates for 2023 through 2026.

Our electric segment.

Third quarter next year or four cents per share, which was flat compared to <unk> 22.

I actually recurring from not having the right track for train train three as we await the pending electric geography that we're in.

New rates for train train three clearly train six.

while also experiencing continued increases in overall operating expenses and interest costs.

Also experiencing continued to increase.

Our operating expenses and interest costs.

The increase in expenses were mostly offset by favorable changes of certain flows.

The increase expenses were mostly offset by favorable changes.

Of total flow through income taxes.

When a decision is issued in the Electric DRC, new rates are expected to be retroactive to January 2023, and cumulative adjustment will be recorded at the time.

Good question.

Electric GIC new rate I expect it to be retroactive January trying to train three and cumulative adjustment will be recorded.

Pat.

Earnings from our contracted services segment were $0.12 per share for this quarter, the same as the earnings for the same period in 2022.

Contact at <unk> 10 per share for this quarter. This time.

Thank you.

Yeah.

Consolidated revenues for the third quarter increased by $16.7 million as compared to the same period in 2022.

Consolidated revenue.

<unk> increased by $16 $7 million as compared to the same period in 2000.

During Q2.

Revenues for the water segment increased by $15.4 million, largely representing the difference from the 2021 adopted rates recorded in 2022 and 2023 rates approved in June .

Revenue for the water segment increased by $15 $4 million.

Representing a defense content <unk> adapter rates recorded in 2022.

<unk> 2023 rate approved in June.

partially offset by a decrease in revenue resulting from the cost of capital decision effective July .

Partially offset by increasing revenue, resulting from.

Our cost of capital application effective July.

31, 2023, which included the fact of a reduction in the cost of debt recovered in rates partially offset by a higher authorized return on equity.

Wei <unk>.

Including the effect of capturing the cost of debt capex in rate, partially offset by a higher authorized.

It quickly.

In addition, bond revenue were lower in the third quarter of 2020 to $1.9 million due to the recording of an estimate of revenue subject to refund at the time.

In addition, 500 revenue Noah.

<unk>.

One 9 million downloads.

The recording of an estimate of vessels that came from the fact at the time.

Electric revenues for three months ended September 30, 2023, have remained flat compared to same period in 2022, as new rates for 2023 has yet to be.

Electric revenue side three months ended September 32023 have remained flat compared to the same period in 2010 as new rates for <unk> III.

It could be.

In addition, there was an increase in revenues of $1.2 million from our contracted services segment due to an increase in management fees revenue from annual economic price adjustment and higher construction activity.

In addition del Webb and increasing revenue of $5 $2 million some odd contracts Beckman.

The increase in management fee revenue from annual economic price adjustment and higher catastrophe activity.

Turning to slide 9 and looking at total operating expenses other than supply cost.

Turning to slide nine and looking at total operating expenses aggregates supply costs.

Consolidated expenses increased $1.9 million as compared to last year's third quarter.

Consolidated expenses increased $1 $9 million as compared to last years third quarter.

The increase was largely related to higher construction costs at our contracted services segment and higher other operation and maintenance expenses across all business segments during this third quarter.

The increase was largely related to higher construction cost at our contracted services segment.

Other operation and maintenance expenses across our business segments during the third quarter.

These increases were partially offset by lower administrative and general expenses.

These increases were partially offset by lower and trademarks and general expenses.

Interest expense, net of interest income, increased by $2.9 million due to higher average interest rate during the quarter and increases in overall borrowing level.

Interest expense net of interest income increased by $2 $9 million.

To higher average interest rates during the quarter and increases in volume.

Volume level.

Other expenses, other expense, net of other income increased by $1.4 million due primarily to an increase in the non-service cost component for Golden State Waters Benefit Plan.

Other expenses other expense net of other income increased by $1 $4 million.

<unk> mother nature, increasing announced service cost component for Golden State waters benefit plan.

resulting from changes in actual aerial assumptions in the plane axis.

Resulting from changes in actuarial assumptions in different aspects.

However, as a result of Golden State Waters two-way balancing account authorized by the CPUC, changes in total net periodic pension costs related to the pension plan have no material impact to earnings.

However, as a result of Golden state water to wait balancing account authorized by the CPUC.

<unk> total net periodic pension costs related to the pension plan has no material impact right.

Slide 10 shows the adjusted ETS bridge compared to the third quarter of 2023 and 2022.

Slide 10.

<unk>.

I guess, the ETF space compared to the third quarter of 2000 campaigns, comparing the third quarters of 'twenty two 'twenty three and.

And 2022.

On slide 11.

This slide reflects our year-to-date earnings per share by segment as reported and adjusted.

This slide reflects our year to.

Earnings per share by segment, I'd say <unk> and Augusta.

The earnings as reported for the nine months ended September 30, 2023 were $2.82 as compared to $1.61 for the same period in 2022, an increase of $1.21 per share.

Fully diluted as reported for the nine months ended September 32023 select.

$2, 83% as compared to $1 61.

For the same period in 2022.

An increase of $1 21 per share.

Included in year-to-date 2023 results was $0.38 per share related to the impact of retroactive rates from the decision the water generated for the full year of 2022.

Included in year to date trends Street retail.

But the AE.

<unk> 38 per share related to the impact of retroactive rate funded decisioning the water general rate case for the full year of 2019.

of which 30 cents per share relates to the first nine months of 2020.

<unk> per.

Per share relates to the first nine months of 2022.

In addition, as a result of the full cost of capital decision, of the final, excuse me, the final cost of capital decision, the 2023 year-to-date results include $0.13 per share related to the reversal of the recording of a lower cost of debt in 2022, of which $0.10 per share was recorded during the nine months ended September 30, 2023.

In addition.

As a result of the full cost of capital decision of the final excuse me the final cost of capital decision that 2023 year to date retailer in crude service.

<unk> per share related to delivery.

Sure.

Joining of our lower cost of debt in 2022 of which <unk> 10 per share recorded during the nine months ended September 30.

Thank you too.

A $1.21 per share increase was also included a favorable variance of $0.17 per share from investments held to fund a retirement plan.

$1 21 per share an increase also included a favorable variance of <unk> 17 per share investments held to fund a retirement plan.

Excluding the three items mentioned above, it has consolidated earnings for the nine months ended September 30, 2023, worth $2.27 per share.

Excluding the three items mentioned above.

<unk> consolidated earnings for the nine months ended September 32023.

<unk>, 27%.

as compared to a just earning of $1.84 per share for the same period in 2022, an increase of $0.43 per share.

As compared to earnings of $1 84 per share for the same period in 2022.

An increase of 43 per share.

Turning to liquidity on slide 12.

Net cash provided by operating activities was $56.5 million through September of this year, as compared to $89.9 million for year-to-date 2022.

Net cash provided by our operating activities.

<unk> $6 $5 million through September of this year as compared to $89 $9 million for year to date and time trying to.

during the first nine months of last year are regulated utilities received.

During the first nine months of last year, our regulated utilities received <unk>.

$9.8 million in COVID-19 relief funds from the state of California to provide assistance to customers for delinquent water and electric customer bills incurred during the pandemic.

$9 $8 million in COVID-19 relief fund.

The state of California to provide assistance to customers.

And while they are in electric customer bills incurred during the pandemic.

There has been no relief funds received thus far in 2023.

There has been no refund received thus far in 2023.

The decrease in operating cash flow was also a result of lower water consumption.

The decrease in operating cash flow was also a result of lower water consumption.

and the delay in receiving water TRC final decision.

And the delays in receiving what Ati's financing station.

Go To Sea Water has implemented the new 2023 rate that took effect on July 31st.

Golden State water has implemented the new 2023 rate that took effect on July 31st.

Surcharges to recover retroactive amount accumulated through July 30 have also been implemented into October .

Surcharges to recover electroactive amounts accumulated June July has.

<unk> has also being implemented in October.

In addition, cash flow from construction-related activity at ASUS decreased this year, representing timing differences of when the work is being performed and when the cash is received for the payment of the work.

In addition, cash cell phone construction related activity at <unk>.

Increased this year with <unk> timing differences of when the work is being performed and when the cash into the season for the payment of that work.

For investing activities, our regulated utility invested $126 million on company-funded capital projects during the first nine months of 2023, and we project company-funded capital expenditure at our regulated utilities to be $155 to $107 million this year.

For investing activities, a regulated utility invested $126 million.

On company funded capital projects during the first nine months of 2023.

It will protect the company funded capital expenditures at our regulated utilities.

The $155 million to $107 million this year.

Yesterday, we executed an amendment to American State Water's credit facility that allows for the addition of a new bank joining the existing syndicate group.

Yesterday, we executed.

The amendment to American States water's credit facility that allows for.

The addition of a new bank joining dates listing syndicate group.

We are pleased to expand our banking group, which also increased AWR's borrowing capacity from $150 million to $165 million.

We're pleased to expand our banking group, which also increased AWS borrowing capacity from $150 million to $165 million.

that will provide additional support to the operations of ASUS and AWRPAC.

That will provide additional support to the operation of <unk> and <unk>.

In addition, American state water may seek additional capital of $150 to $200 million over the next three years, beginning in 2024, potentially through an at-the-market common equity program to fund business operations and pay down debt.

In addition, American states water may seek additional capital of $150 million to $200 million.

Over the next three years beginning.

Beginning in 2024.

Potentially through at the market common equity program to fund.

Business operations and pay down credit facility.

I will turn the car to power to Bob now. Thank you.

I will turn the call over to Bob now banking.

Thank you Eva. I will discuss a few key regulatory matters.

Thank you Eva.

I'll discuss a few key regulatory matters.

As discussed last quarter, and to provide you a recap of key points in the decision,

As discussed last quarter and to provide you a recap of key points in the decision.

The water utility rate case final decision issued on June 29th of this year set new rates for 2022 through 2024.

The water utility rate case final decision issued on June 29 of this year.

Set new rates for 2022 through 2024.

Authorizes a capital infrastructure budget of four hundred and four point eight million dollars over the three-year cycle Adopts new

Authorizes capital infrastructure budget of $404 $8 million over the three year cycles.

Adopt new operating expense levels.

and allows for additional increases in adopted revenues for 2023 and 2024, subject to an earnings test, and changes to the inflation index value.

And allows for additional increases and adopted revenues for 2023, and 2024 subject to an earnings test and changes to the inflation index values.

As mentioned earlier on August 14th Golden State water filed its water general rate case for water rates for the years 2025 through 2027.

Among other things, Gold State Water requested capital budgets in this application of $611.4 million over the rate cycle.

Among other things Golden State water requested capital budgets in this application of 611 $4 million over the rate cycle.

We also requested the continuation of mechanisms to accommodate fully decoupled revenues and sales and track differences between recorded and CPUC authorized supply-related expense.

We also requested the continuation of mechanisms to accommodate fully decoupled revenues and sales and track differences between recorded and CPUC authorized supply related expenses.

A decision in the water general rate case is scheduled for the fourth quarter of 2024 with new rates to become effective January 1, 2025.

A decision in the water general rate case is scheduled for the fourth quarter of 2024 with new rates to become effective January one 2025.

Also in June , the CPUC adopted the final decision in the cost of capital proceeding to set the new cost of capital for 2022 through 2024.

Also in June the CPUC adopt the final decision and the cost of capital proceeding to set the new cost of capital for 2022 through 2024.

The decision adopts a requested capital structure of 57% equity and 43% debt.

The decision adopts our requested capital structure of 57% equity and 43% debt.

A requested cost of debt, 5.1%.

Our requested cost of cost of debt of five 1%.

and an authorized return on equity of 8.85%.

And an authorized return on equity of 885%.

It also allows for the continuation of the water cost of capital mechanism.

It also allows for the continuation of the water cost of capital mechanism.

Okay.

In addition, based on the final decision, all adjustments to rates are prospective and not retroactive.

In addition, based on the final decision.

All adjustments to rates or a prospective not retroactive.

Old State Water File and Advice Letter that implemented the new cost of capital effective July 31st, 2023.

Golden State water filed an advice letter that implemented the new cost of capital effective July 31 2023.

As I just mentioned, the decision allowed for the continuation of the water cost of capital mechanism.

As I just mentioned the decision allowed for the continuation of the water cost of capital mechanism.

For the period from October 1, 2021 through September 30, 2022, the Moody's AA utility bond rate increased by 102.8 basis points from the benchmark.

For the period from October one 2021 through September 32022, the Moody's double AA utility bond rate increased by 102 eight basis points from the benchmark.

which triggered the water cost of capital mechanism adjustment of 51 basis points.

Which triggered the water cost of capital mechanism adjustment of 51 basis points.

Because the recently authorized cost of capital is prospective.

Because the recently authorized cost of capital is prospective.

Golden State Water's adopted return on equity increased from 8.85% to 9.36%.

Golden State waters adopted return on equity increased from 885% to 9393, 6%.

and its cost of debt decreased from 6.6% to 5.1%.

And its cost of debt decreased from six 6% to five 1%.

Both effective July 31st, 2023.

Both effective July 31 2023.

Additionally, for the period from October 1, 2022, through September 30, 2023, the Moody's AA utility bond rate increased by 139.7 base points from the benchmark.

Additionally for the period from October one 2022 through September 32023 the.

The Moody's double AA utility bond rate increased by $139 seven basis points from the benchmark.

which triggered another water cost and capital mechanism adjustment.

Which triggered another water cost of capital mechanism adjustment.

In October , Golden State Water filed an advice letter to establish the water cost of capital mechanism for 2024.

In October at Golden State water filed an advice letter to establish the water cost of capital mechanism for 2024.

which was approved last week on November the 2nd, to increase the 9.36% adopted return on equity.

Which was approved last week on November the second to.

To increase the 936% adopted return on equity.

10.06% effective January 1st, 2024.

10.06% effective January one 2024.

Moving on to slide 15.

Our electric utility subsidiary filed its general rate case on August 30th, 2022.

Our electric utility subsidiary filed its general rate case on August 32022.

for new rates for the period 2023 through 2026.

For new rates for the period 2023 through 2026.

The application includes additional capital expenditures for the four-year rate cycle and a new cost of capital.

The application includes additional capital expenditures for the four year rate cycle, and a new cost of capital.

We have also requested the recovery of more than $22 million in capital already spent related to the wildfire mitigation plan.

We have also requested recovery of more than $22 million in capital already spent related to the wildfire mitigation plans.

CPUC has approved a decision for a general rate case memorandum account that will make new rates once approved in a CPUC final decision.

The CPUC has approved the decision for a general rate case memorandum account that will make new rates once approved and the CPUC final decision.

effective January 1st, 2023.

Effective January one 2023.

Turning our attention to slide 16, we present the growth in Golden State Water's adopted average water rate base from 2018 to 2020.

Turning our attention to slide 16, we present the growth in Golden State Water's adopted average water rate base from 2018.

To 2024.

Old State Waters Adopted Average Rate Base increases from $752.2 million in 2018.

Golden State waters adopted average rate base increases from $752 $2 million in 2018.

to $1,357,500,000 in 2024.

The $1 357 $5 million in 2024.

That's a compound annual growth rate of 10.3% for the six-year period.

That's a compound annual growth rate of 10, 3%.

For the six year period.

Let's continue to <unk>.

ASUS contributed earnings of 12 cents per share for the third quarter for both 2023 and 2022.

<unk> has contributed earnings of <unk> 12 per share for the third quarter for both 2023 and 2022.

For the year to date, 2023, ASUS's earnings were $0.38 per share.

For the year to date 2023.

<unk> earnings were <unk> 38 per share.

an increase of $0.09 per share compared to $0.29 per share for the same period of 2022.

An increase of <unk> <unk> per share compared to 29 per share for the same period of 2022.

The year-to-date increase was largely due to an increase in construction activity due to timing differences of when construction work was performed.

The year to date increase was largely due to an increase in construction activity due to timing differences of when construction work was performed.

and an increase in management fee revenue resulting from the resolution of various economic price adjustments.

And an.

<unk> management fee revenue, resulting from the resolution of various economic price adjustments.

partially offset by higher overall operating expenses and interest costs as compared to the same period of 2022.

Partially offset by higher overall operating expenses and interest costs as compared to the same period of 2022.

ASUS is on target to contribute $0.45 to $0.49 per share for the year.

<unk> is on target to contribute 45 to <unk> 49 per share for the year.

As previously highlighted, ASUS had two contract award wins during the quarter.

As previously highlighted ASU has had two contract award wins during the quarter.

With the award of the estimated $349 million contract value over a 50-year period, ASUS will assume operations at Naval Air Station Pax River following the completion of a six-month transition period.

With the award of the estimated $349 million contract value over a 50 year period.

<unk> will assume operations at Naval Air Station Pax River following the completion of the six month transition period.

ASUS was also awarded a new 15-year contract to serve Joint Base Cape Cod.

<unk> was also awarded a new 15 year contract to serve joint base Cape Cod.

Under this contract, ASUS will have the opportunity to perform work through the periodic issuance of task orders by the U.S. government.

Under this contract <unk> will have the opportunity to perform work through the periodic issuance of task orders by the U S government.

for up to a maximum initial value of $45 million over a 15-year period subject to annual economic.

We're up to a maximum initial value of $45 million over a 15 year period.

Subject to annual economic price adjustments.

In September , the first task order was issued with a value of $2.3 million.

In September the first task order was issued with a value of $2 million to $3 million.

to perform evaluation, construction, and transition services that are scheduled for completion in 2024.

We performed evaluation construction and transition services that are scheduled for completion in 2024.

We project that ASUS will contribute $0.48 to $0.52 per share for 2024.

We project that <unk> will contribute 48 to 52 per share for 2024.

We remain confident that we can effectively compete for new military based contract awards based on our proven track record of managing water and wastewater related services for military bases since 2004. Like to turn our attention to dividends.

We remain confident that we can effectively compete for new military base contract awards based on our proven track record of managing water and wastewater related services for military bases since 2004.

I'd like to turn our attention to dividends.

Which remain a compelling part of our investment story.

Our quarterly dividend rate has grown at a compound annual growth rate of 9.4% over the last five years from 2018 through 2019.

Our quarterly dividend rate has grown at a compound annual growth rate of nine 4% over the last five years from 2018.

Through 2023.

These increases are consistent with our policy to achieve a compound annual growth rate in the dividend of more than 7% over the long term.

These increases are consistent with our policy to achieve a compound annual growth rate in the dividend of more than 7% over the long term.

Our strong dividend history is something that the company is proud of, and is a continuing asset shareholder.

Our strong dividend history is something that the company is proud of.

And as our continuing asset shareholders.

I'd like to conclude our prepared remarks by thanking you for your interest in American States water. And we'll now turn the call over to the operator for questions.

I'd like to conclude our prepared remarks by thanking you for your interest in American States water.

And I will now turn the call over to the operator for questions.

Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone.

Thank you we will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.

If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then two. At this time, we'll pause momentarily to assemble our roster.

If youre using a speakerphone please pick up your handset before pressing the keys to withdraw your question. Please press Star then two at.

At this time, we'll pause momentarily to assemble our roster.

Again Thats Star then one to ask a question.

Our first question comes from Jonathan Reeder from Wells Fargo. Please go ahead.

Our first question comes from Jonathan Reeder from Wells Fargo. Please go ahead.

Hey, Bob and Eva how are you guys today.

Doing good, Jonathan. How about you? Not too bad. Thanks for asking. I want to start first with the CapEx budget. I think earlier in the year you were expecting like $140 to $160 million, and you've increased it to $155 to $170. Can you expand on what drove the increase, and does it at all reflect, you know, the substantially higher CapEx budget requested in the recently filed GRC?

Doing good Jonathan how about you.

Not too bad thanks for asking.

I wanted to start first the Capex budget I think earlier in the year, you are expecting like $140 million to $160 million.

You can increase.

55 to 170 can you expand on what drove that.

And for US and does it at all reflect the substantially higher Capex budget requested in the recently filed GIC.

Yeah, Jonathan, we're just a little bit ahead of schedule on our projects. We do have a pretty substantial step up in our request with the new rate case that we filed and it's real important that we continue to spend capital on time, so our team is doing a great job.

Yeah, Jonathan we're just a little bit ahead of schedule on our projects.

We do have.

Pretty substantial step up in our request.

The new rate case that we filed and it's really important that we continue to spend capital on time. So our our team is doing a great job.

Okay.

Yes.

Okay. Can you talk about what the annual rate increases were that were requested under the recently filed GRC, you know, based on that higher proposed CAPEX budget and, you know, I guess just how does that interplay with, you know, maintaining rate payer affordability? You know, is that something that's becoming like an increasing challenge for you guys?

Okay can you can you talk about what the annual rate increases.

That were requested under the recently filed JRC.

Based on that higher proposed Capex budget, I guess, how does that interplay with.

Maintaining rate payer of affordability.

Something that's becoming.

Like an increasing challenge for you guys.

Yeah, so, Jonathan, as you know, we have eight different rate-making areas, but the overall

Yes, so Jonathan as you know, we have eight different ratemaking areas, but the overall.

collective rate increase and under PUC rules, you sort of have to measure your requested increase versus...

Our collective rate increase in.

Under PUC rules, you sort of have to measure your a requested increase versus.

two years ago, so it's, you know, our requested increase for 2025 in comparison to 2023 rates.

Two years ago.

Our requested increase for 2025 in comparison to 2023 rates is in the neighborhood of 23% to 24%.

is in the neighborhood at 23 to 24 percent. For all the, you know, as an aggregate of all the eight rate making areas, some rate making areas will be higher and some will be lower.

For all of the.

As an aggregate of all the.

Eight ratemaking areas, some rate, making areas will be higher and some will be lower.

Yeah, I know affordability is always something we need to keep an eye on and have been. We do have a substantial step up in the CAPEX. We're pretty comfortable. We're not going to get 100% of what we ask for, but we think all of the projects are needed and I think it's really important that we have a...

Yes, I know affordability is always something we need to keep an eye on and have been.

We do.

Have a substantial step up in the Capex.

We're pretty comfortable were not going to get the 100% of what we asked for Bud.

We thank all of the projects are needed and I think it's really important that we have.

a very reliable system for our customers. So we do balance that with affordability.

Very reliable system.

For our customers. So we do we do balance that with affordability.

And when, Jonathan, if I may add, one of another big factor of the increase is really supply costs. And we expect that we may take some wealth down because of meeting the new requirement of the PFAS. And so we do expect, you know, supply costs will increase in the next rate case cycle. You know, that directly impacts the revenue increase for the rate case cycle.

And one thing.

If I may add one offs and that.

A big factor of increasing <unk> supply costs.

We expect that will may take some wells down because of meeting the new requirement of 13 five.

So we do expect them to.

Supply cost.

It will increase in the next rate case cycle that that directly impact that revenue increase for the rate case cycle.

Yeah, sure. Does, uh, does any of that CapEx just reflect also, like, PFAS, you know, CapEx compliance costs too, or?

Yes sure.

Any of that Capex, just read also Mike piece.

Pizza.

<unk> Capex.

Compliance costs to her.

I mean, there are some dollars in there for PFAS, but it's...

I mean, there are some dollars in there for P for P fast, but it's.

Yeah, I would say it's not a big amount associated with the overall request.

I would say it's not a.

A big amount associated with the overall request.

And you know, Jonathan, just the cost of everything has really increased since the last rate request.

And you know Jonathan just the cost of everything has really increased since the last.

So the rate request.

Sure.

Okay. And then, Eva, just to clarify one of your statements, with the $150 to $200 million of additional capital comment, does that relate just to potential equity needs over the 2024 to 2026 period?

Okay, and then either just to clarify one of your statements with the $150 million to $200 million of additional capital comment.

Does that relate just to potential equity needs over the 2024 to 2026 period.

Yeah, some small systems that we're looking into, it does include that, and also fund the current business, because we haven't issued equity since 2009, as you may recall, Jonathan. So it's been 14 years that we haven't gone to the market for this, and, you know, we try to build a very strong balance sheet, and we'll continue to do so. So it's important we try to maintain a certain equity ratio, consolidate the basis as well.

Yes, some smart system that we're looking into.

It does include that.

Also the current business.

We have an issue at <unk> 2000, <unk> you may call it calendar <unk>.

14 years that we haven't gone through the market.

We try to do that.

Our strong balance sheet and we'll continue to do so it's important I will try to maintain.

Currency ratio.

At the consolidated basis as well.

Okay, it's all equity, the 150 to 200 is all equity. Yeah. Okay, and it's over 20, 24 to 20, 26.

So it's OK and total equity of 150 to 200 is all equity yet.

Okay, and it's over 2024 to 2026.

Yes.

Okay client right now.

Okay and then maybe help me understand the joint base Cape Cod contract and I guess how it differs from the traditional 50-year contracts. Does it basically you know just cover construction work on the base over the next 15 years and no O&M component? No.

Okay, and then maybe help me understand the joint base, Cape Cod contract and I guess, how it differs from the traditional 50 year contracts. So that basically just cover construction work on the base over the next 15 years and no O&M component.

No not necessarily.

So the different branches of the Department of Defense are looking for.

So it's a different branches of the department of defense are looking for.

Perhaps alternatives to the 50-year privatization contract.

Perhaps alternatives to the 50 year privatization contract.

Our company has sort of been out on the leading edge here working to try to

Our company has sort of been out on the leading edge here working to try to.

I guess create, I would say, a second model for privatization.

I guess create.

I would say a second model for <unk>.

Privatization.

And so we have this contract at Joint Base Cape Cod, or JBCC. And as we mentioned earlier, Jonathan, it's you have these annual task orders that you get approved. And so we're working through this process. But this is a very new contract type.

And so we have this contract it.

Base, Cape Cod, our JBC and.

As we mentioned earlier Jonathan it's.

Do you have these annual task orders that you.

Get approved.

And so we're working through this process, but this is a this is a very new contract type.

It's possible this could be used other places. We're very excited about this contract.

It's possible this could be used other places.

We're very excited about this contract.

It's.

not perhaps as easy to understand as the standard utility privatization contract, which we think is also just a very effective way to improve the facilities for the military base.

Not perhaps as easy to understand as the standard utility privatization contract, which we which.

Which we think is also just very.

Effective way to improve the facilities for the military basis.

Okay, so are you actually, though, going to be on that base, like, operating the system in addition to doing some of these, like,

Okay. So are you actually that was going to be on that base like operating the system and additional to doing some of these like.

task orders which are I mean are the task orders like capital projects or.

Task orders, which are.

The task orders like capital projects or.

Right, so Jonathan, we're sort of in this transition phase at the base.

Right, Jonathan we're sort of in this transition phase at the base.

You know, although we, you know, we've got, uh, hasn't been approved yet, but the plan is for us to...

Although we have got.

It Hasnt been approved yet, but the plan is for us to.

Operate, maintain, operate and maintain the system due capital improvements, through renewal and replacement, et cetera.

Operate maintained.

Operator maintain the system do capital improvements through renewal and replacement et cetera.

But it would be one of these approaches where each year we would get approval to go ahead and move forward with that year's project.

But it would be one of these.

Approaches where.

Each year, we would get approval to go ahead and move forward with that years.

Projects.

O&M, capital improvements, et cetera. So it's.

O&M capital improvements et cetera, so it's.

I would say it's similar work to what we do under the 50-year contracts, it's just the contracting vehicles is a bit different. Okay, so...

I'd say its similar work to what we do under the 50 year contracts just the contracting vehicles is a bit different.

Okay. So each year you get like.

a new contractor or dollar amount and that would reflect both O&M work as well as renewal and replacement.

A new contractor or dollar amount and that would reflect both O&M work as well as renewal and replacement.

Yes, that's how we think it'll work. Although, you know, we're, again, the first ones doing this, but that's how we think it'll work.

Yes, that's that's how we think it will work, although we are again in the first ones doing this but that's how we think it will work.

Okay, interesting. Do you expect to be, is this going to be the model that...

Okay interesting.

You expect I mean is this going to be the model that.

and he knew bases that come up for grabs are gonna be under this 15 year versus the 50 year. Cause I mean, you know, certainly from...

Any new basins that come up for grabs here are going to be under this 15 year versus the 50 year, because I mean certainly from.

from our regulated investor kind of standpoint, I mean, the 50 year seems to provide, you know, longer term certainty around the stability of the business.

From a regulated investor kind of standpoint, I mean, the 50 year seems to provide.

Longer term certainty around.

The stability of the business.

It I would say it's an alternative to the for those folks that are those departments that

I would say, it's an alternative to <unk>.

Those folks that are those departments that.

Completely sold on the 50 year privatization. It is an alternative.

Arent completely sold on the 50 year privatization. It is a it is an alternative.

Turning to <unk>.

Got you. Okay. I appreciate. I should mention that the government will.

Gotcha, Okay, Alright, I appreciate it I.

I should mentioned that.

The government will.

Basically turnover the system too.

You know to a different owner and so we'll be working with that owner on this particular.

To a different owner and so we will be working with that owner.

This particular project.

So.

So what does that mean? That means it might be a, I don't want you sitting there thinking, well, it's easy for the government to take this thing back. You should think that, okay, although not as easy to take it back as under the 50-year version, it still will be difficult for them to take the system back. And they're, you know, you typically don't privatize things until it's.

So what does that mean that means that might be.

I don't want you sitting there thinking well, it's easy for the government to take distinct back.

You should think that okay, it's although not as easy to take it back is under the 50 year version.

It is still will be difficult for them to take the system back in there.

<unk>.

You typically don't privatize things until it's.

until you need your need to repair and capital improve.

Until you need you are in need of repair.

<unk> capital improvements.

I mean, we're super excited about working with the folks at JBCC on this project and considerate sort of an innovative contracting method.

So we're I mean, we're super excited about working with the folks at JBC on this project.

Consider it sort of an innovative contracting method.

Gotcha. Okay. No, I I look forward to learning a little more about it next time we get together. So appreciate that. Appreciate the details

Gotcha, Okay, Alright, I look forward to learn more about it next time, we get together so I appreciate it.

The detail.

Again, if you have a question. Please press Star then one.

There are no more questions in the queue. This concludes our question and answer session. I'd like to turn the conference back over to Bob Sprowls for any closing remarks.

There are no more questions in the queue. This concludes our question and answer session I would like to turn the conference back over to Bob Sprowls for any closing remarks.

Yes, thank you, Jason. I just want to thank everybody today for your participation. And let you know, we look forward to speaking with you the next quarter and wish you all a happy holiday season. Thank you.

Yes. Thank you Jason I just wanted to thank everybody today for your participation and led to note. We look forward to speaking with you.

The next quarter and wish you all happy holiday season.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

The conference has now concluded. Thank you for attending today's presentation you may now disconnect.