Q2 2024 SJW Group Earnings Call

July 25, 2024

Operator: Good day, and thank you for standing by. Welcome to the 2024 second quarter SJW Group Financial Results Conference Call. At this time, all participants are in listen-only mode.

Speaker Change: Good day and thank you for standing by. Welcome to the 2024 Second Quarter SJW Group Financial Results Conference Call.

Operator: After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to our first speaker today, Andrew Walter, Chief Financial Officer, Treasurer, and Interim Principal Accounting Officer. Please go ahead.

Speaker Change: At this time, all participants are in listen-only mode.

Speaker Change: After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you'll need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised.

Andrew F. Walters: To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Andrew Walter, Chief Financial Officer, Treasurer, Interim Principal Accounting Officer. Please go ahead.

Andrew F. Walters: Thank you, operator. Welcome to the second quarter 2024 financial results conference call for SJW. I will be presenting today with Eric Thornburg, Chair of the Board, President, and Chief Executive Officer. For those who would like to follow along, slides accompanying our remarks are available on our website at sjwgroup.com. Before we begin today, I would like to remind you that this presentation and related materials posted on our website may contain forward-looking statements. These statements are based on estimates and assumptions made by the company in light of its experience, historical trends, current conditions, and expected future results, as well as other factors that the company believes are appropriate under the circumstances.

Andrew F. Walters: Thank you, operator. Welcome to the second quarter 2024 financial results conference call for SJW Group.

Andrew F. Walters: Many factors could cause a company's actual results and performance to differ materially from those expressed or implied by the forward-looking statement. For a description of some of the factors that could cause actual results to be different from those in this presentation, We refer you to the financial results press release and our most recent Forms 10-K, 10-Q, and 8-K filed with the Securities and Exchange Commission, copies of which may be obtained on our website. All foregoing statements are made as of today, and SJW Group disclaims any duty to update or revise such statements.

Speaker Change: I will be presenting today with Eric Thornburg, Chair of the Board, President, and Chief Executive Officer.

Speaker Change: For those who would like to follow along, slides accompanying our remarks are available on our website at sjwgroup.com.

Speaker Change: Before we begin today, I would like to remind you that this presentation and related materials posted on our website may contain forward-looking statements.

Speaker Change: These statements are based on estimates and assumptions made by the company in light of its experience, historical trends, current conditions, and expected future results, as well as other factors that the company believes are appropriate under the circumstances.

Speaker Change: Many factors could cause the company's actual results and performance to differ materially from those expressed or implied by the forward-looking statements.

Speaker Change: for description of some of the factors that could cause actual results to be different from statements in this presentation.

Speaker Change: We refer you to the financial results press release and our most recent forms 10-K, 10-Q, and 8-K filed with the Securities and Exchange Commission, copies of which may be obtained on our website.

Speaker Change: All forward-looking statements are made as of today, and SJW Group disclaims any duty to update or revise such statements.

Operator: You will have an opportunity to ask questions at the end of the presentation. This webcast is being recorded, and an archive of the webcast will be available until October 21st, 2024. You can access the press release and the webcast on SJW Group's website. In addition, some of the information discussed today includes the non-GAAP financial measures of adjusted net income and adjusted diluted earnings per share that have not been calculated in accordance with generally accepted accounting principles in the United States or GAAP. These non-GAAP financial measures should be considered as a supplement to the financial information prepared on a GAAP basis rather than an alternative to the respective GAAP financial measures.

Speaker Change: You will have an opportunity to ask questions at the end of the presentation.

Speaker Change: This webcast is being recorded and an archive of the webcast will be available until October 21st, 2024. You can access the press release and the webcast at SJW Group's website.

Speaker Change: In addition, some of the information discussed today includes the non-GAAP financial measures of adjusted net income and adjusted diluted earnings per share that have not been calculated in accordance with generally accepted accounting principles in the United States or GAAP.

Speaker Change: These non-GAAP financial measures should be considered as a supplement to the financial information prepared on a GAAP basis rather than an alternative to the respective GAAP financial measures.

Speaker Change: Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are presented in the table in the appendix of our presentation.

Andrew F. Walters: Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are presented in the table in the appendix of our presentation. I will now turn the call over to Eric. Welcome everyone, and thank you for joining us. My name is Eric Thornburg, and it is my honor to serve as Chair, President, and CEO of SJW Group.

Speaker Change: I will now turn the call over to Eric.

Eric W. Thornburg: Welcome, everyone, and thank you for joining us. My name is Eric Thornburg, and it is my honor to serve as chair, president, and CEO of SJW Group.

Eric W. Thornburg: I'm pleased to share that in the second quarter of 2024, we continued to meet drinking water and environmental regulations, deliver on our public health and environmental stewardship commitments, and provide high-quality water and service to customers. Importantly, we also experienced the benefits of our focused efforts to listen to, learn from, and meaningfully respond to our stakeholders.

Eric W. Thornburg: and provide high-quality water and service to customers.

Eric W. Thornburg: Importantly, we also experience the benefits of our focused efforts to listen to, learn from, and meaningfully respond to our stakeholders.

Eric W. Thornburg: In California, we reached an agreement in principle on most issues with the Public Advocate's Office and WRAID, and the Local Water Rates Advocacy Organization in our 2025 through 2027 general rate. We expect the settlement agreement will be filed on or about August 19th. All but two policy issues have been agreed upon, and we are hopeful the CPUC will approve the settlement later this year. In Connecticut, we worked within the constraints of a formidable regulatory environment to complete our general rate case. Now, we didn't get all we expected or, frankly, all that we needed from that particular rape case, and there is a lot of room for improvement going forward, which we are already thinking about.

Eric W. Thornburg: For example.

Eric W. Thornburg: In California, we reached an agreement in principle on most issues with the Public Advocates Office and WRATES, a local water rates advocacy organization.

Eric W. Thornburg: in our 2025 through 2027 general rate case.

Eric W. Thornburg: We expect the settlement agreement will be filed on or about August the 19th.

Eric W. Thornburg: All but two policy issues have been agreed upon.

Eric W. Thornburg: And we are hopeful the CPUC will approve the settlement later this year.

Eric W. Thornburg: In Connecticut, we worked within the constraints of a formidable regulatory environment to complete our general rate case.

Eric W. Thornburg: Now, we didn't get all we expected, or frankly, all that we need.

Eric W. Thornburg: from that particular rate case.

Eric W. Thornburg: And there is a lot of room for improvement going forward, which we are already thinking about.

Eric W. Thornburg: But it was clearly a step in the right direction. Our team's responsive filing and constructive engagement with local stakeholders helped facilitate significant improvement between the proposed draft decision and the final decision. I'm proud to share that the Connecticut team's strategic approach, Hard work and transparency, was commended by the local regulators, parties to the rate case, and members of the financial industry alike. And we were able to serve our customers by securing additional financial assistance funds in California and Expanding Eligibility in Connecticut for our Water Rate Assistance Program, which is a first-of-its-kind program in that state for water utilities.

Eric W. Thornburg: But it was clearly a step in the right direction.

Eric W. Thornburg: Our team's responsive filing and constructive engagement with local stakeholders helped facilitate significant improvements.

Eric W. Thornburg: between the proposed draft decision and the final decision.

Eric W. Thornburg: I'm proud to share that the Connecticut team's strategic approach, hard work, and transparency

Eric W. Thornburg: was commended by the local regulators, parties to the rate case, and members of the financial industry alike.

Eric W. Thornburg: And we were able to serve our customers by securing additional financial assistance funds in California.

Eric W. Thornburg: and Expanding Eligibility in Connecticut for our Water Rate Assistance Program.

Eric W. Thornburg: which is a first-of-its-kind program in that state for water utilities.

Eric W. Thornburg: Additionally, across the enterprise, we invested $158 million in Water and Wastewater Utility Infrastructure, which constitutes approximately 48% of our $332 million 2024 capital expenditure plan. And we also delivered earnings per diluted share of 64 cents and adjusted non-GAAP earnings per diluted share of $0.66 in the second quarter. Now, you hear me say every quarter that our people make the difference at SJW Group.

Eric W. Thornburg: Additionally, across the enterprise,

Eric W. Thornburg: We invested 158 million dollars.

Eric W. Thornburg: and Water and Wastewater Utility Infrastructure.

Eric W. Thornburg: which constitutes approximately 48% of our $332 million 2024 capital expenditure plan.

Eric W. Thornburg: And we also delivered earnings per diluted share of 64 cents.

Eric W. Thornburg: and adjusted non-GAAP earnings per diluted share of 66 cents in the second quarter.

Eric W. Thornburg: Now, you hear me say every quarter that our people make the difference at SJW Group.

Eric W. Thornburg: This is truer than ever before, and we saw that difference from California to Connecticut this quarter. And as we prepare for the future, we know that constructive relationships with our local stakeholders, built on mutual trust and respect, will be critical. You know, our industry has some significant challenges ahead. PFAS remediation, for example.

Eric W. Thornburg: This is truer than ever before, and we saw that difference from California to Connecticut this quarter.

Eric W. Thornburg: And as we prepare for the future, we know that constructive relationships with our local stakeholders.

Eric W. Thornburg: built on mutual trust and respect will be critical.

Eric W. Thornburg: The New Lead and Copper Standard and the replacement of aging infrastructure, just to name a few. And we all know this work needs to get done. There's no question about that, but how do we get it done most effectively for our customers and their communities? Well, that's the question we need to tackle with our regulators and legislators, and our local teams are ready and committed to investing in these relationships to ensure that we can achieve our shared mission of providing our local community members with reliable, high-quality water and sanitation.

Eric W. Thornburg: You know, our industry has some significant challenges ahead.

Speaker Change: PFAS remediation.

Speaker Change: New Lead and Copper Standards.

Speaker Change: and the replacement of aging infrastructure, just to name a few.

Speaker Change: And we all know this work needs to get done. There's no question about that.

Speaker Change: but how we get it done most effectively for our customers and their communities.

Speaker Change: Well, that's the question we need to tackle with our regulators and legislators.

Speaker Change: and our local teams are ready and committed to investing in these relationships to ensure that we can achieve our shared mission.

Speaker Change: of providing our local community members with reliable, high-quality water and service.

Eric W. Thornburg: Sometimes it's easy to align with local stakeholders on the approach to achieving our common goal, and other times it's a slower process. But we are dedicated to investing the time, effort, and resources needed to advocate and collaborate for the benefit of our customers, their communities, our employees, and shareholders. That's our culture, and it's also a competitive advantage of ours. With that, I will pass it over to Andrew to review our detailed financial results and regulatory updates in our state operation. Andrew.

Speaker Change: Sometimes, it's easy to align with local stakeholders on the approach to achieving our common goals.

Speaker Change: And other times, it's a slower process.

Speaker Change: But we are dedicated to investing the time, effort, and resources needed to advocate and collaborate in service of our customers, their communities, our employees, and shareholders.

Speaker Change: That's our culture, and it's also a competitive advantage of ours.

Speaker Change: With that, I will pass it over to Andrew to review our detailed financial results and regulatory updates in our state operations.

Andrew: Thank you, Eric.

Andrew: Last evening, after the close, we released our second quarter 2024 operating results.

Andrew: In the second quarter, we reported revenue of $176.2 million, a 12% increase over the $156.9 million reported the same quarter of 2023.

Andrew: The increase was largely driven by rate increases at each of our local operations that included one or more step increases in general rate cases, infrastructure recovery mechanisms, and customer growth.

Andrew F. Walters: Infrastructure Recovery Mechanisms, and Customer Growth. Despite higher water production expenses, we were able to deliver net income for the quarter of $20.7 million, which was a 13% increase over the $18.3 million reported in the second quarter of 2023. Diluted earnings per share was $0.64 compared to $0.58 in 2023. Second quarter real estate transactions that netted a $0.9 million pre-tax loss have been excluded in non-GAAP results reflected below, with adjusted net income of $21.3 million and adjusted diluted earnings per share of $0.66.

Andrew: Despite higher water production expenses, we were able to deliver net income for the quarter of $20.7 million, which was a 13% increase over the $18.3 million reported in the second quarter of 2023.

Andrew: Second quarter real estate transactions that netted 0.9 million dollars pre-tax loss have been excluded in non-GAAP results reflected below with adjusted net income of 21.3 million dollars and adjusted diluted earnings per share of 66 cents.

Andrew F. Walters: As you can see, 34 cents of the revenue increase was driven primarily by rate increases in California and Maine and the Infrastructure Recovery Mechanisms in Connecticut, Maine, and Texas. Changes in the allowance for uncollectible customer accounts contributed $0.13, and higher usage and growth added $0.12. The revenue increase was offset by higher water production costs of $0.22 and a $0.09 tax reserve release in the same period last year. $13 million of the revenue increase was from rate and infrastructure adjustments, and $6 million was attributable to higher usage and regulatory mechanisms.

Speaker Change: As you can see, 34 cents of the revenue increase was driven primarily by rate increases in California and Maine and the infrastructure recovery mechanisms in Connecticut, Maine, and Texas.

Speaker Change: Changes in the allowance for uncollectible customer accounts contributed $0.13 and higher usage and growth added $0.12.

Speaker Change: The revenue increase was offset by higher water production costs of $0.22 and a $0.09 tax reserve release in the same period last year.

Speaker Change: 13 million of revenue increase was from rate and infrastructure adjustments.

Speaker Change: and $6 million was attributable to higher usage and regulatory mechanisms.

Andrew F. Walters: Water production expense in the quarter increased 14% compared to 2023. The increase was large and was principally driven by rate increases from our water wholesaler in California, higher customer usage, and growth. Total other operating expenses increased 2% year over year and were primarily driven by increases in depreciation and higher administration and general costs, which were partially offset by allowances for uncollectible customer accounts.

Speaker Change: Water production

Speaker Change: Total other operating expenses increased 2% year-over-year and was primarily driven by increases in depreciation and higher administration and general cost.

Speaker Change: which were partially offset by allowances for uncollectible customer accounts.

Andrew F. Walters: Year-to-date revenue of $325.6 million, an 11% increase over the $294.2 million reported in the same period of 2023. As we noted for the quarter, the increases were largely driven by rate increases, the Infrastructure Recovery Mechanism, and Customer Growth. Despite higher water production expenses, net income year-to-date was $32.4 million, a 9% increase, and diluted earnings per share was $1 compared to $0.95 in 2023. As mentioned earlier, second quarter real estate transactions that netted a $0.9 million pre-tax loss have been excluded in non-GAAP results reflected below, with adjusted net income of $33 million.

Speaker Change: Year-to-date, we reported revenue of $325.6 million, an 11% increase over the $294.2 million reported in the same period of 2023.

Speaker Change: As we noted for the quarter, the increases were largely driven by rate increases, infrastructure recovery mechanisms, and customer growth.

Speaker Change: Despite higher water production expenses, net income year-to-date was $32.4 million, a 9% increase.

Speaker Change: And diluted earnings per share was $1 compared to $0.95 in 2023.

Speaker Change: As mentioned earlier, second quarter real estate transactions that netted a $0.9 million pre-tax loss have been excluded in non-GAAP results reflected below, with adjusted net income of $33 million.

Andrew F. Walters: Non-GAAP diluted earnings per share was $1.02 compared to $0.92, an 11% increase over 2023. As you can see, 60 cents of the revenue increase was driven primarily by rate increases in California and Maine, higher usage, and customer growth. The revenue increase was partially offset by higher water production costs of $0.35. Approximately $33 million in gross equity proceeds were raised year-to-date through the At the Market Program. At the end of the second quarter, we had $217 million drawn on our $350 million bank line of credit, which left $133 million available for short-term financing of utility plan additions and operating activities.

Speaker Change: non-GAAP diluted earnings per share was $1.02 compared to $0.92, 11% increase over 2023.

Speaker Change: As you can see, 60 cents of the revenue increase was driven primarily by rate increases in California and Maine.

Speaker Change: Higher usage and customer growth contributed $0.19.

Speaker Change: The revenue increase was partially offset by higher water production costs of $0.35.

Speaker Change: Approximately 33 million in gross equity proceeds was raised year-to-date through the

Speaker Change: at the Market Program.

Speaker Change: At the end of the second quarter, we had $217 million drawn on our $350 million bank line of credit, which left $133 million available for short-term financing of utility plan additions and operating activities.

Andrew F. Walters: During the balance of 2024, we plan to raise approximately $160 million in long-term debt to pay down our line of credit. The average borrowing rate for our line of credit advances during the quarter was approximately 6.53%.

Speaker Change: During the balance of 2024, we plan to raise approximately $160 million in long-term debt to pay down our line of credit.

Speaker Change: The average borrowing rate for our line of credit advances during the quarter was approximately 6.53%.

Andrew F. Walters: The average borrowing rate in the same period of 2023 was approximately $5.9 billion. The effective consolidated income tax rates for the second quarter of 2024 and 2023 were approximately 15% and negative 9%, respectively. Turning to California, we are pleased to report that San Jose Water has reached an agreement in principle to settle its 2025 through 2027 general rate case with the Public Advocates Office and Water Rate Advocates for Transparency, Equity, and Sustainability, or WRATE.

Speaker Change: The average borrowing rate in the same period of 2023 was approximately 5.96%.

Speaker Change: The effective consolidated income tax rates for second quarter of 2024 and 2023 were approximately 15% and negative 9% respectively.

Speaker Change: Turning to California, we are pleased to report that San Jose Water has reached an agreement, in principle, to settle its 2025-2027 general rate case with the Public Advocate's Office

Speaker Change: and Water Rate Advocates for Transparency, Equity, and Sustainability, or WRATES.

Andrew F. Walters: Only two policy issues remain, which we expect will be litigated later this year. As required in the procedural ruling, the formal settlement motion and agreement must be submitted to the California Public Utilities Commission no later than August 19, 2024. Until then, we cannot disclose any additional information. However, as a reminder, the application we filed with the CPUC in January requested a $103 million revenue increase over three years and proposed a three-year, $540 million capital expenditure program that would address several key needs, including treating PFAS to meet drinking water standards finalized by the U.S. EPA earlier this year. Reducing greenhouse gas emissions through solar generation and energy storage systems to replace diesel generators.

Speaker Change: Only two policy issues remain, which we expect will be litigated later this year.

Speaker Change: As required in the procedural ruling, the formal settlement motion and agreement must be submitted to the California Public Utilities Commission no later than August 19, 2024.

Speaker Change: Until then, we cannot disclose any additional information.

Speaker Change: However, as a reminder,

Speaker Change: The application we filed with the CPUC in January requested a $103 million revenue increase over three years and proposed a three-year, $540 million capital expenditure program

Speaker Change: that would address several key needs, including treating PFOS to meet drinking water standards finalized by the U.S. EPA earlier this year.

Speaker Change: Reducing greenhouse gas emissions through solar generation, energy storage systems to replace diesel generators, fleet electrification, and advanced acoustic leak detection.

Andrew F. Walters: Fleet Electrification, and Advanced Acoustic Leak Detection, as well as advancing the CPU C's. Environmental and Social Justice Action Plan to improve access to high-quality water services. Climate Resilience, and Economic and Workforce Development.

Speaker Change: as well as advancing the CPUC's Environmental and Social Justice Action Plan to improve access to high-quality water service, climate resiliency, and economic and workforce development.

Andrew F. Walters: A CPUC decision could come as early as the fourth quarter of 2024, and we expect it to be effective on January 1st, 2025. In May, San Jose Water requested a rate base increase of approximately $4.8 million and an annualized revenue increase of $768,000 for investments made to date in our advanced metering infrastructure project. As you may recall, we are planning to invest approximately $27 million in this project in 2024. It is a $100 million project that is separate from the general rate case capital budget, and the majority of the installation is expected between 2024 and 2026. Turning to Connecticut, on June 28, we received a final decision in Connecticut Waters General Rate.

Speaker Change: A CPUC decision can come as early as the fourth quarter of 2024, and we expect it to be effective on January 1st, 2025.

Speaker Change: In May, San Jose Water requested a rate base increase of approximately $4.8 million.

Speaker Change: and an annualized revenue increase of $768,000 for investments made to date in our advanced metering infrastructure project.

Speaker Change: As you may recall, we are planning to invest approximately $27 million in this project in 2024. It is a $100 million project that is separate from the general rate case capital budget, and the majority of the installation is expected between 2024 and 2026.

Speaker Change: Turning to Connecticut.

Speaker Change: On June 28th, we received a final decision in Connecticut Water's general rate case.

Andrew F. Walters: As Eric shared earlier, this case demonstrated the value of meaningfully engaging with our local stakeholders and approaching the filing and hearings with transparency, responsiveness, and a desire for constructive collaboration. We believe our approach resulted in significant improvements between the preliminary and final decisions issued by the Public Utility Regulatory Authority. The final decision was effective as of July 1st, 2024 and provides for an annualized increase of $6.5 million in revenue. It authorized a return on equity of 9.3%, which is up from 9% in our prior case and up from 9.2% in the draft decision. Our capital structure remains near the level authorized in our last case of 53%, and our equity at 47%. The decision gave us mixed expense recovery. We saw approximately $3.9 million in unrecoverable expenses.

Speaker Change: As Eric shared earlier, this case demonstrated the value of meaningfully engaging with our local stakeholders and approaching the filing and hearings with transparency, responsiveness, and a desire for constructive collaboration.

Speaker Change: We believe our approach resulted in significant improvements between the preliminary and final decisions issued by the Public Utility Regulatory Authority.

Speaker Change: The final decision was effective as of July 1st, 2024 and provides for an annualized increase of $6.5 million in revenue.

Speaker Change: It authorized a return on equity of 9.3% which is up from 9% in our prior case and up from 9.2% in the draft decision.

Speaker Change: Our capital structure remains near the level authorized in our last case of 53% and our equity at 47% debt.

Speaker Change: The decision gave us mixed expense recovery.

Speaker Change: We saw approximately $3.9 million in unrecovered expenses.

Andrew F. Walters: However, for the first time, our company has the opportunity to earn additional revenues of $1.1 million in executive compensation for meeting performance metrics set by PURIS. As part of the general rate case process, our WCA surcharge, which is an infrastructure recovery mechanism used primarily for the replacement of pipe, was reset to zero. We had requested $21.4 million for an 18.1% increase in annual revenue. The final decision granted us approximately 38% of our ask when the opportunity to earn the additional $1.1 million is included and the $1.7 million in depreciation is excluded.

Speaker Change: However, for the first time, our company has the opportunity to earn additional revenues of $1.1 million in executive compensation for meeting performance metrics set by Pura.

Speaker Change: As part of the general rate case process, our WCA surcharge, which is an infrastructure recovery mechanism used primarily for the replacement of pipe, was reset to zero.

Speaker Change: We had requested $21.4 million.

Speaker Change: for an 18.1% increase in annual revenue. The final decision granted us approximately 38% of our ask when the opportunity to earn the additional $1.1 million is included and the $1.7 million in depreciation is excluded.

Andrew F. Walters: It is important to note that none of our infrastructure investment was disallowed, though some projects were excluded because of timing. We expect to recover these investments in future rates, to build on what Eric said earlier. We need more from this final decision, and we are going to continue to need more going forward to address several of the pressing water quality and infrastructure issues facing Connecticut. In approaching our most recent rape case, we went to school on the cases that came before us.

Speaker Change: It is important to note that none of our infrastructure investment was disallowed, though some projects were excluded because of timing.

Speaker Change: We expect to recover these investments in future rate cases.

Speaker Change: to build on what Eric said earlier.

Speaker Change: We need more from this final decision.

Speaker Change: And, we are going to continue to need more going forward to address several of the pressing water quality and infrastructure issues facing Connecticut.

Speaker Change: In approaching our most recent rape case, we went to school on the cases that came before us.

Andrew F. Walters: We learned a lot through the process and from our own research. We're going to use all of this experience and insight, along with continued engagement with regulators and legislators, to figure out a way we can move forward together to recover major upcoming expenditures, such as PFAS treatment and the replacement of aging above-ground infrastructure. We hear from customers that they would prefer a smooth and gradual approach to rate increases driven by essential infrastructure investment, and we would like to work collaboratively with local decision makers to identify the right mechanisms to avoid abrupt and significant rate hikes.

Speaker Change: And we learned a lot through the process and from our own rig case.

Speaker Change: We're going to use all of this experience and insight along with the

Speaker Change: with continued engagement with regulators and legislators to figure out a way we can move forward together to recover major upcoming expenditures such as PFAS treatment and the replacement of aging above ground infrastructure.

Speaker Change: We hear from customers that they would prefer a smooth and gradual approach to rate increases driven by essential infrastructure investments.

Speaker Change: And we would like to work collaboratively with local decision-makers to identify the right mechanisms to avoid abrupt and significant freight hikes.

Andrew F. Walters: However... We acknowledge that a part of the equation is on us to communicate effectively with customers about the need for these investments and the benefits they will provide. We will also continue to find and create opportunities to sustainably reduce operating costs and pass through two customers, such as our company-owned solar generation initiatives that reduce purchase electricity costs for our Shared Vendor Procurement Program that leverages our national scale. It will be a combination of all of these efforts that will help us effectively tackle the challenges lying ahead for our industry on June 24.

Speaker Change: However,

Speaker Change: We acknowledge that a part of the equation is on us to communicate effectively with customers on the need for these investments and the benefits they will provide.

Speaker Change: We will also continue to find and create opportunities to sustainably reduce operating costs and pass through to customers.

Speaker Change: such as our company-owned solar generation initiatives that reduce purchase electricity costs.

Speaker Change: or our Shared Vendor Procurement Program that leverages our national scale.

Speaker Change: It will be a combination of all of these efforts that will help us effectively tackle the challenges lying ahead for our industry.

Andrew F. Walters: Maine Water filed with the Maine Public Utilities Commission for a water infrastructure charge increase in Texas. The U.S. Drought Monitor classifies our service area as being in severe to extreme drought, and conservation measures are in place as a result of the. Because of this, we expect lower water usage in 2024 compared to 2023. However, we are not changing our earnings guidance range due to the situation in Texas, but we are continuing to monitor the drought and its potential impact on guidance. The KT Water Resources acquisition we made last August will add approximately 6,000 acre feet of water to our existing water supply.

Speaker Change: On June 24th, Maine Water filed with the Maine Public Utilities Commission for a water infrastructure charge increase in two of its divisions.

Speaker Change: In Texas,

Speaker Change: The U.S. Drought Monitor classifies our service area as being in severe to extreme drought and conservation measures are in place as a result of the weather.

Speaker Change: Because of this, we expect lower water usage in 2024 compared to 2023.

Speaker Change: However, we are not changing our earnings guidance range due to the situation in Texas, but we are continuing to monitor the drought and its potential impact on guidance.

Speaker Change: The KT Water Resources acquisition we made last August will add approximately 6,000 acre-feet of water to our existing water supplies, but it will take time to bring the additional supply online.

Andrew F. Walters: But it will take time to bring the additional supply online. Additionally, the Public Utility Commission of Texas has approved our request to acquire the 3009 water system, which serves approximately 270 customers. We expect to close later this year. Our guidance for 2024 is $2.66 to $2.76 per diluted share and $2.68 to $2.78 per diluted share on a non-GAP basis.

Speaker Change: Additionally, the Public Utility Commission of Texas has approved our request to acquire the 3009 water system which serves approximately 270 customers.

Speaker Change: We expect to close later this year.

Speaker Change: Our guidance for 2024.

Speaker Change: $2.66 to $2.76 per diluted share and $2.68 to $2.78 per diluted share on a non-GAAP basis.

Andrew F. Walters: Equity issuance of $55 million to $65 million, excluding acquisition growth, to support a strong capital investment. We maintain our five-year capital investment outlook of $1.6 billion, which includes approximately $230 million in investment. PFAS remediation based on the finalized maximum contaminant level.

Speaker Change: Equity issuance of $55 million to $65 million, excluding acquisition growth to support a strong capital investment program.

Speaker Change: We maintain our five-year capital investment outlook of $1.6 billion, which includes approximately $230 million in investments.

Speaker Change: PFAS remediation based on finalized maximum contaminant level.

Andrew F. Walters: The factors underlying our 2024 guidance include the Return on Equity increase in California, which went from 9.31 to 9.81, net of the 20 basis point reduction for the reimplementation of the WCMA was effective January 1st, 2024. The impact of the completed Biddeford soccer rate case with a 9.5 ROE and 51% equity and 49% debt capital structure was effective January 1st, 2024 as well. Finally, constructive regulatory decisions on current and prospective regulatory filings, with Connecticut now behind us, that leaves us with California, as well as strategic reinvestments in the business in 2024. Our 2024 guidance is independent of real estate sales or M&A activity.

Speaker Change: The factors underlying our 2024 guidance include

Speaker Change: The return on equity increase in California, which went from 9.31 to 9.81, net of the 20 basis point reduction for reimplementation of the WCMA, was effective January 1st, 2024.

Speaker Change: The impact of the completed Biddeford SACA rate case with a 9.5 ROE and 51% equity and 49% debt capital structure was effective January 1st, 2024 as well.

Speaker Change: Finally, constructive regulatory decisions on current and prospective regulatory filings with Connecticut now behind us that leaves us with California, as well as strategic and reinvestments in the business in 2024.

Speaker Change: Our 2024 guidance is independent of real estate sales or M&A activities.

Speaker Change: Further, we reaffirm our stated long-term growth rate of 5% to 7% that is anchored off of our 2022 diluted earnings per share of $2.43, which is nonlinear because of rate case cycles.

Speaker Change: With that, I will turn the call over to Eric. Thank you, Andrew. One of the ways we measure our impact and success as a company is how have we been a force for good?

Eric W. Thornburg: One of the ways we measure our impact and success as a company is how we have been a force for good. One area where we have achieved exciting outcomes is in expanding access and financial support for our customers. Over the past two years, San Jose Water has secured $15.3 million in arrearage relief for its customers from the California Water and Wastewater Arrearage Payment Program. The most recent installment of $9.1 million was received this past May and will help support customers who experienced financial hardship due to COVID.

Eric W. Thornburg: One area where we have achieved exciting outcomes is in expanding access and financial support for our customers.

Speaker Change: Over the past two years, San Jose Water has secured $15.3 million in arrearage relief for its customers from the California Water and Wastewater Arrearage Payment Program.

Speaker Change: The most recent installment of $9.1 million was received this past May and will help support customers who experience financial hardship due to COVID.

Eric W. Thornburg: At Connecticut Water, Pura approved our request to expand income eligibility for the Water Rate Assistance Program, or WRAP, a first-of-its-kind program in the state that offers water bill discounts for income-eligible customers. The company looks forward to expanding the program to more customers and providing deeper discounts to those customers who need them most. Here's a little history on WRAP.

Speaker Change: At Connecticut Water, PURA approved our request to expand income eligibility for the Water Rate Assistance Program, or WRAP, a first-of-its-kind program in the state that offers water bill discounts for income-eligible customers.

Speaker Change: The company looks forward to expanding the program to more customers and providing deeper discounts to those customers who need it most.

Eric W. Thornburg: We first introduced the program in Connecticut in our last general rate case, based on the good work San Jose Water was doing in California, assisting customers in need. As you can see, it has since expanded and evolved at Connecticut Water to support more customers and be more meaningful. Importantly, it has also inspired similar programs by regional peers, amplifying the impact of our Force for Good initiatives beyond our own services.

Speaker Change: Just a little history on WRAP, we first introduced the program in Connecticut in our last general rate case, based on the good work San Jose Water was doing in California, assisting customers in need.

Speaker Change: As you can see, it has since expanded and evolved at Connecticut Water to support more customers more meaningfully.

Speaker Change: Importantly, it has also inspired similar programs by regional peers.

Speaker Change: amplifying the impact of our Force for Good initiatives beyond our own service areas.

Eric W. Thornburg: Over the last several years, we've built a strong national platform to support our growing local operations, through the good times and the inevitable headwinds. And with a lot of effort and intention, we have maintained our fundamental values and culture through this growth. And that culture continues to guide us and distinguish us as we make business decisions that build trust with stakeholders.

Speaker Change: Over the last several years, we've built a strong national platform to support our growing local operations.

Speaker Change: through the good times and the inevitable headwinds.

Speaker Change: And with a lot of effort and intention, we have maintained our fundamental values and culture through this growth.

Speaker Change: And that culture continues to guide us and distinguish us as we make business decisions that build trust with stakeholders.

Eric W. Thornburg: I continue to be inspired by the contributions of our talented teams across our local operations, as they consistently provide an essential service with integrity, reliability, genuine care, and transparency. I'm confident that our team's commitment to serving customers, communities, and the environment will continue to exceed SJW Group's ability to deliver value to our stakeholders and reinforce our strong position for a successful future. With that, I'll turn the call back over to the operator. Thank you. At this time, we will conduct a question and answer session. As a reminder, to ask a question, you'll need to press star 1-1 on your telephone and wait for your name to be announced.

Speaker Change: I continue to be inspired by the contributions of our talented teams across our local operations.

Speaker Change: as they consistently provide an essential service with integrity, reliability, genuine care, and transparency.

Speaker Change: I'm confident our team's commitment to serving customers, communities, and the environment will continue to excel SJW Group's ability to deliver value to our stakeholders and reinforce our strong position for a successful future.

Speaker Change: With that, I'll turn the call back over to the operator.

Speaker Change: Thank you. At this time, we will conduct a question and answer session. As a reminder to ask a question, you'll need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster.

Operator: To withdraw your question, please press star 1-1 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Richard Sunderland of J.P. Morgan. Your line is now open. Hi, good morning. Can you hear me?

Speaker Change: Our first question comes from the line of Richard Sunderland of J.P. Morgan. Your line is now open.

Operator: Yeah, we can, Richard. Thank you. Great, thank you very much for the time.

Richard Wallace Sunderland: Hi, good morning. Can you hear me?

Speaker Change: Yeah, we can, Richard. Thank you.

Operator: I wanted to touch, maybe first, on the Texas drought. I know you mentioned the drought risk a little bit, but could you quantify some of that risk both to 2024 guidance overall on an EPS basis, as well as just what the year-to-date impacts you have seen in results are as well? It's a great question, Rich.

Richard Wallace Sunderland: Great, thank you very much for the time.

Speaker Change: I wanted to touch maybe first on the Texas drought.

Richard Wallace Sunderland: I know you mentioned the drought risk a little bit, but could you quantify some of that risk both to 2024 guidance overall on an EPS basis, as well as just what the year-to-date impacts you have seen and results are as well?

Eric W. Thornburg: I think, you know, they have just gone to the next stage of drought, and, you know, at this stage, I don't have an exact quantification of where that's going to be until we see where the usage settles out. I would say that, you know, under the base case scenario, we have taken this into account, and it's just if it becomes more bite-sized than what we expect as a base case scenario that we will have to revisit that at that point. Okay, I understand. Very clear. And then turning to Connecticut, how does the Connecticut order compare to your long-term plan assumptions embedded in the 5% to 7% EPS growth rate? That's an excellent question.

Speaker Change: It's a great question, Rich. I think, you know, they have just gone to the next stage of drought and, you know, at this stage,

Speaker Change: I don't have an exact quantification of where that's going to be until we see where the usage settles out at.

Speaker Change: I would say that, you know, under the base case scenario, we have taken this into account and it's just if it becomes more biting than what we expect as a base case scenario, that we will have to come revisit that at that point.

Speaker Change: Okay, understood. Very clear. And then turning to Connecticut, how does the Connecticut order compare to your long-term plan assumptions embedded in the five to seven percent EPS growth rate?

Eric W. Thornburg: Look, it is definitely not additive to the growth rates that we have, but it is well within the range of where we expected at this point or could expect on a potential range of outcomes. So, while it might itself be dilutive, we are seeing other parts of the business that are overcoming any of the issues with that as it stands today. And then there was one final one on Connecticut.

Speaker Change: That's an excellent question. Look, it is not, it's definitely not additive to the the growth rates that we have, but it is well within the range of where we

Speaker Change: expected at this point or could expect on a on a potential range of outcomes.

Speaker Change: So, it is, while it might itself be dilutive, we are seeing other parts of the business that are overcoming any of the issues with that as it stands today.

Speaker Change: Got it, understood. And then one final one on Connecticut. I know you had a lot of commentary around engagement in the process.

Eric W. Thornburg: I know you had a lot of commentary around engagement in the process, but also balance that against the reality of the outcome and the order itself. Thinking about the state at a high level and given all the public attention on Aquarian, does the rate case outcome impact any thinking or interest around that asset? You know, I think that stands on its own, but, of course, the regulatory climate, Richard, is a key factor in that.

Speaker Change: but also balance that against the reality of the outcome and the order itself.

Speaker Change: Thinking about the state at a high level, and given all the public attention on Aquarian, does the rate case outcome impact any thinking or interest around that asset?

Speaker Change: You know, I think that stands on its own, but of course the regulatory climate, Richard, is a key factor of that. I, you know, certainly, as I mentioned, a good step forward here. I was also heartened with some of the regulatory decisions just announced for

Eric W. Thornburg: I, you know, certainly, as I mentioned, a good step forward here. I was also heartened with some of the regulatory decisions just announced for Eversource and United Illuminating and involving their EV charging deployment work. There were some proposed decisions announced, which is just encouraging to see that getting back on track. And so, we're optimistic, and we will continue to lean in and educate and build trust with regulators. And I might also mention this morning. Governor Lamont announced that a new commissioner was going to be appointed in January. His name is David Arconti.

Speaker Change: for Eversource and United Illuminating and involving their EV charging deployment work. There were some proposed decisions announced which

Speaker Change: You know, it's just encouraging to see that getting back on track. And so, you know, we're optimistic and we will continue to lean in and educate and build trust with regulators.

Speaker Change: I might also mention this morning there was an announcement.

Speaker Change: Governor Lamont announced that a new commissioner was going to be appointed in January . His name is David Arcanti. He's a former state representative and he's currently the Vice President of Government Affairs for United Illuminating.

Eric W. Thornburg: He's a former state representative, and he's currently the vice president of government affairs for United Illuminating. Governor Lamont also announced the retirement in January of Jack Budkoski, who has served for 27 years at Pura. So some recent, very recent regulatory developments there. And, you know, we would like to think that Former State Rep. Arcanti's service at United Illuminating will also provide some additional perspectives that could be valuable down the road as he serves as a regulator in Connecticut.

Speaker Change: Former State Rep Arcanti's service at United Illuminating will also, you know, provide some additional perspectives that could be valuable down the road as he serves as a regulator in Connecticut.

Eric W. Thornburg: Very helpful overall. Thank you for your time today. Thank you, Richard. I appreciate it.

Speaker Change: Got it. Very helpful overall. Thank you for the time today.

Operator: Thank you one moment for our next question. Our next question comes from the line of Michael Gawler from Janey. Your line is now open.

Speaker Change: Thank you, Richard. Appreciate it.

Speaker Change: Thank you one moment for our next question.

Speaker Change: Our next question comes from the line of Michael Gawler of Janey. Your line is now open.

Operator: Hello, everyone. Congratulations on the quarter. Thank you, Michael. I'd like to start on the Connecticut operation, with you coming just out of the rape case.

Michael Gawler: Hello everyone, and congrats on the quarter.

Michael Gawler: Thank you, Michael.

Speaker Change: I'd like to start on the Connecticut operations.

Eric W. Thornburg: Do you expect the rate case cycle to condense going forward, given the outcome? Look, I think, Michael, that's definitely a potential mechanism that we will utilize as we think about this, and what we will do is we'll continue to monitor where we stand from a recovery standpoint and make the best decisions to go in when that fits with where we're seeing our recovery. The other thing to keep in mind that we've talked about in the past is that we do want to continue to distribute our rate cases so that we don't have any crowding of rate cases where California is going in at the same time as Connecticut, so we have our larger divisions going in at different times.

Speaker Change: with you coming just out of the rape case.

Michael Gaugler: Welcome. Look, I think, Michael, that's definitely a potential mechanism that we will utilize as we think about this. What we will do is we'll continue to monitor where we stand from a recovery standpoint and make the best decisions to go in when that fits with where we're seeing our recovery hat.

Speaker Change: Look, I think, Michael, that's definitely a potential mechanism that we will utilize as we think about this and what we will do is we'll continue to monitor where

Speaker Change: We stand from a recovery standpoint and make the best decisions to go in when that fits with where we're seeing our recovery at. The other thing to keep in mind that we've talked about in the past is we do want to also continue to distribute our rate cases.

Eric Thornburg: The other thing to keep in mind that we've talked about in the past is we do want to also continue to distribute our rate cases so that we don't have any crowding of rate cases where California is going in at the same time as Connecticut. So we have kind of our larger divisions going in at different times, so that'll be a second factor, but you can absolutely expect that we will be paying attention to the timing of our next rate case.

Speaker Change: So that we don't have any crowding of rate cases where California is going in at the same time as Connecticut. So we have kind of our larger divisions going in at different times. So that'll be a second factor, but you can absolutely expect that we will be paying attention to the timing of our next rate case.

Eric W. Thornburg: So that'll be a second factor, but you can absolutely expect that we will be paying attention to the timing of our next rate case. Okay, and then over in the California case. Given the settlement agreement, just wondering how confident you are that you could get a decision by yourself.

Jonathan Reeder: And then over in the California Reacaste, given the settlement agreement, just wondering how Jonathan and all you, that you could get a decision by your end?

Speaker Change: Okay, and then over in the California case, given the settlement agreement, just wondering how confident are you that you could get a decision by your end?

Eric W. Thornburg: Yeah, Michael, I'd be highly confident that we can. We achieved an all-party settlement, which makes that all the more likely. And the remaining items are two small policy matters that we'll just brief, and the commission can then decide.

Eric Thornburg: Yeah, Michael, I'd be highly confident that we can, we achieved an all-party settlement which makes that all the more likely, and the remaining items are two small policy matters that will just brief, and the commission can then decide. So I think all parties are highly confident that in this case it will be approved and ready to introduce new rates on January 1st, 2025.

Speaker Change: Yeah, Michael, I'd be highly confident that we can.

Speaker Change: We achieved an all-parties settlement, which makes that all the more likely.

Speaker Change: And the remaining items are two small policy matters that we'll just brief, and the Commission can then decide. So I think all parties are highly confident in this case that we'll be...

Eric W. Thornburg: So I think all parties are highly confident in this case that we'll be approved and ready to introduce new rates on January 1st, 2025. Great. Then just one more on text, mentioned the drought, and Richard had some questions about it as well. Just wondering what your supplies are through the remainder of the year.

Speaker Change: will be approved and ready to introduce new rates on January 1st, 2025.

Richard Sunderland: Great, then just one more, and on Texas mentioned the drought, and Richard has some questions on it as well, just wondering what your supplies through the remainder of the year look like.

Speaker Change: Great. Then just one more on Texas. You mentioned the drought and Richard had some questions on it as well. Just wondering what your supplies through the remainder of the year look like?

Eric Thornburg: You know, Canyon Lake is our significant portion of our source of supply, and that lake is down to 55% of its normal capacity, or full capacity, I should say, and so that's a pretty significant variance for what you would normally expect to see in the summer. We also have significant groundwater supplies that we use, but because of the condition of the lake, we introduce the stage for drought declaration, and what that requires is customers cannot, in certain counties, use water for irrigation. So that's a pretty significant request of our customers, but at the same time, I would put it in perspective. You know, Texas is 5% of our overall business, and our team there will work very hard to offset the earnings implications for that particular business. So, as Andrew said, you know, with our guidance affirmation today, we still feel like we're on track there, but we'll watch it very carefully.

Eric W. Thornburg: You know, Canyon Lake is a significant portion of our source of supply, and that lake is down to 55% of its normal capacity, or full capacity, I should say. And so that's a pretty significant variance for what you would normally expect to see in the summer. We also have significant groundwater supplies that we use. But because of the condition of the lake, we introduced a stage four drought declaration.

Speaker Change: Canyon Lake is a significant portion of our source of supply.

Speaker Change: And that lake is down to 55% of its normal capacity.

Speaker Change: or full capacity, I should say, and so that's a pretty significant, you know, variance from what you would normally expect to see in the summer. We also have significant groundwater supplies that we use.

Speaker Change: But because of the condition of the lake,

Speaker Change: We introduced the Stage 4 drought declaration and what that requires is customers

Eric W. Thornburg: And what that requires is customers cannot, in certain counties, use water for irrigation. So that's a pretty significant request from our customers. But at the same time, I would put it in perspective.

Speaker Change: cannot, in certain counties, cannot use water for irrigation. So that's a pretty significant request of our customers.

Eric W. Thornburg: Texas is 5% of our overall business, and our team there will work very hard to offset the earnings implications for that particular business. So, as Andrew said, with our guidance affirmation today, we still feel like we're on track there. But we'll watch it very carefully.

Speaker Change: But at the same time I would put it in perspective, you know, Texas is 5% of our overall business

Speaker Change: And our team there will work very hard to offset the earnings.

Andrew: implications for that particular business. So as Andrew said, you know, with our guidance affirmation today, we still feel like we're on track there, but we'll watch it very carefully.

Eric Thornburg: The one thing too that to add to what Eric just talked about coming into this quarter, we were already down to one watering day every two weeks for our major areas, and so it's, on one hand, you can say that it's not that big of a move, but you know, it's this when you have no watering, there's no kind of forgetting which day you're supposed to water in this case, and so I think that's going to be the part that we'll have to kind of take a look as is what the ultimate impact.

Andrew F. Walters: The one thing, too, to add to what Eric just talked about, coming into this quarter, we were already down to one watering day every two weeks for our major areas. And so, on the one hand, you can say that it's not that big of a move, but when you don't have to water, there's no kind of forgetting which day you're supposed to water in this case. And so I think that's going to be the part that we'll have to kind of take a look at what the ultimate impact is. All right. Thank you, gentlemen. Take care.

Speaker Change: One thing to add to what Eric just talked about, coming into this quarter, we were already down to one watering day every two weeks for our major areas. And so it's, on one hand, you can say that it's

Speaker Change: It's not that big of a move but you know it's this when you have no watering there's there's no kind of forgetting which day you're supposed to water in this case and so so I think that's going to be the part that we'll have to kind of take a look at is what the ultimate impact is.

Jonathan Reeder: Thank you, Jonathan. Thank you.

Michael Gaugler: Thank you, Michael.

Speaker Change: All right. Thank you, gentlemen.

Operator: Thank you, Michael. Thank you one moment for our next question. Our next question comes from the line of Jonathan Reeder of Wells Fargo Securities. Your line is now open. Hi, Eric and Andrew. How are you guys doing? Hey, hi, Jonathan.

Speaker Change: Thank you. Thank you, Michael.

Operator: Our next question comes from a line of Jonathan Reeder, a Wells Fargo Securities. Your line is now open.

Speaker Change: Our next question comes from the line of Jonathan Reeder of Wells Fargo Securities. Your line is now open.

Jonathan Reeder: Hi, Eric and Andrew. How are you guys doing? Hey, hi, Jonathan. Doing great. Thanks for calling in today. Yeah, thanks for taking the time.

Operator: Doing great. Thanks for calling in today. Yeah, thanks for taking the time. So I first wanted to start on the A&G expenses. You know, they decreased by 3.1 million during the quarter. Was that expected when guidance was first initiated? Or are there some like timing issues or things that might reverse?

Jonathan Garrett Reeder: Hi Eric and Andrew, how are you guys doing?

Eric W. Thornburg: Hey, hi, Jonathan. Doing great. Thanks for calling in today.

Jonathan Reeder: So, first one to start on the ANG expenses. Now they decreased 3.1 million during the quarter. Was that expected when guidance was first initiated?

Jonathan Garrett Reeder: Yeah, thanks for taking the time. So I first wanted to start on the A&G expenses, you know, they decreased.

Jonathan Garrett Reeder: $3.1 million during the quarter. Was that expected when guidance was first initiated, or are there some timing issues or things that might reverse during the rest of 2024? Like, for instance, did that recede of the $9.1 million

Jonathan Reeder: Are there some like time issues or things that might reverse during the rest of 2024? For, like, for instance, did that receipt of the 9.1 million in a reentry lease in California during May? Did that help drive that lower allowance for uncollectable accounts in the quarter?

Andrew F. Walters: The rest of 2024, like, for instance, did that recede from 9.1 million, and did that help drive that lower allowance for uncollectible accounts in the quarter? Yes, Jonathan. It did.

Speaker Change: In a rear-edge relief in California during May, did that help drive that lower allowance for uncollectible accounts in the quarter?

Andrew F. Walters: And the more important part is the ability to, when we applied for that program, we were not in a position at that point to start shutting off customers that were part of that program because that was a condition. So given the ability for us to start shutting off customers who are not paying their bills, that drives the release as well. And the other component to keep in mind, while we knew that we were going to get this during the year at some point.

Eric Thornburg: Yes. So, Jonathan, it did. And the more important part is the ability.

Speaker Change: Yes, so Jonathan it did and the more important part is the ability when we applied for that program we were not in a position at that point to to start shutting off customers that were part of that program because that was a condition.

Eric Thornburg: When we applied for that program, we were not in a position at that point to start shutting off customers that were part of that program because that was a condition. So, given the ability for us to start shutting off customers who are not paying their bills, that drives the release as well. And the other component to keep in mind while we knew that we were going to get this during the year at some point, what we didn't have guarantees amounts were the total amount that was going to happen. We had an expectation. And the other piece is we certainly didn't know the timing.

Speaker Change: So, given the ability for us to start shutting off customers who are not paying their bills, that drives the release as well. And the other component to keep in mind, while we knew that we were going to get this,

Andrew F. Walters: What we didn't have were guarantees of the total amount that was going to happen. We had an expectation, and the other piece was that we certainly didn't know the timing, so kind of which quarter it would come in.

Speaker Change: during the year at some point.

Speaker Change: What we didn't have guarantees amounts were the total amount that was going to happen. We had an expectation.

Eric Thornburg: So, kind of which quarter it would come in. So, yes, it was part of our kind of standard operations and was why it's not highlighted differently. But it is something that we will continue to watch because we do have an expectation that our customers will pick up their payments to us. And we have seen that already on people that were not part of the program that we started doing shuts on. We saw a very positive response to those folks paying their bills.

Andrew F. Walters: So yes, it was part of our kind of standard operations and was why it's not highlighted differently. But it is something that, you know, we will continue to watch because, you know, we do have an expectation that our customers will pick up their... payments to us, and we have seen that already on. People that were not part of the program that we started shutting down, we saw a very positive response from those folks paying their bills. And now it's for these remaining items.

Speaker Change: and the other piece is we certainly didn't know the timing, so kind of which quarter it would come in. So yes, it was part of our kind of standard operations and was why it's not highlighted differently, but it is something that, you know, we will continue to watch because

Speaker Change: We do have an expectation that our customers will pick up their

Speaker Change: payments to us and we have seen that already on

Speaker Change: People that were not part of the program that we started doing shuts on, we saw a very positive response to those folks paying their bills and now it's for these remaining items.

Eric Thornburg: And now it's for these remaining items. The other thing I will just highlight is, with their Rearage Program, it cleared out any balances of people that were prior to 2022. So, the balances are generally speaking fairly fresh at 2023 slash into this year.

Andrew F. Walters: The other thing I'll just highlight is with their rearage program, it cleared out any balances of people that were prior to 2022. So the balances are, generally speaking, fairly fresh at 2023 slash into this year. Okay.

Speaker Change: The other thing I'll just highlight is with their rearage program, it cleared out any balances of people that were prior to 2022, so the balances are generally speaking fairly fresh at 2023 slash into this year.

Jonathan Reeder: Okay. And then I guess can you also remind us whether Q323 or Q423 if the results included any significant benefits that won't be occurring, I guess, in the second half of 2024? Just seems that otherwise, I guess Q2's favorable revenue drivers like the California rate increases and now the Connecticut rate case order would have the full year 24 results trending at or above the high end of the guidance range. Obviously, there's Texas to keep in mind, but I guess if you just kind of say a little differently, the second half 24 EPS are just flat compared to the second half of 23 EPS.

Andrew F. Walters: And then, I guess, can you also remind us whether Q3'23 or Q4'23 if the results included any significant benefits that won't be occurring, I guess, in the second half of 2024? It just seems that, otherwise, I guess Q2's favorable revenue drivers like the California rate increases and now the Connecticut rate case order would have the full year 24 results trending at or above the high end of the guidance range.

Speaker Change: Okay.

Speaker Change: And then, I guess, can you also remind us whether Q3'23 or Q4'23, if the results included any significant benefits that won't be occurring, I guess, in the second half of 2024, just seems that, you know.

Speaker Change: Otherwise, I guess Q2's favorable revenue drivers like the California rate increases and now the Connecticut rate case order.

Speaker Change: would have the full year 24 results trending, you know, at or above the high end of the guidance range. You know, obviously there's taxes to keep in mind, but you know.

Andrew F. Walters: Um, you know, obviously, there's Texas to keep in mind, but... I guess if you just kind of say it a little differently if the second half of 24 EPS is just flat compared to the second half of 23.

Speaker Change: I guess if you just kind of say it a little differently, if the second half 24 EPS are just flat compared to the second half of 23, it puts you just above the midpoint of your guidance range.

Jonathan Reeder: It puts you just above the midpoint of your guidance range.

Andrew F. Walters: It puts you just above the midpoint of your guide, right, so I think it's a very fair way to look at it. As I think about the items that were there that I remember off the top of my head, most of them were kind of the one-time items that would have impacted, like the real estate happened at the beginning of last year, in the first six months, and so that would not be a repeat. Outside of that, I can't think of anything that was a very unique item.

Eric Thornburg: Right, so I think it's a very fair way to look at it as I think about the items that were there that I remember at the top of my head. Most of the kind of the one-time item that would have impacted like the real estate happened in the beginning of last year and the first six months, and so that would not be a repeat. Outside of that, I can't think of something that was a very unique item. There's always the one thing when I make comments like that, Johnson. There are always pluses and minuses all over the place, and that's kind of what we do is just managing all those pluses and minuses. But for something that's significant, I don't have something off the top of my head.

Speaker Change: So I think it's a very fair way to look at it. As I think about the items that were there that I remember off the top of my head, most of the kind of the one-time item that

Speaker Change: would have impacted, like the real estate happened in the beginning of last year, in the first six months, and so that would not be a repeat. Outside of that...

Andrew F. Walters: There's always one thing when I make comments like that, Jonathan, there are always pluses and minuses all over the place, and that's kind of what we do is just manage all those pluses and minuses, but for something that's significant, I don't have anything off the top of my head. Okay, yeah, no, I mean, it just seems like I think it was there, you know, kind of made the point that Texas is only 5%, you know, that, obviously, there's the unknowns around the revenue impact there.

Speaker Change: I can't think of something that was a very unique item. There's always, the one thing when I make comments like that, Jonathan, there are always pluses and minuses all over the place. And that's kind of what we do is just managing all those pluses and minuses. But for something that's significant, I don't have something off the top of my head.

Jonathan Reeder: Yeah, I mean it just seems like I think you're there, you know, kind of made the point Texas is only 5%; you know that obviously there's the unknowns around the revenue impact there, but overall it seems like based on the first half of the year you're in a pretty strong position, you know, if regards your guidance range and maybe, you know, being in the upper half or above, you know, prior to, you know, potentially some of those puts and takes.

Andrew F. Walters: But overall, it seems like, based on the first half of the year, you're in a pretty strong position, you know, with regard to your guidance range and maybe, you know, being in the upper half or, or above, prior to, you know, potentially some of those. Yeah, let me just be clear that we're not seeing us being above the guidance range at this time. So I don't I don't want you to fill that confidence.

Jonathan Garrett Reeder: Okay. Yeah, no, I mean, it just seems...

Jonathan Garrett Reeder: Like, I think it was Eric, you know, kind of made the point Texas is only five percent, you know, that obviously there's the unknowns around the revenue impact there, but...

Speaker Change: Overall, it seems like based on the first half of the year, you're in a pretty strong position, you know, with regards to your guidance range and maybe, you know, being in the upper half or above, you know, prior to, you know, potentially some of those puts and takes.

Eric Thornburg: Yeah, let me just be clear that we're not seeing us being above the guidance range at this time, so I don't want you to fill that confidence. But I do say that we've had a positive performance year today, but there has been, as we highlighted in the press release, there has been inflationary impacts of the impact of the business. So you do have to keep that in mind when you're thinking about the impact. So there are positives that we're seeing in there, but there are some negatives that we're having to manage through as well.

Speaker Change: Yeah, let me just be clear that we're not seeing us being above the guidance range at this time So I don't I don't want you to fill that confidence, but I but I do say that we've had a positive Performance here today, but there has been as we highlighted in that

Andrew F. Walters: But I, but I do say that we've had a positive performance here today. But there has been, as we highlighted in the press release, inflationary impacts that have impacted the business. So you do have to keep that in mind when you're when you're thinking about the impact.

Speaker Change: In the press release, there has been inflationary impacts that have impacted the business, so you do have to keep that in mind when you're thinking about the impact. So there are positives that we're seeing in there, but there are some negatives that we're having to manage through as well.

Andrew F. Walters: So there are positives that we're seeing in there, but there are some negatives that we're having to manage through as well. Okay, kind of shifting gears a little bit, what do you think about the California Supreme Court's recent ruling on decoupling? Uh, you know. How does that impact the prospects of, you know, decoupling getting restored for water utilities by the CPU? You know what, Jonathan, a great development.

Jonathan Reeder: Sure, okay, kind of shipping years a little bit. How do you think about the California Supreme Court's recent ruling on decoupling, you know, and how does that impact the prospects of, you know, decoupling getting restored for water utilities by the CPUC? You know what, Jonathan? A great development, really pleased the collaboration across the industry. You know, to go about getting the legislation that made clear to the California PUC that this was a very viable regulatory tool. And now, further with the Supreme Court ruling on the prior cases for some of our peers, I think it all bodes well.

Speaker Change: Sure, okay. Kind of shifting gears a little bit, how do you think about the California Supreme Court's recent ruling on decoupling, you know, and how does that impact the prospects of, you know, decoupling getting restored for water utilities by the CPUC?

Eric W. Thornburg: I'm really pleased with the collaboration across the industry to go about getting the legislation. That made clear to the California PUC that this was a very viable regulatory tool. And now, with the Supreme Court ruling on the prior cases for some of our peers, I think it all bodes well, but, you know, the Public Advocates Office has strong views in opposition to using decoupling. So there's still work to be done from that standpoint.

Speaker Change: You know what, Jonathan, a great development, really pleased the collaboration across the industry, you know, to go about getting the legislation.

Speaker Change: that made clear to the California PUC that this was a very viable regulatory tool.

Speaker Change: and now further with the Supreme Court ruling on the prior cases for some of our peers. I think it all bodes well.

Eric Thornburg: But you know the Public Advocates Office has strong views in opposition to using decoupling, so there's still work to be done from that standpoint. And we're going to watch carefully our peers, see how they do in their cases, and then our next cycle around, we'll take a very hard look at it. I'm in favor of using them, and, as you know, because we didn't think we had that option.

Speaker Change: But, you know, the Public Advocates Office has strong views in opposition to using decoupling. So there's still work to be done from that standpoint. And we're going to watch carefully our peers, see how they do in their cases.

Eric W. Thornburg: And we're going to watch carefully our peers, see how they do in their cases, and then, when our next cycle around, we'll take a very hard look at it. I'm in favor of using them. And as you know, because we didn't think we had that option, we've worked very hard on the fixed charge component and recovered more and more of our fixed costs through our service charge, which we've achieved. But we do like the decoupling.

Speaker Change: And then our next cycle around, we'll take a very hard look at it.

Speaker Change: I'm in favor of using them, and...

Jonathan Reeder: We've worked very hard on the fixed charge component and recovering more and more of our fixed costs through our service charge, which we've achieved that. So, but we do like the decoupling. We'll watch it carefully and hopefully, you know, we continue to track and trend towards the reintroduction of that tool. And again, just one final comment, of course, we have a form of decoupling in place with ourselves with our WCMA that we're benefiting from current. Yeah, no, you guys are kind of already in a position to strengthen relative to some of the other in there.

Speaker Change: And as you know, because we didn't think we had that option, we've worked very hard on the.

Speaker Change: on the fixed charge component.

Speaker Change: and recovering more and more of our fixed costs.

Speaker Change: through our service charge, which we've achieved that. So, but we do like the decoupling. We'll watch it carefully. And hopefully, you know, we continue to track and trend towards the reintroduction of that tool. And again, just.

Eric W. Thornburg: We'll watch it carefully. And hopefully, we continue to track and trend towards the reintroduction of that tool. And again, just one final comment. Of course, we have a form of decoupling in place with ourselves, with our WCMA that we're benefiting from currently. Yeah, no, you guys are kind of already in a position to shrink relative to some of the others in there.

Speaker Change: One final comment, of course, we have a form of decoupling in place with ourselves, with our WCMA that we're benefiting from currently.

Speaker Change: Yeah, no, you guys are kind of already in a position of strength relative to some of the others in there.

Jonathan Reeder: But kind of last for me, can you provide, you know, the latest thoughts on the potential aquarium opportunity, including, you know, the timing of one the sale process might be conducted as you understand it. You know, it's a difficult one just because, you know, as you would guess, there's confidentiality agreements and the like for events such as that. But we're very excited about the potential opportunity there. Jonathan, we're very familiar with the assets, and we think it would be a great combination with our company, and, you know, we look forward to the process ahead here.

Eric W. Thornburg: Kind of last for me, can you provide, you know, the latest thoughts on the potential aquarium opportunity, including, you know, the timing of when the sale process might be conducted as you understand it? You know, it's a difficult one just because, you know, as you would guess, there's confidentiality agreements and the like for events such as that. And we're very excited about the potential opportunity there, Jonathan. We're very familiar with the assets, and we think it would be a great combination with our company, and, you know, we look forward to the process ahead here. Okay, fair enough. Thanks so much for your time today.

Speaker Change: But kind of last for me, can you provide, you know, the latest thoughts on the potential aquarium opportunity, including, you know, the timing of when the sale process might be conducted as you understand it?

Speaker Change: You know, it's a difficult one just because, you know, as you would guess there's confidentiality agreements and the like for events such as that and

Speaker Change: But we're very excited about the potential opportunity there. Jonathan, we're very familiar with the assets, and we think it would be a great combination with our company. And, you know, we look forward to the process ahead here.

Jonathan Reeder: Okay, fair enough.

Jonathan Reeder: Thanks so much for the time today. Thank you, Jonathan. All the best.

Jonathan Garrett Reeder: Okay, fair enough. Thanks so much for the time today.

Jonathan Garrett Reeder: Thank you, Jonathan. All the best.

Operator: Our next question comes from a line of Angie Storozynski, a seaport. The line is now open.

Eric W. Thornburg: Thank you, Jonathan. All the best. Thank you, Wong Wu, for your next question. Our next question comes from the line of Agnieszka Storozynski of Seaport. Your line is now open. Thank you.

Speaker Change: Our next question comes from the line of Agnieszka Storozynski of Seaport. Your line is now open.

Agnieszka Storozynski: Thank you.

Agnieszka Storozynski: So I have somewhat of a weird question. So I'm just, you know, bracing for arising electric prices and electricity prices overall. And I'm just wondering just two things. One, you know, just talk to us about your recovery methodology for rising electricity capacity prices; you name it. Is there a way for you to either maybe lock in rates ahead of time, or just try to mitigate that impact?

Operator: So I'm just, you know, bracing for rising electric prices, electricity prices overall. And I'm just wondering about two things. One, talk to us about your recovery methodology for rising electricity capacity prices, you name it. Is there a way for you to either maybe lock in rates ahead of time or just try to mitigate that impact? So that's number two.

Agnieszka Anna Storozynski: Thank you. So, I have somewhat of a weird question. So, I'm just, you know, bracing for a rising electric prices, electricity prices overall, and I'm just wondering,

Agnieszka Anna Storozynski: Just two things. One, you know, just talk to us about your recovery methodology for rising electricity capacity prices, you name it.

Speaker Change: Is there a way for you to either maybe lock in rates ahead of time or just try to mitigate that impact?

Agnieszka Storozynski: So that's number two. And then number two mostly, how do you think in this rising electricity price environment, you, you as a water utility will be treated by regulators and potentially investors. You actually think that that you will, you know, regain your competitive advantage given that, you know, water bill affordability will be probably meaningful improvement improved than that versus electric electric bills. So again, just this whole issue of, you know, likely rising electric bills that we are currently forgetting about.

Andrew F. Walters: And then, mostly, how do you think in this rising electricity price environment, you as a water utility will be treated by regulators and potentially investors? Do you actually think that that will regain your competitive advantage, given that water bill affordability will probably be meaningfully improved than that versus electric bills? So again, just this whole issue of and likely raising electric bills that we are currently forgetting about. Yeah, look, it's an excellent point to bring up, Angie, and it's something that we do not overlook because of the impact on our community. In California, we have a balancing account that allows us to put that through, so California is not something that we would see an impact directly on us, but we do have an impact on our customers.

Speaker Change: So that's number two. And then number two, mostly, how do you think, in this rising electricity price environment, you as a water utility will be treated by regulators and potentially investors? Do you actually think that that's...

Speaker Change: You will regain your competitive advantage given that water bill affordability will be probably meaningfully improved than that versus electric bills. So again, just this whole issue of...

Speaker Change: likely raising electric bills that we are currently forgetting about.

Eric Thornburg: Yeah, look, it's an excellent point to bring up, Angie, and it's something that we do not overlook on the impact on our customers. In California, we have a balancing account that allows us to put that through. So California is not something that we're, we would see an impact directly on us, but we do have impacts on our customers. So we have been out there continuing to convert facilities over to solar, which fixes the charge for that electricity over a longer period of time and does also allow for the benefit of providing a greener source of electricity for the community that it's based in.

Speaker Change: Yeah, look it's an excellent point to bring up, Angie, and it's something that we do not overlook on the impact on our customers.

Speaker Change: In California, we have a balancing account that allows us to put that through. So California is not something that we're.

Speaker Change: where we would see an impact directly on us. But we do have impacts on our customers. So we have been...

Eric W. Thornburg: So we have been out there continuing to convert facilities over to solar, which fixes the charge for that electricity over a longer period of time and does also allow for the benefit of providing a greener source of electricity for the communities that it's based in. The second aspect is that when we think about our Connecticut and Maine businesses, we tend to contract for that power, and so we buy the power in advance. We have seen an increase in those rates, to be clear, even for the contracted rates over where we were before because the last time when we purchased power, they were significantly lower than they are today.

Speaker Change: out there continuing to convert facilities over to solar, which fixes the charge for that electricity over.

Speaker Change: over a longer period of time and does also allow for the benefit of providing a greener source of electricity for the communities that it's based in.

Eric Thornburg: The second aspect is we think about our, our Connecticut in main businesses, we tend to contract for that power, and so we buy the power in advance. We have seen an increase in those rates, to be clear, even for the contracted rates over where we were before because of last time when we purchased power; they were significantly lower than they are today. That being said, those increases, at least some of them, have already reflected in the current rate case that we have seen, with more to come. It's something that we will have to manage as we look at that.

Speaker Change: The second aspect is we think about our

Speaker Change: Connecticut and Maine businesses, we tend to contract for that power and so we buy the power in advance. We have seen an increase in those rates to be clear.

Speaker Change: even for for the contracted rates over where where we were before because of last time when we purchased power they were significantly lower than they are today.

Eric W. Thornburg: That being said, you know, those increases, at least some of them, have already been reflected in the current rate case that we have seen with more to come. It's something that we will have to manage as we look at that for your third item, though, of affordability.

Speaker Change: That being said, those increases, at least some of them, have already reflected in the current rate case that we have seen, with more to come. It's something that we will have to manage as we look at that.

Eric Thornburg: For your third item, though, of affordability, there is a tremendous value from my perspective in water relative to some of the other commodities that other utilities are responsible for delivering. If we look at our affordability relative to the metrics that are out there and kind of our overall bills, just to remind you of that page that we have in the back of our investor deck, to highlight what our cost is to customers as an average bill relative to their median household income, we're below 1% in all of our jurisdictions, which is a very solid place to be.

Speaker Change: For your third item, though, of affordability,

Eric W. Thornburg: There is tremendous value, from my perspective, in water relative to some of the other commodities that other utilities, you know, are responsible for delivering. And if we look at our affordability relative to the metrics that are out there and kind of our overall bills, and just to remind you of that page that we have on the back of our investor deck to highlight what our cost is to customers as an average bill relative to their median household income, we're below 1% in all of our jurisdictions, which is a very solid place to be.

Speaker Change: There is a tremendous value, from my perspective, in water relative to some of the other commodities that other utilities are responsible for delivering.

Speaker Change: And if we look at our affordability relative to the metrics that are out there and kind of our overall bills, and just to remind you of that page that we have in the back of our investor deck, that highlights what our cost is to...

Speaker Change: customers as an average bill relative to their median household income, we're below 1% in all of our jurisdictions, which is a very solid place to be.

Eric Thornburg: The other thing that we are continuing to do, Angie, is we're not, we're never done trying to save money for our customers. We are continuing to come up with new ways and new programs in order to save money for our customers. With solar being a great example, we actually put that in and it earns for our shareholders, but it reduces costs for our customers, and what an outstanding outcome for that. It's a really good point. I love the question. By the end of this year, we will be generating 6,200 megawatts of solar power for our companies, and I was delighted when I saw our sustainability report.

Eric W. Thornburg: The other thing that we are continuing to do, Angie, is we're never done trying to save money for our customers, and we are continuing to come up with new ways and new programs in order to save money for our customers, with solar being a great example. We actually put that in, and it earns for our shareholders, but it reduces costs for our customers, and what an outstanding outcome for that, really good points. I love the question,

Speaker Change: The other thing that we are continuing to do, Angie, is we're not...

Agnieszka Anna Storozynski: We're never done trying to save money for our customers.

Agnieszka Anna Storozynski: And we are continuing to come up with new ways and new programs in order to save money for our customers, with solar being a great example. We actually put that in, and it earns for our shareholders, but it reduces costs for our customers. And what an outstanding outcome for that.

Eric W. Thornburg: By the end of this year, we will be generating 6200 megawatts of solar power for our companies. And I was delighted when I saw our sustainability report. In Texas, 100% of our electricity comes from renewable sources. In Connecticut, it's 70%.

Agnieszka Anna Storozynski: It's

Speaker Change: some really good points. I love the question.

Speaker Change: By the end of this year, we will be generating 6,200 megawatts of solar power for our companies.

Speaker Change: And I was

Speaker Change: I was delighted when I saw our

Eric Thornburg: In Texas, 100% of our electricity comes from renewables, and Connecticut is 70%, and then California and Maine is 50% in rising.

Speaker Change: Sustainability Report. You know, in Texas, 100% of our electricity

Eric W. Thornburg: And then California and Maine, it's 50% and rising. So we've been tapping into that market as well and really trying to be a force for good there. And then there's the other question about maybe just in general, like M&A transactions. So, you know, you clearly should have some sort of economies of scale benefits for Aquarium, but also any other, again, utility in the same state where you currently operate. Is there, like, I don't know, a rule of thumb, for example, as far as, you know, O&M savings or sort of, you know, DNA savings or any sort of operational benefits of basically enlarging your operations in the state in which you currently operate? Again, yeah, I can quote those, for example, for power. And I'm just wondering if the same is true on the water.

Speaker Change: It comes from renewables.

Speaker Change: Connecticut is 70% and then California and Maine is 50% and rising. So we've been tapping into that market as well and really trying to be a force for good there.

Eric Thornburg: So, we've been tapping into that market as well and really trying to be a force for good there.

Agnieszka Storozynski: And then the other question about maybe just in general, like M&A transactions, so you clearly should have some sort of economies of scale benefits for acquiring, but also any other, again, utility in the same state where you currently operate is there. I don't know, a role of them, for example, as far as O&M savings or any sort of operational benefits of basically enlarging your operations in the state in which you currently operate. Again, I can quote those for example for power, and I'm just wondering if the same is true on the water side.

Speaker Change: And then the other question about, maybe just in general, like M&A transactions. So, you know, you clearly should have some sort of economies of scale benefits.

Speaker Change: for Aquarium, but also any other, again, utility in the same state where you currently operate. Is there, like, I don't know, a rule of thumb, for example, as far as, you know, O&M savings, or sort of...

Speaker Change: you know, as DNA savings or any sort of operational benefits of basically enlarging your operations in the state in which you currently operate. Again, yeah, I can quote those for example for power and I'm just wondering if the same is true on the on the water side.

Eric Thornburg: I guess Angie, I would say from my understanding what power numbers are for what I expect, and I remember kind of numbers of 10% approximately of non-fuel O&M savings. Those are consistent with where water utilities can expect to potentially have savings. Now, it changes from opportunity to opportunities. You have to be careful with rules of thumb like that because there are places where you can do better, and there's times when you can't do as well. And so I think that's something that has to be paid attention to.

Eric W. Thornburg: I guess, Angie, from my understanding of what power numbers are, for what I expect, and I remember kind of numbers of 10%, approximately, of non-fuel O&M savings. You know, those are consistent with where water utilities can expect to potentially have savings. Now, it changes from opportunity to opportunity, so you have to be careful with rules of thumb like that, because there are places where you can do better, and there are times when you can't do as well.

Agnieszka Anna Storozynski: I guess, Angie, I would say from my understanding what power numbers are...

Agnieszka Anna Storozynski: for what I expect, and I remember kind of numbers of 10% approximately of non-fuel O&M savings.

Agnieszka Anna Storozynski: You know, those are consistent with where water utilities can expect to potentially have savings. Now, it changes from opportunity to opportunity, so you have to be careful with rules of thumb like that.

Agnieszka Anna Storozynski: because there are places where you can do better and there's times when you can't do as well.

Eric W. Thornburg: And so I think that's something that has to be paid attention to. That being said, if there were to happen to be kind of a contiguous consolidation, you tend to have good performance in those kinds of contiguous consolidations. Good. Thank you. Thank you. Thank you, Angie. Great question.

Eric Thornburg: That being said, if there were to happen to be kind of a contiguous consolidation, you tend to have good performance in those kind of contiguous consolidates.

Agnieszka Anna Storozynski: And so I think that's something that has to be paid attention to. That being said, if there were to happen to be kind of a contiguous consolidation, you tend to have good performance in those kind of contiguous consolidations.

Agnieszka Storozynski: questions. Good. Thank you.

Agnieszka Storozynski: Thanks. Thank you.

Agnieszka Storozynski: Thank you, Angie. Great questions.

Speaker Change: Good. Thank you. Thanks.

Operator: Thank you. One moment for next question.

Speaker Change: Thank you, Angie. Great questions.

Operator: Thank you one moment for our next question. Our next question comes from the line of Roger Liddell of Clear Harbor Asset Management. Your line is now open.

Speaker Change: Thank you, one moment for our next question.

Roger Liddell: Our next question comes online from Roger Liddell of Clear Harbor Asset Management. Your line is now open.

Speaker Change: Our next question comes from the line of Roger Liddell of Clear Harbor Asset Management. Your line is now open.

Roger Liddell: Thank you. And good morning. I take you to and hear me. Yes, we can.

Operator: Thank you, and good morning. I take it you can hear me. Yes, we can. Good morning, Roger. Great to hear from you. Thank you. Good to be with you. A couple of questions dealing with kinetic, on the 3.9 million in unrecovered expenses. I take it those are separate and distinct from uncollected. Is it just that crew?

Donald Roger Brooke Liddell: Thank you and good morning. I take it you can hear me.

Roger Liddell: Good morning, Roger. Great to hear from you. Thank you. Good to be with you.

Speaker Change: Yes, we can. Good morning, Roger. Great to hear from you.

Roger Liddell: A couple of questions dealing with Connecticut.

Donald Roger Brooke Liddell: Thank you. Good to be with you.

Donald Roger Brooke Liddell: Bye.

Speaker Change: A couple of questions dealing with Connecticut.

Roger Liddell: The 3.9 million of undercover expenses. I take it. Those are separate and distinct from uncollectables. Is that true? That is true, Roger.

Speaker Change: The 3.9 million of unrecovered expenses.

Speaker Change: I take it those are separate and distinct from uncollectibles.

Speaker Change: Is that true?

Roger Liddell: Okay. The recent rate increase in Connecticut that you referred to, uh, uh, uh, incorporated a make hole for every source in United on unpaid bills, all of the call at the baggage from the pandemic period. So the combined public benefit charge went up about 130% that component of the monthly bill. So that looked to be clearing the decks for EverSource and also on the unrecovered millstone purchase, how keeping millstone in operation. They have been made whole up through July One.

Andrew F. Walters: That that is true. Okay, the recent rate increase in Connecticut that you referred to incorporated a make whole for Eversource and United on unpaid bills, all of the call it the baggage from the pandemic period, of the combined public benefit charge, one up about 130% that component of the Monthly Bill. So that looked to be clearing the decks for Eversource and also on the unrecovered millstones purchase, keeping Millstone in operation. They have been made whole up through July 1.

Donald Roger Brooke Liddell: That is true, Roger.

Donald Roger Brooke Liddell: Okay, the recent rate increase in Connecticut that you referred to...

Speaker Change: Thank you, everyone. Thank you. Have a great afternoon.

Speaker Change #100: incorporated a make whole for Eversource and United on unpaid bills, all of the, call it the baggage from the pandemic period.

Speaker Change #100: So the...

Speaker Change #100: combined public benefit charge went up about a hundred and thirty percent of that component of the

Speaker Change #100: monthly bill.

Speaker Change #100: So, that looked to be clearing the decks for...

Speaker Change #100: Eversource, and also on the unrecovered millstone purchase power, keeping millstone in operation. They have been made whole up through July 1.

Andrew F. Walters: So, there appeared to be sensitivity at Pura for at least those issues and. I'm hanging, you with the 3.9 million unrecovered, can you talk to us just even briefly on why they did that and how you can, how you are dealing? So there were there were a few different factors that kind of impacted the decision. So, you know, just to take one component offline, there was Senate Bill seven that had some expenses that were removed because of what Senate Bill seven said that was in less than a million dollars of that total number that was there.

Eric Thornburg: But so there appeared to be sensitivity at pure for at least those issues and hanging you with a 3.9 million of unrecovered. Can you talk to us just even briefly on why they did that and how you can, how you are dealing with it? So there were a few different factors that kind of impacted the decision. So there was, you know, just to take one component of it offline, there was Senate Bill 7 that had some expenses that were removed because of what Senate Bill 7 said. That was less than a million dollars of that total number that was there.

Speaker Change #101: So there appeared to be sensitivity at Pura.

Speaker Change #101: for at least those issues, and...

Speaker Change #101: hanging

Speaker Change #101: you with a 3.9 million of unrecovered. Can you talk to us just even briefly on

Speaker Change #101: why they did that and how you can how you are dealing with it.

Speaker Change #102: So there were a few different factors that kind of impacted the decision. So there was, you know, just to take one component of it offline, there was Senate Bill 7 that had some...

Speaker Change #101: expenses that were removed because of what Senate Bill 7 said that was in less than a million dollars of that of that total number that was there so while it it was there it was not

Eric Thornburg: So, while it was there, it was not as significant as some of the other key items. I'll give you another example of, and this is not to be like all inclusive, but they reduce the audit fees that were being charged, the internal audit fees, external audit fees, and said that that was really a shareholder benefit. We obviously very much disagree with that because the fact the audit requirements have nothing to do with the equity shareholders is 100% to do with the debt providers that provide debt to those entities. And so that's something that we hope to continue to work to communicate the reasons why those expenses are in place.

Andrew F. Walters: So while it was there, it was not as significant as some of the other key items. I'll give you another example, and this is not to be all-inclusive, but they reduced the audit fees that were being charged, the internal audit fees, and external audit fees, and said that that was really a shareholder benefit. We obviously very much disagree with that because the fact that audit requirements have nothing to do with equity shareholders; it's 100% to do with the debt providers that provide debt to those entities.

Speaker Change #101: as significant as some of the other key items.

Speaker Change #101: I'll give you another example of, and this is not to be like all-inclusive,

Speaker Change #101: But they reduced the audit fees that were being charged, the internal audit fees, external audit fees, and said that that was really a shareholder benefit.

Speaker Change #103: We obviously very much disagree with that because the fact that audit requirements have nothing to do with equity shareholders, it's 100% to do with the debt providers that provide debt to those entities.

Andrew F. Walters: And so that's something that we hope to continue to work on communicating the reasons why those expenses are in place. But it does give us a fresh opportunity, Roger, as always when you have a challenge like this, you know, how can we address the situation and reduce our costs? And so those are the things that we're looking at, how can we reduce those audit expenses that are going into the next three years. Okay, thank you. And on the performance metrics for management. Are they in the public domain, and is there any reason to discuss them here? Sure. I mean, look, they are in the public domain.

Speaker Change #103: Something that we hope to continue to work to communicate the reasons why those expenses are in place.

Eric Thornburg: But it does give us a fresh opportunity, Roger. Like always, always when you have a challenge like this, you know, how can we address the situation, reduce our costs? And so those are the things that we're looking at is how can we reduce those audit expenses that are going into the next three years?

Speaker Change #103: But it does give us a fresh opportunity, Roger, like it always has.

Donald Roger Brooke Liddell: Always when you have a challenge like this, you know, how can we address the situation and reduce our costs? And so those are the things that we're looking at, is how can we reduce those audit expenses that are going into the next three years plus?

Roger Liddell: on the performance metrics for management. Are they in the public domain? And is there any reason to discuss them here?

Donald Roger Brooke Liddell: Okay, thank you. And on the performance metrics for management, are they in the public domain and is there any reason to discuss them here?

Eric Thornburg: Sure. I mean, look, they are in the public domain. It's part of the decision. And it's largely around the metrics associated with our customers and how we affordability. And so I think from that perspective we feel very good about our ability to factor operations in a way to meet those performance metrics. And I think that's important to note that performance metrics, by themselves, some people get nervous about them. But I think as long as they're properly set in a way that you can have a pathway to get there and they can affect what they're trying to affect.

Andrew F. Walters: It's part of the decision. And it's largely around the metrics associated with our customers and how we measure affordability. And so from that perspective, we feel very good about our ability to affect our operations in a way to meet those performance metrics. And I think that it's important to note that, like performance metrics by themselves, some people get nervous about them.

Speaker Change #104: Sure. I mean, look, they are in the public domain. It's part of the decision. And it's largely around the metrics associated with our customers and how we

Speaker Change #104: affordability and so I think from that perspective we feel very good about our ability to to affect our operations in a way to meet those performance metrics and and I think that's that's important to note that like performance

Eric W. Thornburg: But I think as long as they're properly set in a way that you can have a pathway to get there, and they can affect what they're trying to affect, and we can get to those numbers, it can be a very effective way to increase the efficiency of utilities as well as achieve specific objectives that Cura is after as well. Yeah, the plus side, of course, is that it was kind of the first time we'll be able to have the opportunity to recover components of executive comp at the long, long term incentive level. And in the past, we've not been eligible to recover that. So that's, that was a win, as Andrew said. Okay, thank you.

Speaker Change #104: metrics by themselves. Some people get nervous about them, but I think as long as they're properly set in a way that you can have a have a pathway to get there, and they can affect what they're trying to affect, and we can get to those numbers.

Eric Thornburg: And we can get to those numbers. It can be a very effective way to increase the efficiency of utilities, as well as increase specific objectives that you're after as well.

Speaker Change #104: It can be a very effective way to increase the efficiency of utilities as well as increase specific objectives that PURE is after as well.

Eric Thornburg: Yeah, the plus side, of course, is kind of the first time we'll be able to have the opportunity to recover components of executive comp at the long-term incentive level. And in the past, we've not been eligible to recover that. So that was a win, as Andrew said.

Speaker Change #104: Yeah, the plus side, of course, it was kind of the first time we'll be able to have the opportunity to recover components of executive comp at the long-term incentive level. And in the past, we've not been eligible to recover that. So that was a win, as Andrew said.

Eric W. Thornburg: Next question is on the advanced metering infrastructure program. I take it that there is a significant reward for all stakeholders from it. But the term advanced metering infrastructure means so many different things, whether it's electric or gas or water. And in many cases, AMI is effectively just keeping the meter reader from getting bitten by the dog. But the leak detection, I take it, replacement of mechanical meters with ultrasonic-based ones and leak detection, the ability to have notifications to WESI customers on a potential leak. Is that all part of the package? Roger, that's exactly right. We're not installing the kind of drive-by meter reading system.

Roger Liddell: Next question is on the Advanced Metering Infrastructure Program. Big bucks, and I take it. Significant reward for all stakeholders from it.

Speaker Change #105: Okay, thank you. Next question is on the advanced metering infrastructure program.

Eric Thornburg: But the term Advanced Metering Infrastructure means so many different things to whether it's electric or gas or water. And in many cases, AMI is effectively just the way of keeping the meter reader from getting bitten by the dog. But it was a leak detection. I take it a replacement of mechanical meters with ultrasonic-based ones. And leak detection, the ability to have notifications to even Wazzy customers on a potential leak. Is that all part of the package? Roger, that's exactly right. We're not installing the kind of the drive-by meter reading system. This will all be automated.

Speaker Change #106: but yeah the term advanced metering infrastructure means

Speaker Change #107: So many different things, too.

Speaker Change #108: whether it's electric or gas or water, and in many cases AMI is effectively just a way of keeping the meter reader from getting bitten by the dog.

Speaker Change #109: But the leak detection, I take it a replacement of mechanical meters with ultrasonic-based

Speaker Change #110: ones and leak detection, the ability to have notifications to even WESI customers on a potential leak, is that all part of the package?

Donald Roger Brooke Liddell: Roger, that's exactly right. We're not installing the kind of the drive-by meter reading system. This will all be automated. We're installing antennas around our service area so it will be, you know, picked up through through those signals.

Eric W. Thornburg: This will all be automated. We're installing antennas around our service area, so it will be picked up through those signals. So that will eliminate all these truck runs and kind of manual intervention. Customers will have a portal where they can track their daily water use. They will get alerts if they have continuous usage for 24 hours, indicating a leak.

Eric Thornburg: We're installing antennas around our service area. So it will be picked up through those signals. So that will eliminate all these truck runs and kind of manual intervention. Customers will have a portal that they can track their daily water use. They will get alerts if they have continuous usage for 24 hours, indicating a leak. And so all those benefits that we've long been excited about are going to be available to our customers here in the next couple of years. So we're just starting the implementation now. It's exciting. And we're really, really pleased to get this opportunity.

Donald Roger Brooke Liddell: So that will eliminate all these truck runs and kind of manual intervention. Customers will have a portal that they can track their daily water use.

Speaker Change #111: They will get alerts if they have continuous...

Eric W. Thornburg: And so all those benefits that we've long been excited about are going to be available to our customers here in the next couple of years. So we're just starting the implementation now. It's exciting, and we're really, really pleased to get this opportunity, the first of its kind in California for a major water utility. And I'm just going to add to Eric that I'm glad he brought up that it was the first of its kind, because I think that's something that really highlights the, you know, unique area that we're in.

Speaker Change #111: Usage for 24 hours indicating a leak.

Speaker Change #111: And so all those benefits that we've long...

Speaker Change #111: long been excited about, they're going to be available to our customers here in the next couple years, so we're just starting the implementation now. It's exciting, and we're really, really pleased.

Eric Thornburg: The first of its kind in California for major water details.

Speaker Change #111: to get this opportunity, the first of its kind in California for major water utilities.

Eric Thornburg: I'm just going to add to Eric.

Eric Thornburg: I'm glad you brought up that it was the first of a kind because I think that's something that really highlights the unique area that we're in. Our customer base actually is requesting that they have this access to this type of technology. It fits very well with the Silicon Valley area that we are based in and the high-tech focus. So that part is great, but the part that I find particularly satisfying is the ability for us to help save customers money with that leak detection that Eric has talked about. That was a major component. There were many others in terms of the savings, but the savings for this customer side on leaks that they were paying for is significant.

Speaker Change #112: I'm just going to add to Eric, I'm glad he brought up that it was the first of a kind because I think that's something that really...

Speaker Change #113: highlights the, you know, unique area that we're in. Our customer base actually is requesting that they have this access to this type of technology. It fits very well with the Silicon Valley area that we are based in and the high-tech focus.

Andrew F. Walters: But the part that I find particularly satisfying is the ability for us to help save customers money with that leak detection that Eric just talked about. That was a major component. There were many others in terms of the savings, but the savings for the customer side on leaks that they were paying for are significant. And when you have a valuable water resource, such as in California, that has different levels of availability, you don't want to waste water. You want to make sure that it's being delivered to its ultimate intended destination. As I recall, the, my figure may be stale.

Speaker Change #113: So that part is great.

Speaker Change #114: But the part that I find particularly satisfying is the ability for us to help save customers money with that leak detection that Eric just talked about.

Eric W. Thornburg: That was a major component, as there were many others, in terms of the savings, but the savings for the customer side...

Roger Liddell: And when you have a valuable water resource that is in California, that has different levels of availability, you don't want to waste water. You want to make sure that it's being delivered to its ultimate intended use.

Eric W. Thornburg: on leaks that they were paying for is significant. And when you have a valuable water resource with...

Speaker Change #115: that is, you know, in California, that has different levels of availability. You don't want to waste water. You want to make sure that it's being delivered to its ultimate intended use.

Roger Liddell: As I recall the figure, my figure may be stale. I hope you can update me, but on an accountant for a water system wide across the country was in the range of 30%. I'm hoping that figure is a lot lower, but everything you're speaking of is at the customer end as I think you have described it.

Speaker Change #115: As I recall, the...

Andrew F. Walters: I hope you can update me. But unaccounted for water system-wide across the country was in the range of 30%. I'm hoping that figure is a lot lower. But everything you're speaking of is at the customer end, as I think you have described it. And I get those benefits. But how about you managing the system and everything from the production plant to those advanced meters?

Speaker Change #116: figure, my figure may be stale, I hope you can update me, but on unaccounted for water system-wide across the country was in the range of 30%

Speaker Change #117: I'm hoping that figure is a lot lower but everything you're speaking of is at the customer end as I think you have described it and I get those benefits but how about you managing the system and everything from the production plant?

Roger Liddell: And I get those benefits, but how about you managing the system and everything from the production plant to those advanced meters. Are you also instrumenting your systems and able to get the same kind of leak detection that way? And what percentage of do you have at the current time for leakage from and I suppose any wastewater applications.

Eric W. Thornburg: Are you also instrumenting your systems and able to get the same kind of leak detection that way? And by how much? Do you have the current time for leakage from, and I suppose any wastewater application, it's leakage into? Yeah, thank you for the question, Roger. You know, in California, we deployed over 10,000 devices that are built into the steamer nozzle of fire hydrants. And at night, these are activated, and they listen to the pipe.

Speaker Change #118: to those advanced meters? Are you also instrumenting your systems and able to get the same kind of leak detection that way? And what percentage

Speaker Change #119: Do you have at the current time for leakage from, and I suppose any wastewater applications it's leakage into?

Eric Thornburg: Thank you for the question, Roger. You know in California we deployed over 10,000 devices that are built into the steamer nozzle of fire hydrants, and at night, these are activated and they listen to the pipe and through various. You know technology we were able to determine well is it a leak or is it you know water usage in a home. What have you? So we're able to go out and find leaks before the surface as a result of these listening devices that are you know incorporated into the hydrant caps. And we've deployed those throughout California and in Connecticut, and they're just a fantastic way to react preemptively, fix small leaks before they, you know, devolve into a major leak and blow up the street, etc.

Speaker Change #120: Thank you for the question, Roger. You know, in California, we deployed over 10,000 devices that are built into the steamer nozzle of fire hydrants.

Speaker Change #121: And at night, these are activated and they listen to the pipe and through various

Eric W. Thornburg: And through various, you know, technology, we were able to determine, well, is it a leak or is it, you know, water usage in a home, what have you. So we're able to go out and find leaks before they surface, as a result of these listening devices that are, you know, incorporated into the hydrant cap. And we've deployed those throughout California and in Connecticut. And they're just a fantastic way to preemptively fix small leaks before they devolve into a major leak and blow up the street, et cetera. So we are in the 7% unaccounted for range in California. We think it's world class, but we think we can do even better.

Eric W. Thornburg: And in other states, we're more in that 15% range. Unfortunately, the national average is still in that 25% to 30% range. And that goes to our hesitancy across the nation to replace the old pipe. We're committed to 1% replacement a year. That's industry leading, but gee whiz, that's still saying 100 years. And so we'd like to see the rest of the industry adopt that 1% replacement rate at a minimum so we can reduce water loss through leakage. Eric, I may just add one thing to that, too. The system you just talked about uses artificial intelligence to listen to those signatures.

Speaker Change #121: technology

Speaker Change #121: We were able to determine, well, is it a leak, or is it, you know, water usage in a home, or what have you. So we're able to go out and find leaks before they surface.

Speaker Change #121: as a result of these listening devices that are, you know, incorporated into the hydrant caps.

Speaker Change #121: And we've deployed those throughout California and in Connecticut. And they're just a fantastic way to preemptively fix.

Speaker Change #121: Small leaks before they, you know, devolve into a major leak and blow up the street, etc.

Eric Thornburg: So we are in the 7% on accounted for range in California. We think that's it's world class, but we think we can do even better, and in the other states we're more in that 15% range. Unfortunately, the national average still is in that 25 to 30% range. and that goes to our hesitancy across the nation to replace the old pipe. We're committed to 1% replacement a year. That's industry leading, but gee, that's still saying 100 years. And so we'd like to see the rest of the industry adopt that 1% replacement rate at a minimum, so we can reduce water loss through leakage.

Speaker Change #122: So, we are in the 7% unaccounted for range in California. We think that's, it's world class, but we think we can do even better. And in the other states, we're more in that 15% range.

Speaker Change #122: Unfortunately, the national average still is in that 25 to 30 percent range.

Speaker Change #122: And that goes to our hesitancy across the nation to replace the old pipe.

Speaker Change #122: We're committed to 1% replacement a year. That's industry leading, but gee whiz, that's still saying a hundred years. And so we'd like to see.

Speaker Change #122: You know, the rest of the industry adopt that 1% replacement rate at a minimum so we can can reduce water loss through leakage.

Eric Thornburg: Eric, I mean, just add just one thing to that too. The system you just talked about uses artificial intelligence to listen to those signatures. And we also use artificial intelligence on picking pipes just as part of our regular program here in California, which pipe is the right pipe to pick so that it not only looks at the failure, but also the impact of failure, which I think is another industry-leading aspect of the utility.

Speaker Change #123: Eric, I may just add just one thing to that too, the system you just talked about uses artificial intelligence to listen to those signatures.

Speaker Change #123: And we also use artificial intelligence on picking pipes, just as part of our regular program here in California, which pipe is the right pipe to pick, so that it not only looks at the failure, but also the impact of failure, which I think is another industry-leading aspect of the utility.

Roger Liddell: That's great.

Roger Liddell: Thank you. Complete and useful answers.

Roger Liddell: Thank you, Roger. Appreciate your call.

Speaker Change #124: That's great. Thank you. Complete and useful answers.

Operator: Thank you.

Speaker Change #124: Thank you, Roger. I appreciate your call.

Operator: I'm showing off for the questions at this time.

Aaron Thoroughburg: I'd like to turn it back to Aaron Thoroughburg for close remarks.

Aaron Thorborg: Thank you. I'm showing no further questions at this time. I'd now like to turn it back to Aaron Thorborg for closing remarks.

Aaron Thoroughburg: Thank you, everyone, for joining us today. We're halfway through the year, and we've got a lot more to look forward to into 2024, including a decision on our California rate case, implementation of our AMI initiative in California, progress with bringing greater water supply online in Texas, and advancing our PFAS remediation strategy. SJW Group proudly leverages our national platform to support our distinct local operations in our shared mission to reliably serve high-quality water to 1.5 million people across four states. While we do this, we make sure we execute on our growth strategy and deliver shareholder value, including paying a dividend, which we have faithfully done for 80 straight years, and we've raised that dividend for 56 consecutive years.

Aaron Thorborg: Thank you everyone for joining us today. We're halfway through the year and we've got a lot more to look forward to into 2024, including a decision on our California rate case, implementation of our AMI initiative in California.

Speaker Change #126: Progress with bringing greater water supply online in Texas and advancing our PFAS remediation strategy.

Speaker Change #126: SJW Group proudly leverages our national platform to support our distinct local operations in our shared mission to reliably serve high-quality water to 1.5 million people across four states.

Speaker Change #126: And while we do this, we make sure we execute on our growth strategy and deliver shareholder value, including paying a dividend, which we have faithfully done for 80 straight years. And we've raised that dividend for 56 consecutive years.

Aaron Thoroughburg: I recognize that it's our culture of service to our customers and the local communities that underlies our success, and I'm very proud of our people to make it all possible. Thanks again for your time today and your questions. We look forward to sharing our progress with you next quarter, and in the meantime, Andrew and I, along with the rest of the SJW Group team, are always available for follow-up.

Speaker Change #126: I recognize that it's our culture of service to our customers and the local communities that underlies our success, and I'm very proud of our people who make it all possible.

Speaker Change #126: Thanks again for your time today and your questions. We look forward to sharing our progress with you next quarter. And in the meantime, Andrew and I, along with the rest of the SJW Group team, are always available for follow-up. Thank you again for your interest in SJW Group.

Aaron Thoroughburg: Thank you again for your interest in SJW Group.

Operator: Thank you for your participation in today's conference. It does conclude the program.

Speaker Change #127: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

Operator: You may you you you you you you you you you you good day and thank you for standing by. Welcome to the 2024 second quarter S8 W group financial results conference call. At this time, all participants are in listening only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would like to hand the conference over to your first speaker today, Andrew Walters, Chief Financial Officer, Treasurer, Interim Principal Accounting Officer. Please go ahead. Thank you, operator.

Speaker Change #128: Thanks for watching!

Speaker Change #129: Good day, and thank you for standing by.

Andrew F. Walters: And we also use artificial intelligence to pick pipes, just as part of our regular program here in California, which pipe is the right pipe to pick, so that it not only looks at the failure but also the impact of failure, which I think is another industry-leading aspect of the utility. That's great. Thank you. Thank you, Roger. I appreciate your call.

Operator: Thank you. I'm showing no further questions at this time. I'd now like to turn it back to Aaron Thornburg for a closing remark. Thank you, everyone, for joining us today.

Speaker Change #130: Welcome to the 2024 Second Quarter SJW Group Financial Results Conference Call.

Speaker Change #131: At this time, all participants are in listen-only mode.

Speaker Change #132: After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you'll need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised.

Andrew F. Walters: We're halfway through the year, and we've got a lot more to look forward to in 2024, including a decision on our California rate case, implementation of our AMI initiative in California, progress with bringing greater water supply online in Texas, and advancing our PFAS remediation strategy. SJW Group proudly leverages our national platform to support our distinct local operations in our shared mission to reliably serve high-quality water to 1.5 million people across four states.

Andrew Walters: Welcome to the second quarter of 2024 financial results conference call for SJW Group. I will be presenting today with Eric Thornburg, Chair of the Board, President and Chief Executive Officer.

Andrew F. Walters: Thank you, operator. Welcome to the second quarter 2024 financial results conference call for SJW Group.

Andrew F. Walters: And while we do this, we make sure we execute on our growth strategy and deliver shareholder value, including paying a dividend, which we have faithfully done for 80 straight years, and we've raised that dividend for 56 consecutive years. I recognize that it's our culture of service to our customers and the local communities that underlies our success, and I'm very proud of our people who make it all possible. Thanks again for your time today and your questions.

Speaker Change #133: I will be presenting today with Eric Thornburg, Chair of the Board, President, and Chief Executive Officer.

Andrew Walters: For those who would like to follow along, slides accompanying our remarks are available on our website at stwgroup.com. Before we begin today, I would like to remind you that this presentation and related materials posted on our website may contain forward-looking statements. These statements are based on estimates and assumptions made by the company in light of its experience, historical trends, current conditions, and expected future results, as well as other factors that the company believes are appropriate under the circumstances. Many factors could cause the company's actual results in performance to differ materially from those expressed or implied by the forward-looking statements.

Operator: We look forward to sharing our progress with you next quarter, and in the meantime, Andrew and I, along with the rest of the SJW Group team, are always available for follow-up. Thank you again for your interest in SJW Group.

Speaker Change #134: For those who would like to follow along, slides accompanying our remarks are available on our website at sjwgroup.com.

Speaker Change #134: Before we begin today, I would like to remind you that this presentation and related materials posted on our website may contain forward-looking statements.

Speaker Change #134: These statements are based on estimates and assumptions made by the company in light of its experience, historical trends, current conditions, and expected future results, as well as other factors that the company believes are appropriate under the circumstances.

Speaker Change #134: Many factors could cause a company's actual results and performance to differ materially from those expressed or implied by the forward-looking statements.

Andrew Walters: For description of some of the factors that could cause actual results to be different from statements in this presentation, we refer you to the financial results press release and our most recent forms, 10-K, 10-Q, and 8-K filed with the Securities and Exchange Commission, copies of which may be obtained on our website. All forward-looking statements are made as of today, and stwgroup disclaims any duty to update or revise such statements. You will have an opportunity to ask questions at the end of the presentation. This webcast is being recorded, and an archive of the webcast will be available until October 21st, 2024.

Speaker Change #134: for description of some of the factors that could cause actual results to be different from statements in this presentation.

Speaker Change #134: We refer you to the financial results press release and our most recent forms 10-K, 10-Q, and 8-K filed with the Securities and Exchange Commission, copies of which may be obtained on our website.

Speaker Change #134: All forward-looking statements are made as of today, and SJW Group disclaims any duty to update or revise such statements.

Speaker Change #134: You will have an opportunity to ask questions at the end of the presentation.

Speaker Change #134: This webcast is being recorded and an archive of the webcast will be available until October 21st, 2024. You can access the press release and the webcast at SJW Group's website.

Andrew Walters: You can access the press release and the webcast at SJW Group's website. In addition, some of the information discussed today includes the non-GAAP financial measures of adjusted net income and adjusted diluted earnings per share. They have not been calculated in accordance with generally accepted accounting principles in the United States or GAAP. These non-GAAP financial measures should be considered as a supplement to the financial information prepared on a GAAP basis rather than an alternative to the respective GAAP financial measures. Reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures is presented in the table in the appendix of our presentation.

Speaker Change #134: In addition, some of the information discussed today includes the non-GAAP financial measures of adjusted net income and adjusted diluted earnings per share that have not been calculated in accordance with generally accepted accounting principles in the United States or GAAP.

Speaker Change #134: These non-GAAP financial measures should be considered as a supplement to the financial information prepared on a GAAP basis rather than an alternative to the respective GAAP financial measures.

Speaker Change #134: Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are presented in the table in the appendix of our presentation.

Eric Thornburg: I will now turn the call over to Eric. Welcome everyone, and thank you for joining us. My name is Eric Thornberg, and it is my honor to serve as chair, president, and CEO of SJW Group. I'm pleased to share that in the second quarter of 2024, we continued to meet drinking water and environmental regulations, deliver on our public health and environmental stewardship commitments, and provide high-quality water and service to customers. Importantly, we also experienced the benefits of our focused efforts to listen to, learn from, and meaningfully respond to our stakeholders. For example, in California, we reached an agreement in principle on most issues with the Public Advocate's Office and WRAIDs, a local water rate advocacy organization, in our 2025 through 2027 General Rates.

Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. In the name of the Father, and of the Son, and of the Holy Spirit, amen.

Speaker Change #134: I will now turn the call over to Eric.

Operator: Good day, and thank you for standing by. Welcome to the 2024 Second Quarter SJW Group Financial Results Conference Call. At this time, all participants are in listen-only mode.

Eric W. Thornburg: Welcome, everyone, and thank you for joining us. My name is Eric Thornburg, and it is my honor to serve as chair, president, and CEO of SJW Group.

Operator: After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Andrew Walter, Chief Financial Officer, Treasurer, and Interim Principal Accounting Officer. Please go ahead.

Eric W. Thornburg: and provide high-quality water and service to customers.

Andrew F. Walters: Many factors could cause the company's actual results and performance to differ materially from those expressed or implied by the forward-looking statements. For a description of some of the factors that could cause actual results to be different from statements in this presentation, We refer you to the financial results press release and our most recent Forms 10-K, 10-Q, and 8-K filed with the Securities and Exchange Commission, copies of which may be obtained on our website. All foregoing statements are made as of today, and SJW Group disclaims any duty to update or revise such statements.

Eric W. Thornburg: Importantly, we also experience the benefits of our focused efforts to listen to, learn from, and meaningfully respond to our stakeholders.

Andrew F. Walters: You will have an opportunity to ask questions at the end of the presentation. This webcast is being recorded, and an archive of the webcast will be available until October 21st, 2024. You can access the press release and the webcast on SJW Group's website. In addition, some of the information discussed today includes the non-GAAP financial measures of adjusted net income and adjusted diluted earnings per share that have not been calculated in accordance with generally accepted accounting principles in the United States or GAAP. These non-GAAP financial measures should be considered as a supplement to the financial information prepared on a GAAP basis rather than an alternative to the respective GAAP financial measures.

Eric W. Thornburg: For example.

Eric W. Thornburg: In California, we reached an agreement in principle on most issues with the Public Advocates Office and WRATES, a local water rates advocacy organization.

Eric W. Thornburg: in our 2025 through 2027 general rate case.

Eric Thornburg: We expect the settlement agreement will be filed on or about August 19th. All but two policy issues have been agreed upon, and we are hopeful the CPUC will approve the settlement later this year. In Connecticut, we worked within the constraints of a formidable regulatory environment to complete our general rate case. Now we didn't get all we expected, or frankly all that we need from that particular rate case, and there is a lot of room for improvement going forward, which we are already thinking about. But it was clearly a step in the right direction. Our team's responsive filing and constructive engagement with local stakeholders helped facilitate significant improvements between the proposed draft decision and the final decision.

Eric W. Thornburg: We expect the settlement agreement will be filed on or about August the 19th.

Eric W. Thornburg: All but two policy issues have been agreed upon.

Eric W. Thornburg: And we are hopeful the CPUC will approve the settlement later this year.

Eric W. Thornburg: In Connecticut, we worked within the constraints of a formidable regulatory environment to complete our general rate case.

Eric W. Thornburg: Now, we didn't get all we expected, or frankly, all that we need.

Eric W. Thornburg: from that particular rate case.

Eric W. Thornburg: And there is a lot of room for improvement going forward, which we are already thinking about.

Eric W. Thornburg: But it was clearly a step in the right direction.

Eric W. Thornburg: Our team's responsive filing and constructive engagement with local stakeholders helped facilitate significant improvements.

Eric W. Thornburg: between the proposed draft decision and the final decision.

Andrew Walters: I'm proud to share that the Connecticut team's strategic approach, hard work, and transparency was commended by the local regulators, parties to the rate case, and members of the financial industry alike. And we were able to serve our customers by securing additional financial assistance funds in California and expanding eligibility in Connecticut for our water rate assistance program, which is a first of its kind program in that state for water utilities. Additionally, across the enterprise, we invested $158 million in water and wastewater utility infrastructure, which constitutes approximately 48% of our $332 million, 2024 capital expenditure plan. And we also delivered earnings per diluted share of $0.64 and adjusted non-GAAP earnings per diluted share of $0.66 in the second quarter.

Eric W. Thornburg: I'm proud to share that the Connecticut team's strategic approach, hard work, and transparency was commended by the local regulators, parties to the rate case, and members of the financial industry alike.

Eric W. Thornburg: In California, we reached an agreement in principle on most issues with the Public Advocate's Office and WRAI, a local water rates advocacy organization, in our 2025 through 2027 general rate. We expect the settlement agreement will be filed on or about August 19th. All but two policy issues have been agreed upon, and we are hopeful the CPUC will approve the settlement later this year. In Connecticut, we worked within the constraints of a formidable regulatory environment to complete our general rate case.

Eric W. Thornburg: And we were able to serve our customers by securing additional financial assistance funds in California.

Eric W. Thornburg: and Expanding Eligibility in Connecticut for our Water Rate Assistance Program.

Eric W. Thornburg: which is a first-of-its-kind program in that state for water utilities.

Eric W. Thornburg: Additionally, across the enterprise,

Eric W. Thornburg: We invested $158 million in water and wastewater utility infrastructure.

Eric W. Thornburg: which constitutes approximately 48%

Eric W. Thornburg: of our $332 million 2024 Capital Expenditure Plan.

Eric W. Thornburg: And we also delivered earnings per diluted share of 64 cents.

Eric W. Thornburg: and adjusted non-GAAP earnings per diluted share of 66 cents in the second quarter.

Eric Thornburg: Now you hear me say every quarter that our people make the difference at SJW Group. This is true than ever before, and we saw that difference from California to Connecticut this quarter. And as we prepare for the future, we know that constructive relationships with our local stakeholders, built on mutual trust and respect, will be critical. You know, our industry has some significant challenges ahead: PFAS remediation, new lead and copper standards, and a replacement of aging infrastructure just to name a few. And we all know this work needs to get done. There's no question about that.

Eric W. Thornburg: Now, we didn't get all we expected or, frankly, all that we need from that particular rate case. And there is a lot of room for improvement going forward, which we are already thinking about. But it was clearly a step in the right direction.

Eric W. Thornburg: Now you hear me say every quarter that our people make the difference at SJW Group.

Eric W. Thornburg: This is truer than ever before, and we saw that difference from California to Connecticut this quarter.

Eric W. Thornburg: Our team's responsive filing and constructive engagement with local stakeholders helped facilitate significant improvement between the proposed draft decision and the final decision. I'm proud to share that the Connecticut team's strategic approach, hard work, and transparency, was commended by the local regulators, parties to the rate case, and members of the financial industry alike. And we were able to serve our customers by securing additional financial assistance funds in California and Expanding Eligibility in Connecticut for our Water Rate Assistance Program, which is a first-of-its-kind program in that state for water utilities.

Eric W. Thornburg: And as we prepare for the future, we know that constructive relationships with our local stakeholders

Eric W. Thornburg: built on mutual trust and respect will be critical.

Eric W. Thornburg: You know, our industry has some significant challenges ahead.

Speaker Change #135: PFAS remediation.

Speaker Change #135: New Lead and Copper Standards.

Speaker Change #135: and a replacement of aging infrastructure, just to name a few.

Speaker Change #135: And we all know this work needs to get done. There's no question about that.

Eric Thornburg: But how we get it done most effectively for our customers and their communities. Well, that's the question we need to tackle with our regulators and legislators. And our local teams are ready and committed to investing in these relationships to ensure that we can achieve our shared mission of providing our local community members with reliable, high-quality water and service. Sometimes it's easy to align with local stakeholders on the approach to achieving our common goals. And other times it's a slower process. But we are dedicated to investing the time, effort, and resources needed to advocate and collaborate in service of our customers, their communities, our employees, and shareholders.

Speaker Change #135: but how we get it done most effectively for our customers and their communities.

Speaker Change #135: Well, that's the question we need to tackle with our regulators and legislators.

Speaker Change #135: And our local teams are ready and committed to investing in these relationships to ensure that we can achieve our shared mission of providing our local community members with reliable, high-quality water and service.

Speaker Change #135: Sometimes it's easy to align with local stakeholders on the approach to achieving our common goals.

Speaker Change #135: And other times, it's a slower process.

Speaker Change #135: But we are dedicated to investing the time, effort, and resources needed to advocate and collaborate in service of our customers, their communities, our employees, and shareholders.

Eric Thornburg: That's our culture, and it's also a competitive advantage of ours.

Speaker Change #135: That's our culture, and it's also a competitive advantage of ours.

Eric W. Thornburg: Additionally, across the enterprise, we invested $158 million in Water and Wastewater Utility Infrastructure, which constitutes approximately 48% of our $332 million 2024 capital expenditure plan. And we also delivered earnings per diluted share of $0.64 and adjusted non-GAAP earnings per diluted share of 66 cents in the second quarter. Now, you hear me say every quarter that our people make the difference at SJW Group.

Andrew Walters: With that, I will pass it over to Andrew to review our detailed financial results and regulatory updates in our state operators. Andrew, thank you, Eric. Last evening after the close, we released our second quarter 2024 operating results. In the second quarter, we reported revenue of $176.2 million, a 12% increase over the $156.9 million reported in the same quarter of 2023. The increase was largely driven by rate increases at each of our local operations that included one or more step increases in general rate cases, infrastructure recovery mechanisms, and customer growth. Despite higher water production expenses, we were able to deliver net income for the quarter of $20.7 million, which was a 13% increase over the 18.3 million reported in the second quarter of 2023.

Speaker Change #135: With that, I will pass it over to Andrew to review our detailed financial results and regulatory updates in our state operations.

Eric W. Thornburg: New Lead and Copper Standards and a replacement of aging infrastructure, just to name a few. And we all know this work needs to get done. There's no question about that, but how do we get it done most effectively for our customers and their communities? Well, that's the question we need to tackle with our regulators and legislators, and our local teams are ready and committed to investing in these relationships to ensure that we can achieve our shared mission of providing our local community members with reliable, high-quality water and service.

Andrew: Thank you, Eric.

Andrew: Last evening, after the close, we released our second quarter 2024 operating results.

Andrew: In the second quarter, we reported revenue of $176.2 million, a 12% increase over the $156.9 million reported the same quarter of 2023.

Andrew F. Walters: Thank you, Eric. Last evening after the close, we released our second quarter 2024 operating results. In the second quarter, we reported revenue of $176.2 million, a 12% increase over the $156.9 million reported in the same quarter of 2023. The increase was largely driven by rate increases at each of our local operations that included one or more step increases in general rate cases. Infrastructure Recovery Mechanisms, and Customer Growth. Despite higher water production expenses, we were able to deliver net income for the quarter of $20.7 million, which was a 13% increase over the $18.3 million reported in the second quarter of 2023. Diluted earnings per share was $0.64 compared to $0.58 in 2023. Second quarter real estate transactions that netted a $0.9 million pre-tax loss have been excluded in the non-GAAP results reflected below, with adjusted net income of $21.3 million and adjusted diluted earnings per share of $0.66.

Andrew Walters: Deluted earnings per share was 64 cents compared to 58 cents in 2023. Second quarter real estate transactions that netted $0.9 million pre-tax loss have been excluded in non-GAAP results reflected below, with the adjusted net income of $21.3 million and adjusted diluted earnings per share of 66 cents. As you can see, 34 cents of the revenue increase was driven primarily by rate increases in California and Maine, and the infrastructure recovery mechanisms in Connecticut, Maine, and Texas. Changes in the allowance for uncollectable customer accounts contributed 13 cents, and higher usage and growth added 12 cents. The revenue increase was offset by higher water production costs of 22 cents and a 9 cents tax reserve release in the same period last year.

Speaker Change #136: As you can see, 34 cents of the revenue increase was driven primarily by rate increases in California and Maine and the infrastructure recovery mechanisms in Connecticut, Maine, and Texas.

Speaker Change #136: Changes in the allowance for uncollectible customer accounts contributed $0.13 and higher usage and growth added $0.12.

Speaker Change #136: The revenue increase was offset by higher water production costs of $0.22 and a $0.09 tax reserve release in the same period last year.

Andrew Walters: 13 million of revenue increase was from rate and infrastructure adjustments, and 6 million was attributable to higher usage and regulatory mechanisms. Water production expense in the quarter increased 14% compared to 2023. The increase was largely driven by rate increases from our water wholesaler in California, higher customer usage, and growth. Total other operating expenses increased 2% year over year and was primarily driven by increases in depreciation and higher administration and general cost, which were partially offset by allowances for uncollectable customer accounts. Year to date, we reported revenue of $325.6 million, an 11% increase over the $294.2 million reported in the same period of 2023.

Speaker Change #136: $13 million of revenue increase was from rate and infrastructure adjustments.

Speaker Change #136: and $6 million was attributable to higher usage and regulatory mechanisms.

Andrew F. Walters: Water production expense in the quarter increased 14% compared to 2023. The increase was large and was principally driven by rate increases from our water wholesaler in California, higher customer usage, and growth. Total other operating expenses increased 2% year-over-year and were primarily driven by increases in depreciation and higher administration and general costs, which were partially offset by allowances for uncollectible customer accounts.

Speaker Change #136: Water production expense in the quarter increased 14% compared to 2023. The increase was large, was principally driven by rate increases from our water wholesaler in California, higher customer usage, and growth.

Speaker Change #136: Total other operating expenses increased 2% year-over-year and was primarily driven by increases in depreciation and higher administration and general cost.

Speaker Change #136: which were partially offset by allowances for uncollectible customer accounts.

Speaker Change #136: Year-to-date, we reported revenue of $325.6 million, an 11% increase over the $294.2 million reported in the same period of 2023.

Andrew Walters: As we noted for the quarter, the increases were largely driven by rate increases, infrastructure recovery mechanisms, and customer growth. Despite higher water production expenses, net income year-to-date was $32.4 million, a 9% increase. And diluted earnings per share was $1 compared to 95 cents in 2023. As mentioned earlier, second quarter real estate transactions that netted $0.9 million pre-tax loss have been excluded in non-GAAP results reflected below with adjusted net income of $33 million. Non-GAAP diluted earnings per share was $1 compared to 92 cents, 11% increase over 2023. As you can see, 60 cents of the revenue increase was driven primarily by rate increases in California and Maine; higher usage in customer growth contributed 19 cents.

Speaker Change #136: As we noted for the quarter, the increases were largely driven by rate increases, infrastructure recovery mechanisms, and customer growth.

Speaker Change #136: Despite higher water production expenses, net income year-to-date was $32.4 million, a 9% increase.

Speaker Change #136: And diluted earnings per share was $1 compared to $0.95 in 2023.

Speaker Change #136: As mentioned earlier, second quarter real estate transactions that netted a $0.9 million pre-tax loss have been excluded in non-GAAP results reflected below, with adjusted net income of $33 million.

Andrew F. Walters: Non-GAAP diluted earnings per share was $1.02 compared to $0.92, an 11% increase over 2023. As you can see, 60 cents of the revenue increase was driven primarily by rate increases in California and Maine, higher usage, and customer growth. The revenue increase was partially offset by higher water production costs of $0.35. Approximately $33 million in gross equity proceeds have been raised year to date through the At the Market Program. At the end of the second quarter, we had $217 million drawn on our $350 million bank line of credit, which left $133 million available for short-term financing of utility plan additions and operating activities.

Speaker Change #136: non-GAAP diluted earnings per share was $1.02 compared to $0.92, 11% increase over 2023.

Speaker Change #136: As you can see, 60 cents of the revenue increase was driven primarily by rate increases in California and Maine.

Speaker Change #136: Higher usage and customer growth contributed $0.19.

Andrew Walters: The revenue increase was partially upset by higher water production cost of 35 cents. Approximately $33 million in gross equity proceeds was raised year-to-date through the at-the-market program. At the end of the second quarter, we had $217 million drawn on our $350 million bank line of credit, which left $133 million available for short-term financing of utility plan additions and operating activities. During the balance of 2024, we plan to raise approximately $160 million in long-term debt to pay down our line of credit. The average borrowing rate for our line of credit advances during the quarter was approximately 6.53%.

Speaker Change #136: The revenue increase was partially offset by higher water production cost of $0.35.

Speaker Change #136: Approximately $33 million in gross equity proceeds was raised year-to-date through the

Speaker Change #136: at the Market Program.

Speaker Change #136: At the end of the second quarter, we had $217 million drawn on our $350 million bank line of credit, which left $133 million available for short-term financing of utility plan additions and operating activities.

Speaker Change #136: During the balance of 2024, we plan to raise approximately $160 million in long-term debt to pay down our line of credit.

Speaker Change #136: The average borrowing rate for our line of credit advances during the quarter was approximately 6.53 percent.

Andrew Walters: The average borrowing rate in the same period of 2023 was approximately 5.96%. The effective consolidated income tax rates for second quarter of 2024 and 2023 were approximately 15% and negative 9%, respectively. Turning to California, we are pleased to report that San Jose Water has reached an agreement in principle to settle its 2025 through 2027 general rate case with the Public Advocates Office and Water Rate Advocates for Transparency, Equity, and Sustainability, or W Rates. Only two policy issues remain, which we expect will be litigated later this year. As required in the procedural ruling, the formal settlement motion and agreement must be submitted to the California Public Utilities Commission no later than August 19, 2024.

Andrew F. Walters: The average borrowing rate in the same period of 2023 was approximately $5.9. The effective consolidated income tax rates for the second quarter of 2024 and 2023 were approximately 15% and negative 9%, respectively. Turning to California, we are pleased to report that San Jose Water has reached an agreement, in principle, to settle its 2025 through 2027 general rate case with the Public Advocates Office and Water Rate Advocates for Transparency, Equity, and Sustainability, or WRATE. Only two policy issues remain, which we expect will be litigated later this year.

Speaker Change #136: The average borrowing rate in the same period of 2023 was approximately 5.96%.

Speaker Change #136: The effective consolidated income tax rates for second quarter of 2024 and 2023 were approximately 15% and negative 9% respectively.

Speaker Change #136: Turning to California, we are pleased to report that San Jose Water has reached an agreement in principle to settle its 2025 through 2027 general rate case with the Public Advocates Office and Water Rate Advocates for Transparency, Equity and Sustainability, or WRATES.

Speaker Change #136: Only two policy issues remain, which we expect will be litigated later this year.

Andrew F. Walters: As required in the procedural ruling, the formal settlement motion and agreement must be submitted to the California Public Utilities Commission no later than August 19, 2024. Until then, we cannot disclose any additional information. However, as a reminder, the application we filed with the CPUC in January requested a $103 million revenue increase over three years and proposed a three-year, $540 million capital expenditure program that would address several key needs, including treating PFAS to meet drinking water standards finalized by the U.S. EPA earlier this year and reducing greenhouse gas emissions through solar generation and energy storage systems to replace diesel generators.

Speaker Change #136: As required in the procedural ruling, the formal settlement motion and agreement must be submitted to the California Public Utilities Commission no later than August 19, 2024.

Andrew Walters: Till then, we can't disclose any additional information. However, as a reminder, the application we filed with the CPUC in January requested a $103 million revenue increase over three years and proposed a $3 year, $540 million capital expenditure program that would address several key needs, including treating PFAS to meet drinking water standards finalized by the U.S. EPA earlier. this year. Reducing greenhouse gas emissions through solar generation, energy storage systems to replace diesel generators, fleet electrification, and advanced acoustic leak detection, as well as advancing the CPUC's environmental and social justice action plan to improve access to high quality water service, climate resiliency, and economic and workforce development.

Speaker Change #136: Until then, we cannot disclose any additional information.

Speaker Change #136: However, as a reminder, the application we filed with the CPUC in January requested a $103 million revenue increase over

Speaker Change #136: three years, and proposed a three-year, $540 million capital expenditure program that would address several key needs, including treating PFAS to meet drinking water standards finalized by the U.S. EPA earlier this year.

Speaker Change #136: Reducing greenhouse gas emissions through solar generation, energy storage systems to replace diesel generators, fleet electrification, and advanced acoustic leak detection.

Andrew F. Walters: Fleet electrification, and Advanced Acoustic Leak Detection, as well as Advancing the CPU C's. Environmental and Social Justice Action Plan to improve access to high-quality water services. Climate Resilience, and Economic and Workforce Development.

Speaker Change #136: as well as advancing the CPUC's Environmental and Social Justice Action Plan to improve access to high-quality water service, climate resiliency, and economic and workforce development.

Andrew Walters: The CPUC decision can come as early as the fourth quarter of 2024, and we expect it to be effective on January 1st, 2025. In May, San Jose Water requested a rate-based increase of approximately 4.8 million and an annualized revenue increase of $768,000 for investments made to date in our advanced metering infrastructure project. As you may recall, we are planning to invest approximately 27 million in this project in 2024. It is a $100 million project that is separate from the general rate-case capital budget, and the majority of the installation is expected between 2024 and 2026.

Andrew F. Walters: A CPUC decision could come as early as the fourth quarter of 2024, and we expect it to be effective on January 1st, 2025. In May, San Jose Water requested a rate base increase of approximately $4.8 million and an annualized revenue increase of $768,000 for investments made to date in our advanced metering infrastructure project. As you may recall, we are planning to invest approximately $27 million in this project in 2024. It is a $100 million project that is separate from the general rate case capital budget, and the majority of the installation is expected between 2024 and 2026. Turning to Connecticut. On June 28th, we received a final decision on Connecticut Water's general rate.

Speaker Change #137: A CPUC decision can come as early as the fourth quarter of 2024, and we expect it to be effective on January 1st, 2025.

Speaker Change #138: In May, San Jose Water requested a rate base increase of approximately $4.8 million.

Speaker Change #138: and an annualized revenue increase of $768,000 for investments made to date in our advanced metering infrastructure project.

Andrew Walters: Turning to Connecticut. On June 28th, we received a final decision in Connecticut Water's general rate case. As Eric shared earlier, this case demonstrated the value of meaningfully engaging with our local stakeholders and approaching the filling, the filing, and hearings with transparency, responsiveness, and a desire for constructive collaboration. We believe our approach resulted in significant improvements between the preliminary and final decisions issued by the Public Utility Regulatory Authority. The final decision was effective as of July 1st, 2024, and provides for an annualized increase of $6.5 million in revenue. It authorized a return on equity of 9.3%, which is up from 9% in our prior case, and up from 9.2% in the draft decision.

Speaker Change #139: Turning to Connecticut.

Speaker Change #139: On June 28th, we received a final decision in Connecticut Water's general rate case.

Speaker Change #139: As Eric shared earlier, this case demonstrated the value of meaningfully engaging with our local stakeholders and approaching the filing and hearings with transparency, responsiveness, and a desire for constructive collaboration.

Speaker Change #140: We believe our approach resulted in significant improvements between the preliminary and final decisions issued by the Public Utility Regulatory Authority.

Speaker Change #140: The final decision was effective as of July 1st, 2024 and provides for an annualized increase of $6.5 million in revenue.

Speaker Change #140: It authorized a return on equity of 9.3%, which is up from 9% in our prior case, and up from 9.2% in the draft decision.

Andrew Walters: Our capital structure remains near the level authorized in our last case of 53%, and our equity at 47%. The decision gave us mixed expense recovery. We saw approximately 3.9 million in unrecovered expenses. However, for the first time, our company had the opportunity to earn additional revenues of 1.1 million in executive compensation for median performance metrics set by Pura. As part of the general rate-case process, our WICASER charge, which is an infrastructure recovery mechanism used primarily for the replacement of pipe, was reset to zero. We had requested 21.4 million, or an 18.1% increase in annual revenues.

Speaker Change #140: Our capital structure remains near the level authorized in our last case of 53% and our equity at 47% debt.

Speaker Change #140: The decision gave us mixed expense recovery.

Speaker Change #140: We saw approximately $3.9 million in unrecovered expenses.

Speaker Change #140: However, for the first time, our company has the opportunity to earn additional revenues of $1.1 million in executive compensation for meeting performance metrics set by Pura.

Speaker Change #140: As part of the general rate case process, our WCA surcharge, which is an infrastructure recovery mechanism used primarily for the replacement of pipe, was reset to zero.

Speaker Change #140: We had requested $21.4 million for an 18.1% increase in annual revenue. The final decision granted us approximately 38% of our ask when the opportunity to earn the additional $1.1 million is included and the $1.7 million in depreciation is excluded.

Andrew F. Walters: The final decision granted us approximately 38% of our ask when the opportunity to earn the additional $1.1 million is included and the $1.7 million in depreciation is excluded. It is important to note that none of our infrastructure investment was disallowed, though some projects were excluded because of timing. We expect to recover these investments at a future rate, to build on what Eric said earlier. But we need more from this final decision. And we are going to continue to need more going forward to address several of the pressing water quality and infrastructure issues facing Kinetic. In approaching our most recent rape case, we went to school on the cases that came before us.

Andrew Walters: The final decision granted us approximately 38% of our asks when the opportunity to earn the additional 1.1 million is included, and the 1.7 million in depreciation is excluded. It is important to note that none of our infrastructure investment was disallowed, though some projects were excluded because of time. Committee. We expect to recover these investments in future rate cases. To build on what Eric said earlier, we need more from this final decision, and we are going to continue to need more going forward to address several of the pressing water quality and infrastructure issues facing Connecticut. In approaching our most recent rate case, we went to school on the cases that came before us, and we learned a lot through the process, and from our own rate case.

Speaker Change #140: It is important to note that none of our infrastructure investment was disallowed, though some projects were excluded because of timing.

Speaker Change #140: We expect to recover these investments in future rate cases.

Speaker Change #140: to build on what Eric said earlier.

Speaker Change #141: We need more from this final decision.

Speaker Change #142: And, we are going to continue to need more going forward to address several of the pressing water quality and infrastructure issues facing Connecticut.

Speaker Change #143: In approaching our most recent rape case, we went to school on the cases that came before us.

Andrew Walters: We are going to use all of this experience and insight, along with continued engagement with regulators and legislators, to figure out a way we can move forward together to recover major upcoming expenditures, such as PFAS treatment and the replacement of aging above ground infrastructure. We hear from customers that they would prefer a smooth and gradual approach to rate increases driven by essential infrastructure investments, and we would like to work collaboratively with local decision makers to identify the right mechanisms to avoid abrupt and significant rate hikes. However, we acknowledge that a part of the equation is on us to communicate effectively with customers on the need for these investments and the benefits they will provide.

Speaker Change #143: And we learned a lot through the process and from our own rig case.

Speaker Change #143: We're going to use all of this experience and insight along

Speaker Change #144: with continued engagement with regulators and legislators to figure out a way we can move forward together to recover major upcoming expenditures such as PFAS treatment and the replacement of aging above-ground infrastructure.

Speaker Change #144: We hear from customers that they would prefer a smooth and gradual approach to rate increases driven by essential infrastructure investments.

Speaker Change #144: And we would like to work collaboratively with local decision-makers to identify the right mechanisms to avoid abrupt and significant freight hikes.

Speaker Change #144: However,

Speaker Change #144: We acknowledge that a part of the equation is on us to communicate effectively with customers on the need for these investments and the benefits they will provide.

Andrew Walters: We will also continue to find and create opportunities to sustainably reduce operating costs and pass through to customers, such as our company-owned solar generation initiatives that reduce purchase electricity costs, or our shared vendor procurement program that leverages our national scale. It will be a combination of all of these efforts that will help us effectively tackle the challenges line ahead for our industry.

Speaker Change #144: We will also continue to find and create opportunities to sustainably reduce operating costs and pass through to customers.

Speaker Change #144: such as our company-owned solar generation initiatives that reduce purchase electricity costs.

Speaker Change #144: or our Shared Vendor Procurement Program that leverages our national scale.

Speaker Change #144: It will be a combination of all of these efforts that will help us effectively tackle the challenges lying ahead for our industry.

Andrew Walters: On June 24, Main Water filed with the Maine Public Utilities Commission for a water infrastructure charge increase in two of its divisions. In Texas, the U.S. Drought monitor classifies our service area as being in severe to extreme drought, and conservation measures are in place as a result of the weather. Because of this, we expect lower water usage in 2024 compared to 2023. However, we are not changing our earnings guidance range due to the situation in Texas, but we are continuing to monitor the drought and its potential impact on guidance. The KT Water Resources acquisition we made last August will add approximately 6,000 acre-feet of water to our existing water supplies, but it will take time to bring the additional supply online.

Speaker Change #145: On June 24th, Maine Water filed with the Maine Public Utilities Commission for a water infrastructure charge increase in two of its divisions.

Andrew F. Walters: The U.S. Drought Monitor classifies our service area as being in severe to extreme drought, and conservation measures are in place as a result of this. Because of this, we expect lower water usage in 2024 compared to 2023. However, we are not changing our earnings guidance range due to the situation in Texas, but we are continuing to monitor the drought and its potential impact on guidance. The KT Water Resources acquisition we made last August will add approximately 6,000 acre feet of water to our existing water supply.

Speaker Change #145: In Texas,

Speaker Change #145: The U.S. Drought Monitor classifies our service area as being in severe to extreme drought and conservation measures are in place as a result of the weather.

Speaker Change #145: Because of this, we expect lower water usage in 2024 compared to 2023.

Speaker Change #146: However, we are not changing our earnings guidance range due to the situation in Texas, but we are continuing to monitor the drought and its potential impact on guidance.

Speaker Change #146: The KT Water Resources acquisition we made last August will add approximately 6,000 acre-feet of water to our existing water supplies, but it will take time to bring the additional supply online.

Andrew Walters: Additionally, the Public Utility Commission of Texas has approved our request to acquire the three 009 water system, which serves approximately 270 customers. We expect to close later this year.

Speaker Change #146: Additionally, the Public Utility Commission of Texas has approved our request to acquire the 3009 water system, which serves approximately 270 customers.

Speaker Change #146: We expect to close later this year.

Andrew Walters: Our guidance for 2024. $2.66 to $2.76 per diluted share and $2.68 to $2.78 per diluted share on a non-GAAP basis. Equity issuance of $55 million to $65 million, excluding acquisition growth, to support a strong capital investment program. We maintain our five-year capital investment outlook of $1.6 billion, which includes approximately $230 million in investment in PFAS remediation based on finalized maximum contaminant levels. The factors underlying are 2024 guidance include the return on equity increase in California, which went from 9.31 to 9.81, net of the 20 basis point reduction for re-implementation of the WCMA, which was effective January 1st, 2024.

Speaker Change #146: Our guidance for 2024.

Speaker Change #146: $2.66 to $2.76 per diluted share and $2.68 to $2.78 per diluted share on a non-GAAP basis.

Speaker Change #146: Equity issuance of $55 million to $65 million excluding acquisition growth to support a strong capital investment program.

Speaker Change #146: We maintain our five-year capital investment outlook of $1.6 billion, which includes approximately $230 million in investments.

Speaker Change #146: PFAS remediation based on finalized maximum contaminant level.

Andrew F. Walters: The factors underlying our 2024 guidance include the return on equity increase in California, which went from 9.31 to 9.81, net of the 20 basis point reduction for the reimplementation of the WCMA was effective January 1st, 2024. The impact of the completed Biddeford SACA rate case with a 9.5 ROE and 51% equity and 49% debt capital structure was effective January 1st, 2024 as well. Finally, constructive regulatory decisions on current and prospective regulatory filings, with Connecticut now behind us, that leaves us with California, as well as strategic reinvestment in the business in 2024. Our 2024 guidance is independent of real estate sales or M&A activity.

Speaker Change #146: The factors underlying our 2024 guidance include

Speaker Change #146: The return on equity increase in California, which went from 9.31 to 9.81, net of the 20 basis point reduction for reimplementation of the WCMA, was effective January 1st, 2024.

Andrew Walters: The impact of the completed Bitterford soccer race case with the 9.5-ROS, R.O.E., and 51 percent equity and 49 percent debt capital structure was effective January 1st, 2024 as well. Finally, constructive regulatory decisions on current and prospective regulatory filings with Connecticut now behind us that leads us with California as well as strategic and reinvestments in the business in 2024. Our 2024 guidance is independent of real estate sales or M&A activities. Further, we reaffirm our stated long-term growth rate of 5 percent to 7 percent that is anchored off of our 2022 diluted earnings per share of $2.43, which is nonlinear because of rate case cycles.

Speaker Change #146: The impact of the completed Biddeford SACA rate case with a 9.5 ROE and 51% equity and 49% debt capital structure was effective January 1st, 2024 as well.

Speaker Change #146: Finally, constructive regulatory decisions on current and prospective regulatory filings with Connecticut now behind us that leaves us with California, as well as strategic and reinvestments in the business in 2024.

Speaker Change #146: Our 2024 guidance is independent of real estate sales or M&A activities.

Andrew F. Walters: Further, we reaffirm our stated long-term growth rate of 5% to 7% that is anchored off of our 2022 diluted earnings per share of $2.43, which is non-linear because of the rate case cycle. With that, I will turn the call over to Eric. Thank you, Andrew. One of the ways we measure our impact and success as a company is how have we been a force for good. One area where we have achieved exciting outcomes is in expanding access and financial support for our customers.

Speaker Change #146: Further, we reaffirm our stated long-term growth rate of 5% to 7% that is anchored off of our 2022 diluted earnings per share of $2.43, which is non-linear because of rate case cycles.

Eric Thornburg: With that, I will turn the call over to Eric. Thank you, Andrew. One of the ways we measure our impact and success as a company is how we have been a force for good? One area where we have achieved exciting outcomes is in expanding access and financial support for our customers. Over the past two years, San Jose Water has secured $15.3 million in a rearage relief for its customers from the California Water and Waste Water of Rearage Payment Program. The most recent installment of $9.1 million was received this past May and will help support customers who experience financial hardship due to COVID.

Speaker Change #146: With that, I will turn the call over to Eric. Thank you, Andrew. One of the ways we measure our impact and success as a company is how have we been a force for good?

Eric W. Thornburg: One area where we have achieved exciting outcomes is in expanding access and financial support for our customers.

Andrew F. Walters: Over the past two years, San Jose Water has secured $15.3 million in arrearage relief for its customers from the California Water and Wastewater Arrearage Payment Program. The most recent installment of $9.1 million was received this past May and will help support customers who experienced financial hardship due to COVID.

Speaker Change #147: Over the past two years, San Jose Water has secured $15.3 million in arrearage relief for its customers from the California Water and Wastewater Arrearage Payment Program.

Speaker Change #147: The most recent installment of $9.1 million was received this past May and will help support customers who experience financial hardship due to COVID.

Eric Thornburg: At Connecticut Water, Pura approved our request to expand income eligibility for the Water Rate Assistance Program or RAP, a first-of-its-kind program in the state that offers water-built discounts for income-eligible customers. The company looks forward to expanding the program to more customers and providing deeper discounts to those customers who need it most. Just a little history on RAP. We first introduced the program in Connecticut in our last general rate case based on the good works San Jose Water was doing in California assisting customers in need. As you can see, it has since expanded and evolved at Connecticut Water to support more customers, more meaning.

Speaker Change #149: At Connecticut Water, Pura approved our request to expand income eligibility for the Water Rate Assistance Program, or WRAP, a first-of-its-kind program in the state that offers water bill discounts for income-eligible customers.

Speaker Change #148: The company looks forward to expanding the program to more customers and providing deeper discounts to those customers who need it most.

Speaker Change #150: Just a little history on WRAP. We first introduced the program in Connecticut in our last general rate case, based on the good work San Jose Water was doing in California, assisting customers in need.

Speaker Change #150: As you can see, it has since expanded and evolved at Kinetica Water to support more customers, more meaningfully.

Eric Thornburg: and, importantly, it has also inspired similar programs by regional peers, amplifying the impact of our force for good initiatives beyond our own service areas. Over the last several years, we built a strong national platform to support our growing local operations through the good times and the fundamental values and culture through this growth. And that culture continues to guide us and distinguish us as we make business decisions that build trust with stakeholders. I continue to be inspired by the contributions of our talented teams across our local operations as they consistently provide an essential service with integrity, reliability, genuine care, and transparency.

Speaker Change #150: Importantly, it has also inspired similar programs by regional peers.

Speaker Change #150: amplifying the impact of our Force for Good initiatives beyond our own service areas.

Eric W. Thornburg: Over the last several years, we've built a strong national platform to support our growing local operations, for the good times and the inevitable headwinds. And with a lot of effort and intention, we have maintained our fundamental values and culture through this growth. And that culture continues to guide us and distinguish us as we make business decisions that build trust with stakeholders.

Speaker Change #150: Over the last several years, we've built a strong national platform to support our growing local operations.

Speaker Change #150: through the good times and the inevitable headwinds.

Speaker Change #150: And with a lot of effort and intention, we have maintained our fundamental values and culture through this growth.

Speaker Change #150: And that culture continues to guide us and distinguish us as we make business decisions that build trust with stakeholders.

Speaker Change #150: I continue to be inspired by the contributions of our talented teams across our local operations.

Speaker Change #150: as they consistently provide an essential service with integrity, reliability, genuine care, and transparency.

Eric Thornburg: I'm confident our team's commitment to serving customers, communities, and the environment will continue to excel SJW Group's ability to deliver value to our stakeholders and reinforce our strong position for a successful future.

Speaker Change #150: I'm confident our team's commitment to serving customers, communities, and the environment will continue to excel SJW Group's ability to deliver value to our stakeholders and reinforce our strong position for a successful future.

Operator: With that, I'll turn the call back over to the operator. Thank you.

Speaker Change #151: With that, I'll turn the call back over to the operator.

Eric W. Thornburg: Thank you. At this time, we will conduct a question and answer session. As a reminder, to ask a question, you will need to press star 1-1 on your telephone and wait for your name to be announced.

Operator: At this time, we'll conduct a question-and-answer session. As a reminder to ask a question, you'll need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster.

Speaker Change #152: Thank you. At this time, we will conduct a question and answer session. As a reminder to ask a question, you'll need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster.

Richard Thunderland: Our first question comes from line of Richard Thunderland of JPMorgan. Your line is now open.

Speaker Change #152: Our first question comes from the line of Richard Sunderland of J.P. Morgan. Your line is now open.

Richard Thunderland: Hi, good morning. Can you hear me? Yeah, we can, Richard. Thank you. Great. Thank you very much for the time.

Operator: Yeah, we can, Richard. Thank you. Great, thank you very much for the time.

Richard Wallace Sunderland: Hi, good morning. Can you hear me?

Speaker Change #153: Yeah, we can Richard. Thank you.

Richard Thunderland: I wanted to touch maybe first on the Texas drought. I know you mentioned the drought risk a little bit, but could you quantify some of that risk both to 2024 guidance overall on an EPS basis, as well as just what the year-to-date impacts you've seen in results are as well? It's a great question, Rich.

Richard Wallace Sunderland: Great, thank you very much for the time.

Richard Wallace Sunderland: I wanted to touch maybe first on the Texas drought. I know you mentioned the drought risk a little bit, but could you quantify some of that risk both to 2024 guidance overall on an EPS basis, as well as just what the year-to-date impacts you have seen in results are as well?

Andrew Walters: I think they have just gone to the next stage of drought. At this stage, I don't have an exact quantification where that's going to be until we see where the usage settles out at. I would say that under the base case scenario we have taken this into account, and it's just if it becomes more biting than what we expect is the base case scenario that we will have to come revisit that at that point. Okay, understood. Very clear.

Speaker Change #154: It's a great question, Rich. I think, you know, they have just gone to the next stage of drought. And, you know, at this stage,

Speaker Change #155: I don't have an exact quantification of where that's going to be until we see where the usage settles out at.

Speaker Change #155: I would say that you know under the base case scenario we have taken this into account and it's just if it becomes more biting than what we expect as a base case scenario that we will have to come revisit that at that point.

Andrew Walters: And then turning to Connecticut, how does the Connecticut order compare to your long-term plan assumptions embedded in the five to seven percent EPS growth rate? That's an excellent question. Look, it is definitely not additive to the growth rates that we have, but is well within the range of where we expected at this point or could expect on a potential range of outcomes. So it is, while it might itself be dilutive, we are seeing other parts of the business that are overcoming any of the issues with that as it stands today. I know you had a lot of commentary around engagement in the process but also down set against the reality of the outcome in the order itself.

Speaker Change #156: Okay, understood. Very clear. And then turning to Connecticut, how does the Connecticut order compare to your long-term plan assumptions embedded in the five to seven percent EPS growth rate?

Speaker Change #157: That's an excellent question. Look, it is not, it's definitely not additive to the the growth rates that we have, but it is well within the range of where we

Speaker Change #157: expected at this point or could expect on a on a potential range of outcomes.

Speaker Change #157: So, it is, while it might itself be dilutive, we are seeing other parts of the business that are overcoming any of the issues with that as it stands today.

Eric W. Thornburg: I know you had a lot of commentary around engagement in the process, but also balance that against the reality of the outcome and the order itself. Thinking about the state at a high level, and given all the public attention on Aquarian, does the rate case outcome impact any thinking or interest around that asset? You know, I think that stands on its own, but, of course, the regulatory climate, Richard, is a key factor in that.

Speaker Change #158: Got it, understood. And then one final one on Connecticut. I know you had a lot of commentary around engagement in the process.

Speaker Change #159: but also balance that against the reality of the outcome and the order itself.

Eric Thornburg: Think about the state at a high level and given all the public attention on aquarium. Does the rate case outcome impact any thinking or interest around that asset? You know, I think that stands on its own, but of course the regulatory climate, Richard, is a key factor of that. I, you know, certainly, as I mentioned, a good step forward here. I was also heartened with some of the regulatory decisions just announced for, for Ever Source, and United Illuminating and involving their EV charging deployment work. There were some proposed decisions announced which, you know, it's just encouraging to see that getting back on track.

Speaker Change #160: Thinking about the state at a high level, and given all the public attention on Aquarian, does the rate case outcome impact any thinking or interest around that asset?

Speaker Change #161: You know, I think that stands on its own, but of course the regulatory climate, Richard, is a key factor of that. You know, certainly, as I mentioned, a good step forward here. I was also heartened with some of the regulatory decisions just announced for

Speaker Change #161: for Eversource and United Illuminating and involving their EV charging deployment work. There were some proposed decisions announced which

Eric Thornburg: And so, you know, we're optimistic, and we will continue to lean in and educate and build trust with regulators.

Speaker Change #161: You know, it's just encouraging to see that getting back on track and so so, you know we're optimistic and we will continue to lean in and educate and and build trust with regulators and I might also mention this morning. There was an announcement

Eric Thornburg: And I might also mention this morning there was an announcement: Governor Lamont announced that a new commissioner was going to be appointed in January. His name is David Arconti. He's a former state representative, and he's currently the vice president of government affairs for United Illuminating. And Governor Lamont also announced the retirement in January of Jack Batkowski, and Jack has served for 27 years at Pura. So some recent, very recent regulatory developments there. And, you know, we would like to think that former state Rep Arconti's service at United Illuminating will also, you know, provide some additional perspectives that could be valuable down the road.

Speaker Change #161: Governor Lamont announced that a new commissioner was going to be appointed in January . His name is David Arcanti. He's a former state representative and he's currently the Vice President of Government Affairs for United Illuminating.

Eric W. Thornburg: He's a former state representative, and he's currently the vice president of government affairs for United Illuminating. Governor Lamont also announced the retirement in January of Jack Budkoski, who has served for 27 years at Pura. So some recent, very recent regulatory developments there. And, you know, we would like to think that Former state Rep. Arconti's service at United Illuminating will also provide some additional perspectives that could be valuable down the road as he serves as a regulator in Connecticut.

Speaker Change #161: And Governor Lamont also announced the retirement in January of Jack Budkoski, and Jack has served for 27 years.

Speaker Change #162: Former State Rep Arcanti's service at United Illuminating will also, you know, provide some additional perspectives that could be valuable down the road as he serves as a regulator in Connecticut.

Eric Thornburg: As he serves as a regulator in Connecticut. Got it very helpful overall.

Eric W. Thornburg: Very helpful overall. Thank you for your time today. Thank you, Richard. I appreciate it.

Richard Thunderland: Thank you for the time today. Thank you, Richard. Appreciate it.

Speaker Change #163: Got it. Very helpful overall. Thank you for the time today.

Operator: Thank you. One moment for our next question.

Operator: Thank you one moment for our next question. Our next question comes from the line of Michael Gawler from Janey. Your line is now open.

Speaker Change #163: Thank you, Richard. Appreciate it.

Speaker Change #164: Thank you one moment for our next question.

Michael Gaugler: Our next question comes from a line of Michael Gowler of Janie. Your line is now open.

Speaker Change #165: Our next question comes from the line of Michael Gawler of Janey. Your line is now open.

Michael Gaugler: Hello, everyone. Congrats on the quarter. Hey, thank you, Michael.

Operator: Hello everyone, congratulations on the quarter. Thank you, Michael. I'd like to start on the Connecticut operation, with you coming just out of the rape case. Do you expect the rate case cycle to condense going forward, given the outcome? Look, I think, Michael, that's definitely a potential mechanism that we will utilize as we think about this. And what we will do is we'll continue to monitor where we stand from a recovery standpoint and make the best decisions to go in when that fits with where we're seeing our recovery.

Michael Gawler: Hello everyone, and congrats on the quarter.

Operator: The other thing to keep in mind that we've talked about in the past is that we do want to continue to distribute our rate cases so that we don't have any crowding of rate cases where California is going in at the same time as Connecticut, so we have our larger divisions going in at different times. So that'll be a second factor, but you can absolutely expect that we will be paying attention to the timing of our next rate case. Okay, and then in the California case, Given the settlement agreement, I was just wondering how confident you are that you could get a decision by yourself?

Eric Thornburg: I'd like to start on the Connecticut operations. What you come in just out of the rate case, do you expect the rate case cycle to condense going forward, giving the outcome? Look, I think, Michael, that's definitely a potential mechanism that we will utilize as we think about this. And what we will do is we'll continue to monitor where we stand from a recovery standpoint and make the best decisions to go in when that fits with where we're seeing our recovery hats.

Michael Gawler: Thank you, Michael.

Speaker Change #167: I'd like to start on the Connecticut operations.

Speaker Change #166: with you coming just out of the rape case.

Michael Gawler: Do you expect the rate case cycle to condense going forward, given the outcome?

Michael Gawler: Look, I think, Michael, that's that's definitely a potential mechanism that we will utilize as we as we think about this. And what we will do is we'll continue to monitor where

Michael Gawler: We stand from a recovery standpoint and make the best decisions to go in when that fits with where we're seeing our recovery at. The other thing to keep in mind that we've talked about in the past is we do want to also continue to distribute our rate cases.

Eric Thornburg: The other thing to keep in mind that we've talked about in the past is we do want to also continue to distribute our rate cases so that we don't have any crowding of rate cases where California is going in at the same time as Connecticut. So we have kind of our larger divisions going in at different times. So that'll be a second factor, but you can absolutely expect that we will be paying attention to the timing of our next rate case.

Michael Gawler: so that we don't have any crowding of rate cases where California is going in at the same time as Connecticut, so we have kind of our larger divisions going in at different times. So that'll be a second factor, but you can absolutely expect that we will be paying attention to the timing of our next rate case.

Eric Thornburg: Okay, and then over in the California request, given the settlement agreement, just wondering how confident are you that you could get a decision by your end. Yeah, Michael, I'd be highly confident that we can. We received an all-party settlement, which makes that all the more likely, and the remaining items are too small policy matters that will just brief, and the commission can then decide. So I think all parties are highly confident.

Michael Gawler: Okay, and then over in the California rate case.

Speaker Change #168: Given the settlement agreement just wondering how confident are you that you could get a decision by your end?

Eric W. Thornburg: Yeah, Michael, I'd be highly confident that we can do it. We achieved an all-party settlement, which makes that all the more likely. And the remaining items are two small policy matters that we'll just brief, and the Commission can then decide on that. So I think all parties are highly confident, in this case, that it will be approved and ready to introduce new rates on January 1, 2025. Great. Then just one more on text.

Speaker Change #168: I'd be highly confident that we can.

Speaker Change #168: We achieved an all-party settlement, which makes that all the more likely.

Speaker Change #168: And the remaining items are two small policy matters that we'll just brief and the commission can then decide. So, I think all parties are highly confident in this case that we'll be approved and ready to introduce new rates on January 1st, 2025.

Eric Thornburg: In this case, it will be approved and ready to introduce new rates on January 1st, 2025.

Eric Thornburg: Great, then just one more, and on Texas, you know, mentioned the drought, and Richard had some questions on it as well. Just wondering if your supplies could either remainder the year and look like. You know, Canyon Lake is our significant portion of our source of supply, and that lake is down to 55 percent of its normal capacity, or full capacity, I should say, and so that's a pretty significant variance for what you would normally expect to see in the summer. We also have significant groundwater supplies that we use, but because of the condition of the lake, we introduce the stage 4 drought declaration, and what that requires is customers cannot, in certain counties, cannot use water for irrigation. So that's a pretty, pretty significant request of our customers, but at the same time, I would put it in perspective. You know, Texas is 5 percent of our overall business, and our team there will work very hard to offset the earnings implications for that particular business.

Speaker Change #169: Great. Then just one more on Texas. You know, mentioned the drought and Richard had some questions on it as well. Just wondering what your supplies through the remainder of the year look like?

Eric W. Thornburg: You mentioned the drought, and Richard had some questions on it as well. I was just wondering what your supplies will be through the remainder of the year. You know, Canyon Lake is a significant portion of our source of supply, and that lake is down to 55% of its normal capacity, or full capacity, I should say. And so that's a pretty significant, you know, variance for what you would normally expect to see in the summer. We also have significant groundwater supplies that we use. But because of the condition of the lake, we introduced a stage four drought declaration.

Speaker Change #170: Canyon Lake is a significant portion of our source of supply.

Speaker Change #171: And that lake is down to 55% of its normal capacity, or full capacity, I should say. And so that's a pretty significant.

Speaker Change #172: variants from what you would normally expect to see in the summer. We also have significant groundwater supplies that we use.

Speaker Change #172: But because of the condition of the lake.

Speaker Change #172: We introduced the Stage 4 drought declaration and what that requires is customers

Speaker Change #172: cannot, in certain counties, cannot

Speaker Change #172: use water for irrigation.

Speaker Change #172: So that's a pretty, pretty significant request of our customers. But at the same time, I would put it in perspective, you know, Texas is 5% of our overall business.

Speaker Change #172: And our team there will work very hard to offset the earnings.

Eric Thornburg: So, as Andrew said, you know, with our guidance affirmation today, we still feel like we're on track there, but we'll watch it very carefully.

Andrew: implications for that particular business. So as Andrew said, you know, with our guidance affirmation today, we still feel like we're on track there, but we'll watch it very carefully.

Eric Thornburg: So one thing, too, to add to what Eric just talked about, coming into this quarter, we were already down to one watering day every two weeks for our major areas, and so it's, on one hand, you can say that it's not that big of a move, but, you know, when you have no watering, there's no kind of forgetting which day you're supposed to water in this case, and so I think that's going to be the part that we'll have to kind of take a look at is what the ultimate impact is.

Speaker Change #173: The one thing, too, to add to what Eric just talked about, coming into this quarter, we were already down to one watering day every two weeks for our major areas, and so it's, on one hand, you can say that it's

Speaker Change #174: It's not that big of a move but you know it's this when you have no watering there's there's no kind of forgetting which day you're supposed to water in this case and so so I think that's going to be the part that we'll have to kind of take a look as what the ultimate impact is.

Michael Gaugler: All right.

Andrew F. Walters: All right. Thank you, gentlemen. Thank you. Please wait one moment for our next question. Our next question comes from the line of Jonathan Reeder of Wells Fargo Securities. Your line is now open. Hi, Eric and Andrew. How are you guys doing?

Michael Gaugler: Thank you, gentlemen. Thank you. Thank you, Michael.

Speaker Change #175: All right, thank you gentlemen

Jonathan Reeder: We'll learn for next question. Our next question comes from a line of Jonathan Reader of Wells Fargo Securities. Your line is now open.

Speaker Change #175: Thank you. Thank you, Michael.

Speaker Change #176: Our next question comes from the line of Jonathan Reeder of Wells Fargo Securities. Your line is now open.

Jonathan Reeder: Hi, Eric and Andrew. How are you guys doing? Hey, hi, Jonathan. Doing great. Thanks for calling in today. Yeah, thanks for taking the time.

Operator: Hey, hi, Jonathan. Doing great. Thanks for calling in today. Yeah, thanks for taking the time. So I first wanted to start on the A&G expenses. You know, they decreased by 3.1 million during the quarter. Was that expected when guidance was first initiated? Or are there some like timing issues or things that might reverse?

Jonathan Garrett Reeder: Hi Eric and Andrew, how are you guys doing?

Eric W. Thornburg: Hey, hi, Jonathan. Doing great. Thanks for calling in today.

Jonathan Reeder: First one to start on the ANG expenses. You know, they decreased 3.1 million during the quarter. Was that expected when guidance was first initiated?

Jonathan Garrett Reeder: Yeah, thanks for taking the time. So I first wanted to start on the A&G expenses, you know, they decreased.

Jonathan Garrett Reeder: $3.1 million during the quarter. Was that expected when guidance was first initiated, or are there some like timing issues or things that might reverse during the rest of 2024? Like, for instance, did that recede of the $9.1 million

Jonathan Reeder: Are there some like time and issue or things that might reverse? during the rest of 2024. Like, for instance, did that receipt of the 9.1 million in a rear at release in California during May? Did that help drive that lower allowance for uncollectable accounts in the quarter?

Operator: The rest of 2024, like, for instance, did that recede from 9.1 million, and a rearage release in California during May. Did that help drive that lower allowance for uncollectible accounts in the quarter? Yes, Jonathan, it did.

Speaker Change #177: In a rear-edge relief in California during May, did that help drive that lower allowance for uncollectible accounts in the quarter?

Eric Thornburg: Yes. So, Jonathan, it did. And the more important part is the ability; when we applied for that program, we were not in a position at that point to start shutting off customers that were part of that program because that was a condition. So, given the ability for us to start shutting off customers who were not paying their bills, that drives the release as well. And the other component to keep in mind, well, we knew that we were going to get this during the year at some point. What we didn't have guarantees amounts, or the total amount that was going to happen, we had an expectation.

Speaker Change #177: Yes.

Speaker Change #178: So Jonathan, it did, and the more important part is the ability, when we applied for that program we were not in a position at that point to...

Speaker Change #179: to start shutting off customers that were part of that program because that was a condition.

Speaker Change #179: So, given the ability for us to start shutting off customers who are not paying their bills, that drives the release as well. And the other component to keep in mind, while we knew that we were going to get this,

Speaker Change #179: during the year at some point.

Speaker Change #179: What we didn't have guarantees amounts were the total amount that was going to happen. We had an expectation.

Eric Thornburg: And the other piece is we certainly didn't know the timing. So, kind of which quarter it would come in. So, yes, it was part of our kind of standard operations, and why it's not highlighted differently. But it is something that, you know, we will continue to watch because, you know, we do have an expectation that our customers will pick up their payments to us. And we have seen that already on people that were not part of the program, that we started doing shuts on. We saw a very positive response to those folks paying their bills.

Andrew F. Walters: So yes, it was part of our kind of standard operations, and that's why it's not highlighted differently. But it is something that, you know, we will continue to watch because, you know, we do have an expectation that our customers will pick up their... payments to us, and we have seen that already on. People that were not part of the program that we started shutting down, we saw a very positive response from those folks paying their bills. And now it's for these remaining items.

Speaker Change #179: and the other piece is we certainly didn't know the timing, so kind of which quarter it would come in. So yes, it was part of our kind of standard operations and that's why it's not highlighted differently, but it is something that, you know, we will continue to watch because

Speaker Change #179: You know, we do have an expectation that our customers will pick up their...

Speaker Change #179: payments to us and we have seen that already on

Speaker Change #179: People that were not part of the program that we started doing shuts on we saw a very positive response to those folks paying their bills

Andrew F. Walters: The other thing I'll just highlight is with the rearage program, it cleared out any balances of people that were prior to 2022. So the balances are, generally speaking, fairly fresh at 2023 slash into this year. Okay.

Speaker Change #179: And now it's for these remaining items.

Speaker Change #179: The other thing I'll just highlight is with their rearage program, it cleared out any balances of people that were prior to 2022, so the balances are generally speaking fairly fresh at 2023 slash into this year.

Jonathan Reeder: Okay. And then, I guess, can you also remind us whether Q323 or Q423, if the results included any significant benefits that won't be occurring, I guess, in the second half of 2024? Just seems that, you know, otherwise, I guess, Q2's favorable revenue drivers like the California rate increases, and now the Connecticut, you know, rate case order would have the full year 24 results trending, you know, at or above the high end of the guidance range. You know, obviously, there's taxes to keep in mind, but, you know, I guess, if you just kind of say a little differently, if the second half 24 EPS are just flat compared to the second half of 23, it puts you just above the midpoint of your guidance range.

Andrew F. Walters: And then, I guess, can you also remind us whether Q3'23 or Q4'23 included any significant benefits that won't be occurring, I guess, in the second half of 2024? It just seems that, you know. Otherwise, I guess Q2's favorable revenue drivers like the California rate increases and now the Connecticut rate case order would have the full year 24 results trending at or above the high end of the guidance range.

Speaker Change #179: Okay.

Speaker Change #180: And then, I guess, can you also remind us whether Q3-23 or Q4-23, if the results included any significant benefits that won't be occurring, I guess, in the second half of 2024? It just seems that, you know,

Speaker Change #181: Otherwise, I guess Q2's favorable revenue drivers like the California rate increases and now the Connecticut rate case order.

Speaker Change #181: would have the full year 24 results trending, you know, at or above the high end of the guidance range. You know, obviously there's taxes to keep in mind, but you know.

Andrew F. Walters: Um, you know, obviously, there's Texas to keep in mind, but... I guess if you just kind of say it a little differently, if the second half of 24 EPS is just flat compared to the second half of 23.

Speaker Change #182: I guess if you just kind of say it a little differently, if the second half 24 EPS are just flat compared to the second half of 23, it puts you just above the midpoint of your guidance range.

Jonathan Reeder: Right.

Eric Thornburg: So, I think it's a very fair way to look at it. As I think about the items that were there that I remember at the top of my head, most of the kind of the one-time item that would have impacted, like the real estate happened in the beginning of last year, in the first six months. And so, that would not be a repeat. Outside of that, I can't think of something that was a very unique item.

Speaker Change #183: I think it's a very fair way to look at it. As I think about the items that were there that I remember off the top of my head, most of the one-time items that would have impacted the real estate happened in the beginning of last year.

Speaker Change #183: in the first six months. And so that was, that would not be a repeat. Outside of that,

Andrew F. Walters: There's always one thing when I make comments like that, Jonathan, there are always pluses and minuses all over the place, and that's kind of what we do is just manage all those pluses and minuses, but for something that's significant, I don't have anything off the top of my head. Okay, yeah, no, I mean, it just seems like I think it was there, you know, kind of made the point that Texas is only 5%, you know, that obviously there's the unknowns around the revenue impact there.

Eric Thornburg: There's always the one thing when I make comments like that, Jonathan. There are always pluses and minuses all over the place, and that's kind of what we do is just managing all those pluses and minuses. But for something that's significant, I don't have something off the top of my head. Okay.

Speaker Change #183: I can't think of something that was a very unique item. There's always the one thing when I make comments like that, Jonathan, there are always pluses and minuses all over the place. And that's kind of what we do is just managing all those pluses and minuses. But for something that's significant, I don't have something off the top of my head.

Jonathan Reeder: Yeah. No, I mean, it just seems like I think it was there, you know, kind of made the point. Texas is only 5%.

Jonathan Garrett Reeder: Okay, yeah, no, I mean it just seems...

Jonathan Reeder: Obviously, there's the unknowns around the revenue impact there, but overall, it seems like based on the first half of the year, you're in a pretty strong position with regards to your guidance range, and maybe being in the upper half or above, you know, prior to potentially some of those. and James.

Speaker Change #184: Like, I think it was Eric, you know, kind of made the point, Texas is only 5%, you know, that obviously there's the unknowns around the revenue impact there, but...

Speaker Change #185: Overall, it seems like based on the first half of the year, you're in a pretty strong position, you know, with regards to your guidance range and maybe, you know, being in the upper half or above, you know, prior to, you know, potentially some of those puts and takes.

Eric Thornburg: Yeah, let me just be clear that we're not seeing us being above the guidance range at this time, so I don't want you to fill that confidence. But I do say that we've had a positive performance here today. However, there has been, as we highlighted in the press release, there has been inflationary impacts that impacted the business, so you do have to keep that in mind when you're thinking about the impact. So there are positives that we're seeing in there, but there are some negatives that we're having to manage through as well.

Speaker Change #186: Yeah, let me just be clear that we're not seeing us being above the guidance range at this time So I don't I don't want you to fill that confidence, but I but I do say that we've had a positive Performance here today, but there has been as we highlighted in that

Andrew F. Walters: But I, but I do say that we've had a positive performance year to date. But there has been, as we highlighted in the press release, inflationary impacts that have impacted the business. So you do have to keep that in mind when you're when you're thinking about the impact.

Speaker Change #186: In the press release, there has been inflationary impacts that have impacted the business, so you do have to keep that in mind when you're thinking about the impact. So there are positives that we're seeing in there, but there are some negatives that we're having to manage through as well.

Jonathan Reeder: Sure, okay, kind of shipping years a little bit.

Jonathan Reeder: How do you think about the California Supreme Court's recent ruling on decoupling, and how does that impact the prospects of decoupling getting restored for water utilities by the CPUC? You know what, Jonathan, a great development. Really pleased, the collaboration across the industry, you know, to go about getting the legislation that made clear to the California PC that this was a very viable regulatory tool, and now further with the Supreme Court ruling on the prior cases for some of our peers. I think it all bodes well, but you know, the Public Advocates Office has strong views in opposition to using decoupling.

Speaker Change #187: Sure, okay. Kind of shifting gears a little bit, how do you think about the California Supreme Court's recent ruling on decoupling, you know, and how does that impact the prospects of, you know, decoupling getting restored for water utilities by the CPUC?

Speaker Change #187: You know what, Jonathan, a great development, really pleased the collaboration across the industry, you know, to go about getting the legislation.

Speaker Change #187: that made clear to the California PUC that this was a very viable regulatory tool.

Speaker Change #187: And now further with the Supreme Court ruling on the prior cases for some of our peers. I think it all bodes well.

Speaker Change #188: But, you know, the Public Advocate's Office has strong views.

Eric Thornburg: So there's still work to be done from that standpoint, and we're going to watch carefully our peers see how they do in their cases, and then our next cycle around will take a very hard look at it. I'm in favor of using them, and as you know, because we didn't think we had that option, we've worked very hard on the fixed charge component and recovering more and more of our fixed costs through our service charge, which we've achieved that. But we do like the decoupling; we'll watch it carefully, and hopefully, you know, we continue to track and trend towards the reintroduction of that tool.

Speaker Change #188: in opposition to using decoupling. So there's still work.

Speaker Change #188: to be done from that standpoint. And we're going to watch carefully our peers, see how they do in their cases. And then our next cycle around, we'll take a very hard look at it.

Eric W. Thornburg: I'm in favor of using them. And as you know, because we didn't think we had that option, we've worked very hard on the fixed charge component and recovering more and more of our fixed costs through our service charge, which we've achieved. But we do like the decoupling. We'll watch it carefully.

Speaker Change #189: I'm in favor of using them, and...

Speaker Change #189: And as you know, because we didn't think we had that option, we've worked very hard on the.

Speaker Change #189: on the fixed charge component.

Speaker Change #189: and recovering more and more of our fixed costs.

Speaker Change #189: through our service charge, which we've achieved that. So, but we do like the decoupling. We'll watch it carefully. And hopefully, you know, we continue to track and trend towards the reintroduction of that tool. And again, just.

Eric W. Thornburg: And hopefully, we continue to track and trend towards the reintroduction of that tool. And again, just one final comment. Of course, we have a form of decoupling in place with ourselves, with our WCMA, that we're benefiting from currently. Yeah, no, you guys are kind of already in a position of strength relative to some of the others in there.

Jonathan Reeder: And again, just one final comment: of course, we have a form of decoupling in place with ourselves, with our WCMA that we're benefiting from currently. Yeah, no, you guys are kind of already in a position to strengthen relative to some of the other in there.

Speaker Change #189: One final comment, of course, we have a form of decoupling in place with ourselves, with our WCMA that we're benefiting from currently.

Speaker Change #190: Yeah, no, you guys are kind of already in a position to shrink relative to some of the others in there.

Jonathan Reeder: But kind of last for me, can you provide, you know, the latest thoughts on the potential aquarium opportunity, including, you know, the timing of when the sale process might be conducted as you understand it? You know, it's a difficult one just because, you know, as you would guess, there's confidentiality agreements and the like for events such as that. But we're very excited about the potential opportunity there, Jonathan. We're very familiar with the assets, and we think it would be a great combination with our company. And you know, we look forward to the process ahead here.

Eric W. Thornburg: Kind of last for me, can you provide, you know, the latest thoughts on the potential aquarium opportunity, including, you know, the timing of when the sale process might be conducted as you understand it? But we're very excited about the potential opportunity there. Jonathan, we're very familiar with the assets, and we think it would be a great combination with our company, and, you know, we look forward to the process ahead here. Okay, fair enough. Thanks so much for your time today.

Speaker Change #191: But kind of last for me, can you provide, you know, the latest thoughts on the potential aquarium opportunity, including, you know, the timing of when the sale process might be conducted as you understand it?

Speaker Change #192: You know, it's a difficult one just because, you know, as you would guess, there's confidentiality agreements and the like for events such as that.

Speaker Change #192: But we're very excited about the potential opportunity there. Jonathan, we're very familiar with the assets, and we think it would be a great combination with our company. And, you know, we look forward to the process ahead here.

Jonathan Reeder: Okay, fair enough.

Jonathan Reeder: Thanks so much for the time today.

Operator: Thank you, Jonathan. All the best. Thank you, one more for our next question.

Jonathan Garrett Reeder: Okay, fair enough. Thanks so much for the time today.

Eric W. Thornburg: Thank you, Jonathan. All the best. Thank you one more for our next question. Our next question comes from the line of Agnieszka Storozynski of Seaport. Your line is now open. Thank you.

Jonathan Garrett Reeder: Thank you, Jonathan. All the best.

Speaker Change #193: Thank you one moment for our next question.

Agnieszka Storozynski: Our next question comes from a line of Angie Storzinski of Seaport. The line is now open.

Speaker Change #194: Our next question comes from the line of Agnieszka Storozynski of Seaport. Your line is now open.

Agnieszka Storozynski: Thank you. So I have somewhat of a weird question. So I'm just, you know, bracing for arising electric prices and electricity prices overall, and I'm just wondering just two things.

Agnieszka Anna Storozynski: Thank you. So, I have somewhat of a weird question. So, I'm just, you know, bracing for a rising electric prices, electricity prices overall, and I'm just wondering,

Agnieszka Storozynski: One, you know, just talk to us about your recovery methodology for rising electricity capacity prices; you name it. Is there a way for you to either maybe lock in rates ahead of time? Or just try to mitigate that impact on a number two.

Agnieszka Anna Storozynski: Just two things. One, you know, just talk to us about your recovery methodology for rising electricity capacity prices, you name it.

Speaker Change #195: Is there a way for you to either maybe lock in rates ahead of time or just try to mitigate that impact?

Andrew F. Walters: And then, mostly, how do you think in this rising electricity price environment, you as a water utility will be treated by regulators and potentially investors? Do you actually think that by that you will regain your competitive advantage, given that water bill affordability will probably be meaningfully improved than that versus electric bills? So again, just this whole issue of and likely raising electric bills that we are currently forgetting about. Yeah, look, it's an excellent point to bring up, Angie, and it's something that we do not overlook because of the impact on our community. In California, we have a balancing account that allows us to put that through, so California is not something that we would see an impact directly on us, but we do have an impact on our customers.

Eric Thornburg: And then number two, mostly how do you think in this rising electricity price environment, you you as a water utility will be treated by regulators and potentially investors, these actually think that that you will, you know, regain your competitive advantage given that, you know, water bill affordability will be probably meaningful improvement improved than that versus electric electric bill. So again, just this whole issue of like the rising electric bills that we are currently forgetting about. Yeah, look, it's an excellent point to bring up, Angie, and it's something that we do not overlook on the impact on our customers.

Speaker Change #196: So that's number two. And then number two, mostly, how do you think, in this rising electricity price environment, you as a water utility will be treated by regulators and potentially investors? Do you actually think that that's...

Speaker Change #197: you will, you know, regain your competitive advantage given that, you know, water bill affordability will be probably meaningfully improved than that versus electric bills. So, again, just this whole issue of...

Speaker Change #197: likely raising electric bills that we are currently forgetting about.

Speaker Change #198: Yeah, look it's an excellent point to bring up, Angie, and it's something that we do not overlook on the impact on our customers.

Eric Thornburg: In California, we have a balancing account that allows us to put that through. So California is not something that we're, we would see an impact directly on us, but we do have impacts on our customers. So we have been out there, continuing to convert facilities over to solar, which fixes the charge for that electricity over a longer period of time and does also allow for the benefit of providing a greener source of electricity for the community.

Speaker Change #199: In California, we have a balancing account that allows us to put that through. So California is not something that we're.

Speaker Change #199: where we would see an impact directly on us. But we do have impacts on our customers. So we have been.

Speaker Change #199: out there continuing to convert facilities over to solar, which fixes the charge for that electricity over.

Speaker Change #199: over a longer period of time, and does also allow for the benefit of providing a greener source of electricity for the communities that it's based in.

Eric Thornburg: So it's based in the second aspect is we think about our, our Connecticut in main businesses, we tend to contract for that power. And so we buy the power in advance. We have seen an increase in those rates, to be clear, even for the contracted rates over where we were before because of last time when we purchased power; they were significantly lower than they are today. That being said, you know, those increases, at least some of them, have already reflected in the current rate case that we have seen, with more to come. It's something that we will have to manage as we look at that.

Speaker Change #199: The second aspect is we think about our

Speaker Change #199: Connecticut and Maine businesses, we tend to contract for that power.

Speaker Change #199: And so we, by the power in advance, we have seen an increase in those rates, to be clear.

Speaker Change #199: even for for the contracted rates over where we were before because of last time when we purchased power they were significantly lower than they are today.

Eric W. Thornburg: That being said, you know, those increases, at least some of them, have already been reflected in the current rate case that we have seen, with more to come. It's something that we will have to manage as we look at that for your third item, though, affordability. There is tremendous value, from my perspective, in water relative to some of the other commodities that other utilities are responsible for delivering. And if we look at our affordability relative to the metrics that are out there and kind of our overall bills, and just to remind you of that page that we have on the back of our investor deck, it highlights what our cost is to customers as an average bill relative to their median household income, we're below 1% in all of our jurisdictions, which is a very solid place to be.

Speaker Change #199: That being said, you know, those increases, at least some of them, have already reflected in the current rate case that we have seen, with more to come. It's something that we will have to manage as we look at that.

Eric Thornburg: For your third item, though, of affordability. There is a tremendous value from my perspective and water relative to some of the other commodities that other utilities, you know, are responsible for delivering. And if we look at our affordability relative to the metrics that are out there and kind of our overall bills, and just to remind you of that page that we have in the back of our investor deck to highlight what our cost is to customers as an average bill relative to their meeting household income. We are below 1% in all of our jurisdictions, which is a very solid place to be.

Speaker Change #200: For your third item, though, of affordability,

Speaker Change #201: There is a tremendous value, from my perspective, in water relative to some of the other commodities that other utilities are responsible for delivering.

Speaker Change #201: And if we look at our affordability relative to the metrics that are out there and kind of our overall bills, and just to remind you of that page that we have in the back of our investor deck, that highlights what our cost is to...

Speaker Change #201: customers as an average bill relative to their median household income, we are below 1% in all of our jurisdictions, which is a very solid place to be. The other thing that we are continuing to do, Angie, is we're not

Eric Thornburg: The other thing that we are continuing to do, Angie, is we're not, we're never done trying to save money for our customers. And we are continuing to come up with new ways and new programs in order to save money for our customers, with solar being a great example. We actually put that in, and it earns for our shareholders, but it reduces costs for our customers, and what an outstanding outcome. for that.

Speaker Change #202: We're never done trying to save money for our customers, and we are continuing to come up with new ways and new programs in order to save money for our customers, with solar being a great example. We actually put that in, and it earns for our shareholders, but it reduces costs for our customers, and what an outstanding outcome for that.

Agnieszka Storozynski: It's some really good points.

Eric Thornburg: I love the question. By the end of this year, we will be generating 6,200 megawatts of solar power for our companies. I was delighted when I saw our sustainability report. In Texas, 100% of our electricity comes from renewables, and Connecticut is 70%, and then California and Maine is 50% in rising. We've been tapping into that market as well and really trying to be a force for good there.

Speaker Change #203: That's some really good points. I love the question.

Speaker Change #203: By the end of this year, we will be generating 6,200 megawatts of solar power for our companies.

Speaker Change #203: And I was delighted when I saw our, um...

Speaker Change #203: sustainability report, you know in Texas 100% of our electricity comes from renewables and Connecticut is 70% and then California and Maine is 50% and rising. So we've been tapping into that market as well and really trying to be a force for good there.

Agnieszka Storozynski: Then the other question about maybe just in general like M&A transactions. You clearly should have some sort of economies of scale benefits for acquiring, but also any other utility in the same state where you currently operate is there.

Eric W. Thornburg: And then California and Maine, it's 50% and rising. So we've been tapping into that market as well and really trying to be a force for good there. And then there is the other question about maybe just in general, like M&A transactions. So, you know, you clearly should have some sort of economies of scale benefits for Aquarium, but also any other, again, utility in the same state where you currently operate. Is there like, I don't know, a rule of thumb, for example, as far as, you know, O&M savings or, you know, DNA savings or any sort of operational benefits of basically enlarging your operations in the state in which you currently operate? Again, I can quote those, for example, for power. And I'm just wondering if the same is true on the water.

Speaker Change #204: And then the other question about, maybe just in general, like M&A transactions. So, you know, you clearly should have some sort of economies of scale benefits.

Speaker Change #205: for Aquarium, but also any other again utility in the same state where you currently operate. Is there like, I don't know, a rule of thumb, for example, as far as, you know, O&M savings or sort of

Eric Thornburg: I don't know, a rule of thumb, for example, as far as O&M savings or any sort of operational benefits of basically enlarging your operations in the state in which you currently operate. Again, I can quote those for example for power, and I'm just wondering if the same is true on the water side. I guess Angie, I would say from my understanding what power numbers are for what I expect, and I remember kind of numbers of 10% approximately of non-fuel O&M savings. Those are consistent with where water utilities can expect to potentially have savings. Now it changes from opportunity opportunities.

Speaker Change #205: you know, as DNA savings or any sort of operational benefits of basically enlarging your operations in the state in which you currently operate. Again, I can quote those, for example, for power, and I'm just wondering if the same is true on the water side.

Eric W. Thornburg: I guess, Angie, from my understanding of what power numbers are, for what I expect, and I remember kind of numbers of 10%, approximately, of non-fuel O&M savings, you know, those are consistent with where water utilities can expect to potentially have savings. Now, it changes from opportunity to opportunity, so you have to be careful with rules of thumb like that, because there are places where you can do better, and there are times when you can't do as well.

Agnieszka Anna Storozynski: I guess, Angie, I would say, from my understanding, what power numbers are.

Agnieszka Anna Storozynski: For what I expect, and I remember kind of numbers of 10% approximately of non-fuel O&M savings, you know, those are consistent with where water utilities can expect to potentially have savings. Now, it changes from opportunity to opportunity, so you have to be careful with rules of thumb like that.

Eric Thornburg: You have to be careful with rules of thumb like that because there are places where you can do better, and there's times when you can't do as well. So I think that's something that has to be paid attention to. That being said, if there were to happen to be kind of a contiguous consolidation, you tend to have good performance in those kind of contiguous consolidations.

Agnieszka Anna Storozynski: because there are places where you can do better and there's times when you can't do as well.

Agnieszka Storozynski: Good. Thank you. Thanks.

Agnieszka Storozynski: Thank you.

Agnieszka Storozynski: Thank you, Angie. Great questions.

Speaker Change #206: Good. Thank you. Thanks.

Operator: Thank you. One moment for the next question. Our next question comes from the line of Roger Liddell of Clear Harbor Asset Management. Your line is now open.

Speaker Change #206: Thank you. Thank you, Angie. Great questions.

Roger Liddell: One moment for next question. Our next question comes online from Roger LaDelle of Clear Harbor Asset Management.

Speaker Change #206: Thank you one moment for our next question.

Speaker Change #207: Our next question comes from the line of Roger Liddell of Clear Harbor Asset Management. Your line is now open.

Roger Liddell: Your line is not open.

Roger Liddell: Thank you.

Operator: Thank you, and good morning. I take it you can hear me. Yes, we can. Good morning, Roger.

Roger Liddell: Good morning. I take it from here. Yes, we can. Good morning, Roger. Great to hear from you. Thank you. Good to be with you.

Donald Roger Brooke Liddell: Thank you and good morning. I take it you can hear me?

Operator: Great to hear from you. Thank you. Good to be with you.

Speaker Change #208: Yes, we can. Good morning, Roger. Great to hear from you.

Roger Liddell: A couple of questions dealing with Connecticut.

Operator: A couple of questions dealing with Connecticut, of the 3.9 million in unrecovered expenses. I take it those are separate and distinct from uncollected. Is it just that crude?

Donald Roger Brooke Liddell: Thank you. Good to be with you.

Donald Roger Brooke Liddell: Bye.

Speaker Change #209: A couple of questions dealing with Connecticut.

Roger Liddell: The 3.9 million of unrecovered expenses, I take it, those are separate and distinct from uncollectables. Is that true? That is true, Roger. Okay. The recent rate increase in Connecticut that you referred to incorporated a make hole for every source in United on unpaid bills, all of the call at the baggage from the pandemic period. and so the combined public benefit charge went up about 130% that component of the monthly bill.

Speaker Change #210: The 3.9 million of unrecovered expenses.

Speaker Change #211: I take it those are separate and distinct from uncollectibles.

Speaker Change #212: Is that true?

Andrew F. Walters: That that is true. Okay, the recent rate increase in Connecticut that you referred to incorporated a make whole for Eversource and United on unpaid bills, all of the call it the baggage from the pandemic period, of the combined public benefit charge, one up about 130% that component of the Monthly Bill. So, that looked to be clearing the decks for Eversource and also on the unrecovered millstones purchase, keeping Millstone in operation. They have been made whole up through July 1.

Donald Roger Brooke Liddell: That is true, Roger.

Donald Roger Brooke Liddell: Okay, the recent rate increase in Connecticut that you referred to...

Donald Roger Brooke Liddell: All right.

Speaker Change #213: Incorporated a make whole for Eversource and United on unpaid bills. All of the, call it the baggage from the pandemic period.

Speaker Change #213: So the...

Speaker Change #213: combined public benefit charge went up about a hundred and thirty percent that component of the monthly bill. So that looked to be clearing the decks for

Eric Thornburg: So that looked to be clearing the decks for EverSource and also on the unrecovered millstone purchase, how keeping millstone in operation, they had been made whole up through July 1. But so there appeared to be sensitivity, pure for at least those issues and hanging you with a 3.9 million of unrecovered. Can you talk to us just even briefly on why they did that and how you can, how you are dealing with it? So there were a few different factors that kind of impacted the decision. So there was, you know, just to take one component of it offline, there was Senate Bill 7 that had some expenses that were removed because of what Senate Bill 7 said.

Speaker Change #213: Eversource, and also on the unrecovered millstone purchase power, keeping millstone in operation. They have been made whole up through July 1.

Speaker Change #214: So there appeared to be sensitivity at Pura.

Speaker Change #214: for at least those issues, and...

Speaker Change #215: I'm hanging.

Speaker Change #216: you with a 3.9 million of unrecovered. Can you talk to us just even briefly on

Speaker Change #217: why they did that and how you are dealing with it.

Speaker Change #218: So there were a few different factors that kind of impacted the decision. So there was, you know, just to take one component of it offline, there was Senate Bill 7 that had some expenses that were removed because of what Senate Bill 7 said. That was less than a million dollars of that total number that was there. So while it was there, it was not...

Eric Thornburg: That was less than a million dollars of that total number that was there. So, while it was there, it was not as significant as some of the other key items. I'll give you another example of, and this is not to be like all-inclusive, but they reduced the audit fees that were being charged, the internal audit fees, external audit fees, and said that that was really a shareholder benefit. We obviously very much disagree with that because the fact the audit requirements have nothing to do with the equity shareholders is 100% to do with the debt providers that provide debt to those entities.

Speaker Change #217: as significant as some of the other key items.

Speaker Change #217: I'll give you another example of, and this is not to be like all-inclusive,

Speaker Change #217: But they reduced the audit fees that were being charged, the internal audit fees, external audit fees, and said that that was really a shareholder benefit.

Speaker Change #219: We obviously very much disagree with that because the fact that audit requirements have nothing to do with equity shareholders, it's 100% to do with the debt providers that provide debt to those entities.

Eric Thornburg: And so that's something that we hope to continue to work to communicate the reasons why those expenses are in place, but it does give us a fresh opportunity, Roger.

Andrew F. Walters: And so that's something that we hope to continue to work on communicating the reasons why those expenses are in place, but it does give us a fresh opportunity, Roger, like always when you have a challenge like this, you know, how can we address the situation and reduce our costs? And so those are the things that we're looking at, how can we reduce those audit expenses that are going into the next three years. Okay, thank you. And on the performance metrics for management. Are they in the public domain, and is there any reason to discuss them here?

Speaker Change #219: Something that we hope to continue to work to communicate the reasons why those expenses are in place.

Eric Thornburg: Like always, always when you have a challenge like this, you know, how can we address the situation and reduce our costs, and so those are the things that we're looking at is how can we reduce those audit expenses that are going into the next three years, but.

Speaker Change #219: But it does give us a fresh opportunity, Roger, like it always has.

Roger Liddell: Okay. Thank you.

Roger Liddell: And on the performance metrics for management, are they in the public domain?

Donald Roger Brooke Liddell: Okay, thank you. And on the performance metrics for management, are they in the public domain and is there any reason to discuss them here?

Roger Liddell: And is there any reason to discuss them here? Sure. I mean, look, they are in the public domain. It's part of the decision, and it's largely around the metrics associated with our customers and in how we affordability, and so I think from that perspective, we feel very good about our ability to affect our operations in a way to meet those performance metrics. And I think that's important to note that, like performance metrics by themselves, some people get nervous about them. But I think as long as they're properly set in a way that you can have a pathway to get there and they can affect what they're trying to affect, and we can get to those numbers.

Andrew F. Walters: Sure. I mean, look, they are in the public domain. It's part of the decision. And it's largely around the metrics associated with our customers and how we measure affordability. And so from that perspective, we feel very good about our ability to affect our operations in a way to meet those performance metrics. And I think that it's important to note that, just like performance metrics by themselves, some people get nervous about them.

Speaker Change #220: Sure. I mean, look, they are in the public domain. It's part of the decision. And it's largely around the metrics associated with our customers and how we...

Donald Roger Brooke Liddell: affordability and so I think from that perspective we feel very good about our ability to to affect our operations in a way to meet those performance metrics and and I think that's that's important to note that like performance

Andrew F. Walters: But I think as long as they're properly set in a way that you can have a pathway to get there, and they can affect what they're trying to affect, and we can get to those numbers, it can be a very effective way to increase the efficiency of utilities as well as achieve specific objectives that PURE is after as well. Yeah, the plus side, of course, is that it was kind of the first time we'll be able to have the opportunity to recover components of executive comp at the long, long term incentive level. And in the past, we've not been eligible to recover that.

Donald Roger Brooke Liddell: metrics by themselves. Some people get nervous about them, but I think as long as they're properly set in a way that you can have a have a pathway to get there and they can affect what they're trying to affect and we can get to those numbers.

Roger Liddell: It can be a very effective way to increase the efficiency of utilities as well as increase specific objectives that you're after as well.

Donald Roger Brooke Liddell: It can be a very effective way to increase the efficiency of utilities as well as increase specific objectives that PURE is after as well.

Andrew Walters: Yeah, the plus side, of course, is kind of the first time we'll be able to have the opportunity to recover components of executive comp at the long-term incentive level, and in the past we've not been eligible to recover that, so that was a win, as Andrew said.

Donald Roger Brooke Liddell: Yeah, the plus side, of course, it was kind of the first time we'll be able to have the opportunity to recover components of executive comp at the long-term incentive level, and in the past we've not been eligible to recover that, so that was a win, as Andrew said.

Roger Liddell: Okay, next question is on the Advanced Metering Infrastructure program. Big bucks, and I take it, a significant reward for all stakeholders from it, but the term advanced metering infrastructure means so many different things to whether it's electric or gas or water. In many cases, AMI is effectively just the way keeping the meter reader from getting bitten by the dog. But the leak detection, I take it, a replacement of mechanical meters with ultrasonic-based ones, and leak detection, the ability to have notifications to even westy customers on a potential leak, is that all part of the package?

Eric W. Thornburg: So that's, that was a win, as Andrew said. Okay, thank you. Next question is on the advanced metering infrastructure program. Big bucks, and I take it, a significant reward for all stakeholders from it. But the term advanced metering infrastructure means so many different things, whether it's electric or gas or water. And in many cases, AMI is effectively just keeping the meter reader from getting bitten by the dog. But leak detection, I take it as the replacement of mechanical meters with ultrasonic-based ones, and leak detection, the ability to have notifications to WESI customers on a potential leak.

Speaker Change #221: but yeah the term advanced metering infrastructure means

Speaker Change #222: So many different things, too.

Speaker Change #223: whether it's electric or gas or water. And in many cases AMI is effectively just a way of keeping the meter reader from getting bitten by the dog.

Speaker Change #224: Thank you very much.

Speaker Change #225: ones and leak detection, the ability to have notifications to even WESI customers on a potential leak, is that all part of the package?

Eric W. Thornburg: Is that all part of the package? Roger, that's exactly right. We're not installing the kind of drive-by meter reading system. This will all be automated. We're installing antennas around our service area, so it will be picked up through those signals. So that will eliminate all these truck runs and kind of manual intervention. Customers will have a portal that they can track their daily water use. They will get alerts if they have continuous usage for 24 hours, indicating a leak.

Eric Thornburg: Roger, that's exactly right.

Eric Thornburg: We're not installing the kind of the drive-by meter-reading system. This will all be automated. We're installing antennas around our service area, so it will be picked up through those signals, so that will eliminate all these truck runs and kind of manual intervention. Customers will have a portal that they can track their daily water use. They will get alerts if they have continuous usage for 24 hours indicating a leak, and so all those benefits that we've long been excited about are going to be available to our customers here in the next couple of years, so we're just starting the implementation now.

Donald Roger Brooke Liddell: So that will eliminate all these truck runs and kind of manual intervention. Customers will have a portal that they can track their daily water use.

Donald Roger Brooke Liddell: They will get alerts if they have continuous usage for 24 hours, indicating a leak, and so all those benefits that we've long...

Donald Roger Brooke Liddell: long been excited about, are going to be available to our customers here in the next couple years. So we're just starting the implementation now. It's exciting, and we're really, really pleased.

Eric Thornburg: It's exciting, and we're really, really pleased to get this opportunity.

Eric Thornburg: The first of its kind in California for major water utilities. I'm just going to add to Eric. I'm glad you brought up that it was the first of a kind, because I think that's something that really highlights the unique area that we're in. Our customer base actually is requesting that they have this access to this type of technology. It fits very well with the Silicon Valley area that we are based in and the high-tech focus, so that part is great, but the part that I find particularly satisfying is the ability for us to help save customers money with that leak detection that Eric just talked about.

Donald Roger Brooke Liddell: to get this opportunity, the first of its kind in California for major water utilities.

Speaker Change #226: I'm just going to add to Eric, I'm glad I'm glad he brought up that it was the first of a kind, because I think that's something that really

Andrew F. Walters: Our customer base is actually requesting that they have access to this type of technology. It fits very well with the Silicon Valley area that we are based in and its high-tech focus. So that part is great, but the part that I find particularly satisfying is the ability for us to help save customers money with that leak detection that Eric just talked about. That was a major component. There were many others in terms of the savings, but the savings for the customer side on leaks that they were paying for were significant. And when you have a valuable water resource that is, you know, in California that has different levels of availability, you don't want to waste water.

Speaker Change #227: highlights the unique area that we're in. Our customer base actually is requesting that they have this access to this type of technology. It fits very well with the Silicon Valley area that we are based in and the high-tech focus.

Speaker Change #227: So that part is great.

Speaker Change #228: But the part that I find particularly satisfying is the ability for us to help save customers money with that leak detection that Eric just talked about.

Eric Thornburg: That was a major component; there were many others in terms of the savings. But the savings for this customer side on leaks that they were paying for is significant, and when you have a valuable water resource that is in California that has different levels of availability, you don't want to waste water; you want to make sure that it's being delivered to its ultimate intended.

Eric W. Thornburg: That was a major component, there were many others in terms of the savings, but the savings for the customer side.

Eric W. Thornburg: on leaks that they were paying for is significant and when you have a valuable water resource that is, you know, in California that has different levels of availability, you don't want to waste water. You want to make sure that it's being delivered to its ultimate.

Roger Liddell: Thank you.

Roger Liddell: As I recall the figure, my figure may be stale; I hope you can update me, but on an accountant for a water system wide across the country was in the range of 30%. I'm hoping that figure is a lot lower, but everything you're speaking of is at the customer, and as I think you have described it, I get those benefits. But how about you managing the system and everything from the production plant to those advanced meters? Are you also instrumenting your systems and able to get the same kind of leak detection that way?

Andrew F. Walters: You want to make sure that it's being delivered to its ultimate intended destination. As I recall, the figure, my figure may be stale, I hope you can update me, but on unaccounted for water system-wide across the country was in the range of 30 percent. I'm hoping that figure is a lot lower.

Eric W. Thornburg: intended use.

Eric W. Thornburg: As I recall, the

Speaker Change #229: figure, my figure may be stale, I hope you can update me, but on unaccounted for water system-wide across the country was in the range of 30%

Eric W. Thornburg: But everything you're speaking of is at the customer end, as I think you have described it, and I get those benefits. But how about you managing the system and everything from the production plant to those advanced meters?

Speaker Change #230: I'm hoping that figure is a lot lower but everything you're speaking of is at the customer end as I think you have described it and I get those benefits but how about you managing the system and everything from the production plant?

Eric W. Thornburg: Are you also instrumenting your systems and able to get the same kind of leak detection that way? And by how much? Do you have, at the current time, for leakage from, and I suppose any wastewater application, it's leakage into, Yeah, thank you for the question, Roger. You know, in California, we deployed over 10,000 devices that are built into the steamer nozzle of fire hydrants. And at night, these are activated, and they listen to the pipe.

Speaker Change #231: to those advanced meters. Are you also instrumenting your systems and able to get the same kind of leak detection that way? And what percentage?

Eric Thornburg: And what percentage of do you have at the current time for leakage from and I suppose any wastewater applications that's leakage into?

Speaker Change #232: Do you have at the current time for leakage from and I suppose any wastewater applications it's leakage into?

Eric Thornburg: Thank you for the question, Roger. You know in California, we deployed over 10,000 devices that are built into the steamer nozzle of fire hydrants, and at night these are activated and they listen to the pipe, and through various technology we were able to determine well is it a leak or is it you know water usage in a home, what have you. So we're able to go out and find leaks before the surface as a result of these listening devices that are you know incorporated into the hydrant caps, and we've deployed those throughout California and in Connecticut, and they're just a fantastic way to react preemptively, fix small leaks before they you know devolve into a major leak and blow up the street, etc. So we are in the 7% on account for range in California, we think that's it's world class, but we think we can do even better, and in the other states we're more in that 15% range. Unfortunately, the national average still is in that 25 to 30% range, and that goes to our heaven to see across the nation to replace the old pipe. We're committed to 1% replacement a year, that's industry leading, but gee with that's still saying 100 years, and so we'd like to see you know the rest of the industry adopt that 1% replacement rate at a minimum so we can can reduce water loss through leakage. Yeah Eric, I mean just add just one thing to that too, that that system you just talked about uses artificial intelligence to listen to those signatures, and we also use artificial intelligence on picking pipes just as part of our regular program here in California, which pipe is the right pipe to pick so that it not only looks at the failure but also the impact of failure, which I think is is another industry leading aspect of the Activity.

Speaker Change #232: Thank you for the question, Roger. You know, in California, we deployed over 10,000 devices that are built into the steamer nozzle of fire hydrants.

Speaker Change #233: And at night, these are activated and they listen to the pipe and through various

Eric W. Thornburg: And through various technology, we're able to determine, well, is it a leak, or is it water usage in a home, what have you. So we're able to go out and find leaks before they surface, as a result of these listening devices that are, you know, incorporated into the hydrant cap. And we've deployed those throughout California and in Connecticut. And they're just a fantastic way to preemptively fix small leaks before they devolve into a major leak and blow up the street, et cetera.

Speaker Change #233: Technology.

Speaker Change #233: We were able to determine, well, is it a leak, or is it water usage in a home, or what have you. So we're able to go out and find leaks before they surface as a result of these listening devices that are incorporated into the hydrant caps.

Speaker Change #233: And we've deployed those throughout California and in Connecticut. And they're just a fantastic way to preemptively fix.

Speaker Change #233: small leaks before they, you know, devolve into a major leak and blow up the street, etc.

Eric W. Thornburg: So we are in the 7% unaccounted-for range in California. We think that's world-class, but we think we can do even better. And in the other states, we're more in that 15% range. Unfortunately, the national average is still in that 25 to 30% range.

Speaker Change #233: So we are in the 7% unaccounted-for range in California.

Speaker Change #233: I think we can do even better. And in the other states, we're more in that 15% range.

Speaker Change #234: Unfortunately, the national average still is in that 25 to 30 percent range.

Eric W. Thornburg: And that goes to our hesitancy across the nation to replace the old pipe. We're committed to 1% replacement a year. That's industry leading, but gee whiz, that's still saying 100 years. And so we'd like to see the rest of the industry adopt that 1% replacement rate at a minimum so we can reduce water loss through leakage. Eric, I may just add one thing to that, too. The system you just talked about uses artificial intelligence to listen to those signatures.

Speaker Change #234: And that goes to our hesitancy across the nation to replace the old pipe.

Speaker Change #234: We're committed to 1% replacement a year. That's industry leading. But gee whiz, that's still saying 100 years. And so we'd like to see.

Speaker Change #234: You know, the rest of the industry adopt that 1% replacement rate at a minimum so we can can reduce water loss through leakage.

Eric W. Thornburg: Eric, I may just add just one thing to that too. The system you just talked about uses artificial intelligence to listen to those signatures.

Eric W. Thornburg: And we also use artificial intelligence on picking pipes, just as part of our regular program here in California, which pipe is the right pipe to pick, so that it not only looks at the failure, but also the impact of failure, which I think is another industry-leading aspect of the utility.

Roger Liddell: That's great.

Roger Liddell: Thank you. Complete and useful answers. Thank you, Roger.

Speaker Change #235: That's great. Thank you. Complete and useful answers.

Roger Liddell: Appreciate your call.

Speaker Change #235: Thank you, Roger, appreciate your call.

Operator: Thank you.

Operator: I'm showing off for the questions at this time.

Andrew F. Walters: I'd now like to turn it back to Aaron Thornburg for a closing remark. Thank you, everyone, for joining us today. We're halfway through the year, and we've got a lot more to look forward to in 2024, including a decision on our California rate case, implementation of our AMI initiative in California, progress with bringing greater water supply online in Texas, and advancing our PFAS remediation strategy. SJW Group proudly leverages our national platform to support our distinct local operations in our shared mission to reliably serve high-quality water to 1.5 million people across four states.

Aaron Thoroughburg: I'll not like to turn back to Aaron Thoroughport for close-room marks.

Speaker Change #235: Thank you. I'm showing no further questions at this time. I'd now like to turn it back to Aaron Thornburg for closing remarks.

Aaron Thoroughburg: Thank you, everyone, for joining it today. We're halfway through the year. We've got a lot more to look forward to into 2024, including a decision on our California rate case, implementation of our AMI initiated in California, progress with bringing greater water supply online in Texas, and advancing our PFAS remediation strategy. SJW Group proudly leverages our national platform to support our distinct local operations in our shared mission to reliably serve high-quality water to 1.5 million people across four states. And while we do this, we make sure we execute on our growth strategy and deliver shareholder value, including paying a dividend, which we have faithfully done for 80 straight years, and we've raised that dividend for 56 consecutive years.

Eric W. Thornburg: Thank you, everyone, for joining us today. We're halfway through the year. We've got a lot more to look forward to into 2024, including a decision on our California rate case, implementation of our AMI initiative in California.

Speaker Change #236: Progress with bringing greater water supply online in Texas and advancing our PFAS remediation strategy.

Speaker Change #236: SJW Group proudly leverages our national platform to support our distinct local operations in our shared mission to reliably serve high-quality water to 1.5 million people across four states.

Speaker Change #236: And while we do this, we make sure we execute on our growth strategy and deliver shareholder value, including paying a dividend, which we have faithfully done for 80 straight years. And we've raised that dividend for 56 consecutive years.

Aaron Thoroughburg: I recognize that it's our culture of service to our customers and the local communities that underlies our success, and I'm very proud of our people and make it all possible.

Andrew F. Walters: I recognize that it's our culture of service to our customers and the local communities that underlies our success, and I'm very proud of our people who make it all possible. Thanks again for your time today and your questions. We look forward to sharing our progress with you next quarter, and in the meantime, Andrew and I, along with the rest of the SJW Group team, are always available for follow-up. Thank you again for your interest in SJW Group and thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

Speaker Change #236: I recognize that it's our culture of service to our customers and the local communities that underlies our success, and I'm very proud of our people who make it all possible.

Aaron Thoroughburg: Thanks again for your time today and your questions. We look forward to sharing our progress with you next quarter, and in the meantime, Andrew and I, along with the rest of the SJW Group team, are always available for follow-up.

Speaker Change #236: Thanks again for your time today and your questions. We look forward to sharing our progress with you next quarter. And in the meantime, Andrew and I, along with the rest of the SJW Group team, are always available for follow-up. Thank you again for your interest in SJW Group.

Aaron Thoroughburg: Thank you again for your interest in SJW Group.

Operator: Thank you for your participation in today's conference. This is the concluded program.

Operator: You may now disconnect.

Speaker Change #237: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

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