Uncategorized

SJW GROUP MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND RESULTS OF OPERATIONS (amounts in thousands of dollars, except per share amounts and otherwise indicated) (Form 10-Q)

The information in this Item 2 should be read in conjunction with the financial
information and the notes thereto included in Item 1 of this Form 10-Q and the
condensed consolidated financial statements and notes thereto and the related
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" contained in SJW Group's Annual Report on Form 10-K for the year
ended December 31, 2021.

This report contains forward-looking statements within the meaning of the
federal securities laws relating to future events and future results of SJW
Group and its subsidiaries that are based on current expectations, estimates,
forecasts, and projections about SJW Group and its subsidiaries and the
industries in which SJW Group and its subsidiaries operate and the beliefs and
assumptions of the management of SJW Group. Actual results may differ materially
from those currently anticipated and expressed in such forward-looking
statements as a result of a number of factors. For more information about such
forward-looking statements, including some of the factors that may affect our
actual results, please see our disclosures under "Forward-Looking Statements,"
and elsewhere in this Form 10-Q, including Part II, Item 1A under "Risk
Factors."


General:

SJW Group is a holding company with five wholly-owned subsidiaries: San Jose Water Company (“SJWC”), SJWNE LLC, SJWTX, Inc., SJW Land Corporationand SJWTX Holdings, Inc.

SJWC is a public utility in the business of providing water service to
approximately 232,000 connections that serve a population of approximately one
million people in an area comprising approximately 139 square miles in the
metropolitan San Jose, California area. The principal business of SJWC consists
of the production, purchase, storage, purification, distribution, wholesale, and
retail sale of water. SJWC provides water service to customers in portions of
the cities of San Jose and Cupertino and in the cities of Campbell, Monte
Sereno, and Saratoga and the Town of Los Gatos, and adjacent unincorporated
territories, all in the County of Santa Clara in the State of California. SJWC
distributes water to customers in accordance with accepted water utility methods
which include pumping from storage and gravity feed from high elevation
reservoirs. SJWC also provides non-tariffed services under agreements with
municipalities and other utilities. These non-tariffed services include water
system operations, maintenance agreements, and antenna site leases.

SJWC has utility property including land held in fee, impounding reservoirs,
diversion facilities, wells, distribution storage, and all water facilities,
equipment, office buildings and other property necessary to serve its customers.
Under Section 851 of the California Public Utilities Code, properties currently
used and useful in providing utilities services cannot be disposed of unless
California Public Utilities Commission ("CPUC") approval is obtained.

SJWC also owns approximately 234 acres of non-utility property which has been identified as no longer in use and useful for providing utility services. The majority of the properties are located in the hillside areas adjacent to the various properties within the SJWC watershed.

SJWNE LLC is the holding company for Connecticut Water Service, Inc. ("CTWS").
CTWS, headquartered in Connecticut, serves as a holding company for water
utility companies providing water service to approximately 141,000 connections
that serve a population of approximately 459,000 people in 81 municipalities
throughout Connecticut and Maine and more than 3,000 wastewater connections in
Southbury, Connecticut. The subsidiaries held by CTWS that provide utility water
services are The Connecticut Water Company ("Connecticut Water") and The Maine
Water Company ("Maine Water"). The remaining two CTWS subsidiaries are Chester
Realty, Inc., a real estate company in Connecticut, and New England Water
Utility Services, Inc. ("NEWUS"), which provides contract water and sewer
operations and other water related services.

The properties of CTWS's subsidiaries consist of land, easements, rights
(including water rights), buildings, reservoirs, standpipes, dams, wells, supply
lines, water treatment plants, pumping plants, transmission and distribution
mains and other facilities and equipment used for the collection, purification,
storage and distribution of water throughout Connecticut and Maine. In certain
cases, Connecticut Water and Maine Water are or may be a party` to limited
contractual arrangements for the provision of water supply from neighboring
utilities.

SJWTX, Inc., doing business as Canyon Lake Water Service Company ("CLWSC"), is a
public utility in the business of providing water service to approximately
24,000 connections that serve approximately 73,000 people. CLWSC's service area
comprises more than 267 square miles in Bandera, Blanco, Comal, Hays, Kendall,
Medina and Travis County in the growing region between San Antonio and Austin,
Texas. SJWTX, Inc. holds a 25% equity interest in Acequia Water Supply
Corporation. Acequia has been determined to be a variable interest entity within
the scope of ASC Topic 810 with SJWTX, Inc. as the primary beneficiary. As a
result, Acequia has been consolidated with SJWTX, Inc. SJWTX, Inc is undergoing
a corporate reorganization to separate regulated operations from non-tariffed
activities. In November 2021, SJWTX Holdings,
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Inc. ("SJWTX Holdings") and Texas Water Operation Services LLC ("TWOS") were
formed for the purpose of effecting a corporate reorganization of our water
services organization in Texas. TWOS was created for non-tariffed operations and
is wholly-owned by SJWTX Holdings. SJWTX Holdings is a wholly-owned subsidiary
of SJW Group, incorporated to hold the investments in SJWTX, Inc. and TWOS. In
addition, SJWTX Holdings intends to create a new subsidiary to hold future
wholesale water supply assets prior to the end of 2022.

SJW Land Company and Chester Realty, Inc. own undeveloped land and operate
commercial buildings in Tennessee, California and Connecticut. SJW Land Company
and Chester Realty, Inc. owned the following real properties during the six
months ended June 30, 2022:

                                                                                                                               % for Six months ended June 30, 2022 of
                                                                                                                                          SJW Land Company
            Description                            Location                   Acreage                Square Footage                Revenue                Expense
Warehouse building                         Knoxville, Tennessee                        30                        361,500                  52  %                  42  %
Commercial building                        Knoxville, Tennessee                        15                        135,000                  47  %                  57  %
Undeveloped land and parking lot           Knoxville, Tennessee                        10                            N/A                    N/A                    N/A
Undeveloped land                           San Jose, California                       101                            N/A                    N/A                    N/A
Commercial building                        Clinton, CT                                 22                          9,000                   1  %                   1  %
Commercial building                        Guilford, CT                                 1                          1,300                   -  %                   -  %


Business strategy for water utilities:

SJW Group focuses its business initiatives in three strategic areas:

(1) Regional operations of regulated water utilities;

(2)Regional non-tariffed water utility related services provided in accordance
with the guidelines established by the CPUC in California, the Public Utilities
Regulatory Authority ("PURA") in Connecticut, the Public Utilities Commission of
Texas ("PUCT") in Texas, and the Maine Public Utilities Commission ("MPUC") in
Maine; and

(3) Services related to water and utilities outside the region.

As part of our pursuit of the above three strategic areas, we consider from time
to time opportunities to acquire businesses and assets. However, we cannot be
certain we will be successful in identifying and consummating any strategic
business combination or acquisitions relating to such opportunities. In
addition, the execution of our business strategy will expose us to different
risks than those associated with the current utility operations. We expect to
incur costs in connection with the execution of this strategy and any
integration of an acquired business could involve significant costs, the
assumption of certain known and unknown liabilities related to the acquired
assets, the diversion of management's time and resources, the potential for a
negative impact on our financial position and operating results, entering
markets in which we have no or limited direct prior experience and the potential
loss of key employees of any acquired company. Any strategic combination or
acquisition we decide to undertake may also impact our ability to finance our
business, affect our compliance with regulatory requirements, and impose
additional burdens on our operations. Any businesses we acquire may not achieve
sales, customer growth and projected profitability that would justify the
investment. Any difficulties we encounter in the integration process, including
the integration of controls necessary for internal control and financial
reporting, could interfere with our operations, reduce our operating margins and
adversely affect our internal controls. SJW Group cannot be certain that any
transaction will be successful or that it will not materially harm operating
results or our financial condition.

Real estate services:

SJW Group's real estate investment activity is conducted through SJW Land
Company and Chester Realty, Inc. As noted above, SJW Land Company owns
undeveloped land and operates commercial buildings in Tennessee. Chester Realty,
Inc. owns and operates land and commercial buildings in Connecticut. SJW Land
Company and Chester Realty, Inc. manage income producing and other properties
until such time a determination is made to reinvest proceeds from the sale of
such properties.


Critical accounting policies:

The discussion and analysis of our financial condition and results of operations
is based on the accounting policies used and disclosed in our 2021 consolidated
financial statements and accompanying notes that were prepared in accordance
with
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accounting principles generally accepted in the United States of America and
included as part of our annual report on Form 10-K for the year ended
December 31, 2021, that was filed with the Securities and Exchange Commission on
February 28, 2022.

Our critical accounting policies are described in Management's Discussion and
Analysis of Financial Condition and Results of Operations included in our annual
report on Form 10-K for the year ended December 31, 2021. Our significant
accounting policies are described in our notes to the 2021 Consolidated
Financial Statements included in our annual report on Form 10-K for the year
ended December 31, 2021. There have been no changes to our critical or
significant accounting policies during the three months ended June 30, 2022.

Results of operations:

Water sales are seasonal in nature and influenced by weather conditions. The
timing of precipitation and climatic conditions can cause seasonal water
consumption by customers to vary significantly. Due to the seasonal nature of
the water business, the operating results for interim periods are not indicative
of the operating results for a 12-month period. Revenue is generally higher in
the warm, dry summer months when water usage and sales are greater, and lower in
the winter months when cooler temperatures and increased rainfall curtail water
usage and sales.

Overview

SJW Group's consolidated net income for the three months ended June 30, 2022,
was $11,558, a decrease of $9,217, or approximately 44%, from $20,775 for the
same period in 2021. Consolidated net income includes a one-time impact of $441
related to SJWC's Order Instituting Investigation settlement expenses. SJW
Group's consolidated net income for the six months ended June 30, 2022, was
$15,295, a decrease of $8,096, or approximately 35%, from $23,391 for the same
period in 2021. Consolidated net income in 2022 includes a gain on the sale of
nonutility property of $4,450, offset by the one-time impacts of $1,960 related
to depreciation on certain Cupertino concession assets and $1,709 related to
SJWC's Order Instituting Investigation settlement expenses and certain true-ups
of deferred taxes and acquisition related tax expenses.

Operating revenue

Revenue by segment

                                                   Three months ended June 30,                Six months ended June 30,
                                                    2022                 2021                 2022                 2021
Water Utility Services                         $   147,675              150,921          $   270,621              264,362
Real Estate Services                                 1,366                1,320                2,722                2,664
                                               $   149,041              152,241          $   273,343              267,026


The change in consolidated operating revenues was due to the following factors:

                                                                Three months ended                                 Six months ended
                                                                     June 30,                                           June 30,
                                                                  2022 vs. 2021                                      2022 vs. 2021
                                                               Increase/(decrease)                                Increase/(decrease)
Water Utility Services:
Consumption changes (including unbilled utility
revenue)                                          $         (6,631)                        (4) %       $            (4,829)                (2) %
Increase in customers                                          417                          -  %                     2,881                  1  %
Rate increases                                               7,524                          5  %                    12,687                  5  %

Balancing and memorandum accounts                              (48)                         -  %                       755                  -  %

Other regulatory mechanisms                                 (4,672)                        (3) %                    (5,498)                (2) %
Other                                                          164                          -  %                       264                  -  %
Real Estate Services                                            46                          -  %                        57                  -  %
                                                  $         (3,200)                        (2) %       $             6,317                  2  %


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Exploitation charges

Operating expenses by segment

                                                   Three months ended June 30,                Six months ended June 30,
                                                    2022                 2021                 2022                 2021
Water Utility Services                         $   121,227              117,514          $   226,657              217,361
Real Estate Services                                   915                  881                1,824                1,762
All Other                                              497                1,207                1,871                2,185
                                               $   122,639              119,602          $   230,352              221,308


The change in consolidated operating expenses was due to the following factors:

                                                                   Three months ended                                 Six months ended
                                                                        June 30,                                           June 30,
                                                                     2022 vs. 2021                                      2022 vs. 2021
                                                                  Increase/(decrease)                                Increase/(decrease)
Water production expenses:
Change in surface water use                          $         (1,805)                        (2) %       $            (3,651)                (2) %
Change in usage and new customers                              (6,913)                        (6) %                    (7,224)                (3) %

Fee for abstraction of purchased water and groundwater, variation in the price of energy and other production expenses, net

                                                             6,636                          6  %                    11,131                  5  %
Balancing and memorandum accounts cost recovery                   756                          1  %                     1,170                  -  %
Total water production expenses                                (1,326)                        (1) %                     1,426                  -  %
Administrative and general                                      1,427                          1  %                     3,632                  2  %
Balance and memorandum account cost recovery                      507                          1  %                     1,615                  1  %
Maintenance                                                       304                          -  %                       734                  -  %
Property taxes and other non-income taxes                         430                          -  %                     1,224                  -  %
Depreciation and amortization                                   1,695                          1  %                     5,863                  3  %
Gain on sale of nonutility properties                               -                          -  %                    (5,450)                (2) %
                                                     $          3,037                          2  %       $             9,044                  4  %


Sources of Water Supply

SJWC's water supply consists of imported water purchased from the Santa Clara
Valley Water District ("Valley Water") under the terms of a master contract with
Valley Water expiring in 2051, groundwater from wells, surface water from
watershed run-off and diversion, and reclaimed water. Surface water is the least
expensive source of water. Changes and variations in quantities from each of
these sources affect the overall mix of the water supply, thereby affecting
water supply cost. In addition, the water rate for purchased water and the
groundwater extraction charge may be increased by Valley Water at any time. If
an increase occurs, then SJWC would file an advice letter with the CPUC seeking
authorization to increase customer rates to offset the cost increase.

We are currently experiencing a severe drought in California that is expected to
have a significant impact on the sources of our water supply. On July 1, 2022,
Valley Water's 10 reservoirs were at approximately 22% of total capacity with
11,822 million gallons of water in storage, which is 40% of the twenty-year
average for this date. Valley Water's largest reservoir, Anderson, remains
drained for a dam seismic retrofit project. As reported by Valley Water, there
was 8.35 inches of rainfall in San Jose during the current annual rainfall
season that commenced on July 1, 2021. Rainfall at SJWC's Lake Elsman was
measured at 37.50 inches during the current rainfall season compared to the
five-year average of 47.17 inches. Under normal hydrologic conditions, state and
federal water allocations represent approximately 40% of the Valley Water's
total annual water supply. As of July 1, 2022, Valley Water reported that
allocations from the State Water Project was 5% or 1,629 million gallons and an
additional allocation of human health and safety water has been secured. The
U.S. Bureau of Reclamation allocation remains at public health and safety water
only. Valley Water reported that its Semitropic groundwater bank reserves are at
80% of capacity or 91,747 million gallons, which can be used to perform water
transfers with other state water contractors. Valley Water also reported that
the managed groundwater recharge from January to June in the Santa Clara Plain
was 84% of the five-year average. The groundwater level in the Santa Clara Plain
is approximately 10 feet higher than June 2021. According to Valley Water, the
projected total groundwater storage at the end of 2022 is expected to fall
within the Alert Stage of Valley Water's Water Shortage Contingency Plan.
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On July 1, 2022, SJWC's Lake Elsman contained 1,099 million gallons of water, of
which approximately 949 million gallons can be released for treatment in water
production and maintaining downstream bypass flow regulatory requirements. This
Lake Elsman volume represents 91% of the five-year average. Local surface water
is a less costly source of water than groundwater or purchased water and its
availability significantly impacts SJWC's results of operations. Typically, SJWC
will utilize surface water and additional water from its portfolio of
groundwater supplies to supplement imported water from Valley Water. Production
from the Montevina Surface Water Treatment Plant through the second quarter was
996 million gallons, which is 88% of the five-year average. Through the second
quarter of 2022, there was 43 million gallons of water production at SJWC's
smaller Saratoga Water Treatment Plant. The Saratoga Water Treatment Plant is
out of service due to lack of run-off from Saratoga Creek and remains offline.
Nonetheless, SJWC believes that its various other water supply sources will be
sufficient to meet customer demand through the remainder of 2022.

On June 9, 2021, Valley Water declared a water shortage emergency and asked its
retailers to reduce consumption by 15% based on 2019 usage. In response to
Valley Water's declaration of drought emergency and call for conservation, SJWC
filed with the CPUC to activate Stage 3 of its Rule 14.1 Water Shortage
Contingency Plan. Like the most recent drought, the current restrictions center
on outdoor water usage which typically accounts for half of a residential
customer's consumption. The restrictions include limits on watering days and
times, use of potable water for washing structures and other non-porous surfaces
except to protect public health and safety, and no outdoor watering during and
up to 48 hours after measurable rainfall.

Connecticut Water's infrastructure consists of 65 noncontiguous water systems in
the State of Connecticut. These systems, in total, consist of approximately
1,800 miles of water main and reservoir storage capacity of 2.4 billion
gallons. The safe, dependable yield from our 235 active wells and 18 surface
water supplies is approximately 65 million gallons per day. Water sources vary
among the individual systems, but overall approximately 80% of the total
dependable yield comes from surface water supplies and 20% from wells.

CLWSC's water supply consists of groundwater from wells and purchased treated
and untreated raw water from local water agencies. CLWSC has long-term
agreements with the GBRA, which expire in 2037, 2040, 2044 and 2050. The
agreements, which are take-or-pay contracts, provide CLWSC with an aggregate of
7,650 acre-feet of water per year from Canyon Lake at prices that may be
adjusted periodically by GBRA. CLWSC also has raw water supply agreements with
the Lower Colorado River Authority ("LCRA") and West Travis Public Utility
Agency ("WTPUA") expiring in 2059 and 2046, respectively, to provide for 350
acre-feet of water per year from Lake Austin and the Colorado River,
respectively, at prices that may be adjusted periodically by the agencies.
Production wells located in a Comal Trinity Groundwater Conservation District, a
regulated portion of the Trinity aquifer, are charged a groundwater pump tax
based upon usage.

Maine Water's infrastructure consists of 12 noncontiguous water systems in the
State of Maine. These systems, in total, consist of approximately 600 miles of
water main and reservoir storage capacity of 7.0 billion gallons. The safe,
dependable yield from our 14 active wells and 7 surface water supplies is
approximately 120 million gallons per day. Water sources vary among the
individual systems, but overall approximately 90% of the total dependable yield
comes from surface water supplies and 10% from wells.

The following table shows the evolution of water supply sources, in millions of gallons, for Water Utility Services:

                                        Three months ended June 30,                   Increase/           % of Total                 Six months ended June 30,                   Increase/           % of Total
                                      2022                        2021               (decrease)             Change                2022                        2021              (decrease)             Change
Purchased water                       5,274                       5,885                 (611)                    (4) %            9,038                      9,257                 (219)                    (1) %
Groundwater                           5,062                       5,964                 (902)                    (6) %            8,920                     10,567               (1,647)                    (7) %
Surface water                         2,720                       2,368                  352                      2  %            5,287                      4,475                  812                      3  %
Reclaimed water                         247                         243                    4                      -  %              372                        328                   44                      -  %
                                     13,303                      14,460               (1,157)                    (8) %           23,617                     24,627               (1,010)                    (5) %

Changes in the mix of supply sources have been consistent with changes in water production expenditures.

SJWC's unaccounted-for water on a 12-month-to-date basis for June 30, 2022, and
2021 approximated 7.5% and 7.1%, respectively, as a percentage of total
production. The unaccounted-for water estimate is based on the results of past
experience and the impact of flows through the system, partially offset by
SJWC's main replacements and lost water reduction programs.

CTWS's unaccounted-for water on a 12-month-to-date basis for June 30, 2022, and
2021 was approximately 13.5% and 15.7%, respectively, as a percentage of total
production. The unaccounted-for water estimate is based on the results of past
experience and the impact of flows through CTWS's systems, unadjusted for any
required system flushing, partially offset by Water Infrastructure Conservation
Adjustment and Water Infrastructure Surcharge main replacement programs and lost
water reduction initiatives.
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Water production expenses

The change in water production expenses for the three and six months ended June
30, 2022, compared to the same period in 2021, was primarily attributable to
increases in average per unit costs for purchased water, groundwater extraction,
energy charges and other production expenses, offset by a decrease in customer
usage and an increase in available surface water for SJWC. Effective July 1,
2021, Valley Water increased the unit price of purchased water by approximately
9.5% and the groundwater extraction charge by approximately 9.1%. SJWC was
notified by Valley Water that the unit price of purchased water and groundwater
extraction charges was increased 13.9% and 15%, respectively, effective July 1,
2022.

Other Operating Expenses

Operating expenses, excluding water production expenses, increased $4,363 for
the three months ended June 30, 2022, compared to the same period in 2021. The
increase was primarily attributable to increases of $1,934 in administrative and
general expenses primarily due to increases in labor and group insurance costs,
and an increase of $1,695 in depreciation and amortization due to increases in
utility plant.

Operating expenses, excluding water production expenses, increased $7,618 for
the six months ended June 30, 2022, compared to the same period in 2021. The
increase was primarily attributable to increases of $5,863 in depreciation and
amortization due to increases in utility plant and a true up related to
Cupertino assets to adjust the useful lives over the concession term, and an
increase of $5,247 in administrative and general expenses primarily due to
increases in labor and group insurance costs, partially offset by $5,450 from
the gain on sale of vacant land located in California and nonutility property in
Texas.

Other (Expense) Income

For the three and six months ended June 30, 2022 , compared to the same period
in 2021, the change in other (expense) income was primarily due to the $3,000
pre-tax gain on sale from the release of a holdback amount by GBRA for the sale
of TWA, an increase in interest on long term debt and a decrease on the return
from retirement plan assets, partially offset by income generated from pension
non service cost.

Provision for Income Taxes

For the three and six months ended June 30, 2022, compared to the same period in
2021, income tax expense decreased $938 and increased by $1,025, respectively.
The decrease in income tax expense for the three months ended June 30, 2022 was
primarily due to a decrease in pre-tax book income while the increase in income
tax expense for the six months ended June 30, 2022 was primarily due to discrete
tax expense items. The effective consolidated income tax rates were 17% and 14%
for the three months ended June 30, 2022, and 2021, respectively, and 18% and 9%
for the six months ended June 30, 2022, and 2021, respectively. The higher
effective rate for the three and six months ended June 30, 2022, was also
primarily due to discrete tax expense items.

Regulations and Tariffs

Almost all of the operating revenue of SJW Group results from the sale of water
at rates authorized by the subsidiaries' respective state utilities commissions.
The state utilities commissions set rates that are intended to provide revenue
sufficient to recover operating expenses and the opportunity to achieve a
specified return on common equity. The timing of rate decisions could have an
impact on the results of operations.

Please also refer to Note 2 of the “Notes to the Condensed Consolidated Financial Statements”.

California Regulatory Affairs

On January 4, 2021, SJWC filed General Rate Case Application No. 21-01-003
requesting authority for an increase of revenue of $51,585 or 13.35% in 2022,
$16,932 or 3.88% in 2023, and $19,195 or 4.24% in 2024. The application also
includes requests to recover $18,499 from balancing and memorandum accounts,
authorization for a $435,000 capital budget, further alignment between actual
and authorized usage, and a shift to greater revenue collection in the service
charge. Review of the application is currently underway by the CPUC and new
rates, if approved, are expected to be effective in the fourth quarter of 2022.
Due to the processing delay, SJWC filed Advice Letter No. 573 on December 30,
2021, to request interim rates effective January 1, 2022, which will allow SJWC
to retroactively apply the final decision to January 1, 2022. Interim rates were
requested to equal the present rates in effect to avoid customer confusion and
short-term bill changes. This advice letter was approved with an effective date
of January 1, 2022. SJWC and the Public Advocates Office filed an amended
settlement agreement resolving all issues in the proceeding on February 4, 2022,
which will be considered by the CPUC for adoption. The settlement provides a
revenue increase of $54,131 over the three-year period with an increase of
$25,074 in 2022. The settlement recognizes the need for continued investments in
the water system to deliver safe and reliable water service, providing
authorization of a three-year $350,000 capital budget. Additionally, it further
aligns authorized and actual consumption, particularly for business customers,
addresses the water supply mix variability, and provides greater revenue
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recovery in the fixed load. The settlement also approves the recovery of
$18,254 balance and memory accounts. New tariffs are expected in the fourth quarter of 2022.

On May 3, 2021, SJWC filed Application No. 21-05-004 requesting authority to
adjust its cost of capital for the period from January 1, 2022 through December
31, 2024. The request seeks a revenue increase of $6,418 or 1.61% in 2022. The
application also proposes a rate of return of 8.11%, an increase from the
current rate of 7.64%, a decrease in the average cost of debt rate from 6.20% to
5.48%, and a return of equity of 10.30%, an increase from the current rate of
8.90%. In addition, the request seeks to adjust SJWC's currently authorized
capital structure of approximately 47% debt and 53% equity to approximately 45%
debt and 55% equity. If approved, new rates are expected to be effective in the
third quarter of 2022.

On December 6, 2019, SJWC filed Application No. 19-12-002 to deploy Advanced
Metering Infrastructure ("AMI") throughout its service area. On August 5, 2021,
an all-party settlement agreement was submitted to the CPUC for adoption that
would authorize the deployment of AMI outside of the capital budget requested in
the 2021 GRC. A final decision approving the settlement agreement was issued on
June 10, 2022.

On May 3, 2022, SJWC filed Advice Letter 575 to increase revenue requirement by
$232 or 0.06% for utility plant improvements to the Franciscan Station Pumps.
This advice letter was approved on June 10, 2022 with an effective date of July
1, 2022.

SJWC filed Advice Letter No. 577 on May 24, 2022 to increase revenue requirement
by $24,331 or 5.9% to offset the increases to purchased potable water charges,
the groundwater extraction fee, and purchased recycled water charges from its
water wholesalers effective July 1, 2022. Advice Letter No. 577 was approved on
June 30, 2022.

Connecticut Regulatory Affairs

On October 26, 2021, Connecticut Water filed for a Water Infrastructure
Conservation Adjustment ("WICA") increase of approximately $21,746 in completed
projects. Many of the projects were those that were not considered by PURA in
the rate case because of the deadline in the proceeding for pro forma capital
additions. On December 22, 2021, PURA approved a WICA surcharge of 2.44% to be
added to bills of all Connecticut Water customers, including those of the former
The Avon Water Company and The Heritage Village Water Company, effective January
1, 2022 which is expected to generate approximately $2,581 in additional
revenue. On February 14, 2022 Connecticut Water filed its 2021 WICA
reconciliation with PURA. The reconciliation, approved by PURA on March 16, 2022
and effective for 12 months beginning April 1, 2022, replaced the expiring 2020
reconciliation surcharge of 0.07% with a credit of (0.02)%. As a result, the net
WICA surcharge, effective April 1, 2022 was 2.35%.

On February 28, 2022 Connecticut Water filed its 2021 Water Rate Adjustment
mechanism ("WRA"). The mechanism reconciles 2021 revenues as authorized in the
Company's most recent rate cases. The 2021 WRA, as approved by PURA on March 30,
2022 and effective for 12 months beginning on April 1, 2022 imposed a 2.85%
surcharge on customer bills to collect the 2021 revenue shortfall.

On April 26, 2022, Connecticut Water filed for a WICA increase of $9,779 in
completed projects. PURA approved the Company's application on June 22, 2022.
The cumulative WICA charge as of July 1, 2022 is 3.26%, collecting $3,448 on an
annual basis.

On June 17, 2022, Connecticut Water submitted an application to PURA for the
approval to issue unsecured notes in the amount of $25,000. The notes carry an
interest rate of 4.71% and the closing is expected to occur on December 15,
2022. A decision is expected from PURA in August.

Texas Regulatory Affairs

CLWSC filed its annual Water Pass Through Charge ("WPC") true-up report on
January 31, 2022 with the PUCT under Docket No. 53173. The PUCT modified the WPC
formula which resulted in a new usage rate increasing from $0.70 to $0.90
dollars per thousand gallons. The new usage rate was effective March 1, 2022.
The true-up report was approved by the PUCT on May 10, 2022 and CLWSC received
approval of the new tariff on May 24, 2022.

CLWSC filed its annual WPC true-up report for its Kendall West system on June
29, 2022 with the PUCT under Docket No. 53751. CLWSC requested an increase from
$2.39 to $3.69 per thousand gallons for the WPC. Subsequent to this filing, the
increase requested was revised to $2.56 per thousand gallons on July 15, 2022.

Maine Regulatory Affairs

The rates approved in the Biddeford Saco division by the April 5, 2022
stipulated agreement, which authorized a rate increase of $6,313, or 72.5% went
into effect on July 1, 2022. The Saco River Drinking Water Resource Center began
supplying the water distribution system on June 16, 2022.
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On February 28, 2022, Maine Water filed requests for general rate increases in
the Camden-Rockland, Freeport, Millinocket and Oakland Divisions. The four
filings collectively request $532 in new revenue and seek to reset the WISC in
all four divisions. Individually, the Camden Rockland Division request is $225,
or 3.4%; the Freeport request is $51, or 6.1%; the Millinocket request is $184,
or 14.5%; and the Oakland request is $72, or 9.9%. The four cases, while
docketed separately, are proceeding through the adjudication process together.
Decisions by the Commission in these filings are expected in the third quarter
of 2022.

On March 14, 2022Maine Water has applied for authorization to issue $15,000 in long-term debt. The debt issuance was approved by the MPUC on April 20, 2022.


Liquidity:

Cash flow from operating activities

During the six months ended June 30, 2022, SJW Group generated cash flows from
operations of approximately $83,600, compared to $67,100 for the same period in
2021. Cash flow from operations is primarily generated by net income from
revenue producing activities, adjusted for non-cash expenses for depreciation
and amortization, deferred income taxes, stock-based compensation, allowance for
equity funds used during construction, gains or losses on the sale of assets,
and changes in working capital items. Cash flow from operations increased by
approximately $16,500. This increase was the result of a combination of the
following factors: (1) an increase of $25,500 in regulatory assets primarily due
to the recognition of balancing and memorandum accounts, offset by (2) general
working capital and net income, adjusted for non-cash items, decreased by
$5,100, (3) an increase of a net payable of taxes payable which was $2,700 more
than in prior year, and (4) payments of amounts previously invoiced and accrued
including accrued production costs, decreased by $1,200.

As of June 30, 2022, Water Utility Services' write-offs for uncollectible
accounts represented less than 1% of its total revenue, unchanged from June 30,
2021. As of February 1, 2022, the remaining state executive order suspending
water service disconnections due to non-payment by customers expired in
California. There is no guarantee that the respective state regulators will not
reinstate such orders. Management believes that the collection rate for its
accounts receivables will gradually return to pre-pandemic levels now that
service disconnections are allowable once again to mitigate payment
delinquencies. On February 3, 2022, SJWC received $9,757 through the State of
California Water and Wastewater Arrearages Payment Program to relieve
outstanding payment delinquencies for customers accounts greater that 60-days
past due as of June 30, 2021. Bill credits were applied to customer accounts
that remained outstanding and the excess of $3,272 was returned to the State of
California. The financial impact of certain remaining past due accounts are
being recorded for future recovery through the rate-making process. There is no
guarantee that such recovery will be approved by the respective state regulatory
utility commissions.

Cash flow from investing activities

During the six months ended June 30, 2022, SJW Group used cash flows from
investing activities of approximately $117,100, compared to $107,000 for the
same period in 2021. SJW Group used approximately: (1) $101,600 of cash for
company-funded capital expenditures, (2) $13,300 for developer-funded capital
expenditures, and (3) $1,800 for utility plant retirements.

Water Utility Services' budgeted capital expenditures for 2022, exclusive of
capital expenditures financed by customer contributions and advances, are
anticipated to be approximately $223,000. As of June 30, 2022, approximately
$101,600 or 46% of the $223,000 has been invested.

Water Utility Services' capital expenditures are incurred in connection with
normal upgrading and expansion of existing facilities and to comply with
environmental regulations. Over the next five years, Water Utility Services
expects to incur approximately $1,300,000 in capital expenditures, which
includes replacement of pipes and mains, and maintaining water systems. A
significant portion of this amount is subject to future respective state
regulatory utility commissions' approval. Capital expenditures have the effect
of increasing utility plant rate base on which Water Utility Services earns a
return. Water Utility Services actual capital expenditures may vary from their
projections due to changes in the expected demand for services, weather
patterns, actions by governmental agencies, and general economic conditions.
Total additions to utility plant normally exceed Company-financed additions as a
result of new facilities construction funded with advances from developers and
contributions in aid of construction.

The Water Utility Services' distribution systems were constructed during the
period from the early 1900's through today. Expenditure levels for renewal and
modernization will occur as the components reach the end of their useful lives.
In most cases, replacement cost will significantly exceed the original
installation cost of the retired assets due to increases in the costs of goods
and services and increased regulation.
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Cash flow from financing activities

Net cash provided by financing activities for the six months ended June 30,
2022, decreased by approximately $24,700 from the same period in the prior year,
primarily as a result of (1) a decrease in net proceeds from our common stock
equity offering in prior year of $66,800, (2) a decrease in net proceeds of
$72,000 from new long-term debt, (3) an increase of dividends paid to
stockholders of $1,900, offset by (4) an increase in net borrowings and
repayments on our lines of credit of $114,900, and (5) $1,100 increase in net
cash receipts from advances and contributions in aid of construction.


Sources of capital:

SJW Group's ability to finance future construction programs and sustain dividend
payments depends on its ability to maintain or increase internally generated
funds and attract external financing. The level of future earnings and the
related cash flow from operations is dependent, in large part, upon the timing
and outcome of regulatory proceedings.

Short-term financing agreements

SJW Group and its subsidiaries have unsecured line of credit agreements where borrowings are used for long-term financing of capital expenditures, working capital and general corporate purposes. A summary of line of credit agreements at June 30, 2022are the following:

                                          Maturity Date              Line Limit           Amounts Outstanding             Unused Portion
SJWC credit agreement (a)               December 31, 2023           $  140,000                   66,000                       74,000
CTWS credit agreement                   December 14, 2023               75,000                   33,836                       41,164
CTWS credit agreement                     May 15, 2025                  40,000                   40,000                            -
SJWTX, Inc. credit agreement (b)        December 31, 2023                5,000                    1,500                        3,500
                                                                    $  260,000                  141,336                      118,664

___________________________________

(a) The credit agreement also provides for a letter of credit sub-limit of $15,000. (b) The credit agreement also provides for a letter of credit sub-limit of $1,000.

During the first half of 2022, the cost of borrowing on credit lines averaged 1.44% compared to 1.39% in the same period of 2021.

All of SJW Group's and subsidiaries lines of credit contain customary
representations, warranties and events of default, as well as certain
restrictive covenants customary for facilities of this type, including
restrictions on indebtedness, liens, acquisitions and investments, restricted
payments, asset sales, and fundamental changes. All of the lines of credit also
include certain customary financial covenants such as a funded debt to
capitalization ratio and a minimum interest coverage ratio. As of June 30, 2022,
SJW Group and its subsidiaries were in compliance with all covenants on their
lines of credit.

Long-term financing agreements

SJW Group and its subsidiaries long-term debt activities are for purposes of
refinancing short-term borrowings, long-term capital expenditure financing and
working capital, and refinancing of maturing long-term debt.

On April 6, 2022, Maine Water entered into a credit agreement with a commercial
bank, pursuant to an existing master loan agreement under which the commercial
bank issued Maine Water a promissory note on the same date with an aggregate
principal amount of $15,000 and a fixed interest rate of 4.54%, due May 31,
2042. The notes are unsecured obligations of Maine Water. Interest is payable
quarterly in arrears on the 20th day of January, April, July and October of each
year. The promissory note contains customary representations and warranties.
Under the promissory note, Maine Water is required to comply with certain
customary affirmative and negative covenants for as long as the notes are
outstanding. The notes are also subject to customary events of default, the
occurrence of which may result in all of the notes then outstanding becoming
immediately due and payable. Proceeds from the borrowing were received on May
13, 2022.

On June 28, 2022, Connecticut Water entered into a note purchase agreement with
certain affiliates of New York Life Insurance Company, pursuant to which
Connecticut Water sold an aggregate principal amount of $25,000 of its 4.71%
Senior Notes, Series 2022, due 2052. The closing of the note purchase agreement
is expected to occur on December 15, 2022, and is subject to customary closing
conditions and regulatory approval. The Series 2022 Notes are unsecured
obligations of Connecticut Water. Interest is payable semi-annually in arrears
on June 15th and December 15th of each year. The note purchase agreement
contains customary representations and warranties. Connecticut Water has agreed
to customary affirmative and negative covenants for as long as the Series 2022
Notes are outstanding. The Series 2022 Notes are also subject to customary
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event of default, the occurrence of which may cause all Series 2022 Notes then outstanding to become immediately due and payable.

On July 14, 2022, SJWC entered into a note purchase agreement with certain
affiliates of New York Life Insurance, Metropolitan Life Insurance, Northwestern
Mutual Life Insurance, and John Hancock Life Insurance (collectively the
"Purchasers"), pursuant to which the company will sell an aggregate principal
amount of $70,000 of its 4.85% Senior Notes, Series P ("Series P Notes") to the
Purchasers. The Series P Notes are unsecured obligations of SJWC and are due on
February 1, 2053. Interest is payable semi-annually in arrears on February 1st
and August 1st of each year. The note purchase agreement contains customary
affirmative and negative covenants for as long as the Series P Notes are
outstanding. The Series P Notes are also subject to customary events of default.
The closing is expected to occur in January 2023 upon satisfaction of customary
closing conditions.

The debt and credit agreements of SJW Group and its subsidiaries contain various
financial and other covenants. Non-compliance with these covenants could result
in accelerated due dates and termination of the agreements. In addition, the
credit agreements contain customary representations and warranties and are
subject to customary events of default, which may result in the outstanding debt
becoming immediately due and payable. As of June 30, 2022, SJW Group and its
subsidiaries were in compliance with all covenants related to its long-term debt
agreements.

Equity Financing Arrangements

On November 17, 2021, SJW Group entered into an equity distribution agreement
(the "Equity Distribution Agreement") with J.P. Morgan Securities LLC, Janney
Montgomery Scott LLC, RBC Capital Markets, LLC and Wells Fargo Securities, LLC
(each a "Sales Agent" and, collectively, the "Sales Agents"), pursuant to which
the company may offer and sell shares of its common stock, $0.001 par value per
share (the "Shares"), from time to time in "at-the-market" offerings, having an
aggregate gross sales price of up to $100,000. Pursuant to the Equity
Distribution Agreement, the Shares may be offered and sold through the Sales
Agents in transactions that are deemed to be "at-the-market" offerings as
defined in Rule 415 under the Securities Act of 1933, as amended, including
sales by means of ordinary brokers' transactions on the New York Stock Exchange
or otherwise at market prices prevailing at the time of sale, at prices related
to the prevailing market prices or at negotiated prices, in block transactions,
or as otherwise agreed upon by the company and the Sales Agents. Proceeds from
the sale of the shares under the Equity Distribution Agreement can be used in
the financing of acquisitions, infrastructure improvements and other capital
expenditures, repayment of debt or other corporate obligations, and working
capital over the term of the Equity Distribution Agreement as such needs arise.
As of June 30, 2022, SJW Group has $75,000 remaining on the Equity Distribution
agreement. No shares were sold in the first and second quarters of 2022.

Credit rating

The condition of the capital and credit markets or the strength of financial
institutions could impact SJW Group's ability to draw on its lines of credit,
issue long-term debt, sell its equity or earn interest income. In addition,
government policies, the state of the credit markets and other factors could
result in increased interest rates, which would increase SJW Group's cost of
capital. While our ability to obtain financing will continue to be a risk, we
believe that based on our 2022 and 2021 activities, we will have access to the
external funding sources necessary to implement our on-going capital investment
programs in the future. The current Standard & Poor's Rating Service assigned
company rating for SJW Group is an A-, with a stable outlook, for SJWC is an A,
with a stable outlook, for CTWS is an A- with a stable outlook, and for
Connecticut Water is an A- with a stable outlook.

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