CALIFORNIA WATER SERVICE GROUP (CWT) Business

Item 1.    Business.

Forward-Looking Statements

This annual report, including all documents incorporated by reference, contains forward-looking statements within the meaning established by the Private Securities Litigation Reform Act of 1995 (the PSLRA). The forward-looking statements are intended to qualify under provisions of the federal securities laws for “safe harbor” treatment established by the PSLRA. Forward-looking statements in this annual report are based on currently available information, expectations, estimates, assumptions and projections, and our management’s beliefs, assumptions, judgments and expectations about us, the water utility industry and general economic conditions. These statements are not statements of historical fact. When used in our documents, statements that are not historical in nature, including words like “will,” “would,” “expects,” “intends,” “plans,” “believes,” “may,” “could,” “estimates,” “assumes,” “anticipates,” “projects,” “progress,” “predicts,” “hopes,” “targets,” “forecasts,” “should,” “seeks,” “indicates,” or variations of these words or similar expressions are intended to identify forward-looking statements. Examples of forward-looking statements in this annual report include, but are not limited to, statements describing our intention, indication or expectation regarding our financial performance, dividends or targeted payout ratio, our expectations, anticipations or beliefs regarding governmental, legislative, judicial, administrative or regulatory timelines, regulatory compliance, decisions, approvals, authorizations, requirements or other actions, including plans and proposals pursuant to and timing of the California Water Service Company (Cal Water)’s general rate case (GRC) filed on July 8, 2024 (2024 CA GRC) and the GRCs filed by our other subsidiaries, the anticipated closing and timing of acquisition of Nexus Water Group’s (Nexus) Nevada and Oregon utilities, and the remaining membership interests in BVRT Utility Holding Company LLC (BVRT) and expected benefits resulting from such transactions, timing of our cost of capital application, rate amounts, cost recovery or refunds, certain per- and polyfluoroalkyl substances (PFAS) regulations, and associated impacts, such as our expected or estimated revenue, our intentions regarding recovery billing, our expectations regarding regulatory asset and operating revenue recognition, sources of funding or capital requirements, estimates of, or expectations regarding, capital expenditures, funding needs or other capital requirements, obligations, contingencies or commitments, our expectations regarding water sources, our beliefs regarding adequacy of water supplies, our anticipation regarding renewing water supply contracts and estimated water prices, estimates and assumptions relating to our significant accounting policies, such as deferred revenue or assets or refund of advances, our expectations or assumptions regarding employee benefit plans and stock-based compensation and estimated contributions to our pension plans and other postretirement benefit plans, our estimated annual effective tax rate and expectations regarding tax benefits, our intentions regarding use of net proceeds from any future equity or debt issuances or borrowings, our expectations, intentions or anticipations regarding our sources of funding, capital structure, including authorized return on equity, cost of debt and rate of return, or capital allocation plans, our intentions regarding growth opportunities or our expectations regarding the amount, timing, and use of settlement proceeds relating to certain PFAS-contamination claims. The forward-looking statements are not guarantees of future performance. They are based on numerous assumptions that we believe are reasonable, but they are open to a wide range of uncertainties and business risks. Consequently, actual results or outcomes may vary materially from what is contained in a forward-looking statement.

Factors which may cause actual results to be different than those expected or anticipated include, but are not limited to:

•the outcome and timeliness of regulatory commissions’ actions concerning rate relief and other matters, including with respect to the 2024 CA GRC and the GRCs of our other subsidiaries;

•the impact of opposition to rate increases;

•our ability to recover costs;

•Federal governmental and state regulatory commissions’ decisions, including decisions on proper disposition of property;

•changes in state regulatory commissions’ policies and procedures;

•changes in California State Water Resources Control Board (Water Board) water quality standards;

•changes in environmental compliance and water quality requirements, such as the United States Environmental Protection Agency’s (EPA) finalization of a National Primary Drinking Water Regulation establishing legally enforceable maximum contaminant levels (MCL) for PFAS in drinking water in 2024 as well as legal challenges to such MCLs;

•the impact of weather, climate change, natural disasters, including wildfires and landslides, and actual or threatened public health emergencies, including disease outbreaks, on our operations, water quality, water availability, water sales and operating results and the adequacy of our emergency preparedness;

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•electric power interruptions, especially as a result of Public Safety Power Shutoff (PSPS) programs;

•availability of water supplies;

•our ability to invest or apply the proceeds from the issuance of common stock in an accretive manner;

•consequences of eminent domain actions relating to our water systems;

•increased risk of inverse condemnation losses as a result of the impact of weather, climate change, and natural disasters, including wildfires and landslides;

•shifts in population, including housing and customer growth;

•issues with the implementation, maintenance or security of our information technology systems;

•physical and cyber security risks and threats and the adequacy of our efforts to mitigate such risks and threats;

•the ability of our enterprise risk management processes to identify or address risks adequately;

•labor relations matters as we negotiate with unions;

•changes in customer water use patterns and the effects of conservation, including as a result of drought conditions;

•our ability to complete, in a timely manner or at all, successfully integrate, and achieve anticipated benefits from announced acquisitions, including the Nexus and BVRT acquisitions;

•restrictive covenants in or changes to the credit ratings on our current or future debt that could increase our financing costs or affect our ability to borrow, make payments on debt or pay dividends;

•risks associated with expanding our business and operations, including into other geographic areas;

•the impact of stagnating or worsening business and economic conditions, including inflationary pressures, general economic slowdown or a recession, changes in tariff policy, the interest rate environment, changes in monetary policy, adverse capital markets activity or macroeconomic conditions as a result of geopolitical conflicts, and the prospect of shutdowns of the U.S. federal government;

•the impact of market conditions and volatility on unrealized gains or losses on our non-qualified benefit plan investments and our operating results;

•the impact of weather and timing of meter reads on our accrued and unbilled revenue;

•the impact of evolving legal and regulatory requirements, including sustainability requirements;

•the impact of the evolving U.S. political environment and changes effected, proposed or threatened by the U.S. federal government that has led to, in some cases, legal challenges and uncertainty around the funding, functioning and policy priorities of U.S. federal regulatory agencies and the status of current and future regulations; and

•the risks set forth in “Risk Factors” included elsewhere in this annual report.

In light of these risks, uncertainties and assumptions, investors are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this annual report or as of the date of any document incorporated by reference in this annual report, as applicable. When considering forward-looking statements, investors should keep in mind the cautionary statements in this annual report and the documents incorporated by reference. We are not under any obligation, and we expressly disclaim any obligation, to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise.

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Overview

California Water Service Group (Company) is a holding company with seven operating subsidiaries: Cal Water, Washington Water Service Company (Washington Water), New Mexico Water Service Company (New Mexico Water), Hawaii Water Service Company, Inc. (Hawaii Water), TWSC, Inc. (Texas Water), CWS Utility Services, and HWS Utility Services LLC (CWS Utility Services and HWS Utility Services LLC being referred to collectively in this annual report as Utility Services). Cal Water, Washington Water, New Mexico Water, and Hawaii Water are regulated public utilities. Texas Water is a holding company with regulated water and wastewater utilities.

The regulated utility entities also provide non-regulated services. Utility Services holds non-utility property and provides non-regulated services to private companies and municipalities outside of California (see “Non-Regulated Activities” below for more details). Cal Water was the original operating company that began operations in 1926.

Our business is conducted through our operating subsidiaries and we provide utility services to approximately two million people. The bulk of our business consists of the production, purchase, storage, treatment, testing, distribution, and sale of water for domestic, industrial, public, and irrigation uses, and the provision of water for domestic and municipal fire protection services. In some areas, we provide wastewater collection and treatment services, including treatment that allows water recycling. We also provide non-regulated water-related services under agreements with municipalities and other private companies. The non-regulated services include full water system operation, meter reading, and billing services. Non-regulated operations also include the lease of communication antenna sites, lab services, and promotion of other non-regulated services.

During the year ended December 31, 2025, there were no significant changes in the kind of products produced or services rendered by our operating subsidiaries, or in the markets or methods of distribution.

Our mailing address and contact information is:

California Water Service Group

1720 North First Street

San Jose, California 95112-4598

Telephone number: 408-367-8200

www.calwatergroup.com

Annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to these reports are available free of charge through our website at www.calwatergroup.com. The reports are available on our website as soon as reasonably practicable after such reports are filed with the U.S. Securities and Exchange Commission (SEC).

The content on any website referred to in this annual report is not incorporated by reference in this annual report unless expressly noted.

Regulated Business

California water operations are conducted by Cal Water, which provides service to approximately 500,000 customer connections in 20 separate districts, which are subject to regulation by the California Public Utilities Commission (CPUC). California water operations accounted for approximately 89.0% of our total customer connections and 91.2% of our total consolidated operating revenue in 2025.

We operate the City of Hawthorne and the City of Commerce water systems under lease agreements. In accordance with the lease agreements, we receive all revenues from operating the systems and are responsible for paying the operating costs. The City of Hawthorne and the City of Commerce lease revenues are governed through their respective city councils and are considered non-regulated because they are outside of the CPUC’s jurisdiction. We report revenue and expenses for the City of Hawthorne and City of Commerce leases in operating revenue and operating expenses because we are entitled to retain all customer billings and are responsible for all operating expenses. These leases are considered “nontariffed products and services” (NTPS) by the CPUC and require a 10% revenue share with regulated customers.

In October of 2011, an agreement was negotiated with the City of Hawthorne to lease and operate its water system. The system, which is located near our Hermosa Redondo district, serves about half of Hawthorne’s population. The capital lease agreement required an up-front $8.1 million lease deposit to the city that is being amortized over the lease term. Additionally, annual lease payments are contracted to be adjusted based on changes in rates charged to customers. Under the lease, we are responsible for all aspects of system operation and capital improvements, although title to the system and system improvements reside with the city. Capital improvements are recorded as depreciable plant and equipment and depreciated per the asset lives set forth in the agreement. In exchange, we receive all revenue from the water system, which was $13.0 million, $12.7 million, and $12.2 million in 2025, 2024, and 2023, respectively. At the end of the lease, the city is required to reimburse us for the

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unamortized value of capital improvements made during the term of the lease. The City of Hawthorne capital lease is a 15-year lease and expires in August of 2026. We do not expect to renew the lease upon expiration.

In April of 2018, a renewal agreement was negotiated with the City of Commerce for us to continue to lease and operate its water system for 15 years. Under the agreement, the operating lease requires us to pay $0.8 million per year in monthly installments. We have operated the City of Commerce water system since 1985 and are responsible for all operations, maintenance, water quality assurance, customer service programs, and financing capital improvements to provide a reliable supply of water that meets federal and state standards to customers served by the City of Commerce system. The City of Commerce retains title to the system and system improvements and remains responsible for setting its customers’ water rates. We bear the risks of operation and collection of amounts billed to customers. In exchange, we receive all revenue from the water system, which was $4.0 million, $4.1 million, and $4.2 million, in 2025, 2024, and 2023, respectively. The agreement allows us to request a rate change annually in order to recover costs.

Hawaii Water provides service to approximately 6,800 water and wastewater customer connections on the islands of Kauai, Maui, Oahu, and Hawaii, including several large resorts and condominium complexes. Hawaii Water’s regulated customer connections are subject to the jurisdiction of the Hawaii Public Utilities Commission (HPUC). Hawaii Water accounted for 1.2% of our total customer connections and approximately 4.6% of our total consolidated operating revenue in 2025.

Washington Water provides domestic water service to approximately 38,500 customer connections in the Tacoma, Olympia, Graham, Spanaway, Puyallup, Rainier, Yelm, and Gig Harbor areas. Washington Water’s utility operations are regulated by the Washington Utilities and Transportation Commission (UTC). Washington Water accounted for approximately 6.8% of our total customer connections and approximately 2.6% of our total consolidated operating revenue in 2025.

New Mexico Water provides service to approximately 11,800 water and wastewater customer connections in our Rio Communities, Rio Del Oro, Meadow Lake, Indian Hills, Squaw Valley, Elephant Butte, Morningstar, Sandia Knolls, Juan Tomas, Monterey, and Cypress Gardens systems. New Mexico’s regulated operations are subject to the jurisdiction of the New Mexico Public Regulation Commission. New Mexico Water accounted for approximately 2.1% of our total customer connections and 0.8% of our total consolidated operating revenue in 2025.

In May of 2021, Texas Water became the majority owner of BVRT, a Texas-based utility development company owning and operating water and wastewater utilities serving growing communities outside of Austin and San Antonio. BVRT provides regulated water and wastewater services under the rules and regulation of the Public Utilities Commission of Texas (PUCT). Texas Water initially invested funds to enable BVRT to continue to build wastewater infrastructure and converted its investment to equity. BVRT’s water and wastewater utilities currently serve or are under contract to serve approximately 4,900 customer connections. On August 16, 2022, BVRT entered into a long-term water supply agreement with the Guadalupe Blanco River Authority (GBRA) that enables BVRT to receive up to 2,419 acre-feet of potable water annually (see Note 15 of the Notes to Consolidated Financial Statements for more details). Texas Water accounted for approximately 0.9% of our total customer connections and 0.8% of our total consolidated operating revenue in 2025. In November of 2025, Texas Water entered into an agreement to purchase the remaining membership interests of BVRT for $45.0 million and become the sole owner. Texas Water expects to file a change of control application with the PUCT in the first quarter of 2026 to request approval for the acquisition. Texas Water’s acquisition of the remaining membership interests is subject to satisfaction of customary closing conditions in addition to PUCT and our Board of Director’s approval.

In February of 2026, we entered into an agreement to purchase Nexus’ Nevada and Oregon water and wastewater systems (the Systems) for approximately $218.0 million, subject to the finalization of closing adjustments. The transaction is expected to close by the end of 2026 and is subject to regulatory approvals and other customary closing conditions. Our Board of Directors has approved the acquisition. The Systems currently serve approximately 36,000 equivalent residential connections and have a combined rate base of approximately $109.0 million.

The state regulatory bodies governing our regulated operations are referred to as the Commissions in this annual report. Rates and operations for regulated customers are subject to the jurisdiction of the respective state’s regulatory Commission. The Commissions require that water and wastewater rates for each regulated district be independently determined based on the cost of service. The Commissions are expected to authorize rates sufficient to recover normal operating expenses and allow the utility an opportunity to earn a fair and reasonable return on invested capital.

We treat and distribute water and collect and treat wastewater in accordance with accepted water and wastewater utility methods. Where applicable, we hold franchises and permits in the cities and communities where we operate. The franchises and permits allow us to operate and maintain facilities in public streets and rights-of-way as necessary.

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Non-Regulated Activities

Non-regulated activities consist primarily of the operation of water systems that are owned by other entities under lease agreements, leasing of communication antenna sites on our properties, and billing of optional third-party insurance programs to our residential customers.

Fees for non-regulated activities are based on contracts negotiated between the parties. Under our non-regulated contract arrangements, we operate municipally owned water systems and privately owned water and recycled water distribution systems, but are not responsible for all operating costs. Non-regulated revenue received from non-leased water system operations is generally determined on a fee-per-customer basis.

In California, nearly all non-regulated activities are considered NTPS. The prescribed accounting for these NTPS is incremental cost allocation plus revenue sharing with regulated customers. Non-regulated services determined to be “active activities” require a 10% revenue sharing, and “passive activities” require a 30% revenue sharing. The amount of non-regulated revenues subject to revenue sharing is the total billed revenues less any authorized pass-through costs. Some examples of CPUC authorized pass-through costs are purchased water, purchased power, and pump taxes. All of our non-regulated services, except for leasing communication antenna sites on our properties, are “active activities” subject to a 10% revenue sharing. Leasing communication antenna sites on our properties are “passive activities” subject to a 30% revenue sharing. Cal Water’s annual revenue sharing with regulated customers was $2.7 million, $2.8 million, and $2.7 million in 2025, 2024, and 2023, respectively.

Operating Segment

We operate in one reportable segment, the supply and distribution of water services and the provision of wastewater services. For information about revenue from external customers, net income attributable to California Water Service Group and total assets, see “Item 8. Financial Statements and Supplementary Data.”

Growth

We intend to continue exploring opportunities to expand our regulated and non-regulated water and wastewater activities, particularly in the western United States. The opportunities could include system acquisitions, such as our announced agreement to purchase Nexus’s Nevada and Oregon water and wastewater systems, lease arrangements similar to the City of Hawthorne and City of Commerce contracts, utility development investments similar to the BVRT investment, full service system operation and maintenance agreements, customer service functions, and other utility-related services.

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Geographical Service Areas and Number of Customer Connections at Year-end

Our principal markets are users of water within our service areas. The approximate number of customer connections served in each California regulated district, the City of Hawthorne, the City of Commerce, and each operating subsidiary, at December 31 is as follows:

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Rates and Regulation

The Commissions have plenary powers to set both rates and operating standards. As such, the Commissions’ decisions significantly impact the Company’s revenues, earnings, and cash flows. The amounts discussed herein are generally annual amounts, unless otherwise stated, and the financial impact to recorded revenue is expected to occur over a 12-month period from the effective date of the decision. In California, water utilities are required to make several different types of filings. Certain filings, such as GRC filings, escalation rate increase filings, and offset filings, may result in rate changes that generally remain in place until the next GRC. As explained below, surcharges and surcredits to recover balancing and memorandum accounts as well as GRC interim rate relief are temporary rate changes, having specific time frames for recovery.

The CPUC follows a rate case plan that requires Cal Water to file a GRC for each of its regulated districts every three years. For the discussion of California regulatory activity that follows, Grand Oaks is excluded unless its inclusion is expressly stated. In a GRC proceeding, the CPUC not only considers the utility’s rate setting requests, but may also consider other issues that affect the utility’s rates and operations. The CPUC is generally required to issue its GRC decision prior to the first day of the test year or authorize interim rates and an Interim Rates Memorandum Account (IRMA). In accordance with the rate case plan, Cal Water filed its most recent GRC in July of 2024 (2024 CA GRC) requesting rate changes effective January 1, 2026. For additional information on our 2024 CA GRC, see “California Regulatory Activity”.

Between GRCs, Cal Water may file escalation rate increases, which allow Cal Water to recover cost increases, primarily from inflation and incremental investments, generally during the second and third years of the rate case cycle. However, escalation rate increases are district specific and subject to an earnings test. The CPUC may reduce a district’s escalation rate increase if, in the most recent 13-month period, the earnings test reflects earnings in excess of what was authorized for that district or if new assets placed in service are less than authorized amounts.

In addition, California water utilities are entitled to make offset requests via an advice letter. Offsets may be requested to adjust revenues for authorized construction projects or recycled water projects when those capital projects go into service (these filings are referred to as “rate base offsets”), or for rate changes charged to Cal Water for purchased water, purchased power, and pump taxes (which are referred to as “expense offsets”). Rate changes approved in offset requests remain in effect until the next GRC is approved.

California Regulatory Activity

2024 CA GRC Application and IRMA

On July 8, 2024, Cal Water submitted Infrastructure Improvement Plans (the Plans) for its California districts from 2025 to 2027 in its 2024 CA GRC application with the CPUC. The application also proposed a Low-Use Water Equity Program, that would, if approved as filed, decouple revenue from water sales, to assist low-water-using, lower-income customers. The CPUC continues to evaluate the Plans along with the operating budget proposals and the Low-Use Water Equity Program to establish water rates for 2026 to 2028 that reflect the cost of providing safe, reliable water service. The required, triennial filing was the start of an approximately 18-month review process, with any changes in customer rates scheduled to become effective on January 1, 2026.

In the Plans, Cal Water proposed to invest more than $1.6 billion in its districts from 2025 to 2027, including approximately $1.3 billion of newly proposed capital investments. About 46% of the proposed new infrastructure improvements are to replace aging water pipelines. Such improvements are designed to enhance water supply reliability to support customers’ and firefighters’ everyday and emergency needs. The Plans also include, among other projects:

•Water quality upgrades to treat for existing and newly regulated contaminants.

•Infrastructure replacements to help provide reliable delivery of water service.

•Equipment such as generators to help withstand power outages and shutoffs, and solar installation projects to help reduce Cal Water’s dependency on the electric power grid and lessen our environmental footprint.

•Physical and cyber security and safety enhancements to help protect facilities, customers, and employees.

•Water supply initiatives to help safeguard long-term reliability and sustainability of water sources.

•Advanced Metering Infrastructure to aid conservation efforts and enhance water-use efficiency.

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Cal Water’s proposed Low-Use Water Equity Program would, if approved as filed, decouple revenue from water sales across its regulated service areas. The program is designed to work in conjunction with Cal Water’s proposed four-tier rate design and sales forecast proposals to enhance affordability—particularly for low-use and low-income customers—plus reinforce conservation goals, while providing the utility an opportunity to recover its authorized revenue requirement in a timely manner.

To support these investments, Cal Water has proposed to change 2024 rates to increase 2026 total revenue by $140.6 million, or 17.1%. Cal Water also proposes rate increases of $74.2 million, or 7.7%, in 2027; and $83.6 million, or 8.1%, in 2028.

Cal Water concluded an initial pre-hearing conference and an Administrative Law Judge (ALJ) and Commissioner were assigned to the case. The Commissioner issued the Scoping Memo and Ruling in November 2024 identifying the issues to be addressed and setting the schedule for the proceeding. At the start of 2025, public participation hearings were conducted and Cal Water received California Public Advocate Office’s testimony responding to the 2024 CA GRC application. Cal Water submitted rebuttal testimony in late March 2025. The assigned Commissioner also issued an Amended Scoping Memo and Ruling on March 13, 2025 granting in part Cal Water’s request to modify the ex-parte rules established in the Scoping Memo, and denying Cal Water’s request to modify the issues within the scope of the proceeding. Settlement discussions took place during April 2025, and hearings before the ALJ occurred in May 2025. After the hearings, the ALJ issued a ruling requesting additional information that parties to the proceeding responded to in June 2025. Briefs were filed on July 7, 2025 and reply briefs were filed on July 28, 2025. A law and motion hearing occurred on August 5, 2025 and a joint status conference occurred on October 3, 2025 in order to address pending motions and administrative matters. A proposed decision on the case was previously expected to be issued in late 2025 in accordance with the CPUC’s rate case plan, with new rates effective January 1, 2026; however, due to the CPUC requiring additional time to process the case, the timing of a proposed decision is uncertain. In December of 2025, the CPUC issued a decision extending its statutory deadline until June 8, 2026. Normally, the CPUC is subject to a requirement to process applications within 18 months of filing. In our experience, it is the CPUC’s practice to extend its statutory deadline, in some cases multiple times, as needed. The delay in the decision could have a material adverse impact on our revenue, operating results and earnings per share; however, we would expect this to be reversed at the time of a final decision through recognition of revenues that should have been recovered for services delivered beginning January 1, 2026.

In June of 2025, Cal Water filed a motion requesting authority to increase rates by inflation on January 1, 2026 (interim rates) and for the establishment of an IRMA in the event the CPUC did not issue a final decision for the 2024 CA GRC in time for new rates to be implemented on January 1, 2026. In October of 2025, the ALJ granted Cal Water’s motion for interim rates and the establishment of the IRMA. In November of 2025, Cal Water filed an advice letter implementing a three percent increase in interim rates and the IRMA as of January 1, 2026. The IRMA tracks the difference between interim rates and the rates that will ultimately be approved pursuant to the CPUC’s decision on the 2024 CA GRC.

Escalation Increase Requests

As a part of the decision on Cal Water’s 2021 GRC (2021 CA GRC), Cal Water was authorized to request annual escalation rate increases for 2025 for those districts that passed the CPUC’s earnings test. In November of 2024, Cal Water requested 2025 escalation rate increases for 18 of its regulated districts. The increase in annual adopted gross revenue associated with the November 2024 filing was $27.2 million. The new rates were implemented on January 1, 2025.

Rate Base Offset Requests

For construction projects authorized in the 2021 CA GRC as advice letter projects, Cal Water is allowed to request rate base offsets to increase revenues after the project goes into service. In October of 2024, Cal Water submitted a $5.7 million rate base offset advice letter to recover $0.9 million of annual revenue increases for 9 of its regulated districts. The new rates were implemented on January 1, 2025.

In May of 2025, Cal Water submitted an $11.4 million rate base offset advice letter to recover $1.6 million of annual revenue increases for all of its regulated districts. The new rates were implemented on July 1, 2025.

In November of 2025, Cal Water submitted a $12.3 million rate base offset advice letter to recover $1.5 million of annual revenue increases for 6 of its regulated districts. The new rates were implemented on January 1, 2026.

Expense Offset Requests

Expense offsets are dollar-for-dollar increases in revenue to match increased expenses, and therefore do not affect net operating income. In October of 2024, Cal Water submitted an advice letter to request offsets for increases in purchased water costs and pump taxes in 8 of its regulated districts totaling $17.1 million. The new rates were implemented on January 1, 2025.

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In June of 2025, Cal Water submitted an advice letter to request expense offsets for increases in purchased water costs and pump taxes in 5 of its regulated districts totaling $5.1 million. The new rates were implemented on July 1, 2025.

In July of 2025, Cal Water submitted an advice letter to request expense offsets for increases in purchased water costs and pump taxes in 2 of its regulated districts totaling $2.6 million. The new rates were implemented on August 1, 2025.

In November of 2025, Cal Water submitted an advice letter to request expense offsets for increases in purchased water costs, pump taxes, and purchased power offsets in 18 of its regulated districts totaling $15.7 million. The new rates were implemented on January 1, 2026.

Monterey-Style Water Revenue Adjustment Mechanism (MWRAM) Filing

In September of 2025, Cal Water submitted an advice letter requesting surcharges to bill for the MWRAM-related revenue undercollection for 2024 in its regulated districts with tiered rates. The advice letter was approved and $18.7 million is being recovered from customers in the form of 12-, 18-. and 24-month surcharges. The new surcharges were implemented on October 1, 2025. These new surcharges are in addition to surcharges authorized in the prior year which have not yet expired.

Incremental Cost Balancing Account (ICBA) Filing

In September of 2025, Cal Water submitted an advice letter to recover a net $3.4 million undercollection in its ICBA for 2024 in 18 of its regulated districts. The advice letter was approved and the new surcharges/surcredits were implemented on October 1, 2025. Additionally, $10.5 million is being recovered via a 12-month surcharge and $7.1 million is being refunded via either a one time or 12-month surcredit.

Cost of Capital Application

The CPUC issued and adopted a proposed decision for the Cal Water 2021 Cost of Capital Application in the second quarter of 2023. The decision authorized Cal Water’s return on equity, cost of debt, and capital structure for 2023 and 2024. The CPUC also reauthorized the Water Cost of Capital Mechanism (WCCM) for 2023 and 2024, which automatically adjusts the rate of return when the Moody’s Utilities Bond Index (Index) fluctuates between cost of capital applications.

On February 2, 2024, Cal Water received a letter from the CPUC addressed jointly to Cal Water and three other Class A water companies granting their request for a one-year extension in their next cost of capital filing with the CPUC to May 1, 2025. The WCCM remained in effect during the one-year extension.

In October of 2024, Cal Water evaluated the WCCM for 2025 and determined that it was not triggered. Since the WCCM was not triggered, there was no change to Cal Water’s 10.27% return on equity, 4.23% cost of debt, and 7.46% authorized rate of return for 2025. Cal Water’s authorized capital structure is 53.4% equity and 46.6% debt.

On January 14, 2025, Cal Water received a letter from the CPUC addressed jointly to Cal Water and three other Class A water companies granting a second extension for an additional one-year period in their cost of capital filing with the CPUC to May 1, 2026. The WCCM remained in effect during the one-year extension.

In October of 2025, Cal Water evaluated the WCCM for 2026 and determined that it was not triggered. Since the WCCM was not triggered, there was no change to Cal Water’s 10.27% return on equity for 2026.

On November 18, 2025, Cal Water received a letter from the CPUC addressed jointly to Cal Water and three other Class A water companies granting a third extension for an additional one-year period in their cost of capital filing with the CPUC to May 1, 2027. The WCCM will remain in effect during the one-year extension. As a result, Cal Water’s authorized return on equity in 2027 is expected to remain at 10.27% plus or minus any changes from the WCCM. The next measurement date for the WCCM is September 30, 2026.

PFAS Memorandum Account (PFAS MA)

Public water systems have been ordered by the Water Board to detect, monitor, and report certain PFAS in drinking water. In the third quarter of 2020, the CPUC approved the PFAS MA which allows Cal Water to track incremental expenses related to compliance with the order. The tracking of capital costs was excluded due to the lack of a MCL at that time.

In June of 2025, Cal Water filed an application with the CPUC requesting authorization to spend $125.0 million (net of litigation settlement proceeds after deducting fees and expenses) for PFAS treatment in 6 of its regulated districts in 2026 and 2027. The associated requested annual revenue increase for 2027 and 2028 is $6.7 million and $9.0 million, respectively. The impact to the annual revenue requirement is expected to be adjusted downwards for additional litigation or grant proceeds that Cal Water receives. The application also includes a proposal for the amortization of incremental costs tracked in the PFAS MA for these 6 regulated districts totaling $2.5 million.

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Palos Verdes Peninsula Water Reliability Project

In 2002, Cal Water commissioned a Water System Master Plan (Master Plan) for the Palos Verdes water system. The Master Plan identified the high-priority need to augment the existing potable water system with new transmission mains and a new pump station to improve the capacity and reliability of the water system. This resulted in the development of a capital project known as the PV Project. Before the PV Project, a single pipeline that was over 60 years old delivered potable water to approximately 90 percent of the Peninsula, and a second pipeline of the same age delivered water to the remaining 10 percent. Both of these pipelines were approaching the end of their useful lives.

The CPUC authorized Cal Water to recover revenue associated with costs up to a cap of $96.1 million after the PV Project was placed in service, subject to the CPUC’s reasonableness review. Due to the complexity of the PV Project, total project costs exceeded the advice letter cap of $96.1 million. Total project costs incurred were $117.2 million. Amongst other things, the 2021 CA GRC approved an additional $6.4 million of capital costs to be included in base rates plus authority to open a memorandum account allowing Cal Water to track incremental capital-related costs associated with this project.

In July of 2024, Cal Water submitted a Tier 3 advice letter to recover the remaining $14.7 million of capital costs not in base rates. Cal Water requested an increased revenue requirement for Palos Verdes customers of $1.8 million which is obtained by adding $14.2 million to rate base for the additional capital costs of the PV Project (which equals the $14.7 million above less two years of depreciation). Cal Water also requested to recover $3.8 million of revenue tracked in the memorandum account through a temporary surcharge of $0.2832 per ccf for 24 months. This includes $3.6 million of the revenue requirement for 2023 and 2024 from the increase in total capital costs above what was already included in base rates and $0.2 million of interest.

On January 30, 2025, a resolution was issued that approved Cal Water’s request to include $14.2 million of incremental costs in rate base and for a temporary surcharge to recover $3.8 million of carrying costs tracked in the Palos Verdes Pipeline Memorandum Account. New base rates were implemented on February 1, 2025, and new surcharges were implemented on April 1, 2025.

California Drought Memorandum Account (DRMA)

In June 2021, Cal Water submitted an advice letter to request a DRMA to track the incremental operational and administrative costs incurred to further implement updated Rule 14.1 for voluntary conservation measures and Schedule 14.1 for implementation of our Water Shortage Contingency Plan, including activities related to enhanced conservation efforts, staffing, and capital expenditures to provide a safe, reliable water supply. The DRMA would also track monies paid by customers for fines, penalties, or other compliance measures associated with water use violations and penalties paid by Cal Water to its water wholesalers. The DRMA was approved by the CPUC with an effective date of June 14, 2021.

On July 28, 2023, Cal Water submitted a Tier 3 advice letter requesting authority to amortize $1.4 million of incremental expenses incurred in 18 of its districts from June 2021 to December 2022 tracked in the DRMA.

On January 30, 2025, a resolution was issued that approved Cal Water’s request to recover $1.4 million of incremental costs incurred in 18 of its districts from June 2021 to December 2022 tracked in the DRMA. New surcharges were implemented on April 1, 2025.

In September of 2025, Cal Water submitted a Tier 3 advice letter requesting to recover $1.9 million of incremental expenses incurred from January 2023 to August 2024 tracked in the DRMA. The effective date of the advice letter is uncertain as Tier 3 advice letters require a resolution to be adopted by the CPUC.

Drought Response Memorandum Account (DREMA)

The DREMA was established to track lost revenues associated with reduced sales as a result of the activation of Rule 14.1 and Schedule 14.1 of Cal Water’s Water Use Restrictions of its Water Shortage Contingency Plan in 18 of its districts.

In September of 2025, Cal Water submitted a Tier 3 advice letter to recover a net $3.9 million undercollection tracked in its DREMA for the period January 2023 to August 2024. The effective date of the advice letter is uncertain as Tier 3 advice letters require a resolution to be adopted by the CPUC.

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Regulatory Activity - Other States

Washington Water Service – Stroh’s 2025 Rate Case

On March 17, 2025, Washington Water filed a tariff update with the UTC for the Stroh’s water system to increase revenues by $0.2 million. The general rate increase was approved on May 22, 2025, implemented into rates over two years. The first implementation of new rates was effective May 23, 2025, and the second implementation of new rates will be effective May 23, 2026.

Washington Water Service – 2025 East Pierce and Legacy Water Systems General Rate Case

On September 25, 2025, Washington Water filed a tariff update with the UTC for the East Pierce and Legacy water systems to increase revenues by $4.9 million. The general rate increase, which includes recovery of expenses, capital expenditures and PFAS-related expenses incurred in 2023 and 2024, is expected to be implemented in the second half of 2026.

Hawaii Water Service – 2024 Ka’anapali General Rate Case (2024 Ka’anapali GRC)

During the first quarter of 2025, a settlement was reached in the 2024 Ka’anapali GRC between Hawaii Water and the Hawaii Division of Consumer Advocacy (DCA). The settlement calls for a total test year revenue requirement of $7.5 million, representing an increase over the $6.4 million previously approved, on rate base of $13.4 million. The settlement agreement was filed with the HPUC and approved on April 7, 2025. The updated rate tariff was effective on April 18, 2025.

Hawaii Water Service – 2024 Waikoloa General Rate Case

In October of 2024, Hawaii Water filed a rate case with the HPUC to increase revenues across the five utilities operating in the Waikoloa service territory. A settlement agreement was reached between Hawaii Water and the Hawaii DCA and filed with the HPUC in August of 2025 to increase revenues by $4.7 million over two years. HPUC approved the settlement on October 7, 2025. The initial phase of the new rates was implemented on October 9, 2025, and the second implementation of new rates will be effective October 9, 2026.

Hawaii Water Service – 2025 Kapalua General Rate Case

In November of 2025, Hawaii Water filed a rate case with the HPUC to increase revenue in its Kapalua water and wastewater systems by $2.2 million. The request seeks to recover increases in purchased water costs, higher operating expenses, and the cost of completed capital investments. The new rates, if approved, are expected to be effective in the fourth quarter of 2026.

Texas Water Service

In June of 2024, BVRT filed a consolidated rate case with the PUCT comprised of 5 subsidiary utilities, Camino Real, Forest Glen, Windy Hill, Zipp Road, and Spanish Trail Utility Companies. A comprehensive settlement was filed on October 20, 2025. On December 15, 2025, after the final deadline, a customer filed a late objection to the proposed settlement. Parties are awaiting a decision from the PUCT regarding the objection. The initial phase of the new rates was implemented on July 25, 2025, and the next phase is scheduled to be implemented in October 2026.

In December of 2023, Camino Real Utility filed a new water Certificate of Convenience and Necessity (CCN) application with the PUCT to establish a water service area that initially covers 229.1 acres in Caldwell County. On December 30, 2025, a Notice of Approval was received from the PUCT establishing the CCN and initial water tariff rates.

Water Supply

Our source of supply varies among our operating subsidiaries and districts. Certain subsidiaries and districts obtain all of their supply from wells; some purchase all of their supply from wholesale suppliers; and others obtain supply from a combination of wells and wholesale suppliers. A small portion of supply comes from surface sources and is processed through Company-owned water treatment plants. To the best of management’s knowledge, we are meeting water quality, environmental, and other regulatory standards for all Company-owned systems.

Historically, approximately half of our annual water supply is pumped from wells. State groundwater management agencies operate differently in each state. Some of our wells extract ground water from water basins under adjudicated groundwater basins, in which a court has settled the dispute between landowners, or other parties over how much annual groundwater can be extracted by each party. All of our adjudicated groundwater basins are located in the State of California. Our average annual groundwater extraction from adjudicated groundwater basins approximates 8.2 billion gallons or 15.0% of our total average annual (2024 to 2025) water supply pumped from wells. Historically, we have extracted less than 100% of our annual adjudicated groundwater rights and have the right to carry forward up to 20% of the unused amount to the next annual

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period. All of our remaining wells extract groundwater from locally managed or unmanaged water basins or aquifers. There are currently no set limits for the ground water extracted from these water basins or aquifers. Our average annual groundwater extraction from managed groundwater basins approximates 30.9 billion gallons or 56.2% of our total average annual (2024 to 2025) water supply pumped from wells. Many managed groundwater basins from which we extract water have groundwater recharge facilities that we financially support by paying well pump taxes. Our well pump taxes for 2025, 2024, and 2023 were $24.2 million, $21.8 million, and $19.0 million, respectively. In 2014, the State of California enacted the Sustainable Groundwater Management Act of 2014 (SGMA). The law and its implementing regulations required most basins to create a sustainability agency by 2017, develop a sustainability plan by the end of 2022, and show progress toward sustainability by 2027. We expect that after the SGMA provisions are fully implemented, all the Company’s California groundwater will be produced from sustainably managed and/or adjudicated basins.

California’s normal weather pattern yields little precipitation between mid-spring and mid-fall. The Washington Water service areas receive precipitation in all seasons, with the heaviest amounts during the winter. New Mexico Water’s rainfall is heaviest in the summer monsoon season. Hawaii Water receives precipitation throughout the year, with the largest amounts in the winter months. Typically, water usage in all service areas is highest during the warm and dry summers and declines in the cool winter months. Rain and snow during the winter months in California replenish underground water aquifers and fill reservoirs, providing the water supply for subsequent delivery to customers. As of December 31, 2025, the snowpack water content of the statewide average during the 2025 to 2026 water year was 69% of long-term averages, statewide precipitation was 140% of long-term averages, and statewide reservoir storage was 123% of long-term averages (per the California Department of Water Resources). Management believes that supply pumped from underground aquifers and purchased from wholesale suppliers will be adequate to meet customer demand during 2026 and thereafter. Our customers in West Maui are experiencing drought conditions, and we are working with local partners to encourage additional conservation. Water rationing in West Maui may be required in future periods, if declared by the state or local jurisdictions. Long-term water supply plans are developed for each of our districts to help assure an adequate water supply under various operating and supply conditions. Some districts have unique challenges in meeting water quality standards, but management believes that supplies will meet current standards using currently available treatment processes or by installing the best available technologies.

On May 31, 2018, California’s Governor signed two bills (Assembly Bill 1668 and Senate Bill 606) into law that were intended to establish long-term standards for water use efficiency. The bills revise and expand the existing urban water management plan requirements to include five-year drought risk assessments, water shortage contingency plans, and annual water supply/demand assessments. The Water Board, in conjunction with the California Department of Water Resources, has adopted long-term water use standards for indoor residential use, outdoor residential use, water losses, and other uses. Cal Water is also required to calculate and report on urban water use targets each year, that compares actual urban water use to the targets. Management believes that Cal Water is well positioned to comply with all such regulations.

In April of 2024, the EPA finalized a National Primary Drinking Water Regulation establishing legally enforceable MCLs for six PFAS in drinking water. Under the PFAS regulation, water utilities across the country are required to complete initial PFAS monitoring by 2027 and to implement treatment for sources exceeding the MCL by 2029. In May of 2025, the EPA announced its intention to rescind the regulations for four of the PFAS compounds, and to extend the compliance date to 2031. On January 20, 2026, a three-judge panel of the U.S. Court of Appeals for the District of Columbia unanimously denied an EPA request to vacate and remove MCLs on four PFAS. Multi-party litigation continues with regard to PFAS MCLs. We estimate a capital investment of approximately $269.1 million will be required to comply with the currently effective regulation.

We are a party to four separate class-action settlements with the following companies: 3M Company; E.I. Du Pont de Nemours and Company (n/k/a EIDP, Inc.), DuPont de Nemours, Inc., The Chemours Company, The Chemours Company FC, LLC, and Corteva, Inc. (collectively, DuPont); Tyco Fire Products LP (Tyco); and BASF Corporation. These settlements are designed to resolve certain claims for PFAS contamination of drinking water in active public water systems. We plan to use settlement proceeds received, net of fees and expenses, to offset capital expenditures required to comply with PFAS drinking water regulations. In 2025, we received the first and second installments of ten unequal settlement payments from 3M Company totaling $34.8 million, net of legal fees and expenses. The remaining installments are expected to be received annually beginning in the second quarter of 2026. In addition, we received $6.1 million from DuPont, net of legal fees and expenses. Proceeds from settlements with Tyco, and BASF Corporation are expected to be received beginning in the first half of 2026. The proceeds, net of fees and expenses, will be allocated on a prorated basis to identified PFAS projects.

On April 17, 2024, the Water Board adopted an MCL of 10 parts per billion for Chromium-6 in drinking water. Our water systems in California will be required to comply with the regulation within two to four years. We developed and installed treatment for this contaminant at most of our impacted water sources when the same MCL was originally set in 2014, which was subsequently vacated for administrative reasons. After the MCL was vacated, we continued to treat our impacted water systems. We anticipate installing treatment or taking wells out of service for the remaining impacted sources before the regulatory deadline.

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The following table shows the estimated quantity of water purchased and the percentage of purchased water to total water production in each California operating district that purchased water in 2025. Other than noted below, all other districts receive 100% of their water supply from wells.

_______________________________________________________________________________

MG = million gallons

*     Bay Area Region includes Bayshore and Redwood Valley

**     North Valley Region includes Chico and Oroville

***     South Bay Region includes Dominguez and Hermosa Redondo

****     Los Angeles County Region includes Palos Verdes and Antelope Valley

The Bear Gulch district obtains a portion of its water supply from surface runoff from the local watershed. The Oroville district in the Sacramento Valley, the Bakersfield district in the San Joaquin Valley, and the Kern River Valley district in the Los Angeles Area purchase water from a surface supply. Surface sources are processed through our water treatment plants before being delivered to the distribution system. The Bakersfield district also purchases treated water as a component of its water supply.

The Chico, Marysville, Dixon, and Willows districts in the Sacramento Valley, the Salinas Valley Region district in the Salinas Valley, the Selma and Visalia districts in the San Joaquin Valley, and the Travis Air Force Base in Solano County obtain their entire supply from wells.

Purchases for the Bayshore and Bear Gulch districts are in accordance with long-term contracts with the San Francisco Public Utilities Commission (SFPUC) until June 30, 2034. Purchases for the Los Altos, Livermore, Oroville, Redwood Valley, Stockton, and Bakersfield districts are pursuant to long-term contracts expiring on various dates after 2025. The water supplies purchased for the Dominguez, East Los Angeles, Hermosa Redondo, Palos Verdes, and Westlake districts as well as the Hawthorne and Commerce systems are provided by public agencies pursuant to a statutory obligation of continued non-preferential service to purveyors within the agencies’ boundaries.

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Management anticipates water supply contracts will be renewed as they expire though the price of wholesale water purchases is anticipated to increase in the future.

Shown below are wholesaler price rates and increases that became effective in 2025, and estimated wholesaler price rates and percent changes for 2026. In 2025, several districts experienced purchased water rate increases, resulting in the filing of several purchased water offsets with the CPUC.

_______________________________________________________________________________

af = acre foot;

ccf = hundred cubic feet;

yr = fixed annual cost;

mo = fixed monthly cost

(1)untreated water

(2)wholesaler price changes occur every six months

We work with all local suppliers and agencies responsible for water supply to secure adequate, long-term supply for each system.

Seasonal Fluctuations

In California, our customers’ consumption pattern of water varies with the weather, in terms of rainfall and temperature. When setting customer rates, the CPUC considers the historical pattern in determining the adopted sales and production costs. With a majority of our sales expected to be subject to the MWRAM and per-unit variations in production costs being covered by the ICBA, fluctuations in financial results are expected to be moderated by the application of the MWRAM and ICBA mechanisms. However, cash flows from operations and short-term borrowings on our credit facilities can be significantly impacted by seasonal fluctuations including recovery of the MWRAM and ICBA.

Our water business is seasonal in nature. Weather conditions can have a material effect on customer usage. Customer demand for water generally is lower during the cooler and rainy winter months. Demand increases in the spring when warmer weather returns and the rains end, and customers use more water for outdoor purposes such as landscape irrigation. Warm temperatures during the generally dry summer months result in increased demand. Water usage declines during the late fall as temperatures decrease and the rainy season begins. During years in which precipitation is especially heavy or extends beyond the spring into the early summer, customer demand can decrease from historic normal levels, generally due to reduced outdoor water usage. Likewise, an early start to the rainy season during the fall can cause a decline in customer usage. As a result, seasonality of water usage has a significant impact on our cash flows from operations and borrowing on our short-term facilities.

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Utility Plant Construction

We have continually extended, enlarged, and replaced our facilities as required to meet increasing demands and to maintain our water systems. We obtain construction financing using funds from operations, long-term financing, advances for construction and contributions in aid of construction that are funded by developers. Advances for construction are cash deposits from developers for construction of water facilities or water facilities deeded from developers. These advances are generally refundable without interest over a period of 40 years in equal annual payment amounts and developer-installed facilities are exempt from corporate income taxes. Contributions in aid of construction consist of nonrefundable cash deposits or facilities transferred from developers, primarily for fire protection and relocation projects. We cannot control the amounts received from developers. This amount fluctuates from year-to-year as the level of construction activity carried on by developers varies. This activity is impacted by the demand for housing, commercial development, and general business conditions, including interest rates.

See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” for additional information.

Energy Reliability

We continue to seek to use power efficiently to minimize the power expenses passed on to our customers, and maintain backup power systems to continue water service to our customers if the power companies’ supplies are interrupted. If future legislation limits emissions from the power generation process, our cost of power may increase. Any increase in the per-unit cost of power would be expected to be passed along to our California customers through the ICBA or included in our cost of service paid by our customers as requested in our GRC filings. Many of our well sites are equipped with emergency electric generators designed to produce electricity to keep the wells operating during power outages. Storage tanks also provide customers with water during interruptions in electrical service.

During 2025, 2024, and 2023 we leased additional emergency generators to respond to potential PSPSs, an electric utility operating paradigm approved by the CPUC.

Security at Company Facilities

Due to terrorism and other risks, we have heightened security at our facilities and have taken added precautions to protect our employees and the water delivered to customers. In 2002, federal legislation was enacted that resulted in new regulations concerning security of water facilities, including submitting vulnerability assessment studies to the federal government. We have complied with regulations issued by the EPA pursuant to federal legislation concerning vulnerability assessments and have made filings to the EPA as required. In addition, communication plans have been developed as a component of our procedures.

In accordance with the 2018 America’s Water Infrastructure Act, we are required to conduct additional risk and resilience assessments (RRAs) and develop emergency response plans (ERPs) for each of our water systems. These RRAs and ERPs include natural hazards as well as malevolent acts. There are 3 tiers of RRA and ERP certification deadlines which are based on system population. The first such assessments were completed in 2020 and 2021. Since the RRAs are scheduled to be reviewed and resubmitted every five years, Cal Water completed workshops and recertified the tier 1 and tier 2 system RRAs and tier 1 system ERPs in 2025. We expect to complete additional workshops and recertification of the tier 3 RRA and tiers 2 and 3 ERPs in 2026 in accordance with the schedule required by the EPA.

While we do not make public comments on our security programs, we have been in contact with federal, state, and local law enforcement agencies to coordinate and improve our water delivery systems’ security.

Competition and Condemnation

Our principal operations are regulated by the Commission of each state. Under state laws, no privately owned public utility may compete within any service territory that we already serve without first obtaining a certificate of public convenience and necessity from the applicable Commission. Issuance of such a certificate would only be made upon finding that our service is deficient. To management’s knowledge, no application to provide service to an area served by us has been made.

State law in California provides that whenever a public agency constructs facilities to extend a utility system into the service area of a privately owned public utility, such an act constitutes the taking of property and requires reimbursement to the utility for its loss. State law in Washington and other states recognize chartered service areas but do not have specific statutes. State statutes allow municipalities, water districts and other public agencies to own and operate water systems. These agencies are empowered to condemn properties already operated by privately owned public utilities. The agencies are also authorized to issue bonds, including revenue bonds, for the purpose of acquiring or constructing water systems. However, if a public agency were to acquire utility property by eminent domain action, the utility would be entitled to just compensation for its loss. In Washington, annexation was approved in February 2008 for property served by us on Orcas Island; however, we continue to

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serve the customers in the annexed area and do not expect the annexation to affect our operations. To management’s knowledge, other than the Orcas Island property, no municipality, water district, or other public agency is contemplating or has any action pending to acquire or condemn any of our systems.

Government Regulations

Our water and wastewater services are governed by various federal, state, and local environmental protection, health and safety laws, and regulations. These provisions establish criteria for drinking water and for discharges of water, wastewater, and airborne substances. The EPA, state water quality regulators, and other state regulatory authorities promulgate numerous nationally and locally applicable standards, including MCLs for drinking water. We believe we are currently in compliance with all of the MCLs promulgated to date.

Environmental Matters

Our operations and facilities are subject to environmental regulation by various governmental authorities. Environmental health and safety programs have been designed to provide compliance with water discharge regulations, underground and above-ground fuel storage tank regulations, hazardous materials management plans, hazardous waste regulations, air quality regulatory requirements, wastewater discharge limitations, construction controls and mitigations, and employee safety issues related to hazardous materials. In addition, we actively investigate alternative technologies for meeting environmental regulations and continue the traditional practices of meeting environmental regulations.

For a description of the material effects that compliance with environmental regulations may have on us, see Item 1A. “Risk Factors—Risks Related to Our Regulatory Environment.” We expect environmental regulation to increase, resulting in higher operating costs in the future, and there can be no assurance that the Commissions will approve rate increases to enable us to recover these additional compliance costs.

Quality of Water Supply

Our operating practices are designed to produce potable water in accordance with accepted water utility practices. Water entering the distribution systems from surface and groundwater sources is treated in compliance with federal and state Safe Drinking Water Act (SDWA) and state standards. Well supplies in California, Hawaii and New Mexico are chlorinated or chloraminated for disinfection. Water samples from each water system are analyzed on a regular, scheduled basis in compliance with regulatory requirements. We operate a state-certified water quality laboratory at the San Jose Customer Support Services Office that provides testing for most of our California operations. Certain tests in California are contracted with independent certified labs qualified under the Environmental Laboratory Accreditation Program. State and local independent state certified labs provide water sample testing for the Washington, New Mexico, and Hawaii operations.

In recent years, federal and state water quality regulations have resulted in increased water sampling requirements. The SDWA and state regulations continue to be used to monitor and regulate additional potential contaminants to address public health concerns. The State of California has continued to adopt new water quality regulations, which are in addition to those adopted by the EPA. We monitor water quality standard changes and upgrade our treatment capabilities to maintain compliance with the various regulations.

Impact of Climate Change Legislation and Regulation

Our operations depend on power provided by other public utilities and, in emergencies, power generated by our portable and fixed generators. If future legislation limits emissions from the power generation process, our cost of power may increase. Any increase in the cost of power would be expected to be passed along to our California customers through the ICBA or included in our cost of service paid by our customers as requested in our GRC filings.

We maintain a fleet of vehicles to provide service to our customers, including a number of passenger vehicles, as well as heavy-duty diesel vehicles that were retrofitted to meet California emission standards. If future legislation affects the cost to operate the fleet or the fleet acquisition cost in order to meet certain emission standards and/or requirements to phase-in the use of zero-emission vehicles, it would increase our cost of service and our rate base. Any increase in fleet operating costs associated with meeting emission standards and/or requirements to phase-in the use of zero-emission vehicles would be expected to be included in our cost of service paid by our customers as requested in our GRC filings. While recovery of these costs is not guaranteed, we would expect recovery in the regulatory process.

Under the California Environmental Quality Act (CEQA), all capital projects of a certain type (primarily wells, tanks, major pipelines, and treatment facilities) require mitigation of greenhouse gas emissions. The cost to prepare the CEQA documentation and permits are expected to be included in our capital cost and added to our rate base, which is expected to be requested to be paid for by our customers. Any increase in the operating cost of the facilities would also be expected to be

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included in our cost of service paid by our customers, as requested in our GRC filings. While recovery of these costs is not guaranteed, we would expect recovery in the regulatory process.

Cap-and-trade regulations were implemented in California in 2012 with the goal of reducing emissions to 1990 levels by the year 2020. These regulations have not affected water utilities at this time. In the future, if we are required to comply with these regulations, any increase in operating costs associated with meeting these standards would be included in our cost of service paid by our customers as requested in our GRC filings. While recovery of these costs is not guaranteed, we would expect recovery in the regulatory process.

We currently publicly disclose information about our climate change strategy, risks, metrics, and targets. If future legislation or regulation requires new or additional reporting on our climate change strategy, risks, metrics, and/or targets, our cost to gather and report that information in accordance with the legislation or regulation may increase, and we may be subject to litigation, enforcement proceedings, fines or other penalties if we are unable to comply in part or in whole, or if our efforts are deemed insufficient.

Human Capital Resources

We believe that our employees are our greatest asset and are critical to our continued success. We place a strong emphasis on attracting and retaining talented and experienced individuals to manage and support our operations. To support these efforts, we offer our employees a broad range of Company-paid benefits, and we believe our compensation package and benefits are competitive with others in our industry. Additional information about our employee benefit plans is included in Note 11 of the Notes to Consolidated Financial Statements.

We have an unwavering focus on hiring, developing, and supporting an inclusive, diverse and equal opportunity workforce. It’s essential that each employee actively fosters an environment where everyone feels valued and respected. Our employees are expected to exhibit and promote honest, ethical, and respectful conduct. This is not just a guideline but a fundamental value of our Company culture. All of our employees must adhere to a business code of conduct that sets standards for appropriate behavior and ethics and includes required internal training on preventing, identifying, reporting, and stopping any type of unlawful discrimination.

Employee health and safety in the workplace is another one of the Company’s core values that we seek to live by every day. Safety efforts are led by the Executive Safety Committee and supported by safety committees that operate at the local level. These teams work tirelessly to help our work environment remain safe and healthy for everyone. Our practice is to actively identify hazards in the workplace so that management can track incidents and take remedial actions to improve workplace safety.

As evidenced by our internally created Future Leaders of Water Development Program, our management team is dedicated to fostering a culture of developing future leaders from our existing workforce, enabling us to promote from within for many leadership positions. We firmly believe this provides long-term focus and continuity to our operations while also providing opportunities for the growth and advancement of our employees. Our focus on retention is clearly reflected in the length of service of our management team, with an average tenure exceeding 15 years.

Employee levels are managed to align with the pace of business and management believes it has sufficient human capital to operate its business successfully. Management believes that the Company’s employee relations are strong, as evidenced by the Company being recognized by several organizations as a top workplace. At December 31, 2025, we had 1,336 employees, including 1,182 at Cal Water, 84 at Washington Water, 48 at Hawaii Water, 22 at New Mexico Water, and no employees at Texas Water. In California, the Utility Workers Union of America (UWUA), AFL-CIO represents our non-exempt field, customer service, and non-confidential clerical employees and the International Federation of Professional and Technical Engineers (IFPTE), AFL-CIO represents our professional and technical engineering and water quality laboratory employees.

As of December 31, 2025, we had 696 employees represented by the UWUA and 109 employees represented by the IFPTE. In 2021, we reached separate six-year agreements with both unions on new contracts that run from May 14, 2021 (UWUA) and October 4, 2021 (IFPTE) through February 28, 2027. The parties worked hard in reaching these agreements that we believe provides our employees with a market competitive pay and benefits package.

Employees at Washington Water, Hawaii Water, and New Mexico Water are not represented by a labor union.

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Information About Our Executive Officers

The following individuals serve as executive officers of the Company, as of February 26, 2026.

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