Ladies and gentlemen, thank you for standing by. Welcome to the American States Water Company Conference call discussing the company’s Second Quarter 2024 Results. The call is being recorded. If you would like to listen to the replay of this call, it will begin this afternoon at 5:00 p.m. Eastern Time and run through Wednesday, August 14, 2024, on the company’s website at www.aswater.com. The slides that the company will be referring to are also on the website. All participants will be in a listen only mode. [Operator Instructions] the replay will be limited to one-hour presenting today from American States Water Company are Mr. Bob Sprowls, President and Chief Executive Officer; and Ms. Eva Tang, Senior Vice President in Finance and Chief Financial Officer. As a reminder, certain matters discussed during this conference call may be forward-looking statements intended to qualify for the Safe Harbor from liability established by the Private Securities Litigation Reform Act of 1995. Please review a description of the company’s risks and uncertainties in our most recent Form 10-K and Form 10-Q on file with the Securities and Exchange Commission. In addition, this conference call will include a discussion of certain measures that are not prepared in accordance with general accepted accounting principles or GAAP, in the United States and constitute non-GAAP financial measures under SEC rules. These non-GAAP financial measures are derived from consolidated financial information but not presented in our financial statements that are prepared in accordance with GAAP. For more details, please refer to the press release. At this time, I would like to turn the call over to Mr. Bob Sprowls, President and Chief Executive Officer of American States Water Company.

Thank you, Jamie. Welcome everyone and thank you for joining us today. I will begin with some brief comments on the quarter. Eva will then discuss some financial details. And then I will wrap it up with updates on regulatory activity, ASUS, dividends, and then we will take your questions. Second quarter was notably productive for the company as our largest subsidiary, Golden State Water, reached a settlement in principle with the Public Advocates Office of the California Public Utilities Commission or CAL Advocates for short in connection with Golden State Water’s general rate case that will set new water rates for the years 2025 to 2027. As a result of these efforts, on July 12, the company and CAL Advocates filed a joint motion to adopt the settlement agreement with the California Public Utilities Commission or CPUC. Proposed settlement agreement, if approved by the CPUC, resolves most of the issues related to the 2025 annual revenue requirement, leaving only two unresolved issues, which will be discussed later. Among other items, the settlement authorized Golden State Water to invest approximately $573.1 million in capital infrastructure over the three-year capital cycle. This allows the company to continue to provide safe and reliable water utility service to our customers. We are also very pleased that our contracted services segment commenced management of the water and wastewater systems on our two new military bases, until new military bases in April, as we successfully completed our transitions at Naval Air Station Patuxent River, also known as Pax River, and Joint Base Cape Cod. For the systems at Pax River, we have a 50-year firm fixed price contract with an initial estimated value at $349 million, which was increased to $378 million in July upon completion of a joint inventory adjustment. Contract to serve Joint…

Thank you, Bob. Hello everyone. Let me start with our second quarter results. Consolidated earnings as recorded were $0.85 per share for the second quarter as compared to $1.04 per share for the second quarter of 2023. Included in the results of last year’s Q2 was $0.18 per share related to the impact of the final cost of capital decision for the water segment that made all adjustments to rate perspective. The cost of capital decision resulted in the reversal in June of 2023 of revenues subject to refunds of $9.3 million or $0.18 per share recorded during 2022 and the Q1 of 2023. During this item, adjusted consolidated earnings for the Q2 of 2023 were $0.86 per share as compared to recorded earnings of $0.85 per share for the second quarter, a decrease of $0.01 per share. For our Water Utility Golden State Water, reported earnings were $0.67 per share as compared to $0.91 per share for the Q2 of 2023. Factoring in the same effect from the adjusted items for 2023, earnings for the Q2 of 2024 at Golden State Water were $0.67 per share, a decrease of $0.06 per share as compared to adjusted earnings of $0.73 per share for the Q2 of last year. The $0.06 per share decrease was largely due to favorable nonrecurring regulatory adjustments recorded during the Q2 of last year that did not recurred this year. Higher operating and interest expenses and lower other income with less gains generated from investment held for retirement plan, partially offset by an increase in third-year water rates in 2024. Lastly, there was also a decrease in earnings of approximately $0.01 per share due to the dilutive effect from the issuance of equity under AWR’s end market offering program. Our Electric segment earnings were $0. 01…

Thank you, Eva. I will start with Golden State Water’s settlement agreement with CAL Advocates on Golden State’s general rate case. As I mentioned earlier, Golden State Water and CAL Advocates filed a joint motion in July to adopt a settlement agreement between the two parties in connection with the general rate case that determines water rates for the years 2025 through 2027. If approved, the settlement resolves most of the issues related to the 2025 annual revenue requirement. The settlement authorizes Golden State Water to invest approximately $573.1 in capital infrastructure over the three-year capital cycle. This amount, as settled, includes $17.7 million of advice letter capital investments to be filed for revenue recovery during the second, third-year attrition increases when those projects are completed. In addition, the settlement agreement authorizes advice letter of capital investments already under construction at the beginning of 2023 of $58.2 million to be filed for revenue recovery during the second, third-year attrition increases when those projects are completed. Excluding revenues for advice letter capital projects, adopted operating revenues less water supply costs for 2025 are projected to increase by approximately $23 million when compared to 2024. Also, there are potential additional revenue increases of approximately $20 million for each of the years 2026 and 2027 based on inflation factors, without factoring in the revenues from those advice letter capital projects. The two remaining unresolved 2025 revenue requirement issues relate to the sales forecast and supply mix. In addition, there were four regulatory mechanisms that Golden State Water requested and are being litigated. First, a full sales and revenue decoupling mechanism and full cost balancing account for water supply. Second, a sales reconciliation mechanism. Third, a supply mix adjustment mechanism. And fourth, a request to modify the existing PFAS memorandum account track carrying costs…

[Operator Instructions] And our first question today comes from Jonathan Reeder from Wells Fargo. Please go ahead with your question.

Hi, Bob and Eva. How are you guys today?

Good, Jonathan. How about you?

Yes.

Not too bad at all. Just about the earnings. Wanted to ask you like what do you believe the prospects are of the CPUC reauthorizing fully decoupled rates? Has there been any indication of how commissioners might be leaning following the California Supreme Court’s decision? And do you expect that California Americans rate case will be the first indication of how the CPUC is thinking?

Yes. We don’t really know how the PUC is leaning at this point. We do have the Governor Newsom signing the bill to allow us to ask for full decoupling. We do have the Supreme Court case that came back in the utilities favor. Those are sort of two things on the plus side. But, it is still I think a question mark at this point. I believe the PUC can still possibly deny the use of the piece use of full decoupling. I do think, it will be instructive to hear where they come out on the Cal American case. They are a year ahead of us in that case. I can just sort of speak a little bit about our case, Jonathan, but just a comment or two. When the Public Advocates Office denied our request for the full RAM in their report, they almost singularly cited to the 2020 lira case decision. Our company has now filed a motion to strike that, because the LIRA decision with regard to removing the RAM has been, I guess, eliminated or pushed back to the P2C. What we struggle with is what is in the record at this point to say that we don’t deserve to get the full RAM. But, the PUC will do, I mean they will follow the rules, but it is just kind of in a little bit of new territory, I would say.

Yes. No, I think not surprising, I guess, PAO’s testimony is obviously pretty consistent with Cal Americans citing that 2020 order that is no longer valid. So it does make it interesting. Switching to your other GRC for bare value, any update on the timing of that? I know after Q1, you mentioned how it is tough to kind of even get PAO to engage in settlement discussions, just given the small size and PAO being stretched thin with some of the larger electrics. Any kind of updates on what is going on there? Yes. Under PUC rules a decision has to be issued in September. However, as you know Jonathan, they do have the ability to move that date out. So I don’t really know. We aren’t getting strong feeling that there is a proposed decision in the offing. But I think the size of the company there relative to what the commission has to deal with probably works against us in terms of getting a decision more quickly than what we hope to get a decision by the end of the year, but I doubt if it will be in the month or two.

Yes. Is that kind of a similar situation with trying to engage in settlement discussions, still haven’t been able to really get PAO’s attention there for similar reasons?

Yes. We struggled. We have been working on this for quite some time and we do get the sense we are clearly not on the top of their to do list. You know, it is just whenever one of the bigger companies files something, you know, it is, hey, we got to do they got to deal with those things and we understand that. We understand they don’t have enough people and they the electrics are so much the three big electrics are so much bigger than Bear Valley Electric. It is all pretty logical to be honest and we have been very, I would say, understanding. And they are a good group to work with. It is just we understand they get pulled in a lot of different directions.

Yes. No, I mean, it is logical, but at the same time, I mean, it does impact not just your business, but then your customers and then the pancaking of rates and everything like that when a decision is finally kind of handed to them?

That is right, John. We make that argument with them a lot and they understand it and don’t push back on that argument. It is just - they can only do what they can do, I think, is probably the way to look at it.

Preaching to the choir here. So, yes, any sense of like how big of an impact like the delayed Bear Valley GRC has had on like your first half 2024 EPS. I know the recovery of the wildfire mitigation costs made this case larger than it has been in the past. Obviously, it depends on like what the outcome would be. So maybe as a different way, if the case is approved as filed, like how big of a bump would it be or would it have been to the first half 2024 EPS or full-year 2024 EPS?

Well, another thing to throw into the mix relative to prior rate cases just the interest costs are higher these days than they were. And so we are having to cover significant amount of rate base that is in the ground that isn’t we aren’t getting recovery of, yes, we really are not we have really not gone public with how big the impact might be. It is just probably a little bit dangerous to do that given that the requested increase is pretty significant and there is just sort of have to wait and see what the proposed and final decisions look like in this case I think.

Right. I mean Bear Valley is $0.03 lower on a year-to-date basis and had you had the relief, I would assume you would expect Bear Valley to be large last year. So, yes, just trying to get a sense when we hopefully do get an order by year end and we get that retroactive component, how helpful that would be? I mean, it is not immaterial at this at this point, I don’t think.

No. it is very significant. It is very significant for Bear Valley Electric, I would say.

And we are putting another wildfire mitigation plan based on the PUC regulation and we are funding that ourselves at this point until the final decision comes about.

Yes. And think about it, if you are looking at the 2024 effect, of course, let’s say we could go all the way to the end of September that is 21-months delay. So, you are going to get 21-months worth of increase that, I mean we think it will be an increase, I’m sure it will be an increase; it is just how large it is. And we are a bit surprised that it is taking this long, given that the way I think about it and I haven’t studied the big electrics, but I believe we are one of the last companies to come in for a rate case since the wildfire mitigation activities started in a big way. So one would think, the commission would have dealt with this for three or four or five companies prior to us coming forward. I think, that is an advantage for us in that really they are going to expect that that first year increase is going to be very sizable. And we have made the arguments that, listen, it is potentially going to be higher for us than other companies, because we have gone the longest without that increase. But again, the commission will do what they are going to do and they have - I do have great respect for all the things they have to deal with there at the commission. It is a big state with a lot of issues to regulate and there is only five commissioners to deal with it.

Yes. Last question for me here then, any insight into potential new base additions at ASUS? I mean, I think the Cape Cod award, which is the 15-year variety kind of snuck up on us.

Yes, I can talk a little bit about that. We have a sense that the Army and the Air Force had sort of taken this strategic pause to evaluate whether the typical utility privatization contract, the 50-year variety is something they want to continue to do. We have a sense from meetings that have been held, public meetings, that they are both interested in moving forward on utility privatizations. With that said, I don’t think we have a belief that there will be a new privatization from either the Army or the Air Force on the street this year, but we would look to next year to see some new utility privatizations there. As we have talked in the past, the Navy has embraced the 50-year utility privatization activities. And they are although it isn’t going to be a bunch, they are very interested in continuing that process. At this point, I don’t believe there is a single 50-year utility privatization contract on the street. Now there is talk there is potentially these one offs like the JBCC contract, but I don’t think there will be any - personally I don’t think there will be any contract awards in 2024 by any of the big three. And of course JBCC is Air National Guard, so it would be sort of a fourth arm of the Department of Defense. I don’t know if that is helpful, Jonathan, but...

Yes, no, it is. So do the 15-year ones, do those potentially come quicker than the 50-year in terms of the lead up and the way that they are kind of competitively bid and all that?

Well, I will just say the first one did not. We worked on that for years and years. But we were we felt like we were the pioneer and we and our partner developed the template for that. Now the template is out there and it is possible these will be done more quickly, but more quickly than they had been done, not more quickly than your standard utility privatization. One other thing, the standard utility privatization typically runs through the events logistics agency energy. They are sort of the group that manages the standard 50-year utility privatization. On these exchange agreements or the one we did, it is sort of based on who’s doing it and it typically doesn’t roll through the DLAE. So there is always a little bit of reinventing the wheel I guess that will go on. So but like I said, we have worked with our partner to establish the template and it should be quicker to do the second one than the first one. To a degree there is an appetite for that.

Okay. And it doesn’t sound like anything given it though, so okay.

Yes. I would say that is a good assessment.

Yes. Alright. Thanks for the additional color. Looking forward to seeing you in San Diego here in a month or so.

As are we, Jonathan. All right. Thank you.

Thank you. And ladies and gentlemen, at this time, I’m showing no additional questions. I would like to turn the floor back over to Bob Sprowls for any closing comments.

Yes. Thank you, Jamie. And I just want to thank everyone for their participation today and let you know we look forward to speaking with you next quarter. Thank you everyone.

And ladies and gentlemen, with that, we will conclude today’s conference call and presentation. We do thank you for joining. You may now disconnect your lines.