(Dollar amounts in thousands, except per share amounts and otherwise noted)
The information in this Item 2 should be read in conjunction with the financial
information and the notes thereto included in Item 1 of this Form 10-Q and the
condensed consolidated financial statements and notes thereto and the related
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" contained in SJW Group's Annual Report on Form 10-K for the year
ended December 31, 2020.
This report contains forward-looking statements within the meaning of the
federal securities laws relating to future events and future results of SJW
Group and its subsidiaries that are based on current expectations, estimates,
forecasts, and projections about SJW Group and its subsidiaries and the
industries in which SJW Group and its subsidiaries operate and the beliefs and
assumptions of the management of SJW Group. Actual results may differ materially
from those currently anticipated and expressed in such forward-looking
statements as a result of a number of factors. For more information about such
forward-looking statements, including some of the factors that may affect our
actual results, please see our disclosures under "Forward-Looking Statements,"
and elsewhere in this Form 10-Q, including Part II, Item 1A under "Risk
Factors."

General:

SJW Group is a holding company with four wholly-owned subsidiaries: San Jose
Water Company ("SJWC"), SJWNE LLC, SJWTX, Inc. and SJW Land Company.
SJWC is a public utility in the business of providing water service to
approximately 231,000 connections that serve a population of approximately one
million people in an area comprising approximately 139 square miles in the
metropolitan San Jose, California area.
The principal business of SJWC consists of the production, purchase, storage,
purification, distribution, wholesale, and retail sale of water. SJWC provides
water service to customers in portions of the cities of San Jose and Cupertino
and in the cities of Campbell, Monte Sereno, and Saratoga and the Town of Los
Gatos, and adjacent unincorporated territories, all in the County of Santa Clara
in the State of California. SJWC distributes water to customers in accordance
with accepted water utility methods which include pumping from storage and
gravity feed from high elevation reservoirs. SJWC also provides non-tariffed
services under agreements with municipalities and other utilities. These
non-tariffed services include water system operations, maintenance agreements,
and antenna site leases.
SJWC has utility property including land held in fee, impounding reservoirs,
diversion facilities, wells, distribution storage, and all water facilities,
equipment, office buildings and other property necessary to serve its customers.
Under Section 851 of the California Public Utilities Code, properties currently
used and useful in providing utilities services cannot be disposed of unless
California Public Utilities Commission ("CPUC") approval is obtained.
SJWC also has approximately 230 acres of nonutility property which has been
identified as no longer used and useful in providing utility services. The
majority of the properties are located in the hillside areas adjacent to SJWC's
various watershed properties.
SJWNE LLC is the holding company for Connecticut Water Service, Inc. ("CTWS").
CTWS became a wholly-owned subsidiary of SJWNE LLC as part of the merger
transaction between SJW Group and CTWS that was completed on October 9, 2019.
CTWS, headquartered in Connecticut, serves as a holding company for water
utility companies providing water service to approximately 140,000 connections
that serve a population of approximately 457,000 people in 81 municipalities
throughout Connecticut and Maine and more than 3,000 wastewater connections in
Southbury, Connecticut. The subsidiaries held by CTWS that provide utility water
services are The Connecticut Water Company ("Connecticut Water") and The Maine
Water Company ("Maine Water"). The remaining two CTWS subsidiaries are Chester
Realty, Inc., a real estate company in Connecticut, and New England Water
Utility Services, Inc. ("NEWUS"), which provides contract water and sewer
operations and other water related services. CTWS also offers Linebacker, an
optional service line protection program to eligible residential customers
through NEWUS in Connecticut and Maine.
The properties of CTWS's subsidiaries consist of land, easements, rights
(including water rights), buildings, reservoirs, standpipes, dams, wells, supply
lines, water treatment plants, pumping plants, transmission and distribution
mains and other facilities and equipment used for the collection, purification,
storage and distribution of water throughout Connecticut and Maine. In certain
cases, Connecticut Water and Maine Water are or may be a party to limited
contractual arrangements for the provision of water supply from neighboring
utilities.
SJWTX, Inc., doing business as Canyon Lake Water Service Company ("CLWSC"), is a
public utility in the business of providing water service to approximately
22,000 connections that serve approximately 65,000 people. CLWSC's service area
comprises more than 248 square miles in the southern region of the Texas Hill
Country in Blanco, Comal, Hays and Travis
                                       21
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counties, the growing region between San Antonio and Austin, Texas. On July 1,
2021, CLWSC completed the asset purchase of Clear Water Estates Water System,
LLC which added approximately 230 connections and 0.6 square miles to the
service area. CLWSC has a 25% interest in Acequia Water Supply Corporation
("Acequia"). The water supply corporation has been determined to be a variable
interest entity within the scope of Accounting Standards Codification Topic 810
with CLWSC as the primary beneficiary. As a result, Acequia has been
consolidated with CLWSC.
SJW Land Company owns undeveloped land and operates commercial buildings in
Tennessee. SJW Land Company owned the following real properties during the nine
months ended September 30, 2021:
                                                                                                                               % for Nine months ended September 30,
                                                                                                                                     2021 of SJW Land Company
           Description                          Location                   Acreage                Square Footage                  Revenue                 Expense
Warehouse building                      Knoxville, Tennessee                        30                         361,500                   48  %                   44  %
Commercial building                     Knoxville, Tennessee                        15                         135,000                   52  %                   56  %
Undeveloped land and parking lot        Knoxville, Tennessee                        10                             N/A                     N/A                     N/A
Undeveloped land (1)                    San Jose, California                       103                             N/A                     N/A                     N/A


____________________
(1)  On October 29, 2021, SJW Land sold 1.93 acres of undeveloped land located
in San Jose, California. See Note 13, "Subsequent Events" of the Notes to
Unaudited Condensed Consolidated Financial Statements for a discussion of the
transaction.
As of September 30, 2021, Chester Realty, Inc. owns 23 acres of undeveloped land
and a commercial building in the State of Connecticut.

Business Strategy for Water Utility Services:
SJW Group focuses its business initiatives in three strategic areas:
(1)Regional regulated water utility operations;
(2)Regional non-tariffed water utility related services provided in accordance
with the guidelines established by the California Public Utilities Commission in
California, the Public Utilities Regulatory Authority in Connecticut, the Public
Utilities Commission of Texas in Texas, and the Maine Public Utilities
Commission in Maine; and
(3)Out-of-region water and utility related services.
As part of our pursuit of the above three strategic areas, we consider from time
to time opportunities to acquire businesses and assets. However, we cannot be
certain we will be successful in identifying and consummating any strategic
business combination or acquisitions relating to such opportunities. In
addition, the execution of our business strategy will expose us to different
risks than those associated with the current utility operations. We expect to
incur costs in connection with the execution of this strategy and any
integration of an acquired business could involve significant costs, the
assumption of certain known and unknown liabilities related to the acquired
assets, the diversion of management's time and resources, the potential for a
negative impact on SJW Group's financial position and operating results,
entering markets in which SJW Group has no or limited direct prior experience
and the potential loss of key employees of any acquired company. Any strategic
combination or acquisition we decide to undertake may also impact our ability to
finance our business, affect our compliance with regulatory requirements, and
impose additional burdens on our operations. Any businesses we acquire may not
achieve sales, customer growth and projected profitability that would justify
the investment. Any difficulties we encounter in the integration process,
including the integration of controls necessary for internal control and
financial reporting, could interfere with our operations, reduce our operating
margins and adversely affect our internal controls. SJW Group cannot be certain
that any transaction will be successful or that it will not materially harm
operating results or our financial condition.
Real Estate Services:
SJW Group's real estate investment activity is conducted through SJW Land
Company and Chester Realty, Inc. As noted above, SJW Land Company owns
undeveloped land and operates commercial buildings in Tennessee. Chester Realty,
Inc. owns and operates land and commercial buildings in the State of
Connecticut. SJW Land Company and Chester Realty, Inc. manage income producing
and other properties until such time a determination is made to reinvest
proceeds from the sale of such properties.

                                       22
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Critical Accounting Policies:
The discussion and analysis of our financial condition and results of operations
is based on the accounting policies used and disclosed in our 2020 consolidated
financial statements and accompanying notes that were prepared in accordance
with accounting principles generally accepted in the United States of America
and included as part of our annual report on Form 10-K for the year ended
December 31, 2020, that was filed with the Securities and Exchange Commission on
March 1, 2021.
Our critical accounting policies are described in Management's Discussion and
Analysis of Financial Condition and Results of Operations included in our annual
report on Form 10-K for the year ended December 31, 2020. There have been no
changes in our critical accounting policies. Our significant accounting policies
are described in our notes to the 2020 Consolidated Financial Statements
included in our annual report on Form 10-K for the year ended December 31, 2020.

Recently Adopted Accounting Policies:
See Note 1 of the Notes to Unaudited Condensed Consolidated Financial Statements
for a discussion of recently adopted accounting policies for the nine months
ended September 30, 2021.

Results of Operations:
Water sales are seasonal in nature and influenced by weather conditions. The
timing of precipitation and climatic conditions can cause seasonal water
consumption by customers to vary significantly. Due to the seasonal nature of
the water business, the operating results for interim periods are not indicative
of the operating results for a 12-month period. Revenue is generally higher in
the warm, dry summer months when water usage and sales are greater, and lower in
the winter months when cooler temperatures and increased rainfall curtail water
usage and sales.
Overview
SJW Group's consolidated net income for the three months ended September 30,
2021, was $19,068, a decrease of $7,025, or approximately 27%, from $26,093 for
the same period in 2020. SJW Group's consolidated net income for the nine months
ended September 30, 2021, was $42,459, a decrease of $5,772, or approximately
12%, from $48,231 for the same period in 2020. The decrease in net income for
the three months ended September 30, 2021, was primarily due to an increase in
production costs due to increases in average per unit costs for purchased water,
groundwater extraction, energy charges, and a decrease in available surface
water at SJWC. In addition, administrative and general expenses increased due to
higher compensation, contracted work charges and the impact of one-time credits
in 2020 that not recur in 2021. The decrease in net income for the nine months
ended September 30, 2021, was primarily due to an increase in production costs
due to increases in average per unit costs for purchased water, groundwater
extraction, energy charges and a decrease in available surface water at SJWC,
and an increase in administrative and general expenses increased primarily due
to the same factors noted for the three months ended September 30, 2021, as
described above. These increases were partially offset by an increase in revenue
of $5,123 or 1% from an increase in cumulative water rates and net recognition
of other regulatory mechanisms and certain balancing and memorandum accounts,
net of a decrease in customer usage. In addition, for the nine months ended
September 30, 2021, SJW Group recorded a $3,000 pre-tax gain on sale of utility
property from the release of a holdback amount by Guadalupe-Blanco River
Authority ("GBRA") in connection with the sale of Texas Water Alliance Limited
("TWA") that occurred in 2017.
Coronavirus ("COVID-19") Update
The outbreak of COVID-19 has had significant impact on the global economy.
Financial impacts experienced by SJW Group due to the COVID-19 pandemic include
higher uncollectible accounts receivables and increased costs from COVID-19
related prevention activities. The regulators in the states SJW Group operates
have approved mechanisms to either record a regulatory asset or track in a
memorandum account expenses and savings related to COVID-19. SJWC and CLWSC have
determined that future recovery of the amount related to COVID-19 activities are
probable and have recognized the related regulatory assets. Probability criteria
have not yet been met for CTWS. If a state regulator disagrees with the
calculation of recorded COVID-19 account balances, we may be required to make
adjustments that could adversely affect our results of operations. SJW Group
continues to monitor COVID-19 developments affecting our business, employees and
suppliers and will take additional precautions as management believes is
necessary. See Item 1A, "Risk Factors" for further discussion.
                                       23
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Operating revenue

Operating income by segment

                                                Three months ended September 30,           Nine months ended September 30,
                                                    2021                 2020                 2021                  2020
Water Utility Services                         $   165,520              164,460          $    429,882              424,609
Real Estate Services                                 1,403                1,403                 4,067                4,217
                                               $   166,923              165,863          $    433,949              428,826


The change in consolidated operating revenues was due to the following factors:
                                                             Three months ended                              Nine months ended
                                                               September 30,                                   September 30,
                                                               2021 vs. 2020                                   2021 vs. 2020
                                                            Increase/(decrease)                             Increase/(decrease)
Water Utility Services:
Consumption changes (including unbilled utility
revenue)                                          $          (12,850)                (8) %       $           (14,215)                (3) %
Increase in customers                                            909                  1  %                     2,027                  -  %
Rate increases                                                 7,642                  5  %                    14,044                  3  %
Texas winter storm customer credits                                -                  -  %                      (839)                 -  %
Balancing and memorandum accounts                              1,847                  1  %                     1,632                  -  %

Other regulatory mechanisms                                    3,267                  2  %                     2,380                  1  %
Other                                                            245                  -  %                       244                  -  %
Real Estate Services                                               -                  -  %                      (150)                 -  %
                                                  $            1,060                  1  %       $             5,123                  1  %


Operating Expense
                                                                        Operating Expense by Segment
                                                Three months ended September 30,           Nine months ended September 30,
                                                    2021                 2020                 2021                  2020
Water Utility Services                         $   132,071              122,046          $    349,432              328,368
Real Estate Services                                   956                  961                 2,718                2,642
All Other                                              122                  973                 2,307                4,436
                                               $   133,149              123,980          $    354,457              335,446


                                       24

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The change in consolidated operating expenses was due to the following factors:
                                                                Three months ended                              Nine months ended
                                                                  September 30,                                   September 30,
                                                                  2021 vs. 2020                                   2021 vs. 2020
                                                               Increase/(decrease)                             Increase/(decrease)
Water production expenses:
Change in surface water use                          $            1,221                  1  %       $             3,879                  1  %
Change in usage and new customers                                (7,451)                (6) %                    (5,763)                (1) %

Purchased water and groundwater extraction costs, change in energy price and other production expenses, net

                                                               7,814                  6  %                     6,299                  2  %
Balancing and memorandum accounts cost recovery                     834                  1  %                       668                  -  %
Total water production expenses                                   2,418                  2  %                     5,083                  2  %
Administrative and general                                        4,370                  4  %                     7,770                  3  %
   Balance and memorandum account cost recovery                  (1,186)                (1) %                    (1,755)                (1) %
Maintenance                                                         600                  -  %                     2,032                  1  %
   Balance and memorandum account cost recovery                   1,219                  1  %                     1,219                  -  %
Property taxes and other non-income taxes                           328                  -  %                       427                  -  %
Depreciation and amortization                                     1,420                  1  %                     4,235                  1  %
                                                     $            9,169                  7  %       $            19,011                  6  %


Sources of Water Supply
SJWC's water supply consists of imported water purchased from the Santa Clara
Valley Water District ("Valley Water") under the terms of a master contract with
Valley Water expiring in 2051, groundwater from wells, surface water from
watershed run-off and diversion, and reclaimed water. Surface water is the least
expensive source of water. Changes and variations in quantities from each of
these sources affect the overall mix of the water supply, thereby affecting
water supply cost. In addition, the water rate for purchased water and the
groundwater extraction charge may be increased by Valley Water at any time. If
an increase occurs, then SJWC would file an advice letter with the California
Public Utilities Commission (" CPUC") seeking authorization to increase customer
rates to offset the cost increase.
We are currently experiencing a severe drought in California that is expected to
have a significant impact on the sources of our water supply. On October 1,
2021, Valley Water's 10 reservoirs were at approximately 12% of total capacity
with 6,252 million gallons of water in storage, which is 26% of the twenty-year
average for this date. Valley Water's largest reservoir, Anderson, remains
drained in preparation for the 8-10 year Anderson Dam Seismic Retrofit Project.
As reported by Valley Water, there was zero inches of rainfall in San Jose
during the current annual rainfall season that commenced on July 1, 2021.
Rainfall at SJWC's Lake Elsman was measured at zero inches during the current
rainfall season. Under normal hydrologic conditions, state and federal water
allocations represent approximately 40% of the Valley Water's total annual water
supply. As of October 1, 2021, Valley Water reported that allocations from the
State Water Project was 5% or 1,629 million gallons. Valley Water received
conditional approval for an increase of the Central Valley Project allocation
from the original allocation of 25%. Conditional approval is based on public
health and safety needs, and increases the total allocation to 23,298 million
gallons. Valley Water reported that its Semitropic groundwater bank reserves are
at 91% of capacity or 103,931 million gallons, which can be used to perform
water transfers with other state water contractors. Valley Water also reported
that the managed groundwater recharge from January to September in the Santa
Clara Plain was 46% of the five-year average. The groundwater level in the Santa
Clara Plain is approximately 14 feet lower than the five-year average. According
to Valley Water, the projected total groundwater storage at the end of 2021 is
expected to fall within the Alert Stage of the Valley Water's Water Shortage
Contingency Plan.
On October 1, 2021, SJWC's Lake Elsman contained 191 million gallons of water,
of which approximately 41 million gallons can be utilized for treatment in water
production. This Lake Elsman volume represents 18% of the five-year average
which reflects the low winter rainfall we experienced in our Santa Cruz
mountains watershed. Local surface water is a less costly source of water than
groundwater or purchased water and its availability significantly impacts SJWC's
results of operations. Typically, SJWC will utilize surface water and additional
water from its portfolio of groundwater supplies to supplement imported water
from Valley Water. Production from the Montevina Surface Water Treatment Plant
through the third quarter was 259 million gallons, which is 14% of the five-year
average. On April 14, 2021, SJWC took the Montevina Surface Water Treatment
Plant offline due to worsening hydrologic conditions in the local watershed. The
plant remains offline. Through the third quarter, there was no water production
at SJWC's smaller Saratoga Water Treatment Plant. The Saratoga Water Treatment
Plant was unable to be placed into service due to lack of run-off from Saratoga
Creek and remains offline.
                                       25
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Nonetheless, SJWC believes that its various other water supply sources will be
sufficient to meet customer demand through the remainder of 2021.
On June 9, 2021, Valley Water declared a water shortage emergency and asked its
retailers to reduce consumption by 15% based on 2019 usage. In response to
Valley Water's declaration of drought emergency and call for conservation, SJWC
filed with the CPUC to activate Stage 3 of its Rule 14.1 Water Shortage
Contingency Plan. Like the most recent drought, the current restrictions center
on outdoor water usage which typically accounts for half of a residential
customer's consumption. The restrictions include limits on watering days and
times, use of potable water for washing structures and other non-porous surfaces
except to protect public health and safety, and no outdoor watering during and
up to 48 hours after measurable rainfall.
Connecticut Water utility services' infrastructure consists of 65 noncontiguous
water systems in the State of Connecticut. These systems, in total, consist of
approximately 1,800 miles of water main and reservoir storage capacity of 2.4
billion gallons. The dependable yield from our 235 active wells and 18 surface
water supplies is approximately 65 million gallons per day. Water sources vary
among the individual systems, but overall approximately 72% of the total
dependable yield comes from wells and 28% from surface water supplies.
CLWSC's water supply consists of groundwater from wells and purchased treated
and untreated raw water from local water agencies. CLWSC has long-term
agreements with the GBRA, which expire in 2037, 2040, 2044 and 2050. The
agreements, which are take-or-pay contracts, provide CLWSC with an aggregate of
6,900 acre-feet of water per year from Canyon Lake at prices that may be
adjusted periodically by GBRA. CLWSC also has raw water supply agreements with
the Lower Colorado River Authority and West Travis Public Utility Agency
expiring in 2053 and 2046, respectively, to provide for 350 acre-feet of water
per year from Lake Austin and the Colorado River, respectively, at prices that
may be adjusted periodically by the agencies. Production wells located in a
Comal Trinity Groundwater Conservation District, a regulated portion of the
Trinity aquifer, are charged a groundwater pump tax based upon usage. CLWSC has
recently updated its Drought Management Plan to better account for both climatic
conditions within its service area and increased demand due to new developments.
The updated Drought Management Plan has been approved by the Texas Commission
for Environmental Quality. CLWSC believes that by following the Drought
Management Plan water supply sources will be sufficient to meet customer demand
through the remainder of 2021.
Maine Water's infrastructure consists of 12 noncontiguous water systems in the
State of Maine. These systems, in total, consist of approximately 600 miles of
water main and reservoir storage capacity of 7.0 billion gallons. The dependable
yield from our 14 active wells and 7 surface water supplies is approximately 120
million gallons per day. Water sources vary among the individual systems, but
overall approximately 90% of the total dependable yield comes from surface water
supplies and 10% from wells.
The following table presents the change in sources of water supply, in million
gallons, for Water Utility Services:
                                        Three months ended September 30,                  Increase/           % of Total                 Nine months ended September 30,                  Increase/           % of Total
                                       2021                            2020              (decrease)             Change                 2021                            2020              (decrease)             Change
Purchased water                        5,703                            7,478             (1,775)                   (10) %            15,601                           16,462               (861)                    (2) %
Groundwater                            6,283                            6,265                 18                      -  %            16,850                           16,110                740                      2  %
Surface water                          3,113                            2,914                199                      1  %             6,947                            7,893               (946)                    (2) %
Reclaimed water                          341                              326                 15                      -  %               669                              605                 64                      -  %
                                      15,440                           16,983             (1,543)                    (9) %            40,067                           41,070             (1,003)                    (2) %


The changes in the source of supply mix were consistent with the changes in the
water production expenses.
SJWC's unaccounted-for water on a 12-month-to-date basis for September 30, 2021,
and 2020 approximated 6.9% and 6.6%, respectively, as a percentage of total
production. The unaccounted-for water estimate is based on the results of past
experience and the impact of flows through the system, partially offset by
SJWC's main replacements and lost water reduction programs.
CTWS's unaccounted-for water on a 12-month-to-date basis for September 30, 2021
was approximately 14.6% as a percentage of total production. Unaccounted-for
water on an acquisition-to-date basis for the period ended September 30, 2020
was approximately 16.9%. The unaccounted-for water estimate is based on the
results of past experience and the impact of flows through CTWS's systems,
unadjusted for any required system flushing, partially offset by Water
Infrastructure Conservation Adjustment and Water Infrastructure Surcharge main
replacement programs and lost water reduction initiatives.
Water Production Expenses
The change in water production expenses for the three and nine months ended
September 30, 2021, compared to the same period in 2020, was primarily
attributable to increases in average per unit costs for purchased water,
groundwater extraction, energy charges and other production expenses, and a
decrease in available surface water for SJWC, offset by a decrease in
                                       26
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customer usage. Effective July 1, 2021, Valley Water increased the unit price of
purchased water by approximately 9.5% and the groundwater extraction charge by
approximately 9.1%.
Other Operating Expenses
Operating expenses, excluding water production expenses, increased $6,751 for
the three months ended September 30, 2021, compared to the same period in 2020.
The increase was primarily attributable to increases of $4,370 in administrative
and general expenses primarily due to a credit to expense for the Current
Expected Credit Loss ("CECL") adoption in prior year and increases in labor,
contracted work and rate case expenses, offset by lower accounting fees. In
addition, maintenance expense increased $1,819 due to the reversal of the
Hydroturbine reserve in the prior year and depreciation and amortization expense
increased $1,420 due to increases in utility plant.
Operating expenses, excluding water production expenses, increased $13,928 for
the nine months ended September 30, 2021, compared to the same period in 2020.
The increase was primarily attributable to increases of $7,770 in administrative
and general expenses primarily due to a credit to expense for the CECL adoption
in prior year and increases in labor, group insurance costs, rate case expenses
and contracted work, offset by lower accounting fees, $4,235 in depreciation and
amortization expense due to increases in utility plant, and $3,251 in
maintenance expenses.
Other (Expense) Income
For the three months ended September 30, 2021, compared to the same period in
2020, the change in other (expense) income was primarily due to gain on sale of
real estate investments recorded in prior year.
For the nine months ended September 30, 2021, compared to the same period in
2020, the change in other (expense) income was primarily due to a $3,000 pre-tax
gain on sale from the release of a holdback amount by GBRA for the sale of TWA
recorded in 2017.
Provision for Income Taxes
For the three and nine months ended September 30, 2021, compared to the same
period in 2020, income tax expense decreased $1,829 and $4,067, respectively.
The decrease in income tax expense was primarily due to a decrease in pre-tax
book income and flow-through tax benefits. The effective consolidated income tax
rates were 13% and 15% for the three months ended September 30, 2021, and 2020,
respectively, and 11% and 16% for the nine months ended September 30, 2021, and
2020, respectively. The lower effective rates for the three and nine months
ended September 30, 2021, were primarily due to flow-through tax benefits.
On March 11, 2021, the American Rescue Plan Act ("Act") was signed into law. SJW
Group has considered the income tax implications of the Act in its estimated tax
provision and does not believe it will materially impact the company's year-end
tax rate.
Regulation and Rates
Almost all of the operating revenue of SJW Group results from the sale of water
at rates authorized by the subsidiaries' respective state utilities commissions.
The state utilities commissions set rates that are intended to provide revenue
sufficient to recover operating expenses and the opportunity to achieve a
specified return on common equity. The timing of rate decisions could have an
impact on the results of operations.
See Note 2 of Notes to Unaudited Condensed Consolidated Financial Statements for
a discussion of regulatory activities that have occurred during the quarter.

Liquidity:

Cash Flow from Operating Activities
During the nine months ended September 30, 2021, SJW Group generated cash flows
from operations of approximately $100,300, compared to $70,600 for the same
period in 2020. Cash flow from operations is primarily generated by net income
from revenue producing activities, adjusted for non-cash expenses for
depreciation and amortization, deferred income taxes, stock-based compensation,
allowance for equity funds used during construction, gains or losses on the sale
of assets, and changes in working capital items. Cash flow from operations
increased by approximately $29,700. This increase was the result of a
combination of the following factors: (1) an increase in collections from
accounts receivable and accrued unbilled utility revenue of $14,800, (2)
payments of amounts previously invoiced and accrued including accrued
productions costs, increased by $7,000, (3) an up-front payment of $5,000 in the
prior year for renewal of the Cupertino service concession agreement that did
not reoccur in the current year, (4) net income adjusted for non-cash items
increased by $5,400 primarily due to deferred income taxes, and (5) general
working capital items increased $3,000, offset by, (6) a decrease in net
collection of taxes receivable which was $5,500.
                                       27
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As of September 30, 2021, Water Utility Services' write-offs for uncollectible
accounts represented less than 1% of its total revenue, unchanged from
September 30, 2020. In 2020, the regulated utilities commissions of the
respective states we operate initiated executive orders suspending water service
disconnections due to non-payment from customers in light of the then current
stay-at-home orders, quarantines and similar governmental restrictions in
response to the global COVID-19 pandemic. Some of the orders have been lifted
and the anticipation is that the remaining orders will be lifted at the end of
2021. Once lifted, management believes that the collection rate for its accounts
receivables will return to pre-pandemic levels. The financial impact of certain
past due accounts are being recorded for future recovery through the rate-making
process. There is no guarantee that such recovery will be approved by the
respective state regulatory utility commissions.
Cash Flow from Investing Activities
During the nine months ended September 30, 2021, SJW Group used cash flows from
investing activities of approximately $182,900, compared to $141,200 for the
same period in 2020. SJW Group used approximately: (1) $169,200 of cash for
company-funded capital expenditures, (2) $12,500 for developer-funded capital
expenditures, and (3) $3,500 for utility plant retirements.
Water Utility Services' budgeted capital expenditures for 2021, exclusive of
capital expenditures financed by customer contributions and advances, are
anticipated to be approximately $238,800. As of September 30, 2021,
approximately $169,200 or 71% of the $238,800 has been invested.
Water Utility Services' capital expenditures are incurred in connection with
normal upgrading and expansion of existing facilities and to comply with
environmental regulations. Over the next five years, Water Utility Services
expect to incur approximately $1,400,000 in capital expenditures, which includes
replacement of pipes and mains, and maintaining water systems. A significant
portion of this amount is subject to future respective state regulatory utility
commissions' approval. Capital expenditures have the effect of increasing
utility plant rate base on which Water Utility Services earns a return. Water
Utility Services actual capital expenditures may vary from their projections due
to changes in the expected demand for services, weather patterns, actions by
governmental agencies, and general economic conditions. Total additions to
utility plant normally exceed Company-financed additions as a result of new
facilities construction funded with advances from developers and contributions
in aid of construction.
The Water Utility Services' distribution systems were constructed during the
period from the early 1900's through today. Expenditure levels for renewal and
modernization will occur as the components reach the end of their useful lives.
In most cases, replacement cost will significantly exceed the original
installation cost of the retired assets due to increases in the costs of goods
and services and increased regulation.
Cash Flow from Financing Activities
Net cash provided by financing activities for the nine months ended September
30, 2021, increased by approximately $16,700 from the same period in the prior
year, primarily as a result of (1) an increase in net proceeds from our recent
common stock equity offering of $66,800, (2) an increase in net proceeds of
$8,900 from new long-term debt, and (3) $4,600 increase in net cash receipts
from advances and contributions in aid of construction, offset by (4) a decrease
in net borrowings and repayments on our lines of credit of $61,600, and (5) an
increase of dividends paid to stockholders of $2,600.

Sources of Capital:
SJW Group's ability to finance future construction programs and sustain dividend
payments depends on its ability to maintain or increase internally generated
funds and attract external financing. The level of future earnings and the
related cash flow from operations is dependent, in large part, upon the timing
and outcome of regulatory proceedings.
Long-term Financing Agreements
SJW Group's 2011 unsecured senior note of $50,000 was paid in full at maturity
on June 30, 2021. SJW Group's remaining 2019 and 2020 unsecured senior note
agreements have terms and conditions that restrict SJW Group from issuing
additional funded debt if the funded consolidated debt would exceed 70% of total
capitalization. SJW Group was not restricted from issuing future indebtedness as
a result of these terms and conditions at September 30, 2021.
SJWC's financing activity is designed to achieve a capital structure consistent
with our CPUC authorized structure of approximately 47% debt and 53% equity. As
of September 30, 2021, SJWC's funded debt and equity were approximately 48% and
52%, respectively.
Funding for SJWC's future capital expenditure program is expected to be provided
primarily through internally-generated funds, the issuance of new long-term
debt, and the issuance of equity, all of which will be consistent with regulator
guidelines.
SJWC's unsecured senior note agreements generally have terms and conditions that
restrict SJWC from issuing additional funded debt if: (1) the funded debt would
exceed 66-2/3% of total capitalization, and (2) net income available for
interest
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charges for the trailing 12-month-calendar period would be less than 175% of
interest charges. SJWC was not restricted from issuing future indebtedness as a
result of these terms and conditions at September 30, 2021.
On June 25, 2021, SJWC entered into a note purchase agreement with certain
affiliates of New York Life Insurance (collectively the "Purchasers"), pursuant
to which the company sold an aggregate principal amount of $50,000 of its 3.00%
Senior Notes, Series N ("Series N Notes") to the Purchasers. The Series N Notes
are unsecured obligations of SJWC and are due on June 25, 2051. Interest is
payable semi-annually in arrears on January 1st and July 1st of each year. The
note purchase agreement contains customary affirmative and negative covenants
for as long as the Series N Notes are outstanding. The Series N Notes are also
subject to customary events of default, the occurrence of which may result in
all of the Series N Notes then outstanding becoming immediately due and payable.
The closing occurred simultaneously with the signing of the note purchase
agreement. As of September 30, 2021, SJWC was in compliance with all such
covenants.
On August 4, 2021, SJWC entered into a note purchase agreement with the
purchasers listed in the agreement, pursuant to which the company sold an
aggregate principal amount of $50,000 of its 3.00% Senior Notes, Series O
("Series O Notes"), due December 1, 2051. The Series O Notes are unsecured
obligations of SJWC. Interest is payable semi-annually in arrears on June 1st
and December 1st of each year. The note purchase agreement contains customary
affirmative and negative covenants for as long as the Series O Notes are
outstanding. The Series O Notes are also subject to customary events of default,
the occurrence of which may result in all of the Series O Notes then outstanding
becoming immediately due and payable. The closing of the note purchase agreement
is expected to occur on December 1, 2021. As of September 30, 2021, SJWC was in
compliance with all such covenants.
SJWC's loan agreements with the California Pollution Control Financing Authority
contain affirmative and negative covenants customary for loan agreements
relating to revenue bonds, including, among other things, complying with certain
disclosure obligations and covenants relating to the tax exempt status of the
interest on the bonds and limitations and prohibitions relating to the transfer
of the projects funded by the loan proceeds and the assignment of the loan
agreement. As of September 30, 2021, SJWC was in compliance with all such
covenants.
CTWS has outstanding term loans with a commercial bank, and under the master
loan agreement CTWS is required to comply with certain financial ratio and
customary affirmative and negative covenants. The most restrictive of these
covenants is to maintain a consolidated (CTWS and its subsidiaries) debt to
capitalization ratio of not more than 60%. As of September 30, 2021, CTWS was in
compliance with all covenants under the master loan agreement.
Connecticut Water has outstanding term loans with a commercial bank, and under
its master loan agreement Connecticut Water is required to comply with financial
and customary affirmative and negative covenants substantially identical to
those found in CTWS's master loan agreement. Connecticut Water is required to
maintain a debt to capitalization ratio of not more than 60% and an interest
coverage ratio of no less than 3 to 1. As of September 30, 2021, Connecticut
Water was in compliance with all covenants under its master loan agreement.
Connecticut Water has tax-exempt and taxable Water Facilities Revenue Bonds
issued through Connecticut Innovations (formerly the Connecticut Development
Authority). The bond indentures and loan agreements contain customary
affirmative and negative covenants and also provide for the acceleration of the
Revenue Bonds upon the occurrence of stated events of default. As of
September 30, 2021, Connecticut Water was in compliance with all covenants of
the bond indentures and loan agreements.
Connecticut Water's unsecured senior notes have terms and conditions that
restrict Connecticut Water from issuing additional debt or paying a dividend to
CTWS if such debt or distribution would trigger an event of default. The senior
note agreements also require Connecticut Water to maintain a debt to
capitalization ratio of not more than 60% and an interest coverage ratio of no
less than 3 to 1. As of September 30, 2021, Connecticut Water was in compliance
with all covenants under this agreement.
On August 4, 2021, Connecticut Water entered into a note purchase agreement with
certain affiliates of Metropolitan Life Insurance Company, New York Life
Insurance Company, the Northwestern Mutual Life Insurance Company and Pacific
Life Insurance Company, pursuant to which Connecticut Water sold on August 4,
2021, an aggregate principal amount of $50,000 of its 3.07% Senior Notes, Series
2021A, due 2051 (the "2021A Notes") and will sell on December 1, 2021, an
aggregate principal amount of $50,000 of its 3.10% Senior Notes, Series 2021B,
due 2051 (the "2021B Notes" and together with the 2021A Notes, the "CWC Notes").
The closing on December 1, 2021, is subject to customary closing conditions. The
CWC Notes are unsecured obligations of Connecticut Water, with the 2021A Notes
due on June 1, 2051, and the 2021B Notes due on December 1, 2051. Interest on
the CWC Notes is payable semi-annually in arrears on June 1st and December 1st
of each year. The note purchase agreement contains customary representations and
warranties. Connecticut Water has agreed to customary affirmative and negative
covenants for as long as the CWC Notes are outstanding. The CWC Notes are also
subject to customary events of default, the occurrence of which may result in
all of the CWC Notes then outstanding becoming immediately due and payable. The
proceeds from the sale of the CWC Notes will be used to repay outstanding short
and/or long-term borrowings, to fund Connecticut Water's capital expenditures,
and/or for other general corporate purposes. As of September 30, 2021,
Connecticut Water was in compliance with all covenants under this agreement.
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CLWSC's unsecured senior note agreement has terms and conditions that restrict
CLWSC from issuing additional funded debt if: (1) the funded debt would exceed
66-2/3% of total capitalization, and (2) net income available for interest
charges for the trailing 12-month-calendar period would be less than 175% of
interest charges. In addition, SJW Group is a guarantor of CLWSC's senior note
which has terms and conditions that restrict SJW Group from issuing additional
funded debt if: (1) the funded consolidated debt would exceed 66-2/3% of total
capitalization, and (2) the minimum net worth of SJW Group becomes less than
$125,000 plus 30% of Water Utility Services cumulative net income, since
December 31, 2005. As of September 30, 2021, CLWSC and SJW Group were not
restricted from issuing future indebtedness as a result of these terms and
conditions.
On May 13, 2021, CLWSC entered into a master credit agreement and promissory
note with a commercial bank under which it entered into a borrowing agreement
for an aggregate principal amount not to exceed $30,000, of which $20,000 was
advanced at the closing date. The borrowing carries a fixed interest rate of
4.01% due on March 20, 2041. The remaining aggregate principal amount of the
promissory note is to be advanced at the discretion of CLWSC before the maturity
date. The notes are unsecured obligations of CLWSC. Interest is payable
quarterly in arrears on the 20th day of January, April, July and October of each
year. The promissory note contains customary representations and warranties.
Under the promissory note, CLWSC is required to comply with certain customary
affirmative and negative covenants for as long as the notes are outstanding. The
notes are also subject to customary events of default, the occurrence of which
may result in all of the notes then outstanding becoming immediately due and
payable.
Maine Water has First Mortgage Bonds issued to the Maine Municipal Bond Bank
through the State Safe Drinking Water Revolving Loan Fund and First Mortgage
Bonds issued to One America. The associated bond indentures and loan agreements
contain customary affirmative and negative covenants, including a prohibition on
the issuance of indebtedness secured by assets or revenue of Maine Water where
the lien is senior to the lien of the bond trustee under the above bonds except
as permitted by the bond indentures and related loan and security agreements, a
requirement to maintain a debt to capitalization ratio of not more than 65% and
an interest coverage ratio of no less than 3 to 1, required compliance with
other various financial covenants, and a provision for maturity acceleration
upon the occurrence of stated events of default. As of September 30, 2021, Maine
Water was in compliance with all covenants in its bond indentures and related
loan agreements.
Maine Water has outstanding term loans with a commercial bank and under its
master loan agreement, Maine Water is required to comply with financial and
customary affirmative and negative covenants substantially identical to those
found in CTWS and Connecticut Water's master loan agreements. Maine Water is
required to maintain a debt to capitalization ratio of not more than 60% and an
interest coverage ratio of no less than 3 to 1. As of September 30, 2021, Maine
Water was in compliance with all covenants under its master loan agreement.
On March 2, 2021, Maine Water entered into a credit agreement with a commercial
bank, pursuant to an existing master loan agreement under which the commercial
bank issued Maine Water a promissory note on the same date with an aggregate
principal amount of $17,000 and a fixed interest rate of 3.89%, due March 1,
2041. The notes are unsecured obligations of Maine Water. Interest is payable
quarterly in arrears on the 20th day of January, April, July and October of each
year. The promissory note contains customary representations and warranties.
Under the promissory note, Maine Water is required to comply with certain
customary affirmative and negative covenants for as long as the notes are
outstanding. The notes are also subject to customary events of default, the
occurrence of which may result in all of the notes then outstanding becoming
immediately due and payable. Proceeds from the borrowing were received on March
18, 2021. As of September 30, 2021, Maine Water was in compliance with all
financial, affirmative and negative covenants under this agreement.
Short-term Financing Agreements
As of September 30, 2021, SJW Group and its subsidiaries had unsecured bank
lines of credit, allowing aggregate short-term borrowings of up to $260,000, of
which $5,000 was available to CLWSC under a single line of credit, $140,000 was
available to SJWC under a single line of credit, and $40,000 and $75,000,
respectively, under a third and fourth line of credit was available to CTWS. At
September 30, 2021, SJW Group and its subsidiaries had available unused
short-term bank lines of credit totaling $137,928. The lines of credit bear
interest at variable rates. On April 23, 2021, the $140,000 line of credit of
SJWC, which was set to mature and expire on June 1, 2021, was closed and
replaced by a new $140,000 line of credit that will expire on December 31, 2023.
On April 23, 2021, the $5,000 line of credit of CLWSC, which was set to mature
and expired on June 1, 2021, was closed and replaced by a new $5,000 line of
credit that will expire on December 31, 2023. The $40,000 and $75,000 lines of
credit for CTWS expire May 15, 2025 and December 14, 2023, respectively. During
2021, the cost of borrowing on SJW Group's short-term credit facilities has
averaged 1.34%. All of SJW Group's and subsidiaries lines of credit contain
customary representations, warranties and events of default, as well as certain
restrictive covenants customary for facilities of this type, including
restrictions on indebtedness, liens, acquisitions and investments, restricted
payments, asset sales, and fundamental changes. All of the lines of credit also
include certain customary financial covenants such as a funded debt to
capitalization ratio and a minimum interest coverage ratio. As of September 30,
2021, SJW Group and its subsidiaries were in compliance with all covenants on
their lines of credit.
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Equity Financing Agreement
On March 8, 2021, SJW Group entered into an underwriting agreement with J.P.
Morgan Securities LLC, as the representative of the several underwriters named
therein (the "Underwriters"), which provided for the issuance and sale by SJW
Group to the Underwriters of 1,030,000 shares of our common stock, par value
$0.001 per share, in an underwritten public offering (the "Offering"). The
shares in the Offering were sold at a public offering price of $59.00 per share.
SJW Group also granted the Underwriters an option to purchase up to 154,500
additional shares of our common stock, which was exercised in full. The Offering
closed on March 10, 2021, and the offering of option shares closed on March 16,
2021.
SJW Group received net proceeds of approximately $66,775 from the Offering and
the sale of option shares, after deducting the underwriting discounts and
commissions and offering expenses. SJW Group used the proceeds from the
offerings to pay down a bank line of credit agreement, dated as of June 1, 2016,
between SJWC and JPMorgan Chase Bank, N.A. and for general corporate purposes,
which include, among other things, financing infrastructure improvements and
other capital expenditures, repayment of debt or other corporate obligations and
working capital.
The condition of the capital and credit markets or the strength of financial
institutions could impact SJW Group's ability to draw on its lines of credit,
issue long-term debt, sell its equity or earn interest income. In addition,
government policies, the state of the credit markets and other factors could
result in increased interest rates, which would increase SJW Group's cost of
capital. While our ability to obtain financing will continue to be a key risk,
we believe that based on our 2021 activities, we will have access to the
external funding sources necessary to implement our on-going capital investment
programs in the future. The current Standard & Poor's Ratings Service assigned
the company rating for SJW Group as an A-, with a stable outlook, SJWC as an A,
with a stable outlook, and Connecticut Water as an A- with a stable outlook.

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