California Water Service Group

Thank you for your patience and welcome everyone to the California Water Service Group second quarter 2023 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you'd like to withdraw your question, again, press star one. Thank you. I would now like to turn the call over to Marty Kropelnicki. Chairman, President, and Chief Executive Officer. Mr. Kropelnicki, please go ahead.

Great. Thank you, Jack. Good morning, everyone. Thanks for joining us this morning. Apologies for the technical difficulties. We had some problems with our telecommunication line getting through, so sincere apologies for that. With me today is Dave Healy, our Interim Vice President, Chief Financial Officer, and Greg Milliman, Vice President of Rates and Regulatory Affairs. Prior to getting into the results for the quarter, I'm going to turn over to Dave Healy to go through our statement on poor looking statements. And Dave, why don't you jump into the financial results for the quarter, please?

Thank you, Marty. Replay dial-in information for this call can be found in our quarterly results release, which was issued earlier today. The replay will be available until September 25th, 2023. As a reminder, before we begin, The company has a slide deck to accompany the earnings call this quarter. The slide deck was furnished with an AK yesterday afternoon and is also available at the company's website at www.calwatergroup.com. Before looking at this quarter results, we'd like to take a few moments to cover forward-looking statements. During the course of the call, the company may make certain forward-looking statements. Because these statements deal with future events, they are subject to various risk and uncertainties, and actual results could differ materially from the company's current expectations. Because of this, the company strongly advises all current shareholders as well as interested parties to carefully read and understand the company's disclosures on risk and uncertainties found in our Form 10-K, Form 10-Q, press releases, and other reports filed from time to time with the Securities and Exchange Commission. Our presentation starts on slide four with our values and priorities. And moving on to slide five, I'll discuss the second quarter results. So during the second quarter of 2023, net income attributable to group was $9.6 million in diluted earnings per share was 17 cents as compared to net income attributable to group of 19.5 million in diluted earnings per share of 36 cents for the quarter ended June 30th, 2022. As we discussed last quarter, second quarter results primarily reflect the temporary absence of 2023 California general rate rate increases and regulatory mechanisms included in our 2021 general rate case. As a result of the delay, California general rate case, there was a decrease in second quarter 2023 operating revenue as compared to the same period last year. Additionally, operating revenue decreased 13.8 million due to a 10.4% decrease in customer usage. General rate increases during the quarter were approximately 3.4 million, with most of it in California. Along with the delay to our GRC, the Commission authorized a 4% general rate increase for most of our California districts effective May 5, 2023, until the final, 2023 GRC general rate case increases are authorized by the Commission. This added approximately $3 million to operating revenue during the second quarter. Total operating expenses decreased slightly in the second quarter of 2023 as compared to the same period last year. Net interest expense increased $1.7 million mostly due to an increase in interest rates, and $23 million of additional borrowings on our short-term lines of credits. We invested $95.2 million in capital improvements during the second quarter of 2023, a 25.1 percent increase over the same period last year. This was the second quarter record for our company. In California, the governor, extended the state's arrearage program to help customers struggling to pay monthly water bills. The program covers delinquent customer balances 60 days past due or written off during the period from mid-June 2021 to December 31, 2022. Our plan is to file our application for these funds with the State Water Resources Control Board at the end of September. One last item. We filed a California advice letter in July to increase annual operating revenues 24.6 million to offset known increases in California water production costs. Our EPS bridge is on page 10. And now I'll turn it over to Greg Milliman to discuss the temporary absence of 2023 California's general rate case, general rate increases, and regulatory mechanisms.