American Water Works (AWK) 10-K risk factor changes: FY2022 vs FY2021

Moreover, a PUC may not approve a rate request [removed: to] [added: in] an [removed: extent] [added: amount] that is sufficient to:

- cover our [removed: expenses, including] [added: cost of operations, including:] purchased [removed: water] [added: water; chemicals;] and [removed: costs of chemicals, fuel] [added: fuel, power] and other commodities used in our operations;

This could occur if certain conditions exist, including, but not limited to, [added: (i)] water usage is less than the level anticipated in establishing rates, [added: (ii)] customers increase their conservation efforts, [removed: or] [added: (iii)] we experience [removed: unanticipated impacts of] [added: unusual or emergent situations, events or conditions (including with respect to] the [removed: on-going] COVID-19 [removed: pandemic,] [added: pandemic),] or [removed: if] [added: (iv)] our investments or expenses prove to be higher than the levels estimated in establishing rates.

Our [removed: regulated] water and wastewater operations [removed: and the operations of our Market-Based Businesses] are subject to extensive federal, state and local laws and regulations.

These requirements include, among others, CERCLA, the Clean Water Act, the Safe Drinking Water Act, the [removed: LCR,] [added: LCRR] and other federal and state requirements.

In the most serious cases, regulators could reduce requested rate increases or force us to discontinue operations and sell our [added: operating assets to another utility or to a municipality.]

Given the nature of our business which, in part, involves providing water service for human consumption, any potential non-compliance with, or violation of, environmental, water quality and health and safety laws or regulations would likely pose a more [removed: significant risk to us than to a company not similarly involved in the water and wastewater industry.]

Examples of sources of contaminants include, but are not limited to, newly created chemical compounds (including, for example, manufactured nanomaterials); human and veterinary products; perfluorinated and polyfluorinated compounds; bacteria, microbes, viruses (including [removed: the coronavirus),] [added: COVID-19),] amoebae and other pathogens; and residual by-products of disinfection.

Limitations on availability of water supplies or restrictions on our use of water supplies [removed: as a result] [added: because] of government regulation or action may adversely affect our access to sources of water, our ability to supply water to customers or the demand for our water services.

For example, in our Monterey County, California operations, we are seeking to augment our sources of water supply, principally to comply with [removed: an October 2009] [added: the] cease and desist [removed: order] [added: orders issued by the SWRCB in July 1995 and October 2009] (the [added: “1995 Order,” the] “2009 [removed: Order”),] [added: Order” and,] as amended [removed: by a] [added: in] July [removed: 2016 order (the] [added: 2016, the] “2016 [removed: Order”), of] [added: Order” and, collectively,] the [removed: SWRCB] [added: “Orders”)] that [removed: requires our California subsidiary] [added: require Cal Am] to significantly decrease its diversions from the Carmel River in accordance with a reduction schedule that terminated on December 31, [removed: 2021 (the “2021 Deadline”).][added: 2021.]

[removed: While the Company cannot currently predict the likelihood or result of any adverse outcome associated with these matters, further attempts to comply with the 2009 Order and the 2016 Order may result in material] additional costs or obligations, including fines and penalties against [removed: our California subsidiary] [added: Cal Am] in the event of noncompliance with the [removed: 2009 Order and the 2016 Order,] [added: Orders,] which could have a material adverse effect upon us and our business, results of operations and cash flows.

These include, among other things, storms, freezing conditions, high wind conditions, hurricanes, tornadoes, earthquakes, landslides, drought, wildfires, coastal and intercoastal floods or high water conditions, including those in or near designated flood plains, pandemics (including [removed: the COVID-19 pandemic)] [added: COVID-19)] and epidemics, severe electrical storms, sinkholes and solar flares.

Seasonal [added: and other] drought [removed: conditions] [added: conditions, including, for example, those currently being experienced in California,] that may impact our water services are possible across all of our service areas.

While expenses incurred in implementing water conservation and rationing plans may generally be recoverable provided the relevant PUC determines they were reasonable and prudent, we cannot [removed: assure] [added: be certain] that any such expenses incurred will, in fact, be fully recovered.

Moreover, reductions in water consumption, including those resulting from installation of equipment or changed consumer behavior, may persist even after [added: a] drought [added: has ended and] restrictions are [removed: repealed and the drought has ended,] [added: lifted,] which could adversely affect our business, financial condition, results of operations and cash flows.

Furthermore, laws and regulations have been enacted [added: or proposed] that seek to reduce or limit [removed: GHG] [added: greenhouse gas] emissions and require [added: or would require] additional reporting and monitoring, and these regulations may become more pervasive or stringent in light of changing governmental agendas and priorities, although the exact nature and timing of these changes is uncertain.

Although some or all potential expenditures and costs associated with the impact of climate variability and related laws and regulations on our Regulated Businesses could be recovered through rates, infrastructure replacement surcharges or other regulatory mechanisms, there can be no assurance that state PUCs would authorize rate increases to enable us to recover such [added: expenditures and costs, in whole or in part.]

- negatively impacting, among other things: (i) tax rates or positions or the deductibility of expenses under federal or state tax laws, (ii) the availability or amount of, or our ability to comply with the terms and conditions of, tax credits or tax [removed: abatement benefit, (iii) the amount of taxes owed, (iv) the timing of tax effects on rates or (v) the ability to utilize our net operating loss carryforwards;]

Adverse economic [removed: conditions, including the COVID-19 pandemic or other factors,] [added: conditions] may cause our customers, particularly industrial and large commercial customers, to curtail operations.

In [removed: 2021,] [added: 2022,] we invested [removed: $1.8] [added: $2.3] billion in net Company-funded capital improvements.

We expect to fund capital improvement projects using cash generated from operations (including, among other things, a portion of the net proceeds from the [removed: sales] [added: sale] of [removed: HOS and our New York subsidiary),] [added: HOS)] borrowings under our revolving credit facility and commercial paper programs and issuances of long-term debt and equity.

If we are not able to obtain sufficient financing, we may be unable to maintain our existing property, plant and equipment, fund our capital investment [removed: strategies, meet our growth targets and] [added: strategies or] expand our rate base to enable us to [removed: earn satisfactory future returns on] [added: meet] our [removed: investments.][added: growth targets.]

Even with adequate financial resources to make required capital expenditures, we face the additional risk that we will not complete our major capital projects on time, as a result of supply chain interruptions, construction delays, permitting delays, labor shortages or other disruptions, environmental restrictions, legal and [added: regulatory challenges, or other obstacles.]

Aging infrastructure may lead to service disruptions, property damage and increased capital expenditures and O&M [added: expenses and other] costs, all of which could negatively impact our financial results.

Failure of aging infrastructure could result in increased capital expenditures and O&M [added: expenses and other] costs, and negatively impact our future O&M efficiency ratio.

Two of our jurisdictions, California and Illinois, [added: currently] have [removed: adopted] revenue stability mechanisms that permit us to recover the revenues authorized in a general rate case, regardless of sales volume.

Our business and operations have a large direct and indirect customer base and, as a result, we are exposed to public criticism regarding, among other things, the reliability of water service, wastewater and related or ancillary services, the quality of water provided, and the amount, timeliness, [added: content,] accuracy and format of bills that are provided for such services.

Adverse publicity and negative consumer sentiment arising out of [removed: these and other incidents] [added: our operations] may render legislatures and other governing bodies, state PUCs and other regulatory authorities, and government officials less likely to view us in a favorable light, and may cause us to be susceptible to less favorable legislative, regulatory and economic outcomes, as well as increased regulatory or other oversight and more stringent regulatory or economic requirements.

Unfavorable regulatory and economic outcomes may include the enactment of more stringent laws and regulations governing our operations and less favorable economic terms in our agreements related to [removed: our Military Services Group,] [added: MSG,] as well as fines, penalties or other sanctions or requirements.

The properties of our Regulated Businesses segment include [removed: 76] [added: 73] dams, the majority of which are earthen dams.

We may not be able to acquire other systems or businesses if we cannot identify suitable acquisition opportunities or reach mutually agreeable terms with acquisition [removed: candidates.][added: candidates, and whether or not any particular acquisition is successfully completed, these activities are expensive and time consuming and are subject to the availability of capital and personnel resources to complete such acquisitions.]

Further, competition for acquisition opportunities from other regulated utilities, governmental entities and other [added: strategic and financial] buyers may hinder our ability to expand our business.

The negotiation and execution of potential acquisitions as well as the integration of acquired systems or businesses with our existing operations could require us to incur significant [removed: costs and] [added: costs,] cause diversion of our management’s time and [removed: resources.][added: resources and have a material adverse impact on our results of operations.]

- [removed: the need to successfully integrate the] [added: difficulties in integrating or assimilating] acquired systems’ [removed: operations] [added: operations, personnel, benefits, services] and [added: systems and] water quality, cybersecurity and infrastructure protection [removed: measures;][added: measures.]

- fluctuations in quarterly [added: and/or annual] results;

The public vote led to the issuance by the MPWMD [removed: in November 2019] of [added: (i)] a preliminary report finding, among other things, that the acquisition of the Monterey system assets by the MPWMD would be economically [removed: feasible.][added: feasible, and (ii) a final environmental impact report analyzing the environmental impacts of such an acquisition through the power of eminent domain.]

See Item 1—Business—Regulated Businesses—Condemnation and Eminent [removed: Domain,] [added: Domain and Item 3—Legal Proceedings—Proposed Acquisition of Monterey System Assets — Local Area Formation Commission Litigation,] which includes additional information regarding these matters.

Our water and wastewater systems may be vulnerable to disability or failures as a result of physical or cyber attacks, acts of [removed: war or terrorism, vandalism or other causes.]

Our operational and technology systems throughout our businesses may be vulnerable to unauthorized external or internal access, due to hacking, viruses, acts of [added: violence,] war or terrorism, and other causes.

Unauthorized access to confidential information located or stored on these systems could negatively and materially impact our [added: reputation,] customers, employees, suppliers and other third parties.

- cover our operational labor and labor-related expenses, including without limitation costs and expenses associated with our pension and other post-employment benefits;

It may be difficult to predict the outcome or impact of these events on us or the actions that may be taken by the PUCs or other governmental authorities in response thereto.

significant risk to us than to a company not similarly involved in the water and wastewater industry.

For 2022, Cal Am complied with the diversion limitations contained in the 2016 Order, but continued compliance with these limitations in 2023 and future years may be impacted by a number of factors, including without limitation continued drought conditions in California and the exhaustion of water supply reserves, and will require successful development of alternate water supply sources sufficient to meet customer demand.

While the Company cannot currently predict the likelihood or result of any adverse outcome associated with these matters, further attempts to comply with the Orders may result in material

abatement benefit, (iii) the amount of taxes owed, (iv) the timing of tax effects on rates or (v) the ability to utilize our net operating loss carryforwards;

- increasing the costs or difficulty of complying with proposed changes to federal contractor affirmative action audits;

- failure to recover acquisition adjustments or premiums due to unfavorable decisions by PUCs and other governmental authorities;

war or terrorism, vandalism or other causes.

New laws and regulations may require us to disclose incidents to authorities, regulators and/or the public, when we otherwise may not have been required to disclose such incidents under previous laws and regulations, and such disclosures could negatively and materially impact our reputation, customers, employees, suppliers and other third parties.

condition, results of operations, cash flows and liquidity.

A significant part of our long-term strategic plan focuses on safety, operational excellence, cost and expense efficiency (including O&M expense efficiency), water quality and affordability, asset and capital management and the customer experience.

systems.

For example, a recent fire at a plant owned by the sole supplier of permanganate in the Western Hemisphere has severely limited the U.S. supply of potassium and sodium permanganate, two chemicals used by water utilities to treat water.

The Company is seeking to utilize alternative methods of treatment and to manage its existing supplies of permanganate, but any inability to source sufficient quantities of these chemicals or utilize alternative chemicals may have a material adverse effect on the Company’s ability to comply with applicable environmental and regulatory requirements.

In order to meet our capital expenditure needs, we intend to issue a combination of short-term and long-term debt securities and/or additional equity shares of common stock.

Our assets as of December 31, 2022 included $1.1 billion of goodwill and $347 million of total assets measured and recorded at fair value on a recurring basis.

See Note 18—Fair Value of Financial Information in the Notes to the Consolidated Financial Statements for information on the fair value of financial and other assets.

of operations and every three years thereafter.

Similar to other organizations, the Company may have challenges implementing its human capital management and employee succession plans to attract and retain such talent based on a number of factors including, among others, market conditions, retirements and geography.

Our business may be adversely affected by the intentional misconduct of our employees and contractors.

Our Code of Ethics requires employees and contractors to make decisions ethically and in compliance with applicable law and regulatory requirements, and our Code of Ethics and its underlying policies, practices and procedures.

All employees are required to complete training on and review the Code of Ethics on an annual basis, and violations of the Code of Ethics could result in disciplinary actions up to, and including, termination.

Despite these efforts to prevent misconduct, it is possible for employees or contractors to engage in intentional misconduct and violate laws and regulations through, among other things, theft, fraud, misappropriation, bribery, corruption and engaging in conflicts of interest or related person transactions, or otherwise committing serious breaches of our Code of Ethics and our policies, practices and procedures.

Intentional misconduct by employees or contractors could result in substantial liability, higher costs, increased regulatory scrutiny and significant reputational harm, any of which could have a material adverse effect on our financial condition, results of operations and cash flows.

PUCs and other governmental authorities have taken, and may continue to take, emergency or other actions in light of the on-going COVID-19 pandemic that may impact us, including prohibiting the termination of service for non-payment and extending or delaying procedural schedules in our regulatory proceedings.

We are unable to predict the range of impacts that the ongoing COVID-19 pandemic and other related events may have on our ability to obtain these approvals as needed or requested by our Regulated Businesses in the ordinary course or at all, or the nature or impacts of any further emergency or other action that may be taken by the PUCs or other governmental authorities.

operating assets to another utility or to a municipality.

Beginning in January 2022, Cal Am currently expects that it will be able to comply with the diversion reduction requirement schedule contained in the 2016 Order, but continued compliance with the diversion reduction requirements for 2023 and future years

will depend on successful development of alternate water supply sources sufficient to meet customer demand.

The 2009 Order and the 2016 Order remain in effect until Cal Am certifies to the SWRCB, and the SWRCB concurs, that Cal Am has obtained a permanent supply of water to substitute for past unauthorized Carmel River diversions.

expenditures and costs, in whole or in part.

regulatory challenges, or other obstacles.

- failure to recover acquisition premiums;

- difficulties in integrating or assimilating personnel, benefits, services and systems.

We compete with governmental entities, other regulated utilities, and strategic and financial buyers for acquisition opportunities.

Also, five municipalities in the Chicago, Illinois area formed a water agency that filed an eminent domain lawsuit against our Illinois subsidiary in January 2013, seeking to condemn a water pipeline that serves those five municipalities.

This lawsuit remains pending, and a valuation trial is scheduled for the second quarter of 2022.

Our insurance programs have

A significant part of our long-term strategic focus on safety, operational excellence, O&M expense efficiency, water quality, asset and capital management and the customer experience includes implementing new technologies for, among other things: customer service and support; environmental compliance; water metering; water quality and source monitoring; cybersecurity; business development and growth; data analysis; employee development and training; and other initiatives.

Where appropriate, we also seek to align these new technologies with existing technology infrastructure and systems.

Although we make efforts to minimize any

We continue to assess our short- and long-term liquidity needs in light of the impact of the COVID-19 pandemic on the financial and capital markets, especially with respect to the market for corporate commercial paper, which experienced volatility and shortages of liquidity in March 2020.

In response to these events, in March 2020, we entered into a $750 million 364-day term loan facility and immediately executed a $500 million draw thereunder to support our short-term liquidity by retaining that amount in cash.

We repaid this term loan facility in full in March 2021.

However, as the impacts of the COVID-19 pandemic on the economy, the financial and capital markets and our operations continue to evolve, we will continue to assess our liquidity needs.

We may not be able to fully utilize our state net operating loss carryforwards.

As of December 31, 2021, we had state NOL carryforwards of approximately $123 million, and management believes it is more likely than not that these NOL carryforwards will be recovered in the future.

Our state NOL carryforwards began to expire in 2021 and will continue to expire through 2041.

We have, in the past, been unable to utilize certain of our state NOL carryforwards, and the establishment or increase of a valuation allowance in the future would reduce our deferred income tax assets and our net income.

Our actual results may differ from those estimated by management in making its assessment as to our ability to use the state NOL carryforwards.

If we are unable to fully utilize our state NOL carryforwards to offset taxable income generated in the future, our financial position, results of operations and cash flows could be materially adversely affected.

Our total assets include $1.1 billion of goodwill at December 31, 2021.

We are currently unable to predict the effect, if any, of the COVID-19 pandemic or other events on the valuation of our pension assets and liabilities.

From time to time, it may be difficult to attract and retain qualified individuals with the expertise and in the timeframe demanded for our business needs.

In certain geographic areas, for example, we may not be able to satisfy the demand for our services because of our inability to successfully hire and retain qualified personnel.

In addition, as key personnel approach retirement age, we need to have appropriate succession plans in place and to successfully implement such plans.

For a discussion and analysis of the Company’s financial statements for fiscal [removed: 2020] [added: 2021] compared to fiscal [removed: 2019,] [added: 2020,] please refer to Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Company’s Annual Report on Form 10-K for the year ended December 31, [removed: 2020,] [added: 2021,] filed with the SEC on February [removed: 24, 2021.*][added: 16, 2022.*]

The Company employs approximately [removed: 6,400] [added: 6,500] professionals who provide drinking water, wastewater and other related services to over 14 million people in 24 states.

The Company’s primary business involves the ownership of utilities that provide water and wastewater services to residential, commercial, industrial, public authority, fire service and sale for resale customers, collectively presented as the “Regulated Businesses.” The Company’s utilities operate in approximately [removed: 1,700] [added: 1,600] communities in 14 states in the United States, with 3.4 million active customers with services provided by its water and wastewater networks.

The Company also operates other [removed: market-based] businesses [added: not subject to economic regulation by state PUCs] that provide [removed: water, wastewater] [added: water] and [removed: other] [added: wastewater] services to [removed: residential and smaller commercial customers,] the U.S. government on military installations, as well as [removed: municipalities and utility customers,] [added: municipalities,] collectively presented [removed: as the “Market-Based Businesses.” These Market-Based Businesses are not subject to economic regulation by state PUCs.][added: throughout this Form 10-K within “Other.” See Item 1—Business for additional information.]

See Item [removed: 1—Business] [added: 1—Business—Regulated Businesses—Regulation and Rate Making] for additional information.

[removed: These impacts are collectively referred to as “financial impacts.”] See Note [removed: 3—Impact of the COVID-19 Pandemic] [added: 5—Acquisitions and Divestitures] in the Notes to Consolidated Financial Statements for additional information.

[removed: Other regulatory actions to date are presented] [added: Presented] in the table [removed: below:][added: below is information for Other:]

[removed: Sale] [added: *Sale] of Homeowner Services [removed: Group][added: Group*]

On [removed: the Closing Date,] [added: December 9, 2021,] the Company sold all of the equity interests in subsidiaries that comprised [added: the Company’s] HOS to [removed: the Buyer] [added: a wholly owned subsidiary of funds advised by Apax Partners LLP, a global private equity advisory firm (the “Buyer”),] for total consideration of approximately $1.275 billion, resulting in [removed: a] pre-tax gain [removed: on sale] of $748 [removed: million.][added: million during the fourth quarter of 2021.]

The consideration [removed: is] [added: was] comprised of $480 million in cash, a seller promissory note issued by the Buyer in the principal amount of $720 million, and a contingent cash payment of $75 million payable upon satisfaction of certain conditions on or before December 31, 2023.

The Company and the Buyer also entered into [removed: a] revenue share [removed: agreement,] [added: agreements,] pursuant to which the Company is to receive 10% of the revenue generated from customers who are billed for home warranty services through an applicable Company subsidiary (an “on-bill” arrangement), and 15% of the revenue generated from any future on-bill arrangements entered into after the closing.

[removed: Financing Activities][added: | Other financing activities, net (a) | | | 69 | | | | | | 35 | | | | | | 22 | | |]

[removed: Net] [added: AWCC used the net] proceeds of [removed: this offering were used] [added: the offering: (i)] to lend funds to parent company and its regulated [removed: subsidiaries, to prepay $327 million in aggregate principal amount of AWCC’s outstanding senior notes,] [added: subsidiaries; (ii)] to repay AWCC’s commercial paper [removed: obligations] [added: obligations;] and [added: (iii)] for general corporate purposes.

See Note [removed: 12—Long-Term Debt] [added: 5—Acquisitions and Divestitures] in the Notes to Consolidated Financial Statements for additional information.

| (In millions, except per share data) | | | [removed: 2021] [added: 2022] | | | | | | [removed: 2020] [added: 2021] | | | | | | [removed: 2019] [added: 2020] | | | | | | [removed: 2018] [added: 2019] | | | | | | [removed: 2017] [added: 2018] | | |

| Operating revenues | | | $ | [removed: 3,930] [added: 3,792] | | | | | $ | [removed: 3,777] [added: 3,930] | | | | | $ | [removed: 3,610] [added: 3,777] | | | | | $ | [removed: 3,440] [added: 3,610] | | | | | $ | [removed: 3,357] [added: 3,440] | |

| Net income attributable to common shareholders | | | [removed: 1,263] [added: 820] | | | | | | [removed: 709] [added: 1,263] | | | | | | [removed: 621] [added: 709] | | | | | | [removed: 567] [added: 621] | | | | | | [removed: 426] [added: 567] | | |

| Net income attributable to common shareholders per basic common share | | | [removed: $] [added: 4.51] | [removed: 6.96] | | | | | [removed: $] [added: 6.96] | [removed: 3.91] | | | | | [removed: $] [added: 3.91] | [removed: 3.44] | | | | | [removed: $] [added: 3.44] | [removed: 3.16] | | | | | [removed: $] [added: 3.16] | [removed: 2.39] | |

| Net income attributable to common shareholders per diluted common share | | | [removed: 6.95] [added: 4.51] | | | | | | [removed: 3.91] [added: 6.95] | | | | | | [removed: 3.43] [added: 3.91] | | | | | | [removed: 3.15] [added: 3.43] | | | | | | [removed: 2.38] [added: 3.15] | | |

| Total assets | | | $ | [removed: 26,075] [added: 27,787] | | | | | $ | [removed: 24,766] [added: 26,075] | | | | | $ | [removed: 22,682] [added: 24,766] | | | | | $ | [removed: 21,223] [added: 22,682] | | | | | $ | [removed: 19,482] [added: 21,223] | |

| Long-term debt and redeemable preferred stock at redemption value | | | [removed: 10,344] [added: 10,929] | | | | | | [removed: 9,333] [added: 10,344] | | | | | | [removed: 8,644] [added: 9,333] | | | | | | [removed: 7,576] [added: 8,644] | | | | | | [removed: 6,498] [added: 7,576] | | |

| Cash dividends declared per common share | | | $ | [removed: 2.41] [added: 2.62] | | | | | $ | [removed: 2.20] [added: 2.41] | | | | | $ | [removed: 2.00] [added: 2.20] | | | | | $ | [removed: 1.82] [added: 2.00] | | | | | $ | [removed: 1.66] [added: 1.82] | |

| Net cash provided by operating activities | | | [removed: 1,441] [added: 1,108] | | | | | | [removed: 1,426] [added: 1,441] | | | | | | [removed: 1,383] [added: 1,426] | | | | | | [removed: 1,386] [added: 1,383] | | | | | | [removed: 1,449] [added: 1,386] | | |

| Net cash used in investing activities | | | [removed: (1,536)] [added: (2,127)] | | | | | | [removed: (2,061)] [added: (1,536)] | | | | | | [removed: (1,945)] [added: (2,061)] | | | | | | [removed: (2,036)] [added: (1,945)] | | | | | | [removed: (1,672)] [added: (2,036)] | | |

| Net cash [removed: (used in)] provided by [added: (used in)] financing activities | | | [removed: (345)] [added: 1,000] | | | | | | [removed: 1,120] [added: (345)] | | | | | | [removed: 494] [added: 1,120] | | | | | | [removed: 726] [added: 494] | | | | | | [removed: 207] [added: 726] | | |

| Capital expenditures included in net cash used in investing activities | | | [removed: (1,764)] [added: (2,297)] | | | | | | [removed: (1,822)] [added: (1,764)] | | | | | | [removed: (1,654)] [added: (1,822)] | | | | | | [removed: (1,586)] [added: (1,654)] | | | | | | [removed: (1,434)] [added: (1,586)] | | |

For the years ended December 31, [removed: 2021, 2020] [added: 2022, 2021] and [removed: 2019,] [added: 2020,] diluted earnings per share (GAAP) were [removed: $6.95, $3.91] [added: $4.51, $6.95] and [removed: $3.43,] [added: $3.91,] respectively.

This increase was primarily driven by [removed: a pre-tax gain on sale of $748 million relating to the sale of HOS and] continued growth in the Regulated Businesses from infrastructure [removed: investment, acquisitions] [added: investment] and [added: acquisitions, as well as] organic [removed: growth.][added: growth, offset somewhat by impacts from inflationary pressures on production costs and higher interest costs along with higher depreciation expenses from the growth of the business.]

The Company [removed: expects to continue] [added: continues] to grow its businesses, with the majority of its growth to be achieved in the Regulated Businesses through (i) continued capital investment in the Company’s infrastructure to provide safe, [removed: clean,] reliable and affordable water and wastewater services to its customers, and (ii) regulated acquisitions to expand the Company’s services to new customers.

In [removed: 2021,] [added: 2022,] the Company invested [removed: $1.9] [added: $2.6] billion, primarily in the Regulated Businesses, as discussed below:

- [removed: $1.8] [added: $2.3] billion capital investment in the Regulated Businesses, the [added: substantial] majority for infrastructure improvements and replacements; and

- [removed: $135] [added: $315] million to fund [removed: acquisitions, including deposits discussed below,] [added: acquisitions] in the Regulated Businesses, which added approximately [removed: 20,000 water and wastewater] [added: 70,000] customers during [removed: 2021,] [added: 2022,] in addition to approximately [removed: 17,500] [added: 18,500] customers added through organic growth during [removed: 2021.][added: 2022.]

The Company expects to close this acquisition [removed: in] [added: by] the [removed: first half] [added: end] of [removed: 2022,] [added: 2023,] pending regulatory approval.

The Company expects to close this acquisition in [removed: the second half of 2022, pending regulatory approval.][added: early 2023.]

During 2022, the Company [removed: closed on] [added: paid $315 million for] the acquisition of [removed: two regulated] [added: 26] water and wastewater [removed: systems adding approximately 700 customers, for a total] [added: systems, representing in the] aggregate [removed: purchase price of $2 million.][added: approximately 70,000 customers.]

As of [removed: February 16,] [added: December 31,] 2022, the Company has entered into agreements for [added: 21] pending acquisitions in the Regulated Businesses, including the [removed: York City Sewer Authority and Egg Harbor City] [added: two] agreements discussed above, to add approximately [removed: 77,000] [added: 32,400] additional customers.

On January 1, 2022, the Company completed the previously disclosed sale of its regulated utility operations in New York to [removed: Liberty,] [added: Liberty Utilities (Eastern Water Holdings) Corp. (“Liberty”),] an indirect, wholly owned subsidiary of Algonquin Power & Utilities Corp. Liberty purchased from the Company all of the capital stock of the Company’s New York subsidiary for a purchase price of $608 million in cash.

See Note [removed: 6—Acquisitions] [added: 5—Acquisitions] and Divestitures in the Notes to Consolidated Financial Statements for additional information.

On February 4, 2022, the Company completed the sale of its operations in Michigan for [removed: approximately] $6 [removed: million.][added: million in cash.]

The Company expects to invest between [removed: $13] [added: $14] billion to [removed: $14] [added: $15] billion over the next five years, and between [removed: $28] [added: $30] billion to [removed: $32] [added: $34] billion over the next 10 years, including [removed: $2.5] [added: $2.9] billion in [removed: 2022.][added: 2023.]

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The 2021 financial results included a pre-tax gain of $748 million relating to the sale of HOS and a $45 million pre-tax contribution to the American Water Charitable Foundation, a consolidated net impact of $2.70 diluted earnings per share.

After excluding the gain related to the sale of HOS and charitable contribution in 2021, diluted earnings per share increased $0.26 in 2022 as compared to 2021.

Results for 2022 also reflect the favorable impact of weather, estimated at $0.06 per share, primarily due to hot and dry weather in the third quarter of 2022 as compared to a $0.02 per share favorable impact in 2021.

Also, included in the results for 2022 are $0.24 per share from interest income earned on the seller note and income earned on revenue share agreements, which compares to HOS operating results for 2021 of $0.31 per share.

This includes the Company’s Pennsylvania subsidiary’s acquisition of the wastewater system assets from the York City Sewer Authority and the City of York on May 27, 2022, for a cash purchase price of $235 million, $20 million of which was funded as a deposit to the seller in April 2021 in connection with the execution of the acquisition agreement.

On October 11, 2022, the Company’s Pennsylvania subsidiary entered into an agreement to acquire the wastewater assets of the Butler Area Sewer Authority for a total purchase price of $232 million in cash, subject to adjustment as provided for in the Asset Purchase Agreement.

This system provides wastewater service for approximately 14,700 customer connections.

See Note 18—Fair Value of Financial Information for additional information relating to the seller promissory note and contingent cash payment.

For the year ended December 31, 2022, the Company recorded post-close adjustments, primarily related to working capital, of pre-tax income of $20 million, which is included in Gain on sale of businesses on the Consolidated Statements of Operations.

The Company recognized $50 million of interest income during the year ended December 31, 2022, from the seller note.

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The Company recognized $9 million of income during the year ended December 31, 2022, from the revenue share agreements, which is included in Other, net on the Consolidated Statements of Operations.

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Other Matters

*Military Services Group*

On June 30, 2022, MSG was awarded a contract for the ownership, operation, maintenance and replacement of the wastewater utility system assets at Naval Station Mayport in Jacksonville, Florida.

The contract was effective July 1, 2022, and its total revenue is approximately $341 million over a 50-year period, subject to an annual economic price adjustment.

The performance start date for operation is scheduled for March 1, 2023.

MSG operates and maintains water and/or wastewater systems and related capital programs as part of the U.S. government’s Utilities Privatization Program.

This contract represents the 18th installation in MSG’s footprint and the first contract with respect to a U.S. Navy installation.

*Permanganate Supply Disruption*

In January 2023, a fire occurred at a plant owned by the sole supplier of permanganate in the Western Hemisphere, which has severely limited the U.S. supply of potassium and sodium permanganate, two chemicals used by water utilities to treat water.

The Company is seeking to utilize alternative methods of treatment and to manage its existing supplies of permanganate, but any inability to source sufficient quantities of these chemicals or utilize alternative chemicals may have a material adverse effect on the Company’s ability to comply with applicable environmental and regulatory requirements.

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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Hawaii | | | July 1, 2022 | | | | | | 2 | | |

| California, Step Increase | | | January 1, 2022 | | | | | | 9 | | |

| Pennsylvania, Step Increase | | | January 1, 2022 | | | | | | 20 | | |

Presented in the table below are annualized incremental revenues, including reductions for the amortization of EADIT that are generally offset in income tax expense, assuming a constant water sales volume and customer count, resulting from general rate case authorizations that became effective on or after January 1, 2023:

| | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| (In millions) | | | Effective Date | | | | | | Amount | | |

| General rate cases by state: | | | | | | | | | | | |

| Pennsylvania | | | January 28, 2023 | | | | | | $ | 138 | |

| Illinois | | | January 1, 2023 | | | | | | 67 | | |

| California, Step Increase | | | January 1, 2023 | | | | | | 13 | | |

| Total general rate case authorizations | | | | | | | | | $ | 218 | |

COVID-19 Pandemic Update

American Water continues to monitor the COVID-19 pandemic and has taken steps since the beginning of the pandemic to mitigate adverse impacts to the Company.

The Company has three main areas of focus as part of its response to COVID-19: the care and safety of its employees; the safety of its customers and the communities it serves; and the execution of its business continuity plan.

American Water continues to work with its vendors to prevent disruptions in its supply chain, and, at this time, has not experienced, and does not anticipate, any material disruptions.

The Company also continues to monitor the impacts of the COVID-19 pandemic on the capital markets, including impacts that could increase its cost of capital.

The Company has experienced financial impacts since the beginning of the pandemic resulting from lower revenues from the suspension of late fees and foregone reconnect fees in certain states, certain incremental O&M expenses, an increase in uncollectible accounts expense and additional debt costs.

The extent to which the COVID-19 pandemic may further impact American Water, including without limitation, its liquidity, financial condition, and results of operations, will depend on future developments, which presently cannot be predicted.

As of February 16, 2022, American Water has commission orders authorizing deferred accounting or cost recovery for COVID-19 financial impacts in 11 of 13 jurisdictions.

| | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Commission Actions | | | | | | Description | | | | | | States | | |

| Orders issued with deferred accounting | | | | | | Allows the Company to establish regulatory assets to record certain financial impacts related to the COVID-19 pandemic. | | | | | | HI, IN, MD, NJ, PA, VA, WV | | |

| Orders issued with cost recovery | | | | | | California’s Catastrophic Event Memorandum Account allows the Company’s California subsidiary to track certain financial impacts related to the COVID-19 pandemic for future recovery requests. Iowa issued a base rate case order on June 28, 2021, authorizing recovery in rates of the COVID-19 financial impacts deferred within its annual non-recurring expense rider. Illinois has authorized cost recovery of the COVID-19 financial impacts through a special purpose rider over a 24-month period, which was implemented effective October 1, 2020. Additionally, Illinois approved a bad debt rider tariff on December 16, 2020, allowing collection of actual bad debt expense over last authorized beginning April 2021 through February 2023. Illinois approved a stipulation in March 2021 to allow the rider to be extended through the end of 2023. Missouri issued a base rate case order on April 7, 2021, authorizing recovery in rates of the COVID-19 financial impacts deferred through March 31, 2021 over a three-year period. | | | | | | CA, IA, IL, MO | | |

The Company’s Pennsylvania subsidiary filed for a request with the Pennsylvania Public Utility Commission (the “PaPUC”) to defer as a regulatory asset all identified COVID-19 financial impacts.

On September 15, 2021, the PaPUC issued an order approving the Company’s request to defer, with carrying costs, incremental uncollectible expense and other incremental costs net of savings attributed to the COVID-19 pandemic.

The PaPUC order denied the request to include lost revenues attributed to the waiver of late fees and reconnect fees and expenses associated with additional interest costs.

Additionally, the PaPUC order approved the request to allow for the continuation of the deferral of financial impacts, rejecting proposals from the intervening parties to define an end date to the deferral in 2021.

As a result of the order discussed above, the Company recorded a net $7 million reduction to its regulatory assets and corresponding impacts to revenue, interest expense and uncollectible expense during the third quarter of 2021.

The Company continues to evaluate options within its next base rate case to address these denied items and the resulting financial impact.

On July 28, 2021, the Company’s Tennessee subsidiary filed a stipulation and settlement agreement with the Consumer Advocate Unit in the Financial Division of the Office of the Tennessee Attorney General, which reflected agreement on the deferral of COVID-19-related financial impacts through April 30, 2021.

On August 9, 2021, the Tennessee Public Utility Commission denied the stipulation and settlement agreement and moved to address the Company’s Tennessee subsidiary’s petition to defer the COVID-19 financial impacts in a future hearing.

On August 26, 2021, the Company’s Tennessee subsidiary filed a motion to withdraw its pending petition, preserving its right to seek recovery of the COVID-19 financial impacts in a future proceeding.

In December 2020, the Kentucky Public Service Commission issued an order denying a request to defer to a regulatory asset the financial impacts related to the COVID-19 pandemic.

Consistent with these regulatory orders, the Company has recorded $36 million in regulatory assets and $6 million of regulatory liabilities for the financial impacts related to the COVID-19 pandemic on the Consolidated Balance Sheets as of December 31, 2021.

As of February 16, 2022, one state, New Jersey, continues moratoria until March 15, 2022, on the suspension of service disconnections due to non-payment.

The moratoria on disconnects have expired in 12 states.

The Company continues to monitor the COVID-19 pandemic and will continue to comply with the current ordered moratoria and any future moratoria implemented.

In 2019, the Company completed and submitted its project completion certification to the New Jersey Economic Development Authority (“NJEDA”) in connection with its capital investment in its corporate headquarters in Camden, New Jersey.

The NJEDA determined that the Company is qualified to receive $164 million in tax credits over a ten-year period.

The Company is required to meet various annual requirements in order to monetize one-tenth of the tax credits annually and is subject to a claw-back period if the Company does not meet certain NJEDA requirements of the tax credit program in years 11 through 15.

The Company has made the necessary annual filings for the years ended December 31, 2019 and 2020 and expects to make the 2021 filing by April 30, 2022.

As a result, the Company had receivables of $49 million and $115 million in other current assets and other long-term assets, respectively, on the Consolidated Balance Sheets as of December 31, 2021.

The submitted filings are under review by the NJEDA and it is expected that the Company will receive final NJEDA approval and monetize the credits in the first half of 2022.

In March 2020, in connection with the COVID-19 pandemic, the NJEDA, pursuant to Executive Order 103 - State of Emergency and a Public Health Emergency, temporarily waived the requirement that a full-time employee must spend at least 80% of his or her time at the qualified business facility (“QBF”) to meet the definition of eligible position or full-time job.

The waiver will continue for as long as New Jersey’s Executive Order 281 is valid.

On July 2, 2021, New Jersey’s Governor approved a bill that revised provisions of the Economic Recovery Act of 2020 and other economic development programs, including amending the definition of an eligible position and full-time job in the Grow New Jersey Program and replacing the 80% requirement of time spent at the QBF.

The bill states that an eligible position is one that is filled by a full-time employee who has their primary office at the QBF and spends at least 60% of their time at the QBF.

The bill specifically states that it supersedes the existing regulations and existing incentive agreements that require an eligible employee spend at least 80% of their time at the QBF.

The structure of the transaction enables the initial cash proceeds to be redeployed into the Regulated Businesses to fund near-term incremental capital investments, while interest on the seller note provides a stream of earnings during its term.

Upon maturity, the proceeds from the repayment of the seller note are expected to be used to fund capital investment in the Regulated Businesses.

As of December 31, [removed: 2021,] [added: 2022,] a hypothetical increase of interest rates by 1% associated with the Company’s short-term borrowings would result in a [removed: $8] [added: $6] million increase in short-term interest expense.

The Company is exposed to credit risk through its water, wastewater and [removed: other water-related services provided by the Regulated Businesses and Market-Based Businesses.][added: related services.]

The Company’s Regulated Businesses serve residential, commercial, industrial and other customers, while the [removed: Market-Based Businesses] [added: businesses within Other] engage in business activities with [removed: developers,] government entities and other customers.

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A holding company originally incorporated in Delaware in 1936, the Company employs approximately [removed: 6,400] [added: 6,500] professionals who provide drinking water, wastewater and other related services to over 14 million people in 24 states.

The Company conducts the majority of its business through regulated utilities that provide water and wastewater services, collectively presented as the “Regulated Businesses.” The Company also operates [added: other] market-based businesses that provide [removed: complementary services.][added: water and wastewater services to the U.S. government on military installations, as well as municipalities.]

Individually, these [added: market-based] businesses do not meet the criteria of a reportable segment in accordance with generally accepted accounting principles in the United States (“GAAP”), and are collectively presented [removed: as the “Market-Based Businesses,”] [added: throughout this Annual Report on Form 10-K within “Other,”] which is consistent with how management assesses the results of these businesses.

See Item [removed: 1—Business—Market-Based Businesses—Sale] [added: 1—Business—Other—Sale] of Homeowner Services Group below and Note [removed: 6—Acquisitions] [added: 5—Acquisitions] and Divestitures in the Notes to Consolidated Financial Statements for additional information.

On January 1, 2022, the Company completed the sale of its New York subsidiary, see Item 1—Business—Regulated Businesses—Sale of New York American Water Company, Inc. below and Note [removed: 6—Acquisitions] [added: 5—Acquisitions] and Divestitures in the Notes to Consolidated Financial Statements for additional information.

The Company’s utilities operate in approximately [removed: 1,700] [added: 1,600] communities in 14 states in the United States, with 3.4 million active customers in its water and wastewater networks.

Operating revenues for the Regulated Businesses were [removed: $3,384] [added: $3,505] million for [removed: 2021, $3,255] [added: 2022, $3,384] million for [removed: 2020] [added: 2021] and [removed: $3,094] [added: $3,255] million for [removed: 2019,] [added: 2020,] accounting for [removed: 86%,] [added: 92%,] 86% and 86%, respectively, of the Company’s total operating revenues for the same periods.

Presented in the table below is a geographic summary of the Regulated Businesses’ operating revenues and the number of customers the Company serves, by type of service, for and as of the year ended December 31, [removed: 2021:][added: 2022:]

[removed: (c)The] [added: The] Company completed the sale of its New York subsidiary on January 1, [added: 2022 and the sale of its Michigan subsidiary on February 4,] 2022.

[removed: (d)Includes] [added: (c)Includes] the Company’s utility operations in the following states: Georgia, Hawaii, Indiana, Iowa, Kentucky, Maryland, [removed: Michigan,] Tennessee, Virginia and West Virginia and other revenue attributable collectively to the Regulated Businesses.

[removed: The] [added: (b)The] Company completed the sale of its [added: New York subsidiary on January 1, 2022 and the sale of its] Michigan subsidiary on February 4, 2022.

The following chart depicts the allocation of the Company’s Regulated Businesses’ operating revenue of [removed: $3,384] [added: $3,505] million by type, including a breakout of the total water services revenues by class of customer, for the year ended December 31, [removed: 2021:][added: 2022:]

[removed: ][added: ]

Presented in the table below is the number of water and wastewater customers the Company served by class as of December 31, [removed: 2021, 2020] [added: 2022, 2021] and [removed: 2019,] [added: 2020,] which represents approximately 14 million people served as of December 31, [removed: 2021:][added: 2022:]

| | | | [removed: 2021] [added: 2022] | | | | | | | | | | | | [removed: 2020] [added: 2021] | | | | | | | | | | | | [removed: 2019] [added: 2020] | | | | | | | | |

| Residential | | | [removed: 2,972] [added: 2,870] | | | | | | [removed: 245] [added: 270] | | | | | | [removed: 2,948] [added: 2,972] | | | | | | [removed: 236] [added: 245] | | | | | | [removed: 2,914] [added: 2,948] | | | | | | [removed: 215] [added: 236] | | |

| Commercial | | | [removed: 225] [added: 219] | | | | | | [removed: 15] [added: 17] | | | | | | 225 | | | | | | 15 | | | | | | [removed: 222] [added: 225] | | | | | | [removed: 13] [added: 15] | | |

| Fire service | | | [removed: 52] [added: 51] | | | | | | — | | | | | | [removed: 50] [added: 52] | | | | | | — | | | | | | [removed: 49] [added: 50] | | | | | | — | | |

| Public and other (a) | | | [removed: 16] [added: 17] | | | | | | 1 | | | | | | [removed: 17] [added: 16] | | | | | | 1 | | | | | | [removed: 16] [added: 17] | | | | | | 1 | | |

| Total [added: (b)] | | | [removed: 3,269] [added: 3,161] | | | | | | [removed: 261] [added: 288] | | | | | | [removed: 3,244] [added: 3,269] | | | | | | [removed: 252] [added: 261] | | | | | | [removed: 3,205] [added: 3,244] | | | | | | [removed: 229] [added: 252] | | |

The Company plans to invest between [removed: $28] [added: $30] billion and [removed: $32] [added: $34] billion over the next 10 years for capital improvements, including acquisitions, to its Regulated Businesses’ water and wastewater infrastructure, largely for pipe replacement and upgrading aging water and wastewater treatment facilities.

The Company has proactively improved its pipe renewal rate from a 250-year replacement cycle in 2009 to an expected 110-year replacement cycle by [removed: 2026,] [added: 2027,] which it anticipates will enable the Company to replace nearly [removed: 2,200] [added: 2,100] miles of mains and collection pipes between [removed: 2022] [added: 2023] and [removed: 2026.][added: 2027.]

In addition, from [removed: 2022] [added: 2023] to [removed: 2026,] [added: 2027,] the Company’s capital investment in treatment plants, storage tanks and other key, above-ground facilities is expected to increase, further [removed: addressing] [added: seeking to address] infrastructure renewal, resiliency, water quality, operational efficiency, technology and innovation, and emerging regulatory compliance needs.

| Expense mechanisms | | | | | | Allows changes in certain operating expenses, which may fluctuate based on conditions beyond the utility’s control, to be recovered outside of a general rate case proceeding or deferred until the next general rate case proceeding. | | | | | | CA, [added: HI,] IL, [added: IN,] MD, MO, NJ, PA, TN, VA | | |

| Consolidated tariffs | | | | | | Use of a unified rate structure for water systems owned and operated by a single utility, which may or may not be physically interconnected. The consolidated tariff pricing structure may be used fully or partially in a state, and is generally used to moderate the price impact of periodic fluctuations in local costs, while lowering administrative costs for customers. Pennsylvania [added: and West Virginia] also [removed: permits] [added: permit] a blending of water and wastewater revenue requirements. | | | | | | CA, IA, IL, IN, KY, MD, MO, NJ, PA, VA, WV | | |

| Deferred accounting | | | | | | A [removed: regulators’] [added: regulator’s] willingness to defer recognition of financial impacts when setting rates for utilities. | | | | | | All | | |

The EPA also estimates, as of 2017, that there are [removed: approximately] [added: over] 50,000 community water systems and [removed: approximately] [added: over] 15,000 community wastewater systems in the United States, with approximately 80% of the community water systems serving a population of 3,000 or less.

The Company’s current customer mix of [removed: 93%] [added: 92%] water and [removed: 7%] [added: 8%] wastewater also presents strategic opportunities for wastewater growth and [removed: systems] consolidation, allowing the Company to add wastewater customers where it already serves water customers.

Before entering new regulated markets, the Company will evaluate the business and regulatory climates to ensure that it will have the opportunity to achieve an appropriate rate of return on its investment while maintaining its high standards for providing safe, reliable and affordable services to its [removed: customers, as well as a line of sight to grow the Company’s base customers to attain efficiencies after entering the new domestic market.][added: customers.]

Increasingly stringent environmental, health and safety, [added: cybersecurity] and water quality and water accountability regulations, the amount of infrastructure in need of significant capital investment, financial challenges and industry legislation are several elements, among others, that may drive more municipalities to consider selling their water and wastewater assets.

See Note [removed: 6—Acquisitions] [added: 5—Acquisitions] and Divestitures in the Notes to Consolidated Financial Statements for additional information.

The [removed: bill] [added: IIJA] also [removed: includes] [added: included] a low-income assistance program, [added: in] which [removed: provides] eligible low-income customers who receive their water from public and private entities [removed: to be eligible to participate in the program.][added: may participate.]

Enhanced WQAA legislation includes additional enforcement requirements for disclosure of results, requires the sale of systems for prolonged violations and imposes new [removed: cyber security] [added: cybersecurity] requirements and asset management plans.

In 2021, the Tennessee Public [removed: Utilities] [added: Utility] Commission implemented acquisition valuation rules that [removed: create] [added: include] a [removed: mechanism] [added: methodology] to value water and wastewater assets based upon [added: the new] replacement cost [removed: new] [added: of the assets] less [removed: depreciation.][added: the depreciation, in addition to other valuation methodology options.]

Consolidated tariff pricing moderates the impact of periodic fluctuations in local costs and promotes a more universal water infrastructure investment in a [removed: state.][added: jurisdiction.]

As a result, consolidated tariffs can make it easier to incorporate new systems into an existing utility, support economies of scale for even the smallest of systems and prioritize capital needs across the [removed: state.][added: jurisdiction.]

When pursuing acquisitions, the Company’s largest investor-owned competitors, based on a comparison of operating revenues and population served, include Essential Utilities, Inc., [removed: Suez North America,] American States Water Company and California Water Service Group.

From time to time, the Company also faces competition from infrastructure funds, multi-utility companies and others, such as Algonquin Power and Utilities Corp., Eversource [removed: Energy] [added: Energy, SouthWest Water Company] and [removed: Corix.][added: Corix Infrastructure, Inc.]

The acquisition consideration related to such a proceeding initiated by a local government may be determined consistent with applicable eminent domain law, or may be negotiated or fixed by appraisers as prescribed by the law of the state or [removed: in] the [added: jurisdiction of the] particular CPCN.

In [removed: November] 2019, the MPWMD issued a preliminary valuation and cost of service analysis report, finding in part that (1) an estimate of the Monterey system assets’ total value plus adjustments would be approximately $513 million, (2) the cost of service modeling results indicate significant annual reductions in revenue requirements and projected monthly water bills, and (3) the acquisition of the Monterey system assets by the MPWMD would be economically feasible.

| New Jersey | | | $ | 858 | | | | | $ | 51 | | | | | $ | 909 | | | | | 25.9 | | % | | | | 663 | | | | | | 59 | | | | | | 722 | | | | | | 20.9 | | % |

| Pennsylvania | | | 714 | | | | | | 105 | | | | | | 819 | | | | | | 23.4 | | % | | | | 679 | | | | | | 97 | | | | | | 776 | | | | | | 22.5 | | % |

| Missouri | | | 367 | | | | | | 16 | | | | | | 383 | | | | | | 10.9 | | % | | | | 480 | | | | | | 22 | | | | | | 502 | | | | | | 14.6 | | % |

| Illinois | | | 310 | | | | | | 39 | | | | | | 349 | | | | | | 10.0 | | % | | | | 297 | | | | | | 71 | | | | | | 368 | | | | | | 10.7 | | % |

| California | | | 281 | | | | | | 4 | | | | | | 285 | | | | | | 8.1 | | % | | | | 189 | | | | | | 3 | | | | | | 192 | | | | | | 5.6 | | % |

| Total—Top Five States (b) | | | 2,530 | | | | | | 215 | | | | | | 2,745 | | | | | | 78.3 | | % | | | | 2,308 | | | | | | 252 | | | | | | 2,560 | | | | | | 74.2 | | % |

| Other (c) | | | 733 | | | | | | 27 | | | | | | 760 | | | | | | 21.7 | | % | | | | 853 | | | | | | 36 | | | | | | 889 | | | | | | 25.8 | | % |

| Total Regulated Businesses | | | $ | 3,263 | | | | | $ | 242 | | | | | $ | 3,505 | | | | | 100.0 | | % | | | | 3,161 | | | | | | 288 | | | | | | 3,449 | | | | | | 100.0 | | % |

The Company will also evaluate whether there is a line of sight to grow to sufficient scale in a new regulated market so that it can attain efficiencies after entering a new domestic market.

The Company has leveraged these funds throughout its service areas to benefit its customers.

For example, the Monterey water service system assets (the “Monterey system assets”) of the Company’s California subsidiary (“Cal Am”) are the subject of a potential condemnation action by the Monterey Peninsula Water Management District (the “MPWMD”) stemming from a November 2018 public ballot initiative.

On April 1, 2022, the MPWMD filed a lawsuit against LAFCO challenging its decision to deny the MPWMD’s application seeking approval to become a retail water provider.

For more information on the lawsuit against LAFCO, see Item 3—Legal Proceedings—Proposed Acquisition of Monterey System Assets — Local Area Formation Commission Litigation.

By letter dated October 3, 2022, the MPWMD notified Cal Am of a decision to appraise the Monterey system assets and requesting access to a number of Cal Am’s properties and documents to assist the MPWMD with such an appraisal.

Cal Am responded by letter on October 24, 2022, denying the request for access, stating that the MPWMD does not have the right to appraise Cal Am’s system without LAFCO approval to become a retail water provider.

During a valuation trial held in January 2023, the parties settled the lawsuit and the water agency dismissed the eminent domain case, and as a result the Company will retain the pipeline.

As part of the dismissal, the Company’s Illinois subsidiary and another subsidiary entered into a settlement agreement with the water agency agreeing to, among other things, maintain through December 31, 2027 the utility-specific wholesale water rate passed through to customers of the pipeline, such that the rate, exclusive of other pass-through charges, remains no higher than the current rate.

| California | | | — | | | | | | 68% | | | | | | 32% | | |

Other

Other also includes CSG, corporate costs that are not allocated to the Company’s Regulated Businesses, interest income related to the seller promissory note and income from the revenue share agreement from the sale of HOS, eliminations of inter-segment transactions and fair value adjustments related to acquisitions that have not been allocated to the Regulated Businesses segment.

As a result of the sale of HOS, the categories which were previously shown as “Market-Based Businesses” and “Other” have been combined and are shown as Other.

On December 21, 2021, the EPA announced next steps to strengthen the regulatory framework on lead in drinking water, including implementing the Lead and Copper Rule Revisions (“LCRR”) and indicated their intent to finalize a forthcoming Lead and Copper Rule Improvements (“LCRI”) prior to October 16, 2024, the initial compliance date in the LCRR.

The Company is executing an implementation strategy to comply with the initial LCRR requirement to complete a lead service line inventory.

The EPA has identified leveraging wastewater discharge permitting and application of biosolids, or sewage sludge, containing PFAS as areas of focus in its PFAS Strategic Roadmap.

Individual states may also take action in these areas.

As indicated previously, capital expenditures and operating costs to comply with environmental mandates have been traditionally recognized by PUCs as appropriate for inclusion in establishing rates.

As a result, the Company expects to recover the operating and capital costs resulting from any new requirements in these areas.

- advancing the science on holistic management strategies to improve distribution system water quality further;

- systematically investigating PFAS removal by treatment processes in a wide range of water matrices;

Delivering a reliable supply of safe, clean and affordable water to customers and treating wastewater has been fundamental to the Company’s business for decades.

Within every community in which the Company operates, there is an opportunity to make a sustainable positive impact on the community, reflect the communities served with diverse and skilled employees, and maintain the governance and diligence to meet or exceed service expectations for decades to come.

Key Highlights

Demonstrated ESG Leadership

- The Company was ranked fifth in the Energy and Utilities industry category within Newsweek’s 2023 list of America’s Most Responsible Companies and ranked 19th within Barron’s list of the 100 Most Sustainable Companies in 2022.

- The Company was included in the Bloomberg Gender Equality Index for the fifth consecutive year, was recognized as a top-scoring company, for the fourth consecutive year, on the Disability Equality Index (DEI)®, as well as a Military Friendly Employer and Supplier.

- The Company earned the U.S. Department of Homeland Security SAFETY Act Designation for its internal enterprise security program, which includes risk management processes, personnel training and emergency exercises, and security oversight activities.

The Company was the first U.S. water and wastewater company and third utility to earn this designation.

- The Company established medium- and long-term goals that are science-based and aligned with the Paris Agreement, for scope 1 (direct) and scope 2 (indirect, derived from the Company’s purchase of power) greenhouse gas emissions reductions.

- The goals aim to reduce absolute scope 1 and 2 emissions by 50% by 2035 (from a 2020 baseline year) and achieve net zero scope 1 and scope 2 emissions by 2050.

- The Company has also estimated certain of its scope 3 greenhouse gas emissions, including Categories 1 (Purchased Goods and Services), 2 (Capital Goods), 3 (Fuel and Energy Related Activities) and 6 (Business Travel).

The assets and related liabilities of the New York subsidiary were classified as held for sale on the Consolidated Balance Sheets as of December 31, 2021 and 2020.

| New Jersey | | | $ | 778 | | | | | $ | 48 | | | | | $ | 826 | | | | | 24.4 | | % | | | | 660 | | | | | | 55 | | | | | | 715 | | | | | | 20.3 | | % |

| Pennsylvania | | | 688 | | | | | | 82 | | | | | | 770 | | | | | | 22.8 | | % | | | | 677 | | | | | | 82 | | | | | | 759 | | | | | | 21.5 | | % |

| Missouri | | | 337 | | | | | | 12 | | | | | | 349 | | | | | | 10.3 | | % | | | | 474 | | | | | | 17 | | | | | | 491 | | | | | | 13.9 | | % |

| Illinois | | | 303 | | | | | | 37 | | | | | | 340 | | | | | | 10.0 | | % | | | | 295 | | | | | | 69 | | | | | | 364 | | | | | | 10.3 | | % |

| California | | | 265 | | | | | | 3 | | | | | | 268 | | | | | | 7.9 | | % | | | | 187 | | | | | | 3 | | | | | | 190 | | | | | | 5.4 | | % |

| Total—Top Five States (b) | | | 2,371 | | | | | | 182 | | | | | | 2,553 | | | | | | 75.4 | | % | | | | 2,293 | | | | | | 226 | | | | | | 2,519 | | | | | | 71.4 | | % |

| New York (c) | | | 127 | | | | | | — | | | | | | 127 | | | | | | 3.8 | | % | | | | 127 | | | | | | — | | | | | | 127 | | | | | | 3.6 | | % |

| Other (d) | | | 678 | | | | | | 26 | | | | | | 704 | | | | | | 20.8 | | % | | | | 849 | | | | | | 35 | | | | | | 884 | | | | | | 25.0 | | % |

| Total Regulated Businesses | | | $ | 3,176 | | | | | $ | 208 | | | | | $ | 3,384 | | | | | 100.0 | | % | | | | 3,269 | | | | | | 261 | | | | | | 3,530 | | | | | | 100.0 | | % |

The benefit of investing in resiliency projects was seen firsthand in the aftermath of Tropical Depression Ida, when the Company’s New Jersey subsidiary reported that all its operating areas successfully withstood widespread flooding and drinking water quality was not impacted in any of its service areas.

Specifically, the New Jersey subsidiary’s Raritan-Millstone Water Treatment Plant, which was fortified with a $37 million flood protection project in 2018, withstood a record flood and continued to provide potable water supply for approximately 1 million people in parts of seven counties in central New Jersey.

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The Company is awaiting further guidance on the distribution of these funds.

It also requires water and wastewater utilities to participate in regional discussions and planning to assess opportunities for the more efficient use of water and wastewater utility assets and infrastructure.

Water and wastewater utilities that fail to comply with the requirements of the law may be ineligible for grants and loans from the State Revolving Fund.

Under the law, all new municipal and investor-owned utilities are required to be regulated by the Indiana Utility Regulatory Commission for ten years from inception of operations.

Upon request by the Missouri Department of Natural Resources, the water providers must certify compliance with all regulations regarding water quality sampling, testing and reporting, hydrant and valve testing and reporting and cybersecurity plans and procedures.

For example, a citizens group in Monterey, California successfully added “Measure J” to the November 2018 election ballot asking voters to decide whether the Monterey Peninsula Water Management District (the “MPWMD”) should conduct a feasibility study concerning the potential purchase of the Monterey water service system assets (the “Monterey system assets”) of the Company’s California subsidiary, and, if feasible, to proceed with a purchase of those assets without an additional public vote.

This service territory represents approximately 40,000 customers.

In November 2018, Measure J was certified to have passed.

In August 2019, the MPWMD’s General Manager issued a report that recommends that the MPWMD board (1) develop criteria to determine which water systems should be considered for acquisition; (2) examine the feasibility of acquiring the Monterey system assets and consider public ownership of smaller systems only if the MPWMD becomes the owner of a larger system; (3) evaluate whether the acquisition of the Monterey system assets by the MPWMD is in the public interest and sufficiently satisfies the criterion of “feasible” as provided in Measure J; (4) ensure there is significant potential for cost savings before agreeing to commence an acquisition; and (5) develop more fully alternate operating plans before deciding whether to consider a Resolution of Necessity.

On June 12, 2020, the MPWMD issued a draft environmental impact report for the potential acquisition of the Monterey system assets and a related district boundary adjustment that would be required if the MPWMD were to acquire and operate certain of the Monterey system assets located outside the MPWMD’s boundaries.

On September 15, 2020, the MPWMD gave notice of its intention to appraise the Monterey system assets and related property interests.

On September 29, 2020, the Company’s California subsidiary declined to make the Monterey system assets and related property interests available for inspection or to comply with any of the other requests contained in the MPWMD’s notice.

On November 25, 2020, the Company’s California subsidiary filed a petition challenging this certification in court.

A hearing on the matter was held on August 30, 2021, and on November 19, 2021, the court denied the petition.

See Item 3—Legal Proceedings—Challenge of Certification—Proposed Monterey System Final Environmental Impact Report.

On January 5, 2022, LAFCO’s commissioners confirmed the denial.

On January 31, 2022, the MPWMD filed an application for reconsideration of LAFCO’s confirmation of denial.

A hearing on the application has been set for February 28, 2022.

Before filing its eminent domain lawsuit, the water agency made an offer of $38 million for the pipeline.

The parties have filed with the court updated valuation reports.

A valuation trial was originally scheduled for October 2021 but has been continued to June 2022.

| California | | | — | | | | | | 65% | | | | | | 35% | | |

Market-Based Businesses

MSG is the Company’s remaining primary market-based business.

To help formulate the basis for future regulations, the EPA has the authority to require monitoring for additional, unregulated contaminants under the Unregulated Contaminant Monitoring Rule (the “Monitoring Rule”).

The Company’s facilities have participated in the data gathering effort for the Monitoring Rule in previous rounds, which occurs every five years, including the fourth round that concluded at the end of 2020.

Set forth below is information related to the Company’s material pending legal proceedings as of February [removed: 16, 2022,] [added: 15, 2023,] other than ordinary routine litigation incidental to the business, required to be disclosed in this Annual Report on Form 10-K.

The information below should be read together with Note [removed: 17—Commitments] [added: 16—Commitments] and Contingencies in the Notes to the Consolidated Financial Statements.

Under the 2009 Order, [removed: California-American Water Company, the Company’s California subsidiary (“Cal Am”)] [added: Cal Am] is required, among other things, to decrease significantly its yearly diversions of water from the Carmel River according to a set reduction schedule.

The 2009 Order responded to claims that Cal Am had not sufficiently implemented actions to terminate its unpermitted diversions of water from the Carmel River as required by [removed: a] [added: the] 1995 [removed: order of] [added: Order issued by] the SWRCB.

In July 2016, at the request of Cal Am and several Monterey County government agencies, the SWRCB issued the 2016 Order approving [removed: the] [added: a deadline of December 31,] 2021 [removed: Deadline.][added: for Cal Am’s compliance with the 2009 Order.]

[added: Following issuance by the Coastal Commission in November 2022 of a coastal development permit, as described below,] Cal Am continues to work constructively with all appropriate agencies to [removed: provide necessary information in connection with obtaining] [added: obtain the remaining] required [removed: approvals] [added: permits] for the Water Supply Project.

[removed: Beginning in January 2022, Cal Am expects to be able to comply with the diversion reduction requirements contained in the 2016 Order, but continued] [added: Continued] compliance with the diversion [removed: reduction requirements for] [added: limitations in] 2023 and future years [added: may be impacted by a number of factors, including without limitation continued drought conditions in California and the exhaustion of water supply reserves, and] will [removed: depend on] [added: require] successful development of alternate water supply sources sufficient to meet customer demand.

In [removed: September] 2016, the CPUC unanimously approved a final decision to authorize Cal Am to enter into a water purchase agreement for the GWR Project and to construct a pipeline and pump station facilities and recover up to the incurred $50 million in associated costs plus AFUDC, subject to meeting certain criteria.

In [removed: September] 2018, the CPUC unanimously approved another final decision finding that the Water Supply Project meets the CPUC’s requirements for a CPCN and an additional procedural phase was not necessary to consider alternative projects.

Cal Am has incurred [removed: $186] [added: $206] million in aggregate costs as of December 31, [removed: 2021] [added: 2022,] related to the Water Supply Project, which includes [removed: $47] [added: $51] million in AFUDC.

In September 2021, Cal Am, Monterey One Water and the MPWMD reached an agreement on Cal Am’s purchase of additional water from [removed: the] [added: an] expansion to the GWR Project, which is not expected to produce additional water until 2024 at the earliest.

The amended and restated water purchase agreement for the GWR Project [added: expansion] is subject to review and approval of the CPUC, and [removed: on] [added: in] November [removed: 29,] 2021, Cal Am filed an application with the CPUC [removed: seeking] [added: that sought] review and approval of the amended and restated water purchase agreement.

Cal Am [removed: is] also [removed: requesting] [added: requested] rate base treatment of the additional capital investment for certain Cal Am facilities required to maximize the water supply from the expansion to the GWR Project and a related Aquifer Storage and Recovery Project, totaling approximately $81 million.

This [added: requested] amount [removed: is] [added: was] in addition to, and consistent in regulatory treatment with, the prior $50 million of [added: cost] recovery for facilities associated with the original water purchase agreement, which was approved by the CPUC in its [added: unanimous] 2016 final decision.

While Cal Am believes that its expenditures to date have been prudent and necessary to comply with the 2009 Order and the 2016 Order, as well as the CPUC’s 2016 and 2018 final decisions, Cal Am cannot currently predict its ability to recover all of its costs and expenses associated with the Water Supply Project and there can be no assurance that Cal Am will be able to recover all of such costs and expenses in excess of the [removed: $50] [added: $112] million in [added: aggregate] construction [removed: costs] [added: costs, plus applicable AFUDC,] previously approved by the CPUC in its 2016 [added: and December 2022] final [removed: decision.][added: decisions.]

See Note [removed: 17—Commitments] [added: 16—Commitments] and Contingencies in the Notes to the Consolidated Financial Statements for further discussion.

In [removed: June] 2018, Cal Am submitted a coastal development permit application [added: (the “Marina Application”)] to the City of Marina (the “City”) for those project components of the Water Supply Project located within the City’s coastal zone.

In May 2019, the City issued a notice of final local action based upon the denial by the Planning Commission of [removed: Cal Am’s coastal development permit application.][added: the Marina Application.]

At the same time, Cal Am submitted an application [added: (the “Original Jurisdiction Application”)] to the Coastal Commission for a coastal development permit for those project components located within the Coastal Commission’s original jurisdiction.

The withdrawal of the [removed: original jurisdiction application] [added: Original Jurisdiction Application] did not impact Cal Am’s appeal of the City’s [removed: denial,] [added: denial of the Marina Application,] which remains pending before the Coastal Commission.

[added: In November 2020,] Cal Am refiled the [removed: original jurisdiction application in November 2020.][added: Original Jurisdiction Application.]

[removed: The original jurisdiction] [added: This] application remains pending.

The proposed desalination plant for the Water Supply Project is to be located in an unincorporated portion of Monterey County, [removed: California] [added: California,] on a site owned by CEMEX, Inc. (“CEMEX”), and requires a combined development permit from [removed: the County of] Monterey [added: County] prior to commencement of construction.

[removed: On] [added: In] April [removed: 24,] 2019, [removed: the] [added: Monterey] County’s Planning Commission voted to approve the permit.

In July 2019, the Board of Supervisors heard appeals filed by MCWD and a public advocacy group, at which time it denied the appeals and [removed: approved the permit.]

In October 2019, after a hearing, the court denied, without prejudice, MCWD’s motion for a preliminary injunction, but issued a stay of [removed: the] [added: Monterey] County’s approval of the combined development permit, precluding commencement of physical construction of the desalination plant, but allowing Cal Am to continue to obtain permits needed for the desalination plant’s construction.

[removed: On] [added: In] January [removed: 21,] 2021, the court issued its decision granting in part and denying in part MCWD’s petition.

The court found that [removed: the County of] Monterey [added: County] did not completely comply with all of the requirements necessary to approve the combined development permit and set aside its approval so that [removed: the] [added: Monterey] County could come into compliance.

[removed: On] [added: In] May [removed: 25,] 2021, Cal Am filed a notice of appeal as to the Monterey County Superior Court’s January [removed: 21,] 2021 decision, seeking to challenge the court’s decision on Monterey County’s statement of overriding considerations.

Monterey County filed a notice of appeal as to the same issue [removed: on] [added: in] May [removed: 26,] 2021.

[removed: On] [added: In] June [removed: 22,] 2021, MCWD filed cross-appeals on its claims that had been denied by the court.

Because Cal Am may use the test slant well as one of the slant wells for the Water Supply Project, Cal Am sought and obtained from the Coastal Commission permit amendments to allow the test slant well to remain in place and be maintained until February [removed: 23, 2023.][added: 28, 2024.]

A required lease obtained from the California State Lands Commission, as amended, [removed: will expire] [added: expired] on December 16, 2022.

[removed: On] [added: in] November [removed: 26,] 2019, the City notified CEMEX that, based on this permanent easement and Cal Am’s proposed use of the site for the intake wells, CEMEX has breached or will soon breach a prior 1996 annexation agreement (to which Cal Am was not a party).

The lawsuit, as amended, alleges a claim for breach of contract against CEMEX and seeks declaratory relief to void the permanent easement and prohibiting extraction of water by Cal Am’s slant wells at the CEMEX [removed: site in excess of 500 acre-feet per year and the export of such water outside the groundwater basin.]

In November 2020, Cal Am, CEMEX and MCWRA filed demurrers, which were overruled by the court at a hearing held [removed: on] [added: in] February [removed: 9,] 2021.

In August 2020, MCWD filed a cross-complaint in the May [removed: 8,] 2020 lawsuit against Cal Am, CEMEX and MCWRA, alleging claims for specific performance of certain provisions of the 1996 annexation agreement related to the property owned by CEMEX on which intake wells for the Water Supply Project will be located, as well as claims of water rights, nuisance and unreasonable water use, and seeking additional declaratory relief.

Following various rulings on demurrers filed by Cal Am, CEMEX and MCWRA, [removed: on] [added: in] February [removed: 23,] 2021, the court sustained, without leave to amend, the demurrer to MCWD’s nuisance claim and overruled the remainder of the demurrers.

[removed: On] [added: In] October [removed: 7,] 2021, the court granted a motion filed by Cal Am related to MCWD’s cross-complaint, which motion requested a referral of certain issues related to MCWD’s water rights and unreasonable use claims to the SWRCB for its expert advisory opinion.

Under California’s Sustainable Groundwater Management Act (“SGMA”) enacted in 2015, groundwater basins designated by the state as critically overdrafted must be managed by a [removed: groundwater sustainability agency (“GSA”)] [added: GSA] by 2020 in accordance with an approved groundwater sustainability plan (“GSP”) designed to achieve sustainability by 2040.

For the year ended December 31, 2022, Cal Am has complied with the diversion limitations contained in the 2016 Order.

The reasonableness of the Water Supply Project costs will be reviewed by the CPUC when Cal Am seeks cost recovery for the Water Supply Project.

On December 5, 2022, the CPUC issued a final decision that authorizes Cal Am to enter into the amended water purchase agreement, and specifically to increase pumping capacity and reliability of groundwater extraction from the Seaside Groundwater Basin.

The final decision sets the cost cap for the proposed facilities at approximately $62 million.

Cal Am may seek recovery of amounts above the cost cap in a subsequent rate filing or general rate case.

Additionally, the final decision authorizes AFUDC at Cal Am’s actual weighted average cost of debt for most of the facilities.

On December 30, 2022, Cal Am filed with the CPUC an application for rehearing of the CPUC’s December 5, 2022 final decision.

Cal Am is requesting inclusion in the cost cap all infrastructure costs for the GWR Project expansion that were not included in the final decision.

Cal Am believes that the December 5, 2022 final decision is contrary to the CPUC’s precedent and that obtaining recovery of these infrastructure costs is a key component of the GWR Project expansion and Cal Am’s ability to meet the future water supply needs of its customers in Monterey.

After Coastal Commission staff issued reports recommending denial of the Original Jurisdiction Application, noting potential impacts on environmentally sensitive habitat areas and wetlands and possible disproportionate impacts to communities of concern, in September 2020, Cal Am withdrew the Original Jurisdiction Application in order to address the staff’s environmental justice concerns.

On October 5, 2022, Cal Am announced a phasing plan for the proposed desalination plant component of the Water Supply Project.

The desalination plant and slant wells originally approved by the CPUC would produce up to 6.4 million gallons of desalinated water per day.

Under the phased approach, the facilities would initially be constructed to produce up to 4.8 million gallons per day of desalinated water, enough to meet anticipated demand through about 2030, and would limit the number of slant wells initially constructed.

As demand increases in the future, desalination facilities would be expanded to meet the additional demand.

The phased approach seeks to meet near-term demand by allowing for additional supply as it becomes needed, while also providing an opportunity for regional future public participation and was developed by Cal Am based on feedback received from the community.

On November 18, 2022, the Coastal Commission approved the Marina Application and the Original Jurisdiction Application with respect to the phased development of the proposed desalination plant, subject to compliance with a number of conditions, all of which Cal Am expects to satisfy.

Cal Am continues to seek the remaining permits necessary to construct the Water Supply Project.

On December 29, 2022, the City, Marina Coast Water District (“MCWD”), MCWD’s groundwater sustainability agency (“GSA”), and the MPWMD jointly filed a petition for writ of mandate in Monterey County Superior Court against the Coastal Commission, alleging that the Coastal Commission violated the California Coastal Act and the California Environmental Quality Act in issuing a coastal development permit to Cal Am for construction of the MPWSP slant wells.

Cal Am is named as a real party in interest.

Subject to the impact or resolution of this litigation, construction of the desalination plant is expected to begin in 2024 and the desalination plant is estimated to be in-service by the end of 2027.

approved the permit.

These appeals remain pending.

Cal Am has filed an applications for extension of the State Lands Commission lease.

This application remains pending.

site in excess of 500 acre-feet per year and the export of such water outside the groundwater basin.

The SWRCB has scheduled hearings on the referred issues before its Administrative Hearing Officer, which took place in the fourth quarter of 2022 and are set to continue into early 2023.

The Monterey County Superior Court has set a trial date of October 23, 2023, for the City’s lawsuit.

Proposed Acquisition of Monterey System Assets — Local Area Formation Commission Litigation

those assets without an additional public vote.

In February 2021, the MPWMD filed an application with LAFCO seeking approval to become a retail water provider and annex approximately 58 parcels of land into the MPWMD’s boundaries.

In December 2021, LAFCO’s commissioners denied the MPWMD’s application to become a retail water provider, determining that the MPWMD does not have the authority to operate the Monterey system assets, a result that precludes the MPWMD from proceeding with a condemnation thereof.

On April 1, 2022, the MPWMD filed a lawsuit against LAFCO challenging its denial.

On June 17, 2022, the court granted, with conditions, a motion by Cal Am to intervene in the MPWMD’s lawsuit against LAFCO.

On December 13, 2022, the court sustained in part, and denied in part, demurrers that had been filed by LAFCO seeking to dismiss the MPWMD’s lawsuit.

This matter remains pending.

On July 5, 2022, the Circuit Court entered an order again certifying a class to address at trial certain liability issues but not to consider damages.

On August 26, 2022, WVAWC filed another Petition for Writ of Prohibition in the Supreme Court of Appeals of West Virginia challenging the West Virginia Circuit Court’s July 5, 2022 order.

The Writ Petition has been supported by an amicus brief filed by certain water and utility industry trade groups.

On February 9, 2023, the Supreme Court of Appeals accepted the Writ Petition by issuing a Rule to Show Cause and scheduling oral argument for April 26, 2023.

On January 12, 2023, after hearing oral argument, the court issued an oral ruling denying the Tennessee Plaintiffs’ motion for class certification.

[Table](#ifb4765332bfb410ba6ce53d196f7d99d_7) [of Contents](#ifb4765332bfb410ba6ce53d196f7d99d_7)

In July 2019, Cal Am notified the MPWMD and Monterey One Water (collectively, the “Agencies”) that an event of default occurred under the water purchase agreement for the GWR Project because the Agencies failed to deliver to Cal Am by July 1, 2019 advanced treated recycled water produced by the GWR Project.

In its notification to the Agencies, Cal Am expressly reserved its right to terminate the water purchase agreement until the Performance Start Date, which was September 1, 2020.

As of June 30, 2021, Cal Am determined that the Agencies met their performance obligations under the water purchase agreement with respect to the first fiscal year of the contract.

The reasonableness of the Water Supply Project costs will be reviewed in the first general rate case filed by Cal Am after it becomes operational.

In October 2019, staff of the Coastal Commission issued a report recommending a denial of Cal Am’s application for a coastal development permit with respect to the Water Supply Project, largely based on a memorandum prepared by the general manager of the MPWMD that contradicted findings made by the CPUC in its final decision approving the Water Supply Project.

In November 2019, discussions between staffs of the Coastal Commission and the CPUC took place regarding the Coastal Commission staff recommendation, at which time the CPUC raised questions about the Coastal Commission staff’s findings on water supply and demand, groundwater impacts and the viability of a project that the Coastal Commission staff believes may be a possible alternative to the Water Supply Project.

In August 2020, the staff of the Coastal Commission released a report again recommending denial of Cal Am’s application for a coastal development permit.

Although the report concluded that the Water Supply Project would have a negligible impact on groundwater resources, the report also concluded it would impact other coastal resources, such as environmentally sensitive habitat areas and wetlands, and that the Coastal Commission staff believes that a feasible alternative project exists that would avoid those impacts.

The staff’s report also noted disproportionate impacts to communities of concern.

In September 2020, Cal Am withdrew its original jurisdiction application to allow additional time to address the Coastal Commission staff’s environmental justice concerns.

In December 2020, the Coastal Commission sent to Cal Am a notice of incomplete application, identifying certain additional information needed to consider the application complete.

In March 2021, Cal Am provided responses to the Coastal Commission’s notice of incomplete application.

On June 18, 2021, the Coastal Commission responded, acknowledging the responses and requesting certain additional information before the application could be considered complete.

Cal Am responded with the requested additional information on January 11, 2022, and on February 8, 2022, the Coastal Commission requested additional information.

Challenge of Certification — Proposed Monterey System Acquisition Final Environmental Impact Report

In August 2019, the MPWMD’s General Manager issued a report that recommends that the MPWMD board, among other things, (1) evaluate whether the acquisition of the Monterey system assets by the MPWMD is in the public interest and sufficiently satisfies the criterion of “feasible” as provided in Measure J, (2) ensure there is significant potential for cost savings before agreeing to commence an acquisition, and (3) develop more fully alternate operating plans before deciding whether to consider a Resolution of Necessity.

On October 7, 2020, the MPWMD issued a FEIR for the potential acquisition of the Monterey system assets, and on November 4, 2020, the MPWMD certified the FEIR, which purports to analyze the environmental impacts of the MPWMD’s project to (1) acquire the Monterey system assets through the power of eminent domain, if necessary, and (2) expand its geographic boundaries to include all parts of this system.

On November 25, 2020, Cal Am filed a petition for writ of mandate in Monterey County Superior Court challenging certification of the FEIR, alleging that the MPWMD’s analysis of environmental impacts was inadequate and that certification was improper.

A hearing on the matter was held on August 30, 2021, and on November 19, 2021, the court denied Cal Am’s petition.

On July 16, 2021, oral argument was heard by the Circuit Court on the issue of addressing the Supreme Court of Appeals’ remand.

The court has entered an agreed scheduling order, which sets a hearing in October 2022 to address the question of class certification.

For the fiscal year ended December 31, [removed: 2021][added: 2022]

Common Stock, $0.01 par [removed: value—$24,667,400,000] [added: value—$25,487,300,000] as of June 30, [removed: 2021] [added: 2022] (solely for purposes of calculating this aggregate market value, American Water has defined its affiliates to include (i) those persons who were, as of June 30, [removed: 2021,] [added: 2022,] its executive officers, directors or known beneficial owners of more than 10% of its common stock, and (ii) such other persons who were deemed, as of June 30, [removed: 2021,] [added: 2022,] to be controlled by, or under common control with, American Water or any [removed: of the] [added: such] persons [removed: described] in clause (i) above).

Indicate the number of shares outstanding of each of the registrant’s classes of common stock as of the latest practicable date: Common Stock, $0.01 par value per [removed: share—181,724,991] [added: share—181,858,619] shares as of [removed: February 10, 2022.][added: January 31, 2023.]

Portions of the American Water Works Company, Inc. definitive proxy statement for the [removed: 2022] [added: 2023] Annual Meeting of Shareholders to be filed with the Securities and Exchange Commission within 120 days after December 31, [removed: 2021] [added: 2022] are incorporated by reference into Part III of this report.

| [Forward-Looking [removed: Statements](#ifb4765332bfb410ba6ce53d196f7d99d_13)] [added: Statements](#if348ed1740c649ea8353396181058b86_13)] | | | | | | [removed: [1](#ifb4765332bfb410ba6ce53d196f7d99d_13)] [added: [1](#if348ed1740c649ea8353396181058b86_13)] | | |

| Item 1. | | | [removed: [Business](#ifb4765332bfb410ba6ce53d196f7d99d_19)] [added: [Business](#if348ed1740c649ea8353396181058b86_19)] | | | [removed: [4](#ifb4765332bfb410ba6ce53d196f7d99d_19)] [added: [4](#if348ed1740c649ea8353396181058b86_19)] | | |

| Item 1A. | | | [Risk [removed: Factors](#ifb4765332bfb410ba6ce53d196f7d99d_46)] [added: Factors](#if348ed1740c649ea8353396181058b86_46)] | | | [removed: [26](#ifb4765332bfb410ba6ce53d196f7d99d_46)] [added: [25](#if348ed1740c649ea8353396181058b86_46)] | | |

| Item 1B. | | | [Unresolved Staff [removed: Comments](#ifb4765332bfb410ba6ce53d196f7d99d_49)] [added: Comments](#if348ed1740c649ea8353396181058b86_49)] | | | [removed: [41](#ifb4765332bfb410ba6ce53d196f7d99d_49)] [added: [40](#if348ed1740c649ea8353396181058b86_49)] | | |

| Item 2. | | | [removed: [Properties](#ifb4765332bfb410ba6ce53d196f7d99d_52)] [added: [Properties](#if348ed1740c649ea8353396181058b86_52)] | | | [removed: [41](#ifb4765332bfb410ba6ce53d196f7d99d_52)] [added: [40](#if348ed1740c649ea8353396181058b86_52)] | | |

| Item 3. | | | [Legal [removed: Proceedings](#ifb4765332bfb410ba6ce53d196f7d99d_55)] [added: Proceedings](#if348ed1740c649ea8353396181058b86_55)] | | | [removed: [41](#ifb4765332bfb410ba6ce53d196f7d99d_55)] [added: [40](#if348ed1740c649ea8353396181058b86_55)] | | |

| Item 4. | | | [Mine Safety [removed: Disclosures](#ifb4765332bfb410ba6ce53d196f7d99d_58)] [added: Disclosures](#if348ed1740c649ea8353396181058b86_58)] | | | [removed: [48](#ifb4765332bfb410ba6ce53d196f7d99d_58)] [added: [46](#if348ed1740c649ea8353396181058b86_58)] | | |

| Item 5. | | | [Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity [removed: Securities](#ifb4765332bfb410ba6ce53d196f7d99d_64)] [added: Securities](#if348ed1740c649ea8353396181058b86_64)] | | | [removed: [49](#ifb4765332bfb410ba6ce53d196f7d99d_64)] [added: [47](#if348ed1740c649ea8353396181058b86_64)] | | |

| Item 7. | | | [Management’s Discussion and Analysis of Financial Condition and Results of [removed: Operations](#ifb4765332bfb410ba6ce53d196f7d99d_70)] [added: Operations](#if348ed1740c649ea8353396181058b86_67)] | | | [removed: [50](#ifb4765332bfb410ba6ce53d196f7d99d_70)] [added: [48](#if348ed1740c649ea8353396181058b86_67)] | | |

| Item 7A. | | | [Quantitative and Qualitative Disclosures About Market [removed: Risk](#ifb4765332bfb410ba6ce53d196f7d99d_103)] [added: Risk](#if348ed1740c649ea8353396181058b86_100)] | | | [removed: [78](#ifb4765332bfb410ba6ce53d196f7d99d_103)] [added: [74](#if348ed1740c649ea8353396181058b86_100)] | | |

| Item 8. | | | [Financial Statements and Supplementary [removed: Data](#ifb4765332bfb410ba6ce53d196f7d99d_106)] [added: Data](#if348ed1740c649ea8353396181058b86_103)] | | | [removed: [79](#ifb4765332bfb410ba6ce53d196f7d99d_106)] [added: [76](#if348ed1740c649ea8353396181058b86_103)] | | |

| Item 9. | | | [Changes in and Disagreements with Accountants on Accounting and Financial [removed: Disclosure](#ifb4765332bfb410ba6ce53d196f7d99d_199)] [added: Disclosure](#if348ed1740c649ea8353396181058b86_196)] | | | [removed: [137](#ifb4765332bfb410ba6ce53d196f7d99d_199)] [added: [134](#if348ed1740c649ea8353396181058b86_196)] | | |

| Item 9A. | | | [Controls and [removed: Procedures](#ifb4765332bfb410ba6ce53d196f7d99d_202)] [added: Procedures](#if348ed1740c649ea8353396181058b86_199)] | | | [removed: [137](#ifb4765332bfb410ba6ce53d196f7d99d_202)] [added: [134](#if348ed1740c649ea8353396181058b86_199)] | | |

| Item 9B. | | | [Other [removed: Information](#ifb4765332bfb410ba6ce53d196f7d99d_205)] [added: Information](#if348ed1740c649ea8353396181058b86_202)] | | | [removed: [137](#ifb4765332bfb410ba6ce53d196f7d99d_205)] [added: [135](#if348ed1740c649ea8353396181058b86_202)] | | |

| Item 9C. | | | [Disclosure Regarding Foreign Jurisdictions that Prevent [removed: Inspections](#ifb4765332bfb410ba6ce53d196f7d99d_2051)] [added: Inspections](#if348ed1740c649ea8353396181058b86_205)] | | | [removed: [138](#ifb4765332bfb410ba6ce53d196f7d99d_2051)] [added: [135](#if348ed1740c649ea8353396181058b86_205)] | | |

| | | | [Part [removed: III](#ifb4765332bfb410ba6ce53d196f7d99d_208)] [added: III](#if348ed1740c649ea8353396181058b86_208)] | | | | | |

| Item 10. | | | [Directors, Executive Officers of the Registrant and Corporate [removed: Governance](#ifb4765332bfb410ba6ce53d196f7d99d_211)] [added: Governance](#if348ed1740c649ea8353396181058b86_211)] | | | [removed: [139](#ifb4765332bfb410ba6ce53d196f7d99d_211)] [added: [136](#if348ed1740c649ea8353396181058b86_211)] | | |

| Item 11. | | | [Executive [removed: Compensation](#ifb4765332bfb410ba6ce53d196f7d99d_214)] [added: Compensation](#if348ed1740c649ea8353396181058b86_214)] | | | [removed: [139](#ifb4765332bfb410ba6ce53d196f7d99d_214)] [added: [136](#if348ed1740c649ea8353396181058b86_214)] | | |

| Item 12. | | | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder [removed: Matters](#ifb4765332bfb410ba6ce53d196f7d99d_217)] [added: Matters](#if348ed1740c649ea8353396181058b86_217)] | | | [removed: [139](#ifb4765332bfb410ba6ce53d196f7d99d_217)] [added: [136](#if348ed1740c649ea8353396181058b86_217)] | | |

| Item 13. | | | [Certain Relationships and Related Transactions and Director [removed: Independence](#ifb4765332bfb410ba6ce53d196f7d99d_220)] [added: Independence](#if348ed1740c649ea8353396181058b86_220)] | | | [removed: [139](#ifb4765332bfb410ba6ce53d196f7d99d_220)] [added: [136](#if348ed1740c649ea8353396181058b86_220)] | | |

| Item 14. | | | [Principal Accountant Fees and [removed: Services](#ifb4765332bfb410ba6ce53d196f7d99d_223)] [added: Services](#if348ed1740c649ea8353396181058b86_223)] | | | [removed: [139](#ifb4765332bfb410ba6ce53d196f7d99d_223)] [added: [136](#if348ed1740c649ea8353396181058b86_223)] | | |

| | | | [Part [removed: IV](#ifb4765332bfb410ba6ce53d196f7d99d_226)] [added: IV](#if348ed1740c649ea8353396181058b86_226)] | | | | | |

| Item 15. | | | [Exhibits and Financial Statement [removed: Schedules](#ifb4765332bfb410ba6ce53d196f7d99d_229)] [added: Schedules](#if348ed1740c649ea8353396181058b86_229)] | | | [removed: [140](#ifb4765332bfb410ba6ce53d196f7d99d_229)] [added: [137](#if348ed1740c649ea8353396181058b86_229)] | | |

| Item 16. | | | [Form 10-K [removed: Summary](#ifb4765332bfb410ba6ce53d196f7d99d_2057)] [added: Summary](#if348ed1740c649ea8353396181058b86_232)] | | | [removed: [140](#ifb4765332bfb410ba6ce53d196f7d99d_2057)] [added: [137](#if348ed1740c649ea8353396181058b86_232)] | | |

Forward-looking statements may relate to, among other things: the Company’s future financial performance, liquidity and cash flows; the timing and amount of rate and revenue adjustments, including through general rate case filings, filings for infrastructure surcharges and other governmental agency authorizations and proceedings, and filings to address regulatory lag; the Company’s growth and portfolio optimization strategies, including the timing and outcome of pending or future acquisition activity; the ability of the Company’s California subsidiary to obtain adequate alternative water supplies in lieu of diversions from the Carmel River; the amount and allocation of projected capital expenditures and related funding requirements; the Company’s ability to repay or refinance debt; the future impacts of increased or increasing financing costs, inflation and interest rates; the Company’s ability to execute its current and long-term business, operational and capital expenditures strategies; the Company’s ability to finance current operations, capital expenditures and growth initiatives by accessing the debt and equity capital markets; the outcome and impact on the Company of governmental and regulatory proceedings and related potential fines, penalties and other sanctions; the ability to meet or exceed the Company’s stated environmental and sustainability goals, including its greenhouse gas [added: (“GHG”)] emission reduction, water delivery efficiency and water system resiliency goals; the ability to complete, and the timing and efficacy of, the design, development, implementation and improvement of technology and other strategic initiatives; the impacts to the Company of the ongoing COVID-19 pandemic; the ability to capitalize on existing or future utility privatization opportunities; trends in the water and wastewater industries in which the Company operates, including macro trends with respect to the Company’s efforts related to customer, technology and work execution; regulatory, legislative, tax policy or legal developments; and impacts that future significant tax legislation may have on the Company and on its business, results of operations, cash flows and liquidity.

- the decisions of governmental and regulatory bodies, including decisions to raise or lower customer [removed: rates and regulatory responses to the ongoing COVID-19 pandemic;][added: rates;]

- changes in customer demand for, and patterns of use of, [removed: water,] [added: water and energy,] such as may result from conservation efforts, [removed: impacts of the COVID-19 pandemic,] or otherwise;

- a loss of one or more large industrial or commercial customers due to adverse economic conditions, [removed: the COVID-19 pandemic,] or other factors;

- the Company’s ability to obtain [added: and have delivered] adequate and cost-effective supplies of pipe, equipment (including personal protective equipment), chemicals, [removed: electricity,] [added: power and other] fuel, water and other raw materials, and to address or mitigate supply chain constraints that may result in delays or shortages in, as well as increased costs of, supplies, products and materials that are critical to or used in the Company’s business operations;

- acquiring, closing and successfully integrating regulated [removed: operations and market-based businesses;][added: operations;]

- risks and uncertainties following the completion of the sale of the Company’s Homeowner Services Group [removed: (“HOS”) and its New York subsidiary,] [added: (“HOS”),] including:

- the Company’s ability to receive any contingent consideration provided for in the HOS sale, as well as amounts due, payable and owing to the Company [removed: from time to time] under the seller note when due; and

- the ability of the Company to redeploy successfully and timely the net proceeds of [removed: these transactions] [added: this transaction] into the Company’s Regulated Businesses;

- changes in general economic, political, business and financial market [removed: conditions, including without limitation conditions and collateral consequences associated with the COVID-19 pandemic;][added: conditions;]

- access to sufficient debt and/or equity capital on satisfactory terms and [removed: when and] as needed to support operations and capital expenditures;

- fluctuations in the value [removed: of] [added: of, or assumptions and estimates related to, its] benefit plan assets and [removed: liabilities] [added: liabilities, including with respect to its pension and other post-retirement benefit plans,] that could increase [removed: the Company’s cost] [added: expenses] and [added: plan] funding [removed: requirements;]

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).

| | | | [Part I](#if348ed1740c649ea8353396181058b86_16) | | | | | |

| | | | [Part II](#if348ed1740c649ea8353396181058b86_61) | | | | | |

| Item 6. | | | [\[](#if348ed1740c649ea8353396181058b86_2049)[Reserved](#if348ed1740c649ea8353396181058b86_2049)[\]](#if348ed1740c649ea8353396181058b86_2049) | | | [47](#if348ed1740c649ea8353396181058b86_64) | | |

| [Exhibit Index](#if348ed1740c649ea8353396181058b86_235) | | | | | | [137](#if348ed1740c649ea8353396181058b86_235) | | |

| [Signatures](#if348ed1740c649ea8353396181058b86_238) | | | | | | [142](#if348ed1740c649ea8353396181058b86_238) | | |

- the ability of energy providers, state governments and other third parties to achieve or fulfill their GHG emission reduction goals, including without limitation through stated renewable portfolio standards and carbon transition plans;

- fluctuations in inflation or interest rates, and the Company’s ability to address or mitigate the impacts thereof;

requirements;

| | | | [Part I](#ifb4765332bfb410ba6ce53d196f7d99d_16) | | | | | |

| | | | [Part II](#ifb4765332bfb410ba6ce53d196f7d99d_61) | | | | | |

| [Exhibit Index](#ifb4765332bfb410ba6ce53d196f7d99d_232) | | | | | | [140](#ifb4765332bfb410ba6ce53d196f7d99d_232) | | |

| [Signatures](#ifb4765332bfb410ba6ce53d196f7d99d_235) | | | | | | [145](#ifb4765332bfb410ba6ce53d196f7d99d_235) | | |

- fluctuations in inflation or interest rates;

- [removed: 480] [added: 490] groundwater treatment plants;

- [removed: 160] [added: 175] wastewater treatment plants;

- [removed: 52,500] [added: 53,500] miles of transmission, distribution and collection mains and pipes;

- [removed: 1,300] [added: 1,100] treated water storage facilities; and

- [removed: 76] [added: 73] dams.

The properties [removed: of its Market-Based Businesses] [added: within Other] consist mainly of office furniture and IT equipment.

[Table](#ifb4765332bfb410ba6ce53d196f7d99d_7) [of Contents](#ifb4765332bfb410ba6ce53d196f7d99d_7)

Since April 23, 2008, the Company’s common stock has traded on the New York Stock Exchange (“NYSE”) under the symbol “AWK.” As of [removed: February 10, 2022,] [added: January 31, 2023,] there were [removed: 181,724,991] [added: 181,858,619] shares of common stock outstanding held by approximately [removed: 2,333] [added: 2,234] record holders.

See Note [removed: 10—Shareholders’] [added: 9—Shareholders’] Equity in the Notes to Consolidated Financial Statements for additional information regarding the Company’s dividends.

From April 1, 2015, the date repurchases under the anti-dilutive stock repurchase program commenced, through December 31, [removed: 2021,] [added: 2022,] the Company repurchased an aggregate of 4,860,000 shares of its common stock under the program, leaving an aggregate of 5,140,000 shares available for repurchase under this program.

There were no repurchases of common stock in [removed: 2021.][added: 2022.]

[Table of Content](#if348ed1740c649ea8353396181058b86_7)[s](#if348ed1740c649ea8353396181058b86_7)

| [Report of Independent Registered Public Accounting [removed: Firm](#ifb4765332bfb410ba6ce53d196f7d99d_109)] [added: Firm](#if348ed1740c649ea8353396181058b86_106)] [(PCAOB [removed: I](#ifb4765332bfb410ba6ce53d196f7d99d_109)[D](#ifb4765332bfb410ba6ce53d196f7d99d_109) 238[)](#ifb4765332bfb410ba6ce53d196f7d99d_109)] [added: ID](#if348ed1740c649ea8353396181058b86_106) 238[)](#if348ed1740c649ea8353396181058b86_106)] | | | [removed: [80](#ifb4765332bfb410ba6ce53d196f7d99d_109)] [added: [77](#if348ed1740c649ea8353396181058b86_106)] | | |

| [Consolidated Balance Sheets as of December 31, [removed: 202](#ifb4765332bfb410ba6ce53d196f7d99d_115)[1](#ifb4765332bfb410ba6ce53d196f7d99d_115)] [added: 202](#if348ed1740c649ea8353396181058b86_112)[2](#if348ed1740c649ea8353396181058b86_112)] [and [removed: 2](#ifb4765332bfb410ba6ce53d196f7d99d_115)[020](#ifb4765332bfb410ba6ce53d196f7d99d_115)] [added: 20](#if348ed1740c649ea8353396181058b86_112)[21](#if348ed1740c649ea8353396181058b86_112)] | | | [removed: [82](#ifb4765332bfb410ba6ce53d196f7d99d_115)] [added: [79](#if348ed1740c649ea8353396181058b86_112)] | | |

| [Consolidated Statements of Operations for the years ended December 31, [removed: 202](#ifb4765332bfb410ba6ce53d196f7d99d_118)[1](#ifb4765332bfb410ba6ce53d196f7d99d_118)[, 20](#ifb4765332bfb410ba6ce53d196f7d99d_118)[20](#ifb4765332bfb410ba6ce53d196f7d99d_118)] [added: 202](#if348ed1740c649ea8353396181058b86_115)[2](#if348ed1740c649ea8353396181058b86_115)[, 202](#if348ed1740c649ea8353396181058b86_115)[1](#if348ed1740c649ea8353396181058b86_115)] [and [removed: 20](#ifb4765332bfb410ba6ce53d196f7d99d_118)[19](#ifb4765332bfb410ba6ce53d196f7d99d_118)] [added: 2](#if348ed1740c649ea8353396181058b86_115)[020](#if348ed1740c649ea8353396181058b86_115)] | | | [removed: [84](#ifb4765332bfb410ba6ce53d196f7d99d_118)] [added: [81](#if348ed1740c649ea8353396181058b86_115)] | | |

| [Consolidated Statements of Comprehensive Income for the years ended December [removed: 31,](#ifb4765332bfb410ba6ce53d196f7d99d_121) [202](#ifb4765332bfb410ba6ce53d196f7d99d_121)[1](#ifb4765332bfb410ba6ce53d196f7d99d_121)[, 20](#ifb4765332bfb410ba6ce53d196f7d99d_121)[20](#ifb4765332bfb410ba6ce53d196f7d99d_121)] [added: 31, 202](#if348ed1740c649ea8353396181058b86_118)[2](#if348ed1740c649ea8353396181058b86_118)[, 202](#if348ed1740c649ea8353396181058b86_118)[1](#if348ed1740c649ea8353396181058b86_118)] [and [removed: 201](#ifb4765332bfb410ba6ce53d196f7d99d_121)[9](#ifb4765332bfb410ba6ce53d196f7d99d_121)] [added: 2](#if348ed1740c649ea8353396181058b86_118)[02](#if348ed1740c649ea8353396181058b86_118)[0](#if348ed1740c649ea8353396181058b86_118)] | | | [removed: [85](#ifb4765332bfb410ba6ce53d196f7d99d_121)] [added: [82](#if348ed1740c649ea8353396181058b86_118)] | | |

| [Consolidated Statements of Cash Flows for the years ended December 31, [removed: 202](#ifb4765332bfb410ba6ce53d196f7d99d_124)[1](#ifb4765332bfb410ba6ce53d196f7d99d_124)[, 20](#ifb4765332bfb410ba6ce53d196f7d99d_124)[20](#ifb4765332bfb410ba6ce53d196f7d99d_124)] [added: 202](#if348ed1740c649ea8353396181058b86_121)[2](#if348ed1740c649ea8353396181058b86_121)[, 202](#if348ed1740c649ea8353396181058b86_121)[1](#if348ed1740c649ea8353396181058b86_121)] [and [removed: 201](#ifb4765332bfb410ba6ce53d196f7d99d_124)[9](#ifb4765332bfb410ba6ce53d196f7d99d_124)] [added: 20](#if348ed1740c649ea8353396181058b86_121)[20](#if348ed1740c649ea8353396181058b86_121)] | | | [removed: [86](#ifb4765332bfb410ba6ce53d196f7d99d_124)] [added: [83](#if348ed1740c649ea8353396181058b86_121)] | | |

| [Consolidated Statements of Changes in Shareholders’ Equity for the years ended December 31, [removed: 202](#ifb4765332bfb410ba6ce53d196f7d99d_127)[1](#ifb4765332bfb410ba6ce53d196f7d99d_127)[, 20](#ifb4765332bfb410ba6ce53d196f7d99d_127)[20](#ifb4765332bfb410ba6ce53d196f7d99d_127)] [added: 202](#if348ed1740c649ea8353396181058b86_124)[2](#if348ed1740c649ea8353396181058b86_124)[, 202](#if348ed1740c649ea8353396181058b86_124)[1](#if348ed1740c649ea8353396181058b86_124)] [and [removed: 201](#ifb4765332bfb410ba6ce53d196f7d99d_127)[9](#ifb4765332bfb410ba6ce53d196f7d99d_127)] [added: 20](#if348ed1740c649ea8353396181058b86_124)[20](#if348ed1740c649ea8353396181058b86_124)] | | | [removed: [87](#ifb4765332bfb410ba6ce53d196f7d99d_127)] [added: [84](#if348ed1740c649ea8353396181058b86_124)] | | |

| [Notes to Consolidated Financial [removed: Statements](#ifb4765332bfb410ba6ce53d196f7d99d_130)] [added: Statements](#if348ed1740c649ea8353396181058b86_127)] | | | [removed: [88](#ifb4765332bfb410ba6ce53d196f7d99d_130)] [added: [85](#if348ed1740c649ea8353396181058b86_127)] | | |

We have audited the accompanying consolidated balance sheets of American Water Works Company, Inc. and its subsidiaries (the “Company”) as of December 31, [removed: 2021] [added: 2022] and [removed: 2020,] [added: 2021,] and the related consolidated statements of operations, comprehensive income, changes in shareholders’ equity and cash flows for each of the three years in the period ended December 31, [removed: 2021,] [added: 2022,] including the related notes (collectively referred to as the “consolidated financial statements”).

We also have audited the Company's internal control over financial reporting as of December 31, [removed: 2021,] [added: 2022,] based on criteria established in *Internal Control - Integrated Framework* (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, [removed: 2021] [added: 2022] and [removed: 2020,] [added: 2021,] and the results of its operations and its cash flows for each of the three years in the period ended December 31, [removed: 2021] [added: 2022] in conformity with accounting principles generally accepted in the United States of America.

[removed: Also] [added: Also,] in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, [removed: 2021,] [added: 2022,] based on criteria established in *Internal Control - Integrated Framework* (2013) issued by the COSO.

As described in Notes 2 and [removed: 4] [added: 3] to the consolidated financial statements, the Company’s consolidated regulatory assets and liabilities balances were [removed: $1,067] [added: $1,030] million and [removed: $1,608] [added: $1,595] million, respectively, as of December 31, [removed: 2021.][added: 2022.]

| [added: West Virginia | | |] February [removed: 16,] [added: 25,] 2022 | | | [added: | | | 13 | | |]

| | | | December 31, [removed: 2021] [added: 2022] | | | | | | December 31, [removed: 2020] [added: 2021] | | |

| Property, plant and equipment | | | $ | [removed: 27,413] [added: 29,736] | | | | | $ | [removed: 25,614] [added: 27,413] | |

| Accumulated depreciation | | | [removed: (6,329)] [added: (6,513)] | | | | | | [removed: (5,904)] [added: (6,329)] | | |

| Property, plant and equipment, net | | | [removed: 21,084] [added: 23,223] | | | | | | [removed: 19,710] [added: 21,084] | | |

| Cash and cash equivalents | | | [removed: 116] [added: 85] | | | | | | [removed: 547] [added: 116] | | |

| Restricted funds | | | [removed: 20] [added: 32] | | | | | | [removed: 29] [added: 20] | | |

| Accounts receivable, net of allowance for uncollectible accounts of [removed: $75] [added: $60] and [removed: $60,] [added: $75,] respectively | | | [removed: 271] [added: 334] | | | | | | [removed: 321] [added: 271] | | |

| Unbilled revenues | | | [removed: 248] [added: 275] | | | | | | [removed: 206] [added: 248] | | |

| Materials and supplies | | | [removed: 57] [added: 98] | | | | | | [removed: 47] [added: 57] | | |

| Assets held for sale | | | [removed: 683] [added: —] | | | | | | [removed: 629] [added: 683] | | |

| Total current assets | | | [removed: 1,554] [added: 1,250] | | | | | | [removed: 1,906] [added: 1,554] | | |

| Regulatory assets | | | [removed: 1,051] [added: 990] | | | | | | [removed: 1,127] [added: 1,051] | | |

| Seller promissory note from the sale of the Homeowner Services Group | | | 720 | | | | | | [removed: —] [added: 720] | | |

| Operating lease right-of-use assets | | | [removed: 92] [added: 82] | | | | | | [removed: 95] [added: 92] | | |

| Goodwill | | | [removed: 1,139] [added: 1,143] | | | | | | [removed: 1,504] [added: 1,139] | | |

| Postretirement benefit assets | | | [removed: 193] [added: —] | | | | | | [removed: 173] [added: 193] | | |

| Other | | | [removed: 242] [added: 379] | | | | | | [removed: 196] [added: 242] | | |

| Total regulatory and other long-term assets | | | [removed: 3,437] [added: 3,314] | | | | | | [removed: 3,150] [added: 3,437] | | |

| Total assets | | | $ | [removed: 26,075] [added: 27,787] | | | | | $ | [removed: 24,766] [added: 26,075] | |

| Common stock ($0.01 par value; 500,000,000 shares authorized; [removed: 186,880,413] [added: 187,200,539] and [removed: 186,466,707] [added: 186,880,413] shares issued, respectively) | | | $ | 2 | | | | | $ | 2 | |

| Paid-in-capital | | | [removed: 6,781] [added: 6,824] | | | | | | [removed: 6,747] [added: 6,781] | | |

| Retained earnings | | | [removed: 925] [added: 1,267] | | | | | | [removed: 102] [added: 925] | | |

| Accumulated other comprehensive loss | | | [removed: (45)] [added: (23)] | | | | | | [removed: (49)] [added: (45)] | | |

| Treasury stock, at cost [removed: (5,269,324] [added: (5,342,477] and [removed: 5,168,215] [added: 5,269,324] shares, respectively) | | | [removed: (365)] [added: (377)] | | | | | | [removed: (348)] [added: (365)] | | |

| Total common shareholders' equity | | | [removed: 7,298] [added: 7,693] | | | | | | [removed: 6,454] [added: 7,298] | | |

| Long-term debt | | | [removed: 10,341] [added: 10,926] | | | | | | [removed: 9,329] [added: 10,341] | | |

| Redeemable preferred stock at redemption value | | | 3 | | | | | | [removed: 4] [added: 3] | | |

[Table of Content](#if348ed1740c649ea8353396181058b86_7)[s](#if348ed1740c649ea8353396181058b86_7)

[Table of Content](#if348ed1740c649ea8353396181058b86_7)[s](#if348ed1740c649ea8353396181058b86_7)

[Table of Content](#if348ed1740c649ea8353396181058b86_7)[s](#if348ed1740c649ea8353396181058b86_7)

| Income tax receivable | | | 114 | | | | | | 4 | | |

| Other | | | 312 | | | | | | 155 | | |

[Table of Content](#if348ed1740c649ea8353396181058b86_7)[s](#if348ed1740c649ea8353396181058b86_7)

| | | | December 31, 2022 | | | | | | December 31, 2021 | | |

[Table of Content](#if348ed1740c649ea8353396181058b86_7)[s](#if348ed1740c649ea8353396181058b86_7)

[Table of Content](#if348ed1740c649ea8353396181058b86_7)[s](#if348ed1740c649ea8353396181058b86_7)

[Table of Content](#if348ed1740c649ea8353396181058b86_7)[s](#if348ed1740c649ea8353396181058b86_7)

| Depreciation and amortization | | | 649 | | | | | | 636 | | | | | | 604 | | |

| Income tax receivable | | | (110) | | | | | | 21 | | | | | | (3) | | |

| Accrued taxes | | | (118) | | | | | | 129 | | | | | | 3 | | |

[Table of Content](#if348ed1740c649ea8353396181058b86_7)[s](#if348ed1740c649ea8353396181058b86_7)

| Balance as of December 31, 2022 | | | 187.4 | | | | | | $ | 2 | | | | | $ | 6,824 | | | | | $ | 1,267 | | | | | $ | (23) | | | | | (5.4) | | | | | | $ | (377) | | | | | $ | 7,693 | |

[Table of Content](#if348ed1740c649ea8353396181058b86_7)[s](#if348ed1740c649ea8353396181058b86_7)

The Company determines if long-lived assets are potentially impaired by comparing the undiscounted expected future cash flows to the carrying value when indicators of impairment exist.

When the undiscounted cash flow analysis indicates a long-lived asset may not be recoverable, the amount of the impairment loss is determined by measuring the excess of the carrying amount of the long-lived asset or asset group over its fair value.

The Company maintains defined benefit pension plans and other postretirement benefit plans for eligible employees and retirees.

The plan obligation and costs of providing benefits under these plans are annually measured as of December 31.

The measurement involves various factors, assumptions and accounting elections.

The impact of assumption changes or experience different from that assumed on pension and other postretirement benefit obligations is recognized over time rather than immediately recognized in the Consolidated Statements of Operations and the Consolidated Statements of Comprehensive Income.

| Reference Rate Reform | | | | | | This update provides an additional two-year deferral on the sunset date for temporary relief during the reference rate reform transition period. After December 31, 2024, the Company will no longer be permitted to apply the relief for reference rate reform. | | | | | | December 21, 2022 | | | | | | Prospective | | | | | | The standard did not have a material impact on the Consolidated Financial Statements | | |

| Troubled Debt Restructurings and Vintage Disclosures | | | | | | The main provisions of this standard eliminate the receivables accounting guidance for troubled debt restructurings (“TDRs”) by creditors while enhancing disclosure requirements when a borrower is experiencing financial difficulty. Entities must apply the loan refinancing and restructuring guidance for receivables to determine whether a modification results in a new loan or a continuation of an existing loan. Additionally, the amendments in this update require that an entity disclose current-period gross write-offs by year of origination for financing receivables and net investment in leases. | | | | | | January 1, 2023; early adoption permitted | | | | | | Prospective, with a modified retrospective option for amendments related to the recognition and measurement of TDRs. | | | | | | The Company is evaluating any impact on its Consolidated Financial Statements, as well as the timing of adoption. | | |

| Hawaii | | | July 1, 2022 | | | | | | 2 | | |

| California, Step Increase | | | January 1, 2022 | | | | | | 9 | | |

| Pennsylvania, Step Increase | | | January 1, 2022 | | | | | | 20 | | |

Presented in the table below are annualized incremental revenues, including reductions for the amortization of EADIT that are generally offset in income tax expense, assuming a constant water sales volume and customer count, resulting from general rate case authorizations that became effective on or after January 1, 2023:

| (In millions) | | | Effective Date | | | | | | Amount | | |

| General rate cases by state: | | | | | | | | | | | |

| Pennsylvania | | | January 28, 2023 | | | | | | $ | 138 | |

| Illinois | | | January 1, 2023 | | | | | | 67 | | |

| California, Step Increase | | | January 1, 2023 | | | | | | 13 | | |

| Total general rate case authorizations | | | | | | | | | $ | 218 | |

On December 15, 2022, the Illinois Commerce Commission issued an order approving the adjustment of base rates requested in a rate case filed on February 10, 2022, by the Company’s Illinois subsidiary.

As updated in the Illinois subsidiary’s June 29, 2022 rebuttal filing, the request sought $83 million in additional annualized revenues excluding previously recovered infrastructure surcharges.

The general rate case order approved a $67 million annualized increase in water and wastewater system revenues excluding previously recovered infrastructure surcharges, effective January 1, 2023, based on an authorized return on equity of 9.8%, authorized rate base of $1.64 billion, a common equity ratio of 49.0% and a debt ratio of 51.0%.

The annualized revenue increase is being driven primarily by significant water and wastewater system capital investments since the Illinois subsidiary’s 2017 rate case order that have been completed or are planned through December 31, 2023, expected higher pension and other postretirement benefit costs, and increases in production costs, including chemicals, fuel and power costs.

On December 8, 2022, the Pennsylvania Public Utility Commission issued an order approving the joint settlement of the rate case filed on April 29, 2022, by the Company’s Pennsylvania subsidiary.

The general rate case order approved a $138 million annualized increase in water and wastewater revenues and authorizes implementation of the new water and wastewater rates effective January 28, 2023.

| Other | | | 159 | | | | | | 127 | | |

| Intangible assets | | | — | | | | | | 55 | | |

| Foreign currency translation adjustment | | | — | | | | | | — | | | | | | (1) | | |

| (Remittances) proceeds from issuances of employee stock plans and direct stock purchase plan, net of taxes paid of $18, $17 and $11 in 2021, 2020 and 2019, respectively | | | (1) | | | | | | 9 | | | | | | 15 | | |

| Anti-dilutive share repurchases | | | — | | | | | | — | | | | | | (36) | | |

| Balance as of December 31, 2018 | | | 185.4 | | | | | | $ | 2 | | | | | $ | 6,657 | | | | | $ | (464) | | | | | $ | (34) | | | | | (4.7) | | | | | | $ | (297) | | | | | $ | 5,864 | |

| Cumulative effect of change in accounting principle | | | — | | | | | | — | | | | | | — | | | | | | (2) | | | | | | — | | | | | | — | | | | | | — | | | | | | (2) | | |

| Repurchases of common stock | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | (0.3) | | | | | | (36) | | | | | | (36) | | |

An increase in the allowance for uncollectible accounts for the periods ending December 31, 2021 and 2020 reflects the impacts from the COVID-19 pandemic, including an increase in uncollectible accounts expense and a reduction in amounts written off due to shutoff moratoria in place across the Company’s subsidiaries.

Intangible Assets

Intangible assets consisted primarily of finite-lived customer relationships associated with the acquisition of Pivotal Home Solutions in June 2018.

Finite-lived intangible assets were initially measured at their estimated fair values and were amortized over their estimated useful lives based on the pattern in which the economic benefits of the intangible assets were consumed or otherwise used.

All of the Company’s finite-lived intangible assets were sold as part of the HOS sale transaction.

When such indicators arise, the Company estimates the fair value of the long-lived asset from future cash flows expected to result from its use and, if applicable, the eventual disposition of the asset, comparing the estimated fair value to the carrying value of the asset.

An impairment loss will be recognized in the amount equal to the excess of the long-lived asset’s carrying value compared to its estimated fair value.

*Market-Based Businesses Revenue*

Environmental Costs

The Company’s water and wastewater operations and the operations of its Market-Based Businesses are subject to U.S. federal, state, local and foreign requirements relating to environmental protection, and as such, the Company periodically becomes subject to environmental claims in the normal course of business.

Environmental expenditures that relate to current operations or provide a future benefit are expensed or capitalized as appropriate.

Remediation costs that relate to an existing condition caused by past operations are accrued, on an undiscounted basis, when it is probable that these costs will be incurred and can be reasonably estimated.

A conservation agreement entered into by a subsidiary of the Company with the National Oceanic and Atmospheric Administration in 2010 and amended in 2017 required the subsidiary to, among other provisions, implement certain measures to protect the steelhead trout and its habitat in the Carmel River watershed in the State of California.

The subsidiary agreed to pay $1 million annually commencing in 2010 with the final payment made in 2021.

No remediation costs were accrued as of December 31, 2021 and $1 million was accrued as of December 31, 2020.

Changes in the fair value of a fair-value hedge, along with the gain or loss on the underlying hedged item, are recorded in current-period earnings.

| Facilitation of the Effects of Reference Rate Reform on Financial Reporting | | | | | | Provided optional guidance for a limited time to ease the potential accounting burden associated with the transition from London Interbank Offered Rate (“LIBOR”). The guidance contains optional expedients and exceptions for contract modifications, hedging relationships, and other transactions that reference LIBOR or other reference rates expected to be discontinued. The expedients elected must be applied for all eligible contracts or transactions, with the exception of hedging relationships, which can be applied on an individual basis. | | | | | | March 12, 2020 through December 31, 2022 | | | | | | Prospective for contract modifications and hedging relationships; applied as of January 1, 2020. | | | | | | The standard did not have a material impact on the Consolidated Financial Statements. | | |

| Simplifying the Accounting for Income Taxes | | | | | | The guidance removes exceptions related to the incremental approach for intraperiod tax allocation, the requirement to recognize a deferred tax liability for changes in ownership of a foreign subsidiary or equity method investment, and the general methodology for calculating income taxes in an interim period when the year-to-date loss exceeds the anticipated loss. The guidance adds requirements to reflect changes to tax laws or rates in the annual effective tax rate computation in the interim period in which the changes were enacted, to recognize franchise or other similar taxes that are partially based on income as an income-based tax and any incremental amounts as non-income-based tax, and to evaluate when a step up in the tax basis of goodwill should be considered part of the business combination in which the book goodwill was originally recognized and when it should be considered a separate transaction. | | | | | | January 1, 2021 | | | | | | Modified retrospective for amendments related to changes in ownership of a foreign subsidiary or equity method investment; Modified retrospective or retrospective for amendments related to taxes partially based on income; Prospective for all other amendments. | | | | | | The standard did not have a material impact on the Consolidated Financial Statements. | | |

The Company reclassified $44 million relating to loss on the sale of Keystone Clearwater Solutions, LLC in 2019 from operating expenses to other income (expenses) included in Gain or (loss) on sale of businesses on the Consolidated Statements of Operations.

Note 3: Impact of the COVID-19 Pandemic

American Water continues to monitor the COVID-19 pandemic and has experienced financial impacts since the start of the pandemic resulting from lower revenues from the suspension of late fees and foregone reconnect fees in certain states, certain incremental O&M expenses, an increase in uncollectible accounts expense and additional debt costs.

These impacts are collectively referred to as “financial impacts.”

As of February 16, 2022, American Water has commission orders authorizing deferred accounting or cost recovery for COVID-19 financial impacts in 11 of 13 jurisdictions.

Other regulatory actions to date are presented in the table below:

| | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Commission Actions | | | | | | Description | | | | | | States | | |

| Orders issued with deferred accounting | | | | | | Allows the Company to establish regulatory assets to record certain financial impacts related to the COVID-19 pandemic. | | | | | | HI, IN, MD, NJ, PA, VA, WV | | |

| Orders issued with cost recovery | | | | | | California’s Catastrophic Event Memorandum Account allows the Company’s California subsidiary to track certain financial impacts related to the COVID-19 pandemic for future recovery requests. Iowa issued a base rate case order on June 28, 2021, authorizing recovery in rates of the COVID-19 financial impacts deferred within its annual non-recurring expense rider. Illinois has authorized cost recovery of the COVID-19 financial impacts through a special purpose rider over a 24-month period, which was implemented effective October 1, 2020. Additionally, Illinois approved a bad debt rider tariff on December 16, 2020, allowing collection of actual bad debt expense over last authorized beginning April 2021 through February 2023. Illinois approved a stipulation in March 2021 to allow the rider to be extended through the end of 2023. Missouri issued a base rate case order on April 7, 2021, authorizing recovery in rates of the COVID-19 financial impacts deferred through March 31, 2021 over a three\-year period. | | | | | | CA, IA, IL, MO | | |

The Company’s Pennsylvania subsidiary filed for a request with the Pennsylvania Public Utility Commission (the “PaPUC”) to defer as a regulatory asset all identified COVID-19 financial impacts.

On September 15, 2021, the PaPUC issued an order approving the Company’s request to defer, with carrying costs, incremental uncollectible expense and other incremental costs net of savings attributed to the COVID-19 pandemic.

The PaPUC order denied the request to include lost revenues attributed to the waiver of late fees and reconnect fees and expenses associated with additional interest costs.

The Company, under the supervision and with the participation of its management, including [removed: the Company’s President,] [added: its] Chief Executive Officer and [added: its] Chief Financial Officer, conducted an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as such term is defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act as of the end of the period covered by this report.

Based on that evaluation, the Company’s [removed: President,] Chief Executive Officer and [added: its] Chief Financial Officer [removed: has] [added: have] concluded that, as of December 31, [removed: 2021,] [added: 2022,] the Company’s disclosure controls and procedures were effective at a reasonable level of assurance.

The Company’s disclosure controls and procedures are designed to [removed: provide reasonable assurance] [added: ensure] that [removed: the] information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including the [removed: Company’s President,] Chief Executive Officer and [added: the] Chief Financial Officer, to allow timely decisions regarding required disclosure.

The Company’s internal control over financial reporting is a process designed by or under the supervision of the Company’s [removed: President,] Chief Executive Officer and [added: its] Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP.

The Company’s management, including the Company’s [removed: President,] Chief Executive Officer and [added: its] Chief Financial Officer, assessed the effectiveness of its internal control over financial reporting, as of December 31, [removed: 2021,] [added: 2022,] using the criteria described in *Internal Control—Integrated Framework (2013)* issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Based on the Company’s evaluation under the framework in *Internal Control—Integrated Framework (2013)*, its management concluded that its internal control over financial reporting was effective as of December 31, [removed: 2021.][added: 2022.]

The effectiveness of the Company’s internal control over financial reporting as of December 31, [removed: 2021] [added: 2022] has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report appearing in Item 8—Financial Statements and Supplementary Data of this Annual Report on Form 10-K.

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objective.

On February 15, 2023, Karl F.

Kurz, the Company’s Board Chair, was notified by George MacKenzie that Mr. MacKenzie does not wish to be considered as a candidate for re-election at the Company’s 2023 Annual Meeting of Shareholders.

Mr. MacKenzie’s notification was not due to any known disagreement on any matter relating to the Company’s operations, policies or practices.

Mr. MacKenzie has been a director of the Company since 2003 and served as Chairman of the Board from 2006 until 2018.

He currently serves as a member of the Audit, Finance and Risk Committee and the Nominating/Corporate Governance Committee.

The Company wishes to thank Mr. MacKenzie for his many years of service to the Board of Directors.

None.

The information required by this item and not set forth below or in Item 1—Business—Executive Officers of this Annual Report on Form 10-K, is incorporated by reference from the Company’s Proxy Statement for the [removed: 2022] [added: 2023] Annual Meeting of Shareholders, to be filed with the SEC within 120 days following the end of the fiscal year covered by this report, under the captions entitled “Board of Directors and Corporate [removed: Governance,”] [added: Governance” and] “Proposal 1—Election of [removed: Directors” and “Certain Beneficial Ownership Matters—Delinquent Section 16(a) Reports.”][added: Directors.”]

Information required by this item is incorporated by reference in the Company’s Proxy Statement for the [removed: 2022] [added: 2023] Annual Meeting of Shareholders, under the captions entitled “Proposal 1—Election of Directors—Director Compensation Table,” “Compensation Discussion and Analysis,” “Executive [removed: Compensation,”] [added: Compensation” (excluding the subsection “Pay Versus Performance”),] “Compensation Committee Interlocks and Insider Participation” and “Compensation Committee [removed: Report.”][added: Report” (with the latter report being furnished, and not filed, in this Annual Report on Form 10-K).]

Information required by this item setting forth the security ownership of certain beneficial owners and management is incorporated by reference in the Company’s Proxy Statement for the [removed: 2022] [added: 2023] Annual Meeting of Shareholders, under the captions entitled “Certain Beneficial Ownership Matters—Security Ownership of Management,” “Certain Beneficial Ownership Matters—Security Ownership of Certain Beneficial Owners” and “Equity Compensation Plan Information.”

Information required by this item is incorporated by reference in the Company’s Proxy Statement for the [removed: 2022] [added: 2023] Annual Meeting of Shareholders, under the caption entitled “Board of Directors and Corporate Governance—Board Review of Related Person Transactions” and “Proposal 1—Election of Directors—Director Independence.”

Information required by this item is incorporated by reference in the Company’s Proxy Statement for the [removed: 2022] [added: 2023] Annual Meeting of Shareholders, under the caption entitled “Proposal [removed: 3—Ratification] [added: 4—Ratification] of Appointment of Independent Registered Public Accounting Firm—Fees Paid to Independent Registered Public Accounting Firm” and “Proposal [removed: 3—Ratification] [added: 4—Ratification] of Appointment of Independent Registered Public Accounting Firm—Pre-Approval of Services Provided by Independent Registered Public Accounting Firm.”

The list of documents contained in “Exhibit Index” [removed: below] is provided in response to this Item 15(a).

| 3.2 | | | | | | [Amended and Restated Bylaws of American Water Works Company, Inc. (incorporated by reference to Exhibit 3.1 to American Water Works Company, Inc.’s Current Report on Form 8-K, File No. 001-34028, filed [removed: December 10, 2020).](http://www.sec.gov/Archives/edgar/data/1410636/000141063620000153/exhibit31-amendedandre.htm)] [added: December](https://www.sec.gov/Archives/edgar/data/1410636/000141063622000165/exhibit31-amendedandrestat.htm) [8](https://www.sec.gov/Archives/edgar/data/1410636/000141063622000165/exhibit31-amendedandrestat.htm)[, 202](https://www.sec.gov/Archives/edgar/data/1410636/000141063622000165/exhibit31-amendedandrestat.htm)[2](https://www.sec.gov/Archives/edgar/data/1410636/000141063622000165/exhibit31-amendedandrestat.htm)[).](https://www.sec.gov/Archives/edgar/data/1410636/000141063622000165/exhibit31-amendedandrestat.htm)] | | |

| 4.1 | | | | | | [Indenture, dated as of October 22, 2007, between American Water Capital Corp. [removed: and] [added: and](http://www.sec.gov/Archives/edgar/data/1410635/000119312507270490/dex44.htm) [Computershare Trust Company, N.A., as successor to] Wells Fargo Bank, National [removed: Association (incorporated] [added: Association](http://www.sec.gov/Archives/edgar/data/1410636/000119312510273459/dex41.htm) [(incorporated] by reference to Exhibit 4.4 to American Water Capital Corp.’s Registration Statement on Form S-4, File No. 333-148284, and American Water Works Company, Inc.’s Registration Statement on Form S-4, File No. 333-148284-01, filed December 21, 2007).](http://www.sec.gov/Archives/edgar/data/1410635/000119312507270490/dex44.htm) | | |

| 4.2 | | | | | | [Indenture, dated as of December 4, 2009, between American Water Capital Corp. [removed: and Wells] [added: and](http://www.sec.gov/Archives/edgar/data/1410636/000119312510273459/dex41.htm) [Computersha](http://www.sec.gov/Archives/edgar/data/1410636/000119312510273459/dex41.htm)[re Trust C](http://www.sec.gov/Archives/edgar/data/1410636/000119312510273459/dex41.htm)[o](http://www.sec.gov/Archives/edgar/data/1410636/000119312510273459/dex41.htm)[mpany, N](http://www.sec.gov/Archives/edgar/data/1410636/000119312510273459/dex41.htm)[.A., as successor](http://www.sec.gov/Archives/edgar/data/1410636/000119312510273459/dex41.htm) [to](http://www.sec.gov/Archives/edgar/data/1410636/000119312510273459/dex41.htm) [Wells] Fargo Bank, National Association (incorporated by reference to Exhibit 4.1 to American Water Works Company, Inc.’s Current Report on Form 8-K, File No. 001-34028, filed December 3, 2010).](http://www.sec.gov/Archives/edgar/data/1410636/000119312510273459/dex41.htm) | | |

| [removed: 4.21] [added: 4.22] | | | | | | [Description of American Water Works Company, Inc.’s Equity Securities (filed [removed: herewith).](https://www.sec.gov/Archives/edgar/data/1410636/000141063622000048/ex-421x12312021xdescriptio.htm)] [added: herewith).](https://www.sec.gov/Archives/edgar/data/1410636/000141063623000020/ex-422x12312022xdescriptio.htm)] | | |

| [removed: 4.22] [added: 4.23] | | | | | | [Note Purchase Agreement, dated May 15, 2008, between American Water Capital Corp. and the purchasers party thereto (incorporated by reference to Exhibit 10.1 to American Water Works Company, Inc.’s Current Report on Form 8-K, File No. 001-34028, filed May 19, 2008) with respect to the 6.55% Series H Senior Notes due May 15, 2023.](https://www.sec.gov/Archives/edgar/data/1410636/000119312508118312/dex101.htm) | | |

| [removed: 10.1.1] [added: 10.1#] | | | | | | [removed: [Second Amended] [added: [Third](https://www.sec.gov/Archives/edgar/data/1410636/000141063622000155/q32022ex-101xwellsfargox3r.htm) [Amended] and Restated Credit Agreement, dated as [removed: of March 21, 2018,] [added: of](https://www.sec.gov/Archives/edgar/data/1410636/000141063622000155/q32022ex-101xwellsfargox3r.htm) [October 26](https://www.sec.gov/Archives/edgar/data/1410636/000141063622000155/q32022ex-101xwellsfargox3r.htm)[, 20](https://www.sec.gov/Archives/edgar/data/1410636/000141063622000155/q32022ex-101xwellsfargox3r.htm)[22](https://www.sec.gov/Archives/edgar/data/1410636/000141063622000155/q32022ex-101xwellsfargox3r.htm)[,] by and among American Water Works Company, Inc., American Water Capital Corp., each of the Lenders party thereto, Wells Fargo Bank, National Association, as administrative agent, JPMorgan Chase Bank, N.A., as syndication agent, and Mizuho Bank, Ltd., PNC Bank, National Association, and U.S. Bank National Association, as co-documentation agents (incorporated by reference to Exhibit 10.1 to American Water Works Company, [removed: Inc.’s Current Report] [added: Inc.’s](https://www.sec.gov/Archives/edgar/data/1410636/000141063622000155/q32022ex-101xwellsfargox3r.htm) [Quarterly](https://www.sec.gov/Archives/edgar/data/1410636/000141063622000155/q32022ex-101xwellsfargox3r.htm) [](https://www.sec.gov/Archives/edgar/data/1410636/000141063622000155/q32022ex-101xwellsfargox3r.htm)[Report] on [removed: Form 8-K,] [added: Form](https://www.sec.gov/Archives/edgar/data/1410636/000141063622000155/q32022ex-101xwellsfargox3r.htm) [10-Q](https://www.sec.gov/Archives/edgar/data/1410636/000141063622000155/q32022ex-101xwellsfargox3r.htm)[,] File No. 001-34028, filed [removed: on March 21, 2018).](http://www.sec.gov/Archives/edgar/data/1410636/000141063618000088/exhibit10_1tocreditagreeme.htm)] [added: on](https://www.sec.gov/Archives/edgar/data/1410636/000141063622000155/q32022ex-101xwellsfargox3r.htm) [October 31](https://www.sec.gov/Archives/edgar/data/1410636/000141063622000155/q32022ex-101xwellsfargox3r.htm)[, 20](https://www.sec.gov/Archives/edgar/data/1410636/000141063622000155/q32022ex-101xwellsfargox3r.htm)[22](https://www.sec.gov/Archives/edgar/data/1410636/000141063622000155/q32022ex-101xwellsfargox3r.htm)[).](https://www.sec.gov/Archives/edgar/data/1410636/000141063622000155/q32022ex-101xwellsfargox3r.htm)] | | |

| [removed: 10.1.2] [added: 10.13.3*] | | | | | | [removed: [Extension Agreement, dated as of April 9, 2019, among American] [added: [American] Water Works Company, [removed: Inc., American Water Capital Corp., each of the Lenders party thereto, and Wells Fargo Bank, National Association, as administrative agent] [added: Inc. 2017 Omnibus Equity Compensation Plan 2019 Restricted Stock Unit Grant] (incorporated by reference to Exhibit [removed: 10.17.2] [added: 10.1] to American Water Works Company, Inc.’s Quarterly Report on Form 10-Q, File No. 001-34028, filed May 1, [removed: 2019).](http://www.sec.gov/Archives/edgar/data/1410636/000141063619000080/a2019q1ex-10172.htm)] [added: 2019).](http://www.sec.gov/Archives/edgar/data/1410636/000141063619000080/a2019q1ex-101.htm)] | | |

| [removed: 10.1.3] [added: 10.13.4*] | | | | | | [removed: [Extension Agreement, dated as of April 1, 2020, among American] [added: [American] Water Works Company, [removed: Inc., American Water Capital Corp., each of the Lenders party thereto, and Wells Fargo Bank, National Association, as administrative agent (incorporated] [added: Inc. 2017 Omnibus Equity Compensation Plan 2020 Restricted Stock Unit Grant.(incorporated] by reference to Exhibit [removed: 10.1.3] [added: 10.3] to American Water Works Company, Inc.’s Quarterly Report on Form 10-Q, File No. 001-34028, filed [removed: on] May 6, [removed: 2020).](https://www.sec.gov/Archives/edgar/data/1410636/000141063620000080/a2020q1ex-1013.htm)] [added: 2020).](https://www.sec.gov/Archives/edgar/data/1410636/000141063620000080/a2020q1ex-103.htm)] | | |

| 10.3* | | | | | | [Offer Letter for Employment, dated as of February 2, 2022, between American Water Works Company, Inc. and M. Susan Hardwick [removed: (filed herewith).](https://www.sec.gov/Archives/edgar/data/1410636/000141063622000048/exhibit103-susanhardwick.htm)] [added: (incorporated by reference to Exhibit 10.](https://www.sec.gov/Archives/edgar/data/1410636/000141063622000048/exhibit103-susanhardwick.htm)[3](https://www.sec.gov/Archives/edgar/data/1410636/000141063622000048/exhibit103-susanhardwick.htm) [to American Water Works Company, Inc.’s](https://www.sec.gov/Archives/edgar/data/1410636/000141063622000048/exhibit103-susanhardwick.htm) [Annual](https://www.sec.gov/Archives/edgar/data/1410636/000141063622000048/exhibit103-susanhardwick.htm) [Report on Form 10-](https://www.sec.gov/Archives/edgar/data/1410636/000141063622000048/exhibit103-susanhardwick.htm)[K](https://www.sec.gov/Archives/edgar/data/1410636/000141063622000048/exhibit103-susanhardwick.htm)[, File No. 001-34028, filed](https://www.sec.gov/Archives/edgar/data/1410636/000141063622000048/exhibit103-susanhardwick.htm) [February 16](https://www.sec.gov/Archives/edgar/data/1410636/000141063622000048/exhibit103-susanhardwick.htm)[, 2022).](https://www.sec.gov/Archives/edgar/data/1410636/000141063622000048/exhibit103-susanhardwick.htm)] | | |

| 10.4* | | | | | | [Offer Letter for Employment, dated [removed: August 5, 2020,] [added: February 16, 2021,] between American Water Works Company, Inc. and [removed: Adam Noble] [added: Cheryl Norton] (incorporated by reference to Exhibit [removed: 10.1] [added: 10.13] to American Water Works Company, Inc.’s Quarterly Report on Form 10-Q, File No. 001-34028, filed [removed: November 4, 2020).](https://www.sec.gov/Archives/edgar/data/1410636/000141063620000145/a2020q3ex101adamnobleo.htm)] [added: May 3, 2021).](https://www.sec.gov/Archives/edgar/data/1410636/000141063621000147/a2021q-1exx1013_nortoncher.htm)] | | |

| 10.5* | | | | | | [Offer Letter for Employment, dated [removed: February 16, 2021,] [added: January 21, 2022,] between American Water Works Company, Inc. and [removed: Cheryl Norton] [added: James H. Gallegos] (incorporated by reference to Exhibit [removed: 10.13] [added: 10.11] to American Water Works Company, Inc.’s Quarterly Report on Form 10-Q, File No. 001-34028, filed [removed: May 3, 2021).](http://www.sec.gov/Archives/edgar/data/1410636/000141063621000147/a2021q-1exx1013_nortoncher.htm)] [added: April 27, 2022).](https://www.sec.gov/Archives/edgar/data/1410636/000141063622000091/a2022q-1exx1011gallegos_ja.htm)] | | |

| [removed: 10.6*] [added: 10.7*] | | | | | | [Amended and Restated American Water Works Company, Inc. Deferred Compensation Plan, dated as of January 1, 2001 (incorporated by reference to Exhibit 10.9 to American Water Capital Corp.’s Registration Statement on Form S-1, File No. 333-145757-01, and American Water Works Company, Inc.’s Registration Statement on Form S-1, File No. 333-145757, filed October 11, 2007).](http://www.sec.gov/Archives/edgar/data/1410636/000119312507216990/dex109.htm) | | |

| [removed: 10.7*] [added: 21.1] | | | | | | [removed: [Separation Agreement and General Release, dated as] [added: [Subsidiaries] of [removed: February 2, 2022, between] American Water Works [removed: Service] Company, Inc. [removed: and Walter J. Lynch] (filed [removed: herewith).](https://www.sec.gov/Archives/edgar/data/1410636/000141063622000048/ex-107x12312021xwalterlync.htm)] [added: herewith).](https://www.sec.gov/Archives/edgar/data/1410636/000141063623000020/ex-211xsubsidiariesofthere.htm)] | | |

| [removed: 10.9.1*] [added: 10.8.1*] | | | | | | [Nonqualified Savings and Deferred Compensation Plan for Employees of American Water Works Company, Inc. and Its Designated Subsidiaries, as amended and restated, effective as of June 1, 2018 (incorporated by reference to Exhibit 10.9.3 to American Water Works Company, Inc.’s Annual Report on Form 10-K, File No. 001-34028, filed February 19, 2019).](http://www.sec.gov/Archives/edgar/data/1410636/000141063619000041/ex-1093x12312018.htm) | | |

| [removed: 10.9.2*] [added: 10.8.2*] | | | | | | [Amendment No. 2019-1 to the Nonqualified Savings and Deferred Compensation Plan for Employees of American Water Works Company, Inc. and its Designated Subsidiaries, as amended and restated, effective as of November 1, 2019 (incorporated by reference to Exhibit 4.1.2 to American Water Works Company, Inc.’s Registration Statement on Form S-8, File No. 333-235598, filed December 19. 2019).](http://www.sec.gov/Archives/edgar/data/1410636/000141063619000166/exhibit412awwdcpamendment.htm) | | |

| [removed: 10.10*] [added: 10.9*] | | | | | | [Amended and Restated American Water Works Company, Inc. Executive Retirement Plan, dated as of March 1, 2007 (incorporated by reference to Exhibit 10.8 to American Water Capital Corp.’s Registration Statement on Form S-1, File No. 333-145757-01, and American Water Works Company, Inc.’s Registration Statement on Form S-1, File No. 333-145757, filed October 11, 2007).](http://www.sec.gov/Archives/edgar/data/1410636/000119312507216990/dex108.htm) | | |

| [removed: 10.11.1*] [added: 10.10.1*] | | | | | | [American Water Works Company, Inc. Annual Incentive Plan (incorporated by reference to Appendix C to American Water Works Company, Inc.’s Definitive Proxy Statement, File No. 001-34028, filed March 27, 2015).](http://www.sec.gov/Archives/edgar/data/1410636/000156459015002060/awk-DEF14A_20150515.htm#APPENDIX_C) | | |

| [removed: 10.11.2*] [added: 10.10.2*] | | | | | | [Amendment 2016-1 to American Water Works Company, Inc. Annual Incentive Plan (now known as the Annual Performance Plan), effective January 1, 2016 (incorporated by reference to Exhibit 10.14.2 to American Water Works Company, Inc.’s Annual Report on Form 10-K, File No. 001-34028, filed February 25, 2016).](http://www.sec.gov/Archives/edgar/data/1410636/000156459016013247/awk-ex10142_465.htm) | | |

| [removed: 10.12*] [added: 10.11*] | | | | | | [Second Amended and Restated American Water Works Company, Inc. and its Designated Subsidiaries 2017 Nonqualified Employee Stock Purchase Plan, adopted on July 27, 2018, effective as of February 5, 2019 (incorporated by reference to Exhibit 10.2 to American Water Works Company, Inc.’s Quarterly Report on Form 10-Q, File No. 001-34028, filed October 31, 2018).](http://www.sec.gov/Archives/edgar/data/1410636/000141063618000169/a2018q3ex-102.htm) | | |