American Water Works (AWK) 10-K risk factor changes: FY2024 vs FY2023

Our Regulated Businesses are subject to extensive regulation by [removed: state] PUCs and other regulatory agencies, which significantly affects our business, financial condition, results of operations and cash flows.

Our Regulated Businesses provide water and wastewater services to our customers through subsidiaries that are subject to regulation by [removed: state] PUCs.

Generally, [removed: the state] PUCs authorize us to charge rates that they determine are sufficient to recover our prudently incurred operating expenses, including, but not limited to, operating and maintenance costs, depreciation, financing costs and taxes, and provide us with the opportunity to earn an appropriate rate of return on invested capital.

Our ability to successfully implement our business plan and strategy depends on the rates authorized by the various [removed: state] PUCs.

We periodically file rate increase applications with [removed: state] PUCs.

Approval by the PUCs is also required in connection with other aspects of our Regulated Businesses, which are required to have numerous permits, approvals and [removed: certificates] [added: CPCNs] from the PUCs that regulate their businesses and authorize acquisitions, dispositions, debt and/or equity financing, and, in certain cases, affiliated transactions.

Some [removed: state] PUCs are empowered to impose financial penalties, fines and other sanctions for non-compliance with applicable rules and regulations.

Even if the rates approved are sufficient, we face the risk that we will not achieve the rates of return on equity permitted by [removed: state] PUCs.

For example, [removed: state] PUCs and environmental regulators set conditions and standards for the water and wastewater services we deliver.

If the water or wastewater services we provide to our customers do not comply with regulatory standards, or otherwise violate environmental laws, regulations or permits, or other health and safety and water quality regulations, we could incur substantial fines, penalties or other sanctions or costs, as well as damage to our [removed: reputation.][added: reputation, as a result of governmental proceedings and private litigation.]

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

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

These laws and regulations and their enforcement, have become more stringent over time, and new or stricter requirements, such as the [removed: anticipated] [added: final] EPA drinking water regulations for PFAS, the LCRR and the [removed: proposed] [added: recently implemented] LCRI, [removed: could] [added: are expected to] increase our costs.

Although we may seek to recover ongoing compliance costs in our Regulated Businesses through customer rates, [added: and certain jurisdictions in which our Regulated Businesses operate have passed laws authorizing recovery of such costs,] there can be no guarantee that the various [removed: state] [added: other regulatory] PUCs or similar regulatory bodies that govern our Regulated Businesses would approve rate increases that would enable us to recover such costs or that such costs will not materially and adversely affect our financial condition, results of operations, cash flows and liquidity.

We may also incur liabilities if, under environmental laws and regulations, we are required to investigate and clean up environmental contamination, including potential releases of [added: certain] hazardous chemicals, [removed: such as gaseous chlorine,] which [removed: we use to treat water,] [added: are used in our treatment processes,] or at off-site locations where we have disposed of residual waste or caused an adverse environmental impact.

The discovery of previously unknown conditions, or the imposition of cleanup obligations in the future, [added: including those obligations related to the disposal of PFAS residuals and other waste,] could result in significant costs and could adversely affect our financial condition, results of operations, cash flows and liquidity.

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

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 additional costs or obligations, including fines and penalties against Cal Am in the event of noncompliance with the Orders, which [removed: could have a material adverse effect upon us and our business, results of operations and cash flows.]

Service disruptions caused by severe weather conditions, climate variability patterns or natural or other disasters may disrupt our operations or reduce the demand for our water [added: and wastewater] services, which could adversely affect our financial condition, results of operations, cash flows and liquidity.

These include, among other things, storms, [added: ice or] freezing conditions, high [added: rainfall and] 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 and epidemics, severe electrical storms, sinkholes, solar flares and chemical spills or other contamination causing temporary unavailability of our source water supplies.

Government restrictions on water use may also result in decreased use of water [added: and wastewater] services, even if our water supplies are sufficient to serve our customers, which may adversely affect our financial condition, results of operations and cash flows.

Seasonal and other drought [removed: conditions] [added: conditions, such as those experienced during 2024 in New Jersey, for example,] that may impact our water services are possible across all of our service areas.

Responses may range from voluntary to mandatory water use [removed: restrictions,] [added: restrictions (including those mandated in New Jersey in 2024),] rationing restrictions, water conservation regulations, and requirements to minimize water system leaks.

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 [removed: state] PUCs would authorize rate increases to enable us to recover such expenditures and costs, in whole or in part.

In addition, billings permitted by [removed: state] PUCs typically are, to a considerable extent, based on the volume of water used in addition to a minimum base rate.

We endeavor to mitigate or reduce regulatory lag by pursuing constructive regulatory [removed: practices.][added: practices and certain regulatory mechanisms.]

While these [added: practices and] mechanisms [removed: have mitigated] [added: may serve to mitigate] or [removed: reduced] [added: reduce] regulatory lag in [removed: several] [added: certain] of our regulated [removed: states,] [added: jurisdictions,] we continue to seek approval of regulatory practices [added: and mechanisms] to mitigate or reduce regulatory lag in [removed: those] [added: other] jurisdictions that have not approved them.

Furthermore, PUCs may fail to adopt new surcharges [added: or those permitted by applicable law,] and existing [added: practices and] mechanisms may not continue in their current form, or at all, [removed: or] [added: and] we may be unable or become ineligible to continue to utilize [removed: certain of these mechanisms] [added: them] in the future.

Although we intend to continue [removed: our efforts] to seek [removed: state] [added: regulatory] PUC approval of [removed: constructive regulatory] practices [added: or mechanisms] to mitigate or reduce regulatory lag, our efforts may not be [removed: successful,] [added: successful in whole] or [added: in part, and] even [removed: if partially] [added: to the extent] successful, our business, financial condition, results of operations, cash flows and liquidity may be materially and adversely [removed: affected.][added: affected by regulatory lag.]

- 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 [added: abatement benefits, (iii) the amount of taxes owed or paid, including as a result of the CAMT provisions, (iv) the timing of tax effects on rates or (v) the ability to utilize our net operating loss carryforwards;]

- revoking or altering the terms of a CPCN issued to us by a [removed: state] PUC or other governmental authority.

In [removed: 2023,] [added: 2024,] we invested [removed: $2.6] [added: $2.8] billion in net Company-funded capital improvements.

Additionally, we may have limited information regarding buried and [removed: newly acquired] [added: newly-acquired] assets, which [added: could challenge our ability to conduct efficient asset management and maintenance practices.]

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

[removed: Revenue stability] [added: These] mechanisms are designed to recognize declining sales resulting from reduced consumption, while providing an incentive for customers to use water more efficiently.

The water supplies that flow into our treatment plants or are delivered through our distribution system, or the water service that is provided to our customers, may be subject to contamination, including, among other [removed: items,] [added: types,] contamination from naturally-occurring compounds, chemicals in groundwater systems, pollution resulting from manufactured sources (such as perchlorate, perfluorinated and polyfluorinated compounds, methyl tertiary butyl ether, 1,4-dioxane, lead and other materials, or chemical spills or other incidents that result in contaminants entering the water source), and [added: contamination resulting from new and emerging contaminants as well as cyber attacks,] possible terrorist attacks or other similar incidents.

Moreover, we could be subject to claims for damages arising from government enforcement actions or toxic tort or other [added: lawsuits, including class action] lawsuits [added: brought by affected parties,] arising out of an interruption of service or human exposure to hazardous substances in our drinking water and water supplies.

See Item 3—Legal Proceedings for information on certain pending lawsuits [added: and other proceedings] related to interruptions of water service.

Such claims could relate to, among other things, personal injury, loss of life, business [removed: interruption,] [added: interruption and expenses related thereto,] property damage, pollution, and environmental damage and may be brought by our customers or third parties.

In addition, insurance coverage may not cover all or a portion of these [removed: losses,] [added: losses] and are subject to deductibles and other limitations.

to discontinue operations and sell our operating assets to another utility or to a municipality.

In addition, in April 2024, the EPA issued a final rule designating PFOA and PFOS as hazardous substances under CERCLA.

While the EPA has stated that it will focus on holding responsible under CERCLA entities that significantly contributed to the release of PFAS into the environment, it is not yet known whether liability protection will be afforded to passive receivers of PFAS, including water and wastewater utilities.

For example, the designation of PFOA and PFOS as hazardous substances under CERCLA may impact our ability to dispose of material used to treat impacted systems and may increase our costs as a result.

could have a material adverse effect upon us and our business, results of operations and cash flows.

See Item 1—Business—Regulated Businesses—Regulation and Rate Making for a discussion of these practices and mechanisms.

Two of our regulated jurisdictions

customers and could adversely affect our financial condition and results of operations.

By way of example, on October 3, 2024, we identified unauthorized activity within our information technology computer networks and systems, which we determined to be the result of a cybersecurity incident.

See Item 7—Management's Discussion and Analysis of Financial Condition and Results of Operations—Other Matters—Cybersecurity Incident, for more information regarding this incident.

Such unauthorized access could be caused through, among other causes, failure to follow established policies and procedures on the part of our employees, agents, vendors, suppliers, contractors or other third parties.

While we believe that we have appropriate security measures and safeguards to protect our operational and information technology systems, the recent cybersecurity incident that we experienced in October 2024 demonstrated that those protections alone may not prevent a cyber attack, and we cannot guarantee that such protections will be completely successful in preventing or mitigating a future cyber attack.

The Company has completed its investigation into the scope, nature and impact of the cybersecurity incident and determined the incident did not have a material effect on the Company or its financial condition or results of operations; however, the Company remains subject to various risks as a result of this incident, including those related to litigation, governmental and regulatory scrutiny, including from putative class action lawsuits that have been filed in connection with the recent incident.

See Item 3—Legal Proceedings—Cybersecurity Incident Class Action Lawsuits.

We have incurred, and may continue to incur, certain expenses related to the October 2024 cybersecurity incident, and we maintain a cybersecurity insurance policy as part of our overall insurance program.

See Item 1A—Risk Factors Risks Related to our Industry and Business Operations—We may sustain losses that exceed or are excluded from our insurance coverage or for which we are self-insured, below for more information.

See Item 3—Legal Proceedings—Cybersecurity Incident Class Action Lawsuits.

As a result, we may sustain losses that

In addition, we have invested resources to develop and adopt new technologies, including cloud-based systems, which rely on the security of our infrastructure, including hardware and other components provided by third parties, to support the reliability of our services and protect our data.

Even when employees implement all appropriate and effective safety measures and precautions, accidents, injuries and even fatalities can and do occur.

See Item 1—Business—Human Capital Resources—Safety First.

Given our usage of long-term debt as a key component of our capital and investment strategy, one of the principal market risks to which the Company is exposed is changes in interest rates.

Given the nature of our business which, in part, involves

Examples of sources of contaminants include, but are not limited to, newly created chemical compounds (including, for example, manufactured nanomaterials); human and veterinary products; PFAS; bacteria, microbes, viruses, amoebae and other pathogens; and residual by-products of disinfection.

For example, two of our states have approved revenue stability mechanisms that adjust rates periodically to ensure that a utility’s revenue will be sufficient to cover its costs regardless of sales volume, including recognition of declining sales resulting from reduced usage, while providing an incentive for customers to use water more efficiently.

In addition, 10 of our state PUCs permit rates to be adjusted outside of the general rate case process through surcharges that address certain capital investments, such as replacement of aging infrastructure.

These surcharges are adjusted periodically based on factors such as project completion or future budgeted expenditures, and specific surcharges are eliminated once the related capital investment is incorporated in new PUC-approved rates.

Furthermore, in setting rates, nine of our state PUCs allow us to use future test years, which extend beyond the date a general rate case is filed to allow for current or projected revenues, expenses and investments to be reflected in rates on a more timely basis.

Other examples of such regulatory practices include expense mechanisms that allow us to increase rates for certain cost increases that are beyond our control, such as purchased water costs, property or other taxes, or costs for power or other fuel, conservation, chemical or other expenditures.

These mechanisms enable us to adjust rates in less time after costs have been incurred than would be the case under a general rate case process without the mechanisms.

abatement benefit, (iii) the amount of taxes owed or paid, including as a result of the Corporate Alternative Minimum Tax provisions, (iv) the timing of tax effects on rates or (v) the ability to utilize our net operating loss carryforwards;

could challenge our ability to conduct efficient asset management and maintenance practices.

In addition, new categories of contaminants continue to emerge in the water industry.

favorable legislative, regulatory and economic outcomes, as well as increased regulatory investigations or other oversight and more stringent regulatory or economic requirements.

While we have instituted what we believe are reasonable and appropriate safeguards to protect our operational and technology systems, those safeguards may not always be effective due to the evolving nature of cyber attacks and cyber vulnerabilities.

We cannot guarantee that such protections will be completely successful to prevent or mitigate a cyber attack.

Applicable laws and regulations or contracts may require us to report cybersecurity incidents or breaches or securely maintain confidential data in the event that we experience a physical or cyber security incident.

As a specific example, we depend on water meters to record and communicate the amount of water our customers use, which information in turn is used to generate customer bills, and in recent years, we have experienced greater than expected performance failures with certain water meters used in the Regulated Businesses.

When failures occur, we work with meter manufacturers to determine and address the cause of such failures.

These items include but are not limited to

indebtedness or reduce equity in connection with financings or other corporate opportunities that we may believe would be in our best interests or the interests of our shareholders to complete.

The inability of management to certify as to the effectiveness of these controls due to the identification of one or more material weaknesses in these controls could also harm our reputation, increase financing costs or adversely affect our ability to access the capital markets.

For a discussion and analysis of the Company’s financial statements for fiscal [removed: 2022] [added: 2023] compared to fiscal [removed: 2021,] [added: 2022,] 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: 2022,] [added: 2023,] filed with the SEC on February [removed: 15, 2023.*][added: 14, 2024.*]

The Company employs approximately [removed: 6,500] [added: 6,700] 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 [removed: approximately 1,700 communities in] 14 states in the United States, with 3.5 million active customers with services provided by its water and wastewater networks.

| (In millions, except per share data) | | | [removed: 2023] [added: 2024] | | | | | | [removed: 2022] [added: 2023] | | | | | | [removed: 2021] [added: 2022] | | | | | | [removed: 2020] [added: 2021] | | | | | | [removed: 2019] [added: 2020] | | |

| Operating revenues | | | $ | [removed: 4,234] [added: 4,684] | | | | | $ | [removed: 3,792] [added: 4,234] | | | | | $ | [removed: 3,930] [added: 3,792] | | | | | $ | [removed: 3,777] [added: 3,930] | | | | | $ | [removed: 3,610] [added: 3,777] | |

| Net income attributable to common shareholders | | | [removed: 944] [added: 1,051] | | | | | | [removed: 820] [added: 944] | | | | | | [removed: 1,263] [added: 820] | | | | | | [removed: 709] [added: 1,263] | | | | | | [removed: 621] [added: 709] | | |

| Net income attributable to common shareholders per basic common share | | | [removed: 4.90] [added: 5.39] | | | | | | [removed: 4.51] [added: 4.90] | | | | | | [removed: 6.96] [added: 4.51] | | | | | | [removed: 3.91] [added: 6.96] | | | | | | [removed: 3.44] [added: 3.91] | | |

| Net income attributable to common shareholders per diluted common share | | | [removed: 4.90] [added: 5.39] | | | | | | [removed: 4.51] [added: 4.90] | | | | | | [removed: 6.95] [added: 4.51] | | | | | | [removed: 3.91] [added: 6.95] | | | | | | [removed: 3.43] [added: 3.91] | | |

| Total assets | | | $ | [removed: 30,298] [added: 32,830] | | | | | $ | [removed: 27,787] [added: 30,298] | | | | | $ | [removed: 26,075] [added: 27,787] | | | | | $ | [removed: 24,766] [added: 26,075] | | | | | $ | [removed: 22,682] [added: 24,766] | |

| Long-term debt and redeemable preferred stock at redemption value | | | [removed: 11,718] [added: 12,521] | | | | | | [removed: 10,929] [added: 11,718] | | | | | | [removed: 10,344] [added: 10,929] | | | | | | [removed: 9,333] [added: 10,344] | | | | | | [removed: 8,644] [added: 9,333] | | |

| Cash dividends declared per common share | | | $ | [removed: 2.83] [added: 3.06] | | | | | $ | [removed: 2.62] [added: 2.83] | | | | | $ | [removed: 2.41] [added: 2.62] | | | | | $ | [removed: 2.20] [added: 2.41] | | | | | $ | [removed: 2.00] [added: 2.20] | |

| Net cash provided by operating activities | | | [removed: 1,874] [added: 2,045] | | | | | | [removed: 1,108] [added: 1,874] | | | | | | [removed: 1,441] [added: 1,108] | | | | | | [removed: 1,426] [added: 1,441] | | | | | | [removed: 1,383] [added: 1,426] | | |

| Net cash used in investing activities | | | [removed: (2,815)] [added: (3,379)] | | | | | | [removed: (2,127)] [added: (2,815)] | | | | | | [removed: (1,536)] [added: (2,127)] | | | | | | [removed: (2,061)] [added: (1,536)] | | | | | | [removed: (1,945)] [added: (2,061)] | | |

| Net cash provided by (used in) financing activities | | | [removed: 1,188] [added: 1,110] | | | | | | [removed: 1,000] [added: 1,188] | | | | | | [removed: (345)] [added: 1,000] | | | | | | [removed: 1,120] [added: (345)] | | | | | | [removed: 494] [added: 1,120] | | |

| Capital expenditures included in net cash used in investing activities | | | [removed: (2,575)] [added: (2,856)] | | | | | | [removed: (2,297)] [added: (2,575)] | | | | | | [removed: (1,764)] [added: (2,297)] | | | | | | [removed: (1,822)] [added: (1,764)] | | | | | | [removed: (1,654)] [added: (1,822)] | | |

For the years ended December 31, [removed: 2023, 2022] [added: 2024, 2023] and [removed: 2021,] [added: 2022,] diluted earnings per share (GAAP) were [removed: $4.90, $4.51] [added: $5.39, $4.90] and [removed: $6.95,] [added: $4.51,] respectively.

[removed: The increase was primarily] [added: Increased results were] driven [added: primarily] by the implementation of new rates in the Regulated Businesses [removed: for the return on and recovery of] [added: from] capital and acquisition [removed: investments, offset somewhat by increased operating costs, primarily production costs from inflationary pressures, and higher pension costs.][added: investments.]

Results for [added: 2024 and] 2023 reflect the net favorable impact of warmer, drier weather compared to normal, estimated at [removed: $0.13] [added: $0.12] per share, [removed: while results for 2022 reflect the net favorable impact of weather compared to normal, estimated at $0.06] [added: and $0.13] per [removed: share.][added: share, respectively.]

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

In [removed: 2023,] [added: 2024,] the Company invested [removed: $2.7] [added: $3.3] billion, in the Regulated Businesses, as discussed below:

- [removed: $2.6] [added: $2.8] billion capital investment in the Regulated Businesses, [removed: the substantial majority] for infrastructure improvements and replacements; and

- [removed: $81] [added: $417] million to fund [removed: acquisitions, including deposits for pending acquisitions,] [added: acquisitions] in the Regulated Businesses, which added approximately [removed: 18,100 customers during 2023, in addition to approximately 18,800] [added: 69,500] customers [removed: added through organic growth] during [removed: 2023.][added: 2024.]

As of December 31, [removed: 2023,] [added: 2024,] the Company had entered into [removed: 25] [added: 17] agreements with a total aggregate purchase price of [removed: $589] [added: $105] million for pending acquisitions in the Regulated [removed: Businesses, including the agreements discussed above,] [added: Businesses] to add approximately [removed: 88,300] [added: 24,200] additional customers.

The Company expects to invest between [removed: $16] [added: $17] billion to [removed: $17] [added: $18] billion over the next five years, and between [removed: $34] [added: $40] billion to [removed: $38] [added: $42] billion over the next 10 years, including [removed: $3.1] [added: $3.3] billion in [removed: 2024.][added: 2025.]

- capital investment for infrastructure improvements [added: and replacements] in the Regulated Businesses [added: of] between [removed: $14.5] [added: $15.5] billion to [removed: $15] [added: $16] billion over the next five years, and between [removed: $30] [added: $36] billion to [removed: $33] [added: $37] billion over the next 10 years; and

The Company estimates the expected capital investment for infrastructure improvements in its Regulated Businesses over the next ten years will be allocated to the following purposes: infrastructure renewal [removed: 68-70%,] [added: 68%;] resiliency [removed: 9-11%,] [added: 10%;] water quality, including capital expenditures [removed: for the EPA proposed regulations on] [added: related to] PFAS [removed: 6-8%,] [added: 8%;] operational efficiency, technology and innovation [removed: 5-7%,] [added: 6%;] system expansion [removed: 4-6%,] [added: 5%;] other [removed: 3-5%.][added: 3%.]

The Company estimates an investment of approximately $1 billion of capital expenditures to install additional treatment facilities [removed: over a three to five-year period] in order to comply with the [removed: proposed regulations.][added: new regulations by April 2029.]

Additionally, the Company estimates [added: that it will incur] annual operating expenses [added: of] up to approximately $50 million related to testing and [removed: treatment in today's dollars.][added: treatment, with the majority of the operating expenses beginning near the April 2029 compliance deadline.]

The Company supports sound policies and compliance with the NPDWR [added: for PFAS] by all water utilities, while protecting customers and communities from the costly burden of monitoring and mitigating PFAS contamination in water systems.

| [removed: (Dollars in] [added: (In] millions) | | | [removed: 2023] [added: 2024] | | | | | | [removed: 2022] [added: 2023] | | | | | | [removed: 2021] [added: 2022] | | |

| [removed: Total operation] [added: Operation] and maintenance [removed: expenses] | | | [removed: $] [added: 1,858] | [removed: 1,720] | | | | | [removed: $] [added: 1,720] | [removed: 1,589] | | | | | [removed: $] [added: 1,589] | [removed: 1,777] | |

| Operation and maintenance [removed: expenses—Other] | | | [removed: 279] [added: 341] | | | | | | [removed: 244] [added: 279] | | | | | | [removed: 452] [added: 244] | | |

| Total operation and maintenance [removed: expenses—Regulated Businesses] [added: expense] | | | [removed: 1,441] [added: $] | [added: 1,517] | | | | | [removed: 1,345] [added: $] | [added: 1,441] | | | | | [removed: 1,325] [added: $] | [added: 1,345] | |

| [removed: Regulated purchased] [added: Purchased] water [removed: expenses] | | | [removed: 161] [added: $] | [added: 180] | | | | | [removed: 154] [added: $] | [added: 161] | | | | | [removed: 153] [added: $] | [added: 154] | |

| [removed: Total operating] [added: Operating] revenues | | | $ | [removed: 4,234] [added: 4,684] | | | | | $ | [removed: 3,792] [added: 4,234] | | | | | $ | [removed: 3,930] [added: 3,792] | |

| Operating [removed: revenues—Other] [added: revenues] | | | [removed: 314] [added: $] | [added: 388] | | | | | [removed: 287] [added: $] | [added: 314] | | | | | [removed: 546] [added: $] | [added: 287] | |

| Total operating [removed: revenues—Regulated Businesses] [added: revenues] | | | [removed: 3,920] [added: $] | [added: 4,296] | | | | | [removed: 3,505] [added: $] | [added: 3,920] | | | | | [removed: 3,384] [added: $] | [added: 3,505] | |

[removed: Presented in the] [added: The] table below [removed: are] [added: summarizes the] annualized incremental [removed: revenues] [added: revenues,] assuming a constant sales volume and customer count, resulting from general rate case authorizations that became effective during [removed: 2023:][added: 2024.]

| Illinois | | | January 1, [removed: 2023] [added: 2025] | | | | | | [removed: 67] [added: 105] | | |

| Total general rate case authorizations | | | | | | | | | $ | [removed: 273] [added: 283] | |

Results also reflect increased production and employee-related costs, increased depreciation and higher financing costs used to fund the current capital investment plan.

Results for 2024 include incremental interest income of $0.09 per share, resulting from the early 2024 amendment to the secured seller note from the sale of the former HOS business.

This includes the acquisitions by the Company’s Pennsylvania subsidiary of the wastewater collection and treatment system assets from the Butler Area Sewer Authority on October 29, 2024, for a cash purchase price of $230 million, which added approximately 15,000 customer connections, and by the Company’s Illinois subsidiary of a wastewater treatment plant and related assets from Granite City on March 11, 2024, for a cash purchase price of $86 million, which added approximately 26,000 wastewater customers, including 15,500 customers indirectly in surrounding communities.

- Approximately 19,400 new customers were added through organic growth in existing systems.

In December 2020, the Company’s Pennsylvania subsidiary entered into an agreement (an acquisition intended to comply with Act 12 (discussed below)) to acquire the wastewater collection system assets of Brentwood Borough (“Brentwood”) for a purchase price of approximately $19 million.

On February 22, 2024, the Pennsylvania Public Utility Commission (the “PaPUC”) denied the Pennsylvania subsidiary’s application to acquire Brentwood.

On April 3, 2024, the Pennsylvania subsidiary filed an appeal of the decision with the Pennsylvania Commonwealth Court, asserting, among other things, the PaPUC did not apply the correct legal standard in its decision.

The Company cannot currently predict the outcome of this appeal, and the matter remains pending.

On July 2, 2024, the PaPUC issued the Final Supplemental Implementation Order (“FSIO”), which makes certain changes to the process by which the PaPUC considers and decides applications to acquire water and wastewater assets under Pennsylvania’s existing utility valuation law, known as Act 12 of 2016 (“Act 12”).

The FSIO includes, among other things, a reasonableness review ratio that would be applied to help guide the determination on the overall prudency of the transaction and reasonableness of the purchase price.

The provisions of the FSIO are not retroactive and apply to acquisition applications filed after July 2, 2024.

The Company cannot currently predict the impact of the FSIO, but the Company intends to continue to support outcomes that allow for consolidation and investment in water and wastewater infrastructure in Pennsylvania and in its other regulated jurisdictions.

On April 10, 2024, the EPA announced a final NPDWR for six PFAS including PFOA, PFOS, PFNA, HFPO-DA, PFHxS, and PFBS.

The NPDWR for PFAS establishes MCLs, for PFAS in drinking water.

Utilities will be required to complete their initial monitoring for PFAS by 2027, followed by ongoing compliance monitoring.

Utilities will be required to comply with the new MCLs by April 2029, implementing solutions to reduce PFAS levels where needed.

Beginning in April 2029, utilities that exceed any of the PFAS MCLs will be required to provide notification to the public of the violation.

The actual level of capital investment and expenses may differ from these estimates and will be dependent upon market dynamics upon implementation of solutions to comply with the NPDWR for PFAS.

The Company has entered into a nine-year exclusive contract with a third-party vendor to supply granular activated carbon, equipment and reactivation services to more than 50 of the Company’s treatment sites across 10 states through 2033.

The equipment and services provided through the contract will aid the Company in treating drinking water to assist in complying with the NPDWR for PFAS.

On April 19, 2024, the EPA issued a final rule to designate PFOA and PFOS as hazardous substances under CERCLA.

The Company, along with a coalition of other water and wastewater organizations, is actively advocating for and supporting bipartisan legislation that would provide PFAS liability protections under CERCLA for water and wastewater systems, as passive receivers of PFAS, and to hold polluters, and not the public or customers, accountable for PFAS-related liability.

On October 30, 2024, the EPA published the LCRI with a “Compliance Date” of November 1, 2027.

The LCRI focus includes requirements related to (i) replacing all lead and certain galvanized service lines under a utilities control by October 30, 2037, 10 years from the Compliance Date; (ii) identifying the materials of all service lines of unknown material; (iii) improving tap sampling; (iv) lowering the lead action level; and (v) strengthening protections to reduce exposure.

The LCRI also deferred the compliance date of certain requirements of the LCRR to allow for compliance with both new rules.

The Company is in the process of developing an estimate of capital expenditures and operating costs needed to meet the specific requirements of the LCRI.

Capital expenditures and operating costs associated with compliance with federal water quality regulations have been traditionally recognized by PUCs as appropriate for inclusion in establishing rates.

The Company continues to comply with the EPA’s existing Lead and Copper Rule requirements by replacing lead service lines in accordance with current scientific guidance and utilizing appropriate corrosion control techniques as necessary to comply with current water quality regulatory requirements.

The Company met the LCRR requirements, effective October 16, 2024, identified as enforceable by the EPA.

Remaining LCRR requirements are deferred under the LCRI.

*Cybersecurity Incident*

On October 3, 2024, the Company identified unauthorized activity within its information technology computer networks and systems, which was determined to be the result of a cybersecurity incident.

Upon identification of this activity, the Company immediately activated its incident response protocols and third-party cybersecurity experts to assist with containment and mitigation activities and to investigate the nature and scope of the incident.

The Company also promptly notified law enforcement and has coordinated fully with them.

As part of the incident response, and in order to protect its systems and data, the Company disconnected and deactivated certain of its systems, which have since been reconnected and reactivated upon verification that those systems were secure.

All necessary containment, mitigation and restoration activities related to this incident have been completed.

None of the Company’s water or wastewater facilities were impacted by this incident, and the incident did not have a material effect on the Company or its financial condition or results of operations.

In addition, a number of putative class action lawsuits have been filed in connection with this cybersecurity incident, primarily alleging claims related to federal and/or state consumer protection and data privacy laws, and while the Company believes the claims are without merit and is vigorously defending itself against these claims, it cannot currently predict the outcome or impact of these lawsuits.

See Item 3—Legal Proceedings—Cybersecurity Incident Class Action Lawsuits for more information.

The amounts include reductions for the amortization of the excess accumulated deferred income taxes (“EADIT”) that are generally offset in income tax expense.

In 2023, as compared to 2022, diluted earnings per share increased $0.39.

Results for 2023 also reflect the impact of share dilution from the equity financing of $0.29 per share, roughly equivalent to avoided interest expense on the year.

*Regulated Businesses Growth and Optimization*

This includes the Company’s New Jersey subsidiary’s acquisition of the water and wastewater assets of Egg Harbor City on June 1, 2023, for a cash purchase price of $22 million, $2 million of which was funded as a deposit to the seller in March 2021 in connection with the execution of the acquisition agreement.

On April 6, 2023, the Company’s Illinois subsidiary entered into an agreement to acquire the wastewater treatment plant from Granite City for an amended purchase price of $86 million.

This plant provides wastewater service for approximately 26,000 customer connections.

The Company expects to close this acquisition in the first quarter of 2024.

Effective March 24, 2023, the Company’s Pennsylvania subsidiary acquired the rights to buy the wastewater system assets of the Township of Towamencin, for an aggregate purchase price of $104 million, subject to adjustment as provided in the asset purchase agreement.

This system provides wastewater services to approximately 6,300 customer connections in seven townships in Montgomery County, Pennsylvania.

The Company expects to close this acquisition in late 2024 or early 2025, pending final regulatory approval.

On October 11, 2022, the Company’s Pennsylvania subsidiary entered into an agreement to acquire the public wastewater collection and treatment system assets (the “System Assets”) from the Butler Area Sewer Authority.

On November 9, 2023, the Pennsylvania Public Utility Commission (the “PaPUC”) approved a settlement agreement without modification with respect to the Company’s Pennsylvania subsidiary’s application to acquire the System Assets from the Butler Area Sewer Authority for a purchase price of $230 million, subject to adjustment as provided for in the asset purchase agreement.

This system provides wastewater service for approximately 15,000 customer connections.

On December 14, 2023, Center Township and Summit Township filed appeals with the Pennsylvania Commonwealth Court seeking to reverse the order entered by the PaPUC approving the sale of the System Assets.

On December 29, 2023, the Company’s Pennsylvania subsidiary filed applications with the Commonwealth Court seeking to dismiss the appeals and requesting expedited consideration.

By order dated February 1, 2024, the Commonwealth Court deferred deciding the application to dismiss the appeals and directed that the issues raised by the applications to dismiss are to be considered as part of the merits of the appeals.

The order also granted expedited consideration and directed the case to be included on the next available list and established a briefing schedule.

Based on the court’s schedule, the Company estimates that the disposition of the appeals could occur as soon as the second quarter of 2024.

On March 14, 2023, the EPA announced the proposed National Primary Drinking Water Regulations (“NPDWR”) for six PFAS including perfluorooctanoic acid (“PFOA”), perfluorooctane sulfonic acid (“PFOS”), perfluorononanoic acid (“PFNA”), hexafluoropropylene oxide dimer acid (“HFPO-DA”, commonly known as “GenX Chemicals”), perfluorohexane sulfonic acid (“PFHxS”), and perfluorobutane sulfonic acid (“PFBS”).

The proposed regulations would establish legally enforceable levels for PFAS in drinking water.

The EPA anticipates issuing a final rule in 2024 and utilities will be provided a three-year window to comply with the new regulations once finalized, although the Safe Drinking Water Act allows utilities to request an additional two years if capital improvements are required.

The Company performed an initial review of the NPDWR to assess the four parts per trillion requirements for PFAS and the application of the Hazard Index approach for PFNA, PFBS, PFHxS, and GenX Chemicals.

On May 24, 2023, the Company submitted comments to the EPA outlining its position on key issues to address the proposed regulations, including its projected costs associated with PFAS treatment at the proposed limits and the potential impact to customers’ bills.

These are preliminary estimates based on the proposed rule.

The actual expenses may differ from these preliminary estimates and will be dependent upon multiple factors, including the final rule and effective date, as well as the completion of a system-by-system engineering analysis.

Operational Excellence

The Company’s adjusted regulated O&M efficiency ratio was 32.8% for the year ended December 31, 2023, compared to 33.7% for the year ended December 31, 2022.

The ratio reflects an increase in operating revenues for the Regulated Businesses, after considering the adjustment for the amortization of the excess accumulated deferred income taxes (“EADIT”) shown in the table below, as well as the continued focus on operating costs.

The Company’s adjusted regulated O&M efficiency ratio is a non-GAAP measure and is defined by the Company as its operation and maintenance expenses from the Regulated Businesses, divided by the operating revenues from the Regulated Businesses, where both operation and maintenance expenses and operating revenues were adjusted to eliminate purchased water expense.

Operating revenues were further adjusted to exclude reductions for the amortization of the EADIT.

Also excluded from operation and maintenance expenses is the allocable portion of non-O&M support services costs, mainly depreciation and general taxes, which is reflected in the Regulated Businesses segment as operation and maintenance expenses, but for consolidated financial reporting purposes, is categorized within other line items in the accompanying Consolidated Statements of Operations.

The items discussed above were excluded from the O&M efficiency ratio calculation as they are not reflective of management’s ability to increase the efficiency of the Regulated Businesses.

The Company evaluates its operating performance using this ratio, and believes it is useful to investors because it directly measures improvement in the operating performance and efficiency of the Regulated Businesses.

This information is derived from the Company’s consolidated financial information but is not presented in its financial statements prepared in accordance with GAAP.

This information supplements and should be read in conjunction with the Company’s GAAP disclosures, and should be considered as an addition to, and not a substitute for, any GAAP measure.

The Company’s adjusted regulated O&M efficiency ratio (i) is not an accounting measure that is based on GAAP; (ii) is not based on a standard, objective industry definition or method of calculation; (iii) may not be comparable to other companies’ operating measures; and (iv) should not be used in place of the GAAP information provided elsewhere in this Annual Report on Form 10-K.

Presented in the table below is the calculation of the Company’s adjusted regulated O&M efficiency ratio and a reconciliation that compares operation and maintenance expenses and operating revenues, each as determined in accordance with GAAP, to those amounts utilized in the calculation of its adjusted O&M efficiency ratio:

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

| | | | For the Years Ended December 31, | | | | | | | | | | | | | | |

As of December 31, [removed: 2023,] [added: 2024,] the Company had [removed: six] [added: eight] treasury lock agreements, each with a term of 10 [added: years or 30] years, with notional amounts totaling [removed: $225] [added: $355] million, to reduce interest rate exposure on debt expected to be issued in [removed: 2024.][added: 2025.]

These treasury lock agreements terminate in [removed: September 2024,] [added: June 2025] and [added: December 2025 and] have an average fixed rate of [removed: 4.24%.][added: 4.03%.]

The fair value of the treasury locks at December 31, [removed: 2023,] [added: 2024,] was in a [removed: loss] [added: gain] position of [removed: $8] [added: $24] million.

A hypothetical 1% [removed: adverse] [added: favorable] change in interest rates would result in [removed: a decrease] [added: an increase] in the fair value of the treasury locks to a [removed: loss] [added: gain] position of approximately [removed: $26] [added: $60] million at December 31, [removed: 2023.][added: 2024.]

As of December 31, 2024, a hypothetical 1% increase in average interest rates applied to the Company’s short-term borrowing balances throughout 2024 would result in an increased annual interest expense of approximately $2 million.

As of December 31, 2023, a hypothetical increase of interest rates by 1% associated with the Company’s short-term borrowings would result in a $3 million increase in short-term interest expense.

A holding company originally incorporated in Delaware in 1936, the Company employs approximately [removed: 6,500] [added: 6,700] professionals who provide drinking water, wastewater and other related services to over 14 million people in 24 states.

The Company’s utilities operate in [removed: approximately 1,700 communities in] 14 states in the United States, with 3.5 million active customers in its water and wastewater networks.

Operating revenues for the Regulated Businesses were [removed: $3,920] [added: $4,296] million for [removed: 2023, $3,505] [added: 2024, $3,920] million for [removed: 2022] [added: 2023] and [removed: $3,384] [added: $3,505] million for [removed: 2021,] [added: 2022,] accounting for [removed: 93%, 92%] [added: 92%, 93%] and [removed: 86%,] [added: 92%,] 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: 2023:][added: 2024:]

Presented in the table below is a breakout of the Company’s Regulated Businesses’ operating revenue by class of customer, for the years ended December 31, [removed: 2023, 2022] [added: 2024, 2023] and [removed: 2021:][added: 2022:]

| | | | [removed: 2023] [added: 2024] | | | | | | | | | | | | [removed: 2022] [added: 2023] | | | | | | | | | | | | [removed: 2021] [added: 2022] | | | | | | | | |

| Residential | | | $ | [removed: 2,143] [added: 2,349] | | | | | 55 | | % | | | | $ | [removed: 1,941] [added: 2,143] | | | | | 55 | | % | | | | $ | [removed: 1,935] [added: 1,941] | | | | | [removed: 57] [added: 55] | | % |

| Commercial | | | [removed: 798] [added: 885] | | | | | | [removed: 20] [added: 21] | | % | | | | [removed: 710] [added: 798] | | | | | | 20 | | % | | | | [removed: 676] [added: 710] | | | | | | 20 | | % |

| Fire service | | | [removed: 158] [added: 164] | | | | | | 4 | | % | | | | [removed: 147] [added: 158] | | | | | | 4 | | % | | | | [removed: 151] [added: 147] | | | | | | [removed: 5] [added: 4] | | % |

| Industrial | | | [removed: 167] [added: 184] | | | | | | 4 | | % | | | | [removed: 153] [added: 167] | | | | | | 4 | | % | | | | [removed: 141] [added: 153] | | | | | | 4 | | % |

| Public and other water (a) | | | [removed: 284] [added: 301] | | | | | | 7 | | % | | | | [removed: 267] [added: 284] | | | | | | [removed: 8] [added: 7] | | % | | | | [removed: 239] [added: 267] | | | | | | [removed: 7] [added: 8] | | % |

| Wastewater | | | [removed: 327] [added: 363] | | | | | | 8 | | % | | | | [removed: 242] [added: 327] | | | | | | [removed: 7] [added: 8] | | % | | | | [removed: 208] [added: 242] | | | | | | [removed: 6] [added: 7] | | % |

| Other (b) | | | [removed: 43] [added: 50] | | | | | | [removed: 2] [added: 1] | | % | | | | [removed: 45] [added: 43] | | | | | | 2 | | % | | | | [removed: 34] [added: 45] | | | | | | [removed: 1] [added: 2] | | % |

| Total | | | $ | [removed: 3,920] [added: 4,296] | | | | | 100 | | % | | | | $ | [removed: 3,505] [added: 3,920] | | | | | 100 | | % | | | | $ | [removed: 3,384] [added: 3,505] | | | | | 100 | | % |

Presented in the table below is the number of water and wastewater customers the Company’s Regulated [removed: Businesses’] [added: Businesses] served by class of customer as of December 31, [removed: 2023, 2022] [added: 2024, 2023] and [removed: 2021,] [added: 2022,] which represents approximately [removed: 14] [added: 13] million people served as of December 31, [removed: 2023:][added: 2024:]

| Residential | | | [removed: 2,893] [added: 2,920] | | | | | | [removed: 279] [added: 307] | | | | | | [removed: 2,870] [added: 2,893] | | | | | | [removed: 270] [added: 279] | | | | | | [removed: 2,972] [added: 2,870] | | | | | | [removed: 245] [added: 270] | | |

| Commercial | | | [removed: 221] [added: 222] | | | | | | [removed: 18] [added: 21] | | | | | | [removed: 219] [added: 221] | | | | | | [removed: 17] [added: 18] | | | | | | [removed: 225] [added: 219] | | | | | | [removed: 15] [added: 17] | | |

| Fire service | | | [removed: 4] [added: 53] | | | | | | — | | | | | | [removed: 51] [added: 52] | | | | | | — | | | | | | [removed: 52] [added: 51] | | | | | | — | | |

| Industrial | | | [removed: 52] [added: 4] | | | | | | — | | | | | | 4 | | | | | | — | | | | | | 4 | | | | | | — | | |

| Public and other (a) | | | 18 | | | | | | 1 | | | | | | [removed: 17] [added: 18] | | | | | | 1 | | | | | | [removed: 16] [added: 17] | | | | | | 1 | | |

| Total [removed: (b)] | | | [removed: 3,188] [added: 3,217] | | | | | | [removed: 298] [added: 329] | | | | | | [removed: 3,161] [added: 3,188] | | | | | | [removed: 288] [added: 298] | | | | | | [removed: 3,269] [added: 3,161] | | | | | | [removed: 261] [added: 288] | | |

The Company plans to invest between [removed: $34] [added: $40] billion and [removed: $38] [added: $42] 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 [removed: has] [added: is] proactively [removed: improved] [added: improving] its pipe renewal rate from a 250-year replacement cycle in 2009 to an approximate 125-year replacement cycle by [removed: 2028,] [added: 2029,] which it anticipates will enable the Company to replace nearly 2,000 miles of mains and collection pipes between [removed: 2024] [added: 2025] and [removed: 2028.][added: 2029.]

In addition, from [removed: 2024] [added: 2025] to [removed: 2028,] [added: 2029,] the Company’s capital investment in treatment plants, storage tanks and other key, above-ground facilities is expected to increase, further seeking to address infrastructure renewal, resiliency, water quality, operational efficiency, technology and innovation, and emerging regulatory compliance needs.

Specific authority might differ from state to state, but in most states, PUCs review and approve rates charged to customers, accounting treatments, long-term financing [removed: programs] [added: applications] and cost of capital, operation and maintenance (“O&M”) expenses, capital expenditures, taxes, affiliated transactions and relationships, reorganizations, mergers and acquisitions, and dispositions, along with imposing certain penalties or granting certain incentives.

| Revenue stability mechanisms | | | | | | Adjusts rates periodically to ensure that a utility recovers the revenues authorized in its general rate case, regardless of sales volume, including recognition of declining sales resulting from reduced consumption, while providing an incentive for customers to use water more efficiently. [added: In California, the ratemaking tool provides partial revenue recovery with a focus on promotion of conservation signals in the pricing structure.] | | | | | | CA, IL | | |

According to the [removed: most recent study by the] U.S. Environmental Protection Agency (“EPA”), as of [removed: 2017,] [added: 2024,] approximately 84% of the water market is served by municipal systems [removed: and] [added: and, as of 2022,] approximately 98% of the country’s wastewater systems are government owned.

The EPA also estimates, as of [removed: 2017,] [added: 2024,] that there are over 50,000 community water systems [removed: and] [added: and, as of 2022,] over [removed: 15,000] [added: 17,000] community wastewater systems in the United States, with approximately 80% of the community water systems serving a population of [added: approximately] 3,000 or less.

Before entering new [removed: regulated markets,] [added: regulatory jurisdictions (states),] the Company will evaluate the [removed: business] [added: regulatory, legislative] and [removed: regulatory] [added: business] climates [removed: to ensure that it will have] [added: for] the opportunity to achieve an appropriate rate of return on its investment while maintaining its high standards [removed: for providing safe, reliable and affordable] [added: of] services to [removed: its] customers.

The Company’s regulated subsidiaries in New Jersey, [removed: Indiana,] [added: Indiana] and Missouri have versions of water quality or safety accountability acts [removed: which] [added: that] require operational or safety and security standards for water and wastewater utilities serving a certain number of customers.

Fair market value assessment of water and wastewater systems is an alternative to the traditional depreciated original cost method of valuation, [removed: which] [added: and] allows the Company to offer municipalities a purchase price for their system assets that is reflective of the assets’ fair market value, while providing the Company with increased opportunity to recover the purchase price over the life of the purchased system assets, subject to PUC approval.

However, the Company’s Regulated Businesses [removed: do] face [removed: increasing] competition from governmental agencies, other investor-owned utilities, large industrial customers with the ability to provide their own water supply/treatment process and strategic buyers that are entering new markets and/or making strategic acquisitions.

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

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

[removed: Typically,] [added: The water] the Company [removed: does not own the water, which] [added: treats and delivers] is held in public trust and is allocated to the Company through contracts, permits and allocation rights granted by federal and state or multi-state agencies or through the ownership of water rights pursuant to local law.

The level of water treatment the Company applies varies significantly depending upon the quality of the water source and [removed: customer stipulations.][added: any state requirements that are more restrictive than federal water quality standards.]

Presented in the table below are the percentages of water supply by source type for the Company’s Top Five States individually and the Regulated Businesses collectively for the year ended December 31, [removed: 2023:][added: 2024:]

| New Jersey | | | 74% | | | | | | [removed: 20%] [added: 22%] | | | | | | [removed: 6%] [added: 4%] | | |

[removed: In order to ensure that] [added: To support] the [removed: Company has] [added: maintenance of] adequate water [removed: supply, it] [added: supplies, the Company] uses long-term planning processes and maintains contingency plans to minimize the potential impact on service caused by climate variability and a wide range of weather fluctuations.

Surface and ground water levels are routinely monitored [removed: so that] [added: in an effort to predict and mitigate] supply capacity deficits [removed: may, to the extent possible, be predicted and mitigated] through demand management and additional supply development.

| New Jersey | | | $ | 990 | | | | | $ | 61 | | | | | $ | 1,051 | | | | | 24.5 | | % | | | | 672 | | | | | | 70 | | | | | | 742 | | | | | | 20.9 | | % |

| Pennsylvania | | | 872 | | | | | | 167 | | | | | | 1,039 | | | | | | 24.2 | | % | | | | 688 | | | | | | 115 | | | | | | 803 | | | | | | 22.6 | | % |

| Missouri | | | 487 | | | | | | 21 | | | | | | 508 | | | | | | 11.8 | | % | | | | 485 | | | | | | 24 | | | | | | 509 | | | | | | 14.4 | | % |

| Illinois | | | 359 | | | | | | 73 | | | | | | 432 | | | | | | 10.1 | | % | | | | 300 | | | | | | 77 | | | | | | 377 | | | | | | 10.6 | | % |

| California | | | 342 | | | | | | 4 | | | | | | 346 | | | | | | 8.1 | | % | | | | 191 | | | | | | 3 | | | | | | 194 | | | | | | 5.5 | | % |

| Total—Top Five States (b) | | | 3,050 | | | | | | 326 | | | | | | 3,376 | | | | | | 78.6 | | % | | | | 2,336 | | | | | | 289 | | | | | | 2,625 | | | | | | 74.0 | | % |

| Other (c) | | | 883 | | | | | | 37 | | | | | | 920 | | | | | | 21.4 | | % | | | | 881 | | | | | | 40 | | | | | | 921 | | | | | | 26.0 | | % |

| Total Regulated Businesses | | | $ | 3,933 | | | | | $ | 363 | | | | | $ | 4,296 | | | | | 100.0 | | % | | | | 3,217 | | | | | | 329 | | | | | | 3,546 | | | | | | 100.0 | | % |

| | | | 2024 | | | | | | | | | | | | 2023 | | | | | | | | | | | | 2022 | | | | | | | | |

Typically, the Company does not own the water.

| Missouri | | | 83% | | | | | | 16% | | | | | | 1% | | |

| Illinois | | | 53% | | | | | | 35% | | | | | | 12% | | |

| California | | | —% | | | | | | 64% | | | | | | 36% | | |

| Regulated Businesses | | | 70% | | | | | | 23% | | | | | | 7% | | |

The Company leverages its collective size and scale to achieve operational efficiencies, prioritize capital investments and utilize employee knowledge to manage acquired systems.

Operational efficiencies and investment needs allow the Company to be successful in integrating and managing the systems acquired with its regulated service areas.

American Water continues to advocate for constructive policies at the federal level that align with the Company’s strategic priorities and would be beneficial to its customers.

These include bi-partisan, bi-cameral legislation to establish a permanent, nationwide, low to moderate income water assistance program, given the expiration of the previous program in 2023; establishing liability exemptions under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (“CERCLA”) for certain entities, notably passive receivers of hazardous substances, specifically related to PFAS (such as water and wastewater utilities); and granting investor-owned wastewater utilities the opportunity to access state revolving loan funds.

Efforts to advance these legislative priorities will continue in 2025.

In addition, the Company advocates for low income rate discount programs and rate design reform measures in state rate proceedings that will improve the affordability of service specifically for lower income customers.

MSG faces competition primarily from American States Water Company.

Over the last 40 years, there have been numerous federal regulations aimed at reducing the potential exposure of lead from plumbing materials into drinking water.

Regulations have addressed both piping system materials and water quality.

In 1986, the Safe Drinking Water Act was amended to prohibit the installation of pipe, solder and flux in public water systems and premise plumbing systems that was not lead-free.

In 1991, the EPA published the Lead and Copper Rule (“LCR”) to reduce the corrosivity of water and control lead and copper in drinking water.

Since that time, the EPA has issued several minor revisions (2000, 2004 and 2007) and two major revisions (2021 and 2024) to the LCR.

The 2021 and 2024 revisions are discussed below.

On January 15, 2021, the EPA published the final LCRR with a revised final compliance date of October 16, 2024.

The LCRR is designed to better identify high levels of lead, improve the reliability of lead tap sampling results, strengthen corrosion control treatment requirements, expand consumer awareness and improve risk communication.

On October 30, 2024, the EPA published the LCRI with a “Compliance Date” of November 1, 2027.

The LCRI focus includes requirements related to (i) replacing all lead and certain galvanized service lines under a utility’s control by October 30, 2037, 10 years after the Compliance Date; (ii) identifying the materials of all service lines of unknown material; (iii) improving tap sampling; (iv) reducing the lead action level; and (v) strengthening protections to reduce exposure to lead.

The LCRI also deferred the compliance date of certain requirements of the LCRR to allow for compliance with both new rules.

Utilities will be required to complete their initial monitoring for PFAS by 2027, followed by ongoing compliance monitoring.

Utilities will be required to comply with the new MCLs by April 2029, implementing solutions to reduce PFAS levels where needed.

Beginning in April 2029, utilities that exceed any of the PFAS MCLs will be required to provide notification to the public of the violation.

The actual level of capital investment and expenses may differ from these estimates and will be dependent upon market dynamics upon implementation of solutions to comply with the NPDWR for PFAS.

The Company has entered into a nine-year exclusive contract with a third-party vendor to supply granular activated carbon, equipment and reactivation services to more than 50 of the Company’s treatment sites across 10 states through 2033.

The equipment and services provided through the contract will aid the Company in treating drinking water to assist in complying with the NPDWR for PFAS.

On April 19, 2024, the EPA issued a final rule to designate PFOA and PFOS as hazardous substances under CERCLA.

The Company, along with a coalition of other water and wastewater organizations, is actively advocating for and supporting bipartisan legislation that would provide PFAS liability protections under CERCLA for water and wastewater systems, as passive receivers of PFAS, and to hold polluters, and not the public or customers, accountable for PFAS-related liability.

| Pennsylvania | | | $ | 810 | | | | | $ | 155 | | | | | $ | 965 | | | | | 24.6 | | % | | | | 683 | | | | | | 98 | | | | | | 781 | | | | | | 22.4 | | % |

| New Jersey | | | 908 | | | | | | 57 | | | | | | 965 | | | | | | 24.6 | | % | | | | 668 | | | | | | 64 | | | | | | 732 | | | | | | 21.0 | | % |

| Missouri | | | 430 | | | | | | 20 | | | | | | 450 | | | | | | 11.5 | | % | | | | 483 | | | | | | 24 | | | | | | 507 | | | | | | 14.5 | | % |

| Illinois | | | 366 | | | | | | 61 | | | | | | 427 | | | | | | 10.9 | | % | | | | 299 | | | | | | 72 | | | | | | 371 | | | | | | 10.6 | | % |

| California | | | 300 | | | | | | 4 | | | | | | 304 | | | | | | 7.8 | | % | | | | 190 | | | | | | 3 | | | | | | 193 | | | | | | 5.5 | | % |

| Total—Top Five States (b) | | | 2,814 | | | | | | 297 | | | | | | 3,111 | | | | | | 79.4 | | % | | | | 2,323 | | | | | | 261 | | | | | | 2,584 | | | | | | 74.1 | | % |

| Other (c) | | | 779 | | | | | | 30 | | | | | | 809 | | | | | | 20.6 | | % | | | | 865 | | | | | | 37 | | | | | | 902 | | | | | | 25.9 | | % |

| Total Regulated Businesses | | | $ | 3,593 | | | | | $ | 327 | | | | | $ | 3,920 | | | | | 100.0 | | % | | | | 3,188 | | | | | | 298 | | | | | | 3,486 | | | | | | 100.0 | | % |

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

The proximity of acquisition opportunities to the Company’s regulated footprint allows it to integrate and manage the acquired systems and operations primarily using the Company’s existing management (although the Company typically retains the majority, if not all, of the employees of the acquired systems) and to achieve operational efficiencies and prioritize capital investment needs.

Sale of New York American Water Company, Inc.

On January 1, 2022, the Company completed the previously disclosed sale of its regulated utility operations in New York to 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.

The Company’s regulated New York operations represented approximately 127,000 customers in the State of New York.

In 2020 and 2021, the United States Congress passed, and the President signed into law, legislation with water and wastewater provisions including the Infrastructure Investment and Jobs Act (the “IIJA”), the Consolidated Appropriations Act of 2021 and the American Rescue Plan of 2021.

The legislation provided funding for a variety of initiatives to support water and wastewater infrastructure, lead service line replacement, treatment of PFAS and other contaminants of emerging concern, and low-income water assistance (“LIHWAP”).

LIHWAP expired in 2023.

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

| Missouri | | | 84% | | | | | | 15% | | | | | | 1% | | |

| Illinois | | | 55% | | | | | | 35% | | | | | | 10% | | |

| California | | | —% | | | | | | 67% | | | | | | 33% | | |

| Regulated Businesses | | | 71% | | | | | | 22% | | | | | | 7% | | |

The Company supports the United Nations’ declaration of access to clean water and sanitation as a human right, regardless of economic status.

The Company’s approach to water access and affordability consists of two key strategies.

The first is to supply water that is safe, reliable and meets the needs of its customers.

The second is to provide affordable water services to customers while protecting its customers’ right to clean water, regardless of economic status or geographic location.

The Company also focuses on addressing water affordability by maximizing both supply-side and demand-side efficiency.

Average residential water bills for the Company’s customers are approximately $55 to $65 per month, and the expected average annual rate increases across the Company’s footprint over the next five years is 5% to 6%.

Sale of Homeowner Services Group

On December 9, 2021 (the “Closing Date”), the Company sold all of the equity interests of the HOS subsidiaries for total consideration of approximately $1.275 billion.

Prior to the Closing Date, the Company provided various warranty protection programs and other home services primarily to residential and smaller commercial customers through its HOS operations.

See Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 5—Acquisitions and Divestitures in the Notes to Consolidated Financial Statements for additional information.

MSG faces competition from a number of service providers, including American States Water Company and Veolia Environnement S.A.

In 1991, the EPA published the Lead and Copper Rule (“LCR”) to control lead and copper in drinking water and, since that time, has issued minor revisions in 2000, 2004 and 2007, enhancing monitoring, reporting and public education requirements.

The failure of certain water systems in the United States to comply with the requirements of the LCR has received recent media attention and scrutiny, and in certain cases, has led to a number of investigations and the imposition of significant penalties and sanctions against the operators of those systems and others.

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 an intent to finalize the Lead and Copper Rule Improvements (“LCRI”) which were proposed on December 6, 2023, 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.

Capital expenditures and operating costs associated with the LCRI will be determined once the EPA finalizes the rule, but as previously noted, costs associated with compliance with federal water quality regulations have been traditionally recognized by PUCs as appropriate for inclusion in establishing rates.

The Company has provided both oral and written comments to the EPA on the proposed LCRI.

The Company believes that, if the LCRI rulemaking were to be implemented, the total investment cost to identify and replace lead and galvanized steel service lines in the United States by 2037 would be significant and has been underestimated by the EPA in the LCRI rulemaking.

Finally, the Company supports a delay of the compliance date for those portions of the LCRR proposed to be extended by the LCRI, some of which are currently scheduled to take effect on October 16, 2024, to allow all water service providers to prepare adequately for any changes that may be implemented through the proposed LCRI rulemaking while continuing to comply with the existing requirements.

Set forth below is information related to the Company’s material pending legal proceedings as of February [removed: 14, 2024,] [added: 19, 2025,] other than ordinary routine litigation incidental to the business, required to be disclosed in this Annual Report on Form 10-K.

Under the 2009 Order, Cal Am is [removed: required, among other things,] [added: required] to decrease significantly its yearly diversions of water from the Carmel River according to a set reduction schedule.

Following issuance by the [added: California] Coastal Commission [added: (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 obtain the remaining required permits for the Water Supply Project.

For the year ended December 31, [removed: 2023,] [added: 2024,] Cal Am has complied with the diversion limitations contained in the 2016 Order.

Continued compliance with the diversion limitations in [removed: 2024,] [added: 2025,] and future years may be impacted by a number of factors, including without limitation potential recurrence of drought conditions in California and the reduction or exhaustion of water supply reserves, and will require successful development of alternate water supply sources sufficient to meet customer demand.

In 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 [removed: the incurred] $50 million in associated [added: incurred] costs plus AFUDC, subject to meeting certain criteria.

Cal Am has incurred [removed: $241] [added: $281] million in aggregate costs as of December 31, [removed: 2023,] [added: 2024,] related to the Water Supply Project, which includes [removed: $72] [added: $88] 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 an expansion to the GWR Project, which is not expected to produce additional water until [removed: 2024] [added: late 2025] at the earliest.

On December 5, 2022, the CPUC issued a final decision that [removed: authorizes] [added: authorized] 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.

On December 30, 2022, Cal Am filed with the CPUC an application for rehearing of the CPUC’s December 5, 2022 final [removed: decision.][added: decision, and on March 30, 2023, the CPUC issued a decision denying Cal Am’s application for rehearing but adopting its proposed AFUDC for already incurred and future costs.]

The decision also [removed: provides] [added: provided] Cal Am the opportunity to serve supplemental testimony to increase its cost cap for certain of the Water Supply Project’s extraction wells.

Further evidentiary hearings in this proceeding [removed: have been scheduled for] [added: were held in] March 2024.

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 relevant final decisions of the CPUC related thereto, 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 $112 million in aggregate construction costs, plus applicable AFUDC, previously approved by the CPUC in its 2016 and December 2022 final decisions, as amended by its March 30, [removed: 2023] [added: 2023,] rehearing decision.

In December 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 [removed: the MPWSP] slant [removed: wells.][added: wells for the Water Supply Project.]

[removed: On September 25,] [added: In February] 2023, MCWD filed a petition for [removed: rehearing in the court] [added: review] of [removed: appeal,] [added: the appellate decision with the California Supreme Court,] which was denied [removed: on October 4,] [added: in March] 2023.

On [removed: November 13,] [added: December 22,] 2023, [removed: MCWD] [added: the City] filed a petition for review [removed: in] [added: with] the California Supreme Court, which was denied on [removed: January 10,] [added: February 24,] 2024.

*Proposed Zoning Changes at [removed: CEMEX] [added: CEMEX, Inc.] Site for Slant Wells*

The proposed amendments would change zoning at [removed: the CEMEX] [added: a] site [added: owned by CEMEX, Inc. (“CEMEX”)] to open space and restrict future uses, including with respect to Cal Am’s planned use of the site for the slant wells for the Water Supply Project.

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 28, [removed: 2025.][added: 2026.]

In May 2020, the City filed a lawsuit in Monterey County Superior Court, naming Cal Am and CEMEX as defendants, and [removed: MCWRA] [added: Monterey County Water Resources Agency (“MCWRA”)] and MCWD as real parties in interest.

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

In 2020, the MPWMD certified a final environmental impact report, analyzing the environmental impacts of the MPWMD’s project to [removed: (1)] [added: (i)] acquire the Monterey system assets through the power of eminent domain, if necessary, and [removed: (2)] [added: (ii)] expand its geographic boundaries to include all parts of this system.

On December 11, 2023, the Monterey County Superior Court issued a writ of mandate directing LAFCO to vacate and set aside its original denial of the MPWMD’s application to serve as a retail water provider (in conjunction with its effort to acquire the Monterey [removed: water] system assets) [removed: and allowing the MPWMD] [added: and, if requested,] to [removed: seek further LAFCO review of its] [added: re-hear the] application in compliance with all applicable law.

On February 8, 2024, and February 9, 2024, [added: respectively,] each of Cal Am and [removed: LAFCO, respectively,] [added: LAFCO] filed a notice of appeal with the California Court of [removed: Appeals] [added: Appeal] regarding the Monterey County Superior Court’s decision to issue the writ of mandate.

Cal Am is evaluating potential additional actions to [removed: contest the writ of mandate and to] seek to uphold LAFCO’s denial of the MPWMD’s application, including filing other challenges and/or making suitable presentations at a subsequent LAFCO rehearing.

[removed: *Potential] [added: *MPWMD] Condemnation [removed: Actions by MPWMD*][added: Action*]

Separate from the proceedings related to the MPWMD’s application with LAFCO, by letter dated October 3, 2022, the MPWMD notified Cal Am of a decision to appraise the Monterey system assets and [removed: requesting] [added: requested] access to a number of Cal Am’s properties and documents to assist the MPWMD with such an appraisal.

On December 15, 2023, the MPWMD filed a lawsuit [added: against Cal Am] in Monterey County Superior Court seeking to condemn the Monterey system assets.

While the Company cannot currently predict the outcome of this lawsuit, the Company believes that, given existing legal [removed: precedent related to similar attempts by public agencies in California to take over water systems] [added: authorities] and its other defenses, Cal Am should be able to defend itself successfully against the MPWMD’s eminent domain lawsuit.

Dunbar, West Virginia [removed: Water Main Break] Class Action Litigation

Water service was fully restored [removed: on] [added: by] July 1, 2015, to all customers affected by this event.

The Company and [removed: WVAWC] [added: TAWC] believe that [removed: WVAWC] [added: TAWC] has [added: valid,] meritorious defenses to the claims raised in this class action [removed: complaint] [added: complaint,] and [removed: WVAWC] [added: TAWC] will continue to vigorously defend itself against these allegations.

[removed: On] [added: In] January [removed: 12,] 2023, after hearing oral argument, the court issued an oral ruling denying the Tennessee Plaintiffs’ motion for class certification.

[removed: On] [added: In] February [removed: 9,] 2023, the Tennessee Plaintiffs sought reconsideration of the ruling by the court, and any final ruling is appealable to the Tennessee Court of Appeals, as allowed under Tennessee law.

[removed: On] [added: In] September [removed: 21,] 2023, the court upheld its prior ruling but gave the Tennessee Plaintiffs the option to file an amended class definition.

[removed: On] [added: In] October [removed: 12,] 2023, the Tennessee Plaintiffs filed an amended class definition seeking certification of a business customer-only class.

On November 10, 2023, a break was reported in a low-pressure natural gas main located near the affected WVAWC water [removed: main break,] [added: main,] and an inflow of water into the natural gas main and associated delivery pipelines occurred.

The resulting inflow of water into the natural gas main and related pipelines resulted in a loss of natural gas service to approximately [removed: 1,100] [added: 1,500] Mountaineer Gas customers, as well as water entering customer service lines and certain natural gas appliances owned or used by some of the affected Mountaineer Gas customers.

[removed: Mountaineer Gas Company and West Virginia-American Water Company* was filed in West Virginia Circuit Court in Kanawha] County on behalf of an alleged class of Mountaineer Gas residential and business customers and other households and businesses supplied with natural gas in Kanawha County, which lost natural gas service on November 10, 2023, as a result of these events.

West Virginia-American Water Company and Mountaineer Gas Company*, was filed in West Virginia Circuit Court in Kanawha County asserting similar allegations as those included in the *Ruffin*, *Toliver* and *Dodson* [removed: lawsuits (the “first three lawsuits”),] [added: lawsuits,] with the addition of counts alleging unjust enrichment and violations of the West Virginia Human Rights Act and the West Virginia Consumer Credit and Protection Act.

On April 24, 2024, the court granted defendants’ motion for judgment on the pleadings and dismissed one of MCWD’s causes of action in its petition.

A trial commenced on December 9, 2024, and further proceedings continued in January 2025.

On September 19, 2024, the SWRCB administrative hearing officer sent a letter to the court advising that the full draft report of the SWRCB advisory opinion addressing the questions referred by the court would not be received until at least November 1, 2024.

On November 22, 2024, the administrative hearing officer sent a second letter to the court advising that the draft report would be considered for approval at a public meeting of the SWRCB to be held in the first quarter of 2025.

On December 31, 2024, an initial draft report was circulated by the SWRCB to the parties for review and comment.

*Regional Water Quality Control Board Approval of NPDES Permit Amendment*

A requirement of the desalination plant that is a key component of the Water Supply Project is the discharge of brine through Monterey One Water’s outfall.

As a condition to Cal Am’s coastal development permit, an amendment of a NPDES permit must be obtained by Monterey One Water as the outfall owner from the Regional Water Quality Control Board (the “RWQCB”).

The RWQCB must also determine that the proposed brine discharge complies with the desalination facility requirements under the California Ocean Plan.

Working in cooperation with Monterey One Water staff and consultants, Cal Am prepared an application for submission to the RWQCB, which application and submission were approved by Monterey One Water's Board on September 30, 2024.

On October 31, 2024, the parties entered into an agreement settling the stayed validation complaints and all claims for attorneys’ fees and costs.

The validation complaints were subsequently dismissed.

*Cal Am’s Action for Damages Following Termination of Regional Desalination Project (“RDP”)*

In 2010, the CPUC had approved the RDP, which was a precursor to the current Water Supply Project and called for the construction of a desalination facility in the City of Marina.

The RDP was to be implemented through a Water Purchase Agreement and ancillary agreements (collectively, the “Agreements”) among MCWD, Cal Am and MCWRA.

In 2011, due to a conflict of interest concerning a former member of MCWRA’s Board of Directors, MCWRA stated that the Agreements were void, and, as a result, Cal Am terminated the Agreements.

In ensuing litigation filed by Cal Am in 2012 to resolve the termination of the RDP, the court in 2015 entered a final judgment agreeing with Cal Am’s position that four of the five Agreements are void, and one, the credit line agreement, is not void.

As a result of this litigation, Cal Am was permitted to institute further proceedings, discussed below, to determine the amount of damages that may be awarded to Cal Am as a result of the failure of the RDP.

In 2015, Cal Am and MCWRA filed a complaint in San Francisco County Superior Court against MCWD and RMC Water and Environment, a private engineering consulting firm (“RMC”), seeking to recover compensatory, consequential and incidental damages associated with the failure of the RDP, as well as punitive and treble damages, statutory penalties and attorneys’ fees.

In 2019, MCWD was granted a motion for summary judgment related to the tort claims in the complaint.

A settlement as to the non-tort claims was finalized and entered into in March 2020, in which MCWD and RMC paid Cal Am an aggregate of $5.2 million to resolve Cal Am’s contract claims against MCWD and all claims against RMC relating to the RDP.

Under this agreement, Cal Am’s and MCWRA’s right to appeal the dismissal of their tort claims against MCWD were expressly reserved.

In July 2020, Cal Am appealed the grant of summary judgment on MCWD’s tort claims, and in December 2022, the trial court’s decision was reversed on appeal with instructions to vacate its prior orders granting MCWD’s motions for summary judgment and to enter new orders denying the motions.

On June 27, 2024, MCWD filed a motion for judgment on the pleadings.

Following a hearing, on December 5, 2024, the court granted MCWD’s motion without leave to amend, dismissing all of Cal Am’s remaining claims.

Final judgment was entered on January 7, 2025.

Cal Am intends to file a notice of appeal of the trial court’s decision.

The MPWMD filed a notice of cross-appeal on February 15, 2024.

On February 26, 2024, Cal Am filed a motion requesting the Monterey County Superior Court dismiss the MPWMD’s eminent domain lawsuit seeking to condemn Cal Am’s Monterey system assets.

Cal Am’s motion asserted that the MPWMD lacks legal authorization from both the California legislature and LAFCO to become a retail water provider and the lawsuit improperly seeks to effect a taking of property outside the boundaries of the MPWMD’s territory.

Hearings on the motion were held on May 3, 2024, and August 23, 2024.

On November 14, 2024, the court issued a final ruling denying Cal Am’s motion to dismiss.

Cal Am filed its answer to the complaint on December 13, 2024.

This matter remains pending.

Trial in this matter had been scheduled for January 2025.

On January 17, 2025, before trial commenced, the parties notified the Circuit Court that an agreement in principle to settle this litigation was reached among the parties.

Under the terms of the agreement in principle and any subsequent proposed settlement agreement, WVAWC has not admitted, and will not admit, any fault or liability for any of the allegations made by the *Jeffries* plaintiffs.

The proposed maximum pre-tax amount of the settlement is approximately $18 million, of which the Company currently estimates that approximately $5 million would be contributed by the Company and WVAWC, and the remainder would be contributed

by certain of the Company’s general liability insurance carriers.

The actual total amount to be paid to claimants through this settlement will depend upon the claims submitted and approved through a claims process to be negotiated by the parties and approved by the Circuit Court.

On March 30, 2023, the CPUC issued a decision denying Cal Am’s application for rehearing but adopting its proposed AFUDC for already incurred and future costs.

The withdrawal of the Original Jurisdiction Application did not impact Cal Am’s appeal of the City’s denial of the Marina Application, which remains pending before the Coastal Commission.

On November 14, 2023, the court set an initial trial date of May 1, 2024.

*Desalination Plant Development Permit*

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

In April 2019, 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 approved the permit.

In August 2019, MCWD filed a petition in Monterey County Superior Court challenging Monterey County’s approval of Cal Am’s combined development permit application and seeking injunctive relief to enjoin Monterey County and Cal Am from commencing construction of the desalination plant.

In October 2019, after a hearing, the court denied, without prejudice, MCWD’s motion for a preliminary injunction, but issued a stay of 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.

In January 2021, the court issued its decision granting in part and denying in part MCWD’s petition.

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

The court denied all of MCWD’s other claims.

The court also lifted its stay on physical construction at the plant site.

In May 2021, Cal Am filed a notice of appeal as to the Monterey County Superior Court’s January 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 in May 2021.

In June 2021, MCWD filed cross-appeals on its claims that had been denied by the court.

On September 8, 2023, the court of appeal issued its opinion reversing the trial court’s determination in favor of MCWD as to the statement of overriding considerations and rejecting MCWD’s appeals on all of its claims that the Monterey County Superior Court had denied.

The Monterey County Superior Court has set a trial date of July 15, 2024, for the City’s lawsuit.

On December 22, 2023, the City filed a petition for review with the California Supreme Court.

In August 2020, WVAWC filed a Petition for Writ of Prohibition in the Supreme Court of Appeals of West Virginia seeking to vacate or remand the Circuit Court’s order certifying the issues class.

In January 2021, the Supreme Court of Appeals remanded the case back to the Circuit Court for further consideration in light of a decision issued in another case relating to the class certification issues raised on appeal.

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

In August 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 2022 order, which petition was denied on June 8, 2023.

On August 21, 2023, the Circuit Court set a date of September 9, 2024, for a class trial on issues relating to duty and breach of that duty.

The trial will not find class-wide or punitive damages.

On December 1, 2023, TAWC filed a memorandum in opposition to the amended class definition.

On January 18, 2024, the court heard oral argument on the motions but issued no decision.

The court instead requested additional briefing and a second oral argument, deadlines for which have not yet been set.

TAWC and the Company believe that TAWC has meritorious defenses to the claims raised in this class action complaint, and TAWC is vigorously defending itself against these allegations.

That motion remains pending.

These motions remain pending.

WVAWC is cooperating with its general investigation.

West Virginia Elk River Freedom Industries Chemical Spill

See Note 16—Commitments and Contingencies—Contingencies—West Virginia Elk River Freedom Industries Chemical Spill in the Notes to Consolidated Financial Statements for information regarding the final court approval of the global settlement with respect to the January 2014 Freedom Industries, Inc. chemical spill.

In August 2023, a potential class action settlement involving defendants The Chemours Company, Corteva, Inc. and DuPont de Nemours, Inc. to resolve claims brought in the MDL against them by public water systems, and a similar class action settlement with defendant 3M Company, received preliminary approval from the MDL court.

The Company’s utility subsidiaries have determined to remain parties to these class action settlements.

On February 8, 2024, after a hearing on December 14, 2023, the MDL court issued its final approval of the DuPont settlement, and the Company will begin the process of perfecting its claims under this settlement within the time period to be provided by the MDL court.

A fairness hearing on the 3M settlement was held on February 2, 2024.

Other Matters

In April 2021, American Water Resources, LLC (“AWR”), which, prior to the December 2021 sale of the Company’s former Homeowner Services Group business (“HOS”) was one of the indirect, wholly owned subsidiaries comprising that business, received a grand jury subpoena in connection with an investigation by the U.S. Attorney’s Office for the Eastern District of New York (the “EDNY”).

For the fiscal year ended December 31, [removed: 2023][added: 2024]

Common Stock, $0.01 par [removed: value—$24,527,200,000] [added: value—$22,045,400,000] as of June [removed: 30, 2023] [added: 28, 2024] (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 [removed: 30, 2023,] [added: 28, 2024,] 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 [removed: 30, 2023,] [added: 28, 2024,] to be controlled by, or under common control with, American Water or any such persons 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—194,755,320] [added: share—194,947,313] shares as of February [removed: 6, 2024.][added: 10, 2025.]

Portions of the American Water Works Company, Inc. definitive proxy statement for the [removed: 2024] [added: 2025] Annual Meeting of Shareholders to be filed with the Securities and Exchange Commission within 120 days after December 31, [removed: 2023] [added: 2024] are incorporated by reference into Part III of this report.

| [Forward-Looking [removed: Statements](#i3c090b3ff6cd4ccd8bbfc58c9f828836_13)] [added: Statements](#idabc48ed40d14bf4b46aaccabb5d2c9e_13)] | | | | | | [removed: [1](#i3c090b3ff6cd4ccd8bbfc58c9f828836_13)] [added: [1](#idabc48ed40d14bf4b46aaccabb5d2c9e_13)] | | |

| Item 1. | | | [removed: [Business](#i3c090b3ff6cd4ccd8bbfc58c9f828836_19)] [added: [Business](#idabc48ed40d14bf4b46aaccabb5d2c9e_19)] | | | [removed: [4](#i3c090b3ff6cd4ccd8bbfc58c9f828836_19)] [added: [4](#idabc48ed40d14bf4b46aaccabb5d2c9e_19)] | | |

| Item 1A. | | | [Risk [removed: Factors](#i3c090b3ff6cd4ccd8bbfc58c9f828836_46)] [added: Factors](#idabc48ed40d14bf4b46aaccabb5d2c9e_52)] | | | [removed: [22](#i3c090b3ff6cd4ccd8bbfc58c9f828836_46)] [added: [21](#idabc48ed40d14bf4b46aaccabb5d2c9e_52)] | | |

| Item 1B. | | | [Unresolved Staff [removed: Comments](#i3c090b3ff6cd4ccd8bbfc58c9f828836_49)] [added: Comments](#idabc48ed40d14bf4b46aaccabb5d2c9e_55)] | | | [removed: [37](#i3c090b3ff6cd4ccd8bbfc58c9f828836_49)] [added: [36](#idabc48ed40d14bf4b46aaccabb5d2c9e_55)] | | |

| Item 1C. | | | [Cyber [removed: Security](#i3c090b3ff6cd4ccd8bbfc58c9f828836_1975)] [added: Security](#idabc48ed40d14bf4b46aaccabb5d2c9e_58)] | | | [removed: [37](#i3c090b3ff6cd4ccd8bbfc58c9f828836_1975)] [added: [36](#idabc48ed40d14bf4b46aaccabb5d2c9e_58)] | | |

| Item 2. | | | [removed: [Properties](#i3c090b3ff6cd4ccd8bbfc58c9f828836_52)] [added: [Properties](#idabc48ed40d14bf4b46aaccabb5d2c9e_61)] | | | [removed: [39](#i3c090b3ff6cd4ccd8bbfc58c9f828836_52)] [added: [38](#idabc48ed40d14bf4b46aaccabb5d2c9e_61)] | | |

| Item 3. | | | [Legal [removed: Proceedings](#i3c090b3ff6cd4ccd8bbfc58c9f828836_55)] [added: Proceedings](#idabc48ed40d14bf4b46aaccabb5d2c9e_64)] | | | [removed: [39](#i3c090b3ff6cd4ccd8bbfc58c9f828836_55)] [added: [38](#idabc48ed40d14bf4b46aaccabb5d2c9e_64)] | | |

| Item 4. | | | [Mine Safety [removed: Disclosures](#i3c090b3ff6cd4ccd8bbfc58c9f828836_58)] [added: Disclosures](#idabc48ed40d14bf4b46aaccabb5d2c9e_67)] | | | [removed: [48](#i3c090b3ff6cd4ccd8bbfc58c9f828836_58)] [added: [48](#idabc48ed40d14bf4b46aaccabb5d2c9e_67)] | | |

| Item 5. | | | [Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity [removed: Securities](#i3c090b3ff6cd4ccd8bbfc58c9f828836_64)] [added: Securities](#idabc48ed40d14bf4b46aaccabb5d2c9e_73)] | | | [removed: [49](#i3c090b3ff6cd4ccd8bbfc58c9f828836_64)] [added: [49](#idabc48ed40d14bf4b46aaccabb5d2c9e_73)] | | |

| Item 6. | | | [removed: [\[Reserved\]](#i3c090b3ff6cd4ccd8bbfc58c9f828836_67)] [added: [\[Reserved\]](#idabc48ed40d14bf4b46aaccabb5d2c9e_76)] | | | [removed: [49](#i3c090b3ff6cd4ccd8bbfc58c9f828836_64)] [added: [49](#idabc48ed40d14bf4b46aaccabb5d2c9e_73)] | | |

| Item 7. | | | [Management’s Discussion and Analysis of Financial Condition and Results of [removed: Operations](#i3c090b3ff6cd4ccd8bbfc58c9f828836_70)] [added: Operations](#idabc48ed40d14bf4b46aaccabb5d2c9e_79)] | | | [removed: [50](#i3c090b3ff6cd4ccd8bbfc58c9f828836_70)] [added: [50](#idabc48ed40d14bf4b46aaccabb5d2c9e_79)] | | |

| Item 7A. | | | [Quantitative and Qualitative Disclosures About Market [removed: Risk](#i3c090b3ff6cd4ccd8bbfc58c9f828836_109)] [added: Risk](#idabc48ed40d14bf4b46aaccabb5d2c9e_118)] | | | [removed: [75](#i3c090b3ff6cd4ccd8bbfc58c9f828836_109)] [added: [74](#idabc48ed40d14bf4b46aaccabb5d2c9e_118)] | | |

| Item 8. | | | [Financial Statements and Supplementary [removed: Data](#i3c090b3ff6cd4ccd8bbfc58c9f828836_112)] [added: Data](#idabc48ed40d14bf4b46aaccabb5d2c9e_121)] | | | [removed: [77](#i3c090b3ff6cd4ccd8bbfc58c9f828836_112)] [added: [76](#idabc48ed40d14bf4b46aaccabb5d2c9e_121)] | | |

| Item 9. | | | [Changes in and Disagreements with Accountants on Accounting and Financial [removed: Disclosure](#i3c090b3ff6cd4ccd8bbfc58c9f828836_205)] [added: Disclosure](#idabc48ed40d14bf4b46aaccabb5d2c9e_217)] | | | [removed: [138](#i3c090b3ff6cd4ccd8bbfc58c9f828836_205)] [added: [137](#idabc48ed40d14bf4b46aaccabb5d2c9e_217)] | | |

| Item 9A. | | | [Controls and [removed: Procedures](#i3c090b3ff6cd4ccd8bbfc58c9f828836_208)] [added: Procedures](#idabc48ed40d14bf4b46aaccabb5d2c9e_220)] | | | [removed: [138](#i3c090b3ff6cd4ccd8bbfc58c9f828836_208)] [added: [137](#idabc48ed40d14bf4b46aaccabb5d2c9e_220)] | | |

| Item 9B. | | | [Other [removed: Information](#i3c090b3ff6cd4ccd8bbfc58c9f828836_211)] [added: Information](#idabc48ed40d14bf4b46aaccabb5d2c9e_223)] | | | [removed: [139](#i3c090b3ff6cd4ccd8bbfc58c9f828836_211)] [added: [138](#idabc48ed40d14bf4b46aaccabb5d2c9e_223)] | | |

| Item 9C. | | | [Disclosure Regarding Foreign Jurisdictions that Prevent [removed: Inspections](#i3c090b3ff6cd4ccd8bbfc58c9f828836_214)] [added: Inspections](#idabc48ed40d14bf4b46aaccabb5d2c9e_229)] | | | [removed: [139](#i3c090b3ff6cd4ccd8bbfc58c9f828836_214)] [added: [138](#idabc48ed40d14bf4b46aaccabb5d2c9e_229)] | | |

| Item 10. | | | [Directors, Executive [removed: Officers](#i3c090b3ff6cd4ccd8bbfc58c9f828836_220) [and] [added: Officers and] Corporate [removed: Governance](#i3c090b3ff6cd4ccd8bbfc58c9f828836_220)] [added: Governance](#idabc48ed40d14bf4b46aaccabb5d2c9e_235)] | | | [removed: [140](#i3c090b3ff6cd4ccd8bbfc58c9f828836_220)] [added: [139](#idabc48ed40d14bf4b46aaccabb5d2c9e_235)] | | |

| Item 11. | | | [Executive [removed: Compensation](#i3c090b3ff6cd4ccd8bbfc58c9f828836_223)] [added: Compensation](#idabc48ed40d14bf4b46aaccabb5d2c9e_241)] | | | [removed: [140](#i3c090b3ff6cd4ccd8bbfc58c9f828836_223)] [added: [139](#idabc48ed40d14bf4b46aaccabb5d2c9e_241)] | | |

| Item 12. | | | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder [removed: Matters](#i3c090b3ff6cd4ccd8bbfc58c9f828836_226)] [added: Matters](#idabc48ed40d14bf4b46aaccabb5d2c9e_244)] | | | [removed: [140](#i3c090b3ff6cd4ccd8bbfc58c9f828836_226)] [added: [139](#idabc48ed40d14bf4b46aaccabb5d2c9e_244)] | | |

| Item 13. | | | [Certain Relationships and Related Transactions and Director [removed: Independence](#i3c090b3ff6cd4ccd8bbfc58c9f828836_229)] [added: Independence](#idabc48ed40d14bf4b46aaccabb5d2c9e_247)] | | | [removed: [140](#i3c090b3ff6cd4ccd8bbfc58c9f828836_229)] [added: [139](#idabc48ed40d14bf4b46aaccabb5d2c9e_247)] | | |

| Item 14. | | | [Principal Accountant Fees and [removed: Services](#i3c090b3ff6cd4ccd8bbfc58c9f828836_232)] [added: Services](#idabc48ed40d14bf4b46aaccabb5d2c9e_250)] | | | [removed: [140](#i3c090b3ff6cd4ccd8bbfc58c9f828836_232)] [added: [139](#idabc48ed40d14bf4b46aaccabb5d2c9e_250)] | | |

| Item 15. | | | [Exhibits and Financial Statement [removed: Schedules](#i3c090b3ff6cd4ccd8bbfc58c9f828836_238)] [added: Schedules](#idabc48ed40d14bf4b46aaccabb5d2c9e_256)] | | | [removed: [141](#i3c090b3ff6cd4ccd8bbfc58c9f828836_238)] [added: [140](#idabc48ed40d14bf4b46aaccabb5d2c9e_256)] | | |

| Item 16. | | | [Form 10-K [removed: Summary](#i3c090b3ff6cd4ccd8bbfc58c9f828836_241)] [added: Summary](#idabc48ed40d14bf4b46aaccabb5d2c9e_259)] | | | [removed: [141](#i3c090b3ff6cd4ccd8bbfc58c9f828836_241)] [added: [140](#idabc48ed40d14bf4b46aaccabb5d2c9e_259)] | | |

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 ability to execute its current and long-term business, operational, capital expenditures and growth plans and strategies; the timing and outcome of pending or future acquisition activity, and the ability to achieve organic customer growth; the ability of the Company’s California subsidiary to obtain adequate alternative water supplies in lieu of diversions from the Carmel River; the amount, allocation and timing 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 finance current and projected operations, capital expenditure needs and growth initiatives by accessing the debt and equity capital markets and sources of short-term liquidity; the outcome and impact on the Company of governmental and regulatory [removed: investigations] [added: investigations, class action lawsuits,] and [removed: proceedings] [added: other litigation] and [added: legal 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 (“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 Company’s ability to comply with new and changing environmental regulations; 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 [added: and projects] related to customer, technology and work [added: efficiency and] 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.

- present and future proposed changes in laws, governmental regulations and policies, including with respect to the environment (such as, for example, potential improvements to existing Federal regulations with respect to lead and copper service lines and galvanized steel pipe), health and safety, data and consumer privacy, security and protection, water quality and water quality accountability, contaminants of emerging concern (including without limitation per- and polyfluoroalkyl substances [removed: (“PFAS”)),] [added: (collectively, “PFAS”)),] public utility and tax regulations and policies, and impacts resulting from U.S., state and local elections and changes in federal, state and local executive administrations;

- weather conditions and events, climate variability patterns, and natural disasters, including drought or abnormally high rainfall, prolonged and abnormal ice or freezing conditions, strong winds, coastal and intercoastal flooding, pandemics [removed: (including COVID-19)] and epidemics, earthquakes, landslides, hurricanes, tornadoes, wildfires, electrical storms, sinkholes and solar flares;

- exposure or infiltration of the Company’s technology and critical infrastructure systems, including the disclosure of sensitive, personal or confidential information contained therein, through physical or cyber attacks or other means, and impacts from required or voluntary public and other [removed: disclosures] [added: disclosures, as well as civil class action and other litigation or legal, regulatory or administrative proceedings,] related thereto;

- risks and uncertainties associated with contracting with the U.S. government, including ongoing compliance with applicable government [removed: procurement and] [added: procurement,] security [added: and cybersecurity] regulations;

- the Company’s exposure to liabilities related to environmental laws and regulations, including those enacted or adopted and under consideration, and the substances related thereto, including without limitation [added: copper,] lead and galvanized steel, PFAS and other contaminants of emerging concern, and similar matters resulting from, among other things, water and wastewater service provided to customers;

- changes in federal or state general, income and other tax laws, including (i) future significant tax legislation or regulations (including without limitation impacts related to the Corporate Alternative Minimum [removed: Tax),] [added: Tax (“CAMT”)),] and (ii) the availability of, or the Company’s compliance with, the terms of applicable tax credits and tax abatement programs;

- the Company’s ability to retain and attract highly qualified and skilled employees [removed: and/or diverse] [added: and] talent;

| | | | [Part I](#idabc48ed40d14bf4b46aaccabb5d2c9e_16) | | | | | |

| | | | [Part II](#idabc48ed40d14bf4b46aaccabb5d2c9e_70) | | | | | |

| | | | [Part III](#idabc48ed40d14bf4b46aaccabb5d2c9e_232) | | | | | |

| | | | [Part IV](#idabc48ed40d14bf4b46aaccabb5d2c9e_253) | | | | | |

| [Exhibit Index](#idabc48ed40d14bf4b46aaccabb5d2c9e_262) | | | | | | [140](#idabc48ed40d14bf4b46aaccabb5d2c9e_262) | | |

| [Signatures](#idabc48ed40d14bf4b46aaccabb5d2c9e_265) | | | | | | [145](#idabc48ed40d14bf4b46aaccabb5d2c9e_265) | | |

| | | | [Part I](#i3c090b3ff6cd4ccd8bbfc58c9f828836_16) | | | | | |

| | | | [Part II](#i3c090b3ff6cd4ccd8bbfc58c9f828836_61) | | | | | |

| | | | [Part III](#i3c090b3ff6cd4ccd8bbfc58c9f828836_217) | | | | | |

| | | | [Part IV](#i3c090b3ff6cd4ccd8bbfc58c9f828836_235) | | | | | |

| [Exhibit Index](#i3c090b3ff6cd4ccd8bbfc58c9f828836_244) | | | | | | [141](#i3c090b3ff6cd4ccd8bbfc58c9f828836_244) | | |

| [Signatures](#i3c090b3ff6cd4ccd8bbfc58c9f828836_247) | | | | | | [146](#i3c090b3ff6cd4ccd8bbfc58c9f828836_247) | | |

[removed: However, cybersecurity] [added: Cybersecurity] threats are constantly evolving and have and will continue to become more frequent and sophisticated.

Although the Company has implemented measures that it believes are reasonable to safeguard its operational and [added: information] technology systems and has sought to establish a culture of continuous monitoring and improvement, the evolving [added: and increasingly complex] nature of cybersecurity attacks and vulnerabilities means that these protections may not always be effective.

To date, [removed: management] [added: the Company] has determined that [removed: no] [added: it has not experienced a] cybersecurity incident [removed: experienced by the Company] [added: that] has resulted in a material impact [removed: on its] [added: to the Company’s] financial condition, results of [removed: operations] [added: operations, cash flows,] or business strategy.

For additional information concerning [added: the October 3, 2024, cybersecurity incident, and] cybersecurity-related risks, see Item 1A—Risk [removed: Factors—We] [added: Factors—Risks Related to Our Industry and Business Operations—We are, and] may [removed: be] [added: in the future be,] subject to physical and cyber attacks, and —We may sustain losses that exceed or are excluded from our insurance coverage or for which we are [removed: self-insured.][added: self-insured; and Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Other Matters—Cybersecurity Incident.]

To oversee cybersecurity risk management, the Company employs a dedicated unit, led by the Company’s Chief [added: Information] Security Officer [removed: (“CSO”),] [added: (“CISO”),] to implement cybersecurity controls, assess and report on cybersecurity risks and consult with the Company’s internal Enterprise Risk Management Committee, a decision-making body which supports and oversees the identification, assessment, prioritization, and mitigation strategies for enterprise-level risks, including cybersecurity risks.

The [removed: CSO] [added: CISO] reports directly to the [removed: Company's] [added: Company’s] Chief [added: Technology and] Information [removed: Officer (“CIO”),] [added: Officer,] who is responsible for the Company’s information technology program.

The [removed: CIO] [added: CISO] has over 25 years of work experience in the information technology, physical security and cybersecurity fields, including previously serving as the Company’s [removed: CSO,] [added: Chief Security Officer,] and holds the Certified Protection Professional, Professional Certified Investigator and Physical Security Professional certifications from ASIS International.

The [removed: CIO] [added: CISO] serves on the Water Sector Coordinating Council (“WSCC”), an advisory body comprised of representatives from various U.S. water and wastewater organizations, which serves as a policy, strategy and coordination mechanism for the water sector on critical infrastructure security and resilience issues.

In that role, the [removed: CIO] [added: CISO] partners with representatives from the Department of Homeland Security and the EPA on U.S. water and wastewater sector initiatives.

The [removed: CIO] [added: CISO] is also the former Chair of the WSCC, the National Association of Water Companies’ Safety and Security Committee, and the ASIS Utility Security Council.

In [removed: 2023,] [added: 2024,] 100% of the Company’s active workforce completed mandatory cybersecurity training.

The Company has also implemented a vulnerability assessment program that is [removed: conducted] [added: reviewed] at least annually and more frequently, depending on [removed: the nature of] [added: changes to] the [removed: risk.][added: risk environment.]

[removed: If] [added: When] a cybersecurity incident [removed: were to occur,] [added: occurs,] the Company [removed: would establish] [added: establishes] a cross-functional incident response team to respond to the specific cybersecurity incident.

The incident response team [removed: would consist] [added: consists] of a subset of members from the standing crisis response team, including personnel with the most relevant experience related to the specific incident.

The Board of Directors has delegated to [removed: the Safety, Environmental, Technology and Operations (“SETO”)] [added: its SETO] Committee [removed: of the Board of Directors] responsibility for the oversight and review of technology policy, strategy and governance, and cybersecurity issues that could impact the Company’s operational performance or risk profile.

The SETO Committee meets at least quarterly and receives reports [removed: from the CIO and CSO] related to cybersecurity threats, trends and risks, and related mitigation activities.

The SETO Committee coordinates with the Audit, Finance and Risk [removed: Committee of the Board of Directors,] [added: Committee,] as appropriate, on matters related to cybersecurity risk.

By way of example, as previously disclosed, on October 3, 2024, the Company identified unauthorized activity within its information technology computer networks and systems, which was determined to be the result of a cybersecurity incident.

The Company believes that its current preventative actions and response activities provide reasonable measures of protection against security breaches and serve generally to reduce the Company’s overall cybersecurity risk.

In addition, the Company has obtained insurance to provide coverage for a portion of the losses and damages that may result from a cyber attack or a security breach, but such insurance is subject to exclusions, limitations and exceptions, and may not cover the total loss or damage caused by an attack or breach.

The Company’s CSO has 23 years of work experience in the cybersecurity field throughout various industries, including the utility sector, and has obtained several professional certifications, including from the International Information System Security Certification Consortium.

- [removed: 540] [added: 520] groundwater treatment plants;

- [removed: 175] [added: 190] wastewater treatment plants;

- [removed: 53,700] [added: 54,500] miles of transmission, distribution and collection mains and pipes;

- [removed: 1,700] [added: 1,800] water and wastewater pumping stations;

- [removed: 74] [added: 75] dams.

Since April 23, 2008, the Company’s common stock has traded on the New York Stock Exchange (“NYSE”) under the symbol “AWK.” As of February [removed: 6, 2024,] [added: 10, 2025,] there were [removed: 194,755,320] [added: 194,947,313] shares of common stock outstanding held by approximately [removed: 2,101] [added: 1,922] record holders.

From April 1, 2015, the date repurchases under the anti-dilutive stock repurchase program commenced, through December 31, [removed: 2023,] [added: 2024,] 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: 2023.][added: 2024.]

| [Report of Independent Registered Public Accounting [removed: Firm](#i3c090b3ff6cd4ccd8bbfc58c9f828836_115)] [added: Firm](#idabc48ed40d14bf4b46aaccabb5d2c9e_124)] [(PCAOB [removed: ID](#i3c090b3ff6cd4ccd8bbfc58c9f828836_115) 238[)](#i3c090b3ff6cd4ccd8bbfc58c9f828836_115)] [added: ID](#idabc48ed40d14bf4b46aaccabb5d2c9e_124) 238[)](#idabc48ed40d14bf4b46aaccabb5d2c9e_124)] | | | [removed: [78](#i3c090b3ff6cd4ccd8bbfc58c9f828836_115)] [added: [77](#idabc48ed40d14bf4b46aaccabb5d2c9e_124)] | | |

| [Consolidated Balance Sheets as of December 31, [removed: 202](#i3c090b3ff6cd4ccd8bbfc58c9f828836_121)[3](#i3c090b3ff6cd4ccd8bbfc58c9f828836_121)] [added: 202](#idabc48ed40d14bf4b46aaccabb5d2c9e_130)[4](#idabc48ed40d14bf4b46aaccabb5d2c9e_130)] [and [removed: 202](#i3c090b3ff6cd4ccd8bbfc58c9f828836_121)[2](#i3c090b3ff6cd4ccd8bbfc58c9f828836_121)] [added: 202](#idabc48ed40d14bf4b46aaccabb5d2c9e_130)[3](#idabc48ed40d14bf4b46aaccabb5d2c9e_130)] | | | [removed: [80](#i3c090b3ff6cd4ccd8bbfc58c9f828836_121)] [added: [79](#idabc48ed40d14bf4b46aaccabb5d2c9e_130)] | | |

| [Consolidated Statements of Operations for the years ended December 31, [removed: 202](#i3c090b3ff6cd4ccd8bbfc58c9f828836_124)[3](#i3c090b3ff6cd4ccd8bbfc58c9f828836_124)[, 202](#i3c090b3ff6cd4ccd8bbfc58c9f828836_124)[2](#i3c090b3ff6cd4ccd8bbfc58c9f828836_124)] [added: 202](#idabc48ed40d14bf4b46aaccabb5d2c9e_133)[4](#idabc48ed40d14bf4b46aaccabb5d2c9e_133)[, 202](#idabc48ed40d14bf4b46aaccabb5d2c9e_133)[3](#idabc48ed40d14bf4b46aaccabb5d2c9e_133)] [and [removed: 202](#i3c090b3ff6cd4ccd8bbfc58c9f828836_124)[1](#i3c090b3ff6cd4ccd8bbfc58c9f828836_124)] [added: 202](#idabc48ed40d14bf4b46aaccabb5d2c9e_133)[2](#idabc48ed40d14bf4b46aaccabb5d2c9e_133)] | | | [removed: [82](#i3c090b3ff6cd4ccd8bbfc58c9f828836_124)] [added: [81](#idabc48ed40d14bf4b46aaccabb5d2c9e_133)] | | |

| [Consolidated Statements of Comprehensive Income for the years ended December 31, [removed: 202](#i3c090b3ff6cd4ccd8bbfc58c9f828836_127)[3](#i3c090b3ff6cd4ccd8bbfc58c9f828836_127)[, 202](#i3c090b3ff6cd4ccd8bbfc58c9f828836_127)[2](#i3c090b3ff6cd4ccd8bbfc58c9f828836_127)] [added: 202](#idabc48ed40d14bf4b46aaccabb5d2c9e_136)[4](#idabc48ed40d14bf4b46aaccabb5d2c9e_136)[, 202](#idabc48ed40d14bf4b46aaccabb5d2c9e_136)[3](#idabc48ed40d14bf4b46aaccabb5d2c9e_136)] [and [removed: 202](#i3c090b3ff6cd4ccd8bbfc58c9f828836_127)[1](#i3c090b3ff6cd4ccd8bbfc58c9f828836_127)] [added: 202](#idabc48ed40d14bf4b46aaccabb5d2c9e_136)[2](#idabc48ed40d14bf4b46aaccabb5d2c9e_136)] | | | [removed: [83](#i3c090b3ff6cd4ccd8bbfc58c9f828836_127)] [added: [82](#idabc48ed40d14bf4b46aaccabb5d2c9e_136)] | | |

| [Consolidated Statements of Cash Flows for the years ended December 31, [removed: 202](#i3c090b3ff6cd4ccd8bbfc58c9f828836_130)[3](#i3c090b3ff6cd4ccd8bbfc58c9f828836_130)[, 202](#i3c090b3ff6cd4ccd8bbfc58c9f828836_130)[2](#i3c090b3ff6cd4ccd8bbfc58c9f828836_130)] [added: 202](#idabc48ed40d14bf4b46aaccabb5d2c9e_139)[4](#idabc48ed40d14bf4b46aaccabb5d2c9e_139)[, 202](#idabc48ed40d14bf4b46aaccabb5d2c9e_139)[3](#idabc48ed40d14bf4b46aaccabb5d2c9e_139)] [and [removed: 202](#i3c090b3ff6cd4ccd8bbfc58c9f828836_130)[1](#i3c090b3ff6cd4ccd8bbfc58c9f828836_130)] [added: 202](#idabc48ed40d14bf4b46aaccabb5d2c9e_139)[2](#idabc48ed40d14bf4b46aaccabb5d2c9e_139)] | | | [removed: [84](#i3c090b3ff6cd4ccd8bbfc58c9f828836_130)] [added: [83](#idabc48ed40d14bf4b46aaccabb5d2c9e_139)] | | |

| [Consolidated Statements of Changes in Shareholders’ Equity for the years ended December 31, [removed: 202](#i3c090b3ff6cd4ccd8bbfc58c9f828836_133)[3](#i3c090b3ff6cd4ccd8bbfc58c9f828836_133)[, 202](#i3c090b3ff6cd4ccd8bbfc58c9f828836_133)[2](#i3c090b3ff6cd4ccd8bbfc58c9f828836_133)] [added: 202](#idabc48ed40d14bf4b46aaccabb5d2c9e_142)[4](#idabc48ed40d14bf4b46aaccabb5d2c9e_142)[, 202](#idabc48ed40d14bf4b46aaccabb5d2c9e_142)[3](#idabc48ed40d14bf4b46aaccabb5d2c9e_142)] [and [removed: 202](#i3c090b3ff6cd4ccd8bbfc58c9f828836_133)[1](#i3c090b3ff6cd4ccd8bbfc58c9f828836_133)] [added: 202](#idabc48ed40d14bf4b46aaccabb5d2c9e_142)[2](#idabc48ed40d14bf4b46aaccabb5d2c9e_142)] | | | [removed: [85](#i3c090b3ff6cd4ccd8bbfc58c9f828836_133)] [added: [84](#idabc48ed40d14bf4b46aaccabb5d2c9e_142)] | | |

| [Notes to Consolidated Financial [removed: Statements](#i3c090b3ff6cd4ccd8bbfc58c9f828836_136)] [added: Statements](#idabc48ed40d14bf4b46aaccabb5d2c9e_145)] | | | [removed: [86](#i3c090b3ff6cd4ccd8bbfc58c9f828836_136)] [added: [85](#idabc48ed40d14bf4b46aaccabb5d2c9e_145)] | | |

We have audited the accompanying consolidated balance sheets of American Water Works Company, Inc. and its subsidiaries (the “Company”) as of December 31, [removed: 2023] [added: 2024] and [removed: 2022,] [added: 2023,] and the related consolidated statements of operations, [added: of] comprehensive income, [added: of] changes in shareholders’ equity and [added: of] cash flows for each of the three years in the period ended December 31, [removed: 2023,] [added: 2024,] including the related notes (collectively referred to as the “consolidated financial statements”).

We also have audited the [removed: Company's] [added: Company’s] internal control over financial reporting as of December 31, [removed: 2023,] [added: 2024,] 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: 2023] [added: 2024] and [removed: 2022,] [added: 2023,] and the results of its operations and its cash flows for each of the three years in the period ended December 31, [removed: 2023] [added: 2024] in conformity with accounting principles generally accepted in the United States of America.

Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, [removed: 2023,] [added: 2024,] based on criteria established in *Internal Control - Integrated Framework* (2013) issued by the COSO.

As described in Notes 2 and 3 to the consolidated financial statements, the Company’s consolidated regulatory assets and liabilities balances were [removed: $1,119] [added: $1,169] million and [removed: $1,482] [added: $1,416] million, respectively, as of December 31, [removed: 2023.][added: 2024.]

| [added: West Virginia | | |] February [removed: 14,] [added: 25,] 2024 | | | [added: | | | 18 | | |]

| | | | December 31, [removed: 2023] [added: 2024] | | | | | | December 31, [removed: 2022] [added: 2023] | | |

| Property, plant and equipment | | | $ | [removed: 32,189] [added: 35,059] | | | | | $ | [removed: 29,736] [added: 32,189] | |

| Accumulated depreciation | | | [removed: (6,751)] [added: (7,021)] | | | | | | [removed: (6,513)] [added: (6,751)] | | |

| Property, plant and equipment, net | | | [removed: 25,438] [added: 28,038] | | | | | | [removed: 23,223] [added: 25,438] | | |

| Cash and cash equivalents | | | [removed: 330] [added: 96] | | | | | | [removed: 85] [added: 330] | | |

| Restricted funds | | | [removed: 34] [added: 29] | | | | | | [removed: 32] [added: 34] | | |

| Accounts receivable, net of allowance for uncollectible accounts of [removed: $51] [added: $53] and [removed: $60,] [added: $51,] respectively | | | [removed: 339] [added: 416] | | | | | | [removed: 334] [added: 339] | | |

| Income tax receivable | | | [removed: 86] [added: 25] | | | | | | [removed: 114] [added: 86] | | |

| Unbilled revenues | | | [removed: 302] [added: 315] | | | | | | [removed: 275] [added: 302] | | |

| Materials and supplies | | | [removed: 112] [added: 103] | | | | | | [removed: 98] [added: 112] | | |

| Other | | | [removed: 186] [added: 231] | | | | | | [removed: 312] [added: 186] | | |

| Total current assets | | | [removed: 1,389] [added: 1,215] | | | | | | [removed: 1,250] [added: 1,389] | | |

| Regulatory assets | | | [removed: 1,106] [added: 1,150] | | | | | | [removed: 990] [added: 1,106] | | |

| [removed: Seller] [added: Secured seller] promissory note from the sale of the Homeowner Services Group | | | [removed: 720] [added: 795] | | | | | | 720 | | |

| Operating lease right-of-use assets | | | [removed: 86] [added: 89] | | | | | | [removed: 82] [added: 86] | | |

| Goodwill | | | [removed: 1,143] [added: 1,144] | | | | | | 1,143 | | |

| Other | | | [removed: 416] [added: 399] | | | | | | [removed: 379] [added: 416] | | |

| Total regulatory and other long-term assets | | | [removed: 3,471] [added: 3,577] | | | | | | [removed: 3,314] [added: 3,471] | | |

| Total assets | | | $ | [removed: 30,298] [added: 32,830] | | | | | $ | [removed: 27,787] [added: 30,298] | |

| Common stock ($0.01 par value; 500,000,000 shares authorized; [removed: 200,144,968] [added: 200,371,701] and [removed: 187,200,539] [added: 200,144,968] shares issued, respectively) | | | $ | 2 | | | | | $ | 2 | |

| Paid-in-capital | | | [removed: 8,550] [added: 8,598] | | | | | | [removed: 6,824] [added: 8,550] | | |

| Retained earnings | | | [removed: 1,659] [added: 2,112] | | | | | | [removed: 1,267] [added: 1,659] | | |

| Accumulated other comprehensive [removed: loss] [added: income (loss)] | | | [removed: (26)] [added: 12] | | | | | | [removed: (23)] [added: (26)] | | |

| Treasury stock, at cost [removed: (5,414,867] [added: (5,451,216] and [removed: 5,342,477] [added: 5,414,867] shares, respectively) | | | [removed: (388)] [added: (392)] | | | | | | [removed: (377)] [added: (388)] | | |

| Total common shareholders' equity | | | [removed: 9,797] [added: 10,332] | | | | | | [removed: 7,693] [added: 9,797] | | |

| Long-term debt | | | [removed: 11,715] [added: 12,518] | | | | | | [removed: 10,926] [added: 11,715] | | |

| Total long-term debt | | | [removed: 11,718] [added: 12,521] | | | | | | [removed: 10,929] [added: 11,718] | | |

| | | | December 31, 2024 | | | | | | December 31, 2023 | | |

| Depreciation and amortization | | | 788 | | | | | | 704 | | | | | | 649 | | |

| Purchases of available-for-sale fixed-income securities | | | (135) | | | | | | — | | | | | | — | | |

| Proceeds from sales and maturities of available-for-sale fixed-income securities | | | 181 | | | | | | — | | | | | | — | | |

| Debt issuance costs | | | (14) | | | | | | (16) | | | | | | (7) | | |

| Balance as of December 31, 2024 | | | 200.4 | | | | | | $ | 2 | | | | | $ | 8,598 | | | | | $ | 2,112 | | | | | $ | 12 | | | | | (5.5) | | | | | | $ | (392) | | | | | $ | 10,332 | |

Presented in the table below is a reconciliation of the cash and cash equivalents and restricted funds amounts as presented on the Consolidated Balance Sheets to the sum of such amounts presented on the Consolidated Statements of Cash Flows for the years ended December 31:

| Cash and cash equivalents | | | $ | 96 | | | | | $ | 330 | |

| Restricted funds included in other long-term assets | | | 15 | | | | | | — | | |

| Cash and cash equivalents and restricted funds as presented on the Consolidated Statements of Cash Flows | | | $ | 140 | | | | | $ | 364 | |

The Company recognizes revenues for certain ratemaking mechanisms that meet the criteria for alternative revenue program accounting.

These mechanisms, which include the Company’s revenue stability mechanisms, qualify as alternative revenue programs if they have been authorized for rate recovery, are objectively determinable and probable of recovery and are expected to be collected within 24 months following the end of the period in which they were recognized.

For mechanisms that meet these criteria, the Company adjusts revenue and records an offsetting regulatory asset or liability once the condition or event allowing additional billing or refund has occurred.

See Note 4—Revenue Recognition for disaggregated revenue information.

| Income Statement Disaggregation | | | | | | The guidance in this standard enhances disclosures related to income statement expenses to further disaggregate expenses in the footnotes to the financial statements. The standard requires disaggregation of any relevant expense caption presented on the face of the income statement that contains the following expense categories: purchases of inventory, employee compensation, depreciation, intangible asset amortization, and depletion. Further, the standard requires disclosure of the total amount and the entity’s definition of selling expenses. | | | | | | Annual periods beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027 | | | | | | Prospective, with retrospective application also permitted. | | | | | | The Company is evaluating the impact on its Consolidated Financial Statements and the timing of adoption. | | |

| Induced Conversions of Convertible Debt Instruments | | | | | | The guidance in this standard clarifies the requirements for determining whether to account for certain settlements of convertible debt instruments as induced conversions or extinguishments. The guidance requires an entity to account for a settlement as an induced conversion if the inducement offer includes the issuance of all of the consideration issuable under the conversion privileges provided in the terms of the existing convertible debt instrument. | | | | | | Annual periods beginning after December 15, 2025 and interim reporting period within those annual reporting periods | | | | | | Prospective, with retrospective application also permitted. | | | | | | The Company is evaluating the impact on its Consolidated Financial Statements and the timing of adoption. | | |

The amounts include reductions for the amortization of the excess accumulated deferred income taxes (“EADIT”) that are generally offset in income tax expense.

| Kentucky | | | (a) | | | | | | $ | 17 | |

| Pennsylvania | | | August 7, 2024 | | | | | | 99 | | |

| Indiana, Step Increases | | | (b) | | | | | | 48 | | |

(a)In 2024, $6 million was effective November 6 and $11 million was effective May 3.

(b)In 2024, $23 million was effective May 10 and $25 million was effective February 21.

The table below summarizes the annualized incremental revenues, assuming a constant sales volume and customer count, resulting from general rate case authorizations that became effective on or after January 1, 2025.

The amounts include reductions for the amortization of EADIT that are generally offset in income tax expense.

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

| Tennessee | | | January 21, 2025 | | | | | | $ | 1 | |

| Total general rate case authorizations | | | | | | | | | $ | 106 | |

On January 21, 2025, the Tennessee Public Utility Commission (the “TPUC”) approved a motion authorizing an adjustment of water base rates requested in a rate case filed on May 1, 2024, by the Company’s Tennessee subsidiary.

The TPUC approved an increase of $1 million in annualized revenues, excluding previously recovered infrastructure surcharges of $18 million, based on an authorized return on equity of 9.70%, authorized rate base of approximately $300 million, a common equity ratio of 44.19% and a debt ratio of 55.81%.

This adjustment took effect on January 21, 2025, and is driven primarily by approximately $173 million in capital investments made and to be made by the Tennessee subsidiary through December 2025.

The general rate case order denied the second step increase of $16 million.

On December 5, 2024, the California Public Utilities Commission (the “CPUC”) approved a final decision adopting the terms of a partial settlement agreement filed on November 17, 2023, in the Company’s California subsidiary’s general rate case originally filed on July 1, 2022.

Incorporating the currently effective return on equity of 10.20%, the decision provides incremental annualized water and wastewater revenues of $21 million in the 2024 test year, and an estimated $16 million in the 2025 escalation year and $16 million in the 2026 attrition year.

New rates were implemented retroactively to January 1, 2024.

In addition, the CPUC denied the California subsidiary’s proposed Water Resources Sustainability Plan decoupling mechanism but approved continuation of its currently effective Annual Consumption Adjustment Mechanism.

On December 12, 2024, the California subsidiary filed an application for rehearing of the CPUC’s denial of the proposed Water Resources Sustainability Plan decoupling mechanism.

The annualized increase is based upon an authorized return on equity of 9.70%, authorized rate base of $489 million, which reflects capital investments through January 31, 2025, and a capital structure with a common equity ratio of 52.22%.

On May 16, 2024, the Kentucky subsidiary filed with the KPSC a petition for rehearing of the KPSC’s order, seeking clarification and/or correction of certain computational inconsistencies that the Kentucky subsidiary believes are reflected in the KPSC’s order with respect to the authorized amount of annualized revenues to be received by the Kentucky subsidiary.

On November 6, 2024, the KPSC approved a final order (the “Final Order”) providing for a $17 million annualized increase in water revenues, an increase of approximately $6 million from May 3, 2024.

New rates provided in the Final Order were effective November 6, 2024.

| (Repayments of) proceeds from term loan | | | — | | | | | | — | | | | | | (500) | | |

| Debt issuance costs and make-whole premium on early debt redemption | | | (16) | | | | | | (7) | | | | | | (26) | | |

| Seller promissory note from the sale of the Homeowner Services Group | | | $ | — | | | | | $ | — | | | | | $ | 720 | |

| Contingent cash payment from the sale of the Homeowner Services Group | | | $ | — | | | | | $ | — | | | | | $ | 75 | |

| Balance as of December 31, 2020 | | | 186.5 | | | | | | $ | 2 | | | | | $ | 6,747 | | | | | $ | 102 | | | | | $ | (49) | | | | | (5.2) | | | | | | $ | (348) | | | | | $ | 6,454 | |

The Company also recognizes revenue when it is probable that future recovery of previously incurred costs or future refunds that are to be credited to customers will occur through the ratemaking process.

Prior to December 9, 2021, through various warranty protection programs and other home services, the Company previously provided fixed fee services to residential customers for interior and exterior water and sewer lines, interior electric and gas lines, heating and cooling systems, water heaters and other home appliances, as well as power surge protection and other related services through its former HOS business.

Most of the contracts had a one-year term and each service was a separate performance obligation, satisfied over time, as the customers simultaneously received and consumed the benefits provided from the service.

Customers were obligated to pay for the protection programs ratably over 12 months or via a one-time, annual fee, with revenues recognized ratably over time for those services.

Advances from customers were deferred until the performance obligation was satisfied.

| Accounting for Contract Assets and Contract Liabilities from Contracts with Customers | | | | | | The guidance requires an acquirer recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Accounting Standards Codification Topic 606, as if it had originated the contracts. The amendments in this update also provide certain practical expedients for acquirers when recognizing and measuring acquired contract assets and contract liabilities from revenue contracts in a business combination. | | | | | | January 1, 2023 | | | | | | Prospective | | | | | | This 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 | | | | | | Prospective, with a modified retrospective option for amendments related to the recognition and measurement of TDRs. | | | | | | This standard did not have a material impact on the Consolidated Financial Statements | | |

| Presentation and Disclosure Requirements | | | | | | The guidance amends GAAP disclosure and presentation requirements for various subtopics in the Financial Accounting Standards Board Codification and was issued in response to the U.S. Securities and Exchange Commission’s (“SEC”) final rule published in August 2018 that updated and simplified disclosure requirements that it believed were outdated, superseded, overlapping, duplicative and redundant. The new guidance is intended to align GAAP requirements with those of the SEC for all entities. | | | | | | The date on which the SEC’s removal of the related disclosure requirement became effective | | | | | | Prospective | | | | | | This standard did not have a material impact on the Consolidated Financial Statements | | |

| Missouri | | | May 28, 2023 | | | | | | $ | 44 | |

| Virginia | | | April 24, 2023 (a) | | | | | | 11 | | |

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

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

The Virginia State Corporation Commission issued its final Order on April 24, 2023.

On June 29, 2023, the California Public Utilities Commission (“CPUC”) issued a decision on the cost of capital application for the Company’s California subsidiary, which authorized a return on equity of 8.98% and a capital structure with an equity component of 57.04% for the three-year period from 2022 to 2024.

The CPUC’s decision was effective from the date of the order through the end of 2024.

The decision included a Water Cost of Capital Mechanism (the “WCCM”) that allows the California subsidiary to increase its return on equity for the remainder of 2023 and 2024 based on capital market rates.

As authorized by the WCCM, the California subsidiary filed with the CPUC staff advice letters to increase the return on equity.

On July 25, 2023, the CPUC staff approved a return on equity of 9.50%, effective July 31, 2023.

On November 15, 2023, the CPUC staff approved a return on equity of 10.20%, effective January 1, 2024.