Item 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

American Water maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in its reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including the Chief Executive Officer and the Chief Financial Officer, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objective.

The Company’s management, including the Chief Executive Officer and the Chief Financial Officer, conducted an evaluation of the effectiveness of its disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of September 30, 2022.

Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that, as of September 30, 2022, the Company’s disclosure controls and procedures were effective at a reasonable level of assurance.

Changes in Internal Control over Financial Reporting

The Company concluded that there have been no changes in internal control over financial reporting that occurred during the three months ended September 30, 2022, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The following information updates and amends the information provided in the Company’s Form 10-K in Part I, Item 3—Legal Proceedings, and in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2022 in Part II, Item 1—Legal Proceedings. Capitalized terms used but not otherwise defined herein have the meanings set forth in the Company’s Form 10-K. In accordance with the SEC’s disclosure rules, the Company has elected to disclose environmental proceedings involving the Company and a governmental authority if the amount of potential monetary sanctions, exclusive of interest and costs, that the Company reasonably believes will result from such proceeding is $1 million or more.

Alternative Water Supply in Lieu of Carmel River Diversions

Monterey Peninsula Water Supply Project

CPUC Final Approval of Water Supply Project

In September 2022, the parties completed testimony in the CPUC proceeding to review and approve Cal Am’s application to amend and restate the water purchase agreement for the GWR Project. The parties are now meeting and conferring to set hearing dates during the fourth quarter of 2022.

On September 30, 2022, a CPUC-assigned ALJ issued a proposed decision that would, if adopted by the CPUC, authorize Cal Am to enter into the amended water purchase agreement, and specifically to increase pumping capacity and reliability of groundwater extraction from the Seaside Groundwater Basin. The proposed decision sets the cost cap for the proposed facilities at approximately $45 million, and the remaining $36 million of costs initially requested have been deferred to a subsequent filing. Under the proposed decision, Cal Am may seek recovery of amounts above the cost cap in a subsequent rate filing or general rate case. Additionally, the proposed decision recommended AFUDC be authorized at Cal Am’s actual weighted average cost of debt. On October 20, 2022, the parties filed their comments to the proposed decision. Cal Am currently expects a CPUC ruling to be issued by the end of 2022. After that, this matter will remain open as part of a Phase 2 proceeding to update supply and demand amounts for the Water Supply Project and to address certain of the deferred capital requests.

Coastal Development Permit Application

Cal Am responded to the Coastal Commission’s February 8, 2022, request for additional information with respect to the original jurisdiction application that Cal Am had refiled in November 2020. On September 1, 2022, the Coastal Commission deemed Cal Am’s application complete. A hearing on the application is expected in November 2022.

On October 5, 2022, Cal Am announced a phasing plan for its proposed desalination plant, part of the proposed Water Supply Project. The desalination plant and slant wells approved by the CPUC and currently pending before the Coastal Commission would produce up to 6.4 million gallons of desalinated water per day. Under the phased approach, the facilities would initially be constructed to produce up to 4.8 million gallons per day of desalinated water, enough to meet anticipated demand through about 2030, and limiting the number of slant wells initially constructed. As demand increases in the future, desalination facilities would be expanded to meet the additional demand. The phased approach seeks to meet near-term demand by allowing for additional supply as it becomes needed, while also providing an opportunity for regional future public participation and was developed by Cal Am based on feedback received from the community.

Dunbar, West Virginia Water Main Break Class Action Litigation

On August 26, 2022, WVAWC filed a Petition for Writ of Prohibition in the Supreme Court of Appeals of West Virginia challenging the West Virginia Circuit Court’s July 5, 2022, order certifying a class to address at trial certain liability issues but not to consider damages. The Writ Petition has been supported by an amicus brief filed by certain water and utility industry trade groups. The Supreme Court of Appeals will decide whether to accept the Writ Petition by issuing a Rule to Show Cause.

Chattanooga, Tennessee Class Action Litigation

A hearing that had been originally scheduled for October 2022 to address the question of class certification has been postponed to January 2023.

Other Matters

On April 2, 2021, American Water Resources, LLC (“AWR”), which prior to the sale of HOS was one of the indirect, wholly owned subsidiaries comprising the Company’s former HOS operations, 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”) regarding AWR’s operations and contractor network in the New York City metropolitan area. On September 9, 2022, a former employee of AWR pled guilty in U.S. District Court to two felony charges in connection with the matters being investigated by the EDNY. The Company continues to believe that the investigation is not focused on the Company and is cooperating fully with the investigation. While it is not possible at

this time to predict the outcome of the investigation or determine the amount, if any, of fines, penalties or other liabilities that may be incurred in connection with it, the Company does not currently believe that the investigation will have a material adverse effect on the Company’s results of operations, financial condition or liquidity.