Thank you, Lonnie. Welcome, everyone, to the 2021 First quarter results call for California Water Service Group. With me today are Martin Kropelnicki, our President and CEO; Thomas Smegal, our Vice President and Chief Financial Officer; and Paul Townsley, our Vice President of Corporate Development and Chief Regulatory Officer. Replay dial-in information for this call can be found in our first quarter results release, which was issued earlier today. The replay will be available until June 30, 2021. As a reminder, before we begin, the company has a slide deck to accompany the earnings call this quarter. The slide deck was furnished with an 8-K this morning and is also available at the company's website at www.calwatergroup.com.

Thank you, Dave, and good morning, everyone. Welcome to our first quarter results call. I'll align my comments with the slide deck, starting on Slide 5, which shows the results table comparing 2020 to 2021. Our operating revenue for the quarter increased to $147.7 million from $125.6 million in the first quarter of 2020, and I'll discuss the reasons for this shortly. Our net loss decreased from $20.3 million to $3 million, and our loss per share improved from a $0.42 loss to a $0.06 loss for the quarter. I want to highlight that our capital investments increased slightly and were in line with our plans. Moving to Slide 6 for our financial highlights, as I mentioned earlier, the net loss reduction of $17.3 million was mainly due to the adoption of the California General Rate case late last year. This included various factors such as freight cost increases contributing $6.4 million in revenue. Additionally, in the first quarter of 2020, we did not recognize our balancing mechanisms, including the RAM and the MCBA, as well as our pension and healthcare balancing accounts. By recognizing them in the first quarter of 2021 following their adoption in the rate case, we added $7.6 million in revenue. As expected, we also saw increases in our other operations, depreciation, and related costs, which somewhat offset the revenue gains from the rate case and the recognition of the mechanisms. As we discussed at year-end, our AFUDC equity, which represents funds used during construction, is lower due to a decreased amount of construction work in progress. In 2020, we had a significant capital project related to the Palace Verdes Peninsula water reliability project, which supported our AFUDC equity throughout the year. Therefore, we anticipate lower AFUDC equity moving forward, and in this quarter, it declined by about $1 million.

Thanks, Paul. Good morning, everyone. I want to provide a quick update on our continued efforts in responding to the COVID-19 pandemic. First and foremost, let me start off by saying we have continued to see the incremental benefits of people being vaccinated in all four states that we operate in. Currently, over one-third of our employees have been vaccinated, which is great news. The vaccine rollout was a little bumpy at first, but we've seen those bumps kind of smooth out, and we continue to see daily increases in the number of employees that we've seen vaccinated as well as we have seen a steep decline in the number of cases of COVID found within the Cal Water family or from our employees. We only had five cases in the first quarter that we've seen where employees have become sick and then recovered.

Thank you, Marty. Cal Water's business development efforts have been very active and successful. Last year, we completed two deals: the Rainier View Water System in Washington and the Calea Loa system in Hawaii. We are currently working on announced acquisitions, including the capital water and wastewater system, which we expect to close in the next few days. It's exciting to add another system to our Hawaii water family. Additionally, we have ongoing activities in all of our operating states, with plans to close on other listed systems as well. There are several announced systems and more still in the pipeline. This is an exciting time for acquisitions within our company. With that, Marty, I'll hand it back to you.

Actually, it goes over to Tom.

Yes. I'm going to grab it.

I'm sorry, Tom is going to in the next slide.

No worries. We are on Slide 13, which features our traditional graph of capital investment. Last quarter, we included a line for depreciation to illustrate the relationship between our capital expenditures and the annual depreciation in our systems. Notably, we have been averaging about three times our annual depreciation accrual for the past five years. This chart and projection apply only to this year, with our estimate being $285 million, which is the midpoint of our forecast range of $270 million to $300 million for capital expenditures. During our second quarter call, when we release the details of our General Rate Case in California, I will update this slide to include the years 2022 through 2024 as well. Moving to Slide 14, this is our rate base line, which we will project from 2023 through 2025 based on the rate case filing. You'll find that information in the second quarter slide decks, so there isn't much new to report on the rate base estimate at this time. Marty, I will hand it over to you for the summary.

Great. Thanks, Tom. As we conclude our call and prepare for Q&A, I want to emphasize that Q1 is always our slowest quarter, so it's good to have it behind us.

Marty, I did get the comment from one of our analysts that every California utilities having their earnings call at the same exact time.

Yes. I saw that, too, Tom. I know there are a lot of earlier reports coming out today, which is the hard thing about earnings season.

Yes.

You're the only California water utility about me. I didn't push Star 1. That was a problem. So Marty, just on the last point, I hope you guys are all well. It's going to be your employees are well too. The last point about the drought I've been reading about two as a California native or born there. Can I put my interest? What are you guys doing? I guess, it goes for you and Tom and Paul, what are the discussions like with the POCs? Because I know that there's been a difference in opinion about this kind of stuff, right?

Sure. I'll take the initial remarks, and then Paul can elaborate on the commission aspect. To start, we have not officially exited a stage 1 drought at Cal Water. After the last drought, the mandatory restrictions were lifted, and we met our conservation goals, which was positive. It was emphasized that we need to maintain tight restrictions since we're achieving goals and reducing consumption. There are two points to consider: First, when the governor declares a drought emergency, it simplifies our ability to obtain a memo account for that area. The governor mentioned earlier this week that he expects the drought conditions to be very regionally dependent based on local water supplies. For Mendocino and Sonoma County, we don't operate there, but if we did, we would seek a drought memo account. Additionally, some water agencies like East Bay Mud and the Northern Marin water district have declared a stage 1 drought, which affects two of our systems in Northern California. At that point, Paul and his team will likely apply for a memo account based on the local agency declaring a drought emergency. To summarize, we need to monitor the situation. Right now, the key difference from 2015 is that we only have 25% of our snowpack. In contrast, during 2015, Governor Brown held a press conference where he stood on a green pasture instead of snow. While we have some snowpack and the reservoirs are in decent condition, the crucial factor will be what unfolds in 2022. We anticipate that more local drought conditions will be declared at the local level, rather than at a statewide level for now. Paul, do you have anything to add?

Yes. It's still early days concerning the commission. We have been receiving inquiries from commission staff about our preparations, and we have been responding to some of these data requests. Another aspect of the drought is the increased likelihood of Public Safety Power Shutoffs, and there has been significant ongoing attention from the commission on this matter. We have been actively engaging on this front, but I don't believe the commission has started to focus on the drought yet, and we can expect to see more attention to this as the year progresses.

Great. Maybe for you, Tom. You mentioned various regulatory dates. Could you clarify once more what we should be aware of?

Yes, absolutely. This Monday, we will be filing our cost of capital application, which we have already outlined. It is expected to be filed around May 1 and should be reviewed by the end of the year, according to the plan in the commission's model, unless it is delayed.

That's for California, right?

That's for California, correct. Yes. In addition, we will be filing the General Rate Case around July 1. Paul noted that there are some weekend days, and sometimes there is a bit of load that gets filed even the day after the 4th of July, due to the holidays. So, we will see; that will be early July. This is an 18-month process. Therefore, the California General Rate Case is not expected to yield results until the effective date of January 1, 2023. As we observed last year, these cases can get delayed, and they often do; two of our last three general rate cases have been delayed by more than six months. We will need to monitor when that becomes effective. Both of these California filings are subject to interim rates if they are not resolved on time. Thus, the effective date is essentially those effective dates. Additionally, we have a rate case that we will be filing in Washington state as part of the Rainier View acquisition. We have agreed with the commission to file a new rate case for both our existing operations and the Rainier View Group this year, and that will be done this year, but it will be considerably smaller.

Understood. Regarding the 10.35% figure compared to your previous number, how much do interest rates affect that? Does it make a significant difference? What are your thoughts on this?

So Ben, the technical aspects of the company applications involve a metric economist witness who is analyzing various standard models, including DPF models and CapEx pricing models, to establish recommended rates for return on equity. It's not clear that a single factor is causing the increase. We requested more than that in the 2017 case, but I would need to check the specifics. I want to highlight that in California, it's unusual for water utilities to have significantly lower return on equity compared to electric utilities. In other states, there isn't a discount for water utilities, and typically, we are smaller organizations than electric utilities, suggesting a greater financial risk. However, California appears to grant a discount on the return on equity for water utilities for some reason. The return on equity we are proposing, which is 10.35%, aligns more closely with the electric returns on equity in California. We will see how this develops. I believe we have strong arguments to support our case, and our witness is well-qualified, so we hope to succeed with this proposal.

Yes, I agree with the front on California and the scale. Maybe the last thing, Marty, just on infrastructure, does any of that infrastructure package? I know there's a lot to be determined. Does any of that impact you? Or how do you think of that impacting you guys?

Sure. Actually, Ben, that is a very, very good question, and it's a very kind of complex area with a lot of moving parts. Our National Association, headed by Rob Paulson, former PERC Commissioner and former Head of the Pennsylvania PUC has been very involved with efforts on the hill, obviously, for allocations to the state revolving funds. We want to make sure that we fight for access to those funds within the state when they get allocated. But it can vary state-by-state as those funds get pushed down as it's mandated in the federal laws. The other big thing that's been talked about as part of the Bill is, are there any dollars that are going to be available for real rich management, and we have been involved in those. In fact, we were at an event with one of the governors this week where we were emphasizing the point that any dollars that come from the Feds that is for COVID relief for customers with outstanding balances, investor on water utilities, their customers or taxpayers as well, and we shall have equal access to those dollars. So nothing is concrete yet. It's a very gray area. The Department of Health Services has had dollars since the late fall, they haven't pushed down yet to the states. We're watching that. We're involved in discussions with them about what happens when those dollars do get pushed out and trying to secure access for those dollars for our customers, but nothing has been finalized yet, Ben, but believe me, when I say we are all over it, we have our federal team working on it, we have our CWA teams, our California Water Association teams working on it, and we have our local government affairs keep working and that's to be determined. I expect to see some dollars flowing from the Feds down to the state, probably sometime here in the second quarter, but nothing has been determined about how the mechanics are actually going to work out, but discussions are underway.

There are no further questions at this time. Great. Lonnie, thank you, everyone. Thanks for taking time for being us here today. I know there's a lot of conference calls happening concurrently. As Tom mentioned earlier, we’re around if anyone has questions. If you get a chance, please read the ESG report, you'll see all the great stuff we're doing on the ESG side. And we look forward to reporting on our progress with the General Rate Case and our cost of capital at the end of the second quarter. So everyone would be safe, be well, and we look forward to talking to everyone at the end of the next quarter on our next earnings call. Thanks, everybody. Have a great day. Lonnie, back to you.

This does conclude today's conference call. Thank you for your participation. You may now disconnect.