By California Water Service Group (NYSE: NYSE:CWT) has reported a significant increase in its third-quarter earnings for 2024, with operating revenue up by 17.5% to $299.6 million. The company’s net income rose sharply to $60.7 million, or $1.03 per share, compared to $34.4 million, or $0.60 per share, during the same period in 2023. This growth was fueled by increased customer rates and usage. The company also declared a consistent dividend, marking its 319th consecutive quarterly dividend, and provided updates on its capital structure and environmental initiatives.
Key Takeaways
Operating revenue increased by 17.5% to $299.6 million in Q3 2024.
Net income rose to $60.7 million, or $1.03 per share.
Customer rates and usage drove revenue growth.
Operating expenses increased to $232.8 million, mainly due to higher water production costs and taxes.
Year-to-date revenue reached $814.6 million, with net income at $171.1 million.
The company invested $332.2 million in capital for the first nine months, targeting $385 million for the full year.
A dividend of $0.28 per share was declared for stockholders of record on November 11, 2024.
Company Outlook
California Water Service Group expects to invest $1.6 billion from 2025 to 2027, with a focus on infrastructure.
The company has secured a return on equity of 10.27% for 2025.
Approximately $94.2 million is expected to be collected over the next three years from regulatory balances.
Bearish Highlights
Operating expenses have risen due to increased water production costs and taxes.
The company may need to file a cost of capital application in 2025.
Bullish Highlights
The company’s strong performance is reflected in the significant increase in net income and operating revenue.
Environmental initiatives have led to a 21% reduction in customer bills over 15 years.
The company received the WaterSense Excellence Award from the EPA.
Misses
There were no specific misses reported in the earnings call.
Q&A Highlights
CEO Martin Kropelnicki emphasized the importance of considering lower-income communities in their rate case filings.
The company’s equity stands at 60.8%, with a recent $125 million debt financing to align the capital structure.
The EPA’s new lead and copper rule is not expected to significantly impact the California service area.
Investments of $226 million are planned to address PFOS concerns.
California Water Service Group’s third-quarter earnings call highlighted a strong financial performance and a commitment to significant capital investments in infrastructure and environmental initiatives. With a solid increase in operating revenue and net income, the company is well-positioned to continue its growth trajectory. The company’s equity position and recent debt financing demonstrate a strategic approach to managing its capital structure, while its environmental programs underscore a commitment to sustainability and customer savings. As California Water Service Group looks to the future, it remains focused on delivering value to shareholders and providing reliable water services to its customers.
InvestingPro Insights
California Water Service Group’s strong third-quarter performance is further supported by data from InvestingPro. The company’s revenue growth of 24.25% over the last twelve months aligns with the reported 17.5% increase in Q3 operating revenue. This growth trend is expected to continue, as InvestingPro Tips indicate that analysts anticipate sales growth in the current year.
The company’s commitment to shareholder value is evident in its dividend history. An InvestingPro Tip highlights that California Water Service Group has raised its dividend for 31 consecutive years and has maintained dividend payments for 54 consecutive years. This impressive track record underscores the company’s financial stability and commitment to returning value to shareholders, which is consistent with the quarterly dividend declaration mentioned in the earnings report.
From a valuation perspective, the company’s P/E ratio of 17.36 suggests a reasonable valuation relative to its earnings. An InvestingPro Tip notes that the stock is trading at a low P/E ratio relative to near-term earnings growth, which could indicate potential upside for investors. Additionally, with a dividend yield of 2.16%, the stock may be attractive to income-focused investors.
The company’s profitability outlook remains positive, with InvestingPro data showing a gross profit margin of 55.38% and an operating income margin of 24.07% over the last twelve months. These figures support the company’s ability to manage costs effectively while growing revenue, as discussed in the earnings report.
For investors seeking more comprehensive analysis, InvestingPro offers additional tips and metrics beyond those mentioned here. There are 5 more InvestingPro Tips available for California Water Service Group, providing deeper insights into the company’s financial health and market position.
Full transcript – California Water Service Group (CWT) Q3 2024:
Operator: Thank you for standing by. My name is Kathleen, and I will be your conference operator today. At this time, I would like to welcome everyone to the California Water Service Group Third Quarter 2024 Earnings Call. [Operator Instructions]. After the speaker’s remarks, there will be a question-and-answer session. [Operator Instructions]. And now I would like to turn the call over to Jim Lynch, Senior Vice President and Chief Financial Officer. Please go ahead, sir.
James Lynch: Thank you, Kathleen. Welcome, everyone, to our third quarter 2024 results call for California Water Service Group. With me today is Marty Kropelnicki, our Chairman and CEO; and Greg Milleman, Vice President of Rates and Regulatory Affairs. Replay dial-in information for this call can be found in our quarterly results earnings release. which was issued earlier today. The replay will be available until December 30, 2024. As a reminder, before we begin, the company has a slide deck to accompany today’s earnings call. The slide deck was furnished with an 8-K and is also available at the company’s website at www.calwatergroup.com. Before looking at third quarter 2024 results, I’d like to take a few moments to address forward-looking statements. During the course of the call, the company may make certain forward-looking statements. Because these statements deal with future events, they are subject to various risks and uncertainties, and actual results could differ materially from the company’s current expectations. As a result, the company strongly advises all current shareholders as well as interested parties to carefully read and understand the company’s disclosures on risks and uncertainties found in our Form 10-K, Form 10-Qs, press releases and other reports filed from time to time with the Securities and Exchange Commission. And now I’ll turn the call over to Marty.
Martin Kropelnicki: Thanks, Jim. Good morning, everyone, and happy Halloween. We’re happy you can join us here today. I’m very pleased to share with you our results for the third quarter of 2024. There’s really 5 main topics that we want to cover today. The first one being our strong third quarter financial performance that continues to benefit from the regulatory release date of California. We want to give an update on the 2024 general rate case, where during the quarter, we had our initial preconference and we’ve been assigned an administrative law judge and a commissioner to oversee our case. We received approval of certain advice letters from the California Public Utilities Commission that’s going to allow us to collect $94.2 million in certain regulatory balances through 2027. We want to talk about the record amount of capital that we’ve invested this year and what that looks like going into year-end. And then lastly, take a moment to talk about our continued environmental leadership and corporate recognition and talk about a few awards that we won during the quarter. But to start things off, let’s do like we typically do and have Jim Lynch take you through some of the financial analysis that highlights the quarterly results. Jim, back to you.
James Lynch: So as Marty mentioned, our Q3 2024 financial results continue to benefit from new rates and the rate structure authorized in our 2021 California GRC. As a result, our operating revenue for the quarter increased 17.5% to $299.6 million compared to our prior year Q3 operating revenue of $255 million. Net income for the quarter was $60.7 million or $1.03 per diluted share compared to $34.4 million or $0.60 per diluted share in Q3 of 2023. The $44.6 million increase in Q3 2024 revenue was driven primarily by a $42.2 million increase in rates billed to customers as authorized in our regulatory filings and an increase in customer usage, including usage by new customers of $9.6 million. These increases were offset by a $9.4 million reduction in our Monterrey water rate adjustment mechanism, or our [ MRAM]. Recall that the MRAM is a rate adjustment mechanism that includes a tiered rate structure is usage. In periods of warm dry weather when usage increases, the MRAM typically decreases. The balance typically increases in cooler wet weather when usage declines. Q3 2024 operating expenses were $232.8 million compared to Q3 2023 operating expenses of $211.5 million. The $21 million increase was primarily driven by $2.7 million in higher water production costs due to an increase in wholesale rates and higher customer usage, a $3.2 million increase in depreciation and amortization due to new assets placed in service and $11.5 million in higher income taxes related to higher pretax earnings. In addition, net other income increased $3.8 million during the third quarter primarily due to an increase in unrealized gains on nonqualified benefit plan investments of $5 million. The impact of the Q3 2024 activity on diluted earnings per share is presented on Slide 6. The more significant growth drivers were rate and usage increases of $0.56 and $0.13 per diluted share, respectively. In addition, gains on nonqualified benefit plan investments contributed $0.09 per diluted share. These drivers were partially offset by the change in MRAM balance of $0.12 per diluted share and increases in water production expenses and depreciation and amortization expenses of $0.04 per diluted share, respectively. Year-to-date 2024 results benefited from the same regulatory mechanisms as the quarterly results. Year-to-date operating revenue increased $234.5 million to $814.6 million in 2024 compared to $580 million year-to-date in 2023. Year-to-date 2024 net income was $171.1 million or $2.93 diluted share compared to year-to-date net income in 2023 of $21 million or $0.38 per diluted share. The growth in revenue was primarily driven by cumulative rate increases, including 2024 [Irma] of $95 million, 2023 interim rate relief from the 2021 GRC of $87.5 million and the recognition of deferred RAM revenue of $15.6 million. In addition, the change in our 2024 MRAM balance added $12.4 million and increased usage contributed $8.8 million. Year-to-date, 2024 operating expenses were $621.8 million compared to year-to-date 2023 operating expenses of $538.2 million. The $83.6 million increase was primarily driven by an increase in water production cost of $15.4 million due to increases in wholesale water rates and higher usage. Water production costs increased an additional $3.3 million due to the incremental cost balancing account or ICBA, that was authorized in the 2021 GRC. We also recognized $13.1 million in deferred costs associated with the recognition of deferred RAM revenue and higher depreciation and amortization expense of $9.3 million. Also, year-to-date income tax increased $41.1 million, primarily due to higher pretax earnings. The impact of year-to-date 2024 activity on diluted earnings per share is presented on Slide 8. The more significant earnings drivers include cumulative rate increases in 2023 interim rate relief and recognized deferred RAM revenue of $1.29, $1.19 and $0.21 diluted earnings per share, respectively. The change in our 2024 MRAM balance and increased usage added another $0.17 and $0.12 diluted earnings per share, respectively. These increases were partially offset by higher water production expenses and the recognition of MRAM related deferred water expenses of $0.25 and $0.18 diluted earnings per share, respectively and higher depreciation and amortization of $0.13 diluted earnings per share. As a reminder, our 2021 GRC was adopted in Q1 2024 and included 2023 interim rate relief, totaling $64 million. $15.2 million of the interim rate relief was attributed to Q3 2023 and $50.4 million would have been attributable to the 2023 9-month period year-to-date. Turning to our capital. We continue to make significant investments in our water infrastructure to help ensure the delivery of safe and reliable water service. Company capital investments during the 9-month period ended September 30, 2024, totaled $332.2 million which is 86% of our $385 million 2024 capital base. As a reminder, our planned 2024 capital investments and our estimated capital investments for the period from 2025 through 2027, do not include $226 million of estimated PFOS projects that will be constructed over multiple years beginning in the fourth quarter of 2024. [Scrib] will discuss plan 2025 and 2027 increases applied for in the 2024 GRC and infrastructure improvement plan later on in the call. The positive impact of our capital investment program is having on regulated rate base is presented on Slide #10. Our overall rate base is projected to grow to $2.36 billion by the end of 2024. This is an increase of 7.3% over 2023. If approved, as requested, the 2024 California GRC and infrastructure improvement plan, coupled with planned capital investments in our utilities and other states would result in a compounded annual rate base growth of 11.7%. Moving to Slide 11. We continue to maintain a strong balance sheet with a capital structure of 61% equity and 39% debt. During the quarter, the CPUC issued a final decision granting Cal Water Authority to issue up to $1.3 billion in new debt and equity securities to finance water system infrastructure investments from 2023 to 2027. We raised approximately $34.5 million during the quarter from the sale of 639,000 shares of common stock under our at the market or our ATM stock equity program. Year-to-date, we’ve raised approximately $86.5 million from the sales of [ $1.6 million, ] 390,000 shares under the ATM program. We have approximately $43.1 million remaining under the program that can be raised for general corporate purposes in the future, including planned capital investments and strategic opportunities. On the debt side, Cal Water completed the sale and issuance of $125 million of first mortgage bonds, the bonds in a private placement that closed October 22, 2024. The bonds bear interest at a rate of 5.22% and mature on October 22, 2054. Cal Water is the bond proceeds to refinance certain existing borrowings on its short-term bank line of credit. And just to note, yesterday, our Board of Directors declared a $0.28 per share dividend for stockholders of record on November 11, 2024. I believe that’s November 12, 2024. This is our 319th consecutive quarterly dividend. Moving to Slide 12. We continue to maintain a strong liquidity position. As of September 30, 2024, the company had cash and cash equivalents of $105.2 million of which $45.6 million was classified as restricted. Further, we had additional short-term borrowing capacity on our company and Cal Water lines have credit of $340 million. With that, I’ll turn the call over to Greg to give an update on our 2024 general rate case and other regulatory matters. Greg?
Greg Milleman: Thanks, Jim. On Slide 13, we discuss the 2024 general rate case I’m pleased to report that we continue to make progress with our 2024 general rate case filing. We’ve completed the initial prehearing conference and a judge and Commissioner have been assigned to our case. The assigned commissioner to the case is Commissioner Baker. We are pleased with this assigned given his past work at the California public advocates to educate [indiscernible] a negative customer impacts associated with rate case delays. As Jim mentioned earlier, we’re proposing to invest $1.6 billion in our districts from 2025 to 2027, including approximately $1.3 billion of newly proposed capital investments to continue providing reliable, high-quality water service. This application includes our innovative low-use water equity program designed to decouple revenue from water sales while keeping rates affordable and reinforcing conservation goals. Our proposal includes rate increases to generate an additional $140.6 million for 2026, $74.2 million for 2027 and $83.6 million for 2028. We are now 4 months into the standard 18-month review process with the PUC and are actively responding to data requests. We’ve completed all our district tours and are preparing for public participation hearings later in the year. With that, I’ll return the call back to Marty.
Martin Kropelnicki: Greg, just out of curiosity, the volume of data requests kind of consistent with past rate cases.
Greg Milleman: Yes, just on the past rate.
Martin Kropelnicki: Moving ahead, I’m on Slide 14. I want to take a moment to talk about our cost of capital for 2025. As many of you know, we have in California, what’s called a cost of capital adjustment mechanism. Cost of capital adjustment mechanism basically tracks the utilities bond index from October 1 to September 30, the following year. In the event there’s a 100 basis point change or greater the company can make apply for an adjustment to its ROE, both up and down. So I’m very happy to report that the period ended September 30, it was less than 100 basis point change and therefore, it locks in our ROE for 2025 at 10.27%, which we think is a very good ROE. Moving on to the next slide. Other regulatory mechanisms. There’s a few things that happened in the quarter that I think are important. As I mentioned in my opening comments, we filed a number of advice letters for recovery that have been approved by the CPUC here in California. There’s 3 primary filings emphasize. One is the [indiscernible] the incremental rates memo account, the 2023 MRAM balance and the 2023 incremental cost balance. The combination of those 3 things total approximately $94.2 million that we will be collecting over the next 3 years. For 2024, we expect to collect about $11.6 million from these balances as we move into the new year. Going on to Slide #16, I want to take a moment to talk about our environmental leadership and corporate recognition. First of all, I continue to be very proud of the recognition we received for our environmental stewardship and workplace excellence. The Alliance for Water Efficiency recently posted a study that highlighted the important impact of our conservation programs, which have reduced customer bills by approximately 21% over the last 15 years compared to projections with customers that did not have the same type of conservation program. So we’re very happy with the results of the survey and what we’ve helped our customers has achieved over the last 15 years. In addition, the U.S. Environmental Protection Agency awarded California Water Service the WaterSense Excellence Award for the second consecutive year. This recognizes the promotion of our water-efficient products that we have in our conservation programs. The products that we’ve implemented to date will save an additional 395 million gallons over the life of the devices useful life for our customers. Additionally, during the quarter, we were named one of the world’s most trustworthy companies by Newsweek for its second consecutive year. This places us among only 5 water utilities that are recognized and honored in the energy and utility category. And then lastly, for the ninth consecutive year, we were recognized as a great place to work, reflecting our ongoing commitment to creating an exceptional workplace environment and supporting our employees. I think as many of you have probably heard me say that, yes, we are a company of fixed assets, pipes and pumps, but our most important assets are our employees, because they’re the ones that make it all happen and they’re the ones that interface with our customers. Lastly, I want to take a moment to mention a [ K ] that we filed during the quarter that announced the retirement of [ Ron Webb], who is our Vice President and Chief Human Resource Officer; who will be retiring on April 1, 2025. Ron has done an excellent job as our Head of HR and has been an outstanding HR colleague and friend who has made countless contributions here at Cal Water. I want to take a moment to personally thank Ron and wish him all the best as him and his wife, he now prepares for retirement, and he will be dearly missed. I think as everyone can appreciate, as the CEO, one of your closest confidence is your HR executive. And Ron, it’s been just a fantastic 10 years working with you, and I’m going to miss working with you and wish you all the best in retirement. Having said that, we have started a national search for Ron’s replacement, and I hope to be in a position to announce his replacement by year-end or early 2025. So where does that take us for the quarter? Very happy with the results for the quarter. Results were in line with our expectations. They are a little bit confusing. I think Jim did a good job laying out all the moving parts and how they fit together, given the delayed 2021 general rate case. Moving forward, it’s really simple. The strategy is focused on getting the capital on the ground in the press release. And as Jim mentioned, we’ve invested a record amount of capital this year. So we’re going in the fourth quarter very strong and doing investments in our infrastructure improvement plan. We want to stay focused on customer service and servicing our customers and then also on the 2024 general rate case. As Greg said, so far, things are moving and tracking the plan. We want to make sure we do everything we can to make sure that we conclude that rate case by the end of 2025 with new rates in effect 1/1/26. So there’s a lot going on. The other thing I’d just point out is, as Jim said, on the rate base growth side. We’ve historically been about a the depreciation rate investment rate, and that’s bumping up in this next cycle or 2. And it’s given that the growth of the internal capital needs of the existing infrastructure plus the incremental $226 million. That’s not reflected in that 11.7% CAGR number on rate base growth that will be incremental. So overall, we have a lot of stuff happening within the company, and it’s really — the spreads really forward. We’re going to stick to what we do, which is getting the capital on the ground and serving the customers. And I guess one thing I’d wrap up before we open the comments. It’s just fire season this year. Surprisingly, for our service areas have been — has been relatively light. We had 3 major fires this year that were close to our service areas, none of which did damage to our service areas, at the Thomson Fire, the Park Fire and the Boreal fire. So nothing major that affected our service territory. I’m very happy to report that we are getting the first snowfall this week in the [indiscernible], which is a good sign that winter’s off to a start will help bring down the last few weeks of fire season that we have here, which typically goes on until the end of November. So with that, Kathleen, we will open it up for questions, please.
Operator: [Operator Instructions]. And your first question comes from the line of Jonathan Reeder of Wells Fargo.
Jonathan Reeder: All today. Jonathan, on wanted to start out just to get your view on the CPUC’s recent decision to hold the PD and [Calum’s] rate case? I know the PDs language as pretty strongly against restoring pool decoupling. But do you think there are enough commissioners that are supportive of decoupling? Or might we just see some of the rationale language in that section revised?
Greg Milleman: Jonathan, this is Greg. And the kind of feeling of the industry right now is — it was a strong sign that the PD was held almost a little over a month, maybe 2 months to the December meeting. But there is not a consensus on exactly what that could mean. That could potentially mean we are tightening up the language around disallowing it or going the other way and putting in the language that would allow it. It’s just too soon to tell.
Jonathan Reeder: Okay. Fair enough. I can’t tell either.
Martin Kropelnicki: Jonathan, one thing I would add to that, and I haven’t read the full decoupling application for any of our peer companies in California. But I do know in our application, we were keenly focused on 2 things that I think are on [indiscernible]. And I think this may be a strategy differential for us. One, we were very focused on conservation as we originally were when we originally decoupled back in the early 2012, I guess a couple — that was number one. The other thing we focused on in our new rate design in our application was kind of underserved communities and having a rate design that helps low-income customers with kind of a lifeline rate that first year. So in our application, it wasn’t just about conservation. It was also about low-income communities and making sure there’s like a lifeline rate there that reduces customers on the lower term of the economic are the lower range of the economic spectrum. And we think that’s going to be really, really important.
Jonathan Reeder: Yes. No. And that’s where, I think, if it is even just softening the language in that BD, it kind of then opens the door to right. Some of these reimagined ways of, I guess, designing the decoupling where it really focuses on some of the goals you just mentioned, Marty.
Martin Kropelnicki: Right, and I think what’s important about the — this community piece for the people on the lower economic scale is at sustained goal of the commission. It’s — they’ve made that very public. They’re very interested in it. And I give the team here a lot of credit we took that to heart in the design of our decoupling mechanism that we filed for in our rate case.
Jonathan Reeder: Okay. Great. I look forward to that — to see how that plays out. Also, I know the CPUC recently issued a decision lowering the energy utilities allowed ROEs by 42 basis points in 2025 by effectively reducing the magnitude of the 2024 cost of capital mechanism increase. Is there any avenue for the CPUC to do something similar for the waters for 2025?
Martin Kropelnicki: I’ll go first, Greg, and you can add a comment. I mean, I think that’s always a possibility. Our ROEs have historically lagged the energy industries. So we’re not coming off real high ROEs. In fact, I think our ROE at $10.27 is about where it was on the company back in 2006, and then it went down for a number of years, [indiscernible] went back up above 10% just recently. So I think that’s a possibility. I think there’s a number of factors going on in the electric industry. It’s a little different than water. One, as you see, we have a growing appetite to get capital in the ground and we have to kind of step it up, getting that capital on the ground just to keep up with our current demands that we have in the existing rate case, which is great for stockholders. That means we’re growing rate base and potentially future earnings for customers. I think the other thing, though, on the electric side is in California, you have a lot of wildfire costs that are being recovered in electrical rates, which have put multiple layers of rate increases on customers and I think there may be some pressure on the commission and just political pressure overall in California, given some of the incremental increases that were outside the general rate case that were added to electric bills. And so I don’t think we know until we get there. But I think for us, we will most likely have to file a cost of capital application in 2025. It would be great if we can defer it again, but that — I think that might be hard to do. and we’ll do our best to defend the company’s position on its ROE. Greg, anything you want to add on that?
Greg Milleman: The only thing else I would add is the — unlike the water companies, the energies have an option to file an application to change their cost of capital in between their scheduled time. And they did that, I believe, in 2022 if there’s an emergency, which was COVID. And so I think that might also be to why there’s different treatment on the cost of capital between the 2 of us, energies as well water.
Martin Kropelnicki: So obviously, Jonathan, this will be a hot topic for 25, and we’ll provide updates on our cost of capital as we go through the process with the commission in 2025.
James Lynch: Yes. I think the takeaway, at least in the near term, is that for 2025, we have the 10.27% in terms as Marty mentioned, in terms of the recalculation this year at September 30, we didn’t trigger any kind of movement from what we are currently experiencing in our ROE now. And I think we haven’t had any pushback from the commission about the $10.27 how to break.
Martin Kropelnicki: No, we made a filing to demonstrate just what Jim said and how we heard back from them.
Jonathan Reeder: Okay. So good. So it sounds like — or the 10.27 is safe for 2025 and then [indiscernible] if there’s — I mean, I guess, would you be open to an extension that maybe include some sort of adjustment to the ROE maybe in exchange, you get some sort of multiyear extension in whatever that new ROE would be?
Martin Kropelnicki: It’s hard to speculate on something like that on the future. I will say, I have been a big supporter of the cost of capital adjustment mechanism because it does float up and down, and it’s a 2-way mechanism. And again, our ROEs have lagged the electric industry, and we have a growing need to increase our capital investment. So I think — obviously, we’d love to settle anything if we can because it’s just a cleaner process that we can do it. But it’s really hard to speculate because we don’t have any facts and circumstances around it. And obviously, what we want to do is what’s right for Cal Water, which is make sure we have an ROE that’s appropriate enough that allows us to attract capital to allow us to continue our rate base growth. So I think we’ll have a lot more certainty on it as we get into it, but it’s really hard to speculate not being in a dialogue with the commission about it.
Jonathan Reeder: Sure. And then last on kind of the cost of capital. Slide 11 kind of indicates your authorized California capital structures, 60.8% equity. How does that reconcile with the 53.4% approved under the last cost of capital [indiscernible]?
MartinKropelnicki: No, that’s our actual cap structure as of right now. So talk a little bit about …
James Lynch: Yes. And again, Jonathan, that grew, right? So if you — we are working to kind of manage that structure to mirror as close as possible or authorized amounts in other — our operating utilities. I mentioned on the call, subsequent to the quarter end, we did a first mortgage bond in which we raised $125 million in debt financing. So we’re starting to balance the debt and the equity. And really, it’s — to get it more in line with what our authorized amount is at the operating utilities to get that more in line with what we’ve got at group. And we’ll kind of work through the capital structure at group to take the most optimal path to get that closer in line, but the first step was this $125 million that we issued subsequent to quarter end.
Jonathan Reeder: Okay. Great. I appreciate that clarity. And then last question for me. What are the potential impacts on the CapEx budget from the EPA’s recently finalized lead and copper rule? Is that a major issue for your California service area?
Martin Kropelnicki: It’s really not. I mean, frankly, one of the nice things about being out on the West Coast is our infrastructure is newer than the East Coast. So based on what we’ve seen in all of our updated testing, we have one district that has hit that action level. But as we went in the testing in that district, our wells and our purchased water is spine, we think it’s more associated with a couple of customers’ homes. So I don’t think it’s that big of an impact for us, which, frankly, is nice because PFOS is the big [ kahuna ] for us the next 2 — the next 3 years because that’s an incremental $226 million we got to invest, and we want to be ahead of schedule on that. So I’m not losing too much sleep on the lead and copper role now [west].
Operator: [Operator Instructions] There are no questions at this. I will now turn the conference back over to Martin Kropelnicki, Chairman and CEO, for closing remarks.
Martin Kropelnicki: Kathleen, thank you. Thanks for everyone for joining today. Please if you have questions, feel free to reach out to one of us and we’ll answer the best that we can. Just closing, we closed the third quarter strong. We’re going into the fourth quarter with a lot of momentum. But again, the overall goal going into the fourth quarter to just stay focused on the core business plan of the company and executing our existing strategy, and we look forward to giving everyone an update at the end of February when we announce our earnings results for 2024. So happy Halloween. Be safe, and we’ll talk to everyone soon. Thank you.
Operator: Ladies and gentlemen, that concludes today’s call. Thank you all for joining. You may now disconnect.
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