AWK

American Water Works Company, Inc.

NYSE · UTILITIES · WATER SUPPLY

134.76

−1.03 −0.76%

USD · close Oct 21

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MKT CAP $26.8BP/E 23.4DIV YIELD —FCF YIELD -3.85%REV TTM $5.3B +7.3%NET INCOME $1.1B +4.2%NET DEBT $9.5B52W 121.13 – 143.73SEC XBRL · TTM TO Invalid Date

How AWK rewrote its risk factors

10-K ITEM 1A · FY2024 → FY2025

Text kept

44%

of sentences unchanged

Added

550

new sentences

Dropped

575

sentences removed

Length

words, now 62,317

New in FY2025

In 2011, the California Public Utilities Commission (the “CPUC”) issued a decision directing modifications in Cal Am’s utility tariffs to recognize the moratorium mandated by the 2009 Order, and directing Cal Am to seek written guidance from the SWRCB with respect to any unresolved issues of interpretation or implementation of this condition.
During the fourth quarter of 2025, the MPWMD filed an application with the SWRCB seeking to modify the 2009 Order and the 2016 Order to rescind a condition included therein that prohibits (i) new service connections and (ii) increased water use at existing service connections resulting from a change in zoning or use, throughout Cal Am’s Monterey service territory.
The MPWMD’s stated rationale for seeking to rescind this condition is a lack of threatened violation for the foreseeable future given a sufficient water supply to serve demand, and the current prohibitions restrict local housing construction needed to meet state affordable housing mandates.
On December 19, 2025, Cal Am filed a response, requesting that the SWRCB deny the application or hold it in abeyance to permit Cal Am to meet with appropriate stakeholders and to develop a proposal for relief from the prohibitions.
For the year ended December 31, 2025, Cal Am has complied with the diversion limitations contained in the 2016 Order.
Continued compliance with the diversion limitations in 2026 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.
Cal Am has incurred $ 324 million in aggregate costs as of December 31, 2025, related to the Water Supply Project, which includes $ 107 million in AFUDC.
On December 30, 2022, Cal Am filed with the CPUC an application for rehearing of the CPUC’s December 5, 2022 final decision, and in March 2023, the CPUC issued a decision denying Cal Am’s application for rehearing but adopting its proposed AFUDC for already incurred and future costs.
On May 21, 2025, the CPUC issued a decision authorizing an increase to the cost cap of $ 11 million for the specified extraction wells.
Further hearings were scheduled in a Phase 2 to this CPUC proceeding to focus on updated supply and demand estimates for the Water Supply Project.
On August 14, 2025, the CPUC approved a final decision, which was updated on October 9, 2025, finding that, as to the supply and demand estimates for the Water Supply Project, projected demand will outstrip supply by approximately 2,500 acre-feet per year as of 2050.
On September 17, 2025, the City of Marina (the “City”), the Marina Coast Water District (“MCWD”) and the MPWMD filed applications for rehearing of the final decision.
On September 22, 2025, these parties also filed a motion to stay the final decision.
The CPUC has not yet ruled on these motions.
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 accordance with the CPUC’s prior decisions.
Subject to the impacts, outcomes or resolution of applicable litigation and other proceedings, construction of the desalination plant for the Water Supply Project is expected to begin in 2026, and the desalination plant is currently anticipated to be in service by the end of 2029.
Coastal Development Permit Application In 2018, Cal Am submitted a coastal development permit application (the “Marina Application”) to the City for those project components of the Water Supply Project located within the City’s coastal zone.
In December 2022, the City, 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 slant wells for the Water Supply Project.
In April 2024, the court granted defendants’ motion for judgment on the pleadings and dismissed one of MCWD’s causes of action in its petition.
After trial and subsequent proceedings ending in the first quarter of 2025, on May 12, 2025, the court entered its final decision denying the petition in full.
On July 24, 2025, a notice of appeal was filed.
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, 2027.
On June 25, 2025, the SWRCB administrative hearing officer transmitted a final report of an advisory opinion to the SWRCB’s board for approval, as well as to the parties and the Monterey County Superior Court.
The final report analyzes potential impacts to the groundwater basin and groundwater users based on predictive modeling presented by the parties’ experts, and concludes, among other things, that the slant well pumping is not expected to materially impact MCWD’s water rights, or its ability to draw water from its wells.
The report also finds that although some harm to the groundwater basin may occur in the form of increased seawater intrusion and lowering of groundwater levels, any such harm should be balanced against the benefits of the project, and could be avoided or remedied by a physical solution.
Trial commenced on November 12, 2025, and is expected to continue into the first quarter of 2026.
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 in September 2024.
Following submission of the application to amend the relevant NPDES permit to the RWQCB, Cal Am’s and Monterey One Water’s consultants developed a less environmentally impactful alternative that reduces the number of outfall modifications required to accommodate brine discharge.
The alternatives analysis was approved by Monterey One Water’s board on June 30, 2025, and was submitted to the RWQCB on July 1, 2025.
In June 2024, MCWD filed a motion for judgment on the pleadings.
In December 2024, the court granted MCWD’s motion without leave to amend, dismissing all of Cal Am’s remaining claims.
On February 27, 2025, Cal Am and MCWRA each filed a Notice of Appeal of the trial court’s decision.
In December 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 system assets) and, if requested, to re-hear the application in compliance with all applicable law.
In February 2024, each of Cal Am and LAFCO filed a notice of appeal with the California Court of Appeal regarding the Monterey County Superior Court’s decision to issue the writ of mandate, and the MPDMD filed a notice of cross-appeal.
MPWMD Condemnation Action Separate from the proceedings related to the MPWMD’s application with LAFCO, the MPWMD notified Cal Am in October 2022 of a decision to appraise the Monterey system assets and requested access to a number of Cal Am’s properties and documents to assist the MPWMD with such an appraisal.
Cal Am responded shortly thereafter, denying the request for access, and stating that the MPWMD does not have the right to appraise Cal Am’s system without LAFCO approval to become a retail water provider.
In April 2023, Cal Am rejected an offer by the MPWMD to purchase the Monterey system assets for $ 448.8 million.
Over the written and oral objections of Cal Am, at a hearing held in October 2023, the MPWMD adopted a resolution of necessity to authorize it to file an eminent domain lawsuit with respect to the Monterey system assets.
In December 2023, the MPWMD filed a lawsuit against Cal Am in Monterey County Superior Court seeking to condemn the Monterey system assets.
In February 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.

and 510 more.

Gone since FY2024

In 2011, the California Public Utilities Commission (the “CPUC”) issued a decision directing modifications in Cal Am’s tariffs to recognize the moratorium mandated by the 2009 Order, and directing Cal Am to seek written guidance from the SWRCB with respect to any unresolved issues of interpretation or implementation of this condition.
For the year ended December 31, 2024, Cal Am has complied with the diversion limitations contained in the 2016 Order.
Continued compliance with the diversion limitations in 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.
Cal Am has incurred $ 281 million in aggregate costs as of December 31, 2024, related to the Water Supply Project, which includes $ 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 late 2025 at the earliest.
The amended and restated water purchase agreement for the GWR Project expansion is subject to review and approval of the CPUC, and in November 2021, Cal Am filed an application with the CPUC that sought review and approval of the amended and restated water purchase agreement.
Cal Am also requested rate base treatment of the additional capital investment for certain Cal Am facilities required to maximize the water supply from the expansion to the GWR Project and a related Aquifer Storage and Recovery Project, totaling approximately $81 million.
This requested amount was in addition to, and consistent in regulatory treatment with, the prior $50 million of cost recovery for facilities associated with the original water purchase agreement, which was approved by the CPUC in its unanimous 2016 final decision.
Further evidentiary hearings in this proceeding 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, 2023, rehearing decision.
Coastal Development Permit Application In 2018, Cal Am submitted a coastal development permit application (the “Marina Application”) to the City of Marina (the “City”) for those project components of the Water Supply Project located within the City’s coastal zone.
In 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 slant wells for the Water Supply Project.
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.
Subject to the impact or resolution of this litigation, construction of the desalination plant is expected to begin in 2025 and the desalination plant is estimated to be in-service by the end of 2027.
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, 2026.
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.
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.
Challenges Related to Compliance with California’s Sustainable Groundwater Management Act Under California’s Sustainable Groundwater Management Act (“SGMA”) enacted in 2015, groundwater basins designated by the state as critically overdrafted must be managed by a GSA by 2020 in accordance with an approved groundwater sustainability plan (“GSP”) designed to achieve sustainability by 2040.
Under the SGMA, GSAs have broad powers to achieve sustainability including, but not limited to, regulating groundwater extraction by imposing fees on groundwater extractions and controlling groundwater extractions by regulating, limiting or suspending extractions from wells.
The 400-acre CEMEX site overlies a small portion of the 180/400 Subbasin of the Salinas Valley Groundwater Basin; the 84,000-acre 180/400 Subbasin has been designated by the state as critically overdrafted, mainly due to seawater intrusion into the subbasin.
In late 2016, the Salinas Valley Basin Groundwater Sustainability Agency (the “SVBGSA”) was formed as a joint powers authority to become the GSA for the Salinas Valley Groundwater Basin and prepare a GSP.
In April 2018, the City filed a notice to become the GSA for the CEMEX site, creating an overlap with the SVBGSA’s filing for the 180/400 Subbasin.
In 2016, the SVBGSA commenced preparation of a GSP covering the entire 180/400 Subbasin, including the CEMEX site, but in August 2019 the City filed a notice that it intends to prepare its own GSP for the CEMEX site with the intent to severely limit or prohibit groundwater pumping at that site.
The State Department of Water Resources (“SDWR”) has taken the position that until the overlap is resolved, it will not accept the GSP from either agency, placing the subbasin at risk of being placed in a probationary status and subject to state management.
In December 2019, the County of Monterey filed its own notice to become the exclusive GSA at the CEMEX site in order to resolve the overlap, which is permitted under SGMA.
SDWR accepted Monterey County’s filing in December 2019, and now lists Monterey County as the exclusive GSA for the site.
In December 2019, the City filed a lawsuit in Monterey County Superior Court challenging Monterey County’s filing, and SDWR’s acceptance of the filing, as the exclusive GSA for the CEMEX site.
The City has named Monterey County and its Board of Supervisors, its GSA, and SDWR and its director as defendants, and the SVBGSA and its Board of Directors as real parties.
The City seeks to invalidate Monterey County’s filing, as well as injunctive relief to preserve the City’s status as a GSA for the site.
To protect its interest in the matter, Cal Am filed an application to intervene in this lawsuit, which was granted.
Monterey County filed cross-claims against the City and SDWR.
In September 2020, Cal Am filed a separate but related complaint in Monterey County Superior Court challenging the validity of actions taken by the City and its GSA in adopting a groundwater sustainability plan for the CEMEX site, and the validity of the provisions of such plan.
Due to the overlap of issues in the City’s lawsuit with those in the validation action, the parties stipulated to a stay of the validation action pending determination of the claims in the City’s action, which was approved by the court in December 2020.
In February 2021, the City filed a separate but related in rem reverse validation complaint challenging the adoption by Monterey County of a GSP for the CEMEX site.
On May 3, 2023, the City filed a second reverse validation complaint, challenging the adoption of amendments to the GSP for the 180/400 Subbasin.
After a hearing, in August 2021, the court denied the claims brought by the City and granted Monterey County’s cross-claims, finding that the City’s GSA notice was untimely, the Monterey County GSA was the exclusive GSA for the CEMEX site, and the SVBGSA’s GSP was properly adopted for the entire 180/400 Subbasin, including the CEMEX site.
In November 2021, the City appealed this decision, and in December 2021, Monterey County appealed the court’s decision as to the finding that the City’s action creating a GSA was not void.
The related validation and reverse validation actions remain stayed during the pendency of the appeal.

and 535 more.

Sentence-level comparison of Item 1A in the two most recent 10-Ks (FY2024 ↗, FY2025 ↗). A reworded sentence counts as one dropped and one added, so heavy edits read as low “kept”. Headings and page furniture are stripped; nothing is summarised by a model.

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