SJW Group

The stable outlook on SJWG reflects our expectation that the company will effectively manage its regulatory risk with the addition of Connecticut Water Service Inc. (CTWS). CTWS provides additional regulatory diversity and significantly increases SJWG's customer base, which we expect altogether is favorable for SJWG's overall credit quality. The stable outlook also reflects our expectations that SJWG's financial measures will consistently reflect the middle of the range for its financial risk profile category, including funds from operations (FFO) to debt of about 10%-11%. We could lower the rating over the next 24 months if SJWG's FFO to debt approaches 9%. This could occur if adverse regulatory decisions in key jurisdictions, including in California or Connecticut, weaken the company's financial measures.

...We expect SJW Group (SJWG) to effectively manage regulatory risk through the use of various regulatory mechanisms across multiple jurisdictions. The company's regulatory risk management reflects credit-supportive mechanisms across multiple jurisdictions, including use of forward-test years, decoupling, and various balancing accounts that track and recover various costs, all of which promote generally stable revenue and cash flow....

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