Press Release

California Water Service Group Announces Results for 3rd Quarter 2010

SAN JOSE, CA, Oct 27, 2010 (MARKETWIRE via COMTEX) -- California Water Service Group (NYSE: CWT) today announced net income of $20.4 million and earnings per share of $0.98 for the third quarter of 2010, compared to net income of $19.6 million and earnings per share of $0.94 in the third quarter of 2009.

For the quarter, total revenue increased $7.2 million, or 5.1%, to $146.3 million. The net effect of the water revenue adjustment mechanism (WRAM) and the modified cost balancing account (MCBA) for the third quarter 2010 was to add $2.4 million to revenue. Included in this number was an $8.6 million decrease resulting from lower-than-adopted production costs driven by a reduction in customer usage. The WRAM is a ratemaking mechanism that decouples water sales from revenues and the MCBA is an account that allows California Water Service Company (Cal Water) to track and recover or refund changes in water production costs.

Total operating expenses for the third quarter of 2010 increased by $5.4 million, or 4.7%, to $120.5 million. Water production costs increased by $5.7 million, or 11.7%, due to wholesale water rates and higher power costs, which were partially offset by reduced sales to existing customers. Administrative costs decreased $1.3 million, or 6.8%, due primarily to lower outside services and legal costs. Other operations expenses increased by 1.7%, or $0.3 million, to $14.9 million, as a result of an increase in transmission and distribution expense that was partially offset by a decrease in uncollectible expense.

Maintenance expense increased by 10.0% to $4.9 million due to additional expenditures for water main repairs. Depreciation expense increased by 6.6% to $10.9 million as a result of increases in capital expenditures. Taxes other than income increased $0.2 million to $4.6 million, primarily due to property tax increases.

Other income, net of income taxes, added $1.0 million in revenues, while interest expense increased by 17.1% to $6.5 million due to higher short-term borrowings in the current year.

For the twelve months ended September 30, 2010, net income was $39.2 million and dilutive earnings per share were $1.89, compared to net income of $41.4 million and dilutive earnings per share of $1.99 for the same period last year. Revenues for the trailing twelve months were $461.9 million, compared to $442.6 million for the same period in the prior year.

On Wednesday, October 27, 2010, the California Public Utilities Commission issued a proposed decision on California Water Service Company's 2009 General Rate Case. The proposed decision approves the original settlement agreement announced by the company on June 28, 2010, and the total gross revenue recommended in the settlement. In addition, in the 3rd quarter, and since the original settlement filing, the company received $9.8 million in offset and other rate increases, meaning the proposed decision would increase rates on January 1, 2011 by an additional $25.44 million. The proposed decision also adopts the previously announced ratemaking authorizations which would allow the company to obtain up to another $7 million in gross revenue after certain capital projects are completed. The proposed decision cannot be approved by the Commission until completion of a 30-day comment period. The Commission may approve the proposed decision as written or may modify it based upon comments received. The company cannot predict the timing of final Commission approval or whether any changes will be made before adoption.

"The most important factor in our financial performance continues to be our ability to recover prudently incurred costs in rates in a timely manner," said President and Chief Executive Officer Peter C. Nelson. "We are pleased that the proposed decision adopting the comprehensive settlement was issued in a timely fashion."

Other Information

All stockholders and interested investors are invited to listen to the 2010 third quarter conference call on October 28, 2010, at 11:00 a.m. (EDT), by dialing 1-866-253-6505 and keying in ID# 1484282. A replay of the call will be available from 2:00 p.m. (EDT) October 28, 2010, through December 27, 2010, at 1-888-266-2081, ID# 1484282. The call, which will be hosted by President and CEO, Peter Nelson and Vice President and Chief Financial Officer, Martin A. Kropelnicki, will also be webcast under the investor relations tab at www.calwatergroup.com.

California Water Service Group is the parent company of California Water Service Company, Washington Water Service Company, New Mexico Water Service Company, Hawaii Water Service Company, Inc., CWS Utility Services, and HWS Utility Services. Together these companies provide regulated and non-regulated water service to nearly 2 million people in California, Washington, New Mexico, and Hawaii. Group's common stock trades on the New York Stock Exchange under the symbol "CWT."

This news release contains forward-looking statements within the meaning established by the Private Securities Litigation Reform Act of 1995 ("Act"). The forward-looking statements are intended to qualify under provisions of the federal securities laws for "safe harbor" treatment established by the Act. Forward-looking statements are based on currently available information, expectations, estimates, assumptions and projections, and management's judgment about the Company, the water utility industry and general economic conditions. Such words as expects, intends, plans, believes, estimates, assumes, anticipates, projects, predicts, forecasts or variations of such words or similar expressions are intended to identify forward-looking statements. The forward-looking statements are not guarantees of future performance. They are subject to uncertainty and changes in circumstances. Actual results may vary materially from what is contained in a forward-looking statement. Factors that may cause a result different than expected or anticipated include, but are not limited to: governmental and regulatory commissions' decisions; changes in regulatory commissions' policies and procedures; the timeliness of regulatory commissions' actions concerning rate relief; new legislation; electric power interruptions; increases in suppliers' prices and the availability of supplies including water and power; fluctuations in interest rates; changes in environmental compliance and water quality requirements; acquisitions and our ability to successfully integrate acquired companies; the ability to successfully implement business plans; changes in customer water use patterns; the impact of weather on water sales and operating results; access to sufficient capital on satisfactory terms; civil disturbances or terrorist threats or acts, or apprehension about the possible future occurrences of acts of this type; the involvement of the United States in war or other hostilities; restrictive covenants in or changes to the credit ratings on our current or future debt that could increase our financing costs or affect our ability to borrow, make payments on debt or pay dividends; and, other risks and unforeseen events. When considering forward-looking statements, you should keep in mind the cautionary statements included in this paragraph, as well as the annual 10-K, Quarterly 10-Q, and other reports filed from time-to-time with the Securities and Exchange Commission (SEC). The Company assumes no obligation to provide public updates of forward-looking statements.

Additional information is available at our Web site at www.calwatergroup.com.

CALIFORNIA WATER SERVICE GROUP
CONDENSED CONSOLIDATED BALANCE SHEETS
Unaudited
(In thousands, except per share data)         September 30,  December 31,
                                                  2010           2009
                                              -------------  -------------
ASSETS
Utility plant:
     Utility plant                            $   1,819,330  $   1,709,062
     Less accumulated depreciation and
      amortization                                 (538,919)      (510,985)
                                              -------------  -------------
          Net utility plant                       1,280,411      1,198,077
                                              -------------  -------------
Current assets:
     Cash and cash equivalents                        9,738          9,866
     Receivables
          Customers                                  33,606         25,567
          Regulatory balancing accounts               6,898         10,513
          Other                                       5,699          9,043
     Unbilled revenue                                21,602         13,417
     Materials and supplies at average cost           5,925          5,530
     Taxes, prepaid expense, and other assets         8,260         18,305
                                              -------------  -------------
          Total current assets                       91,728         92,241
                                              -------------  -------------
Other assets:
     Regulatory assets                              223,724        204,104
     Goodwill                                         2,615          2,615
     Other assets                                    33,462         28,544
                                              -------------  -------------
          Total other assets                        259,801        235,263
                                              -------------  -------------
                                              $   1,631,940  $   1,525,581
                                              =============  =============
CAPITALIZATION AND LIABILITIES
Capitalization:
     Common stock, $.01 par value             $         208  $         208
     Additional paid-in capital                     217,147        215,528
     Retained earnings                              219,127        204,898
                                              -------------  -------------
          Total common stockholders' equity         436,482        420,634
     Long-term debt, less current maturities        380,285        374,269
                                              -------------  -------------
          Total capitalization                      816,767        794,903
                                              -------------  -------------
Current liabilities:
     Current maturities of long-term debt             2,374         12,953
     Short-term borrowings                           56,250         12,000
     Accounts payable
          Trade and other                            47,827         43,689
          Regulatory balancing accounts                 586          2,430
     Accrued interest                                 8,991          4,258
     Accrued expenses and other liabilities          39,511         35,028
                                              -------------  -------------
          Total current liabilities                 155,539        110,358
Unamortized investment tax credits                    2,318          2,318
Deferred income taxes, net                          103,866         91,851
Pension and postretirement benefits other
 than pensions                                      143,619        137,127
Regulatory liability and Other                       88,839         85,780
Advances for construction                           187,646        185,027
Contributions in aid of construction                133,346        118,217
                                              -------------  -------------
                                              $   1,631,940  $   1,525,581
                                              =============  =============
CALIFORNIA WATER SERVICE GROUP
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Unaudited
(In thousands, except per share data)
For the Three-Months ended:
                                                September 30  September 30
                                                    2010          2009
                                                ------------  ------------
Operating revenue                               $    146,349  $    139,167
                                                ------------  ------------
Operating expenses:
  Operations:
      Water production costs                          54,634        48,898
      Admistrative and General                        17,794        19,084
      Other operations                                14,889        14,639
  Maintenance                                          4,853         4,405
  Depreciation and amortization                       10,934        10,259
  Income taxes                                        12,825        13,417
  Property and other taxes                             4,555         4,371
                                                ------------  ------------
      Total operating expenses                       120,484       115,073
                                                ------------  ------------
      Net operating income                            25,865        24,094
                                                ------------  ------------
Other income and expenses:
  Non-regulated revenue                                3,850         5,194
  Non-regulated expenses                              (2,214)       (3,464)
  Gain on sale of non-utility property                    33             -
  Income taxes (expense) on other income and
   expenses                                             (674)         (702)
                                                ------------  ------------
                                                         995         1,028
                                                ------------  ------------
Interest expense:
  Interest Expense                                     6,958         6,480
  Less: capitalized interest                            (484)         (950)
                                                ------------  ------------
      Net interest expense                             6,474         5,530
                                                ------------  ------------
Net income                                      $     20,386  $     19,592
                                                ============  ============
Earnings per share
  Basic                                         $       0.98  $       0.94
                                                ============  ============
  Diluted                                       $       0.98  $       0.94
                                                ============  ============
Weighted average shares outstanding
  Basic                                               20,811        20,745
                                                ============  ============
  Diluted                                             20,824        20,767
                                                ============  ============
Dividends per share of common stock             $     0.2975  $     0.2950
                                                ------------  ------------
CALIFORNIA WATER SERVICE GROUP
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Unaudited
(In thousands, except per share data)
For the Nine-Months ended:                      September 30  September 30
                                                    2010          2009
                                                ------------  ------------
Operating revenue                               $    354,942  $    342,447
                                                ------------  ------------
Operating expenses:
  Operations:
      Water production costs                         126,923       119,468
      Admistrative and General                        53,718        57,331
      Other operations                                43,204        41,425
  Maintenance                                         14,962        13,352
  Depreciation and amortization                       32,364        30,739
  Income taxes                                        21,324        21,438
  Property and other taxes                            12,545        12,371
                                                ------------  ------------
      Total operating expenses                       305,040       296,124
                                                ------------  ------------
      Net operating income                            49,902        46,323
                                                ------------  ------------
Other income and expenses:
  Non-regulated revenue                               10,963        11,173
  Non-regulated expenses                              (9,451)       (6,826)
  Gain on sale of non-utility property                    33           675
  Income taxes (expense) on other income and
   expenses                                             (614)       (2,032)
                                                ------------  ------------
                                                         931         2,990
                                                ------------  ------------
Interest expense:
  Interest Expense                                    20,386        17,480
  Less: capitalized interest                          (2,338)       (2,270)
                                                ------------  ------------
      Net interest expense                            18,048        15,210
                                                ------------  ------------
Net income                                      $     32,785  $     34,103
                                                ============  ============
Earnings per share
  Basic                                         $       1.58  $       1.64
                                                ============  ============
  Diluted                                       $       1.58  $       1.64
                                                ============  ============
Weighted average shares outstanding
  Basic                                               20,798        20,740
                                                ============  ============
  Diluted                                             20,813        20,765
                                                ============  ============
Dividends per share of common stock             $     0.8925  $     0.8850
                                                ------------  ------------
1720 North First Street
San Jose, CA 95112-4598

Contact:
Marty Kropelnicki
(408) 367-8200 (analysts)
Shannon Dean
(310) 257-1435 (media)

SOURCE: California Water Service Group