Press Release

California Water Service Group Announces Revenues and Earnings for 4th Quarter and Year-End 2007

SAN JOSE, Calif.--(BUSINESS WIRE)--Feb. 27, 2008--California Water Service Group (NYSE:CWT) today announced net income of $8.0 million for the fourth quarter of 2007, an increase of 25% over net income of $6.4 million in the fourth quarter of 2006, and diluted earnings per common share of $0.39, compared to $0.31 per common share for the same period last year.

Revenue for the fourth quarter increased $5.2 million, or 6.5%, to $85.9 million, from $80.6 million for the same period last year. Revenues reflected an additional $3.3 million from rate increases, $1.4 million due to increased usage by existing customers, and an increase of $0.5 million in sales to new customers. Total operating expenses for the quarter were $75.9 million, an increase of 7%, or $4.9 million, over the same period last year. Water production costs were up approximately 7%, or $2.1 million, to $30.7 million, due to increases in production and rates charged by wholesalers. Other operations expense increased 1.5%, or $0.4 million, to $25.1 million, due mainly to increases in water treatment costs and uncollectable accounts. Income taxes charged to utility operations increased 53%, or $1.4 million, to $4.1 million.

Maintenance expense increased approximately 6.5%, or $0.3 million, to $4.4 million, due to increased costs for repairs to water mains, reservoirs, and pumping equipment. Depreciation expense increased 11%, or $0.8 million, to $8.4 million, due to increased utility plant.

Net interest expense decreased $0.5 million, or 12%, to $3.7 million, due to an increase in capitalized interest on capital expenditures.

Net other income increased $0.8 million from the same period in 2006. Included in this number is a gain on sales of $2.6 million in properties no longer used and useful in providing utility services to customers. The gain on sales were partially offset by a decrease in interest income and an unfavorable mark to market adjustments for long term investment assets held by the Company.

Full Year 2007 Results

For 2007, net income was $31.2 million, up 22%, or $5.6 million, from the $25.6 million posted in 2006; diluted earnings per share were $1.50, compared to $1.34 for the same period last year.

Revenue for 2007 was $367.1 million, increasing $32.4 million, or 10%, from the $334.7 million in revenues recorded in 2006. Revenues reflected an additional $15.0 million from rate increases, $14.7 million from increased usage by existing customers, and $2.7 million in sales to new customers.

Total operating expenses increased $28.5 million, or 10%, to $322.9 million for the year. Of this amount, water production costs increased 12%, or $14.6 million, to $138.9 million. Other operations expense increased 5%, or $4.9 million, to $100.6 million, due primarily to increases in water treatment expenses and provision for uncollectable accounts.

Maintenance expense increased $2.7 million, or 18%, to $18.3 million, due to cost increases related to repairs of water mains. Depreciation increased 9.5%, or $2.9 million, to $33.6 million for the full year.

Net interest expense increased 1%, or $0.2 million, to $17.1 million during the year. Income tax charged to utility operations increased 17%, or $2.6 million, to $17.9 million, due to the increase in operating income in 2007.

Net other income increased 84%, or $1.9 million, to $4.1 million during the year, primarily due to the gain on sale of non-utility property mentioned above.

President and Chief Executive Officer Peter C. Nelson noted that the Company had achieved success in key areas in 2007, particularly regulatory affairs and customer growth.

"In 2007, we continued to work with the California Public Utilities Commission to implement the California Water Action Plan, made several small but important acquisitions, continued efforts to improve customer service, and invested diligently in our infrastructure, reaching $1 billion in net utility plant," Nelson said.

Regulatory Update for 2007

The California Public Utilities Commission made several key decisions affecting California Water Service Company (Cal Water), Group's largest subsidiary, in 2007. First, it did not render a decision of General Rate Cases filed in 2006, but set an effective billing date of July 2007 to mitigate delayed revenue recovery. It approved a Rate Case Plan that allows Cal Water to file for recovery of certain centralized costs, including employee healthcare and benefits, all at one time, rather than staggering recovery over Cal Water's various districts' three-year rate case cycles, thereby reducing the amount of time between expenditure and recovery. Cal Water filed for all of its centralized costs in addition to its three-year District General Rate Cases in 2007 and expects decisions on the filings in July 2008.

Acquisitions

In 2007, Group's Washington subsidiary, Washington Water Service Company, acquired five small systems with a combined 461 active customer connections, and signed operations and maintenance agreements with 11 new water system owners.

Another subsidiary, Hawaii Water Service Company, awaits approval from the Hawaii Public Utilities Commission on its acquisition of Pukalani Sewerage Treatment Works, a wastewater system serving 800 customers in Pukalani on the island of Maui, and West Hawaii Utilities, which serves an equivalent of 9,000 residential water and wastewater customers in Waikoloa and Waikoloa Village on the island of Hawaii. And finally, the Company formed a non-regulated subsidiary, HWS Utility Services, LLC, to acquire non-regulated operations and maintenance contracts on the island of Hawaii from Waimea-based Island Utility Services.

Key Appointments in 2007

Key appointments in 2007 reflect California Water Service Group's emphasis on regulatory affairs and growth. First, Thomas F. Smegal, III was appointed Vice President of Regulatory Matters and Corporate Relations effective March 2008. Smegal, a professional engineer with dual undergraduate degrees in history and civil engineering from Stanford University, and graduate work at UC Berkeley, brings a wealth of experience to the position, including working at the Commission as a Utilities Engineer and Regulatory Analyst and at Cal Water as Manager of Rates.

Smegal's predecessor, Francis S. Ferraro, was named Vice President, Corporate Development. With 36 years of experience in the water industry, including 4 years as an Administrative Law Judge at the California Public Utilities Commission and 18 years as an officer of California Water Service Group, Ferraro will lead a team that is executing the Company's disciplined growth strategy.

Lastly, Terry S. Tamble, formerly manager of one of Cal Water's largest districts, was selected General Manager of Hawaii Water Service Company. Having 35 years of experience in various positions at Cal Water, Tamble will oversee Hawaii operations and manage integration of new systems into Hawaii Water Service Company.

Nelson further said, "Our people are simply outstanding, and we wouldn't have had such a good year without their combined efforts. Going forward, we will continue to provide excellent service and quality to customers, take the lead in implementing the California Water Action Plan, work with the California Public Utilities Commission on a fair and timely conclusion to our 2007 filings, and pursue growth opportunities that make sense for stockholders and customers."

Other Information

All stockholders and interested investors are invited to listen to the 2007 fourth quarter and year-end conference call on Feb 28, 2008 at 8:00 a.m. PST (11:00 a.m. EST) by dialing 1-866-244-4519 and keying in ID# 1186949. A replay of the call will be available from 11:00 a.m. PST (2:00 p.m. EST) on February 28, 2008, through April 28, 2008, at 888-266-2081, ID# 835974. The call, which will be hosted by President and CEO Peter C. Nelson and Vice President and CFO 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, LLC. Together these companies provide regulated and non-regulated water service to approximately 2 million people in more than 100 California, Washington, New Mexico and Hawaii communities. 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, including decisions on proper disposition of property; changes in regulatory commissions' policies and procedures; the timeliness of regulatory commissions' actions concerning rate relief; new legislation; changes in accounting valuations and estimates; the ability to satisfy requirements related to the Sarbanes-Oxley Act and other regulations on internal controls; 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. The Company assumes no obligation to provide public updates of forward-looking statements.

    Additional information is available online at
www.calwatergroup.com.

CALIFORNIA WATER SERVICE GROUP
CONDENSED CONSOLIDATED BALANCE SHEETS
Unaudited

(In thousands, except per share data)          December 31 December 31
                                                  2007        2006
                                               ----------- -----------
ASSETS
Utility plant:
 Utility plant                                 $1,447,047  $1,344,415
 Less accumulated depreciation and
  amortization                                   (436,851)   (402,940)
                                               ----------- -----------
  Net utility plant                             1,010,196     941,475
                                               ----------- -----------

Current assets:
 Cash and cash equivalents                          6,734      60,312
 Receivables
  Customers                                        18,600      19,526
  Other                                             8,618       6,700
 Unbilled revenue                                  12,911      11,341
 Materials and supplies at average cost             4,743       4,515
 Prepaid pension expense                                -       1,696
 Taxes, prepaid expense, and other assets           8,369       5,534
                                               ----------- -----------
  Total current assets                             59,975     109,624
                                               ----------- -----------

Other assets:
 Regulatory assets                                 90,908      93,785
 Other assets                                      23,420      20,135
                                               ----------- -----------
  Total other assets                              114,328     113,920
                                               ----------- -----------
                                               $1,184,499  $1,165,019
                                               =========== ===========

CAPITALIZATION AND LIABILITIES
Capitalization:
 Common stock, $.01 par value                  $      207  $      207
 Additional paid-in capital                       211,885     211,513
 Retained earnings                                173,617     166,582
                                               ----------- -----------
  Total common stockholders' equity               385,709     378,302
 Preferred stock                                    3,475       3,475
 Long-term debt, less current maturities          289,220     291,814
                                               ----------- -----------
  Total capitalization                            678,404     673,591
                                               ----------- -----------

Current liabilities:
 Current maturities of long-term debt               2,701       1,778
 Accounts payable                                  36,694      33,130
 Accrued expenses and other liabilities            30,259      35,317
                                               ----------- -----------
  Total current liabilities                        69,654      70,225

Unamortized investment tax credits                  2,467       2,541
Deferred income taxes, net                         69,712      69,503
Pension and postretirement benefits other than
 pensions                                          39,444      48,584
Regulatory and other liabilities                   38,782      33,411
Advances for construction                         168,024     157,660
Contributions in aid of construction              118,012     109,504
Commitments and contingencies
                                               ----------- -----------
                                               $1,184,499  $1,165,019
                                               =========== ===========
CALIFORNIA WATER SERVICE GROUP
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Unaudited
(In thousands, except per share data)

                                                      For the three
                                                       months ended:
                                                       December 31,
                                                     -----------------
                                                       2007     2006
                                                     -------- --------

Operating revenue                                    $85,879  $80,645
                                                     -------- --------
Operating expenses:
 Water production costs                               30,734   28,622
 Other operations                                     25,149   24,773
 Maintenance                                           4,353    4,088
 Depreciation and amortization                         8,390    7,585
 Income taxes                                          4,126    2,704
 Property and other taxes                              3,124    3,199
                                                     -------- --------
  Total operating expenses                            75,876   70,971
                                                     -------- --------

  Net operating income                                10,003    9,674
                                                     -------- --------

Other income and expenses:
 Non-regulated revenue                                 3,674    3,799
 Non-regulated expenses                               (3,261)  (2,127)
 Gain on sale of non-utility property                  2,599        -
 Less: income taxes on other income and expenses      (1,227)    (681)
                                                     -------- --------
                                                       1,785      991
                                                     -------- --------

Interest expense:
 Interest Expense                                      4,931    4,971
 Less: capitalized interest                           (1,185)    (725)
                                                     -------- --------
  Net interest expense                                 3,746    4,246
                                                     -------- --------

Net income                                           $ 8,042  $ 6,419
                                                     ======== ========

Earnings per share
 Basic                                               $  0.39  $  0.31
                                                     ======== ========
 Diluted                                             $  0.39  $  0.31
                                                     ======== ========
Weighted average shares outstanding
 Basic                                                20,666   20,388
                                                     ======== ========
 Diluted                                              20,691   20,408
                                                     ======== ========
Dividends per share of common stock                  $0.2900  $0.2875
                                                     ======== ========
CALIFORNIA WATER SERVICE GROUP
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Unaudited
(In thousands, except per share data)

                                                     For the twelve
                                                      months ended:
                                                      December 31,
                                                   -------------------
                                                     2007      2006
                                                   --------- ---------

Operating revenue                                  $367,082  $334,717
                                                   --------- ---------
Operating expenses:
 Water production costs                             138,882   124,258
 Other operations                                   100,573    95,716
 Maintenance                                         18,336    15,591
 Depreciation and amortization                       33,563    30,652
 Income taxes                                        17,887    15,297
 Property and other taxes                            13,671    12,897
                                                   --------- ---------
  Total operating expenses                          322,912   294,411
                                                   --------- ---------

  Net operating income                               44,170    40,306
                                                   --------- ---------

Other income and expenses:
 Non-regulated revenue                               13,557    10,645
 Non-regulated expenses                              (9,114)   (7,208)
 Gain on sale of non-utility property                 2,516       348
 Less: income taxes on other income and expenses     (2,836)   (1,542)
                                                   --------- ---------
                                                      4,123     2,243
                                                   --------- ---------

Interest expense:
 Interest Expense                                    19,719    19,669
 Less: capitalized interest                          (2,585)   (2,700)
                                                   --------- ---------
  Net interest expense                               17,134    16,969
                                                   --------- ---------

Net income                                         $ 31,159  $ 25,580
                                                   ========= =========

Earnings per share
 Basic                                             $   1.50  $   1.34
                                                   ========= =========
 Diluted                                           $   1.50  $   1.34
                                                   ========= =========
Weighted average shares outstanding
 Basic                                               20,665    18,905
                                                   ========= =========
 Diluted                                             20,689    18,925
                                                   ========= =========
Dividends per share of common stock                $ 1.1600  $ 1.1500
                                                   ========= =========

CONTACT: California Water Service Group
Martin A. Kropelnicki, 408-367-8200 (analysts)
Shannon Dean, 310-257-1435 (media)

SOURCE: California Water Service Group