Press Release

California Water Service Group Announces Revenues and Earnings for Year-End and 4th Quarter 2008

SAN JOSE, CA, Feb 25, 2009 (MARKET WIRE via COMTEX) -- California Water Service Group (NYSE: CWT) today announced net income of $39.8 million, up 28% or $8.6 million for the 2008 fiscal year. Diluted earnings per share were $1.90, up 27% or $0.40 per share compared to $1.50 for the same period last year.

Revenue for 2008 was $410.3 million, increasing 12% or $43.2 million over revenue of $367.1 million for 2007. Revenues for 2008 included an additional $42.0 million from rate increases and $4 million in sales to new customers. The net effect of the Water Revenue Adjustment Mechanism (WRAM) and Modified Cost Balancing Account (MCBA), that went into effect July 1, 2008, increased revenue by $2.0 million. Sales to existing customers declined $2.2 million while other decreases accounted for $2.6 million.

Total operating expenses increased 9% or $29.9 million to $352.8 million for the year. Of this amount, water production costs increased 6% or $7.7 million to $146.6 million. Other operations expense increased 10% or $10.1 million to $110.6 million, due primarily to increases in health and welfare plan expense, professional and other outside services costs, and additional water treatment expenses.

Maintenance expense increased 3% or $0.6 million to $19.0 million. Depreciation increased 11% or $3.8 million to $37.3 million for the full year.

Net other income decreased $4.6 million for the full year primarily due to no significant property sales during the year and a negative mark to market adjustment of $3.8 million associated with long-term investment assets held by the Company. Net interest expense remained similar to last year at $17.1 million, while income tax increased 16% or $3.4 million to $24.1 million, due to the higher pretax income.

According to President and Chief Executive Officer Peter C. Nelson, California Water Service Group's greatest achievements in 2008 were those related to implementing the California Public Utilities Commission's Water Action Plan. "Receiving recovery of reasonably incurred costs was critical to this year's results, as was implementing both a WRAM and an MCBA which allows us to promote water efficiency," Nelson said. "We also made some key acquisitions, made important and necessary infrastructure upgrades, and continue our focus on improving the way we serve our customers."

Fourth Quarter 2008 Results

For the fourth quarter 2008, net income was $7.3 million, down 9% or $0.7 million from net income of $8.0 million in the fourth quarter of 2007, and diluted earnings per common share were $0.35, a decrease of 10% from $0.39 per common share for the same period last year.

Revenue for the fourth quarter increased to $100.1 million, up 17% or $14.2 million for the same period last year. Revenues reflected an additional $13.8 million from rate increases, an increase of $2.3 million in sales to new customers and an additional $0.9 million in revenue from the WRAM and MCBA. These increases were offset by a $1.6 million reduction in sales to existing customers and other decreases of $1.2 million.

Total operating expenses for the quarter were $88.7 million, an increase of 17% or $12.8 million over operating expenses in the same period last year. Water production costs were up 12% or $3.7 million to $34.4 million, due to increases in production and higher rates charged by wholesalers. Other operations expense increased 22% or $5.5 million to $30.6 million, due mainly to health and welfare plan expenses, increases in professional services, and increased water treatment costs.

Maintenance expense increased approximately 40% or $1.7 million to $6.1 million, which includes increased expenditures on water mains, reservoirs, and pumping equipment. Depreciation expense increased 14% or $1.2 million to $9.6 million due to increases in utility plant. Taxes other than income increased 18% or $0.6 million to $3.7 million, primarily due to increases in property taxes.

Net other income decreased $2.1 million from the same period in 2007, primarily due to no property sales in the fourth quarter and a negative mark to market adjustment of $1.6 million associated with long-term investment assets held by the Company.

Regulatory Update for 2008

In July 2008, the CPUC approved California Water Service Company's (the Company) 2007 General Rate Case filing, authorizing rate increases of $33.4 million for eight districts, and an additional $13.7 million in 24 districts for General Office expenses. Additionally, the Company requested recovery of increases in "offsettable" expenses, including purchased water, power, and pump taxes, and others were made to recover incremental cost increases and certain capital expenses incurred in the districts in between the three-year General Rate Case cycle.

Also in 2008, the CPUC approved the Company's request for a WRAM, which effectively decouples water sales from revenues, as well as a tiered rate structure for most California districts. Having a WRAM effectively removes a major disincentive for the Company to pursue and promote water efficiency and conservation. In the same decision, the CPUC approved an MCBA, which will enable the Company to capture changes in costs resulting from utilizing different sources and volumes of supply. Both mechanisms support principals expressed in the CPUC's Water Action Plan, which reflects best practices in water utility regulation.

Pursuant to the CPUC's Rate Case Plan, the Company will file a General Rate Case in 2009 for all California districts, including general office, with a scheduled effective date of January 1, 2011; if the decision is delayed, the Company will seek interim rates and recovery of lost revenues resulting from any delay. Subsequent General Rate Cases will be filed for all California districts every three years.

2008 Acquisitions

The most significant growth in 2008 occurred in Hawaii, beginning with HWS Utility Services' acquisition of multiple water and wastewater operations contracts on the Island of Hawaii. In the second quarter of 2008, Hawaii Water Service Company (Hawaii Water) received approval from the Hawaii Public Utilities Commission (HPUC) to acquire a wastewater system serving approximately 800 customers in the community of Pukalani on the Island of Maui, and in the third quarter, Hawaii Water completed its acquisition of Waikoloa Resort Utilities, Waikoloa Water Company, Inc., and Waikoloa Sanitary Sewer Company, Inc. (collectively known as West Hawaii Utilities), which together provide water utility services to 1,970 customer accounts and wastewater services to 300 customer accounts on the Island of Hawaii. Finally, in the fourth quarter, Hawaii Water completed its acquisition of a water and wastewater system serving approximately 250 customers in Kukio on the Island of Hawaii.

Additionally, in California, the Company agreed to acquire Skyline County Water District, a 465-connection system adjacent to Cal Water's Bear Gulch District, and signed an agreement to purchase the Woodside Mutual Water Company, another adjacent system serving 43 customers.

Other Information

All stockholders and interested investors are invited to listen to the 2008 fourth quarter and year-end conference call on February 26, 2009 at 8:00 a.m. PST (11:00 a.m. EST) by dialing 1-866-882-0695 and keying in ID #1322231. A replay of the call will be available from 11:00 a.m. PST (2:00 p.m. EST) on February 26, 2009 through April 27, 2009, at 1-888-266-2081 ID #1322231. 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
                                                      2008         2007
                                                  -----------  -----------
ASSETS
Utility plant:
     Utility plant                                $ 1,583,079  $ 1,447,047
     Less accumulated depreciation and
      amortization                                   (470,712)    (436,851)
                                                  -----------  -----------
          Net utility plant                         1,112,367    1,010,196
                                                  -----------  -----------
Current assets:
     Cash and cash equivalents                         13,869        6,734
     Receivables
          Customers                                    22,786       18,600
          Other                                        12,071        8,617
     Unbilled revenue                                  13,112       12,911
     Materials and supplies at average cost             5,070        4,744
     Taxes, prepaid expense, and other assets          12,890        8,369
                                                  -----------  -----------
          Total current assets                         79,798       59,975
                                                  -----------  -----------
Other assets:
     Regulatory assets                                201,558       90,908
     Goodwill                                           3,736            -
     Other assets                                      23,913       23,420
                                                  -----------  -----------
          Total other assets                          229,207      114,328
                                                  -----------  -----------
                                                  $ 1,421,372  $ 1,184,499
                                                  ===========  ===========
CAPITALIZATION AND LIABILITIES
Capitalization:
     Common stock, $.01 par value                 $       207  $       207
     Additional paid-in capital                       213,922      211,885
     Retained earnings                                188,820      173,617
                                                  -----------  -----------
          Total common stockholders' equity           402,949      385,709
     Preferred stock                                        -        3,475
     Long-term debt, less current maturities          287,498      289,220
                                                  -----------  -----------
          Total capitalization                        690,447      678,404
                                                  -----------  -----------
Current liabilities:
     Current maturities of long-term debt               2,818        2,701
     Short-term borrowing                              40,000            -
     Accounts payable                                  41,772       36,694
     Accrued expenses and other liabilities            38,606       30,258
                                                  -----------  -----------
          Total current liabilities                   123,196       69,653
Unamortized investment tax credits                      2,392        2,467
Deferred income taxes, net                             72,344       69,712
Pension and postretirement benefits other than
 pensions                                             152,685       39,444
Regulatory and other liabilities                       52,361       38,783
Advances for construction                             176,163      168,024
Contributions in aid of construction                  117,568      118,012
MTBE Settlement                                        34,216            -
Commitments and contingencies
                                                  -----------  -----------
                                                  $ 1,421,372  $ 1,184,499
                                                  -----------  -----------
CALIFORNIA WATER SERVICE GROUP
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Unaudited
(In thousands, except per share data)
For the Three-Months ended:
                                                  December 31  December 31
                                                      2008         2007
                                                  -----------  -----------
Operating revenue                                 $   100,108  $    85,879
                                                  -----------  -----------
Operating expenses:
    Water production costs                             34,402       30,734
    Other operations                                   30,610       25,149
    Maintenance                                         6,085        4,353
    Depreciation and amortization                       9,560        8,390
    Income taxes                                        4,381        4,126
    Property and other taxes                            3,676        3,124
                                                  -----------  -----------
        Total operating expenses                       88,714       75,876
                                                  -----------  -----------
        Net operating income                           11,394       10,003
                                                  -----------  -----------
Other income and expenses:
    Non-regulated revenue                               4,499        3,674
    Non-regulated expenses                             (5,103)      (3,261)
    Gain on sale of non-utility property                    -        2,599
    Less: income taxes on other income and
     expenses                                             258       (1,227)
                                                  -----------  -----------
                                                         (346)       1,785
                                                  -----------  -----------
Interest expense:
    Interest Expense                                    5,186        4,931
    Less: capitalized interest                         (1,456)      (1,185)
                                                  -----------  -----------
        Net interest expense                            3,730        3,746
                                                  -----------  -----------
Net income                                        $     7,318  $     8,042
                                                  ===========  ===========
Earnings per share
    Basic                                         $      0.35  $      0.39
                                                  ===========  ===========
    Diluted                                       $      0.35  $      0.39
                                                  ===========  ===========
Weighted average shares outstanding
    Basic                                              20,719       20,666
                                                  ===========  ===========
    Diluted                                            20,743       20,691
                                                  ===========  ===========
Dividends per share of common stock               $    0.2925  $    0.2900
                                                  -----------  -----------
CALIFORNIA WATER SERVICE GROUP
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Unaudited
(In thousands, except per share data)
For the Twelve-Months ended:
                                                  December 31  December 31
                                                      2008         2007
                                                  -----------  -----------
Operating revenue                                 $   410,312  $   367,082
                                                  -----------  -----------
Operating expenses:
    Water production costs                            146,564      138,883
    Other operations                                  110,625      100,572
    Maintenance                                        18,969       18,336
    Depreciation and amortization                      37,339       33,563
    Income taxes                                       24,507       17,887
    Property and other taxes                           14,839       13,671
                                                  -----------  -----------
        Total operating expenses                      352,843      322,912
                                                  -----------  -----------
        Net operating income                           57,469       44,170
                                                  -----------  -----------
Other income and expenses:
    Non-regulated revenue                              14,230       13,557
    Non-regulated expenses                            (15,097)      (9,114)
    Gain on sale of non-utility property                    7        2,516
    Less: income taxes on other income and
     expenses                                             376       (2,836)
                                                  -----------  -----------
                                                         (484)       4,123
                                                  -----------  -----------
Interest expense:
    Interest Expense                                   20,591       19,719
    Less: capitalized interest                         (3,411)      (2,585)
                                                  -----------  -----------
        Net interest expense                           17,180       17,134
                                                  -----------  -----------
Net income                                        $    39,805  $    31,159
                                                  ===========  ===========
Earnings per share
    Basic                                         $      1.90  $      1.50
                                                  ===========  ===========
    Diluted                                       $      1.90  $      1.50
                                                  ===========  ===========
Weighted average shares outstanding
    Basic                                              20,710       20,665
                                                  ===========  ===========
    Diluted                                            20,734       20,689
                                                  ===========  ===========
Dividends per share of common stock               $    1.1700  $    1.1600
                                                  -----------  -----------

Contact:
Martin A. Kropelnicki
(408) 367-8200 (analysts)

Shannon Dean
(310) 257-1435 (media)

1720 North First Street
San Jose, CA 95112-4598

SOURCE: California Water Service Group