Press Release

California Water Service Group Announces Revenues and Earnings for Year-End and 4th Quarter 2010

SAN JOSE, CA, Feb 23, 2011 (MARKETWIRE via COMTEX) --

California Water Service Group (NYSE: CWT) today announced 2010 net income of $37.7 million, down 7.2% or $2.9 million from 2009, and diluted earnings per share of $1.81, a decrease of 7.4% or $0.14 per share over the prior year.

Total revenue increased $11.0 million, or 2.5%, to $460.4 million in 2010. The net effect of the water revenue adjustment mechanism (WRAM) and the modified cost balancing account (MCBA) for the year was an additional $18.5 million in revenue, a $6.5 million increase over 2009. 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), a wholly owned subsidiary of California Water Service Group, to track and recover or refund changes in water production costs. Both the WRAM and the MCBA are designed to allow Cal Water to promote water efficiency and conservation.

Total operating expenses increased $7.3 million, or 1.9%, to $398.6 million in 2010. Water production costs were $164.1 million, up $4.6 million or 2.9%, primarily due to increased purchased water costs, partially offset by lower water usage. Administrative and general costs were flat at $75.3 million. Other operations expense was $56.5 million, down slightly from 2009.

Maintenance expense increased $1.1 million, or 6.2%, to $19.7 million due to additional expenditures for water main repairs. Depreciation increased $3.1 million, or 7.7%, to $42.8 million for the year due to increases in utility plant.

Net interest expense increased $5.1 million, or 23.7%, to $26.4 million, while income tax decreased $2.8 million, or 10.3%, to $24.6 million, due to the lower pretax income.

"2010 was a challenging year because it was the last year in our transition to a three-year rate case cycle in California. As such, about one-third of the districts in which the Company operates had gone more than four years since the last General Rate Case. Accordingly, we took many significant steps to continue to improve our operating efficiency and minimize operating cost increases. While we had minimal rate relief during the year, the Company managed to hold the line on administrative and general costs and other operations expenses," said President and Chief Executive Officer Peter C. Nelson.

"We predicted that 2010 would be a challenging year, but we believe we have taken necessary steps to position the Company well for 2011, when new rates from our 2009 General Rate Case for California have become effective," Nelson said.

Fourth Quarter 2010 Results

For the fourth quarter of 2010, net income was $4.9 million, down 24.5% or $1.6 million from net income of $6.5 million in the fourth quarter of 2009, and diluted earnings per common share were $0.23, a decrease of 25.8% from $0.31 per common share for the same period last year.

Revenue for the fourth quarter decreased to $105.5 million, down 1.4% or $1.5 million from the same period last year. The net effect of the WRAM and the MCBA for the fourth quarter 2010 resulted in a decrease of $2.9 million in revenue from the $5.2 million recorded in fourth quarter of 2009.

Total operating expenses for the quarter were $93.5 million, a decrease of 1.7% or $1.6 million over operating expenses in the same period last year. Water production costs were down $2.8 million, or 7.1%, to $37.2 million, due to decreases in production. Administrative and general costs increased $3.6 million, or 20.4%, to $21.6 million, primarily due to increased benefit expenses and other costs. Other operations expense decreased $1.8 million, or 12.1%, to $13.3 million.

Maintenance expense decreased approximately $0.5 million, or 8.9%, to $4.7 million. Depreciation expense increased $1.4 million, or 15.8%, to $10.5 million due to increases in utility plant.

Regulatory Update for 2010

In December 2010, the California Public Utilities Commission (CPUC) approved the Company's 2009 General Rate Case, authorizing an additional $25 million to annual gross revenues and an additional $8 million in gross revenues that may be obtained when certain capital projects are completed. The next statewide General Rate Case for the Company will be filed in 2012.

On January 25, 2011, California Governor Jerry Brown appointed two new commissioners, Catherine Sandoval and Mike Florio. The Company looks forward to working with the new commissioners and their colleagues at the CPUC to continue implementing the Commission's Water Action Plan, which sets forth clear direction on best practices in water utility regulation.

Other Information

All stockholders and interested investors are invited to listen to the 2010 year-end and fourth quarter conference call on February 24, 2011 at 8:00 a.m. PST (11:00 a.m. EST) by dialing 1-866-244-4637 and keying in ID #1508018. A replay of the call will be available from 11:00 a.m. PST (2:00 p.m. EST) on February 24, 2011 through April 25, 2011, at 1-888-266-2081, ID #1508018. 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. California Water Service 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,
                                                      2010         2009
                                                  -----------  -----------
ASSETS
Utility plant:
     Utility plant                                $ 1,843,766  $ 1,709,062
     Less accumulated depreciation and
      amortization                                   (549,469)    (510,985)
                                                  -----------  -----------
          Net utility plant                         1,294,297    1,198,077
                                                  -----------  -----------
Current assets:
     Cash and cash equivalents                         42,277        9,866
     Receivables
          Customers                                    25,813       25,567
          Regulatory balancing accounts                14,784       10,513
          Other                                         5,386        9,043
     Unbilled revenue                                  13,925       13,417
     Materials and supplies at average cost             6,058        5,530
     Taxes, prepaid expense, and other assets          17,967       18,305
                                                  -----------  -----------
          Total current assets                        126,210       92,241
                                                  -----------  -----------
Other assets:
     Regulatory assets                                229,577      204,104
     Goodwill                                           2,615        2,615
     Other assets                                      39,367       28,544
                                                  -----------  -----------
          Total other assets                          271,559      235,263
                                                  -----------  -----------
                                                  $ 1,692,066  $ 1,525,581
                                                  ===========  ===========
CAPITALIZATION AND LIABILITIES
Capitalization:
     Common stock, $.01 par value                 $       208  $       208
     Additional paid-in capital                       217,517      215,528
     Retained earnings                                217,801      204,898
                                                  -----------  -----------
          Total common stockholders' equity           435,526      420,634
     Long-term debt, less current maturities          479,181      374,269
                                                  -----------  -----------
          Total capitalization                        914,707      794,903
                                                  -----------  -----------
Current liabilities:
     Current maturities of long-term debt               2,380       12,953
     Short-term borrowings                             23,750       12,000
     Accounts payable
          Trade and other                              39,505       43,689
          Regulatory balancing accounts                 3,025        2,430
     Accrued interest                                   4,651        4,258
     Accrued expenses and other liabilities            34,037       35,028
                                                  -----------  -----------
          Total current liabilities                   107,348      110,358
Unamortized investment tax credits                      2,244        2,318
Deferred income taxes, net                            107,084       91,851
Pension and postretirement benefits other than
 pensions                                             155,224      137,127
Regulatory liability and Other                         47,761       51,405
Advances for construction                             186,899      185,027
Contributions in aid of construction                  136,356      118,217
MTBE Settlement                                        34,443       34,375
                                                  -----------  -----------
                                                  $ 1,692,066  $ 1,525,581
                                                  -----------  -----------
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,
                                                  2010           2009
                                              -------------  -------------
Operating revenue                             $     105,457  $     106,926
                                              -------------  -------------
Operating expenses:
    Operations:
        Water production costs                       37,184         40,015
        Admistrative and general                     21,558         17,912
        Other operations                             13,315         15,152
    Maintenance                                       4,723          5,185
    Depreciation and amortization                    10,464          9,039
    Income taxes                                      1,744          3,375
    Property and other taxes                          4,558          4,451
                                              -------------  -------------
        Total operating expenses                     93,546         95,129
                                              -------------  -------------
        Net operating income                         11,911         11,797
                                              -------------  -------------
Other income and expenses:
    Non-regulated revenue                             5,030          7,017
    Non-regulated expenses                           (2,861)        (5,626)
    Loss on sale of non-utility property                (11)          (114)
    Income taxes on other income and expenses          (873)          (519)
                                              -------------  -------------
                                                      1,285            758
                                              -------------  -------------
Interest expense:
    Interest Expense                                  7,550          6,915
    Capitalized interest                                775           (811)
                                              -------------  -------------
        Net interest expense                          8,325          6,104
                                              -------------  -------------
Net income                                    $       4,871  $       6,451
                                              =============  =============
Earnings per share
    Basic                                     $        0.23  $        0.31
                                              =============  =============
    Diluted                                   $        0.23  $        0.31
                                              =============  =============
Weighted average shares outstanding
    Basic                                            20,832         20,758
                                              =============  =============
    Diluted                                          20,840         20,776
                                              =============  =============
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 Twelve-Months ended:
                                              December 31,   December 31,
                                                  2010           2009
                                              -------------  -------------
Operating revenue                             $     460,399  $     449,372
                                              -------------  -------------
Operating expenses:
    Operations:
        Water production costs                      164,107        159,484
        Admistrative and general                     75,276         75,243
        Other operations                             56,518         56,577
    Maintenance                                      19,685         18,537
    Depreciation and amortization                    42,828         39,778
    Income taxes                                     23,069         24,812
    Property and other taxes                         17,103         16,822
                                              -------------  -------------
        Total operating expenses                    398,586        391,253
                                              -------------  -------------
        Net operating income                         61,813         58,119
                                              -------------  -------------
Other income and expenses:
    Non-regulated revenue                            15,993         18,190
    Non-regulated expenses                          (12,312)       (12,452)
    Gain on sale of non-utility property                 22            560
    Income taxes on other income and expenses        (1,487)        (2,550)
                                              -------------  -------------
                                                      2,216          3,748
                                              -------------  -------------
Interest expense:
    Interest Expense                                 27,936         24,394
    Less: capitalized interest                       (1,563)        (3,081)
                                              -------------  -------------
        Net interest expense                         26,373         21,313
                                              -------------  -------------
Net income                                    $      37,656  $      40,554
                                              =============  =============
Earnings per share
    Basic                                     $        1.81  $        1.95
                                              =============  =============
    Diluted                                   $        1.81  $        1.95
                                              =============  =============
Weighted average shares outstanding
    Basic                                            20,806         20,745
                                              =============  =============
    Diluted                                          20,819         20,766
                                              =============  =============
Dividends per share of common stock           $      1.1900  $      1.1800
                                              -------------  -------------

1720 North First Street

San Jose, CA 95112-4598


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

SOURCE: California Water Service Group