Revenues increased by $11.1 million, or 11%, to $116.7 million, with rate increases adding $19.2 million and water usage by new customers adding $3.4 million. These increases were offset by a decrease in water usage by existing customers and other charges totaling $11.1 million. The combined net effect of the water revenue adjustment mechanism (WRAM) and modified cost balancing account (MCBA) was a $0.4 million decrease in revenue. The WRAM is a ratemaking mechanism that decouples water sales from revenues and the MCBA is an account that allows Cal Water to track and recover or refund changes in water production costs.

Total operating expenses for the second quarter of 2009 increased by $9.6 million to $100.7 million. Water production costs increased by $1.4 million due to higher power costs and wholesale water rates. Administrative costs increased $5.6 million, due primarily to increases in pension, health, and legal expenses. Other operations expenses increased $1.6 million to $14.3 million, as a result of increases in costs of pumping and distributing water.

Fewer water system repairs resulted in a $0.6 million decrease in maintenance expense, which was $4.3 million for the quarter. Depreciation expense increased $1.0 million to $10.3 million as a result of increases in capital expenditures. Taxes other than income increased $0.4 million to $3.9 million.

Other income, net of income taxes, increased $1.1 million to $1.5 million. Interest expense increased $0.6 million to $5.3 million due to a new debt offering in April 2009.

For the twelve months ended June 30, 2009, net income was $44.0 million and dilutive earnings per share were $2.11, compared to net income of $32.2 million and dilutive earnings per share of $1.55 for the same period in the prior year. Revenues for the trailing twelve months were $435.1 million, compared to $378.2 million for the same period last year.

"The most important factor in our financial performance continues to be our ability to recover prudently incurred costs in rates, and our second quarter results were positively affected by our approved rates in the 2007 General Rate Case filing," said President and Chief Executive Officer Peter C. Nelson.

"We also believe that the WRAM and MCBA are working effectively to facilitate water conservation and efficiency programs," Nelson said.

Rate-Related Matters

On July 2, 2009, Cal Water filed a General Rate Case with the California Public Utility Commission for all California operations, beginning an 18-month review process. The filing requests an additional $70.6 million in 2011, followed by increases of $24.8 million in 2012 and 2013. The increased revenues are to cover expense increases and capital projects for 2011 through 2013. The Company cannot predict at this time the rate change the Commission will order in 2011.

Interim rate increases, which are typically allowed in the second and third years following a General Rate Case, became effective on July 23, 2009 for 11 California Districts, which will add $9 million to annual revenues.

Acquisitions and New Business

In the second quarter of 2009, Cal Water received final approval from the California Public Utilities Commission on its acquisition of the Skyline County Water District, a 465-connection system adjacent to Cal Water's Bear Gulch District.

Other Information

All stockholders and interested investors are invited to listen to the 2009 second quarter conference call on July 30, 2009, at 11:00 a.m. (EDT), by dialing 1-866-871-4881 and keying in ID# 1369368. A replay of the call will be available from 2:00 p.m. (EDT) July 30, 2009, through September 28, 2009, at 1-888-266-2081, ID# 1369368. The call, which will be hosted by President and CEO, Peter Nelson and Controller and Assistant Treasurer, Calvin L. Breed, 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)               June 30,   December 31,                                                       2009         2008                                                   -----------  ----------- ASSETS Utility plant:      Utility plant                                $ 1,638,356  $ 1,583,079      Less accumulated depreciation and       amortization                                   (492,989)    (470,712)                                                   -----------  -----------           Net utility plant                         1,145,367    1,112,367                                                   -----------  ----------- Current assets:      Cash and cash equivalents                         41,498       13,869      Receivables           Customers                                    26,613       22,786           Other                                        20,299       12,071      Unbilled revenue                                  20,273       13,112      Materials and supplies at average cost             5,244        5,070      Taxes, prepaid expense, and other assets          10,565       12,890                                                   -----------  -----------           Total current assets                        124,492       79,798                                                   -----------  ----------- Other assets:      Regulatory assets                                198,064      198,293      Goodwill                                           3,906        3,906      Other assets                                      31,411       23,743                                                   -----------  -----------           Total other assets                          233,381      225,942                                                   -----------  -----------                                                   $ 1,503,240  $ 1,418,107                                                   ===========  =========== CAPITALIZATION AND LIABILITIES Capitalization:      Common stock, $.01 par value                 $       207  $       207      Additional paid-in capital                       214,451      213,922      Retained earnings                                191,098      188,820                                                   -----------  -----------           Total common stockholders' equity           405,756      402,949      Preferred stock                                        -            -      Long-term debt, less current maturities          383,500      287,498                                                   -----------  -----------           Total capitalization                        789,256      690,447                                                   -----------  ----------- Current liabilities:      Current maturities of long-term debt               2,664        2,818      Accounts payable                                  48,344       41,772      Notes payable                                     12,000       40,000      Accrued expenses and other liabilities            38,202       38,606                                                   -----------  -----------           Total current liabilities                   101,210      123,196 Unamortized investment tax credits                      2,392        2,392 Deferred income taxes, net                             76,008       72,344 Regulatory liability and Other                         83,282       83,312 Pension and postretirement benefits other than  pensions                                             152,468      152,685 Advances for construction                             179,566      176,163 Contributions in aid of construction                  119,058      117,568 Commitments and contingencies                                                   -----------  -----------                                                   $ 1,503,240  $ 1,418,107                                                   ===========  =========== CALIFORNIA WATER SERVICE GROUP CONDENSED CONSOLIDATED STATEMENTS OF INCOME Unaudited (In thousands, except per share data) For the Three-Months ended:                                                       June 30,   June 30,                                                         2009       2008                                                       ---------  --------- Operating revenue                                     $ 116,667  $ 105,581                                                       ---------  --------- Operating expenses:     Water production costs                               41,702     40,349     Admistrative and General                             19,385     13,835     Other operations                                     14,331     12,766     Maintenance                                           4,313      4,947     Depreciation and amortization                        10,282      9,276     Income taxes                                          6,789      6,442     Property and other taxes                              3,911      3,484                                                       ---------  ---------         Total operating expenses                        100,713     91,099                                                       ---------  ---------         Net operating income                             15,954     14,482                                                       ---------  --------- Other income and expenses:     Non-regulated revenue                                 3,098     (2,905)     Non-regulated expenses                                 (720)     3,036     Gain on sale of non-utility property                     72          7     Less: income taxes on other income and expenses        (993)      (219)                                                       ---------  ---------                                                           1,457        (81)                                                       ---------  --------- Interest expense:     Interest Expense                                      5,961      5,157     Less: capitalized interest                             (640)      (439)                                                       ---------  ---------         Net interest expense                              5,321      4,718                                                       ---------  --------- Net income                                            $  12,090  $  10,116                                                       =========  ========= Earnings per share     Basic                                             $    0.58  $    0.48                                                       =========  =========     Diluted                                           $    0.58  $    0.48                                                       =========  ========= Weighted average shares outstanding     Basic                                                20,745     20,717                                                       =========  =========     Diluted                                              20,767     20,741                                                       =========  ========= Dividends per share of common stock                   $  0.2950  $  0.2925                                                       =========  ========= CALIFORNIA WATER SERVICE GROUP CONDENSED CONSOLIDATED STATEMENTS OF INCOME Unaudited (In thousands, except per share data) For the Six-Months ended:                                                       June 30,   June 30,                                                         2009       2008                                                       ---------  --------- Operating revenue                                     $ 203,280  $ 178,502                                                       ---------  --------- Operating expenses:     Water production costs                               70,570     65,707     Admistrative and General                             38,247     27,253     Other operations                                     26,786     24,831     Maintenance                                           8,947      9,060     Depreciation and amortization                        20,480     18,498     Income taxes                                          8,021      6,616     Property and other taxes                              7,999      7,223                                                       ---------  ---------         Total operating expenses                        181,050    159,188                                                       ---------  ---------         Net operating income                             22,230     19,314                                                       ---------  --------- Other income and expenses:     Non-regulated revenue                                 5,979      4,601     Non-regulated expenses                               (3,362)    (4,168)     Gain on sale of non-utility property                    675          7     Less: income taxes on other income and expenses      (1,330)      (170)                                                       ---------  ---------                                                           1,962        270                                                       ---------  --------- Interest expense:     Interest Expense                                     11,000     10,171     Less: capitalized interest                           (1,319)      (889)                                                       ---------  ---------         Net interest expense                              9,681      9,282                                                       ---------  --------- Net income                                            $  14,511  $  10,302                                                       =========  ========= Earnings per share     Basic                                             $    0.70  $    0.49                                                       =========  =========     Diluted                                           $    0.70  $    0.49                                                       =========  ========= Weighted average shares outstanding     Basic                                                20,738     20,702                                                       =========  =========     Diluted                                              20,763     20,726                                                       =========  ========= Dividends per share of common stock                   $  0.5900  $  0.5850                                                       =========  ========= 

 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

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