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behind the scenes.
2006 Annual Report
California Water Service Group
1720 North First Street
San Jose, California 95112-4598
(408) 367-8200
www.calwatergroup.com
NYSE: CWT
N
E W M EX
I
C
O
financial highlights
Year ended December 31 2006 2005 2004 2003 2002
Market price at year-end $ 40.40 $ 38.23 $ 37.65 $ 27.40 $ 23.65
Book value 18.31 15.98 15.66 14.44 13.12
Earnings per share (diluted) 1.34 1.47 1.46 1.21 1.25
Dividends per share 1.150 1.140 1.130 1.125 1.120
Revenue 334,717 320,728 315,567 277,128 263,151
Net income 25,580 27,223 26,026 19,417 19,073
company over view
California Water Service Group (NYSE: CWT) is the second largest investor-owned water
utility in the United States, providing high-quality water utility services to more than 2 million
people in 100 communities through five subsidiaries: California Water Service Company
(Cal Water), Hawaii Water Service Company, Inc. (Hawaii Water), New Mexico Water Service
Company (New Mexico Water), Washington Water Service Company (Washington Water),
and CWS Utility Services (Utility Services). Cal Water, Hawaii Water, New Mexico Water,
and Washington Water provide regulated water utility services, while Utility Services
conducts the Company’s non-regulated business, which includes providing billing, water
quality testing, and water system operations and management services to cities and
other companies.
Table of Contents
Behind the Scenes Editorial 1
20 -Year Return on Investment 2
Letter to Stockholders 24
Ten-Year Financial Review 32
Customer Service Areas 34
Service Area Map 35
Board of Directors 36
Corporate Officers 38
corporate information
corporate information
Stock Transfer, Dividend Disbursing, and Reinvestment Agent
Stock Transfer, Dividend Disbursing, and Reinvestment Agent
American Stock Transfer and Trust Company
American Stock Transfer and Trust Company
57 Maiden Lane
57 Maiden Lane
New York, NY 10038
New York, NY 10038
(800) 937-5449
(800) 937-5449
To Transfer Stock
To Transfer Stock
A change of ownership of shares (such as when stock is sold or gifted or when owners are deleted from or
A change of ownership of shares (such as when stock is sold or gifted or when owners are deleted from or
added to stock certificates) requires a transfer of stock. To transfer stock, the owner must complete the assign-
added to stock certificates) requires a transfer of stock. To transfer stock, the owner must complete the assign-
ment on the back of the certificate and sign it exactly as his or her name appears on the front. This signature
ment on the back of the certificate and sign it exactly as his or her name appears on the front. This signature
must be guaranteed by an eligible guarantor institution (banks, stock brokers, savings and loan associations
must be guaranteed by an eligible guarantor institution (banks, stock brokers, savings and loan associations
and credit unions with membership in approved signature medallion programs) pursuant to SEC Rule 17Ad-15.
and credit unions with membership in approved signature medallion programs) pursuant to SEC Rule 17Ad-15.
A notary’s acknowledgement is not acceptable. This certificate should then be sent to American Stock Transfer
A notary’s acknowledgement is not acceptable. This certificate should then be sent to American Stock Transfer
and Trust Company, by registered or certified mail with complete transfer instructions.
and Trust Company, by registered or certified mail with complete transfer instructions.
Bond Registrar
Bond Registrar
US Bank Trust, N.A.
US Bank Trust, N.A.
One California Street
One California Street
San Francisco, CA 94111-5402
San Francisco, CA 94111-5402
(415) 273-4580
(415) 273-4580
Executive Office
Executive Office
California Water Service Group
California Water Service Group
1720 North First Street
1720 North First Street
San Jose, CA 95112-4598
San Jose, CA 95112-4598
(408) 367-8200
(408) 367-8200
Annual Meeting
Annual Meeting
The Annual Meeting of Stockholders will be held on Wednesday, April 25, 2007 at 9:30 a.m. at the Company’s
The Annual Meeting of Stockholders will be held on Wednesday, April 25, 2007 at 9:30 a.m. at the Company’s
Executive Office, located at 1720 North First Street in San Jose, California. Details of the business to be
Executive Office, located at 1720 North First Street in San Jose, California. Details of the business to be
transacted during the meeting will be contained in the proxy material, which will be mailed to stockholders on
transacted during the meeting will be contained in the proxy material, which will be mailed to stockholders on
or about March 23, 2007.
or about March 23, 2007.
Dividend Dates For 2007
Dividend Dates For 2007
Quarter Declaration Record Date Payment Date
Quarter Declaration Record Date Payment Date
First January 24 February 5 February 16
First January 24 February 5 February 16
Second April 25 May 7 May 18
Second April 25 May 7 May 18
Third July 25 August 6 August 17
Third July 25 August 6 August 17
Fourth October 24 November 5 November 16
Fourth October 24 November 5 November 16
Annual Report For 2006 On Form 10-K
Annual Report For 2006 On Form 10-K
A copy of the Company’s report for 2006 filed with the Securities and Exchange Commission (SEC) on Form 10-K
A copy of the Company’s report for 2006 filed with the Securities and Exchange Commission (SEC) on Form 10-K
will be available in March 2007 and can be obtained by any stockholder at no charge upon written request to
will be available in March 2007 and can be obtained by any stockholder at no charge upon written request to
the address below. The Company’s filings with the SEC can be viewed via the link to the SEC’s EDGAR system
the address below. The Company’s filings with the SEC can be viewed via the link to the SEC’s EDGAR system
on the Company’s web site.
on the Company’s web site.
Stockholder Information
Stockholder Information
California Water Service Group
California Water Service Group
Attn: Stockholder Relations
Attn: Stockholder Relations
1720 North First Street
1720 North First Street
San Jose, CA 95112-4598
San Jose, CA 95112-4598
(408) 367-8200 or (800) 750-8200
(408) 367-8200 or (800) 750-8200
http://www.calwatergroup.com
http://www.calwatergroup.com
Water – it’s life’s key
ingredient, but often,
we take it for granted.
This year, we take you
behind the scenes to
see what it takes to
ensure that customers
have a reliable supply
of high-quality water,
24 hours per day,
7 days per week.
Behind the Scenes / 1
CWT 20-year total return on investment
(On Stock Purchased December 31, 1986, with Dividends Reinvested)
$1000
$900
$800
$700
$600
$500
$400
$300
$200
$100
$0
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
You’ll see that water
does not magically
appear at the turn of
a faucet; it is delivered
through a carefully
planned and well-
maintained system,
after being collected,
treated, tested, and
delivered by our team
of dedicated, industry-
leading professionals.
Behind the Scenes / 2 & 3
6:14a.m.
You are
awakened from a deep
Behind the Scenes / 4 & 5
sleep by your radio
alarm clock. After tap-
ping the “snooze” button
a few times, you shuffl e
into the bathroom and
turn on the shower.
There, under the spray
of hot water, you begin
to feel ready to face
the day – just as soon
as you’ve had your
morning coffee.
Meanwhile, at 6:14 a.m., Cal Water employee Dave Kirsling turns a valve at the outlet structure of the Bear Gulch
reservoir, the collection point for water that accumulates in the Company’s 1,300-acre watershed and fl ows to the
reservoir through the Bear Gulch Creek. After being released from the reservoir, the water is sent to the treatment
plant, where it goes through a multi-barrier treatment process that culminates with exposure to ultraviolet light. It is
one of the fi rst and largest drinking water treatment plants using this technology in California, and because it’s there,
you can savor that morning shower – and cup of coffee – with the assurance that your water meets stringent state and
federal water quality standards.
Behind the Scenes / 6 & 7
9:08a.m.You volunteered
Behind the Scenes / 8 & 9
to take a vacation
to look after the kids
during their spring
break from school, but
you realize that after
the week is over, you’re
going to need another
week off to recover.
As you make your way
through bedrooms pick-
ing clothes up off the
fl oor, you remember that your daughter has a soccer game this afternoon. You load the basket with her uniform, among
other things, and prepare to wash a load of laundry... At 9:08 a.m., Matt Menezes descends a ladder to inspect a new
storage tank before it is fi lled with water. Company-wide, we have 520 tanks that can store a total of 267 million gallons
of water, enough water to fi ll the Rose Bowl to the rim more than three times. At a capacity of 165,000 gallons, this one
is relatively small, but it is equipped with a new check-valve system that promotes circulation of the water, which in turn
enhances water quality. Investing in new tanks, and maintaining existing ones, enables us to store water for delivery
during times of day when customer usage peaks. It also provides an emergency supply that can be used to fi ght fi res or
continue providing water if a power outage affects the operation of our wells and pumps. That means when you hit the
“start” button on your washing machine, you know that you’ll have a clean soccer uniform ready in time for the game,
no matter what time of day it is.
Behind the Scenes / 10 & 11
11:47a.m. This morning
Behind the Scenes / 12 & 13
your grandson called
to remind you of the
date –as if you needed
a reminder. It is his
eighth birthday, and
he wants to be sure
you are making your
“special cake.” Of
course you are, you tell
him. After you hang up,
you laugh, tickled that he is so enamored with your “special cake”-- a simple cake mix (just add water and eggs) topped
with plenty of frosting and colored sprinkles... At 11:47 a.m., Darlene Hudler analyzes a water sample at the Company’s
state-certifi ed water quality laboratory. She is part of the team of chemists and microbiologists responsible for testing
more than 70,000 water samples each year for 310,000 compounds. Here, in the “inorganic section” of the laboratory,
chemists use various methods, and a quarter-of-a-million-dollar Inductive Coupled Plasma Mass Spectrophotometer, to
test the water for elements such as iron. Of course, you don’t want to think about elements like iron. But because we
do, you can feel comfortable giving your grandson, and his friends, seconds of your “special cake.”
Behind the Scenes / 14 & 15
5:12p.m.
You sip a
Behind the Scenes / 16 & 17
glass of iced tea as
you sit on the patio and
watch the kids play tag
in the soft, green grass.
You think about the fact
that so many of your
family’s best memories–of summer picnics, Easter egg hunts, and even a small wedding–were made in this backyard.
It’s your little refuge from the world, and you can’t imagine your family living without it... At 5:12 p.m., Lenny Carrasco
checks the calibration of the Supervisory Control and Data Acquisition program, which is used to monitor and control
the water system remotely via laptop computers. Moving water from the source to the customer requires large, power-
ful pumps. The ones that Lenny is checking are equipped with a unique variable-frequency drive, which causes them
to speed up or slow down automatically based on customer demand. This ensures that customers receive steady,
consistent water pressure. Why should this matter? Because it helps ensure that the farthest corners of your lawn will
get water, even if you turn the sprinklers on at the same time as everybody else in your neighborhood.
Behind the Scenes / 18 & 19
10:52p.m.
You are
tucked in and ready for
Behind the Scenes / 20 & 21
a good night’s sleep.
You take a drink of
water from the glass
on your nightstand and
turn off your reading
lamp. Unfortunately,
you can’t turn off your
mind. So your thoughts
drift to the work project
you’ve put off, your kid’s chemistry grade, and your inability to remember the name of a particular song that played
at your high school prom. One thing that doesn’t keep you awake is concern about your water... At 10:52 p.m., Sean
Cabuag checks water quality after making an emergency repair to the water system. Throughout the company, we have
professionals standing by, ready to respond to after-hours emergency calls. So if a customer needs us to investigate a
leak, a water quality concern, a change in water pressure, or any other urgent matter in the middle of the night, we are
ready. And now, we also offer an optional, non-regulated service called Extended Service Protection, through which we
make repairs to the customer’s water line from the meter to the house. It’s just one more way that we provide customers
peace of mind, ensuring that they don’t lose sleep worrying about their water.
Behind the Scenes / 22 & 23
to our stockholders
For decades, the water utility industry referred to itself as the “silent service.”
We went about our business ---securing water supplies, planning and build-
ing infrastructure, treating and testing the water for quality, and delivering
it to our customers --- without much fanfare. The result of this low-profi le ap-
proach is that many of our customers have little idea how valuable our ser-
vices are. Water costs a fraction of a penny per gallon, a unit price that is con-
siderably lower than those of other necessities, such as food, gasoline, and
other utilities, and about one thousand times lower than the cost of bottled
water. In fact, water rates in the United States are among the lowest in the world.
And yet, what could be more important, more valuable, than water? As reporter
Michael Specter wrote in the October 2006 issue of the New Yorker magazine,
“It is a fact of the human condition that we can achieve none of our goals without
water.” Although water may continue to be a bargain, it need not be under-
valued. That is why we have invited you behind the scenes, to see for yourself
what it takes to provide high-quality, reliable water service to our customers.
As a stockholder, you play an important role by investing
in the infrastructure that is essential to providing life’s key
ingredient, 24 hours per day, seven days per week.
11:00 a.m. A stockholder retrieves her mail and fi nds a
dividend check from California Water Service Group. At
the same time, our team is making strategic decisions to
increase the value of that stockholder’s investment.
Financial Results
The total return on your investment in California Water
Ser vice Group increased nearly 9% in 2006, as annual
dividends increased for the 39th consecutive year
to $1.15 per share (at a yield of approximately 3%)
6.28%
Five-year
compound annual
growth rate
Left to right:
Peter C. Nelson,
President and Chief Executive Offi cer
Robert W. Foy,
Chairman of the Board
and stock price rose 6% to $40.40 per share as of
December 31, 2006.
Earnings per share were $1.34 and net income was
$25.6 million, compared to earnings per share of $1.47
and net income of $27.2 million for 2005. Revenues
were up 4% to $334.7 million, with rate increases
adding $10.1 million to 2006 revenues, sales to new
customers adding $3.1 million, and sales to existing
customers adding $0.8 million. Decreases in earn-
ings and net income were due in part to the impacts
of wet weather in the fi rst six months of the year and
the issuance of 2.25 million shares of stock in 2006.
Additionally, we experienced expense increases in
several categories.
Stockholder Letter / 24 & 25
1.120
1.125
1.130
1.140
1.150
2:00 p.m. A new homeowner turns on a faucet and fi nds
that his water service has been started, just as Cal
Water’s professional customer service representative
said it would. Meanwhile, employees throughout the
Company are executing a four-pronged strategy that will
positively affect that homeowner for years to come.
Our Four-pronged Strategy For 2007 And Beyond
2002
2003
2004
2005
2006
1. Intense Focus on Regulatory Matters
Five-Year Dividend Growth
The Water Action Plan is truly a milestone for our industry,
because it sets the course for future water regulation
and formally establishes the California Public Utilities
Commission’s commitment to fair and balanced policy-
making. Supporting four key principles—safe, high-
quality water; highly reliable water supplies; effi cient
The California Public Utilities Commission sets customer
use of water; and reasonable rates and viable water
rates in each of our 24 service areas on a staggered
utilities—the Plan refl ects the best practices of utilities
basis once every three years. As a result, under current
commissions across the country. More importantly, in
regulatory rules, prudently incurred and reasonable in-
2006, the Commission made several decisions that
creases in certain expenses, such as those associated
clearly demonstrated its commitment to implementing
with employee health and welfare plans and mandatory
the Plan:
compliance with Sarbanes-Oxley (SOX) requirements,
take several years to be fully refl ected in rates. This
• The Commission repealed W-1, the decision that pre-
delay, known in the utility industry as “regulatory lag,”
cluded California water utilities from recovering certain
affected 2006 results. The good news is that we believe
prudently incurred expenses in rates.
that this type of expense increase will be recovered in
future years in a timelier manner, thanks to the California
• It issued the “Order Instituting Rulemaking on
Public Utilities Commission’s adoption of the Water
the General Rate Case Plan,” the goal of which is
Action Plan.
to streamline the process and reduce regulatory
plan to fi le General Rate Cases for all 24 California districts as well as the Company
headquarters in 2007, which, if approved, will allow company-wide expense
increases to be recovered in all service areas more quickly than they would if
they were phased-in in three-year rate case cycles.
• It accepted our application for a Revenue Adjustment Mechanism. If approved,
it will enable us to promote water conservation more effectively and lessen the short-
term impacts of conservation and weather on our revenue.
• It approved a Rate Support Fund and a Low-Income Ratepayer Assistance pro-
gram to soften the impact of necessary water system improvement costs on
certain vulnerable customers.
Considering these positive developments, and the timely conclusion of the eight
General Rate Cases fi led in 2005 and approved in 2006, we are optimistic that
regulation in California will continue to improve. Going forward, we will continue
to work diligently to seek innovative solutions in support of the Commission’s
stated purpose of protecting customers’ best interests while ensuring the fi nan-
cial viability of the water utilities that serve them.
Our strategy has been, and will continue to be, predicated on the notion that the
two goals are not mutually exclusive; that is, we believe that we can and should
achieve excellence in customer service and provide value to our stockholders.
2. Continuing Emphasis on Customer Service and Water Quality
It is our focus on the customer that sets us apart. In 2006, we upgraded our
Customer Information System to enable our Customer Service Representatives
to serve customers better when they need assistance, and we implemented a
company-wide, advanced training program for Customer Service Representatives
to ensure that each has the skills and knowledge necessary to meet customers’
8.7%
total return
in
2006
Stockholder Letter / 26 & 27
needs the fi rst time they call. Results of customer surveys completed in 2006
indicate that we are on the right track, as 91.6% of respondents ranked our
overall service as “excellent or very good.”
In 2007, we will upgrade our electronic billing site and make it easier to navi-
gate. More customers than ever opted to pay their bills electronically in 2006,
and with the upgrade, we expect even greater participation. Other customer
service-related plans for 2007 include implementation of a new cash-handling
technology; provision of a new, no-fee credit card online payment option; and
introduction of a new customer service management training and develop-
ment program. These initiatives, combined with our ongoing commitment to the
Continuous Improvement approach to the business, will keep us at the forefront
in providing excellent customer service.
Providing high-quality water is an integral part of our service, and we con-
tinue to make customer health and safety our highest priority. In 2006,
our lab earned its annual accreditation from the Environmental Laboratory
Accreditation Program of the state of California, one of the toughest cer-
tifi cations to attain in the United States. Our Water Quality Department
also leads the industry in compliance planning, and it made great strides in
2006 in preparing to meet future standards, including the Groundwater Rule,
the Stage 2 Disinfectants/Disinfection By-Product Rule, the Long-Term 2
Enhanced Surface Water Treatment Rule, and the Unregulated Contaminant
Monitoring Rule 2.
It is our employees’ expertise and dedication that make us leaders in the in-
dustry, and they play a key role in protecting our service areas. We are happy to
report that in 2006, the City of Visalia decided after studying the issue that it
would not start its own water system to serve new developments, due largely to
its recognition of Cal Water’s expertise, resources, and performance record.
91.6%
ranked service
“excellent or
very good”
3. Disciplined Approach to Growth
Like all of our Central Valley service areas, our Visalia
District is experiencing high growth rates. In 2006, it
added 2,000 new customers. In total, we added 5,000
customers in existing service areas in 2006.
As for acquisitions, only one met our strict criteria
in 2006. In August, we completed the acquisition of
the assets of the Independent Utility Company, which
has added 400 metered connections 15 miles east of
Albuquerque, New Mexico. In 2007 and beyond, we
will continue to pursue quality systems that comple-
ment our core business and increase value for our
stockholders.
13.12
14.44
15.66
15.98
18.31
2002
2003
2004
2005
2006
Five-Year Book Value
On the non-regulated side of the business, our new
water line. I know if I had to pay for the repairs out of
Extended Service Protection (ESP) program was very
pocket, it would have been very expensive.”
well received. More customers than anticipated signed
up for this voluntary program, introduced throughout
Perhaps the most signifi cant source of growth in a reg-
California in 2006. For a monthly fee of $4.95, we
ulated utility such as ours is our investment in water
repair or replace the portion of the water line that is
system infrastructure. Because we earn a return on in-
the customer’s responsibility if it is damaged by tree
vested capital, our return grows when we invest more in
roots, age, earthquakes, or freezing temperatures. Not
improvements that benefi t our customers. In 2006, we
only does ESP add to non-regulated revenues, it also
spent $86 million on capital projects, including a new
provides a valuable service that customers truly appre-
treatment plant in Bakersfi eld, an arsenic standard com-
ciate. As one customer said of signing up, “I decided
pliance project in Stockton, and 10 new wells. Our capital
to err on the side of caution, because I was very re-
budget for 2007 is expected to exceed $80 million, and
cently widowed and there was also a very large tree in
an upward trend for 2008 and beyond is likely, as we
my front yard. I’m so glad I signed up for ESP; it helped
continue to replace aging infrastructure and enhance our
tremendously when that tree’s roots destroyed my
systems to meet new water quality standards.
Stockholder Letter / 28 & 29
696,988
759,498
800,305
862,731
941,475
2002
2003
2004
2005
2006
Five-Year Net Utility Plant
4. Prudent Fiscal Management
fund capital programs that are approved by our utilities
commissions provides a means by which our stockhold-
ers can earn a fair rate of return and helps improve fi -
nancial performance in future periods. As of December
31, we had $941 million in net utility plant assets, up
9% from 2005, and our market capitalization was $835
million, up from $703 million for the previous year.
Another key development in 2006 was the even greater
interest that we generated on Wall Street. During 2006,
three additional fi nancial fi rms initiated research cover-
age of our company, bringing our total to seven. Increas-
ing coverage of our company opens up new channels
through which we can communicate with retail and insti-
tutional investors; this ultimately assists us in improving
liquidity and ensuring that we have the means to raise
capital to fund our operations and provide the excellent
As is the case with each element of our strategy, pru-
service for which we are known.
dent fi scal management is a performance measure that
affects both customers and stockholders. Operating
At this minute, you are nearing the end of our letter.
effi ciently and using resources wisely ensures that we
And we are preparing to overcome any challenges that
continue to provide excellent service and high-quality
lay ahead.
water at reasonable rates while building long-term stock-
holder value.
Outlook For 2007 And Beyond
In 2006, we raised gross proceeds of $104.7 million by
The coming years will no doubt present challenges, in-
issuing 2.25 million shares of common stock and $20
cluding the time that it will take to fully implement the
million in long-term debt, a move that strengthened our
California Public Utilities Commission’s Water Action
balance sheet and enabled us to fund our capital invest-
Plan and recover higher expenses associated with health
ment programs. Prudently issuing equity to help
care, pensions, and Sarbanes-Oxley compliance.
We are confi dent that we are capable of overcoming challenges that arise. Next
year, we will seize the opportunity to fi le rate cases for every California operation,
and if we are successful, we will signifi cantly reduce the time it takes to fully
recover reasonable expense increases. We will pursue growth opportunities that
benefi t customers and add value to stockholders. We will continue to evaluate
and improve the way we do business to increase effi ciency. And we will remain
focused on our strategy, which has proven successful in both favorable and unfa-
vorable business climates.
Most importantly, we can take pride in the value of the services we provide,
services that you make possible as a stockholder in the company. As the largest
investor-owned water utility in the state, we stand to gain much from anticipated
improvements in California utility regulation. This, combined with our reputation
for providing excellent customer service, positions us well for future success.
We wish you the best in 2007 and thank you for your continued investment in
California Water Service Group.
Robert W. Foy
Chairman of the Board
Peter C. Nelson
President and Chief Executive Offi cer
Stockholder Letter / 30 & 31
ten-year fi nancial review
Dollars in thousands, except common share data
2006
2005
2004
Summary of Operations
Operating revenue
Residential
Business
Industrial
Public authorities
Other
Total operating revenue
Operating expenses
Interest expense, other income and expenses, net
Net income
Common Share Data
Earnings per share - diluted
Dividend declared
Dividend payout ratio
Book value
Market price at year-end
Common shares outstanding at year-end (in thousands)
Return on average common stockholders’ equity
Long-term debt interest coverage
Balance Sheet Data
Net utility plant
Utility plant expenditures (company- & developer-funded)
Total assets
Long-term debt including current portion
Capitalization ratios:
Common stockholders’ equity
Preferred stock
Long-term debt
Other Data
Water production (million gallons)
Wells and surface supply
Purchased
Total water production
Metered customers
Flat-rate customers
Customers at year-end, including Hawthorne
New customers added
Revenue per customer
Utility plant per customer
Employees at year-end
$ 232,811
60,366
16,286
15,728
9,526
334,717
294,411
14,726
25,580
$
$
$
1.34
1.150
86%
18.31
40.40
20,657
8.2%
3.17
$ 222,634
56,962
14,241
14,965
11,926
320,728
278,903
14,602
$ 27,223
$
$
1.47
1.140
78%
15.98
38.23
18,390
9.3%
3.61
$ 221,323
55,803
13,592
15,118
9,731
315,567
271,701
17,840
$ 26,026
$
$
1.46
1.130
77%
15.66
37.65
18,367
9.8%
3.38
$ 941,475
112,279
1,165,019
293,592
$ 862,731
94,517
996,945
275,275
$ 800,305
68,573
942,853
275,921
56.0%
0.5%
43.5%
51.4%
0.6%
48.0%
50.8%
0.6%
48.6%
70,677
62,790
133,467
407,762
76,131
483,893
4,892
692
2,778
869
$
68,162
64,028
132,190
402,191
76,810
479,001
5,846
670
2,578
840
$
72,279
66,760
139,039
395,286
77,869
473,155
6,733
667
2,418
837
$
2003
2002
2001
2000
1999
1998
1997
$ 194,903
49,666
11,255
12,789
8,515
277,128
233,996
23,716
$ 19,417
$
$
1.21
1.125
93%
14.44
27.40
16,932
9.1%
2.78
$ 184,894
46,404
11,043
12,706
8,104
263,151
232,404
11,674
$ 19,073
$
$
1.25
1.120
90%
13.12
23.65
15,182
9.7%
2.73
$ 173,823
44,944
9,907
11,860
6,286
246,820
221,116
10,739
$ 14,965
$
$
0.97
1.115
115%
12.95
25.75
15,182
7.6%
2.64
$ 171,234
44,211
11,014
11,609
6,738
244,806
211,610
13,233
$ 19,963
$
$
1.31
1.100
84%
13.13
27.00
15,146
10.1%
3.31
$ 163,681
41,246
12,695
10,898
6,417
234,937
201,890
11,076
$ 21,971
$
$
1.44
1.085
75%
12.89
30.31
15,094
11.5%
3.79
$ 150,491
38,854
10,150
9,654
5,777
214,926
183,245
11,821
$ 19,860
$
$
1.31
1.070
82%
12.49
31.31
15,015
10.8%
3.64
$ 158,210
40,520
10,376
11,173
4,886
225,165
188,020
11,388
25,757
$
$
$
1.71
1.055
62%
12.15
29.53
15,015
14.5%
4.37
$ 759,498
74,253
873,035
273,130
$ 696,988
88,361
798,478
251,365
$ 624,342
62,049
710,214
207,981
$ 582,782
37,161
666,605
189,979
$ 564,390
48,599
645,507
171,613
$ 538,741
41,061
613,143
152,674
$ 515,917
37,511
594,444
153,271
47.0%
0.7%
52.3%
44.0%
0.7%
55.3%
48.8%
0.9%
50.3%
51.1%
0.9%
48.0%
53.0%
0.9%
46.1%
54.6%
1.0%
44.4%
53.8%
1.0%
45.2%
68,416
63,264
131,680
387,579
78,843
466,422
7,434
594
2,313
813
$
69,414
62,811
132,223
380,087
78,901
458,988
8,561
579
2,182
802
$
65,283
61,343
126,626
371,281
79,146
450,427
6,081
552
2,020
783
$
65,408
62,237
127,645
366,242
78,104
444,346
5,219
554
1,916
797
$
65,144
58,618
123,762
361,235
77,892
439,127
6,727
539
1,851
790
$
57,482
54,661
112,143
354,832
77,568
432,400
4,383
500
1,768
759
$
63,736
59,646
123,382
350,139
77,878
428,017
4,719
529
1,694
752
$
10-Year Financial Review / 32 & 33
customer service areas*
District Name Including 2006 2005
California
Antelope Valley Fremont Valley, Lake Hughes, Lancaster & Leona Valley 1,400 1,400
Bakersfi eld 64,900 63,600
Bear Gulch Atherton, Woodside, Portola Valley & portions of Menlo Park 18,000 18,000
Chico Hamilton City 26,900 26,400
Dixon
2,900 2,900
Dominguez Carson & portions of Compton, Harbor City, Long Beach,
Los Angeles & Torrance 33,700 33,600
East Los Angeles City of Commerce 27,800 27,800
Hawthorne 6,200 6,100
Hermosa-Redondo Hermosa Beach, Redondo Beach & a portion of Torrance 26,200 26,100
Kern River Valley Bodfi sh, Kernville, Lakeland, Mountain Shadows, Onyx,
Squirrel Valley, South Lake & Wofford Heights 4,300 4,300
King City
2,400 2,400
Livermore 18,200 18,200
Los Altos Portions of Cupertino, Los Altos Hills, Mountain View 18,600 18,500
& Sunnyvale
Marysville 3,800 3,800
Mid-Peninsula San Mateo & San Carlos 36,100 36,100
Oroville 3,600 3,600
Palos Verdes Palos Verdes Estates, Rancho Palos Verdes, Rolling Hills
& Rolling Hills Estates 24,000 24,000
Redwood Valley Lucerne & portions of Duncans Mills, Guerneville,
Dillon Beach, Noel Heights & Santa Rosa 2,000 2,000
Salinas
Selma
27,800 27,800
6,100 6,000
South San Francisco Colma & Broadmoor 16,800 16,800
Stockton
Visalia
42,100 42,300
37,800 35,800
Westlake Westlake Village & a portion of Thousand Oaks 7,000 7,000
Willows
Hawaii
New Mexico
Washington
Subtotal 460,900 456,700
2,300 2,300
500 500
7,100 6,500
15,400 15,300
Total 483,900 479,000
* Includes customers from regulated operations and full-system, non-regulated operations in Commerce and
Hawthorne. Numbers are rounded to the nearest hundred.
california
Chico
Chico
Willows
Willows
Oroville
Oroville
Mar ysville
Mar ysville
Redwood Valley
Redwood Valley
Dixon
Dixon
Stockton
Stockton
Salinas
Salinas
King City
King City
Selma
Selma
Visalia
Visalia
South San Francisco
South San Francisco
Mid-Peninsula
Mid-Peninsula
Bear Gulch
Bear Gulch
Los Altos
Los Altos
Livermore
Livermore
San Jose/Headquar ters
San Jose/Headquar ters
Kern River Valley
Kern River Valley
Bakersfield
Bakersfield
Antelope Valley
Antelope Valley
Hawthorne
Hawthorne
East Los Angeles
East Los Angeles
Westlake
Westlake
Hermosa-Redondo
Hermosa-Redondo
Palos Verdes
Palos Verdes
Dominguez
Dominguez
new mexico
Los Lunas
Los Lunas
Belen
Belen
Elephant Butte
Elephant Butte
hawaii
Kauai
Kauai
OahuOahu
Molokai
Molokai
Kaanapali
Kaanapali
MauiMaui
Hawaii
Hawaii
washington
Gig Harbor
Gig Harbor
South Sound
South Sound
Service Area / 34 & 35
board of directors
President of B. Hill Enterprises, L.L.C.
4 years served as a Board Member. Co-Founder of
Icon Blue; on the boards of a number of corporations
and non-profi t organizations. Member of the following
Committees: Organization/Compensation and Nominat-
ing/Corporate Governance.
Vice President and Chief Financial Offi cer,
the David & Lucile Packard Foundation
9 years served as a Board Member.
Member of the Audit Committee and
Finance Committee.
Bonnie G. Hill
George A. Vera
Richard P. Magnuson
David N. Kennedy
Private Venture Capital Investor
11 years served as a Board Member.
Member of the following Committees: Audit,
Organization/Compensation, Executive, Finance,
and Nominating/Corporate Governance.
Former Director of the
California Department of Water Resources
4 years served as a Board Member. Member of
the Organization/Compensation Committee and
Finance Committee.
Chairman of the Board
30 years served as a Board Member.
Member of the Executive Committee.
Robert W. Foy
Member of the National Board
of the Institute of International Education
13 years served as a Board Member. Director of
Greater Bay Bancorp, Trustee of World Affairs Council,
and Co-Chair of the Stanford Challenge. Member of
the following Committees: Audit, Organization/Com-
pensation, and Nominating/Corporate Governance.
Linda R. Meier
Edward D. Harris, Jr., M.D.
Peter C. Nelson
Douglas M. Brown
Professor of Medicine, Emeritus,
Stanford University Medical Center
14 years served as a Board Member.
Member of the following Committees:
Organization/Compensation, Executive,
and Nominating/Corporate Governance.
President and Chief Executive Offi cer
Former Treasurer, State of New Mexico
11 years served as a Board Member.
Member of the Executive Committee.
6 years served as a Board Member.
Member of the following Committees:
Audit, Finance, and Nominating/Corporate
Governance.
Board of Directors / 36 & 37
corporate offi cers
California Water Service Company
Robert W. Foy 1,2,3
Chairman of the Board
Peter C. Nelson 1,2,3
President and Chief Executive Offi cer
Paul G. Ekstrom
Vice President, Customer Service and Information Systems
Francis S. Ferraro 2, 4
Vice President, Regulatory Matters and Corporate Relations
Robert R. Guzzetta 2
Vice President, Operations
Martin A. Kropelnicki 1, 2, 3
Vice President, Chief Financial Offi cer and Treasurer
Christine L. McFarlane
Vice President, Human Resources
Michael J. Rossi
Vice President, Engineering and Water Quality
Calvin L. Breed 1
Controller, Assistant Secretary and Assistant Treasurer
Lynne P. McGhee 1, 2, 3
Acting Corporate Secretary
Washington Water Service Company
Michael P. Ireland
President
1 Holds the same position with California Water Service Group.
2 Also an offi cer of CWS Utility Services.
3 Also an offi cer of Washington Water Service Company, New Mexico Water Service Company and Hawaii Water Service Company, Inc.
4 Holds the same position with New Mexico Water Service Company and Hawaii Water Service Company, Inc.
Offi cers / 38
financial highlights
Year ended December 31 2006 2005 2004 2003 2002
Market price at year-end $ 40.40 $ 38.23 $ 37.65 $ 27.40 $ 23.65
Book value 18.31 15.98 15.66 14.44 13.12
Earnings per share (diluted) 1.34 1.47 1.46 1.21 1.25
Dividends per share 1.150 1.140 1.130 1.125 1.120
Revenue 334,717 320,728 315,567 277,128 263,151
Net income 25,580 27,223 26,026 19,417 19,073
company over view
California Water Service Group (NYSE: CWT) is the second largest investor-owned water
utility in the United States, providing high-quality water utility services to more than 2 million
people in 100 communities through five subsidiaries: California Water Service Company
(Cal Water), Hawaii Water Service Company, Inc. (Hawaii Water), New Mexico Water Service
Company (New Mexico Water), Washington Water Service Company (Washington Water),
and CWS Utility Services (Utility Services). Cal Water, Hawaii Water, New Mexico Water,
and Washington Water provide regulated water utility services, while Utility Services
conducts the Company’s non-regulated business, which includes providing billing, water
quality testing, and water system operations and management services to cities and
other companies.
Table of Contents
Behind the Scenes Editorial 1
20 -Year Return on Investment 2
Letter to Stockholders 24
Ten-Year Financial Review 32
Customer Service Areas 34
Service Area Map 35
Board of Directors 36
Corporate Officers 38
corporate information
corporate information
Stock Transfer, Dividend Disbursing, and Reinvestment Agent
Stock Transfer, Dividend Disbursing, and Reinvestment Agent
American Stock Transfer and Trust Company
American Stock Transfer and Trust Company
57 Maiden Lane
57 Maiden Lane
New York, NY 10038
New York, NY 10038
(800) 937-5449
(800) 937-5449
To Transfer Stock
To Transfer Stock
A change of ownership of shares (such as when stock is sold or gifted or when owners are deleted from or
A change of ownership of shares (such as when stock is sold or gifted or when owners are deleted from or
added to stock certificates) requires a transfer of stock. To transfer stock, the owner must complete the assign-
added to stock certificates) requires a transfer of stock. To transfer stock, the owner must complete the assign-
ment on the back of the certificate and sign it exactly as his or her name appears on the front. This signature
ment on the back of the certificate and sign it exactly as his or her name appears on the front. This signature
must be guaranteed by an eligible guarantor institution (banks, stock brokers, savings and loan associations
must be guaranteed by an eligible guarantor institution (banks, stock brokers, savings and loan associations
and credit unions with membership in approved signature medallion programs) pursuant to SEC Rule 17Ad-15.
and credit unions with membership in approved signature medallion programs) pursuant to SEC Rule 17Ad-15.
A notary’s acknowledgement is not acceptable. This certificate should then be sent to American Stock Transfer
A notary’s acknowledgement is not acceptable. This certificate should then be sent to American Stock Transfer
and Trust Company, by registered or certified mail with complete transfer instructions.
and Trust Company, by registered or certified mail with complete transfer instructions.
Bond Registrar
Bond Registrar
US Bank Trust, N.A.
US Bank Trust, N.A.
One California Street
One California Street
San Francisco, CA 94111-5402
San Francisco, CA 94111-5402
(415) 273-4580
(415) 273-4580
Executive Office
Executive Office
California Water Service Group
California Water Service Group
1720 North First Street
1720 North First Street
San Jose, CA 95112-4598
San Jose, CA 95112-4598
(408) 367-8200
(408) 367-8200
Annual Meeting
Annual Meeting
The Annual Meeting of Stockholders will be held on Wednesday, April 25, 2007 at 9:30 a.m. at the Company’s
The Annual Meeting of Stockholders will be held on Wednesday, April 25, 2007 at 9:30 a.m. at the Company’s
Executive Office, located at 1720 North First Street in San Jose, California. Details of the business to be
Executive Office, located at 1720 North First Street in San Jose, California. Details of the business to be
transacted during the meeting will be contained in the proxy material, which will be mailed to stockholders on
transacted during the meeting will be contained in the proxy material, which will be mailed to stockholders on
or about March 23, 2007.
or about March 23, 2007.
Dividend Dates For 2007
Dividend Dates For 2007
Quarter Declaration Record Date Payment Date
Quarter Declaration Record Date Payment Date
First January 24 February 5 February 16
First January 24 February 5 February 16
Second April 25 May 7 May 18
Second April 25 May 7 May 18
Third July 25 August 6 August 17
Third July 25 August 6 August 17
Fourth October 24 November 5 November 16
Fourth October 24 November 5 November 16
Annual Report For 2006 On Form 10-K
Annual Report For 2006 On Form 10-K
A copy of the Company’s report for 2006 filed with the Securities and Exchange Commission (SEC) on Form 10-K
A copy of the Company’s report for 2006 filed with the Securities and Exchange Commission (SEC) on Form 10-K
will be available in March 2007 and can be obtained by any stockholder at no charge upon written request to
will be available in March 2007 and can be obtained by any stockholder at no charge upon written request to
the address below. The Company’s filings with the SEC can be viewed via the link to the SEC’s EDGAR system
the address below. The Company’s filings with the SEC can be viewed via the link to the SEC’s EDGAR system
on the Company’s web site.
on the Company’s web site.
Stockholder Information
Stockholder Information
California Water Service Group
California Water Service Group
Attn: Stockholder Relations
Attn: Stockholder Relations
1720 North First Street
1720 North First Street
San Jose, CA 95112-4598
San Jose, CA 95112-4598
(408) 367-8200 or (800) 750-8200
(408) 367-8200 or (800) 750-8200
http://www.calwatergroup.com
http://www.calwatergroup.com
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behind the scenes.
2006 Annual Report
California Water Service Group
1720 North First Street
San Jose, California 95112-4598
(408) 367-8200
www.calwatergroup.com
NYSE: CWT
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