California Water Service Group
Annual Report 2010

Plain-text annual report

C a i l i f o r n a W a t e r S e r v i c e G r o u p 2 0 1 0 A n n u a l R e p o r t Everywhere. California Water Service Group 2010 Annual Report California Water Service Group 1720 North First Street San Jose, California 95112-4598 (408) 367-8200 www.calwatergroup.com NYSE: CWT Table of Contents Employee Profiles 2 Letter to Stockholders 17 Service Area Maps 30 Eight-Year Financial Review 34 Board of Directors 36 Corporate Officers 38 California Water Service Group (NYSE: CWT) is the third largest investor-owned water utility in the United States, providing high-quality water utility services to approximately two million people in more than 100 communities through six 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), CWS Utility Services (CWSUS), and HWS Utility Services (HWSUS). Cal Water, Hawaii Water, New Mexico Water, and Washington Water provide regulated water and wastewater utility services, while CWSUS and HWSUS conduct the Company’s non-regulated business, which includes providing billing, water quality testing, and water and wastewater system operations and management services to cities and other companies. Financial Highlights Year ended December 31 2010 2009 2008 2007 2006 Market price at year-end $ 37.27 $ 36.82 $ 46.43 $ 37.02 $ 40.40 Book value per share 20.91 20.26 19.44 18.66 18.31 Earnings per share (diluted) 1.81 1.95 1.90 1.50 1.34 Dividend per share 1.19 1.18 1.17 1.16 1.15 Revenue* 460,399 449,372 410,312 367,082 334,717 Net income* 37,656 40,554 39,805 31,159 25,580 *Dollars in thousands Stock Transfer, Dividend Disbursing, and Reinvestment Agent American Stock Transfer & Trust Company 59 Maiden Lane New York, NY 10038 (800) 937-5449 To Transfer Stock 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 assignment 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 eli- gible 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. A notary’s acknowledgement is not acceptable. This certificate should then be sent to American Stock Transfer & Trust Company, by registered or certified mail with complete transfer instructions. Alternatively, the Direct Registration System can be utilized, which allows electronic share transactions between your broker or dealer and American Stock Transfer & Trust Company. Bond Registrar US Bank Trust, N.A. One California Street San Francisco, CA 94111-5402 (415) 273-4580 Annual Meeting The Annual Meeting of Stockholders will be held at 9:30 a.m. on Tuesday, May 24, 2011, at the Doubletree Hotel, located at 2050 Gateway Place 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 or about April 8, 2011. Anticipated Dividend Dates For 2011 Declaration Quarter Record Date First Second Third Fourth January 26 April 27 July 27 October 26 February 7 May 9 August 8 November 7 Payment Date February 18 May 20 August 19 November 18 Annual Report For 2010 On Form 10-K A copy of the Company’s report for 2010 filed with the Securities and Exchange Commission (SEC) on Form 10-K will be avail- able in April 2011 and can be obtained by any stockholder at no charge upon written request to the address below. The Com- pany’s filings with the SEC can be viewed via the link to the SEC’s EDGAR system on the Company’s web site. Executive Office and Stockholder Information California Water Service Group Attn: Stockholder Relations 1720 North First Street San Jose, CA 95112-4598 (408) 367-8200 or (800) 750-8200 http://www.calwatergroup.com The pages in this report are 50% recycled with 25% post-consumer fiber, acid free, elemental chlorine free (ECF), and FSC-certified. We operate 360 water and wastewater systems serving approximately two million people in California, Hawaii, New Mexico, and Washington. For every one of those customers, we are here. 2010 Annual Report / 3 And here, He has been at the kitchen faucet countless times today – first when he made his morning coffee; again when he filled a drinking glass after his workout; yet again when he made pasta for lunch; one more time to swallow his vitamins; and most recently before he sat down to read. Not once did he wonder about the safety of the water, thanks in large part to water quality professionals like Stephanie Hearn. Stephanie is part of a team of scientists, chemists, and microbiologists who work tirelessly to ensure that our water meets stringent quality standards. As a Water Quality Project Manag- er, Stephanie serves as a liaison between the scien- tists in the laboratory and the water professionals in the field. Together, they vigilantly monitor, test, and treat the water in order to meet 146 water quality standards. Because our experts concern themselves with water quality, our customer doesn’t have to, whether he goes to the tap five or fifty times per day. Stephanie Hearn, Bakersfield & Visalia Districts 2010 Annual Report / 5 even here, He is nervous. He’s never been in the hospital before, much less on the operating room table. Still, he knows he’s lucky they caught the problem in time. And he feels very good about the doctor who will be doing his surgery. He doesn’t even think about the fact that he will be much less likely to suffer an infection in this day and age when the medical community knows the importance of scrubbing up before going in. Hospitals rely on Cal Water for an uninterrupted supply of high- quality wa- ter, and Leak Truck Foremen like Scott Carmichael make sure they get it. Day in and day out, Scott and his crew maintain, repair, and replace the water lines and valves necessary for reliable service. And that’s a good thing, because it gives the patient one less thing to worry about as he counts backwards from 10. Scott Carmichael, Chico District 2010 Annual Report / 7 here too. She pulls into her driveway on Juanita Avenue in Redondo Beach after a long day at work. All she wants to do is brew a cup of tea and relax in a nice hot bath, but when she goes to fill her kettle, there is no water. It’s already 8 o’clock, but when she calls Cal Water, someone like Dick Lee will answer. Because when a Cal Water customer has an after- hours emergency, we are here. Water professionals like Dick monitor water system op- erations and respond to customer calls around the clock, dispatching crews to help when needed. In this case, the problem will be easily solved. Dur- ing the call, Dick will learn that a plumber has been working on the sprinkler system. Suspecting that he may have turned off the customer’s house valve, Dick will stay on the phone with her to help her lo- cate the valve and turn it back on. By 8:15, she’ll be filling her teapot and her tub. Dick Lee, Dominguez District 2010 Annual Report / 9 Yes, we’re here, All those years she spent saving up to retire in Hawaii, she dreamed about starting each day at the first hole of a lush green golf course. Now her dream has come true, and although she doesn’t know it, one of the reasons the course is so perfect is because it is getting all the water it needs. And not just any water – water from Hawaii Water Service Company’s Pukalani Wastewater Treatment Plant. Thanks to Engineers like Devi Presanna, highly treated effluent is being recycled and used to irrigate the course and free up precious potable water supplies. Water supply plan- ning is one of the most critical roles of our Engi- neers, who design the wells, pump stations, storage tanks, pipelines, and water treatment facilities in our water and wastewater systems. The golfer may be blissfully unaware of the engineering that makes it possible, but she still savors every moment on the course. Devi Presanna, General Office, San Jose 2010 Annual Report / 11 and here, He doesn’t hear the sirens or see the lights flashing, but he does feel the heat from the blaze. Armed with a fire hose, he’s counting on a continu- ous supply of water. Indeed, without it, he would be completely defenseless. That’s where a Certified Pump Operator like Eric Gardea comes in. One of the primary responsibilities of Pump Operators is to maintain water system production and storage facilities. They continuously monitor water system operations to ensure that the system is ready and able to meet customer demand. And when demand increases, as it would during a fire, Pump Operators monitor reservoir levels, adjust system pressure, and if necessary, activate additional sources of supply to boost water flow. Knowledgeable Pump Operators are critical, because for this firefighter, having a reli- able supply is not just convenient, it’s a matter of life and death. Eric Gardea, East Los Angeles District 2010 Annual Report / 13 even here. It’s not easy managing a business. You strategize. You execute. You control expenses. You improve customer service. At California Water Service Group, we get it. Not only do we do the same things, but we also provide the water service your factory needs to manufacture your product. Not just your product either, but also the products you need to make your product. So when your plant manager wants one of our water professionals on site or your accounting department needs clarification on the water bill, we are here. To be more precise, a friendly, professional Customer Service Representa- tive like Krystal Sandifer is here. She knows that you want your issue resolved quickly the first time you call, with efficiency and a smile. And she is trained to do just that. That way, you can stay focused on your business without having to worry about ours. Krystal Sandifer, Bakersfield District Everywhere you look, you can see the vital role water plays 2010 Annual Report / 15 in our daily lives. That’s why it is critical for us to be here for our customers. And we are. We are here, taking care of our water sources and our water and wastewater systems. We are here, executing a rigorous water quality assurance program. We are here, planning strategically to meet supply needs of today and tomorrow. We are here, providing responsive, professional, friendly service to our customers. We are here, contributing to the well-being of our environment and our communities. By doing all of these things well, we provide value to you, our valued stockholder. Peter C. Nelson President and Chief Executive Officer Robert W. Foy Chairman of the Board 2010 Annual Report / 17 To Our Stockholders If you’ve owned our stock for any length of time, you don’t expect the unexpected in our letter. After all, year after year, we are here, doing the same things – taking care of our water sources, serving our customers, developing our employees, and providing fair value to our stockholders. If you pick up previous years’ reports (and we hope you still have them!), you will see com- mon themes from year to year, as we describe our commitment to doing the right thing, our responsibility for being good stewards of the life-sustaining resource we provide, and our pride in providing something so invaluable and irreplaceable as water. As much as we’d like to “wow” you with something you’re not expecting, we simply can’t. Because the fact of the matter is, we are here, doing the same key things… We Are Here, Providing Value to Our Stockholders As we predicted last year, 2010 was a challenge in that it was the final year of our transition to a three-year General Rate Case cycle in California, which made it a critical year for holding the line on expenses and working toward the best decision on the General Rate Case filed with the California Public Utilities Commission in 2009, approved in 2010, and effective in 2011. Although we were disappointed, we were not surprised by our financial results, given the fact that rate relief for utility operations was minimal in 2010. Total revenues increased 2.5% to $460.4 million. Net income decreased 7.1% to $37.7 million, and earnings per share were down 7.2% to $1.81. Throughout the year, we stayed focused on managing our operating costs, and we believe we have positioned the Company well for 2011 and beyond. In light of improvements in the regulatory environment in California and our successful efforts over the past few years to reach a dividend payout 1,294,297 10 1,198,077 09 Five -Year Net Utility Plant (Dollars in thousands) 1,112,367 08 1,010,196 07 941,475 06 2010 Annual Report / 19 ratio target range of approximately 60% of earnings, our Board of Directors approved a larger dividend increase for 2011, increasing annual dividends from $1.19 to $1.23 per common share. We Are Here, Working to Improve Regulation These improvements in the regulatory climate are due in large measure to imple- mentation of the California Public Utilities Commission’s Water Action Plan, which provides a roadmap for regulators and utilities by formalizing priorities for water regulation in California. As adopted in 2005, the Plan established six objectives: • Maintain highest standards for water quality. • Strengthen water conservation. • Promote water infrastructure investment. • Assist low-income ratepayers. • Streamline Commission decision-making. • Set rates that balance investment, conservation, and affordability. The California Public Utilities Commission adopted an updated Water Action Plan in 2010, and we are pleased to report that the objectives set forth in 2005 have been carried forward in the new Plan. We are hopeful that new and continuing Commissioners will be guided by the Plan as they make decisions affecting our customers and our stockholders. Respect for the principles of the Water Action Plan was evident in the Commission’s resolution of California Water Service Company’s 2009 General Rate Case. The California Public Utilities Commission approved the 2009 General Rate Case on time, authorizing rate increases that will add $25 million to annual gross revenues in 2011 and an additional $8 million that may be obtained when certain capital projects are completed. The decision approved wa- ter infrastructure investments, additional conservation programs, and increased funding for our Rate Support Fund, which helps customers in disadvantaged communities where water costs are high. 2010 Annual Report / 20 We Are Here, Managing Expenses and Increasing Efficiency In addition to working diligently toward a favorable outcome on the 2009 General Rate Case, we continued to focus on improving our efficiency and service. Several achievements fall into this category. First, we brought our Hawaii subsidiary onto the same financial system as our other subsidiaries, which increases transparency and minimizes audit costs. More than 3,000 miles away in New Mexico, we converted to the same customer information system used in California, reducing billing costs, im- proving our ability to serve New Mexico customers, and enabling us to offer cus- tomers more payment options. Back at our San Jose headquarters, we rolled out a new budgeting system that will greatly improve our districts’ and departments’ ability to track and manage expenses, launched an initiative to streamline and enhance our procurement process, and made administrative changes to our pen- sion program that significantly reduce transaction costs. We also locked in a lower cost of debt– a benefit to both customers and stockholders– when we sold $100 million of first mortgage bonds. We consider our AA- credit rating to be a reflection of our strong balance sheet and manage- ment team, because it is one of the best in the water industry and means our company is viewed as being highly creditworthy. We Are Here, Providing Reliable, High-Quality Water and Wastewater Services The funds raised in our bond offering and our syndicated line of credit provided the capital we needed to invest in our infrastructure to ensure reliable and high-quality water and wastewater services. In 2010, we invested $113 mil- lion in water and wastewater system projects, and in 2011, we expect to invest $125 million. Our stockholders earn a return on capital investment, but we don’t simply invest for the sake of investing; we are strategic and diligent, completing projects that truly benefit customers by improving reliability and water quality. Five -Year Dividend Growth 10 1.19 09 1.18 08 1.17 07 1.16 06 1.15 CWT 20 -Year Total Return on Investment (On stock purchased December 31, 1990, with dividends reinvested) $900 $800 $700 $600 $500 $400 $300 $200 $100 $0 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 2010 Annual Report / 24 In fact, a relatively small investment yielded huge benefits for a remote community in the mountains in eastern New Mexico. Before we purchased the system and installed computer-operated remote controls, customers routine- ly experienced days -long interruptions in service. If lightning struck (a common occurrence in this community called Sandia Knolls), a piece of equipment failed, or a manual control malfunctioned, the water stopped flowing. Today, the supply is much more reliable. And it costs less to operate the system, which translates into lower water rates for customers. This was one of several 2010 capital projects that increased reliability, as we completed a number of well and water treatment projects that reduce our dependence on higher-cost imported water supplies by increasing the amount of water we can produce locally. Increased reliability and expense management aren’t the only objectives; we strive for innovation as well. In our Bear Gulch District, we replaced a key wa- ter line using a trenchless construction method that involves digging only at each end of the pipeline rather than along its entire length. Trenchless construction tends to be more environmentally friendly and less disruptive to neighbors. And in our Westlake District, we utilized the walls of an existing storage tank as shoring for the new tank, thereby addressing space constraints on the site and lessening the noise, traffic, and volume of material to be hauled away. “Green” was also the name of the game in Hawaii, where we replaced an aging wastewater treatment plant with a state -of-the-art Membrane Bio -Reactor (MBR) treatment plant that produces high -quality effluent that is reused for irrigation. The Pukalani Treatment Plant, located upcountry on the island of Maui, treats 180,000 gallons of wastewater per day. Just one island away, in Waikoloa on the island of Hawaii, we began construction on a larger MBR filtration plant that will treat one million gallons of water per day when it is completed in 2011. Five -Year Book Value 10 20.91 09 20.26 08 19.44 07 18.66 06 18.31 2010 Annual Report / 27 Five -Year Operating Revenue (Dollars in thousands) 460,399 10 Conservation is by its very nature “green,” and we continued to offer a robust variety of conservation programs in 2010. Granted, storms in late 2010 vastly improved the state’s water supply picture, with mountain snowpack at nearly 200 % of normal and most major reservoirs near or above average at year- end. Time will tell if this wet weather will continue into 2011, but the first few months of the year have been promising. Regardless, in wet years or dry, we recognize the importance of water-use efficiency and strategic water supply planning. 449,372 09 We Are Here, Improving Our Customer Service 410,312 08 367,082 07 All of these things– providing stockholder value, improving regulation, increasing efficiency, and ensuring reliable and high-quality water and wastewater services– enable us to provide excellent customer service. Beyond the improve- ments in water infrastructure and upgrades in technology that we’ve already cov- ered, there is the human element. In 2010, we conducted training for all of our Customer Service Managers to better enable them to achieve customer service goals in their respective districts. We launched a “Voice of the Business Cus- tomer” project in order to better understand and prioritize the needs of business customers and ensure that these needs are being met. We continued to expand our mobile workforce project, which provides field employees direct access to customer information, resulting in faster, more efficient response to customer needs. And for those customers who prefer a computer experience over face-to-face contact, we began implementing a self-service option on our web site that will enable customers to initiate a service order online at their convenience. 334,717 06 We Are Here, Developing Our People We’ve said it before, but it bears repeating. To provide the best customer service, we need the best and most skilled people. We start by offering competi- tive salary and benefits packages, but it certainly doesn’t end there. 2010 Annual Report / 28 In 2010, we implemented a management development program and developed a management trainee program to supplement our ongoing training and tuition reimbursement programs. We also created a Business Intelligence information system that ensures our people have easy and fast access to the key data they need to make the best management decisions. We expect every employee to make a difference in continuously improving customer service and efficiency, and we continue to provide skills development and tools to do just that. Like our employees, our directors contribute significantly to our success. In 2010, we lost a truly special and beloved board member with the passing of Dr. Ted Harris. We were fortunate to recruit an outstanding individual to our board who brings the critical public health perspective that we so valued in Dr. Harris. Highly accomplished in his field, Dr. Thomas M. Krummel is the Susan B. Ford Surgeon-in-Chief at the Lucile Packard Children’s Hospital at Stanford and Emile Holman Professor and Chair of the Department of Surgery at Stanford University School of Medicine. The Board of Directors also appointed Lester A. Snow, whose 30 years of experience in natural resources management includes service as the State Secretary for Natural Resources, Di- rector of the California Department of Water Resources, Regional Director of the U.S. Bureau of Reclamation, and Executive Director of the CALFED Bay-Delta Program. Mr. Snow’s vast experience in the water profession will be invaluable as we continue to fulfill our responsibility for providing reliable, high-quality water to customers in California, Washington, New Mexico, and Hawaii. As always, we thank you for your continued investment in California Water Service Group and wish you the best in the coming year. Peter C. Nelson President and Chief Executive Officer Robert W. Foy Chairman of the Board Hawaii Operations/Customer Centers We serve We serve customers in customers in more than 100 more than 100 communities. communities. And each one of them is unique. We serve cowboys and surfers, entrepreneurs and homemakers. We are in big cities and small towns, beach communities and deserts. We support cherry festivals and little leagues, rodeos and art shows. But whatever their differences, these communities have one thing in common: they all need water to thrive. And that’s where we come in. That’s why we’re here. Washington Operations/Customer Centers (Maui) Ka’anapali • (Hawaii) Waikoloa Serving the communities of Ka’anapali, Pukalani, Waimea, Waikoloa, North Kona Coast, and Kohala Coast on the islands of Maui and Hawaii. Regulated Customer Connections 4,200* 09 4,200* 10 * Includes several large resorts and condominium complexes Olympia (S.W. Regional Office) • Gig Harbor (N.W. Regional Office and Customer Center) • Sequim • Issaquah • Orcas Island (Field Offices) Serving more than 425 neighborhoods and small communities in the counties of Clallam, Jefferson, Kitsap, Mason, Pierce, King, San Juan, and Thurston. Regulated Customer Connections 15,600 09 15,700 10 Antelope Valley • Bakersfield • Bear Gulch • Chico • Commerce • Dixon • Dominguez • East Los Angeles • Haw- thorne • Hermosa-Redondo • Kern River Valley • King City • Livermore • Los Altos • Marysville • Mid-Peninsula • Oroville • Palos Verdes • Redwood Valley • Salinas • Selma • South San Francisco • Stockton • Visalia • Westlake • Willows Customer Connections* 467,100 09 470,200 10 * Numbers include Hawthorne and Commerce lease agreements California Districts California Districts & Communities Antelope Valley • Fremont Valley, Lake Hughes, Lancaster & Leona Valley Bakersfield Bear Gulch • Atherton, Woodside, Portola Valley & a portion of Menlo Park Chico • Hamilton City Commerce (lease agreement) Dixon Dominguez • Carson & portions of Compton, Harbor City, Long Beach, Los Angeles County & Torrance East Los Angeles • Portions of Montebello, Commerce, Monterey Park & Vernon Hawthorne (lease agreement) Hermosa-Redondo • Hermosa Beach, Redondo Beach & a portion of Torrance Kern River Valley • Bodfish, Kernville, Lakeland, Mountain Shadows, Onyx, Squirrel Valley, South Lake & Wofford Heights King City Livermore Los Altos • Portions of Cupertino, Los Altos Hills, Mountain View & Sunnyvale New Mexico Operations/Customer Centers Marysville 2010 Annual Report / 33 2010 2009 1,400 67,600 18,800 27,900 1,200 2,900 33,800 26,700 6,200 26,600 4,300 2,500 18,300 18,700 3,700 1,400 66,900 18,600 27,700 1,200 2,800 33,700 26,600 6,200 26,500 4,300 2,500 18,200 18,700 3,700 Elephant Butte • Belen • Cedar Crest Serving the communitites of Meadow Lake, Cypress Gar- dens, Rio Communities, Rio Del Oro, Elephant Butte, Sandia Knolls, and Cedar Crest in the counties of Sierra, Valencia, and Bernalillo. Regulated Customer Connections 7,800 09 7,800 10 Mid-Peninsula • San Mateo & San Carlos Oroville Palos Verdes • Palos Verdes Estates, Rancho Palos Verdes, Rolling Hills 36,400 36,200 3,600 3,600 & Rolling Hills Estates 24,100 24,000 Redwood Valley • Lucerne & portions of Duncans Mills, Guerneville, Dillon Beach, Noel Heights & Santa Rosa Salinas Selma South San Francisco • Colma & Broadmoor Stockton Visalia Westlake • Westlake Village & a portion of Thousand Oaks Willows 2,000 28,000 6,100 16,900 42,800 40,300 7,000 2,400 2,000 27,900 6,000 16,800 42,400 39,800 7,000 2,400 Eight-Year Financial Review 2010 Annual Report / 35 (Dollars in thousands, except common share and other data) 2010 2009 2008 2007 2006 2005 2004 2003 Summary of Operations Operating revenue Operating expenses Interest expense, other income and expenses, net 24,157 Net income Common Share Data $37,656 $460,399 $449,372 $410,312 $367,082 $334,717 $320,728 $315,567 $277,128 398,586 391,253 17,565 $40,554 352,843 17,664 322,912 13,011 $39,805 $31,159 294,411 14,726 $25,580 278,903 14,602 $27,223 273,488 16,053 $26,026 244,167 13,544 $19,417 Earnings per share - diluted $1.81 $1.95 $1.90 Dividend declared 1.190 Dividend payout ratio 66% 1.180 61% 1.170 62% 77% 86% Book value $20.91 $20.26 $19.44 Market price at year-end 37.27 36.82 46.43 Common shares outstanding at year-end (in thousands) 20,833 20,765 20,723 Return on average common stockholders’ equity 9.0% 9.8% 10.2% Long-term debt interest coverage 3.59 4.04 4.72 $18.66 37.02 20,666 8.1% 3.70 $1.50 1.160 $1.34 1.150 $18.31 40.40 $1.47 1.140 78% $15.98 38.23 $1.46 1.130 77% $15.66 37.65 18,367 20,657 18,390 8.2% 9.3% 9.8% 3.17 3.61 3.38 2.78 $1.21 1.125 93% $14.44 27.40 16,932 9.1% Balance Sheet Data Net utility plant $1,294,297 $1,198,077 $1,112,367 $1,010,196 $941,475 $862,731 $800,305 $759,498 Total assets Long-term debt, including current portion Capitalization ratios: 1,692,066 1,525,581 481,561 387,222 1,418,107 1,184,499 1,165,019 290,316 291,921 293,592 996,945 275,275 942,853 275,921 873,035 273,130 Common stockholders’ equity 47.5% 52.1% 58.1% Preferred stock Long-term debt Other Data 0 % 52.5% 0 % 47.9% 0% 41.9% 56.9% 0.5% 42.6% 56.0% 51.4% 50.8% 0.5% 0.6% 0.6% 43.5% 48.0% 48.6% 47.0% 0.7% 52.3% Water production (million gallons) 121,942 131,558 137,757 Customers at year-end, including Hawthorne and Commerce 497,900 494,700 490,500 New customers added 3,200 4,200 2,900 Revenue per customer $925 $908 $837 Utility plant per customer 3,706 3,455 3,228 Employees at year-end 1,127 1,013 929 141,238 487,600 3,707 $753 2,968 891 132,414 483,893 4,892 $692 2,778 129,453 479,001 139,039 473,155 5,846 6,733 $670 $667 2,578 2,418 131,680 466,422 7,434 $594 2,313 869 840 837 813 Board of Directors 2010 Annual Report / 37 Peter C. Nelson President and Chief Executive Officer Robert W. Foy Chairman of the Board 15 years served as a Board 34 years served as a Board Member. Member of the Executive Committee. Member. Member of the Executive Committee. Douglas M. Brown Dean, Anderson School of Business, University of New Mexico 10 years served as a Board Member. Member of the following Committees: Audit, Executive, Finance/Risk Management, and Nominating/Corporate Governance. Edwin A. Guiles Former Executive Vice President Bonnie G. Hill President of of Corporate Development, B. Hill Enterprises, L.L.C. Sempra Energy Richard P. Magnuson Private Venture Capital Investor 3 years served as a Board 8 years served as a Board Member. Member of the following Member. Member of the following Member. Member of the following Committees: Audit, Organization/ Committees: Organization/ Committees: Organization/ Compensation, Executive, Finance/ Compensation, Finance/Risk Compensation and Nominating/ Risk Management, and Nominating/ Management, and Audit. Corporate Governance. Corporate Governance. 15 years served as a Board George A. Vera Vice President and Chief Financial Officer, Thomas M. Krummel, M.D. Professor and Chair, Surgery Linda R. Meier Member of the National Board Department, Stanford University of the Institute of International the David and Lucile Packard School of Medicine Education Foundation 13 years served as a Board Member. Member of the following 17 years served as a Board Member. Member of the following Committees: Audit, Finance/Risk 1 year served as a Board Member. Committees: Audit, Executive, Management, and Nominating/ Member of the Nominating/Corporate Organization/Compensation, and Corporate Governance. Governance Committee. Nominating/Corporate Governance. 2010 Annual Report / 38 Officers California Water Service Company Peter C. Nelson 1, 2, 3 President and Chief Executive Officer Paul G. Ekstrom Vice President, Customer Service, Human Resources, and Information Technology Francis S. Ferraro 2, 4 Vice President, Corporate Development Robert R. Guzzetta 2 Vice President, Operations Martin A. Kropelnicki 1, 2, 3 Vice President, Chief Financial Officer and Treasurer Christine L. McFarlane 3 Vice President, Chief Administrative Officer Michael J. Rossi 2, 3 Vice President, Engineering and Water Quality Thomas F. Smegal III 4 Vice President, Regulatory Matters and Corporate Relations Calvin L. Breed 1, 2, 3 Controller, Assistant Secretary and Assistant Treasurer Lynne P. McGhee 1, 2, 3 Corporate Secretary Washington Water Service Company Michael P. Ireland President 1 Holds the same position with California Water Service Group. 2 Also an officer of CWS Utility Services. 3 Also an officer 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. 

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