California Water Service Group Annual Report 2015

← All annual reports

FY2015 Annual Report · California Water Service Group

Loading PDF…

EVERYDAY
HEROES

California Water Service Group 2015 Summary Annual Report

HOME

HIGHLIGHTS

LETTER

SERVICE AREAS

FINANCIAL REVIEW

DIRECTORS

Table of Contents

1 Everyday Heroes

11 Highlights

15 Letter to Stockholders

23 Service Areas

25 Eight-Year Financial Review

27 Board of Directors

28 Corporate Officers

29 Corporate Information

California Water Service Group (NYSE: CWT) is the third largest publicly traded water utility in the United States, providing high- quality utility ser vices to

approximately two million people in more than 100 communities through six subsidiaries: California Water Service (Cal Water), Hawaii Water Service Company,

Inc. (Hawaii Water), New Mexico Water Service Company (New Mexico Water), Washington Water Ser vice Company (Washington Water), CWS Utility Ser vices

(CWSUS), and HWS Utility Ser vices (HWSUS). Cal Water, Hawaii Water, New Mexico Water, and Washington Water provide regulated water and wastewater

utility ser vices, 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.

HOME

HIGHLIGHTS

LETTER

SERVICE AREAS

FINANCIAL REVIEW

DIRECTORS

Not all heroes fly.

HOME

HIGHLIGHTS

LETTER

SERVICE AREAS

FINANCIAL REVIEW

DIRECTORS

They don’t all leap
tall buildings in a single bound, carry
lassos of truth, or shoot webs
from their wrists.

Some of them make the world a better place without the benefit of
superpowers. It’s these ever yday heroes who are helping us through
one of the worst droughts in California history.

HOME

HIGHLIGHTS

LETTER

SERVICE AREAS

FINANCIAL REVIEW

DIRECTORS

And they’ve joined forces
with our customers
to deliver
spectacular results.

HOME

HIGHLIGHTS

LETTER

SERVICE AREAS

FINANCIAL REVIEW

DIRECTORS

Extraordinary Acts of
Customer Service!

Due to historic drought conditions, the Governor of California issued an emergency
proclamation in April 2015 that gave us little more than a month to begin meeting
ambitious water-use reduction targets. We already had an industry-leading
conservation program in place, but new state mandates required us to step up
our efforts even further. Taking a customer-first approach, we established an
individualized water budget for each customer, set up a centralized drought call
center to answer questions and process water-budget appeals, and trained a small
army of Conservation Coordinators to provide personal, individual assistance to all
who needed it. And before we launched, we hosted 25 public meetings throughout
the state to discuss the plan personally with thousands of customers.

During the first few months, call volumes in our drought call center and our districts
skyrocketed, but our team did a heroic job of explaining the state requirements,
walking customers through their water budgets, and offering a range of conservation
programs. The upshot: Despite very challenging circumstances, customer
satisfaction levels remained high. We conducted a poll in October, and on a scale
of 1 to 5 with 5 being best, we scored 4 for overall satisfaction, 4.4 for service,
and 4 for communications. These results wouldn’t have been possible without
the extraordinary efforts of Sandra Millan, Camisha Townsend, and our other 153
customer service professionals.

HOME

HIGHLIGHTS

LETTER

SERVICE AREAS

FINANCIAL REVIEW

DIRECTORS

Extraordinary Acts of
Customer Service!

Sandra Millan & Camisha Townsend

HOME

HIGHLIGHTS

LETTER

SERVICE AREAS

FINANCIAL REVIEW

DIRECTORS

Stupendous Exploits
in Community
Outreach!

There’s only one way to be “customer first,” and that is to be with the customer.
That’s why we spent a lot of time in our communities in 2015. Whether we were sitting
cross-legged on the floor talking to schoolkids, knocking on individual customers’
doors, engaging with fans on our Facebook page, mingling with neighbors during
National Safety Night Out, or providing drought-tolerant landscaping advice to avid
gardeners, we were impacting our communities.

President and Chief Executive Officer Martin A. Kropelnicki personally visited Shasta
Elementary School in Chico to congratulate the fifth graders in Room 17, who won the
Company’s inaugural H2O Challenge for their rain harvesting and drought-tolerant
garden project. District Managers Lee Seidel, Dan Trejo, and Dan Armendariz joined
community leaders and elected officials at ribbon-cutting ceremonies for three new
conservation demonstration gardens. District Manager Pete Bonacich made an inspiring
presentation at Chico State Water Week 2015. And Susan Cordone and our team of
Conservation Coordinators made it their mission to personally interact with as many of
our neighbors as (super) humanly possible.

HOME

HIGHLIGHTS

LETTER

SERVICE AREAS

FINANCIAL REVIEW

DIRECTORS

Stupendous Exploits
in Community
Outreach!

Susan Cordone

HOME

HIGHLIGHTS

LETTER

SERVICE AREAS

FINANCIAL REVIEW

DIRECTORS

Spectacular Efforts
in Water Supply!

It took serious heroism to provide a reliable water supply in the midst of one
of the most serious droughts in California history. In Bakersfield, water supplies
were extremely constrained, and we needed to secure more water to keep two
critical treatment plants in operation. That’s where District Manager Rudy Valles
stepped in and saved the day, leading the effort to partner with the City of
Bakersfield on a critical water exchange agreement with the Kern Delta Water
District and the Kern County Water Agency. All four entities expeditiously
collaborated and executed a new agreement to supply the two treatment plants
in less than 90 days.

Despite significant challenges in many of our communities, none of our customers
went without water, thanks to the phenomenal efforts of our engineering and
operations professionals. In fact, in July, we installed 3,000 feet of water main to
supply water to 26 Visalia families who weren’t our customers, but whose private
wells had gone dry. This wasn’t our only act of “supply heroism”; we also
supplied emergency water to drought-stricken neighbors outside of our service
areas in Tulare, Kern, and San Mateo counties.

HOME

HIGHLIGHTS

LETTER

SERVICE AREAS

FINANCIAL REVIEW

DIRECTORS

Spectacular Efforts
in Water Supply!

Rudy Valles

HOME

HIGHLIGHTS

LETTER

SERVICE AREAS

FINANCIAL REVIEW

DIRECTORS

Incredible Deeds
in Technology!

The old saying “knowledge is power” certainly makes sense in the middle of a drought.
That’s where technology comes in. Landscape Program Specialist Ari Wilfley has been
utilizing aerial imagery to gather information about individual customers’ landscape
types and sizes in order to develop water budgets. She is also using our Geospatial
Information System (GIS) and a “hot spot algorithm” to map neighborhoods with higher-
than-average water usage to help the drought response team conduct more focused,
informed outreach. And for her latest project, golfers carry Global Positioning Systems
(GPS) and data loggers to collect data to help golf courses identify landscaping that can
be removed. This may sound like fun and games, but it’s actually serious business,
considering the water savings that can be achieved by helping golf courses reduce
non-essential water use.

Technology is also helping customers manage their own use. We are piloting water meter
“endpoints” that provide customers with real-time water use information, which enables
them to identify and repair leaks quickly. Because of the resources these endpoints
require, we will conduct careful cost-benefit analyses before expanding their use,
reflecting our commitment to providing the highest levels of service while maintaining
affordability for customers.

HOME

HIGHLIGHTS

LETTER

SERVICE AREAS

FINANCIAL REVIEW

DIRECTORS

Incredible Deeds
in Technology!

Ari Wilfley

HOME

HIGHLIGHTS

LETTER

SERVICE AREAS

FINANCIAL REVIEW

DIRECTORS

Amazing Feats in
Water Conservation!

We went into the drought with a robust portfolio of water conservation
programs. In 2015, we added even more, including a bathroom retrofits,
high-efficiency toilet deliveries, tur f replacement programs, and commercial
customer water-use efficiency evaluations, to help our customers meet
ambitious water-use reduction targets.

Customer Jason Nunez came through like a champion. It helps that his mom
Maggie is a longtime Cal Water employee, so he grew up recognizing the
importance of treating water like the precious resource that it is. But even
Mom doesn’t submit to the Navy showers that Jason requires of his wife and
two little ones. We bet the next generation will be even more water-wise.

The Nunez family wasn’t alone. Overall, our customers achieved a cumulative
28.6% reduction in water use between June and December 2015 compared to
2013. That’s pretty darn heroic, don’t you think?

HOME

HIGHLIGHTS

LETTER

SERVICE AREAS

FINANCIAL REVIEW

DIRECTORS

Amazing Feats in
Water Conservation!

Jason Nunez

HOME

HIGHLIGHTS

LETTER

SERVICE AREAS

FINANCIAL REVIEW

DIRECTORS

In 2015,
it took everyday heroes
to fulfill our purpose
of improving the quality of life

HOME

HIGHLIGHTS

LETTER

SERVICE AREAS

FINANCIAL REVIEW

DIRECTORS

for those we serve
and deliver on our promise...

Quality. Service. Value.

HOME

HIGHLIGHTS

LETTER

SERVICE AREAS

FINANCIAL REVIEW

DIRECTORS

Financial Highlights

Year ended December 31

2015

2014

2013

2012

2011

Market price at year-end

$ 23.27

$ 24.61

$ 23.07

$ 18.35

$ 18.26

Book value per share

13.41

13.11

12.54

11.30

10.76

Earnings per share (diluted)

0 .94

1.19

1.02

1.17

Dividend per share

0.670

0.650

0.640

0.630

0.90

0.615

Revenue*

Net income*

*Dollars in thousands

588,368

597,499

584,103

559,966

501,814

45,017

56,738

47,254

48,828

37,712

HOME

HIGHLIGHTS

LETTER

SERVICE AREAS

FINANCIAL REVIEW

DIRECTORS

2015 Review

Cal Water reaches agreement to invest $1.5 million in the recycled water system it will use to serve the new
Apple 2 Campus in Cupertino, in partnership with the City of Sunnyvale and the Santa Clara Valley Water District.

Company renews its lines of credit, increasing capacity to $450 million.

Company donates $10,000 to the Food Bank in Monterey County following an arson fire, and challenges others
in the community to match the contribution.

President & CEO announces to school assembly at Shasta Elementary in Chico that the fifth graders in
Room 17 have won the Cal Water’s first H2O Challenge, the prize for which is an educational field trip to the
Channel Islands.

Cal Water enacts its Drought Response Plan, dedicating a team of more than 30 professionals to help customers
meet ambitious water-use reduction targets.

Cal Water named a “Top 100 Workplace” in the San Francisco Bay Area by Bay Area News Group for the fourth
consecutive year.

HOME

HIGHLIGHTS

LETTER

SERVICE AREAS

FINANCIAL REVIEW

DIRECTORS

2015 Review

Cal Water files its triennial General Rate Case, requesting additional revenues of $94.8 million in 2017,
$23 million in 2018, and $22.6 million in 2019, 80% of which is proposed for water system improvements.

Cal Water receives $1.3 million in grants for water - and energy -saving projects from California Department
of Water Resources, to be used to augment bathroom fixture replacement programs in East Los Angeles,
Dominguez, and Bakersfield systems.

The State Legislature recognizes students from Chico and Westlake for winning $10,000 college scholarships
from Cal Water as part of the Company’s annual $60,000 scholarship program.

Company contributes $198,000 to charities providing holiday meals to the needy, marking the 27th consecutive
year of Operation Gobble.

Company agrees to sell $150 million in first mortgage bonds.

Company cuts ribbon at a chromium - 6 treatment plant in Dixon, commemorating the completion of the ninth
plant constructed to comply with the new standard.

Company hosts a celebration for 800 East Los Angeles customers to recognize their conservation achievements.

HOME

HIGHLIGHTS

LETTER

SERVICE AREAS

FINANCIAL REVIEW

DIRECTORS

CWT 20-Year Total Return on Investment

(On $100 stock purchase on December 31, 1995, with dividends reinvested)

$600

$500

$400

$300

$200

$100

1996

1997

1998

1999

2000

2001 2002 2003

2004

2005

2006

2007 2008

2009

2010

2011

2012

2013

2014 2015

HOME

HIGHLIGHTS

LETTER

SERVICE AREAS

FINANCIAL REVIEW

DIRECTORS

Letter to Stockholders

Dear Stockholder:

What a year. Mother Nature continued to test us with one of the
worst droughts in California histor y, but we provided an uninterrupted
supply of clean water and continued to deliver on our promise to
provide quality, ser vice, and value.

As expected, the drought put pressure on our financial results by
reducing revenue and increasing costs. Net income for the year was
$45.0 million, a decrease of $11.7 million compared to 2014, and
diluted earnings per share was $ 0.94, down from $1.19 in 2014.
Total revenues were also down slightly to $588.4 million, compared
to $597.5 million in 2014.

Despite the less-than-superhuman financial results, there were many
bright spots in 2015, including:

• The capital improvements. In 2015, the Company completed

$177.3 million in important capital improvements, a 34% increase
over 2014. This is significant, because our stockholders earn a return
on capital investment, and our capital program lays the foundation for
future earnings growth.

• The dividend. On January 27, 2016, our Board declared our 284th

consecutive quarterly dividend and increased the annual dividend for
the 49th consecutive year.

Peter C. Nelson Chairman of the Board Martin A. Kropelnicki President and Chief Executive Officer

HOME

HIGHLIGHTS

LETTER

SERVICE AREAS

FINANCIAL REVIEW

DIRECTORS

• The rate cases. We filed a General Rate Case for California requesting additional revenues of $94.8 million in

2017, $23.0 million in 2018, and $22.6 million in 2019. Although we cannot predict what the California Public
Utilities Commission will ultimately approve, a decision is expected by the end of 2016. And, in Hawaii, we
received two approvals that together will add $2.8 million to annual revenues.

• The recycled water partnership with Apple. As announced in February 2015, we partnered with Apple, Inc., the

City of Sunnyvale, and the Santa Clara Valley Water District on a recycled water project that will produce 157,000
gallons of water per day. Cal Water will invest $1.5 million in the project and provide water utility services to the
new Apple 2 campus in Cupertino.

Although we expect to eventually recover drought-related expenses, 2016 promises to be a lean year as it is the
third year of a three-year rate case cycle for Cal Water, our largest subsidiary. We will work diligently to manage
controllable expenses while focusing on achieving a favorable outcome in ongoing rate case proceedings.
We will also maintain our focus on providing affordable, excellent service to our customers, something we
succeeded at again in 2015.

Magnificent Achievements in Providing
Reliable, Affordable, Excellent Service to Customers!

In order to tell our 2015 customer service story in a way that reads more like a comic book than a 400-page
novel, we will organize our efforts into three categories: reliability, affordability, and service. First, let’s take
a break from the California drought and begin in New Mexico with an achievement in all three.
In April, we acquired the assets of the Indian Hills Water Company, whose 235
customers routinely experienced interruptions in water service that lasted
several days at a time – often in the hot summer months. In a very short
period of time, we identified problems with the system’s water storage and
well productivity and made relatively low-cost repairs. Now, customers get
uninterrupted, high-quality water service, and they couldn’t be happier.

Our new customers
now get uninterrupted,
high-quality water service

HOME

HIGHLIGHTS

LETTER

SERVICE AREAS

FINANCIAL REVIEW

DIRECTORS

In California...

Drought conditions required heroic effort from our engineering and operations professionals. Throughout 2015,
we monitored water supplies closely and modified our operations when necessitated by changing conditions.
One challenge we didn’t anticipate was the damage done to the California Aqueduct, a key part of the state’s
infrastructure, by mid-October storms. When we learned that water deliveries for customers in our Leona Valley
water system would be interrupted during lengthy repairs, BAM! we flew into action. We asked our customers
to curtail non-essential water use; calculated how much water we could pump from local groundwater wells;
secured water trucks to supplement local water production; and monitored water levels in our storage tanks
round-the-clock to prevent any interruptions in service during the weeks the aqueduct repairs were underway.

In other supply news, we reached an agreement with the City of San Bruno, Daly City, and the San Francisco
Public Utilities Commission on a groundwater storage and recover y project that will enhance supplies in
our South San Francisco ser vice area by coordinating water deliver y operations in a way that allows the
groundwater basin to recover in wet years and sur face water supplies to recover in dry years. Another
partnership on the horizon is a study with the Bay Area Water Supply and Conservation Agency to determine
whether it is possible to augment existing water supplies by pumping and treating brackish water from beneath
the San Francisco Bay.

On the demand management side, our efforts were nothing short of amazing. We added several conservation
programs to an already impressive portfolio, including turf replacement, commercial water -use evaluations,
and toilet delivery and bathroom retrofit programs. And POW! These new programs are expected to
save 99 million gallons of water per year, and more than 1.7 billion gallons over their lifetime. Even better,
our customers achieved an overall reduction in water use of 28.6% from June through December 2015
compared to 2013, surpassing the State-mandated reduction of 25%.

There is no question that declining water use is requiring water providers throughout the state
of California to increase rates in order to cover fixed costs. That’s because most of the costs
of providing clean, reliable water supplies don’t decrease when customers use less water.
Although we can’t change that, we can continue to focus on increasing our efficiency and
offering programs to help those who need it.

HOME

HIGHLIGHTS

LETTER

SERVICE AREAS

FINANCIAL REVIEW

DIRECTORS

In addition to our Continuous Improvement program, through which every employee works to improve our service
and efficiency, we began work on several projects with our partners, Professor Juneseok Lee and the San Jose
State University School of Engineering. Over a five-year period, we will pursue seven projects to address knowledge
gaps in the drinking water industry. One of these projects will enable us to better prioritize our water main
replace- ment projects; another will develop key performance indicators for our water distribution systems; and
yet another will identify optimal strategies for water well rehabilitation. We expect this collaboration between our
team and the university to yield improvements in our efficiency that will enhance affordability.

Another avenue for improving affordability is securing government grants to offset costs. In Januar y, we
announced that we had received a $136,000 grant to make improvements to pumping facilities in our Lucerne,
California system. One month later, we received grants for more than $5 million to offset costs of meeting the
new state standard for chromium -6 in our Willows District. And in July, we received $1.3 million in grants from
the Department of Water Resources Water-Energy Grant Program to enhance our Bathroom Fixture Replacement
Program in our Bakersfield, East Los Angeles, and Dominguez systems. It takes effort to apply for government
grants, but it is well worth it when we can secure funds that will minimize rate impacts of necessar y projects.

Consolidation is another approach to affordability that the California Public Utilities Commission is currently
considering as part of our 2015 General Rate Case. In the case, we proposed consolidating rate-making for
some of our small districts with larger districts to take advantage of economies of scale and minimize rate
increases. We also proposed enhancements to our Rate Support Fund, which provides discounts to customers
in lower-income communities where the costs of providing clean, reliable water supplies are relatively high, and
our Low-Income Rate Assistance Program.

As important as it is for us to provide a reliable and affordable water supply, the reality is that customers expect
us to do just that. You don’t build loyalty by providing what’s expected; you build loyalty by going beyond what’s
expected. And that’s where excellent ser vice comes in.

HOME

HIGHLIGHTS

LETTER

SERVICE AREAS

FINANCIAL REVIEW

DIRECTORS

In 2015, we tasked a team with streamlining our top 10 customer center business processes to improve
customer satisfaction as well as operational efficiency and employee safety. And, as we have reported in
years past, we continued to track various customer satisfaction indicators to ensure that we are providing
excellent service, with the goal always being to surpass industry standards. We are very happy with our team’s
per formance in 2015, when, despite a significant increase in drought-related call volume, we answered 87% of
customer calls within 30 seconds.

We also implemented a new automated program that sends surveys to customers after they receive service from
us. The surveys enable us to get real-time feedback, identify trends, and resolve issues. The results for 2015
were good, with 78% of the respondents rating our service a 4 or 5 on a scale of 5 (with 5 being best); 84.4%
rating our employees a 4 or 5; and 67% indicating that their issue was resolved on the first call.

These results mirror the results of a poll we conducted in the fall of 2015 to determine whether our drought
response, and in particular, our system of water budgets and surcharges, was impacting customer satisfaction
levels. In that poll of randomly selected customers from throughout our California service areas, we got a score
of 4 for overall satisfaction (with 5 being best) and 4.4 for service.

We firmly believe that our track record of providing quality, service, and value came into play at the end of 2015
when the City of Visalia notified us of its intention to conduct an appraisal of our assets, the first step in an
eminent domain action to acquire our water system. We responded swiftly and decisively with an aggressive
public education campaign. Within weeks, more than 1,000 customers were offering to support us, and another
3,000 were following our issue- specific Facebook page. We are pleased to report that two months later, the City
announced its decision not to move forward. This outcome was particularly important because it demonstrated
our unwavering commitment to protecting our business to all of the communities we ser ve.

HOME

HIGHLIGHTS

LETTER

SERVICE AREAS

FINANCIAL REVIEW

DIRECTORS

Astounding Performance in Providing
High-Quality Water and Water Reuse Services!

As this report goes to press, the people of Flint, Michigan are experiencing ver y serious water quality issues
that appear from our vantage point to be a culmination of poor water system maintenance, a lack of adequate
testing and preparation for use of a new water source, and an absence of critical regulator y oversight. Our
hearts go out to them. Their ver y sad situation highlights the seriousness of the responsibility we have to
protect our customers’ health and safety and underscores the importance of our water
quality assurance program.

Protecting customer health and safety has always been our top priority. In fact,
the superheroes on our water quality team worked diligently to conduct more
than 400,000 water quality tests in 2015 to check for the presence of 269
constituents. Their efforts, as well as our proactive approach to water system
maintenance and infrastructure investment, are critical to ensuring that we
don’t experience a water quality crisis like the one unfolding in Flint.

...customer health
and safety has
always been our top
priority

Our water quality and engineering teams also reached a significant milestone
in 2015 by achieving full compliance with the new California regulation for
chromium-6. After conducting groundbreaking research to identify the most
cost- effective treatment methodology, we became one of the first water providers
in the United States to use full-scale strong base anion-exchange technology to meet
the chromium-6 standard. In 2015, we constructed nine treatment plants that will operate at a cost that
is considerably less expensive than other treatment methodologies, which is critical to maintaining
affordability for our customers. At a December ribbon-cutting ceremony, Dixon Mayor Jack Batchelor, Jr.
recognized Cal Water for being a great partner and commended us for being proactive and “laying the
groundwork” for other water providers. We thank the Mayor for his kind com-ments, and commend our
water quality and engineering teams for their work, which has once again earned us recognition as leaders
in the industry.

HOME

HIGHLIGHTS

LETTER

SERVICE AREAS

FINANCIAL REVIEW

DIRECTORS

Marvelous Adventures in
Building a Strong Brand and Reputation!

We had a lot of fun in 2015 spending time with students from our ser vice areas. At Shasta Elementar y School
in Chico, California, we took part in an all-school assembly outside on the soccer field, where, SHAZAM! – we
surprised the fifth graders from Room 17 with the announcement that they had won our H2O Challenge. Seeing
the excitement on their faces then, and the pride later as they toured us through their rain harvesting and
drought garden project, was truly a pleasure. Then, it was our turn to be proud as we watched two accomplished
young customers, one from Chico and one from Westlake, be recognized by state legislators for winning our
grand-prize scholarships of $10,000 each. Spending the day with them at the Capitol and learning about their
interests and aspirations was inspiring, and made us proud to be part of a company that really does improve
the quality of life for those it ser ves.

Throughout the year, we contributed $600,000 to organizations in California, Washington, Hawaii, and New
Mexico, including the Lucerne Alpine Senior Center in California, the Maui Food Bank in Hawaii, the Adelante
Development Center in New Mexico, and the Peninsula Community Foundation in Washington. In March, when
an arsonist set fire to the Monterey County Food Bank, we contributed $10,000, and in October, when
wildfires ravaged northern California, we joined our employees in making a donation of $11,000.

So much goes into building our brand and our reputation. It’s the service we provide
to customers. It’s the support we provide to our communities. And, as much as
anything, it’s our people. Or, as we like to think of them, our everyday heroes. We
think the world of our employees, and we think they think the world of us. After all,
thanks to their survey responses, we were ranked as a Top Work-place in the
San Francisco Bay Area for the fourth year in a row by the Bay Area News Group.

We contributed
$600,000 to
charitable
organizations

HOME

HIGHLIGHTS

LETTER

SERVICE AREAS

FINANCIAL REVIEW

DIRECTORS

In 2015, two of our officers announced their plans to retire: Francis S. (Stan) Ferraro, Vice President of
Corporate Development, effective Januar y 31, 2016, and Michael J. Rossi, Vice President of Continuous
Improvement, effective March 31, 2016. We will miss them both and wish them a ver y healthy, happy
retirement. We also welcomed a new officer, Robert J. Kuta, who joined our team in April 2015 as Vice
President of Engineering, and a new member of our Board of Directors, Gregory E. Aliff, who joined us
in September 2015. Both of them bring impressive credentials and expertise to their roles at the Company.

In the coming year, we will proudly work alongside our ever yday heroes to continue delivering results and
fulfilling our purpose of enhancing the quality of life for our customers, communities, employees, and
stockholders. As always, we wish you the best in 2016 and thank you for your continued investment in
California Water Ser vice Group.

Martin A. Kropelnicki
President and Chief Executive Officer

Peter C. Nelson
Chairman of the Board

HOME

HIGHLIGHTS

LETTER

SERVICE AREAS

FINANCIAL REVIEW

DIRECTORS

Washington
Operations/ Customer Centers

Hawaii
Operations/ Customer Centers

California
Districts

Olympia (S.W. Regional Office) •
Gig Harbor (N.W. Regional Office
and Customer Center) • Sequim
• Issaquah • Orcas Island
(Field Offices)

Ka`anapali (Maui) • Waikoloa (Hawaii)

Antelope Valley • Bakersfield • Bayshore •
Bear Gulch • Chico • Commerce • Dixon •
Dominguez • East Los Angeles • Haw-
thorne • Hermosa-Redondo • Kern River
Valley • King City • Livermore • Los Altos
• Marysville • Oroville • Palos Verdes •
Redwood Valley • Salinas • Selma •
Stockton • Visalia • Westlake • Willows

New Mexico
Operations / Customer Centers

Elephant Butte • Rio Communities •
Cedar Crest

Serving more than 425 neighborhoods
and small communities in the counties
of Clallam, Jefferson, Kitsap, Mason,
Pierce, King, San Juan, and Thurston.

Serving the communities of
Ka`anapali, Pukalani, Waikoloa,
North Kona Coast, and Kohala
Coast on the islands of Maui
and Hawaii.

Including Hawthorne and
Commerce operation and
maintenance agreements

Serving the communities of Meadow
Lake, Cypress Gardens, Rio Communities,
Rio Del Oro, Elephant Butte, Sandia
Knolls, and Cedar Crest in the counties of
Sierra, Valencia, and Bernalillo.

Regulated Customer Connections

Customer Connections

Regulated Customer Connections

2015 16,500

2014 16,300

2015 4,300

2014 4,300

2015 480,300

2014 477,900

2015 7,900

2014 7,600

HOME

HIGHLIGHTS

LETTER

SERVICE AREAS

FINANCIAL REVIEW

DIRECTORS

California Districts & Communities

Antelope Valley • Fremont Valley, Lake Hughes, Lancaster & Leona Valley

Bakersfield

Bayshore • South San Francisco, Colma, Broadmoor, San Mateo & San Carlos

Bear Gulch • Atherton, Woodside, Portola Valley & a portion of Menlo Park

Chico • Hamilton City

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 & Commerce (lease agreements)

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

2015

2014

1,400

70,800

70,100

53,600

53,500

18,900

29,000

28,700

2,900

34,000

26,800

7,600

26,800

26,700

4,000

2,600

4,100

2,600

18,600

18,500

Los Altos • Portions of Cupertino, Los Altos Hills, Mountain View & Sunnyvale

18,900

Mar ysville

Oroville

Palos Verdes • Palos Verdes Estates, Rancho Palos Verdes, Rolling Hills & Rolling Hills Estates

Redwood Valley • Lucerne & portions of Duncans Mills, Guerneville, Dillon Beach, Noel Heights & Santa Rosa

Salinas

Selma

Stockton

Visalia

Westlake • Westlake Village & a portion of Thousand Oaks

Willows

3,800

3,600

3,700

3,600

24,100

1,900

28,500

28,400

6,300

43,600

43,300

43,100

42,400

7,100

2,400

7,100

2,400

HOME

HIGHLIGHTS

LETTER

SERVICE AREAS

FINANCIAL REVIEW

DIRECTORS

Eight-Year Financial Review

(Dollars in thousands, except common
share and other data)

Summar y of Operations

Operating revenue

Operating expenses

Interest expense, other income
and expenses, net

2015 2014

2013

2012

2011

2010 2009

2008

$588,368

$597,499

$584,103

$559,966

$501,814

$460,399

$449,372

$410,312

$517,215

$515,652

$510,098

$486,123

$434,647

$398,586

$391,253

$352,843

$26,136 $25,109

$26,751

$25,015

$29,455

$24,157 $17,565

$17,664

Net income

$45,017

$56,738

$47,254

$48,828

$37,712

$37,656

$40,554

$39,805

Common Share Data

Earnings per share (diluted)

Dividend declared

Dividend payout ratio

Book value

$0.94

$0.670

$1.19

$1.02

$1.17

$0.90

$0.98

$0.95

$ 0.650

$0.640

$0.630

$0.615

$0.595 $0.590

$0.585

71% 53%

63%

54%

68% 66% 61%

62%

$13.41 $13.11

$12.54

$11.30

$10.76 $10.45

$10.13

$9.72

Market price at year-end

$23.27

$24.61 $23.07

$18.35

$18.26

$18.64 $18.41

$ 23.22

47,875

47,806

47,741

41,908

41,817

41,667 41,531

41,446

Common shares outstanding
at year-end (in thousands)

Return on average common
stockholders’ equity

Long-term debt interest coverage

3.67

4.29

7.1% 9.3%

10.6%

8.5%

9.0%

9.8%

10.2%

3.45

3.11

3.59

4.04

4.72

8.8%

3.42

HOME

HIGHLIGHTS

LETTER

SERVICE AREAS

FINANCIAL REVIEW

DIRECTORS

Eight-Year Financial Review

(Dollars in thousands, except common
share and other data)

Balance Sheet Data

Net utility plant

Total assets

Long-term debt,
including current portion

Capitalization ratios:

2015 2014

2013

2012

2011

2010 2009

2008

$1,701,768

$1,590,431

$1,515,831

$1,381,119

$1,457,056

$1,294,297

$1,198,077

$1,112,367

$ 2,246,095

$2,187,351

$1,959,855

$1,995,924

$1,854,587

$1,692,066

$1,525,581

$1,418,107

$518,887

$425,840

$434,050

$481,250

$488,165

$481,561

$387,222

$290,316

Common stockholders’ equity

55.3%

59.5%

58.0%

49.6%

0.0% 0.0 %

0.0%

44.7% 40.5%

42.0%

50.4%

48.0%

0.0%

52.0%

47.5% 52.1%

58.1%

0.0% 0.0%

0.0%

52.5% 47.9%

41.9%

Preferred stock

Long-term debt

Other Data

Water production
(million gallons)

Customers at year-end, including
Hawthorne and Commerce

New customers added

Revenue per customer

98,899

118,282

126,363

125,892

120,353

121,942

131,558

137,757

509,000

506,100

502,900

500,700

499,500

497,900

494,700

490,493

2,900

3,200

2,200

1,200

1,600

3,200

4,207

$1,156

$1,181

$1,161

$1,118

$1,105

$925

$908

2,938

$837

3,228

Utility plant per customer

4,925

4,628

4,401

4,087

3,925

3,706

3,455

Employees at year-end

1,155 1,105

1,125

1,132

1,127 1,013

929

HOME

HIGHLIGHTS

LETTER

SERVICE AREAS

FINANCIAL REVIEW

DIRECTORS

Board of Directors

George A. Vera
Former Vice President and Chief Financial Officer, the David and Lucile Packard Foundation. Director since 1998.
Member of the following Committees: Audit, Finance/Risk Management, and Nominating/Corporate Governance.

Bonnie G. Hill
President, B. Hill Enterprises, L.L.C. Director since 2003. Member of the following
Committees: Organization/Compensation and Nominating/Corporate Governance.

Edwin A. Guiles
Former Executive Vice President of Corporate Development, Sempra Energy. Director since 2008.
Member of the following Committees: Organization/Compensation, Finance/Risk Management, and Audit.

Gregory E. Aliff
Former Vice Chairman and Senior Partner of U.S. Energy & Resources, Deloitte LLP.
Director since 2015. Member of the Audit Committee.

Martin A. Kropelnicki
President and Chief Executive Officer. Director since 2013.

Peter C. Nelson
Chairman of the Board. Director since 1996.

Terry P. Bayer
Chief Operating Officer, Molina Healthcare, Inc. Director since 2014. Member of the following Committees:
Organization/Compensation and Nominating/Corporate Governance.

Thomas M. Krummel, M.D.
Professor and Chair, Surgery Department, Stanford University School of Medicine. Director
since 2010. Member of the following Committees: Nominating/Corporate Governance and
Organization/Compensation.

Richard P. Magnuson
Lead Director and Private Venture Capital Investor. Director since 1996. Member of the following Committees:
Audit, Finance/Risk Management, and Nominating/Corporate Governance.

Lester A. Snow
Former Director of the California Department of Water Resources. Director since 2011. Member
of the following Committees: Organization/Compensation and Finance/Risk Management.

HOME

HIGHLIGHTS

LETTER

SERVICE AREAS

FINANCIAL REVIEW

DIRECTORS

Corporate Officers

Paul G. Townsley Vice President, Rates and Regulatory Matters

Thomas F. Smegal, lll Vice President, Chief Financial Officer and Treasurer

Lynne P. McGhee Vice President, General Counsel

Ronald D. Webb Vice President, Human Resources

Martin A. Kropelnicki President and Chief Executive Officer

Timothy D. Treloar Vice President, Operations and Water Quality

Michelle R. Mortensen Corporate Secretary

David B. Healey Vice President, Controller

Francis (Stan) Ferraro Vice President, Corporate Development

Robert J. Kuta Vice President, Engineering

Shannon C. Dean Vice President, Corporate Communications and Community Affairs

Michael B. Luu Vice President, Customer Service and Information Technology

Michael J. Rossi Vice President, Continuous Improvement

HOME

HIGHLIGHTS

LETTER

SERVICE AREAS

FINANCIAL REVIEW

DIRECTORS

Corporate Information

American Stock Transfer & Trust Company
6201 15th Avenue
Brooklyn, NY 11219
(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 eligible guarantor institution (banks, stockbrokers, 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 on Wednesday, May 25, 2016, 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 transacted during the meeting will be contained in the proxy material, which will be mailed to stockholders on or about
April 13, 2016.

Anticipated Dividend Dates For 2016
Quarter Declaration Record Date Payment Date

First January 27 February 8 February 19
Second April 27 May 9 May 20
Third July 27 August 8 August 19
Fourth October 26 November 7 November 18

Annual Report For 2015 On Form 10-K
A copy of the Company’s report for 2015 filed with the Securities and Exchange Commission (SEC) on Form 10-K is available 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 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

HOME

HIGHLIGHTS

LETTER

SERVICE AREAS

FINANCIAL REVIEW

DIRECTORS

California Water Ser vice Group

1720 North First Street
San Jose, California 95112-4598
(408) 367-8200
www.calwatergroup.com

NYSE: CWT

THE
END