California Water Service Group Annual Report 2016

← All annual reports

FY2016 Annual Report · California Water Service Group

Loading PDF…

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

www.calwatergroup.com
NYSE: CWT

Making
Making
Good Things
Good Things
Happen
Happen

CALIFORNIA WATER SERVICE GROUP 2016 SUMMARY ANNUAL REPORT

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 24, 2017, 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 12, 2017.

Anticipated dividend dates for 2017
Declaration
Quarter

Record Date

Payment Date

First
Second
Third
Fourth

January 25
April 26
July 26
October 25

February 6
May 8
August 7
November 6

February 17
May 19
August 18
November 17

Annual report For 2016 On form 10-K
A copy of the Company’s report for 2016 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 website.

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

Table of Contents

Go With the Flow

My Journey to the Tap

When I Finally Arrive, I Make
Good Things Happen

And I Owe it All to California
Water Service Group

They Make Good Things
Happen Too

Awards

Financial Highlights

2016 Highlights

Twenty-Year Total Return
on Investment

Letter to Our Stockholders

Service Area Maps

California Districts and
Communities

Eight-Year Financial Review

Board of Directors

Corporate Officers

So Now You Know

Corporate Information

California Water Service Group (NYSE: CWT) is the third-largest publicly traded water utility in the
United States, providing high-quality utility services 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 Service Company, Inc. (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.

Go with the

Flow

Hello! It’s me, Water. I’m the one who’s there for you

whenever you need me, even though you tend to take

me for granted. No hard feelings—I get it. After all, I’m

just two parts hydrogen and one part oxygen. But humor

me. Let me show you how I travel from the source to your

tap. If you come along with me on this adventure, you’ll

be amazed at all the places I go, and all the good things

that happen when I get there!

I fall from the sky as
snow or rain.

I don’t even need a parachute–
woo-hoo!

Journey

to the tap

Admit it: you turn on your faucet
without giving it a second thought.
Do you think the tap water fairy waves
a wand and I magically appear? Au
contraire! Depending upon where you
live, I might travel hundreds of miles
to get to you. And that’s only after
jumping through all kinds of water
quality hoops. It’s quite a journey, let
me tell you. It all starts with me sitting
in a cloud, waiting for the adventure
to begin…

When I land, I either make it to a lake or river, or I seep
into the ground, where I end up in an aquifer deep
under the Earth’s surface.

If I trickled through the ground to the
aquifer, a groundwater well hauls me up
as many as 1,000 feet to be treated.

It’s quite a ride!

If I’m in a lake or river,
I relax for a while until I’m pulled
out by pumps and taken to a
water quality treatment plant.

After I get cleaned up, I have to pass some
really tough water quality tests.

Most people don’t like taking tests, but
I love it; it’s how I know I’m safe to drink.

P hew! After all that,
I’m sent with some of my
friends to wait our turn in a
water storage tank.

l y , I t r a v e l
Fi n a l
t o m y de st i n at i o n
t hr o u gh be l o w -
g r o u n d p i pe s.

One last water quality check before
I go to the customer.

In C hico, C alifor nia,
I go t o Sierra Nevada Brewer y.
C heers!

Not to brag or anything, but I’m kind
of a big deal. Thanks to me, you can
wake up to a nice hot shower and
a delicious cup of coffee. And that’s
just the beginning; the list goes
on and on. Your food? Yep, I grew
that. Your blue jeans? Me again! The
tires on your car and the fuel that
makes it go? You got it—I helped
make them. I make everything from
computer chips to potato chips.
And who wants to imagine a world
without potato chips? The fact is, I
make good things happen pretty
much everywhere I go.

In Gig Harbor, Washington, I clean up the family dog.

In Waikoloa, Hawaii, I’m recycled and used
to make golf courses green.

Aloha!

In Belen, New Mexico, I hang out here just
waiting to fight fires— let me at ‘em!

In South San Francisco, California, I’m part of
the candy-making process at See’s—yum!

In Visalia, California Dairies uses
me to make milk. No cow tipping allowed!

To tell the truth, I couldn’t do the amazing things I do
without California Water Service Group. It’s not that I’m
lazy or anything, but if it were left up to me, I’d just kick
back wherever I landed. I certainly wouldn’t be where
you need me, I wouldn’t be clean, and I wouldn’t be
able to make so many good things happen. So I have to
give credit where credit is due—thanks for everything,
California Water Service Group!

Here I am being cleaned.

This scientist is getting up close and
personal, but that’s OK!

This gigantic pump pushes
me up and down the
Palos Verdes
Peninsula.

Uh-oh: a leak in the water main!
Thanks for the quick repair.

Here are some storage tanks
being constructed–
how awesome is that?

Once my job is done, I’m taken away to
be cleaned so I can start the process
all over again.

They make

Good Things
happen
too

It turns out, I’m not the only one who’s a big deal around here. In 2016,
the people at California Water Service Group made good things
happen in so many ways: they helped customers save 28 billion
gallons of water. They invested $228.9 million to build and upgrade
pipes, pumps, and water quality treatment plants. They analyzed
nearly 58,000 water samples and conducted nearly 385,000 water
quality tests. They answered 600,000 customer service calls. They
taught elementary-school kids all about me, and even helped some
high schoolers pay for college. And if all that wasn’t enough, their
stockholders contributed $665,000 to charitable organizations in
California, Washington, Hawaii, and New Mexico. Nice!

I may not get as
much attention
as i’d like, but
California
Water Service
Group got a lot
of recognition
in 2016.

Maybe next year, I’ll get some
cool awards ,too
(hint, hint).

For the first time ever, California
Water Service Group was certified
as a Great Place to Work® by the
Great Place to Work® Institute.

For the fifth year in a row,
Cal Water was named a
Top Workplace in the
Bay Area by the Bay Area
News Group.

The Company received its first-ever
patent for a device invented by our
team to protect the environment
in the event of a drinking water
storage tank overflow.

In J.D. Power’s inaugural Water
Utility Residential Customer
Satisfaction StudySM, Cal Water
ranked “Highest in Customer
Satisfaction among

Water Utilities in the West.”*

Cal Water was named
Business of the Year by the
City of Salinas for its
dedication and involvement
in the local community.

*Cal Water received the highest numerical score among 24 water utilities in the West region in the J.D. Power 2016 Water Utility Residential Customer Satisfaction Study, based on 20,951 total
responses, measuring experiences and perceptions of customers with their primary water provider surveyed March 2016. Your experiences may vary. Visit jdpower.com for more information.

Financial highlights

Year ended December 31

2016

2015

2014

2013

2012

Market price at year-end

$33.90

$23.27

$24.61

$23.07

$18.35

Book value per share

13.75

13.41

13.11

12.54

11.30

Earnings per share (diluted)

1.01

0.94

1.19

1.02

1.17

Dividend per share

0.690

0.670

0.650

0.640

0.630

Revenue*

609,370

588,368

597,499

584,103

559,966

Net Income*

48,675

45,017

56,738

47,254

48,828

*Dollars in thousands

2016 Highlights

(Although there are too many to name!)

Q1
Directors declare the 284th consecutive
quarterly dividend and the 49th consecutive
annual dividend increase.

Customers tour the Bakersfield and Visalia
Districts to meet employees and get a
firsthand look at water system upgrades.

Company wins its first ever U.S. Patent for
a device developed by employees to
dechlorinate drinking water in the event
of a storage tank overflow.

Q2
Sixth-grade students in Ms. Lenix’s class at
Downtown Elementary School in Bakersfield
learn they are the grand-prize winners of the
Company’s H2O Challenge.

Cal Water hosts appreciation events in Stockton
and Willows to recognize customers’ excellent
conservation performance.

Cal Water is ranked highest in the west in J.D.
Powers’ first-ever Residential Water Customer
Satisfaction StudySM.

Company is named a top workplace in the Bay
Area for the fifth consecutive year.

Q3
West Basin Municipal Water District
extends Cal Water’s contract to maintain
and operate recycled water system
through 2021.

Smokey Bear looks on as Cal Water presents
a check for $42,000 from employees and
stockholders to help victims of the Erskine Fire.

Hawaii Water Service Company (Hawaii
Water) receives approval on its 2015 Rate
Case for Ka’anapali.

Q4
Company awards $60,000 in college
scholarships to students in California,
Hawaii, and Washington.

Hawaii Water launches a new website to
provide convenient, user-friendly customer
service.

Company contributes $174,000 to local
charities to help those in need during the
holidays.

Cal Water receives final decision on its
2015 General Rate Case.

Cwt 20-year total return on investment

(On $100 stock purchase on December 31, 1996, with dividends reinvested)

$63

$64

$47

$53

$47

$77

$153

$166

$189

$173

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

$558

$353

$341

$313

$254

$189

$202

$206

$218

2008

2009

2010

2011

2012

2013

2014

2015

2016

$600

$500

$400

$300

$200

$100

2016—
W hat a
great year!
Thank you!

martin A. Kropelnicki
President and Chief Executive Officer

Peter C. Nelson
Chairman of the Board

Letter to our
Stockholders

Dear fellow stockholder:

If you thought Water’s adventure from
the source to the tap was exciting, wait
until you hear about our journey through
2016. It was definitely a year for making
good things happen—for our customers,
stockholders, communities, and employees.

We anticipated it would be a tough year
financially, given the continuing drought
in California and the fact that 2016 was
the third year of a three-year rate case
cycle for California Water Service (Cal
Water), our largest subsidiary. Despite
these circumstances, we delivered strong
results. Net income for the year was $48.7
million, compared to $45.0 million
in 2015, and earnings per common
share were $1.02, up from $0.94
in 2015. Total revenues were
$609.4 million, an increase of
3.6% compared to the prior year.
And, in January 2017, our Board
declared our 289th consecutive
quarterly dividend and increased
the annual dividend for the 50th
consecutive year.

We invested a record
$228.9 mil lion
in water system
infrastructure
impr ovements!

Even better, we reached two significant
milestones that support our goal of
building long-term stockholder value while
providing high-quality water to customers
at affordable rates. First, we invested a

record $228.9 million in expanding and
upgrading our water infrastructure. Second,
we concluded our 2015 General Rate Case
in California.

Enhancing Stockholder
Value

Let’s begin with our capital investment
program. By investing in infrastructure
projects that provide critical customer
benefits, such as quality and reliability, we
also provide value to stockholders, who
earn a return on this investment.

In 2016, our investment in infrastructure
included:
$83.8 million in new water lines, which increases
reliability for customers

$4.9 million in water treatment plants and
treatment plant upgrades, which enables us
to provide high-quality water

$34.3 million in wells, tanks, and pumps, which
ensures that we can deliver water supplies where
customers need them

$13.2 million in information technology projects,
which is key to providing excellent customer service

C ommi ssion aut hor ized
ion
l
$658.8 mi
f or i nfrastr uct ure
pr ojects!

One of the many advantages of being served by a regulated utility is
that all capital investments are reviewed and approved by state utility
commissions as part of the rate-setting process.

It was through this process that Cal Water received authorization in
2016 to begin two of its largest capital projects ever: a $60 million,
seven-mile, large-diameter pipeline project in Southern California, and
a $70 million project for water quality treatment at 38 wells to meet an imminent new water
quality standard for 1,2,3-trichloropropane (TCP). When the projects are completed,
Cal Water will be able to request expedited administrative approval to add them to rate base
and begin earning a return on them.

That brings us to the second important stockholder value story of 2016: after an extensive,
18-month review of rates, water system improvement plans, and costs, the California Public
Utilities Commission (Commission) issued a favorable, on-time decision on Cal Water’s
General Rate Case. This case was the largest in the company’s 90-year history, and the
Commission’s approval of rate increases means that we can continue to make water system
improvements that enable us to deliver a safe, reliable water supply.

The decision authorizes Cal Water to invest a total of $658.8 million in infrastructure projects
throughout California in 2016, 2017, and 2018. Included in the $658.8 million is $197.3 million
for “advice letter” projects, which are projects that we will complete before we ask to include
them in rates. It also increases revenue by an estimated $45.0 million in 2017, up to
$17.2 million in 2018, up to $16.3 million in 2019, and up to $30.0 million upon completion
and approval of the advice letter projects.

Total Operating Revenue
($ in thousands)

559,966

584,103

597,499

588,368

609,370

2012

2013

2014

2015

2016

In a separate approval, the Commission authorized us to begin collecting $2.9 million in
drought expenses incurred in 2014 and 2015. We continue to track drought expenses in 2016
and 2017 for future recovery.

Finally, the Hawaii Public Utilities Commission approved a $1.1 million increase in revenues to
recover the costs of several infrastructure improvements in Ka’anapali, including replacement
of meters and service lines, recoating and reinforcement of a 1.5 million-gallon storage tank,
two additional new storage tanks, and upgrades to the computer system used to monitor
and control the water system.

Here’s the bottom line: maintaining, expanding, and updating water infrastructure requires
regular investment. While the nation’s overall water infrastructure gets a dismal D grade
from the American Society of Civil Engineers, our systems continue to be in far superior
condition. And that’s good news for our customers.

Delivering High-Quality Drinking Water and Water for Reuse

As new water quality standards are set and existing standards become increasingly stringent,
water treatment will continue to make up a large part of our capital investment program.
In 2015, we installed treatment units at nine well sites to meet a new state standard for
chromium-6; in 2016, we turned our attention to new challenges.

As previously mentioned, we began work on water quality treatment that will be required
to meet a new state standard for TCP, which is expected to become effective in 2017.
Although the California Public Utilities Commission has approved the TCP treatment for
future rate recovery, we are hoping to mitigate the impact on customer rates by pursuing a
lawsuit to recover these expenses and other damages from the companies responsible for
TCP contamination.

Lead was also a constituent of concern in 2016, due to the ongoing lead contamination
crisis in Flint, Michigan. We are compliant with health and safety codes mandating the
use of lead-free materials in water systems, and we test our water sources regularly
to ensure that the water is not corrosive. (Corrosive water can cause lead from home
plumbing to leach into the water.)

So much more to share!

Even so, we went a step further in 2016, engaging an expert third party to ensure that our lead and
copper compliance program was second to none. We also completed lead and copper monitoring
as required by the United States Environmental Protection Agency (EPA) and collaborated with
public health agencies on a plan to conduct additional testing in schools in 2017.

We did all this while continuing our rigorous water
quality testing and treatment program, analyzing nearly
58,000 samples and conducting almost 385,000 tests
for 275 constituents.

On the water reuse side of the business, our contract with the West Basin Municipal Water
District (West Basin) was extended to 2021 by a unanimous vote of its Board of Directors.
Pursuant to the contract, we will continue to maintain and operate the distribution system for
the Edward C. Little Water Recycling Facility, the largest water recycling facility of its kind in
the United States.

We also continued to make significant upgrades to our wastewater treatment plants. In
Hawaii, we replaced controls at sewer pump stations to improve wastewater spill prevention.
In New Mexico, we replaced 3,600 feet of recycled water pipeline and upgraded the Rio
Communities biological treatment aeration system. We also purchased 116 acres of land near
the Rio Del Oro Wastewater Treatment Facility and installed irrigation systems to allow for the
environmentally friendly spreading of high-quality, treated effluent.

Annual Dividend
($ per share)

0.630

0.640

0.650

0.670

0.690

2012

2013

2014

2015

2016

Providing Affordable, Excellent Service

As important as water system improvements and water quality testing are, they tend to go
unseen by the customer. What is seen by the customer is our service, and when it comes to
service, we strive to deliver both affordability and excellence.

Keeping rates affordable is a challenge for all water providers, because the costs of providing
water service are rising nationwide. As we’ve said, water systems need to be maintained and
updated, and new water quality standards need to be met. That’s why efficient operations
and innovative rate-making are key to keeping rates affordable.

For example, Cal Water proposed in its 2015 General Rate Case to consolidate rates for
some districts, spreading these costs over greater numbers of customers. The Commission
ultimately approved consolidation of rates in seven service areas. Cal Water also sought
approval to enhance its Low-Income Ratepayer Assistance program, which discounts bills for
qualified low-income customers, and its Rate Support Fund, which discounts bills in districts
where the costs of providing water service are highest.

Despite rising costs, we continue to deliver a clean, reliable water supply right to the
customer’s tap for less than a penny per gallon in nearly every community we serve.

In addition to affordable rates, customers expect excellent service. To make sure that’s what
they’re getting, we track key performance metrics. In 2016, we:

Received nearly 50,000 calls per month, and answered 84% of them within 20 seconds

Made an average of 2,100 two-hour appointment windows with customers each month, and arrived on
time 97.8% of the time

Produced and sent 5.5 million bills, achieving an accuracy rate of 99.2%

We also introduced new, simplified bills and partnered with FranklinCovey© to develop a
certification program for our customer service supervisors and managers.

In May, we
celebrated our
customers’
tremendous
conservation
efforts!

We’re committed to fulfilling our promise to provide customers with quality, service, and
value, and we were thrilled to be ranked highest in overall customer satisfaction among the
24 largest water utilities in the western United States in J.D. Power’s inaugural Water Utility
Residential Customer Satisfaction Study (SM). The 2016 study measured performance in six
areas: delivery (including reliability and quality), price, billing and payment, conservation,
communications, and customer service.

Even more extraordinary is the fact that we received this honor in the midst of a historic
drought in California. We believe it validated our customer-first approach to drought
response and our efforts to meet ambitious water-use reduction targets set by the State of
California while maintaining excellent relationships with our customers and communities.

It started back in April 2015, when the Governor declared a drought emergency and issued
an Executive Order mandating a 25% reduction in urban water use. To achieve this target,
the State Water Resources Control Board (the State Board) established water-use reduction
requirements based upon communities’ respective residential per-capita water use. We
responded by establishing an individual water budget for each customer and setting up a
system for surcharges, appeals, and water banking. Then we pulled out all the stops to help
our customers achieve their targets.

In May 2016, the State Board did the unexpected: in response to improving drought
conditions in parts of California, it allowed water providers to eliminate water-use reduction
requirements if they could prove that they could meet their customers’ water demands for
three years, assuming the continuation of severe drought conditions. After assessing our
water supplies, we eliminated surcharges in all of our California service areas, but continued
to ask customers to achieve modest water-use reduction targets. At year-end, our customers
had achieved total water savings of 23.5% compared to 2013.

That’s where we stood when 2016 came to a close, but the story doesn’t end there. At the
same time it changed course on emergency conservation actions, the State Board began
collaborating with several state agencies on a plan to make conservation a way of life
in California. The plan, released in early 2017, includes regulations intended to promote
efficient water use, eliminate water waste, strengthen local drought resilience, and improve
agricultural water-use efficiency and drought planning. We will partner with the State Board
to implement these regulations between 2017 and 2020.

Net Utility Plant
($ in millions)

1,457

1,516

1,590

1,702

1,859

2012

2013

2014

2015

2016

Building a Strong Reputation

Our leadership during the drought emergency strengthened our brand with customers and
regulators alike. After all, crisis response can make or break an organization’s reputation.

Unfortunately, another opportunity to prove ourselves arose in June, when the catastrophic
Erskine Fire destroyed 285 homes and charred 48,000 acres in our Kern River Valley service
area. Power was knocked out immediately, so we brought people, supplies, and emergency
generators from other parts of the Company to assist the community and help the local team
keep water flowing. In the heartbreaking aftermath, employees distributed stockholder-
funded gift cards so that customers who had lost everything could at least buy essentials.
In addition to the gift cards, the Company matched employee donations to the local
Salvation Army for relief efforts. Local Manager Chris Whitley received the prestigious Living
Water Award from the National Association of Water Companies for his role in leading the
Company’s emergency response efforts.

Our charitable giving reflects our purpose: to improve the quality of life for our customers,
employees, communities, and stockholders. Some of our corporate contributions are made
in response to tragedies like the Erskine Fire; others are made to support the day-to-day
efforts of organizations that share our commitment to improving the quality of life in the
communities we serve, such as food banks, homeless shelters, and agencies that assist youth,
seniors, and veterans in need. We also fund a Company scholarship program that distributes
$60,000 to students each year; this year’s two grand prizes of $10,000 scholarships went to
students in Salinas and Rancho Palos Verdes. Altogether, we made $665,000 in charitable
contributions in 2016.

We are proud that our employees share our commitment to giving back. Throughout
the Company, our people take the initiative to organize toy drives, clothing drives, and
blood drives to help those in need. One Stockton employee even took it upon herself to
spearhead an effort to raise $10,000 for a local family that lost its father in a tragic home
accident in 2016.

Book Value
($ per share)

11.30

12.54

13.11

13.41

13.75

2012

2013

2014

2015

2016

Employees as Best Advocates

Obviously, our employees care about our customers and communities. And we care about
them. So in addition to professional development opportunities, including customer service
and leadership training, we doubled down on safety training in 2016. It’s pretty simple; we
want our employees to be safe and healthy. We want them to be engaged. And we want
them to have the tools they need to serve customers. Our focus on being an employer of
choice seems to have paid off; in 2016, we were named a Great Place to Work® by the

Great Place to Work Institute® for the first time ever. We
were also named one of the top 100 places to work in the
greater San Francisco Bay Area by the Bay Area News
Group for the fifth year in a row.

In 2016, we welcomed two people to the officer team.
Elissa Y. Ouyang was promoted to Chief Procurement
Officer, and Gerald A. Simon was promoted to Chief
Safety and Emergency Preparedness Officer. In addition,
as a reflection of their expanded responsibilities and
increasingly complex roles, we announced the promotion of Timothy B. Treloar to Vice
President of Water Quality and Chief Utility Operations Officer and Michael B. Luu to Vice
President of Customer Service and Chief Information Officer.

On a bittersweet note, we said goodbye to the extraordinary Linda R. Meier, who retired
from our Board of Directors after 22 years of service. Linda brought uncommon insight,
intellect, and professionalism to her role, and we will miss her dearly. We wish her the very
best in her retirement.

While we’re at it, we’d like to wish you the best in the coming year. We thank you for your
continued support and investment in California Water Service Group.

martin A. Kropelnicki
President and Chief Executive Officer

Peter C. Nelson
Chairman of the Board

Washington

Hawaii

Operations/Customer Centers

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)

Serving more than 425 neighborhoods
and small communities in the countries
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.

Regulated Customer Connections

2016

16,700

2015

16,500

2016

4,400

2015

4,300

California

Districts

Antelope Valley • Bakersfield • Bayshore • Bear Gulch •
Chico • Commerce • Dixon • Dominguez •
East Los Angeles • Hawthorne • 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

Including Hawthorne and Commerce
operation and maintenance agreements.

Customer Connections

2016

482,400

2015

480,300

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

2016

8,000

2015

7,900

california districts & communities
Number of Customer Accounts

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

2016

2015

1,400

71,100

53,600

18,900

29,400

2,900

34,100

1,400

70,800

53,600

18,900

29,000

2,900

34,000

East Los Angeles | Portions of Montebello, Commerce,

26,800

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

7,600

26,900

3,900

7,600

26,800

4,000

2,600

Livermore

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

Marysville

Oroville

Palos Verdes | Palos Verdes Estates, Rancho Palos Verdes, Rolling Hills

& Rolling Hills Estates

2016

2015

18,600

18,900

3,800

3,600

24,200

18,600

18,900

3,800

3,600

24,100

Redwood Valley | Lucerne & portions of Duncans Mills, Guerneville,

1,900

Dillon Beach, Noel Heights & Santa Rosa

Salinas

Selma

Stockton

Visalia

Westlake | Westlake Village & a portion of Thousand Oaks

Willows

28,500

6,400

43,800

44,000

7,100

2,400

28,500

6,300

43,600

43,100

7,100

2,400

Eight-year financial review

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

2016

2015

Summary of Operations
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
Total assets*
Long-term debt, including current portion*
Capitalization ratios:

Common stockholders’ equity*
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
Utility plant per customer
Employees at year-end

*Years 2009-2015 reflect the retrospective adoption of ASU 2015-03

$609,370
$533,176
$27,519
$48,675

$588,368
$517,215
$26,136
$45,017

$1.01
$0.690
68%
$13.75
$33.90
47,965
7.5%
3.45

$0.94
$0.670
71%
$13.41
$23.27
47,875
7.1%
3.67

$1,859,277
$2,411,745
$557,953

$1,701,768
$2,241,253
$514,045

54.2%
0.0%
45.8%

99,096
511,500
2,500
$1,191
5,312
1,163

55.5%
0.0%
44.5%

98,899
509,000
2,900
$1,156
4,925
1,155

2014

2013

2012

2011

2010

2009

$597,499
$515,652
$25,109
$56,738

$584,103
$510,098
$26,751
$47,254

$559,966
$486,123
$25,015
$48,828

$501,814
$434,647
$29,455
$37,712

$460,399
$398,586
$24,157
$37,656

$449,372
$391,253
$17,565
$40,554

$1.19
$0.650
55%
$13.11
$24.61
47,806
9.3%
4.29

$1.02
$0.640
63%
$12.54
$23.07
47,741
8.8%
3.42

$1.17
$0.630
54%
$11.30
$18.35
41,908
10.6%
3.45

$0.90
$0.615
68%
$10.76
$18.26
41,817
8.5%
3.11

$0.90
$0.595
66%
$10.45
$18.64
41,667
9.0%
3.59

$0.98
$0.590
61%
$10.13
$18.41
41,531
9.8%
4.04

$1,590,431
$2,182,711
$421,200

$1,515,831
$1,954,741
$428,936

$1,457,056
$1,990,333
$475,659

$1,381,119
$1,848,517
$482,094

$1,294,297
$1,685,577
$475,072

$1,198,077
$1,520,826
$382,467

59.80%
0.0%
40.20%

118,282
506,100
3,200
$1,181
4,628
1,105

58.30%
0.0%
41.70%

126,363
502,900
2,200
$1,161
4,401
1,125

49.90%
0.0%
50.10%

125,892
500,700
1,200
$1,118
4,187
1,132

48.30%
0.0%
51.70%

120,353
499,500
1,600
$1,105
3,925
1,132

47.80%
0.0%
52.20%

121,942
497,900
3,200
$925
3,706
1,127

52.40%
0.0%
47.60%

131,558
494,700
4,207
$908
3,455
1,013

Gregory E. Aliff

Former Vice Chairman and Senior Partner
of U.S. Energy & Resources, Deloitte LLP.
Director since 2015. Member of the
following committees:
Finance/Risk Management and Audit.

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 Emeritus, 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.

Peter C. Nelson

Chairman of the Board.
Director since 1996.

Edwin A. Guiles

Former Chairman/CEO of San Diego
Gas & Electric Company and Southern
California Gas Company, Sempra Energy
Utilities. Director since 2008. Member of
the following committees: Organization/
Compensation, Finance/Risk Management,
and Audit.

Bonnie G. Hill

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

Martin A. Kropelnicki

President and Chief Executive Officer.
Director since 2013.

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.

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.

Shannon C. Dean

Vice President, Corporate
Communications and
Community Affairs

David B. Healey

Vice President, Controller

Michelle R. Mortensen

Corporate Secretary

Gerald A. Simon

Chief Safety and Emergency
Preparedness Officer

Elissa Y. Ouyang

Chief Procurement Officer

Thomas F. Smegal, III

Vice President and
Chief Financial Officer

Martin A. Kropelnicki

President and
Chief Executive Officer

Michael B. Luu

Vice President, Customer Service
and Chief Information Officer

Robert J. Kuta

Vice President, Engineering

Lynne P. McGhee

Vice President, General Counsel

Paul G. Townsley

Vice President, Rates and
Regulatory Matters

Timothy D. Treloar

Vice President, Water Quality and
Chief Utility Operations Officer

Ronald D. Webb

Vice President, Human Resources

Next time you turn on your faucet, think about me. Think
about all it took for me to get to you. And think about my
friends at California Water Service Group, because, doggone
it, we’re all making good things happen!

Corporate information

American Stock transfer & trust Company
6201 15th Avenue
Brooklyn, NY 11219
(800) 937-5449

Bond registrar
US Bank Trust, N.A.
One California Street
San Francisco, CA 94111-5402
(415) 273-4580

Anticipated dividend dates for 2017
Declaration
Quarter

Record Date

Payment Date

First
Second
Third
Fourth

January 25
April 26
July 26
October 25

February 6
May 8
August 7
November 6

February 17
May 19
August 18
November 17

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

www.calwatergroup.com
NYSE: CWT

Making
Making
Good Things
Good Things
Happen
Happen

CALIFORNIA WATER SERVICE GROUP 2016 SUMMARY ANNUAL REPORT