California Water Service Group
Annual Report 2019

Plain-text annual report

focus on what matters CALIFORNIA WATER SERVICE GROUP 2019 ANNUAL REPORT home focus letter financial review service areas directors TABLE OF CONTENTS 04 Focus on What Matters 14 Letter to Stockholders 16 CWT 20-Year Total Return on Investment 17 Eight-Year Financial Review 18 Our Service Areas 21 Board of Directors 22 Corporate Officers 23 Corporate Information California Water Service Group (NYSE: CWT) is the third-largest publicly traded water utility in the United States, providing high-quality water and wastewater services to more than two million people through four regulated subsidiaries: California Water Service (Cal Water), Hawaii Water Service (Hawaii Water), New Mexico Water Service (New Mexico Water), and Washington Water Service (Washington Water). We are committed to improving the quality of life for our customers, communities, employees, and stockholders. We do this by living our core values and delivering on our promise to provide quality, service, and value. 2 focus on what matters home focus letter financial review service areas directors Everyone knows the key to success is keeping your eye on the ball. You can’t hit home runs if you’re distracted by the vendor tossing peanuts in the stands. We live in a world filled with distractions. But when you provide essential water and waste- water services, there’s no room for error. So we stay focused on what matters. We’re not in the business of providing dramatic, short-term returns. We’re in the business of providing long-term value to stockholders by delighting our customers, taking care of our employees, giving back to our communities, and ensuring a sustainable future. We do that by keeping a sharp focus on service, safety, growth, people, and the planet. Ted Edmonson (Cross-Connection Control Specialist) enjoys quality time with his two-year old daughter. 3 focus on what matters home focus letter financial review service areas directors focus on service Fast-food tycoon Ray Kroc said, “If you work just for money, you’ll never make it, but if you love what you’re doing and always put the customer first, success will be yours.” We couldn’t agree more. In fact, service is so important to us, it’s in our name. GOING ABOVE AND BEYOND We are a family of companies that provide water and wastewater services in designated areas in accordance with regulations set by state public utilities commissions, health departments, and other government agencies. But we don’t just check the proverbial boxes and leave it at that. Instead, we invest diligently in our water systems in order to provide a safe, reliable water supply; we practice and prepare to serve customers in times of emergency; and we look for new ways to make doing business with us easy and convenient. We do all these things because, frankly, we want our customers to be our biggest fans. 4 focus on what matters home focus letter financial review service areas directors “ Not all heroes wear capes. Thank you to the EXTREMELY kind @calwaterservice guy who stopped last night at the Stanford Dish hiking trail after seeing me sitting on the ground … with low blood sugar … he gave me a snack bag of trail mix and a peanut butter bar and literally brought me back to life …Thanks @calwaterservice :-)” Customer tweet from March 2019 service innovations In collaboration with the Utility Workers Union of America, we established two regional customer service centers in California in order to lengthen service hours and eventually provide additional services, such as live chat. We also introduced our “Connected Customer,” a system that enables customers to track the arrival time of our service people via text message or email. emergency preparedness Once again, we showed our ability to respond effectively to emergencies as power shutoffs affected numerous California Water Service (Cal Water) districts. Preparation was key. Early on, we formed a wildfire taskforce, leased an additional 64 generators, formalized a red-flag warning operations procedure, and coordinated with each of the electric utilities in our service areas to facilitate prompt notification. As a result, and thanks to ‘round-the-clock efforts from our employees, we kept water flowing to our customers through widespread power shutoffs lasting as long as six days. infrastructure improvements In 2019, we replaced 145,881 feet of water lines, upgraded the network that enables us to monitor and operate water systems remotely (known as our Supervisory Control and Data Acquisition system), and completed a highly complex, $17.6 million groundwater treatment plant, among other projects. The treatment plant, located in our East Los Angeles District, treats water pumped from two high-capacity wells. The project is significant because it is part of a larger effort to increase reliability and affordability for customers by reducing our need to import higher cost water from outside our service areas. Certified Chief Pump Operator Steven Gardea (left) and Utility Worker/Certified Relief Pump Operator Alex Becerril work at the new treatment plant in East Los Angeles, California. 5 focus on what matters home focus letter financial review service areas directors focus on safety MAKING SAFETY A PRIORITY Our focus on safety permeates our entire business. First, there’s the safety of the water we provide. For that, we carefully test, treat, and monitor our supplies to ensure that they meet all safety standards. Then there’s the role we play in keeping people and property safe from fire by designing, maintaining, and testing our water systems to ensure that they meet firefighters’ needs. Of course, there’s the safety of our greatest assets—the employees who work hard every day to serve our customers. And finally, there are the precautions we take to keep customers’ personal data. our systems safe from cyber crime and protect our If you’ve taken a psychology class, you might remember “Maslow’s Hierarchy of Needs.” It’s a pyramid showing humanity’s five essential needs, with the most basic at the foundation. In short, the need for safety comes right after basic needs like food, air, and water. Yep, it’s almost as important as water. That’s why every single one of our employees keeps a laser-sharp focus on safety. 6 focus on what matters home focus letter financial review service areas directors We invested $273.8 million in water system infrastructure in 2019, including two new water treatment plants. We provided 4,176 hours of safety training to employees in 2019. cybersecurity and privacy To enhance cybersecurity, we set up and configured a new, more secure network for the computer software that enables us to monitor and control our water systems remotely. We also installed a new data-loss-prevention computer application to detect and prevent the exportation of sensitive data, and completed our annual three-party network penetration test to identify and fix vulnerabilities within our network and core applications. And, in preparation for compliance with the new California Consumer Privacy Act, we developed new policies and procedures, conducted training for more than 150 employees on data handling and classification, and created new technical processes to comply with customer privacy requests. water quality It isn’t lost on us that the health of our customers and their families is dependent on the quality of the water we deliver. To ensure their safety, we collect more than 70,000 water samples from our water systems and conduct more than 400,000 water quality tests every year to ensure that our water meets state and federal standards set to protect public health. In 2019, we also verified the safety of the plumbing at every single public school in our service areas—566 in all—by testing the water for plumbing-leached lead. safety partnership We pride ourselves on our “One Team” culture and our close and cooperative working relationship with our unions. One example: an exciting partnership with the Utility Workers Union of America on a program that will make all of our employees safer. The three key elements of the program are additional safety and leadership training, a team of roving safety ambassadors that will provide peer-to-peer safety instruction and guidance, and additional requirements and responsibilities for union employees in the field. Hydrant Maintenance Foreman Todd Martinez inspects a fire hydrant in our Bear Gulch District. 7 focus on what matters home focus letter financial review service areas directors focus on people Our CEO, Marty Kropelnicki, has a well-known saying: “We aren’t a ‘pipe company,’ we’re a ‘people company.’” Yes, the pipes are important for getting water from point A to point B. But the bottom line is always the people. If you do right by the people, everything else falls into place. PUTTING PEOPLE FIRST To fulfill our purpose of improving quality of life for our customers, communities, employees, and stockholders, we stay focused on people. In addition to providing excellent service and high-quality water, are we keeping rates affordable and helping customers who are in trouble? Are we making our communities better places to live? Are we offering our employees fulfilling and rewarding careers? When we do all these things, we provide long-term value to our stockholders. And then, everybody’s happy. 8 focus on what matters home focus letter financial review service areas directors employee growth In 2019, we introduced an Employee Stock Purchase Plan, which enables employees to buy stock at a discounted rate, giving them an additional stake in the company’s continued success and adding to an already comprehensive benefits package, which includes medical, dental, and life insurance, flex-spending accounts, 401(k) matching contribution, a defined benefit (pension) plan, and tuition reimbursement. We also set up a scholarship program for children of employees and established a charitable contribution matching program to support employees’ personal efforts to improve the quality of life for others. community involvement One way we make a difference in our communities is by contributing to organizations that share our purpose of improving quality of life, including homeless shelters, food banks, and youth-oriented charities. In 2019, we introduced a new firefighter grant program and contributed $160,000 to fire departments for the purchase of unfunded equipment needed to protect life and property, such as fire hoses and protective gear for first responders. As the impacts of the Camp Fire continued to be felt in our Butte County service areas, we also contributed to the Butte County Humane Society’s capital campaign for a new facility and sponsored a Salvation Army trailer that will provide meals and other disaster relief. affordability Given the fact that nearly half of the average residential customer’s water usage occurs outdoors, it stands to reason that reducing the amount of water used for irrigation can decrease the monthly water bill. In 2019, Cal Water piloted an innovative program that allows customers to have weather-based irrigation controllers installed at their homes to ensure that they are watering as efficiently as possible. In addition to supporting customers’ water conservation efforts, we proposed a revised tiered-rate structure in our most recent filing with the California Public Utilities Commission that prices the first units of water used at a lower rate, increasing affordability for those who use less water. We also requested that our Rate Support Fund, which is used to lower rates in districts where the costs of providing water service is high, be expanded to our Dixon and Willows Districts. Utility Worker Cynthia Barrientos exercises a dog at the Monterey County Society for the Prevention of Cruelty to Animals (a community organization supported by both Cal Water and Cynthia herself). We increased stockholder-funded contributions to community organizations by 25% to more than $1.25 million in 2019. We provided water bill discounts totaling more than $9 million to customers in our Low-Income Rate Payer Assistance Program. 9 focus on what matters home focus letter financial review service areas directors focus on the planet You can’t have healthy, happy people if you don’t have a healthy, happy planet. We are responsible for shepherding a precious natural resource from the source to the tap, and the sustainability of our business is inextricably tied to the sustainability of our water supply. SAVING WATER TO MAKE AN IMPACT When it comes to the environment, we ask ourselves two questions: What are we doing to lessen our impact on the planet, and what are we doing to ensure that we can meet future challenges posed by climate change? Not surprisingly, the answer to both questions is that we’ve got to focus on the water. Water conservation is undoubtedly our biggest contribution to the well-being of the planet. So, in addition to our efforts to reduce our carbon footprint by saving energy, using less fossil fuel, and reducing waste, we conserve water. We also ensure we can meet customers’ future water needs by protecting our water sources, replenishing the water we pump from the ground, and recycling water whenever possible. We consider how climate change could affect our water in every single service area, and we plan and build accordingly. 10 focus on what matters home focus letter financial review service areas directors groundwater protection We have been active participants in agencies formed to comply with the Sustainable Groundwater Management Act (SGMA), a California law that requires water providers to balance the pumping and recharge of underground water basins to reverse overdraft conditions. In late 2019, we were selected to serve on the advisory group for the Public Policy Institute of California’s research report, “SGMA and the Urban Sector.” In this capacity, we will continue to advocate for the inclusion of investor- owned water utilities in SGMA planning, the importance of recognizing the contributions of responsible water providers like Cal Water, and the need to execute effective water conservation plans to reduce groundwater use. esg priorities and reporting There is a growing interest in publicly traded companies’ Environmental, Social, and Governance (ESG) performance. In many ways, we are ahead of the game, having already established a purpose of enhancing the quality of life for our customers, communities, employees, and stockholders and a strategy that supports it. But when it comes to reporting on ESG, we are working to step up our efforts. In order to identify the ESG topics that are most relevant to our business and our stakeholders, we are conducting a materiality assessment that will enable us to prioritize, execute, and measure our ESG efforts. Our goal is to follow best practices, which will mean reporting annually in tandem with our financial reporting. water conservation We are committed to helping our customers save water, and in 2019, we offered a range of conservation programs that will save an estimated 203 million gallons per year. One customer who benefited from our toilet installation program: the University of the Pacific in Stockton, which received 850 low-flow toilets for a lifetime savings of 125 million gallons. Another impactful effort was the acquisition of Pump Pod Direct Recirculating Apparatus Firefighting Training & Sustainability (D.R.A.F.T.S.) Units for the Los Angeles County and Visalia Fire Departments. The units enable firefighters to practice without wasting water, and will save a combined 85 million gallons of water per year. We are also dedicated to saving water ourselves, and made great progress in 2019 on our Water Loss Auditing and Control Project, which seeks to identify and address water system leaks early. In 2019, 546 students worked on projects to save and protect water through our H2O Challenge. We’ve reduced our carbon emissions by 40% over the last five years. Los Angeles County firefighters practice with the new D.R.A.F.T.S. unit provided by Cal Water. 11 focus on what matters home focus letter financial review service areas directors focus on growth Our growth strategy is to invest diligently in water and wastewater infrastructure and take a methodical approach to acquisitions. Although we don’t go around buying water systems for the sake of buying water systems, we do love bringing our excellent service and high-quality water to new people and communities. WELCOMING NEW CUSTOMERS As a regulated water and wastewater utility company, the majority of our growth comes from investing in our infrastructure rather than traditional mergers and acquisitions. The benefit of this business model: Infrastructure investment increases stockholder value while improving service and reliability for customers. That said, we do pursue mergers and acquisitions when they make sense both for customers and stockholders. In 2019, we entered into agreements that will, upon regulatory approval and transaction close, increase our customer connection count by 4.5%. 12 focus on what matters home focus letter financial review service areas directors rainier view water company In November, we announced our largest transaction of the year with the signing of an agreement to purchase the assets of Rainier View Water Company in Washington and provide water utility service to its 18,000 customers. Rainier View Water owns and operates 27 water systems that serve about 35,000 people in parts of Graham, Spanaway, Puyallup, Gig Harbor, and other nearby areas. the preserve at millerton February saw us announce our agreement to acquire the water and wastewater infrastructure of the soon-to-be-built 1,100-unit, master-planned, mixed-used community in Madera County, which will include homes, commercial and office space, and parks. The new development is located near our service area in Selma, California. kalaeloa water company At the end of the first quarter, we announced our agreement to purchase Kalaeloa Water Company, a water and wastewater utility in the growing Kapolei area of Honolulu on Oahu, Hawaii. Kalaeloa currently serves 500 customers, and is expected to serve an additional 2,000 when the development is completed. doe bay water users association Increasing our presence on Orcas Island in Washington, we entered into an agreement with the Doe Bay Water Users Association to provide operations, maintenance, meter reading, and customer service to its primarily residential, 300-customer system on the eastern side of the island, about seven miles from our existing operations. kapalua water company and kapalua waste treatment company Late in the year, we reached an agreement with Maui Land and Pineapple Company to purchase the water and wastewater systems serving the 500 customers in the Kapalua, Maui resort, which includes homes, hotels, condominiums, golf courses, restaurants, and other resort amenities. “ It’s a pleasure to welcome new employees into our family and provide quality, service, and value to new customers.” Marty Kropelnicki, President & CEO Construction Foreman Mark Valentine carries a new water pipe in our growing Washington service area. 13 focus on what matters home focus letter financial review service areas directors letter to stockholders Dear fellow stockholder: Focus on communities: Looking back at 2019, it’s clear that our strategic focus produced excellent results. To amplify a few of the accomplishments on the previous pages: Focus on customers: › We kept water flowing despite extended, simultaneous power shutoffs at more than 60 of our facilities. › We helped customers save an estimated 203 million gallons of water. › We launched a firefighter grant program. › We contributed $1.25 million to charities and set up an employee contribution matching program to make a bigger impact in our communities and further engage employees in our efforts. › We opened two regional customer service centers, resulting in all-time high performance in call handling. Focus on employees: › We met every health-based water quality standard, every day, in every system. › We developed a partnership with the Utility Workers Union of America that will further enhance employee safety. › We launched an Employee Stock Purchase Plan with 29% of employees participating. By staying focused on customers, communities, and employees, we deliver long-term value to stockholders. financial highlights Dollars in thousands, except per common share data Year ended December 31 2019 2018 20171 2016 2015 Market price at year end Book value per share Earnings per share (diluted) Dividend per share Operating revenue Net income $51.56 $16.07 $1.31 $0.790 $714,557 $63,116 $47.66 $15.19 $1.36 $0.750 $698,196 $65,584 $45.35 $14.56 $1.52 $0.720 $676,113 $72,940 $33.90 $13.75 $1.01 $0.690 $609,370 $48,675 $23.27 $13.41 $0.94 $0.670 $588,368 $45,017 1 The 2017 reported financial data was adjusted to reflect an immaterial computational error that resulted in an understatement of operating revenue, net income, and earnings per share. Some 2019 highlights for our stockholders: › We made significant progress on our effort to get legislative relief from unreasonable wildfire liability, as indicated by inclusion of the issue in the Final Report of the Commission on Catastrophic Wildfire and Cost Recovery. › We invested $273.8 million in water system infrastructure. › We signed purchase agreements that will increase our customer count by 4.5%. In 2020, we will continue to focus on what matters, while also paying close attention to regulatory affairs, risk management, and ESG reporting. 14 focus on what matters home focus letter financial review service areas directors regulatory affairs risk management As this report goes to press, we await a decision from the California Public Utilities Commission (Commission) on our 2018 General Rate Case filing. Fortunately, we are allowed to track the differences between current and yet-to-be- approved rates and capture these differences back to January 1, 2020, when new rates are eventually approved. We will participate in the process until a decision is received while we prepare our 2021 filing. We will be closely watching to see how the Commission’s focus on wildfire safety and the PG&E bankruptcy affects the schedule for water utility proceedings going forward. In 2020, under the oversight of the Board of Directors’ new Enterprise Risk Management, Safety, and Security Com- mittee, we will update our Enterprise Risk Management plans to identify and address top risks. Of course, climate change and wildfire risks are top of mind, and we will complete a study to better understand how climate change could affect water resource sustainability in each of our service areas. This climate change study will build on a study completed in 2016 and inform our 20-year Urban Water Management and 30-year Water Supply and Facilities Plans. We will also continue to focus on our wildfire preparedness program, which includes vegetation management, back-up power generation, fire hydrant maintenance, and training, while seeking legislative relief from liability for damages caused by wildfires we didn’t start. esg priorities and reporting In addition to the new Corporate Citizenship Report available for download at www.calwatergroup.com/citizenre- port, we are conducting a materiality assessment in 2020 in order to establish our top ESG priorities and determine the most appropriate reporting framework for our business and our stakeholders going forward. changes on our board Finally, before we close, we would like to welcome Patricia Wagner and Scott Morris to our Board; we are so pleased to have them join us. And it is with great sadness that we report the unexpected loss of Director Ed Guiles, who passed away in June. He was a wonderful friend and colleague, and we miss him dearly. We thank you for your continued investment in our company and wish you the best in 2020. MARTIN A. KROPELNICKI President and Chief Executive Officer PETER C. NELSON Chairman of the Board 15 focus on what matters home focus letter financial review service areas directors cwt 20-year total return on investment $700 $600 $500 $400 $300 $200 $100 $0 On $100-stock purchase on December 31, 1998, with dividends reinvested = S&P 500 = CWT 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 16 focus on what matters home focus letter financial review service areas directors eight-year financial review Summary of Operations Operating revenue 1 Operating expenses 1,2 Interest expense, other income and expenses, net 2 Net income 1 Common Share Data Earnings per share (diluted) 1 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 Long-term debt Other Data Water production (in million gallons) Customers at year end, including Hawthorne and Commerce New customers added Operating revenue per customer Utility plant per customer Employees at year end 2019 2018 2017 2016 2015 2014 2013 2012 Dollars in thousands, except per common share and other data $714,557 $615,145 $36,296 $63,116 $698,196 $587,656 $44,956 $65,584 $676,113 $569,030 $34,143 $72,940 $609,370 $526,734 $33,961 $48,675 $588,368 $506,803 $36,548 $45,017 $597,499 $508,631 $32,130 $56,738 $584,103 $510,098 $26,751 $47,254 $559,966 $486,123 $25,015 $48,828 $1.31 $0.790 60% $16.07 $51.56 48,532 8.4% 3.10 $1.36 $0.750 55% $15.19 $47.66 48,065 9.2% 3.57 $1.52 $0.720 47% $14.56 $45.35 48,012 10.7% 4.58 $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 $1.19 $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 $2,406,370 $3,111,308 $808,622 $2,232,723 $2,837,704 $814,938 $2,047,965 $2,744,710 $531,713 $1,859,277 $2,411,745 $557,953 $1,701,768 $2,241,253 $514,045 $1,590,431 $2,182,711 $421,200 $1,515,831 $1,954,741 $428,936 $1,457,056 $1,990,333 $475,659 49.10% 50.90% 47.3% 52.7% 56.8% 43.2% 54.2% 45.8% 55.5% 44.5% 59.80% 40.20% 58.30% 41.70% 49.90% 50.10% 104,735 520,600 3,100 $1,373 $6,820 1,207 107,589 517,500 3,200 $1,349 $6,240 1,184 104,986 514,300 2,800 $1,315 $5,775 1,176 99,096 511,500 2,500 $1,191 $5,312 1,163 98,899 509,000 2,900 $1,156 $4,925 1,155 118,282 506,100 3,200 $1,181 $4,628 1,105 126,363 502,900 2,200 $1,161 $4,401 1,125 125,892 500,700 1,200 $1,118 $4,187 1,132 1 The 2017 reported financial data was adjusted to reflect an immaterial computational error that resulted in an understatement of operating revenue, operating expenses, net income, and earnings per share. 17 focus on what matters home focus letter financial review service areas directors communities and customer connections hawaii Serving the communities of Ka`anapali, Pukalani, Waikoloa, North Kona Coast, and Kohala Coast on the islands of Maui and Hawaii new mexico Serving the communities of Meadow Lake, Cypress Gardens, Rio Communities, Rio Del Oro, Elephant Butte, Sandia Knolls, Indian Hills, Woodland Hills, Squaw Valley, and Cedar Crest in the counties of Sierra, Valencia, Torrance, and Bernalillo washington Serving more than 425 neighborhoods and small communities in the counties of Clallam, Jefferson, Kitsap, Mason, Pierce, King, San Juan, and Thurston 2019 2018 5,000 4,800 8,300 8,200 17,700 17,600 18 focus on what matters home focus letter financial review service areas directors communities and customer connections california Bakersfield Bay Area Region South San Francisco, Colma, Broadmoor, San Mateo, San Carlos, Lucerne, Duncans Mills, Guerneville, Dillon Beach, Noel Heights, and portions of Santa Rosa Bear Gulch Atherton, Woodside, Portola Valley, and a portion of Menlo Park Chico Hamilton City Dixon Dominguez Carson and portions of Compton, Harbor City, Long Beach, Los Angeles County, and Torrance East Los Angeles Portions of Montebello, Commerce, Monterey Park, and Vernon Hawthorne and Commerce (Operation and maintenance agreements) Hermosa-Redondo Hermosa Beach, Redondo Beach, and a portion of Torrance Kern River Valley Bodfish, Kernville, Lakeland, Mountain Shadows, Onyx, Squirrel Valley, South Lake, and Wofford Heights Los Angeles County Region Palos Verdes Estates, Rancho Palos Verdes, Rolling Hills, Rolling Hills Estates, Fremont Valley, Lake Hughes, Lancaster, and Leona Valley 2019 2018 489,600 486,900 72,700 55,900 71,900 55,800 18,900 18,900 30,500 30,100 3,000 34,200 3,000 34,200 26,800 26,800 7,600 7,600 27,100 27,000 4,000 3,900 25,700 25,600 19 focus on what matters home focus letter financial review service areas directors communities and customer connections california Livermore Los Altos Portions of Cupertino, Los Altos Hills, Mountain View, and Sunnyvale Marysville Monterey Region Salinas and King City Oroville Selma Stockton Visalia Westlake Westlake Village and a portion of Thousand Oaks Willows 2019 2018 489,600 486,900 18,900 19,000 3,800 31,500 3,600 6,500 44,400 46,000 7,100 18,800 19,000 3,800 31,400 3,600 6,500 44,200 45,300 7,100 2,400 2,400 20 focus on what matters home focus letter financial review service areas directors board of directors Gregory E. Aliff Former Vice Chairman and Senior Partner of U.S. Energy & Resources, Deloitte LLP Director since 2015. Chair of the Audit Committee. Member of the Enterprise Risk Management, Safety, and Security Committee. Terry P. Bayer Former Chief Operating Officer, Molina Healthcare Inc. Director since 2014. Chair of the Finance and Capital Investment Committee. Member of the Audit Committee and the Organization and Compensation Committee. Shelly M. Esque Former Vice President and Global Director of Corporate Affairs, Intel Corporation Director since 2018. Member of the Enterprise Risk Management, Safety, and Security Committee and the Nominating and Corporate Governance Committee. Martin A. Kropelnicki President and Chief Executive Officer of California Water Service Group Director since 2013. Thomas M. Krummel, M.D. Emile Homan Professor and Chair Emeritus, Surgery Department, Stanford University School of Medicine Director since 2010. Chair of the Organization and Compensation Committee. Member of the Nominating and Corporate Governance Committee. Richard P. Magnuson Private Venture Capital Investor and Lead Director of California Water Service Group Director since 1996. Chair of the Nominating and Corporate Governance Committee. Member of the Audit Committee and the Finance and Capital Investment Committee. Scott L. Morris Chairman, Avista Corporation Director since 2019. Member of the Enterprise Risk Management, Safety, and Security Committee and the Organization and Compensation Committee. Peter C. Nelson Chairman of the Board of California Water Service Group Director since 1996. Carol M. Pottenger Principal and Owner of CMP Global, LLC, and Retired U.S. Navy Vice Admiral Director since 2017. Vice Chair of the Enterprise Risk Management, Safety, and Security Committee. Member of the Finance and Capital Investment Committee and the Nominating and Corporate Governance Committee. Lester A. Snow Former Director of the California Department of Water Resources Director since 2011. Chair of the Enterprise Risk Management, Safety, and Security Committee. Member of the Finance and Capital Investment Committee and the Organization and Compensation Committee. Patricia K. Wagner Former Group President, U.S. Utilities, Sempra Energy Director since 2019. Member of the Audit Committee and the Nominating and Corporate Governance Committee. 21 focus on what matters home focus letter financial review service areas directors corporate officers Michael B. Luu Chief Information Officer and Vice President, Customer Service Shannon C. Dean Vice President, Corporate Communications and Community Affairs David B. Healey Vice President and Corporate Controller Michael S. Mares Vice President, California Operations Lynne P. McGhee Vice President, General Counsel Martin A. Kropelnicki President and Chief Executive Officer Michelle R. Mortensen Corporate Secretary Elissa Y. Ouyang Chief Procurement and Lead Continuous Improvement Officer Gerald A. Simon Vice President, Chief Safety, Security, and Emergency Preparedness Officer Thomas F. Smegal, III Vice President, Chief Financial Officer and Treasurer Paul G. Townsley Vice President, Corporate Development and Chief Regulatory Officer Robert J. Kuta Vice President, Engineering and Chief Water Quality and Environmental Compliance Officer Greg A. Milleman Vice President, California Rates Ronald D. Webb Vice President, Human Resources 22 focus on what matters 22 focus on what matters home focus letter financial review service areas directors corporate information computershare investor services 462 South 4th Street, Suite 1600 Louisville, Kentucky 40202 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 assign- ment on the back of the certificate and sign it exactly as his or her name appears on the front. This signature must be guaranteed by an eligible guarantor institution (banks, stockbrokers, savings and loan associations, and credit unions with membership in approved signature medallion programs) pursuant to SEC Rule 17Ad-15. A notary’s acknowledgment is not acceptable. This certifi- cate should then be sent to Computershare Investor Services (Computershare) 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 Computershare. bond registrar U.S. Bank Trust, N.A. One California Street San Francisco, California 94111 415.273.4580 annual meeting The Annual Meeting of Stockholders will be held on Wednesday, May 27, 2020, 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 15, 2020. anticipated dividend dates for 2020 Quarter Declaration Record Date Payment Date First January 29 February 10 February 21 Second April 29 May 11 May 22 Third July 29 August 10 August 21 Fourth October 28 November 9 November 20 annual report for 2019 on form 10-k A copy of the Company’s annual report for 2019 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, California 95112-4508 408.367.8200 or 800.750.8200 www.calwatergroup.com 23 focus on what matters home focus letter financial review service areas directors ™ 1720 North First Street, San Jose, California 95112-4508 408.367.8200 www.calwatergroup.com NYSE: CWT focus on what matters 

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