UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from .............to....................
Commission file No. 1-13883
CALIFORNIA WATER SERVICE GROUP
(Exact name of registrant as specified in its charter)
Delaware 77-0448994
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(State of Incorporation) (I.R.S. Employer Identification No.)
1720 North First Street San Jose, California 95112
(Address of Principal Executive Offices) (Zip Code)
(408) 367-8200
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class: Name of Each Exchange on Which Registered:
Common Stock, $0.01 Par Value New York Stock Exchange
Preferred Share Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Cumulative Preferred Stock, Par Value, $25
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes _X_ No ___.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [x]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes _X_ No ___
The aggregate market value of the common stock held by non-affiliates of the
Registrant was $379,279,000 on June 28, 2002, the last business day of the
registrant's most recently completed first fiscal quarter. The valuation is
based on the closing price of the registrant's common stock as traded on the New
York Stock Exchange.
Common stock outstanding at March 4, 2003 - 15,182,046 shares.
EXHIBIT INDEX
THE EXHIBIT INDEX TO THIS FORM 10-K IS ON PAGE 32
DOCUMENTS INCORPORATED BY REFERENCE
Designated portions of Registrant's Annual Report to Stockholders for the
calendar year ended December 31, 2002 (2002 Annual Report) are incorporated by
reference in Part I (Item 1), Part II (Items 5, 6, 7, 7A and 8) and in Part IV
(Item 15(a)(1)).
Designated portions of the Registrant's Proxy Statement (Proxy Statement)
relating to the 2003 annual meeting of stockholders are incorporated by
reference in Part III (Items 10, 11 and 12) as of the date the Proxy Statement
was filed with the Securities and Exchange Commission (SEC). The Proxy Statement
was filed with the SEC via EDGAR on March 18, 2003.
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TABLE OF CONTENTS
Page
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PART I
Item 1. Business...................................................... 5
Forward Looking Statements ................................... 5
General Development of Business .............................. 5
Rates and Regulation ......................................... 6
Financial Information about Industry Segments ................ 7
Narrative Description of Business ............................ 7
Geographical Service Areas and Number of Customers
at Year-end .............................................. 9
Water Supply ................................................. 10
Nonregulated Operations ...................................... 13
Utility Plant Construction Program ........................... 14
Sale of Surplus Real Properties .............................. 15
California Energy Situation .................................. 15
Security at Company Facilities ............................... 15
Quality of Water Supplies .................................... 15
Competition and Condemnation ................................. 16
Environmental Matters ........................................ 17
Human Resources .............................................. 18
Financial Information about Foreign and
Domestic Operations and Export Sales ..................... 18
Item 2. Properties.................................................... 18
Item 3. Legal Proceedings............................................. 18
Item 4. Submission of Matters to a Vote of Security Holders........... 19
Executive Officers of the Registrant................................... 20
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters....................................... 22
Item 6. Selected Financial Data....................................... 22
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 22
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.... 22
Item 8. Financial Statements and Supplementary Data................... 22
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Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure....................... 22
PART III
Item 10. Directors and Executive Officers of the Registrant............ 23
Item 11. Executive Compensation........................................ 23
Item 12. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters................ 23
Item 13. Certain Relationships and Related Transactions................ 23
Item 14. Controls and Procedures....................................... 23
PART IV
Item 15. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K............................................... 25
Independent Auditors' Report........................................... 26
Schedules.............................................................. 27
Signatures............................................................. 28
Certifications under Rule 13a-14....................................... 30
Exhibit Index.......................................................... 32
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PART I
Item 1 Business.
Forward Looking Statements
This annual report, including all documents incorporated by reference,
contain forward-looking statements within the meaning established by
the Private Securities Litigation Reform Act of 1995 ("Act"). The
forward-looking statements are intended to qualify under provisions of
the federal securities laws for "safe harbor" treatment established by
the Act. Forward-looking statements are based on currently available
information, expectations, estimates, assumptions and projections, and
management's judgment about the Company, the water utility industry and
general economic conditions. Such words as expects, intends, plans,
believes, estimates, assumes, anticipates, projects, predicts,
forecasts or variations of such words or similar expressions are
intended to identify forward-looking statements. The forward-looking
statements are not guarantees of future performance. They are subject
to uncertainty and changes in circumstances. Actual results may vary
materially from what is contained in a forward-looking statement.
Factors that may cause a result different than expected or anticipated
include: governmental and regulatory commissions' decisions; changes in
regulatory commissions' policies and procedures; the timeliness of
regulatory commissions' actions concerning rate relief; new
legislation; electric power interruptions; increases in suppliers'
prices and the availability of supplies including water and power;
fluctuations in interest rates; changes in environmental compliance and
water quality requirements; acquisitions and our ability to
successfully integrate acquired companies; the ability to successfully
implement business plans; changes in customer water use patterns; the
impact of weather on water sales and operating results; access to
sufficient capital on satisfactory terms; civil disturbances or
terrorist threats or acts, or apprehension about the possible future
occurrences of acts of this type; the involvement of the United States
in war or other hostilities; restrictive covenants in or changes to the
credit ratings on our current or future debt that could increase our
financing costs or affect our ability to borrow, make payments on debt
or pay dividends; and, other risks and unforeseen events. When
considering forward-looking statements, you should keep in mind the
cautionary statements included in this paragraph. The Company assumes
no obligation to provide public updates of forward-looking statements.
a. General Development of Business
California Water Service Company (Cal Water) began business in 1926. On
December 31, 1997, California Water Service Group (Company) was formed
as the parent company of Cal Water and a second subsidiary, CWS Utility
Services (Utility Services). In 1999, the Company acquired Harbor Water
Company and South Sound Utility Company in the state of Washington.
These two companies were merged to form Washington Water Service
Company (Washington Water). New Mexico Water Service Company (New
Mexico Water) was created in 2000. It acquired the assets of Rio Grande
Utilities Corporation in July 2002. During 2000, we completed the
largest acquisition in our history with the issuance of 2,210,000
shares of common stock in exchange for all of the outstanding shares of
Dominguez Services Corporation. The acquisition, which was accounted
for as a pooling of interests, was completed on May 25, 2000. The
Company is the largest investor-owned water utility west of the
Mississippi River and the second largest in the United States.
Cal Water's regulated operations are subject to the jurisdiction of the
California Public Utilities Commission (CPUC),Washington Water's
regulated operations are subject to the jurisdiction of the Washington
Utilities and Transportation Commission (WUTC) and New Mexico Water's
regulated operations are subject to the jurisdiction of the New Mexico
Public Regulation Commission (PRC). Each company also provides
non-regulated water related services under operation and maintenance
agreements. Jointly the CPUC, WUTC and PRC are referred to as the
commissions.
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Upon formation of the holding company structure on December 31, 1997,
each share of Cal Water common stock was exchanged on a two-for-one
basis for the Company's common stock. Per share data was restated where
necessary to reflect the effective two-for-one stock split. Each share
of Cal Water preferred stock was converted into one share of the
Company's preferred stock. To maintain relative voting strength, the
number of votes to which each preferred share is entitled was doubled
from eight to 16.
Cal Water, a California corporation provides water service to
residential, commercial, public authority and industrial customers in
75 California cities and communities through 25 separate water systems
or districts. In its 24 regulated systems, which serve 434,400
customers, rates and operations are subject to the jurisdiction of
CPUC. An additional 6,100 customers receive service through a long-term
lease of the City of Hawthorne water system, which is not subject to
CPUC regulation
Washington Water, a Washington corporation, provides water service to
14,400 customers subject to the regulation of the WUTC. Washington
Water serves an additional 3,900 customers under operating agreements
with privately owned systems that are not subject to WUTC regulation.
New Mexico Water provides service to 2,400 water and 1,700 wastewater
customers south of Albuquerque subject to PRC regulation. Through this
subsidiary, we also provide non-regulated meter reading service under
contract with Los Alamos County in New Mexico.
Our mailing address and principal executive offices are located at 1720
North First Street, San Jose, California 95112-4598; telephone number:
408-367-8200. We maintain a web site that can be accessed via the
Internet at http://www.calwater.com. In 2002, we began making available
free of charge through our website, our annual reports on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K and
amendments to these reports. We make these reports available on our
website on the same day they appear on the SEC's website.
During the year ended December 31, 2002, there were no significant
changes in the kind of products produced or services we rendered or
those provided by our operating subsidiaries, or in our markets or
methods of distribution.
Rates and Regulation
Our water utility rates and service for the regulated business are
subject to the jurisdiction of the state regulatory commissions. The
commissions' decisions and the timing of those decisions can have a
significant impact on our operations and earnings.
Since our 24 California regulated operating districts are not
physically integrated, rates are set independently for each district as
required by the CPUC. General office (headquarters) expenses and plant
investments are considered separately and allocated ratably to the
operating districts.
General and Step Rate Increases
General rate case (GRC) applications in California address district and
general office operating costs and capital requirements for a
forward-looking three-year period. GRC decisions typically authorize an
immediate rate increase and annual step rate increases for the
three-year cycle. Step rate increases are generally effective at the
start of each calendar year, and are designed to maintain the return on
equity (ROE) authorized in the initial decision in succeeding years.
Effective January 1, 2003, we are required to file a GRC for each
operating district every three years. Cal Water's GRC applications are
submitted in July. According to the CPUC's processing schedule, a final
decision should be expected about 10 months after the filings are
accepted by the CPUC. During 2001, the CPUC did not issue decisions for
our 2000 GRC applications until late summer or about 14 months after
they were submitted. Decisions on our applications submitted in July
2001 are still pending after 19 months. In January 2003 a draft
proposed decision on our 2001 GRC rate case was circulated by the CPUC
staff,
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but we do not expect a final decision until the second quarter of 2003.
In July 2002, we submitted GRC filings for seven districts plus General
Office, which are still pending.
Because districts are on different three-year GRC rate case cycles, the
number of customers affected by GRC filings varies from year to year.
For example, our GRC applications filed in 2001 included 65 percent of
Cal Water's customers, while our 2002 applications affect 17 percent of
Cal Water's customers.
Water rates for our Washington Water and New Mexico Water regulated
operations are set based on historic 12-month data. We can submit GRC
applications annually. Regulatory procedures do not provide for step
rate increases or offset increases in these states.
Offset Rate Increases
In California, we charge to expense increases in purchased water,
purchased power and pump taxes as they are incurred. Expenses for these
categories above levels included in prior GRC decisions are tracked in
off-line expense balancing or memorandum accounts. The cost increases
are referred to as "offsetable expenses". We do not record revenue
related to the balancing accounts until authorized by the CPUC, and
then only as the increased costs are included in customers' monthly
billings. When the CPUC authorizes a rate increase to recover the costs
tracked in expense balancing or memorandum accounts, the rate increase
is referred to as an offset increase.
b. Financial Information about Industry Segments
We operate primarily in one business segment, the supply and
distribution of water and providing water-related utility services.
c. Narrative Description of Business
The Company is the sole shareholder of its four operating subsidiaries:
California Water Service Company, New Mexico Water Service Company,
Washington Water Service Company and CWS Utility Services.
We conduct the Company's business through our operating subsidiaries.
Our business consists of the production, purchase, storage,
purification, distribution and sale of water for domestic, industrial,
public and irrigation uses, and for fire protection. We also provide
water-related services under agreements with municipalities and other
private companies. The nonregulated services include full water system
operation and billing and meter reading services. Nonregulated
operations also include the lease of communication antenna sites. Our
earnings may be significantly enhanced by the sale of surplus real
property. We have a program to dispose of surplus real properties and
to reinvest the proceeds in its business. See "Sales of Surplus Real
Properties" below.
The operating results from the water business fluctuate according to
the demand for water which is often influenced by seasonal conditions,
such as summer temperatures or the amount and timing of precipitation
in the Company's service territories. Our revenue, expenses and income
are affected by changes in water sales. Costs, such as payroll and
benefits, depreciation, interest rates on long-term debt and property
taxes are more predictable and remain fairly constant, and are not
significantly impacted by variations in the amount of water sold. As a
result, earnings are highest in the high use, warm weather summer
months and lowest in the cool winter months when most rainfall takes
place in our service territories.
We distribute water in accordance with accepted water utility methods.
We hold franchises and permits in the cities and communities where we
operate. The franchises and permits allow us to operate and maintain
facilities in public streets and right of ways as necessary.
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We operate the City of Hawthorne water system under a 15-year lease
that commenced in February 1996. In accordance with the lease
agreement, we receive all revenue from operating the system and we are
responsible for paying the operating costs. At the end of the lease,
the undepreciated capital improvements that we have made in the system
during our period of operation will be purchased by the City. Under
other contract arrangements, we operate three municipally owned water
systems, numerous privately owned water systems and two recycled water
distribution systems. We also provide billing and customer services to
a number of municipalities.
We intend to continue exploring opportunities to expand our regulated
and nonregulated businesses. The opportunities could include system
acquisitions, lease arrangements similar to the City of Hawthorne
contract, full service system operation and maintenance agreements,
meter reading and billing contracts, and other utility related
services. We believe that a holding company structure makes us more
competitive in providing nonregulated utility services, which are not
subject to jurisdiction of the commissions. We continually investigate
new business opportunities in the western United States as evidenced by
our expansion into the states of New Mexico and Washington, and our
plans to expand to the state of Hawaii as described in Management's
Discussion and Analysis of Financial Condition and Results of
Operations in the 2002 Annual Report to stockholders which is
incorporated into this Form 10-K report by reference.
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Geographical Service Areas and Number of Customers at Year-end
The Company's principal markets for its services are users of water
within the Company's service areas. The Company's geographical service
areas or districts for both the regulated and nonregulated operations
and the approximate number of customers served in each area at December
31, 2002 are listed below.
Regulated Non-regulated
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SAN FRANCISCO BAY AREA
Mid-Peninsula (serving San Mateo and San Carlos) 35,900
South San Francisco (including Colma and Broadmoor) 16,500
Bear Gulch (serving Menlo Park, Atherton, Woodside
and Portola Valley) 17,600 4,200
Los Altos (including portions of Cupertino, Los Altos Hills,
Mountain View and Sunnyvale) 18,400
Livermore 17,400 200
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105,800 4,400
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SACRAMENTO VALLEY
Chico (including Hamilton City) 24,400
Oroville 3,500
Marysville 3,800
Dixon 2,800 300
Willows 2,300
Redwood Valley (Lucerne, Duncans Mills, Guerneville, Dillon
Beach, portion of Santa Rosa) 1,900
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38,700 300
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SALINAS VALLEY
Salinas 27,300 300
King City 2,200 --
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29,500 300
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SAN JOAQUIN VALLEY
Bakersfield 59,300 29,000
Stockton 41,900
Visalia 32,200
Selma 5,400
Kern River Valley (Bodfish, Kernville, Lakeland, Mountain
Shadows, Onyx, Squirrel Valley, South Lake and Wofford Heights) 4,100 500
Antelope Valley (Fremont Valley, Lake Hughes, Lancaster and
Leona Valley) 1,300 500
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144,200 30,000
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LOS ANGELES AREA
East Los Angeles (including portions of
the cities of Commerce and Montebello) 26,500 2,700
Hermosa Redondo (serving Hermosa Beach,
Redondo Beach and a portion of Torrance) 25,800 13,400
Dominguez (Carson and portions of Compton, Harbor City,
Long Beach, Los Angeles and Torrance) 33,100
Palos Verdes (including Palos Verdes Estates, Rancho Palos Verdes,
Rolling Hills Estates and Rolling Hills) 23,800
Westlake (a portion of Thousand Oaks) 7,000
Hawthorne (leased municipal system) 6,100
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116,200 22,200
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CALIFORNIA TOTAL 434,400 57,200
NEW MEXICO (Albuquerque and Los Alamos) 4,100 23,000
WASHINGTON (Gig Harbor and near Olympia) 14,400 3,900
------- -------
COMPANY TOTAL 452,900 84,100
======= =======
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Water Supply
Cal Water obtains its water supply from wells, surface runoff or
diversion, and by purchase from public agencies and other wholesale
suppliers. Our supply has been adequate to meet consumption demands,
however, during periods of drought some of our districts have
experienced mandatory water rationing. California's rainy season
usually begins in November and continues through March with December,
January and February historically recording the most rainfall. During
winter months, reservoirs and underground aquifers are replenished by
rainfall. Snow accumulated in the mountains provides an additional
water source when spring and summer temperatures melt the snowpack
producing runoff into streams and reservoirs, and also replenishing
underground aquifers.
Washington receives rain in all seasons with the majority falling
during winter months. Washington Water draws all its water supply by
pumping from wells.
New Mexico Water pumps all of its water supply from wells based on
water rights owned by the Company. Rainfall occurs in all seasons, but
is heaviest in the summer monsoon season.
Our water business is seasonal in nature and weather conditions can
have a pronounced effect on customer usage and thus our operating
revenues and net income. Customer demand for water generally is lower
during the normally cooler and rainy winter months. Demand increases in
the spring when warmer weather returns and the rains end, and customers
use more water for outdoor purposes, such as landscape irrigation. Warm
temperatures during the generally dry summer months result in increased
demand. Water usage declines during the fall as temperatures decrease
and the rainy season begins.
During years in which precipitation is especially heavy or extends
beyond the spring into the early summer, customer demand can decrease
from historic normal levels, generally due to reduced outdoor water
usage. Likewise, an early start to the rainy season during the fall can
cause a decline in customer usage and have a negative impact on
revenue. When summer temperatures are cooler than normal, water usage
is generally lower and can result in lower revenue and a reduction in
our earnings. A warmer than normal summer can result in higher customer
usage and an increase in our revenue.
During years of less than normal rainfall, customer demand can increase
as outdoor water usage continues into the fall and winter. When
rainfall is below average for consecutive years, drought conditions can
develop and certain customers may be required to reduce consumption to
preserve available supply. As an example, California experienced a
six-year period when rainfall was annually below historic average. The
drought period ended with the winter of 1992-93. During that period
some of our districts had water-rationing requirements imposed on their
customers. In certain districts, penalties were collected from the
customers who exceeded monthly allotments. During past drought periods,
the CPUC has allowed modifications to our customer billings that
provided us a means to recover a portion of revenue that was deemed
lost due to conservation measures.
As noted above, our Washington Water and New Mexico Water subsidiaries
obtain their entire water supply from wells. Historically, about half
of Cal Water's water supply is purchased from wholesale suppliers with
the balance pumped from wells. During 2002, approximately 52 percent of
the Cal Water supply was obtained from wells, 48 percent was purchased
from wholesale suppliers and less than one percent was from surface
supplies. Well water is generally less expensive and Cal Water strives
to maximize the use of its well sources in districts where there is an
option between well or purchased supply sources.
Our four California water treatment plants (Bakersfield, Bear Gulch,
Oroville and Redwood Valley) are designed to process 17 million gallons
per day. Completion of the 20 million gallon per day Northeast
Bakersfield surface water treatment plant during 2003 will increase the
quantity of water we can produce from surface supplies. Water for
operation of the plant will be drawn from the Kern River under a
long-
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term contract with the City of Bakersfield. We will remove from service
the small existing Bakersfield treatment plant when the new plant is
placed in service.
During 2002, we delivered 132 billion gallons of water to the Company's
customers compared to 127 billion gallons in 2001. Our 2002 average
daily water production was 352 million gallons, while the maximum
single day production was 647 million gallons. By comparison, in 2001
our average daily water production was 348 million gallons and the
maximum single day production was 663 million gallons.
The following table shows the quantity of water we purchased in each
California operating district during 2002.
Supply
District Purchased Source of Purchased Supply
-------- --------- --------------------------
SAN FRANCISCO BAY AREA
Mid-Peninsula 100% San Francisco Water Department
South San Francisco 88% San Francisco Water Department
Bear Gulch 91% San Francisco Water Department
Los Altos 75% Santa Clara Valley Water District
Livermore 70% Alameda County Flood Control
and Water Conservation District
SACRAMENTO VALLEY
Oroville 84% Pacific Gas and Electric Co.
Redwood Valley 76% County of Lake
SAN JOAQUIN VALLEY
Antelope/Kern 8% Antelope Valley East Kern WD
Bakersfield 14% Kern County Water Agency
Stockton 58% Stockton-East Water District
LOS ANGELES AREA
East Los Angeles 74% Central Basin Municipal Water District
Dominguez 79% West Basin and Central Basin Municipal
Water Districts
Hawthorne 87% West Basin Municipal Water District
Hermosa Redondo 91% West Basin Municipal Water District
Palos Verdes 100% West Basin Municipal Water District
Westlake 100% Calleguas Municipal Water District
The balance of our required supply for the above districts is obtained
from wells, except in our Bear Gulch district where the balance is
obtained from surface runoff from the local watershed. In our
Bakersfield and Oroville districts, the water we purchase is from a
surface supply. The surface sources are processed through our water
treatment plants before being delivered to the distribution system.
The Chico, Marysville, Dixon and Willows districts in the Sacramento
Valley, the Salinas and King City districts in the Salinas Valley, and
the Selma and Visalia districts in the San Joaquin Valley obtain their
entire supply from wells.
Our purchases for the Los Altos, Livermore, Oroville, Stockton and
Bakersfield districts are pursuant to long-term contracts expiring on
various dates after 2011.
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The water supplies we purchase for the Dominguez, East Los Angeles,
Hermosa-Redondo, Palos Verdes and Westlake districts, and the City of
Hawthorne system are provided by public agencies pursuant to an
obligation of continued non-preferential service to purveyors within
the agencies' boundaries.
Purchases for the South San Francisco, Mid-Peninsula and Bear Gulch
districts are in accordance with long-term contracts we have with the
San Francisco Water Department (SFWD) expiring on June 30, 2009.
We anticipate that we will be able to renew each of the water supply
contracts as they expire. The price of wholesale water purchases is
subject to pricing changes imposed by the various wholesale suppliers.
Price changes are generally beyond our control. We expect that we will
be allowed to recover the wholesale water suppliers' rate increases in
customer future rates, although recovery is subject to a decision by
the CPUC.
Shown below are wholesaler price rates and increases that became
effective for our operating districts in 2002, and estimated wholesaler
price rates changes for 2003.
2002 2003
------ ------
Effective Percent Effective Percent
District Month Change Unit Cost Month Change Unit Cost
-------- ----- ------ --------- ----- ------ ----------
Antelope/Kern 0.0% $170/af July 29.4% $220/af
Bakersfield 0.0% 137/af July 13.1% 155/af
Bear Gulch 0.0% 0.88/ccf July 22.0% 1.03/ccf
Dominguez 0.0% 528/af Jan. 0.8% 532/af
East Los Angeles 0.0% 478/af Jan. 0.8% 482/af
Hawthorne 0.0% 528/af Jan. 0.8% 532/af
Hermosa Redondo 0.0% 528/af Jan. 0.8% 532/af
Livermore Jan. 1.7% 1.258/ccf Jan. 2.5% 1.290/ccf
Los Altos July 2.4% 420/af July 8.3% 455/af
Oroville 0.0% 69,200/yr Jan. 8.4% 75,000/yr
Palos Verdes 0.0% 528/af Jan. 0.8% 532/af
Mid Peninsula 0.0% 0.88/ccf July 22.0% 1.03/ccf
Redwood Valley May 13.2% 41.88/af May 5.1% 44.00/af
So. San Francisco 0.0% 0.88/ccf July 22.0% 1.03/ccf
Stockton April -18.4% 233,346/mo April 46.6% 342,146/mo
Westlake Jan. 1.2% 560/af Jan. 0.7% 564/af
af = acre foot; ccf = hundred cubic feet;
yr = fixed annual cost; mo = fixed monthly cost
While the water supply outlook for 2003 is good, California faces
long-term water supply challenges. We actively work to meet the water
supply challenges by continuing to educate our customers on responsible
water use practices, particularly in the districts with conservation
programs approved by the CPUC.
Rainfall throughout our service areas for the 2002-2003 season is near
normal as of March 14, 2003, as is the mountain snowpack. Water levels
in underground aquifers that provide supply to our districts served by
well water improved in recent years due to above average rainfall and
most regions have recorded positive changes in groundwater levels
during that period. Regional groundwater management planning continues
as required. Existing laws provide a mechanism for local agencies to
maintain control of their groundwater supply. We continually update
water supply long range projections and work with local wholesale
suppliers to ensure an adequate future supply to meet our customers'
needs.
For a number of years, we have worked with the Salinas Valley water
users and the Monterey County Water Resources Agency (MCWRA) to address
seawater intrusion into the water supply for the Salinas district.
MCWRA completed construction of the Castroville Seawater Intrusion
Project in 1998. This project is designed to deliver up to 20,000 acre
feet of recycled water annually to agricultural users in the
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nearby Castroville area. It is intended to help mitigate seawater
intrusion into the region by reducing the need to pump groundwater. To
date, the project has produced marginal results.
We continue working with the City and County of San Francisco and the
cities of San Bruno and Daly City, to prepare a groundwater management
plan for the Westside Basin from which our South San Francisco district
pumps a portion of its supply. The plan will address a protest that has
been filed concerning the extraction of water by pumping from this
local basin. Our pumping levels have remained within a consistent
range.
Additionally, we worked with the City of San Francisco in its
development of a long-range water supply master plan for the entire
area to which the SFWD is the wholesale water supplier. Our South San
Francisco, Mid-Peninsula and Bear Gulch districts are included in SFWD
service area. The plan has been completed, but no further action has
taken place. Cal Water also signed a two year conjunctive use agreement
with the City and County of San Francisco regarding the South San
Francisco district well supply. When available, the City and County of
San Francisco will provide surplus water to us at a reduced price. In
exchange, we will not operate our South San Francisco wells. The
agreement is intended to assist in protecting the local underground
water basin.
Nonregulated Operations
Our nonregulated operations include full service operation and
maintenance of water systems for cities and private owners, operation
of recycled water systems, utility billing services, laboratory
services, water rights brokering, sales of surplus properties and
leases of antenna sites.
Nonregulated revenue that we receive from water system operations is
generally determined on a fee per customer basis. With the exception of
our agreement for operation of the City of Hawthorne water system,
revenue and expenses from nonregulated operations are accounted for in
other income on a pretax basis. We include revenue and expenses for the
City of Hawthorne lease in operating revenue and operating expenses
because the Company is entitled to retain all customer billings and is
generally responsible for all operating expenses.
We operate municipally owned water systems under contract for the
cities of Bakersfield, Commerce and Montebello, and for numerous
private water company systems in the Antelope Valley, Bakersfield,
Livermore, Kern, Redwood Valley, Salinas and Visalia districts. In
Washington, we operate numerous private water systems under contract
arrangements. We also operate wastewater collection systems in
Bakersfield and Livermore. With the exception of the 15-year Hawthorne
lease discussed below, the terms of the operating agreements range from
one-year to three-year periods with provisions for renewals. We signed
the first operating agreement in 1977 with the City of Bakersfield .
In the Los Angeles Basin, we operate recycled water distribution
systems for the West Basin and Central Basin municipal water districts.
Our engineering department also provides services for these two
recycled water systems.
Under an agreement with the City of Menlo Park, we provide contract
meter reading, billing and customer service for the city's water
customers. Meter reading is performed under contract between us and the
City of Manhattan Beach in California and in New Mexico for the County
of Los Alamos. We also provide sewer and/or refuse billing services to
seven municipalities.
Since February 1996, we have operated the City of Hawthorne's 6,100
account water system under terms of a 15-year agreement between the
city and us. The system which is located near our Hermosa-Redondo
district serves about half of Hawthorne's population. The lease
required us to make an up-front $6.5 million lease payment to the City
which we are amortizing over the lease term. Additionally, we make
annual lease payments to the City of $100,000 indexed to changes in
water rates. Under the lease agreement, we are responsible for all
aspects of system operation and capital improvements, although title to
the system and system improvements reside with the City. At the end of
the lease, the city is required to
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reimburse us for the unamortized value of capital improvements we made
during the term of the lease. In exchange, we receive all revenue from
the water system which amounted to $5.1 million in 2002.
During 1997, we signed an agreement with the Rural North Vacaville
Water District near our Dixon district to design and build a water
distribution system. Construction of the system has been completed and
we began operating the system in February 2003 under a contract with
the water district. The new system will initially provide water to
about 300 customers.
We lease 55 antenna sites to telecommunication companies which place
equipment at various operating properties. Individual lease payments
range from $700 to $2,600 per month. The antennas are used in cellular
phone and personal communication applications. We continue to negotiate
new leases for similar uses.
We provide laboratory services to San Jose Water Company and Great Oaks
Water Company, and for the systems that we serve under operation and
maintenance agreements, and for numerous small water systems.
Utility Plant Construction Program
We continually extend, enlarge and replace our facilities as required
to meet increasing demands and to maintain the water systems. We obtain
construction financing from operations, short-term bank borrowings,
advances for construction and contributions in aid of construction that
are funded by developers. The amounts received from these sources are
shown in our "Statement of Cash Flows" on page 40 of the Company's 2002
Annual Report which is incorporated into this document by reference.
Advances for construction are cash deposits from developers for
construction of water facilities or water facilities deeded from
developers. The advances are generally refundable without interest over
a period of 40 years by equal annual payments. Contributions in aid of
construction consist of nonrefundable cash deposits or facilities
transferred from developers, primarily for fire protection and
relocation projects. We cannot control the amount received from
developers which fluctuates from year to year as the level of
construction activity carried on by developers varies. It is impacted
by the demand for housing, commercial development and general business
conditions, including interest rates.
The 2003 Company-funded construction budget is $51.7 million, exclusive
of additions and improvements financed through advances for
construction and contributions in aid of construction. It includes $4.5
million for the fifth year of our five-year program to construct a
water treatment plant to accommodate growth and meet water quality
standards in our Bakersfield district. Construction of the plant is
proceeding on-time and on-budget. Over the five-year period, we
estimate the plant and related pumping and pipeline facilities will
cost $49.0 million. The 2003 budget categories are: $6.1 million for
land and structures, $9.6 million for water treatment, $11.2 million
for new and replacement water mains, $12.1 million for new wells,
pumping equipment and storage facilities, $5.9 million for services and
meters, and $6.8 million for vehicles and equipment. We plan to fund
the budget with funds from operations, short-term bank borrowings, and
long-term debt and equity financing. New subdivision construction will
be financed by developers' non-refundable contributions in aid of
construction and refundable advances for construction.
The 2002 construction budget was $77.7 million, exclusive of additions
and improvements financed through advances for construction and
contributions in aid of construction. The budget was for the following
areas: land and structures, $4.1 million; wells, pumping and storage
facilities, $10.7 million; water treatment and purification equipment,
$29.6 million; distribution systems $17.3 million; services and meters,
$6.2 million; other equipment, $9.8 million. The budget included
significant expenditures for water treatment and distribution
facilities, especially in connection with the water treatment plant
being constructed in our Bakersfield district.
In 1996, Congress enacted legislation which exempted from taxable
income proceeds received from developers to fund advances for
construction and contributions in aid of construction, except payments
for installation of services. Services represent about 20% of the
deposits we receive from developers. The
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legislation also provided that water utility plant additions be
depreciated for federal tax purposes on a straight-line 25-year life
basis. In 2000, developer deposits for fire protection services were
also exempted from tax. The federal tax exemption of developer payments
reduces our cash flow requirements for income tax payments.
Sale of Surplus Real Properties
When properties are no longer used and useful for public utility
purposes, we are no longer allowed to earn a return on our investment
in the property in the regulated business. The surplus property may be
transferred out of the regulated subsidiary and can be offered for
sale. Income from the sale of surplus properties depends not only on
changes in operations, but also on local real estate market conditions.
In 2002, we sold four surplus properties for a pretax gain of
$2,980,000. In 2001, we sold two surplus properties for a pretax gain
of $3,864,000.
As discussed in Management's Discussion and Analysis of Results of
Operations and Financial Condition, the administrative law judge
assigned to Cal Water's 2001 GRC proceedings has drafted a proposed
decision suggesting a change in the rate-setting practice regarding the
treatment of gains on the sale for surplus property. If the proposals
were adopted by the CPUC, they would have a detrimental impact on the
Company's surplus real estate sales program. The draft proposed
decision on treatment of gains on sale of properties could result in a
reduction of earnings and the rate base on which the CPUC determines
the Cal Water's future earnings. However, because this is only a draft
that does not recommend specific actions, we cannot predict the final
outcome of this matter. Since 1997, we have recorded $10.4 million in
pretax gains under the surplus property sale program.
California Energy Situation
The California energy crisis has been well publicized. In response to
supply shortages, electric power rates have increased significantly.
Our purchased power costs increased $1.8 million in 2002, $6.0 million
in 2001 and $0.7 million in 2000. The 2002 cost increase was caused by
a 5% increase in well production and higher electric rates paid through
May 2002 compared to 2001's electric rates. The 2001 increase was
primarily the result of an average 48% increase in the electric rates
we paid in California. The purchased power cost increase in 2000 was
due mainly to a 3% increase in water production.
There is still uncertainty about the state's ability to avoid future
rolling electric blackouts, however, we did not experience any electric
blackout during 2002. We will continue our efforts to use power as
efficiently as possible and at the lowest cost to our customers. We
maintain backup power systems to continue water service to our
customers if the power companies' supplies are interrupted. Many of our
wellsites are equipped with emergency electric generators. The
generators are designed to produce electricity to keep the wells
operating during power outages. Storage tanks also provide customers
with water during blackout periods.
Security at Company Facilities
As a result of the September 11, 2001 terrorist attacks in New York,
Washington, D.C. and Pennsylvania, we have heightened security at our
facilities and taken added precautions to safeguard our employees and
the water we deliver to our customers. While we do not make public
comments about the details of our security programs, we have been in
contact with federal, state and local law enforcement agencies to
coordinate and improve water delivery systems security. We have also
assigned a high priority to completing work necessary to comply with
new Environmental Protection Agency requirements concerning security of
water facilities. This effort encompasses all of our operations.
Quality of Water Supplies
We maintain operating practices to produce potable water in accordance
with acceptable water utility practices. Water entering the
distribution systems from surface sources is treated in compliance with
federal and state Safe Drinking Water Act (SWDA) standards. Most well
supplies are chlorinated for disinfection. Water samples from each
water system are analyzed on a regular, scheduled basis in
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compliance with regulatory requirements. The Company operates a state
certified water quality laboratory at its San Jose General Office
facility that provides testing for most California operations. Certain
tests in California are contracted with independent certified labs
qualified under the Environmental Laboratory Accreditation Program.
Local independent state certified labs provide water sample testing for
the Washington and New Mexico districts.
In recent years, federal and state water quality regulations have
continued to increase water testing requirements. Changes in the SDWA,
which are expected to bring treatment costs more in line with the
actual public health threats posed by contaminants, were enacted by
Congress during 1996. The SDWA continues to be amended to reflect new
public health concerns. We monitor water quality and upgrade our
treatment capabilities to maintain compliance with the various
regulations continues. These activities include:
o monitoring of all vulnerable sources for MTBE, a gasoline
additive intended to reduce air pollution that has been widely
used in California
o monitoring all sources for Chromium 6 coming from natural or
industrial sources for potential future treatment requirements
o upgrading laboratory equipment and enhancing analytical
testing capabilities
o installation of dedicated sample sites to assure water samples
are drawn at a secure source
o maintaining a federal and state approved compliance monitoring
program required by the Safe Drinking Water Act
o completion of a source water assessment program for all water
supplies
o completion of mandatory Information Collection Rule monitoring
for specified water systems
o ongoing training of laboratory and operating personnel
o installation of disinfection treatment at all well sources
o several well treatment systems that treat for elevated levels
of iron and manganese
o construction of a new iron and manganese treatment plant in
the leased Hawthorne system
o installation and operation of several granular activated
carbon (GAC) filtration systems for removal of hydrogen
sulfide or volatile organic chemicals
o assessing arsenic removal technologies that will be required
at 75 wells in developing a coordinated plan to meet new
arsenic water quality standards mandated by EPA at 10 parts
per billion
Competition and Condemnation
Our operating companies, Cal Water, New Mexico Water and Washington
Water are regulated public utilities, providing water service within
filed service areas approved by the commissions. New Mexico Water also
provides regulated wastewater services. Under California laws, no
privately owned public utility may compete within any service territory
that we already serve without first obtaining a certificate of public
convenience and necessity from the CPUC. Issuance of such a certificate
would only be made upon finding that our service is deficient. To our
knowledge, no application to provide service to an area we serve has
been made.
California law provides that whenever a public agency constructs
facilities to extend a utility system into the service area of a
privately owned public utility, such an act constitutes the taking of
property and requires reimbursement to the utility for its loss.
Further, the state's constitution and statutes allows municipalities,
water districts and other public agencies to own and operate water
systems. These agencies are empowered to condemn properties already
operated by privately owned public utilities. The agencies are also
authorized to issue bonds, including revenue bonds, for the purpose of
acquiring or constructing water systems. However, if a public agency
were to acquire utility property by eminent domain action, the utility
would be entitled to just compensation for its loss. To our knowledge,
no municipality, water district or other public agency is contemplating
or has any action pending to acquire or condemn any of our systems.
In recent years, consolidation within the water industry has
accelerated. A number of publicly traded water companies have been
acquired or merged into larger domestic companies. Several acquisitions
of publicly
-16-
traded companies have also been completed by much larger foreign
companies. We have participated in the industry consolidation by
acquiring Dominguez Services Corporation and by expanding our
operations into Washington and New Mexico, by making other small
acquisitions and pursuing expansion of our nonregulated operations. In
2002, we also agreed to acquire a water system on the island of Maui in
Hawaii. The Hawaii acquisition is expected to close in 2003. We intend
to continue pursuit of opportunities to expand our business in the
western United States.
Environmental Matters
Our operations are subject to environmental regulation by various
governmental authorities. Issues related to water quality are discussed
under the Management's Discussion and Review section of the 2002 Annual
Report to stockholders.
Our environmental affairs program is designed to provide compliance
with underground and above ground fuel storage tank regulations,
hazardous materials management plans, hazardous waste regulations, air
quality permitting requirements, wastewater discharge limitations, and
employee safety issues related to hazardous materials. We are actively
involved in the formulation of air quality standards related to water
utilities. Also, we are proactive in looking to alternative
technologies in meeting environmental regulations and continuing the
traditional practices of water quality.
-17-
Human Resources
At year-end 2002, we had 802 employees, including 12 employees who were
added in New Mexico with the acquisition of Rio Grande Utility
Corporation. At the end of 2001, there were 783 employees and at the
end of 2000, 797 employees. In California, most non-supervisory
employees are represented by the Utility Workers Union of America,
AFL-CIO, except certain engineering and laboratory employees are
represented by the International Federation of Professional and
Technical Engineers, AFL-CIO. In December 2002, the Company
successfully negotiated new three-year agreements with both unions
covering 2003 through 2005. Wage increases under the new agreements
will be 1% in 2003, 1.5% in 2004 and 2% in 2005. Improvements in
employee benefit plans were also negotiated. Employees at Washington
Water and New Mexico Water do not belong to unions.
d. Financial Information about Foreign and Domestic Operations and Export Sales.
We make no export sales.
Item 2. Properties.
Our physical properties consist of offices and water systems to
accomplish the production, storage, purification and distribution of
water. These properties are located in or near our Geographic Service
Areas listed above under section Item 1.c. entitled "Narrative
Description of the Business." Our general office, which houses
accounting, engineering, information systems, human resources,
purchasing, regulatory, water quality and executive staffs is located
in San Jose, California. All properties are maintained in good
operating condition.
The real properties that we own are held in fee simple title.
Properties owned by Cal Water are subject to the indenture securing
first mortgage bonds of which $84.7 million remained outstanding at
December 31, 2002. Washington Water has long-term bank loans totaling
$3.5 million that are secured primarily by utility plant. New Mexico
Water has outstanding bank loans totaling $2.4 million which are
secured by utility plant.
We own 623 wells and operate ten leased wells. There were 376 storage
tanks with a capacity of 246 million gallons and two reservoirs located
in the Bear Gulch and Oroville districts with a capacity of 220 million
gallons. There are 5,200 miles of supply and distribution mains in the
various systems.
In the leased City of Hawthorne system or in systems that we operate
under contract for municipalities or private companies, title to the
various properties is held exclusively by the municipality or private
company.
Item 3. Legal Proceedings.
In 1995, the State of California's Department of Toxic Substances
Control (DTSC) named the Company as a potential responsible party for
cleanup of a toxic contamination plume in the Chico groundwater. The
toxic spill occurred when cleaning solvents, which were discharged into
the city's sewer system by local dry cleaners, leaked into the
underground water supply due to breaks in the city's sewer pipes. The
DTSC contends that the Company's responsibility stems from our
operation of wells in the surrounding vicinity that caused the
contamination plume to spread. While the Company intends to cooperate
with the cleanup effort, it denies any responsibility for the
contamination or the resulting cleanup and intends to vigorously resist
any action that may be brought against it. The Company has negotiated
with DTSC regarding dismissal of the Company from the claim in exchange
-18-
for the Company's cooperation in the cleanup effort. However, no
agreement was reached with DTSC regarding dismissal of the Company from
the DTSC action. In December 2002, the Company was named along with
other defendants in a two lawsuits filed by DTSC for the cleanup of the
plume. The suits assert that the defendants are jointly and severally
liable for the estimated cleanup costs of $8.69 million. The Company
believes that it has insurance coverage for these claims and that if it
were ultimately held responsible for a portion of the cleanup costs,
there would not be a material adverse effect on the Company's financial
position or results of operations.
In December 2001, the Company and several other defendants were served
with a lawsuit by the estate and immediate family members of a deceased
employee of a pipeline construction contractor. The contractor's
employee had worked on various Company projects over a number of years.
The plaintiffs allege that the Company and other defendants are
responsible for an asbestos-related disease that is claimed to have
caused the death of the contractor's employee. The complaint seeks
damages in excess of $50,000, in addition to unspecified punitive
damages. The Company denies responsibility in the case and intends to
vigorously defend itself. Pursuant to an indemnity provision in our
contracts between the contractor and the Company, the contractor has
accepted liability for the claim against the Company and is reimbursing
the Company for its defense costs.
In July 2002, the Company was served with a lawsuit in state court
naming it as one of several defendants for damages alleged to have
resulted from waste oil contamination in the Company's drinking water.
The suit did not specify a dollar amount. The Company does not believe
that the complaint alleges any facts under which it may be held liable.
The Company has filed a motion to dismiss the suit on various grounds.
The Court has not ruled on the Company's motion. The Company intends to
vigorously defend the suit. In 2000, the same plaintiff in this action
brought a suit against the Company in federal court with similar
allegations concerning drinking water contamination. That suit was
dismissed, however, the Court did not bar the plaintiff from filing an
amended complaint. The Company's insurance carrier is paying for legal
defense costs and the Company believes that its insurance policy will
cover all costs related to this matter.
The Company is required to report each water system acquisition to the
CPUC. In February 2003, the CPUC`s Office of Ratepayer Advocates
recommended that the Company be fined up to $9,600,000 and refund
$470,000 in revenue for failing to report two acquisitions as required
by the CPUC's rules. One acquisition was completed on June 25, 1997
prior to adoption of the reporting requirement by the CPUC; the other
was inadvertently not reported. The Company purchased the two water
systems, which serve 283 customers, for approximately $140,000. The
staff's recommendation does not challenge the level of service provided
or amounts charged for water service to the customers; it is based
solely on the fact that the Company failed to report the acquisitions
to the CPUC. The Company is preparing our response. The Company
believes that the Office of Ratepayer Advocates' recommended penalties
will be substantially reduced when this matter is considered by the
full CPUC.
Periodically we are involved in other proceedings or litigation arising
in the ordinary course of business. We do not believe that the ultimate
resolution of these matters will materially affect our financial
position, results of operations or cash flows.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of security holders in the fourth
quarter of 2002.
-19-
Executive Officers of the Registrant
Name Positions and Offices with California Water Service Group Age
- ---- --------------------------------------------------------- ---
Robert W. Foy Chairman of the Board since January 1, 1996. A director since 66
(1) 1977. Formerly President and Chief Executive Officer of Pacific
Storage Company, a diversified transportation and
warehousing company serving Stockton, Modesto,
Sacramento, San Jose, Vallejo, and Merced
California, where he had been employed for 32 years.
Peter C. Nelson President and Chief Executive Officer since February 1, 1996. 55
(2) Formerly Vice President, Division Operations (1994-1995) and
Region Vice President (1989-1994), Pacific Gas &
Electric Company, a gas and electric public utility.
Richard D. Nye Vice President, Chief Financial Officer and Treasurer since 48
(1) March 2003. Formerly Acting Chief Financial Officer (2001 - 2002)
and Vice President of Finance and Administration (1998 - 2002) of
Cornerstone Propane Partners, L.P., a propane distribution company,
Previosly served in various finance management positions with
Frito-Lay, Inc., a snack food company (1989 to 1998).
Paul G. Ekstrom Corporate Secretary since August 1996; Operations 50
(3) Coordinator, 1993 to 1996; District Manager, Livermore,
1988 to 1993; previously served in various field
management positions since 1979; an employee since
1972.
Calvin L. Breed Controller, Assistant Secretary and Assistant Treasurer since 47
(4) November 1994; previously Treasurer of TCI International, Inc.;
from 1980 to 1983, a certified public accountant with Arthur
Andersen & Co., certified public accountants.
(1) holds the same position with California Water Service Company, New
Mexico Water Service Company, Washington Water Service Company and CWS
Utility Services
(2) holds the same position with California Water Service Company and CWS
Utility Services; Chief Executive Officer of New Mexico Water Service
Company and Washington Water Service Company
(3) Vice President, Customer Service with California Water Service Company,
and Corporate Secretary of California Water Service Company, New Mexico
Water Service Company, Washington Water Service Company and CWS Utility
Services
(4) holds the same position with California Water Service Company
Name Positions and Offices with California Water Service Company Age
- ---- ----------------------------------------------------------- ---
Francis S. Ferraro Vice President, Regulatory Matters and Corporate Development 53
(1) since May 2001; Vice President, Regulatory Matters, August 1989
to May 2001. Employed by the California Public
Utilities Commission for 16 years, including 1985
through 1989 as an administrative law judge.
-20-
Robert R. Guzzetta Vice President, Engineering and Water Quality since August 1996; 49
(2) Chief Engineer, 1990 to 1996; Assistant Chief Engineer, 1988 to
1990; various engineering department positions since 1977.
Christine L. McFarlane Vice President, Human Resources since August 1996; Director 56
of Human Resources, 1991 to 1996; Assistant Director of
Personnel, 1989 to 1991; an employee since 1969.
Dan L. Stockton Vice President, Information Systems since April 2001; 58
from 1991 to 2001 he served as Chief Operating Officer of
Great Oaks Water Company, ( years).
Raymond H. Taylor Vice President, Operations since April 1995; Vice President and 57
Director of Water Quality, 1990 to 1995; Director of Water Quality,
1986 to 1990; an employee since 1982; prior to 1982 an employee of
the United States Environmental Protection Agency.
(1) Also, Vice President, Corporate Development with CWS Utility Services,
and Vice President, Regulatory Matters with New Mexico Water Service
Company.
(2) Also, Vice President, Engineering with CWS Utility Services.
Name Positions and Offices with Washington Water Service Company Age
- ---- ---------------------------------------------------------------
Michael P. Ireland President since December 1999; previously President of Harbor Water 49
Company, Gig Harbor, Washington from 1985 to 1999.
Positions and Offices with New Mexico Water Service Company 59
-----------------------------------------------------------
Robert J. Davey President since July 2002; also President
and Chief Executive Officer of Valley Improvement
Association, a nonprofit landowners association,
1985 to Present. He was President and Treasurer of
Rio Grande Utility Corporation, a subsidiary of
Valley Improvement Association, 1988 to Present.
No officer or director has any family relationship to any other executive
officer or director. No executive officer is appointed for any set term. There
are no agreements or understandings between any executive officer and any other
person pursuant to which he was selected as an executive officer.
-21-
PART II
Item 5. Market for Registrant's Common Equity and Related Matters
The information required by this item is contained in the section
captioned "Quarterly Financial Data" on page 55 of the Company's 2002
Annual Report and is incorporated herein by reference.
Item 6. Selected Financial Data.
The information required by this item is contained in the section
captioned "Ten-Year Financial Review" on pages 18 and 19 of the
Company's 2002 Annual Report and is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
The information required by this item is contained in the section
captioned "Management's Discussion and Analysis of Financial Condition
and Results of Operations," on pages 20 through 35 of the Company's
2002 Annual Report and is incorporated herein by reference.
Item 7A Quantitative and Qualitative Disclosures About Market Risk
The information required by this item is contained in the section
captioned "Financial Risk Management" on pages 33 and 34 of the
Company's 2002 Annual Report and is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data.
The information required by this item is contained in the sections
captioned "Consolidated Balance Sheet", "Consolidated Statement of
Income", "Consolidated Statement of Common Stockholders' Equity and
Comprehensive Income", Consolidated Statement of Cash Flows", "Notes to
Consolidated Financial Statements" and "Independent Auditors' Report"
on pages 36 through 55 of the Company's 2002 Annual Report and is
incorporated herein by reference. The 2002 Annual Report to
Stockholders is included with this report as Exhibit 13.1.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
-22-
PART III
Item 10. Directors and Executive Officers of the Registrant.
The information required by this item as to directors of the Company is
contained in the section captioned "Board Structure" and is included on
page 8 of the 2003 Proxy Statement, and in the section captioned
Proposal No. 1 - Election of Directors" on pages 10 through 12 of the
2003 Proxy Statement and is incorporated herein by reference.
Information regarding executive officers of the Company is included in
a separate item captioned "Executive Officers of the Registrant"
contained in Part I of this report.
Item 11. Executive Compensation.
The information required by this item as to directors of the Company is
included under the caption "Director Compensation Arrangements" on page
9 of the 2003 Proxy Statement and is incorporated herein by reference.
The information required by this item as to compensation of executive
officers, including officers who are directors, is included under the
captions "Executive Compensation" and "Report of the Compensation
Committee of the Board of Directors on Executive Compensation" on page
15 through 21 of the 2003 Proxy Statement and is incorporated herein by
reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters.
The information required by this item is contained in the section
captioned "Stock Ownership of Management and Certain Beneficial Owners"
on pages 13 and 14 of the 2003 Proxy Statement and is incorporated
herein by reference.
Item 13. Certain Relationships and Related Transactions.
None.
Item 14. Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures
Under the supervision of the Company's chief executive officer and
chief financial officer, and with the participation of other senior
management, the Company conducted an evaluation of the effectiveness of
the design and operation of the disclosure controls and procedures as
defined by Rules 13a-14(c) and 15d-14(c) under the Securities Exchange
Act of 1934. The evaluation was completed within 90 days of the filing
of this report (Evaluation Date). Based on the evaluation, the chief
executive officer and chief financial officer concluded that as of the
Evaluation Date the disclosure controls and procedures were adequate
and effective, and that the material information required to be
included in this report, including information from the Company's
consolidated subsidiaries, was properly recorded, processed, summarized
and reported, and was made known to the chief executive officer and
chief financial officer by others within the Company in a timely
manner, particularly during the period when this annual report on Form
10-K was being prepared.
-23-
(b) Change in Internal Controls
In addition, there were no significant changes in internal controls or
in other factors that could significantly affect these controls
subsequent to the Evaluation Date. We have not identified any
significant or material weaknesses in our internal controls, and
therefore there were no corrective actions taken.
-24-
PART IV
Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) As part of this Form 10-K, the following documents are being filed:
1. Financial Statements:
Consolidated Balance Sheet as of December 31, 2002 and 2001.
Consolidated Statement of Income for the years ended December
31, 2002, 2001 and 2000.
Consolidated Statement of Common Stockholders' Equity and
Comprehensive Income for the years ended December 31, 2002,
2001 and 2000.
Consolidated Statement of Cash Flows for the years ended
December 31, 2002, 2001 and 2000.
Notes to Consolidated Financial Statements, December 31, 2002,
2001 and 2000.
Independent Auditors' Report.
The above financial statements are contained in sections
bearing the same captions on pages 36 through 55 of the
Company's 2002 Annual Report to stockholders which is filed
with this Form 10-K and incorporated by reference. Refer to
Exhibit 13.1 of this Form 10-K.
2. Financial Statement Schedules: Independent Auditors' Report.
Schedule II - Valuation and Qualifying Accounts for the years
ending December 31, 2002, 2001 and 2000.
All other schedules are omitted as the required information is
inapplicable or the information is presented in the financial
statements or related notes to the financial statements.
3. Exhibits required to be filed by Item 601 of Regulation S-K:
The Exhibit Index on page 32 of this Form 10-K is incorporated
herein by reference.
The exhibits filed as part of this Form 10-K are attached,
unless otherwise indicated. The exhibits listed in the Exhibit
Index that are not filed with this Form 10-K were previously
filed with the Securities and Exchange Commission as indicated
and are hereby incorporated by reference.
(b) Reports on Form 8-K.
No reports were filed on Form 8-K during the quarter ended
December 31, 2002.
(c) Exhibits required to be filed by Item 601 of Regulation S-K.
Refer to item (a) 3 above and the Exhibit Index on page 32 of
this Form 10-K.
(d) Additional Financial Statement Schedules.
No filings are required under this item.
-25-
Independent Auditors' Report
The Board of Directors
California Water Service Group:
Under date of January 29, 2003, except as to Note 16, which is as of February
28, 2003, we reported on the consolidated balance sheet of California Water
Service Group and subsidiaries as of December 31, 2002 and 2001, and the related
consolidated statements of income, common stockholders' equity and comprehensive
income, and cash flows for each of the years in the three-year period ended
December 31, 2002, as contained in the 2002 annual report to stockholders. These
consolidated financial statements and our report thereon are incorporated by
reference in the annual report on Form 10-K for the year 2002. In connection
with our audits of the aforementioned consolidated financial statements, we also
audited the related consolidated financial statement schedule as listed in the
index appearing under Item 15(a)(2). This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this financial statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.
/s/ KPMG LLP
Mountain View, California
January 29, 2003, except as to Note 16, which is as of February 28, 2003
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Schedule II
CALIFORNIA WATER SERVICE GROUP AND SUBSIDIARIES
Valuation and Qualifying Accounts
Additions
----------------------
Balance at Charged to Charged to Balance
Beginning costs and other at end
Description Of period expenses accounts Deductions of period
----------- --------- -------- -------- ---------- ---------
For the year Ended December 31, 2002
Reserves deducted from applicable balance
sheet assets:
Allowance for doubtful accounts $224,000 $480,000 $ 82,822(3) $440,521(1) $180,657
Allowance for obsolete materials and supplies 75,008 48,000 -- 32,724(2) 90,282
======== ======== ======== ======== ========
For the year Ended December 31, 2001
Reserves deducted from applicable balance
sheet assets:
Allowance for doubtful accounts $180,658 $648,000 $169,471(3) $774,128(1) $224,000
Allowance for obsolete materials and supplies 126,608 48,000 75,701 175,302(2) 75,008
======== ======== ======== ======== ========
For the year Ended December 31, 2000
Reserves deducted from applicable balance
sheet assets:
Allowance for doubtful accounts $419,847 $598,608 $ 91,579(3) $929,376(1) $180,658
Allowance for obsolete materials and supplies 100,297 68,939 -- 42,628(2) 126,608
======== ======== ======== ======== ========
Notes:
(1) Accounts written off during the year.
(2) Expenditures and other charges made during the year
(3) Recovery of amounts previously charged to reserve
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
CALIFORNIA WATER SERVICE GROUP
Date: March 24, 2003 By /s/ Peter C. Nelson
PETER C. NELSON,
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated:
Date: February 26, 2003 /s/ Robert W. Foy
ROBERT W. FOY
Chairman, Board of Directors
Date: February 26, 2003 /s/ Douglas M. Brown
DOUGLAS M. BROWN
Member, Board of Directors
Date: February 26, 2003 /s/ Edward D. Harris, Jr.
EDWARD D. HARRIS, JR., M.D.
Member, Board of Directors
Date: February 26, 2003 /s/ Richard P. Magnuson
RICHARD P. MAGNUSON
Member, Board of Directors
Date: February 26, 2003 /s/ Linda R. Meier
LINDA R. MEIER
Member, Board of Directors
Date: February 26, 2003 /s/ Peter C. Nelson
PETER C. NELSON
President and Chief Executive
Officer, Principal Executive Officer
Member, Board of Directors
Date: February 26, 2003 /s/ Langdon W. Owen
LANGDON W. OWEN
Member, Board of Directors
Date: February 26, 2003 /s/ George A. Vera
GEORGE A. VERA
Member, Board of Directors
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Date: March 24, 2003 /s/ Richard D. Nye
RICHARD D. NYE
Vice President, Chief Financial
Officer and Treasurer;
Principal Financial Officer
Date: March 24, 2003 /s/ Calvin L. Breed
CALVIN L. BREED
Controller, Assistant Secretary and
Assistant Treasurer;
Principal Accounting Officer
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CERTIFICATIONS
I, Peter Nelson, President and Chief Executive Officer of California Water
Service Group, certify that:
1. I have reviewed this annual report on Form 10-K of California Water
Service Group;
2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statement were made, not misleading with respect to
the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented
in this annual report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and have:
a. Designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this annual report is being prepared;
b. Evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this annual report (the "Evaluation Date");
and
c. Presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation, to the registrant's auditors
and the audit committee of registrant's board of directors (or
persons performing the equivalent functions):
a. All significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b. Any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in
this annual report whether there were significant changes in
internal controls or in other factors that could significantly
affect internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: March 24, 2003 By: /s/ Peter C. Nelson
PETER C. NELSON
President and Chief Executive Officer
California Water Service Group
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CERTIFICATIONS
I, Richard D. Nye, Chief Financial Officer of California Water Service Group,
certify that:
1. I have reviewed this annual report on Form 10-K of California Water
Service Group;
2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statement were made, not misleading with respect to
the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented
in this annual report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and have:
a) Designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this annual report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this annual report (the "Evaluation Date");
and
c) Presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation, to the registrant's auditors
and the audit committee of registrant's board of directors (or
persons performing the equivalent functions):
a) All significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) Any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in
this annual report whether there were significant changes in
internal controls or in other factors that could significantly
affect internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: March 24, 2003
By: /s/ Richard D. Nye
RICHARD D. NYE
Chief Financial Officer
California Water Service Group
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(all page references will be updated at filing)
EXHIBIT INDEX
Sequential
Exhibit Page Numbers
Number in this Report
- ------ --------------
Unless filed with this Form 10-K, the documents listed are incorporated by
reference.
2. Plan of Acquisition, Reorganization, Liquidation or
Succession:
2.1 Agreement of Merger by and between 32
California Water Service Group and
California Water Service Company creating
a holding company corporate structure
(Filed as Exhibit A of the 1999 California
Water Service Company Proxy Statement)
2.2 Agreement and Plan of Reorganization among 32
California Water Service Group, California
Water Service Company and Dominguez
Services Corporation dated November 13,
1998, and Amendment No. 1 to the Agreement
and Plan of Reorganization (Appendix A and
Appendix B, respectively, to Amendment No.
1 to Form S-4 filed April 2, 1999)
3. Articles of Incorporation and By-laws:
3.1 Certificate of Incorporation of California 32
Water Service Group (Filed as Exhibit B of
the 1999 California Water Service Company
Proxy Statement)
3.2 Restated By-laws of California Water 32
Service Group as amended on January 26,
2000 (Exhibit E-2 to Form 8-K filed
February 3, 2000)
4. Instruments Defining the Rights of Security Holders
of California Water Service Company, including
Indentures:
4.1 Certificate of Determination of 32
Preferences for Group's Series C Preferred
Stock (Exhibit 3.2 to Form 10-K for fiscal
year 1987)
4.2 Shareholder Rights Plan; an agreement 32
between California Water Service Group and
BankBoston, N.A., rights agent, dated
January 28, 1998 (Exhibit 1 to Form 8-A
and Exhibit 1 to Form 8-K dated February
13, 1998)
4.3 Certificate of Determination of 32
Preferences for Group's Series D Preferred
Stock (Exhibit A to the Shareholder Rights
Plan, an agreement between California
Water Service Group and BankBoston, N.A.,
rights agent, dated January 28, 1998 filed
as Exhibit 1 to Form 8-A and Exhibit 1 to
Form 8-K dated February 13, 1998)
-32-
4.4 Certificate of Determination regarding 33
Series D Participating Preferred Shares.
These shares are relative to the
Shareholder Rights Plan and would be
issued if the rights plan were triggered.
This is a revised filing at the California
Secretary of State's request in a revised
form (Exhibit 10.19 to Form 10Q for the
quarter ending September 30, 1998)
4.5 Thirty-fourth Supplemental Indenture dated 33
as of November 1, 1990, covering First
Mortgage 9.86% Bonds, Series CC. (Exhibit
4 to Form 10-K for fiscal year 1990)
4.6 Thirty-sixth Supplemental Indenture dated 33
as of May 1, 1993, covering First Mortgage
7.90% Bonds Series EE (Exhibit 4 to Form
10-Q dated June 30, 1993)
4.7 Thirty-seventh Supplemental Indenture 33
dated as of September 1, 1993, covering
First Mortgage 6.95% Bonds, Series FF
(Exhibit 4 to Form 10-Q dated September
30, 1993)
4.8 Thirty-eighth Supplemental Indenture dated 33
as of October 15, 1993, covering First
Mortgage 6.98% Bonds, Series GG (Exhibit 4
to Form 10-K for fiscal year 1994)
4.9 Note Agreement dated August 15, 1995, 33
pertaining to issuance of $20,000,000,
7.28% Series A Unsecured Senior Notes, due
November 1, 2025 (Exhibit 4 to Form 10-Q
dated September 30, 1995)
4.10 Note Agreement dated March 1, 1999, 33
pertaining to issuance of $20,000,000,
6.77% Series B Unsecured Senior Notes, due
November 1, 2028 (Exhibit 4.1 to Form 10-K
dated December 31, 1999)
4.11 First Supplement dated October 1, 2000 to 33
Note Agreement of March 1, 1999 pertaining
to issuance of $20,000,000, 8.15% Series C
Unsecured Senior Notes, due November 1,
2030 (Exhibit 4.10 to Form 10-K dated
December 31, 2000)
4.12 Second Supplement dated September 1, 2001 33
to Note Agreement of March 1, 1999
pertaining to issuance of $20,000,000,
7.13% Series D Unsecured Senior Notes, due
November 1, 2031 (Exhibit 4.1 to Form 10-Q
dated September 30, 2001)
4.13 Third Supplement dated May 1, 2002 to Note 33
Agreement of March 1, 1999, pertaining to
issuance of $20,000,000, 7.11% Series E
Unsecured Senior Notes, due November 1,
2032 (Exhibit 4.1 to Form 10-Q dated June
30, 2002)
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4.14 Fourth Supplement dated August 15, 2002 to 38
Note Agreement of March 1, 1999, Note
Agreement dated August 15, 2002,
pertaining to issuance of $20,000,000,
5.90% Series F Unsecured Senior Notes, due
November 1, 2017 (Exhibit 4.14 to Form
10-K dated December 31, 2002)
4.15 Fifth Supplement dated November 1, 2002 to 68
Note Agreement of March 1, 1999,
pertaining to issuance of $20,000,000,
5.29% Series G Unsecured Senior Notes, due
November 1, 2022 (Exhibit 4.15 to Form
10-K dated December 31, 2002)
4.16 Sixth Supplement dated December 1, 2002 to 104
Note Agreement of March 1, 1999 pertaining
to issuance of $20,000,000, 5.29% Series H
Unsecured Senior Notes, due December 1,
2022 (Exhibit 16 to Form 10-K dated
December 31, 2002)
4.17 Ninth Supplement dated February 15, 2003 136
to Note Agreement of March 1, 1999
pertaining to issuance of $10,000,000,
4.58% Series K Unsecured Senior Notes, due
June 30, 2010 (Exhibit 4.17 to Form 10-K
dated December 31, 2002)
4.18 Tenth Supplement dated February 15, 2003 162
to Note Agreement of March 1, 1999
pertaining to issuance of $10,000,000,
5.48% Series L Unsecured Senior Notes, due
March 18, 2018 (Exhibit 4.18 to Form 10-K
dated December 31, 2002)
4.19 Thirteenth Supplemental Trust Indenture 34
whereby California Water Service Company
became the successor to Dominguez Water
Corporation in the original trust
indenture for Dominguez Water Corporation
dated August 1, 1954 (Exhibit 4.11 to Form
10-K dated December 31, 2000)
4.20 Eleventh Supplemental Trust Indenture 34
dated as of December 8, 1992 covering
First Mortgage 8.86% Bonds, Series J
(Exhibit 10.2 to Form 10-K as of December
31, 1997 and filed by Dominguez Services
Corporation on March 31, 1998)
4.21 Twelfth Supplemental Indenture dated as of 34
December 1, 1997, covering First Mortgage
6.94% Bonds, Series K due January 1, 2023
(Exhibit 10.2 to Form 10-K dated December
31, 1997 and filed by Dominguez Services
Corporation on March 31, 1998)
10. Material Contracts.
10.1 Water Supply Contract between Cal Water 34
and County of Butte relating to Cal
Water's Oroville District; Water Supply
Contract between Cal Water and the Kern
County Water Agency relating to Cal
Water's Bakersfield District; Water Supply
Contract between Cal Water and Stockton
East Water District relating to Cal
Water's Stockton District. (Exhibits 5(g),
5(h), 5(i), 5(j), Registration Statement
No. 2-53678, which exhibits are
incorporated by reference to Form 10-K for
fiscal year 1974).
-34-
10.2 Settlement Agreement and Master Water 35
Sales Contract between the City and County
of San Francisco and Certain Suburban
Purchasers dated August 8, 1984;
Supplement to Settlement Agreement and
Master Water Sales Contract, dated August
8, 1984; Water Supply Contract between Cal
Water and the City and County of San
Francisco relating to Cal Water's Bear
Gulch District dated August 8, 1984; Water
Supply Contract between Cal Water and the
City and County of San Francisco relating
to the Cal Water's San Carlos District
dated August 8, 1984; Water Supply
Contract between Cal Water and the City
and County of San Francisco relating to
Cal Water's San Mateo District dated
August 8, 1984; Water Supply Contract
between Cal Water and the City and County
of San Francisco relating to Cal Water's
South San Francisco District dated August
8, 1984. (Exhibit 10.2 to Form l0-K for
fiscal year 1984).
10.3 Water Supply Contract dated January 27, 35
1981, between Cal Water and the Santa
Clara Valley Water District relating to
Cal Water's Los Altos District (Exhibit
10.3 to Form 10-K for fiscal year 1992)
10.4 Amendments No. 3, 6 and 7 and Amendment 35
dated June 17, 1980, to Water Supply
Contract between Cal Water and the County
of Butte relating to Cal Water's Oroville
District. (Exhibit 10.5 to Form 10-K for
fiscal year 1992)
10.5 Amendment dated May 31, 1977 to Water 35
Supply Contract between Cal Water and
Stockton-East Water District relating to
Cal Water's Stockton District. (Exhibit
10.6 to Form 10-K for fiscal year 1992)
10.6 Second Amended Contract dated September 35
25, 1987 among Stockton East Water
District, California Water Service
Company, the City of Stockton, the Lincoln
Village Maintenance District, and the
Colonial Heights Maintenance District
Providing for the Sale of Treated Water.
(Exhibit 10.7 to Form 10-K for fiscal year
1987).
10.7 Water Supply Contract dated April 19, 35
1927, and Supplemental Agreement dated
June 5, 1953, between Cal Water and
Pacific Gas and Electric Company relating
to Cal Water's Oroville District. (Exhibit
10.9 to Form 10-K for fiscal year 1992)
10.8 California Water Service Company Pension 35
Plan (Exhibit 10.10 to Form 10-K for
fiscal year 1992)
10.9 California Water Service Company Employees 35
Savings Plan. (Exhibit 10.12 to Form 10-K
for fiscal year 1992)
10.10 Agreement between the City of Hawthorne 35
and California Water Service Company for
the 15-year lease of the City's water
system. (Exhibit 10.17 to Form 10-Q dated
March 31, 1996)
-35-
10.11 Water Supply Agreement dated September 25, 36
1996 between the City of Bakersfield and
California Water Service Company. (Exhibit
10.18 to Form 10-Q dated September 30,
1996)
10.12 Water Supply Contract dated November 16, 36
1994 between California Water Service
Company and Alameda County Flood Control
and Water Conservation District relating
to Cal Water's Livermore District (Exhibit
10.15 to Form 10-K for 1994)
10.13 Agreement of Merger dated March 6, 1997 by 36
and among California Water Service
Company, CWSG Merger Company and
California Water Service Group. (Filed as
Exhibit A of the 1997 California Water
Service Company Proxy Statement/
Prospectus which was incorporated by
reference in the Form 10-K for 1997)
10.14 Dividend Reinvestment and Stock Purchase 36
Plan dated February 17, 1998 (Filed on
Form S-3 dated February 17, 1998)
10.15 California Water Service Group Directors 36
Retirement Plan (Exhibit 10.18 to Form
10-K for fiscal year 1997) *
10.16 $60,000,000 Business Loan Agreements 36
between Bank of America as lead
arranger/bank and California Water Service
Group, and CWS Utility Services and
California Water Service Company, and JCC
Homes dated August 1, 2001; terminated
February 28, 2003 (Exhibit 10.1 to Form
10-Q dated September 30, 2001)
10.17 $10,000,000 Business Loan Agreement 189
between Bank of America and California
Water Service Group and CWS Utility
Services dated February 28, 2003 (Exhibit
10.17 to Form 10-K dated December 31, 2002
10.18 $55,000,000 Business Loan Agreement 206
between Bank of America and California
Water Service Company dated February 28,
2003 (Exhibit 10.18 to Form 10-K dated
December 31, 2002
10.19 Executive Severance Plan (Exhibit 10.24 to 36
Form 10K for the fiscal year 1998) *
10.20 California Water Service Group Long-Term 36
Incentive Plan (filed as Appendix A of the
2000 California Water Service Group
Proxy)*
10.21 California Water Service Group Deferred 36
Compensation Plan effective January 1,
2001; this plan replaces the former
Directors Deferred Compensation Plan
(Exhibit 10.22 to Form 10-K for 2000) *
10.22 California Water Service Company 36
Supplemental Executive Retirement Plan
(SERP) effective January 1, 2001; this
plan replaces a prior plan, see Exhibit
10.9 (Exhibit 10.23 to Form 10-K for
2000)*
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10.23 Amendment to the California Water Service 222
Company Supplemental Executive Retirement
Plan (SERP) effective January 1, 2003
granting 60% retirement benefit after 15
years of service (Exhibit 10.23 to Form
10-K for dated December 31, 2002)*
13. Annual Report to Security Holders, Form 10-Q or
Quarterly Report to Security Holders:
13.1 2002 Annual Report. Certain sections of 223
the 2002 Annual Report to stockholders are
incorporated by reference in this 10-K
filing and filed with this Form 10-K as
Exhibit 13. This includes those sections
referred to in Part II, Item 5, Market for
Registrant's Common Equity and Related
Shareholder Matters; Part II, Item 6,
Selected Financial Data; Part II, Item 7,
Management's Discussion and Analysis of
Financial Condition and Results of
Operations; Part II, Item 7A, Quantitative
and Qualitative Disclosures About Market
Risk; and Part II, Item 8, Financial
Statement and Supplementary Data.
21. Subsidiaries of the Registrant 256
23. Consents of Experts and Counsel.
23.1 Consent of KPMG LLP 257
99. Certification Pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 258
* Management Contract or Compensatory Plan or Arrangement
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