UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    FORM 10-Q

(Mark One)

X    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

For the quarterly period ended June 30, 2004

                                            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 number      1-13883
                      ---------------------------------------------

                           CALIFORNIA WATER SERVICE GROUP
- --------------------------------------------------------------------------------
                    (Exact name of registrant as specified in its charter)

         Delaware                                       77-0448994
- --------------------------------------------------------------------------------
(Sate or other jurisdiction                 (I.R.S. Employer identification No.)
of incorporation or organization)

1720 North First Street, San Jose, CA.                    95112
- --------------------------------------------------------------------------------
(Address of principal executive offices)               (Zip Code)

                                 1-408-367-8200
- --------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)

Not Applicable  (Former name,  former address and former fiscal year, if changed
since last report)

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 checkmark whether the Registrant is an accelerated filer (as defined
in rule 12b-2 of the Act)   Yes  X   No
                                ---     ---
Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date. Common shares outstanding as of
August 4, 2004 - 18,345,496.




TABLE OF CONTENTS
                                                                            Page

PART I     Financial Review - Management's Discussion and Analysis and
             Condensed Consolidated Financial Statements....................   3

Item 1     Condensed Consolidated Balance Sheets  (unaudited)
             June 30, 2004 and December 31, 2003............................   4

           Condensed Consolidated Statements of Income  (unaudited)
             For the Three and Six Months Ended June 30, 2004 and 2003......   5

           Condensed Consolidated Statements of Cash Flows (unaudited)
             For the Six Months Ended June 30, 2004 and 2003................   7

           Notes to Condensed Consolidated Financial Statements.............   8

Item 2     Management's Discussion and Analysis of Financial Condition
             and Results of Operations......................................  15

Item 3     Quantitative and Qualitative Disclosure about Market Risk........  27

Item 4     Controls and Procedures..........................................  28


PART II    Other Information

Item 1     Legal Proceedings................................................  28

Item 4     Submission of Matters to a Vote of Security Holders..............  29


Item 6     Exhibits and Reports on Form 8-K.................................  29

           Signatures.......................................................  30

           Index to Exhibits................................................  31


                                       2



PART I    FINANCIAL INFORMATION

Item 1.

Financial Statements

         The condensed consolidated financial statements presented in this
         filing on Form 10-Q have been prepared by management and are unaudited.




                                       3




CALIFORNIA WATER SERVICE GROUP
CONDENSED CONSOLIDATED BALANCE SHEETS
Unaudited
(In thousands, except per share data)                       June 30,     December 31,
                                                              2004          2003
                                                          -----------    -----------
                                                                   
ASSETS
Utility plant:
         Utility plant                                    $ 1,106,534    $ 1,078,975
         Less accumulated depreciation and amortization       331,150        319,477
                                                          -----------    -----------
                Net utility plant                             775,384        759,498
                                                          -----------    -----------

Current assets:
         Cash and cash equivalents                             24,109          2,856
         Customer receivables                                  23,095         18,434
         Other receivables                                     13,609          5,125
         Unbilled revenue                                      13,107          8,522
         Materials and supplies                                 3,225          2,957
         Taxes and other prepaid expenses                       6,934          5,609
                                                          -----------    -----------
                Total current assets                           84,079         43,503
                                                          -----------    -----------


Regulatory assets                                              54,747         53,326
Other assets                                                   18,228         16,708
                                                          -----------    -----------
                                                          $   932,438    $   873,035
                                                          ===========    ===========

CAPITALIZATION AND LIABILITIES
Capitalization:
         Common stock, $.01 par value                     $       183    $       169
         Additional paid-in capital                           130,636         93,748
         Retained earnings                                    152,764        150,908
         Accumulated other comprehensive loss                    (301)          (301)
                                                          -----------    -----------
                Total common stockholders' equity             283,282        244,524
         Preferred stock                                        3,475          3,475
         Long-term debt, less current maturities              271,968        272,226
                                                          -----------    -----------
                Total capitalization                          558,725        520,225
                                                          -----------    -----------

Current liabilities:
         Current maturities of long-term debt                     846            904
         Short-term borrowings                                   --            6,454
         Accounts payable                                      28,624         23,776
         Accrued expenses and other liabilities                36,406         32,430
                                                          -----------    -----------
                Total current liabilities                      65,876         63,564


Unamortized investment tax credits                              2,925          2,925
Deferred income taxes                                          48,144         38,005
Regulatory and other liabilities                               38,100         35,835
Advances for construction                                     126,642        121,952
Contributions in aid of construction                           92,026         90,529
Commitments and contingencies                                    --             --
                                                          -----------    -----------
                                                          $   932,438    $   873,035
                                                          ===========    ===========
<FN>
See accompanying Notes to Condensed Consolidated Financial Statements
</FN>

                                        4

CALIFORNIA WATER SERVICE GROUP
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
Unaudited

For the three months ended:                                 June 30,    June 30,
                                                              2004        2003
                                                           --------     --------

Operating revenue                                           $88,845      $67,994
                                                           --------     --------
Operating expenses:
     Operations                                              55,450       45,693
     Maintenance                                              3,032        3,063
     Depreciation and amortization                            6,521        5,838
     Income taxes                                             6,844        3,314
     Property and other taxes                                 2,915        2,538
                                                           --------     --------
        Total operating expenses                             74,762       60,446
                                                           --------     --------

        Net operating income                                 14,083        7,548
                                                           --------     --------

Other income and expenses:
        Non-regulated income, net                               573          559
        Gain on sale of non-utility property                   --            958
                                                           --------     --------
        Total other income and expenses                         573        1,517

Interest expense:
     Interest expense                                         4,752        5,090
     Less capitalized interest                                  150          610
                                                           --------     --------
        Total interest expense                                4,602        4,480

Net income                                                  $10,054      $ 4,585
                                                           ========     ========

Earnings per share
     Basic                                                  $  0.59      $  0.30
                                                           ========     ========
     Diluted                                                $  0.59      $  0.30
                                                           ========     ========
Weighted average shares outstanding
     Basic                                                   16,965       15,182
                                                           ========     ========
     Diluted                                                 16,983       15,198
                                                           ========     ========
Dividends per share of common stock                        $0.28250     $0.28125
                                                           ========     ========


See accompanying Notes to Condensed Consolidated Financial Statements

                                        5



CALIFORNIA WATER SERVICE GROUP
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
Unaudited

For the six months ended:                                  June 30,     June 30,
                                                             2004         2003
                                                           --------     --------

Operating revenue                                          $149,085     $119,305
                                                           --------     --------
Operating expenses:
     Operations                                              96,948       83,453
     Maintenance                                              6,213        6,316
     Depreciation and amortization                           13,039       11,598
     Income taxes                                             7,802        2,761
     Property and other taxes                                 5,609        5,003
                                                           --------     --------
        Total operating expenses                            129,611      109,131
                                                           --------     --------

        Net operating income                                 19,474       10,174
                                                           --------     --------

Other income and expenses:
        Non-regulated income, net                             1,123        1,169
        Gain on sale of non-utility property                      1        1,511
                                                           --------     --------
        Total other income and expenses                       1,124        2,680

Interest expense:
     Interest expense                                         9,398        9,947
     Less capitalized interest                                  300          910
                                                           --------     --------
        Total interest expense                                9,098        9,037

Net income                                                 $ 11,500     $  3,817
                                                           ========     ========

Earnings per share
     Basic                                                 $   0.67     $   0.25
                                                           ========     ========
     Diluted                                               $   0.67     $   0.25
                                                           ========     ========
Weighted average shares outstanding
     Basic                                                   16,949       15,182
                                                           ========     ========
     Diluted                                                 16,967       15,191
                                                           ========     ========
Dividends per share of common stock                        $0.56500     $0.56250
                                                           ========     ========


See accompanying Notes to Condensed Consolidated Financial Statements

                                        6




CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Unaudited
For the six months ended:                                        June 30,     June 30,
                                                                   2004        2003
                                                                 --------    --------
                                                                       
Operating activities
      Net income                                                 $ 11,500    $  3,817
                                                                 --------    --------
      Adjustments to reconcile net income to
        net cash provided by operating  activities:
          Depreciation and amortization                            13,039      11,598
          Deferred income taxes, investment tax credits
              regulatory assets and liabilities, net               10,925        (510)
          Gain on sale of non-utility assets                           (1)     (1,511)
          Changes in operating assets and liabilities:
              Receivables                                         (13,103)     (2,360)
              Unbilled revenue                                     (4,572)     (2,070)
              Taxes and other prepaid expenses                     (1,308)      1,670
              Accounts payable                                      4,838       4,824
              Other current assets                                   (268)        (40)
              Other current liabilities                             3,971       1,233
              Other changes, net                                     (915)     (1,513)
                                                                 --------    --------
                 Net adjustments                                   12,606      11,321
                                                                 --------    --------
                 Net cash provided by operating activities         24,106      15,138
                                                                 --------    --------
Investing activities:
      Utility plant expenditures
         Company funded                                           (21,399)    (32,191)
         Developer funded                                          (8,230)    (10,092)
      Acquisitions                                                   (900)     (7,529)
      Proceeds from sale of non-utility assets                          6       1,609
                                                                 --------    --------
                 Net cash used by investing activities            (30,523)    (48,203)
                                                                 --------    --------

Financing activities:
      Net changes in short-term borrowings                         (6,454)     13,679
      Issuance (retirement) of long-term debt, net                   (316)     19,640
      Advances for construction                                     7,096       6,580
      Refunds of advances for construction                         (2,394)     (2,371)
      Contributions in aid of construction                          2,479       4,082
      Issuance of common stock                                     36,903        --
      Dividends paid                                               (9,644)     (8,616)
                                                                 --------    --------
                 Net cash provided by financing
                    activities                                     27,670      32,994
                                                                 --------    --------

Change in cash and cash equivalents                                21,253         (71)
Cash and cash equivalents at beginning of period                    2,856       1,063
                                                                 --------    --------
Cash and cash equivalents at end of period                       $ 24,109    $    992
                                                                 ========    ========
<FN>
      See accompanying Notes to Condensed Consolidated Financial Statements
</FN>


                                        7


                         CALIFORNIA WATER SERVICE GROUP
              Notes to Condensed Consolidated Financial Statements
                                  June 30, 2004


Note 1.  Organization and Operations

     California  Water  Service  Group (the  Company) is a holding  company that
     provides   water  utility  and  other  related   services  in   California,
     Washington,  New Mexico and Hawaii  through its wholly owned  subsidiaries.
     California  Water  Service  Company (Cal Water),  Washington  Water Service
     Company  (Washington  Water),  New Mexico Water Service Company (New Mexico
     Water) and Hawaii  Water  Service  Company,  Inc.  (Hawaii  Water)  provide
     regulated  utility  services  under  the  rules  and  regulations  of their
     respective state's regulatory commission.  In addition,  these entities and
     CWS   Utility   Services   provide    non-regulated   water   utility   and
     utility-related services.

     The Company  operates  primarily in one business  segment  providing  water
     utility services.


Note 2.  Summary of Significant Accounting Policies

     The  interim  financial  information  is  unaudited.   In  the  opinion  of
     management,  the accompanying  condensed  consolidated financial statements
     reflect all adjustments  that are necessary to provide a fair  presentation
     of the results for the periods  covered.  The  adjustments  consist only of
     normal  recurring  adjustments.  The results  for  interim  periods are not
     necessarily  indicative  of the results of the entire year.  The  condensed
     consolidated  financial  statements  should be read in conjunction with the
     Company's consolidated financial statements for the year ended December 31,
     2003,  included in its Form 10-K as filed with the  Securities and Exchange
     Commission on March 15, 2004.


Note 3.  Stock-based Compensation

     The Company has a stockholder-approved Long-Term Incentive Plan that allows
     granting  of  non-qualified  stock  options.  The  Company  has adopted the
     disclosure  requirements  of Statement of  Financial  Accounting  Standards
     (SFAS) No. 123,  "Accounting for Stock-Based  Compensation," as amended. As
     permitted by SFAS No. 123, the Company applies Accounting  Principles Board
     Opinion No. 25,  "Accounting  for Stock Issued to Employees," for its plan.
     All outstanding  options had an exercise price equal to the market price on
     the date they were granted.  No  compensation  expense was recorded for the
     three- and six-month  periods ended June 30, 2004 and 2003 related to stock
     options. No options were granted during these periods.



                                       8


     The table below illustrates the effect on net income and earnings per share
     as if the Company had applied the fair value recognition  provision of SFAS
     No. 123 to employee compensation.

(In thousands, except per share data)

                                                            Three Months Ended
                                                                  June 30
                                                          ----------------------
                                                             2004        2003
                                                          ----------   ---------
Net income, as reported                                   $   10,054   $   4,585

Deduct:  Total stock-based employee compensation
     expense determined under fair value
     method for all awards, net of related tax effects            16          21
                                                          ----------   ---------
Pro forma net income                                      $   10,038   $   4,564
                                                          ==========   =========

Earnings per share
          Basic - as reported                             $     0.59   $    0.30
          Basic - pro forma                               $     0.59   $    0.30

          Diluted - as reported                           $     0.59   $    0.30
          Diluted - pro forma                             $     0.59   $    0.30

(In thousands, except per share data)

                                                             Six Months Ended
                                                                  June 30
                                                          ----------------------
                                                             2004        2003
                                                          ----------   ---------
Net income, as reported                                   $   11,500   $   3,817

Deduct:  Total stock-based employee compensation
     expense determined under fair value
     method for all awards, net of related tax effects            33          42
                                                          ----------   ---------
Pro forma net income                                      $   11,467   $   3,775
                                                          ==========   =========

Earnings per share
          Basic - as reported                             $     0.67   $    0.25
          Basic - pro forma                               $     0.67   $    0.25

          Diluted - as reported                           $     0.67   $    0.25
          Diluted - pro forma                             $     0.67   $    0.24



                                       9


Note 4.  Seasonal Business

     Due to the seasonal nature of the water  business,  the results for interim
     periods  are not  indicative  of the  results  for a  twelve-month  period.
     Revenue and income are generally higher in the warm, dry summer months when
     water  usage and sales are  greater.  Revenue  and  income are lower in the
     winter months when cooler temperatures and rainfall curtail water usage and
     sales.


Note 5.  Earnings Per Share Calculations

     The computations of basic and diluted earnings per share are noted below.

     Common stock options outstanding to purchase common shares were 145,500 and
     149,250 at June 30, 2004 and June 30, 2003, respectively.

      (In thousands, except per share data)

                                                              Three Months Ended
                                                                   June 30
                                                             -------------------
                                                               2004        2003
                                                             -------     -------
       Net income                                            $10,054     $ 4,585
       Less preferred dividends                                   38          38
                                                             -------     -------
       Net income available to common stockholders           $10,016     $ 4,547
                                                             =======     =======

       Weighted average common shares                         16,965      15,182
       Dilutive common stock options (treasury method)            18          16
                                                             -------     -------
       Shares used for dilutive computation                   16,983      15,198
                                                             =======     =======

       Net income per share - basic                          $  0.59     $  0.30
                                                             -------     -------
       Net income per share - diluted                        $  0.59     $  0.30
                                                             -------     -------


                                       10

    (In thousands, except per share data)

                                                               Six Months Ended
                                                                   June 30
                                                             -------------------
                                                               2004        2003
                                                             -------     -------
       Net income                                            $11,500     $ 3,817
       Less preferred dividends                                   76          76
                                                             -------     -------
       Net income available to common stockholders           $11,424     $ 3,741
                                                             =======     =======

       Weighted average common shares                         16,949      15,182
       Dilutive common stock options (treasury method)            18           9
                                                             -------     -------
       Shares used for dilutive computation                   16,967      15,191
                                                             =======     =======

       Net income per share - basic                          $  0.67     $  0.25
                                                             -------     -------
       Net income per share - diluted                        $  0.67     $  0.25
                                                             -------     -------


Note 6.  Pension Plan and Other Postretirement Benefits

     The Company provides a qualified defined benefit,  non-contributory pension
     plan  for   substantially   all   employees.   The  Company   makes  annual
     contributions  to fund the amounts accrued for the qualified  pension plan.
     The  Company  also  maintains  an  unfunded,  non-qualified,   supplemental
     executive  retirement  plan.  The costs of the plans are charged to expense
     and utility plant.

     The Company offers medical,  dental, vision and life insurance benefits for
     retirees and their spouses and dependents. Participants are required to pay
     a premium, which offsets a portion of the cost.

     Payments by the Company  related to pension  plan and other  postretirement
     benefits  were  $1,649,000  for the three months  ended June 30, 2004,  and
     $6,041,000  for the six months ended June 30, 2004. The Company is planning
     to  increase  its  funding  for  2004  by  $3,800,000  from  $7,700,000  to
     $11,500,000.  The increase relates to payments previously scheduled for the
     first  quarter  of 2005 and does not  represent  an  increase  in the total
     estimated  payments related to the 2004 plan year.  Estimated payments will
     be adjusted  prior to December  2004 upon  receipt of updated  calculations
     from the Company's actuary.


                                       11


     The  following  table  lists  components  of the  pension  plans  and other
     postretirement  benefits. The data listed under "pension plan" includes the
     qualified  pension  plan  and  the  non-qualified   executive  supplemental
     retirement  plan.  The data listed under "other  benefits" is for all other
     postretirement benefits.



     (In thousands)
                                                                        Three Months Ended June 30
                                                       -------------------------------------------------------------
                                                            Pension Benefit                    Other Benefits
                                                       --------------------------         --------------------------
                                                        2004              2003              2004              2003
                                                       -------           -------           -------           -------
                                                                                                 
      Service cost                                     $ 1,137           $   970           $   305           $   258
      Interest cost                                      1,364             1,344               342               306
      Expected return on plan assets                    (1,219)           (1,189)              (86)              (58)
      Recognized net initial ABO                          --                --                 N/A               N/A
      Recognized net initial APBO                          N/A               N/A                69                69
      Amortization of prior service cost                   424               450                19                19
      Recognized net actuarial (gain) loss                  34                15                84                72
                                                       -------           -------           -------           -------

      Net periodic benefit cost                        $ 1,740           $ 1,590           $   733           $   666
                                                       =======           =======           =======           =======




     (In thousands)
                                                                         Six Months Ended June 30
                                                       -------------------------------------------------------------
                                                            Pension Benefit                    Other Benefits
                                                       --------------------------         --------------------------
                                                          2004               2003             2004             2003
                                                       -------           -------           -------           -------

                                                                                                
      Service cost                                     $ 2,274           $ 1,947           $   610          $   479
      Interest cost                                      2,728             2,697               684              568
      Expected return on plan assets                    (2,438)           (2,387)             (172)            (108)
      Recognized net initial ABO                          --                --                 N/A              N/A
      Recognized net initial APBO                          N/A               N/A               138              128
      Amortization of prior service cost                   848               904                38               35
      Recognized net actuarial (gain) loss                  68                30               168              133
                                                       -------           -------           -------          -------

      Net periodic benefit cost                        $ 3,480           $ 3,191           $ 1,466          $ 1,235
                                                       =======           =======           =======          =======


     ABO - Accumulated benefit obligation
     APBO - Accumulated postretirement benefit obligation

     Postretirement  benefit  expense  for  "other  benefits"  recorded  in  the
     three-month periods ended June 30, 2004 and 2003 was $385,000 and $352,000,


                                       12


     respectively.  Postretirement benefit expense for "other benefits" recorded
     in the  six-month  periods  ended June 30, 2004 and 2003 was  $771,000  and
     705,000,  respectively.  As of June 30, 2004,  the Company had a regulatory
     asset of $7,536,000 related to postretirement  benefits,  which is expected
     to be recovered through future customer rates.


Note 7. Financing

     On June 24, 2004,  the Company  announced  the sale of 1,250,000  shares of
     common stock. A prospectus  supplement  and prospectus  were filed with the
     SEC under rule 424 (b) (2) on that date. The shares were sold at $27.25 per
     share.  The  underwriters  exercised part of their over  allotment  option,
     after which the additional  common shares issued totaled  1,409,700 shares.
     The net proceeds are  estimated at $36.8  million and the  transaction  was
     closed  on June 29,  2004.  The  funds  were  used to pay  down  short-term
     borrowings  and to invest in short-term  money market  instruments  pending
     their use for general corporate  purposes.  After issuance of these shares,
     there remains $35,648,175 in securities under the shelf registration, which
     are available for future issuance.

Note 8.  New Accounting Standards

     In December 2003, the Financial  Accounting  Standards  Board (FASB) issued
     Interpretation  No. 46R,  "Consolidation  of Variable  Interest  Entities,"
     which amended  Interpretation  No. 46,  "Consolidation of Variable Interest
     Entities."  The  revision   exempted  certain  entities  and  modified  the
     effective  dates of  Interpretation  No. 46. The original  guidance  issued
     under   Interpretation   No.  46  in  January  2003  is  still  applicable.
     Interpretation  No. 46 and  Interpretation  No. 46R  provide  guidance  for
     determining  when a  primary  beneficiary  should  consolidate  a  variable
     interest  entity or  equivalent  structure  that  functions  to support the
     activities of the primary beneficiary. Interpretation No. 46R was effective
     March 31, 2004. The adoption of  Interpretation  No. 46R did not impact the
     Company's financial position, results of operations or cash flows.

     In  December  2003,  the FASB issued  Statements  of  Financial  Accounting
     Standards (SFAS) No. 132 (revised),  "Employers' Disclosures about Pensions
     and Other Postretirement Benefits - An Amendment of FASB Statements No. 87,
     88, and 106," which changed certain disclosures. SFAS No. 132 (revised) was
     effective for fiscal years ending after December 15, 2003, and is effective
     for  interim-period  disclosures  beginning after December 15, 2003. As the
     revision relates to disclosure  requirements,  the adoption of SFAS No. 132
     (revised)  did not  impact the  Company's  financial  position,  results of
     operations or cash flows.

     In May  2004,  the  FASB  issued  FASB  Staff  Position  (FSP)  No.  106-2,
     "Accounting   and   Disclosure   Requirements   Related  to  the   Medicare
     Prescription  Drug,  Improvement  and  Modernization  Act of 2003." FSP No.
     106-2 is effective  for the first  quarter after June 15, 2004 and replaces
     FSP No. 106-1.  FSP 106-1 was effective for the  three-month  and six-month
     periods  ended June 30, 2004,  as the Company  chose not to adopt FSP 106-2
     early.  Also,  FSP  106-1  was  effective  for the  Company's  consolidated
     financial  statements  for the year  ended  December  31,  2003.  FSP 106-1
     permits a sponsor  of a  postretirement  health  care plan that  provides a
     prescription  drug benefit to make a one-time  election to defer accounting


                                       13


     for  the  effects  of  the  Medicare  Prescription  Drug,  Improvement  and
     Modernization  Act of 2003 (the Medicare  Act). In accordance  with FSP No.
     106-1, the Company made a one-time election to defer the recognition of the
     impact of FSP No. 106-1  accounting  through June 30, 2004. Any measures of
     the  accumulated   postretirement   benefit  obligation  and  net  periodic
     postretirement  benefit cost in the consolidated  financial  statements and
     footnotes for the three- and six-month periods ended June 30, 2004, did not
     reflect the effects of the Medicare Act. FSP 106-1  addressed  elections to
     defer or not defer the  accounting  implications  of the  Medicare  Act and
     provided disclosure  guidance,  but did not provide specific  authoritative
     accounting guidance. FSP 106-2 provides specific  authoritative  accounting
     guidance and addresses methods of transition. At this time, the Company has
     not determined if its plan is actuarially  equivalent and, as a result,  it
     can not  estimate  the  impact  FSP 106-2  will  have on  future  reporting
     periods.

Note 9.  Subsequent Event

     CPUC Decision Related to Failure to Report Acquisitions
     -------------------------------------------------------
     On July 8, 2004, the California Public Utilities Commission (CPUC) issued a
     final  decision  regarding  the  Company's  failure to report  three  small
     acquisitions. The Company was assessed a fine of $75,000 and a reduction of
     50 basis  points  (0.5%) in the  allowed  return on equity for its  Salinas
     district,  the district  that includes two of the three  acquisitions.  The
     time frame for the return on equity  reduction  is expected to be one year.
     The Office of Ratepayer  Advocates  had  recommended a fine of $9.6 million
     and  refund  of $0.5  million,  which  the  CPUC  rejected.  Prior  to this
     decision,  the Company had filed for a general rate increase in its Salinas
     district, which the CPUC was holding pending the resolution of this matter.
     With the final  decision on this  matter,  a rate  increase for the Salinas
     district was approved  that will increase  annual  revenues by an estimated
     $1.1 million, after adjustment for the reduction in allowed rate of return.
     The  $75,000  fine was  recorded as an expense in the second  quarter.  The
     increase in revenue will be recorded when billed to  customers,  consistent
     with the Company's revenue recognition practices.


                                       14


Item 2

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD LOOKING STATEMENTS

     This quarterly report,  including all documents  incorporated by reference,
     contains  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;  the ability to satisfy  requirements  related to the Sarbanes
     Oxley Act section 404 and other regulations on internal controls;  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 the 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 current or future debt that could  increase  financing  costs or
     affect the ability to borrow, make payments on debt or pay dividends;  and,
     other  risks  and  unforeseen  events.  When  considering   forward-looking
     statements,  the  reader  should  keep in mind  the  cautionary  statements
     included in this  paragraph.  The Company  assumes no obligation to provide
     public updates of forward-looking statements.


CRITICAL ACCOUNTING POLICIES

     The Company maintains its accounting  records in accordance with accounting
     principles  generally  accepted  in the  United  States of  America  and as
     directed by the regulatory commissions to which the Company is subject. The
     process of preparing financial  statements requires the use of estimates on
     the part of  management.  The  estimates  used by  management  are based on
     historical   experience   and  an   understanding   of  current  facts  and


                                       15


     circumstances.  Management believes that the following  accounting policies
     are  critical  because  they  involve  a higher  degree of  complexity  and
     judgment,  and can have a material  impact on the results of operations and
     financial condition.

Revenue Recognition
- -------------------
     Revenue  from metered  customers  includes  billings to customers  based on
     monthly  meter  readings  plus an  estimate  for  water  used  between  the
     customer's  last meter reading and the end of the  accounting  period.  The
     unbilled revenue amount is recorded as a current asset on the balance sheet
     under the  caption  "Unbilled  Revenue."  At June 30,  2004,  the  unbilled
     revenue  amount was  $13,108,000  and at December 31, 2003,  the amount was
     $8,522,000.  The unbilled  revenue  amount is generally  higher  during the
     summer months when water sales are higher.  The amount recorded as unbilled
     revenue varies depending on water usage in the preceding period; the number
     of days between meter reads for each billing cycle;  and the number of days
     between each cycle's meter reading and the end of the accounting cycle.

     Flat rate  customers  are billed in advance at the beginning of the service
     period.  The revenue is prorated so that the portion of revenue  applicable
     to the current accounting period is included in that period's revenue.  The
     portion related to a subsequent  accounting  period is recorded as unearned
     revenue on the balance  sheet and  recognized as revenue when earned in the
     subsequent accounting period. The unearned revenue liability was $2,149,000
     at June 30, 2004 and  $2,127,000  at December 31, 2003.  This  liability is
     included in "accrued expenses and other liabilities" on the balance sheet.

Expense Balancing and Memorandum Accounts
- -----------------------------------------
     Expense balancing accounts and memorandum  accounts  (offsetable  expenses)
     represent  recoverable  costs  incurred,  but not billed to customers.  The
     amounts  included in these  accounts  relate to rate  increases  charged by
     suppliers of purchased  water and  purchased  power,  and increases in pump
     taxes, and only apply for the Company's  California  regulated  operations.
     The Company does not record expense balancing or memorandum accounts in its
     financial  statements as revenue,  nor as a receivable,  until the CPUC has
     authorized  recovery of the higher  costs and  customers  have been billed.
     Therefore,  a timing difference may occur between when costs are recognized
     and the  recognition of associated  revenues.  The balancing and memorandum
     accounts are only used to track the higher costs  outside of the  financial
     statements. The cost increases, which are beyond the Company's control, are
     referred to as "offsetable  expenses"  because under certain  circumstances
     they are recoverable  from customers in future offset rate  increases.  The
     amounts requested may not be ultimately collected through rates, as amounts
     may be disallowed during the review process or subject to an earnings test.
     While the adjustments  would not impact previously  recorded  amounts,  the
     adjustments  may change  future  earnings  and cash flows.  See  Regulatory
     Matters for net balances of expense balancing and memorandum accounts.


                                       16


Regulated Utility Accounting
- ----------------------------
     Because the Company  operates  extensively in a regulated  business,  it is
     subject to the  provisions of SFAS No. 71,  "Accounting  for the Effects of
     Certain Types of Regulation."  Regulators establish rates that are expected
     to permit the  recovery of the cost of service and a return on  investment.
     In the event a portion of the Company's  operations  were no longer subject
     to the provisions of SFAS No. 71, it would be required to write off related
     regulatory assets and liabilities that are not specifically recoverable and
     determine if other assets  might be  impaired.  If a regulatory  commission
     determined  that a portion of the Company's  assets were not recoverable in
     customer  rates,  the  Company  would be required  to  determine  if it had
     suffered an asset impairment that would require a write-down in the assets'
     valuation. There have been no such asset impairments as of June 30, 2004.

Income Taxes
- ------------
     Significant judgment by management is required in determining the provision
     for income taxes.  The  preparation of  consolidated  financial  statements
     requires the  estimation  of income tax expense.  The process  involves the
     estimating  of current  tax  exposure  together  with  assessing  temporary
     differences  resulting from different  treatment of certain items,  such as
     depreciation,  for tax and financial statement reporting. These differences
     result in deferred  tax assets and  liabilities,  which are reported in the
     consolidated balance sheet. Management must also assess the likelihood that
     deferred tax assets will be recovered in future taxable income,  and to the
     extent recovery is unlikely, a valuation allowance would be recorded.  If a
     valuation allowance were required,  it could significantly  increase income
     tax expense. In management's view, a valuation allowance is not required at
     June 30, 2004.

Pension Benefits
- ----------------
     The Company  incurs costs  associated  with its pension and  postretirement
     health care  benefits  plans.  To measure  the  expense of these  benefits,
     management must estimate  compensation  increases,  mortality rates, future
     health cost increases and discount rates used to value related  liabilities
     and  to  determine   appropriate  funding.   Different  estimates  used  by
     management could result in significant variances in the cost recognized for
     pension  benefit  plans.   The  estimates  used  are  based  on  historical
     experience,  current facts, future  expectations and  recommendations  from
     independent advisors and actuaries.  The Company uses an investment advisor
     to  provide   advice  in  managing  the  plan's   investments.   Management
     anticipates that any increase in funding for the pension and postretirement
     health care benefits plans will be recovered in future customer rates.


                                       17

RESULTS OF SECOND QUARTER 2004 OPERATIONS COMPARED TO
SECOND QUARTER 2003 OPERATIONS

Summary
- -------
     Second quarter net income was  $10,054,000,  equivalent to $0.59 per common
     share on a diluted basis, compared to net income of $4,585,000 or $0.30 per
     share on a diluted basis in the second quarter of 2003. The primary drivers
     were  increases  in  rates  and  favorable  weather  conditions.  Partially
     offsetting  revenue  increases  were cost  increases for  purchased  water,
     income taxes, depreciation and other expenses.

Operating Revenue
- -----------------
     Operating  revenue  increased  $20,851,000,  or  31%,  to  $88,845,000.  As
     disclosed  in the  following  table,  the  increase  was due  primarily  to
     increases in rates and increases in usage.  Weather impact was favorable as
     rainfall  was much lower  compared  to the prior  year.  Temperatures  were
     slightly  warmer,  which also increased  usage.  Water usage  increased 18%
     above the prior year, with the largest increase in April, increasing 30%.

     The factors that  affected the  operating  revenue  increase for the second
     quarter of 2004 are presented in the following table:

         Rate increases                                           $    9,713,000
         Increase in usage by existing customers                       9,460,000
         Usage by new customers                                        1,678,000
                                                                 ---------------
              Net operating revenue increase                     $    20,851,000
                                                                 ===============

         The components of the rate increases are listed in the following table:

         2001 General Rate Case (GRC)                            $     3,440,000
         Purchased water offset                                        1,480,000
         2001 GRC catch up                                             1,263,000
         Step rates                                                    1,192,000
         Bakersfield Treatment Plant                                   1,158,000
         2002 GRC                                                        967,000
         Hawthorne                                                       174,000
         Balancing accounts                                               39,000
                                                                 ---------------
              Total increase in rates                            $     9,713,000
                                                                 ===============

     Usage by new customers  includes  $247,000  related to Hawaii Water,  whose
     operations were acquired in May 2003, and includes $458,000 for the City of
     Commerce, for which the lease arrangement began in August 2003.


                                       18


Total Operating Expenses
- ------------------------

     Total operating  expenses were  $74,762,000 for the three months ended June
     30, 2004, versus $60,446,000 for the same period in 2003, a 24% increase.

     Water production  expense consists of purchased water,  purchased power and
     pump  taxes.  It  represents  the  largest  component  of  total  operating
     expenses,  accounting for  approximately  45% of total operating  expenses.
     Water production expenses increased 28% compared to last year.

     For  California  operations,  sources of water  production  as a percent of
     total water production are listed on the following table:

                                                  Three Months Ended June 30
                                                  --------------------------
                                                      2004          2003
                                                     ------         -----
             Well production                            48%           51%
             Purchased                                  48%           48%
             Surface                                     4%            1%
                                                     -----          ----
             Total                                     100%          100%
                                                     =====         =====

     Washington  Water,  New Mexico  Water and Hawaii  Water obtain all of their
     water supply from wells.

     The components of water production costs are shown in the table below:

                                    Three Months Ended June 30
                                    --------------------------
                                       2004           2003           Change
                                    -----------    -----------    -----------
              Purchased water       $25,380,000    $19,298,000    $ 6,082,000
              Purchased power         5,957,000      5,360,000        597,000
              Pump taxes              2,226,000      1,576,000        650,000
                                    -----------    -----------    -----------
                   Total            $33,563,000    $26,234,000    $ 7,329,000
                                    ===========    ===========    ===========

     Purchased  water cost  increased  due to higher  wholesale  water  rates in
     several  districts  and  higher  usage  of  purchased  water.  Included  in
     purchased water are credits received from certain wholesale suppliers.  The
     amounts of the credits were  $1,004,000  and  $1,434,000 for 2004 and 2003,
     respectively.  Purchased  power  increased due to higher usage.  Pump taxes
     increased  primarily  due  to  higher  well  production  in the  Los  Altos
     district,  where  pump tax rates are the  highest  of all of the  Company's
     districts.

     Payroll charged to operations  expense increased  $612,000 or 8%. Wages for
     union employees  increased 1.5% effective January 1, 2004.  Overall payroll
     costs  (expensed  and  capitalized)  increased  5% due to  increases in the
     number of employees  and higher wage rates.  Employee  and retiree  medical
     costs increased $350,000 or 19%. At June 30, 2004, there were 826 employees
     and at June 30, 2003, there were 810 employees.

                                       19


     Other areas of major  expense  increases  were:  water  treatment and water
     quality expenses increased $259,000 or 32%; workers  compensation  expenses
     increased  $373,000,  more  than  doubling;  regulatory  expense,  which is
     primarily CPUC fees, increased $283,000 or 30% due to the higher revenue.

     Maintenance  expense was  essentially  flat for the quarter  ended June 30,
     2004,  decreasing  $31,000,  or 1%.  Depreciation and amortization  expense
     increased  $683,000 or 12% because of 2003  capital  expenditures.  A major
     component of the  depreciation  expense increase relates to the Bakersfield
     Treatment  Plant,  which began operations in the second quarter of 2003 and
     added $438,000 to depreciation expense in the second quarter of 2004.

     Federal and state income taxes  increased  $3,530,000  due to the change in
     taxable  income.  The effective  tax rate was 41% in the second  quarter of
     2004 and 42% for the prior year's quarter.

Other Income and Expense
- ------------------------
     Other income was $573,000 for the quarter ended June 30, 2004,  compared to
     $1,517,000,  a decrease  of  $944,000.  There were no gains or losses  from
     property sales for the second quarter of 2004 compared to gains of $958,000
     for the second quarter of 2003.

Interest Expense
- ----------------
     Total  interest  expense  increased  $122,000  or  3%.  This  was  due to a
     reduction  in  capitalized  interest,  which is a credit to total  interest
     expense.  Construction  work-in-progress  amounts  were lower in the second
     quarter of 2004 compared to 2003.  Partially  offsetting was lower interest
     expense  on  long-term  debt as a result of  refinancing  a portion  of the
     long-term debt in 2003 at lower rates and lower short-term borrowings.


RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 2004 COMPARED TO THE
SIX MONTHS ENDED JUNE 2003

Summary
- -------
     Net income for the six-month  period ended June 30, 2004, was  $11,500,000,
     equivalent  to $0.67 per common share on a diluted  basis,  compared to net
     income of  $3,817,000  or $0.25 per share on a diluted  basis,  for the six
     months ended June 30, 2003. The primary drivers were increases in rates and
     favorable weather conditions. Partially offsetting the increase in revenues
     were cost increases for purchased  water,  income taxes,  depreciation  and
     other expenses.

Operating Revenue
- -----------------
     Operating  revenue  increased  $29,780,000  or  25%  to  $149,085,000.   As
     disclosed  in the  following  table,  the  increase was due to increases in
     rates and increases in usage.  Weather impact was favorable as rainfall was
     much lower compared to prior year. Temperatures were slightly warmer, which
     increased water usage by 15% above the prior year, with the largest monthly
     increase  (30%) in April.

                                       20


     The factors that affected the operating  revenue  increase are presented in
     the following table:

         Rate increases                                          $    16,690,000
         Increase in usage by existing customers                       9,786,000
         Usage by new customers                                        3,304,000
                                                                 ---------------
              Net operating revenue increase                     $    29,780,000
                                                                 ===============

     The components of the rate increases are listed in the following table:

         2001 GRC                                                $     5,863,000
         Purchased water offset                                        2,434,000
         Bakersfield Treatment Plant                                   2,316,000
         2001 GRC catch up                                             2,152,000
         Step rates                                                    1,928,000
         2002 GRC                                                      1,131,000
         Balancing accounts                                              569,000
         Hawthorne                                                       297,000
                                                                  --------------
              Total increase in rates                             $   16,690,000
                                                                  ==============

     Usage by new customers  includes  $949,000  related to Hawaii Water,  whose
     operations were acquired in May 2003, and includes $837,000 for the City of
     Commerce, for which the lease arrangement began in July 2003.

Total Operating Expenses
- ------------------------
     Total operating  expenses were  $129,611,000  for the six months ended June
     30, 2004, versus $109,131,000 for the same period in 2003, a 19% increase.

     Water production  expense consists of purchased water,  purchased power and
     pump  taxes.  It  represents  the  largest  component  of  total  operating
     expenses,  accounting for  approximately  42% of total operating  expenses.
     Water production expenses increased 21% compared to last year.

     For  California  operations,  sources of water  production  as a percent of
     total water production are listed on the following table:

                                                    Six Months Ended June 30
                                                  --------------------------
                                                     2004            2003
                                                     ----            ----
             Well production                          46%             48%
             Purchased                                50%             51%
             Surface                                   4%              1%
                                                     -----          -----
             Total                                   100%            100%
                                                     =====          =====


                                       21

     Washington  Water,  New Mexico  Water and Hawaii  Water obtain all of their
     water supply from wells.

     The components of water production costs are shown in the table below:

                                     Six  Months Ended June 30
                                    --------------------------
                                       2004           2003           Change
                                    -----------    -----------    -----------
              Purchased water       $41,741,000    $33,700,000    $ 8,041,000
              Purchased power         9,552,000      8,991,000        561,000
              Pump taxes              3,431,000      2,504,000        927,000
                                    -----------    -----------    -----------
                   Total            $54,724,000    $45,195,000    $ 9,529,000
                                    ===========    ===========    ===========


     Purchased  water cost  increased  due to higher  wholesale  water  rates in
     several  districts  and  higher  usage  of  purchased  water.  Included  in
     purchased  water was an  additional  expense  of  $840,000  to  revise  the
     estimated  settlement cost to $1,571,000 related to the previously reported
     meter malfunction at the wholesale supplier in the Stockton  district.  The
     estimate  was  revised  after  completion  of  a  study  by a  third  party
     contracted by the Company. At this time,  settlement  negotiations have not
     yet been  completed  with  the  wholesale  supplier  (Stockton  East  Water
     District) and the other primary buyer (City of Stockton);  therefore, final
     resolution may be differ from estimates.  For the six months ended June 30,
     2003,   expenses  related  to  the  meter  malfunction  were  approximately
     $244,000.  Also  included  in  purchased  water are credits  received  from
     certain wholesale suppliers. The amounts of the credits were $2,576,000 and
     $1,978,000 for 2004 and 2003,  respectively.  Purchased power increased due
     to  higher  usage.  Pump  taxes  increased  primarily  due to  higher  well
     production in the Los Altos district,  where pump tax rates are the highest
     of all of the Company's districts.

     Payroll charged to operations expense increased $1,431,000 or 9%. Wages for
     union employees  increased 1.5% effective January 1, 2004.  Overall payroll
     costs  (expensed  and  capitalized)  increased  5% due to  increases in the
     number of employees  and higher wage rates.  Employee  and retiree  medical
     costs increased $633,000 or 18%. At June 30, 2004, there were 826 employees
     and at June 30, 2003, there were 810 employees.

     Other areas of major  expense  increases  were:  water  treatment and water
     quality  expenses   increased   $216,000  or  14%;  insurance  and  workers
     compensation expenses increased $614,000 or 38%; regulatory expense,  which
     is  primarily  CPUC  fees,  increased  $419,000  or 26%  due to the  higher
     revenue.

     Maintenance  expense was  essentially  flat for the six months,  decreasing
     $103,000, or 2%. Depreciation and amortization expense increased $1,441,000
     or 12%  because of 2003  capital  expenditures.  A major  component  of the
     depreciation  expense increase relates to the Bakersfield  Treatment Plant,
     which began  operations in the second quarter of 2003 and added $876,000 to
     depreciation expense in 2004.

                                       22


     Federal and state income taxes  increased  $5,041,000  due to the change in
     taxable income. The effective tax rate was 40% in 2004 and 42% for 2003.

Other Income and Expense
- ------------------------
     Other  income  was  $1,124,000  for the six  months  ended  June 30,  2004,
     compared  to  $2,680,000  for the first six months of 2003,  a decrease  of
     $1,556,000.  Gains from  property  sales for 2004 were minimal  compared to
     gains of $1,511,000 in 2003.

Interest Expense
- ----------------
     Total interest expense increased $61,000 or 1%. This was due to a reduction
     in  capitalized  interest,  which is a credit  to total  interest  expense.
     Construction work-in-progress amounts were lower in the first six months of
     2004  compared to the first six months of 2003.  Partially  offsetting  was
     lower  interest  expense on  long-term  debt as a result of  refinancing  a
     portion of the long-term  debt in 2003 at lower rates and lower  short-term
     borrowings.


REGULATORY MATTERS
Rate Case Proceedings
- ---------------------
     Filings  that were  approved  in 2003 were  disclosed  in the  Management's
     Discussion and Analysis section of the Company's annual report on Form 10-K
     for 2003.  These approved  filings impact 2004 revenues  because revenue is
     recorded based on billings to customers.

     In 2004, Cal Water received  approval from the CPUC for step rate increases
     of  $4,433,000  on an annual basis,  of which  $3,902,000  was effective in
     January 2004 and $531,000 was effective in April 2004.

     In February 2004, the CPUC authorized an advice letter for $718,000 for one
     district  related to increase  purchased  water rates.  The rate change was
     effective in February 2004 and will be collected over the next 12 months.

     In April 2004, Cal Water received  authorization  from the CPUC on its 2002
     General Rate Case (GRC).  The GRC included  four  districts  and  increased
     rates $3,573,000 on an annual basis, effective April 2004.

     In July 2004, Cal Water received authorization from the CPUC on its Salinas
     district  filing.  This will increase rates  $1,121,000 on an annual basis,
     effective July 2004.

     In May  2003,  after  receiving  approval  from the CPUC,  Cal Water  began
     recovering  certain  amounts that were tracked in balancing and  memorandum
     accounts.  (See "Expense  Balancing  and  Memorandum  Accounts"  section in
     Critical Accounting  Policies).  The amounts remaining to be recovered from
     these  approved  filings as of  December  31,  2003 and June 30,  2004 were
     $2,760,000 and $1,603,000, respectively.

     Cal Water has the following pending filings: a 2003 GRC filing covering two
     districts, an advice letter for increased purchased water rates for the Los
     Altos  district and a separate  filing for recovery of balancing  accounts.


                                       23


     The  estimate  of the net annual  revenue  from the 2003 GRC  filing,  when
     approved, is approximately  $300,000. The estimated annual revenue from the
     Los Altos advice letter is $500,000.  The estimated  amount  related to the
     balancing account filing is approximately  $7,900,000.  Once approved, rate
     changes for the 2003 GRC and the Los Altos  advice  letter will be ongoing.
     The estimated  recovery time frame for this  balancing  account filing is a
     1-2 year period and is expected to vary by district.  The Company estimates
     it will receive  regulatory  approval  for all of these  filings in the 3rd
     quarter of 2004, but timing and amounts could differ from estimates.

     In July 2004, Cal Water submitted its preliminary 2004 GRC filings covering
     8 districts and  allocations  of general  office  expenses.  The Company is
     unable to  predict  the timing  and final  amount of these  filings at this
     time.

     New Mexico Water filed for rate increases for its waste water operations in
     July 2004 and Hawaii Water submitted a rate filing for its water operations
     the second quarter of 2004. The Company is unable to predict the timing and
     final amount of these filings at this time.  These  operations  represent a
     small  component of the overall  business and therefore the impact of these
     filings is expected to be immaterial.  Washington  Water is not planning to
     submit a rate filing during 2004.


LIQUIDITY
Short-term and Long-term Debt
- -----------------------------
     Short-term  bank  borrowings  were $0 at June 30, 2004,  and  $6,454,000 at
     December 31, 2003.  California Water Service Group has a $10,000,000 credit
     facility,  which includes  Washington Water, New Mexico Water, Hawaii Water
     and CWS Utility Services and had no borrowings against the facility at June
     30, 2004. Cal Water has a $45,000,000 credit facility and had no borrowings
     against  the  facility  at June 30,  2004.  A $500,000  letter of credit is
     outstanding  under the Cal Water facility,  which reduces amounts available
     for borrowing.  Both agreements have a requirement for balances to be below
     certain  thresholds for 30 consecutive  days each calendar year (clean down
     requirement) and both agreements  require minimum ratings by defined credit
     agencies on Cal Water's  senior,  long-term  debt.  The Company has met the
     clean down requirements for 2004 for both agreements and has credit ratings
     meeting the  requirements.  At June 30, 2004, the Company was in compliance
     with the covenants of both facilities.

     In May 2004, New Mexico Water entered into a credit  agreement which allows
     borrowings up to $3,400,000.  The term is 16 months until approval has been
     received from the New Mexico Public Regulation  Commission,  upon which the
     term will be ten years. At June 30, 2004, no amounts were borrowed  against
     the agreement.  The prior New Mexico Water credit  agreement had borrowings
     of  approximately  $2,500,000,  which was paid and not renewed.  Funds from
     intercompany  borrowings with  California  Water Service Group were used to
     pay the debt.

                                       24


     There were no  additions to long-term  debt in the  six-month  period ended
     June 30, 2004. Principal payments of $133,000 and $316,000 were made during
     the three- and six-month periods ended June 30, 2004, respectively.

Debt Credit Ratings
- -------------------
     Cal Water's debt is rated A2 by Moody's  Investors Service (Moody's) and A+
     by Standard & Poor's  (S&P).  The rating from  Moody's  was  downgraded  in
     February 2004 from A1 to A2. There have not been further changes by Moody's
     as of the filing date of this Form 10-Q.  The rating from S&P was unchanged
     during the quarter  and the last  rating  change from S&P was in the fourth
     quarter of 2002.

Common Stock Issuance and Treasury Stock
- ----------------------------------------
     On June 24, 2004,  the Company  announced  the sale of 1,250,000  shares of
     common stock. A prospectus  supplement  and prospectus  were filed with the
     SEC under rule 424 (b) (2) on that date. The shares were sold at $27.25 per
     share.  The  underwriters  exercised part of their over  allotment  option,
     after which the additional  common shares issued totaled  1,409,700 shares.
     The proceeds net of estimated  expenses of the offering  were $36.8 million
     and the transaction was closed on June 29, 2004. Initially,  the funds were
     used to pay down  short-term  borrowings and to invest in short-term  money
     market instruments pending their use for general corporate purposes.  After
     issuance of these shares, there remains $35,648,175 in securities under the
     shelf registration, which are available for future issuance.

Dividends, Book Value and Shareholders
- --------------------------------------
     The second  quarter  common stock  dividend  was paid on May 21,  2004,  at
     $0.2825 per share,  compared to a quarterly  dividend in 2003 of  $0.28125.
     This was the Company's 238th consecutive  quarterly  dividend.  Annualized,
     the 2004  dividend  rate is $1.13 per common  share  compared  to $1.125 in
     2003.  Based on the  12-month  earnings  per  share at June 30,  2004,  the
     dividend  payout  ratio is 70% of net income.  For the full year 2003,  the
     payout ratio was 93% of net income.  On a long-term  basis,  the goal is to
     achieve a dividend payout ratio of 60% of net income  accomplished  through
     future earnings growth.

     At its July 28, 2004 meeting, the Board declared the third quarter dividend
     of $0.2825 per share payable on August 20, 2004, to  stockholders of record
     on August 9, 2004. This will be the 239th consecutive quarterly dividend.

Dividend Reinvestment and Stock Purchase Plan
- ---------------------------------------------
     The Company has a Dividend  Reinvestment  and Stock  Purchase  Plan (Plan).
     Under the Plan,  stockholders may reinvest dividends to purchase additional
     Company common stock without commission fees. The Plan also allows existing
     stockholders  and other  interested  investors to purchase  Company  common
     stock through the transfer agent up to certain  limits.  The transfer agent
     operates the Plan and purchases shares on the open market to provide shares
     for the Plan.


                                       25


2004 Financing Plan
- -------------------

     Proceeds  from the issuance of  additional  common  shares in June 2004 are
     expected to provide adequate new capital for the balance of 2004 and may be
     supplemented with short- term borrowings as needed. For 2005, the financing
     plan  includes  raising  $30,000,000  -  $50,000,000  of new capital and is
     expected  to  be   accomplished   through   issuance  of  senior  notes  to
     institutional  investors.  The timing of the debt issuance for 2005 has not
     been established.  Beyond 2005, the plan is to fund capital needs through a
     relatively  balanced  approach  between  long-term  debt and  common  stock
     equity.

Book Value and Stockholders of Record
- -------------------------------------
     Book value per common share was $16.63 at June 30, 2004, compared to $14.44
     at December 31, 2003.

     There are  approximately  4,500  stockholders  of record for the  Company's
     common stock.

Utility Plant Expenditures
- --------------------------
     During the six months ended June 30,  2004,  capital  expenditures  totaled
     $29,629,000;  $21,399,000 was from  company-funded  projects and $8,230,000
     was from third  party  funded  projects.  The 2004  company-funded  capital
     expenditure budget is $65,800,000,  but the actual amount may vary from the
     budget  number due to timing of actual  payments  related  to current  year
     projects and prior year projects.  The Company does not control third-party
     funded  capital  expenditures,  and  therefore it is unable to estimate the
     amount of such projects for 2004.

     At June 30, 2004, construction work-in-progress was $27,236,000 compared to
     $13,770,000 at December 31, 2003.  Work-in-progress  includes projects that
     are under construction, but not yet complete and in service.


WATER SUPPLY
     Based  on  information  from  water  management   agencies  and  internally
     developed  data,  the Company  believes  that its various  sources of water
     supply are  sufficient  to meet  customer  demand for the  remainder of the
     year.  Historically,  about half of the water is purchased  from  wholesale
     suppliers  with the other  half  pumped  from  underground  wells.  A small
     portion is developed through three local surface treatment plants.

     To safeguard its water supply and  facilities,  the Company has  heightened
     security and has taken added safety  precautions  for its employees and the
     water  delivered  to  customers.  While the  Company  does not make  public
     comments on its  security  programs,  management  has been in contact  with
     federal, state and local law enforcement agencies to coordinate and improve
     water delivery  systems  security.  Management  assigned a high priority to
     completing  work  necessary  to comply  with new  Environmental  Protection
     Agency (EPA) requirements concerning security of water facilities. In 2002,
     federal legislation was enacted that resulted in new regulations concerning
     security of water facilities, including submitting vulnerability assessment


                                       26


     studies to the federal government.  The Company has completed and submitted
     all studies for all operations as required by this legislation.


ACQUISITIONS
     On April 30,  2004,  the Company  acquired  the stock of  National  Utility
     Company (NUC) and land from owners of NUC for  approximately  $1,030,000 in
     cash.  The Company  retired NUC's stock and merged it into New Mexico Water
     Service  Company.  Revenue and net loss for NUC for 2003 were  $541,000 and
     ($19,000),  respectively. The purchase price is approximately equal to rate
     base and $30,000 of goodwill was recorded in the transaction.


ACCOUNTING PRONOUNCEMENTS
     See Note 8 of the Condensed Consolidated Financial Statements


Item 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
     The  Company  does  not  hold,  trade  in  or  issue  derivative  financial
     instruments  and  therefore  are not  exposed  to risks  these  instruments
     present.  The market risk to interest rate exposure is limited  because the
     cost of long-term  financing  and  short-term  bank  borrowings,  including
     interest  costs,  is covered in  consumer  water  rates as  approved by the
     commissions. The Company does not have foreign operations;  therefore, does
     not have a foreign  currency  exchange  risk.  The business is sensitive to
     commodity  prices and is most  affected by changes in  purchased  water and
     purchased power costs.

     Historically, the CPUC's balancing account or offsetable expense procedures
     allowed for increases in purchased  water and  purchased  power costs to be
     passed on to  consumers.  Traditionally,  a  significant  percentage of the
     Company's  net  income  and cash  flows  comes  from  California  regulated
     operations;  therefore the CPUC's actions have a significant  impact on the
     business.  See Item 2,  Management's  Discussion  and Analysis of Financial
     Condition  and  Results of  Operations--Expense  Balancing  and  Memorandum
     Accounts and Regulatory Matters.


                                       27


Item 4.

CONTROLS AND PROCEDURES
     (a) Evaluation of Disclosure Controls and Procedures

     The Company  carried out an evaluation,  under the  supervision of and with
     the participation of management,  including the principal executive officer
     and principal  financial  officer,  of the  effectiveness of the design and
     operation of the Company's disclosure controls and procedures as of the end
     of the period covered by this report,  pursuant to Rule 13a-15(e) under the
     Securities  Exchange Act of 1934.  Based on their  review of the  Company's
     disclosure  controls and procedures,  the principal  executive  officer and
     principal  financial  officer have concluded that the Company's  disclosure
     controls and procedures are functioning  effectively to provide  reasonable
     assurance  that the  information  required to be  disclosed in periodic SEC
     filings is reported within the time periods  specified by the SEC rules and
     regulations.

     (b) Changes to Internal controls

     There were no changes in the  Company's  internal  control  over  financial
     reporting that occurred during the last fiscal quarter that have materially
     affected, or are reasonably likely to materially affect, such controls.



PART II       OTHER INFORMATION


Item 1.

Legal Proceedings

     (a) From time to time,  the Company has been involved in a variety of legal
         proceedings.  For a complete description, see the annual report on Form
         10-K for the year ended December 31, 2003.  During the six months ended
         June 30,  2004,  there were no material  developments  with  respect to
         previously   disclosed   existing   proceedings  and  no  new  material
         proceedings  not  previously  disclosed  except as discussed in Part I,
         Item 1 "Financial  Statements,  Note 9  Subsequent  Event" and as noted
         below.

     (b) In the  Company's  Selma  district,  the City Council has taken initial
         steps  to  negotiate  the  purchase  of  that  water   operation  under
         condemnation  procedures.  The Company  intends to  vigorously  use all
         legal actions to stop this action.  The Selma district  comprised 1% of
         total revenues and operating income for fiscal 2003.


                                       28


Item 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     (a) Disclosure  of matters  submitted  to a vote of  security  holders  was
         provided in the Company's Form 10-Q for the first quarter of 2004. This
         relates to matters  voted on by security  holders at the April 28, 2004
         annual shareholders meeting.


Item 6.

EXHIBITS AND REPORTS ON FORM 8-K

     (a) Exhibits required to be filed by Item 601 of Regulation S-K.

         The exhibit list required by this Item is  incorporated by reference to
         the Exhibit Index attached to this report.

     (b) Reports on Form 8-K

         On April 29, 2004,  the Company  furnished a Current Report on Form 8-K
         pursuant to Item 12,  "Results of Operations and Financial  Condition,"
         attaching a press release dated April 28, 2004  announcing  results for
         the first  quarter  of 2004.  On June 24,  2004,  the  Company  filed a
         Current  Report on Form 8-K  pursuant to Items 5 "Other  Events" and 7,
         "Financial  Statements and Exhibits" announcing the terms of its common
         stock  issuance.  On July 29,  2004,  the  Company  furnished a Current
         Report on Form 8-K  pursuant  to Item 12,  "Results of  Operations  and
         Financial  Condition,"  attaching a press  release dated July 28, 2004,
         announcing results for the second quarter of 2004.


                                       29

                                   SIGNATURES

     Pursuant to the  requirement  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
                         ------------------------------
                                   Registrant


August 6, 2004


            By:              /s/ RICHARD D. NYE
                     ---------------------------------------
                                 Richard D. Nye
                     Vice President, Chief Financial Officer
                                  and Treasurer


                                       30

                                  Exhibit Index



   Exhibit                 Description
   -------                 -----------

     4                     The   registrant   undertakes   to   furnish  to  the
                           Commission  upon  request  a copy  of any  instrument
                           defining the rights of holders of long term debt that
                           does not exceed 10 percent of the registrant's  total
                           consolidated equity and that is not otherwise on file
                           with the Commission.


     31.1                  Chief Executive  Officer  certification  of financial
                           statements  pursuant to Section 302 of the  Sarbanes-
                           Oxley Act of 2002

     31.2                  Chief Financial  Officer  certification  of financial
                           statements  pursuant to Section 302 of the  Sarbanes-
                           Oxley Act of 2002

     32                    Chief Executive  Officer and Chief Financial  Officer
                           Certification  pursuant to 18 U.S.C. Section 1350, as
                           adopted  pursuant  to  Section  906 of the  Sarbanes-
                           Oxley Act of 2002.

                                       31