8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of Report (date of earliest event reported): February 28, 2007

CALIFORNIA WATER SERVICE GROUP

(Exact name of Registrant as Specified in its Charter)

Delaware	1-13883	77-0448994
(State or other jurisdiction	(Commission file number)	(I.R.S. Employer
of incorporation)		Identification Number)

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)

N/A
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

	Item 7.01. Regulation FD Disclosure.
	Item 9.01. Financial Statements and Exhibits.
SIGNATURES
EXHIBIT INDEX
EXHIBIT 99.1

Item 7.01.     Regulation FD Disclosure.

     On February 28, 2007, the Company issued a press release attached as Exhibit 99.1 to this current report and incorporated by reference herein.

     The information and exhibit shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such a filing.

Item 9.01.     Financial Statements and Exhibits.

     We hereby furnish the following exhibit with this report:

Exhibit No.	Description
99.1	Press Release issued February 28, 2007

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	CALIFORNIA WATER SERVICE GROUP
Date: March 1, 2007	By:	/s/ Martin A. Kropelnicki
	Name:	Martin A. Kropelnicki
	Title:	Vice President, Chief Financial Officer and Treasurer

EXHIBIT INDEX

Exhibit No.	Description
99.1	Press Release issued February 28, 2007

EX-99.1

Exhibit 99.1

NEWS RELEASE

CALIFORNIA WATER SERVICE GROUP

	1720 North First Street	February 28, 2007
	San Jose, CA 95112-4598	For Immediate Release
Contact:	Martin A. Kropelnicki (408) 367-8200 (analysts)
	Shannon Dean (310) 257-1435 (media)

CAL WATER ANNOUNCES REVENUES AND EARNINGS FOR
4^TH QUARTER AND YEAR-END 2006

     SAN JOSE, CA — California Water Service Group (NYSE : CWT) today announced net income of $6.4 million for the fourth quarter of 2006, an increase of 10% over net income of $5.8 million in the fourth quarter of 2005. Diluted earnings per share were $0.31, compared to $0.32 per share for the same period last year.

     Revenue for the fourth quarter increased $2.8 million, or 4%, to $80.6 million. The increase in revenue is primarily due to the addition of $2.8 million from rate increases and an increase of $0.7 million in sales to new customers, which were offset by a decline of $0.7 million in usage by existing customers.

     Total operating expenses for the quarter were $71.0 million, an increase of 3%, or $2.0 million, over the same period last year. Water production costs were up approximately 5% or $1.4 million to $28.6 million, due to increases in rates charged by wholesalers. Other operations expense increased 9% or $2.0 million to $24.8 million, due to increases in vehicle costs, payroll, conservation programs, and outside services. Income taxes decreased 39% or $1.8 million to $2.7 million, due to a lower effective tax rate over the prior year resulting from a reduction in the impact of flow-through tax depreciation.

     Maintenance expense increased approximately 4% or $0.2 million to $4.1 million, due to increased costs for repairs to water mains, meters, and hydrants. Depreciation expense increased 2% or $0.1 million to $7.6 million, due to increased utility plant.

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     Net interest expense was slightly lower in the fourth quarter of 2006 due to an increase in capitalized interest on capital expenditures.

     Other income was down $0.4 million from the same period in 2005. Although there were no property sales during the quarter, the company earned more income on short-term investments than it did in the same period last year.

Full Year 2006 Results

     2006 net income was $25.6 million, down 6%, or $1.6 million, from the $27.2 million posted in 2005, and diluted earnings per share were $1.34, compared to $1.47 for the same period last year. The decrease in earnings per share was primarily due to the record wet weather experienced during the first half of 2006; expense increases in several categories not yet recovered in rates, including employee health and welfare, water production, and conservation programs; and the dilutive effect of the company’s stock offering completed in the fourth quarter.

     Revenue for 2006 was $334.7 million, increasing $14.0 million, or 4%, from the $320.7 million in revenues recorded in 2005. The increase in revenue was due to $10.1 million in rate increases, $3.1 million in sales to new customers, and $0.8 million in sales to existing customers.

     President and Chief Executive Officer Peter C. Nelson noted that despite wet weather in the first six months and regulatory delays in recovering certain costs in rates, the Company made several key achievements in 2006.

     “Our customers continued to give us high marks in service, with 91.6% of those surveyed ranking it as ‘excellent or very good’ in 2006. We also strengthened our balance sheet by issuing 2.25 million shares of common stock and invested a record $86 million in capital projects,” he said.

     Total operating expenses increased $15.5 million, or 6%, to $294.4 million for the year. Of this amount, water production costs increased 7% or $8.6 million to $124.3 million during 2006. Other operations expense increased 8% or $6.9 million to $95.7 million. The increases in other operations expenses were primarily due to increases in upkeep of pumping facilities, water quality and treatment costs, conservation programs, and employee payroll and benefits costs.

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     Maintenance expense increased $0.4 million, or 3%, to $15.6 million, due to cost increases related to repairs of water mains and services in 2006. Depreciation increased 7% or $1.9 million to $30.7 million for the full year.

     Net interest expense decreased 4% or $0.7 million to $17.0 million during the year, due to an increase in capitalized interest over the prior year. Income tax decreased 14% or $2.6 million to $15.3 million, due to the decrease in operating income in 2006 and the lower effective tax rate for the year.

     Other income and expense decreased 28% or $0.9 million to $2.2 million during the year, primarily due to negligible gain on sale of non-utility property during 2006.

     “Going forward, we expect that the regulatory climate in California will continue to improve as the California Public Utilities Commission implements its Water Action Plan, which is based on best practices of commissions throughout the country,” Nelson said.

     The California Water Action Plan expresses the Commission’s commitment to policy that creates “viable utilities” and supports streamlined decision-making. The Commission is currently identifying ways to improve the rate-setting process for multi-district utilities like Cal Water and considering Cal Water’s application for a Revenue Adjustment Mechanism that will decouple sales from revenues, thereby reducing the short-term impacts of conservation and weather on earnings. The Water Action Plan may be viewed in its entirety at: http://www.cpuc.ca.gov/static/hottopics/3water/051109_wateractionplan.htm.

Other Information

     All stockholders and interested investors are invited to listen to the 2006 fourth quarter and year-end conference on March 1, 2007, at 8:00 a.m. PST by dialing 1-866-802-4290 and keying in ID# 1022927. A replay of the call will be available from 2:00 p.m. EST Thursday, March 1, 2007, through April 30, 2007, at 888-266-2081, ID# 1022927. The call, which will be hosted by Chairman Robert W. Foy and Vice President and Chief Financial Officer Martin A. Kropelnicki, will also be webcast under the investor relations tab at www.calwatergroup.com.

     California Water Service Group is the parent company of California Water Service Company, Washington Water Service Company, New Mexico Water Service Company, Hawaii Water Service Company, Inc., and CWS Utility Services. Together these companies provide regulated and non-regulated water service to approximately 2

3

million people in more than 100 California, Washington, New Mexico and Hawaii communities. Group’s common stock trades on the New York Stock Exchange under the symbol “CWT.”

     This news release 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, including decisions on proper disposition of property; changes in regulatory commissions’ policies and procedures; the timeliness of regulatory commissions’ actions concerning rate relief; new legislation; changes in accounting valuations and estimates; the ability to satisfy requirements related to the Sarbanes-Oxley Act 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 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.

     Additional information is available online at www.calwatergroup.com.

     Attachments (2).

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CALIFORNIA WATER SERVICE GROUP
CONDENSED CONSOLIDATED BALANCE SHEET
Unaudited
(In thousands, except per share data)

	December 31,		December 31,
	2006		2005
ASSETS
Utility plant:
Utility plant	$	1,344,415	$	1,235,090
Less accumulated depreciation and amortization		402,940		372,359
Net utility plant		941,475		862,731
Current assets:
Cash and cash equivalents		60,312		9,533
Receivables, net of allowances for uncollectible accounts
Customers		19,526		16,061
Other receivables		6,700		4,700
Unbilled revenue		11,341		11,445
Materials and supplies		4,515		4,182
Prepaid pension expense		1,576		1,696
Taxes and other prepaid expenses		5,654		4,607
Total current assets		109,624		52,224
Regulatory assets		93,785		58,213
Other assets		20,135		23,777
	$	1,165,019	$	996,945
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock, $.01 par value	$	207	$	184
Additional paid-in capital		211,513		131,991
Retained earnings		166,582		162,968
Accumulated other comprehensive loss		—		(1,202	)
Total common stockholders’ equity		378,302		293,941
Preferred stock		3,475		3,475
Long-term debt, less current maturities		291,814		274,142
Total capitalization		673,591		571,558
Current liabilities:
Current maturities of long-term debt		1,778		1,133
Accounts payable		33,130		36,120
Accrued expenses and other liabilities		35,317		25,772
Total current liabilities		70,225		63,025
Unamortized investment tax credits		2,541		2,615
Deferred income taxes		69,503		63,920
Regulatory and other liabilities		19,954		18,782
Pension and postretirement benefits other than pension		48,584		21,514
Advances for construction		157,660		141,842
Contributions in aid of construction		109,504		99,958
Other long-term debt		13,457		13,731
Commitments and contingencies		—		—
	$	1,165,019	$	996,945

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

	For the three month ended:						For the twelve month ended:
	December 31,						December 31,
	2006			2005			2006			2005
Operating revenue	$	80,644		$	77,840		$	334,717		$	320,728
Operating expenses:
Water production costs		28,622			27,245			124,258			115,665
Other operations		24,771			22,765			95,716			88,803
Maintenance		4,088			3,921			15,591			15,216
Depreciation and amortization		7,585			7,442			30,652			28,731
Income taxes		2,704			4,459			15,297			17,875
Property and other taxes		3,199			3,175			12,897			12,613
Total operating expenses		70,969			69,007			294,411			278,903
Net operating income		9,675			8,833			40,306			41,825
Other income and expenses:
Non-regulated income, net		1,671			874			3,437			2,979
Gain on sale of non-utility property		—			1,522			348			2,250
Less: income taxes on other income and expenses		(681	)		(976	)		(1,542	)		(2,131	)
		990			1,420			2,243			3,098
Interest expense:
Interest Expense		4,971			4,641			19,669			18,600
Less: capitalized interest		(725	)		(225	)		(2,700	)		(900	)
Total interest expense		4,246			4,416			16,969			17,700
Net income	$	6,419		$	5,837		$	25,580		$	27,223
Earnings per share
Basic	$	0.31		$	0.32		$	1.34		$	1.47
Diluted	$	0.31		$	0.32		$	1.34		$	1.47
Weighted average shares outstanding
Basic		20,388			18,390			18,905			18,379
Diluted		20,408			18,409			18,925			18,402
Dividends per share of common stock	$	0.28750		$	0.28500		$	1.1500		$	1.1400

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