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): April 27, 2017

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:

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

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

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

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

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Item 2.02. Results of Operations and Financial Condition

On April 27, 2017, California Water Service Group (the “Company”) issued a press release (a copy of which is attached hereto as Exhibit 99.1 and incorporated herein by reference) announcing its financial results for the first quarter of 2017, ended March 31, 2017.  A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated by reference herein.

As announced, the Company will host a conference call on Thursday, April 27, 2017 at 11:00 am EST to discuss financial results and management’s business outlook. The financial results announcement contains information about how to access the conference call.  A slide presentation, which includes supplemental information relating to the Company, will be used by management during the conference call.  A copy of the slide presentation is attached hereto as Exhibit 99.2 and is incorporated by reference herein. The Exhibits will be posted on the Company’s website at www.calwatergroup.com under the “Investor Relations” tab.

The information furnished pursuant to Item 2.02 of this Current Report 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 7.01. Regulation FD Disclosure.

The information included in the Exhibits to this report is incorporated by reference in response to this Item 7.01.

The information furnished pursuant to Item 7.01 of this Current Report shall not be deemed “filed” for the purposes of Section 18 of 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 exhibits, which shall not be deemed “filed” for the purposes of Section 18 of the Exchange Act, with this report:

Exhibit No.	Description
99.1	Press Release issued April 27, 2017
99.2	Slide presentation relating to conference call

2

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: April 27, 2017	By:	/s/Thomas F. Smegal
	Name:	Thomas F. Smegal
	Title:	Vice President, Chief Financial Officer & Treasurer

3

EX-99.1

Exhibit 99.1

	NEWS RELEASE CALIFORNIA WATER SERVICE GROUP
	1720 North First Street San Jose, CA 95112-4598	April 27, 2017 for immediate release
Contact:	Tom Smegal (408) 367-8200 (analysts) Shannon Dean (408) 367-8243 (media)

CALIFORNIA WATER SERVICE GROUP ANNOUNCES

EARNINGS FOR THE FIRST QUARTER 2017

SAN JOSE, CA — California Water Service Group (NYSE: CWT) today announced net income of $1.1 million, or $0.02 diluted earnings per diluted share, for the first quarter of 2017, compared to a net loss of $0.8 million, or $0.02 net loss per diluted share, for the first quarter of 2016.

The increase in net income was primarily a result of rate increases effective January 1, 2017 and decreases in operating expenses, notably a $1.8 million reduction in California drought program incremental costs.  The implementation of allowance for equity funds used during construction and accounting changes for share-based payments, effective January 1, 2017, also increased net income. These increases were partially offset by a decrease in the accrual for unbilled revenue and increases in depreciation and interest expenses.

Total revenue increased $0.3 million to $122.0 million for the first quarter of 2017 as compared to revenue of $121.7 million for the first quarter of 2016. Rate increases added $11.5 million, $2.4 million of which was related to water production cost increases. Revenue decoupling mechanisms and other balancing accounts reduced revenue $7.0 million due mostly to a decrease in water production during the first quarter of 2017. The difference between adopted and recorded water production costs are recorded as an offset to the WRAM mechanism.  The accrual for unbilled revenue reduced revenue $3.3 million.

According to President and Chief Executive Officer Martin A. Kropelnicki, “the quarterly operating results were in line with the Company’s expectations and reflect the authorized rate increases that went into effect at the beginning of the year.”

“We are delighted by the wet weather we have had in California, which has brought an end to the drought crisis for most of the state.  We now continue to work on implementing the Governor’s long-term water use regulations while continuing to support our customers’ day-to-day efforts to use water more efficiently.  We also remain focused on making capital improvements to our water systems as part of our annual capital investment program adopted by the CPUC,” said Kropelnicki.

Total operating expenses decreased $1.5 million, or 1.3%, to $114.0 million for the first quarter of 2017 as compared to operating expenses of $115.5 million for the first quarter of 2016.

Water production costs increased $1.0 million, or 2.4%, to $42.1 million for the first quarter of 2017 as compared to prior year water production costs of $41.1 million, due primarily to wholesale water supplier rate increases. As designed, the California revenue decoupling mechanisms record increases to revenue equal to the increases in California water production costs.

Administrative and general and other operations expenses decreased $5.7 million, or 12.2%, to $41.4 million in the first quarter of 2017, as compared to $47.1 million in the first quarter of 2016.  The decrease was mostly due to the deferral of $2.6 million of costs associated with deferred WRAM operating revenue and decreases in employee health care costs of $1.9 million, California drought program incremental costs of $1.8 million, on-going conservation program costs of $0.8 million, and outside service costs of $0.3 million. These cost decreases were partially offset by increases in employee wages of $0.9 million and uninsured loss costs of $0.3 million.  Changes in employee pension and other postretirement benefit costs, water conservation program costs, and employee health care costs for regulated California operations generally do not affect earnings given the regulatory treatment that allows the Company to track these costs in balancing accounts for future recovery, which creates a corresponding change to operating revenue.

Depreciation and amortization expense increased $3.2 million, or 19.7%, to $19.2 million in the first quarter of 2017, as compared to $16.0 million in the first quarter of 2016, due to 2016 capital additions.

Income tax benefit remained consistent at $0.9 million in the first quarter of 2017 due primarily to an income tax benefit in the first quarter of 2017 associated with the implementation of accounting changes for share-based payments.

Other income, net of income taxes, increased $1.0 million in 2017, mostly due to the implementation of allowance for equity funds used during construction.

Company-funded and developer-funded capital expenditures for the first quarter of 2017 were $51.9 million, a decrease of $4.6 million, or 8.2%, compared to $56.5 million in the first quarter of 2016.  The decrease was primarily due to construction project delays caused by major winter storms in California during the first quarter of 2017.

The under-collected net water revenue adjustment mechanism (WRAM) and modified cost balancing account (MCBA) net receivable balance increased 29.3% or $10.9 million to $48.0 million as of March 31, 2017 from $37.1 million as of December 31, 2016.  The increase was mostly due to a reduction in usage by customers due to winter storms during the first quarter of 2017.  In addition, there were no drought surcharges recorded as an offset to the WRAM balance during the first quarter of 2017 as compared to $11.4 million recorded in the first quarter of 2016.

Regulatory Update

During the first quarter of 2017, Cal Water entered into a 50-year agreement with the U.S. Department of Defense to acquire the water distribution assets of, and to provide water utility service to, the Travis Air Force Base beginning in 2018, subject to CPUC approval.  Cal Water will also make initial capital improvements of about $12.7 million, with an anticipated capital investment of about $52.0 million over the 50-year term of the utility service contract.

In March 2017, Cal Water submitted an advice letter to recover $25.8 million of 2016 net WRAM and MCBA account receivable balances mostly over 12 and 18 months.

In April 2017, Cal Water, along with three other water utilities, filed an application to adopt a new cost of capital and capital structure for 2018. Cal Water requested a return on equity of 10.75% and a 53.4% equity capital structure as well as a water cost of capital adjustment mechanism similar to that last adopted for the company. The California Division of Ratepayer Advocates and other parties will submit testimony later in the year and may propose a different cost of capital and capital structure. The CPUC schedule for the application anticipates a decision on the matter by the end of 2017.

In March 2017, Cal Water submitted an advice letter that established the School Lead Testing Memorandum Account (SLT MA), which gives Cal Water the opportunity to recover costs related to lead monitoring and testing required by the State Water Resources Control Board’s Division of Drinking Water. The SLT MA will track all incremental expenses associated with lead testing conducted at the request of K-12 schools within Cal Water’s service territory.

Other Information

All stockholders and interested investors are invited to listen to the first quarter of 2017 conference call on April 27, 2017 at 8:00 a.m. PST (11:00 a.m. EST) by dialing 1-866-719-0110 or 1-719-325-2104 and keying in ID # 6640105.  A replay of the call will be available from 11:00 a.m. PST (2:00 p.m. EST) on April 27, 2017 through June 27, 2017, at 1-888-203-1112 or 1-719-457-0820, ID # 6640105.  The replay will also be available under the investor relations tab at www.calwatergroup.com.  Prior to the call, Cal Water will post a slide presentation on its website.  The presentation can be found at www.calwatergroup.com/docs/2017q1slides.pdf after 6:00 a.m. PDT today. The call will be hosted by President and Chief Executive Officer Martin A. Kropelnicki, Vice President and Chief Financial Officer Thomas F. Smegal III, and Vice President of Regulatory Matters and Corporate Development Paul G. Townsley.

California Water Service Group is the parent company of California Water Service, Washington Water Service, New Mexico Water Service, Hawaii Water Service, CWS Utility Services, and HWS Utility Services. Together, these companies provide regulated and non-regulated water service to nearly 2 million people in California, Washington, New Mexico, and Hawaii. California Water Service was ranked “Highest in Customer Satisfaction among Water Utilities in the West” in 2016 by J.D. Power in its inaugural Water Utility Residential Customer Satisfaction Study. California Water Service Group’s common stock trades on the New York Stock Exchange under the symbol “CWT.” Additional information is available online at www.calwatergroup.com.

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 would, 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, but are not limited to: governmental and regulatory commissions’ decisions; consequences of eminent domain actions relating to our water systems; changes in regulatory commissions’ policies and procedures; the timeliness of regulatory commissions’ actions concerning rate relief; inability to renew leases to operate city water systems on beneficial terms; changes in California State Water Resources Control Board water quality standards; changes in environmental compliance and water quality requirements; electric power interruptions; changes in customer water use patterns and the effects of conservation; the impact of weather and climate on water availability, water sales and operating results; the unknown impact of contagious diseases, on the Company’s operations; civil disturbances or terrorist threats or acts, or apprehension about the possible future occurrences of acts of this type; labor relations matters as we negotiate with the unions; 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, as well as the annual 10-K, Quarterly 10-Q, and other reports filed from time-to-time with the Securities and Exchange Commission (SEC). The Company assumes no obligation to provide public updates of forward-looking statements.

CALIFORNIA WATER SERVICE GROUP

CONDENSED CONSOLIDATED BALANCE SHEETS

Unaudited

(In thousands, except per share data)

	March 31,			December 31
	2017			2016
ASSETS
Utility plant:
Utility plant	$	2,766,232		$	2,717,339
Less accumulated depreciation and amortization	(878,227		)	(858,062		)
Net utility plant	1,888,005			1,859,277
Current assets:
Cash and cash equivalents	11,990			25,492
Receivables
Customers	24,685			30,305
Regulatory balancing accounts	30,661			30,332
Other	17,394			17,158
Unbilled revenue	24,303			25,228
Materials and supplies at average cost	6,405			6,292
Taxes, prepaid expense, and other assets	12,767			7,262
Total current assets	128,205			142,069
Other assets:
Regulatory assets	367,476			355,930
Goodwill	2,615			2,615
Other assets	53,997			51,854
Total other assets	424,088			410,399
	$	2,440,298		$	2,411,745
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock, $.01 par value	$	480		$	480
Additional paid-in capital	334,220			334,856
Retained earnings	316,633			324,135
Total common stockholders’ equity	651,333			659,471
Long-term debt, less current maturities	521,715			531,745
Total capitalization	1,173,048			1,191,216
Current liabilities:
Current maturities of long-term debt	36,139			26,208
Short-term borrowings	130,100			97,100
Accounts payable	69,276			77,813
Regulatory balancing accounts	8,197			4,759
Accrued interest	12,583			5,661
Accrued expenses and other liabilities	37,078			38,689
Total current liabilities	293,373			250,230
Unamortized investment tax credits	1,798			1,798
Deferred income taxes	299,464			298,924
Pension and postretirement benefits other than pensions	224,851			222,691
Regulatory liability and Other	84,318			83,648
Advances for construction	182,815			182,448
Contributions in aid of construction	180,631			180,790
Commitments and contingencies	—			—
	$	2,440,298		$	2,411,745

CALIFORNIA WATER SERVICE GROUP

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

Unaudited

(In thousands, except per share data)

For the Three-Months ended:

	March 31,			March 31,
	2017			2016
Operating revenue	$	122,036		$	121,727
Operating expenses:
Operations:
Water production costs	42,068			41,069
Administrative and General	25,249			27,827
Other operations	16,124			19,302
Maintenance	6,112			6,063
Depreciation and amortization	19,201			16,046
Income tax benefit	(884		)	(925		)
Property and other taxes	6,116			6,075
Total operating expenses	113,986			115,457
Net operating income	8,050			6,270
Other income and expenses:
Non-regulated revenue	3,462			3,428
Non-regulated expenses	(2,054		)	(2,980		)
Allowance for equity funds used during construction	779
Income tax (expense) on other income and expenses	(889		)	(181		)
Net other income	1,298			267
Interest expense:
Interest Expense	8,710			8,065
Allowance for borrowed funds used during construction	(494		)	(730		)
Net interest expense	8,216			7,335
Net income (loss)	$	1,132		$	(798	)
Earnings (loss) per share
Basic	$	0.02		$	(0.02	)
Diluted	$	0.02		$	(0.02	)
Weighted average shares outstanding
Basic	47,984			47,825
Diluted	47,984			47,825
Dividends per share of common stock	$	0.1800		$	0.1725

EX-99.2

Exhibit 99.2

California Water Service Group First Quarter 2017 Earnings Call Presentation April 27, 2017

Forward-Looking Statements This presentation 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 California drought and its effect on the Company. Words such as would, 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, but are not limited to: governmental and regulatory commissions' decisions; changes in regulatory commissions' policies and procedures; the timeliness of regulatory commissions' actions concerning rate relief; eminent domain actions affecting our water systems; electric power interruptions; the ability to successfully implement conservation measures; changes in customer water use patterns; the impact of weather and climate on water sales and operating results; and, other risks and unforeseen events. When considering forward-looking statements, you should keep in mind the cautionary statements included in this paragraph, as well as the annual 10-K, Quarterly 10-Q, and other reports filed from time-to-time with the Securities and Exchange Commission (SEC). The Company assumes no obligation to provide public updates of forward-looking statements. 2

Marty Kropelnicki President & CEO Tom Smegal Vice President, CFO & Treasurer Paul Townsley Vice President, Regulatory Matters & Corporate Development 3

Presentation Overview Financial Results for the First Quarter Financial Highlights Q1 2017-Q1 2016 EPS Bridge Regulatory Update Drought and Winter Storm Update Financial Effects of the Drought Net WRAM receivable 2011-present Water Quality Initiatives Cap Ex 2007 Recorded to 2018 Projected Rate Base 2014 recorded to 2019 projected What’s next in 2017? • • • • • • • • • • • 4

5 Financial Results: First Quarter (amounts are in millions, except for EPS) Q1 2016 Q1 2017 Variance Operating Revenue $121.7 $122.0 0.3% Operating Expenses 115.5 114.0 -1.3% Income from Operations 6.3 8.0 28.4% Other Income 0.3 1.3 386.1% Net Interest 7.3 8.2 12.0% Net Income/Loss -$0.8 $1.1 EPS -$0.02 $0.02

Financial Highlights – Q1 6 • Quarterly earnings increase of $1.9 million, largely attributable to: o Increase in revenue of $11.5 million from GRC rate increases o Decrease of $1.8 million in incremental drought-related costs o Increase in other income of $1.0 million, primarily due to implementation of allowance for equity funds used during construction (AFUDC) •Company-and developer-funded capital investments were $51.9 million, a decrease of 8.3% compared to Q1 2016 due in part to wet weather

-$0.02 7 EPS Bridge Q1 2016 to Q1 2017 $0.10 $0.08 $0.06 $0.04 $0.02 $0.00 -$0.02 -$0.04 -$0.06 $0.081 $0.003$0.02 $0.016 -$0.043 $0.024 -$0.041

Notes to Quarterly EPS Changes Increased rate relief is driven by recent GRC decisions. Change in unbilled revenue accrual is seasonal and reflects changes due to weather and other factors. Increased depreciation is consistent with $236.3 million additional capital investment placed into service in 2016 and depreciation rates adopted in the GRC. First quarter drought response costs were reduced from $2.0 million in 2016 to $0.2 million in 2017. Governor Brown ended the drought state of emergency in April except for four counties in the San Joaquin valley. • • • • The GRC allowed use of AFUDC rates for construction financing costs in the GRC cycle. The AFUDC income represents the change in regulatory asset and is expected to increase during the year as the company spends capital. • See Forward-Looking Statements for factors which could cause actual results to differ materially from expectations presented here. 8

2017 California GRC Adopted Revenue (in millions) by Month Total 2017 Adopted Revenue of $648.2M $80 $70 $60 $50 $40 $30 $20 $10 $0 63.3 46.4 9 68.067.069.5 59.5 52.1 52.0 41.541.742.045.0

California Regulatory Update New tariff rates in effect January 1 as approved in the GRC decision Filed cost of capital application on April 3, 2017 Requested 10.75% ROE and 53.4% equity capital structure Beginning of a process which will set cost of capital beginning in 2018 • • Company in the planning stages of its 2018 GRC filing 10 See Forward-Looking Statements for factors which could cause actual results to differ materially from expectations presented here.

Other Regulatory Notes California escalation increases of $17.2 million in 2018 and $16.3 million in 2019 are subject to earnings test which reviews capital investment performance $30 million of aggregate California advice letter revenue will be included in rates after completion of specific projects through 2019 • • In the first quarter, Cal Water filed two advice letters for $0.9 million annual revenue which became effective on April 15, 2017 Company will file an application to incorporate Travis Air Force Base into its California service territory in the second quarter Hawaii Water is in process with a $1.5 million rate increase request for its Pukalani sewer service area • • • See Forward-Looking Statements for factors which could cause actual results to differ materially from expectations presented here. 11

12 See Forward-Looking Statements for factors which could cause actual results to differ materially from expectations presented here. DroughtandWinter StormUpdate • California moved from five-year drought to the wettest water year in California history o As of April 21, precipitation in northern Sierra is 209% of annual average o Snow accumulations are 191% of average for date • On April 7, Governor Brown declared an end to the drought emergency in 54 of California’s 58 counties o Two Cal Water districts remain under a declared drought; they serve San Joaquin Valley cities where groundwater was impacted by five years of drought o Drought surcharges were suspended on July 29, 2016 • First step toward permanent water use regulations released by the State Board in January, start of a multi-year process

costs on earnings) since 2008 with WRAM 2016 through Q2 2017 drought costs later in 2017 the first quarter filing as part of the adopted Sales Reconciliation Mechanism 13 Financial Effects of the Drought •Cal Water has been “decoupled” (minimizes effect of sales and production o Sales decline will not reduce profits o Revenue accrual, not included in WRAM, is a temporary impact o During the drought, the WRAM receivable balance declined •Since drought emergency is ended, Cal Water anticipates filing to recover •Due to continued sales decline, net WRAM receivable may grow in 2017 •Extremely wet winter led to lower recorded sales and an increase in WRAM receivable in •2017 undercollection will be billed as surcharges beginning in 2018 •Cal Water will have the opportunity to adjust adopted sales along with its 2018 escalation See Forward-Looking Statements for factors which could cause actual results to differ materially from expectations presented here.

Net WRAM Receivable Balance (in millions) (End of Year balance except current period) $60 $48 $50 $46 $45 $45 $37 $40 $30 $20 $10 $0 2011 2012 2013 2014 2015 2016 3/31/2016 14 $51 $40

15 See Forward-Looking Statements for factors which could cause actual results to differ materially from expectations presented here. WaterQuality Initiatives • Cal Water is executing its plan to treat for 1,2,3 Trichloropropane (TCP) in compliance with California’s proposed maximum contaminant level for the carcinogen o Treatment planned for around 40 sites throughout the state o Company expects to invest around $25 million (included in its projected CapEx) in 2017 to begin to meet the new regulation, with additional expenditure in 2018 • New California legislation requires Cal Water to test for lead at school sites if requested by the school o Cal Water is acting aggressively to offer these tests to all schools, not waiting for a request o CPUC approved a memorandum account to track costs of the testing program

Capital (in millions) Investment History and Projection $250 $200 $150 $118 $116 $113 $111 $108 $99 $100 $50 $0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 *2017 *2018 *2017-2018 amounts are based upon Company projections including 2015 California Rate Case decision See Forward-Looking Statements for factors which could cause actual results to differ materially from expectations presented here. 16 $229 CAGR = 13.0% (2007-2016)$177 $210$215 $131 $76 Q1 2017 $51.9M

Regulated (in millions) Rate Base of CWT $1,600 $1,400 $1,200 $1,058 $1,000 $800 $600 $400 $200 $0 2014 2015 2016 Est. 2017 Est. 2018 Est. 2019 See Forward-Looking Statements for factors which could cause actual results to differ materially from expectations presented here. 17 $1,399* $1,249* $1,140* $978$1,004

What’s next in 2017? • • Ongoing proceedings in cost of capital application anticipated throughout the summer. Company continues to focus on capital investment to comply with California’s proposed 1,2,3-Trichlorpropane (TCP) regulation, pass 2018 escalation earnings tests, and complete “advice letter” projects on schedule. With $51.9 million invested to date, we project $200-$220 million for the full year. Drought response expenses should end in Q2, followed by a request to recover 2016-2017 costs. Cal Water will begin lead testing in schools within our service areas. • • 18 See Forward-Looking Statements for factors which could cause actual results to differ materially from expectations presented here.

Discussion