UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

(Mark One)

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED September 30, 2005 or

o 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                      0-8084

Connecticut Water Service, Inc.

(Exact name of registrant as specified in its charter)

Connecticut
(State or other jurisdiction of
incorporation or organization) 06-0739839
(I.R.S. Employer
Identification No.)

93 West Main Street, Clinton, CT
(Address of principal executive offices) 06413-1600
(Zip Code)

(860) 669-8636
(Registrant’s telephone number, including area code)

Not Applicable
(Former name, 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 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 þ  No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes þ  No o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o  No þ

APPLICABLE ONLY TO CORPORATE ISSUERS:

     Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

8,124,886

Number of shares of common stock outstanding, September 30, 2005
(Includes 49,518 common stock equivalent shares awarded under the Performance
Stock Program)

CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES

Financial Report
September 30, 2005 and 2004

TABLE OF CONTENTS

Part I, Item 1: Financial Statements
Consolidated Balance Sheets at September 30, 2005 and December 31, 2004	Page 3
Consolidated Statements of Capitalization at September 30, 2005 and December 31, 2004	Page 4
Consolidated Statements of Income for the Three Months Ended September 30, 2005 and 2004	Page 5
Consolidated Statements of Income for the Nine Months Ended September 30, 2005 and 2004	Page 6
Consolidated Statements of Comprehensive Income for the Three Months Ended September 30, 2005 and 2004	Page 7
Consolidated Statements of Comprehensive Income for the Nine Months Ended September 30, 2005 and 2004	Page 7
Consolidated Statements of Retained Earnings for the Three Months Ended September 30, 2005 and 2004	Page 8
Consolidated Statements of Retained Earnings for the Nine Months Ended September 30, 2005 and 2004	Page 8
Consolidated Statements of Cash Flows for Nine Months Ended September 30, 2005 and 2004	Page 9
Notes to Consolidated Financial Statements	Page 10
Part I, Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations	Page 15
Part I, Item 3: Quantitative and Qualitative Disclosures About Market Risk	Page 18
Part I, Item 4: Controls and Procedures	Page 19
Part II, Item 1: Legal Proceedings	Page 19
Part II, Item 5: Other Information	Page 19
Part II, Item 6: Exhibits	Page 21
Signatures Page	Page 22
Exhibit 31.1
Exhibit 31.2
Exhibit 32
EX-31.1: CERTIFICATION
EX-31.2: CERTIFICATION
EX-32: CERTIFICATION

Part I, Item 1: Financial Statements

Page 3

Connecticut Water Service, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS
At September 30, 2005 and December 31, 2004
(In thousands)

	September 30,			Dec. 31,
	2005			2004
ASSETS	(Unaudited)			(Unaudited)
Utility Plant	$	330,939		$	333,985
Construction Work in Progress		11,814			7,463
Utility Plant Acquisition Adjustments		(1,273	)		(1,273	)
		341,480			340,175
Accumulated Provision for Depreciation		(97,319	)		(98,399	)
Net Utility Plant		244,161			241,776
Other Property and Investments		4,117			4,298
Cash and Cash Equivalents		835			707
Accounts Receivable (Less Allowance, 2005 - $211; 2004 - $212)		6,159			5,702
Accrued Unbilled Revenues		4,764			4,064
Materials and Supplies, at Average Cost		892			869
Prepayments and Other Current Assets		2,045			3,923
Short-Term Investment		6,766			—
Barlaco Assets Held for Sale		312			—
Total Current Assets		21,773			15,265
Unamortized Debt Issuance Expense		6,839			7,169
Unrecovered Income Taxes		15,871			16,173
Post-retirement Benefits Other Than Pension		1,899			1,088
Goodwill		3,608			3,608
Deferred Charges and Other Costs		1,609			1,563
Total Regulatory and Other Long-Term Assets		29,826			29,601
Total Assets	$	299,877		$	290,940
CAPITALIZATION AND LIABILITIES
Common Stockholders’ Equity	$	94,326		$	87,865
Preferred Stock		847			847
Long-Term Debt		64,584			66,399
Total Capitalization		159,757			155,111
Current Portion of Long Term Debt		210			326
Interim Bank Loans Payable		12,500			5,650
Accounts Payable and Accrued Taxes, Interest and Other Expenses		5,586			9,413
Other Current Liabilities		490			559
Total Current Liabilities		18,786			15,948
Advances for Construction		30,598			27,157
Contributions in Aid of Construction		44,803			46,111
Deferred Federal and State Income Taxes		24,593			24,249
Unfunded Future Income Taxes		12,720			13,096
Long-term Compensation Arrangements		6,918			7,445
Unamortized Investment Tax Credits		1,702			1,823
Commitments and Contingencies
Total Long-Term Liabilities		121,334			119,881
Total Capitalization and Liabilities	$	299,877		$	290,940

The accompanying notes are an integral part of these financial statements.

Page 4

Connecticut Water Service, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CAPITALIZATION
At September 30, 2005 and December 31, 2004
(In thousands, except share data)

	September 30,			Dec. 31,
	2005			2004
	(Unaudited)			(Unaudited)
Common Stockholders’ Equity
Common Stock Without Par Value Authorized - 15,000,000 Shares;	$	58,765		$	57,111
Shares Issued and Outstanding: 2005 - 8,124,886 ; 2004 - 8,035,199
Stock Issuance Expense		(1,256	)		(1,597	)
Retained Earnings		36,560			32,264
Accumulated Other Comprehensive Income		257			87
Total Common Stockholders’ Equity		94,326			87,865
Preferred Stock
Cumulative Preferred Stock of Connecticut Water Service, Inc.
Series A Voting, $20 Par Value; Authorized, Issued and Outstanding 15,000 Shares, Redeemable at $21.00 Per Share		300			300
Series $.90 Non-Voting, $16 Par Value; Authorized 50,000 Shares Issued and Outstanding 29,499 Shares, Redeemable at $16.00 Per Share		472			472
Total Preferred Stock of Connecticut Water Service, Inc.		772			772
Cumulative Preferred Stock of Barnstable Water Company Voting, $100 Par Value; Authorized, Issued and Outstanding 750 shares. Redeemable at $105 per share.		75			75
Total Preferred Stock		847			847
Long-Term Debt
The Connecticut Water Company
Unsecured Water Facilities Revenue Refinancing Bonds
5.05% 1998 Series A, due 2028		9,640			9,640
5.125% 1998 Series B, due 2028		7,685			7,685
4.40% 2003A Series, due 2020		8,000			8,000
5.00% 2003C Series, due 2022		14,930			14,930
Var. 2004 Series Variable Rate, due 2029		12,500			12,500
Var. 2004 Series A, due 2028		5,000			5,000
Var. 2004 Series B, due 2028		4,550			4,550
Total Connecticut Water Company		62,305			62,305
Crystal Water Utilities Corporation
8.0% New London Trust, Due 2017		107			111
Crystal Water Company of Danielson
7.82% Connecticut Development Authority, Due 2021		—			455
Chester Realty
6% Note Payable, Due 2006		23			35
Barnstable Water Company
10.2% Indianapolis Life Insurance Co., Due 2011		—			1,325
Unionville Water Company
8.125% Farmington Savings Bank, Due 2011		873			963
3.56% State of Connecticut, Due 2023		1,486			1,531
Total Unionville		2,359			2,494
Total Connecticut Water Service, Inc.		64,794			66,725
Less Current Portion		(210	)		(326	)
Total Long-Term Debt		64,584			66,399
Total Capitalization	$	159,757		$	155,111

The accompanying notes are an integral part of these financial statements.

Page 5

Connecticut Water Service, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF INCOME
For the Three Months Ended September 30, 2005 and 2004
(In thousands, except per share amounts)

	2005		2004
	(Unaudited)		(Unaudited)
Operating Revenues	$	14,088	$	13,148
Operating Expenses
Operation and Maintenance		6,506		5,745
Depreciation		1,434		1,431
Income Taxes		1,029		502
Taxes Other Than Income Taxes		1,325		1,277
Total Operating Expenses		10,294		8,955
Utility Operating Income		3,794		4,193
Other Income, Net of Taxes
Gain on Property Transactions		45		—
Non-Water Sales Earnings		186		198
Allowance for Funds Used During Construction		179		101
Other		103		51
Total Other Income, Net of Taxes		513		350
Interest and Debt Expense
Interest on Long-Term Debt		767		752
Other Interest Charges		171		120
Amortization of Debt Expense		87		94
Total Interest and Debt Expense		1,025		966
Income From Continuing Operations		3,282		3,577
Discontinued Operations, Net of Tax of $57 in 2005 and $68 in 2004		46		173
Net Income		3,328		3,750
Preferred Stock Dividend Requirement		10		10
Net Income Available to Common Shareholders	$	3,318	$	3,740
Weighted Average Common Shares Outstanding:
Basic		8,108		8,008
Diluted		8,141		8,042
Earnings Per Common Share:
Basic — Continuing Operations	$	0.40	$	0.45
Basic — Discontinued Operations	$	0.01	$	0.02
Basic — Total	$	0.41	$	0.47
Earnings Per Common Share:
Diluted — Continuing Operations	$	0.40	$	0.45
Diluted — Discontinued Operations	$	0.01	$	0.02
Diluted — Total	$	0.41	$	0.47
Dividends Per Common Share	$	0.2125	$	0.2100

The accompanying notes are an integral part of these financial statements.

Page 6

Connecticut Water Service, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF INCOME
For the Nine Months Ended September 30, 2005 and 2004
(In thousands, except per share amounts)

	2005		2004
	(Unaudited)		(Unaudited)
Operating Revenues	$	35,999	$	34,905
Operating Expenses
Operation and Maintenance		17,890		16,067
Depreciation		4,304		4,260
Income Taxes		2,099		1,989
Taxes Other Than Income Taxes		3,969		3,841
Total Operating Expenses		28,262		26,157
Utility Operating Income		7,737		8,748
Other Income, Net of Taxes
Gain on Real Estate Transactions		306		706
Non-Water Sales Earnings		644		553
Allowance for Funds Used During Construction		450		300
Other		177		111
Total Other Income, Net of Taxes		1,577		1,670
Interest and Debt Expense
Interest on Long-Term Debt		2,166		2,222
Other Interest Charges		426		323
Amortization of Debt Expense		260		243
Total Interest and Debt Expense		2,852		2,788
Income From Continuing Operations		6,462		7,630
Discontinued Operations, Net of Tax of $1,847 in 2005 and $118 in 2004		2,939		240
Net Income		9,401		7,870
Preferred Stock Dividend Requirement		29		29
Total Net Income Applicable to Common Shareholders	$	9,372	$	7,841
Weighted Average Common Shares Outstanding:
Basic		8,078		7,991
Diluted		8,123		8,032
Earnings Per Common Share:
Basic — Continuing Operations	$	0.80	$	0.95
Basic — Discontinued Operations	$	0.36	$	0.03
Basic — Total	$	1.16	$	0.98
Earnings Per Common Share:
Diluted — Continuing Operations	$	0.79	$	0.95
Diluted — Discontinued Operations	$	0.36	$	0.03
Diluted — Total	$	1.15	$	0.98
Dividends Per Common Share	$	0.6325	$	0.6250

The accompanying notes are an integral part of these financial statements.

Page 7

Connecticut Water Service, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Three Months Ended September 30, 2005 and 2004
(In thousands)

	2005		2004
	(Unaudited)		(Unaudited)
Net Income	$	3,328	$	3,750
Other Comprehensive Income, net of tax
Qualified Cash Flow Hedging Instrument Benefit (Expense) net of tax expense (benefit) of $78 in 2005; $(118) in 2004		122		(175	)
Comprehensive Income	$	3,450	$	3,575

For the Nine Months Ended September 30, 2005 and 2004
(In thousands, except per share amounts)

	2005		2004
	(Unaudited)		(Unaudited)
Net Income	$	9,401	$	7,870
Other Comprehensive Income, net of tax
Qualified Cash Flow Hedging Instrument Benefit (Expense) net of tax expense (benefit) of $105 in 2005; $17 in 2004		170		26
Comprehensive Income	$	9,571	$	7,896

The accompanying notes are an integral part of these financial statements.

Page 8

Connecticut Water Service, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
For the Three Months Ended September 30, 2005 and 2004
(In thousands, except per share amounts)

	2005		2004
	(Unaudited)		(Unaudited)
Balance at Beginning of Period	$	34,955	$	30,347
Net Income		3,328		3,750
		38,283		34,097
Dividends Declared:
Cumulative Preferred, Class A, $.20 per share		3		3
Cumulative Preferred, Series $.90, $.225 per share		7		7
Common Stock - 2005 $.2125 per share; 2004 $.2100 per share		1,713		1,663
		1,723		1,673
Balance at End of Period	$	36,560	$	32,424

For the Nine Months Ended September 30, 2005 and 2004
(In thousands, except per share amounts)

	2005		2004
	(Unaudited)		(Unaudited)
Balance at Beginning of Period	$	32,264	$	29,549
Net Income		9,401		7,870
		41,665		37,419
Dividends Declared:
Cumulative Preferred, Class A, $.60 per share		9		9
Cumulative Preferred, Series $.90, $.675 per share		20		20
Common Stock - 2005 $.6325 per share; 2004 $.6250 per share		5,076		4,966
		5,105		4,995
Balance at End of Period	$	36,560	$	32,424

The accompanying notes are an integral part of these financial statements.

Page 9

Connecticut Water Service, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2005 and 2004
(In thousands)

	2005			2004
	(Unaudited)			(Unaudited)
Operating Activities:
Net Income	$	9,401		$	7,870
Discontinued Operations, Net of Taxes		2,939			240
Income From Continuing Operations		6,462			7,630
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation (including $140 in 2005, $140 in 2004 charged to other accounts)		4,444			4,400
Change in Assets and Liabilities:
(Increase) in Accounts Receivable and Accrued Unbilled Revenues		(1,321	)		(1,314	)
(Increase) Decrease in Other Current Assets		1,714			(1,590	)
(Increase) Decrease in Other Non-Current Items		(1,186	)		(40	)
(Decrease) in Accounts Payable, Accrued Expenses and
Other Current Liabilities		(5,580	)		(3,094	)
Increase (Decrease) in Deferred Income Taxes and
Investment Tax Credits, Net		559			656
Total Adjustments		(1,370	)		(982	)
Net Cash and Cash Equivalents Provided by Operating Activities in Continuing Operations		5,092			6,648
Net Cash and Cash Equivalents Provided by Operating Activities in Discontinued Operations		1,399			352
Net Cash and Cash Equivalents Provided by Operating Activities		6,491			7,000
Investing Activities:
Gross Additions to Utility Plant (including Allowance for Funds
Used During Construction of $547 in 2005 and $300 in 2004)		(13,229	)		(6,085	)
Proceeds from Sale of Barnstable Water Company Assets (Net of $78 in Transaction Costs)		9,922			—
Purchase of Short Term Investments		(6,724	)		—
Net Cash Used in Investing Activities in Continuing Operations		(10,031	)		(6,085	)
Net Cash Used in Investing Activities in Discontinued Operations		(62	)		(169	)
Net Cash Used in Investing Activities		(10,093	)		(6,254	)
Financing Activities:
Proceeds from Interim Bank Loans		12,500			9,700
Repayment of Interim Bank Loans		(5,650	)		(9,700	)
Proceeds from Issuance of Common Stock		1,654			1,362
Proceeds from Long-Term Debt		—			23,595
Reduction of Long-Term Debt including Current Portion		(606	)		(21,718	)
Costs to Issue Debt and Common Stock		—			(1,261	)
Proceeds from Exercise of Stock Options		394			—
Advances, Contributions and Funds From Others for Construction, Net		3,724			2,055
Cash Dividends Paid		(5,105	)		(4,856	)
Net Cash Provided by (Used in) Financing Activities in Continuing Operations		6,911			(823	)
Net Cash Provided by (Used in) Financing Activities in Discontinued Operations		(3,181	)		(207	)
Net Cash and Cash Equivalents Provided by (Used in) Financing Activities		3,730			(1,030	)
Net Increase (Decrease) in Cash and Cash Equivalents		128			(284	)
Cash and Cash Equivalents at Beginning of Year		707			1,122
Cash and Cash Equivalents at End of Period	$	835		$	838
Supplemental Disclosures of Cash Flow Information:
Cash Paid for Continuing Operations During the Year for:
Interest	$	2,872		$	2,816
State and Federal Income Taxes	$	2,555		$	1,288
Cash Paid for Discontinued Operations During the Year for:
Interest	$	105		$	153
State and Federal Income Taxes	$	405		$	31

The accompanying notes are an integral part of these financial statements.

Page 10

CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. The consolidated financial statements included herein have been prepared by CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES (the “Company”), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission and reflect all adjustments that are of a normal recurring nature which are, in the opinion of management, necessary to a fair statement of the results for interim periods. Certain information and footnote disclosures have been omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these consolidated financial statements be read in conjunction with the financial statements and the notes thereto included in the Company’s latest annual report on Form 10-K for the period ended December 31, 2004 and as updated in the Company’s March 31, 2005 and June 30, 2005 Form 10-Qs.

     The results for interim periods are not necessarily indicative of results to be expected for the year since the consolidated earnings are subject to seasonal factors.

     Certain prior year amounts have been reclassified to conform with the current year presentation. (See Note 7)

2. Stock-Based Compensation

     The Company has a Stock-Based Compensation Plan with two components: the Performance Stock Program and the Stock Option Program. Statement of Financial Accounting Standards (SFAS) No. 123 “Accounting for Stock-Based Compensation,” encourages entities to recognize as expense over the vesting period the fair value of all stock-based awards on the date of grant. Alternatively, SFAS No. 123 also allows entities to continue to apply the provisions of APB opinion No. 25 “Accounting for Stock Issued to Employees” and provide pro forma net income and pro forma earnings per share disclosures for employee stock grants as if the fair-value-based method defined in SFAS No. 123 had been applied.

     The Company accounts for its Stock Option Program under the recognition and measurement principles of APB No. 25. As such, no compensation cost related to the Stock Option Program is reflected in Net Income, as all options under this program had an exercise price equal to market value of the underlying common stock on the date of grant. The following table illustrates the effect on Net Income and Earnings Per Share if the Company had applied the fair value recognition provisions of SFAS No. 123 to the Stock Option Program.

	Three Months Ended
	September 30,
	2005			2004
(in thousands, except for per share data)
Net Income Available to Common Shareholders	$	3,318		$	3,740
Add: Total stock-based employee compensation expense determined under intrinsic value based method for all awards, net of related tax effects		26			64
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects		(32	)		(132	)
Pro forma net income	$	3,312		$	3,672
Earnings per share:
Basic — Total, as reported	$	0.41		$	0.47
Basic — Total, pro forma	$	0.41		$	0.46
Diluted — Total, as reported	$	0.41		$	0.47
Diluted — Total, pro forma	$	0.41		$	0.46

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CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES

	Nine Months Ended
	September 30,
	2005			2004
(in thousands, except for per share data)
Net Income Available to Common Shareholders	$	9,372		$	7,841
Add: Total stock-based employee compensation expense determined under intrinsic value based method for all awards, net of related tax effects		175			66
Deduct: Total stock-based employee compensation expense determined under fair value based method
for all awards, net of related tax effects		(217	)		(269	)
Pro forma net income	$	9,330		$	7,638
Earnings per share:
Basic — Total, as reported	$	1.16		$	0.98
Basic — Total, pro forma	$	1.15		$	0.95
Diluted — Total, as reported	$	1.15		$	0.98
Diluted — Total, pro forma	$	1.15		$	0.95

     See Note 5, “Accounting Pronouncements,” for a discussion of SFAS No. 123 (revised 2004), “Share-Based Payment,” (“SFAS 123R”) and its effect on the Company’s financial statements in 2006.

3. Pension and Other Postretirement Benefits

Pension Benefits
Components of Net Periodic Cost
Three months ended September 30	2005			2004
Service Cost	$	262		$	238
Interest Cost		388			365
Expected Return on Plan Assets		(411	)		(393	)
Amortization of Transition Obligation		3			3
Amortization of Prior Service Cost		24			27
Amortization of Net (Gain) Loss		81			24
Net Periodic Benefit Cost	$	347		$	264

Other Postretirement Benefits
Components of Net Periodic Cost	Connecticut Water						Barnstable Water
Three months ended September 30	2005			2004			2005			2004
Service Cost	$	145		$	83		$	1		$	—
Interest Cost		118			85			1			1
Expected Return on Plan Assets		(40	)		(34	)		—			—
Amortization of Transition Obligation		30			29			1			2
Amortization of Net (Gain) Loss		68			24			(1	)		(1	)
Net Periodic Benefit Cost	$	321		$	187		$	2		$	2

Pension Benefits
Components of Net Periodic Cost
Nine months ended September 30	2005			2004
Service Cost	$	787		$	713
Interest Cost		1,164			1,094
Expected Return on Plan Assets		(1,234	)		(1,179	)
Amortization of Transition Obligation		8			9
Amortization of Prior Service Cost		73			81
Amortization of Net (Gain) Loss		242			72
Net Periodic Benefit Cost	$	1,040		$	790

Other Postretirement Benefits
Components of Net Periodic Cost	Connecticut Water						Barnstable Water
Nine months ended September 30	2005			2004			2005			2004
Service Cost	$	345		$	233		$	2		$	1
Interest Cost		304			243			4			4
Expected Return on Plan Assets		(126	)		(119	)		—			—
Amortization of Transition Obligation		90			91			4			5
Amortization of Net (Gain) Loss		123			14			(2	)		(2	)
Net Periodic Benefit Cost	$	736		$	462		$	8		$	8

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CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES

     The Company has concluded that the postretirement welfare plan’s benefits will be considered actuarially equivalent to the benefits provided by Medicare Part D. The Company does not intend to apply for the government subsidy for postretirement prescription drug benefits, even though it expects to be eligible. Therefore, the impact of the subsidy on the plan’s liabilities is not reflected in the September 30, 2005 disclosure.

4. Earnings per Share

     Earnings per average common share are calculated by dividing net income applicable to common stock by the average number of shares of common stock outstanding during the respective periods as detailed below (diluted shares include the effect of unexercised stock options):

	3 Months Ended				9 Months Ended
	09/30/05		09/30/04		09/30/05		09/30/04
Common Shares Outstanding:
End of period:		8,124,886		8,019,272		8,124,886		8,019,272
Weighted Average Shares Outstanding:
Days outstanding basis
Basic		8,107,567		8,008,390		8,077,786		7,991,210
Diluted		8,140,603		8,042,073		8,122,544		8,031,841

5. Accounting Pronouncements

     Statement of Financial Accounting Standards (SFAS) No. 151, “Inventory (an amendment to ARB No. 43)” was issued in November 2004 and is effective for inventory costs incurred during fiscal years beginning after June 15, 2005 with prospective application. The Company has analyzed the potential effect of the provisions of SFAS No. 151 and does not expect any significant impact.

     Financial Accounting Standards Board Interpretation No. 47, “Accounting for Conditional Asset Retirement Obligations (an interpretation of FASB Statement No. 143)” was issued in March 2005. This Interpretation provides clarification with respect to the timing of liability recognition for legal obligations associated with the retirement of tangible long-lived assets when the timing and/or method of settlement of the obligation are conditional on a future event. The Company has analyzed the potential effect of the provisions of Interpretation No. 47 and does not expect any significant impact.

     In April 2005, the Securities and Exchange Commission issued a rule that amends the implementation dates for SFAS 123R. The new rule calls for the implementation of SFAS 123R at the beginning of the first quarter of 2006, instead of the third quarter of 2005. Although the compensation expense required under the revised statement differs slightly, the impacts on the Company’s quarterly financial statements in 2006 are expected to be similar to the pro forma disclosures included in Note 2 above.

     In May 2005, the FASB issued FAS No. 154, “Accounting Changes and Error Corrections” (FAS 154), which changes the requirements for the accounting and reporting of a change in accounting principle. FAS 154 applies to all voluntary changes in accounting principle as well as to changes required by an accounting pronouncement that does not include specific transition provisions. FAS 154 eliminates the requirement to include the cumulative effect of changes in accounting principle in the income statement and instead requires that changes in accounting principle be retroactively applied. A change in accounting estimate continues to be accounted for in the period of change and future periods if necessary. A correction of an error continues to be reported by restating prior period financial statements. FAS 154 is effective for the

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CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES

Company for accounting changes and correction of errors made on or after January 1, 2006.

6. Segment Reporting

     The Company operates principally in three business segments: water activities, real estate transactions, and services and rentals. Financial data for the segments is as follows in thousands of dollars:

Three Months Ended September 30, 2005

								Income from
			Pre-tax					Continuing
Segment	Revenues		Income		Income Tax			Operations
Water Activities	$	14,088	$	4,150	$	1,099		$	3,051
Real Estate		—		—		(45	)		45
Transactions Services & Rentals		1,000		322		136			186
Total	$	15,088	$	4,472	$	1,190		$	3,282

Three Months Ended September 30, 2004

							Income from
			Pre-tax				Continuing
Segment	Revenues		Income		Income Tax		Operations
Water Activities	$	13,148	$	3,887	$	508	$	3,379
Real Estate		—		—		—		—
Transactions Services & Rentals		1,340		329		131		198
Total	$	14,488	$	4,216	$	639	$	3,577

Nine Months Ended September 30, 2005

							Income from
			Pre-tax				Continuing
Segment	Revenues		Income		Income Tax		Operations
Water Activities	$	35,999	$	7,734	$	2,222	$	5,512
Real Estate		475		427		121		306
Transactions Services & Rentals		2,945		1,076		432		644
Total	$	39,419	$	9,237	$	2,775	$	6,462

Nine Months Ended September 30, 2004

									Income from
			Pre-tax						Continuing
Segment	Revenues		Income			Income Tax			Operations
Water Activities	$	34,905	$	8,347		$	1,976		$	6,371
Real Estate		—		(29	)		(735	)		706
Transactions Services & Rentals		3,348		921			368			553
Total	$	38,253	$	9,239		$	1,609		$	7,630

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CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES

7. Sale of Barnstable Water Company Assets — Discontinued Operations

     On May 20, 2005, the Company completed the sale of the assets of one of its Massachusetts’ subsidiaries, the Barnstable Water Company (“BWC”), to the Town of Barnstable, Massachusetts. Upon closing of the deal, the Town of Barnstable and BWC entered into a one year management contract for BWC to provide the Town with full operating and management services for the water system’s operations. This management contract may be terminated within the 12 month period by 30 days written notice by either party.

     The Company received $10.0 million in gross proceeds from the sale of its water utility assets, advances, and contribution in aid of construction. The gain, net of income taxes of $1,715,000, was $2,764,000 and has been included in Net Income from Discontinued Operations.

     Under the terms of the one year management contract, BWC is being paid $130,000 a month for operating and management services performed by BWC for the Town of Barnstable. The Company has recently been notified that the Town of Barnstable has not selected it to serve as the long-term operator of the system. As a result, the Company expects to be notified by the Town that it will terminate the current one year management contract. The Company does not believe the loss of this contract will have a material impact on its liquidity or overall financial results.

     The sale of Barnstable’s assets has been classified as ‘Discontinued Operations’ in the Consolidated Statements of Income due to the likely loss of the management contract with the Town of Barnstable, at the Town’s discretion. All of the results of BWC, including current and prior years and the gain on the sale of the utility’s assets, have been reclassified and are included as ‘Discontinued Operations’.

     The revenues from Discontinued Operations for the three months ended September 30, 2005 and 2004 were $430 and $768, respectively. The revenues from Discontinued Operations for the nine months ended September 30, 2005 and 2004 were $1,607 and $1,994, respectively.

8. Assets Held for Sale

     The agreement the Town entered into with the Company to purchase the BWC assets also included a provision whereby the Town will acquire all the land owned by BARLACO, another of our Massachusetts subsidiaries, for an additional $1,000,000. The sale of the BARLACO land is expected to close early in 2006.

     The following is a breakdown of the consolidated book basis of the assets classified as being held for sale as of June 30, 2005:

Assets Held for Sale:
BARLACO

Other Property and Investments $ 312,000

     BARLACO is a real estate company which holds its land for sale. BARLACO did not sell any land in 2005 or 2004.

Part I, Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations

Regulatory Matters and Inflation

     During the nine months ended September 30, 2005, there were no material changes under this subheading to any items previously disclosed by the Company in its Annual Report on Form 10-K for the period ended December 31, 2004 and as updated in the Company’s March 31, 2005 and June 30, 2005 Form 10-Qs.

     On July 8, 2005, the Company filed an application with the DPUC to amend the rate schedules for its newly merged Crystal subsidiary. The application requests an overall increase in revenues of $768,000, or 27.25%. The request for rate relief is based on a Return on Equity of 10.5% and an overall return on Rate Base of 7.792%. The Company expects a draft decision from the DPUC in November or December and a final decision by January 2006.

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CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES

Critical Accounting Policies and Estimates

     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’s subsidiaries are subject. Significant accounting policies employed by the Company, including the use of estimates, were presented in the Notes to Consolidated Financial Statements of the Company’s Annual Report.

     Critical accounting policies are those that are the most important to the presentation of the Company’s financial condition and results of operations. The application of such accounting policies requires management’s most difficult, subjective, and complex judgments and involves uncertainties and assumptions. The Company’s most critical accounting policies pertain to public utility regulation related to Financial Accounting Standards No. 71, “Accounting for the Effects of Certain Types of Regulation” (FAS 71), revenue recognition, and pension plan accounting. Each of these accounting policies and the application of critical accounting policies and estimates was discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2004. There were no significant changes in the application of critical accounting policies or estimates during the third quarter of 2005.

     Management must use informed judgments and best estimates to properly apply these critical accounting policies. Because of the uncertainty in these estimates, actual results could differ from estimates used in applying the critical accounting policies. The Company is not aware of any reasonably likely events or circumstances which would result in different amounts being reported that would materially affect its financial condition or results of operations.

Outlook

     The following modifies and updates the “Outlook” section of the Company’s 2004 Form 10-K filing on March 31, 2005.

     The Company’s earnings and profitability are primarily dependent upon the sale and distribution of water, the amount of which is dependent on seasonal weather fluctuations, particularly during the summer months when water demand will vary with rainfall and temperature levels. The Company’s earnings and profitability in current and future years will also depend upon a number of other factors, such as the ability to maintain our operating costs at lower levels, customer growth in the Company’s core regulated water utility business, growth in revenues attributable to non-water sales operations, and the timing and adequacy of rate relief if and when requested, from time to time by our regulated water companies.

     The Company believes that the factors described above, as well as those described in “Commitments and Contingencies” may have significant impact, either alone or in the aggregate, on the Company’s earnings and profitability in fiscal years 2005 and beyond. Please also review carefully the risks and uncertainties described under the heading “Forward Looking Information”.

     Based upon the Company’s current projections, it believes that its net income for the years 2005 and 2006, excluding “Discontinued Operations —Barnstable Water Company” in 2005 and the expected gain from the sale of BARLACO assets in 2006, will be materially reduced from the income levels reported for the years 2003 and 2004. Those reductions are expected to be attributable to lower net income (reduced tax benefits) related to the Company’s land dispositions during 2005 and 2006, excluding BARLACO. In addition the regulated water company subsidiaries increased operating costs, including depreciation on their investments in utility plant, will likely require the Company’s primary subsidiary, The Connecticut Water Company to seek rate relief in 2006. Based upon appropriate recovery of these costs in a timely manner based upon a rate increase application during the third or fourth quarter of 2006, and taking into account the other factors discussed above impacting profitability and earnings, the Company believes that its net income should return to levels achieved in 2003 and 2004. However, there can be no assurance that the Company will be able to recover costs in an appropriate and timely manner in 2006.

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CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES

Liquidity and Capital Resources

     The Company is not aware of demands, events, or uncertainties that will result in a decrease of liquidity or a material change in the mix or relative cost of capital resources.

     Interim Bank Loans Payable at September 30, 2005 was $12,500,000.

     We consider the current $15,500,000 lines of credit with four banks adequate to finance any expected short-term borrowing requirements that may arise during the next twelve months. The bank lines of credit have expiration dates ranging from October 2005 through May 2006. The Company is currently in negotiations to extend the lines of credit that expired in October 2005. Interest expense charged on interim bank loans will fluctuate based on market interest rates.

     Two of the Company’s wholly owned subsidiaries, Connecticut Water Company and the Crystal Water Company of Danielson, will be issuing fixed rated Water Facilities Revenue Bonds through the Connecticut Development Authority for $10 million and $5 million, respectively. The proceeds of these financings will be used to fund a portion of the Company’s ongoing construction program. The bonds are expected to be issued by December 31, 2005.

Results of Operations

     The following factors had a significant effect upon the Company’s net income for the three months ended September 30, 2005 as compared with the net income for the same period last year.

     Income from Continuing Operations for the three months ended September 30, 2005 decreased from that of the prior year by $295,000, which reduced earnings from continuing operations per basic average common share constant by $0.05 to $0.40. This increase in income is broken down by business segment as follows:

	Increase
	(Decrease)
Business Segment	Income
Water Activities	$	(328,000	)
Real Estate Transactions		45,000
Services and Rentals		(12,000	)
Total	$	(295,000	)

     The $328,000 decrease in the Water Activity segment’s net income was primarily due to the net effects of variances listed below.

• a $940,000 increase in Operating Revenue primarily due to an increase in revenues from our metered customers, which was primarily due to a hot and dry summer and an increase in residential customers, and an increase in fire protection revenues.

• a $527,000 increase in Operating Income Tax Expense primarily due to higher pretax income.

• a $78,000 increase in Allowance for Funds Used for Construction related to a dam reconstruction project and work begun on a new water treatment plant.

• a $761,000 increase in Operation and Maintenance expense due primarily to increases in payroll expenses, employee benefit costs, legal expenses, utility costs, and purchased water.

     There were no real estate transactions in the three months ended September 30, 2005 or 2004, however, a higher valuation on land previously donated resulted in $45,000 of additional net income for the Company from a higher tax deduction.

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CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES

     The $12,000 decrease in the Services and Rentals segment’s net income was primarily due to less income earned on the Company’s Linebacker^TM Service Line Maintenance program and antenna site leases. These decreases were partially offset by more income earned from contracted services.

     The following factors had a significant effect upon the Company’s net income for the nine months ended September 30, 2005 as compared with the net income for the same period last year.

     Income from Continuing Operations for the nine months ended September 30, 2005 decreased from that of the prior year by $1,168,000, which resulted in a decrease of earnings per basic average common share of $0.15 for the same period ended. This decrease in net income is broken down by business segment as follows:

	Increase
	(Decrease)
Business Segment	Income
Water Activities	$	(859,000	)
Real Estate Transactions		(400,000	)
Services and Rentals		91,000
Total	$	(1,168,000	)

     The $859,000 decrease in the Water Activity segment’s net income was primarily due to the net effects of several large variances listed below.

• a $1,094,000 increase in Operating Revenue primarily due to an increase in revenues from our metered customers, which was primarily due to a hot and dry summer and an increase in residential customers, and an increase in fire protection revenues.

• a $1,823,000 increase in Operation and Maintenance expense due primarily to increases in payroll expenses, employee benefit costs, legal expenses, utility costs, and purchased water.

• a $110,000 increase in Operating Income Tax Expense primarily due to higher tax rates during the year.

• a $150,000 increase in Allowance for Funds Used for Construction related to a dam reconstruction project and work begun on a new water treatment plant.

     The decrease in the Real Estate segment’s net income was a result of a sale of a small parcel of land (74 acres) in the nine months ending September 30, 2005 which resulted in a net profit of $261,000 compared with a donation of 133 acres of land in the nine months ending September 30, 2004 which generated a net profit of $706,000. Additionally, a higher valuation on land previously donated resulted in $45,000 of additional net income for the Company in 2005.

     The $91,000 increase in the Services and Rentals segment’s net income was primarily due to increased profits in the Company’s Linebacker^TM Service Line Maintenance program, antenna site leases and contract operations.

Commitments and Contingencies

Reverse Privatization

     On March 31, 2005, the Barnstable Town Council approved the agreement the Town had entered into with the Company to purchase the assets of the Barnstable Water Company for $10,000,000 and all the land owned by BARLACO for an additional $1,000,000. The sale of the water company assets closed on May 20, 2005 which resulted in a $2.764 million gain. The Company has recently been notified that the Town of Barnstable has not selected it to serve as the long-

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CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES

term operator of the system. As a result, the Company expects to be notified by the Town that it will terminate the current management contract. That management contract calls for the Company to receive $130,000 per month for the provision of operations and management services. The Company does not believe the loss of this contract will have a material impact on its liquidity or overall financial results. The sale of the BARLACO land is expected to close early in 2006. See Footnotes 7 and 8 for further details.

     There were no other material changes under this subheading to any of the other items previously disclosed by the Company in its Annual Report on Form 10-K for the period ended December 31, 2004 and as updated in the Company’s March 31, 2005 and June 30, 2005 Form 10-Qs.

Forward Looking Information

     This report, including management’s discussion and analysis, contains certain forward-looking statements regarding the Company’s results of operations and financial position. These forward-looking statements are based on current information and expectations, and are subject to risks and uncertainties, which could cause the Company’s actual results to differ materially from expected results.

     Our water companies are subject to various federal and state regulatory agencies concerning water quality and environmental standards. Generally, the water industry is materially dependent on the adequacy of approved rates to allow for a fair rate of return on the investment in utility plant. The ability to maintain our operating costs at the lowest possible level, while providing good quality water service, is beneficial to customers and stockholders. Profitability is also dependent on the timeliness of rate relief, when necessary, and numerous factors over which we have little or no control, such as the quantity of rainfall and temperature, industrial demand, financing costs, energy rates, tax rates, stock market trends which may affect the return earned on pension assets, and compliance with environmental and water quality regulations. The profitability of our other revenue sources is subject to the amount of land we have available for sale and/or donation, the demand for the land, the continuation of the current state tax benefits relating to the donation of land for open space purposes, regulatory approval of land dispositions, the demand for telecommunications antenna site leases and the successful extensions and expansion of our service contract work. We undertake no obligation to update or revise forward-looking statements, whether as a result of new information, future events, or otherwise.

Part I, Item 3: Quantitative and Qualitative Disclosure About Market Risk

     The primary market risk faced by the Company is interest rate risk. The Company has exposure to derivative financial instruments through an interest rate swap agreement. The Company has no other financial instruments with significant credit risk or off-balance sheet risks and is not subject in any material respect to any currency or other commodity risk.

     The Company is subject to the risk of fluctuating interest rates in the normal course of business. The Company’s exposure to interest fluctuations is managed at the Company and subsidiary operations levels through the use of a combination of fixed rate long-term debt, variable long-term debt and short-term variable borrowings under financing arrangements entered into by the Company and its subsidiaries and its use of the interest rate swap agreement discussed below. The Company has $15,500,000 of variable rate lines of credit with four banks, under which interim bank loans payable at September 30, 2005 were $12,500,000. In the third quarter 2004, the Company refinanced $9,550,000 of fixed rate bonds with variable rate bonds.

     During March 2004, The Connecticut Water Company entered into a five-year interest rate swap transaction in connection with the refunding of its First Mortgage Bonds (Series V). The swap agreement provides for The Connecticut Water Company’s exchange of floating rate interest payment obligations for fixed rate interest payment obligations on a notional principal amount of $12,500,000. The purpose of the interest rate swap is to manage the Company’s exposure to fluctuations in prevailing interest rates. The Company does not

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CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES

enter into derivative financial contracts for trading or speculative purposes and does not use leveraged instruments.

     Management does not believe that changes in interest rates will have a material effect on income or cash flow during the next twelve months, although there can be no assurances that interest rates will not significantly change.

Part I, Item 4: Controls and Procedures

Evaluation of Disclosure Controls and Procedures

     As of September 30, 2005, management, including the Company’s Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-14(c) and Rule 13a-15(e)). Based upon, and as of the date of that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective, in all material respects, to ensure that information required to be disclosed in the reports the Company files and submits under the Securities Exchange Act of 1934 is accumulated and communicated to management, including the Company’s Chief Executive Officer and Chief Financial Officer as appropriate to allow timely decisions regarding disclosure to be made within the time periods specified in the SEC’s rules and forms.

Changes in Internal Control Over Financial Reporting

     There were no changes in the Company’s internal control over financial reporting that occurred during the quarter ending September 30, 2005 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

     Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Part II, Item 1: Legal Proceedings

     We are involved in various legal proceedings. Although the results of legal proceedings cannot be predicted with certainty, there are no pending legal proceedings to which we or any of our subsidiaries are a party or to which any of our properties is the subject that presents a reasonable likelihood of a material adverse impact on the Company.

Part II, Item 5: Other Information

     On July 8, 2005, the Crystal Water Company of Danielson filed an application with the DPUC to amend the rate schedules for its newly merged Crystal subsidiary. The application requests an overall increase in revenues of $768,000, or 27.25%. The request for rate relief is based on a Return on Equity of 10.5% and an overall return on Rate Base of 7.792%. The Company expects a draft decision from the DPUC in November or December and a final decision by January 2006.

     On August 18, 2005, the Company was notified by the Internal Revenue Service that they would be conducting an audit of the Company’s 2003 tax return. The Company expects that the audit will be completed in 2005 and results to be available early in 2006.

     On November 2, 2005, the Company announced an agreement with the University of Connecticut (the “University”) where the Company, through its wholly owned subsidiary New England Water Utility Services, Inc., will operate and manage the University’s water systems at the Storrs, CT campus. Under the

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CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES

terms of the agreement, the Company will provide an on-site project manager to direct the operation of the water system at the Storrs’ campus to meet regulatory compliance. The Company will provide guidance and direction on the water system operations including a review of the University’s water system, recommendations on capital improvements and major maintenance projects, and conducting a leak detection survey of the water systems. This agreement expands upon services that the Company has been providing to the University over the past two years.

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CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES

Part II, Item 6: Exhibits

Exhibit
Number	Description
3.1	Certificate of Incorporation of Connecticut Water Service, Inc. amended and restated as of April, 1998. (Exhibit 3.1 to Form 10-K for the year ended 12/31/98).
3.2	By-Laws, as amended, of Connecticut Water Service, Inc. as amended and restated as of August 12, 1999. (Exhibit 3.2 to Form 10-K for the year ended 12/31/99).
3.3	Certification of Incorporation of The Connecticut Water Company effective April, 1998. (Exhibit 3.3 to Form 10-K for the year ended 12/31/98).
3.4	Certificate of Amendment to the Certificate of Incorporation of Connecticut Water Service, Inc. dated August 6, 2001 (Exhibit 3.4 to Form 10-K for the year ended 12/31/01).
3.5	Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Connecticut Water Service, Inc. dated April 23, 2004. (Exhibit 3.5 to Form 10-Q for the quarter ended March 31, 2003.)
31.1*	Rule 13a-14 Certification of Marshall T. Chiaraluce, Chief Executive Officer.
31.2*	Rule 13a-14 Certification of David C. Benoit, Chief Financial Officer.
32*	Certification of Marshall T. Chiaraluce, Chief Executive Officer, and David C. Benoit, Chief Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* filed herewith

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CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES

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 thereunto duly authorized.

	Connecticut Water Service, Inc.
		(Registrant)
Date: November 9, 2005	By:	/s/ David C. Benoit
	David C. Benoit
	Vice President — Finance, and
	Chief Financial Officer
Date: November 9, 2005	By:	/s/ Peter J. Bancroft
	Peter J. Bancroft
	Assistant Treasurer