California Water Service Group is a holding company incorporated in Delaware
with six operating subsidiaries: California Water Service Company (Cal Water),
New Mexico Water Service Company (New Mexico Water), Washington Water Service
Company (Washington Water), Hawaii Water Service Company, Inc. (Hawaii Water),
and CWS Utility Services and HWS Utility Services LLC (CWS Utility Services
and HWS Utility Services LLC being referred to collectively in this annual report
as Utility Services). Cal Water, New Mexico Water, Washington Water, and Hawaii
Water are regulated public utilities. The regulated utility entities also provide
some non-regulated services. Utility Services provides non-regulated services
to private companies and municipalities. Cal Water was the original operating
company and began operations in 1926.
Our business is conducted through our operating subsidiaries. The bulk of the
business consists of the production, purchase, storage, treatment, testing,
distribution and sale of water for domestic, industrial, public and irrigation
uses, and for fire protection. We also provide non-regulated water- related
services under agreements with municipalities and other private companies. The
non-regulated services include full water system operation, billing and meter
reading services. Non-regulated operations also include the lease of communication
antenna sites, lab services, and promotion of other non- regulated services.
The state regulatory bodies governing our regulated operations are referred
to as the Commissions in this annual report. Rates and operations for regulated
customers are subject to the jurisdiction of the respective state's regulatory
commission. The Commissions require that water and wastewater rates for each
regulated district be independently determined based on the cost of service.
The Commissions are expected to authorize rates sufficient to recover normal
operating expenses and allow the utility to earn a fair and reasonable return
on invested capital.
We distribute water in accordance with accepted water utility methods. Where
applicable, we hold franchises and permits in the cities and communities where
we operate. The franchises and permits allow us to operate and maintain facilities
in public streets and right- of-ways as necessary.
We operate the City of Hawthorne and the City of Commerce water systems under
lease agreements. In accordance with the lease agreements, we receive all revenues
from operating the systems and are responsible for paying the operating costs.
The City of Hawthorne and the City of Commerce lease revenues are governed through
their respective city councils and are considered non- regulated because they
are outside of the CPUC's jurisdiction. We report revenue and expenses for the
City of Hawthorne and City of Commerce leases in operating revenue and operating
expenses because we are entitled to retain all customer billings and are generally
responsible for all operating expenses. These leases are considered "nontariffed
products and services (NTPS)" by the CPUC and require a 10% revenue sharing.
Fees for non-regulated activities are based on contracts negotiated between
the parties. Under other non-regulated contract arrangements, we operate municipally
owned water systems, privately owned water systems, and recycled water distribution
systems, but are not responsible for all operating costs. Non-regulated revenue
received from water system operations is generally determined on a fee-per-customer
basis.
Non-regulated activities consist primarily of:
operating water and waste water systems, which are owned by other entities;
leasing communication antenna sites on our properties;
billing of optional third-party insurance programs to our residential customers;
operating recycled water systems;
providing meter reading and billing services;
providing lab services for water quality testing;
selling surplus property; and
other services as requested by the client.
The revenues and expenses for leased water systems are included in operating
revenues and operating expenses. All other non-regulated revenues and expenses
are reported below net operating income on the income statement. Due to the
variety of services provided and activities being outside of our core business,
the number of customers is not tracked for these non-regulated activities, except
customers for the City of Hawthorne and the City of Commerce.
6.11%