California Water Service Group NYSE: CWT executives said first-quarter results were in line with internal expectations as the company awaits a final decision in its delayed 2024 California general rate case, while continuing to accelerate capital investment and advance several acquisition and regulatory initiatives.
First-quarter results reflect rate case timing
James Lynch, senior vice president, CFO and treasurer, said the company’s first-quarter 2026 results did not include the impact of the revenue requirement or other provisions in the revised proposed decision for the 2024 California general rate case, which management expected to be acted on by the California Public Utilities Commission (CPUC) later in the day.
“Our Q1 results do not include the impact of the revenue requirement or any of the other provisions included in the revised proposed decision,” Lynch said. He added that the company’s Interim Rates Memorandum Account allows the final decision to be applied retroactively to Jan. 1 once finalized.
For the quarter, Lynch reported revenue of $214.6 million, up from $204.0 million in the first quarter of 2025. Net income was $4.0 million, or $0.07 per diluted share, compared with $13.3 million, or $0.22 per diluted share, a year earlier.
Lynch outlined several key earnings drivers during the quarter, including rate increases that added $0.11 per diluted share and accrued and unbilled revenue that added $0.06 per diluted share, which he attributed primarily to “warm and dry weather during the last month of the quarter.”
Those benefits were partially offset by a decline in consumption, higher depreciation and interest expense tied to new capital investments, and a higher effective income tax rate due to reduced tax credits. Combined with other items, those offsets reduced earnings per share by about $0.32, Lynch said.
Revised proposed decision provides revenue visibility and new mechanisms
Greg Milleman, vice president of rates and regulatory affairs, said the company received a revised proposed decision on its 2024 California general rate case the day before the call, with a final decision expected “later today or shortly thereafter.”
Milleman said the revised proposed decision “provides clear visibility into revenue growth,” including approximately $91 million in 2026, followed by $43 million in 2027 and $49 million in 2028.
He also said the proposal continues regulatory mechanisms such as the Monterey-style revenue adjustment mechanism (RAM) and authorizes multiple cost balancing accounts, including:
- Pension Cost Balancing Account
- Healthcare Cost Balancing Account
- A new general insurance liability balancing account
Those tools, Milleman said, are intended to help stabilize earnings amid variability in customer usage and certain operating costs. While the proposal did not include decoupling, Milleman said it introduces a new Sales Reconciliation Mechanism and an updated rate design aimed at better supporting fixed-cost recovery.
Chief Executive Officer Marty Kropelnicki said management was “very happy” with the revised proposed decision and expected to issue a press release and an 8-K with additional details once the final decision is approved.
Capital investment rises; liquidity and dividend reiterated
Kropelnicki highlighted capital spending as a major feature of the quarter, noting that infrastructure investment in the first quarter was up 17%.
Lynch said capital investments for the quarter increased 17.6% to $129.5 million, and total planned capital investment for 2026 is $627 million. He said the plan reflects amounts included in the revised proposed 2024 California rate case decision, as well as estimated spending in other states.
If approved as requested, Lynch said the California general rate case and Infrastructure Improvement Plan, combined with planned PFAS investments and spending in other states, would result in compounded annual rate base growth of “over 11%.”
On liquidity, Lynch said that as of March 31, 2026, the company held $58.1 million in unrestricted cash and $45.6 million in restricted cash, along with approximately $470 million available on bank lines of credit. He said the company maintains $600 million in credit facilities expandable to $800 million, with maturities extending into March 2028.
Lynch also noted the company had more than $340 million remaining on its shelf registration related to its at-the-market (ATM) program after completing approximately $6.1 million of sales during the first quarter. He said both California Water Service Group and Cal Water maintain “A+ stable” credit ratings from S&P Global.
The company declared its 325th consecutive quarterly dividend of $0.335 per share, Lynch said, and announced an annual dividend of $1.34 per share for 2026. Kropelnicki added that the board’s declaration followed the company’s 59th annual dividend increase, which was announced in January.
Acquisitions and PFAS cost recovery remain key focus areas
Kropelnicki said the company continues to work toward acquiring Nexus Water Group’s Nevada and Oregon operations. He said change-in-control applications have been filed in both states and noted Nevada has a six-month statutory decision timeline while Oregon does not.
Management hopes to close the transactions “as early as by the end of the year,” Kropelnicki said, adding that the teams are mapping Nexus processes into the company’s systems. Kropelnicki said he has visited the Oregon and Nevada sites and met with commissioners and staff in both states.
Once the Nexus acquisition closes, Kropelnicki said the company would have nearly 100,000 connections outside California, representing about 20% of total connections.
In Texas, Kropelnicki said the company filed a change-of-control application to advance the purchase of a minority interest in BVRT, a partnership the company has been involved with for the past five years. He also said the company added another 210 connections to its existing system and is waiting for the Texas Commission before closing on the remaining minority interest, which would make BVRT a wholly owned subsidiary of Texas Water Service.
Asked about potential future water quality regulation related to microplastics, Kropelnicki pointed to the EPA’s unregulated contaminant monitoring list (UCMR) as an early indicator of future standards. “Do I believe you’ll ultimately have a standard that’ll come up on microplastics? Yes, I do,” he said, adding that the EPA would determine appropriate treatment methods as standards develop. Lynch said it is “uncertain or unclear right now” whether current PFAS treatment plans would be effective for microplastics.
On PFAS, Kropelnicki said the company continues to progress on treatment and cost recovery from polluters. He noted that the company received “another $6.5 million gross” from a polluters’ trust and has recovered about $66.5 million in gross receipts to date, netting about $50 million. Kropelnicki said that net amount is expected to offset PFAS program costs, and he estimated legal recovery efforts are approaching “20%-25%” of estimated PFAS costs.
Lynch said the PFAS program includes treatment and well replacement, with a goal to have treatment in place by the end of 2028, while well replacements will take longer. He added that about $60 million of planned PFAS spending is for wells, with the remainder for treatment.
Looking ahead: tariff implementation and a leadership transition
Kropelnicki said the company’s near-term focus includes implementing the results of the rate case, including retroactive adjustments back to Jan. 1 and extensive billing tariff updates. Assuming approval, he said the company anticipates starting to bill new tariffs on July 1.
He also said the second quarter would remain busy with ongoing work related to the Nexus and BVRT transactions, integration planning, and the company’s centennial celebrations.
In closing remarks, Kropelnicki noted that the call marked Milleman’s last earnings call with the company, and he credited Milleman’s leadership with improved rate case outcomes during his tenure. Milleman joined the company in 2013 and most recently led the company’s rates and regulatory affairs strategy across operating companies, Kropelnicki said.
About California Water Service Group NYSE: CWT
California Water Service Group NYSE: CWT is a publicly traded holding company that provides regulated water utility services through its subsidiaries. The company delivers safe, reliable drinking water and wastewater management to residential, commercial, industrial and municipal customers across California, Hawaii and New Mexico. Its principal operating units include California Water Service, New Mexico Water Service and Hawaii Water Service, each responsible for end‐to‐end water supply operations—from source development and treatment to distribution and customer service.
Founded in 1926 as the California Water Service Company, the group has grown to become one of the largest investor‐owned water utilities in the United States by customer count.
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