CALIFORNIA WATER SERVICE CO, DEF 14A, 1994-03-14

CALIFORNIA WATER SERVICE CO
DEF 14A, 1994-03-14
WATER SUPPLY

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<PAGE> 1

SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )

Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12

CALIFORNIA WATER SERVICE COMPANY
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)

CALIFORNIA WATER SERVICE COMPANY
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.

(1) Title of each class of securities to which transaction applies:

- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:

- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:1

- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:

- --------------------------------------------------------------------------------
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registrations statement number, or
the form or schedule and the date of its filing.

(1) Amount previously paid:

- --------------------------------------------------------------------------------

(2) Form, schedule or registration statement no.:

- --------------------------------------------------------------------------------
(3) Filing party:

- --------------------------------------------------------------------------------
(4) Date filed:

- --------------------------------------------------------------------------------
- ---------------
1Set forth the amount on which the filing fee is calculated and state how it
was determined.
<PAGE> 2

CALIFORNIA WATER SERVICE COMPANY

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS--APRIL 20, 1994

To the Shareholders:

The annual meeting of the shareholders of California Water Service Company,
a California corporation, will be held, as provided in the By-Laws, on
Wednesday, April 20, 1994, at 10 o'clock in the morning at the principal
executive offices of the Company, 1720 North First Street, San Jose, California
95112, for the following purposes:

1. To elect a Board of Directors for the ensuing year;

2. To consider and act upon ratification of the appointment of independent
auditors; and

3. To transact such other business as may properly come before the meeting
or any adjournment thereof.

The Board of Directors' nominees for directors are set forth in the
enclosed proxy statement.

In accordance with the By-Laws of the Company, only shareholders of record
at the close of business on Tuesday, February 22, 1994, will be entitled to vote
at this meeting.

IF YOU ARE UNABLE TO BE PRESENT, PLEASE DATE AND SIGN THE ENCLOSED PROXY
AND RETURN IT IN THE ENCLOSED ENVELOPE.

BY ORDER OF THE BOARD OF DIRECTORS

HELEN MARY KASLEY, Secretary

San Jose, California
March 16, 1994
<PAGE> 3

PROXY STATEMENT

SOLICITATION OF PROXY AND REVOCABILITY,
VOTING SECURITIES

The enclosed proxy is solicited on behalf of the Board of Directors of
California Water Service Company, a California corporation (the "Company"), for
use at the annual meeting of shareholders to be held at the principal executive
offices of the Company, 1720 North First Street, San Jose, California 95112, on
April 20, 1994, at 10 o'clock in the morning at which shareholders of record at
the close of business on February 22, 1994 will be entitled to vote. This
statement and the enclosed proxy are being sent to shareholders on or about
March 16, 1994. On February 22, 1994, the Company had issued and outstanding
5,697,034 shares of Common Stock and 139,000 shares of Cumulative Preferred
Stock, Series C.

Each Share of Common Stock is entitled to one vote and each share of
Preferred Stock to eight votes. Every shareholder, or his proxy, entitled to
vote upon the election of directors may cumulate his votes and give one
candidate a number of votes equal to the number of directors to be elected
multiplied by the number of votes to which his shares are entitled, or
distribute his votes on the same principle among as many candidates as he thinks
fit. No shareholder or proxy, however, will be entitled to cumulate votes unless
such candidate or candidates have been placed in nomination prior to the voting
and the shareholder has given notice at the meeting prior to the voting of the
shareholder's intention to cumulate the shareholder's votes. If any one
shareholder has given such notice, all shareholders may cumulate their votes for
candidates in nomination. The Board of Directors is soliciting discretionary
authority to cumulate votes if cumulative voting rights are exercised.

The shares represented by the proxies received will be voted at the meeting
or any adjournment thereof. However, you may revoke your proxy at any time prior
to its use by filing with the Company a written notice revoking it, or by the
presentation at the meeting of a proxy bearing a later date. It may also be
revoked by attending the meeting and voting in person.

The shares represented by duly executed proxies will be voted in accordance
with the directions given by the shareholders by means of the ballot on the
proxy. If no instructions are given, the shares will be voted FOR the election
of the Board of Directors' nominees for directors and FOR the ratification of
the appointment of independent auditors. If, for any unforeseen reason, any of
said nominees should not be available as a candidate for director, the proxies
will be voted for substitute nominees selected by the Board. Shares for which
duly
<PAGE> 4

executed proxies are received will be voted according to the Board's best
judgment upon such other matters as may properly come before the meeting or any
adjournment thereof.

The Company will bear the entire cost of preparing, assembling, printing
and mailing these proxy statements, the proxies and any additional materials
which may be furnished by the Board of Directors to shareholders. The
solicitation of proxies will be made by the use of the mails and may also be
made by telephone, telegraph, or personally, by directors, officers and regular
employees of the Company who will receive no extra compensation for such
services. In addition, the Company has retained Morrow & Co., a proxy
distribution and solicitation firm, to assist in the distribution and
solicitation of proxies for shares held in the names of brokers, banks and other
nominees, for a fee of $4,500 plus reimbursement of reasonable out-of-pocket
expenses.

ELECTION OF DIRECTORS

(ITEM 1 ON PROXY CARD)

The directors of the Company are elected annually. The following table sets
forth the name of each of the nominees for director, his age, the year in which
he was first elected a director, the number of shares of the Company's Common
Stock beneficially owned by him on January 1, 1994, a brief description of his
principal occupation and business experience during the last five years, all
directorships of publicly held companies presently held by each nominee, and
certain other information. All nominees, except for J.W. Weinhardt, are
presently directors of the Company. The term of office for all directors elected
at the 1994 annual meeting will expire at the time of the 1995 annual meeting.
No nominee has any family relationship with any other nominee or with any
executive officer.

2
<PAGE> 5

<TABLE>
<CAPTION>
AMOUNT AND
SERVICE AS NATURE OF
DIRECTOR BENEFICIAL PERCENT OF
NOMINEE AGE INFORMATION ABOUT NOMINEE(1) SINCE OWNERSHIP(2) CLASS
- ------------------------------ --- ---------------------------------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Edward D. Harris, Jr., 56 Professor of Medicine and 1993 200 Less than 1%
M.D.(5)..................... Chairman, Department of Medicine,
Stanford University Medical Center
Donald L. Houck(5)............ 61 President and Chief Executive Of- 1986 3,834(6) Less than 1%
ficer. Formerly Chief Operating
Officer
Robert K. Jaedicke(3)(4)...... 65 Professor (Emeritus) of Accounting 1974 889 Less than 1%
and Former Dean, Stanford Univer-
sity Graduate School of Business.
Also a director of Boise Cascade
Corporation, Enron Corp.,
Homestake Mining Company,
GenCorp., Inc., Wells Fargo Bank
and State Farm Insurance Companies
L. W. Lane, Jr.(5)............ 74 Retired Co-Chairman of Lane Pub- 1989 3,198 Less than 1%
lishing Company and retired Pub-
lisher, SUNSET Magazine. Also a
director of The Time Inc. Magazine
Co. and a member International
Board of Advice, ANZ Bank (Austra-
lia). Formerly U.S. Ambassador to
Australia and Nauru. A former
director of California Water
Service Company: 1967 to 1985
C. H. Stump(5)................ 68 Chairman of the Board. Formerly 1976 5,484(7) Less than 1%
Chief Executive Officer and Presi-
dent
Edwin E. van Bronkhorst(4).... 70 Financial consultant. Trustee and 1985 2,000 Less than 1%
Treasurer of The David & Lucile
Packard Foundation. Formerly Se-
nior Vice President, Treasurer and
Chief Financial Officer, Hewlett-
Packard Company (manufacturer of
computing and electronic measuring
equipment). Also a director of
Mid-Peninsula Bank and Nellcor
Inc.
</TABLE>

3
<PAGE> 6

- ---------

(1) No corporation or other organization by which any nominee is employed is a
parent, subsidiary or other affiliate of the Company.

(2) No nominee or officer owns any shares of the Company's Preferred Stock.
Directors Ayer, Foy, Harris, Houck, Jaedicke, Lane, Stump and van
Bronkhorst have sole voting and sole investment power with respect to the
shares owned by them (or share such powers with their spouses).

(3) Member of Compensation Committee.

(4) Member of Audit Committee.

(5) Member of Executive Committee.

(6) Includes 2,936 shares held in the Company's Salaried Employees' Savings
Plan (the "Savings Plan").

(7) Includes 4,585 shares held in the Savings Plan.

(8) Does not include 549,976 shares beneficially owned indirectly by SJW Corp.,
of which J.W. Weinhardt is President and Chief Executive Officer and a
director. Mr. Weinhardt disclaims beneficial ownership of all the shares
indirectly owned by SJW Corp.

(9) Includes 6,591 shares held in the Savings Plan for the benefit of officers
who are not directors and 8,879 other shares owned beneficially but not of
record by such officers.

Directors Ayer, Foy, Harris, Jaedicke, Lane and van Bronkhorst are paid,
and upon election nominee Weinhardt will be paid, a retainer of $12,000 per
annum. Directors Emeritus Robert Minge Brown and Ralph D. Lindberg are paid
monthly consulting retainers of $1,650 and $1,550, respectively. Chairman Stump
and Director Houck receive no annual retainer. In addition, all directors,
including Directors Emeritus Brown and Lindberg, are paid $650 for each Board or
Committee meeting attended, except that (i) Committee Chairmen are paid $1,200
for each Committee meeting attended, and (ii) Chairman Stump and Director Houck
are paid $650 for each Board meeting attended and are not paid for attending any
Commitee meeting.

4
<PAGE> 7

The Company established, effective January 1, 1988, a Deferred Compensation
Plan which is an unfunded deferred compensation program for certain directors.
Each member of the Board of Directors who is not an employee of the Company is
eligible to participate. Each participant may elect to defer annually at least
$5,000 of the director's monthly retainer fees. The maximum amount which may be
deferred is 100% of the director's monthly retainer fees. Amounts deferred are
fully vested, recorded by the Company and adjusted as if invested in an
investment selected by the participant. Distribution is made at the earlier of
(1) the time selected by the participant (subject to a minimum length of
deferral), or (2) when the participant ceases to be a director (unless he then
becomes an employee of the Company, in which case, distribution will be made
upon termination of employment). Distributions are also available upon a showing
of hardship. Amounts remaining undistributed at death are distributed to a
designated beneficiary or beneficiaries. The Company is under no obligation to
make any investment or otherwise fund the Plan. Participants are general,
unsecured creditors of the Company.

The Company's directors are covered by a retirement plan. Any director who
retires after having served on the Board of Directors for five or more years
will receive a benefit equal to the annual retainer paid to the Company's
non-employee directors at the time of his retirement. This benefit will be paid
annually for the number of years the director served on the Board of Directors
up to a maximum of ten years.

The Board of Directors has established Audit, Compensation and Executive
Committees. The full Board of Directors generally acts as the Nominating
Committee. The Nominating Committee will consider nominees recommended by
shareholders if the name and qualifications of each nominee are submitted to the
Company in a letter addressed to Helen Mary Kasley, Secretary of the Company,
prior to November 16, 1994. The Audit Committee reviews with the auditors the
scope and results of the audit, Company financial statements and internal
accounting control procedures. It also recommends the selection of auditors to
the Company's Board of Directors. The Compensation Committee makes
recommendations to the Board of Directors with respect to officer compensation.

During 1993, there were 12 regular meetings of the Board of Directors, one
meeting of the Compensation Committee and two meetings of the Audit Committee.
All directors attended an average of 89% of all of the Board and applicable
Committee meetings and each director attended at least 75% of these meetings.

5
<PAGE> 8

RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS

(ITEM 2 ON PROXY CARD)

Proxies in the accompanying form will be voted if so authorized, or if no
instructions are given by the shareholder, for ratification of the selection of
KPMG Peat Marwick, San Jose, California, certified public accountants, to audit
the books, records and accounts of the Company for the year ending December 31,
1994. KPMG Peat Marwick have acted as auditors for the Company since 1939 and
the Board of Directors, pursuant to the recommendation of the Audit Committee,
recommends their services be continued. Representatives of KPMG Peat Marwick are
expected to be present at the meeting to respond to appropriate questions and to
make a statement if they desire to do so. The Board of Directors recommends a
vote FOR adoption of this proposal. If the shareholders do not ratify the
appointment of KPMG Peat Marwick, the selection of certified public accountants
will be reconsidered by the Board of Directors.

6
<PAGE> 9

COMPENSATION OF EXECUTIVE OFFICERS

The following table discloses compensation received by the Company's
President and Chief Executive Officer and the four remaining most highly paid
executive officers for the three fiscal years ended December 31, 1993.

Summary Compensation Table

<TABLE>
<CAPTION>
ANNUAL COMPENSATION
----------------------------------------
(I)
ALL OTHER
(A) (B) (C) COMPENSATION(2)
NAME AND PRINCIPAL POSITION YEAR SALARY($) ($)
- -------------------------------------------- ----- --------- ---------------
<S> <C> <C> <C>
Donald L. Houck(1).......................... 1993 $237,554 $11,697
President and CEO 1992 209,925 11,364
1991 178,080 10,238
C.H. Stump(1)............................... 1993 106,409 10,540
Chairman of the Board 1992 156,370 11,364
1991 243,924 10,238
Harold C. Ulrich............................ 1993 144,132 4,497
Vice President, Chief Financial 1992 136,375 4,364
Officer and Treasurer 1991 125,937 3,146
Francis S. Ferraro.......................... 1993 125,806 4,389
Vice President 1992 119,014 3,838
1991 110,227 2,214
Gerald F. Feeney............................ 1993 111,752 3,301
Controller, Assistant Treasurer 1992 104,111 3,204
and Assistant Secretary 1991 96,507 2,974
</TABLE>

- ------------

(1) Effective May 1, 1992, Mr. Stump retired as CEO. He was succeeded by Mr.
Houck who was formerly president and chief operating officer.

(2) The amounts listed in column (i), entitled "All Other Compensation," relate
to the Company 401(k) contributions on behalf of the employee, and director
meeting fees for Mr. Houck and Mr. Stump of $7,200 each in 1993, $7,000 in
1992 and $6,000 in 1991.

The columns omitted were inapplicable.

7
<PAGE> 10

PENSION PLANS

The table that follows shows the estimated annual benefits payable upon
retirement to Company employees under the California Water Service Company
Pension Plan (the "Pension Plan") and the California Water Service Company
Supplemental Executive Retirement Plan (the "Supplemental Plan").

<TABLE>
<CAPTION>
THREE HIGHEST YEARS OF SERVICE
CONSECUTIVE --------------------------------------------------
YEARS AVERAGE 30 OR MORE
COMPENSATION 15 YEARS 20 YEARS 25 YEARS YEARS
- ------------------------------------- -------- -------- --------
<S> <C> <C> <C> <C>
$100,000.......................... $30,000 $40,000 $45,000 $ 50,000
$125,000.......................... 37,500 50,000 56,250 62,500
$150,000.......................... 45,000 60,000 67,500 75,000
$175,000.......................... 52,500.. 70,000 78,750 87,500
$200,000.......................... 60,000 80,000 90,000 100,000
$225,000.......................... 67,500 90,000 101,250 112,500
$250,000.......................... 75,000 100,000 112,500 125,000
$275,000.......................... 82,500 110,000 123,750 137,500
</TABLE>

The compensation covered by the above plans is the annual earnings of an
employee, including amounts deferred under the Savings Plan, a 401(k) plan. The
covered compensation is the same as the compensation reported in the Summary
Compensation Table under the "Salary" column. The pension table above sets forth
estimated annual retirement benefits, payable as a straight life annuity,
assuming retirement at age 62, using the normal form of benefit under the above
plans; the benefits listed are not subject to any deduction for social security
or other offset amounts.

The number of years of credited service at December 31, 1993 for officers
named in the Summary Compensation Table is as follows: Mr. Houck, 17; Mr.
Ulrich, 31; Mr. Ferraro, 4 and Mr. Feeney, 17. Effective May 1, 1992, Mr. Stump
retired with 41 years of credited service.

NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE COMPANY'S
PREVIOUS FILINGS UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES EXCHANGE ACT
OF 1934 THAT MIGHT INCORPORATE FUTURE FILINGS, INCLUDING THIS PROXY STATEMENT,
IN WHOLE OR IN PART, THE FOLLOWING REPORT AND PERFORMANCE GRAPH SHALL NOT BE
INCORPORATED BY REFERENCE INTO ANY SUCH FILINGS.

8
<PAGE> 11

REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION

The Compensation Committee, which is composed of three of the Company's
outside directors, annually reviews the compensation of the Company's
executives. The Committee's decisions are in turn reviewed by the Board of
Directors as a whole and, for 1993, were adopted by the Board of Directors
without modification.

In making its executive compensation decisions, the Committee seeks to
reward excellent job performance and ability, to recognize the value and
desirability of retaining experienced executives and to provide fair and
reasonable compensation. The Committee believes that compensating executives on
this basis leads to excellence in utility performance which benefits
shareholders and ratepayers alike. The Committee also bears in mind the fiscal
constraints imposed on the Company's decisions by the California Public
Utilities Commission, which regularly reviews the reasonableness of the
compensation paid by the Company. Finally, in factoring the Company's financial
performance into its compensation decisions, the Committee is mindful that the
Company is a regulated utility whose financial performance is to a large extent
dependent upon and constrained by the ratemaking decisions of the California
Public Utilities Commission.

In making individual compensation decisions, the Committee considers each
officer's duties, the quality of his or her performance of those duties and the
contribution the officer has made to the Company's overall performance. If an
officer's duties have been expanded, that is also taken into account by the
Committee. The Committee also considers an officer's experience and value to the
Company. The Committee compares the salary of each officer with the other
officers' salaries and evaluates the range of officers' salaries, taking into
account the number of years each officer has been employed by the Company and
the possibility of future promotions. The Committee also takes into account the
extent and frequency of prior salary adjustments for each officer. The Committee
seeks to set salary levels for the Company's officers so that they are
competitive and reasonable. The Committee annually reviews the salaries of
officers of other major water companies located throughout the United States and
other local companies, as well as the amount of inflation. In reviewing the
salaries of other companies, the Committee takes into account the Company's
small number of officers compared to many other companies of comparable size and
the Company's limited forms of compensating its officers.

9
<PAGE> 12

The Company's policy is to compensate its officers primarily through their
salaries and not to use a wide variety of compensation schemes. Unlike many
companies, the Company does not pay any bonuses or other incentive compensation,
provides comparatively few perquisites to its officers and does not have a stock
option or restricted stock plan. Thus, the principal vehicle for compensating
the Company's officers is salary. This is a flexible compensation vehicle that
allows for annual adjustment and is not likely to result in wide fluctuations in
compensation from year to year. Moreover, by using salaries as the principal
compensation vehicle and in setting salaries in the manner described above, the
Committee is able to reasonably reward an officer's excellent performance and
value to the Company without being automatically and unduly influenced by
variations in the Company's short-term financial performance, which may arise
largely as a result of the ratemaking decisions of the California Public
Utilities Commission or other factors beyond the Company's control.

In February 1993 the Committee set the President and Chief Executive
Officer's compensation for the twelve months beginning March 1, using the same
bases and considering the same factors it used in setting the compensation
levels for the Company's other executive officers. In particular, the Committee
considered how well the President and Chief Executive Officer had performed his
duties, which involve overall responsibility for the daily operations of the
Company, including the extent of the President and Chief Executive Officer's
contribution to the performance of the Company during the prior year. The
Committee also considered the level of the President and Chief Executive
Officer's salary, taking into consideration the salaries and benefits (to the
extent not comparable to those offered by the Company) of chief executive
officers at other major water companies and comparable local utility companies,
the salaries of the Company's other officers, the rate of inflation, the extent
and frequency of prior adjustments that had been made to the President and Chief
Executive Officer's salary and the benefits paid by the Company.

THE COMPENSATION COMMITTEE

WILLIAM E. AYER
ROBERT W. FOY
ROBERT K. JAEDICKE

10
<PAGE> 13

PERFORMANCE GRAPH

The following graph shows a five-year comparison of cumulative total
returns for the Company, the S&P 500 Index and the Edward D. Jones & Co. Water
Utility Average of 14 companies.

(PERFORMANCE GRAPH)

NOTE: The stock performance shown on the graph above is not necessarily
indicative of future price performance.

11
<PAGE> 14

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

The following table shows the beneficial owners of more than five percent
of any class of the Company's voting securities on January 1, 1994:

<TABLE>
<CAPTION>
AMOUNT AND NATURE
TITLE NAME AND ADDRESS OF BENEFICIAL PERCENT
OF CLASS OF BENEFICIAL OWNER OWNERSHIP OF CLASS
- ---------------------------- -----------------
<S> <C> <C> <C>
Common...................... Western Precision, Inc.(1) 549,976 Shares 9.7%
374 W. Santa Clara Street
San Jose, CA 95196
Preferred................... First Colony Life 35,810 Shares 25.8%
(Series C) Insurance Company(2)
700 Main Street
Lynchburg, VA 24504
</TABLE>

- ----------

(1) Western Precision, Inc. is a wholly-owned subsidiary of SJW Corp. with sole
voting and investment power with respect to these shares. Nominee J.W.
Weinhardt is President and Chief Executive Officer, as well as a director,
of SJW Corp.

(2) First Colony Life Insurance Company has sole voting and investment power
with respect to these shares.

SECURITY OWNERSHIP OF MANAGEMENT

The following table sets forth information concerning beneficial ownership
of shares of the Company's equity securities by Messrs. Ulrich, Ferraro and
Feeney on January 1, 1994:

<TABLE>
<CAPTION>
AMOUNT AND NATURE
TITLE NAME OF OF BENEFICIAL PERCENT
OF CLASS BENEFICIAL OWNER(1) OWNERSHIP(2) OF CLASS
- ----------------------------- ----------------- -----------------
<S> <C> <C> <C>
Common....................... Harold C. Ulrich 2,132 Shares (3) Less than 1%
Common....................... Francis S. 295 Shares (4) Less than 1%
Ferraro
Common....................... Gerald F. Feeney 2,714 Shares (5) Less than 1%
</TABLE>

- ------------

(1) For the directors of the Company, Messrs. Houck and Stump and all of the
directors and officers of the Company as a group, refer to the table in
Election of Directors for information as to their beneficial ownership of
shares of the Company.

(2) Messrs. Ulrich, Ferraro and Feeney have sole voting and sole investment
power with respect to the shares owned by them (or share such powers with
their spouses).

12
<PAGE> 15

(3) Includes 122 shares held in the Savings Plan.

(4) All of these shares are held in the Savings Plan.

(5) Includes 1,545 shares held in the Savings Plan.

GENERAL INFORMATION

The Board of Directors is not aware of any matters to come before the
meeting other than the proposals for the election of directors and the
ratification of the selection of independent auditors. If any other matters
should be brought before the meeting, or any adjournment thereof, upon which a
vote properly may be taken, the shares represented by the proxies in the
accompanying form will be voted with respect thereto in accordance with the
discretion of the proxy holders insofar as such proxies are not limited to the
contrary.

SHAREHOLDER PROPOSALS

Proposals of shareholders intended to be presented at the next annual
meeting of the Company must be received by the Company by November 16, 1994, for
inclusion in the next proxy statement and form of proxy relating to that
meeting.

BY ORDER OF THE BOARD OF DIRECTORS

HELEN MARY KASLEY, Secretary

San Jose, California
March 16, 1994

13
<PAGE> 16

CALIFORNIA WATER SERVICE COMPANY
PROXY SOLICITED BY THE BOARD OF DIRECTORS
P
R
O
X DONALD L. HOUCK and HELEN MARY KASLEY, and each of them with full
Y power of substitution, are hereby authorized to vote, as designated on the
reverse side, the stock of the undersigned at the Annual Meeting of
Shareholders of California Water Service Company to be held at 1720 N.
First Street, San Jose, California on Wednesday, April 20, 1994
at 10:00 A.M., or at any adjournment thereof.

PLEASE DATE, SIGN AND MAIL IMMEDIATELY IN THE ENCLOSED ENVELOPE.

(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
SEE REVERSE SIDE
<PAGE> 17
X Please mark votes as in this example.
___

It not otherwise directed, this proxy will be voted FOR the election of
directors and FOR ratification of the appointment of KPMG Peat Marwick as
auditors. The Board of Directors recommends voting in favor of these matters.

1. ELECTION OF DIRECTORS

Nominees: William E. Ayer, Robert W. Foy, Edward D. Harris, Jr., MD.,
Donald L. Houck, Robert K. Jaedicke, L.W. Lane, Jr., C.H. Stump,
Edwin E. van Bronkhorst and J.W. Weinhardt.

___ FOR ALL NOMINEES ___ WITHELD FROM ALL NOMINEES

___ For all nominees except as noted above

2. PROPOSAL TO RATIFY THE APPOINTMENT OF KPMG PEAT MARWICK as the
independant auditors of the Company. ___ FOR ___ AGAINST ___ ABSTAIN

3. IN THEIR DISCRETION UPON SUCH OTHER MATTERS AS MAY PROPERLY COME
BEFORE THE MEETING

MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT ____

NOTE: Please sign exactly as name appears hereon. If signing as attorney,
executor, administrator, trustee, guardian or the like, please give your
full title as such. If signing for a corporation, please give your title. In
the case of shares standing in the name of two or more persons, California
law permits the voting of such shares under a proxy signed by any one of
such persons if none of the others is present in person or represented by proxy.

Signature _____________________ Date _____

PLEASE DATE, SIGN and RETURN PROMPTLY