Form: DEF 14A

Definitive proxy statements

March 9, 2001

DEF 14A: Definitive proxy statements

Published on March 9, 2001




CALIFORNIA WATER SERVICE GROUP

NOTICE OF 2001 ANNUAL MEETING AND PROXY STATEMENT


[PICTURE APPEARS HERE]




CORPORATE PROFILE



California Water Service Group provides high-quality water utility services to 2
million people through four subsidiaries: California Water Service Company,
Washington Water Service Company, New Mexico Water Service Company, and CWS
Utility Services. The three water service companies are regulated by state
public utilities commissions; CWS Utility Services provides non-regulated
contract services, including meter reading, billing, and full-system operations.





[CALIFORNIA WATER CALIFORNIA WATER SERVICE GROUP
SERVICE GROUP California Water Service Company, New Mexico Water Service
LOGO APPEARS HERE] Company, Washington Water Service Company and CWS Utility
Services
1720 North First Street, San Jose, CA 95112-4598
(408) 367-8200




March 16, 2001



DEAR FELLOW STOCKHOLDER:


You are cordially invited to attend our Annual Meeting of Stockholders at 10:00
A.M. on Wednesday, April 18, 2001 at the executive offices of California Water
Service Group, 1720 North First Street, San Jose, California. At the Annual
Meeting, we will review our 2000 performance and answer your questions.
With this letter, we are including the notice for the Annual Meeting, the
proxy statement, the proxy card and the 2000 Annual Report. This year we've
again made arrangements for you to vote over the Internet or by telephone, as
well as by the traditional proxy card. See the proxy card for instructions on
these methods of voting.
When you review this proxy statement, you may wish to keep two factors in
mind. First, you will be deciding who will serve as the Group's directors until
the next Annual Meeting. The directors also will serve on the boards of two of
the Group's subsidiaries, California Water Service Company and CWS Utility
Services. Second, you will be deciding on the ratification of the appointment of
independent auditors.
Whether or not you plan on attending the Annual Meeting on April 18, I hope
you will vote as soon as possible. Your vote is important.
Thank you for your ongoing support of and continued interest in California
Water Service Group.


Sincerely,



/s/ ROBERT W. FOY
_____________________
ROBERT W. FOY
CHAIRMAN OF THE BOARD






California Water Service Group 1





2001 ANNUAL MEETING OF STOCKHOLDERS
NOTICE OF ANNUAL MEETING AND PROXY STATEMENT
TABLE OF CONTENTS




Notice of Annual Meeting 3
Questions and answers about the Proxy Materials and the Annual Meeting 4
WHAT AM I VOTING ON? 4
WHO MAY ATTEND THE ANNUAL MEETING? 4
WHO IS ENTITLED TO VOTE? 4
HOW MANY VOTES DO I GET? 4
WHAT IS "CUMULATIVE VOTING" AND HOW DOES IT WORK? 4
HOW ARE THE DIRECTORS ELECTED? 4
WHO ARE THE BOARD'S NOMINEES? 4
WHAT IS THE REQUIRED VOTE FOR THE SECOND PROPOSAL TO PASS? 4
HOW DO I VOTE? 4
WHAT IF I CHANGE MY MIND AFTER I RETURN MY PROXY? 5
WILL MY SHARES BE VOTED IF I DO NOT RETURN MY PROXY? 5
WHAT HAPPENS IF MY SHARES ARE HELD BY MY STOCKBROKER? 5
WHAT HAPPENS IF I ABSTAIN FROM VOTING ON A PROPOSAL? 5
WHO WILL COUNT THE VOTE? 5
WHAT DOES IT MEAN IF I GET MORE THAN ONE PROXY CARD? 6
WHAT CONSTITUTES A QUORUM? 6
WHAT PERCENTAGE OF STOCK DO THE DIRECTORS AND EXECUTIVE OFFICERS OWN? 6
WHO ARE THE LARGEST STOCKHOLDERS? 6
WHAT IS THE DEADLINE FOR SUBMITTING STOCKHOLDER PROPOSALS FOR THE GROUP'S
PROXY MATERIALS FOR NEXT YEAR'S ANNUAL MEETING? 6
HOW CAN A STOCKHOLDER PROPOSE A NOMINEE FOR THE BOARD? 6
HOW CAN A STOCKHOLDER PROPOSE BUSINESS AT A STOCKHOLDER'S MEETING? 7
CAN I MAKE COMMENTS AND/OR ASK QUESTIONS DURING THE ANNUAL MEETING? 7
Board Structure 8
Director Compensation Arrangements 9
Proposals of the Board to be Voted on 10
Proposal No. 1--Election of Directors 10
Proposal No. 2--Ratification of Selection of KPMG LLP as Auditors for 2001 12
Stock Ownership of Management and Certain Beneficial Owners 13
Ownership of Directors and Executive Officers 13
Ownership of Largest Principal Stockholders 14
Section 16(a) Beneficial Ownership Reporting Compliance 14
Executive Compensation 15
Summary Compensation Table 15
Severance Agreements 15
Option/SAR Grants in 2000 16
Aggregated Option/SAR Exercises in 2000 and 2000 Fiscal Year-End Option/SAR Values 17
Pension Plans 17
Report of the Compensation Committee of the Board of Directors on Executive Compensation 18
Audit Committee 20
Report of the Audit Committee 20
Auditors' Fees and Services 20
Audit Committee Charter 20
Performance Graph 21
Other Matters 22
Appendix A 23
Audit Committee Charter 23
For directions to the Annual Meeting, please refer to the map on the inside back cover.



2 California Water Service Group




CALIFORNIA WATER SERVICE GROUP
1720 North First Street
San Jose, CA 95112-4598
(408) 367-8200




Notice of Annual Meeting of Stockholders

TIME 10:00 A.M. on Wednesday, April 18, 2001

PLACE Executive Offices of California Water Service Group,
1720 North First Street, San Jose, California

ITEMS OF BUSINESS (1) To elect directors
(2) To ratify the appointment of independent auditors
(3) To consider such other business as may properly
come before the meeting

RECORD DATE You are entitled to vote if you were a stockholder at
the close of business on Thursday, February 22, 2001.

VOTING By Proxy Please submit a proxy as soon as
possible so that your shares can be voted at
the meeting in accordance with your
instructions. You may submit your proxy (1)
over the Internet, (2) by telephone, or (3)
by mail. For specific instructions, please
refer to the Questions and Answers beginning on
page 4 of this proxy statement and the
instructions on the proxy card.



By Order of the Board of Directors


PAUL G. EKSTROM
CORPORATE SECRETARY


This notice of meeting and proxy statement and accompanying proxy card are being
distributed beginning on or about March 16, 2001.






California Water Service Group 3





QUESTIONS AND ANSWERS ABOUT THE PROXY MATERIALS AND THE ANNUAL MEETING



WHAT AM I VOTING ON?
o Election of nine directors to serve until the 2002 Annual Meeting.
o Ratification of the Board's selection of KPMG LLP as the Group's independent
auditors for 2001.

Those elected to serve as the Group's directors also will serve as the
directors of California Water Service Company and CWS Utility Services, two of
the Group's operating subsidiaries.

WHO MAY ATTEND THE ANNUAL MEETING?
All Group stockholders may attend.

WHO IS ENTITLED TO VOTE?
Stockholders of record at the close of business on February 22, 2001 (the
"Record Date"), or those with a valid proxy from a brokerage firm or another
similar organization which held shares on the Record Date.

HOW MANY VOTES DO I GET?
Each share of common stock is entitled to one vote. Each share of preferred
stock is entitled to 16 votes. You may also use "cumulative voting" in the
election of directors.

WHAT IS "CUMULATIVE VOTING" AND HOW DOES IT WORK?
Stockholders or persons holding a valid proxy may "cumulate" their votes for the
election of directors. That is, they may give one candidate nine votes for each
common share owned (instead of casting one vote for each of the nine candidates,
they may cast all nine votes for a single candidate) or they may distribute
their votes on the same principle among as many candidates as they desire.
Because each preferred share is entitled to 16 votes, preferred stockholders may
cumulate 144 votes (16 x 9) for each share owned. If you do not indicate
otherwise, the proxies may use their discretion to cumulate votes.

HOW ARE THE DIRECTORS ELECTED?
The nine nominees receiving the highest number of votes are elected to the
Board. Common and preferred shares vote together on directors.

WHO ARE THE BOARD'S NOMINEES?
The nominees are Douglas M. Brown, Robert W. Foy, Edward D. Harris, Jr., M.D.,
Robert K. Jaedicke, Richard P. Magnuson, Linda R. Meier, Peter C. Nelson,
Langdon W. Owen, and George A. Vera. All the nominees except Mr. Brown are
current Board members. See pages 10 and 11 for biographical information,
including the nominees' current directorships in other publicly held companies.

WHAT IS THE REQUIRED VOTE FOR THE SECOND PROPOSAL TO PASS?
In order for the Board's selection of KPMG LLP as auditors to be ratified, the
proposal must receive the affirmative vote of a majority of the shares present
in person or represented by proxy and entitled to vote at the meeting.

HOW DO I VOTE?
You may vote by mail.
You do this by signing the proxy card and mailing it in the enclosed,
prepaid and addressed envelope. If you mark your voting instructions on the
proxy card, your shares will be voted as you instruct.


You may vote by telephone.
You do this by following the "Vote by Telephone" instructions on the proxy
card. If you vote by telephone, you do not have to mail in your proxy card.
Stockholders who do not have touch-tone phones will not be able to vote by
telephone.



4 California Water Service Group



YOU MAY VOTE ON THE INTERNET.
You do this by following the "Vote by Internet" instructions on the proxy
card. If you vote on the Internet, you do not have to mail in your proxy card.


YOU MAY VOTE IN PERSON AT THE MEETING.
We will pass out written ballots to anyone who wants to vote at the meeting.
If you hold your shares in street name, you must request a legal proxy from your
stockbroker in order to vote at the meeting.
If you return a signed card but do not provide voting instructions, your
shares will be voted:
o for the nine named director nominees
o for the approval of the selection of auditors


We have been advised by counsel that these telephone and Internet voting
procedures comply with Delaware law.

WHAT IF I CHANGE MY MIND AFTER I RETURN MY PROXY?
You may revoke your proxy any time before the polls close at the meeting. You
may do this by:
o signing another proxy with a later date,
o voting by telephone or on the Internet (your latest telephone or Internet
proxy is counted),
o voting again at the meeting, or
o notifying the Corporate Secretary, in writing, that you wish to revoke your
previous proxy. We must receive your notice prior to the vote at the Annual
Meeting.

WILL MY SHARES BE VOTED IF I DO NOT RETURN MY PROXY?
If you are a stockholder of record (that is, you hold your shares in your own
name) your shares will not be voted unless you attend the meeting and vote in
person. Different rules apply if your broker holds your shares for you.

WHAT HAPPENS IF MY SHARES ARE HELD BY MY STOCKBROKER?
Your broker, under certain circumstances, may vote your shares.
Brokers will write to you asking how you want your shares voted. However, if
you do not respond, brokers have authority under exchange regulations to vote
your unvoted shares on certain "routine" matters, including election of
directors and approval of auditors. If you wish to change voting instructions
you give to your broker, you must ask your broker how to do so.
If you do not give your broker voting instructions, the broker may either:
o proceed to vote your shares on routine matters and refrain from voting on non-
routine matters, or
o leave your shares entirely unvoted.


Shares which your broker does not vote ("broker non-votes") will count
towards the quorum only. We encourage you to provide your voting instructions to
your broker. This ensures that your shares will be voted at the meeting.
YOU MAY HAVE GRANTED TO YOUR STOCKBROKER DISCRETIONARY VOTING AUTHORITY OVER
YOUR ACCOUNT. If so, your stockbroker may be able to vote your shares even on
non-routine matters, depending on the terms of the agreement you have with your
stockbroker.

WHAT HAPPENS IF I ABSTAIN FROM VOTING ON A PROPOSAL?
If you abstain from voting on a proposal (whether by proxy or in person at the
Annual Meeting), your shares will be counted in determining whether we have a
quorum but the abstention will have the same effect as a vote against a
proposal.

WHO WILL COUNT THE VOTE?
Representatives of EquiServe, our transfer agent, will serve as the inspector of
elections and count the votes.





California Water Service Group 5




WHAT DOES IT MEAN IF I GET MORE THAN ONE PROXY CARD?
It means that you have multiple accounts at the transfer agent and/or with
stockbrokers. Please sign and return all proxy cards to ensure that all your
shares are voted.

WHAT CONSTITUTES A QUORUM?
A majority of the outstanding shares--present at the Annual Meeting or
represented by persons holding valid proxies--constitutes a quorum. If you
submit a valid proxy card, your shares will be part of the quorum.
Without a quorum, no business may be transacted at the Annual Meeting.
However, whether or not a quorum exists, a majority of the voting power of those
present at the Annual Meeting may adjourn the Annual Meeting to another date,
time and place.
At the Record Date, there were approximately 11,000 stockholders of record.
There were 15,145,866 shares of our common stock outstanding and entitled to
vote at the Annual Meeting and 139,000 shares of our preferred stock outstanding
and entitled to vote at the Annual Meeting.

WHAT PERCENTAGE OF STOCK DO THE DIRECTORS AND EXECUTIVE OFFICERS OWN?
Together, they own less than one percent of our common and preferred stock. See
page 13 for more details.

WHO ARE THE LARGEST STOCKHOLDERS?
As of January 1, 2001, the largest principal stockholders were:
o SJW Corp. (1,099,952 shares of common stock, representing 7.3% of our common
stock);
o Employees Savings Plan of California Water Service Group, a Group-sponsored
401(k) plan (628,016 shares of common stock, representing 4.1%); and
o GE Financial Corporation (36,610 shares of Series C preferred stock,
representing 26.3%).


See page 14 for more details.

WHAT IS THE DEADLINE FOR SUBMITTING STOCKHOLDER PROPOSALS FOR THE GROUP'S PROXY
MATERIALS FOR NEXT YEAR'S ANNUAL MEETING?
Any proposals which stockholders intend to present at the 2002 Annual Meeting of
stockholders must be received by the Corporate Secretary of the Group by
November 16, 2001 in order to be considered for inclusion in the Group's 2002
proxy materials. A proposal and any supporting statement together may not exceed
500 words. Please submit the proposal to Paul G. Ekstrom, Corporate Secretary,
California Water Service Group, 1720 North First Street, San Jose, California
95112-4598.

HOW CAN A STOCKHOLDER PROPOSE A NOMINEE FOR THE BOARD?
Any stockholder of record who is entitled to vote at a stockholders meeting may
propose a nominee for the Board. The bylaws contain the requirements for doing
so. Contact the Corporate Secretary to request a copy of the full bylaw
requirements. Briefly, a stockholder must give timely prior notice to the Group.
The notice must be received by the Corporate Secretary at the Group's principal
place of business by the 150th day before the first anniversary of the prior
year's annual meeting. If we move the date of the meeting by more than thirty
days before or more than sixty days after the date of the previous meeting,
notice is due by the 150th day before the annual meeting or the 10th day after
we publicly announce the holding of the meeting.

If the Board calls a special meeting to elect directors, stockholder notice
is due by the 150th day prior to that meeting or the 10th day after we publicly
announce the holding of the special meeting and identify the Board's director
nominees. The bylaws do not affect the rights of preferred holders to nominate
directors where they are otherwise entitled to do so.
The bylaws specify what the notice must contain. The notice deadline for the
2002 Annual Meeting is November 19, 2001.



6 California Water Service Group





HOW CAN A STOCKHOLDER PROPOSE BUSINESS AT A STOCKHOLDER'S MEETING?
Anystockholder of record who is entitled to vote at a stockholders meeting may
propose business for the meeting. Just as with nominations, the bylaws contain
the requirements. Contact the Secretary of the Group and request a copy of the
full bylaw requirements. The stockholder must give timely prior notice to the
Group. The deadlines are the same as for stockholder nominations discussed
above.
The bylaws specify what the notice must contain. Stockholders must comply
with all requirements of the securities laws regarding proposals. The bylaws do
not affect any stockholder right to request inclusion of proposals in the
Group's proxy statement under the rules of the Securities and Exchange
Commission.
Because of the 150-day notice requirement discussed above, stockholders who
have not given prior notice may not raise a proposal (or a nomination) at this
year's meeting.

CAN I MAKE COMMENTS AND/OR ASK QUESTIONS DURING THE ANNUAL MEETING?
Yes, most certainly. Stockholders wishing to address the meeting are welcome to
do so by adhering to the following guidelines:
1. Stockholders may address the meeting when recognized by the Chairman or
President and Chief Executive Officer.
2. Each stockholder, when recognized, should stand and identify himself or
herself.
3. Stockholder remarks must be limited to matters before the meeting and may not
exceed 2 minutes in duration per speaker.



















California Water Service Group 7




BOARD STRUCTURE



This section briefly describes the functions of the principal committees of the
Board.


AUDIT: Reviews the Group's auditing, accounting, financial reporting and
internal audit functions. Also recommends the selection of independent auditors
to the Board. All members are non-employee directors and are independent as
defined in the listing standards of the New York Stock Exchange.


COMPENSATION: Reviews the Group's executive compensation and employee benefit
plans and programs, including their establishment, modification and
administration. All members are non-employee directors.


EXECUTIVE: Has limited powers to act on behalf of the Board whenever it is not
in session. This Committee meets only as needed.


During 2000, there were 11 regular meetings and one special meeting of the
Board, two meetings of the Compensation Committee, four meetings of the Audit
Committee and no meetings of the Executive Committee. Each of the
director-nominees who served on the Board of California Water Service Group in
2000 attended at least 89% of all Board and applicable committee meetings.
Collectively, they attended an average of 95% of all of the Board and applicable
committee meetings.













8 California Water Service Group




DIRECTOR COMPENSATION ARRANGEMENTS



The following table provides information on the Group's compensation and
reimbursement practices during fiscal year 2000 for non-employee directors, as
well as the range of compensation paid to non-employee directors who served the
entire 2000 fiscal year. Directors who are employed by the Group receive no
compensation for their Board activities except a fee for attending each Board
meeting. Directors receive no additional compensation for serving on the Boards
of the Group's subsidiaries.


DIRECTOR COMPENSATION TABLE FOR FISCAL YEAR 2000
Annual Director Retainer $16,000
Board and Committee Meeting Attendance Fees $1,040 and $950
Range of Committee Meeting Attendance Fees Paid to Directors $1,900 - $9,500
Committee Meeting Attendance Fees for Committee Chairs $1,900


COMPENSATION. In 2000, Directors Harris, Jaedicke, Magnuson, Meier, and Vera
received an annual retainer of $16,000. Director Owen, elected to the Board in
April 2000, received an annual retainer of $10,667. Effective January 1, 2001,
non-employee directors are paid an annual retainer of $18,000.


DEFERRED COMPENSATION PLAN. Effective January 1, 2001, the Group established the
California Water Service Group Director, Officer and Manager Deferred
Compensation Plan, an unfunded deferred compensation program for non-employee
directors, executive officers and managers. This plan succeeded the California
Water Service Group Directors Deferred Compensation Plan, which originally
became effective in January 1998. Under the new plan, as under the predecessor
plan, non-employee directors may defer up to 100% of their annual retainer with
a minimum annual contribution of $5,000. The plan also allows non-employee
directors to defer 100% of their meeting and committee meeting fees. Directors
who are also executive officers may defer 100% of their meeting fees and up to
50% of their annual salary with a minimum annual contribution of $5,000. Other
executive officers and managers, who elect to participate in the plan, may defer
up to 50% of their annual salary with a minimum contribution of $5,000. Amounts
deferred are fully vested and recorded by Group as general liabilities and the
value of deferrals fluctuate according to one of several investment indices
selected by the participant. Funds are distributed from this plan when the
participant ceases to be a director (unless the participant is an employee, in
which case we make a distribution when employment terminates). Distributions
also are available upon a showing of hardship. Amounts remaining undistributed
at death are distributed to the participant's designated beneficiary or
beneficiaries. Group is under no obligation to make any investment or otherwise
fund the plan. Participants are general, unsecured creditors of the Group.


RETIREMENT PLAN. Effective January 1, 1998, we established a directors'
retirement plan to succeed the retirement plan of California Water Service
Company. This plan operates in the same manner as the prior plan. Any director
who retires after serving on the Board for a total of five or more years
(including service on the California Water Service Company Board before January
1, 1998) will receive a benefit equal to the annual retainer paid to our
non-employee directors at the time of the director's retirement. This benefit
will be paid annually for the number of years the director served on the Board,
up to a maximum of 10 years.






California Water Service Group 9



PROPOSALS OF THE BOARD



PROPOSAL NO. 1 - ELECTION OF DIRECTORS
There are nine nominees for election to our Board this year. All of the nominees
have served as directors since the last Annual Meeting, except for Douglas M.
Brown, who is a new nominee and will stand for election as a director by our
stockholders for the first time at this year's Annual Meeting. Information
regarding the business experience of each nominee is provided below. All
directors are elected annually to serve until the next Annual Meeting and until
their respective successors are elected.1


THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF THE
FOLLOWING NOMINEES.


VOTE REQUIRED


The nine persons receiving the highest number of votes represented by
outstanding shares present or represented by proxy and entitled to vote will be
elected. Except as otherwise indicated, each director has served for at least
five years in the positions stated below.


DOUGLAS M. BROWN
NEW NOMINEE FOR 2001
age 63
Mr. Brown, a resident of the state of New Mexico, is president and chief
executive officer of Tuition Plan Consortium. He is also chairman of Talbot
Financial Services. From 1990 to 1999, he was president and chief executive
officer of Talbot Financial Services.


ROBERT W. FOY (2)
DIRECTOR SINCE 1977
age 64
Mr. Foy is chairman of the board of California Water Service Group and its
subsidiaries. He was formerly president and chief executive officer of Pacific
Storage Company, a diversified transportation and warehousing Group serving
Stockton, Modesto, Sacramento, San Jose, Vallejo, Marysville and Merced,
California. He has served as chairman of California Water Service Group since
January 1, 1996.


EDWARD D. HARRIS, JR., M.D. (2),(4)
DIRECTOR SINCE 1993
age 63
Dr. Harris is the George DeForest Barnett professor of medicine at Stanford
University Medical Center, where he is the director of the Center for
Musculoskeletal Diseases and the medical director of the International Medicine
Service. He is a director of the Genentech Research and Educational Foundation.
He is also the executive secretary of Alpha Omega Alpha, the National Medical
Honor Society and the governor of the American College of Physicians/American
Society of Internal Medicine--Northern California Chapter.


ROBERT K. JAEDICKE (2),(3),(4),(5)
DIRECTOR SINCE 1974
age 72
Professor Jaedicke is professor emeritus of accounting and was dean at the
Stanford University Graduate School of Business. Professor Jaedicke also is a
director of Boise Cascade Corporation and Enron Corporation.


[PICTURES OF DIRECTORS APPEAR HERE IN ORDER OF
DOUGLAS M. BROWN, ROBERT W. FOY, EDWARD D. HARRIS, JR., M.D.,
ROBERT K. JAEDICKE, AND RICHARD P. MAGNUSON]




10 California Water Service Group



RICHARD P. MAGNUSON (3),(4)
DIRECTOR SINCE 1996
age 45
Mr. Magnuson is a private venture capitalist. From 1984 to 1996, he was a
general partner of Menlo Ventures, a venture capital firm. He also is a director
of several privately held companies.


LINDA R. MEIER (3),(4),(6)
DIRECTOR SINCE 1994
age 60
Ms. Meier is a director of Greater Bay Bancorp, the Peninsula Community
Foundation and the National Advisory Board of the Haas Public Service Center.
She is also a member of the Board of Trustees of the California Academy of
Sciences, the former chair of the Stanford University Hospital Board of
Directors (1992-1997) and a former trustee of Stanford University (1984-1994).


PETER C. NELSON (2)
DIRECTOR SINCE 1996
age 53
Mr. Nelson is president and chief executive officer of California Water
Service Group and its subsidiaries. Before joining California Water Service
Group in 1996, he was vice president, division operations (1994-1995) and region
vice president (1989-1994) of Pacific Gas & Electric Company.


LANGDON W. OWEN (3)
DIRECTOR SINCE 2000
age 70
Mr. Owen is president of Don Owen & Associates, an assessment engineering
and special tax consulting firm. He is also a director of the Metropolitan Water
District of Southern California.


GEORGE A. VERA (3)
DIRECTOR SINCE 1998
age 57
Mr. Vera is chief financial officer (previously, the director of finance and
administration) of the David and Lucile Packard Foundation. Until 1997, he was
an audit partner at Arthur Andersen, LLP.


[FN]
(1) No nominee has any family relationship with any other nominee or with any
executive officer of the Group. "Director since" date refers to the year the
nominee first was elected or appointed to the Board of California Water
Service Group or California Water Service Company, as appropriate.
(2) Member of Executive Committee
(3) Member of Audit Committee
(4) Member of Compensation Committee
(5) Chair of the Audit Committee
(6) Chair of the Compensation Committee



[PICTURES OF DIRECTORS APPEAR HERE IN ORDER OF
LINDA R. MEIER, PETER C. NELSON, LANGDON W. OWEN, AND GEORGE A. VERA]





California Water Service Group 11





PROPOSAL NO. 2 - RATIFICATION OF SELECTION OF KPMG LLP AS AUDITORS FOR 2001

VOTE REQUIRED


In order for the ratification of independent auditors to be approved, it must
receive the affirmative vote of a majority of the shares present in person or
represented by proxy and entitled to vote at the meeting.
Stockholders will vote on the ratification of KPMG LLP, certified public
accountants, to audit our books, records and accounts for the year ending
December 31, 2001. KPMG has acted as independent auditors for California Water
Service Company and Group since 1939. Following the recommendation of the Audit
Committee, the Board recommends a vote FOR the adoption of this proposal.
Representatives of KPMG LLP will be present at the meeting to answer appropriate
questions and will have an opportunity to make a statement if they desire to do
so. If the stockholders do not ratify this appointment, the Board will
reconsider the selection of the auditors.


THE BOARD URGES YOU TO VOTE FOR THIS PROPOSAL.







12 California Water Service Group





STOCK OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS



OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
(COMMON AND PREFERRED STOCK OWNERSHIP AS OF JANUARY 1, 2001) (1)

Name Shares Owned
_____________________________________________________________________

Gerald F. Feeney 10,277 (2)
EXECUTIVE OFFICER
_____________________________________________________________________

Francis S. Ferraro 834 (5)
EXECUTIVE OFFICER
_____________________________________________________________________

Robert W. Foy 7,165 (3)
DIRECTOR AND EXECUTIVE OFFICER
_____________________________________________________________________

Edward D. Harris, Jr., M.D. 1,396
DIRECTOR
_____________________________________________________________________

Robert K. Jaedicke 2,184
DIRECTOR
_____________________________________________________________________

Richard P. Magnuson 15,497
DIRECTOR
_____________________________________________________________________

Linda R. Meier 3,000
DIRECTOR
_____________________________________________________________________

Peter C. Nelson 4,504 (4)
DIRECTOR AND EXECUTIVE OFFICER
_____________________________________________________________________

Langdon W. Owen 14,921
DIRECTOR
_____________________________________________________________________

Raymond H. Taylor 3,807 (5)
EXECUTIVE OFFICER
_____________________________________________________________________

George A. Vera 685
DIRECTOR
_____________________________________________________________________

Douglas M. Brown 3,000 (6)
NOMINEE
_____________________________________________________________________

All directors and executive officers as a group (7) 77,389
_____________________________________________________________________


[FN]
(1) No director, nominee or executive officer owns any shares of Series C
preferred stock. All directors and executive officers have sole voting and
investment power over their shares (or share such powers with their
spouses). To the knowledge of the Group, as of January 1, 2001, all
directors and executive officers together beneficially owned an aggregate of
less than 1% of the Group's outstanding common shares.
(2) Includes 4,371 shares held in the Employees Savings Plan.
(3) Includes 1,198 shares held in the Employees Savings Plan.
(4) Includes 1,204 shares held in the Employees Savings Plan.
(5) Held in the Employees Savings Plan.
(6) Includes 1,000 shares in a trust for which Mr. Brown is the trustee and has
voting and investment power. Mr. Brown disclaims beneficial ownership of
these shares.
(7) Includes 21,471shares held in the Employees Savings Plan for the benefit of
executive officers.






California Water Service Group 13






OWNERSHIP OF LARGEST PRINCIPAL STOCKHOLDERS
The following table shows the largest principal holders of the Group's voting
securities as of January 1, 2001:






Class Beneficial Owner Number of Shares Percent of Class
_____ ________________ ________________ ________________


Common SJW Corp. (1) 1,099,952 7.3%
374 W. Santa Clara Street
San Jose, CA 95196

Common California Water Service Group 628,016 4.1%
Employees Savings Plan (a 401(k) plan)
1720 N. First Street
San Jose, CA 95112

Series C Preferred GE Financial Corporation (2) 36,610 26.3%
3003 Summer Street
Stanford, CT 06905



(1) SJW Corp. has sole voting and investment power over these shares.
(2) GE Financial Corp. has sole voting and investment power over these shares.







SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our directors,
certain officers, and holders of more than 10% of our common stock to file with
the Securities and Exchange Commission reports regarding their ownership of our
securities. Based solely on its review of the copies of forms furnished to the
Group, or written representations that no annual forms (SEC Form 5) were
required, the Group believes that during 2000, all officers, directors and
10-percent stockholders of the Group complied with the requirements for
reporting stock ownership.




14 California Water Service Group






EXECUTIVE COMPENSATION



SUMMARY COMPENSATION TABLE The following table discloses the compensation of the
president and chief executive officer and our four other most highly paid
executive officers for the three years ended December 31, 2000.




Long Term
Compensation
_____________________
Other Annual Securities Underlying All Other
Name and Principal Position Year Salary(1) Compensation Options/SAR's Compensation
______________________________________________________________________________________________________________________


Peter C. Nelson 2000 $412,409 $11,440(2) 12,500 $5,586(3)
PRESIDENT AND CHIEF 1999 383,469 11,900(2) 5,336(4)
EXECUTIVE OFFICER 1998 348,334 11,050(2) 5,336(4)
______________________________________________________________________________________________________________________

Robert W. Foy 2000 261,706 12,480(2) 8,000 5,586(3)
CHAIRMAN OF THE BOARD 1999 246,309 11,900(2) 5,336(4)
1998 205,264 36,050(5) 5,336(4)
______________________________________________________________________________________________________________________

Gerald F. Feeney 2000 204,974 -- 3,000 5,586(3)
VICE PRESIDENT, 1999 191,338 -- 5,336(4)
CHIEF FINANCIAL OFFICER AND 1998 172,183 -- 5,336(4)
TREASURER
______________________________________________________________________________________________________________________

Francis S. Ferraro 2000 191,700 -- 3,000 5,586(3)
VICE PRESIDENT, 1999 176,604 -- 5,336(4)
REGULATORY MATTERS 1998 160,242 -- 5,336(4)
______________________________________________________________________________________________________________________

Raymond H. Taylor 2000 169,394 -- 3,000 5,586(3)
VICE PRESIDENT, 1999 163,265 -- 5,336(4)
OPERATIONS 1998 157,101 -- 5,336(4)
______________________________________________________________________________________________________________________



Footnotes to Summary Compensation Table

(1) Includes salary, amounts deferred under the Employees Savings Plan and
compensation associated with the non-business use of a Company automobile
except for Mr. Nelson, who does not have a Company automobile. The value of
automobile use amounted to $12,038, $5,270, $6,954 and $1,546 for Messrs.
Foy, Feeney, Ferraro and Taylor, respectively.

(2) Director meeting fees.

(3) Includes Employees Savings Plan contributions of $5,250 and annual life
insurance premiums of $336.

(4) Includes Employees Savings Plan contributions of $5,000 and annual life
insurance premiums of $336.

(5) Includes annual consulting fee of $25,000 and director fees of $11,050.







SEVERANCE AGREEMENTS In 1998, we entered into executive severance plan
agreements with all officers. These agreements pro- vide officers with severance
payments of approximately three times their annual salary if we merge with
another company or effect another transaction by which another company acquires
control of us and as a result, within 24 months, these officers lose their
executive positions. This severance amount would be paid in three equal annual
payments, beginning with the month following termination. The agreements provide
uniform payment levels for all officers.





California Water Service Group 15






OPTION/SAR GRANTS IN 2000 (1) The following table shows individual grants of
stock options during 2000 to the president and chief executive officer and our
four other most highly paid executive officers.




Individual Grants
______________________________________________________________________________________
Percentage
Number of of Total
Securities Options/SARs
Underlying Granted to Exercise Grant Date
Options/SARs Employees or Base Expiration Present
Name Granted in Fiscal Year Price Date Value ($)(2)
__________________________________________________________________________________________________________________________


Peter C. Nelson 12,500 23.36% $23.0625 6/28/10 $46,750
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
__________________________________________________________________________________________________________________________

Robert W. Foy 8,000 14.95% $23.0625 6/28/10 $29,920
CHAIRMAN OF THE BOARD
__________________________________________________________________________________________________________________________

Gerald F. Feeney 3,000 5.60% $23.0625 6/28/10 $11,220
VICE PRESIDENT,
CHIEF FINANCIAL OFFICER
AND TREASURER
__________________________________________________________________________________________________________________________

Francis S. Ferraro 3,000 5.60% $23.0625 6/28/10 $11,220
VICE PRESIDENT,
REGULATORY MATTERS
__________________________________________________________________________________________________________________________

Raymond H. Taylor 3,000 5.60% $23.0625 6/28/10 $11,220
VICE PRESIDENT, OPERATIONS



(1) The term "SAR" or "STOCK APPRECIATION RIGHT" refers to an award which is
payable in cash or stock without payment of an excercise price. The Group
does not currently grant SAR's. On June 28, 2000, the Group awarded grants
of 53,500 option shares at an exercise price of $23,0625. All options
granted were for a term of ten years and will vest 25% per year during the
first four years. In addition, the Group awarded grants of 58,000 option
shares on January 2, 2001, as disclosed below in the Report of the
Compensation Committee.

(2) The grant date present value shown is estimated using the Black-Scholes
option pricing model, a method of approximating the present value of options
excercis- able at a fixed price at the end of a fixed period. It relies on
certain assumptions as of the date of grant of the options, such as interest
rates, dividend yield, time to excercise, and stock price sensitivity
(volatility). Each of these factors could change over the life of the
options and affect the estimated value. The actual value of the options when
excercised may be a lesser or greater amount, depending on the price of the
stock at the date of excercise; it is also possible that the options will
expire unexcercised and produce no cash value to the optionee.

The present value of the options was based on the following assumptions:
o risk-free interest rates of 4.9%
o expected dividend yield of 4.3%
o holding period of 5.0 years
o stock price volatility of 22.0%
o that all options ultimately will be excercised
No adjustment has been made for non-transferability or risk of forfeiture
associated with the options.





16 California Water Service Group





AGGREGATED OPTION/SAR EXERCISES IN 2000 AND 2000 FISCAL YEAR-END OPTION/SAR
VALUES The following table shows 2000 fiscal year-end value of unexercised
options held by the president and chief executive officer and our four other
most highly paid exec- utive officers. There were no option exercises by such
persons during 2000.




Number of Securities Underlying Value of Unexercised
Unexercised Options/SARs at In-the-Money Options/SARs at
December 31, 2000 December 31, 2000
Name Exercisable/Unexercisable Exercisable/Unexercisable (1)
_________________________________________________________________________________________________________________


Peter C. Nelson 0 / 12,500 $0 / $49,219
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
_________________________________________________________________________________________________________________

Robert W. Foy 0 / 8,000 $0 / $31,500
CHAIRMAN OF THE BOARD
_________________________________________________________________________________________________________________

Gerald F. Feeney 0 / 3,000 $0 / $11,813
VICE PRESIDENT,
CHIEF FINANCIAL OFFICER AND TREASURER
_________________________________________________________________________________________________________________

Francis S. Ferraro 0 / 3,000 $0 / $11,813
VICE PRESIDENT,
REGULATORY MATTERS
_________________________________________________________________________________________________________________

Raymond H. Taylor 0 / 3,000 $0 / $11,813
VICE PRESIDENT, OPERATIONS



(1) Based on the year-end closing price of $27.00 of the Group's common stock on
the New York Stock Exchange on December 29, 2000. The ultimate value of the
option will depend on the future market price of Group common stock.







PENSION PLANS The table(+) that follows shows the estimated annual benefits we
must pay upon retirement to our executive offi- cers under the Group's Pension
and Supplemental Executive Retirement plans.




Three Highest Consecutive
Years Average Compensation(*) 15 Years 20 Years 25 Years 30 Years
_______________________________________________________________________________________


150,000 45,000 60,000 67,500 75,000
200,000 60,000 80,000 90,000 100,000
250,000 75,000 100,000 112,500 125,000
300,000 90,000 120,000 135,000 150,000
350,000 105,000 140,000 157,500 175,000
400,000 120,000 160,000 180,000 200,000
450,000 135,000 180,000 202,500 225,000
500,000 150,000 200,000 225,000 250,000


(+) The pension table above shows estimated annual retirement benefits, payable
as a straight life annuity, assuming retirement at age 60, 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.
(*) Compensation includes salary plus all other compensation. The number of
years of credited service at January 1, 2001 for officers named in the
Compensation table is as follows: Mr. Nelson, 15, Mr. Foy, 15, Mr. Feeney,
24, Mr. Ferraro, 11, and Mr. Taylor, 18.






California Water Service Group 17




REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE
COMPENSATION


WHAT IS THIS REPORT?
The Securities and Exchange Commission requires that public companies disclose
the policies that the Group uses to establish executive officer compensation.
This report explains the criteria that the Group used to determine the
compensation of all of its officers in 2000.

WHAT ARE THE COMPENSATION COMMITTEE'S RESPONSIBILITIES?
The Committee is responsible for establishing and implementing policies and
programs to compensate Group executives. Each November, the Committee reviews
and recommends compensation levels for all executive officers for the 12-month
period beginning January 1. The Committee submits its recommendations to the
entire Board for approval. In 2000, the Board adopted the Committee's
recommendations without modification.

WHAT IS OUR COMPENSATION PHILOSOPHY?
The primary objectives of our executive compensation program are:
1) To attract, retain and motivate talented and experienced executives,
2) To reward excellent job performance and contributions to the Group's
future success, and
3) To provide fair and reasonable compensation.


The Compensation Committee believes that compensating executives on this basis
leads to excellent executive performance, which benefits stockholders and
ratepayers alike. When making its recommendations, the Committee takes into
account that the California Public Utilities Commission (CPUC) reviews the
compensation decisions of the Group's officers for reasonableness. Furthermore,
as a regulated utility, the Group's financial performance is to a large extent
dependent upon CPUC ratemaking decisions and other factors beyond management's
control, such as weather. Therefore, the Committee's decisions largely are
determined by factors other than the Group's most recent financial performance.

WHO SERVES ON THE COMPENSATION COMMITTEE?
The Compensation Committee is composed of Ms. Meier, Dr. Harris, Mr. Jaedicke,
and Mr. Magnuson.

HOW IS EXECUTIVE COMPENSATION DETERMINED?

When examining the annual compensation of individual executives, the Committee
considers the officer's duties, performance and contribution to the Group's
current and future success. The Committee also considers the officer's
experience, tenure, value to the Group, prior salary adjustments and the
inflation rate.

In order to set salaries for the Group's officers at competitive and
reasonable levels, the Committee annually reviews the compensation of officers
of other major water companies. The Committee factors into its analysis the
Group's comparatively low number of officers and its limited methods of
compensation.

MR. NELSON'S COMPENSATION. In November 1999, the Committee reviewed the
compensation for Peter C. Nelson, president and chief executive officer. The
Committee determined Mr. Nelson's 2000 compensation using the same factors that
it used to set the compensation of the other Group executives.

DO EXECUTIVE OFFICERS OF CALIFORNIA WATER SERVICE GROUP RECEIVE ADDITIONAL
COMPENSATION FOR SERVING AS EXECUTIVE OFFICERS OF CALIFORNIA WATER SERVICE
COMPANY, CWS UTILITY SERVICES, NEW MEXICO WATER SERVICE COMPANY AND WASHINGTON
WATER SERVICE COMPANY?
No. Group officers do not receive additional compensation for serving as
officers of the Group's subsidiaries.

DOES THE GROUP HAVE A LONG TERM INCENTIVE PLAN?
Yes. Stockholders of Group approved a Long Term Incentive Plan at the April 19,
2000 Annual Meeting. The plan allows the Group to offer competitive
compensation, thus assisting in recruiting and retaining top-performing
individuals. The plan also aligns the interests of stockholders and
participants. Finally, the plan provides the potential to link benefits to the
Group's achievement of stockholder, customer or other performance goals, which
gives participants an incentive to achieve these goals.




18 California Water Service Group






WHAT AWARDS WERE GRANTED UNDER THE LONG TERM INCENTIVE PLAN FOR 2000?
The plan provides for three different types of awards: non-qualified stock
options, dividend units, and performance shares. In 2000, non-qualified options
were awarded. Non-qualified stock options are options to purchase a certain
number of shares of the Group's common stock. The options will have an exercise
price not lower than the closing price of the Group's common stock on the New
York Stock Exchange on the date of the grant. Options are granted for a term of
not more than 10 years and become exercisable in yearly increments as determined
by the Compensation Committee.

WHAT WAS THE NUMBER OF OPTION GRANTS AWARDED IN 2000?
On June 28, 2000, the Group awarded option grants covering 53,500 shares at an
exercise price of $23.0625. All options granted were for a term of ten years and
will vest 25% per year during the first four years. The option grants awarded
for 2000 are the following:


Mr. Nelson 12,500
Mr. Foy 8,000
Mr. Feeney 3,000
Mr. Ferraro 3,000
Mr. Taylor 3,000
All executive officers as a group (13 in number) 53,500


In addition, on January 2, 2001, the Group awarded option grants covering 58,000
shares at an exercise price of $25.94. All options granted were for a term of
ten years and will vest 25% per year during the first four years. The option
grants awarded for 2001 are the following:


Mr. Nelson 15,000
Mr. Foy 10,000
Mr. Feeney 3,000
Mr. Ferraro 3,000
Mr. Taylor 3,000
All executive officers as a group (13 in number) 58,000

WHO DETERMINES THE AMOUNT AND TYPE OF AWARD GRANTED?
In 2000, the Chief Executive Officer recommended the stock option award level
for each participant. The Compensation Committee determined stock option awards
for the Chairman of the Board and the Chief Executive Officer. All stock option
awards, including the terms and conditions, were approved by the Compensation
Committee.

DOES THE GROUP HAVE AN EXECUTIVE SEVERANCE PLAN?
Yes. Effective December 16, 1998, the Board of Directors adopted an Executive
Severance Plan for the benefit of the officers of Group and its subsidiaries.
The Board adopted the plan to provide security for the officers in the event of
a change in con- trol of Group. See page 15 for more detailed information.

HOW HAVE WE RESPONDED TO IRS LIMITS ON DEDUCTIBILITY OF COMPENSATION?
The Committee has reviewed the Group's compensation structure in light of
Section 162(m) of the Internal Revenue Code, which limits the amount of
compensation that the Group may deduct in determining its taxable income for any
year to $1,000,000 for any of its five most highly compensated executive
officers. In 2000, no executive officer's compensation exceeded the lim- itation
set by Section 162(m).


COMPENSATION COMMITTEE
Linda R. Meier, Committee Chair
Edward D. Harris, Jr., M.D.
Robert K. Jaedicke
Richard P. Magnuson

California Water Service Group 19






AUDIT COMMITTEE



REPORT OF THE AUDIT COMMITTEE
The Audit Committee consists of five non-management Board members. The Committee
met four times during 2000.

In connection with the December 31, 2000 financial statements, the Audit
Committee:
(1) reviewed and discussed the audited financial statements with management;
(2) discussed with KPMG LLP, the independent auditors, the matters required
by Statement on Auditing Standards No. 61, "Communication with Audit
Committees;" and
(3) received and discussed with the auditor matters required by the
Independence Standards Board Standard No. 1, "Independence Discussions
with Audit Committees."


Based upon these reviews and discussions, the Audit Committee recommended to
the Board of Directors that the audited financial statements be included in the
Annual Report on Form 10-K filed with the Securities and Exchange Commission.


AUDIT COMMITTEE
Robert K. Jaedicke, Committee Chair
Richard P. Magnuson
Linda R. Meier
Langdon W. Owen
George A. Vera




AUDITORS' FEES AND SERVICES
During 2000, KPMG LLP's fees for services are listed below:


Audit Fees $178,000
========

Financial Information Systems Design and Implementation Fees $ 0
All Other Fees
Internal Audit Services $106,000
Merger-Related Services $ 98,000
Other $ 45,000
--------
Total $249,000
========


The Audit Committee did consider the compatibility of non-audit services
provided by the auditors with maintaining the audi- tors' independence, and
determined that the auditors' independence relative to financial audits was not
jeopardized by the non- audit services. The auditors did not employ leased
personnel in connection with their audit work.




AUDIT COMMITTEE CHARTER
The Board has adopted a charter for the Audit Committee, which is included in
Appendix A to this proxy statement.







20 California Water Service Group




PERFORMANCE GRAPH



The graph below shows a five-year comparison of cumulative total returns for the
Company, the S&P 500 Index and the Edward Jones Water Utility Average of 12
Companies.



[PERFORMANCE GRAPH APPEARS HERE]


PERFORMANCE GRAPH DATA



1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ----

California Water Service Group 100 136 200 221 222 207
S&P 500 Index 100 123 164 211 255 232
Edward Jones Water Utility Average 100 121 166 208 206 260


PAST STOCK PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE
PERFORMANCE.




California Water Service Group 21



OTHER MATTERS



ADJOURNMENT. Notice of adjournment need not be given if the date, time and place
thereof are announced at the Annual Meeting at which the adjournment is taken.
However, if the adjournment is for more than 45 days, or if a new record date is
fixed for the adjourned Annual Meeting, a notice of the adjourned Annual Meeting
will be given to each stockholder entitled to vote at the Annual Meeting. At
adjourned Annual Meetings, any business may be transacted which might have been
transacted at the original Annual Meeting.


COST OF PROXY SOLICITATION. The Group will bear the entire cost of preparing,
assembling, printing and mailing this proxy statement, the proxies and any
additional materials which may be furnished by the Board to stockholders. The
solicitation of proxies will be made by the use of the U.S. postal service and
also may be made by telephone, or personally, by directors, officers and regular
employees of the Group, who will receive no extra compensation for such
services. Morrow & Co. was hired to assist in the distribution of proxy
materials and solicitation of votes for $6,000, plus out-of-pocket expenses. The
Group will reimburse brokerage houses and other custodians, nominees and
fiduciaries for their reasonable out-of-pocket expenses for forwarding proxy and
solicitation materials to stockholders.


OTHER MATTERS. The Board is not aware of any matters to come before the Annual
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 proxy holders will vote in their discretion
unless otherwise provided in the proxies. The Report of the Compensation
Committee, the Report of the Audit Committee, the Performance Graph, the Audit
Committee Charter contained in Appendix A to this proxy statement and the
statement of independence of Audit Committee members referred to under "Board
Structure-Audit" are not to be considered as incorporated by reference into any
other filings which the Group makes with the Securities and Exchange Commission
under the Securities Act of 1933, as amended, or the Securities Exchange Act of
1934, as amended. These portions of this proxy statement are not a part of any
of those filings unless otherwise stated in those filings.




22 California Water Service Group





APPENDIX A
AUDIT COMMITTEE CHARTER


The Board of Directors of California Water Service Group ("Group") has
established an audit committee with authority, duties and responsibilities as
described below. The committee will function as the audit committee for Group
and its consolidated subsidiaries. On an annual basis, the audit committee will
review the adequacy of its charter and propose changes as necessary to the full
Board. The charter will be printed in Group's proxy statement at least once
every three years.

MEMBERSHIP
The Committee will be appointed annually by the full Board. It shall be composed
of at least three directors, each independent of management and free of any
relationships that would interfere with the exercise of the member's
independence or judgment.
Committee members will have a basic understanding of finance and accounting
and be able to read and understand financial statements. At least one member
shall have accounting and financial expertise.
One of the members shall be appointed committee chairman by the Chairman of
the Board of Directors.

PURPOSE
The committee shall assist the Board in fulfilling its fiduciary
responsibilities to the stockholders, the public and various reporting agencies
primarily in financial areas relating to Group's accounting policies, auditing
and financial reporting practices. The responsibility shall extend to the
separate financial and benefit plan audits. It should endeavor to assure the
independence of Group's outside auditor, the integrity of management and the
adequacy of disclosures to stockholders, reporting agencies and the public.
The outside auditor is accountable to the audit committee and the Board as
representatives of the stockholders. The Board has the authority and
responsibility to select, evaluate and, if appropriate, recommend replacement of
the outside auditor to the stockholders.
The audit committee should provide a vehicle for communication among the
Directors, the outside auditor, the internal audit staff, and financial
management in order to provide an exchange of views and information and to keep
the committee informed of any unresolved issues.

AUTHORITY
The Board of Directors has granted the audit committee authority to investigate
any financial activity of Group and all employees are directed to cooperate as
requested by the committee members.

MINUTES
Minutes of each meeting will be prepared and distributed to committee members
and to Directors who are not members of the committee. The minutes will be
included with the general minutes of regular meetings of the Directors of the
Group.

MEETINGS AND REPORTS
The committee will convene at least four times annually. It will review
quarterly and annual financial statements and related press releases prior to
their public issuance. At its fall and January meetings, agenda items specified
in this charter will be covered. Additional committee meetings may be held as
deemed necessary.
In addition to the committee members, the outside auditor, the chief
financial officer, controller and senior management normally will attend these
meetings. The internal auditor will attend at least the fall meeting.
Following each audit committee meeting, the committee chairman will report
to the full Board as to the matters covered at the audit committee meeting.
Annually the committee will prepare a report to the stockholders as required
by the Securities and Exchange Commission. The report will be printed in the
annual proxy statement.





California Water Service Group 23



FALL MEETING
Matters to be covered will include the following:

1. Review with the outside auditor the scope of the current year's audit.
2. Review with the outside auditor their audits of employee benefit plans
completed during the year.
3. Review financial accounting and regulatory agency developments to
determine possible effects on financial statements.
4. Review any significant changes in accounting principles, policies and
practices.
5. Receive and review reports from the internal auditor on results of
examinations in the districts and general office.
6. Review the internal auditor's proposed audit plan and budget for the
coming year and coordination with the outside auditors.
7. Meet privately with the outside auditor to ascertain that the audit
scope is without limitations imposed by management and to discuss other
matters the auditor believes should be brought to the attention of the
Committee.
8. Meet separately with management to discuss the quality of service and
performance of the outside auditor in order to be in a position to
consider their reappointment for the succeeding year.

JANUARY MEETING
In late January after the conclusion of the independent audit and before
financial results are presented to the Board and released to the public, the
committee will meet to consider the following matters:

1. Review the annual financial statements and related footnotes to be
included in Group's annual report to stockholders and the Form 10-K
filing with the Securities and Exchange Commission. Also review the
draft news release announcing fourth quarter and annual financial
results.
2. Discuss with the auditor certain matters required to be communicated to
the audit committee in accordance with Statement on Auditing Standards
No. 61 and related amendments. These matters include the auditor's
judgment about the quality and appropriateness of Group's accounting
principles as applied to financial reporting.
3. Review and discuss any significant adjustments proposed by the outside
auditor or any deficiencies noted by them in Group's internal accounting
controls.
4. Review and discuss the results of the audit and the disposition of any
changes in accounting policies or procedures that were recommended in
the prior audit.
5. Receive a written report from the outside auditor delineating all
relationships, including audit and non-audit services, between the
auditor and Group during the past year. Evaluate the auditor's
qualifications regarding independence in light of the professional
services provided by the auditor.
6. Review the proposed scope of the annual audit for the new year and the
fee proposed to be charged as negotiated by management in order to be in
a position to recommend the reappointment of the outside auditor to the
Board for approval by the stockholders. In the event the decision is
against reappointment, further committee meetings would be in order to
select a replacement auditor.
7. Review officers' expense accounts submitted during the prior year.
8. Meet separately with the outside auditor to inquire as to limitations
imposed by management on the scope of the audit. The Committee will
receive an assessment of the effectiveness of Group's internal controls,
and receive and discuss other information the auditor believes should be
brought to the attention of the Committee.
9. Meet with management to discuss the quality of work performed by the
outside auditor in order to assist in the committee's recommendation to
the full Board in considering the auditor's reappointment for the new
year.

FINANCIAL STATEMENT RESPONSIBILITY
While the audit committee has responsibilities as set forth in its charter, it
is not the committee's duty to plan or conduct audits, nor to determine the
completeness and accuracy of Group's financial statements. The outside auditor
is responsible for planning and conducting the audits of the financial
statements. Management is responsible for the completeness and accuracy of the
financial statements.





24 California Water Service Group




[TWO GRAPHIC MAPS OF OFFICE LOCATION APPEARS HERE]




CALIFORNIA WATER SERVICE GROUP
California Water Service Company, New Mexico Water Service Company,
Washinton Water Service Company and CWS Utility Services
1720 North First Street
San Jose, CA 95112-4598
(408) 367-8200





[LOGOS OF WATER SERVICE GROUPs APPEAR HERE IN ORDER OF
CALIFORNIA WATER SERVICE GROUP, CALIFORNIA WATER SERVICE COMPANY,
NEW MEXICO WATER SERVICE COMPANY, WASHINGTON WATER SERVICE COMPANY, AND
CWS UTILITY SERVICES]


















CALIFORNIA WATER SERVICE GROUP
1720 North First Street
San Jose, California 95112-4598
408. 367.8200
www.calwater.com


1780-PS-01








VOTE BY TELEPHONE VOTE BY INTERNET

It's fast, convenient, and immediate! It's fast, convenient, and your vote is immediately
Call Toll-Free on a Touch-Tone Phone confirmed and posted.
1-877-PRX-VOTE (1-877-779-8683).

Follow these four easy steps: Follow these four easy steps:

1. Read the accompanying Proxy Statement and 1. Read the accompanying Proxy Statement
and Proxy Card. Proxy Card.

2. Call the toll-free number 2. Go to the Website
1-877-PRX-VOTE (1-877-779-8683). http://www.eproxyvote.com/cwt

3. Enter your 14-digit Control Number located 3. Enter your 14-digit Control Number located on
on your Proxy Card above your name. your Proxy Card above your name.

4. Follow the recorded instructions. 4. Follow the instructions provided.

Your vote is important! Your vote is important!
Call 1-877-PRX-VOTE Go to http://www.eproxyvote.com/cwt

We have been advised by counsel that these telephone and Internet voting procedures comply with Delaware law.

DO NOT RETURN YOUR PROXY CARD IF YOU ARE VOTING BY TELEPHONE OR INTERNET





ZCWS9A
DETACH HERE


[ X ] Please mark
votes as in
this example.

If not otherwise directed, this proxy will be voted FOR the election of directors and FOR ratification of the
appointment of KPMG LLP as independent auditors and in the discretion of the proxy holders on any other matters
properly raised at the meeting. The Company knows of no other matter to be raised at the meeting other than as
set forth in the Company's proxy statement.

The Board of Directors Recommends Voting FOR Proposals 1 and 2.

1. Election of Directors
Nominees: (01) Douglas M. Brown, (02) Robert W. Foy, (03) Edward D. Harris, Jr., M.D.,
(04) Robert K. Jaedicke, (05) Richard P. Magnuson, (06) Linda R. Meier,
(07) Peter C. Nelson, (08) Langdon W. Owen, and (09) George A. Vera

FOR AGAINST ABSTAIN
2. Proposal to ratify the appointment
FOR WITHHELD of KPMG LLP, as the independent [ ] [ ] [ ]
[ ] ALL [ ] FROM ALL auditors of the Group.
NOMINEES NOMINEES


[ ] ______________________________________
FOR ALL NOMINEES EXCEPT AS NOTED ABOVE
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,
Delaware 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.


Please date, sign and return promptly.


Signature: ______________________________ Date: __________________ Signature: ______________________________ Date: _________________
































ZCWS9B DETACH HERE





PROXY


CALIFORNIA WATER SERVICE GROUP

PROXY SOLICITED BY THE BOARD OF DIRECTORS


PETER C. NELSON and PAUL G. EKSTROM, and each of them, with full power of substitution, are hereby authorized
to vote, as designated on the reverse side, all the shares of California Water Service Group common stock and preferred
stock of the undersigned at the Annual Meeting of Stockholders of California Water Service Group to be held at 1720 N.
First Street, San Jose, California on Wednesday, April 18, 2001 at 10:00 A.M., or at any adjournment thereof. By my
signature on the reverse side of this proxy, I acknowledge that I have received a copy of the notice of meeting and proxy
statement relating to this meeting and of the Group's Annual Report to Stockholders for 2000.

PLEASE DATE, SIGN, AND MAIL AS SOON AS POSSIBLE IN THE ENCLOSED ENVELOPE.

Unless otherwise specified below this proxy authorizes the proxies to cumulate all votes that the undersigned is
entitled to cast at the Annual Meeting for, and to allocate such votes among, one or more of the nominees listed on the
reverse side as the proxies determine in their discretion. To specify a different method of cumulative voting, write
"Cumulate For" and the number of shares and the name(s) of the nominee(s) in the space provided below.

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(Continued and to be signed on reverse side)