<TABLE>

Ten year financial review 
 
<CAPTION> 
(Dollars in thousands except common share and other data)
                                        1995     1994     1993     1992     1991    1990     1989      1988     1987     1986
<S>                                 <C>      <C>      <C>      <C>      <C>      <C>     <C>       <C>      <C>      <C>
SUMMARY OF OPERATIONS 
Operating revenue 
Residential                         $119,814 $114,751 $111,526 $101,842  $87,560 $90,178  $84,295  $ 81,404 $ 82,254  $79,131
Business                              28,230   27,023   25,247   23,670   20,759  20,910   19,870    19,480   19,986   19,095
Industrial                             5,836    5,478    5,123    4,925    4,490   5,146    5,166     4,754    4,361    4,539
Public authorities                     8,149    7,995    7,396    6,892    5,734   6,412    6,225     6,232    6,491    6,285
Other                                  3,057    2,024    2,424    2,476    8,633   1,741    1,932     1,885      693    1,385
Total operating revenue              165,086  157,271  151,716  139,805  127,176 124,387  117,488   113,755  113,785  110,435
Operating expenses                   139,694  131,766  123,861  116,031  102,855 101,017   95,150    91,265   90,587   87,788
Interest expense, other income
and expenses, net                     10,694   11,097   12,354   11,245   10,393   9,004    8,566     8,416    8,026    8,808
Net income                          $ 14,698 $ 14,408 $ 15,501 $ 12,529  $13,928 $14,366  $13,772   $14,074 $15,172*  $13,839

COMMON SHARE DATA	 
Earnings per share                  $   2.33 $   2.44 $   2.70 $   2.18  $  2.42 $  2.50  $  2.40   $  2.45 $  2.63*  $  2.40
Dividends declared                      2.04     1.98     1.92     1.86     1.80    1.74     1.68      1.60     1.48     1.40
Dividend payout ratio                    88%      81%      71%      85%      74%     70%      70%       65%      49%      58%
Cash dividend payout ratio               83%      79%      71%      85%      74%     70%      67%       59%      49%      58%
Book value                          $  23.44 $  23.12 $  21.80 $  21.02  $ 20.70 $ 20.08  $ 19.32   $ 18.59 $  17.72  $ 16.11

Market price at year-end               32.75    32.00    40.00    33.00    28.00    26.75    28.00    25.50    30.00   26.625
Common shares outstanding
at year-end (in thousands)             6,269    6,247    5,689    5,689    5,689    5,689    5,689    5,672    5,636    5,607

Return on common shareholders equity   10.2%    10.6%    12.4%    10.4%    11.7%    12.4%    12.4%    13.2%    14.8%    14.9%
Bond interest coverage                   3.2      3.2      3.2      2.9      3.2      3.6      3.4      3.8      4.3      3.9

BALANCE SHEET DATA	 

Net utility plant                   $422,175 $407,895 $391,703 $374,613 $349,937 $325,409 $307,802 $289,363 $273,619 $262,216
Utility plant expenditures            27,250   28,275   28,829   35,188   34,459   26,861   27,277   23,994   19,511   22,710
Advances for construction             94,100   92,190   90,812   89,127   84,424   77,202   69,016   59,145   54,887   50,907
Capitalization ratios: 
Common shareholders equity             49.7%    52.2%    48.2%    48.8%    52.4%    51.3%    55.1%    53.8%    55.6%    52.1%
Preferred stock                         1.2%     1.3%     1.4%     1.4%     1.5%     1.6%     1.8%     1.8%     3.2%     3.4%
Long-term debt                         49.1%    46.5%    50.4%    49.8%    46.1%    47.1%    43.1%    44.4%    41.2%    44.5%
 
OTHER DATA	 
Water production (million gallons) 
Wells                                 49,755   50,325   47,205   52,000   48,930   51,329   51,350   48,828   48,097   45,222
Purchased                             49,068   49,300   48,089   40,426   36,686   45,595   45,978   48,254   50,744   50,782
Total water production                98,823   99,625   95,294   92,426   85,616   96,924   97,328   97,082   98,841   96,004
Metered customers                    289,200  286,700  282,100  278,700  275,200  272,100  269,200  267,000  261,000  258,600
Flat rate Customers                   77,900   78,800   80,800   82,000   82,400   81,200   79,400   77,800   76,800   75,600
Customers at year-end                367,100  365,500  362,900  360,700  357,600  353,300  348,600  344,800  337,800  334,200
New customers added                    1,600    2,600    2,200    3,100    4,300    4,700    3,800    7,000    3,600    3,900
Revenue per customer                 $   450  $   430  $   418  $   388  $   356  $   352  $   337  $   330  $   337  $   330
Utility plant per customer           $ 1,592  $ 1,530  $ 1,469  $ 1,406  $ 1,327  $ 1,251  $ 1,198  $ 1,140  $ 1,098  $ 1,058
Employees at year-end                    630      624      614      610      593      581      565      550      534      528
 
* Net income excludes $2,196 for a change in accounting for unbilled revenue, $.39 is excluded from earnings per share.
Common share data is adjusted to reflect the 2 - for - 1 stock split effective October 1987.
</TABLE>

Management's discussion and analysis of financial condition and results of
operations 
 
 
BUSINESS 
 
California Water Service Company is a public utility supplying water service
through 20 separate water systems to 367,100 customers living in 38 California
communities.  These systems, or districts, are located throughout the state
as shown in the table on page 5.  Additionally, the Company has contracts with
various municipalities to operate water systems or provide billing services.

The Company's rates and operations are regulated by the California Public
Utilities Commission (Commission).  The Commission requires that water rates
for each district be determined independently.  Each summer the Company files
general rate increase applications for some of its 20 districts.  According
to its rate case processing procedures for water utilities, the Commission
attempts to issue decisions within eight months of acceptance of a general
rate case filing.  Commission procedures also allow offset rate adjustments
for changes in water production costs through use of expense balancing
accounts.  A detailed discussion of Rates and Regulation begins on page 10 of
this report. 

The six-year drought in California which required water rationing in a number
of the Company's districts was declared officially ended after near-record
precipitation in the first three months of 1993.  A detailed discussion 
of Water Supply is on page 6 of this report. 
 
 
RESULTS OF OPERATIONS 
 
Earnings and Dividends.   Net income was $14,698,000 in 1995 compared with
$14,408,000 in 1994 and $15,501,000 in 1993.  Earnings per common share were
$2.33 in 1995, $2.44 in 1994 and $2.70 in 1993. The weighted average number
of shares outstanding in each of the three years was 6,253,000, 5,838,000 and
5,689,000, respectively.  The 1995 and 1994 earnings per share amounts were
affected by the sale of 550,000 common shares in September 1994. 

In January 1995, the Board of Directors increased the dividend rate for the
twenty-eighth consecutive year.  The annual rate paid in 1995 was $2.04 per
share, an increase of 3.0% compared with the 1994 dividend of $1.98 per 
share, which represented an increase of 3.1% over the 1993 dividend of $1.92
per share. The increased dividends were based on projections that the higher
dividend could be sustained while still providing the Company with adequate
financial flexibility.  Earnings not paid as dividends are reinvested in the
Company.  The dividend payout ratio was 88% in 1995 compared with 81% in 1994
and 71% in 1993, an average of 80% for the three-year period.    
 
Operating Revenue.   Operating revenue was a record $165.1 million in 1995,
compared with $157.3 million in 1994 and $151.7 million in 1993.  The current
year increase was $7.8 million, or 5% greater than 1994's revenue.  Offset 
rate adjustments, primarily for purchased water cost increases, added
$3.8 million to revenue while general and step rate increases contributed
$2.2 million.  Proceedings involving Commission actions are discussed in more
detail on page 10 under the caption Rates and Regulation.  Increased customer
usage added $1.1 million.  Average billed water consumption per customer was
286 ccf an increase of only 1 ccf for the year. Only consumption in the fourth
quarter exceeded that of the prior year, the first three quarters of 1995
recorded usage was less than 1994's.  The consumption pattern reflects 1995's
weather.  The winter was unusually wet.   

Rain and cool weather continued through the spring and negatively influenced
summer usage.  With the exception of August, which showed a slight increase
in consumption, all months through the third quarter recorded a sales decline
from the prior year.  Lack of rain and mild weather in the fourth quarter
resulted in increased average customer usage of 14%.  Sales to 1,600 new
customers accounted for $0.7 million in additional revenue.   

Revenue increased $5.6 million in 1994 or 4% over 1993.  Step and general rate
increases accounted for $4.1 million of added revenue.  Offset rate
adjustments, primarily for purchased water and pump tax cost increases, added
$2.7 million.  Average water consumption per customer increased 4%, adding
$2.4 million to revenue.  During 1993, $2.9 million of rationing loss
recoveries were recorded, and as authorized by the Commission, conservation
penalties totaling $1.6 million were transferred to revenue to offset
undercollections in expense balancing accounts.  Since there were no similar
revenue sources in 1994, revenue decreased $4.5 million.  Sales to 2,600 new
customers accounted for $0.9 million in additional revenue. 

In 1993, operating revenue increased $11.9 million, or 9% from 1992.  Step and
general rate increases accounted for $2.7 million of added revenue.  Offset
rate adjustments, primarily for purchased water and pump tax rate increases,
added $7.3 million.  Average water consumption per customer increased 3%,
adding $2.3 million to revenue.  However, rationing loss recoveries declined
$1.2 million from 1992 due to the ending of rationing.  Sales to 2,200 new
customers accounted for $0.8 million in additional revenue. 
	 
Operating and Interest Expenses.   Operating expenses increased $7.9 million
in 1995 and in 1994 and $7.8 million in 1993. 

Well production supplied 49.6% of the water delivered to all systems in 1995,
49.7% was purchased from wholesale suppliers and 0.7% came from the Company's
Bear Gulch district watershed.  Water production was 99 billion gallons, down
1% from 1994's 100 billion gallons.  Production in 1993 was 95 billion gallons.
Total cost of water production, including purchased water, purchased power and
pump taxes, was $62.2 million in 1995, $58.3 million in 1994, and $52.9 million
in 1993.  Purchased water expense continued to be the largest component of
operating expense at $46.4 million, an increase of $3.6 million.  The cost
increase was due primarily to wholesale suppliers' rate increases.  The
Bear Gulch watershed yielded 731 million gallons which was processed through
the Company's filter plant, more than four times the 1994 production.  The
estimated purchased water cost savings provided by the watershed was $0.5
million.  Well production declined 2% in 1995, however, increases in power and
pump tax rates resulted in a $0.3 million increase in these two expense
categories.  

Employee payroll and benefits charged to operations and maintenance expense
was $29.9 million in 1995 compared with $28.0 million in 1994 and $26.2 million
in 1993.  The increases in payroll and benefits are generally attributable to
wage increases and additional employees.  At year-end 1995, 1994 and 1993
there were 630, 624 and 614 employees, respectively. 

Income taxes were $9.9 million in 1995, $9.6 million in 1994, and $10.6 million
in 1993.  The changes in taxes are due to variations in taxable income and the
increase in the federal tax rate to 35% from 34% effective in 1993. 

Interest on long-term debt increased $0.4 million in 1995 due to the sale in
August of $20 million of senior notes.  Long-term debt interest in 1994
decreased $1.4 million due to the bond refinancing program completed at 
lower interest rates in 1993.  In 1993, bond interest expense increased
$1.5 million because of the sale of $20 million of new bonds in November
1992 and the sale of additional new bonds in 1993.  Long-term financing is
discussed further under the caption Liquidity and Capital Resources.
Interest on short-term bank borrowings in 1995 decreased $0.3 million,
despite higher short-term rates during 1995 compared to 1994.  The reduction
in the expense reflects the payoff of outstanding short-term borrowings upon
the issuance of senior notes and a reduced requirement for short-term
borrowings.  In 1994 interest on short-term borrowings increased $0.2 million
due to increased borrowings at higher interest rates.  The increase in 1993
bond interest was partially offset by a $0.3 million reduction in interest on
short-term debt due to reduced borrowings.  Interest coverage of long-term debt
before income taxes was 3.2 in each of the three years. 
 
Other Income.   Other income increased 129% in 1995 to $0.9 million.  Other
income was $0.4 million in 1994 and $0.3 million in 1993.  Other income is
derived from management contracts under which the Company operates three 
municipally owned water systems, agreements for operation of two reclaimed
water systems, billing services provided to various cities, interest on
short-term investments and other nonutility sources.  The Company intends to
continue to pursue opportunities to expand these revenue sources.  Additional
information regarding other income is provided on page 9 of this report. 

Interest earned on temporary investment of excess funds generated from
operations and from the senior notes sale totaled $0.2 million.  At year-end
1995, temporary investments were $4.5 million.  There were no temporary 
investments at the end of 1994 or 1993.  Income from the various operating
and billing contracts was $0.7 million in 1995, $0.4 million in 1994 and
$0.3 million in 1993. 
 
 
LIQUIDITY AND CAPITAL RESOURCES 
 
 
Liquidity.   The Company's liquidity is primarily provided by utilization of a
short-term $30 million bank line of credit as described in Note 3 to the
financial statements and by internally generated funds.  Internally generated
fund sources include retention of a portion of earnings, depreciation and
deferred income taxes.

Because of the seasonal nature of the water business, the need for short-term
borrowings under the line of credit generally increase during the first six
months of the year.  With increased summer usage, cash flow from operations
increases and bank borrowings can be paid down.  The bank credit line was
temporarily increased to $40 million during the bond refinancing periods in
May and November 1993 to allow for short-term cash requirements between the
calling of bonds and the issuance of new bonds. 

The Company believes that long-term financing is available to it through equity
and debt markets.  In 1995, Standard & Poor's and Moody's maintained their
bond ratings of AA- and Aa3, respectively, on the Company's first mortgage
bonds.  Long-term financing, which includes issuance of common stock, first
mortgage bonds, senior notes and other debt securities is used to replace
short-term borrowings and fund construction.  Developer advances and 
contributions are also received for various construction projects. 

During August 1995, Series A, 7.28%, 30-year senior notes were issued.  The
proceeds from the issue were used to repay outstanding bank borrowings,
redeem upon maturity on November 1 the outstanding $2,565,000 Series 
J, first mortgage bonds, and to fund the 1995 construction program.   

In 1995 under the Dividend Reinvestment Plan (Plan), 22,317 new common shares
were issued to shareholders who elected to reinvest their third and fourth
quarter dividends.  Issuance of the new shares increased shareholders equity
by $0.7 million.  Shares required for the first and second quarter dividends
were purchased on the open market and redistributed to Plan participants.
The Company intends to continue to issue new shares required for the Plan's
quarterly dividend reinvestments.  The change to issuing new shares will
reduce cash required to fund quarterly dividend payments by about $1.4 million
annually, based on current shareholder participation of about 11% in the Plan.
Issuance of the additional shares will have a dilutive effect on earnings per
share calculations because of the added shares outstanding, and upon existing
equity of shareholders not participating in the Plan. 

The sale of 550,000 common shares was completed in September 1994 at an offer
price of $33.375.  Proceeds of $17.4 million, net of underwriters commissions
and issuance costs, were used to repay $15.5 million of short-term 
bank borrowings which had been incurred to fund the 1994 construction
program and for temporary working capital requirements.  For the first
quarter 1994 dividend, 8,280 new common shares were issued for the reinvestment
plan. 

A major refinancing program was completed in 1993.  Eight series of first
mortgage bonds in the principal amount of $49,593,000 and bearing coupons
ranging from 8.6% to 12-7/8% were called prior to maturity using a portion
of the proceeds from the sale of three $20 million dollar bond issues:
Series EE, 7.9%, first mortgage bonds issued in June 1993, Series FF, 6.95%,
bonds issued in October 1993 and Series GG, 6.98%, bonds issued in November
1993.  Interest savings from the refinancing will be approximately $1.9
million annually.   
 
 
Capital Requirements.   Capital requirements consist primarily of new
construction expenditures for expanding and replacing the Company's utility
plant facilities.  They also include refunds of advances for construction and
retirement of bonds.  

During 1995, utility plant expenditures totaled $27.3 million compared to
$28.3 million in 1994.  The expenditures included $20.0 million provided by
Company funding and $7.3 million received from developers through refundable
advances and contributions in aid of construction.  Company funded expenditures
were in the following areas: wells, pumping and water treatment equipment, and
storage facilities, $5.3 million; distribution systems, $7.2 million; services
and meters, $5.0 million; equipment, $2.5 million.  Company projects were
funded through cash generated from operations, the use of the short-term line
of credit and the proceeds from the senior notes issue. 

The 1996 Company construction program has been authorized by the Directors for
$22.2 million.  Expenditures are expected to be in the following areas: wells,
pumping and water treatment equipment, and storage facilities, $4.8 million;
distribution systems, $10.0 million; services and meters, $5.0 million; and
equipment, $2.4 million.  The funds for this program are expected to be
provided by cash from operations, bank borrowings and the remaining proceeds
from the senior notes sale.  New subdivision construction will be financed
generally by developers refundable advances and contributions.  Company
funded construction budgets over the next five years are projected to be
$110 million. 
 
Capital Structure.   The Company's total capitalization at December 31, 1995
and 1994 was $296.0 million and $276.9 million, respectively.  Capital ratios
were:   
	 
                     1995    1994 
 
Common equity       49.7%   52.2% 
Preferred stock      1.2%    1.3% 
Long-term debt      49.1%   46.5% 
 
The decrease in the common equity percentage from 1994 to 1995 and the
corresponding increase in the long-term debt percentage were primarily
caused by the sale of $20 million senior notes, completed in August 1995. 

The 1995 return on year-end common equity was 10.2% compared with 10.6% in 1994
and 12.4% in 1993.  

Balance Sheet

December 31,                                       1995               	1994
(In thousands) 
 
ASSETS 
 
Utility plant: 
Land                                         $    7,320	          $    6,904
Depreciable plant and equipment                	572,799	             549,044
Construction work in progress                     3,615	               2,589
Intangible assets                                   658	                 643 
Total utility plant                             584,392	             559,180 
Less depreciation                              	162,217	             151,285 
Net utility plant                               422,175	             407,895 
 
Current assets: 
Cash and cash equivalents                         6,273	               1,301 
Accounts receivable: 
Customers                                        10,747	               9,121 
Other                                             2,916	               2,606
Unbilled revenue                                  6,306	               5,992
Materials and supplies at average cost            2,518                3,018
Taxes and other prepaid expenses                  3,949	               3,927
Total current assets                             32,709	              25,965 
 
Other assets: 
Regulatory assets                                25,316	              24,135 
Unamortized debt premium and expense              4,162	               4,247 
Other                                               521	                 552 
Total other assets                               29,999	              28,934 
                                               $484,883	           $ 462,794 

See accompanying notes to financial statements. 
 
 
 
 
 
 
				 
December 31,                                       1995	                1994
(In thousands) 
 
CAPITALIZATION AND LIABILITIES 
 
Capitalization: 
Common stock                                   $ 43,507            $  42,800 
Retained earnings                               103,442	             101,647 
Total common shareholders equity                146,949	             144,447 
Preferred stock without mandatory 
redemption provision                              3,475	               3,475 
Long-term debt                                  145,540	             128,944 
Total capitalization                            295,964	             276,866 
 
Current liabilities: 
Short-term borrowings                                 0                7,000
Accounts payable                                 14,807	              12,231
Accrued taxes                                     2,104	               1,127
Accrued interest                                  1,979	               1,788
Other accrued liabilities                         6,940	               6,548
Total current liabilities                        25,830	              28,694

Unamortized investment tax credits                3,352	               3,265
Deferred income taxes                            14,056	              12,445
Regulatory liabilities                           11,467               11,467
Advances for construction                        94,100	              92,190
Contributions in aid of construction             40,114	              37,867
                                               $484,883	            $462,794

Statement of income  
 
For the years ended December 31,                      1995      1994     1993
(In thousands, except per share data) 
 
Operating revenue                                 $165,086  $157,271 $151,716 
Operating expenses: 
Operations: 
Purchased water                                     46,370    42,812   38,454 
Purchased power                                     12,689    12,641   11,852 
Pump taxes                                           3,151     2,859    2,601 
Administrative and general                          19,989    18,210   16,910 
Other                                               21,635    20,405   19,718
Maintenance                                          7,722     7,855    7,250 
Depreciation                                        11,436    10,958   10,304 
Income taxes                                         9,850     9,600   10,600 
Property and other taxes                             6,852     6,426    6,172 
Total operating expenses                           139,694   131,766  123,861 
Net operating income                                25,392    25,505   27,855 
Other income and expenses, net                         768       287      273 
Income before interest expense                      26,160    25,792   28,128 

Interest expense: 
Long-term debt interest                             10,984    10,557   11,992 
Other interest                                         478       827      635 
Total interest expense                              11,462    11,384   12,627 
Net income                                       $  14,698 $  14,408 $ 15,501 
 
Earnings per share of common stock               $    2.33 $    2.44 $   2.70
Average number of common shares outstanding          6,253     5,838    5,689 
 
See accompanying notes to financial statements. 

Statement of common shareholders equity
 
 
                                             common 
                                             shares   common retained
For the years ended December 31,        outstanding    stock earnings    total 
(In thousands, except shares) 
 
Balance at December 31, 1992              5,688,754  $25,059 $ 94,515 $119,574
Net income                                                     15,501   15,501
Dividends paid:
preferred stock                                                   153      153
common stock                                                   10,923   10,923
Total dividends paid                                           11,076   11,076
Income reinvested in business                                   4,425    4,425

Balance at December 31, 1993              5,688,754   25,059   98,940  123,999
 
Net income                                                     14,408   14,408
Dividends paid: 
preferred stock                                                   153      153
common stock                                                   11,548   11,548
Total dividends paid                                           11,701   11,701
Income reinvested in business                                   2,707    2,707
Dividend reinvestment                         8,280      304        0      304
Issuance of common stock                    550,000   17,437        0   17,437

Balance at December 31, 1994              6,247,034   42,800  101,647   144,447
 
Net income                                                     14,698   14,698
Dividends paid: 
preferred stock                                                   153      153
common stock                                                   12,750   12,750
Total dividends paid                                           12,903   12,903
Income reinvested in business                                   1,795    1,795
Dividend reinvestment                         22,317     707        0      707

Balance at December 31, 1995               6,269,351 $43,507 $103,442 $146,949
 
See accompanying notes to financial statements. 

Statement of cash flows  
				 
For the years ended December 31,                    1995       1994      1993
(In thousands) 
 
Operating activities: 
Net income                                      $ 14,698   $ 14,408  $ 15,501
Adjustments to reconcile net income to  
net cash provided by operating activities: 
Depreciation                                      11,436     10,958    10,304
Deferred income taxes and investment  
tax credits, net                                   1,698      1,324    12,355
Regulatory assets and liabilities, net            (1,181)      (731)  (11,937)

Changes in operating assets and liabilities: 
Accounts receivable                               (1,936)    (2,326)      908 
Unbilled revenue                                    (314)     1,556      (804) 
Accounts payable                                   2,576        997     2,124 
Other current liabilities                          1,560       (825)   (1,338) 
Other changes, net                                 1,258        130       247
Net adjustments                                   15,097     11,083    11,859 
Net cash provided by operating activities         29,795     25,491    27,360 

Investing activities: 
Utility plant expenditures                       (27,250)   (28,275)  (28,829) 
 
Financing activities: 
Net short-term borrowings                         (7,000)    (8,000)    3,500 
Proceeds from issuance of long-term debt          20,000          0    60,000 
Proceeds from issuance of common stock               707     17,741         0 
Advances for construction                          5,368      4,980     5,024 
Refunds of advances for construction              (3,524)    (3,565)   (3,428) 
Contributions in aid of construction               3,183      3,833     3,402 
Retirements of first mortgage bonds  
including premiums                                (3,404)      (664)  (55,391) 
Dividends paid                                   (12,903)   (11,701)  (11,076) 
Net cash provided by financing activities          2,427      2,624     2,031 
Change in cash and cash equivalents                4,972       (160)      562 
Cash and cash equivalents at beginning of year     1,301      1,461       899 
Cash and cash equivalents at end of year       $   6,273  $   1,301  $  1,461 
 
Supplemental disclosures of cash flow information: 
 
Cash paid during the year for: 
Interest (net of amounts capitalized)           $ 11,050   $ 11,165   $12,763 
Income taxes                                    $  8,258   $ 10,950   $ 9,188 
 
See accompanying notes to financial statements. 

Notes to financial statements 
December 31, 1995, 1994 and 1993 
 
 
Note 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 
 
The accounting records of the Company are maintained in accordance with the
uniform system of accounts prescribed by the California Public Utilities
Commission (Commission).  Certain prior years' amounts have been reclassified,
where necessary, to conform to the current presentation. 

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. 
 
Revenue.   Revenue consists of monthly cycle customer billings for water
service at rates authorized by the Commission.  Revenue from metered accounts
includes unbilled amounts based on the estimated usage from the latest 
meter reading to the end of the accounting period.  Flat rate accounts which
are billed at the beginning of the service period are included in revenue on
a prorated basis for the portion applicable to the current accounting period.

In October 1991, the Commission issued a decision on its investigation into the
effects of the drought on water utilities which permitted the Company to
recover revenue lost through water conservation as recorded in memorandum
accounts.  In March 1994, the Commission closed all voluntary conservation
memorandum accounts.  In 1993, $2,904,000 was recorded as lost water
conservation revenue and accrued in unbilled revenue, while $2,631,000 was
recovered through customer surcharges and penalty charge transfers from
customers who had exceeded their monthly allotments.  In 1994, $32,000 was
recorded as lost water conservation revenue and accrued in unbilled revenue,
while $1,445,000 was recovered through customer surcharges and penalty charge
transfers.  As of December 31, 1994, $1,011,000 of lost water conservation
revenue remained in unbilled revenue.  In 1995, $351,000 was recovered through
customer surcharges while $163,000 was written-off as unrecoverable revenue.
As of December 31, 1995, $497,000 of lost water conservation revenue remained
in unbilled revenue.  Commission authorization to collect the unbilled revenue
is anticipated to be granted in current rate case proceedings. 
 
Utility Plant.   Utility plant is carried at original cost when first
constructed or purchased, except for certain minor units of property recorded
at estimated fair values at dates of acquisition.  Cost of depreciable plant
retired is eliminated from utility plant accounts and such costs are charged
against accumulated depreciation.  Maintenance of utility plant, other than
transportation equipment, is charged to operation expenses.  Maintenance and
depreciation of transportation equipment are charged to a clearing account
and subsequently distributed primarily to operations. Interest is capitalized
on plant expenditures during the construction period and amounted to $207,000
in 1995, $195,000 in 1994 and $141,000 in 1993. 

Intangible assets arising during the period of initial development of the
Company and those acquired as parts of water systems purchased are stated at
amounts as prescribed by the Commission.  All other intangibles have been
recorded at cost. 
 
Long-Term Debt Premium, Discount and Expense.   The discount and expense on
long-term debt is being amortized over the original lives of the related debt
issues.  Premiums paid on the early redemption of certain debt issues and 
unamortized original issue discount and expense of such issues are amortized
over the life of new debt issued in conjunction with the early redemption. 
 
Cash Equivalents.   Cash equivalents include highly liquid investments,
primarily U.S. Treasury and U.S. Government agency interest bearing securities,
stated at cost with original maturities of three months or less.  As of 
December 31, 1995 and 1994, cash equivalents were $4,659,000 and $124,000,
respectively. 
 
Depreciation.   Depreciation of utility plant for financial statement purposes
is computed on the straight-line remaining life method at rates based on the
estimated useful lives of the assets.  The provision for depreciation 
expressed as a percentage of the aggregate depreciable asset balances was
2.4% in 1995, 1994 and 1993.  For income tax purposes, the Company computes
depreciation using the accelerated methods allowed by the respective taxing 
authorities. 
 
Advances for Construction.   Advances for construction of water main extensions
are primarily refundable to depositors without interest over a 20-year or
40-year period.  Refund amounts under the 20-year contracts are based on
annual revenues from the extensions.  Unrefunded balances at the end of the
contract period are credited to Contributions in Aid of Construction and are
no longer refundable.  Refunds on contracts entered into since 1982 are 
made in equal annual amounts over 40 years.  Estimated refunds for 1996 for
all water main extension contracts are $3,800,000. 
 
Income Taxes.   The Company accounts for income taxes using the asset and
liability method.  Deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases.  Measurement of the deferred tax assets and liabilities
is at enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled.
The effect on deferred tax assets and liabilities of a change in tax 
rates is recognized in the period that includes the enactment date. 

It is anticipated that future rate action by the Commission will reflect
revenue requirements for the tax effects of temporary differences recognized
which have previously been flowed through to customers. 

The Commission has granted the Company customer rate increases to reflect the
normalization of the tax benefits of the federal accelerated methods and
available investment tax credits (ITC) for all assets placed in service 
after 1980.  ITC are deferred and amortized over the lives of the related
properties. 

Advances for Construction and Contributions in Aid of Construction received
from developers subsequent to 1986 are taxable for federal income tax
purposes, and subsequent to 1991, subject to state income tax. 
 
Earnings per Share.   Earnings per share are calculated using the weighted
average number of common shares outstanding during the year after deducting
dividend requirements on preferred stock. 
 
 
NOTE 2.  PREFERRED AND COMMON STOCK 
 
As of December 31, 1995, 380,000 shares of preferred stock were authorized.
Dividends on outstanding shares are payable quarterly at a fixed rate before
any dividends can be paid on common stock.  Preferred shares are entitled to
eight votes each with the right to cumulative votes at any elections of
directors. 

The outstanding 139,000 shares of $25 par value cumulative, 4.4% Series C,
preferred shares are not convertible to common stock.  A premium of $243,250
would be due upon voluntary liquidation of Series C.  There is no premium in
the event of an involuntary liquidation. 

The Company is authorized to issue 8,000,000 shares of no par value common
stock.  In September 1994, the Company sold 550,000 common shares in a public
offering with net proceeds of $17,437,000.  As of December 31, 1995 and 1994,
6,269,351 and 6,247,034 shares, respectively, of common stock were issued and
outstanding.  All shares of common stock are eligible to participate in the
Company's dividend reinvestment plan.  Approximately 11% of shareholders
participate in the plan.  New shares of common stock of 22,317 and 8,280 were
issued in 1995 and 1994, respectively. 
 
 
NOTE 3.  SHORT-TERM BORROWINGS 
 
As of December 31, 1995, the Company maintained a bank line of credit providing
unsecured borrowings of up to $30,000,000 at the prime lending rate or lower
rates as quoted by the bank.  The agreement does not require minimum or
specific compensating balances.  The following table represents borrowings
under the bank line of credit. 

 
                                                   Dollars in Thousands 
                                                1995     1994     1993 
 
Maximum short-term borrowings                $13,000  $21,500  $33,500 
Average amount outstanding                     5,142   13,196   11,746 
Weighted average interest rate                 7.26%     5.4%    4.31% 
Interest rate at December 31                       -    7.38%    4.38% 
 
 
NOTE 4.  LONG-TERM DEBT 
 
As of December 31, 1995 and 1994 long-term debt outstanding was: 
 
                                                       In Thousands 
                                                   1995           1994 
 
First Mortgage Bonds: 
Series J,  4.85% due 1995                      $      0   $      2,565 
Series K,  6.25% due 1996                         2,565          2,580 
Series L,  6.75% due 1997                         2,150          2,164 
Series P, 7.875% due 2002                         2,655          2,670 
Series S,  8.50% due 2003                         2,670          2,685 
Series BB, 9.48% due 2008                        17,100         17,280 
Series CC, 9.86% due 2020                        19,300         19,500 
Series DD, 8.63% due 2022                        19,700         19,800 
Series EE, 7.90% due 2023                        19,800         19,900 
Series FF, 6.95% due 2023                        19,800         19,900 
Series GG, 6.98% due 2023                        19,800         19,900 
                                                125,540        128,944 
Senior Notes: 
Series A, 7.28%  due 2025                        20,000              0 
Total long-term debt                           $145,540       $128,944 

The first mortgage bonds are held by institutional investors and secured by
substantially all of the Company's utility plant.  Aggregate maturities and
sinking fund requirements for each of the succeeding five years 1996 through
2000 are $3,197,000, $2,758,000, $620,000, $2,240,000 and $2,240,000
respectively. 

The senior notes are held by institutional investors and are unsecured and
require interest only payments until maturity. 
 
 
NOTE 5.  INCOME TAXES 
 
Income tax expense consists of the following: 
 
                                                        In Thousands 
                                                federal    state    total 
 
1995 
Current                                          $6,839   $2,729   $9,568 
Deferred                                          1,161    (879)      282 
Total                                            $8,000   $1,850   $9,850 
 
1994 
Current                                          $6,492   $2,567   $9,059 
Deferred                                            908    (367)      541 
Total                                            $7,400   $2,200   $9,600 
 
1993 
Current                                          $6,800   $2,408   $9,208 
Deferred                                          1,400      (8)    1,392 
Total                                            $8,200   $2,400  $10,600 
 
Income tax expense computed by applying the current federal tax rate of 35% to
pretax book income differs from the amount shown in the Statement of Income.
The difference is reconciled in the table below: 
 
                                                        In Thousands 
                                                   1995     1994     1993 
 
Computed expected tax expense                    $8,592   $8,401   $9,135 
Increase (reduction) in taxes due to: 
State income taxes net of federal tax benefit     1,203    1,444    1,565 
Investment tax credits                            (132)    (132)    (100) 
Other                                               187    (113)        0 
Total income tax                                 $9,850   $9,600  $10,600 
 
 
The components of deferred income tax expense in 1995, 1994 and 1993 were: 
 
                                                        In Thousands 
                                                   1995     1994     1993 
 
Depreciation                                     $3,854   $3,748   $3,858 
Developer advances and contributions             (3,455)  (3,536)  (3,951) 
Bond redemption premiums                            (75)     (75)   1,333 
Investment tax credits                              (90)     (90)     (72) 
Other                                                48      494      224 
Total deferred income tax expense                $  282   $  541   $1,392 

The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities at December 31, 1995
and 1994 are presented in the following table: 
 
                                                          In Thousands 
                                                      1995           1994 
 
Deferred tax assets: 
Developer deposits for extension  
agreements and contributions in 
aid of construction                                $42,316        $37,359 
Federal benefit of state tax deductions              3,831          3,895 
Book plant cost reduction for future  
deferred ITC amortization                            1,805          1,758 
Insurance loss provisions                              475            617 
Total deferred tax assets                           48,427         43,629 
 
Deferred tax liabilities: 
Utility plant, principally due to 
depreciation differences                            54,479         47,670 
Premium on early retirement of bonds                 1,972          2,081 
Other                                                6,032          6,323 
Total deferred tax liabilities                      62,483         56,074 
Net deferred tax liabilities                       $14,056        $12,445 
 
A valuation allowance was not required during 1995 and 1994.  Based on
historical taxable income and future taxable income projections over the
periods in which the deferred assets are deductible, management believes it
is more likely than not the Company will realize the benefits of the deductible
differences. 
 
 
NOTE 6.  EMPLOYEE BENEFIT PLANS 
 
Pension Plan.  The Company provides a qualified, defined benefit,
noncontributory, pension plan for substantially all employees.  The cost of
the plan was charged to expense and utility plant.  The Company makes annual
contributions to fund the amounts accrued for pension cost.  Plan assets are
invested in mutual funds, pooled equity, bond and short-term investment
accounts.  The data below includes the unfunded, non-qualified, supplemental
executive retirement plan. 

Net pension cost for the years ending December 31, 1995, 1994 and 1993 included
the following components: 
 
                                                      In Thousands 
                                                 1995     1994     1993
 
Service cost-benefits earned 
during the period                             $ 1,265  $ 1,333  $ 1,167 
Interest cost on projected obligation           2,360    2,154    2,153 
Actual loss (return) on plan assets            (5,817)     627   (3,672) 
Net amortization and deferral                   4,220   (2,286)   2,132 
Net pension cost                              $ 2,028  $ 1,828  $ 1,780 
 
The following table sets forth the plan's funded status and the plan's accrued
assets (liabilities) as of December 31, 1995 and 1994:  
 
                                                       In Thousands 
                                                   1995            1994 
 
Accumulated benefit obligation, including
vested benefits of	$25,218 in 1995 and
$19,824 in 1994                                $(25,974)       $(20,329) 
Projected benefit obligation                   $(37,271)       $(30,246) 
Plan assets at fair value                        33,798          27,833 
Projected benefit obligation in 
excess of plan assets                            (3,473)         (2,413) 
Unrecognized net gain                            (1,991)         (3,540) 
Prior service cost not yet recognized 
in net periodic pension cost                      3,161           3,543 
Remaining net transition obligation at 
adoption date January 1, 1987                     1,716           2,002 
Accrued pension liability recognized 
in the balance sheet                           $   (587)       $   (408) 
 
The projected long-term rate of return on plan assets used in determining
pension cost was 8.0% for the years 1995, 1994 and 1993.  A discount rate of
7.0% in 1995 and 1993, and 8.0% in 1994 and future compensation increases of
4.5% in 1995, 5.0% in 1994 and 4.75% in 1993 were used to calculate the
projected benefit obligations for the respective years. 
 
Savings Plan.   The Company sponsors a 401(k) qualified defined contribution
savings plan which allows participants to contribute up to 15% of pre-tax
compensation.  During 1995, 1994 and 1993 the Company matched fifty cents for
each dollar contributed by the employee up to a maximum Company match of 3%
of the employees' compensation.  Company contributions were $711,000,
$678,000 and $606,000 for the years 1995, 1994 and 1993, respectively. 
 
Other Postretirement Plans.   The Company provides substantially all active
employees medical, dental and vision benefits through a self-insured plan.
Employees retiring at or after age 58 with 10 or more years of service are 
offered, along with their spouses and dependents, continued participation in
the plan by a payment of a premium.  Retired employees are also provided with
a $5,000 life insurance benefit. 

The Company records the costs of postretirement benefits during the employees
years of active service.  The Commission has issued a decision which
authorizes rate recovery of tax deductible funding of postretirement benefits
and permits recording of a regulatory asset for the portion of costs that will
be recoverable in future rates. 

Net postretirement benefit cost for the years ending December 31, 1995, 1994
and 1993, included the following components: 
 
                                                         In Thousands 
                                                   1995     1994     1993 
 
Service cost benefits earned                       $131     $120     $ 85 
Interest cost on accumulated 
postretirement benefit obligation                   391      326      384 
Actual return on plan assets                        (30)      (4)       0
Net amortization of transition obligation           260      228      248 
Net periodic postretirement benefit cost           $752     $670     $717 
 
Postretirement benefit expense recorded in 1995, 1994 and 1993, was $507,000,
$481,000 and $480,000, respectively.  The remaining $671,000 which is
recoverable through future customer rates, is recorded as a regulatory 
asset.  The Company intends to make annual contributions to the plan up to
the amount deductible for tax purposes.  Plan assets are invested in a mutual
fund, short-term money market instruments and commercial paper.

The following table sets forth the plan's funded status and the plan's
accrued assets (liabilities) as of December 31, 1995 and 1994: 
 
                                                         In Thousands 
                                                      1995          1994 
 
Accumulated postretirement benefit obligation: 
Retirees                                           $(3,423)      $(2,882) 
Other fully eligible participants                     (571)         (366) 
Other active participants                           (1,942)       (1,150) 
Total                                               (5,936)       (4,398) 
Plan assets at fair value                              348           172 
Accumulated postretirement benefit 
obligation in excess of plan assets                 (5,588)       (4,226) 
Unrecognized net (gain) or loss                        697          (668) 
Remaining unrecognized transition obligation         4,220         4,468 
Net postretirement benefit liability 
included in current liabilities                    $  (671)      $  (426) 
 
For 1995 measurement purposes, a 7% annual rate of increase in the per capita
cost of covered benefits was assumed; the rate was assumed to decrease
gradually to 5% in the year 2000 and remain at that level thereafter.  The 
health care cost trend rate assumption has a significant effect on the amounts
reported.  Increasing the assumed health care cost trend rates by one
percentage point in each year would increase the accumulated postretirement
benefit obligation as of December 31, 1995, by $822,000 and the aggregate of
the service and interest cost components of the net periodic postretirement
benefit cost for the year ended December 31, 1995, by $81,000. 

The discount rate used in determining the accumulated postretirement benefit
obligation was 7% at December 31, 1995, 8% at December 31, 1994 and 7% at
December 31, 1993.  The long-term rate of return on plan assets was 8% for
1995, 1994 and 1993. 
 
 
NOTE 7.  FAIR VALUE OF FINANCIAL INSTRUMENTS 
 
For those financial instruments for which it is practicable to estimate a fair
value the following methods and assumptions were used to estimate the fair
value. 
 
Cash Equivalents.  The carrying amount of cash equivalents approximates fair
value because of the short-term maturity of the instruments. 
 
Long-term Debt.  The fair value of the Company's long-term debt is estimated
at $162,427,000 as of December 31, 1995, and $126,584,000 as of December 31,
1994, using a discounted cash flow analysis, based on the current rates 
available to the Company for debt of similar maturities. 
 
Advances for Construction.  The fair value of advances for construction
contracts is estimated at $21,000,000 as of December 31, 1995 and 1994, based
on data provided by brokers. 
 
 
NOTE 8.  QUARTERLY FINANCIAL AND COMMON STOCK MARKET DATA (Unaudited) 
 
The Company's common stock has traded on the New York Stock Exchange since
April 8, 1994 under the symbol CWT.  Prior to April 8, 1994, the common stock
was traded in the over-the-counter market and quoted in the NASDAQ National
Market System under the symbol CWTR.  There were approximately 6,000 holders
of common stock at December 31, 1995.  Quarterly dividends have been paid on
common stock for 204 consecutive quarters and the quarterly rate has been
increased during each year since 1968.  The 1995 and 1994 quarterly range of
common stock market prices was supplied by The New York Stock Exchange
Composite Tape since April 8, 1994, and by NASDAQ for earlier periods. 
 
1995 

(In thousands, except per share amounts)      first  second   third  fourth 
 
Operating revenue                           $30,416 $40,371 $53,276 $41,023 
Net operating income                          3,685   6,161   9,096   6,450 
Net income                                    1,039   3,467   6,472   3,720 
Earnings per share                              .16     .55    1.03     .59 

Common stock market price range: 
High                                         32-3/8  32-5/8  32-7/8  35-1/4 
Low                                          29-5/8  29-3/4  29-5/8  32-3/8 
Dividends paid                                  .51     .51     .51     .51 
 
1994 
                                              first  second   third  fourth 
 
Operating revenue                           $30,579 $40,147 $50,303 $36,242 
Net operating income                          4,164   6,892   8,730   5,719 
Net income                                    1,395   4,070   5,857   3,086 
Earnings per share                              .24     .71    1.02     .49 

Common stock market price range: 
High                                             41  36-3/4      36  33-1/8 
Low                                          34-1/4  33-3/4  32-7/8  29-3/8 
Dividends paid                              .49-1/2 .49-1/2 .49-1/2 .49-1/2