EXHIBIT 10.26

Bank of America [Logo}

                        AMENDMENT NO. 2 TO LOAN AGREEMENT

                            AND ASSUMPTION AGREEMENT

         This Amendment No. 2 and Assumption  Agreement (the "Amendment")  dated
as of February 18, 2004 is among Bank of America, N.A. (the "Bank"),  California
Water Service Group ("Borrower 1"), CWS Utility Services  ("Borrower 2") and New
Mexico Water Service Company ("Borrower 3") ("Initial Borrowers") and Washington
Water Service  Company  ("Borrower  4") and Hawaii Water Service  Company,  Inc.
("Borrower 5") ("New Borrowers").  (Borrower 1, Borrower 2, Borrower 3, Borrower
4 and Borrower 5 are sometimes  referred to  collectively as the "Borrowers" and
individually as the "Borrower").

         1. RECITALS

         A. The Bank and Initial  Borrowers entered into a certain Business Loan
Agreement dated as of February 28, 2003 (together with any previous  amendments,
the "Agreement").

         B.  Initial  Borrowers,  New  Borrowers  and the Bank  desire  to amend
certain terms and provisions of the Agreement as more  specifically  hereinafter
set forth.

         C. New Borrowers  desire to be parties to and to assume the obligations
under the Agreement jointly and severally with Initial Borrowers.

         2. AGREEMENT

         1.  Definitions.  Capitalized  terms  used  but  not  defined  in  this
Amendment shall have the meaning given to them in the Agreement.

         2. Assumption.  Borrower 4 and Borrower 5 unconditionally,  jointly and
severally  assume each and every  obligation  under the Agreement,  and by their
respective signatures hereto they become parties to the Agreement.

         3. Amendments. The Agreement is hereby amended as follows:

              3.1     Throughout the Agreement, Borrower 1, Borrower 2, Borrower
                      3,  Borrower 4 and Borrower 5, are  sometimes  referred to
                      collectively as the "Borrower."

              3.2     Paragraph  7.3 of the  Agreement is amended to read in its
                      entirety as follows:

                  "7.3     Reduction  of Debt  Period.  To reduce  the amount of
                           advances outstanding under this Agreement to not more
                           than Five Million Dollars  ($5,000,000)  for a period
                           of at  least  thirty  (30)  consecutive  days in each
                           Line-Year.   `Line-Year'  means  the  period  between
                           January  1,  2004 and  December  31,  2004,  and each
                           subsequent one-year period (if any). For the purposes
                           of this paragraph `advances' does not include undrawn
                           amounts of outstanding letters of credit."

              3.3     In Paragraph 7.16 of the Agreement, the date "February 28,
                      2003" is added in the space provided.

<PAGE>

         4.  Representations  and  Warranties.  When  the  Borrowers  sign  this
Amendment,  each Borrower represents and warrants to the Bank that: (a) there is
no event  which is, or with  notice or lapse of time or both would be, a default
under the  Agreement  except those events,  if any, that have been  disclosed in
writing to the Bank or waived in writing  by the Bank,  (b) the  representations
and  warranties in the Agreement are true as of the date of this Amendment as if
made on the date of this  Amendment,  (c) this  Amendment does not conflict with
any law,  agreement,  or obligation by which any Borrower is bound, and (d) this
Amendment is within each Borrower's powers,  has been duly authorized,  and does
not conflict with any of its organizational papers.

         5. Conditions. This Amendment will be effective when the Bank receives,
in form and  content  acceptable  to the  Bank,  evidence  that  the  execution,
delivery and  performance by Borrower 4 and Borrower 5 of this Amendment and any
instrument or agreement required under this Amendment have been duly authorized.

         6. Effect of Amendment.  Except as provided in this  Amendment,  all of
the terms and conditions of the Agreement shall remain in full force and effect.

         7. Counterparts.  This Amendment may be executed in counterparts,  each
of which when so executed shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument.

         8. FINAL AGREEMENT.  BY SIGNING THIS DOCUMENT EACH PARTY REPRESENTS AND
AGREES THAT: (A) THIS DOCUMENT  REPRESENTS THE FINAL  AGREEMENT  BETWEEN PARTIES
WITH RESPECT TO THE SUBJECT  MATTER  HEREOF,  (B) THIS DOCUMENT  SUPERSEDES  ANY
COMMITMENT  LETTER,  TERM SHEET OR OTHER WRITTEN OUTLINE OF TERMS AND CONDITIONS
RELATING TO THE SUBJECT MATTER HEREOF, UNLESS SUCH COMMITMENT LETTER, TERM SHEET
OR OTHER  WRITTEN  OUTLINE OF TERMS AND  CONDITIONS  EXPRESSLY  PROVIDES  TO THE
CONTRARY,  (C) THERE ARE NO UNWRITTEN ORAL AGREEMENTS  BETWEEN THE PARTIES,  AND
(D)  THIS  DOCUMENT  MAY  NOT  BE   CONTRADICTED   BY  EVIDENCE  OF  ANY  PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OR UNDERSTANDINGS OF THE PARTIES.

         This  Amendment  is executed as of the date stated at the  beginning of
this Amendment.

Borrower:                                                          Bank:

<TABLE>
<S>                                                                <C>
California Water Service Group (Initial Borrower)                  Bank of America, N.A.


By     /s/ Richard D. Nye                                          By  /s/ John C. Plecque
-------------------------------------------------------------      -----------------------------------------------------------
Richard D. Nye, Vice President, Chief Financial Officer and        John C. Plecque, Senior Vice President
Treasurer


                                                                   By  /s/ Chris P. Giannotti
                                                                   -----------------------------------------------------------
                                                                   Chris P. Giannotti, Senior Vice President
</TABLE>

<PAGE>

Borrower:

CWS Utility Services (Initial Borrower)


By /s/ Richard D. Nye
-------------------------------------------------------------
Richard D. Nye, Vice President, Chief Financial Officer and
Treasurer


Borrower:

New Mexico Water Service Company (Initial Borrower)


By /s/ Richard D. Nye
-------------------------------------------------------------
Richard D. Nye, Vice President, Chief Financial Officer and
Treasurer


Borrower:

Washington Water Service Company (New Borrower)


By /s/ Richard D. Nye
-------------------------------------------------------------
Richard D. Nye, Vice President, Chief Financial Officer and
Treasurer


Borrower:

Hawaii Water Service Company, Inc. (New Borrower)


By /s/ Richard D. Nye
-------------------------------------------------------------
Richard D. Nye, Vice President, Chief Financial Officer and
Treasurer