California Water Profit Rises as Rate Decision Lifts Revenue
Second-quarter revenue climbed 16.5% to $308.6 million as regulatory recovery accelerated.
California Water Service Group (CWT), the regulated water utility, reported a 33.9% increase in second-quarter profit after California regulators finalized a rate case that had weighed on first-quarter results. Net income rose to $56.5 million from $42.2 million a year earlier.
The decision marked an inflection from the first quarter, when the pending case kept the company from recognizing rate benefits and net income fell to $4.0 million. Second-quarter results included $9.2 million of rate-case revenue attributable to that earlier period, helping reported revenue rise 43.8% sequentially.
Revenue increased $43.6 million from a year earlier, accelerating from 5.2% growth in the first quarter. Diluted earnings rose to $0.93 a share from $0.71, compared with $0.07 a share in the first quarter. For the first half, revenue advanced 11.6% to $523.2 million and earnings increased to $1.01 a share from $0.93.
Rate increases and regulatory mechanisms drove much of the quarter's growth. Interim rate relief and newly implemented rates contributed $15.3 million, other rate changes and regulatory mechanisms added $15.0 million, and deferred prior-year regulatory revenue supplied another $9.3 million. Customer-consumption revenue added $4.1 million after lower usage reduced revenue in each of the previous two quarters, including during extremely wet weather late last year.
The operating spread widened to 23.0% of revenue from 19.6% a year earlier as depreciation and amortization declined $6.5 million under the final rate decision's lower depreciation rates. Higher wholesale water rates pushed production costs up $6.3 million, while other operating expenses increased $13.4 million, partly reflecting costs tied to deferred regulatory revenue and conservation programs.
The final rate-case decision authorized a $90.5 million company-wide revenue increase for 2026, followed by increases of $43.2 million in 2027 and $48.9 million in 2028. It also established firm authorization for about $1.45 billion of infrastructure investment through 2027 and a mechanism intended to reduce exposure to customer-usage volatility. California Water maintains its 2026 infrastructure-investment forecast of up to $627 million after spending a record $276.4 million in the first half.
California Water raised $88.0 million through its at-the-market equity program during the quarter and ended June with about $395 million of available credit. The company also advanced integration planning for its $218 million acquisition of Nexus Water Group's regulated utility systems, which would add about 36,000 customer-equivalent residential units and $109 million of rate base if the transaction closes around year-end as targeted.