Good day, everyone, and welcome the California Water Service Group’s Third Quarter 2014 Results Conference Call. Today’s call is being recorded. At this time, I would like to turn the call over to Thomas Smegal. Please go ahead.

Thank you, Anne. Welcome everyone to our third quarter 2014 earnings call for California Water Service Group and hopefully you can hear Marty and me clearly today, because we were yelling at our television last night, or at the Giants’ win in the seventh game of the World Series, very exciting for us in the bay area here. So with me today is Martin Kropelnicki, he is our President and CEO. And a replay of today's proceedings will be available beginning today October 30, 2014, through December 30, 2014, at 1-888-203-1112 or at 1-719-457-0820, with a replay pass code of 1202555. Before beginning to look at this quarter’s results, we would like to take a few moments to cover forward-looking statements. During the course of the call, the company may make certain forward-looking statements. Because these statements deal with future events, they are subject to various risks and uncertainties, and actual results could differ materially from the company's current expectations. Because of this, the company strongly advices all current shareholders, as well as interested parties to carefully read and understand the company's disclosures on risks and uncertainties found in our Form 10-K, 10-Q and other reports filed from time-to-time with the Securities and Exchange Commission. Now, let's go ahead and look at this quarter’s forward-looking statements. So I am going to cover first the financial results on the income statement side and for the third quarter our revenue was $191.2 million for the quarter, that’s up 3.7% or $6.8 million, primary drivers there where the General Rate Case decision of August 14, 2014. We did include the recognition of $21.6 million of interim rate revenue, as well as $15 million decrease in revenue due to the lower quantity revenue in adopted WRAM mechanism for the interim period. Overall administrative and…

Thanks, Tom. Good morning, everyone, thank you for joining us today. I got four things I’d like to cover. One, just a quick recap on the General Rate Case and some of the key highlights of the rate case that we have – that’ll affect the company going forward. Two, giving an update on some of the officer changes that we’ve had internally. Three, giving update on the drought. And then four, talk about our priorities of the rest of this year and the first six months of 2015. Starting off, looking at the General Rate Case, as we talked about it on the last earnings call, the proposed decision came on, on July 21 and an unprecedented move by the California Public Utilities Commission. It was approved three weeks later on August 14. We quickly filed for our new tariffs and the new rates went into effect for our customers on August 28. Shortly thereafter we filed another advise letter that allowed us to start collecting the balance of the interim rates memorandum account. These balances will be collected over 12 months, 24 months, and 36 months depending on the balance with these districts. So part of the catch-up that was booked in the quarter was the revenue was associated with the interim rates balancing account or memorandum accounts, excuse me, and now we’ll be collecting the cash over these 12 months, 24 months, 36 months. A couple of the key highlights that I want to point out that were included in the 2012 General Rate Case. One, is the continuation of the companies balancing account. Two, is the new healthcare balancing account that covers 85% of the changes in healthcare cost. Three, we have a new sales reconciliation mechanism that essentially if the adopted sales versus the actual…

Thanks Marty. Now I just like to cover a couple of highlights on the balance sheet. Our plants balance at another quarter, utility plant grew to $1.561 billion as of September 30. Work in progress decreased to $121 million at this time. And company funded capital investments through the first nine months of the year were $80 million. And the company does still plan to meet its investment target of $110 million to $130 million for the calendar year. For cash and borrowing, we currently have $29.3 million in cash and $61.7 million outstanding on our revolving credit facilities. That’s also as of the end of the quarter. Our WRAM MCBA balance is declined to $42.7 million, primarily due to booking the new rate case in the quarter and I mentioned earlier the water sales were down on a year-to-date basis. The great news about the rate case is that when we look at it compared to the new adopted figures. We’re currently at 101% of what those new adopted figures are. So really good news out of the rate cases, that the sales forecasts to now seems to be right on. Next, I want to touch on one aspect of the rate case that we haven’t covered yet. And that is a rate design issue and its potential effect on the seasonality of our revenue. The General Rate Case decision adopted lower sales volumes as we talked for nearly all districts and it adjust the proportion of our revenue, which comes from fixed monthly charges versus quantity rates. Prior to the decision we collected 25% of our revenue from fixed charges with the newly adopted rate design, it’s designed to collect 30% of our revenue from fixed charges. And that’s in line with best practices from the California Urban Water Conservation Council. Because of the shift in revenue to the fixed monthly charges the company’s revenue streams will be somewhat less seasonal, meaning that more revenue will be collected in the cooler first and fourth quarters where we’re relying more on that service charge revenue. Obviously, adopted revenue is only one factor in the company’s results, but it’s worth noting as we accept the effect of the rate case through third quarter. So that’s the end of our presentation. And Anne, we’re now happy to take questions.

Thank you very much. (Operator Instructions) We’ll take our first question from Spencer Joyce with Hilliard Lyons. Spencer Joyce – Hilliard Lyons: Hey, good morning, guys. And kudos for you all making it into our yesterday’s Giants’ win, pretty exciting game.

Thanks, Spencer. Good morning. Spencer Joyce – Hilliard Lyons: Yes, listen here. Let’s talk about the rate case a little bit first and specifically some of that accrued benefit you all are looking to recoup over kind of the one, two, or three year timeframe. Can you give us any kind of breakdown over what percentage of either the total impact or percentage of jurisdictions maybe realized over the first year or perhaps maybe how much is going to extend over that full three year time frame there, I just to help us model that a little bit?

Let me try to take a crack at that. We have modeled out and this is based, of course, on the adopted revenue curve and the surcharges of volume metric. So they will be flowing to us based upon how our customers do use water. We would expect most of the collection to be occurring in 2015. Some of it will occur toward the end of this year and some of it will tail-off into 2016, but primarily the cash will come in 2015. And remember we’ve booked this for revenue purposes already and we’re really just talking about the cash flow there. Spencer Joyce – Hilliard Lyons: Okay, got you. And then, you mentioned it’s slightly altered D&A structure, it’s one of kind of the line item comments. Are these expenses at a more accurate run rate or kind of base amount to kind of grow off would be the $14.6 million we saw this quarter that wasn’t an anomaly to the downside there?

Spencer Joyce – Hilliard Lyons: Sorry, I was talking about the depreciation. Not…

Oh, yes. That’s all right, it took me second. The depreciation rate did decline in the rate case. So when you see the quarter, I think that was your question. Spencer Joyce – Hilliard Lyons: Sorry.

The $14.6 million for the quarter, no, that’s okay. We did – one of the difficulties with the rate case delay was that we had eight months at old depreciation rates and that was driving our depreciation expense higher than they had been in the prior year. Spencer Joyce – Hilliard Lyons: Okay.

Go a forward basis for the last quarter I would look at depreciation and amortization to be very similar probably to the fourth quarter of the prior year, given the increase in capital that were depreciating, but the reduction in the rates. So that would be the way that I’ll look at that. Spencer Joyce – Hilliard Lyons:

What is showing up on our radar screen now is in the Central Valley and some of the cities that we serve, we’re seeing some of the well levels decline. And that’s not the case throughout the service territory, but it is the case where we have service territories that pump up against agriculture. And so what we’re watching at and the concern in California overall – there is two concerns. One, with the farmers being cutoff, only get the 5% allocation from the state water supply, they’re punching holes in the ground, they’re sucking water out of the ground and that seems to affecting the water tables. And we have a lot of water from the Sacramento River that goes out under the Golden Gate Bridge everyday versus going to the farmers in the Valley. So my (inaudible) together and we’re getting much more keenly focused, the association that we belong to CWA, which is the California Water Association has been very involved in Sacramento, what’s going on. And I think the big thing to watch now in the short-term is two things: one, proposition one and proposition two next week if it passes; and then two, these water tables around the cities that we provide water to and serve that pump up against the rural ag districts. Spencer Joyce – Hilliard Lyons: Okay. Fantastic color there, thanks. One more short one for me and I’ll hop back in line. You mentioned that roughly 95% or so the capital budget was laid out for the rate case that we’ll be filing middle of next year. My question kind of piggybacking of the drought conversation is, is there any chance for you all to circle back to that capital budget and perhaps add some projects that would – that’d be drought oriented either system redundancy or additional wells or interconnections there. I guess simplistically is there any chance for that number that you’re holding in onto ratchet a bit higher?

That’s also a very good question. I would say, we haven’t changed our planning activities, because I think we’ve always done a very good job at water supply planning, maintaining, and growing the infrastructure. So I don’t think we change it from my planning standpoint. One other things we try to focus on is really where we can spend capital dollars to bring the cost of water for customers and so in areas like in Southern California where we had an adjudicated base in, where we haven’t historically pumped all our water rights. And purchased water cost from the wholesalers continue to rise. It makes sense for us to spend the more money to get the property, to get the well on the ground, to pump more of our water rights. So things that we can do, that reduce the bill to customer but this – our stockholder gets the investment capital are very, very high on our list. Spencer Joyce – Hilliard Lyons: Okay, point well taken. Thanks, guys. Nice quarter.

Thanks.

Thanks, Spencer.

(Operator Instructions) We’ll take our next question from Jon Reeder from Wells Fargo. Jonathan Reeder – Wells Fargo: Hey, good morning, gentlemen. If you could – I kind of hopped on a little late, but what’s your CapEx year-to-date? I know you said you still expect to be in the range for the full-year.

Hi, Jonathan. The CapEx year-to-date is $80 million. Jonathan Reeder – Wells Fargo: Year-to-date $80 million.

$80 million, and the target is $110 million to $130 million. Jonathan Reeder – Wells Fargo: Okay, what’s the target range for 2015?

We haven’t set it yet, Jonathan, but in part of my dialogue, I shared – we’ve got get quicker at deploying capital. I mean if you – our budget this year between $110 million to $130 million and if you look at what we got approved in the rate case that number should be $140 million to $160 million. And so, we’re spending a lot of time internally and what’s been great about having Paul Townsley overseeing engineering is, he is also our rates guy. So he’s been digging into the capital planning process from the engineering side also putting the rate case together. So I think the challenge for us is, is how do we get at a sustainable run rate above $130 million, say $150 million should be our target in the outbound years, because I’ll tell you there is no shortage of places to spend capital when you have 6,000 miles of (inaudible) you maintain in the middle of the drought and keeping the wells fine-tuned and the water production up and trying to do everything you can to try to minimize the expenses for the customer. So we certainly have challenges there but I think it’s a good challenge, I think we have the capital to spend. We just got to think about how we deploy that capital a little bit differently and come up with a faster way to do it. Jonathan Reeder – Wells Fargo: Okay. So if I heard you correctly. I mean from our planning purposes, we should think maybe around $150 million mark would be a good target for next year?

Yes, and we’re not done with the planning yet. We are 95%, so what happens is we accumulate all the projects, and we bring operations and engineering together, and then we slug it out. We justify that each and every dollar of capital, because that’s what we got to do in the rate case when we file it. The next round will be paring our budget down, because that we can’t get all the capital that we needed in the rate case and focusing on the priorities and what we’ll do at the year-end conference call is, we’ll certainly give what the guidance is for capital for 2015. But yes, I mean the base assumption is we have to get more capital on the ground faster. Jonathan Reeder – Wells Fargo: Okay, and if you were spending that $150 million at that level, with your depreciation, what kind of rate base growth does that translate into.

Oh, I haven’t backed into that, yet. I would bet it’s probably 10% to 12%, Tom?

Yes, so if it’s – so if depreciation is running around $60 million for the year, you can do that quick math there, so I don’t have the percentage, if I have, I’ll let you know the percentages, Jonathan. Jonathan Reeder – Wells Fargo: Okay. And then lastly, with issues at the CPUC commissioner changes, the ex parte communication issues, stuff like that, do you anticipate any impacts, I guess, on your regulatory treatment now or perhaps as we look towards your upcoming filings.

I don’t think so, I mean, as you know, Cal Water tries to wear a white hat with the commission and always put all our cards on the table. And I think there is a good amount of respect on both sides of the table, when we work on our rate case. So we never had any of the problems that Peeteni [ph] had. In fact, I just reviewed this with our board yesterday. How do we know that, that we don’t have any issues like Peeteni. And we tightly control the ex parte process through Paul and his team. Jonathan Reeder – Wells Fargo: Have any candidates for the new commissioner spot, not for president, but the actual – this new commissioner spot have any candidates been quoted.

No, not that I’ve seen, I think with the election a week away, everyone is kind of focused on that. I think after the election is when you’ll start to see names start to fly around, but Governor Brown is pretty methodical. He has very good staff and I would be very confident to think that he’s thinking through who would be the right commissioner, especially under these circumstances and coming out of the issues with Peeteni and the commission. He is going to be pretty methodical about who he put into that role. Jonathan Reeder – Wells Fargo: Okay. I mean would your expectations be that someone’s appointed before end of the year to kind of get senate approval as quickly as possible in 2015 or…?

Jonathan, the expectation, the last five or six commissioners that have been appointed, they get appointed without approval and they can sit for a year before they’re approved by the senate. So typically what will be done is probably in middle of December, we’ll get an announcement of a new candidate. They won’t schedule senate hearings for them for a period of time. Jonathan Reeder – Wells Fargo: Okay, but the announcement you think probably would be before the year end?

I would suspect they’re not going to leave a gap there especially because of the president of the commission that there will be an announcement before Peevey’s term expires. Jonathan Reeder – Wells Fargo: Okay. Great. Thanks so much for the additional color. I appreciate it.

Thanks, Jonathan.

Thanks, Jonathan.

(Operator Instructions) We’ll take a follow-up from Spencer Joyce with Hilliard Lyons. Spencer Joyce – Hilliard Lyons: Hey, good morning guys. Just one quick follow-up here, I have in my notes that we adjusted looks like about $0.08 to $0.09 out of EPS last year due to a tax adjustment. Is there any of the tax benefit this year that we should maybe be axing out a, perhaps a one-time item.

It is a much smaller amount this – third quarter of this year. And I want to say that – I want to say that it’s $4.8 million year-to-date and so taxes that’s substantially down from the prior year. Spencer Joyce – Hilliard Lyons: Okay, okay, yes. I think that’s on the ones I was thinking.

Okay. Spencer Joyce – Hilliard Lyons: Okay. Thanks guys.

Thank you.

Thank you.

And at this time we have no further questions in the phone queue.

Okay, well, Anne, I think you very much. I wanted to thank everybody for their continued interest in California Water Service Group. And Marty and I look forward to talking with you again during our year-end conference call in February. Thank you all very much.

Thanks, everyone. Bye, bye.

This does conclude today’s conference. We thank you for your participation. Thank you for calling.