California Water Service Q3 2026 Earnings Rise as Capital Spending Reaches Record

California Water Service Group (NYSE: CWT) reported higher third-quarter revenue, net income and diluted earnings per share, supported by customer rate changes, regulatory cost recoveries and new customers. The water utility also recorded $148.3 million of quarterly capital investment and said it expects to close its Nevada and Oregon acquisitions before the end of 2026.

Operating revenue increased to $332.2 million from $311.2 million in the third quarter of 2025. Net income rose to $65.4 million from $61.2 million, while diluted EPS reached $1.05, compared with $1.03 a year earlier.

The company attributed a $0.28-per-share benefit to customer rate changes, new customers and other items. Approval of its Drought Recovery Memorandum Account added $0.05 per share, and regulatory approval of memorandum-account cost recovery contributed another $0.06.

Those gains were partly offset by lower customer consumption, which reduced EPS by $0.06, and higher water-conservation program expenses, which cut EPS by $0.04. Changes in the effective income tax rate and losses on non-qualified benefit-plan investments each reduced EPS by $0.06, while other items had a $0.15 negative effect.

For the first nine months of 2026, operating revenue rose to $855.3 million from $780.2 million in the comparable 2025 period. Net income increased to $125.9 million from $116.7 million, and diluted EPS advanced to $2.07 from $1.96.

Capital spending and regulatory activity

California Water Service Group invested a record $148.3 million in infrastructure during the quarter, compared with $34.7 million of depreciation. Year-to-date capital expenditures totaled $424.8 million, versus depreciation of $104.2 million.

The company estimates capital spending of $627 million in 2026, $667 million in 2027 and $700 million in 2028. Those figures are based on amounts included in the 2024 California General Rate Case decision and estimates for California and the company’s other states. They remain subject to regulatory review and exclude anticipated investment in the Nevada and Oregon systems.

Estimated rate base is projected to increase from $2.74 billion in 2026 to $3.15 billion in 2027 and more than $3.45 billion in 2028, also excluding the planned Nevada and Oregon investments and subject to regulatory approval.

Recent regulatory decisions included a $4.1 million revenue increase in Washington effective Oct. 1, 2026, and a $1.9 million increase for the Kapalua systems in Hawaii effective Oct. 21. The California Public Utilities Commission also approved use of the advice-letter process for $113.1 million of capital costs tied to certain PFAS projects expected to be completed in 2027 and 2028, along with recovery of $2.5 million in previously incurred expenses.

The company projects total investment of $228 million for its PFAS regulatory-compliance program in California, New Mexico and Washington. It invested $23.3 million in treatment and well-replacement projects during the first nine months of 2026. Sixty-five projects are planned, including eight in the grant-funding process, and 18 of 44 California sites are under construction. Net recoveries from class-action litigation totaled $59.4 million through the presentation date.

Acquisitions and financing

Change-of-control applications for the planned Nevada and Oregon acquisitions have been approved, and management said integration planning remains on schedule and within budget. The transactions are expected to add about 35,600 equivalent residential connections and expand the company into two additional Western states. Following completion, approximately 20% of total customers are expected to be located outside California, and rate base outside California, excluding BVRT, is expected to increase by about 40%.

For the BVRT joint venture, a consolidated rate case has been remanded to the commission for approval, while interim rates remain in effect. The change-of-control filing was deemed complete, with approval and closing targeted for early 2027. New connections increased 12% through the third quarter.

California Water Service Group said it believes it has met its 2026 financing requirements. During the quarter, it generated $49.8 million of net proceeds through its at-the-market equity program and entered forward-sale agreements covering another 1.6 million shares, with estimated proceeds of $77.8 million as of Sept. 30. The company also issued $125 million of unsecured long-term debt, while its California utility issued $150 million of long-term first-mortgage bonds.

As of Sept. 30, the company had about $425 million available under credit facilities, $45.1 million of unrestricted cash and $45.8 million of restricted cash. The facilities total $600 million, can be expanded to $800 million and mature in March 2028.

The board declared a quarterly dividend of $0.335 per share, its 327th consecutive quarterly dividend. The indicated annual dividend of $1.34 per share is 8.1% above the 2025 total and marks the company’s 59th year of dividend growth.

The outlook remains subject to regulatory approvals, the timing and completion of acquisitions and financing transactions, and the company’s ability to recover costs. Other disclosed uncertainties include PFAS requirements, water availability, customer consumption, inflation and interest rates, cybersecurity threats, power interruptions, and weather-related events such as wildfires, landslides and the forecast El Niño conditions.