Good day, and welcome to the California Water Service Group Fourth Quarter and Year End 2014 Results. Today’s conference is being recorded. At this time, I would like to turn the conference over to Thomas Smegal, Vice President, Chief Financial Officer. Please go ahead, Sir.

Thank you, Marr. Welcome everyone to the fourth quarter and year end 2014 earnings call for California Water Service Group. With me today is Martin Kropelnicki, our President and CEO. A replay of today's proceedings will be available beginning today February 26, 2015, through April 26, 2015, at 1-888-203-1112 or at 1-719-457-0820, with a replay passcode of 6105137. Before looking 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, Form 10-Q and other reports filed from time-to-time with the Securities and Exchange Commission. Now, let's look at the quarterly and year end results. So I'm going to go through the income statement and then turn it over to Martin for some commentary. For the fourth quarter our revenue was $137.4 million, that’s up 2.8% or $3.7 million. Our production cost for the quarter was $49.6 million, that's down 8.2% or $4.5 million compared to the year prior. The total water production for the company was down 13.4%, resulting from the company's conservation program and customer awareness regarding the California drought. Our production mix for the quarter, our well production within the quarter was 46.8% of total production while purchased water represented 49.4%, and surplus water accounted for the remaining 3.8%. For administrative and general expenses, we expended $24.7 million for the quarter, that's down 1.1% or $0.3 million, primarily driven by pension…

Thanks, Tom and good morning, everyone, there are five areas that I want to cover this morning in my commentary. One, talk about our 2014 results and what were the main drivers for my perspective behind our success; two, take a few minutes to talk about our 2015 business plan as well as recent rate increases that took place or starting to take place from the end of December through the first quarter. And then what we'll be focusing on during 2015 as well as given the continued drought. Three, briefly discuss few recent projects that we have underway, that have been in the media, primarily Apple project and the Chromium-6 project in the State. To talk about some of the changes after CPUC, in particularly the new Head of the CPUC that was appointed on December 23 by Governor, Jerry Brown. And then five, wrap up by just making a few introductions and comments about some of the new officers we have at the company that we announced at the end of the year. First talking about our earnings, overall we had a strong finish where both the fourth quarter and look forward to the full year of 2014. And looking at it there are really four main drivers for our strong performance during the quarter and during the year. One, first and foremost, the largest item being the 2012 general rate case, we received our decision from the commission, it was approved on August 14 of 2014, and that really allowed us to do two things; one, we're able to quickly adopt to new tier of separate rider rate relief for all of our districts in California; and two, we were able to book the retroactive portion of the rate increase in the third quarter that covered the…

Great, thanks Marty, I'll just complete our presentation by talking a little bit about the balance sheet, just some highlights, our utility plant grew to $1.59 billion as of December 31, our work in progress decreased to $90 million, and our capital investments as Marty mentioned were $132 million for the year. On cash, we had $19.5 million in cash at the end of the year and $79.1 million outstanding on our revolving credit facilities at the same time. And the WRAM MCBA balance stayed relatively flat for the year, increased just a little bit to $45.2 million. So that is the end of our presentation and we are now happy to take questions.

[Operator Instructions]. And we go to our first question from Spencer Joyce at Hilliard Lyons.

First question I want to go back to capital budget and the step up in revenue allowance for this year. I know you all noted that 2015 will only get about 5 million of the revenue step up where potentially we could have seen a little bit more than and my question is if we could potentially see a little higher bump up in '16 to recoup a little bit of that in '15 based on perhaps how much capital you might be able to get into the ground during this year.

The regulatory mechanism at the commission wouldn’t allow us to back but what we would see I expect is a much greater percentage of the 2016 step. So with that step being the potential for about 10 million, I would hope if we continue our CapEx through the next couple of quarters that we will see us reaching much closer to that 10 million for '16.

Also was assuming we fall a little short of the 449 million authorization from this rate case, did you all identify that early enough to make some adjustments for the new proposed capital budget that you will be filing in July of this year?

Washington, New Mexico and Hawaii are historically -- they have spend capital to get it and California it's a perspective rate. So all the capital gets approved as part of the process except the advice letter projects and once those are completed we file to get those worked into rates. So capital projects are complex, it's not uncommon that some of these projects take 2 or 3 years to finish up. So part of the rate case process when we go in with the new capital program is we have to reconcile what's and old and outstanding from the previous program that’s in process to what are the new products and provide justifications for all the new projects. So we finished our capital planning last year for the rate case, we’re going through refinement process and we’re tweaking that. As I said in my comments we don’t see that capital number going down anytime soon, it's going to continue we seem to go up as we make necessary enhancements to our infrastructure and then when the projects are approved and we’re working on them, we will get them done. So there will be a lead lag effect on that. It's not perfect typically it gets caught up in the next rate case.

Totally switching gears, I want to talk about the tax rate a little bit and I know we have talked about this a time or two in the past but several years ago it seemed like we were talking about a potential special item or two but at this point now you won't have three full years kind of behind this a low 30% effective rate or so. Are you pretty comfortable at this point that the low 30s will remain kind of in effect on a go forward basis and we’re not going to see a jump up from 30 to 39 or 40 that could really drive some delta to our estimates.

So we had a three year period where we were doing the result of our tax planning was a lot of look back and so for instance on the repairs deduction we were looking back to 1986 for plant, and making the adjustment for the tax repairs regulation. On a go forward basis it's really related to how much capital investment in qualifying facilities, qualifying for the repairs deduction that we have on a go forward basis. And so we do look at that. We estimate that in the last year we had about 2.4 million of the tax benefit coming from this new plant and equipment and so whether that’s a good number, whether we can raise that number going forward with a higher capital budget. Remember this repairs deduction is related to mains and services and linear assets of the utility. So it's really going to be dependent on our capital spending and completing those projects.

And that’s exactly when Spencer we talk about the relationship between the capital program long term planning and the rate base because we think you’re right, we have basically being able to help improve the bottom-line by doing more effective tax planning and so our corporate controller is very well versed in that area, we have added some resources to that staff and so we will continue to look for ways to optimize the company’s performance using tax strategy.

[Operator Instructions]. We will move on to Jonathan Reeder at Wells Fargo.

Marty, I don’t know if you can but can you try to breakdown the $0.12 improvement in Q4 like how much is attributable to the GRC to the operating cost savings, interest savings etcetera?

That’s a long, complicated answer Jonathan, and a lot of tat detail will be find in 10K that will get filed today. But you will see on the A&G lines, you know A&G has been better managed, it's been more efficient, we have picked up some ground on the tax line. I think what's complicated when you go back and look at '14 you did have a onetime pickup when we booked the interim rates memorandum account that was booked in Q3, that was approximately $6 million to $7 million. And then if you recall on the third quarter conference call, we talked about the fact that you had a change is happening between a fix charged and the quantity charge and so we pushed about 5% more into the fixed charge and so one of the things you’ve seen in the fourth quarter is I would estimate about 5 million, more of the fixed charge that’s being picking out of the quantity charge and picked up in the fixed. That certainly with consumption going down our [Technical Difficulty].

Okay so the pickup in that fix charge, is that something that’s going to help I guess smooth out the quarter distribution of earnings a little bit where Q1.

Exactly right, Jonathan so we mentioned that on the third quarter call that this revenue curve that we have the adopted revenue curve in California is going to get flatter. So when you see a fourth quarter and a first quarter those will tend to be more improved than the second and third quarter just because more of the revenue is coming from the service charge.

And then I think it was in Q2, you kind of booked one non-recurring tax benefit, it was about $0.05. Was there anything in Q4 that you would consider non-recurring or I mean it's just part of that redistribution on the fixed versus quantity charge and just overall -- improvement over all that.

Yes there is no non-recurring tax benefits in the fourth quarter.

Okay. And do you have what -- Cal Water's earned ROE was in 2014?

We’re looking it up in the K. So if you look on a very gross basis we have an earned ROE of 9.3% that’s what's in the K. You do have to consider that in California what's -- this category of plant called construction work in progress, not included in our rates for remaking purposes until it's incorporated into final plan and so we’re earning interest during construction on construction work in progress. So when we look at it we see of the authorized rate base, we did better than the 9.3% when you think of it that way.

Yes, and when we file our proxy because part of our management incentive [ph] plan centers around five key areas one of which is ROE, there will be a good disclosure about what the target was versus what the actual was. So you will see that when we file the proxy.

And Jonathan, let me add one more bit of color to the tax situation. Remember that Marty said we made a really herculean effort on the capital in the fourth quarter. We spent $45 million on capital in the fourth quarter. That contributed to lower tax rate because we did construct a lot of mains and services that allow us to take that deduction for the repairs, maintenance repairs but that’s an ongoing tax item.

And then how about the other states, non-California, I know you’ve always have the regulatory lag issues with historical test years, where are they kind of earning right now? I mean I think previously they were close to breakeven but it seems like you’ve been getting some new rates pushed through particularly in Hawaii, are they starting to contribute little more to the bottom-line?

Hawaii, we’re not making money in Hawaii, we have the Turner rate case there, it's a fairly large one and it seems to take forever in a day when we have settlements take it with the Hawaii Commission but I think things are changing up there a little bit. One of the things we have been focused on at the group level is having when I call the integrator rates platform, so we’re looking at all the subsidiary playing as well as the California planning and make sure we’re coordinating everything. So these will -- rate cases and step ups that we’re seeing that’s a result of us coordinating I think tighter with all the subsidiary companies. So Hawaii, I hope that we will be breakeven to making a profit this year that is our goal for the team. Washington I think was interesting example that’s what we’re talking about an dissecting a little bit. Washington when I file for the general rate increase requested a $1.5 million increase and the commission approved a $1.7 million increase and that’s because we acquired a small system up in Washington that was having operational issues and the Department of Health Services was encouraging us to work with them to take that system over and help make them compliant and in doing so the commission that you see [ph] up in Washington as the commission is named allowed us to add into the proceeding that was already underway as a rate base as well as operating cost. So we actually got a higher number out than what we requested by $200,000. So Washington has about a 10.7 ROE but you never hit it because again it's a historical rate making state. But we have been very encouraged by what the commission did with this rate case filing and the fact that they are continuing to work with us on ways we can improve our operations up in Washington.

If you can only get over a 100% of all your asks [ph] in every jurisdiction, that would be great.

I think it's in the environment -- and I think it's indicative of how we run the business. We have a relationship with the regulator to take a small system that’s not performing at the request of the Department of Health and get it to our standards but then it has a regulator allow us to step up that rate base. I think that speaks well of the partnership that we have up in Washington.

And Jonathan, it also reflects our philosophy of asking for what we need and not asking for more than what we need in having to get cut back on that.

Okay. And then just last question as we kind of look forward to '15, I mean the $1.19 we take out the $0.05 so kind of a $1.14 is the starting base and you would expect to kind of grow off of that, you know the $1.14 is a relatively good run-rate.

We think from a core business number, you’re thinking about the right way, I think the question is while we’re having erosion with any of our cost lines because there is not, in California which is essentially 92% of the business. Other than that step increase, there is not new revenue coming into offset those cost. So when you look at the big picture that’s why we really emphasize the financial planning and analysis and building up the budget skills within the company, so we can better manage through the second and third year period of the rate case.

And just being awry that the step increase was the 5 million and the total increase in the first quarter is about 7.

[Operator Instructions]. Mr. Smegal there are no questions at the moment.