UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

(Mark One)

TO

Commission File Number 0-8084

Connecticut Water Service, Inc.

(860) 669-8636
(Registrant’s telephone number, including area code)

Not Applicable
(Former name, address and former fiscal year, if changed since last report)

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes   (X)   No   (   )

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes   (X)     No   (   )

APPLICABLE ONLY TO CORPORATE ISSUERS:

     Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

7,986,267

Number of shares of common stock outstanding, March 31, 2004

CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES

Financial Report
March 31, 2004 and 2003

TABLE OF CONTENTS

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Connecticut Water Service, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS
At March 31, 2004 and December 31, 2003
(In thousands)

The accompanying notes are an integral part of these financial statements.

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Connecticut Water Service, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CAPITALIZATION
At March 31, 2004 and December 31, 2003
(In thousands, except share data)

The accompanying notes are an integral part of these financial statements.

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Connecticut Water Service, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF INCOME
For the Three Months Ended March 31, 2004 and 2003
(In thousands, except per share amounts)

The accompanying notes are an integral part of these financial statements.

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Connecticut Water Service, Inc. and Subsidiaries

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the Three Months Ended March 31, 2004 and 2003
(In thousands)

The accompanying notes are an integral part of these financial statements.

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Connecticut Water Service, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
For the Three Months Ended March 31, 2004 and 2003
(In thousands, except per share amounts)

The accompanying notes are an integral part of these financial statements.

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Connecticut Water Service, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2004 and 2003
(In thousands)

The accompanying notes are an integral part of these financial statements.

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CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. The consolidated financial statements included herein have been prepared by CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES (the “Company”), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission and reflect all adjustments which are, in the opinion of management, necessary to a fair statement of the results for interim periods. Certain information and footnote disclosures have been omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these consolidated financial statements be read in conjunction with the financial statements and the notes thereto included in the Company’s latest annual report or Form 10-K.

     The results for interim periods are not necessarily indicative of results to be expected for the year since the consolidated earnings are subject to seasonal factors.

2. The Company has a Stock-Based Compensation Plan with two components: the Performance Stock Program and the Stock Option Program. Statement of Financial Accounting Standards (SFAS) No. 123 “Accounting for Stock-Based Compensation,” encourages entities to recognize as expense over the vesting period the fair value of all stock-based awards on the date of grant. Alternatively, SFAS No. 123 also allows entities to continue to apply the provisions of APB opinion No. 25 “Accounting for Stock Issued to Employees” and provide pro forma net income and pro forma earnings per share disclosures for employee stock grants as if the fair-value-based method defined in SFAS No. 123 had been applied.

     The Company accounts for its Stock Option Program under the recognition and measurement principles of APB No. 25. As such, no compensation cost related to the Stock Option Program is reflected in Net Income, as all options under this program had an exercise price equal to market value of the underlying common stock on the date of grant. The following table illustrates the effect on Net Income and Earnings Per Share if the Company had applied the fair value recognition provisions of SFAS No. 123 to the Stock Option Program.

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CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES

3. Pension and Other Postretirement Benefits
Pension Benefits
Components of Net Periodic Cost

Other Postretirement Benefits
Components of Net Periodic Cost

The Company expects to make a contribution of approximately $1.3 million to its defined benefit pension plan during 2004. As of March 31, 2004 no contribution has been made.

4. Earnings per average common share are calculated by dividing net income applicable to common stock by the average number of shares of common stock outstanding during the respective periods as detailed below:

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CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES

Part I, Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations

Regulatory Matters and Inflation

     During the quarter ended March 31, 2004, there were no changes to any items previously disclosed by the Company in its Annual Report on Form 10-K for the period ended December 31, 2003.

Critical Accounting Policies and Estimates

     The Company maintains its accounting records in accordance with accounting principles generally accepted in the United States of America and as directed by the regulatory commissions to which the Company’s subsidiaries are subject. Significant accounting policies employed by the Company, including the use of estimates, were presented in the Notes to Consolidated Financial Statements of the Company’s Annual Report.

     Critical accounting policies are those that are the most important to the presentation of the Company’s financial condition and the results of operations, require management’s most difficult, subjective, and complex judgments, and involve uncertainties. The Company’s most critical accounting policies pertain to public utility regulation related to Financial Accounting Standards No. 71, “Accounting for the Effects of Certain Types of Regulation” (FAS 71), revenue recognition, and pension plan accounting. Each of these accounting policies and the application of critical accounting policies and estimates was discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2003. There were no significant changes in the application of critical accounting policies or estimates during the first quarter of 2004. Management must use informed judgments and best estimates to properly apply these critical accounting policies. Because of the uncertainty in these estimates, actual results could differ from estimates used in applying the critical accounting policies and estimates. The Company is not aware of any reasonably likely events or circumstances which would result in different amounts being reported that would materially affect its financial condition or results of operations.

Liquidity and Capital Resources

     The Company is not aware of demands, events, or uncertainties that will result in a decrease of liquidity or a material change in the mix or relative cost of capital resources.

     Effective on February 15, 2004, the Company changed the method by which it meets its Dividend Reinvestment and Common Stock Purchase Plan (DRIP) requirements by issuing authorized but unissued shares of its common stock. Prior to this date the Company was purchasing shares on the open market to operate the DRIP.

     On March 12, 2004, the Company entered into a one-year agreement with Webster Bank for a $3,000,000 line of credit.

     Interim Bank Loans Payable at March 31, 2004 was $12,000,000.

     We consider the current $15,500,000 lines of credit with four banks adequate to finance any expected short-term borrowing requirements that may arise from operations during 2004. The bank lines of credit have expirations dates ranging from October 2004 through January 2006. Interest expense charged on interim bank loans will fluctuate based on financial market conditions.

     The fair value of the interest rate swap, included in the Company’s Consolidated Balance Sheet as “Other Liabilities”, was approximately $292,000 at March 31, 2004. Changes in the fair value of this derivative are recorded in “Accumulated Other Comprehensive Income” in Common Stock Equity.

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CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES

Off-Balance Sheet Arrangements and Contractual Obligations

     During the quarter ended March 31, 2004, there were no changes to any items previously disclosed by the Company in its Annual Report on Form 10-K for the period ended December 31, 2003.

Results of Operations

     The following factors had a significant effect upon the Company’s net income for the three months ended March 31, 2004 as compared with the net income for the same period last year.

     Net income applicable to common stock for the three months ended March 31, 2004 decreased from that of March 31, 2003 by $135,000, or $.02 per average common share. This decrease is broken down by business segment as follows:

     The decline in 2004 net income associated with the Real Estate segment was expected due to the relative size of the land donated in 2004 versus 2003, leading to a lower income tax deduction in the first quarter of 2004. Both years’ land donations were to the Town of Killingly, CT. and were part of a 3 year (2002-2004) phased plan for land donations in Connecticut.

     The $79,000 increase in the Water Activities segment’s net income is primarily due to decreased interest and debt expense related to the October 2003 and March 2004 refinancing by The Connecticut Water Company of certain bonds.

     The $23,000 increase in the Services and Rentals segment’s net income reflects a 19% increase in earnings primarily due to increased revenues from antenna site leases.

Commitments and Contingencies

     During the quarter ended March 31, 2004, the Company received notice from the State of Connecticut Department of Environmental Protection (DEP) that their review of our approximately 7,600 acres of Class I, II and III land was complete. The DEP notice indicated that the DEP had identified 240 parcels representing 6,823 acres of land and land underwater as land that the DEP would be interested in acquiring as open space, by either fee ownership or a conservation easement. It is the Company’s intention to pursue this with DEP in the future.

     The Town of Barnstable, Massachusetts has advised the Company that it intends to pursue the acquisition of the Company’s wholly-owned subsidiaries, The Barnstable Water Company and BARLACO, at a price substantially below what the Company believes to be the fair market value of the companies. The Town takes the position that it has the right to acquire The Barnstable Water Company and BARLACO pursuant to the provisions of Massachusetts legislation passed in 1911. The Company has previously advised the Town that the Company does not believe the Town has any statutory right to acquire either The Barnstable Water Company or BARLACO. By letter dated May 3, 2004, the Town advised the Company that the Town’s Manager has been directed to enter into acquisition negotiations with the Company. The Company is considering its alternatives with respect to the Town’s proposal to enter into negotiations.

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CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES

     There were no changes to any other items previously disclosed by the Company in its Annual Report on Form 10-K for the period ended December 31, 2003.

Forward Looking Information

     This report, including management’s discussion and analysis, contains certain forward-looking statements regarding the Company’s results of operations and financial position. These forward-looking statements are based on current information and expectations, and are subject to risks and uncertainties, which could cause the Company’s actual results to differ materially from expected results.

     Our water companies are subject to various federal and state regulatory agencies concerning water quality and environmental standards. Generally, the water industry is materially dependent on the adequacy of approved rates to allow for a fair rate of return on the investment in utility plant. The ability to maintain our operating costs at the lowest possible level, while providing good quality water service, is beneficial to customers and stockholders. Profitability is also dependent on the timeliness of rate relief, when necessary, and numerous factors over which we have little or no control, such as the quantity of rainfall and temperature, industrial demand, financing costs, energy rates, tax rates, and stock market trends which may affect the return earned on pension assets, and compliance with environmental and water quality regulations. The profitability of our other revenue sources is subject to the amount of land we have available for sale and/or donation, the demand for the land, the continuation of the current state tax benefits relating to the donation of land for open space purposes, regulatory approval of land dispositions, the demand for telecommunications antenna site leases and the successful extensions and expansion of our service contract work. We undertake no obligation to update or revise forward-looking statements, whether as a result of new information, future events, or otherwise.

Part I, Item 3: Quantitative and Qualitative Disclosure About Market Risk

     The primary market risk faced by the Company is interest rate risk. The Company has no exposure to derivative financial instruments except for the interest rate swap agreement mentioned below or financial instruments with significant credit risk or off-balance sheet risks and is not subject in any material respect to any currency or other commodity risk.

     The Company is subject to the risk of fluctuating interest rates in the normal course of business. The Company’s exposure to interest fluctuations is managed at the Company and subsidiary operations levels through the use of a combination of fixed rate long-term debt (and variable rate borrowings) under financing arrangements entered into by the Company and its subsidiaries and its use of the interest rate swap agreement discussed below. The Company has $15,500,000 current lines of credit with four banks, under which interim bank loans payable at March 31, 2004 were $12,000,000. Management believes that any near-term change in interest rates should not materially affect the consolidated financial position, results of operations or cash flows of the Company.

     During March 2004, The Connecticut Water Company entered into a five-year interest rate swap transaction in connection with the refunding of its First Mortgage Bonds (Series V). The swap agreement provides for The Connecticut Water Company’s exchange of floating rate interest payment obligations for fixed rate interest payment obligations on a notional principal amount of $12,500,000. The purpose of the interest rate swap is to manage the Company’s exposure to fluctuations in prevailing interest rates. The Company does not enter into derivative financial contracts for trading or speculative purposes and does not use leveraged instruments.

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CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES

     Management does not believe that changes in interest rates will have a material effect on income or cash flow during 2004, although there can be no assurances that interest rates will not significantly change.

Part I, Item 4: Controls and Procedures

Evaluation of Disclosure Controls and Procedures

     As of March 31, 2004, management, including the Company’s Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-14(c) and Rule 13a-15(e)). Based upon, and as of the date of that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective, in all material respects, to ensure that information required to be disclosed in the reports the Company files and submits under the Securities Exchange Act of 1934 is accumulated and communicated to management, including the Company’s Chief Executive Officer and Chief Financial Officer as appropriate to allow timely decisions regarding disclosure to be made within the time periods specified in the SEC’s rules and forms. Further, there were no changes in the Company’s internal controls over financial reporting (as defined in Exchange Act Rules 13a – 15(f) and 15d – 15(f)) that occurred during the Company’s most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Part II, Item 1: Legal Proceedings

     We are involved in various legal proceedings. Although the results of legal proceedings cannot be predicted with certainty, there are no pending legal proceedings to which we or any of our subsidiaries are a party or to which any of our properties is the subject that presents a reasonable likelihood of a material adverse impact on the Company.

Part II, Item 4: Submission of Matters to a Vote of Security Holders

     On April 23, 2004, at its annual meeting, the stockholders of Connecticut Water Service, Inc. elected the following directors to serve three-year terms expiring at the annual meeting to be held in 2007:

     Directors whose term of office continues until 2005 are Mary Ann Hanley, Mark G. Kachur, Ronald D. Lengyel, and David A. Lentini.

     Directors whose term of office continues until 2006 are Roger Engle, Lisa J. Thibdaue, Carol P. Wallace, and Donald B. Wilbur.

     The appointment of PricewaterhouseCoopers, LLP, independent public accountants, as independent auditors for the Company for the calendar year ending December 31, 2004 was ratified by the stockholders.

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CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES

     The authorization of an amendment to the Company’s Amended and Restated Certificate of Incorporation was ratified by the Stockholders.

     The 2004 Performance Stock Program was ratified by the stockholders.

Part II, Item 6: Exhibits and Reports on Form 8-K

(a)

Exhibits Required by Item 601 of Regulation S-K.

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CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES

*

filed herewith

(b)		Reports on Form 8-K
		On February 11, 2004, the Company filed a Form 8-K to report its earnings for the fourth quarter of 2003 and for the full fiscal year ended December 31, 2003.
		On April 8, 2004, the Company filed a Form 8-K to report notification of blackout period to the Savings Plan of the Connecticut Water Company.

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SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.