Historic Water Conservation Measures Advanced by Water Utilities and Environmental Groups

SAN FRANCISCO--()--July 26, 2006--A coalition of California water utilities and environmental groups submitted Joint Recommendations to the California Public Utilities Commission (Commission) today to demonstrate broad support for actions that may be taken by the Commission to immediately strengthen water conservation programs, a key objective of the Commission's recently issued Water Action Plan.

The Conservation Recommendations (Recommendations) were developed by California American Water Company, California Water Service Company (NYSE:CWT), Golden State Water Company (Water Utilities), the Natural Resources Defense Council (NRDC), and the Mono Lake Committee. The Recommendations were also endorsed by the California Urban Water Conservation Council, Environmental Defense, Pacific Institute, Planning and Conservation League, League of Women Voters of California, Friends of the River, Sierra Nevada Alliance, and Southern California Watershed Alliance.

Golden State Water Company President, Floyd Wicks, whose company played a key role in bringing the parties together, said that, "this historic set of Recommendations, if adopted by the Commission, will resolve a set of regulatory problems that have plagued the water utilities for many years. Water conservation is a critical part of both the California Water Plan and the Commission's Water Action Plan, and the Water Utilities want to do their part in helping to better manage this precious resource."

Although the Water Utilities have taken steps independently to support water conservation programs, they have been impeded by Commission rate-setting practices that actually penalize them for achieving reductions in water usage. In collaborating with the Water Utilities, the environmental community joins with retail water suppliers to demonstrate their joint support for improvements in water use efficiency that will help reduce diversions from California's rivers, protect and restore the state's aquatic ecosystems, and reduce energy consumption.

In the Conservation Recommendations, the Joint Signatories urge the Commission to take three immediate steps: decouple revenues from sales, establish increasing block rates, and allow for the recovery in rates of conservation programs while requiring the Water Utilities to achieve and report measurable conservation objectives.

First, by decoupling sales from revenues, the Commission will remove the inherent disincentive for water utilities to promote conservation, as it has done in the gas and electric utilities. Second, by establishing increasing block rates, the Commission will enable the water utilities to send their customers a conservation price signal that they will pay a higher rate if they use a greater amount of water. Third, by allowing water utilities to recover the costs of conservation programs, the Commission will position the utilities to achieve a range of conservation objectives, including: investing a minimum of 1.5% of revenues in conservation programming; continuing to meet the "Best Practices" standards of the California Urban Water Conservation Council's Memorandum of Understanding; reporting annually on water conservation program budgets and accomplishments; billing all metered customers at volumetric rates; and, measuring water losses resulting from water system leaks.

California Water Service Company President and Chief Executive Officer Peter Nelson said, "California has been a leader in energy conservation for years; the Commission's adoption of these Recommendations will make California's water utilities a leader in water conservation as well."

Frances Spivy-Weber, Executive Director of the Mono Lake Committee, said, "In making a commitment to these Recommendations, each of the Water Utilities is stepping forward to lead the industry in a direction that is good for California and the communities they serve. We appreciate this leadership and hope that this proposal will become a template for other large water companies." Ronnie Cohen, Senior Policy Analyst with the NRDC, noted: "Water use efficiency will help ensure high-quality, reliable drinking water supplies for California. Conservation will also leave more water for our rivers, lakes, and estuaries. Recognizing this, the Commission has called for increased water conservation; our Recommendations show that these two key stakeholder groups agree and provide the Commission with a plan to get there."

After the Commission addresses the first three recommendations, the Joint Signatories recommend that a second phase of water conservation measures be considered for implementation, including: a uniform approach for measuring avoided water costs, meter installation plans, and system water loss solutions; financial incentives for enhanced water conservation investments; financial assistance for demand reduction measures that are not economically feasible; and, further refinement of the increasing block rate design.

The Conservation Recommendations may be viewed in their entirety at http://www.calwater.com; http://www.aswater.com; and http://www.monolake.org.

Water Company Profiles

California American Water is a wholly-owned subsidiary of American Water, with headquarters in Voorhees, NJ. American Water has a work force of 7,000 who serve more than 18 million people in 29 states, Puerto Rico and Canada. California American Water provides quality water and wastewater service to nearly 600,000 Californians in 50 communities. Counties served include Humbolt, Los Angeles, Monterey, Placer, Sacramento, San Diego, San Mateo, Santa Cruz, Sonoma and Ventura. http://www.calamwater.com

California Water Service Company, a subsidiary of California Water Service Group, is the largest investor-owned American water utility west of the Mississippi River and the second largest in the country. Formed in 1926, the San Jose-based company serves 500,000 customers through 28 Customer and Operations Centers throughout the state. Counties served include: Alameda, Butte, Fresno, Glenn, Kern, Lake, Los Angeles, Monterey, San Joaquin, San Mateo, Santa Clara, Solano, Sonoma, Tulare, Ventura and Yuba. http://www.calwater.com

Golden State Water Company (GSWC), serving Californians for 75 years, is a subsidiary of American States Water and is a public utility company engaged principally in the purchase, production, distribution, and sale of water to over 253,000 customers, or, one out of every 30 persons in California. GSWC's operations are grouped into three regions, seven districts and twenty-one customer service areas throughout California. Counties served include Contra Costa, Imperial, Lake, Los Angeles, Orange, Sacramento, San Bernardino, San Luis Obispo, Santa Barbara and Ventura. http://www.aswater.com

This news release contains forward-looking statements within the meaning established by the Private Securities Litigation Reform Act of 1995 ("Act"). The forward-looking statements are intended to qualify under provisions of the federal securities laws for "safe harbor" treatment established by the Act. Forward-looking statements are based on currently available information, expectations, estimates, assumptions and projections, and management's judgment about the Company, the water utility industry and general economic conditions. Such words as expects, intends, plans, believes, estimates, assumes, anticipates, projects, predicts, forecasts or variations of such words or similar expressions are intended to identify forward-looking statements. The forward-looking statements are not guarantees of future performance. They are subject to uncertainty and changes in circumstances. Actual results may vary materially from what is contained in a forward-looking statement. Factors that may cause a result different than expected or anticipated include but are not limited to: governmental and regulatory commissions' decisions, including decisions on proper disposition of property; changes in regulatory commissions' policies and procedures; the timeliness of regulatory commissions' actions concerning rate relief; new legislation; changes in accounting valuations and estimates; the ability to satisfy requirements related to the Sarbanes-Oxley Act and other regulations on internal controls; electric power interruptions; increases in suppliers' prices and the availability of supplies including water and power; fluctuations in interest rates; changes in environmental compliance and water quality requirements; acquisitions and our ability to successfully integrate acquired companies; the ability to successfully implement business plans; changes in customer water use patterns; the impact of weather on water sales and operating results; access to sufficient capital on satisfactory terms; civil disturbances or terrorist threats or acts, or apprehension about the possible future occurrences of acts of this type; the involvement of the United States in war or other hostilities; restrictive covenants in or changes to the credit ratings on our current or future debt that could increase our financing costs or affect our ability to borrow, make payments on debt or pay dividends; and, other risks and unforeseen events. When considering forward-looking statements, you should keep in mind the cautionary statements included in this paragraph as well as other risk factors disclosed in the Company's 10K's, 10Q's, 8-K's and others filings made by the Company and on file with the SEC. The Company assumes no obligation to provide public updates of forward-looking statements.

Contacts

California Water Service Group
Stan Ferraro, 408-367-8225
sferraro@calwater.com
or
Mono Lake Committee
Frances Spivy-Weber, 310-316-0041
frances@monolake.org

Contacts

California Water Service Group
Stan Ferraro, 408-367-8225
sferraro@calwater.com
or
Mono Lake Committee
Frances Spivy-Weber, 310-316-0041
frances@monolake.org