Exhibit 10.25

                               AGREEMENT NO. 99-73

                                  99 - 03 W.B.

                              NORTHEAST BAKERSFIELD
                             WATER SUPPLY AGREEMENT

            THIS  AGREEMENT  is  made  and  entered  into  on MAR 31 1999 by and
between  the CITY OF  BAKERSFIELD,  a Charter  CITY and  municipal  corporation,
("CITY"  herein) and  CALIFORNIA  WATER  SERVICE  COMPANY,  a California  public
utility water corporation ("CAL WATER" herein).

                                    RECITALS

            WHEREAS,  CITY  and CAL  WATER  have  each  been  investigating  the
feasibility of providing  water to areas in northeast  Bakersfield  that are not
represented by organized water districts or purveyors; and

            WHEREAS,  CAL WATER is currently engaged in purveying domestic water
to, among others,  residents and citizens  within the CITY and desires to expand
its service and augment its existing water service in the incorporated northeast
Bakersfield system; and

            WHEREAS,  It is currently CAL WATER and CITY's desire that CAL WATER
provide  high  quality  domestic  water  service  using Kern River water to CITY
residents in the Northeast Bakersfield area; and

            WHEREAS,  on December 22, 1976,  CITY  acquired  water rights to the
Kern River in order to meet the  present  and future  needs of the  citizens  of
Bakersfield; and

            WHEREAS,  CITY and CAL WATER will  cooperate and effect a project to
achieve water service to the incorporated northeast Bakersfield area, termed the
Northeast  Water Supply Project  (NEWSP),  that will include a Kern River intake
structure,  settling/storage  reservoirs,  high  and  low  lift  pump  stations,
filtration plant and  transmission and distribution  pipelines all to be located
within the area described as NEWSP; and

            WHEREAS,  CITY has received  bicycle path funding to extend the path
from Alfred Harrell  Highway to Paladino Drive along the alignment of the future
Morning  Drive and thus  creating an  opportunity  to install  water  facilities
coincidental with bicycle path construction; and


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            WHEREAS,  the County of Kern (COUNTY)  owns the Kern River  Regional
Park,  consisting of the Hart Memorial Park (HMP) unit,  the  California  Living
Museum  (CALM),  and Kern County Soccer Park (KSP) and COUNTY desires to improve
water delivery services from the Kern River to these lands; and

            WHEREAS, CITY and COUNTY have entered into Operational Agreement No.
98-224 and a Non-exclusive  Easement for Water  Facilities that are incorporated
by reference and attached as Exhibit "A", that grants  right-of-ways  and use of
portions of the Kern River  Regional  Park to  construct,  operate and  maintain
facilities required for the NEWSP.

            NOW,  THEREFORE,  incorporating the foregoing recitals herein, it is
mutually agreed as follows:

      1.  WATER  SUPPLY.  CITY will  make  available  to CAL WATER a Kern  River
surface  water  supply to serve the needs of present and future  CITY  residents
located in the area  described as Northeast  Bakersfield  to include those lands
within the area described herein as the NEWSP. The parties  anticipate CITY will
make available to CAL WATER up to 12,000 (Twelve Thousand) acre-feet per year to
meet the  initial  needs of a newly  constructed  filtration  plant.  CITY is to
provide additional water to meet future demands of the NEWSP filtration plant as
projected on schedules provided in Exhibit "B".

      2. AREA OF SERVICE.  The NEWSP area of service for the  supplying  of high
quality  domestic water service shall be bounded on the north by the Kern River,
on the east by Olcese  Water  District's  boundary,  on the south by East  Niles
Community  Service District  boundary,  and to the west by the franchise service
territory of CAL WATER that lies within the CITY limits. These boundaries may be
changed  by the mutual  consent of both  parties  and may be  adjusted  for CITY
annexations; however, CAL WATER understands the CITY will require water supplied
hereunder  will only be delivered  to CITY  residences  within the  incorporated
boundaries of the CITY no matter what the specified boundaries described in this
Agreement.  Both parties  acknowledge the water acquired  hereunder by CAL WATER
may be commingled with other waters at any time with the resulting goal that the
water  quality at all times shall meet or exceed all Federal,  State,  and local
statutory and regulatory water quality standards, including, but not limited to,
California Department of Health Services standards. A map showing the NEWSP area
is attached hereto as Exhibit "C", and incorporated by reference as though fully
set forth.

      3. POINT OF DELIVERY  AND  MEASUREMENT.  CITY shall make  available to CAL
WATER a Kern River water supply at the  southerly  end of the proposed  settling
basins, near CALM and KSP in Section 5 of T.29S./R.29E.  Measuring devices shall
be installed and  maintained by CAL WATER,  with approval of CITY, in accordance
to industry standards as set by the American Water Works Association.


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      4. WATER FACILITIES.

            4.1 The CITY will design,  finance,  construct,  own and operate the
Kern River  diversion  and intake  works to meet normal  seasonal  demand of the
Northeast Filtration Plant, including but not limited to:

                  4.1.1 Acquisition of land,  right-of-ways  or easements needed
                        for diversion works and settling basins;

                  4.1.2 Kern River intake and low-lift pump station;

                  4.1.3 Canal  from  diversion  works to raw water  storage  and
                        settling reservoirs;

                  4.1.4 Settling reservoirs or pools; and

                  4.1.5 Turn-outs to HMP, KSP and CALM.

            4.2 CAL WATER will design, finance,  construct,  own and operate the
facilities  that are needed to  transport,  purify and  deliver  water to NEWSP,
including, but not limited to:

                  4.2.1 Acquisition  of all  land,  easements  or  right-of-ways
                        needed  for   construction   and   locating   pipelines,
                        filtration plants, pump stations and all works CAL WATER
                        may need for this project;

                  4.2.2 High lift pump station and facility for metering  supply
                        delivered by CITY at southerly end of settling basins;

                  4.2.3 Intake   pipeline   from  high  lift  pump   station  to
                        filtration plant;

                  4.2.4 Filtration plant;

                  4.2.5 Transmission  pipelines and facilities to provide retail
                        delivery within NEWSP. Said transmission  facilities may
                        be funded under California  Public Utilities  Commission
                        extension agreement rules.

            4.3 Each party agrees to construct  all the listed water  facilities
and put said facilities  into operation  within six (6) years from the date this
Agreement is executed.

      5. FAILURE TO CONSTRUCT.  Each party to this  Agreement will bear the cost
and risk of  constructing  the water  facilities  listed for which each party is
responsible as set forth in Section 4 of this Agreement.  Under no circumstances
shall  either  party  pay for the  construction  of  facilities  which are to be
constructed by the other.

      6.  PLACE OF USE.  The  water  supplied  by CITY to CAL WATER  under  this
agreement  shall be used by CAL WATER for the sole purpose of  purification  and
distribution to residents of the CITY of Bakersfield in the NEWSP area.


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      7. WATER QUALITY.  CITY does not represent or guarantee the quality of the
raw water which is subject of this  Agreement.  CAL WATER  understands the water
specified for delivery under this Agreement, as supplied from the Kern River, is
untreated and not fit for human  consumption  as  delivered.  CAL WATER shall be
solely  responsible  for testing said water and for any and all treatment  which
may be necessary to bring the water into conformity with all Federal,  State and
local  domestic  water quality  requirements  prior to its delivery for domestic
use.  CITY shall not be  responsible  for the quality of water  delivered by CAL
WATER in any way or at any  time and CAL  WATER's  failure  to test or  property
treat  the  water  is not the  responsibility  of  CITY.  By  execution  of this
Agreement CAL WATER  expressly  waives any and all legal remedies  against CITY,
from the CITY's  delivery  of  non-potable  water to CAL WATER.  CAL WATER shall
indemnify,  defend and hold CITY  harmless  from and  against any and all claims
from or  against  CAL WATER for  failure to  delivery  water to  domestic  users
pursuant to this Agreement in conformance with Federal, State and local domestic
water  quality  requirements.  CITY will provide  timely  notice to CAL WATER of
contamination to the water delivered of which the CITY has actual knowledge.

      8.  COMPENSATION  TO CITY.  To  compensate  CITY for CITY Kern River water
delivered  hereunder (except as otherwise provided herein),  CAL WATER shall pay
CITY Fifty-five  Dollars  ($55.00) per acre foot. The price is subject to annual
adjustment  on the  basis of the  January  1999  Producer  Price  Index for "All
Commodities" published by the Bureau of Labor Statistics of the U. S. Department
of Labor and first  adjustment  shall  occur in  January  of the year  following
execution of this  Agreement.  The price as stated shall  include all costs CITY
may incur in pumping,  exchange and storage fees in delivering  Kern River water
to CAL WATER high lift pump  station  metering  point.  Payment in full shall be
made to CITY within thirty (30) days after mailing of an itemized invoice to CAL
WATER.  The due date on the  invoice  shall be  clearly  set  forth and shall be
thirty  (30)  days  beyond  the  billing  date.  CITY  shall  bill CAL WATER for
quantities  delivered only after the water is actually delivered by CITY through
the high lift pump station metering facility. CAL WATER shall not assess or levy
any charge of any kind or type to CITY for the  delivery of said water.  Failure
to pay CITY in full within  thirty  (30) days of the due date shall  subject CAL
WATER to late  fees.  Reasonable  late fee  amounts  (not to exceed 6% on unpaid
balance) may be assessed by CITY and shall be paid by CAL WATER upon demand.  At
CITY's sole  discretion,  CITY may terminate this  Agreement  after notice and a
sixty (60) day cure  period for failure to pay all  charges  assessed  for water
delivery and collect all past due sums and late fees.

      9. CONSUMER  WATER RATES.  CAL WATER intends and will use its best efforts
to continue with a single tariff water rate schedule for domestic  water service
to all its Bakersfield district customers. The single rate tariff would apply to
customers in the existing  system and in the NEWSP  project  area.  CITY and CAL
WATER  understand and agree that CAL WATER's rates are currently  subject to the
jurisdiction and control of the California  Public Utilities  Commission  (CPUC)
and CAL WATER's rates will comply with decisions issued by the CPUC.


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      10. SPECIAL FACILITY FEE. CAL WATER special facility fees may be necessary
to  supplement  the  financing of the  construction  of  facilities as listed in
Section 4.2 of this  Agreement.  CAL WATER shall  petition the CPUC to allow the
imposition of special facility fees to new water service  connections within the
service  territory of CAL WATER in its  Bakersfield  District and a differential
fee structure to those properties connecting in the NEWSP.

      11. ENVIRONMENTAL STUDIES OR REVIEW. CITY shall be responsible at its sole
cost for  preparation of any  environmental  impact reviews or reports  required
under  State and  Federal law for the NEWSP.  The  environmental  review will be
provided for the project that includes,  but is not  necessarily  limited to the
Kern River intake structure,  canal to settling basins,  pipeline and conveyance
facilities to Hart Park the settling basins or lagoons,  pumping  stations,  raw
water  transmission  pipes,  filtration plant site and major trunk  distribution
mains.  If  available,  CAL WATER may obtain  copies of CITY treated  water data
otherwise available to the public.

      12.  ACCOUNTING  RECORDS.  CITY  and CAL  WATER  shall  maintain  accurate
accounting  records  and other  written  documentation  pertaining  to all costs
incurred in performance of this Agreement.  Such records and documentation shall
be kept at each  party's  office  during  the  term of this  Agreement  and said
records shall be made available to CITY or CAL WATER representatives upon proper
request.

      13. ASSIGNMENT.  This Agreement shall not be assigned by any party, or any
party substituted, without prior written consent of all the parties.

      14. BINDING  EFFECT.  The rights and  obligations of this Agreement  shall
inure to the benefit of, and be binding upon,  the parties to this Agreement and
their heirs, administrators, executors, personal representatives, successors and
assigns.

      15.  CITY  INSURANCE.   CITY  represents  it  is  self-insured  and  will,
throughout the term of the this Agreement,  maintain its self-insurance program.
Currently the CITY is  self-insured  for One Million  Dollars  ($1,000,000)  and
carries  additional  coverage through an insurance  pooling  arrangement  termed
ACCELL. The amounts of this additional coverage may vary. CITY warrants that, at
all times during the term of this Agreement, it shall have and maintain workers'
compensation  insurance  in  compliance  with  the  Labor  Code of the  State of
California. CITY shall supply documentation of its self-insurance program to CAL
WATER upon request.

      16.  COMPLIANCE  WITH ALL LAWS. In connection  with the performance of its
obligation  under this  Agreement,  CAL WATER  shall,  at CAL WATER's sole cost,
comply with all of the requirements of Municipal, State, and Federal authorities
now in force, or which may hereafter be in force,  pertaining to this Agreement,
and shall  faithfully  observe in all  activities  relating to or growing out of
this Agreement all Municipal ordinances and State and Federal statutes, rules or
regulations now in force or which may hereafter be in force.


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      17. CONFIDENTIALITY.  During the term of this Agreement, CAL WATER will be
dealing  with  information  of  a  legal  and  confidential   nature,  and  such
information  could  severely  damage CITY if disclosed to outside  parties.  CAL
WATER will not disclose to any person, directly or indirectly, either during the
term of this Agreement or at any time  thereafter,  any such  information or use
such  information  other  than as  necessary  in the  course of this  Agreement.
Confidential  information  given  to  CAL  WATER  under  this  Agreement  is the
exclusive  property  of  the  CITY.  Under  no  circumstances   shall  any  such
information or documents be removed from the CITY's  offices  without the CITY's
prior  written  consent.  CITY is subject to the Public  Records  Act and cannot
maintain  confidential  records unless allowed by said Act. CITY understands CAL
WATER may, through the California  Public Utilities  Commission,  be required to
release  documents.  It shall not be a violation  of this  Agreement  to release
documents or information which are required by law to be public.

      18.  CORPORATE   AUTHORITY.   Each  individual  executing  this  Agreement
represents  and warrants  they are duly  authorized  to execute and deliver this
Agreement on behalf of the corporation or organization, if any, named herein and
this Agreement is binding upon said  corporation or  organization  in accordance
with its terms.

      19.  EXECUTION.  This  Agreement is effective  upon  execution.  It is the
product of negotiation and all parties are equally responsible for authorship of
this Agreement. Section 1654 of the California Civil Code shall not apply to the
interpretation of this Agreement.

      20. EXHIBITS. In the event of a conflict between the terms,  conditions or
specifications  set  forth in this  Agreement  and  those in  exhibits  attached
hereto,  the terms,  conditions,  or specifications  set forth in this Agreement
shall  prevail.  All exhibits to which  reference is made in this  Agreement are
deemed incorporated in this Agreement, whether or not actually attached.

      21. FORUM. Any lawsuit  pertaining to any matter arising under, or growing
out of, this Agreement shall be instituted in Kern County, California.

      22. JOINT LIMITATION ON LIABILITIES AND INDEMNIFICATION.

            22.1  Neither party shall be liable to the other party for any loss,
                  damage,  liability,  claim or cause of action for damage to or
                  destruction  of  property or for injury to or death of persons
                  arising  solely from any act or omission of the other  party's
                  officers, council, directors, agents or employees.

            22.2  CITY and CAL WATER  agree to  indemnify  and hold  each  other
                  harmless from any and all claims, demands, liabilities, losses
                  or causes of action  which  arise by virtue of its own acts or
                  omissions


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                  (either  directly  or  through  or  by  its  agents,  council,
                  directors,  officers, or employees) to such extent and in such
                  part as the  respective  parties are found by reason of law to
                  have proximately caused the injury or damage.

            22.3  The party  against  whom any claim  arising  from any  subject
                  matter of this  Agreement is filed shall give prompt notice of
                  the filing of the claim to the other party.

      23.  INDEPENDENT  CONTRACTOR.  CAL WATER  shall not  become or be deemed a
partner or joint  venturer with CITY or associate in any  relationship  with CAL
WATER by reason of the provisions of this Agreement other than specified herein.
CAL WATER  shall  not,  for any  purpose,  be  considered  an agent,  officer or
employee of CITY in regard to this Agreement.

      24.  INSURANCE.  CAL WATER shall  procure and maintain for the duration of
this  Agreement the following  types and limits of insurance  ("basic  insurance
requirements" herein):

            24.1  Automobile  liability  insurance,  providing  coverage  on  an
                  occurrence basis for bodily injury, including death, of one or
                  more persons, property damage and personal injury, with limits
                  of  not  less  than  One  Million  Dollars   ($1,000,000)  per
                  occurrence; and the policy shall:

                  24.1.1 Provide coverage for owned, non-owned and hired autos.

                  24.1.2 Contain an additional  insured  endorsement in favor of
                         the  CITY,  its  mayor,  council,   officers,   agents,
                         employees and designated volunteers.

            24.2  Broad form commercial general liability  insurance,  providing
                  coverage on an occurrence  basis for bodily injury,  including
                  death,  of one or more persons,  property  damage and personal
                  injury,  with  limits  of not less  than One  Million  Dollars
                  ($1,000,000) per occurrence; and the policy shall:

                  24.2.1 Provide contractual liability coverage for the terms of
                         this Agreement.

                  24.2.2 Contain an additional  insured  endorsement in favor of
                         the  CITY,  its  mayor,  council,   officers,   agents,
                         employees and designated volunteers.


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            24.3  Workers' compensation  insurance,  as required or permitted by
                  California state law.

All  policies  required of CAL WATER shall be primary  insurance as to the CITY,
its mayor, council,  officers,  agents,  employees, or designated volunteers and
any  insurance or  self-insurance  maintained by the CITY,  its mayor,  council,
officers,  agents,  employees,  and designated volunteers shall be excess of the
CAL WATER's insurance and shall not contribute with it.

Insurance  is to be placed with  insurers  with a Bests'  rating of no less than
A:VII. Any deductibles,  self-insured retentions or insurance In lesser amounts,
or lack of certain types of insurance  otherwise required by this Agreement,  or
insurance rated below Bests' A:VII,  must be declared prior to execution of this
Agreement and approved by the CITY in writing.

All policies  shall contain an  endorsement  providing the CITY with thirty (30)
days written notice of  cancellation  or material  change in policy  language or
terms.  All  policies  shall  provide that there shall be  continuing  liability
thereon, notwithstanding any recovery on any policy.

The insurance  required hereunder shall be maintained until all work required to
be  performed  by this  Agreement  is  satisfactorily  completed as evidenced by
written acceptance by the CITY.

CAL WATER shall  furnish the City Risk Manager with a  certificate  of insurance
and required  endorsements  evidencing the insurance  required.  CAL WATER shall
provide CITY with  certificates of insurance and endorsements  required prior to
the execution of this Agreement.

Unless  otherwise  approved  by the  CITY,  if any part of the work  under  this
Agreement is subcontracted,  the "basic insurance  requirements" set forth above
shall be provided by, or on behalf of, all  subcontractors  even if the CITY has
approved lesser insurance requirements for CAL WATER.

      25.  MERGER  AND  MODIFICATION.  This  Agreement  sets  forth  the  entire
Agreement  between  the  parties  and  supersedes  all  other  oral  or  written
representations.  Its terms are intended by the parties as a final expression of
their agreement with respect to such terms as are included herein and may not be
contradicted  by  evidence  of  any  prior  agreement  or  contemporaneous  oral
agreement.  The parties  further intend this Agreement  constitutes the complete
and exclusive statement of its terms and no extrinsic evidence whatsoever may be
introduced in any judicial or arbitration  proceeding  involving this Agreement.
This  Agreement may be modified  only in a writing  approved by the CITY Council
and signed by all the parties.


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      26.  NON-INTEREST.  No  officer  or  employee  of the CITY  shall hold any
interest in this Agreement (California Government Code section 1090).

      27.  NOTICES.  All notices  relative to this  Agreement  shall be given in
writing and shall be personally  served or sent by certified or registered  mail
and be effective upon actual personal service or depositing in the United States
mail.  The  parties  shall be  addressed  as  follows,  or at any other  address
designated by notice:

           CITY:      CITY OF BAKERSFIELD
                      CITY Hall
                      1501 Truxtun Avenue
                      Bakersfield, California, 93301

           CAL WATER: CALIFORNIA WATER SERVICE COMPANY
                      1720 North First Street
                      San Jose, CA 95112-4598

      28.  POSSESSORY  INTEREST  TAXES.  CAL WATER's  interest  hereunder may be
subject to  property  taxation  and CAL WATER,  as a party in whom a  possessing
interest is vested,  may be subject to the payment of property  taxes  levied on
such interest, and shall pay all such possessory interest taxes.

      29. PRE-JUDGEMENT INTEREST. In the event of a default by any party to this
Agreement,  the non-defaulting party shall be allowed to recover interest on all
damages at the legal rate from the date of the breach.

      30. TAX NUMBERS.

          CAL WATER's Federal Tax Identification No. 94-0362795.
          CAL WATER is a corporation?  Yes X No __.
                                      (Please check one.)

      31.  TERM.  This  Agreement  shall  commence  upon date of  execution  and
terminate on December 31, 2022 unless sooner terminated as herein provided. This
Agreement  will  automatically  renew for an  additional  term of ten (10) years
unless either party provides written notice within 180 days of termination date.

      32. TIME. Time is of the essence in this Agreement.

      33. WAIVER OF DEFAULT. The failure of any party to enforce against another
a provision  of this  Agreement  shall not  constitute  a waiver of that party's
right to enforce such a provision  at a later time,  and shall not serve to vary
the terms of this Agreement.


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<PAGE>

      IN WITNESS  WHEREOF,  the parties  hereto have caused this Agreement to be
executed, the day and year first-above written.

      "CITY"                                        "CAL WATER"

CITY OF BAKERSFIELD                          CALIFORNIA WATER SERVICE
                                             COMPANY

By: /s/ Bob Price                            By: /s/ Peter C. Nelson
    -------------------------                    -------------------------
    BOB PRICE, Mayor                         Title: President
                                                    ----------------------

APPROVED AS TO CONTENT:                      By: /s/ [ILLEGIBLE]
WATER RESOURCES DEPARTMENT                       -------------------------
                                             Title: Corporate Secretary
                                                    ----------------------
By: /s/ Gene Bogart
    -------------------------
    GENE BOGART
    Water Resources Manager

APPROVED AS TO FORM:
OFFICE OF THE CITY ATTORNEY

By: /s/ Bart J. Thiltgen
    -------------------------
    BART J. THILTGEN
    City Attorney

COUNTERSIGNED:

By: /s/ Gregory J. Klimko
    -------------------------
    GREGORY J. KLIMKO
    Finance Director

Attachments:

         Exhibit "A", Exhibit "B", Exhibit "C"

ADD:dlr
T:\Water\CalWaterNWSP 2 wpd
December 14, 1998


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<PAGE>

                                                           Kern County EXHIBIT A

                                                           Agt # 734-98

                              AGREEMENT NO. 98-224
                               Approved 9/23/1998

                              OPERATIONAL AGREEMENT
                         NORTHEAST WATER SUPPLY PROJECT

      THIS  OPERATIONAL  AGREEMENT,  is made and  entered  into this 15th day of
September, 1998, by and between the CITY OF BAKERSFIELD, a municipal corporation
and  charter  city  ("CITY"  herein),  and  the  COUNTY  OF  KERN,  a  political
subdivision of the State of California ("COUNTY" herein),

                                    RECITALS

      WHEREAS,  CITY and CALIFORNIA  WATER SERVICE  COMPANY ("CAL WATER" herein)
are  cooperating  to develop  water  service to CITY  residents in the northeast
Bakersfield area, and

      WHEREAS,  COUNTY leases property to the COUNTY BOARD) OF EDUCATION for the
benefit of CALIFORNIA LIVING MUSEUM ("CALM" herein) for non-profit purposes; and

      WHEREAS,  COUNTY AND CALM see benefits to both parties in  developing  the
northeast  water supply as set forth in this Agreement and in  cooperating  with
the CITY and CAL WATER in granting easements for its development; and

      WHEREAS,  the water  facilities  to be  constructed  include,  but are not
limited to,  access,  diversion  works,  headworks,  headgates,  pump  stations,
canals,  water  storage  facilities,  settling  reservoirs  or ponds,  turnouts,
pipelines,  filtration plants, and other related facilities ("Water  Facilities"
herein); and

      WHEREAS,  CAL WATER is currently  engaged in purveying  domestic water to,
among others, residents and citizens within the CITY's incorporated area; and

      WHEREAS,  that portion of the Kern River County Park,  owned by the COUNTY
consisting  of CALM,  Kern County  Soccer  Park,  and Hart  Memorial  Park would
benefit from an improved water delivery service from the Kern River; and

      WHEREAS,  CITY and CAL WATER desire to  cooperate  and effect a project to
provide high quality  domestic water service using Kern River water to residents
and citizens of the CITY in the northeast Bakersfield area.

      NOW,  THEREFORE,  incorporating  the foregoing  recitals herein,  CITY and
COUNTY mutually agree as follows:


                                  Page 1 of 5
<PAGE>

1.  OWNERSHIP  OF WATER.  CITY shall own all water  diverted  into the  Transfer
Facilities which shall start with the Kern River intake or headworks, except for
water diverted for COUNTY use under the existing March 17, 1934 agreement.  CITY
may sell or  otherwise  put its  water to  beneficial  use  Notwithstanding  the
foregoing,  the existing  March 17, 1934  agreement for supplying  water to Hart
Memorial Park shall remain in full force and effect and shall not be modified by
this Agreement. In addition, CITY agrees to provide to County (at no cost) up to
a maximum of 648 acre feet of City  water  annually  for use on County  property
which is currently under lease to CALM and the Kern County Soccer Foundation, in
addition to water diverted under the March 17, 1934 agreement.

2.  OPERATION  AND  MAINTENANCE.  CITY  shall  be  responsible  for the  design,
construction,  operation and maintenance of the new Kern River intake structure,
low-lift pump station,  pipelines  connecting CITY's  facilities,  canal and raw
water storage reservoirs and settling ponds, including the turnouts (head gates)
to Hart Memorial  Park,  the Kern County Soccer Park and CALM,  and the required
service roads and security fencing. CITY shall maintain a minimum of 150 feet of
unobstructed public access paralleling the south shoreline of the Kern River (as
measured  from the mean high water mark) to allow public access to and along the
Kern River Notwithstanding the foregoing, CITY may preclude public access to the
Kern River along the length of the intake structure (for public safety reasons).
Portions of the intake structure may encroach south of the mean high water mark,
however, unobstructed public access along the south side of the intake structure
shall be at least 150 feet in width.  CITY shall provide  suitable  screening of
the  Kern  River  intake  structure,   including  but  not  limited  to,  native
vegetation,  trees,  berms and other  landscapes  that  compliment  the  natural
surrounding.  Under CITY's direction and control, CAL WATER shall be responsible
for the design,  construction,  operation and  maintenance of the high-lift pump
station and metering  facility,  pipelines  connecting to CAL WATER's facilities
located at the south end of the future reservoir sites. Neither COUNTY, the Kern
County Soccer  Foundation or CALM will have  maintenance,  repair;  or operation
responsibility of any kind or nature concerning the Water Facilities,  including
without  limitation,  all electrical costs associated with the operations of the
low and high-lift pump stations.

3. RECORDS AND SCHEDULING. CITY shall maintain records of all water diverted via
Water  Facilities  head  works.  All  water to be  diverted  shall be  scheduled
Twenty-four  (24) hours in advance through the CITY Water  Dispatcher.  CITY, as
owner  and  operator  of the  head  works,  shall  have  sole  control  of same.
Notwithstanding  the  foregoing,  CITY  will  provide  such  water as  COUNTY is
entitled  to  in  Section  1  hereof,  on an  uninterrupted  basis  (except  for
circumstances beyond CITY's control) unless notified to the contrary by COUNTY.

4. TERM. The term of this Agreement shall commence the day and year  first-above
written and the same shall  continue  thereafter in full force and effect unless
terminated.  This Agreement terminates if the easement reverts to the COUNTY for
failure to engage in the uses specified therein.

5.  ASSIGNMENT.  This Agreement shall not be assigned by any party, or any party
substituted, without prior written consent of all the parties.


                                  Page 2 of 5
<PAGE>

6. BINDING  EFFECT.  The rights and obligations of this Agreement shall inure to
the benefit of, and be binding  upon,  the  parties to the  Agreement  and their
heirs,  administrators,   executors,  personal  representative,  successors  and
assigns.

7. CITY  INSURANCE.  CITY,  in order to protect  COUNTY,  its  governing  board,
commissions,  officers,  agents and employees against all claims and expense for
death,  injury,  loss, or damage as a result of CITY's use of and  activities on
the  premises or in  connection  therewith,  shall  secure and maintain in force
during the life of the  Agreement  and  covering  all of CITY's  operations  and
activities on the premises, the following insurance:

      CITY  represents it is self insured with certain excess coverage and will,
throughout the term of this  Agreement,  maintain  self-insurance  limits of One
Million Dollars  ($1,000,000) with a minimum of excess insurance coverage to Ten
Million Dollars ($10,000,000).  CITY warrants that, at all times during the term
of this Agreement, it shall have and maintain worker's compensation insurance in
compliance with the Labor Code of the State of California.

8. JOINT LIMITATION ON LIABILITIES AND INDEMNIFICATION.

      8.1 No party  shall be  liable to any  other  party for any loss,  damage,
liability,  claim or cause of action for damage to or destruction of property or
for injury to or death of persons arising solely from any act or omission of any
other party's officers agents or employees.

      8.2 CITY and  COUNTY  agree  to  indemnify,  defend  and hold  each  other
harmless  from any and all  claims,  demands  liabilities,  losses  or causes of
action which result from its own acts or omissions  (either  directly or through
or by its agents, officers, or employees) to such extent and in such part as the
respective  parties  are found by reason of law to have  proximately  caused the
injury or damage.

      8.3 The party  against whom any claim  arising from any subject  matter of
this  Agreement is filed shall give prompt  notice of the filing of the claim to
all other parties.

9. CORPORATE AUTHORITY.  Each individual executing this Agreement represents and
warrants  they are duly  authorized  to execute and deliver  this  Agreement  on
behalf  of the  corporation  or  organization,  if any,  named  herein  and this
Agreement is binding upon said  corporation or  organization  in accordance with
its terms.

10. EXECUTION.  This Agreement is effective upon execution. It is the product of
negotiation  and all parties  are equally  responsible  for  authorship  of this
Agreement.  Section  1654 of the  California  Civil  Code shall not apply to the
interpretation of this Agreement.

11.  EXHIBITS.  In the event of a  conflict  between  the terms,  conditions  or
specifications  set  forth in this  Agreement  and  those in  exhibits  attached
hereto, the terms, conditions, or specifications set


                                  Page 3 of 5
<PAGE>

forth in this Agreement  shall prevail.  All exhibits to which reference is made
in this  Agreement are deemed  incorporated  in this  Agreement,  whether or not
actually attached.

12. FORUM. Any lawsuit pertaining to any matter arising under, or growing out of
this Agreement shall be instituted in Kern County, California.

13. MERGER AND  MODIFICATION.  This  Agreement  sets forth the entire  Agreement
between the parties and  supersedes  all other oral or written  representations.
This  Agreement  may be modified  only in a writing  approved by the Kern County
Board of Supervisors and the CITY Council.

14. NON-INTEREST.  No officer or employee of the CITY shall hold any interest in
this Agreement (California Government Code section 1090).

15.  NOTICES.  All notices  relative to this Agreement shall be given in writing
and shall be personally  served or sent by certified or  registered  mail and be
effective upon actual personal  service or depositing in the United States mail.
The parties shall be addressed as follows, or at any other address designated by
notice:

             CITY:   CITY OF BAKERSFIELD
                     Water Resources Dept.
                     1000 Buena Vista Road
                     Bakersfield, CA 93311

             COUNTY: County of Kern
                     Parks and Recreation Dept.
                     1110 Golden State Ave.
                     Bakersfield, CA 93301

16.  WAIVER OF DEFAULT.  The failure of any party to enforce  against  another a
provision of this Agreement  shall not constitute a waiver of that party's right
to enforce  such a provision  at a later  time,  and shall not serve to vary the
terms of this Agreement.

///

                                       ///

                                                                             ///


                                  Page 4 of 5
<PAGE>

      IN WITNESS  WHEREOF,  the parties  hereto have caused this Agreement to be
executed, the day and year first-above written.

      "CITY"                                       "COUNTY"

CITY OF BAKERSFIELD                          COUNTY OF KERN

By: /s/ Bob Price                            By: /s/ Pete H. Parra
    -------------------------                    -------------------------
    BOB PRICE, Mayor                             PETE H. PARRA, Chairman,
                                                 Board of Supervisors

APPROVED AS TO CONTENT:                      APPROVED AS TO CONTENT:
WATER RESOURCES DEPATMENT                    PARKS & RECREATION DEPT.

By: /s/ Gene Bogart                          By: /s/ Robert D. Addison
    -------------------------                    -------------------------
    GENE BOGART                                  ROBERT D. ADDISON, Director
    Water Resources Manager

APPROVED AS TO FORM:                         APPROVED AS TO CONTENT:
OFFICE OF THE CITY ATTORNEY                  COUNTY ADMINISTRATIVE OFFICE

By: /s/ Alan D. Daniel                       By: /s/ William A. Wilbanks
    -------------------------                    -------------------------
    ALAN D. DANIEL                               WILLIAM A. WILBANKS, Assistant
    Assistant City Attorney                      County Administrative Officer
                                                 for General Services

COUNTERSIGNED:                               APPROVED AS TO FORM:
                                             OFFICE OF THE COUNTY COUNSEL

By: /s/ Gregory J. Klimko                    By: /s/ Bruce Divelbliss
    -------------------------                    -------------------------
    GREGORY J. KLIMKO                            BRUCE DIVELBLISS, Deputy
    Finance Director


                                  Page 5 of 5
<PAGE>

                                James Maples Assessor-Recorder          JASON
                                Kern County Official Records            Pages: 6

                                DOCUMENT #: 0198134283                 9/29/1998
                                                                       8:00:00
RECORDING REQUESTED BY AND
WHEN RECORDED MAIL TO:
                                    [BAR CODE OMITTED]          Fees
CITY OF BAKERSFIELD                     0198132483              Taxes
PROPERTY MANAGEMENT DEPT                                        Other
1501 TRUXTLJN AVENUE                                            TOTAL
BAKERSFIELD, CA 93301                                            PAID

                                                                   Stat Types: I
--------------------------------------------------------------------------------
Portion of Assessor's Parcel No 386-030-17        Space above for Recorder's use

                                                                            4951

             NON-EXCLUS1VE EASEMENT FOR WATER FACILITIES AND ACCESS

      FOR VALUABLE CONSIDERATION,  receipt of which is hereby acknowledged,  the
COUNTY OF KERN, a political  subdivision  of the State of California  ("County")
hereby grants to the CITY OF  BAKERSFIELD,  a municipal  corporation and charter
city ("City"), upon condition that the City engages in the described uses of the
property, a non-exclusive easement to lay, remove, construct, operate, maintain,
repair,  reconstruct,  or change the size of  electrical  facilities,  diversion
works,  head works,  head gates,  sealing  reservoirs or ponds,  pump  stations,
canals,  water storage  facilities  and the pertinent and necessary  surface and
subsurface structures,  fittings, and other equipment, with the right of ingress
and egress  thereto,  in,  under,  across,  over and upon those  parcels of land
described  in  Exhibit  "A" as Parcel  No. 1,  Parcel No. 2 and Parcel No. 3 and
shown on the drawing  entitled  "Figure 1", all of which are attached hereto and
incorporated   herein  by  this  reference  City  shall  maintain  150  feet  of
unobstructed  public access paralleling the Kern River as measured from the mean
high water mark or the south side of any intake  structure on the southern  side
of the Kern River.  City may  prevent  access to any intake  structure  built by
City. The design,  construction  and maintenance of the water  facilities  shall
compliment the natural park setting of Kern River County Park. All  construction
plans must be approved in advance by County.  County  shall have a 60 day period
in which to review and comment on the plans.  The plans shall be deemed approved
if County does not respond within 60 days of County's  receipt of the plans. The
rights  conveyed  hereunder are subject to the  provisions of the 1974 Quitclaim
Deed recorded in the County of Kern at Book 4847 Page 1882, whereby the State of
California  transferred  title to the  property  described in Exhibit "A" to the
County of Kern,  including  the  restriction  therein  that the property be used
"...only for park and recreation purposes..."

In the event the City fails to use the easement  for any of the stated  purposes
for a period of two (2) years, all rights conveyed hereunder shall automatically
revert to the County, who shall be immediately  entitled to exclusive possession
of the premises. In the event of such reversion, City shall restore the property
encumbered by the easement to its original  condition,  or as near thereto as is
reasonably possible, unless directed otherwise by County.

IN WITNESS WHEREOF, COUNTY executes this easement on:

                                                  September 15, 1998
                                                  -------------

                                                  /s/ Pete H. Parra
                                                  ------------------------------
                                                  Chairman, Board of Supervisors

                                                                        "County"
<PAGE>

                                                                            4951

                               CITY OF BAKERSFIELD
                               RESERVOIR EASEMENT

                                  PARCEL NO. 1

      All that portion of Section 5,  Township 29 South,  Range 29 East,  MDB&M,
County of Kern, State of California, being a parcel of land described as:

      Commencing  at the  Northwest  corner  of the  Southwest  quarter  of said
Section;

THENCE (1) South 0(degrees) 39' 47" East,  along the West line of said Southwest
      quarter,  a distance of 433.02 feet to the  centerline  of County Road No.
      2239 as shown on Map  9P1KRP1aM5,  on file in the  Kern  County  Surveyors
      office;

THENCE (2) South 65(degrees) 07' 49" East, along said centerline,  a distance of
      414.81 feet, to the centerline of the future extension of Morning Drive;

THENCE (3) North 42(degrees) 19' 44" East,  along said extension,  a distance of
      800.00 feet;

THENCE (4) South  47(degrees)  40' 16" East,  a  distance  of 55.00  feet to the
      easterly right-of-way of the future extension of Morning Drive;

THENCE (5) North 42(degrees)  19' 44" East, a distance of 886.31 feet,  to Lease
      Corner No. 7 as identified on said Map 9P1KRP1aM5;

THENCE (6) South 70(degrees) 28' 33" East, a distance of 37.97 feet, to the true
      point of beginning;

THENCE (7) South 70(degrees)  28' 33" East, a distance of 1265.89 feet, to Lease
      Corner No 6;

THENCE (8) From a tangent which bears North  83(degrees) 02' 16" East,  easterly
      along a curve, concave southerly,  having a radius of 1800 feet, through a
      central angle of 7(degrees) 57' 28", an arc length of 250.00 feet;

THENCE (9) North 00(degrees) 59' 44" East, 70.00' to the beginning of a curve;

THENCE (10) From a tangent which bears South  89(degrees) 00' 16" East, easterly
      along a curve, concave southerly,  having a radius of 1870 feet, through a
      central angle of 9(degrees) 11' 31", an arc length of 300 00 feet;

THENCE (11) South 10(degrees) 11' 15" West, 140.00 feet;

THENCE (12) South 78(degrees) 32' 18" West, 963.45 feet;

THENCE (13) North 70(degrees) 28' 33" West, 400.00 feet;

THENCE (14) South 72(degrees) 18' 35" West, 1096.91 feet;

THENCE (15) North 47(degrees)  40' 16" West,  125.00  feet,  to a point  located
      35.00  feet from the  easterly  right-of-way  of the future  extension  of
      Morning Drive;

THENCE (16)  North 42(degrees)  19' 44" East,  1101.03  feet,  on a line that is
      35.00 feet  easterly of an parallel to the  easterly  right-of-way  of the
      future extension of Morning Drive, to the True Point of Beginning

      Containing 20.65 acres more or less

                                                             [SEAL]
                                                REGISTERED PROFESSIONAL ENGINEER
                                                        MORRIS W. TAYLOR
                                                      /s/ Morris W. Taylor
                                                            No 13340
                                                        Exp. Date 3-31-01
                                                              CIVIL
                                                       STATE OF CALIFORNIA

                                   EXHIBIT "A"
<PAGE>

                                                                            4951

                               CITY OF BAKERSFIELD
                              ACCESS ROAD EASEMENT

                                  PARCEL NO. 2

      All that portion of Section 5,  Township 29 South,  Range 29 East,  MDB&M,
County of Kern, State of California,  being a parcel of land, more  particularly
described as follows:

      A 24 foot wide  easement for the  construction  and operation of an access
      road commencing at the entrance to the California  Living Museum at County
      Road No. 2239;

THENCE(1) Following  existing and new road alignments  northwesterly to the base
      of the bluff,  and then  continuing  westerly along the base of the bluff,
      northerly of the Bike Path,  and  northerly and easterly of the Lease Line
      for the California  Living Museum,  to a point on the southwest  corner of
      Parcel No. 1, an approximate length of 2230 feet.

      Containing 1.2 acres more or less.

                                                             [SEAL]
                                                REGISTERED PROFESSIONAL ENGINEER
                                                        MORRIS W. TAYLOR
                                                      /s/ Morris W. Taylor
                                                            No 13340
                                                        Exp. Date 3-31-01
                                                              CIVIL
                                                       STATE OF CALIFORNIA

                                   EXHIBIT "A"
<PAGE>

                                                                            4951

                               CITY OF BAKERSFIELD
                               PIPE LINE EASEMENT

                                   PARCEL NO.3

      All that portion of Section 5,  Township 29 South,  Range 29 East,  MDB&M,
County of Kern, State of California, being a parcel of land described as:

      Commencing  at the  Northwest  corner  of the  Southwest  quarter  of said
Section,

THENCE (1) South 0(degrees) 39' 47" East,  along the West line of said Southwest
      quarter,  a distance of 433.02 feet to the  centerline  of County Road No.
      2239 as shown on Map  9P1KRP1aM5,  on file in the  Kern  County  Surveyors
      office;

THENCE (2) South 65(degrees) 07' 49" East, along said centerline,  a distance of
      414.81 feet, to the centerline of the future extension of Morning Drive;

THENCE (3) North 42(degrees) 19' 44" East,  along said extension,  a distance of
      600.00 feet;

THENCE (4) South  47(degrees)  40' 16"  East,  a  distance  of 80.00 feet to the
      easterly  right-of-way of the future extension of Morning Drive also being
      the true point of beginning:

THENCE (5) continuing South 47(degrees) 40' 16" East, a distance of 136.36 feet;

THENCE (6) South 42(degrees) 19' 44" West, a distance of 290.03 feet, to a point
      on  the  northerly  right-of-way  of  County  Road  2239  (Alfred  Harrell
      Highway);

THENCE (7) along  said  right-of-way  line  North  47(degrees)  39' 26"  West, a
      distance of 136.38 feet;

THENCE (8) North 42(degrees) 19' 44" East, a distance of 290.00 feet to the true
      point beginning.

      Containing 0.91 acres more or less.

                                                             [SEAL]
                                                REGISTERED PROFESSIONAL ENGINEER
                                                        MORRIS W. TAYLOR
                                                      /s/ Morris W. Taylor
                                                            No 13340
                                                        Exp. Date 3-31-01
                                                              CIVIL
                                                       STATE OF CALIFORNIA

                                   EXHIBIT "A"
<PAGE>

                                  [MAP OMITTED]

                                                             [SEAL]
                                                REGISTERED PROFESSIONAL ENGINEER
                                                        MORRIS W. TAYLOR
                                                      /s/ Morris W. Taylor
                                                            No 13340
                                                        Exp. Date 3-31-01
                                                              CIVIL
                                                       STATE OF CALIFORNIA

                                   EXHIBIT "A"

                                                 Kennedy/Jenks Consultants

                                                    CITY OF BAKERSFIELD
                                           RESERVOIR, ACCESS & PIPELINE EASEMENT

                                                        PARCEL MAP

                                                      AUGUST 6, 1998
                                                         948608.00

                                                         Figure 1
<PAGE>

                                                                            4951

                            CERTIFICATE OF ACCEPTANCE

      THIS IS TO CERTIFY that the interest in real property conveyed by the deed
or  grant  dated  September  15,  1998  from  County  of  Kern,  to the  City of
Bakersfield,  a  political  corporation  and/or  governmental  agency  is hereby
accepted by order of the Council of the City of  Bakersfield  on  September  23,
1998,  and the grantee  consents to recordation  thereof by its duly  authorized
officer.

DATED: September 25, 1998
       -------------------------

                                            By: /s/ Bob Price
                                                --------------------------------
                                                            BOB PRICE
                                                Mayor of the City of Bakersfield
<PAGE>

                                                                     EXHIBIT "B"

                          Proposed Plan of Delivery of
                    City of Bakersfield's Kern River Water to
                      California Water Service Company for
                  Northeast Bakersfield Water Filtration Plant

Introduction

The City of Bakersfield ("CITY") Kern River water supplies vary in quantity from
year to year. Thus, the Miscellaneous  Water supplies  available to the City for
diversion to California Water Service  Company's ("CAL WATER")  filtration plant
will fluctuate on an annual basis.

An analysis of the annual  water  supplies  that will be made  available  to CAL
WATER was  performed  utilizing  historical  data and review of CITY water right
yields.

Assumptions:

                                      CITY:

1.)   Honor all presently existing agreements,  contracts or documents referring
      to provisions to supply Kern River water;

2.)   Best  use  its  acquired  surface  storage  reservoir  space  to  maximize
      conservation of miscellaneous water for filtration plant deliveries;

3.)   Operate its "2800 Acres"  banking and  extraction  facility to  supplement
      Kern River flows during  critically  "dry"  conditions to provide  minimum
      base flows to filtration plant;

4.)   Formulate  exchanges or trades of water supplies in anticipation of annual
      shortages of CITY miscellaneous water;

5.)   Exercise  the  provisions  of certain  contracts  for priority use of Kern
      River water within CITY boundaries and on CITY properties.

                                   CAL WATER:

1.)   Determine a ramp up timetable  for the  filtration  plant  initial  annual
      delivery requirement and expansion to full build-out;

2.)   Project  annual  delivery  schedule  required  to  meet  filtration  plant
      requirements including demands for maximum and minimum month & maximum and
      minimum day;

3.)   Limit  take to  filtration  plant in  critically  "dry"  years  to  amount
      necessary to serve only the new customers in the immediate vicinity of the
      filtration plant;

4.)   Optimize use of alternative water supply sources, both treated surface and
      groundwater resources, in years of critically dry or low flows on the Kern
      River;

5.)   Use best efforts to regulate  receiving  Kern River waters into its system
      to minimize peaks and dips in flows.
<PAGE>

Projected Annual Delivery Schedules

The delivery  schedules are developed to quantify projected water deliveries for
the NEWSP under  various  hydrologic  conditions  on the Kern  River.  CITY will
attempt to deliver  the water in  conformance  with the  Normal  Delivery  where
practical  and at the ability and  convenience  of the CITY.  However,  CITY may
deliver  pursuant  to  the  Critically  Dry or  Maximum  Delivery  schedules  as
conditions warrant.

                               1.) NORMAL DELIVERY

<TABLE>
<CAPTION>
=============================================================================================
            PLANT           MAXIMUM      PEAK        MINIMUM       M[NIMUM            ANNUAL
YEAR       CAPACITY          MONTH       FLOW         MONTH         FLOW               TOTAL
            (MGD)            (AF)       (CES)                       (CFS)               (AF)
=============================================================================================
<S>           <C>            <C>          <C>         <C>            <C>               <C>
2002          10             1,000        15.5        1,000          15.5              12,000

2007          20             1,900        31          1,900          31                22,800

2012          40             3,700        62          1,900          31                29,500

2017          60             5,500        93          1,900          31                39,600
=============================================================================================
</TABLE>

                           2.) CRITICALLY DRY DELIVERY

<TABLE>
<CAPTION>
=============================================================================================
            PLANT           MAXIMUM      PEAK        MINIMUM       M[NIMUM            ANNUAL
YEAR       CAPACITY          MONTH       FLOW         MONTH         FLOW               TOTAL
            (MGD)            (AF)       (CES)                       (CFS)               (AF)
=============================================================================================
<S>           <C>           <C>           <C>         <C>            <C>               <C>
2002          10              300           5          200            3.5               4,500

2007          20              500           8          300            5                 4,500

2012          40            1,500          25          500            8                10,525

2017          60            2,000          35          625           10.5              13,825
=============================================================================================
</TABLE>


                                        2
<PAGE>

                              3.) MAXIMUM DELIVERY

<TABLE>
<CAPTION>
=============================================================================================
            PLANT           MAXIMUM      PEAK        MINIMUM       M[NIMUM            ANNUAL
YEAR       CAPACITY          MONTH       FLOW         MONTH         FLOW               TOTAL
            (MGD)            (AF)       (CES)                       (CFS)               (AF)
=============================================================================================
<S>           <C>            <C>          <C>         <C>            <C>               <C>
2002          10             1,000        15.5        1,000          15.5              12,000

2007          20             1,900        31          1,900          31                22,800

2012          40             3,700        62          2,500          42                37,200

2017          60             5,500        93          3,500          59                54,000
=============================================================================================
</TABLE>

Revised Deliveries

If CAL WATER desires to vary its delivery schedule, it may do so by submitting a
revised  schedule  to CITY no later  than  February  1 of the year for which CAL
WATER  desires  to vary  schedule.  CITY  shall  review  and advise CAL WATER of
approval of revised  schedule for that  remaining  year by March 1 of that year.
CITY will make reasonable efforts to deliver the water according to the approved
revised  schedules.  The inability of CAL WATER to accept water when tendered by
CITY under schedules herein shall be deemed to be water delivered under terms of
this Agreement


                                        3
<PAGE>

                                  [MAP OMITTED]

                                   Exhibit "C"