Document:

Exhibit 4.25
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                        CALIFORNIA WATER SERVICE COMPANY

                      ELEVENTH SUPPLEMENT TO NOTE AGREEMENT

                          Dated as of November 3, 2003

         Re:         $20,000,000 5.52% Series M Senior Notes
                              Due November 1, 2013

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                      ELEVENTH SUPPLEMENT TO NOTE AGREEMENT

                                                                     Dated as of
                                                                November 3, 2003

To the Purchasers named in
Schedule A hereto

Ladies and Gentlemen:

         This  Eleventh  Supplement to Note Purchase  Agreement  (the  "Eleventh
Supplement") is between  California  Water Service Company (the "Company") whose
address  is  1720  North  First  Street,  San  Jose,  California  95112  and the
institutional investors named on Schedule A attached hereto (the "Purchasers").

         Reference  is hereby made to that certain  Note  Agreement  dated as of
March 1, 1999 (the "Note  Agreement")  between the  Company  and the  purchasers
listed on Schedule I thereto. All capitalized terms not otherwise defined herein
shall have the same  meaning as specified  in the Note  Agreement.  Reference is
further made to Section 4.3 thereof which requires  that,  prior to the delivery
of any Additional Notes, the Company and each Additional Purchaser shall execute
and deliver a Supplement.

         The  Company  hereby  agrees  with each  Purchaser  named on Schedule A
hereto as follows:

         1. The  Company  has  authorized  the  issue  and  sale of  $20,000,000
aggregate  principal  amount of its 5.52%  Series M Senior Notes due November 1,
2013 (the  "Series M  Notes").  The Series M Notes,  together  with the Series B
Notes initially issued pursuant to the Note Agreement, the Series C Notes issued
pursuant to the First  Supplement to Note Agreement dated as of October 1, 2000,
the Series D Notes issued  pursuant to the Second  Supplement to Note  Agreement
dated as of September 1, 2001,  the Series E Notes issued  pursuant to the Third
Supplement to Note Agreement  dated as of May 1, 2002, the Series F Notes issued
pursuant to the Fourth Supplement to Note Agreement dated as of August 15, 2002,
the Series G Notes issued  pursuant to the Fifth  Supplement  to Note  Agreement
dated as of November 1, 2002,  the Series H Notes  issued  pursuant to the Sixth
Supplement to Note  Agreement  dated as of December 1, 2002,  the Series I Notes
issued  pursuant to the Seventh  Supplement to Note Agreement dated as of May 1,
2003,  the Series J Notes  issued  pursuant to the Amended and  Restated  Eighth
Supplement to Note Agreement  dated as of May 1, 2003, the Series K Notes issued
pursuant to the Ninth  Supplement  to Note  Agreement  dated as of February  15,
2003,  the  Series L Notes  issued  pursuant  to the  Tenth  Supplement  to Note
Agreement  dated as of February 15, 2003, the Series N Notes issued  pursuant to
the Twelfth  Supplement to Note Agreement  dated as of October 24, 2003 and each
Series of Additional Notes which may from time to time be issued pursuant to the
provisions of Section 1.4 of the Note Agreement, are collectively referred to as
the "Notes" (such term shall also include any such notes issued in

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substitution therefor pursuant to Section 9.2 of the Note Agreement). The Series
M Notes shall be substantially in the form set out in Exhibit 1 hereto with such
changes therefrom, if any, as may be approved by the Purchasers and the Company.

         2. Subject to the terms and  conditions  hereof and as set forth in the
Note  Agreement  and  on  the  basis  of  the   representations  and  warranties
hereinafter  set forth,  the Company agrees to issue and sell to the Purchasers,
and each  Purchaser  agrees to purchase from the Company,  Series M Notes in the
principal  amount set forth opposite such  Purchaser's name on Schedule A hereto
at a price of 100% of the principal amount thereof on the closing date hereafter
mentioned.

         3. Delivery of the  $20,000,000  in aggregate  principal  amount of the
Series M Notes will be made at the offices of Chapman  and Cutler LLP,  111 West
Monroe Street, Chicago,  Illinois 60603-4080 against payment therefor in Federal
Reserve or other funds current and immediately available at the principal office
of Bank of America,  ABA No. 121000358,  Account No. 14879-00161,  Account Name:
California  Water Service Company  Security Sales, in the amount of the purchase
price at 11:00 A.M., San Francisco, California time, on November 3, 2003 or such
later date (not later than  November 10, 2003) as shall  mutually be agreed upon
by the Company and the Purchasers of the Series M Notes (the "Closing Date").

         4. Prepayment of Notes.

         (a) Required  Prepayments.  No prepayments are required to be made with
respect to the Series M Notes prior to the expressed maturity date thereof other
than  prepayments  made in connection with an acceleration of the Series M Notes
pursuant to the provisions of Section 6.3 of the Note Agreement.

         (b) Optional Prepayment with Premium. Upon compliance with Section 4(d)
below the Company shall have the  privilege,  at any time and from time to time,
of prepaying  the  outstanding  Notes of any Series,  either in whole or in part
(but if in part then in a minimum  principal  amount of  $100,000) by payment of
the  principal  amount of the Notes of such  Series,  or  portion  thereof to be
prepaid,  and accrued interest thereon to the date of such prepayment,  together
with a premium equal to the  Make-Whole  Amount,  determined as of five Business
Days prior to the date of such prepayment pursuant to this Section 4(b).

         (c) Optional  Prepayment  at Par in the Event of  Condemnation.  In the
event a Material  Condemnation  shall have occurred with respect to any property
of the Company or a Restricted  Subsidiary,  then upon  compliance  with Section
4(d) below the Company  shall have the privilege of applying the proceeds of any
condemnation award received in connection with such Material Condemnation to the
prepayment of the principal amount of the Notes of any Series then  outstanding,
or any portion  thereof to the extent of such  proceeds,  together  with accrued
interest  thereon to the date of such prepayment.  Any optional  prepayment made
pursuant to this Section 4(c) shall be without premium.

         (d) Notice of Optional Prepayments. The Company will give notice of any
prepayment of the Notes pursuant to Section 4(b) or 4(c) to each Holder of Notes
to be prepaid  not less than 30 days nor more than 60 days before the date fixed
for such optional  prepayment  specifying

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(a) such date,  (b) the  Section of this  Eleventh  Supplement  under  which the
prepayment is to be made,  (c) the principal  amount of the Holder's Notes to be
prepaid on such date,  (d) whether a premium  may be payable,  (e) the date when
the premium,  if any, will be calculated,  (f) the estimated  premium,  together
with a reasonably  detailed  computation of such estimated premium,  and (g) the
accrued interest  applicable to the prepayment.  Such notice of prepayment shall
also  certify all facts,  if any,  which are  conditions  precedent  to any such
prepayment.  Notice of prepayment having been so given, the aggregate  principal
amount  of the Notes to be  prepaid  specified  in such  notice,  together  with
accrued interest  thereon and the premium,  if any, payable with respect thereto
shall become due and payable on the  prepayment  date  specified in said notice.
Not later than two Business Days prior to the prepayment  date specified in such
notice,  the Company shall  provide each Holder of a Note to be prepaid  written
notice of the premium,  if any,  payable in connection with such prepayment and,
whether or not any premium is payable, a reasonably detailed  computation of the
Make-Whole Amount.

         (e) Application of Prepayments.  In the case of each partial prepayment
of the Notes  pursuant to the  provisions of Section 4(b) or 4(c), the principal
amount of the Notes of the Series to be prepaid shall be allocated  among all of
the Notes of such Series at the time  outstanding  in  proportion,  as nearly as
practicable, to the respective unpaid principal amounts thereof.

         (f) Direct Payment.  Notwithstanding anything to the contrary contained
in the Note Agreement, this Eleventh Supplement or the Notes, in the case of any
Note owned by any Holder that is a Purchaser,  Additional Purchaser or any other
Institutional  Holder which has given written  notice to the Company  requesting
that  the  provisions  of this  Section  4(f)  shall  apply,  the  Company  will
punctually pay when due the principal thereof,  interest thereon and premium, if
any,  due with  respect to said  principal,  without  any  presentment  thereof,
directly to such Holder at its address set forth herein or such other address as
such Holder may from time to time  designate  in writing to the Company or, if a
bank account with a United  States bank is so  designated  for such Holder,  the
Company  will make such  payments in  immediately  available  funds to such bank
account,  marked for attention as indicated,  or in such other manner or to such
other  account in any United  States  bank as such  Holder may from time to time
direct in writing.

         (g) Make Whole Amount. The term "Make-Whole Amount" means, with respect
to any Series M Note, an amount equal to the excess,  if any, of the  Discounted
Value of the Remaining  Scheduled  Payments with respect to the Called Principal
of such  Note  over the  amount  of such  Called  Principal,  provided  that the
Make-Whole  Amount  may in no event  be less  than  zero.  For the  purposes  of
determining  the  Make-Whole  Amount,  the  following  terms have the  following
meanings:

                  "Called  Principal"  means, with respect to any Series M Note,
         the  principal  of such Note that is to be prepaid  pursuant to Section
         4(b) or has become or is  declared  to be  immediately  due and payable
         pursuant to Section 6.3 of the Note Agreement, as the context requires.

                  "Discounted Value" means, with respect to the Called Principal
         of any Series M Note, the amount  obtained by discounting all Remaining
         Scheduled  Payments  with respect to such Called  Principal  from their
         respective  scheduled due dates to the

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         Settlement  Date with respect to such Called  Principal,  in accordance
         with accepted  financial  practice and at a discount factor (applied on
         the same periodic basis as that on which interest on the Series M Notes
         is payable) equal to the Reinvestment Yield with respect to such Called
         Principal.

                  "Reinvestment   Yield"  means,  with  respect  to  the  Called
         Principal  of any  Series M Note,  0.50%,  plus the  yield to  maturity
         implied by (i) the  yields  reported,  as of 10:00 A.M.  (New York City
         time) on the fifth  Business Day  preceding  the  Settlement  Date with
         respect to such Called Principal,  on the display page of the Bloomberg
         Financial Markets Services Screen PX1 or the equivalent screen provided
         by Bloomberg  Financial  Markets  Commodities  News for actively traded
         U.S.  Treasury  securities  having a  maturity  equal to the  Remaining
         Average Life of such Called  Principal as of such  Settlement  Date, or
         (ii) if such  yields  are not  reported  as of such time or the  yields
         reported as of such time are not  ascertainable,  the Treasury Constant
         Maturity  Series  Yields  reported,  for the  latest day for which such
         yields have been so reported as of the second  Business  Day  preceding
         the Settlement Date with respect to such Called  Principal,  in Federal
         Reserve  Statistical  Release H.15 (519) (or any  comparable  successor
         publication)  for actively  traded U.S.  Treasury  securities  having a
         constant  maturity  equal to the Remaining  Average Life of such Called
         Principal  as of such  Settlement  Date.  Such  implied  yield  will be
         determined,   if  necessary,  by  (a)  converting  U.S.  Treasury  bill
         quotations  to  bond-equivalent  yields  in  accordance  with  accepted
         financial  practice  and (b)  interpolating  linearly  between  (1) the
         actively traded U.S. Treasury security with the maturity closest to and
         greater than the  Remaining  Average  Life and (2) the actively  traded
         U.S.  Treasury  security with the maturity closest to and less than the
         Remaining Average Life.

                  "Remaining  Average  Life"  means,  with respect to any Called
         Principal,  the number of years (calculated to the nearest  one-twelfth
         year) obtained by dividing (i) such Called  Principal into (ii) the sum
         of the products obtained by multiplying (a) the principal  component of
         each Remaining  Scheduled Payment with respect to such Called Principal
         by (b) the number of years (calculated to the nearest one-twelfth year)
         that will  elapse  between  the  Settlement  Date with  respect to such
         Called Principal and the scheduled due date of such Remaining Scheduled
         Payment.

                  "Remaining  Scheduled  Payments"  means,  with  respect to the
         Called  Principal  of any Series M Note,  all  payments  of such Called
         Principal and interest  thereon that would be due after the  Settlement
         Date with respect to such Called Principal if no payment of such Called
         Principal  were made prior to its scheduled due date,  provided that if
         such Settlement  Date is not a date on which interest  payments are due
         to be made  under the terms of the  Series M Notes,  then the amount of
         the next succeeding  scheduled  interest payment will be reduced by the
         amount of interest  accrued to such  Settlement Date and required to be
         paid on such Settlement Date pursuant to Section 4(b) hereof or Section
         6.3 of the Note Agreement.

                  "Settlement  Date" means, with respect to the Called Principal
         of any Series M Note, the date on which such Called  Principal is to be
         prepaid pursuant to Section 4(b)

<PAGE>

         hereof or has become or is declared to be  immediately  due and payable
         pursuant to Section 6.3 of the Note Agreement, as the context requires.

         5. Closing Conditions.

         (a) Conditions. The obligation of each Purchaser to purchase the Series
M Notes on the Closing Date shall be subject to the  performance  by the Company
of its agreements  hereunder which by the terms hereof are to be performed at or
prior to the time of delivery of the Series M Notes and to the following further
conditions precedent:

                  (i) Closing Certificate.  Such Purchaser shall have received a
         certificate  dated the Closing Date,  signed by the President or a Vice
         President  of the  Company,  the truth and accuracy of which shall be a
         condition to such Purchaser's obligation to purchase the Series M Notes
         proposed  to be sold to such  Purchaser  and to the effect that (1) the
         representations  and  warranties  of the Company set forth in Exhibit 2
         hereto are true and correct on and with  respect to the  Closing  Date,
         (2) the Company has performed all of its  obligations  hereunder  which
         are to be performed on or prior to the Closing Date, and (3) no Default
         or Event of Default has occurred and is continuing.

                  (ii)  Compliance   Certificate.   Such  Purchaser  shall  have
         received a  certificate  dated the Closing  Date,  signed by the Senior
         Financial Officer of the Company stating that such officer has reviewed
         the provisions of the Note  Agreement and this Eleventh  Supplement and
         setting forth the information  and  computation (in sufficient  detail)
         required in order to  establish  whether  the Company is in  compliance
         with Section 5.6 of the Note Agreement on the Closing Date.

                  (iii) Legal Opinions.  Such Purchaser shall have received from
         Bingham McCutchen LLP, counsel for the Company,  and Chapman and Cutler
         LLP,  special  counsel for the  Purchasers,  their  opinions  dated the
         Closing Date, in form and substance  satisfactory  to such  Purchasers,
         and  covering  the matters set forth  respectively  in Exhibits 3 and 4
         hereto.

                  (iv) Regulatory Approval. Prior to the Closing Date, the issue
         and sale of the  Series M Notes  shall  have  been duly  authorized  or
         approved by appropriate order of the Public Utilities Commission of the
         State of California (the  "Commission").  Such order shall be final and
         in full  force and  effect  and not  subject  to any  appeal,  hearing,
         rehearing or contest.  All conditions contained in any such order which
         are to be  fulfilled  on or prior to the issuance of the Series M Notes
         shall have been  fulfilled.  The Company  shall have  delivered  to the
         Purchasers and their special counsel a certified copy of such order and
         the application therefor.

                  (v) Related  Transactions.  The Company shall have consummated
         the sale of the entire principal amount of the Series M Notes scheduled
         to be sold on the Closing Date pursuant to this Eleventh Supplement.

<PAGE>

                  (vi)  Satisfactory  Proceedings.   All  proceedings  taken  in
         connection  with  the   transactions   contemplated  by  this  Eleventh
         Supplement,  and all documents  necessary to the consummation  thereof,
         shall be  satisfactory in form and substance to such Purchaser and such
         Purchaser's  special counsel,  and such Purchaser shall have received a
         copy  (executed  or  certified  as may  be  appropriate)  of all  legal
         documents or proceedings  taken in connection with the  consummation of
         said transactions.

                  (vii)  Purchase  Permitted By  Applicable  Law. On the Closing
         Date, the purchase of Series M Notes shall (a) be permitted by the laws
         and regulations of each jurisdiction to which any Purchaser is subject,
         without recourse to provisions  (such as Section  1405(a)(8) of the New
         York  Insurance  Law)  permitting  limited   investments  by  insurance
         companies  without  restriction  as to the character of the  particular
         investment,   (b)  not  violate  any   applicable   law  or  regulation
         (including,  without  limitation,  Regulation U, T or X of the Board of
         Governors  of the  Federal  Reserve  System)  and (c) not  subject  any
         Purchaser  to any tax,  penalty or  liability  under or pursuant to any
         applicable law or regulation, which law or regulation was not in effect
         on the date hereof. If requested by any Purchaser, such Purchaser shall
         have received an Officer's Certificate certifying as to such matters of
         fact as such Purchaser may reasonably  specify to enable such Purchaser
         to determine whether such purchase is so permitted.

                  (viii) Payment of Special Counsel Fees. The Company shall have
         paid,   on  or  before  the  Closing  Date,   the  fees,   charges  and
         disbursements  of the Purchasers'  special counsel referred to in (iii)
         above, to the extent  reflected in a statement of such counsel rendered
         to the Company at least one Business Day prior to the Closing Date.

                  (ix) Private  Placement  Number.  A Private  Placement  Number
         issued by Standard & Poor's CUSIP Service Bureau (in  cooperation  with
         the  Securities   Valuation  Office  of  the  National  Association  of
         Insurance  Commissioners)  shall  have been  obtained  for the Series M
         Notes.

         (b) The  obligation  of the  Company  to  deliver  the  Series  M Notes
hereunder  is  subject  to the  conditions  that (i) the  Commission  shall have
authorized  the  issuance  and sale by the  Company of the Series M Notes at the
price herein provided and said  authorization  shall be in full force and effect
and (ii) the entire  principal amount of the Series M Notes scheduled to be sold
on the  Closing  Date  pursuant  to this  Eleventh  Supplement  shall  have been
tendered by the  Purchasers.  If the  condition  specified  in this Section 5(b)
shall not have been  fulfilled  prior to or on the Closing  Date,  this Eleventh
Supplement and all the obligations of the Company hereunder,  except as provided
in Section 9.4 of the Note Agreement, may be cancelled by the Company.

         (c) If on the Closing Date the Company fails to tender to any Purchaser
the  Series  M Notes  to be  issued  to any  Purchaser  on  such  date or if the
conditions specified in Section 5(a) have not been fulfilled, such Purchaser may
thereupon  elect to be relieved of all further  obligations  under this Eleventh
Supplement.  Without  limiting the  foregoing,  if the  conditions  specified in
Section 5(a) have not been fulfilled, such Purchaser may waive compliance by the
Company with any such condition to such extent as such Purchaser may in its sole
discretion

<PAGE>

determine.  Nothing in this Section 5(c) shall operate to relieve the Company of
any of its obligations  hereunder or to waive any Purchaser's rights against the
Company.

         6. Each Purchaser  represents and warrants that the representations and
warranties  set forth in Section 3.2 of the Note  Agreement are true and correct
on the  date  hereof  with  respect  to the  Series  M Notes  purchased  by such
Purchaser.

         7. The Company and each Purchaser  agree to be bound by and comply with
the terms and  provisions  of the Note  Agreement as if such  Purchaser  were an
original signatory to the Note Agreement.

<PAGE>

California Water Service Company
Eleventh Supplement

         The execution  hereof shall  constitute a contract  between the Company
and the Purchaser(s)  for the uses and purposes  hereinabove set forth, and this
agreement  may  be  executed  in  any  number  of  counterparts,  each  executed
counterpart constituting an original but all together only one agreement.

                                      CALIFORNIA WATER SERVICE COMPANY

                                      By _______________________________________
                                         Name:  Richard D. Nye
                                         Title: Vice President, Chief Financial
                                                Officer and Treasurer

<PAGE>

California Water Service Company
Eleventh Supplement

Accepted as of November 3, 2003

                                      ALLSTATE LIFE INSURANCE COMPANY

                                      By _______________________________________
                                          Name:

                                      By _______________________________________
                                         Name:
                                         Authorized Signatories

<PAGE>

California Water Service Company
Eleventh Supplement

Accepted as of November 3, 2003

                                      NATIONWIDE LIFE INSURANCE COMPANY
                                      NATIONWIDE LIFE AND ANNUITY INSURANCE
                                        COMPANY
                                      NATIONWIDE MUTUAL INSURANCE COMPANY

                                      By _______________________________________
                                         Name:
                                         Title: Authorized Signatory

<PAGE>

                     INFORMATION RELATING TO THE PURCHASERS

                                                            PRINCIPAL AMOUNT OF
NAME AND ADDRESS OF PURCHASER                               SERIES M NOTES TO BE
                                                                 PURCHASED

ALLSTATE LIFE INSURANCE COMPANY                         $10,000,000 to be issued
3075 Sanders Road, STE G5D                              in two Notes as follows:
Northbrook, Illinois  60062-7127
Attention:  Private Placements Department             one Note for $7,500,000,
Telephone Number:  (847) 402-7117                    and one Note for $2,500,000
Telecopier Number:  (847) 402-3092

Payments

All  payments  on or in respect of the Notes to be made by Fedwire  transfer  of
immediately  available  funds,  identifying the name of the Issuer,  the Private
Placement  Number  preceded by "DPP" and the payment as  principal,  interest or
premium, in the exact format as follows:

         BBK =        Harris Trust and Savings Bank
                      ABA #071000288
         BNF =        Allstate Life Insurance Company
                      Collection Account #168-117-0
         ORG =        California Water Service Company
         OBI =        DPP - PPN: 130789 P# 1
                      Payment Due Date (MM/DD/YY) - P ______ (Enter "P" and the
                      amount of principal being remitted, for example,
                      P5000000.00) - I ______ (Enter "I" and the amount of
                      interest being remitted, for example, I225000.00)

Notices

All notices of scheduled payments and written confirmation of each such payment,
to be addressed:

         Allstate Insurance Company
         Investment Operations-Private Placements
         3075 Sanders Road, STE G4A
         Northbrook, Illinois  60062-7127
         Telephone:        (847) 402-6672 Private Placements
         Telecopy:         (847) 326-7032

All financial reports, compliance certificates and all other written
communications, including notice of prepayments to be addressed as first
provided above.

Name of Nominee in which Notes are to be issued:  None

Taxpayer I.D. Number:  36-2554642

                                   Schedule A
                                (to Supplement)

<PAGE>

                                                            PRINCIPAL AMOUNT OF
NAME AND ADDRESS OF PURCHASER                               SERIES M NOTES TO BE
                                                                 PURCHASED

NATIONWIDE LIFE INSURANCE COMPANY                                $4,000,000
One Nationwide Plaza (1-33-07)
Columbus, Ohio  43215-2220
Attention:  Corporate Fixed-Income Securities
Facsimile:  (614) 249-4553

Payments

All  payments  on or in  respect  of the  Notes to be by bank wire  transfer  of
Federal  or other  immediately  available  funds  (identifying  each  payment as
"California  Water Service Company,  5.52% Series M Senior Notes due November 1,
2013, PPN: 130789 P# 1, principal, premium or interest") to:

         The Bank of New York
         ABA #021-000-018
         BNF:  IOC566
         F/A/O Nationwide Life Insurance Company
         Attention:  P&I Department
         PPN:  130789 P# 1
         Security Description:  California Water Service Company Series M Notes

Notices

All notices of payment on or in respect of the Notes and written confirmation of
each such payment to:

         Nationwide Life Insurance Company
         c/o The Bank of New York
         P. O. Box 19266
         Newark, New Jersey 07195
         Attention: P&I Department

         With a copy to:

         Nationwide Life Insurance Company
         One Nationwide Plaza (1-32-05)
         Columbus, Ohio  43215-2220
         Attention:  Investment Accounting

All  notices  and  communications  other than those in respect to payments to be
addressed as first provided above.

Name of Nominee in which Notes are to be issued: None

Taxpayer I.D. Number:  31-4156830

                                      A-2
<PAGE>

                                                            PRINCIPAL AMOUNT OF
NAME AND ADDRESS OF PURCHASER                               SERIES M NOTES TO BE
                                                                 PURCHASED

NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY                    $3,000,000
One Nationwide Plaza (1-33-07)
Columbus, Ohio  43215-2220
Attention:  Corporate Fixed-Income Securities
Facsimile:  (614) 249-4553

Payments

All  payments  on or in  respect  of the  Notes to be by bank wire  transfer  of
Federal  or other  immediately  available  funds  (identifying  each  payment as
"California  Water Service Company,  5.52% Series M Senior Notes due November 1,
2013, PPN: 130789 P# 1, principal, premium or interest") to:

         The Bank of New York
         ABA #021-000-018
         BNF:  IOC566
         F/A/O Nationwide Life and Annuity Insurance Company
         Attention:  P&I Department
         PPN:  130789 P# 1
         Security Description:  California Water Service Company Series M Notes

Notices

All notices of payment on or in respect of the Notes and written confirmation of
each such payment to:

         Nationwide Life and Annuity Insurance Company
         c/o The Bank of New York
         P. O. Box 19266
         Newark, New Jersey 07195
         Attention: P&I Department

         With a copy to:

         Nationwide Life and Annuity Insurance Company
         One Nationwide Plaza (1-32-05)
         Columbus, Ohio  43215-2220
         Attention:  Investment Accounting

All  notices  and  communications  other than those in respect to payments to be
addressed as first provided above.

Name of Nominee in which Notes are to be issued:  None

Taxpayer I.D. Number:  31-1000740

                                      A-3
<PAGE>

                                                            PRINCIPAL AMOUNT OF
NAME AND ADDRESS OF PURCHASER                               SERIES M NOTES TO BE
                                                                 PURCHASED

NATIONWIDE MUTUAL INSURANCE COMPANY                             $3,000,000
One Nationwide Plaza (1-33-07)
Columbus, Ohio  43215-2220
Attention:  Corporate Fixed-Income Securities
Facsimile:  (614) 249-4553

Payments

All  payments  on or in  respect  of the  Notes to be by bank wire  transfer  of
Federal  or other  immediately  available  funds  (identifying  each  payment as
"California  Water Service Company,  5.52% Series M Senior Notes due November 1,
2013, PPN: 130789 P# 1, principal, premium or interest") to:

         The Bank of New York
         ABA #021-000-018
         BNF:  IOC566
         F/A/O Nationwide Mutual Insurance Company
         Attention:  P&I Department
         PPN:  130789 P# 1
         Security Description:  California Water Service Company Series M Notes

Notices

All notices of payment on or in respect of the Notes and written confirmation of
each such payment to:

         Nationwide Mutual Insurance Company
         c/o The Bank of New York
         P. O. Box 19266
         Newark, New Jersey 07195
         Attention: P&I Department

         With a copy to:

         Nationwide Mutual Insurance Company
         One Nationwide Plaza (1-32-05)
         Columbus, Ohio  43215-2220
         Attention:  Investment Accounting

All  notices  and  communications  other than those in respect to payments to be
addressed as first provided above.

Name of Nominee in which Notes are to be issued:  None

Taxpayer I.D. Number:  31-4177100

                                      A-4
<PAGE>

                             [FORM OF SERIES M NOTE]

THIS NOTE HAS NOT BEEN  REGISTERED  WITH THE SECURITIES AND EXCHANGE  COMMISSION
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND ANY SALE, TRANSFER,  PLEDGE OR
OTHER DISPOSITION THEREOF MAY BE MADE ONLY (1) IN A TRANSACTION REGISTERED UNDER
SAID ACT OR (2) IF AN EXEMPTION FROM REGISTRATION UNDER SAID ACT IS AVAILABLE.

                        CALIFORNIA WATER SERVICE COMPANY

                           5.52% Series M Senior Note
                              Due November 1, 2013

                                 PPN 130789 P# 1

No.                                                            November __, 2003

$

         California  Water  Service  Company,  a  California   corporation  (the
"Company"), for value received, hereby promises to pay to

                              or registered assigns
                       on the first day of November, 2013,
                             the principal amount of

                                                         DOLLARS ($____________)

and to pay interest  (computed  on the basis of a 360-day year of twelve  30-day
months) on the principal amount from time to time remaining unpaid hereon at the
rate  of  5.52%  per  annum  from  the  date  hereof  until  maturity,   payable
semiannually on the first day of each May and November in each year  (commencing
on the first of such dates after the date hereof) and at  maturity.  The Company
agrees to pay interest on overdue  principal  (including any overdue required or
optional  prepayment  of  principal)  and  premium,  if any,  and (to the extent
legally  enforceable)  on any overdue  installment  of interest,  at the rate of
7.52% per annum after the due date, whether by acceleration or otherwise,  until
paid. Both the principal hereof and interest hereon are payable at the principal
office of the Company in San Jose,  California in coin or currency of the United
States of  America  which at the time of payment  shall be legal  tender for the
payment of public and private debts.

         This Note is one of a series of Notes (the "Notes")  issued pursuant to
the Eleventh Supplement (the "Eleventh  Supplement") to the Note Agreement dated
as of March 1, 1999 (as from time to time  amended and  supplemented,  the "Note
Agreement"),  between the Company,

                                    EXHIBIT 1
                                 (to Supplement)

<PAGE>

the  Purchasers  named therein and  Additional  Purchasers of Notes from time to
time issued pursuant to any Supplement to the Note Agreement.  This Note and the
holder  hereof are  entitled  equally and ratably  with the holders of all other
Notes of all Series from time to time  outstanding  under the Note  Agreement to
all the  benefits  provided  for thereby or referred to therein.  Each holder of
this  Note  will  be  deemed,  by  its  acceptance  hereof,  to  have  made  the
representation  set forth in Section 3.2 of the Note  Agreement,  provided  that
such holder may (in reliance  upon  information  provided by the Company,  which
shall not be unreasonably withheld) make a representation to the effect that the
purchase by such holder of any Note will not constitute a non-exempt  prohibited
transaction under Section 406(a) of ERISA.

         This Note and the other Notes  outstanding under the Note Agreement may
be declared due prior to their expressed  maturity dates, all in the events,  on
the terms and in the manner and amounts as provided in the Note Agreement.

         The Notes are not subject to  prepayment or redemption at the option of
the Company  prior to their  expressed  maturity  dates  except on the terms and
conditions  and in the amounts and with the  premium,  if any,  set forth in the
Note Agreement.

         This Note is registered on the books of the Company and is transferable
only by surrender  thereof at the principal  office of the Company duly endorsed
or  accompanied  by a  written  instrument  of  transfer  duly  executed  by the
registered  holder of this Note or its  attorney  duly  authorized  in  writing.
Payment of or on account of  principal,  premium,  if any,  and interest on this
Note  shall be made  only to or upon  the  order in  writing  of the  registered
holder.

         This Note shall be construed and enforced in accordance  with,  and the
rights of the parties  shall be governed by, the law of the State of  California
excluding  choice-of-law  principles of the law of such State that would require
the application of the laws of a jurisdiction other than such State.

                                     CALIFORNIA WATER SERVICE COMPANY

                                     By ________________________________________
                                        Name:  _________________________________
                                        Title: _________________________________

                                     E-1-2
<PAGE>

                         REPRESENTATIONS AND WARRANTIES

         The Company represents and warrants to the Purchasers that:

         1. Corporate Organization,  Subsidiaries. The Company is duly organized
and existing and in good  standing  under and by virtue of the laws of the State
of  California  and is duly  authorized  and  empowered  to own and  operate its
properties  and to carry on its  business,  all as and in the places  where such
properties  are now owned and  operated  and such  business  is  conducted.  The
Company has no Subsidiaries.

         2.  Corporate  Authority.  The  Company  has full  corporate  power and
corporate  authority to sell and issue the Series M Notes. The issuance and sale
of the Series M Notes and the execution and delivery of the Eleventh  Supplement
will have been duly  authorized  by the Board of Directors of the Company and by
the Public  Utilities  Commission of the State of California (the  "Commission")
prior to the Closing  Date,  and no other action is required to be taken by, and
no consents or approvals are required to be obtained from, the  shareholders  of
the Company or any public body or bodies,  and no other corporate  action of the
Company is requisite to such issue and sale.

         3. Business and Property.  Each Purchaser has heretofore been furnished
with a copy of the Company  Information which generally sets forth the principal
properties  of the  Company  and  the  business  conducted  and  proposed  to be
conducted by the Company.

         4.  Indebtedness.  Annex A  attached  hereto  correctly  describes  all
Current Debt, Funded Debt and Capitalized  Leases of the Company  outstanding on
September 30, 2003.

         5.  Financial  Statements  and Reports.  The Company has furnished each
Purchaser with a copy of its audited  financial  reports for 2000, 2001 and 2002
hereinafter  called  the  "Company  Reports,"  and a copy of Form 10-K  filed by
California Water Service Group ("CWSG")  hereinafter called the "CWSG 10-K" with
the  Securities and Exchange  Commission for 2002,  together with all reports or
documents  required to be filed by CWSG  pursuant to Sections  13(a) or 15(d) of
the  Securities  Exchange Act of 1934, as amended,  since the filing of the CWSG
10-K. The Company has also furnished each Purchaser with an unaudited  quarterly
financial  statement for the Company for the fiscal quarter ended June 30, 2003,
and  Forms  10-Q  for CWSG for the  fiscal  quarter  ended  June 30,  2003  (the
"Quarterly  Reports").  The  financial  statements  contained  in the  foregoing
Company Reports, the CWSG 10-K, the Quarterly Reports and such other reports and
documents  were  prepared  in  accordance  with  generally  accepted  accounting
principles upon a consistent  basis and are complete and correct and the balance
sheets included therein fairly present the financial condition of the Company or
CWSG, as the case may be, as at the respective  dates thereof and the Statements
of Income,  Common  Shareholders'  Equity and Cash Flows included therein fairly
present the  results of the  operations  of the Company for the periods  covered
thereby,  subject  in the  case  of  unaudited  statements  to  normal  year-end
adjustments.

         6.  Material  Contracts.  The Company has no contracts or  commitments,
whether  contingent  or other,  which are material to the Company and which were
not made in the ordinary

                                    EXHIBIT 2
                                 (to Supplement)

<PAGE>

course of  business.  Certain  material  contracts  related to water  supply are
listed  in  Annex  B  hereto.  The  Company  has no  contracts  or  commitments,
contingent or other,  which materially and adversely affect or in the future may
(so far as the Company can foresee)  materially and adversely affect the Company
or its business, property, assets, operations or condition,  financial or other.
As of  December  31,  2002,  there were no material  liabilities  of the Company
(other than those under contracts entered into in the normal and ordinary course
of business),  actual,  contingent  or accrued,  which were not reflected in the
Company Reports and CWSG 10-K except for (i) liability in respect of uncompleted
construction  work  under  open  contracts  in  connection  with  the  Company's
construction  program and (ii) the obligations of the Company to contribute to a
pension plan, an employees' savings plan and a health and welfare plan.

         7. No  Material  Adverse  Change.  (a)  There has been no change in the
condition of the Company,  financial or other,  from that set forth or reflected
in the Company  Information,  other than changes  which may have occurred in the
ordinary course of business or by reason of ordinary  dividends paid or declared
or outstanding  First Mortgage Bonds redeemed by the Company in accordance  with
their terms,  and no such changes in the ordinary  course of business  have been
material adverse changes.

         (b)  Since  December  31,  2002,  neither  the  business,   operations,
properties  nor  assets of the  Company  have  been  adversely  affected  in any
material way by any casualties such as fire, windstorm, riot, strike, explosion,
accident, flood, earthquake,  lockout, sabotage, activities of armed forces, act
of God or the public enemy or  condemnation  of  properties by the United States
government or any municipal governmental agency, authority or body.

         8. Title to  Properties.  The  Company is engaged in the  business of a
public utility water company  serving all or a portion of the California  cities
and  communities  listed in the 2002 Company Report and paragraph 9 hereof.  The
Company  has  good  and  merchantable  title,  subject  only to the  lien of the
Mortgage  Indenture  and to current  tax and  assessment  liens,  rights-of-way,
easements  and certain  minor  liens,  encumbrances,  clouds or defects in title
which do not  materially  affect  the use  thereof,  to all the  material  water
distribution  facilities  (including,   without  limitation,   transmission  and
distribution  mains,  pump stations,  wells,  storage tanks and  reservoirs) and
other material units of property used in its business except as follows:

                  (a) some of the offices,  but not its principal office, are in
         leased premises and some wells, well sites and other minor distribution
         facilities are rented; and

                  (b) several  wells are  located on property  which the Company
         does not own but in which it has an easement  for the  location of such
         wells;

and except as to easements and  rights-of-way  and certain  parcels of land (not
exceeding for said parcels of land an aggregate book value of  $1,000,000)  with
respect to which there is a possibility of reverter if the property ceases to be
used for public utility  purposes,  and,  except that the greater portion of its
transmission and distribution  systems is located in public highways and streets
and in  rights-of-way  owned by the Company over lands of others,  the Company's
title thereto is fee simple. Except for parcels of land having an aggregate book
value of not more than $1,000,000,  the Company has good and merchantable  title
to all its other  property  and assets

                                     E-2-2
<PAGE>

subject only to the lien of the Mortgage Indenture and the lien of the Dominguez
Mortgage  Indenture and to current tax and assessment  liens and minor liens and
encumbrances  which  do  not  materially  affect  the  use  thereof.  All of the
properties  of  the  Company  are  located  in  the  State  of  California   and
substantially  all of the properties of the Company used or useful in its public
utility business are subject to the Mortgage Indenture. As used herein, the term
"Dominguez  Mortgage  Indenture" means the Trust Indenture dated as of August 1,
1954, as supplemented  from time to time,  between the Company,  as successor to
Dominguez Water Company ("Dominguez") and U.S. Bank, as Trustee,  which provides
a lien  on  properties  owned  by  Dominguez  immediately  prior  to the  merger
described  in  paragraph 9 hereof  which lien  secures  $9,000,000  in aggregate
principal  amount of Dominguez  bonds which were assumed by the Company upon the
merger.

         9. Franchises.  The Company has, in its judgment,  adequate  franchises
and  permits  without  burdensome   restrictions  (other  than  those  typically
contained  in  franchises  and  permits  of this  type) to allow the  Company to
conduct the business in which it is engaged.

         The Company has two classes of  franchises to install and operate water
pipes and mains under public streets and highways:

                  (a) so-called  "constitutional"  franchises obtained by virtue
         of the  provisions  of  Article  XI,  Section  19,  of  the  California
         Constitution, as in effect prior to 1911; and

                  (b) franchises granted pursuant to statutory authority.

         The Company  believes,  based on the advice of counsel (which is itself
based upon the assumption of the accuracy of information obtained by the Company
from sources  believed to be reliable  that the  following  cities served by the
Company were all incorporated prior to 1911:

            Bakersfield            Marysville              South San Francisco
            Chico                  Oroville                Stockton
            Dixon                  Redondo Beach           Visalia
            Hermosa Beach          Salinas                 Willows
            King City              San Mateo
            Livermore              Selma

that water  distribution  systems were constructed and service  furnished to the
inhabitants  of each by various  predecessors  of the Company prior to 1911, and
that there were no public water works owned or controlled by the municipality in
any of them prior to 1911), that the Company has a "constitutional" franchise in
each of the above cities and under such constitutional franchise has a perpetual
right which was not  repealed  by the repeal of Article  XI,  Section 19, of the
California  Constitution  to continue to occupy  public  streets of each of said
cities  with its pipes and mains and to lay down  additional  pipes and mains in
said streets for the supplying of water, subject to reasonable regulation by the
respective  municipalities.  The Company also  believes,  based on the advice of
counsel,  that this right is not limited to streets in which pipes or mains were
laid  prior  to  1911  but   extends  at  least  to  all  streets  in  the  said
municipalities  as they  existed  at the date of  repeal  of the  constitutional
provision in 1911 and probably also extends to territory  incorporated

                                     E-2-3
<PAGE>

into each  respective  city after such  repeal,  although  this latter  question
remains  somewhat  in doubt in the  absence  of a final  decision  of the courts
thereon.  The  Company  holds  either  by  assignment  or  as  original  grantee
franchises  granted  under  statutory  authority  by the  Counties of Kern,  Los
Angeles,  San  Joaquin,  Santa  Clara and  Monterey,  the Cities of  Montebello,
Torrance, Cupertino, Sunnyvale, Los Altos, Mountain View, Bakersfield, Commerce,
San Carlos,  Rolling Hills Estates and Thousand Oaks, and the Towns of Los Altos
Hills and Atherton.  Following  incorporation of the City of Rancho Palos Verdes
in 1973, the Company made  franchise  payments to the City and the City accepted
the same as successor in interest to the  grantor's  rights under the  Company's
former  franchise  from the County of Los Angeles;  the City has agreed that the
Company may exercise its rights in the City under its current  County  franchise
until the expiration of that franchise in 2012.  The Company's  franchises  from
the Cities of Palos Verdes Estates,  Menlo Park and Woodside terminated in 1977,
1993 and 1994,  respectively.  While  none of the Cities  and the  Company  have
executed a new  franchise  agreement,  the Company has made and will continue to
make franchise  payments to each of the Cities in accordance with the provisions
of the prior franchise.  In other areas where the Company has no franchise,  the
Company or its predecessors  have  distributed  water for many years and, to the
Company's  knowledge,  no question  has ever been raised as to the right to make
such distribution and to maintain all pipes and mains necessary therefor.

         On May 25,  2000,  Dominguez  Service  Corporation  was merged into the
Company and subsequently  Dominguez and its  subsidiaries  were also merged into
the Company (collectively,  the "merger"). The Company acquired in the Dominguez
merger  operations in the following  cities,  counties,  townships or localities
that Dominguez previously served:

            Bodfish                Kern County             Los Angeles County
            Carson                 Kernville               Lucerne
            Compton                Lake Hughes             Mountain Shadows
            Duncans Mills          Lakeland                Onyx
            Fremont Valley         Lancaster               Squirrel Valley
            Guerneville            Leona Valley            Torrance
            Harbor City            Long Beach              Wofford Heights

Water  distribution  systems  were  constructed  and  service  furnished  to the
inhabitants of the localities currently known as Carson,  Compton,  Harbor City,
Long Beach and Torrance by various predecessors of the Company prior to 1911 and
the Company  believes  that it has a prior  right to operate in these  locations
which right was not extinguished by the incorporation of these cities subsequent
to 1911.  Except as noted below,  Dominguez has no franchises  from these cities
and has made no franchise payments to them and, to the Company's  knowledge,  no
question has ever been raised as to the right to make water  distribution and to
maintain all pipes and mains necessary therefor.

         As  to  the  remaining  localities,   Dominguez  has  received  written
franchise  agreements  which  are in full  force  and  effect  and has  paid all
franchise fees to date, with the exception of Compton, as to which the franchise
expired without renewal in 1994.  Dominguez  continued to provide water services
to Compton  subsequent to the expiration of the franchise,  and to pay franchise
fees, and to the Company's  knowledge no question has ever been raised as to the
right

                                     E-2-4
<PAGE>

to make  such  distribution  and to  maintain  all  pipes  and  mains  necessary
therefor.  However,  as of May 2003,  the County of Los  Angeles  cancelled  its
Dominguez  franchise and incorporated the franchise territory into the Company's
Los Angeles County franchise.

         10.  Condition  of Assets.  The  physical  assets of the Company are in
sound operating  condition,  there are no material arrears in the maintenance of
any such physical assets and the Company  believes that its sources of water are
adequate to meet its requirements for the foreseeable future.

         11. Pending Litigation, Proceedings. (a) There are no actions, suits or
proceedings  pending  at law or in equity or  before or by any  federal,  state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality,  domestic  or foreign,  or, to the  knowledge  of the  Company,
threatened  against or affecting the Company not adequately covered by insurance
or for  which  reserves  adequate  in  the  Company's  judgment  have  not  been
established  which  involve,  in  the  opinion  of  the  Company,  a  reasonable
possibility of judgments or liabilities  exceeding $500,000 in the aggregate net
of insurance, or which may, in the opinion of the Company result in any material
adverse change in the business or properties or in the  condition,  financial or
other, of the Company,  or the ability of the Company to perform its obligations
under the Eleventh Supplement or the Series M Notes.

         (b) There  are no  proceedings  pending  or,  to the  knowledge  of the
Company,  threatened  against the  Company  before or by any  federal,  state or
municipal commission, board or other administrative agency, which materially and
adversely affect the water rates of the Company presently in effect.

         (c) The  Company is not in  default  with  respect to any order,  writ,
injunction  or  decree  of  any  court,  or  any  federal,  state  or  municipal
commission,  board or other  administrative  agency and the Company has complied
with all applicable statutes and regulations of the United States of America and
of any state,  municipality or agency of any thereof,  in respect of the conduct
of its business known or believed by the Company to be applicable  thereto,  the
failure to comply  with which  could  reasonably  be expected to have a material
adverse effect on the Company or its properties.

         12. No  Condemnation  Proceedings.  Since January 1, 1995, no elections
have  been  held  or  other  actions  taken   authorizing  the  commencement  of
proceedings for  condemnation of any of the properties of the Company.  However,
from time to time  there are  expressions  of  interest  made by public  bodies,
elected or appointed municipal officials,  persons seeking political position or
citizens groups urging acquisition of the Company's facilities in one or more of
the  communities  served by the  Company.  The Company does not believe that any
acquisition  by a city or  municipality  of its  properties by  condemnation  or
threat thereof would be adverse to the holders of the Series M Notes.

         13. No  Burdensome  Restrictions.  The  Company  is not  subject to any
burdensome corporate  restrictions in its Articles of Incorporation,  By-Laws or
otherwise, which materially and adversely affect or in the future may (so far as
the Company can  foresee)  materially  and

                                     E-2-5
<PAGE>

adversely affect the Company or its business,  property,  assets,  operations or
condition, financial or other.

         14. Regulatory  Status,  Approval.  (a) The Company is not a registered
holding company or a subsidiary of a registered  holding company and the Company
is not  required to register  under the Public  Utility  Holding  Company Act of
1935, as amended. The Company is subject to the jurisdiction of the Commission.

         (b) No consent of, approval or authorization by, filing or registration
with, or notice to any  governmental  or public  authority or agency is required
for the  issuance,  sale or  delivery  of the  Series M Notes or the  execution,
delivery or performance of the Eleventh Supplement, other than the authorization
of the Commission,  which authorization has been duly obtained, is in full force
and effect and is not subject to any appeal, hearing,  rehearing or contest. All
conditions  contained in any such authorization which were to be fulfilled on or
prior to the issuance of the Series M Notes have been fulfilled. The Company has
furnished  to your special  counsel  true,  correct and complete  copies of said
authorization  and all  applications  heretofore  filed with or submitted to the
Commission in connection with its action to obtain said authorization.

         15. No Defaults,  Compliance with Other Instruments. The Company is not
in default under any outstanding  indentures,  contracts or agreements which are
material to the Company including,  without limitation,  the Mortgage Indenture;
and on the  Closing  Date there will not exist any  condition  which  would be a
default  under any such  indenture,  contract or  agreement.  The  execution and
delivery  of the  Eleventh  Supplement,  the  consummation  of the  transactions
therein  provided  for  and  compliance  with  the  provisions  of the  Eleventh
Supplement  and the Series M Notes by the Company  will not violate or result in
any breach of the terms,  conditions or  provisions  of, or constitute a default
under, its Articles of Incorporation,  By-Laws or any indenture,  mortgage, deed
of  trust,  bank  loan or  credit  agreement,  or other  material  agreement  or
instrument to which the Company is a party or by which the Company may be bound,
nor will  such  acts  result  in the  violation  of any  applicable  law,  rule,
regulation  or order  applicable  to the  Company  of any court or  governmental
authority  having  jurisdiction in the premises or in the creation or imposition
of any lien, charge or encumbrance of any nature  whatsoever,  upon any property
or assets of the Company.

         16. Leases.  The Company has the right to, and does, enjoy peaceful and
undisturbed possession under all material leases to which it is a party or under
which it is operating.  All such leases are valid,  subsisting and in full force
and effect, and the Company is not in default under any thereof and no event has
occurred  and is  continuing,  and no  condition  exists  that,  after notice or
passage of time or both could become a material default under any such Lease.

         17. Use of Proceeds.  The Company will use the gross  proceeds  derived
from the sale of the Series M Notes under the Eleventh  Supplement  to refinance
existing   Indebtedness  and  for  general  corporate  purposes.   None  of  the
transactions  contemplated  in  the  Eleventh  Supplement  (including,   without
limitation thereof, the use of the proceeds from the sale of the Series M Notes)
will  violate or result in a violation of Section 7 of the  Securities  Exchange
Act of 1934, as amended,  or any regulations issued pursuant thereto,  including
without  limitation,  Regulations  U, T and X of the Board of  Governors  of the
Federal  Reserve  System,  12 C.F.R.,  Chapter II. The

                                     E-2-6
<PAGE>

Company  does not own or intend to carry or purchase any "margin  stock"  within
the meaning of said Regulation U, including  margin stock  originally  issued by
it.  None of the  proceeds  from the sale of the  Series M Notes will be used to
purchase or carry (or refinance any borrowing the proceeds of which were used to
purchase or carry) any margin stock.

         18. ERISA.  (a) The fair market value of all assets under all "employee
pension  benefit  plans" (as such term is  defined  in  Section  3(2) of ERISA),
maintained  by the Company,  as from time to time in effect,  as of December 31,
2002,  the last annual  valuation  date,  was exceeded by the actuarial  present
value of all benefits vested under the Plans by $7,050,000.

         (b) Neither any of the Plans nor any of the trusts created  thereunder,
nor  any  trustee  or  administrator  thereof,  has  engaged  in  a  "prohibited
transaction,"  as such term is defined in Section  4975 of the Code which  could
subject  the  Plans  or  any  of  them,  any  such  trust,  or  any  trustee  or
administrator  thereof,  or any disqualified person with respect to the Plans to
the tax or penalty on  prohibited  transactions  imposed by said  Section  4975,
except  that,  with  respect to any  actions  or  omissions  of  administrators,
trustees,  other fiduciaries,  parties in interest or disqualified persons of or
in respect to the Plans (other than  employees of the Company),  the Company has
no knowledge  that any of such persons has  committed a prohibited  transaction,
nor has the Company participated knowingly in or knowingly undertaken to conceal
a prohibited  transaction with or by any of such persons nor enabled any of them
to commit a prohibited transaction.

         (c)  Neither  any of the  Plans  subject  to Title IV of ERISA  nor any
trusts  related  to such  plans  have been  terminated,  nor have there been any
Reportable Events, as that term is defined in Section 4043 of ERISA (as modified
by the  regulations  thereunder),  in respect of those plans since the effective
date of ERISA.

         (d)  Neither any of the Plans which are subject to Section 302 of ERISA
nor any trusts  related to such plans have  incurred  any  "accumulated  funding
deficiency,"  as such  term is  defined  in said  Section  302  (whether  or not
waived), since the effective date of ERISA.

         (e) The consummation of the  transactions  provided for in the Eleventh
Supplement  and  compliance by the Company with the  provisions  thereof and the
Series M Notes issued  thereunder  will not involve any  prohibited  transaction
within the meaning of ERISA or Section 4975 of the Code.

         19. Taxes. All Federal,  state and local taxes and assessments due from
the Company have been (a) fully paid or adequately  provided for on the books of
the Company in accordance with generally accepted  accounting  principles or (b)
are being contested in good faith by the Company.  There has been no examination
of the Federal income tax returns of the Company by the Internal Revenue Service
subsequent to the examinations of the returns for tax years 1984-1991.

         20. Compliance with Laws. To the best of the Company's knowledge, after
due inquiry, the Company is in compliance with all applicable Federal, state, or
local  laws,  statutes,  rules,  regulations  or  ordinances  relating to public
health, safety or the environment,  including,  without

                                     E-2-7
<PAGE>

limitation,  relating to  releases,  discharges,  emissions or disposals to air,
water,  land or ground water,  to the withdrawal or use of ground water,  to the
use, handling or disposal of polychlorinated biphenyls (PCB's), asbestos or urea
formaldehyde,  to the  treatment,  storage,  disposal or management of hazardous
substances   (including,   without  limitation,   petroleum,   its  derivatives,
by-products or other hydrocarbons), and to exposure to hazardous substances, the
failure to comply  with which  could  reasonably  be expected to have a material
adverse  effect on the Company or its  properties.  Except as  disclosed  in the
"Environmental  Matters" section of Item 1 of the CWSG 10-K, the  "Environmental
Matters"  section of CWSG's  2002  Annual  Report  and the  "Legal  Proceedings"
section  of Item 3 of the CWSG  10-K  with  respect  to  matters  in  Chico  and
Marysville,  California,  the  Company  does  not know of any  liability  of the
Company  under  the  Comprehensive  Environmental  Response,   Compensation  and
Liability   Act  of  1980,   as  amended  by  the   Superfund   Amendments   and
Reauthorization Act of 1986 (42 U.S.C. Section 9601 et seq.) with respect to any
property now or heretofore owned or leased by the Company.

         21.  Full  Disclosure.  The  financial  statements  referred  to in the
Eleventh  Supplement  do not,  nor does the  Eleventh  Supplement,  the  Company
Information  or any written  statement  (including  without  limitation the 2002
Company  Report and the 2002 CWSG  Report)  furnished  by the  Company to you in
connection with the  negotiation of the sale of the Series M Notes,  contain any
untrue  statement of a material  fact or, taken  together,  omit a material fact
necessary to make the  statements  contained  therein or herein not  misleading.
There is no fact which the Company  has not  disclosed  to you in writing  which
materially  affects  adversely nor, so far as the Company can now foresee,  will
materially  affect  adversely the properties,  business,  prospects,  profits or
condition  (financial or otherwise) of the Company or the ability of the Company
to perform its obligations under the Note Agreement,  the Eleventh Supplement or
the Series M Notes.

         22. Private Offering.  Neither the Company, directly or indirectly, nor
any agent on its  behalf  has  offered  or will  offer the Series M Notes or any
similar Security or has solicited or will solicit an offer to acquire the Series
M Notes or any similar  Security from or has otherwise  approached or negotiated
or will  approach or  negotiate  in respect of the Series M Notes or any similar
Security  with any Person  other than the  Purchasers  and not more than six (6)
other institutional investors,  each of whom was offered a portion of the Series
M Notes at  private  sale for  investment.  Neither  the  Company,  directly  or
indirectly,  nor any agent on its behalf has  offered or will offer the Series M
Notes or any  similar  Security  or has  solicited  or will  solicit an offer to
acquire  the  Series M Notes or any  similar  Security  from any Person so as to
cause the  issuance  and sale of the  Series M Notes  not to be exempt  from the
provisions of Section 5 of the Securities Act of 1933, as amended.

         23. Foreign Assets Control  Regulations,  Etc.  Neither the sale of the
Series M Notes by the Company hereunder nor its use of the proceeds thereof will
violate the Trading with the Enemy Act, as amended, or any of the foreign assets
control  regulations of the United States Treasury  Department (31 CFR, Subtitle
B,  Chapter V, as  amended)  or any  enabling  legislation  or  executive  order
relating  thereto.  Without  limiting the foregoing,  the Company (a) is not and
will not become a person  whose  property or  interests  in property are blocked
pursuant to Section 1 of Executive  Order 13224 of September  23, 2001  Blocking
Property  and  Prohibiting  Transactions

                                     E-2-8
<PAGE>

With Persons Who Commit,  Threaten to Commit, or Support Terrorism (66 Fed. Reg.
49079  (2001)) or (b) does not and will not engage in any  Material  dealings or
transactions, or is otherwise associated, with any such person.

         The Company is in compliance in all material  respects with the Uniting
and Strengthening  America by Providing  Appropriate Tools Required to Intercept
and Obstruct  Terrorism (USA Patriot Act of 2001).  No part of the proceeds from
the sale of the Series M Notes  hereunder will be used,  directly or indirectly,
for any payment to any  governmental  official  or  employee,  political  party,
official of a political  party,  candidate for  political  office or anyone else
acting in an official capacity,  in order to obtain,  retain or direct business,
in violation of the United  States  Foreign  Corrupt  Practices  Act of 1977, as
amended.

                                     E-2-9
<PAGE>

                CURRENT DEBT, FUNDED DEBT AND CAPITALIZED LEASES
                            AS OF SEPTEMBER 30, 2003

1.       Current Debt

         None.

2.       Funded Debt

         $56,600,000  outstanding  under the Company's  various  series of First
         Mortgage Bonds with due dates ranging from 2020 to 2023.

         $4,000,000 First Mortgage Bonds,  Series J due 2023 (formerly Dominguez
         Water Company).

         $5,000,000 First Mortgage Bonds,  Series K due 2012 (formerly Dominguez
         Water Company).

         $20,000,000 Series A Senior Notes due November 1, 2025.

         $20,000,000 Series B Senior Notes due November 1, 2028.

         $20,000,000 Series C Senior Notes due November 1, 2030.

         $20,000,000 Series D Senior Notes due November 1, 2031.

         $20,000,000 Series E Senior Notes due May 1, 2032.

         $20,000,000 Series F Senior Notes due November 1, 2017.

         $20,000,000 Series G Senior Notes due November 1, 2022.

         $20,000,000 Series H Senior Notes due December 1, 2022.

         $10,000,000 Series I Senior Notes due May 1, 2023.

         $10,000,000 Series J Senior Notes due May 1, 2018.

         $10,000,000 Series K Senior Notes due June 30, 2010.

         $10,000,000 Series L Senior Notes due March 1, 2018.

         $2,719,000 California Department of Water Resources Loans maturing 2011
         to 2032.

         $430,000 obligations due on water system acquisitions.

3.       Capitalized Leases

         None.

                                     ANNEX A
                                 (to Exhibit 2)

<PAGE>

                         MATERIAL WATER SUPPLY CONTRACTS

1.       Water  Supply  Contract  between  the  Company  and the County of Butte
         relating to the Company's Oroville District.

2.       Water Supply Contract  between the Company and Kern County Water Agency
         relating to the Company's Bakersfield District.

3.       Water  Supply  Contract  between the Company  and  Stockton  East Water
         District relating to the Company's Stockton District.

4.       Amended  Contract  between the Company and Stockton East Water District
         relating to the Company's Stockton District.

5.       Settlement  Agreement and Master Water Sales Contract  between the City
         and County of San Francisco and Certain Suburban Purchasers.

6.       Supplement  to  Settlement  Agreement  and Master Water Sales  Contract
         between the Company and the City and County of San  Francisco  relating
         to the Company's Bear Gulch District.

7.       Supplement  to  Settlement  Agreement  and Master Water Sales  Contract
         between the Company and the City and County of San  Francisco  relating
         to the Company's San Carlos District.

8.       Supplement  to  Settlement  Agreement  and Master Water Sales  Contract
         between the Company and the City and County of San  Francisco  relating
         to the Company's San Mateo District.

9.       Supplement  to  Settlement  Agreement  and Master Water Sales  Contract
         between the Company and the City and County of San  Francisco  relating
         to the Company's South San Francisco District.

10.      Water Supply Contract  between the Company and Santa Clara Valley Water
         District relating to the Company's Los Altos District.

11.      Water Supply Contract  between the Company and Pacific Gas and Electric
         Company related to the Company's Oroville District.

12.      Water  Supply  Contract  between the Company and Alameda  County  Flood
         Control  and  Water  Conservation  District  related  to the  Company's
         Livermore District.

13.      Water Supply Contract  between the Company,  ARCO Products  Company and
         West Basin Municipal Water District relating to recycled water.

14.      Northeast  Bakersfield  Water  Supply  Agreement  between  the  City of
         Bakersfield and the Company.

                                     ANNEX B
                                 (to Exhibit 2)

<PAGE>

                         DESCRIPTION OF CLOSING OPINION
                            OF COUNSEL TO THE COMPANY

         The closing opinion of Bingham  McCutchen LLP, counsel for the Company,
which is called for by Section  5(a)(iii) of the Eleventh  Supplement,  shall be
dated the Closing Date and addressed to the Purchasers, shall be satisfactory in
scope and form to the Purchasers and shall be to the effect that:

                  1. The Company is a  corporation  duly  incorporated,  validly
         existing and in corporate good standing under the laws of California.

                  2. The  execution  and  delivery  by the  Company  of the Note
         Agreement,  the Eleventh  Supplement and the Notes, and the performance
         by the  Company  of its  obligations  under  the  Note  Agreement,  the
         Eleventh  Supplement and the Notes, are within the Company's  corporate
         powers and have been duly authorized by all requisite  corporate action
         on the part of the Company. The Company has duly executed and delivered
         the Note Agreement, the Eleventh Supplement and the Notes.

                  3. Each of the Note Agreement, the Eleventh Supplement and the
         Notes  constitutes  a  valid  and  binding  agreement  of the  Company,
         enforceable  against the Company in accordance with its terms. Based on
         Section 1646.5 of the California  Civil Code, a California  state court
         and a Federal court which applies the law of the State of California to
         the  Note  Agreement,  the  Eleventh  Supplement  and the  Notes  would
         recognize and give effect to the choice of law  provisions set forth in
         the Note Agreement, the Eleventh Supplement and the Notes.

                  4. The  execution  and  delivery  by the  Company  of the Note
         Documents,  and compliance by the Company with the  provisions  thereof
         will not, to the best of our  knowledge,  result in a breach or default
         (or  give  rise  to  any   right  of   termination,   cancellation   or
         acceleration)  under the  Articles of  Incorporation  or By-Laws of the
         Company, or the Mortgage  Indenture,  the Business Loan Agreement dated
         as of  February  28,  2003,  between the Company and Bank of America as
         amended  by  Amendment  No. 1 thereto  dated as of June 25,  2003,  the
         Business Loan Agreement dated as of February 28, 2003,  among CWSG, CWS
         Utility Services, New Mexico Water Service Company and Bank of America,
         or any other  agreement  or  instrument  that is  listed as a  material
         contract  in  CWSG's  Annual  Report  on Form  10-K for the year  ended
         December 31, 2002 or any agreement or other  instrument  that is listed
         as a material  contract  in CWSG's  Annual  Report on Form 10-K for the
         year ended December 31, 2002. To the best of our knowledge,  no consent
         or  approval  by, or any  notification  of or filing  with,  any court,
         public body or authority of the State of  California  is required to be
         obtained or effected by the Company in connection  with the  execution,
         delivery and  performance  by the Company of the Note  Documents or the
         issuance  or sale of the  Notes,  except for the  authorization  of the
         Commission,  which  authorization has been duly obtained and is in full
         force and effect.

                                    EXHIBIT 3
                                 (to Supplement)

<PAGE>

                  5.  Based upon the  representations  set forth in Section 6 of
         the   Eleventh   Supplement,   the   accuracy  of  which  we  have  not
         independently verified or investigated, the issuance, sale and delivery
         of the  Notes  under the  circumstances  contemplated  by the  Eleventh
         Supplement do not, under existing law,  require the registration of the
         Notes  under  the   Securities   Act  of  1933,  as  amended,   or  the
         qualification  of the Eleventh  Supplement  or an  indenture  under the
         Trust Indenture Act of 1939, as amended.

                  6. Based upon the  assumption  of the accuracy of  information
         obtained  by the  Company  from  sources  believed by the Company to be
         reliable (a) that the  following  cities served by the Company were all
         incorporated prior to 1911:

            Bakersfield            Marysville              South San Francisco
            Chico                  Oroville                Stockton
            Dixon                  Redondo Beach           Visalia
            Hermosa Beach          Salinas                 Willows
            King City              San Mateo
            Livermore              Selma

         (b) that  water  distribution  systems  were  constructed  and  service
furnished  to the  inhabitants  of each by various  predecessors  of the Company
prior to 1911; and

         (c) that there were no public  water works owned or  controlled  by the
municipality in any of them prior to 1911;

                  in our opinion,

                  (i) the Company has a  "constitutional"  franchise  in each of
         the  above  cities  and under  such  "constitutional"  franchise  has a
         perpetual  right  which was not  repealed  by the repeal of Article XI,
         Section 19, of the California Constitution to continue to occupy public
         streets  of each of said  cities  with  pipes and mains and to lay down
         additional  pipes and mains in said streets for the supplying of water,
         subject to reasonable regulation by the respective municipalities;

                  (ii) this right is not  limited  to streets in which  pipes or
         mains  were laid prior to 1911 but  extends at least to all  streets in
         the said  municipalities  as they  existed at the date of repeal of the
         constitutional provision in 1911; and

                  (iii) the right  probably  also extends to  territory  annexed
         into each  respective  city after such  repeal,  although  this  latter
         question  is not  entirely  free from  doubt in the  absence of a final
         decision of the courts thereon.

                  7.   Dominguez   Services    Corporation   (along   with   its
         subsidiaries,  "Dominguez")  was merged into the Company  effective May
         25, 2000 and  Dominguez  Water Company was also merged into the Company
         effective  October 12,  2000.  In the  Dominguez  mergers,  the Company
         acquired the operations of Dominguez,  which to our knowledge  included
         service to the following cities, counties, townships or localities:

                                     E-3-2
<PAGE>

            Bodfish                Kernville               Mountain Shadows
            Carson                 Lake Hughes             Onyx
            Compton                Lakeland                Torrance
            Duncans Mills          Lancaster               Squirrel Valley
            Fremont Valley         Leona Valley            Wofford Heights
            Guerneville            Long Beach              Los Angeles County
            Harbor City            Lucerne                 Kern County

                  8. We note that the Officers'  Certificates state that: (a) to
         the Company's  knowledge,  water distribution  systems were constructed
         and service  furnished to the  inhabitants of the localities  currently
         known as Carson,  Compton,  Harbor  City,  Long Beach and  Torrance  by
         various  predecessors  of the  Company  prior to 1911;  (b) the Company
         believes that it has a prior right to operate in these  locations which
         right  was  not  extinguished  by the  incorporation  of  these  cities
         subsequent  to 1911;  (c)  except  as  noted  below,  to the  Company's
         knowledge Dominguez has no franchises from these cities and has made no
         franchise  payments to them;  and (d) to the  Company's  knowledge,  no
         question   has  ever  been  raised  as  to  the  right  to  make  water
         distribution and to maintain all pipes and mains necessary therefor.

                  9. We note that the Officers'  Certificates state that: (a) as
         to the  remaining  localities  listed in paragraph 7, to the  Company's
         knowledge,  Dominguez has received written  franchise  agreements which
         are in full force and effect and has paid all  franchise  fees to date,
         with the  exception  of  Compton,  as to which  the  franchise  expired
         without  renewal in 1994;  (b) to the  Company's  knowledge,  Dominguez
         continued  to  provide  water  services  to Compton  subsequent  to the
         expiration of the franchise,  and to pay franchise fees; and (c) to the
         Company's  knowledge,  no question has ever been raised as to the right
         to make such distribution and to maintain all pipes and mains necessary
         therefor.  However, as of May 2003, the County of Los Angeles cancelled
         its Dominguez  franchise and incorporated the franchise  territory into
         the Company's Los Angeles County franchise.

         The opinion of Bingham  McCutchen  LLP shall  cover such other  matters
relating  to the sale of the  Series M Notes as the  Purchasers  may  reasonably
request and shall provide that Chapman and Cutler LLP in delivering  its opinion
under the Note Agreement may rely on the opinion of Bingham  McCutchen LLP as to
matters of California law. With respect to matters of fact on which such opinion
is based, such counsel shall be entitled to rely on appropriate  certificates of
public officials and officers of the Company.

                                     E-3-3
<PAGE>

                DESCRIPTION OF SPECIAL COUNSEL'S CLOSING OPINION

         The closing  opinion of Chapman and Cutler LLP,  special counsel to the
Purchasers, called for by Section 5(a)(iii) of the Eleventh Supplement, shall be
dated the Closing Date and addressed to the Purchasers, shall be satisfactory in
form and substance to the Purchasers and shall be to the effect that:

                  1. The Company is a corporation,  validly existing and in good
         standing  under  the  laws  of the  State  of  California  and  has the
         corporate power and the corporate  authority to execute and deliver the
         Eleventh Supplement and to issue the Series M Notes.

                  2. The Note  Agreement and the Eleventh  Supplement  have been
         duly  authorized by all necessary  corporate  action on the part of the
         Company,  have been duly  executed  and  delivered  by the  Company and
         constitute  the  legal,  valid  and  binding  contract  of the  Company
         enforceable  in  accordance  with its  terms,  subject  to  bankruptcy,
         insolvency, fraudulent conveyance and similar laws affecting creditors'
         rights  generally,  and general  principles  of equity  (regardless  of
         whether  the   application  of  such  principles  is  considered  in  a
         proceeding in equity or at law).

                  3.  The  Series  M Notes  have  been  duly  authorized  by all
         necessary  corporate action on the part of the Company,  have been duly
         executed and delivered by the Company and constitute  the legal,  valid
         and binding  obligations of the Company  enforceable in accordance with
         their terms, subject to bankruptcy,  insolvency,  fraudulent conveyance
         and similar laws affecting  creditors'  rights  generally,  and general
         principles of equity  (regardless  of whether the  application  of such
         principles is considered in a proceeding in equity or at law).

                  4. The issuance, sale and delivery of the Series M Notes under
         the circumstances contemplated by the Eleventh Supplement do not, under
         existing law,  require the registration of the Series M Notes under the
         Securities  Act  of  1933,  as  amended,  or  the  qualification  of an
         indenture under the Trust Indenture Act of 1939, as amended.

         The  opinion  of Chapman  and  Cutler LLP may rely upon the  opinion of
Bingham  McCutchen LLP as to matters of  California  law. The opinion of Chapman
and Cutler LLP shall also  state that the  opinion of Bingham  McCutchen  LLP is
satisfactory  in scope and form to Chapman  and  Cutler  LLP and that,  in their
opinion, the Purchasers are justified in relying thereon.

         In rendering  the opinion set forth in  paragraph 1 above,  Chapman and
Cutler LLP may rely,  as to matters  referred to in  paragraph 1, solely upon an
examination of the Articles of Incorporation  certified by, and a certificate of
good  standing  of the  Company  from,  the  Secretary  of State of the State of
California,  the By-laws of the Company and the general business corporation law
of the State of California.

                                     E-3-4
<PAGE>

         With  respect to  matters  of fact upon  which  such  opinion is based,
Chapman and Cutler LLP may rely on appropriate  certificates of public officials
and  officers  of the Company  and upon  representations  of the Company and the
Purchasers  delivered in  connection  with the issuance and sale of the Series M
Notes.

                                     E-3-5Exhibit 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

                            -- Page 1 of 10 Pages --
<PAGE>

            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.

                            -- Page 2 of 10 Pages --
<PAGE>

      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.

                            -- Page 3 of 10 Pages --
<PAGE>

      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.

                            -- Page 4 of 10 Pages --
<PAGE>

      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.

                            -- Page 5 of 10 Pages --
<PAGE>

      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

                            -- Page 6 of 10 Pages --
<PAGE>

                  (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.

                            -- Page 7 of 10 Pages --
<PAGE>

            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.

                            -- Page 8 of 10 Pages --
<PAGE>

      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.

                            -- Page 9 of 10 Pages --
<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

                            -- Page 10 of 10 Pages --
<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"

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00058-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00058-of-00352.parquet"}]]