CAL-AM'S MONTEREY PENINSULA WATER SYSTEM APPRAISED AT $50.7 MILLION

Monterey FLOW appraisal makes case for public acquisition as in the best interest of Monterey Peninsula residents and businesses

MONTEREY, CALIF., APRIL 10, 2006 - California American Water's Monterey Peninsula water system is valued at $50 million, an amount that does not include the $30 million to $175 million liability of the San Clemente dam, according to an independent appraisal released Wednesday by Monterey FLOW, a community group promoting public acquisition of the water system.

“Based on this appraisal, we could purchase the system at 6% interest for less than $8 a month over 30 years added to each water bill,” said Monterey FLOW member Ron Weitzman. “This is substantially less than the rate hikes of around $78 a month on a typical bill that Cal-Am has requested in perpetuity from the California Public Utilities Commission.”

The appraisal, conducted by Beacon Valuation Group of San Francisco, examined at least three industry standard valuation approaches to estimate the fair market value of the water system. The result of the valuation analysis indicated a fair market value estimate of a 100 percent interest in the equity of Cal-Am at $50,700,000.

“This impartial appraisal demonstrates that public acquisition of the Monterey Peninsula water system is affordable and in the best interest of local residents and business owners,: said Darryl Kenyon, a member of Monterey FLOW and a director with the Monterey Commercial Property Owners Association. “Cal-Am's German parent company, RWE, is exiting the water market worldwide and we view this as the best opportunity to purchase the system and have it managed by a locally accountable public agency.”

Members of Monterey FLOW worked with State Senator Abel Maldonado to sponsor SB 1630, a bill that would give local public agencies the right of first refusal to purchase the Monterey Peninsula water system if the company is sold. That bill passed the Senate Energy, Utilities and Communications Subcommittee on April 4 and is scheduled for another Senate hearing in May.

The appraisal did not directly factor in any contingent liabilities, including but not limited to the liability of the silt-filled San Clemente Dam, which could require $30 million to reinforce, or $70 million to $175 million to remove from the Carmel River.

Cal-Am spent more than $300,000 - a record for campaign spending - to defeat Measure W, a November 2005 ballot measure that would have funded a study of the costs of public acquisition of the water system. Monterey FLOW, which voted not to take a position on the measure, moved forward with its own appraisal believing that the $550,000 spending cap included in Measure W was put there by opponents on the Monterey Peninsula Water Management Board to increase the likelihood that voters would reject it.

“Cal-Am has proposed rate increases that will double our water rates by 2008 and triple them by 2010,” said George Riley of Citizens for Public Water “85% of Americans get their water from public utilities and they have a track record for delivering water for a lower price than investor-owned utilities. Let's not forget that private ownership always siphons off profits and locally Cal-Am has not re-invested in improving the infrastructure.”

A Cal-Am executive was forced under oath in December to admit that the company's proposed desalination project in Moss Landing was 16 months behind schedule and could fall further behind a competing desal project managed by the Pajaro Sunny Mesa Water District.

About Beacon Valuation Group
Beacon Valuation Group, LLC is a leading provider of valuation advisory services headquartered in San Francisco. Beacon's business and intangible asset valuation practice performs strategic and financial advisory services for clients nationwide throughout every phase of the economic cycle. Beacon executes industry-focused valuation services for public and private clients primarily in connection with financial reporting, tax compliance, strategic planning and litigation. For more information, visit http://www.beaconval.com or call Rene Hlousek, ASA at 415-357-1227.

About Monterey FLOW
Monterey FLOW (Friends of Locally Owned Water) is a grassroots organization of Monterey Peninsula business and civic leaders who are working toward public acquisition of the local water system as a way to keep water rates affordable for residents and business owners. For more information, visit http://www.monteryflow.com .

Photo of Carmel River in Monterey FLOW Coalition masthead is courtesy of Paola Berthoin. Cal-Am has repeatedly been cited for overpumping the Carmel River.