Table of Contents

SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

(Mark One)

x	Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended September 30, 2002 or
o	Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from _________ to ___________

Commission file number	333-47647

American States Water Company

(Exact Name of Registrant as Specified in Its Charter)

California		95-4676679
(State or Other Jurisdiction of Incorporation or Organization)		(IRS Employer Identification No.)

630 East Foothill Boulevard, San Dimas		91773
(Address of Principal Executive Offices)		(Zip Code)

(909) 394-3600

(Registrant’s Telephone Number, Including Area Code)

Not Applicable

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Commission file number	000-01121

Southern California Water Company

(Exact Name of Registrant as Specified in Its Charter)

California		95-1243678
(State or Other Jurisdiction of Incorporation or Organization)		(IRS Employer Identification No.)

630 East Foothill Boulevard, San Dimas		91773
(Address of Principal Executive Offices)		(Zip Code)

(909) 394-3600

(Registrant’s Telephone Number, Including Area Code)

Not Applicable

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Indicate by check mark whether Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

	American States Water Company	Yes x    No o
	Southern California Water Company	Yes x    No o

As of November 8, 2002, the number of Common Shares outstanding, no par value with stated value of $2.50, of American States Water Company was 15,167,149 shares.

As of November 8, 2002, all of the 110 outstanding Common Shares of Southern California Water Company were owned by American States Water Company.

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PART I
	Item 1. Financial Statements
		CONSOLIDATED BALANCE SHEETS
		CONSOLIDATED STATEMENTS OF INCOME
		CONSOLIDATED STATEMENTS OF INCOME
		CONSOLIDATED STATEMENTS OF INCOME
		CONSOLIDATED CASH FLOW STATEMENTS
		BALANCE SHEETS
		STATEMENTS OF INCOME
		STATEMENTS OF INCOME
		STATEMENTS OF INCOME
		CASH FLOW STATEMENTS
		NOTES TO FINANCIAL STATEMENTS
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operation
	Item 3. Quantitative and Qualitative Disclosures About Market Risk
	Item 4. Controls and Procedures
PART II Other Information
	Item 1. Legal Proceedings
	Item 2. Changes in Securities
	Item 3. Defaults Upon Senior Securities
	Item 4. Submission of Matters to a Vote of Security Holders
	Item 5. Other Information
	Item 6. Exhibits and Reports on Form 8-K
SIGNATURE
CERTIFICATIONS

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Table of Contents

AMERICAN STATES WATER COMPANY
and
SOUTHERN CALIFORNIA WATER COMPANY
FORM 10-Q

INDEX

		Page No.
Part I	Financial Information
Item 1:	Financial Statements		1
	Consolidated Balance Sheets of American States Water Company as of September 30, 2002 and December 31, 2001		2-3
	Consolidated Statements of Income of American States Water Company for the Three Months Ended September 30, 2002 and September 30, 2001		4
	Consolidated Statements of Income of American States Water Company for the Nine Months Ended September 30, 2002 and September 30, 2001		5
	Consolidated Statements of Income of American States Water Company for the Twelve Months Ended September 30, 2002 and September 30, 2001		6
	Consolidated Statements of Cash Flow of American States Water Company for the Nine Months Ended September 30, 2002 and September 30, 2001		7
	Consolidated Balance Sheets of Southern California Water Company as of September 30, 2002 and December 31, 2001		8-9
	Consolidated Statements of Income of Southern California Water Company for the Three Months Ended September 30, 2002 and September 30, 2001		10
	Consolidated Statements of Income of Southern California Water Company for the Nine Months Ended September 30, 2002 and September 30, 2001		11
	Consolidated Statements of Income of Southern California Water Company for the Twelve Months Ended September 30, 2002 and September 30, 2001		12
	Consolidated Statements of Cash Flow of Southern California Water Company for the Nine Months Ended September 30, 2002 September 30, 2001		13
	Notes to Financial Statements		14-18
Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operation		19-42
Item 3:	Quantitative and Qualitative Disclosures About Market Risks		43
Item 4.	Controls and Procedures		43
Part II	Other Information
Item 1:	Legal Proceedings		43-45
Item 2:	Changes in Securities		45-46
Item 3:	Defaults Upon Senior Securities		46
Item 4:	Submission of Matters to a Vote of Security Holders		46
Item 5:	Other Information		46
Item 6:	Exhibits and Reports on Form 8-K		47
	Signature		48
	Certifications		49-50

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PART I

Item 1. Financial Statements

1

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Table of Contents

AMERICAN STATES WATER COMPANY

CONSOLIDATED BALANCE SHEETS
ASSETS
(Unaudited)

(in thousands)	September 30, 2002						December 31, 2001
Utility Plant, at cost
Water		$	684,248					$	645,185
Electric			39,136						38,525
			723,384						683,710
Less - Accumulated depreciation			(204,955	)					(190,656	)
			518,429						493,054
Construction work in progress			39,964						46,788
			558,393						539,842
Other Property and Investments			24,000						24,104
Current Assets
Cash and cash equivalents			11,673						30,496
Accounts receivable-Customers, less reserves of $1,035 in 2002; $972 in 2001			14,106						10,557
Other accounts receivable			5,676						5,306
Unbilled revenue			15,223						12,141
Materials and supplies, at average cost			1,098						970
Supply cost balancing accounts - current			5,486						3,333
Prepayments and other			2,035						2,493
			55,297						65,296
Deferred Charges and Other Long-Term Assets
Regulatory tax-related assets			14,510						15,843
Other deferred charges			20,211						16,186
Supply cost balancing accounts			25,347						22,493
			60,068						54,522
Total Assets		$	697,758					$	683,764

The accompanying notes are an integral part of these financial statements

2

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AMERICAN STATES WATER COMPANY
CONSOLIDATED BALANCE SHEETS
CAPITALIZATION AND LIABILITIES
(Unaudited)

(in thousands)	September 30, 2002						December 31, 2001
Capitalization
Common shareholders’ equity		$	208,095					$	199,982
Preferred shares			—						1,600
Preferred shares subject to mandatory redemption requirements			—						280
Long-term debt			245,190						245,692
			453,285						447,554
Current Liabilities
Notes payable to banks			14,000						20,000
Long-term debt and preferred shares due within one year			760						800
Accounts payable			18,139						13,931
Taxes payable			7,074						5,389
Accrued interest			5,023						1,945
Reserves for potential disallowance of power costs			6,388						7,948
Other accrued liabilities			13,452						13,623
			64,836						63,636
Other Credits
Advances for construction			69,770						69,436
Contributions in aid of construction			46,510						43,723
Accumulated deferred income taxes-net			57,418						53,444
Unamortized investment tax credits			2,814						2,882
Regulatory tax-related liability			1,739						1,773
Other			1,386						1,316
			179,637						172,574
Total Capitalization and Liabilities		$	697,758					$	683,764

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AMERICAN STATES WATER COMPANY

CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS
ENDED SEPTEMBER 30, 2002 AND 2001
(Unaudited)

	Three Months Ended September 30,
(in thousands, except per share amounts)		2002					2001
Operating Revenues
Water		$	55,866				$	55,412
Electric			5,529					3,807
Other			217					191
			61,612					59,410
Operating Expenses
Water purchased			14,205					12,791
Power purchased for pumping			3,327					3,367
Power purchased for resale			3,645					4,758
Groundwater production assessment			1,831					1,697
Supply cost balancing accounts			(428	)				(2,920	)
Other operating expenses			4,883					4,398
Administrative and general expenses			7,848					6,956
Depreciation and amortization			4,622					4,486
Maintenance			2,546					1,767
Taxes on income			5,207					6,739
Other taxes			2,062					1,999
			49,748					46,038
Operating income			11,864					13,372
Other Income/(Loss)			157					(53	)
Income before interest charges			12,021					13,319
Interest Charges			4,382					3,865
Net Income			7,639					9,454
Dividends on Preferred Shares			0					(21	)
Earnings Available for Common Shareholders		$	7,639				$	9,433
Weighted Average Number of Shares Outstanding			15,154					15,120
Basic Earnings Per Common Share		$	0.50				$	0.62
Weighted Average Number of Diluted Shares			15,170					15,257
Fully Diluted Earnings Per Share		$	0.50				$	0.62
Dividends Declared Per Common Share		$	0.22				$	0.22

The accompanying notes are an integral part of these financial statements

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AMERICAN STATES WATER COMPANY

CONSOLIDATED STATEMENTS OF INCOME
FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 2002 AND 2001
(Unaudited)

	Nine Months Ended September 30,
(in thousands, except per share amounts)		2002					2001
Operating Revenues
Water		$	143,722				$	138,052
Electric			14,574					10,940
Other			603					579
			158,899					149,571
Operating Expenses
Water purchased			32,523					29,941
Power purchased for pumping			7,767					6,793
Power purchased for resale			13,973					15,106
Groundwater production assessment			5,427					5,124
Supply cost balancing accounts			(6,243	)				(11,480	)
Other operating expenses			12,811					13,034
Administrative and general expenses			24,291					22,474
Depreciation and amortization			13,728					13,463
Maintenance			6,632					6,066
Taxes on income			12,355					13,577
Other taxes			5,967					5,865
			129,231					119,963
Operating income			29,668					29,608
Other Income/(Loss)			326					(223	)
Income before interest charges			29,994					29,385
Interest Charges			13,113					11,761
Net Income			16,881					17,624
Dividends on Preferred Shares			(29	)				(63	)
Earnings Available for Common Shareholders		$	16,852				$	17,561
Weighted Average Number of Shares Outstanding			15,135					15,120
Basic Earnings Per Common Share		$	1.11				$	1.16
Weighted Average Number of Diluted Shares			15,153					15,257
Fully Diluted Earnings Per Share		$	1.11				$	1.15
Dividends Declared Per Common Share		$	0.65				$	0.65

The accompanying notes are an integral part of these financial statements

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AMERICAN STATES WATER COMPANY

CONSOLIDATED STATEMENTS OF INCOME
FOR THE TWELVE MONTHS
ENDED SEPTEMBER 30, 2002 AND 2001
(Unaudited)

		Twelve Months Ended September 30,
(in thousands, except per share amounts)		2002				2001
Operating Revenues
Water		$	187,144			$	178,662
Electric			18,885				14,645
Other			813				799
			206,842				194,106
Operating Expenses
Water purchased			40,190				39,061
Power purchased for pumping			10,565				8,744
Power purchased for resale			18,530				18,977
Groundwater production assessment			7,150				6,816
Supply cost balancing accounts			(9,444	)			(14,553	)
Other operating expenses			16,939				17,227
Administrative and general expenses			36,927				30,489
Depreciation and amortization			18,216				17,528
Maintenance			9,206				8,975
Taxes on income			14,158				16,700
Other taxes			7,654				7,747
			170,091				157,711
Operating income			36,751				36,395
Other Income/(Loss)			39				(389	)
Income before interest charges			36,790				36,006
Interest Charges			17,087				15,330
Net Income			19,703				20,676
Dividends on Preferred Shares			(50	)			(84	)
Earnings Available for Common Shareholders		$	19,653			$	20,592
Weighted Average Number of Shares Outstanding			15,131				15,120
Basic Earnings Per Common Share		$	1.30			$	1.36
Weighted Average Number of Diluted Shares			15,146				15,240
Fully Diluted Earnings Per Share		$	1.30			$	1.35
Dividends Declared Per Common Share		$	0.87			$	0.87

The accompanying notes are an integral part of these financial statements

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AMERICAN STATES WATER COMPANY

CONSOLIDATED CASH FLOW STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001
(Unaudited)

		Nine Months Ended September 30,
(in thousands)		2002				2001
Cash Flows From Operating Activities:
Net income		$	16,881			$	17,624
Adjustments for non-cash items:
Depreciation and amortization			13,728				13,463
Deferred income taxes and investment tax credits			4,757				5,736
Other - net			(1,747	)			(1,116	)
Changes in assets and liabilities:
Accounts receivable			(3,549	)			(3,346	)
Prepayments			458				892
Supply cost balancing accounts			(6,243	)			(11,480	)
Accounts payable			4,208				6,415
Taxes payable			1,685				3,425
Unbilled revenue			(3,082	)			(3,576	)
Other			2,085				5,753
Net Cash Provided			29,181				33,790
Investing Activities:
Construction expenditures			(32,312	)			(33,799	)
Net Cash Used			(32,312	)			(33,799	)
Financing Activities:
Issuance of securities			1,100				20,000
Receipt of advances and contributions			4,954				3,934
Repayments of long-term debt, net of redemption of preferred shares			(2,422	)			(449	)
Refunds on advances for construction			(3,455	)			(4,463	)
Changes in notes payable to banks			(6,000	)			(7,000	)
Common and preferred dividends paid			(9,869	)			(9,890	)
Net Cash Provided (Used)			(15,692	)			2,132
Net Increase (Decrease) in Cash and Cash Equivalents			(18,823	)			2,123
Cash and Cash Equivalents, Beginning of period			30,496				5,808
Cash and Cash Equivalents, End of period		$	11,673			$	7,931

The accompanying notes are an integral part of these financial statements

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SOUTHERN CALIFORNIA WATER COMPANY
BALANCE SHEETS
ASSETS
(Unaudited)

	September 30,				December 31,
(in thousands)	2002				2001
Utility Plant, at cost
Water	$	647,051			$	607,988
Electric		39,136				38,525
		686,187				646,513
Less - Accumulated depreciation		(194,972	)			(181,371	)
		491,215				465,142
Construction work in progress		38,590				46,042
		529,805				511,184
Other Property and Investments		9,351				9,446
Current Assets
Cash and cash equivalents		6,231				26,079
Accounts receivable-Customers, less reserves of $998 in 2002; $498 in 2001		13,566				10,228
Other accounts receivable		5,471				5,202
Intercompany receivable		7,299				—
Unbilled revenue		14,935				11,940
Materials and supplies, at average cost		1,065				883
Supply cost balancing accounts - current		5,486				3,333
Prepayments and other		1,930				2,310
		55,983				59,975
Deferred Charges and Other Long-Term Assets
Regulatory tax-related assets		14,510				15,843
Other deferred charges		19,186				15,433
Supply cost balancing accounts		25,347				22,493
		59,043				53,769
Total Assets	$	654,182			$	634,374

The accompanying notes are an integral part of these financial statements

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SOUTHERN CALIFORNIA WATER COMPANY

BALANCE SHEETS
CAPITALIZATION AND LIABILITIES
(Unaudited)

	September 30,				December 31,
(in thousands)	2002				2001
Capitalization
Common shareholders’ equity	$	202,447			$	196,107
Long-term debt		236,571				236,804
		439,018				432,911
Current Liabilities
Long-term debt and preferred shares due within one year		260				300
Accounts payable		17,494				13,548
Intercompany payable		—				26
Taxes payable		7,160				5,599
Accrued interest		4,878				1,877
Reserves for potential disallowance of power costs		6,388				7,948
Other accrued liabilities		13,091				13,372
		49,271				42,670
Other Credits
Advances for construction		59,200				58,570
Contributions in aid of construction		46,246				43,493
Accumulated deferred income taxes-net		55,894				52,075
Unamortized investment tax credits		2,814				2,882
Regulatory tax-related liability		1,739				1,773
		165,893				158,793
Total Capitalization and Liabilities	$	654,182			$	634,374

The accompanying notes are an integral part of these financial statements

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SOUTHERN CALIFORNIA WATER COMPANY

STATEMENTS OF INCOME
FOR THE THREE MONTHS
ENDED SEPTEMBER 30, 2002 AND 2001
(Unaudited)

	Three Months Ended September 30,
(in thousands, except per share amounts)	2002				2001
Operating Revenues
Water	$	54,052			$	53,674
Electric		5,529				3,807
		59,581				57,481
Operating Expenses
Water purchased		14,025				12,620
Power purchased for pumping		3,187				3,222
Power purchased for resale		3,645				4,758
Groundwater production assessment		1,831				1,697
Supply cost balancing accounts		(428	)			(2,920	)
Other operating expenses		4,505				4,105
Administrative and general expenses		7,003				6,679
Depreciation and amortization		4,387				4,176
Maintenance		2,488				1,730
Taxes on income		5,283				6,664
Other taxes		1,939				1,886
		47,865				44,617
Operating income		11,716				12,864
Other Income/(Loss)		141				(81	)
Income before interest charges		11,857				12,783
Interest Charges		4,127				3,513
Net Income		7,730				9,270
Dividends on Preferred Shares		—				—
Earnings Available for Common Shareholders	$	7,730			$	9,270
Weighted Average Number of Shares Outstanding		110				110
Basic Earnings Per Common Share	$	70,273			$	84,273
Dividends Declared Per Common Share	$	40,000			$	33,000

The accompanying notes are an integral part of these financial statements

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SOUTHERN CALIFORNIA WATER COMPANY

STATEMENTS OF INCOME
FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 2002 AND 2001
(Unaudited)

	Nine Months Ended September 30,
(in thousands, except per share amounts)	2002				2001
Operating Revenues
Water	$	138,854			$	133,313
Electric		14,574				10,940
		153,428				144,253
Operating Expenses
Water purchased		31,999				29,616
Power purchased for pumping		7,444				6,509
Power purchased for resale		13,973				15,106
Groundwater production assessment		5,427				5,124
Supply cost balancing accounts		(6,243	)			(11,480	)
Other operating expenses		11,955				12,226
Administrative and general expenses		21,719				21,642
Depreciation and amortization		13,038				12,532
Maintenance		6,448				5,910
Taxes on income		12,698				13,243
Other taxes		5,612				5,575
		124,070				116,003
Operating income		29,358				28,250
Other Income/(Loss)		289				(303	)
Income before interest charges		29,647				27,947
Interest Charges		12,307				10,936
Net Income		17,340				17,011
Dividends on Preferred Shares		—				—
Earnings Available for Common Shareholders	$	17,340			$	17,011
Weighted Average Number of Shares Outstanding		110				106
Basic Earnings Per Common Share	$	157,636			$	160,481
Dividends Declared Per Common Share	$	100,000			$	96,509

The accompanying notes are an integral part of these financial statements

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SOUTHERN CALIFORNIA WATER COMPANY

STATEMENTS OF INCOME
FOR THE TWELVE MONTHS
ENDED SEPTEMBER 30, 2002 AND 2001
(Unaudited)

	Twelve Months Ended September 30,
(in thousands, except per share amounts)	2002				2001
Operating Revenues
Water	$	180,746			$	172,658
Electric		18,885				14,645
		199,631				187,303
Operating Expenses
Water purchased		39,494				38,594
Power purchased for pumping		10,105				8,393
Power purchased for resale		18,530				18,977
Groundwater production assessment		7,150				6,816
Supply cost balancing accounts		(9,444	)			(14,553	)
Other operating expenses		15,840				16,205
Administrative and general expenses		34,007				29,375
Depreciation and amortization		17,215				16,343
Maintenance		8,949				8,753
Taxes on income		14,521				16,127
Other taxes		7,126				7,358
		163,493				152,388
Operating income		36,138				34,915
Other Income/(Loss)		(32	)			(351	)
Income before interest charges		36,106				34,564
Interest Charges		15,948				14,733
Net Income		20,158				19,831
Dividends on Preferred Shares		—				—
Earnings Available for Common Shareholders	$	20,158			$	19,831
Weighted Average Number of Shares Outstanding		110				104
Basic Earnings Per Common Share	$	183,255			$	190,683
Dividends Declared Per Common Share	$	130,000			$	131,359

The accompanying notes are an integral part of these financial statements

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SOUTHERN CALIFORNIA WATER COMPANY

CASH FLOW STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001
(Unaudited)

	Nine Months Ended September 30,
(in thousands)	2002				2001
Cash Flows From Operating Activities:
Net income	$	17,340			$	17,011
Adjustments for non-cash items:
Depreciation and amortization		13,038				12,532
Deferred income taxes and investment tax credits		5,050				5,780
Other - net		(2,011	)			(1,204	)
Changes in assets and liabilities:
Accounts receivable		(3,338	)			(3,071	)
Prepayments		380				667
Supply cost balancing accounts		(6,243	)			(11,480	)
Accounts payable		3,946				6,681
Intercompany payable		(7,325	)			(4,858	)
Taxes payable		1,561				3,454
Unbilled revenue		(2,995	)			(3,484	)
Other		1,945				5,575
Net Cash Provided		21,348				27,603
Investing Activities:
Construction expenditures		(31,684	)			(33,333	)
Net Cash Used		(31,684	)			(33,333	)
Financing Activities:
Issuance of securities		—				45,000
Receipt of advances and contributions		4,850				3,934
Repayments of long-term debt, net of redemption of preferred shares		(273	)			(206	)
Refunds on advances for construction		(3,089	)			(3,896	)
Changes in notes payable to banks		—				(27,000	)
Common and preferred dividends paid		(11,000	)			(10,230	)
Net Cash Provided (Used)		(9,512	)			7,602
Net Increase (Decrease) in Cash and Cash Equivalents		(19,848	)			1,872
Cash and Cash Equivalents, Beginning of period		26,079				1,545
Cash and Cash Equivalents, End of period	$	6,231			$	3,417
The accompanying notes are an integral part of these financial statements

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AMERICAN STATES WATER COMPANY
AND
SOUTHERN CALIFORNIA WATER COMPANY

NOTES TO FINANCIAL STATEMENTS
(Unaudited)

          American States Water Company (AWR), incorporated in 1998, is the parent company of Southern California Water Company (SCW), American States Utility Services, Inc. (ASUS) and Chaparral City Water Company (CCWC). More than 90% of AWR’s assets consist of the common stock of SCW. SCW is a public utility company engaged principally in the purchase, production, distribution and sale of water in California. In addition, SCW distributes and sells electric energy in several mountain communities in California. Unless otherwise stated in this report, the term Registrant applies to both AWR and SCW, collectively.

1.	The consolidated financial statements included herein have been prepared by AWR, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles for annual financial statements have been condensed or omitted pursuant to such rules and regulations. The preparation of the consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. In the opinion of management, all adjustments, consisting of normal recurring items and estimates necessary for a fair presentation of the results for the interim periods, have been made. It is suggested that these consolidated financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in the 2001 Form 10-K filed with the SEC on March 5, 2002. Certain prior year amounts have been reclassified to conform to current year presentation.
2.	Basic earnings per common share are calculated pursuant to SFAS No. 128 - Earnings per Share - and are based on the weighted average number of common shares outstanding during each period and net income after deducting preferred dividend requirements. Under the American States Water Company 2000 Stock Incentive Plan, stock options representing 68,153 common shares were granted to certain eligible employees on May 1, 2000, stock options representing an additional 68,486 common shares were granted on January 2, 2001, and stock options representing 116,775 common shares and 1,050 restricted stock shares were granted on February 4, 2002. As a result, fully diluted earnings per share amounts are shown. Earnings per share also reflect a three-for-two split of Registrant’s common shares payable on June 7, 2002 to holders of record on May 15, 2002.
3.	New water rates with an annual increase of approximately $2.5 million for seven ratemaking districts in SCW’s Region I and step increases of approximately $1.7 million for SCW’s Region III were effective in January 2001. An attrition increase of approximately $2.8 million for Region II was in effect from February 2001. Step increases of approximately $321,600 for four of seven ratemaking districts in SCW’s Region I were implemented in January 2002.
4.	As permitted by the CPUC, SCW has historically maintained water and electric supply balancing accounts to account for under-collections and over-collections of revenues designed to recover such costs. Costs have been recorded in income and charged to balancing accounts when such costs were incurred. The balancing accounts were reversed when such costs were recovered through rate adjustments or through refunds of previously incurred costs. SCW accrued interest

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	on its supply cost balancing accounts at the rate prevailing for 90-day commercial paper. CCWC does not maintain a supply cost balancing account.
	Water Balancing Account - On November 29, 2001, the CPUC ordered water utilities with existing water supply balancing accounts to cease booking amounts to such accounts. In its place, water utilities are now required to establish a memorandum account for water supply costs that are included in rates. As a result, the income statements of SCW will no longer include entries reflecting differences between actual unit water supply costs included in rates and actual water supply costs. SCW will not be entitled to recover any deferred costs for providing water service unless it is within its general rate case cycle and is earning less than its authorized rate of return on a weather normalized basis. As a result, any changes in water supply costs as well as any future authorized revenue increases for supply expenses may directly impact earnings. The negative impact this CPUC order has had on registrant’s basic earnings per share for the quarter, nine and twelve months ended September 30, 2002 was $0.04, $0.05 and $0.01, respectively. SCW may not be able to recover the under-collection of supply costs if it is earning a rate of return in excess of that allowed. SCW had a net under-collection position of $2.8 million in its water supply balancing account at September 30, 2002 principally related to pre-November 29, 2001 activities. Of this amount, approximately $0.5 million is currently included in rates. SCW anticipates recovering the remaining amount as part of a general rate case filed for the third quarter of 2002.
	Electric Balancing Account -Electric power costs incurred by SCW’s Bear Valley Electric division continue to be charged to a balancing account. The amount of the under-collection in the electric balancing account was $27.6 million at September 30, 2002. This is a result of the cumulative differences between wholesale purchased power costs and the $24 per megawatt hour (MWh) authorized in rates up to July 2002 for collection of purchased power costs from customers. The CPUC has approved two of SCW’s Advice Letters for recovery, over a five-year period, of approximately $11.1 million in aggregate in under-collected power costs, which resulted in an overall rate increase of 29% for customers of BVE.
	On August 17, 2001, SCW filed an application with the CPUC seeking recovery of an average cost of $87 per MWh for electric energy purchased pursuant to power purchase contracts with Mirant Americas Energy Marketing, LP and Pinnacle West Capital Corporation. On July 17, 2002, the CPUC approved a settlement agreement reached among SCW, all intervening parties and the Office of Ratepayer Advocates (“ORA”), which permits SCW to recover $77 per MWh of purchased power costs through rates, effective immediately thereafter. SCW will only be allowed to include up to a weighted annual energy purchase cost of $77 per MWh each year for 10 years in its balancing account. To the extent SCW’s actual average annual weighted cost for purchased power is less than $77 per MWh, the differential will recover amounts included in the electric supply balancing account. Conversely, to the extent that actual average annual weighted costs for power purchased exceed the $77 per MWh amount, SCW will not be able to include these amounts in its balancing account and such amounts will be expensed against income. SCW has a balance of $6.4 million in reserves as of September 30, 2002 against potential non-recovery of electric power costs. In addition, the settlement extended the previously approved surcharges for an additional five years to allow SCW an opportunity to collect amounts remaining in its electric cost balancing account.
	Based on estimates, management believes that continuation of the $0.022 per kilowatt-hour surcharge will allow for full recovery of amounts included in the electric balancing account. See the sections entitled “Liquidity and Capital Resources,” “Electric Energy Situation in California,” and “Regulatory Matters” included in Part I, Item 2 in Management’s Discussion and Analysis of Financial Condition and Results of Operation for information on additional actions being taken by SCW to recover these costs.

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	CCWC, subject to regulation by the Arizona Corporation Commission (ACC), does not maintain balancing accounts and increases in costs are normally recovered through general rate case applications.
5.	In July 2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 141, Business Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets. SFAS No. 141 eliminated the pooling-of-interests method of accounting, effective June 30, 2001. After that, all business combinations must be recorded under the purchase method of accounting. SFAS No. 142 primarily addresses the accounting for goodwill and intangible assets subsequent to their initial recognition. The major provisions of SFAS No. 142 (i) prohibit the amortization of goodwill and indefinite-lived intangible assets, (ii) require that goodwill and indefinite-lived intangibles assets be tested annually for impairment (and in interim periods if certain events occur indicating that the carrying value of goodwill and/or indefinite-lived intangible assets may be impaired), (iii) require that reporting units be identified for the purpose of assessing potential future impairments of goodwill, and (iv) remove the forty-year limitation on the amortization period of intangible assets that have finite lives

	In October 2000, AWR completed the acquisition of the common stock of CCWC for an aggregate value of $31.2 million, including the assumption of approximately $12 million in debt. As of September 30, 2002, AWR had $12.3 million in goodwill included in Other Property and Investments. Registrant’s reporting units are generally consistent with the principal business units identified in Note 6. The amount represents the difference between the purchase price of the common equity of CCWC and CCWC’s book equity at the time of closing and was being amortized over a period of 40 years. Registrant adopted the provisions of SFAS 142 and ceased amortization on January 1, 2002. In 2001, $331,073 was amortized against the goodwill.
	SFAS No. 142 requires that goodwill be tested annually for impairment using a two-step process. The first step is to identify a potential impairment and, in transition, this step must be measured as of the beginning of the fiscal year. The second step of the goodwill impairment test measures the amount of the impairment loss, which is also measured as of January 1, 2002, if any. Registrant completed this two-step process in the first quarter ended March 31, 2002 and has determined that no impairment of this goodwill exists.
	The following table reflects Registrant’s net income and earnings per share adjusted for amortizations for the three, nine and twelve months ended September 30, 2002, and 2001, respectively:

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	Three Months								Nine Months								Twelve Months
($000s except for earnings per	Ended Sept. 30,								Ended Sept. 30,								Ended Sept. 30,
(share amounts)	2002				2001				2002				2001				2002				2001
Earnings available for common shareholders:
Reported earnings	$	7,639			$	9,433			$	16,852			$	17,561			$	19,653			$	20,592
Add back goodwill amortization		—				83				—				248				166				312
Less: Tax		—				(34	)			—				(107	)			(107	)			(138	)
Adjusted earnings	$	7,639			$	9,48`2			$	16,852			$	17,702			$	19,712			$	20,766
Basic earnings per share:
Reported basic earnings per share	$	0.50			$	0.62			$	1.11			$	1.16			$	1.30			$	1.36
Add amortization net of taxes		—				0.01				—				0.01				—				0.01
Adjusted basic earnings per share	$	0.50			$	0.63			$	1.11			$	1.17			$	1.30			$	1.37
Diluted earnings per share:
Reported diluted earnings per share	$	0.50			$	0.62			$	1.11			$	1.15			$	1.30			$	1.35
Add amortization net of taxes		—				—				—				0.01				—				0.01
Adjusted diluted earnings per share	$	0.50			$	0.62			$	1.11			$	1.16			$	1.30			$	1.36

	In June 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement Obligations, which requires businesses to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred. When the liability is initially recorded, the entity capitalizes a cost by increasing the carrying amount of the related long-lived asset. Over time, the liability is accreted to its present value each period, and the capitalized cost is depreciated over the useful life of the related asset. Upon settlement of the liability, an entity either settles the obligation for its recorded amount or incurs a gain or loss upon settlement. FASB No. 143 is effective for fiscal years beginning after June 15, 2002. Registrant is reviewing the provisions of this Statement, but does not expect it to have a material impact on its financial statements.
	In August 2001, the FASB also issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets and Discontinued Operations, which addresses the financial accounting and reporting for the impairment or disposal of long-lived assets. Registrant does not expect this Statement to materially impact its financial statements.
	In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities. This pronouncement is effective for exit or disposal activities that are initiated after December 31, 2002, and requires these costs to be recognized when the liability is incurred and not at project initiation. Registrant is reviewing the provisions of this Statement, but does not expect it to have a material impact on its financial statements.
6.	AWR has three principal business units: water and electric distribution units, through its SCW subsidiary, a water service utility operation conducted through its CCWC unit, and a non-regulated activity unit through the ASUS subsidiary. All activities of SCW currently are geographically located within California. All activities of CCWC are located in the state of Arizona. Both SCW and CCWC are regulated utilities. On a stand-alone basis, AWR has no material assets other than its investments in its subsidiaries. The tables below set forth information relating to SCW’s water and electric operating segments, CCWC, and non-regulated businesses, consisting of ASUS and AWR corporate expenses. Included in the amounts set forth, certain assets, revenues and expenses have been allocated. The identifiable assets are net of respective accumulated provisions for depreciation.

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(dollars in thousands)	For The Three Months Ended September 30, 2002
	SCW								CCWC				Non-				Consolidated
	Water				Electric				Water				Regulated				AWR
Operating revenues	$	54,052			$	5,529			$	1,813			$	218			$	61,612
Operating income before income taxes		16,452				547				578				(506	)			17,071
Identifiable assets		502,402				27,402				28,573				16				558,393
Depreciation expense		4,019				368				235				—				4,622
Capital additions	$	12,032			$	434			$	230			$	15			$	12,711
(dollars in thousands)		For The Three Months Ended September 30, 2001
	SCW								CCWC				Non-				Consolidated
	Water				Electric				Water				Regulated				AWR
Operating revenues	$	53,674			$	3,807			$	1,738			$	191			$	59,410
Operating income before income taxes		19,064				464				611				(28	)			20,111
Identifiable assets		473,698				27,172				28,809				—				529,679
Depreciation expense		3,814				362				310				—				4,486
Capital additions	$	10,850			$	820			$	254				—			$	11,924
(dollars in thousands)		For The Nine Months Ended September 30, 2002
	SCW								CCWC				Non-				Consolidated
	Water				Electric				Water				Regulated				AWR
Operating revenues	$	138,854			$	14,574			$	4,867			$	604			$	158,899
Operating income before income taxes		41,457				1,599				1,500				(1,532	)			42,023
Identifiable assets		502,402				27,402				28,573				16				558,393
Depreciation expense		11,935				1,103				690				—				13,728
Capital additions	$	31,904			$	1,401			$	613			$	15			$	33,933
(dollars in thousands)		For The Nine Months Ended September 30, 2001
	SCW								CCWC				Non-				Consolidated
	Water				Electric				Water				Regulated				AWR
Operating revenues	$	133,313			$	10,940			$	4,739			$	579			$	149,571
Operating income before income taxes		40,715				778				1,624				68				43,185
Identifiable assets		473,698				27,172				28,809				—				529,679
Depreciation expense		11,448				1,084				931				—				13,463
Capital additions	$	33,040			$	1,882			$	471				—			$	35,393
(dollars in thousands)		For The Twelve Months Ended September, 2002
	SCW								CCWC				Non-				Consolidated
	Water				Electric				Water				Regulated				AWR
Operating revenues	$	180,746			$	18,885			$	6,398			$	813			$	206,842
Operating income before income taxes		53,778				(3,119	)			1,790				(1,540	)			50,909
Identifiable assets		502,402				27,402				28,573				16				558,393
Depreciation expense		15,751				1,464				1,001				—				18,216
Capital additions	$	46,310			$	1,774			$	693			$	15			$	48,792
(dollars in thousands)		For The Twelve Months Ended September 30, 2001
	SCW								CCWC				Non-				Consolidated
	Water				Electric				Water				Regulated				AWR
Operating revenues	$	172,658			$	14,645			$	6,004			$	799			$	194,106
Operating income before income taxes		49,090				1,952				1,923				130				53,095
Identifiable assets		473,698				27,172				28,809				—				529,679
Depreciation expense		14,909				1,434				1,185				—				17,528
Capital additions	$	45,325			$	2,650			$	667				—			$	48,642

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operation

Forward-Looking Information

General

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Results of Operation

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higher labor costs. Other operating expenses decreased by 1.7%, respectively, for the nine and twelve months ended September 30, 2002 as compared to the same periods of last year. The decreases were primarily due to a refund for a sewer service overpayment, reimbursement received during the second quarter of 2002 from one of the settling parties for expenses incurred in the San Gabriel basin to meet water quality standards, and a decrease in the accrual for bad debt during the first quarter of 2002.

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Accounting for Supply Costs

Critical Accounting Policies

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assets, operating costs and other matters are subject to review, and disallowances could occur. Regulatory disallowances in the past have not been frequent but have on occasion significantly impacted Registrant’s results of operations.

•	Water and electric operations of Registrant in the State of California are subject to regulation by the CPUC and, in the State of Arizona, the ACC regulates the water operations of Registrant. The accounting policies of Registrant conform to generally accepted accounting principles applicable to rate-regulated enterprises and reflect the effects of the ratemaking process. As such, Registrant is allowed to defer as regulatory assets, certain costs that otherwise would have been expensed if it is probable future recovery from customers will occur. If rate recovery is no longer probable, Registrant is required to write off the related regulatory asset.
•	Registrant’s income tax calculations require estimates due principally to the regulated nature of its operations, the multiple states in which Registrant operates, and potential future tax rate changes. Registrant uses the asset and liability method of accounting for income taxes under which deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. A change in the regulatory treatment, or significant changes in tax-related estimates or assumptions, could have a material impact on the financial position and results of operations of Registrant.
•	Depreciation is computed at composite rates considered sufficient to amortize costs over the estimated remaining lives of assets. Depreciation studies are performed periodically and prospective changes in rates are estimated to make up for past differences. These studies are reviewed and approved by either the CPUC or the ACC. Changes in estimates of depreciable lives or changes in depreciation rates mandated by regulations could impact results of operations of Registrant in periods subsequent to the change.
•	As prescribed by the CPUC under its Uniform System of Accounts for Water Utilities, SCW is allowed to capitalize a portion of general costs such as engineering, supervision, general office salaries and expenses, legal expenses, insurance, injuries and damages, pensions and benefits, taxes and allowance for funds used during construction, as overhead construction costs included in Registrant’s Utility Plant. All overhead construction costs are charged to jobs on the basis of the amounts of such overhead expenses reasonably applicable thereto, so that each job bears its equitable proportion of such costs and its direct costs.

Liquidity and Capital Resources

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Contractual Obligations and Other Commitments

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($ in thousands)		Payments/Commitments Due by Period (1)
		Total				Less than 1 Year				1-3 Years				4-5 Years				After 5 Years
Notes/Debentures (2)		$	185,600				—			$	12,500				—			$	173,100
Private Placement Notes (3)			28,000				—				—				—				28,000
Tax-Exempt Obligations (4)			20,721				87				285				218				20,131
Other Debt Instruments (5)			2,510				174				584				451				1,301
Other Commitments (6)			76,947				—				—				—				—
Chaparral City Water Company (7)			9,119				499				1,684				620				6,316
TOTAL		$	322,897			$	760			$	15,053			$	1,289			$	228,848

(1) Excludes interest, dividends, commitment and facility fees.

(2) The Notes and Debentures are issued under an Indenture dated as of September 1, 1993. The Notes and Debentures do not contain any financial covenants that Registrant believes to be material or cross default provisions.

(3) The private placement notes are issued pursuant to the terms of Note Agreements with substantially similar terms. The Note Agreements contain restrictions on the payment of dividends, minimum interest coverage requirements, maximum debt to capitalization ratio and a negative pledge. Pursuant to the Note Agreements, SCW must maintain a minimum interest coverage ratio of two times interest expense. SCW does not currently have any outstanding mortgages or other encumbrances on its properties. For further information on the dividend restrictions, see discussion included in Part II, Item 2 in Changes in Securities ..

(4) Consists of obligations under a loan agreement supporting $8 million in debt issued by the California Pollution Control Financing Authority, $6 million in obligations supporting $6 million in certificates of participation issued by the Three Valleys Municipal Water District and $6.7 million of obligations incurred by SCW with respect to its 500 acre foot entitlement to water from the State Water Project (SWP). Except as described below, these obligations do not contain any financial covenants believed to be material to Registrant or any cross default provisions. SCW’s obligations with respect to the certificates of participation issued by the Three Valleys Municipal Water District are supported by a letter of credit issued by Wells Fargo Bank. In regards to its SWP entitlement, SCW has entered into agreements with various developers for 422 acre-feet, in aggregate, of its entitlement to water from the SWP. For further information, see the section entitled “Regulatory Matters-Disallowance of Costs” included in Part I, Item 2 in Management’s Discussion and Analysis of Financial Condition and Results of Operation.

(5) Consists of $1.6 million outstanding under a fixed rate obligation incurred to fund construction of water storage and delivery facilities with the Three Valleys Municipal Water District, $0.6 million outstanding under a variable rate obligation incurred to fund construction of water delivery facilities with the Three Valleys Municipal Water District and an aggregate of $0.4 million outstanding under capital lease obligations. These obligations do not contain any financial covenants believed to be material to Registrant or any cross default provisions.

(6) Other commitments of Registrant consist of (i) $75 million syndicated revolving credit facility, expiring in June 2005, (ii) a $966,534 irrevocable letter of credit, which is reviewed at the end of each year for adjustment, for its self-insured workers compensation plan, (iii) an amount of $296,000 with respect to a $6,296,000 irrevocable letter of credit issued by Wells Fargo Bank to support the certificates of participation of Three Valleys Municipal Water District (the other $6,000,000 is reflected under tax-exempt obligations), (iv) an irrevocable letter of credit in the amount of $400,000 that expires on October 2003 for the deductible in Registrant’s business automobile insurance policy (v) an irrevocable letter of

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credit that expires June 30, 2005 for its energy scheduling agreement with Automated Power Exchange; the amount of the credit is $585,000 for the months from November to March, and $270,000 to cover the months from April to October, and (vi) outstanding performance bonds of $14,790 to secure performance under franchise agreements with governmental agencies. The syndicated revolving credit facility contains restrictions on prepayments, deposition of property, mergers, liens and negative pledges, indebtedness and guaranty obligations, transactions with affiliates, minimum interest coverage requirements, a maximum debt to capitalization ratio, and a minimum debt rating. Pursuant to the Credit Agreement, AWR must maintain a minimum interest coverage ratio of 3.25 times interest expense, a maximum total funded debt ratio of 0.65 to 1.00 and a minimum debt rating of Baa1 or BBB+.

(7) Consists of $8.1 million of obligations under a loan agreement supporting Industrial Development Revenue Bonds due in 2006 and a $1.1 million repayment obligation to the United States Bureau of Reclamation. The loan agreement contains provisions that establishes a maximum of 65% debt in the capital structure, limits cash distributions when the percentage of debt in the capital structure exceeds 55% and requires a debt service coverage ratio of two times. The Bureau of Reclamation obligation does not contain any financial covenants believed to be material to Registrant or any cross default provisions.

Under the terms of its power purchase contracts with Mirant Americas Energy Marketing, LP and Pinnacle West Capital Corporation, SCW is required to post security, at the request of the seller, if SCW is in default under the terms of the contract and the future value of the contract is greater than the future value of contracts of a similar term on the date of default. SCW will be in default under the terms of these contracts if its debt is rated less than BBB- by Standard & Poor’s Ratings Service (“S&P”) or Fitch, Inc. (“Fitch”) or less than Baa3 by Moody’s Investor Services, Inc (“Moody’s”). SCW currently has a rating of A+ by S & P and A2 by Moody’s. Fitch does not rate SCW.

S&P debt ratings range from AAA (highest rating possible) to D (obligation is in default). Moody’s debt ratings range from Aaa (best quality) to C (lowest quality). Securities ratings are not recommendations to buy, sell or hold a security and are subject to change or withdrawal at any time by the rating agency.

Electric Energy Situation in California

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market. It remains unclear how long the FERC will leave its mitigation measures in place. The premature termination of such mitigation measures could result in a substantial increase in spot market prices and the prices of long-term contracts for power and capacity. In addition, FERC is considering a number of market reforms. One of the reforms that has been suggested by the Cal ISO is the imposition of an available capacity obligation (“ACAP”) on all load-serving entities. The purpose of the ACAP obligation is to ensure that all load-serving entities have sufficient power resources to meet their maximum possible load. If an ACAP obligation is adopted, SCW could be required to procure substantial additional power and capacity. The cost of procuring this additional power and capacity could have a material adverse impact on SCW if SCW is not permitted to recover the costs of procuring this additional power and capacity from its ratepayers on a timely basis.

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not it will be entitled to receive any refunds as a result of these proceedings or any other investigations into the causes of the California energy crisis.

Construction Program

Regulatory Matters

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FERC in which SCW has requested FERC to reduce the prices in its power purchase contract with Mirant to a just and reasonable price. If FERC rules a price reduction, SCW is required to file an Advice Letter to notify the CPUC within 30 days of the ruling. On July 17, 2002, CPUC approved the settlement agreement with new rates effective immediately thereafter. For further information, see the section entitled “Electric Energy Situation in California” included in Part I, Item 2 in Management’s Discussion and Analysis of Financial Condition and Results of Operation and Note 4 to the Notes to Financial Statements in Part I, Item 1.

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application. An Administrative Law Judge subsequently reopened the proceeding in August 2001 requiring additional information. A final order is not anticipated until 2003. A final order is not anticipated until 2003.

Environmental Matters

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each of SCW’s five surface water treatment plants and CCWC’s surface water treatment plant. It Registrant anticipates that all plants will achieve compliance within the three year to five-year time frames identified by EPA.

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most likely will not be published until late 2003. SCW and CCWC currently monitor their wells for radon in order to determine the best treatment appropriate for affected wells.

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the three wells detected with ammonium perchlorate in excess of the 1997 action levels out of service. In April 1997, SCW found ammonium perchlorate in three additional wells and, at that time, removed those wells from service until it was determined that the levels were below the state-determined action level. Those wells were returned to service. SCW periodically monitors these wells to determine that levels of ammonium perchlorate are below the action level currently in effect. Following the reduction in the action level for ammonium perchlorate in January 2002, SCW removed three wells from service since they contained ammonium perchlorate in amounts in excess of this reduced action level.

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Santa Monica and Santa Monica took over the prosecution against the potentially responsible parties in exchange for an assignment payment. The settlement agreement is pending the CPUC’s approval.

Security

Water Supply

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SCW undertook taken a number of steps to provide water service, including trucking water into the area from nearby sources, bringing a formerly shut down well into service, taking steps to increase capacity at existing wells and expediting the drilling and equipping of a new well. In taking these steps to meet water demand, SCW experienced increased operating costs of approximately $450,000, most significantly associated with the cost of trucking water. However, due to the actions of SCW and conservation efforts of consumers the situation has stabilized. Management is unable to predict the extent to which additional costs may be incurred or the extent to which additional problems may be encountered. The cause of the unexplained and sudden drop in groundwater supply has not been identified, but it may be drought-related.

Risk Factor Summary

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in place. The premature termination of such mitigation measures could result in a substantial increase in spot market prices and the prices of long-term contracts for power and capacity. In addition, Cal ISO has proposed a number of market reforms that could require us to procure substantial additional power and/or capacity. This could also result in an increase in the level and volatility of electric prices in California.

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•	The 1996 amendments to the Safe Drinking Water Act that require increased testing and treatment of water to reduce specified contaminants to maximum contaminant levels
•	Approved regulations requiring increased surface-water treatment to decrease the risk of microbial contamination; these regulations affect SCW’s five surface water treatment plants and one CCWC plant
•	Additional regulation of disinfection/disinfection byproducts; these regulations will potentially affect two of SCW’s systems
•	Additional regulations expected to be adopted requiring disinfection of certain groundwater systems
•	Currently pending regulation of arsenic and radon
•	California customer requirements to fluoridate public water systems serving over 10,000 customers
•	Changes in the action level and the proposed adoption of MCLs for ammonium perchlorate; we have removed 8 wells from service due to the presence of ammonium perchlorate above action levels.

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•	Rainfall
•	The amount of water stored in reservoirs
•	Availability of Colorado River water
•	The amount of water stored in reservoirs
•	The amount of water used by our customers and others
•	Water quality, and
•	Legal limitations on use

•	They adversely affect supply mix by causing us to rely on more expensive purchased water
•	They adversely affect operating costs
•	They may result in an increase in capital expenditures for building pipelines to connect to alternative sources of supplies and reservoirs and other facilities to conserve or reclaim water

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from all customers for costs associated with general office activities. In addition, we are seeking CPUC authorization to construct an 8.4 MW natural gas-fueled generator facility to meet increasing demand in our Bear Valley customer service area. The CPUC’s resolution ordering SCW to suspend the use of the current water balancing account, and instead to start a memorandum account for our supply costs has and will directly impact our earnings. We may recover certain water supply costs based on the memorandum account only if we are within our rate case cycle and we are not earning an amount in excess of our authorized rate of return.

Accounting Standards

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

Item 4. Controls and Procedures

PART II

Item 1. Legal Proceedings

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San Gabriel Valley that has been designated a federal superfund site, that the maintenance of this contaminated well water has resulted in contamination of the soil, subsurface soil and surrounding air with trichloroethylene (TCE), perchloroethene (PCE), carbon tetrachloride and other solvents and that plaintiffs have been injured and their property damaged as a result. Three of the lawsuits involve a customer service area located in Sacramento County in northern California that have been filed in Sacramento County Superior Court: Nathaniel Allen, Jr. v. Aerojet-General Corporation, et al., Case No. 97AS06295, Daphne Adams, et al. v. Aerojet-General Corporation, et al., Case No. 98AS01025, and Wallace Andrew Pennington et al. v. Aerojet-General Corporation, et al., Case No. 00AS02622. The lawsuits filed in Sacramento County Superior Court are based on the allegations that SCW and other defendants have delivered water to plaintiffs that is contaminated with a number of chemicals, including, TCE, PCE, carbon tetrachloride, perchlorate, Freon-113, hexavalent chromium and other unnamed chemicals and that plaintiffs have been injured and their property damaged as a result.

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Item 2. Changes in Securities

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Item 3. Defaults Upon Senior Securities

Item 4. Submission of Matters to a Vote of Security Holders

Item 5. Other Information

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Item 6. Exhibits and Reports on Form 8-K

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SIGNATURE

	AMERICAN STATES WATER COMPANY and its subsidiary SOUTHERN CALIFORNIA WATER COMPANY
	By:s/	McClellan Harris III
		McClellan Harris III   Senior Vice President-Finance, Chief Financial Officer,   Treasurer and Corporate Secretary

Dated: November 12, 2002

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CERTIFICATIONS

I, Floyd E. Wicks, Chief Executive Officer of the Registrant, certify that:

1)		I have reviewed this quarterly report on Form 10-Q for the period ended September 30, 2002 (this “quarterly report”);
2)		Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3)		Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this quarterly report;
4)		The Registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Section 240.13a-14of the General Rules and Regulations promulgated under the Securities Exchange Act of 1934) for the Registrant and we have:

	a)		designed such disclosure controls and procedures to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
	b)		evaluated the effectiveness of the Registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and
	c)		presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5)		The Registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the Registrant’s auditors and the audit committee of Registrant’s board of directors (or persons performing the equivalent function):

	a)		all significant deficiencies in the design or operation of internal controls which could adversely affect the Registrant’s ability to record, process, summarize and report financial data and have identified for the Registrant’s auditors any material weaknesses in internal controls; and
	b)		any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal controls; and

6)

The Registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

	Dated: November 12, 2002	By:	/s/ FLOYD E. WICKS
			Floyd E. Wicks   Chief Executive Officer

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CERTIFICATIONS

I, McClellan Harris III, Chief Financial Officer of the Registrant, certify that:

1)		I have reviewed this quarterly report on Form 10-Q for the period ended September 30, 2002 (this “quarterly report”);
2)		Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3)		Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this quarterly report;
4)		The Registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Section 240.13a-14of the General Rules and Regulations promulgated under the Securities Exchange Act of 1934) for the Registrant and we have:
		a)	designed such disclosure controls and procedures to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
		b)	evaluated the effectiveness of the Registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and
		c)	presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5)		The Registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the Registrant’s auditors and the audit committee of Registrant’s board of directors (or persons performing the equivalent function):
		a)	all significant deficiencies in the design or operation of internal controls which could adversely affect the Registrant’s ability to record, process, summarize and report financial data and have identified for the Registrant’s auditors any material weaknesses in internal controls; and
		b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal controls; and
6)		The Registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

	Dated: November 12, 2002	By:	/s/ McCLELLAN HARRIS III
			McClellan Harris III   Chief Financial Officer, Senior Vice President-   Finance, and Corporate Secretary

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