Proposed Retail Rate Change Effective January 1, 2008

Process 2006 Retail Financial Plan & Water Rate Study 2006 Retail Financial Plan & Water Rate Study Capital Improvement Program Changes – schedule and costs Capital Improvement Program Changes – schedule and costs Operating Costs Update Operating Costs Update Capital Funding Update Capital Funding Update Retail Financial Plan Update Retail Financial Plan Update

Retail Financial Plan & Water Rate Study Recommended Five-Year Rate Structure: Recommended Five-Year Rate Structure: % % % % % % 20108% 20108% 20113% 20113%

Capital Improvement Program Update Deferred Joint Water Storage Tank Project at least 5- years $4M Deferred Joint Water Storage Tank Project at least 5- years $4M Deferred Sierra Pump Station improvements required by Joint Water Storage Tank Project $500K Deferred Sierra Pump Station improvements required by Joint Water Storage Tank Project $500K Reduced Auburn-Folsom Road 24” Pipeline Project cost by $1.5M - cost savings of partnering with Placer County Reduced Auburn-Folsom Road 24” Pipeline Project cost by $1.5M - cost savings of partnering with Placer County Eliminated Kokila Reservoir Pressure Reducing Station (due to optimizing pressures within Bacon Zone) $200K Eliminated Kokila Reservoir Pressure Reducing Station (due to optimizing pressures within Bacon Zone) $200K Eliminated Bacon Pump Station stand-by generator (due to optimizing pressures to reduce pumping requirements within the Bacon Zone) $600K Eliminated Bacon Pump Station stand-by generator (due to optimizing pressures to reduce pumping requirements within the Bacon Zone) $600K Re-scheduled several steel water line replacements based on current condition assessments to defer costs Re-scheduled several steel water line replacements based on current condition assessments to defer costs Added $300k for retail area groundwater study Added $300k for retail area groundwater study

Impact of CIP Update Eliminated First Recommended Debt Financing Eliminated First Recommended Debt Financing Reduces operating cost by $500,000 Reduces operating cost by $500,000 Altered Timing and Size of Succeeding Debt Financings Altered Timing and Size of Succeeding Debt Financings

Operating Costs Update Decreased: Conservation programs Decreased: Conservation programs Increased: Engineering professional services, Transmission & Distribution maintenance Increased: Engineering professional services, Transmission & Distribution maintenance Pressure Zone Testing Pressure Zone Testing

Capital Funding Update Increased connection fees received Increased connection fees received Increased property taxes received Increased property taxes received

Retail Financial Plan Update Recommended Five-Year Rate Structure: Recommended Five-Year Rate Structure: % % 20087% 20087% 20097% 20097% 20107% 20107% 20114% 20114%

Additional Consideration Dry year planning and funding Dry year planning and funding