1. Rancho Pauma Mutual Water Company Annual Shareholder Meeting February 12, 2018
Andy Mathews President, Treasurer
Brad Smith Vice President
Chuck Bandy Director
Son Do Director
Laurie Kariya Director, Secretary
Bobby Graziano General Manager
Jeff Pape Consultant, Operations
Amber Watkins Office Manager
Rancho Pauma Mutual Water Company

2. Agenda Call to Order Call for Proxies Certification of Quorum
Year in Review
Financial Review
Shareholder Comments
Adjournment
2. Certification of Quorum
A. Share Count - present or by proxy
3. Year in Review
4. Financial Review
5. Shareholder Comments
6. Adjournment
Rancho Pauma Mutual Water Company

3. Year in Review :: 2016/2017 Rancho Pauma is a Mutual Water Company
Each shareholder entitled to a pro rata share of available groundwater
Conservation Efforts Showing Results
Pumped 603,000 BUs groundwater :: down 50% from :: 53,000 > plan
Purchased 129,000 BUs public $4.23 per BU
Residential water consumption was about 30% of total :: 75% was for irrigation
Well Levels May Have Stabilized
January 2018 levels essentially the same as January 2017 levels
Demonstrates current pumping level may be sustainable
Developed Infrastructure
Drilled 2 wells and rebuilt 2 wells at cost of almost $500,000
Policy of spreading wells over the service area appears to be working
Maintained Healthy Financial Position
Funded Capital Expenditure
Maintained reserves for anticipated capital expenditures and the unexpected
Sustainable Groundwater Management Law
Developments will have a major impact upon water use in future years
Rancho Pauma Mutual Water Company

4. 2016/2017 Year in Review :: Conservation
Annual BUs
Water deliveries continued down trend which slowed as conservation became more difficult.
Agricultural was about 70% of total; their costs have increased as Yuima water has replaced groundwater.
Imported water was reduced as an outcome of the heavy winter rains.
Some 90% of Residential use was for irrigation where many have not so far adopted drought tolerant landscape.
Annual Tier I allocation of BUs for Residential equated to about 15 inches of water and in the summer months is about 2.5 inches of water per month.
Penalty level pricing starts at about 7.5 inches of water in the summer months.
Rancho Pauma Mutual Water Company

5. 2016/17 Year in Review :: Annual Pattern
Rain in December 2016 and first quarter reduced demand by 60%.
2016/17 Actual of 722,0000 BUs included 129,000 BUs of Yuima imported water.
2017/18 Plan is for 722,00 BUs including 200,000 BUs from Yuima.
Residential usage is an offset of those under and over allocation.
3:1 ratio from low to high monthly demand stresses the infrastructure.
Billing Units
Rancho Pauma Mutual Water Company

6. Year in Review ::Pumping Capacities
Small increase in pumping capability comes from additional and rebuilt wells.
Pumping capability not sustainable over long term as well depth has only stabilized.
522,000 BUs is about 40% of yearly pumping capability.
70,000 BUs in a summer month is about 75% of capability.
Wells drilled years ago for higher water levels have to be replaced to reach lower water levels.
Short term pumping capacity will be critical during rebuild of main reservoir.
Typical pumping depth in feet (right scale)
Rancho Pauma Mutual Water Company

7. Year in Review :: 2018/2019 Outlook
One year of rain does not end the drought
Wells have, at best, stabilized
2018 rains to date are behind 2017 and historic average levels
Pumping objective reduced by 5% from prior year
In expectation of reduced rainfall from 2017
To be revisited in early summer
Main storage tank will have to be rebuilt late in 2018
40 year old 1.5 million gallon tank (2,000 BUs, one summer day)
Useful life can no longer be extended by patching and repairs
Water will be delivered from wells in real time without intermediate storage
Capital cost expected in excess of $300,000 and take 4 to 5 months
Infrastructure is now 50+ years old and continues to age
Distribution system valve cycling program to be on an annual basis
Development of additional replacement wells in 2018/2019
Wells have a finite life :: 11 wells now producing out of 42 wells drilled
Financial reserves maintained against unexpected infrastructure failures
Further developments of SIGMA
Unknown impact of claimed federally reserved tribal water rights
Rancho Pauma water remains inexpensive by comparison
Rancho Pauma Mutual Water Company

8. 2016/2017 Year in Review :: Price Comparison
Rancho Pauma pricing provides advantages to customers
Allocated water is directly related to lot size, not fixed per household
Water allocation is highest in summer months when usage is greatest
Most advantageous to customers who conserve water
Agricultural non-potable pricing considerably cheaper than Residential potable

9. Financial Review Profit and Loss
$(rounded)
2015/6 Actual
2016/7 Actual
2017/8 Plan
Revenue
2,068,000
2,065,000
2,127,000
Costs of purchased water
716,000
616,000
687,000
Electricity & direct costs
241,000
229,000
332,000
Gross Margin
1,111,000
1,222,000
1,108,000
Operating Costs
563,000
567,000
544,000
Legal Costs
44,000
67,000
40,000
Depreciation
227,000
202,000
216,000
Income Tax
20,000
24,000
22,000
Net Income
257,000
362,000
286,000
Capital Expenditure
144,000
451,000
550,000
Actual amounts extracted from audited results
Rancho Pauma Mutual Water Company

10. Financial Review :: Balance Sheet
$(rounded)
October 2016
October 2017
Cash and Equivalents
704,000
691,000
Accounts Receivable
190,000
252,000
Prepaid Expenses
14,000
15,000
Gross Assets
4,747,000
5,166,000
Cumulative Depreciation
(2,985,000)
(3,155,000)
Total Assets
2,670,000
2,969,000
Accounts Payable
125,000
85,000
Other Current Liabilities
25,000
2,000
Total Liabilities
150,000
87,000
Shareholder Equity
2,520,000
2,882,000
Amounts extracted from audited results
Rancho Pauma Mutual Water Company

11. Rancho Pauma Mutual Water Company Annual Shareholder Meeting February 12, 2018
Shareholder Comments
Rancho Pauma Mutual Water Company