PENSION BENEFITS

⁽¹⁾ The present value of the accumulated benefit for each executive officer, other than Mr. Wicks, is based on the age when he or she would be eligible to retire with full benefits, which is 62 for each of the executive officers, other than Mr. Sprowls, and 63 and 10 months for Mr. Sprowls. The present value of the accumulated benefit for Mr. Wicks is based on his age at December 31, 2006 since he is currently eligible to retire with full benefits. If we had assumed that each executive would retire at age 65, the normal retirement age under each of these plans, the present value of the accumulated benefit under the pension plan would instead be $716,191, $46,648, 373,903, $410,349 and $165,633, for Mr. Wicks, Mr. Sprowls, Mr. Dickson, Mr. Harris and Ms. Kruger, respectively, and the present value of the accumulated benefit under the pension restoration plan would instead be $1,168,837, $26,681, $160,538, $162,409 and $50,395, for Mr. Wicks, Mr. Sprowls, Mr. Dickson, Mr. Harris and Ms. Kruger, respectively.
⁽²⁾ Mr. Harris was eligible to retire with a 50% reduction in benefits at December 31, 2006. If we had assumed that Mr. Harris retired at December 31, 2006, the present value of his accumulated benefit for the pension plan and the pension restoration plan would instead be $447,176 and $179,684, respectively.
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     Each of our executive officers is a participant in the pension plan. This plan is a defined benefit pension plan available to all eligible employees who are 21 years or older and have completed 1,000 hours of service in the first year of employment or in any subsequent plan. The normal retirement benefit is 2% of an employee’s five highest consecutive years average earnings multiplied by the number of years of credited service, up to a maximum of 40 years, reduced by a percentage of primary social security benefits. Normal retirement age is 65. An employee must have five years of credited service in order to receive benefits under this plan. For purposes of this plan, compensation includes an executive’s salary and all other reportable compensation received by the executive, except bonuses, the value of the personal use of company-owned vehicles, unused vacation pay, severance pay and long-term incentive program payments, up to the maximum amount permitted under the Internal Revenue Code (which was $ 225,000 at January 1, 2007).

     The plan provides a special early retirement option for those employees who are at least 55 and have completed 5 years of credited service. The amount of the early retirement benefit will, however, be reduced based on special reduction factors set forth in the plan, unless the participant is at least 62 and the sum of his or her age and number of years of service, at retirement, equals at least 80.

     We also provide each of our executive officers additional pension benefits under the Pension restoration plan. Each executive has the right to receive a benefit under the terms of this plan equal to the sum of 2% of compensation for each year of service before 2006 plus 3% of compensation for each year of service after 2005, up to a combined maximum of 60% of compensation, less a percentage of primary social security benefits and amounts payable to the executive under the pension plan. For participants who were employed by the company on January 1, 2006, the benefit is the greater of the benefit under the formula described in the previous sentence or the benefit under the previous formula. Under the previous formula, each executive was entitled to receive a benefit equal to the sum of 2% of compensation for each year of service. For the purpose of this calculation, compensation includes all compensation paid to the executive, including bonuses paid pursuant to a “cash pay” annual performance incentive plan (other than an extraordinary bonus, such as a holiday, year end, anniversary or signing bonus) and dividend equivalents paid in cash to an executive in connection with awards made under the 2000 Stock Incentive Plan prior to 2006 and without regard to Internal Revenue Code limits. Mr. Sprowls has the right to receive these benefits even though he is not vested under the pension plan.

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     Under the terms of each of these plans, an employee who is vested may retire and receive benefits at age 55 with a reduction in benefits of 50%. An employee, who retires after age 55, but prior to age 65, will receive a lesser reduction in benefits depending upon the age at which the executive retires, unless the sum of the executive’s age and years of service equals 80. Mr. Wicks is currently eligible to retire with full retirement benefits under these plans. Mr. Harris is currently eligible to retire with a benefit reduction of 50%.

     We did not make any payments to any named executive officer under either of our pension plans during the last year.

     We also provide a Medicare supplement insurance policy for each employee who we hired prior to February 1, 1995 and his or her spouse at or after age 65. Each of our named executive officers has a right to this benefit after reaching age 65, other than Mr. Sprowls who we hired after February 1, 1995.

Are any of these executive officers participants in a non-qualified deferred compensation plan?

     None of our named executive officers are participants in a defined contribution or deferred compensation plan, other than our 401(k) Investment Incentive Program, which is a tax-qualified defined contribution plan available to our employees generally.

What are the terms of these executives’ change in control agreements?

     Each of our named executive officers is a party to a change in control agreement which provides for certain benefits in the event of a change in control of the company if the executive officer’s employment is terminated other than for cause or disability or the executive terminates employment for good reason. A change in control under these agreements will generally include:

• any sale or other change in ownership of substantially all of our assets, unless our business is continued by another entity in which the holders of our voting securities immediately before the event own more than 55% of the continuing entity’s voting securities;
   
• any reorganization or merger, unless the holders of our voting securities immediately before the event own more than 55% of the continuing entity’s securities and at least a majority of the members of the board of directors of the surviving entity were members of our board of directors at the time of execution of the agreement or approval by our board of directors;
   
• an acquisition by any person or group acting in concert of more than 55% of our voting securities, unless the holders of our voting securities immediately before the event own more than 55% of the acquirer’s voting securities immediately after the acquisition;
   
• a tender offer or exchange offer by any person or group of more than 25% of our voting securities, unless the tender offer is approved by a majority of the members of our board of directors who were in office at the beginning of the 12-month period preceding the commencement of the tender offer; or
   
• a change of one-half or more of the members of our board of directors within a 12-month period, unless at least two-thirds of the directors then still in office at the beginning of the 12- month period approved the election or nomination for election of the new directors.

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     An executive may terminate his or her employment for good reason if following the change in control:

• the executive is assigned duties inconsistent in any respect with the executive’s position or the executive is not re-appointed to the same position,

• the executive’s salary or benefits are reduced (including the elimination of any cash incentive or other cash bonus plan, without providing adequate substitutes), or

• the executive is located at an office that increases the distance from the executive’s home by more than 35 miles.

     Under the change in control agreements, we have generally agreed to pay each executive a cash lump sum payment equal to 2.99 times the sum of (i) the executive’s highest annual base salary during the preceding three years, (ii) the average of the amount paid to the executive pursuant to a “cash pay” incentive plan (excluding any extraordinary bonus, such as a holiday, year end, anniversary or signing bonus), and (iii) the average of the amount of cash received by the executive with respect to dividend equivalents credited to the account of the executive during the five calendar years preceding the date of termination of employment. We have also agreed to pay the executive in a cash lump sum the difference between (i) the single sum actuarial equivalent of the executive’s benefits under the pension plan and the pension restoration plan if the executive were credited with three additional years of service, and (ii) the single sum actuarial equivalent of the executive’s accrued benefits under the pension plan and the pension restoration plan at the time of the executive’s termination of employment. Each executive also has coverage under our health and welfare benefit plans for a period of two years after termination (three years for Mr. Wicks and Mr. Sprowls). In addition, all unvested options and restricted stock units will vest on the earlier of the change in control date or the date on which the executive’s employment is terminated. Each executive will also receive a gross-up payment if the executive officer is required to pay an excise tax under Section 4999 of the Internal Revenue Code.

     If we are unable to deduct any payments we make under a change in control agreement due to the limitations imposed by Section 162(m) of the Internal Revenue Code, we will defer such payments to the extent necessary to enable us to deduct the payments. Each executive will be entitled to interest on any deferred payments at the applicable federal tax rate under the Internal Revenue Code (which changes monthly). Under Section 162(m) of the Internal Revenue Code, we may generally not deduct for federal income tax purposes annual compensation in excess of $1,000,000 paid to any named executive officer.

     In addition, if we are required to make any payment under a change in control agreement which would be subject to Section 409A of the Internal Revenue Code, we will defer such payments until six months following the date of termination of the executive’s employment. Section 409A of the Internal Revenue Code sets forth requirements applicable to deferred compensation arrangements and imposes stiff penalties for non-compliance. Payments made under a change in control agreement may, in certain cases, be subject to the requirements of Section 409A.

What do we estimate we will pay each of these executive officers in the event his or her employment is terminated as a result of a change in control?

     Assuming that each of our executive’s employment was terminated on December 29, 2006 and based on the assumptions set forth below in the footnotes below, we estimate that we will make the following payments to our named executive officers:

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CHANGE IN CONTROL BENEFITS ⁽¹⁾

	Floyd E.	Robert J.	Joel A.	McClellan	Denise L.
Payments and Benefits	Wicks	Sprowls	Dickson	Harris III	Kruger
Payments
Base Salary Benefit	$1,430,012	$   811,032	$   820,970	$   777,902	$   724,896
Bonus Benefit	156,895	42,458	76,909	76,132	63,747
Dividend Equivalent Rights Benefit	148,121	54,335	70,933	70,933	61,397
Excess Supplemental Executive	406,652	78,439	107,362	148,657	45,633
Retirement Plan Benefit(2)
Benefits
Welfare and Fringe Benefits(3)	25,950	36,126	24,084	17,300	24,084
Purchase of Automobile Benefit(4)	7,435	5,710	5,050	6,085	5,530
Stock Options Benefit(5)	35,454	16,895	17,089	15,383	15,383
Restricted Stock Units Benefit(6)	22,274	11,130	11,130	8,349	8,349
Tax Gross Up Payment(7)	851,021	408,917	448,098	480,776	383,217
Total	$3,083,814	$1,465,042	$1,581,625	$1,601,517	$1,332,236

⁽¹⁾ We have assumed, for purposes of preparing this table, that we make all change in control payments to each executive officer by January 31, 2007. As a result, we have not included any interest for deferral of any payments that would not be deductibility under Section 162(m) of the Internal Revenue Code.
⁽²⁾ In calculating the single sum actuarial equivalent, we used an interest rate equal to 6% and the mortality table named and described in detail in Section A.1 of the pension plan, after reduction, if any, of the benefit using the “Regular Factors” under Section A.4 of the pension plan, each executive officer’s age at December 31, 2006, less a percentage of primary social security benefits, as required by the terms of each executive officer’s change in control agreement.
⁽³⁾ Welfare benefits cover 85% of dental, medical and vision insurance premiums paid by the company for each named executive officer under the insurance plans currently offered by the company, and each named executive officer’s pro rata share of the group term life insurance and accidental death and dismemberment premiums based on premiums currently paid by the company for a period of three years after termination of the employment of Mr. Wicks and Mr. Sprowls and two years after termination of employment for each of the other named executive officers.
⁽⁴⁾ We have estimated the value of this benefit as the difference between (i) the wholesale value of the company car which the executive officer has the right to purchase at the wholesale value, and (ii) the retail value of the car as shown in a national auto research publication.
⁽⁵⁾ We measured the fair value of options which were not vested at December 31, 2006 using the difference between the exercise prices of the option grants and the price of our common shares on the date of each executive’s termination of employment, which we assumed was December 31, 2006. The closing price of our common shares as reported on the New York Stock Exchange Composite Tape on December 29, 2006, the last trading day of the year, was $38.62.
⁽⁶⁾ We measured the fair value of restricted stock units which were not vested at December 31, 2006 assuming the price of our common shares on the date of each executive’s termination of employment was $38.62.
⁽⁷⁾ We assumed that each of the executive officers would (i) be subject to Section 280G of the Internal Revenue Code, (ii) have a marginal combined federal and state income tax rate of 44.2467% for payments over $1 million and 43.5577% for under $1 million, (iii) receive cash equal to the difference between the exercise price of each stock option which was not vested on December 31, 2006 and $38.62, which is the closing price of our common shares on the New York Stock Exchange on December 29, 2006, and (iv) receive cash equal to $38.62 for each restricted stock unit which was not vested on December 31, 2006. We used 5.89% as the interest rate for determining the present value of the accelerated vesting of stock options and restricted stock units. As prescribed by the applicable regulations under Section 280G, this rate is equal to 120% of the applicable federal tax rate (compounded semiannually) for short-term periods for December 31, 2006 as set forth in Revenue Ruling 2006-61.
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PROPOSAL 2: RATIFICATION OF AUDITORS

     The audit and finance committee has appointed PricewaterhouseCoopers LLP as our registered public accounting firm for the year ended December 31, 2007, subject to reconsideration if our shareholders do not ratify this appointment. We expect representatives of PricewaterhouseCoopers to attend the 2007 annual meeting. They will have an opportunity to make a statement at the 2007 annual meeting, if they desire to do so. They will also be available to respond to appropriate questions from you if you attend the 2007 annual meeting.

What are the audit and finance committee’s pre-approval policies and procedures?

     The audit and finance committee adopted a policy statement on February 2, 2004 regarding the approval of audit, audit-related, tax and other services provided by our registered public accounting firm. This policy statement specifies guidelines and procedures we will use to assist us in maintaining the independence of our registered public accounting firm and complying with Sections 201 and 202 of the Sarbanes-Oxley Act of 2002 and the related rules and regulations promulgated by the Securities and Exchange Commission. The audit and finance committee administers this policy statement. The policy statement established the four categories of permitted services described below, the reporting procedure for each category of permitted services, prohibited services and the pre-approval process we will use for each category of permitted service.

     The audit and finance committee has reviewed the advisability and acceptability of utilizing our external auditor, PricewaterhouseCoopers LLP, for non-audit services. In reviewing this matter, the committee focused on the ability of our external auditor to maintain its independence. Based on input from management and the committee’s review of procedures established by PricewaterhouseCoopers LLP, the committee finds that it is both advisable and acceptable to employ our external auditor for certain limited non-audit services from time-to- time.

Principal Accounting Fees and Services

     We have estimated the aggregate fees billed or we expect to be billed to us by PricewaterhouseCoopers LLP for the years ended December 31, 2006 and 2005 as follows:

Type of Fee	2005	2006
Audit Fees	$   956,422	$1,145,846
Audit-Related Fees	5,937	-
Tax Fees	133,080	317,945
All Other Fees	-	-
Total	$1,095,439	$1,463,791

     Audit Fees

     Audit fees represent the aggregate fees billed, or which we expect we will be billed, for professional services rendered in connection with the audit of our annual financial statements, a review of our financial statements included in our Form 10-Qs filed with the Securities and Exchange Commission and services normally provided by our accountants in connection with statutory or regulatory filings and engagements. In 2006, audit fees also include $452,988 for attestation services rendered in connection with the Sarbanes-Oxley Act of 2002 and out of pocket expenses incurred in providing audit services.

     Audit-Related Fees

     Audit-related fees represent the aggregate fees billed, or which we expect we will be billed, for assurance and related services that were reasonably related to the performance of the audit or review of our financial statements and are not included in audit fees, including fees for assistance with registration statements, comfort letters and consents. On a quarterly basis, the audit and finance committee pre-approves a specific quarterly limit on the amount of audit related fees for non-audit services. Management is also required to report the specific engagements to the committee and obtain specific pre-approval from the committee. All fees listed above have been pre-approved by the audit and finance committee.

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     Tax Fees

     Tax fees represent the aggregate fees billed, or which we expect we will be billed, for professional services for tax compliance, tax advice and tax planning, including tax return review, review of tax laws and regulations and cases and other support in connection with complying with federal and state tax reporting and payment requirements.

     All Other Fees

     We have not been billed and do not expect to be billed for other products or services not included in the categories discussed above.

OTHER MATTERS

     Our management knows of no business, other than that mentioned above, to be transacted at the 2007 annual meeting. Unless otherwise instructed, the named proxies intend to vote in favor of any proposal to adjourn the 2007 annual meeting to enable management to continue to solicit proxies in favor of any proposal set forth in this proxy statement that has not obtained the requisite vote in favor of the proposal on the date of the 2007 annual meeting and in accordance with their judgment on any other matter that may properly come before the 2007 annual meeting.

OBTAINING ADDITIONAL INFORMATION FROM US

     This proxy statement incorporates by reference certain information from our financial statement footnotes in our Form 10-k for the year ended December 31, 2006. We undertake, on written or oral request, to provide you (or a beneficial owner of our securities entitled to vote), without charge, a copy of our annual report on Form 10-K for the year ended December 31, 2006 as filed with the Securities and Exchange Commission, including our financial statements and schedules. You should address your requests to the corporate secretary at American States Water Company, 630 East Foothill Boulevard, San Dimas, California 91773, telephone number 909-394-3600.

     We also undertake, upon written or oral request, to deliver promptly a separate copy of this proxy statement to a security holder at a shared address to which a single copy of this proxy statement was delivered. If you share an address with another shareholder and wish to receive a single copy of this proxy statement, instead of multiple copies, you may direct this request to us at the address or telephone number listed above.

     You may also visit our website at http://www.aswater.com to view the charters of our audit and finance committee, nominating and governance committee and compensation committee. We also provide a copy of our code of conduct and guidelines on significant governance issues on this website. You can find this information on our website by clicking on “Investors” and then clicking on “Governance”. You may also request a copy of our code of conduct and guidelines on significant governance issues and the charters of our audit and finance committee, nominating and governance committee and compensation committee from us at the address set forth above. We have provided a copy of our audit and finance committee charter to you as an appendix to this proxy statement.

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APPENDIX I

AUDIT AND FINANCE COMMITTEE CHARTER
(Applicable to American States Water Company and its subsidiaries, hereinafter “the Corporation”)

PURPOSES: The Audit and Finance Committee (hereinafter, “the Committee”) is a committee of the Board of Directors (hereinafter, “the Board”). Its primary functions are: to assist the Board in fulfilling its oversight responsibilities by reviewing the financial information which will be provided to the shareholders and others, the systems of internal controls which management and the Board have established, and the audit process; and to review and make recommendations to the Board with respect to the management of the financial affairs of the Corporation. In doing so, the Committee shall have the sole responsibility and authority to appoint, oversee, terminate and compensate the Corporation’s independent accountants. The Committee shall provide an avenue of communication between the Board, management, the internal auditors and the independent accountants.

While the Committee has the responsibilities and powers set forth in this Charter, it is not the duty of the Committee to plan or conduct audits or to determine that the Corporation’s financial statements are complete and accurate and are in accordance with generally accepted accounting principles. This is the responsibility of management. The independent auditors are responsible for planning and conducting the audit, in order to report on the financial statements. Nor is it the duty of the Committee to conduct investigations or to assure compliance with laws and regulations and the Corporation’s code of conduct.

The outside auditor and internal audit function ultimately report to the Board of Directors and the Audit and Finance Committee of the Board of Directors.

ORGANIZATION: The Board shall appoint the members of the Committee annually. The Committee shall be composed of at least three, but not more than five, directors, each of whom shall meet the independence and experience requirements of the New York Stock Exchange and the Securities and Exchange Commission (“SEC”). At least one member shall have the experience and knowledge to meet the definition of “financial expert” as defined by the rules of the SEC.

The Chairman of the Board shall serve as an “ex-officio” member of the Committee. The Board shall appoint one of the members of the Committee as Chairperson. It is the responsibility of the Chairperson to schedule all meetings of the Committee and, with the assistance of management, provide the Committee with a written agenda for all meetings.

Audit and Finance Committee members may receive no remuneration from the Corporation or its subsidiaries other than that received as members of the Board and committees of the Board.

In meeting its responsibilities, the Committee shall:

GENERAL
     - - Have the power to conduct or authorize investigations into any matters within the Committee’s scope of responsibilities. The Committee shall have unrestricted access to members of management and all information relevant to its responsibilities. The Committee shall be empowered to retain independent counsel, accountants or others to assist it in the conduct of any investigation of matters brought to its attention within the scope of its duties as outlined herein.

     - - Meet at least 4 times per year or more frequently as circumstances require. The Committee may ask members of management or others to attend the meetings and provide pertinent information as necessary.

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     - - Submit the Committee meeting minutes and report actions of the Committee to the Board with such recommendations as the Committee may deem appropriate.

     - - Review the Committee’s charter annually and update as necessary and annually review its own performance.

     - - Review accounting and financial human resources and succession planning within the Corporation.

     - - Review and make recommendations to the board of directors regarding any transactions with related persons as defined in Item 404 of Regulation S-K.

     - - Perform such other functions assigned by law, the Corporation’s by-laws, or the Board.

     - - Receive reports under Section 10A of the Securities Exchange Act, which requires the Corporation’s independent auditors to report illegal acts (other than those which are inconsequential) to the Committee.

     - - Meet at least quarterly with the internal auditor, the independent accountants and the chief financial officer in separate executive sessions to discuss any matters that the Committee or these groups believe should be discussed privately with the Committee. Among the items to be discussed in these meetings are the independent accountants’ evaluation of the Corporation’s financial, accounting and auditing personnel and the cooperation and/or any conflicts experienced with management during the course of the audit or other related engagements.

INTERNAL CONTROLS AND RISK ASSESSMENT
     - - Review and evaluate the effectiveness of the Corporation’s process for assessing significant risks or exposures and the steps management has taken to minimize such risks to the Corporation.

     - - Consider and review with management, the independent accountants (to the extent consistent with, or required by, their professional duties) and internal auditing:

     1. The adequacy and effectiveness of, or weaknesses in, the Corporation’s internal controls including computerized information system controls and security, the overall control environment and accounting and financial controls.

     2. Any related significant findings and recommendations of the independent accountants and internal auditing together with management’s responses thereto, including the timetable for implementation of recommendations to correct weaknesses in internal controls.

     - - Review with internal auditing the intended level of support for, and coordination with, the independent accountants. Discuss with the independent accountants their plans, if any, to use the work of internal auditing.

     - - Discuss with management, the Corporation’s independent accountants (to the extent consistent with, or required by, their professional duties), and internal auditing, the status and adequacy of management information systems and other information technology, including the significant risks related thereto and major controls over such activities.

FINANCIAL REPORTING
     - - Review filings with the SEC (including, without limitation “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” when applicable) and other significant published documents filed with other agencies containing the Corporation’s consolidated financial statements, including annual and interim reports, pre-announced press releases of earnings, statutory filings, as well as financial information and earnings guidance provided to analysts and ratings agencies, and consider whether the information contained in these documents is consistent with the information contained in the financial statements.

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     - - Review with management and the independent accountants at the completion of the annual examination:

     1. The Corporation’s (and its separately reporting or consolidated subsidiaries, as applicable) annual consolidated financial statements and related footnotes.

     2. The independent accountants’ audit of the consolidated financial statements and its report thereon (and any separate reports on statements of subsidiaries, as applicable).

     3. Any significant changes required in the independent accountants’ audit plan.

     4. Any serious difficulties or disputes with management encountered during the course of the audit.

     5. The existence of significant estimates and judgments underlying the financial statements, including the rationale behind those estimates as well as the details on material accruals and reserves.

     6. Other matters related to the conduct of the audit that are to be communicated to the Committee under generally accepted auditing standards or pursuant to the rules of the SEC or the requirements of the New York Stock Exchange.

     7. Review the Corporation’s accounting principles and proposed changes thereto.

     - - Review the adequacy and appropriateness of the Corporation’s code of business conduct.

     - - Advise the Board with respect to the Corporation’s policies and procedures regarding compliance with applicable laws and regulations.

     - - Assess internal processes for determining and managing key financial statement risk areas.

EXTERNAL INDEPENDENT AUDITOR
     - - Review and consult with the Board concerning the independent accountants to be nominated to audit the consolidated financial statements of the Corporation and any separately reported subsidiaries. The Committee, however, shall have direct responsibility for appointing the independent accountants and has sole authority to approve the compensation of the independent accountants and to review and approve the discharge of the independent accountants. 

     - - Approve, in advance, all audit services, and all non-audit services provided by the Corporation’s independent auditors that are not specifically prohibited under Sarbanes-Oxley unless such services are approved in accordance with policies relating to approval of services provided by the auditor duly adopted by the Committee. Non-audit services need not be approved in advance only if (1) (a) the aggregate amount of all such non-audit services are not more than 5% of all amounts paid to the independent auditors during the fiscal year, (b) they were not recognized to be non-audit services at the time of the engagement, and (c) they are promptly brought to the attention of the Committee and approved prior to the completion of the audit; or (2) if approved in accordance with policies relating to approval of services provided by the auditor duly adopted by the Committee.

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     - - Meet with and review the scope and approach for the proposed annual audit with the independent accountants to:

     1. Assess the external auditors’ process for identifying and responding to key audit and internal control risks.

     2. Review the external auditors’ identification of issues and business and financial risks and exposures.

     3. Discuss with the independent auditors the matters required to be discussed by the statement on Auditing Standards No. 61, as amended, relating to the conduct of the audit.

     - - Confirm and assure the independence of the independent accountants in writing, including a review of the nature of all services and related fees provided by the independent accountants.

     - - Review the qualifications of the independent accountant.

     - - Direct the attention of the independent accountants to specific matters or areas deemed by the Committee to be of special significance; and authorize the independent accountants to perform such supplemental reviews or audits.

     - - Instruct the independent accountants to communicate directly to the Committee any serious difficulties or disputes with management and resolve disputes between management and the independent accountants.

     - - Recommend to the Board policies for the Corporation’s hiring of employees or former employees of the independent accountants who were engaged on the Corporation’s account.

     - - At least annually, obtain and review from the independent accountants, a report describing: the firm’s internal quality-control procedures; any material issues raised by the most recent internal quality-control review, or peer review, of the firm, or by any inquiry or investigation by governmental or professional authorities, within the preceding five years, respecting one or more independent audits carried out by the firm, and any steps taken to deal with any such issues; and all relationships between the independent accountants and the Corporation.

     - - Obtain and review any additional reports required to be obtained from the independent accountants pursuant to the rules of the SEC or the requirements of the New York Stock Exchange.

INTERNAL AUDITOR
     - - Meet with the internal auditor and evaluate the internal audit process for establishing the annual internal audit plans and the focus on risk and the intended level of support for, and coordination with, the independent accountants.

     - - Consider, in consultation with the internal auditors, the audit scope and the overall role of the internal auditors.

     - - Review and evaluate the scope, risk assessment and nature of the internal auditors’ plan and any subsequent changes, including whether or not the internal auditors’ plan is sufficiently linked to the Corporation’s overall business objectives and management’s success and risk factors.

     - - Receive prior to each meeting, a summary of the findings from completed internal audits since the prior such report and a progress report on the proposed audit plan, with explanations of deviations therefrom.

     

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     - - At least annually, consider and review with management and internal auditing:

     1. Significant findings during the year and management’s responses thereto, including the timetable for implementation of the recommendations to correct weaknesses in internal control.

     2. Any difficulties encountered in the course of their audits, including any restrictions on the scope of their work or access to required information.

     3. Any changes required in the planned scope of their audit plan.

     4. The internal auditing department budget and staffing.

     - - Internal auditing department’s compliance with The IIA’s Standards for the Professional Practice of Internal Auditing.

     - - Review and concur in the appointment, replacement, reassignment, or dismissal of personnel in internal auditing.

     - - Confirm and assure the independence of the internal auditor function within the Corporation.

FINANCE MATTERS
     - - Review and make recommendations thereon to the Board for the following:

     1. Proposed changes to the capital structure of the Corporation, including the establishment or revision of bank lines of credit or other short-term borrowing arrangements, the issuance of any intermediate or long-term indebtedness and the issuance of additional equity securities.

     2. Proposed capital expenditures budget of the Corporation.

     3. Performance of the investment manager for the Pension Plan assets.

     4. Financial impact of the implementation of all compensation and employee benefit plans and of any amendments or modifications thereto and the actuarial assumptions and financial policies pertaining to the investment of funds related to such plans.

     5. Operations of and reporting for all employee benefit plans to ensure that they are operated in accordance with existing legal requirements and sound financial principles.

     - - Consider, review and make appropriate recommendations to the Board with respect to all other financial matters of the Corporation specifically delegated to it by the Board in the management of the financial affairs of the Corporation.

     - - Review the activities of management in the sale and issuance of specific debt and equity securities, when specifically authorized to do so by action of the Board.

REPORTS
     - - Prepare the report required by the rules of the SEC to be included in the Corporation’s annual proxy statement.

     - - Submit a written affirmation annually, or whenever the composition of the Committee changes, to the New York Stock Exchange certifying that the Committee meets the requirements of the New York Stock Exchange.

     - - Disclose, at least on a triennial basis, this Charter in the Corporation’s annual meeting of shareholders.

Dated as of January 30, 2007.

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630 East Foothill Boulevard, San Dimas, California 91773
909-394-3600 www.aswater.com

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630 EAST FOOTHILL BOULEVARD
SAN DIMAS, CALIFORNIA 91773

PROXY SOLICITED BY BOARD OF DIRECTORS
MAY 22, 2007

VOTE BY INTERNET - www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.

ELECTRONIC DELIVERY OF FUTURE SHAREHOLDER COMMUNICATIONS
If you would like to reduce the costs incurred by American States Water Company, in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access shareholder communications electronically in future years.

VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the meeting date. Have your proxy card in hand when you call and then follow the instructions.
  
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to American States Water Company, c/o ADP, 51 Mercedes Way, Edgewood, NY 11717.

 

 

 

 

 

 

 

 

 

 

 

 

TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:	AMSTW1		KEEP THIS PORTION FOR YOUR RECORDS
		DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.

AMERICAN STATES WATER COMPANY

The Board of Directors recommends that shareholders vote FOR each of the nominees for class I directors listed below and FOR ratification of the independent auditors.

Election of Directors

For All

Withhold All

For All   Except

To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below.

1.

To elect four class I directors to the Board of Directors of the Company to serve until their successors are elected and qualified. The Board of Directors has nominated the following individuals for election as class I directors (1) James L. Anderson, (2) Diana M. Bontá, (3) Anne M. Holloway, and (4) Floyd E. Wicks.

o

o

o

For

Against

Abstain

2.

To ratify the appointment of PricewaterhouseCoopers LLP as the independent auditors.

o

o

o

3.

To transact any other business which may properly come before the meeting or any adjournment thereof.

Please sign exactly as name(s) appear(s) hereon. When shares are held by joint tenants, both should sign. When signing as attorney or executor, administrator, trustee or guardian, please give full title as such. If a corporation, please sign in full corporate name by president or other authorized officer. If a partnership, please sign in partnership name by authorized person. If a limited liability company, please sign in name of limited liability company by authorized person.

For address changes and/or comments, please check this box and write them on the back where indicated.

o

Please indicate if you plan to attend this meeting.

o

o

Yes

No

Signature [PLEASE SIGN WITHIN BOX]

Date

Signature (Joint Owners)

Date

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INFORMATION ABOUT ATTENDING We will hold the Annual Meeting at the Pasadena Hilton, 168 South Los Robles Avenue, Pasadena, California. Shareholders must present a ticket to be admitted to the Annual Meeting. For shareholders of record, your admission ticket is the detachable portion of your proxy form. Please have your ticket out and available when you reach the registration area at the Annual Meeting.

For shareholders who hold shares through a brokerage firm, bank or other holder of record, your ticket is the copy of the latest account statement showing the American States Water Company investment. Please present this account statement to the Company representative at the Annual Meeting. You will not, however, be entitled to vote these shares at the Annual Meeting, unless you have obtained a legal proxy from your broker, bank or other shareholder of record. A copy of this account statement is not sufficient for this purpose.

AMERICAN STATES WATER COMPANY
2007 ANNUAL MEETING OF SHAREHOLDERS
MAY 22, 2007

This Proxy is solicited on behalf of the Board of Directors

The undersigned hereby appoints Lloyd E. Ross and N.P. Dodge, Jr., and each or any of them, proxies of the undersigned, each with full power of substitution, to vote in their discretion at the Annual Meeting of Shareholders of the Company (the “Annual Meeting”) and any adjournments thereof. The Annual Meeting will be held on Tuesday, May 22, 2007 at 10:00 a.m., Pacific Time at the Pasadena Hilton, 168 South Los Robles Avenue, Pasadena, California.

This proxy, when properly executed, will be voted in the manner described herein by the undersigned shareholder(s) and the named proxies will, in their sole discretion, vote such shares on any other matters that may properly come before the meeting or any adjournments thereof. If no direction is made, this proxy will be voted FOR the listed nominees and FOR ratification of the appointment of the independent auditors. Further, if cumulative voting rights for the election of directors (Item 1) are exercised at the meeting, the proxies will cumulatively vote the shares as provided in the proxy statement. If a proposal is made to adjourn the meeting in order to enable management to continue to solicit proxies in favor of any of the above proposals, the proxies will be voted in favor of adjournment, unless otherwise directed.
 

Address Changes/Comments:
(If you noted any Address Changes/Comments above, please mark corresponding box on the reverse side.)

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