2009 SHORT-TERM INCENTIVE PROGRAM

American States Water Company, a California corporation, (the “ Corporation ”) has adopted the American States Water Company Performance Incentive Plan (the “ Plan ”) to promote the success of the Corporation by (a) motivating executives selected to participate in the Plan to maximize the performance of the Corporation both from a financial perspective and in serving its customers and (b) rewarding them with cash Objective Bonuses directly related to such performance.  The Corporation’s board of directors recognizes that the ability of the Corporation and its subsidiaries to attract capital at a low cost is based on its financial performance and that the Corporation’s customers benefit through its ability to attract low cost capital.  This 2009 Short-Term Incentive Program (the “ 2009 STIP ”) sets forth the names of the individuals selected to be Participants who are eligible to earn Objective Bonuses under the Plan for the 2009 calendar year and the applicable Business Criteria, Performance Targets, and Payout Percentages for the 2009 calendar year.  The 2009 STIP also provides for Discretionary Bonuses, which when added to the Objective Bonuses under the Plan, equal the Aggregate Bonuses payable under the 2009 STIP for the 2009 calendar year.

The Performance Period covered by the 2009 STIP (the “ Term ”) began on January 1, 2009 and will end on December 31, 2009.

The Objective Bonuses payable under Awards granted under the 2009 STIP are granted under the authority of the Plan and are subject to all of the terms and conditions of the Plan, as it may be amended from time to time, and any rules adopted by the Committee in accordance with the terms of the Plan, as such rules are in effect from time to time.  The Discretionary Bonuses are granted under the general authority of the Compensation Committee to determine the compensation payable to Executives.

Capitalized terms used and not otherwise defined herein have the meanings set forth in the Plan.  In addition, the following phrases shall have the meanings specified below:

“ Adjusted EPS-ASUS ” means the EPS of ASUS for 2009 adjusted to remove the amount by which the actual Pension Expense allocated from Golden State Water Company (“ GSWC ”) and charged to ASUS for 2009 exceeds the amount of the Budgeted Pension Expense allocated from GSWC and charged to ASUS for 2009.

“ Adjusted EPS-AWR Consolidated ” means the Corporation’s EPS for 2009 adjusted to remove (a) settlement charges and outside expenses associated with the California Public Utilities Commission subpoena regarding the capital projects contracting matter and the pending litigation with two former officers of the Corporation, (b) any derivative gains or losses attributable to fixed-price purchase contracts as reported in the Corporation’s consolidated financial statements for 2009, and (c) the amount by which the actual companywide Pension Expense for 2009 exceeds the companywide Budgeted Pension Expense for 2009.

“ Adjusted EPS-Regulated Utilities ” means the sum of the EPS of each of the Regulated Utilities for 2009 adjusted to remove the portion of the following expenses that are otherwise included in each such EPS determination:  (a) settlement charges and outside expenses associated with the California Public Utilities Commission subpoena regarding the capital projects contracting matter and the pending litigation with two former officers of the Company, (b) any derivative gains or losses attributable to fixed-rate purchase contracts as reported in the Corporation’s consolidated financial statements for 2009, and (c) the amount by which the actual Pension Expense charged or allocated to the Regulated Utilities for 2009 exceeds the Budgeted Pension Expense charged or allocated to the Regulated Utilities for 2009.

“ Aggregate Bonus ” means the combination of a Participant’s Objective Bonus and his or her Discretionary Bonus.

“ Award Agreement ” means a written agreement setting forth the material terms and conditions of the Award as determined by the Committee consistent with the express limitations of the Plan and the 2009 STIP.

“ Base Salary ” means the Participant’s rate of annual base pay on the date the Committee approves the Business Criteria and Performance Targets.

“ Board of Directors ” means the Corporation’s board of directors.

“ Budget ” or “ Budgeted ” means (a) in the case of Adjusted EPS for the Corporation, the Regulated Utilities or ASUS, as the case may be, the projected Adjusted EPS for 2009 as set forth in the Operating Budget, (b) in the case of Capital Expenditures, the projected capital expenditures as set forth in the Capital Budget, and (c) in the case of Pension Expense, the projected Pension Expense for 2009 as set forth in the Operating Budget.

“ Business Criteria ” means Adjusted EPS-AWR Consolidated, Adjusted EPS - Regulated Utilities, Adjusted EPS - ASUS, Relative Stock Price, Customer Complaints, Capital Expenditures, SOX Deficiencies - Regulated Utilities, SOX Deficiencies - ASUS, Equitable Adjustment and Price Redetermination.

Capital Budget means the Company’s capital budget for 2009 as approved by the Audit and Finance Committee of the Board of Directors at its meeting on October 30, 2008.

“ Capital Expenditures ” means the dollar amount of Budgeted capital expenditures for 2009 for the Regulated Utilities including the Budgeted capital expenditures for 2009 for the Wrightwood project only to the extent that the Division of Ratepayer Advocates of the California Public Utilities Commission does not oppose the Wrightwood project in the 2008-2009 Region III rate case.

“ Compensation Committee ” means the Compensation Committee of the Board of Directors.

“ Customer Complaints ” means the number of water quality, pressure and service complaints reported by customers to the California Department of Public Health during 2009.

“ Discretionary Bonus ” means a bonus payable to a Participant based on that Participant’s Individual Performance Measures.

“ EPS ” means fully diluted earnings per share as reported in the Corporation’s consolidated financial statements for 2009.

“ Equitable Adjustment ” means the execution, during calendar year 2009, of an agreement with the U.S. government that provides for a permanent increase in the Company’s operation and maintenance fees at Old North Utility Services (Fort Bragg) to recognize that the Company is managing more inventory than was included in the government’s initial request for proposal.

“ Individual Performance Measures ” means the criteria or goals utilized to determine the amounts of each Participant’s Discretionary Bonus.

“ Objective Bonus ” means a bonus based on the degree of achievement of the Performance Targets for the Business Criteria.

“ Operating Budget ” means the Company’s operating budget for 2009 as presented to and reviewed by the Board of Directors at its meeting on October 31, 2008.

“ Payout Percentage ” means the percentage of a Participant’s Target Aggregate Bonus that is payable based on the degree of satisfaction of a Perform