AMERICAN STATES WATER COMPANY PERFORMANCE INCENTIVE PLAN

The purpose of the American States Water Company Performance Incentive Plan (the “ Plan ”) is to promote the success of American States Water Company, a California corporation, (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 the executives with cash 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 utility customers benefit through lower rates when the Corporation is able to attract low cost capital.

This Plan is intended to provide Bonuses for Performance Periods beginning after December 31, 2009, that qualify as performance-based compensation within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (“ Section 162(m) ”).  The Bonuses payable for the year ending on December 31, 2009, are not intended to satisfy Section 162(m).

This Plan is adopted effective as of January 1, 2009; provided, however, that its continued effectiveness after December 31, 2009, is subject to shareholder approval of the Plan before December 31, 2010.

2.1            Accounting Terms .  Except as otherwise expressly provided or the context otherwise requires, financial and accounting terms in this Plan and the Awards granted under this Plan are used as defined for purposes of, and shall be determined in accordance with, generally accepted accounting principles, as from time to time in effect, as applied and included in the consolidated financial statements of the Corporation, prepared in the ordinary course of business.

2.2            Specific Terms .  The following words and phrases as used herein shall have the following meanings unless a different meaning is plainly required by the context:

“ ASUS ” means American States Utility Services, Inc. and its subsidiaries.

“ Award ” means an award under this Plan of a conditional opportunity to receive a Bonus if the applicable Performance Targets are satisfied in the applicable Performance Period.

“ Bonus ” means a cash payment or a cash payment opportunity under the Plan, as the context requires.

“ Business Criteria ” means any one or any combination of the following business criteria:  earnings per share, shareholder return, customer satisfaction, customer complaints, capital expenditures, capital investments, significant deficiencies and material weaknesses under Section 404 of the Sarbanes-Oxley Act of 2002, operating revenue, revenues from specific facilities, net income from operations, net income, earnings (before or after interest, taxes, depreciation and/or amortization), growth in earnings, return on equity, return on capital, economic value added, and cash flow.

“ Code ” means the Internal Revenue Code of 1986, as amended from time to time.

“ Committee ” means the Compensation Committee of the Corporation’s Board of Directors.

“ Company ” means American States Water Company, a California corporation, and its subsidiaries.

“ Corporation ” means American States Water Company, a California corporation.

“ Executive ” means the Chief Executive Officer of the Corporation and any other key employee (including any officer) of the Company who is a Senior Vice President or Vice President.

“ Participant ” means an Executive selected to participate in the Plan by the Committee.

“ Performance Period ” means the Year or Years (or portions thereof) with respect to which the Performance Targets are set by the Committee.

“ Performance Targets ” means the specific objective goal or goals that are timely set in writing by the Committee pursuant to Section 4.2 for each Participant for the applicable Performance Period in respect of any one or more of the Business Criteria.

“ Plan ” means this American States Water Company Performance Incentive Plan.

“ Regulated Utility ” means Golden State Water Company and Chaparral City Water Company and any other regulated utility acquired by the Company.

“ Section 162(m) ” means Section 162(m) of the Code, and the regulations promulgated thereunder, all as amended from time to time.

“ Section 409A ” means Section 409A of the Code, and the regulations and any interpretative guidance promulgated thereunder, all as amended from time to time.

“ Year ” means a calendar year commencing on or after January 1, 2009.

3.1            Powers of the Committee .  The Committee shall have the sole authority to establish and administer the Business Criteria and Performance Targets and the responsibility of determining from among the Executives those persons who will participate in and receive Awards under the Plan and, subject to the terms of the Plan, the amount of Awards, and the time or times at which and the manner in which Awards will be paid (which may include elective or mandatory deferral alternatives subject to Section 409A) and shall otherwise be responsible for the administration of the Plan, in accordance with its terms.  The Committee shall have the authority to construe and interpret the Plan (except as otherwise provided herein) and any agreement or other document relating to any Awards under the Plan, may adopt rules and regulations governing the administration of the Plan, and shall exercise all other duties and powers conferred on it by the Plan, or which are incidental or ancillary thereto.

4.1            Provision for Bonus .  Each Participant may receive a Bonus if the Performance Targets established by the Committee, relative to the applicable Business Criteria, are attained in the applicable Performance Period established by the Committee.  The applicable Performance Period and Performance Targets shall be determined by the Committee consistent with the terms of the Plan and, after December 31, 2009, Section 162(m).  Notwithstanding the fact that the Performance Targets have been attained, the Company may pay a Bonus of less than the amount determined by the formula or standard established pursuant to Section 4.2 or may pay no Bonus at all.

4.2            Selection of Performance Targets .  With respect to Performance Periods beginning after December 31, 2009, the Committee must establish the specific Performance Targets with respect to the Business Criteria within the first 90 days of the Performance Period (and, in the case of any Performance Period of less than one year, in no event after 25% or more of the Performance Period has elapsed) and while the performance relating to the Performance Targets remains substantially uncertain within the meaning of Section 162(m).  The Committee may establish the Performance Targets with respect to any Performance Period on a stand-alone basis with respect to the Corporation or on a relative basis with respect to any peer companies or index selected by the Committee.  The Committee may establish the Performance Targets with respect to any Performance Period on the basis of one or more of the Business Criteria for the Corporation on a consolidated basis or for one or more of the Corporation’s subsidiaries, divisions, segments, facilities or business units or any combination of the foregoing.  At the time the Committee selects the Performance Targets, the Committee shall provide, in terms of an objective formula or standard for each Participant the method of computing the specific amount that will represent the maximum amount of Bonus payable to the Participant if the Performance Targets are attained, subject to Sections 4.1, 4.3, 4.7, 5.1 and 5.7.  The objective formula or standard shall preclude the use of discretion to increase the amount of any Bonus earned pursuant to the terms of the Award.

4.3            Maximum Annual Bonuses .  Notwithstanding any other provision hereof, the maximum amount that may be payable in respect o