2. Background

2.1. Parties

Ponderosa Sky Ranch Water System (Ponderosa) is a domestic water enterprise currently furnishing service to customers within Ponderosa Sky Ranch Subdivision in Paynes Creek, California. Seller was appointed Receiver of the system on September 7, 2003, by the Superior Court of California for the County of Tehama (Court), in Case No. 52345.

Buyer is a public entity established in the Ponderosa Sky Ranch Subdivision. It is governed by Title 12 of the California Water Code, Section 30000 et seq., and may lawfully incur debt to be repaid in a future fiscal year.

2.2. Ponderosa System

Ponderosa serves 110 customers in or near Paynes Creek. Its system basically consists of approximately five miles of pipeline, five fire hydrants, 84 meters, one operable 16,000-gallon capacity steel storage tank, one 300-gallon capacity steel pressure storage tank and associated components comprising its hydropneumatic system, and one well and associated components comprising its water supply system. Ponderosa's assets are more particularly described in the Asset Acquisition Agreement dated June 9, 2009 (Agreement), a copy of which is attached as the Appendix to our Order.

Ponderosa's most recent Annual Report (2007) shows that it had net income of $2,410 on total operating revenues of $51,715. Its system requires modification and repairs to bring it into compliance with standards mandated by Commission General Order (GO) 103-A. Seller is unable to repair and operate the system with available financial resources.

2.3. Sale and Purchase Transaction

Buyer intends to purchase the system, make repairs and upgrades, and operate it in compliance with state and local requirements. To that end, Buyer has applied for state and federal grants and low interest loans to perform the necessary work.

Under the terms of the Agreement, Buyer will purchase Ponderosa for $50,000, payable in cash upon closing. The sale will be subject to final approval by the Court, and by state and local health agencies. The sale is conditioned upon Buyer meeting California Department of Public Health Technical Management and Financial criteria before the ownership change.

Buyer proposes to adopt Ponderosa's presently filed tariffs. Customer deposits will be transferred to Buyer at closing. There are no main extension advances extant.