OPERATING ORDER

Between

STATE OF CALIFORNIA
DEPARTMENT OF WATER RESOURCES

And

SOUTHERN CALIFORNIA EDISON COMPANY

THIS ORDER HAS BEEN FILED WITH AND APPROVED BY THE CALIFORNIA PUBLIC UTILITIES COMMISSION ("COMMISSION") FOR USE BETWEEN THE STATE OF CALIFORNIA DEPARTMENT OF WATER RESOURCES ("DWR") AND SOUTHERN CALIFORNIA EDISON COMPANY ("UTILITY").

Date of Commission Approval: December 19, 2002

Effective Date: December 19, 2002

This OPERATING ORDER (this "Order") is between the State of California Department of Water Resources ("DWR"), acting solely under the authority and powers granted by AB1X, codified as Sections 80000 through 80270 of the Water Code, and not under its powers and responsibilities with respect to the State Water Resources Development System, and Southern California Edison Company, a California corporation ("Utility"). DWR and Utility are sometimes collectively referred to herein as the "Parties" and individually referred to as a "Party." Unless otherwise noted, all capitalized terms shall have the meanings set forth in Article I of this Order.

R E C I T A L S

WHEREAS, under the Act, DWR has entered into a number of long-term power purchase agreements for the purpose of providing the net short requirements to the retail ratepayers of the State's electrical corporations, including Utility; and

WHEREAS, the Contract Allocation Order of the Commission provides that such long-term power purchase agreements are to be operationally allocated among the State's electrical corporations, including Utility; solely for the purpose of causing the State's electrical corporations to perform certain specified functions, on behalf of DWR, including dispatching, scheduling, billing and settlements functions, all as such functions relate to those certain power purchase agreements allocated to each electrical corporation under the Contract Allocation Order; and

WHEREAS, DWR wishes to provide for the performance of such functions under the Allocated Contracts by Utility on behalf of DWR in accordance with such long-term power purchase agreements as provided in this Order; and

WHEREAS, consistent with the Contract Allocation Order, DWR will retain legal and financial obligations, together with any other functions not explicitly provided in this Order to be performed by Utility, with respect to each of the Allocated Contracts and it is the intent of DWR and the Utility that the provisions of this Order will not constitute an "assignment" of the Allocated Contracts as such term is used and as provided in each of the Allocated Contracts; and

WHEREAS, consistent with the Interim Contract Order of the Commission, DWR expects to enter into certain Interim Contracts prior to January 1, 2003 and DWR wishes to provide for the administration of such Interim Contracts by Utility.

NOW, THEREFORE, DWR agrees and Utility is ordered to do as follows: