ORDER

IT IS ORDERED that:

1. San Jose Water Company (SJWC) is authorized, pursuant to § 816 et seq. of the Public Utilities Code, to issue evidence of indebtedness in an amount not to exceed $1,660,250 for capital expenditures within its service area and to provide a security instrument such as an annual stand-by letter of credit to support the loan. A copy of the promissory note and loan contract agreement shall be filed with the Water Division within 15 days after execution.

2. SJWC shall retain all invoices related to the design and construction of additional washwater handling facilities financed by the Safe Drinking Water State Revolving Fund loan so that Commission staff may confirm that the loan was properly used for the stated purpose and paid for through a customer surcharge.

3. SJWC shall maintain adequate records to facilitate review of amounts expended and amounts drawn upon its income to pay for the cost of the project.

4. SJWC shall maintain adequate records to enable Commission staff to audit revenues collected through the surcharge, and payments of principal and interest on the loan.

5. SJWC is authorized to file in accordance with General Order No. 96-A, or its successor, at least 180 days prior to DWR's first billing, an advice letter which implements the rate surcharges to customers (as discussed in Section IV. B of the foregoing Opinion) to repay the indebtedness authorized in Ordering Paragraph 1.

6. The authority granted herein shall be subject to the conditions enumerated in Section IV. B of the foregoing Opinion.

7. On or before July 31, 2005, and semi-annually thereafter, for as long as the surcharge is imposed, SJWC shall send a comparative report to the Director of the Water Division stating the changes in the number of connections by type of customer and by size of connection, the amount of service fee collected, the outstanding balance of the loan, and the overages and shortages in the utility's bank account. SJWC shall also indicate in the report if an advice letter will be forthcoming to reflect changes in the surcharge rate.

8. The authority granted by this order shall become effective when SJWC pays $2,660, the fee required by Public Utilities Code 1904(b).

9.Application 04-10-033 is closed.

This order is effective today.

Dated January 27, 2005, at San Francisco, California.

MICHAEL R. PEEVEY

President

GEOFFREY F. BROWN

DIAN M. GRUENEICH

SUSAN P. KENNEDY

Commissioners