Coalition for Equitable Water Rates (CEWR)

www.cewr.net

August 22, 2011

Dear Fellow Ratepayer, The Coalition for Equitable Water Rates (CEWR) wishes to thank you for your support of our protest effort against Canyon Lake Water Service Companys (CLWSC) filing to raise our water rates an additional 71%. As a direct result of the participation of good people and supporters like you, we have been busy working for the ratepayers of Comal and Blanco counties. CEWR remains fully engaged in the tough work of developing the evidence required to present a compelling case to the Administrative Law Judge (ALJ) that will lead to a final rate order by the Texas Commission on Environmental Quality (TCEQ), substantially lower than the enormous increase requested by the California based water company. Challenge to SJW/CLWSC Testimony In early June, CEWR filed a motion requesting the ALJ dismiss SJW/CLWSCs pre-filed testimony on the grounds that the new data contained in the testimony was materially different from the initial rate filing information and was tantamount to filing a new rate application. We also requested that if the ALJ allowed the amended application to be considered, then it should be considered as a new rate increase application and the interim 38% increase being currently charged should be refunded to the ratepayers. Unfortunately the ALJ did not accept our position and allowed SJW/CLWSCs changes to be considered. This decision will require CEWRs consultants to completely review the new data as we prepare our hearing testimony and cost us approximately an additional $15,000 in expenses. Interim Settlement Negotiations On June 27, 2011, after months with no negotiation efforts or offers from San Jose Water (SJW) or CLWSC, CEWRs settlement negotiation team proposed to enter into interim settlement negotiations. SJW/CLWSC accepted our initiative and our first meeting took place in early July. These confidential negotiations will remain active throughout the hearing process and could result in a settlement proposal to the ALJ at any time during the process. Updated Hearing Schedule The delay resulting from SJW/CLWSCs revised testimony and our motion has required a change in the protest hearing schedule, allowing CEWR to have adequate time to update and refine our pre-filed testimony for the hearing. The new approved schedule is: October 31, 2011 CEWR pre-files its testimony with the ALJ December 30, 2011 The ED (Executive Director, TCEQ) pre-files its testimony with the ALJ January 16, 2012 Pre-trial hearing in Austin February 20, 2012 Objections to pre-filed testimony are due to the ALJ February 29, 2012 Responses to objections to pre-filed testimony are due to the ALJ The final date for the formal protest hearing in Austin is being negotiated with March 26-30, April 17-20, and April 23-27, 2012 being considered for the hearing date. We expect final orders to come from the TCEQ Commissioners during the 4th quarter of 2012.

WWW.CEWR.NET

830-542-WATR

Coalition for Equitable Water Rates (CEWR)

www.cewr.net

The Next Sixty Days Are Critical for Ratepayers

CEWRs most important effort in the next 60 days is development of our pre-filed testimony for the hearing and working the effort to achieve a settlement agreement with SJW/CLWSC. We believe our major points that dispute SJW/CLWSCs rate filing remain valid and we will make a compelling argument that convinces the ALJ to find for the CEWR. It is critical that CEWR place its full effort to develop facts and hard data from the information we have discovered and the data the Water Company has been compelled to provide to us. Trust that we will deliver a quality product to convince the ALJ to rule in the ratepayers favor. Our next update will be in October after our testimony filing. We will provide an executive overview of the testimony so you have the facts and data that challenges CLWSCs enormous rate increase request. We will also give you an update on our financial status and our ability to sustain CEWRs efforts throughout the formal hearing process. SJW/CLWSCs continuing efforts to use the legal system to extend the hearing process and force CEWR to spend its funds to challenge them may require us to ask Associations and individual members/supporters to make another donation to ensure we are able to fully represent the ratepayers at the formal hearing. Fair and affordable water rate should be a Texans right. We believe CEWRs challenge to SJW/CLWSCs massive water rate increase request is the most effective way for all ratepayers to express their outrage to the States regulatory agency and the Water Company. We pledge to continue to give you our commitment to win this protest.

Please send me an e-mail at www.cewr.net if you have a comment or initiative you think will help us win.

Respectfully,

Geoff Miller President, CEWR

(Please Visit CEWRs Website at www.cewr.net)

Texas law makes provisions for water utilities to recover expenses from rate case challenges via billing surcharges. The utility ratepayer does not benefit from any such protection and does not have legal recourse to recoup its legal fees.

WWW.CEWR.NET

830-542-WATR