SAN DIEGO, Calif.--(BUSINESS WIRE)--Dec. 28, 1998--Western Water Company (Nasdaq:WWTR) announced today that it has completed a landmark water sale in cooperation with The Metropolitan Water District of Southern California ("MWD").

For the first time in its 70-year history, MWD is exchanging water with a private company for delivery within MWD's service territory.

Following signing last week of the historic agreement among Western Water Company, MWD, the Municipal Water District of Orange County, and Western Water Company's customer, the Santa Margarita Water District, water began to flow through the State Water Project into the MWD system. The water will then be delivered to Santa Margarita Water District over the course of the next year.

"Working with MWD underscores our shared commitment to bring more water to Southern California at the lowest cost while protecting the environment," said Michael Patrick George, president and chief executive officer of Western Water Company. "Western Water Company applauds MWD's willingness to facilitate this transaction, and we are proud of our role in this significant pilot project. We anticipate cooperation between MWD and private water resource providers on future water transactions."

John Schatz, general manager of the Santa Margarita Water District, stated: "This is a first -- and we are delighted. This transaction provides a model for the future that will allow Santa Margarita and other water retailers to purchase water at a lower overall cost with greater reliability than has been available in the past."

Stan Sprague, general manager of the Municipal Water District of Orange County, said: "We support the Western Water Company exchange. It gives us a chance to work out the mechanics of such transactions during a period of abundant supplies. Completing this transaction also points out the need to update MWD's rate structure to facilitate future exchanges and other transactions."

"This one-year exchange of 1000 acre-feet was structured as a pilot project that solves most of the technical and policy issues relating to moving water through the MWD system," continued George. "Although it does not address all of our concerns relating to bringing new water into Southern California, we believe it provides a good template for many aspects of future transfers. This transfer enabled the parties to focus on developing a model that would be fair, replicable and environmentally responsible. The small size of the transaction provides limited insight into the total cost for larger transfers, particularly in consideration of the payment of fixed costs associated with the pilot project. This will be an issue for serious negotiation on future transfers."

Western Water Company has been working with the Santa Margarita Water District for the better part of 1998 to structure and execute a water transfer that would meet Santa Margarita's cost and reliability needs. After receiving a firm order from Santa Margarita in June to purchase water at $385 per acre-foot, Western Water Company began negotiating in earnest with MWD to provide conveyance and treatment services through its system, as well as conveyance through the State Water Project.

The transaction involves water purchased by Western Water Company in Central California. The water will be delivered into the State Water Project, where it will then be conveyed to MWD by the California Department of Water Resources. In exchange, MWD will store, treat, and deliver the water to the Municipal Water District of Orange County, and ultimately to Santa Margarita over the ensuing year. Western Water Company will pay MWD approximately $400,000 for its participation in the pilot project. The transaction was the subject of an environmental review under the California Environmental Quality Act, and was approved by the Board of Directors of MWD on November 10, 1998.

Western Water Company is a leading water resource company in the wholesale, non-regulated water market in the Western United States. Its principal activities include the acquisition, development and marketing of water supplies throughout the West.

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: Statements in this press release regarding Western Water Company's business which are not historical facts are "forward-looking statements" that involve risks and uncertainties. For a discussion of such risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see "Risk Factors" in the Company's Annual Report or Form 10-K for the most recently ended fiscal year.