Exhibit 10.1

AMERICAN STATES WATER COMPANY

2010 SHORT-TERM INCENTIVE PROGRAM

1.        Purpose of 2010 Short-Term Incentive Program

American States Water Company, a California corporation, (the “Corporation”) has adopted the American States Water Company Performance Incentive Plan (the “Plan”) to promote the success of the Corporation by (a) motivating executives selected to participate in the Plan to maximize the performance of the Corporation both from a financial perspective and in serving its customers and (b) rewarding them with cash Objective Bonuses directly related to such performance.  The Corporation’s board of directors recognizes that the ability of the Corporation and its subsidiaries to attract capital at a low cost is based on its financial performance and that the Corporation’s customers benefit through its ability to attract low cost capital.  This 2010 Short-Term Incentive Program (the “2010 STIP”) sets forth the names of the individuals selected to be Participants who are eligible to earn Objective Bonuses under the Plan for the 2010 calendar year and the applicable Business Criteria, Performance Targets, and Payout Percentages for the 2010 calendar year.  The 2010 STIP also provides for Discretionary Bonuses, which when added to the Objective Bonuses under the Plan, equal the Aggregate Bonuses payable under the 2010 STIP for the 2010 calendar year.

2.        Term of 2010 STIP

The Performance Period covered by the 2010 STIP (the “Term”) began on January 1, 2010 and will end on December 31, 2010.

3.        Relationship to American States Water Company Performance Incentive Plan

The Objective Bonuses payable under Awards granted under the 2010 STIP are granted under the authority of the Plan and are subject to all of the terms and conditions of the Plan, as it may be amended from time to time, and any rules adopted by the Committee in accordance with the terms of the Plan, as such rules are in effect from time to time.  The Discretionary Bonuses are granted under the general authority of the Compensation Committee to determine the compensation payable to Executives.  

4.        Definitions

Capitalized terms used and not otherwise defined herein have the meanings set forth in the Plan.  In addition, the following phrases shall have the meanings specified below:

“Adjusted EPS-ASUS” means the EPS of ASUS for 2010 adjusted to remove the general office allocation to ASUS related to (a) settlement charges and outside expenses associated with the CPUC subpoena regarding the capital projects contracting matter and (b) any transaction fees and/or gain or loss on sale recognized in the financial statements in 2010 associated with a sale of any of the Corporation’s business units.

“Adjusted EPS-AWR Consolidated” means the Corporation’s EPS for 2010 adjusted to remove (a) settlement charges and outside expenses associated with the CPUC subpoena regarding the capital projects contracting matter and (b) any transaction fees and/or gain or loss on sale recognized in the financial statements in 2010 associated with a sale of any of the Corporation’s business units.

“Adjusted EPS-Regulated Utilities” means the sum of the EPS of each of the Regulated Utilities for 2010 adjusted to remove (a) the portion of the settlement charges and outside expenses associated with the CPUC subpoena regarding the capital projects contracting matter and (b) any transaction fees and/or gain or loss on sale recognized in the financial statements in 2010 associated with a sale of any of the Corporation’s business units.

“Aggregate Bonus” means the combination of a Participant’s Objective Bonus and his or her Discretionary Bonus.  

“Andrews Price Redetermination” means the execution, during calendar year 2010, of an agreement with the U.S. government that provides for an interim or permanent increase in the monthly fees payable to Terrapin Utility Services, Inc. of at least 16% for operations and maintenance with respect to its operations at Andrews AFB.  

“Award Agreement” means a written agreement setting forth the material terms and conditions of the Award as determined by the Committee consistent with the express limitations of the Plan and the 2010 STIP.  

“Base Salary” means the Participant’s rate of annual base pay on the date the Committee approves the Business Criteria and Performance Targets.  

“Board of Directors” means the Corporation’s board of directors.

“Budget” or “Budgeted” means (a) in the case of Adjusted EPS for the Corporation, the Regulated Utilities or ASUS, as the case may be, the projected Adjusted EPS for 2010 as set forth in the Operating Budget, and (b) in the case of Capital Expenditures, the projected capital expenditures as set forth in the Capital Budget.

“Business Criteria” means Adjusted EPS-AWR Consolidated, Adjusted EPS- Regulated Utilities, Adjusted EPS-ASUS, Relative Stock Price, Customer Complaints to DPH, Customer Complaint Standards, Capital Expenditures, SOX Deficiencies-Regulated Utilities, SOX Deficiencies-ASUS, Andrews Price Redetermination, Fort Bragg ICU Contract Modification, Fort Jackson Equitable Adjustment, Customer Satisfaction and Virginia Bases Price Redetermination.

“CAB” means the CPUC Consumer Affairs Branch.

Capital Budget means the Company’s capital budget for 2010 as approved by the Audit and Finance Committee of the Board of Directors at its meeting on October 26, 2009.  The Capital Budget excludes those items footnoted as “Project is being litigated with DRA.”

“Capital Expenditures” means the dollar amount of capital expenditures for 2010 for the Regulated Utilities.

“Compensation Committee” means the Compensation Committee of the Board of Directors.  

“CPUC” means the California Public Utilities Commission.

“Customer Complaint Standards” means the number of complaints on all matters on Golden State Water Company received by CAB in 2010 divided by the average number of customers served by Golden State Water Company during 2010.

“Customer Complaints to DPH” means the number of water quality, pressure and service complaints received from customers by Golden State Water Company (GSWC) during 2010 that are reported to the California Department of Public Health by GSWC.

“Customer Satisfaction” means meeting the small business utilization targets in four of the six categories for the commercial subcontracting plan.  The six categories include 1) Service Disabled Veteran-owned, Small Business, 2) Veteran-owned Small Business, 3) Historically Underutilized Business Zones, 4) Women-owned small business, 5) Small Disadvantaged Business and 6) Small Business.

“Discretionary Bonus” means a bonus payable to a Participant based on that Participant’s Individual Performance Measures.

“EPS” means fully diluted earnings per share as reported in the Corporation’s consolidated financial statements for 2010.

 “Fort Bragg ICU Contract Modification” means the execution, during calendar year 2010, of a modification of the contract at Fort Bragg to better the prospects of earnings as a result of changes to the schedule and work plans for the original Initial Capital Upgrade projects.

“Fort Jackson Equitable Adjustment” means the execution, during calendar year 2010, of an agreement with the U.S. government that provides funding of at least $650,000 for the Longstreet sewer system overflow at Fort Jackson that occurred in 2008.

“Individual Performance Measures” means the criteria or goals utilized to determine the amounts of each Participant’s Discretionary Bonus.

“Objective Bonus” means a bonus based on the degree of achievement of the Performance Targets for the Business Criteria.  

“Operating Budget” means the Company’s operating budget for 2010 as presented to the Board of Directors in October 2009 and February 2010 and finalized through an email by Robert Sprowls to the Board of Directors on March 17, 2010.

“Payout Percentage” means the percentage of a Participant’s Target Aggregate Bonus that is payable based on the degree of satisfaction of a Performance Target or the Individual Performance Measures.

 “Performance Measures” means the Business Criteria and Individual Performance Measures.  

“Performance Target” means a specific goal established by the Committee with respect to the Business Criteria as set forth in Section 6.

“Relative Stock Price” means the Corporation’s total shareholder return as compared to the total shareholder return of each of the following 12 companies for 2010:  UIL Holdings, South Jersey Industries, Aqua America, MGE Energy, Empire District Electric, ITC Holdings, California Water Service, Central Vermont Public Service, Unitil, Chesapeake Utilities, Southwest Water and SJW Corp.  For this purpose, total shareholder return for the Corporation and each of the other 12 companies shall be calculated using the Securities and Exchange Commission guidelines for reporting financial performance.  If the stock of any of the 12 companies is no longer traded or is suspended from trading as of December 31, 2010, that company shall not be included in the calculation of Relative Stock Price, but the exclusion of such company shall not affect the Performance Targets for Relative Stock Price set forth in Section A of Exhibit A.

“SOX” means the Sarbanes-Oxley Act of 2002.

“SOX Deficiencies-ASUS” means the number of “control deficiencies” (each a “CD”), “significant deficiencies” (each an “SD”) and “material weaknesses” (each a “MW”) reported for ASUS in the independent auditor’s report for 2010 pursuant to Section 404 of SOX.

“SOX Deficiencies-Regulated Utilities” means the number of CDs, SDs and MWs reported for the Regulated Utilities in the independent auditor’s report for 2010 pursuant to Section 404 of SOX.

“Target Aggregate Bonus” means the amount of bonus that would be payable if each of the Performance Targets were met at the targeted level and the Participant’s Individual Performance Measures were met at the targeted level.

“Virginia Bases Price Redetermination” means the execution, during calendar year 2010, of an agreement with the U.S. government that provides for a permanent increase in the monthly fees payable to the Company of at least 16% for operations and maintenance with respect to its operations under Old Dominion Utility Services (Forts Lee, Story, Eustis and Monroe).  

5.        Participation and Individual Awards

The individuals who have been selected as Participants in the 2010 STIP are set forth below together with the amount of their Target Aggregate Bonuses as a percentage of Base Salary:

For purposes of this 2010 STIP, the GSWC officers will be divided into (1) Administrative and General Officers and (2) Operations Officers.

The Corporation will enter into an Award Agreement with each Participant that (a) describes his or her Individual Performance Measures and sets forth his or her Target Aggregate Bonus, (b) sets forth his or her threshold, target and maximum Performance Targets and (c) incorporates the terms and conditions of the Plan and this 2010 STIP by reference.  The Target Aggregate Bonus amount set forth in each Participant’s Award Agreement shall represent the aggregate amount of two separate bonuses:  an Objective Bonus (under the Plan) and a Discretionary Bonus.  

6.        Performance Targets for Objective Bonuses

The threshold, target and maximum Performance Targets for the 2010 STIP are set forth in Exhibit A to this 2010 STIP.

7.        Determination of Participants’ Aggregate Bonuses

The Aggregate Bonus payable to each Participant shall be determined on the basis of the extent to which the Performance Targets for the Business Criteria and that Participant’s Individual Performance Measures are achieved.  The amount of Aggregate Bonus payable is equal to the amount of the Target Aggregate Bonus multiplied by the sum of the Payout Percentages for each of the Performance Measures as determined pursuant to the tables in (a) Section B of Exhibit A for Participants that are Administrative and General Officers employed by GSWC, (b) Section C for Participants that are Operations Officers employed by GSWC and (c) Section D for Participants employed by ASUS.

As soon as practicable following the end of the Term of the 2010 STIP and the completion of the independent auditor’s report for 2010, the Committee shall determine the extent to which the Performance Targets for the Business Criteria are achieved and the extent to which the Individual Performance Measures are achieved, and determine the Payout Percentage for each of the Performance Measures.  In order for a Participant to receive any payment with respect to the Participant’s Discretionary Bonus, the Participant must meet the standards established for the Participant’s position, which standards shall be one of the components of the Participant’s Individual Performance Measures.  The determination of whether the standards established for the Participant’s position are achieved shall be made by the Committee, which (other than for the Company’s President and Chief Executive Officer) determination shall be based on the recommendations of the President and Chief Executive Officer or other direct supervisor of the Participant.

For levels of achievement between threshold and maximum, the Committee shall determine the Payout Percentage by interpolation.  Subject to Section 8 below, the Aggregate Bonus for each Participant shall be the sum of the Payout Percentages determined with respect to each Performance Measure multiplied by the amount of Participant’s Target Aggregate Bonus.  

8.        Payment of Accounts

At the time the Committee makes the determinations described in Section 7, it shall certify, in accordance with Section 4.8 of the Plan, the amounts of the Objective Bonuses payable to Participants.  The Committee shall, at the same time, determine the amount of the Discretionary Bonus payable to Participants.  Payment of such bonuses (the Aggregate Bonuses) shall be made as soon as practicable following the Committee’s determination and certification, but in no event later than December 31, 2011.

Notwithstanding the foregoing, any Objective Bonus otherwise payable to any Participant under this 2010 STIP shall be subject to the adjustments, limitations (including the dollar limitation under Section 4.3 of the Plan), Committee’s discretionary authority to make downward adjustments and other terms and conditions set forth in the Plan.  Any Discretionary Bonus otherwise payable under this 2010 STIP shall be subject to any adjustments, limitations, upward or downward adjustments in amounts and any other terms or conditions that the Committee may impose in its sole discretion.  

9.        Effect of Termination of Employment

Except as otherwise provided in an employment agreement, memorandum of understanding, other contract between a Participant and the Corporation or one of its Subsidiaries, or by the Committee in its sole discretion, the bonuses payable under a Participant’s Award will be forfeited, and the Participant will not be entitled to any bonus payments with respect to such Award if the Participant ceases to be employed by the Corporation or one of its Subsidiaries for any reason prior to the date the bonuses payments under the 2010 STIP are paid to Participants.

10.       Recoupment of Bonuses

          Any payment of an Objective Bonus, Discretionary Bonus or Aggregate Bonus under this 2010 STIP is subject to recoupment pursuant to the Corporation’s Policy Regarding the Recoupment of Certain Performance-Based Compensation Payments as in effect from time to time, and a Participant shall promptly make any reimbursement requested by the Board of Directors or the Committee pursuant to such policy with respect to any such bonuses.  Further, each Participant shall agree, by accepting an Award under the 2010 STIP and executing an Award Agreement, that the Corporation and/or any of its affiliates may deduct from any amounts it may owe the Participant from time to time (such as wages or other compensation) any and all amounts the Participant is required to reimburse the Corporation pursuant to such policy with respect to the Award.

EXHIBIT A

2010 STIP
PERFORMANCE TARGETS AND PAYOUT PERCENTAGES

A.        PERFORMANCE TARGETS FOR OBJECTIVE BONUSES

B.        PAYOUT PERCENTAGES FOR PERFORMANCE MEASURES - GSWC ADMINISTRATIVE AND GENERAL OFFICERS

C.        PAYOUT PERCENTAGES FOR PERFORMANCE MEASURES - GSWC OPERATIONS OFFICERS

D.        PAYOUT PERCENTAGES FOR PERFORMANCE MEASURES - ASUS

A-4