SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )

Filed by the Registrant [X]

Filed by a Party other than the Registrant [_]

Check the appropriate box:

[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement

[_] Definitive Additional Materials

[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12

SOUTHWEST WATER COMPANY
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.

[_] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).

[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

(1) Title of each class of securities to which transaction applies:

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(2) Aggregate number of securities to which transaction applies:

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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):

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(4) Proposed maximum aggregate value of transaction:

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(5) Total fee paid:

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[_] Fee paid previously with preliminary materials.

[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

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(2) Form, Schedule or Registration Statement No.:

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(3) Filing Party:

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(4) Date Filed:

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Notes:

Southwest Water Company "A Service Company"

March 20, 1995

[LOGO OF SOUTHWEST WATER COMPANY]

DEAR STOCKHOLDER:

You are invited to attend the Annual Meeting of Stockholders of Southwest
Water Company, to be held on Tuesday, May 9, 1995, at 10:00 a.m. in Salon C-D of
the San Gabriel Valley Marriott, located at 14635 Baldwin Park Towne Center,
Baldwin Park, California.

For this year's meeting, you are asked to elect six directors and to ratify
the appointment of the Company's independent auditors. The accompanying Notice
of Meeting and Proxy Statement describe these proposals. We have also enclosed
a copy of our 1994 Annual Report. We urge you to read this information
carefully.

Your Board of Directors unanimously believes that election of its nominees
as directors and ratification of its appointment of independent auditors are in
the best interests of Southwest Water and its stockholders, and accordingly
recommends a vote FOR Items 1 and 2 on the enclosed proxy card.

In addition to the formal business to be transacted at the meeting,
management will make a presentation on developments during the past year and
will respond to comments and questions of general interest to stockholders. I
personally look forward to greeting our stockholders who attend the meeting.

It is important that your shares be represented and voted, whether or not
you plan to attend. THEREFORE, PLEASE SIGN, DATE AND PROMPTLY MAIL THE ENCLOSED
PROXY CARD IN THE POSTAGE-PAID ENVELOPE PROVIDED. Thank you.

Sincerely,

ANTON C. GARNIER
President and Chief Executive Officer

225 North Barranca Avenue, Suite 200, West Covina, CA 91791-1605,
Phone: (818) 915-1551, Facsimile: (818) 915-1558

[LOGO OF SOUTHWEST WATER COMPANY]

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 9, 1995

To the Stockholders of Southwest Water Company:

NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of SOUTHWEST
WATER COMPANY, a Delaware corporation (the "Company"), will be held at the San
Gabriel Valley Marriott, 14635 Baldwin Park Towne Center, Baldwin Park,
California, on Tuesday, May 9, 1995, at 10:00 a.m. local time, for the purpose
of considering and acting upon the following business:

1. The election of directors to serve until the next Annual Meeting of
Stockholders and until their successors are duly elected and qualified;

2. Ratification of the Board of Directors' selection of KPMG Peat
Marwick LLP as the Company's independent auditors for 1995; and

3. Transaction of such other business as may properly come before the
meeting or any adjournments thereof.

Only stockholders of record at the close of business on March 10, 1995, shall
be entitled to notice of and to vote at the meeting or any adjournments thereof.

The Company's Proxy Statement accompanies this notice.

By order of the Board of Directors

DIANE CASTELLO PITTS
Secretary

West Covina, California
March 20, 1995

IMPORTANT

YOU ARE URGED TO MARK, SIGN AND PROMPTLY RETURN THE ENCLOSED PROXY CARD SO THAT
YOUR SHARES MAY BE VOTED IN ACCORDANCE WITH YOUR WISHES AND TO ASSURE THE
PRESENCE OF A QUORUM AT THE MEETING. THE PROMPT RETURN OF YOUR SIGNED PROXY,
REGARDLESS OF THE NUMBER OF SHARES THAT YOU HOLD, WILL AID THE COMPANY IN
REDUCING THE EXPENSE OF ADDITIONAL PROXY SOLICITATION. THE GIVING OF YOUR PROXY
DOES NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IN THE EVENT THAT YOU ATTEND THE
MEETING.

225 North Barranca Avenue, Suite 200, West Covina, CA 91791-1605,
Phone: (818) 915-1551, Facsimile: (818) 915-1558

[LOGO OF SOUTHWEST WATER COMPANY]

225 NORTH BARRANCA AVENUE, SUITE 200
WEST COVINA, CALIFORNIA 91791-1605

--------------------

PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS

MAY 9, 1995

--------------------

SOLICITATION AND REVOCATION OF PROXY

This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Southwest Water Company (the "Company") for
use at the Annual Meeting of Stockholders of the Company to be held May 9, 1995,
or at any adjournments thereof, for the purposes set forth in the accompanying
Notice of Annual Meeting of Stockholders. The form of Proxy which accompanies
this Proxy Statement is solicited by the Board of Directors of the Company, and
all expenses incident to the preparation and mailing, or otherwise making
available to the stockholders of the Company, of the Notice of Annual Meeting of
Stockholders, Proxies, and this Proxy Statement will be borne by the Company.
In addition to the use of the mails, Proxies may be solicited by officers,
directors and regular employees of the Company, personally or by telephone. The
Company is a Delaware corporation with its principal executive offices located
at 225 North Barranca Avenue, Suite 200, West Covina, California 91791-1605,
Telephone: (818) 915-1551.

This Proxy Statement and the accompanying form of Proxy are being first mailed
to stockholders of the Company on or about March 20, 1995. Only stockholders of
record at the close of business on March 10, 1995 (the "Record Date"), will be
entitled to notice of, and to vote at, the Annual Meeting of Stockholders. The
persons named in the accompanying Proxy have advised the Company of their
intention to vote the shares represented by Proxies received by them as
specified on the Proxies. If no specification is made, such persons will vote
the shares represented by Proxies for the election as directors of the Company
of those persons designated as management nominees and for ratification of the
selection of the Company's independent auditors for 1995. Any stockholder of the
Company may revoke his Proxy at any time prior to its use by filing with the
Company, at the address indicated herein, a written notice of revocation or a
duly executed Proxy bearing a later date, or by voting in person at the Annual
Meeting.

Under the Company's Bylaws and Delaware law, shares represented by proxies that
reflect abstentions or "broker non-votes" (i.e., shares held by a broker or
nominee which are represented at the meeting, but with respect to which such
broker or nominee is not empowered to vote on a particular proposal or
proposals) will be counted as shares that are present and entitled to vote for
purposes of determining the presence of a quorum. However, under the Company's
Bylaws and Delaware law, proxies that reflect abstentions as to a particular
proposal will be treated as voted for purposes of determining the approval of
that proposal and will have the same effect as a vote against that proposal,
while proxies that reflect broker non-votes will be treated as unvoted for
purposes of determining approval and will not be counted as votes for or against
that proposal.

OUTSTANDING STOCK AND VOTING RIGHTS

As of the Record Date, the following shares of the Company's common stock and
preferred stock were issued and outstanding and entitled to vote at the Annual
Meeting of Stockholders:

NUMBER OF SHARES
OUTSTANDING NUMBER OF VOTES
AS OF MARCH 10, BY CLASS
CLASS OF STOCK 1995 OR SERIES
-------------------------- ------------------ ----------------

Series "A" Preferred Stock 10,373.25 51,866.25
----------------
Common Stock 2,424,131.00 2,424,131.00
----------------
TOTAL NUMBER OF VOTES 2,475,997.25
================

Pursuant to the Company's Restated Certificate of Incorporation, each holder of
shares of preferred stock is entitled to five votes for each share held and each
holder of shares of common stock is entitled to one vote for each share held on
each matter presented for a vote of the stockholders. The Company's Restated
Certificate of incorporation does not provide for cumulative voting; therefore,
a simple plurality of the votes cast will elect all of the directors. Similarly,
a simple plurality of the votes cast will be sufficient to ratify the selection
of the independent auditors.

BENEFICIAL OWNERSHIP OF THE COMPANY'S SECURITIES

BY MANAGEMENT

The following table sets forth, as of the Record Date, the number of shares of
each class of equity securities of the Company beneficially owned by each
director of the Company, the chief executive officer of the Company, the four
other most highly compensated executive officers of the Company and its
subsidiaries, and by all directors and officers as a group. In each case where
the number of shares of a class of securities exceeds 1% of the securities of
that class outstanding on the Record Date, the percentage of ownership of that
class is stated. Except as otherwise indicated, each individual named has sole
investment and voting power with respect to the securities shown.

NUMBER OF
SHARES
CLASS OF NAME OF BENEFICIAL BENEFICIALLY PERCENTAGE
STOCK OWNER CAPACITY WITH COMPANY OWNED OF CLASS
- - -------- ---------------------- ----------------------------- ------------------ ----------

Common Michael J. Fasman Director 4,060 (a) *

Common Monroe Harris Director 12,918 (b) *

Common Donovan D. Huennekens Director 6,302 *

Common Richard Kelton Director 8,585 *

Common Richard G. Newman Director 6,000 (c) *

Common Anton C. Garnier Director, Chief Executive Officer 85,478 (d) 3.5%
and President

Common James E. Furman President of ECO Resources, Inc. 902 *

Common Michael O. Quinn Chief Operating Officer of 4,836 *
Suburban Water Systems

Common Robert L. Swartwout President of New Mexico -- *
Utilities, Inc.

Common Diane Castello Pitts Corporate Controller, Treasurer 355 *
and Secretary

Common All Directors and 129,436 5.3%
Officers as a Group
(10 people)

- - ------------
* Indicates less than 1% of class of stock.

(a) Excludes 9,644 shares of common stock held of record by Mr. Fasman's wife,
as trustee. Also excludes 27,728 shares of common stock and 147 shares of
Series "A" preferred stock held of record by Mr. Fasman as a co-trustee of
two trusts in which Mr. Fasman has no beneficial interest. Mr. Fasman
disclaims beneficial ownership of all such shares.
(b) 8,518 of such shares are held by Mr. Harris and his wife as co-trustees of
a family trust and 800 shares are held by Mr. Harris' wife.
(c) All of the 6,000 shares are held by Mr. and Mrs. Newman as trustees of a
revocable trust for their benefit. Mr. Newman is a trustee of such trust,
and has shared voting and investment power with respect to such shares and
may be deemed the beneficial owner of such shares.
(d) Included in the table are 42,174 shares owned by Mr. and Mrs. Garnier as
trustees of a revocable trust for their benefit. Mr. Garnier is a trustee
of such trust, has shared voting and investment power with respect to such
shares and may be deemed the beneficial owner of such shares. Excluded
from the table are 154,414 shares owned by two family corporations of which
Mr. Garnier, as President and a director, has shared voting and investment
power. Mr. Garnier disclaims beneficial ownership of such 154,414 shares,
other than the 32,237 shares representing his proportionate interest in the
corporations, which are included in the table.

BY OTHERS

The following table identifies each of the persons known to the Company to own
of record and beneficially (as determined pursuant to the Securities Exchange
Act of 1934 and the rules and regulations promulgated thereunder), as of the
Record Date, more than 5% of any class or series of the Company's outstanding
voting securities, the number of shares of each class or series so owned, and
the percentage of each class or series owned:

NAME AND ADDRESS OF NUMBER OF SHARES PERCENTAGE
CLASS OF STOCK BENEFICIAL OWNER BENEFICIALLY OWNED OF CLASS
- - -------------------- ------------------------- ------------------ ---------

Series "A" Preferred The Lincoln National Life 3,607 35%
Insurance Company (1)

- - ----------------
(1) The address for The Lincoln National Life Insurance Company is c/o Banker's
Trust, P.O. Box 704, Church Street Station, New York, NY 10008.

To the knowledge of the Company's management, there are no other beneficial
owners of more than 5% of any class of voting securities of the Company. There
are no arrangements known to the Company's management, the operation of which
may hereafter result in a change in control of the Company. Neither the
foregoing beneficial owner, nor any director, officer or affiliate, nor any of
their respective associates is a party to any legal proceeding adverse to the
Company or any of its subsidiaries or has a material interest adverse to the
Company or any of its subsidiaries.

PROPOSAL 1: ELECTION OF DIRECTORS

The Company's Certificate of Incorporation and Bylaws provide for a Board of
Directors consisting of six members. It is intended that the persons named in
the Proxy will, unless otherwise instructed, vote for the election of the six
nominees identified on the following page to serve as directors until the next
Annual Meeting of Stockholders and until their respective successors are duly
elected and qualified or until their earlier resignation or removal. If any
nominee, for any reason currently unknown, cannot be a candidate for election,
the shares represented by valid Proxies will be voted in favor of the remaining
nominees and may be voted for the election of a substitute nominee recommended
by the Board of Directors.

Each of the nominees was elected to his current term of office at the last
Annual Meeting of Stockholders.

INFORMATION REGARDING THE BOARD OF DIRECTORS

The following information with respect to each nominee's principal occupation
or employment and each nominee's affiliations and business experience during the
past five years, has been furnished to the Company by each of the respective
nominees:

MICHAEL J. FASMAN, 85, is a lawyer and a partner of the law firm, Allen and
Fasman. Mr. Fasman was first elected a director in 1975.

ANTON C. GARNIER, 54, has been president of the Company since 1968 and chief
executive officer of the Company since 1992. Mr. Garnier was first elected a
director in 1968.

MONROE HARRIS, 73, is a consultant and retired executive vice president and
director of Johns-Manville Corporation. Mr. Harris was first elected a director
in 1963. He resigned from the Board in 1965 when he moved to New York.
Mr. Harris was reelected a director in 1987.

DONOVAN D. HUENNEKENS, 58, is a partner of Huennekens, Quinn & Talcott, a real
estate development company, a director of Bixby Ranch Company, a trustee of the
Mead Foundation and a member of the board of Mead Housing, Inc. Mr. Huennekens
was first elected a director in 1969.

RICHARD KELTON, 65, is president of Bollenbacher & Kelton, Inc., a commercial
and residential developer, and chairman of the board of Pay-Fone Systems, Inc.,
a payroll data processing company. Mr. Kelton was first elected a director in
1969.

RICHARD G. NEWMAN, 60, is chairman, president and chief executive officer and
serves as a director of AECOM Technology Corporation, the parent of several
subsidiaries which provide architectural, engineering, construction, operations
and maintenance services on an international basis. Mr. Newman also serves on
the board of 12 mutual funds managed by the Capital Research and Management
Company. Mr. Newman was first elected a director in 1991.

There are no family relationships between any director and any executive
officer of the Company. None of the entities by whom the foregoing directors
are employed are related to the Company. No director is a director of any other
corporation subject to Sections 12 or 15(d) of the Securities Exchange Act of
1934 or registered as an investment company under the Investment Company Act of
1940, except for Mr. Kelton who is a director of Pay-Fone Systems, Inc., the
common stock of which is traded on the American Stock Exchange. Neither any
director nor any executive officer of the Company has been, during the last five
years, involved in a legal proceeding of the type which would be required to be
disclosed herein by the Securities Exchange Act of 1934. There are no
arrangements or understandings between any director and any other persons
pursuant to which any director was or is to be selected as a director or nominee
of the Company or of any other company.

COMMITTEES OF THE BOARD OF DIRECTORS

The Company's Board of Directors has five committees: the Audit, Compensation,
Investment/Acquisition, Nominating and Director Stock Option Committees. The
principal responsibilities of these committees and the members of each committee
during 1994 are described below.

The Audit Committee was chaired by Mr. Kelton and also included Messrs. Fasman,
Harris, Huennekens and Newman. During 1994, the Audit Committee held two
meetings. Among its responsibilities, the Audit Committee recommends to the
Board the selection of the Company's independent auditors for the ensuing year,
reviews with the independent auditors and management the scope and results of
the auditing engagement, as well as management's internal auditing program,
reviews the adequacy of the Company's internal control procedures and reviews
the independence of the auditors.

The Compensation Committee was chaired by Mr. Harris and also included Messrs.
Fasman, Huennekens, Kelton and Newman. During 1994, the Compensation Committee
held three meetings. Among its responsibilities, the Compensation Committee
determines Mr. Garnier's compensation program, reviews and approves management's
recommendations as to other executive salaries, approves the yearly salary
administration program for non-executive Company employees, and reviews and
approves changes to the Company's employee benefit programs. There are no
Compensation Committee interlocks.

The Investment/Acquisition Committee was chaired by Mr. Huennekens and also
included Messrs. Fasman, Garnier, Harris, Kelton and Newman. During 1994, the
Investment/Acquisition Committee held no meetings. Among its responsibilities,
the Investment/Acquisition Committee sets overall investment policy with respect
to the Company's short-term funds, provides guidance in the selection of the
Company's banking relationships and analyzes the effects of external economic
conditions on the Company's investment policy. Further, this Committee provides
direction in the areas of long-term planning, consideration of diversification
alternatives, new business developments, and acquisitions and mergers.

The Nominating Committee was chaired by Mr. Newman and also included Messrs.
Fasman, Garnier, Harris, Huennekens and Kelton. During 1994, the Nominating
Committee held no meetings. The functions of the Nominating Committee include
establishing criteria for the selection of nominees for election as directors,
reviewing the qualifications of and maintaining information concerning potential
nominees, making recommendations to the Board of Directors with respect to
nominees for election as directors at the Annual Meeting of Stockholders and as
vacancies occur on the Board between annual meetings, reviewing on a long-term
basis the size and composition of the Board and investigating and making
recommendations to the Board of Directors with respect to amendments to the
Company's Bylaws. The Nominating Committee will consider recommendations for
director nominees proposed by stockholders. Any such recommendations should be
submitted in writing to Mr. Newman at the Company's principal executive offices.

The Director Stock Option Committee was chaired by Mr. Fasman and was comprised
of Messrs. Fasman and Harris. During 1994, the Director Stock Option committee
held one meeting. The Director Stock Option Committee was formed in 1991 to
administer the Company's Stock Option and Restricted Stock Plan (the "Option
Plan"). Messrs. Fasman and Harris are duly qualified to serve on this committee
according to the conditions imposed by Rule 16b-3(c)(2)(i) of the Securities
Exchange Act of 1934.

DIRECTORS' COMPENSATION

Directors who are not officers of the Company are currently paid an annual
retainer of $12,000 for service on the Board and a fee of $750 for attendance at
each Board meeting, Committee meeting or long-range planning meeting, and $500
for an additional meeting or meetings on the same day. Directors who are
officers of the Company are not paid any fees or additional remuneration for
service as members of the Board or any Committee thereof. Information as to
additional directors' compensation is set forth under the heading "Other
Compensation" under the caption "Executive Compensation and Other Information."

ATTENDANCE AT BOARD AND COMMITTEE MEETINGS

During 1994, the Board of Directors held six Board meetings, one planning
meeting and six Committee meetings. All directors, with the exception of Mr.
Kelton, attended 100% of the combined meetings of the Board and the Committees
of the Board on which such directors served. Mr. Kelton attended 69% of the
combined meetings of the Board and the Committees of the Board on which he
served.

COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934

To the knowledge of the Company, based upon a review of Forms 3, 4 and 5, and
amendments thereto, furnished by the Company and upon certificates furnished by
the officers and directors of the Company, no officer, director or beneficial
owner of more than 10% of any class of equity security of the Company, during
the Company's most recent fiscal year, failed to timely file any report required
by Section 16(a) of the Securities Exchange Act of 1934.

EXECUTIVE COMPENSATION AND OTHER INFORMATION

REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS

The Compensation Committee of the Board of Directors (the "Committee") consists
of the five non-employee directors. The Committee oversees and administers the
Company's various compensation plans, including salaries, bonuses and other
forms of compensation. In addition, the Committee regularly evaluates executive
performance and reviews executive compensation levels. The Committee also
considers executive succession and related matters, and reviews in detail all
aspects of compensation for the executive officers. Periodic stock option
grants issued pursuant to the Company's Option Plan are administered by the
Director Stock Option Committee (the "Option Committee"). The Option
Committee's report follows this report.

In 1990, the Company retained the services of a compensation consulting
organization to design the executive compensation program now in place. In 1993,
the Company commissioned a limited review of its executive compensation programs
by a compensation consulting firm, Frederic W. Cook & Co, Inc. ("Cook & Co.").
A partner of Cook & Co. met with the Committee and presented two formal reports
for their use. The Committee modified its compensation program to incorporate
certain of the recommendations made by Cook & Co.

The compensation policy of the Company, which is endorsed by the Committee, is
that a portion of the annual compensation of each officer relates to and must be
contingent upon the performance of the Company, as well as the individual
contribution of each officer. The Committee has reviewed the compensation
program for each of the executive officers and believes that the compensation of
these officers is reasonable in view of the Company's consolidated performance
and the contribution of these officers to that performance.

In determining the overall level and form of executive compensation, the
Committee's judgment was primarily based upon its ongoing assessment of the
Company's overall performance in 1993 and its future objectives. The
Committee's decisions concerning the specific 1994 compensation elements for
individual executive officers, including the chief executive officer, were made
within this broad framework and in light of each executive officer's level of
responsibility, performance and current salary.

As of July 1, 1994, the Committee awarded Mr. Garnier a 3.9% increase on his
base salary. The Committee based this decision on the financial performance of
the Company and certain "Standards of Performance" established for Mr. Garnier.
Mr. Garnier's Standards of Performance for this review period included areas of
new business development, financial reporting and planning, internal
communication, teamwork, increased Company visibility in the financial
community, and personal education. In December 1994, the Committee increased
Mr. Garnier's monthly car allowance to reflect an inflationary increase,
effective January 1, 1995. Each year, the Committee formally appraises
Mr. Garnier's performance, and the chairman of the Committee reviews the
Committee's assessment with Mr. Garnier in a private session.

Under the Company's annual bonus plan, bonuses are awarded based on an
executive's performance and the performance of the operating unit to which the
executive is assigned, or, in the case of Mr. Garnier, the performance of the
entire Company. For 1994, Mr. Garnier's bonus performance measures were as
follows: Company earnings per share -- 46% weighting; ECO's Operation and
maintenance contract net bookings -- 26% weighting; Average fourth quarter 1994
common stock price -- 18% weighting; and the Committee's discretion -- 10%
weighting. Mr. Garnier was not awarded any bonus for 1994.

Mr. Garnier was not present when his 1994 salary adjustment was determined, nor
when his 1994 bonus plan was approved.

As noted above, the Committee's specific decisions involving 1994 executive
officer compensation were ultimately based upon the Committee's discretion
regarding the individual executive officer's performance and whether each
particular payment would provide an appropriate reward and incentive for his or
her contribution to the Company's long-term performance. The members of the
Committee believe that the Company's compensation program for its executive
officers is reasonable and adequate to enable the Company to attract and retain
the necessary executive talent and expertise to operate efficiently and to
increase stockholder value.

Compensation Committee

Monroe Harris (Chairman) Donovan D. Huennekens Richard G. Newman
Michael J. Fasman Richard Kelton

February 21, 1995

REPORT OF THE STOCK OPTION COMMITTEE OF THE BOARD OF DIRECTORS

The Option Committee was formed in 1991 to administer the Company's Option
Plan. As explained above, periodic stock option grants are issued pursuant to
the Option Plan.

The Company includes stock option grants as part of its long-range compensation
program. Stock options are granted to attract and retain exceptional executive
talent and to align the interests of executives and directors with those of the
stockholders. Stock options are granted on a periodic basis at a price equal to
the fair market value on the date of the grant and generally vest 20% per year
until fully vested. They are granted to executive officers and directors based
on anticipated contribution to the Company's future performance and the ability
to impact consolidated and/or operating unit results. Stock options were
granted to the executive officers and directors as approved by the Option
Committee. Mr. Garnier was not present when his stock option award was
determined and approved.

Director Stock Option Committee

Michael J. Fasman (Chairman)
Monroe Harris

February 21, 1995

COMPARISON OF THE CUMULATIVE TOTAL RETURN ON THE COMPANY'S COMMON STOCK TO
CERTAIN INDUSTRY STANDARDS

The following graph compares the cumulative total return to holders of the
common stock of the Company during the most recent five fiscal years versus the
average return to investors during the same period achieved by 14 publicly held
water utilities listed in the Edward D. Jones & Co. Water Utility Index and the
Standard and Poor's Index of 500 Companies. In each instance, the graph assumes
an investment of $100 on December 31, 1989:

COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
AMONG SOUTHWEST WATER COMPANY, UTILITY INDEX AND S&P 500 INDEX

PERFORMANCE GRAPH APPEARS HERE

Measurement Period SOUTHWEST UTILITY
(Fiscal Year Covered) WATER COMPANY INDEX S&P 500
- - ------------------- ------------- ------- -------

Measurement Pt- 1989 $100 $100 $100
FYE 1990 $102.49 $ 92.82 $ 96.89
FYE 1991 $ 96.07 $132.54 $126.28
FYE 1992 $117.42 $146.78 $135.88
FYE 1993 $ 76.15 $167.24 $149.52
FYE 1994 $ 69.31 $155.79 $151.55

* Total return assumes reinvestment of dividends and is based on a $100
investment on December 31, 1989.

COMPENSATION OF CERTAIN EXECUTIVE OFFICERS

The following table sets forth certain information as to the compensation paid
during the last three fiscal years of the Company to the chief executive officer
of the Company and to the five other most highly compensated executive officers
of the Company and its subsidiaries:

SUMMARY COMPENSATION TABLE

Long Term Compensation
Annual Compensation Awards
- - ----------------------------------------------------------------------------------------------------------------------
Other
Annual Restricted All Other
Name and Compen- Stock Stock Compen-
Principal Salary Bonus sation Awards Options sation
Position Year ($) (1) ($) ($) (2) (3) ($) (4) (#) ($) (5)
- - ----------------------------------------------------------------------------------------------------------------------

Anton C. Garnier, 1994 201,226 - 5,149 - 7,660 -
Chief Executive Officer 1993 191,630 - 2,559 - - -
President 1992 187,743 35,000 2,764 - - -
Southwest Water Company

James E. Furman, 1994 144,394 - 1,481 - 4,295 2,867
President 1993 141,417 - 1,344 - - 1,900
ECO Resources, Inc. 1992 136,000 29,250 10,316 - 10,000 -

Michael O. Quinn 1994 130,184 6,900 2,331 - 2,130 -
Chief Operating Officer 1993 126,322 - 391 - - -
Suburban Water Systems 1992 113,290 17,349 18,047 - - 916

Robert L. Swartwout, 1994 91,312 10,800 498 - 1,500 -
President 1993 90,752 8,586 454 - - -
New Mexico Utilities, Inc. 1992 85,903 11,907 311 - 2,500 -

Diane Castello Pitts, 1994 92,676 - 110 - - -
Corporate Controller, Treasurer 1993 86,508 - 98 - - -
Secretary 1992 80,658 13,682 98 - - -
Southwest Water Company

R. Joseph Saunders, 1994 178,502 - 1,580 - 5,120 -
Former Chief Financial Officer, 1993 167,268 - 1,755 - - -
Vice President Finance 1992 161,000 29,605 11,728 31,480 15,000 -
Secretary
Southwest Water Company (6)

(1) Salaries shown for Messrs. Furman, Swartwout and Saunders in 1992 are
annualized, based upon a full year of employment. Salaries include car
allowances for Messrs. Garnier and Furman, Ms. Pitts and Mr. Saunders, and
the value of personal usage of company provided cars for Messrs. Quinn and
Swartwout. Mr. Garnier was provided with personal usage of a company-
provided car through September 1, 1993, and a car allowance thereafter.

(2) Includes relocation allowances of $9,871, $17,500 and $10,000 for Messrs.
Furman, Quinn and Saunders, respectively, in 1992. The other amounts
consist of other expenses, including spousal travel expense reimbursement,
paid to or for the benefit of the named officers.

(3) Excludes directors fees received by Messrs. Garnier, Quinn and Saunders for
serving as directors of entities in which the Company holds a minority
interest. Fees received are at the same rates paid by such entities to all
outside directors and are not more than $7,000 per person per year per
directorship.

(4) Restricted stock awards vest 10 years after grant. Should an employee
terminate prior to the vesting of the restricted stock, the stock is
subject to repurchase. Dividends paid on the restricted stock go directly
to the grantee with no further restrictions. At December 31, 1994, the
following summarizes cumulative holdings of restricted stock:

VALUE AT $8.50
SHARES (#) PER SHARE ($)
---------- --------------

Anton C. Garnier (granted in 1988 and 1989) 11,067 94,070

Michael O. Quinn (granted in 1988 and 1989) 3,683 31,306

On November 25, 1994, 2,000 shares of restricted stock granted to
Mr. Saunders in 1992 were repurchased and cancelled upon his resignation
from the Company.

(5) Represents Company contributions to executive's account in a 401(k) Plan.

(6) Terminated employment with the Company on November 25, 1994. The amount
reported as Mr. Saunders' salary is for service rendered prior to his
resignation.

Pursuant to severance compensation agreements entered into on February 21, 1995
between the Company and Messrs. Garnier, Furman, Quinn, Swartwout and Ms. Pitts,
the Company has agreed to provide severance benefits and payments to such
individuals based on 1-1/2 times the average 5-year compensation of such
individuals and payable to an executive if one of the following conditions are
met as to such executive: (1) termination of the executive's employment by his
employer prior to the second anniversary of a change in control other than by
retirement or for death, disability or cause; or (2) termination of executive's
employment by the executive within two years after a change in control for "good
reason" (including assignment of executive to duties inconsistent with
executive's position, duties, responsibilities and status prior to the change in
control, or alternatively, a reduction of salary, a significant reduction in
benefits, an elimination of stock plans or a relocation of employment greater
than 50 miles), without written consent by executive. Under these agreements,
cash severance payments are based upon base salary, auto benefits, bonuses and
certain life insurance premium amounts paid by the employer and are payable
within five days after termination of employment. Cash severance payments,
assuming termination meeting the requirements for a severance payment as of
December 31, 1994 are as follows: Mr. Garnier - $301,817; Mr. Furman, $227,496;
Mr. Quinn - $188,600; Mr. Swartwout - $146,747 and Ms. Pitts - $143,156. In
addition to the cash payment, each executive is entitled to certain health
insurance benefits with a value of approximately $17,232 and outplacement
services with a maximum benefit of $4,000. For purposes of the severance
compensation agreements, a "change in control" is generally defined as a change
in the person or persons owning, directly or indirectly, sufficient voting stock
to elect the Board of Directors for the entity which employs an executive.
These agreements are in addition to the plans described under the heading
"Retirement Benefits."

Pursuant to an agreement entered into in 1992 between Mr. Swartwout and New
Mexico Utilities, Inc. ("NMU"), NMU may terminate Mr. Swartwout's employment
without cause at any time upon 30 days' written notice. Upon such termination
under the NMU agreement, Mr. Swartwout was entitled to a severance payment
equal to one year's salary. Such provision of the NMU agreement is superseded by
the severance compensation agreement described above. In addition, upon a
disposition of substantially all assets of NMU, Mr. Swartwout is, if he
continues his employment with NMU through completion of the transaction,
entitled to a severance payment of 1% of the gross disposition price if in
excess of $6,000,000, or 3% of the gross disposition price if in excess of
$11,000,000. Upon such a disposition, Mr. Swartwout would receive a cash
payment equal to the greater of (1) the cash severance payment determined
pursuant to his severance compensation agreement or (2) the amount determined
under the NMU agreement based upon the gross disposition price of the NMU
assets. In no event would Mr. Swartwout receive cash payments under both
agreements.

OPTIONS GRANTED TO CERTAIN EXECUTIVE OFFICERS

Stock options were granted during the Company's most recent fiscal year to the
chief executive officer of the Company and other highly compensated officers of
the Company and its subsidiaries as shown below:

OPTION TABLE

Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation for
Individual Grants 10 Years
-------------------------------------------------- ----------------------
% of Total Exercise
Options or
Granted to Base
Employees Price
Options in ($/sh.) Expiration 5% 10%
Name (#)(1) Fiscal Year (2) Date ($) ($)

Anton C. Garnier 7,660 34% 9.75 2004 46,956 119,036

James E. Furman 4,295 19% 9.75 2004 26,328 66,744

Michael O. Quinn 2,130 9% 9.75 2004 13,057 33,100

Robert L. Swartwout 1,500 7% 9.75 2004 9,195 23,310

Diane Castello Pitts - - - - - -

R. Joseph Saunders (3) 5,120 23% 9.75 - - -

The following table summarizes the total potential appreciation based on the
stated assumptions for all optionees and stockholders:

CUMULATIVE SUMMARY AT DECEMBER 31, 1994:

All Stockholders N/A N/A 8.50 N/A 12,915,226 32,710,527

All Optionees (4) 111,635 100% 14.78 VAR - 811,586

Optionee Gain as % of
All Stockholder Gain N/A N/A N/A N/A - 2%

(1) Options vest 20% per year until fully vested.
(2) All exercise prices represent fair market value on the date of grant.
(3) Options expired upon resignation from employment with the Company on
November 25, 1994.
(4) No gain to the optionees is possible without stock price appreciation,
which will benefit all stockholders commensurately. The optionees' benefit
is computed based on stock price appreciation from $8.50 less the composite
exercise price of $14.78.

EXERCISE OF OPTIONS BY CERTAIN EXECUTIVE OFFICERS

The following table sets forth certain information as to exercised and
unexercised stock options, value realized and value of unexercised options
during the Company's most recent fiscal year by the chief executive officer of
the Company and other highly compensated officers of the Company and its
subsidiaries:

OPTION EXERCISES AND YEAR-END VALUE TABLE

Value of
Number of Unexercised
Unexercised In-the-Money
Options at Fiscal Options at
Year-End Fiscal Year-End (1)
(#) ($)

Shares Value
Acquired on Realized Exercisable/ Exercisable/
Name Exercise (#) ($) Unexercisable Unexercisable
- - ---------------------------------------------------------------------------------------------------

Anton C. Garnier - - 20,160 / 15,700 0 / 0

James E. Furman - - 4,000 / 10,295 0 / 0

Michael O. Quinn - - 6,560 / 4,370 0 / 0

Robert L. Swartwout - - 1,000 / 3,000 0 / 0

Diane Castello Pitts - - 5,340 / 560 0 / 0

R. Joseph Saunders (2) - - 0 / 0 0 / 0

(1) Based on fair market value at fiscal year end of $8.50.
(2) Options expired upon resignation from employment with the Company on
November 25, 1994.

RETIREMENT BENEFITS

The Company is a party to a Noncontributory Defined Benefit Pension Plan and
Trust (the "Pension Plan"), established on December 31, 1957, which provides
retirement benefits and certain death benefits. All regular full-time and part-
time employees of the parent Company, Suburban Water Systems ("Suburban"), NMU
and East Pasadena Water Company ("East Pasadena") who meet all eligibility
requirements, including the completion of one year of service, are eligible to
participate in the Pension Plan. The relationship of East Pasadena to the
Company is described under the heading "Certain Transactions."

Four executive officers of the Company and its participating subsidiaries are
covered under the terms of the Pension Plan. The Company, its participating
subsidiaries and East Pasadena pay the entire cost of administering the Pension
Plan. No non-employee director, as such, is included in the Pension Plan. All
of the trustees and administrators of the Pension Plan are currently officers or
employees of the participating companies. Payments to the Pension Plan by the
Company are computed on an actuarial basis to provide fixed benefits to
employees in the event of retirement at specified ages.

The following table indicates the approximate annual benefits which would be
received by participants in the Pension Plan, based upon the assumptions
indicated.

ESTIMATED ANNUAL BENEFIT FOR YEARS OF SERVICE INDICATED
5-YEAR AVERAGE -------------------------------------------------------
ANNUAL COMPENSATION 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
- - ------------------- -------------------------------------------------------

$ 80,000 $23,300 $31,000 $ 38,800 $ 46,500 $ 54,300
120,000 35,300 47,000 58,800 70,500 82,300
160,000 47,300 63,000 78,800 94,500 110,300
200,000 59,300 79,000 98,800 118,500 138,300
240,000 71,300 95,000 118,800 142,500 166,300

The actual maximum amount of compensation that may be recognized for Pension
Plan purposes was reduced by the Internal Revenue Code of 1986 (the "Code") from
$235,840 in 1993 to $150,000 in 1994. The maximum annual defined benefit in 1994
allowable under the Code was $118,800. These limits are subject to annual cost
of living adjustments.

The compensation on which benefits under the Pension Plan are based is limited
to salary paid by the Company and certain subsidiaries and excludes bonuses and
other forms of compensation. The amounts used in making the calculations under
the Pension Plan for 1994 are based on July 1, 1994 base compensation as
follows: Anton C. Garnier - $198,033; Michael O. Quinn - $127,880; Robert L.
Swartwout - $91,012; and Diane Castello Pitts - $88,350. Years of credited
service of each of such individuals are, respectively, 24, 18, 2 and 8 years at
December 31, 1994. Mr. Quinn participated in the Pension Plan for 15 years until
1985, and his compensation at that time was $53,000. He rejoined the Pension
Plan in 1992 upon his return to Suburban. Benefits under the Pension Plan are
not subject to offset for amounts received from Social Security or other
sources.

In 1988, the Company established the Profit-Sharing 401(k) Plan for Southwest
Water Company's Related Companies ("Profit-Sharing Plan") covering employees of
ECO Resources, Inc. Participants may elect to contribute up to 15% of their
salary to the Profit-Sharing Plan. The Company matches a participant's
contribution for an amount up to 50% of the first 4% of a participant's salary.
Company contributions vest immediately. Company contributions to the Profit-
Sharing Plan were $90,584 in 1994. Mr. Furman is a member of the Profit-Sharing
Plan, and the Company made $2,867 in contributions to the Profit-Sharing Plan
during 1994 for Mr. Furman. No other officer is eligible to participate in the
Profit-Sharing Plan. ECO pays most of the cost of administering the Profit-
Sharing Plan. Participants pay minor administrative fees in certain instances.

On January 1, 1994, the Company established a 401(k) plan (the "Utility 401(k)
Plan") covering the parent Company, Suburban and NMU employees. Participants
may elect to contribute up to 15% of their salary. The Utility 401(k) Plan does
not allow Company contributions. All named executive officers, other than Mr.
Furman, are eligible to participate in the Utility 401(k) Plan. The parent
Company, Suburban and NMU pay the entire cost of administering the Utility
401(k) Plan.

OTHER COMPENSATION

Information as to compensation paid to directors, as directors, is included
under the caption "Information Regarding the Board of Directors" under the
heading "Directors' Compensation." Information concerning stock options and
restricted stock issued to officers of the Company is set forth under the
headings "Compensation of Certain Executive Officers," "Options Granted to
Certain Executive Officers" and "Exercise of Options by Certain Executive
Officers." Information concerning options issued to directors of the Company is
set forth below.

In 1993, the stockholders approved the First Amendment to the Option Plan.
The Amendment provided for an increase in the number of shares reserved for
issuance thereunder from 150,000 to 250,000 and an extension of the period
during which options to purchase shares of the common stock of the Company may
be granted under the Option Plan from February 17, 1998, to February 17, 2003.
In addition, the Amendment eliminated any future issuances of restricted stock
under the Option Plan.

All officers, employees and certain eligible directors of the Company and any
subsidiary corporation are eligible to receive options under the Option Plan.
The following table sets forth summary information concerning the hypothetical
value of option grants made in 1994 to all eligible directors under the Option
Plan:

Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation for
Individual Grants 10 Years
----------------------------------- -----------------------------

Exercise or
Options Base Price Expiration
Eligible Directors (#) (1) ($/sh.) (2) Date 5% ($) 10% ($)
- - -------------------------------------------------------------------------------------------------

Donovan D. Huennekens 600 9.75 2004 3,678 9,324

Richard Kelton 600 9.75 2004 3,678 9,324

Richard G. Newman 600 9.75 2004 3,678 9,324
- - -------------------------------------------------------------------------------------------------

(1) Options vest 20% per year until fully vested.
(2) All exercise prices represent fair market value on the date of grant.

As of December 31, 1994, there were a total of 111,635 options outstanding
with a weighted average exercise price of $14.78 per share and no options had
been exercised. As of such date, the Non-Executive Officer Director Group had
13,050 options outstanding with a weighted average exercise price of $14.71 per
share.

As of December 31, 1994, 22,335 shares of restricted stock had been issued
under the Option Plan, and 14,750 shares were outstanding. Of the restricted
shares issued, 5,585 shares have been released from escrow and 2,000 shares were
cancelled upon Mr. Saunders' resignation from the Company on November 25, 1994.
No person other than those specified in Footnote 4 of the "Summary Compensation"
table held any restricted stock under the Option Plan as of December 31, 1994.
Additionally, the restrictions with respect to outstanding shares of restricted
stock had not lapsed. Unearned compensation of $237,692 related to the issuance
of 14,750 shares of restricted stock is being amortized over the vesting period.
In 1994, $12,659 was recorded as compensation expense.

CERTAIN TRANSACTIONS

East Pasadena, a water purveyor, is a wholly owned subsidiary of California
Michigan Land and Water Company ("California Michigan"). Mr. Garnier is the
beneficial owner of approximately 10% of the outstanding stock of California
Michigan, and is the president and a director of California Michigan. In 1994,
East Pasadena participated in purchases of equipment leases and employee
insurance coverage with the Company and certain of its subsidiaries. In
connection with such participation, East Pasadena paid to Suburban and the
Company an aggregate of $31,407 in 1994. Amounts paid by East Pasadena were
based upon its pro rata or proportionate share of the cost of goods and services
involved. East Pasadena also is a party to the Pension Plan described under the
heading "Retirement Benefits." East Pasadena makes contributions to the Pension
Plan on the same actuarial basis as payments by the Company. The Pension Plan
owns 363 shares of California Michigan stock, or 17% of the common shares
outstanding.

The Pension Plan (see the caption "Retirement Benefits" on Page 15) owns
64,064 shares of the Company's common stock, which had a market value of
approximately $545,000 at December 31, 1994. The Pension Plan received dividends
on these shares of approximately $26,000 in 1994.

Also during 1994, Suburban made a lease payment of $50,367 for the use of
water rights owned by a Garnier family trust. The lease payments were at market
rate, based upon information obtained by the Company.

The foregoing transactions have been reviewed and approved by the outside
members of the Board of Directors of the Company, after full disclosure by Mr.
Garnier. Mr. Garnier did not participate in the Board's consideration of these
transactions.

PROPOSAL 2: RATIFICATION OF APPOINTMENT OF AUDITORS

The Board of Directors, upon recommendation of its Audit Committee, has
selected the accounting firm of KPMG Peat Marwick LLP to serve as independent
auditors of the Company for 1995, and proposes the ratification of such
decision. Such firm has served as the Company's independent auditors since the
1978 fiscal year, and is familiar with the business and operations of the
Company and its subsidiaries.

Representatives of KPMG Peat Marwick LLP are expected to be present at the
Annual Meeting of Stockholders. They will have an opportunity to make a
statement if they desire to do so and will be available to respond to
appropriate questions.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR RATIFICATION
OF THE SELECTION OF KPMG PEAT MARWICK LLP AS INDEPENDENT AUDITORS.

STOCKHOLDER PROPOSALS FOR 1996 ANNUAL MEETING

Stockholder proposals intended for inclusion in the Company's Proxy Statement
for the Company's 1996 Annual Meeting of Stockholders must be received by the
Secretary of the Company no later than November 21, 1995, at the Company's
address set forth on the first page of this Proxy Statement, in order to be
eligible for consideration for inclusion in the Company's Proxy Statement for
such meeting.

OTHER BUSINESS

The Board of Directors knows of no other business to be presented at the
Annual Meeting, but if other matters do properly come before the Meeting, the
persons named on the enclosed Proxy will have discretionary authority to vote
all Proxies in accordance with their best judgment.

DIANE CASTELLO PITTS
Secretary

West Covina, California
March 20, 1995

PROXY

SOUTHWEST WATER COMPANY

PROXY FOR ANNUAL MEETING OF STOCKHOLDERS-MAY 9, 1995

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. The signatory
of this Proxy hereby appoints Anton C. Garnier and Diane Castello Pitts as
Proxies, each with the power to appoint his or her substitute, and hereby
authorizes them to represent and to vote as designated on the reverse side, all
the shares of common or preferred stock of Southwest Water Company held of
record by the undersigned on March 10, 1995, at the Annual Meeting of
Stockholders to be held on May 9, 1995, or any adjournment thereof.

(Continued on reverse side)

FOR each director nominee and FOR APPROVAL of each I/WE WILL
proposal is unanimously recommended by the [_] ATTEND
Board of Directors. THE MEETING

- - ----------- ------------------------- -----------
COMMON DIVIDEND REINVESTMENT PREFERRED A

1. Election as directors of the Michael J. Fasman, Anton C. Garnier,
nominees listed in the Monroe Harris, Donovan D. Huennekens,
accompanying Proxy Statement. Richard Kelton and Richard G. Newman

FOR all nominees WITHHOLD (INSTRUCTION: To withhold authority to
listed at the AUTHORITY vote for any individual nominee, write
right (except as to vote for that nominee's name on the line provided
marked to the all nominees below.)
contrary) listed at right
----------------------------------------
[_] [_]

2. Ratification of the selection of
KPMG Peat Marwick LLP as the
Company's independent auditors.

FOR AGAINST ABSTAIN
[_] [_] [_]

THE SHARES REPRESENTED HEREBY SHALL BE
VOTED OR NOT VOTED AS SPECIFIED. ANY
EXECUTED PROXY WHICH CONTAINS NO
SPECIFICATION WILL BE VOTED FOR ELECTION
OF EACH DIRECTOR NOMINEE NAMED AND FOR
RATIFICATION OF THE SELECTION OF THE
COMPANY'S INDEPENDENT AUDITORS.

Please sign exactly as your name appears
on this Proxy. If signing for estates,
trusts, corporations or partnerships,
titles or capacities should be stated.
Each joint tenant should sign.

PLEASE MARK, SIGN, DATE AND RETURN THIS
PROXY PROMPTLY IN THE ENCLOSED ENVELOPE.

- - ---------------------------------------
(Signature)

DATE: ,1995
-----------------------------