ARSESP RESOLUTION 469, FEBRUARY 3, 2014 It approves, on an emergency basis, the implementation of Sabesp’s Consumption Reduction Incentive Program. Its purpose is to grant a 30% reduction in water and sewage tariffs to the users served by the Cantareira System who reduce their monthly consumption by 20% during the term of the Program. The Executive Board of the São Paulo State Sanitation and Energy Regulatory Agency – Arsesp, Considering that, in accordance to Official Letter P – 0048/2014, of January 31, 2014 and the respective attachment, submitted by SABESP: a) In 2013, only 1,090 millimeters of rainfall were recorded in the four reservoirs that compose the Cantareira System, against a historical annual average of 1,566 millimeters; b) December 2013 had the lowest average rainfall since measurements began 84 years ago and temperatures were 5% above the average, increasing consumption. c) The Cantareira reservoir, which is the main water supply for The Greater São Paulo, serving 9.3 million people, has reached its lowest level in the last ten years; d) It is necessary to recover the Cantareira System’s capacity in order to normalize water supply conditions; Considering also that Sabesp's Consumption Reduction Incentive Program does not represent any tariff increase for users and that the consumption reduction is voluntary, it decides: Article One – To approve, on an emergency basis, Sabesp’s Water Consumption Reduction Incentive Program in Sabesp Notice 1/2014, attachment I, in order to preserve water supply conditions for Cantareira System users and without prejudice to additional subsequent analyses of said Program by this Agency. Article Two – Tariffs will be reduced by 30% for Cantareira System users whose monthly consumption falls by 20% in relation to their average monthly consumption between February 2013 and January 2014. Article Three – The Program will be in effect from February to September 2014 or until the reservoirs reach normal levels (whichever occurs first), in accordance with SABESP's metering and bill delivery schedules. Article Four ‐ Sabesp must inform Arsesp of the status of the Cantareira System and the Program's results on a monthly basis. Article Five – This Resolution enters into effect on the date it is published. ATTACHMENT I – SABESP NOTICE 1/2014 Companhia de Saneamento Básico do Estado de São Paulo ‐ Sabesp, pursuant to ARSESP Resolution 469, of February 3, 2014, published in the São Paulo State Official Gazette on February 4, 2014, with the purpose of encouraging the population of the São Paulo Metropolitan Region – SPMR served by the Cantareira System to reduce its water consumption and help tackle the supply crisis caused by the shortage of rain, high temperatures and low levels of water in the referred system, hereby announces the implementation of the Water Consumption Reduction Incentive Program. Scope of the program: *Municipalities served by Sabesp: part of the municipality of São Paulo, i.e., districts: Aclimação, Alto de Pinheiros, Água Rasa, Anhanguera, Aricanduva, Bom Retiro, Brás, Bela Vista, Belém, Barra Funda, Brasilândia, Butantã (part), Cachoerinha, Cambuci, Campo Belo (part), Carrão, Casa Verde, Consolação, Cursino, Freguesia do Ó, Ipiranga, Itaim Bibi, Jabaquara (part), Jaguaré, Jaguara, Jaraguá, Jaçanã, Jardim Paulista, Lapa, Liberdade, Limão, Mandaqui, Mooca, Moema, Pari, Perdizes, Perus, Pinheiros, Pirituba, República, Rio Pequeno (part), Sacomã, Santana, Santa Cecília, Saúde, São Lucas, São Domingos, Sé, Tatuapé, Tremembé, Tucuruvi, Vila Formosa, Vila Guilherme, Vila Medeiros, Vila Maria, Vila Mariana, Vila Leopoldina, Vila Prudente, and the municipalities of Barueri, Caieiras, Cajamar, Carapicuíba, Francisco Morato, Franco da Rocha, Itapevi, Jandira, Mairiporã, Osasco and Santana de Parnaíba. *Municipalities that buy water from Sabesp wholesale: Guarulhos (part) and São Caetano do Sul. WATER CONSUMPTION REDUCTION INCENTIVE PROGRAM All clients within the scope of the program, with no distinctions, will have the target of reducing their water consumption by 20% in relation to the average consumption between February 2013 and January 2014; The established target will be written out on the bill; Clients who achieve their targets will have a 30% bonus in their water and sewage tariffs even if they are within the minimum consumption bracket (up to 10 m³). 1 ‐ Term February to September or until the reservoirs reach normal levels (whichever occurs first), in accordance with SABESP's metering and bill delivery schedules. 2 – Application conditions 2.1 – In the municipalities where Sabesp operates: 2.1.1 – Clients covered by the program: All the clients with an active water or water and sewage connection of the residential, commercial, industrial and public use categories, regardless of the tariff type associated with them, except for clients with fixed demand contracts and public category clients with contracts. 2.1.2 – Monthly target of the connection: It is a fixed amount in m³ printed on the bills and will be a reference for clients to reduce their consumption. It will be used by Sabesp to compare with the connection’s water consumption in the month and verify if clients have achieved the volume to apply for a bonus in their bills. 2.1.3 – Target Calculation: Each connection’s consumption target (regardless of the number of consumption units) will be calculated based on a 20% reduction over the average consumption in the bills from February 2013 to January 2014. 2.1.4 – Bonus application: 2.1.4.1 – Municipalities: Part of São Paulo, Barueri, Caieiras, Cajamar, Carapicuíba, Francisco Morato, Franco da Rocha, Itapevi, Jandira, Mairiporã and Osasco – bills of the reference months: March to August 2014 2.1.4.2 – Municipality of Santana de Parnaíba – bills of the reference months: April to September 2014 2.2. ‐ Municipalities that buy water wholesale They will be covered by the program, provided that they reduce their wholesale purchase of water by 20%, intensify the campaign for consumption reduction in their area of operations and pass the same benefit granted by Sabesp on to their consumers, in accordance with procedures to be defined and officially disclosed by the municipality to the population. Date: December 13, 2013 The Executive Board .