mprwa regular meeting agenda packet 02-14-13

7/29/2019 MPRWA Regular Meeting Agenda Packet 02-14-13

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AgendaMonterey Peninsula Regional Water Authority (MPRWA)

Regular Meeting

7:00 PM, Thursday, February 14, 2013

City Council ChamberFew Memorial HallMonterey, California

ROLL CALL

PLEDGE OF ALLEGIANCE

REPORTS FROM BOARD DIRECTORS AND STAFF

PUBLIC COMMENTSPUBLIC COMMENTS allows you, the public, to speak for a maximum of three minutes on any

subject which is within the jurisdiction of the MPRWA and which is not on the agenda. Any personor group desiring to bring an item to the attention of the Authority may do so by addressing theAuthority during Public Comments or by addressing a letter of explanation to: MPRWA, Attn:Monterey City Clerk, 580 Pacific St, Monterey, CA 93940. The appropriate staff person will contactthe sender concerning the details.

APPROVAL OF MINUTES

1. January 10, 2013 Special Meeting

2. January 24, 2013 Regular Meeting

3. January 31, 2013 Special Meeting

AGENDA ITEMS

4. Approve Amendment to Contract for Executive Director Services with the City of Montereyto Include Licensed Professional Engineer and Authorize Increase of Insurance Premiumsas Required (Action)

5. Approve and Authorize the President to Execute an Agreement to Form the MontereyPeninsula Water Supply Project Governance Committee Together with California-American Water Company, the Monterey Peninsula Water Management District, and theCounty of Monterey and Appoint the Water Authoritys Representative to Said Committee

(Discussion/Action)

6. Review the First Amended and Restated Joint Exercise of Powers Agreement andRecommend Execution by Member Cities and the County of Monterey to Add the theCounty of Monterey as a Member of the Water Authority and to Make Other Modificationsto the Agreement (Discussion/Action)

7. Update on Member City Approval of Increased Member Contributions for FY 2012-13(Information)

8. Approve Future Meeting Dates (Discussion/Action)


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Thursday, February 14, 2013

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ADJOURNMENT

The Monterey Peninsula Regional Water Authority is committed to include the disabled in all ofits services, programs and activities. For disabled access, dial 711 to use the California RelayService (CRS) to speak to staff at the Monterey City Clerks Office, the Principal Office of theAuthority. CRS offers free text-to-speech, speech-to-speech, and Spanish-language services24 hours a day, 7 days a week. If you require a hearing amplification device to attend ameeting, dial 711 to use CRS to talk to staff at the Monterey City Clerks Office at(831) 646-3935 to coordinate use of a device or for information on an agenda.

Agenda related writings or documents provided to the MPRWA are available for publicinspection during the meeting or may be requested from the Monterey City Clerks Office at 580Pacific St, Room 6, Monterey, CA 93940. This agenda is posted in compliance with CaliforniaGovernment Code Section 54954.2(a) or Section 54956.


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MINUTES

MONTEREY PENINSULA REGIONAL WATER AUTHORITY (MPRWA)Special Meeting

8:30:00 PM, Thursday, January 10, 2013MONTEREY PUBLIC LIBRARY

651 PACIFIC STREETMONTEREY, CALIFORNIA

Directors Present: Burnett, Edelen, Kampe, Pendergrass, Rubio, Della Sala

Directors Absent: None

Staff Present: Legal Counsel, Interim Executive Director, Clerk to the Authority

ROLL CALL

President Della Sala called the meeting to order at 10:05 p.m. following the regular Authoritymeeting.

PUBLIC COMMENTS

President Della Sala opened the item for Public Comment.

Tom Rowley encouraged the Authority to make a decision of project support by the CPUCtestimony deadline of February 22, 2013 but also to continuing evaluating new information if itbecomes available. Jim Cullem expressed that the Authority has paralysis by analysis andencouraged the authority to consider alternatives or a combination of others. Unless they havean absolute source of water that is guaranteed and wont be litigated, he discouraged theAuthority from supporting a project. Nelson Vega spoke Jim Cullems comments that the mainproblem is source water.

AGENDA ITEMS

1. Receive Response Letter From California Office of the Attorney General and Take Action toRecommend Amending the Joint Powers Agreement to Allow The County of Monterey to Be aParticipatory Member of the MPRWA, Subject to the Approval of the City Members andExecution of the Agreement by the County of Monterey, and Provide Direction for OtherChanges as NecessaryAction: Approved

Legal Counsel Freeman introduced the item. He reminded the Authority that he had received aletter questioning the compatibility of offices with the County of Monterey participation in theJPA. The County requested an opinion regarding the matter and received a response from the

California Attorney Generals office which did not directly address the issue but indicated thatthe Attorney General is willing to consider the issue in depth for a formal opinion and there willlikely not be an incompatibility of offices if the Joint Powers Authority agreement was amendedto include the unincorporated areas. A formed opinion is available but could take up to a fullyear to be delivered.

Therefore Mr. Freemen recommended that the Authority direct staff to prepare an amended JPAagreement which would then be forwarded to Attorney Generals office, along with a letter fromthe County of Monterey in order to get a more definitive answer. Once approved, it would becirculated to different cities for approval and signature. President Della Sala invited discussionon the item from the Authority.


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MPRWA Minutes Thursday, January 24, 2013

Monterey Peninsula Regional Water Authority

Regular Meeting Minutes - Thursday, January 24, 20132

Director Rubio questioned the intention of the statement urban and rural water users andwould the change to be limited to Cal am service area. Legal Counsel Freeman responded ifwe expand our zone of influence it should suffice.

President Della Sala opened the item to public comment, having no requests to speak thenclosed and brought the item back to the Board for a motion.

On motion by President Della Sala, and seconded by Director Rubio and carried by thefollowing vote the Monterey Peninsula Regional Water Authority directed staff to amend theJoint Powers Authority agreement to include the entire unincorporated area of Monterey Countyand bring back for approval.

AYES: 6 DIRECTORS: Burnett, Edelen, Kampe, Pendergrass, Rubio, DellaSala

NOES: 0 DIRECTORS: NoneABSENT: 0 DIRECTORS: NoneABSTAIN: 0 DIRECTORS: None

RECUSED: 0 DIRECTORS: None

ADJOURNMENT

With no further business to discuss, President Della Sala adjourned the meeting.

ATTEST:

Lesley Milton, Clerk to the Authority MPRWA President


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MINUTES

MONTEREY PENINSULA REGIONAL WATER AUTHORITY (MPRWA)Regular Meeting

7:00 PM, Thursday, January 24, 2013FEW MEMORIAL HALL OF RECORDS

COUCIL CHAMBERMONTEREY, CALIFORNIA



Staff Present: Legal Counsel, Interim Executive Director, Clerk to the Authority

ROLL CALL


APPROVAL OF MINUTES

1. January 10, 2013

On a motion by Director Pendergrass, seconded by Director Kampe, and carried by thefollowing vote, the Monterey Peninsula Regional Water Authority approved the minutes ofJanuary 10, 2013:


NOES: 0 DIRECTORS: None

ABSENT: 0 DIRECTORS: NoneABSTAIN: 0 DIRECTORS: NoneRECUSED: 0 DIRECTORS: None

PUBLIC COMMENTS

Opened public comment

David Armanasco spoke representing the Deep Water Desal project and informed the Authoritythat DWD has begun the CEQA/EIR process and has been in contact with the CPUC to provideinformation in the Cal AM MPWSP EIR. He also said DWD has entered into an MOU with theCity of Salinas for a power sponsor agreement to purchase wholesale energy from Dynagy.

The relationship will allow DWD to purchase energy at a cheaper rate and the data centerslocated on the Dynagy site will use the cold sea water to cool down the data center, in turnpreheating the water for desalination. This process will reduce total energy consumption andwill help the project achieve California carbon reduction requirements.

Dale Hekhuis expressed concern about a published interview with Director Burnett in theHerald which indicated that Cal Am had a clear edge over the other projects. He alsoexpressed concern about the governance proposal and the proposed cost of the Cal Am projectin relation to the other projects. He questioned the criteria the Authority will consider to makethe selection of a preferred project. Director Burnett spoke to Mr. Hekhuis comments that hewas speaking on his own behalf, not on that of the Authority and that he was stating a position


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with facts based from the SPI consultants report that they are further along in their processthan the other projects and do have an edge in various capacities over other project.

Tom Rowley reflected on the public defeat of prior opportunities for public ownership of waterand attributed it to a lack of collective leadership by the public officials, which lead to peoplebeing mislead, and vote no. He then thanked all of the elected leaders indicating that taxpayersappreciate the collective leadership to get behind and support a project that the Peninsula so

desperately needs.

Bill Hood said he would not object if the Authority selects the Cal Am project, if the decision isbased on the purpose to develop the lowest cost water supply and providing water in theshortest possible time. He commented on the surcharge that it should not be a burden on thetaxpayers, which it could leave with stranded costs, and encouraged sharing of the risk byutilizing the surcharge during less risky project phases.

George (name) discouraged the Authority from acting too quickly but to grant a thoroughevaluation in the taxpayers best interest. If the Authority works diligently and prudently, theState Water Board should grant more time. He then spoke in support of local ownership andpublic independence encouraging more individual participation with rainwater capture and gray

water incorporation, then encouraged the Mayors empower their citizens to be proactive.

Safwat Malek spoke representing Rate Payers First and a provided a petition addressing theWater District, the Authority and the CPUC asking for lowest cost, and public ownership andfinancing.

Rudy Fisher encouraged the Authority to still continue pursuing a contingency project as abackup plan and spoke in support of the surcharge as away to lower the overall cost ofproducing water. He encouraged structuring the surcharge as a last dollar in method toensure Cal Am adopts a certain amount of risk which would keep the project on track. Hedisagreed with Mr. George () comments that the authority should act quickly. With no furtherrequests to speak President Della Sala closed public comment.

AGENDA ITEMS

2. Approve Contract for Executive Director Services with the City of Monterey (Discussion/Action)Action: Approved

Interim Executive Director Meurer presented the report including the recommendation that theAuthority approve the contract. The City of Monterey would be the hiring agency, and made theselection with the recommendation of the JPA. The position was budgeted for 600 hours for thenext 6 months, and 20 hours a week thereafter. Mr. Meurer also commented that this was

contingent upon all member Cities approval of additional allocations to fund the budgetadjustment passed on January 10, 2013.


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President Della Sala opened the item for public comments and Bill Hood congratulated theAuthority and Mr. Reichmuth on his appointment. With no further requests to speak, PresidentDella Sala closed public comment and brought the discussion back to the Board. DirectorBurnett commented that he was pleased Mr. Reichmuth accepted and is willing to take on thechallenge and thinks he is the right person to work with the Authority.

On a motion by President Della Sala, seconded by Director Pendergrass, and carried by thefollowing vote, the Monterey Peninsula Regional Water Authority authorized entry into a contractwith the City of Monterey for Executive Director Services.


NOES: 0 DIRECTORS: NoneABSENT: 0 DIRECTORS: NoneABSTAIN: 0 DIRECTORS: NoneRECUSED: 0 DIRECTORS: None

3. Review and Discuss Project Evaluation Matrix Submissions by the TAC, Monterey Peninsula

Water Management District and SPI Consultants (Information/Discussion)

President Della Sala opened the item indicating the Monterey Peninsula Water ManagementDistrict was not able complete the matrix due to the time constraints. Director Burnett, as Chairof the TAC, delivered the matrix with comments from the TAC from the meeting on January 24,2013 at 2:00 p.m.

He prefaced the discussion indicating the TAC only made comments when they had a differentview than what the SPI consultants prepared and acknowledged that while there are threeprojects, based on the current questions surrounding the People's Moss Landing (PML) projectand no communication with them to refute, the TAC focused the deliberation on the first two ofthree projects. He requested If the PML is still a live project, they need to make that known

since they have not been involved. President Della Sala commented that Director Burnett actedas a moderator for the TAC and represented the TAC members independent of DirectorBurnetts personal perspectives and comments.

Director Burnett then indicated the purpose of the matrix was to assist the Authority withcollecting the information communicated important by the Authority.

Pendergrass asked if the intent of this discussion was to make a decision on project support.President Della Sala responded that the matrix is a tool that will assist with the decision making.He said there will be a special meeting on January 31, 2013 and it will be agendized to identifya project to support. Director Burnett discussed information on the matrix and answeredquestions of the board.

Director Rubio, questioned if the possibility of a Tsunami was considered and if it would theplacement of other projects. Director Burnett answered that the TAC did not discuss the issueof Tsunami, but acknowledged it should be added to the matrix. With no more questions fromthe Directors, President Della Sala opened the item for public comments.


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Bill Hood questioned the TAC position on private vs. public ownership indicating he knewdifferent TAC members had clearly opposite opinions. Director Burnett acknowledged that therewas a diversity of views represented on the TAC and they tried to incorporate into thedocument.

Dennis Ing answered questions about the Deep Water Desal Project financial ability tocompete indicating they are private investors that are seeking to build the facility with 100% riskand no impact on the ratepayers. If the project is successful through the permitting process,they proposed it to be a publicly financed project. A JPA would be the financing agency andwould own the project. The project owners have engaged professional firms since thebeginning and have professional opinions that assure that the project would be eligible for taxfree municipal bond status.

Norm Grut the Executive Director of the Monterey County Farm Bureau indicated he is a PacificGrove resident and that personally and professional wants a solution for an adequate watersupply. He spoke to the reluctance of the agricultural community to support a project andindicated that the aquifer is an asset which the Agricultural community has spent millions ofdollars to enhance, improving and protecting after they found about the salt water intrusionproblem. Therefore they are unwilling to take a risk without a guarantee of success. The testwells will take years, but will give verifiable evidence that there will be no harm. He encouragedthe Authority to look at alternative risks and alternative projects.

George Schroder spoke representing the People's Moss Landing project apologize for the lackof interaction as he was out of the country. He requested a few more days to respond, and wasdisappointed the TAC ignored the committee because no one responded. He feels it is the bestsite for the project, and as a public agency. He assured the Authority that they would respond toany questions posed in the next three days and requested more time to provide information tothe Authority. He said PML will be continuing to work with ESA to provide responses to the EIR.

Nancy Isakson from the Salinas Valley Water Coalition spoke in support of the comments madeby Mr. Grut that the Salinas Valley has spent thousands of dollars and still has not resolved the

salt water intrusion problem. She expressed appreciation of the TAC's recommendation that theHydrologist Tim Durbin's comments are addressed. The well does need to be real time tested,at least 2 years for adequate data, to show there will be no impact or harm to the basin. Shesaid it was short sighted to select a project when the EIR's are not completed yet, as thepotential impacts and mitigations measures will determine the true cost of the project.

Tom Rowley thanked the TAC for the detailed analysis and requested the Authority addressthree additional hurdles: intake source, Hydrologist Tim Durbin's testimony and build asurvivable project that can withstand earthquakes.

David Armanasco spoke to the SPI report that the Monterey Peninsula residents are concernedabout costs, so it is important to point out the cost per acre foot on each project.

Nelson Vega suggested using this matrix to pull the components together that make the mostsense and focus on the issue of source water.

Dale Haikus expressed concern that there was not more mention of project risk. DirectorBurnett encouraged Mr. Haikus to attend the next TAC meeting on January 28, 2013 at 2:00p.m. to voice the comments and participate in the discussion.


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Lorin Letendre President of the Carmel River Watershed Conservancy thanked the Authority forthe efforts to attain a water supply and encouraged consideration of contingency plans andabout who is going to be advocating before the State Water Resources Control Board for anextension. With no more requests to speak, President Della Sala closed public comment andbrought the discussion back to the board.

Director Pendergrass questioned the necessity to make a decision for project endorsement at

this time indicating there is too much legal risk and said the Authority should be concentratingon GWR and recycled water options. Director Burnett responded that if the Authority desires to

submit testimony prior to the February 22, 2013 CPUC deadline for the Cal Am project, staff

will need adequate time facilitate the direction provided.

Director Rubio encouraged the Authority to make a decision indicating the information DirectorPendergrass is requesting could take up to a year or more to have. He supported a decisionnow to be able to submit testimony to the PUC to include what is important to the public, anadequate water supply.

Director Burnett reaffirmed that he only acted as a moderator during the TAC meeting but as aDirector would like to express his positions on the different categories. He indicated that it wasimportant to share his position before the Special meeting and receive feedback.

Size and Intake Source: the size of the facility is less important than the source of waterintake and permitting. For permitting, a project must pursue slant wells first then over toopen water without having to start from scratch. If DWD wants to accommodate thisposition, they need to come forward with a proposal.

Economics: If the Authority chooses to support the Cal Am project, the Authority mustinsist acceptance of a Public Financing Proposal. Cal Am must provide proof that theyhave access to SRF funds and Surcharge 2 lowers Net Present Value calculations toreduce rate shock, but must be targeted at portions of the project that are lower risk.

Public vs. private ownership: there are two benefits to public ownership; cost and

control. Control, not for control sake, to make sure the public has a voice in thedecisions that matter. Government is not always better at doing things than privatebusiness and vice versa. The governance proposal will identify the key decision pointsthat the public has a local voice in.

Director Burnett stated that this is not an opportunity to submit a list of questions and problemswith the proposal but to provide what solutions the Authority wants to see come out of it.Director Kampe applauded the specific and tangible proposal and a great point of reference forthe next meeting. He acknowledged that there will be controversy from some perspectives, butto point to a clearly preferred alternative will take 2 years with the slant well tests.

President Della Sala thanked the TAC and Director Burnett for his work on the item and

encouraged the Authority and the public to consider what was presented and be ready todiscuss next Thursday, January 31, 2013 at a special meeting.

Director Pendergrass indicated that he was not comfortable with taking action next Thursday toselect a project but should discuss it further. Director Rubio suggested a two part decision. Onebacking a project, second what project. He also requested Director Burnett to provide hiscomments in writing for review.


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Director Edelen acknowledged that there will never be perfect information but the Authorityneeds to rally collectively. City Manager Meurer stated that the public is looking to the authorityto make a decision and bring order to all aspects and give a rational point of view on behalf ofyour constituents.

4. Discuss Draft Governance Proposal and Provide Direction to Staff

Action: Discussed and Provided Direction

Don Freeman introduced the item and explained the three categories and indicated it wasstructured in such a way it is not CEQA reviewable. Only decisions this body will be involved inand will not require any type of change or effect on the environment. If Cal am does not takethe recommendations, they will have to answer to the CPUC.

Director Burnett indicated that the document included in the packet is similar version to whatthe Authority voted on in September 2012 as well as the draft version that was before the boardon January 10, 2013. He indicated that this project is a good case study how CEQ could beimproved. He requested comments and direction from the Authority to be incorporated beforethe next meeting.

Director Pendergrass questioned if the proposed governance committee would be subject tothe Brown Act. Legal Counsel Freeman responded that if this proposal is it would be a separategroup in and of itself. President Della Sala opened the item for public comment.

Bill Hood said that the document as excellent but should consider value engineering and to givea definition of what that is. He also suggested that the stipulation listed in Category B thatallows the agency to give direction should remain in category A. He said that the disputesection was in conflict and inconsistent. He then spoke to review and recommendations ofchange orders of over $1 million saying it should remain in category A if you are going to exertcost control. With no more requests to speak, President Della Sala closed public comment and

brought the discussion back to the board.

Director Burnett responded to Mr. Hood's comments indicating defining the role of valueengineer is excellent and the committee will work more on that and indicated that he wants thisgovernance to work but that it cannot create delay.

ADJOURNMENT

With no further business to discuss, President Della Sala adjourned the meeting at 10:12 p.m.

ATTEST:

Lesley Milton, Clerk to the Authority MPRWA President


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MINUTES

MONTEREY PENINSULA REGIONAL WATER AUTHORITY (MPRWA)Special Meeting

7:00 PM, Thursday, January 31, 2013FEW MEMORIAL HALL OF RECORDS

MONTEREY, CALIFORNIA



Staff Present: Legal Counsel Freeman and McLaughlin, Executive Director, Clerk to theAuthority

ROLL CALL

President Della Sala called the meeting to order at 7:01 p.m. with all Directors present.


PUBLIC COMMENTS

President Della Sala invited public comment for items not on the agenda. Nelson Vegacommended Mayor Burnett for an outstanding job making contact with influential people andworking for the benefit of the Authority. He encouraged the public to attend a MontereyPeninsula Water Management District special meeting next week and then he requested theAuthority to petition the State Legislature for an extension for the cease and desist order.

Dan Turner said it was obvious that the Authority is leaning toward the Cal Am project andunderstood the position because it appears they can deliver but cautioned the authoritybecause he thinks the slant wells have a high chance of resulting in a lawsuit, which Cal amwould likely loose. He then spoke against the history of Cal Am projects.

Anthony Tersol from the Surfrider Foundation read an excerpt from a letter the MontereyRegional Water Pollution Control Agency delivered to the California Public Utilities Commissionwhich indicated there is ample water physically available and that over the last 13 years over10,600 acre feet of water was treated and discharged in the outfall. He encouraged theconsideration of utilizing water that is treated and discharged instead of desalination.

President Della Sala reminded the audience that public comments related to an agendized itemshould be delivered when the Authority opens public comment for that specific item.

Alan Haffa questioned the water supply governance contract. He expressed concern theAuthority may be sacrificing the ability to govern in the future with the proposed document and

encouraged each Director to seek legal advice from the City they represent before finaladoption of the document.

Darby Moss Worth spoke in support of a public water option. She thinks the Public has beenpredominantly vocal supporting a public option and encouraged the Authority to listen.

Ellison Ferrall spoke of his experience of financing startup and entrepreneurs. He then spoke insupport of innovation and encouraged the Authority to think outside of typical methods andpractices. He said innovation and marketing is an investment, as well as cost. Trust innovationand set the standard.


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Special Meeting Minutes - Thursday, January 31, 20132

Steve Ecklund spoke in support of publicly owned water and against Cal Am's because they area for profit company.

George Riley spoke representing Citizens for Public Water commending the Directors forputting together a package that might work and he hopes Cal Am will recognize and accept theproposal. He expressed concern that that Cal am has too many hurdles that are not addressedincluding litigation and water rights and the fact Cal am has not agreed to the conditions or thenumbers presented in the SPI report. He spoke to the fact he has and will continue to advocatefor public ownership and lowest cost therefore his efforts going forward will be to focus on analternative option and will work with the Water Management District to try to make thealternative project a viable project. With no further requests to speak President Della Salaclosed public comment.

AGENDA ITEMS

1. Approve Budget Adjustment Necessary to Fund Separation Processes Inc. and Kris HelmConsulting to Prepare Testimony To Be Submitted To the California Public Utilities Commissionon February 22, 2013 and Appear at Subsequent Hearings in April. (CPUC A 12-04-019)

Executive Director Reichmuth reported that staff has been compiling comments for thetestimony to be submitted to the CPUC by February 22, 2013. However, in order to facilitate thewritten comments for the testimony, staff is requesting the authority approve an additionalcontract with the Consultants for their expertise and experience. Staff recommends usingmoney from the contingency line item from the amended budgeted for FY12-13 therefore noadditional funds will be requested from the member cities. Member Reichmuth answeredquestions from the Directors. Mayor Burnett indicated that in addition to SPI Consultants andKris Helm Legal Counsel Russ McLaughlin and Ron Larkin will also be participating, and fundswill be used from the previously approved budget.

Director Edelen questioned the testimony process to understand the need and the cost forstaffing. Russ McLaughlin clarified that no one is attending the testimony hearing on February22, 2013 but that comments submitted will be written testimony. Later in April, there will be anevidentially hearing before the CPUC where witnesses that provide written testimony will besubject to cross examination.

President Della Sala opened the item for public comment and with no requests to speak closedpublic comment.

Director Rubio spoke in support of sending the necessary professionals indicating the weight ofthe expertise will have an effect that will be evident to the hearing and does not think this is awaste of money. Director Pendergrass agreed with Director Rubio's comments.

On a motion by Director Kampe seconded by Director Rubio and carried by the following vote,

the Monterey Peninsula Regional Water Authority amended the FY 2012-13 approved budgetby a maximum of $15,000 as necessary to Fund Separation Processes Inc. and Kris HelmConsulting to Prepare Testimony To Be Submitted To the California Public Utilities Commissionon February 22, 2013 and Appear at Subsequent Hearings in April. (CPUC A 12-04-019):


NOES: 0 DIRECTORS: NoneABSENT: 0 DIRECTORS: NoneABSTAIN: 0 DIRECTORS: None


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RECUSED: 0 DIRECTORS: None

2. Discuss Status of Desalination Project Proposals and Provide Direction to Staff for Submissionof Testimony to the California Public Utilities Commission on February 22, 2013 (CPUC A 12-04-019)

Executive Director Reichmuth presented the report and projected the staff report on the screen

for the benefit of the public. He spoke to the fact there is only one application before the CPUCat this time and reiterated that the Authority policy has been to consider all projects equally, butsuggested that the Directors are able to make a preferred suggestion, which would not precludethe other projects. He indicated the Staff recommendation is that the Authority can conditionallysupport the Cal Am Monterey Peninsula Water Supply project. He then referenced justificationsfor the recommendation, which are listed in the agenda documents including a cost sensitivityevaluation and the decision matrix which were used to draft the deliberative document assupporting materials. Mr. Reichmuth requested the Authority to provide guidance from theDirectors to be able to draft the testimony to be submitted and asked for comments regardingthe enclosed Deliberative Document.

Legal Counsel Freeman presented the history of the Authority, the water shortage issue, and

the reason for which this decision must be made. He clarified the process for the submission oftestimony and why the Cal Am project is the only project being regulated by the CPUC. He thenrequested the Authority, based on what information is available today, to direct staff regardinginformation and direction to include within the testimony document. Staff answered questionsfrom the Directors.

Mayor Burnett spoke to Director Pendergrass question regarding the contingency plans and thetechnical and legal risk over the slant wells. The case was made to the CPUC in December andthe language included in the document requires Cal Am to fully develop a contingency plan thatdoes not involve wells in the Salinas basin the event that the slant wells are deemedtechnologically or legally infeasible. Director Rubio questioned the Authoritys ability to requireaccountability on the proposed policy document and questioned if the Authority would change

the recommendation if Cal Am does not comply with the conditions. The Authority agreed torevisit the issue if this Cal Am does not comply with the conditions.

President Della Sala opened the item for Public Comment on the agenda item. Libby Downeyquestioned why the document was negotiable then expressed concern that the proposedsurcharge would be paid at the expense of current residents and future residents would benefit.She then encouraged the Authority to work with the Water Management District as they haveaccess to SRF loans and Cal Am cannot and indicated that the governance needs to be morespecific because she thinks it is problematic moving items between B and C. Then Ms. Downeyquestioned if the Authority considered the Poseidon project strategy so the public would buy theplant after 30 years as well as questioned if the Authority considered costs of procuring energyfrom the Waste Management District. She suggested asking a City to help get power at a less

expensive rate. Ms. Downey said that Salinas Water Rights concern her and directed theAuthority to keep other projects supported and online. Lastly, she thanked Director Burnett forall his efforts.


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Alan Haffa spoke to Mr. Reichmuth's comment, and encouraged the Authority to keep allprojects under consideration. He expressed that he does not think that the Cal Am project iscost comparable and in terms of viability and that the slant well technology and ability to bepermitted has real questions. He then requested the Authority demand more control over thefacilitation of the surcharge as a condition of support, and the Authority should use the currentability to leverage in order to get the best deal for the public as it is the only way to make itviable. Lastly he requested insertion of stronger language to unilaterally change the support to

a contingency plan.

Norm Brut, Executive Director of the Monterey County Farm Bureau indicated there areconcerns over the well site in North Marina, and the science and risks around the slant wellsincluding endangered species, shallow cliffs, the insufficiency of the water. Informationpresented at the workshop indicated they are going to hold any process that is subsurface to ano harm standard similar to any aquifer which presents a problem you have to show no harm tothe aquifer as well as to the ocean itself. He encouraged the Authority to ensure there arealternative sites included in this process and are done concurrently and in parallel.

Sandy Teal publicly thank the Authority for taking the time to do the necessary research andwas was pleased to hear about the MPRWA coming forward as he felt this group represented

both the people and the businesses. He urged the Authority to make the vote of project support.Tom Frutchey City Manger of Pacific Grove spoke in support of the Pacific Grove Small WaterProjects indicating it does meet all the criteria requested and indicated that the AdministrativeLaw Judge also supported this project. He indicated it is not a competing project but is acomplementary project, characterized by low energy and low environmental footprint which canaddress multiple city objectives, reducing storm water flows, helping the areas of biologicalsignificance (ASBS) and is not just a Pacific Grove City project but will address the NIPprogram in Monterey and will allow the return of the Cal Am Corporation yard as aneighborhood aspect. The project would have full public ownership, low public financing with asimplified governance structure with, full public input and transparency. Without unanticipateddelays, could be online prior to January 1, 2016. Lastly, he indicated that it would provide goodwill and justification to delay the imposition of the cease and desist order and requested the

support of the Authority for the project.

Nelson Vega strongly urged the Authority to follow through with making a decision, thankedDirectors Burnet and Della Sala for their work and encouraged the Directors not be distractedby comments made that are irrelevant to this discussion and decision. He then spoke to Ms.Downey's comment that it is unreasonable to expect a company to make all the capitalinvestment and then sell it to the community for a dollar.

Rudy Fischer spoke to Mr. Frutchey's comments and encouraged the Authority to support thePacific Grove Small water projects as a viable option. He then encouraged the Authority to useleverage to get some accountability regarding the surcharge.

Ellison Ferrall presented the idea that the Federal government has a lot of ships that aremothballed and currently contain desalination capabilities and the Authority should considerinnovative ideas such as utilizing and converting these ships to floating desalination plants.

Rene Boscoff, General Manager of the Monterey Marriot said that our community has debatedthe water issue for over 35 years and indicated that the Authority must find a solution to thewater issue. If businesses are required to reduce water consumption by 50% there will be adevastating effect on the community. The number one generator of revenue in this communityis hospitality; therefore it is necessary to find a steady, predictable water source. He asked thatthe Authority support the MPWSP as presented in the staff report.


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Ken Talmage requested that the Authority consider strengthening the conditions on the secondpage regarding the contingency plan and indicated that cost is less important than timingindicating that there is less than 4 years before the cease and desist order comes into effect.He spoke to the current schedule of slant well test and requested the Authority to strengthenthe 6th bullet and get the first option implemented so they are testing two things at the sametime.

Sue McCloud commented on the deliberative statement fully realizing this discussion is relatedto a snapshot in time. She questioned the specific language which is quantitative, but notdefined, indicating there may be push back about what is meant by "suitable" and "competitive".She also expressed there is a difference in style as sub points, or declarative points indicatingthe declarative are much stronger. She questioned the item on page 4, item 4, questioning ifCal Am was to fund lower risk phases, because the Authority had expressed desires to havethe surcharge fund the lower risk portions. She then echoed Director Pendergrass commentabout power needs from local municipal utilities. Then she noted paragraph 11 speaks togovernance and since there is no approved governance agreement it may need to be recast as"working to avoid".

Alan Williams spoke about the historic process of the Carmel River Dam EIR process and how

there were no project alternatives which is a reason we have the current dilemma. Heencouraged the Directors not to leave the community without a viable alternative and said theproposed document is appropriate for an environmental process. He spoke in support of analternative project proposal at the Moss Landing site as there is current infrastructure there andenvironmental reports which make it a viable alternative.

Bonnie Adams Executive Director of the Monterey County Hospitality strongly recommendedthat the Authority support the Cal Am MPWSP. She supported her position by saying the detailshave been vetted by the TAC and the Cal Am project is only one before the CPUC. They havean EIR, as well as the technology, managerial and technical capabilities to build and per theSPI report is the only one close to being built in time. Failure to find a solution will impact thecommunity dramatically.

Sam Philips from the Monterey Commercial Property owners association read a letter by theCoalition of Peninsula Businesses urging the Authority to make a decision to support Cal Amproject. All critical information was submitted and evaluated appropriately; the Process hasbeen fair and objective and it is clear the Cal Am project needs your support. MontereyCommercial Property Owners Association is also requesting support of the Cal Am project atthis time. MCPOA has always taken the stance for the lowest cost but a project that can behere in time is more important. Lastly, Mr. Philips made comments about the size of thedesalination plant indicating this problem has been discussed for more than 30 years and wouldlike to see the Authority support projects that will provide enough water and not hinderdevelopment and growth. By accepting a plant that does not produce sufficient amounts ofwater is kicking the can down the road. He encouraged the Authority to support the largest

plant and allow the agencies to regulate as they were put in place to do.

Jody Hansen spoke representing the Monterey Peninsula Chamber of commerce in support ofMr. Phillips comments and commended the Authority for exemplary work. She expressedsupport of selection of the Cal Am project, but to keep the alternatives in mind. Economicvitality really depends on this. Jobs will be lost and lifestyles will be impacted.


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Anthoy Tersol of Surfrider spoke to the ground water replenishment issue and the size of thefinal facility. He indicated Surfrider is an environmental organization but the members work inthe trades and everyone will be affected and encouraged the Authority to consider othersolutions outside of desalination including the use of the water treated at MRWPCA anddischarged.

John Narigi spoke of his service on the TAC indicating he has learned to respect the public

official as they are required to listen to the complaints and comments. He thinks the TAC did anexcellent job, directed by this group and each member put in a many hours working togetherand was a consensus but did not always agree. He spoke to the fact the same peopleparticipate in each meeting and it is clear that Cal am is the front runner in this race. He spokein agreement with the conditions presented an indicated that an alternative is a must. Herequested the Directors to please address this water issue so we can all focus on a project andmake sure it will get across the finish line as close as it can to the deadline indicating rationingis a serious problem that hoteliers cannot answer. The Plaza made drastic, expensive changesto save water and keep costs and ability up to keep earning the TOT. Encouraged the decisionsto be made not just for adequate supply but for ample supply for future needs.

David Armanasco speaking for Deep Water Desal and on behalf of the DWD colleagues want

to extend compliments about the process that the Authority has conducted, that it was a wellrun and intended process and thanked the members of the TAC with whom they have spentmany hours working with. He wanted to make sure that people in the audience and theAuthority identify that this document does not recognize that DWD has begun the EIR process.He acknowledged that there are serious questions about the Cal Am project and DWD willcontinue to go forward. Thank for being part of the process and good luck.

With no more requests to speak, President Della Sala closed public comment and adjourned toa 10 minute break. He Reconvened the meeting at 9:13 p.m. and indicated that the Authorityhas already expressed support of the Pacific Grove Small Water Projects. President DellaSalsa responded to some of the public comments made referencing the document then movedforward.

Director Rubio expressed disappointment that the public is not as diverse as the people that aregoing to be affected by what happens here tonight. The people that depend on this water for

jobs and raising their families are not here represented. Those folks are not represented but issure they have a lot to say about the viability of those projects and how it will impact them. Heexpressed disappointment that the facilities and the document should consider a general planbuild out. All mayors have a general plan in their cities which will need to be updated. We havean opportunity to request the CPUC to consider a full general plan build out in the scope. Fromall the comments we herd tonight it is appropriate for the CPC /CEQA to consider other projectsas alternatives and it is up to the project proponents to gain the legs to catch up so we canconsider them as viable alternatives. This discussion relates to the CPUC and the one projectunder review, as the others do not fall under the jurisdiction.

President Della Sala asked Legal Counsel if there are any legal issues to request the CPUC toinclude a full build out of the cities general plans given the project we are supporting will besignificantly small than the general plan build out? Legal Counsel McLaughlin responded thatthe Authority can make that statement in testimony from a policy stance, but cautions that thescoping memo from the EIR was last fall, the EIR is well underway, while we may make thatcomment, we cannot guarantee it will have an impact due to timing and other participatingtestimony on the merits of the project while the EP is being handled separately by the energyportion of the CPUC however there will be no harm making the comment from a policystandpoint.


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Director Edelen agreed with Director Rubios suggestion and thanked the Staff and DirectorBurnett for all the work that has been done. He then spoke to Director Burnetts comments thatCal Am's slant wells may not be successful it that must be understood all of the Directors haveto agree on the one collective political project. The project that appears the furthest along is CalAm, and if we have some influence over that project then we might be able to have impact oversome aspects of pricing and other outcomes. Recommends supporting one project collectively.

Director Pendergrass spoke to comments made last week that if we support a project it needsto be conditional and should be validated by the PUC. We do not want to support a project thatwill fail with no alternatives. He expressed concern about how the Authority will be able tocontrol the 99 million dollar surcharge and wants to convey the Authority concerns to theCPUC. He commended the President and Vice Chair for work on this project and spoke to theAuthority Mayors active participation with the publics best interest at hand.

President Della Sala spoke to the concerns on page 1, Item number 3, referring to thepurchasing powers with a municipality and should add public entity to that sentence. He thenspoke to comment about innovation and encouraging residents to install catchment basins onroofs indicating it was not cost effective to put catch basins on system on existing buildings buttruly does not think it will get enough water to meet the communitys needs. He then spoke to

the surcharge comments that the reason for that proposal is to save money on interest andindicated that Mayor Burnett has crafted a solution to the risk regarding that surcharge and ifthat goes forward it would in effect once the permits are granted from the Coastal Commissionso the ratepayer funds are less at risk.

Director Burnett also responded to the comments about the surcharge and the concernexpressed by the public and the Water Management District meeting as the goal is to reducethe financing cost and the net present value cost of the facility to our community. Total savingsare well over $100 million that we would be brining to our community by introducing sources ofpublic financing into this project.

Director Burnett moved that the Authority adopt the proposed position statement with the

following adds/modifications:

1. Reiterate a support for a portfolio approach for ASW and GWR and note that all havepublic ownership and must include a desal project.

2. Reference the existing the policy statement passed at a meeting regarding theprincipals

3. Identify edits within document. First page, item 3: the cost of electricity add in "otherpublic entity or other source of power" which was intended to be a broader list. Nextbullet 4: Cal Am must agree to limit the cost of revenue from Cal Am Surcharge 2,should read, "for example Cal Am would agree to use surcharge 2 to fund lower riskparts or phases".

4. Correct the way we are approaching contingency, to pull out the two last bullets of 5 to

form their own number 6 to signal they are not sub issues but primary issues. TheSecond bullet: Cal Am must fully develop a contingency plan and implement for sourcewater not in the Salinas Basin. This must be done concurrently with the planning andtest wells.

5. Under the general heading "fiscal am meets the above condition:" would clarify Cal Am'scurrent project size, consistent with replacement and replenishment, to include lots ofrecord and economic rebound.

6. Point 11: Include "draft" before the governance committee agreement anticipated to befinalized in the next couple of weeks.


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Seconded by Kampe. Discussion on the Motion. Director Pendergrass requested number 10,regarding project alternatives, should be emphasized to be stronger. We don't want to go backto square one. Director Burnett proposed the change to read, "More over the Authorityreiterates that both be reviewed at the project level." Director Kampe agreed to themodification.

On a motion by Director Burnett seconded by Director Kambe and carried by the following vote,

the Monterey Peninsula Regional Water Authority adopted the proposed position statement withthe following adds/modifications:

1. Reiterate a support for a portfolio approach for ASW and GWR and note that all havepublic ownership and must include a desal project.

2. Reference the existing the policy statement passed at a meeting regarding the principals3. Identify edits within document. First page, item 3: the cost of electricity add in "other

public entity or other source of power" which was intended to be a broader list. Nextbullet 4: Cal Am must agree to limit the cost of revenue from Cal Am Surcharge 2,should read, "for example Cal Am would agree to use surcharge 2 to fund lower riskparts or phases".

4. Correct the way we are approaching contingency, to pull out the two last bullets of 5 to

form their own number 6 to signal they are not sub issues but primary issues. TheSecond bullet: Cal Am must fully develop a contingency plan and implement for sourcewater not in the Salinas Basin. This must be done concurrently with the planning andtest wells.

5. Under the general heading "fiscal am meets the above condition:" would clarify Cal Am'scurrent project size, consistent with replacement and replenishment, to include lots ofrecord and economic rebound.

6. Point 11: Include "draft" before the governance committee agreement anticipated to befinalized in the next couple of weeks.

7. Number 10 be changed to read, "More over the Authority reiterates that both bereviewed at the project level."


NOES: 0 DIRECTORS: NoneABSENT: 0 DIRECTORS: NoneABSTAIN: 0 DIRECTORS: NoneRECUSED: 0 DIRECTORS: None

On a motion by Director Rubio and seconded by Director Edelen and carried by the followingvote the Monterey Peninsua Regional water Authority directed staff to to submit writtentestimony to provide a policy statement of the need for preference for full consideration of full

general build out for the sizing of the project and directed staff to work with members of theAuthority to review the testimony to make sure it is accurate to reflect the amended motion.

AYES: 5 DIRECTORS: Burnett, Edelen, Pendergrass, Rubio, Della SalaNOES: 0 DIRECTORS: NoneABSENT: 0 DIRECTORS: NoneABSTAIN: 1 DIRECTORS: KampeRECUSED: 0 DIRECTORS: None


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President Della Sala invited discussion on the motion. Legal Counsel confirmed that it does notconflict, but does broaden the bounds analysis. It does not modify the Authoritys position aboutthe size of the project but for environmental purposes should look at something broader. In theeven there is an opportunity for expansion we do not have to go through an EIR process again,

just supplemental or amend. Director Kampe expressed concern about how much water isinvolved in "full general plan build out" acknowledging that it is dependent on each city's current

adopted general plans.With no further business to come before the Authority, President Della Sala Adjourned themeeting.

ADJOURNMENT

ATTEST:

Lesley Milton, Clerk to the Authority, Authority Clerk MPRWA President


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Monterey Peninsula Regional Water AuthorityMonterey Peninsula Regional Water AuthorityMonterey Peninsula Regional Water AuthorityMonterey Peninsula Regional Water AuthorityAgenda ReportAgenda ReportAgenda ReportAgenda Report

Date: February 14, 2013

Item No: 4.

08/12

FROM: Prepared By: Clerk to the Authority Milton

SUBJECT: Approve Amendment to Contract for Executive Director Services with the City of

Monterey to Include Licensed Professional Engineer in the title and Authorize

Increase of Insurance Premiums as Required (Action)

RECOMMENDATION:

That the Authority adopt the attached Resolution authorizing the contract for employmentservices with the City of Monterey to modify position title to read Executive Director/LicensedProfessional Engineer and to authorize an increase in the Special Liability Insurance Policy asrecommended.

DISCUSSION:

At the December 24, 2012 meeting, the Authority directed staff to proceed with hiring anExecutive Director and requested a member city to sponsor the position, as an employee and tocontract for services. The City of Monterey facilitated this request, and both the Authority andthe City of Monterey approved and executed a contract for services for the position of ExecutiveDirector.

Bill Reichmuth, a licensed professional engineer, was appointed as Executive Director. Sincehis appointment, it has been recommended by member city Risk Managers that in order becovered in the event of litigation, the Authority needs to amend the contract include hisprofessional designation and increase the Authority Special Liability Insurance Policy. Theattached resolution amends the previous resolution for services with the City of Monterey toinclude the designation of Executive Director/Licensed Professional Engineer and alsoauthorizes the Authority to increase the special liability insurance premium from the $5 million to$10 million limit policy.

Approval of the attached resolution will not change the approved expenses related to theExecutive Director position, however with the designation change, it has been recommended toincrease the annual premium for the Authority's Special Liability Insurance Policy which willincur an additional $2,946.25 annually and could be paid out of the approved contingency fund.

Attachments: 1. Resolution


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RESOLUTION NO. __-___ C.S.

A RESOLUTION OF THE MONTEREY PENINSULA

REGIONAL WATER AUTHORITY

APPROVE AMENDED CONTRACT FOR EXECUTIVE DIRECTOR SERVICESWITH THE CITY OF MONTEREY AND AUTHORIZE INCREASED LIMITS TO SPECIAL

LIABLITY INSURANCE PREMIUM

WHEREAS, on January 24, 2013 the Authority adopted Resolution 13-04 authorizing thePresident to execute a contract with the City of Monterey for Executive Director Services; and

WHEREAS, the individual that was selected for the position of Executive Director, WilliamReichmuth, is a licensed professional engineer; and

WHEREAS, since selecting Mr. Reichmuth, it has been recommended that the MPRWAincrease the current Special Liability Insurance Premium policy in order to protect the MPRWA in the

event of litigation; and

WHEREAS, the President and MPRWA Directors have reviewed the amended contract andagrees to its terms and conditions.

NOW, THEREFORE, BE IT RESOLVED that the President is hereby authorized to executean amended agreement on behalf of the MPRWA to contract with the City of Monterey for ExecutiveDirector/Licensed Professional Engineer Services.

BE IT ALSO RESOLVED that the MPRWA authorizes an increase in the Special LiabilityInsurance Premium to cover the Executive Director position with a designation of LicensedProfessional Engineer and the costs incurred from such action.

PASSED AND ADOPTED BY THE MONTEREY PENINSULA REGIONAL WATERAUTHORITY this ___ day of ____ 201_, by the following vote:

AYES: DIRECTORS:NOES: DIRECTORS:ABSENT: DIRECTORS:ABSTAIN: DIRECTORS:

APPROVED:

ATTEST:

Chuck Della Sala, President

Clerk to the Authority


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Monterey Peninsula Regional Water AuthorityMonterey Peninsula Regional Water AuthorityMonterey Peninsula Regional Water AuthorityMonterey Peninsula Regional Water AuthorityAgenda ReportAgenda ReportAgenda ReportAgenda Report

Date: February 14, 2013

Item No: 5.

08/12

SUBJECT: Approve and Authorize the President to Execute an Agreement to Form the

Monterey Peninsula Water Supply Project Governance Committee Together withCalifornia-American Water Company, the Monterey Peninsula WaterManagement District, and the County of Monterey and Appoint the WaterAuthoritys Representative to Said Committee (Discussion/Action)

DISCUSSION:

At the January 31, 2013 meeting, the Authority approved conditional support of the Cal Amproposed Monterey Peninsula Water Supply Project contingent upon the conditions set forth inthe position policy statement titled Deliberative Document. Specific conditions included withinthe position statement read, The project must have suitable public governance, public

accountability and public transparency and Cal-Am must agree, upon mutually-acceptableterms, to form a Governance Committee to provide publicly-accountable oversight of theproject. In order to abide by the above conditions set forth in the policy document, anagreement for a Governance Committee is necessary.

The attached draft agreement creates the Monterey Peninsula Water Supply ProjectGovernance Committee and will include the Authority, the Monterey Peninsula WaterManagement District, the County of Monterey and California American Water.

The purpose of this committee will be to ensure efficient and effective public input into thedevelopment and operation of the Monterey Peninsula Water Supply Project. Cal-Ams entryinto this agreement is expressly conditioned upon its legal obligations to abide by the orders and

decisions of the CPUC. The parties acknowledge that the project is still under development andseveral aspects of the project may be modified as planning continues.

Staff is recommending that the Authority approves the attached Resolution, authorizes thePresident to execute an agreement with the above parties to form the Monterey PeninsulaWater Supply Project Governance Committee and authorizes the MPRWA to be a participatorymember in that committee.

ATTACHMENTS: 1) Draft Resolution

2) Draft MPWSP Governance Agreement


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AUTHORIZE THE PRESIDENT TO EXECUTE AN AGREEMENT TO FORM THE MONTEREYPENINSULA WATER SUPPLY PROJECT GOVERNANCE COMMITTEE TOGETHER WITH

CALIFORNIA-AMERICAN WATER COMPANY, THE MONTEREY PENINSULA WATERMANAGEMENT DISTRICT, AND THE COUNTY OF MONTEREY AND APPOINT THE WATER

AUTHORITYS REPRESENTATIVE TO SAID COMMITTEE

WHEREAS, at its January 31, 2013 meeting, the Monterey Peninsula RegionalWater Authority (MPRWA) conditionally approved support of California-American WaterCompanys Monterey Peninsula Water Supply Project (Project), subject to specific conditions;

WHEREAS, conditions were set forth in the position statement that require theProject to have suitable public governance, public accountability and public transparency;

WHEREAS, the conditions also include the provision that Cal-Am must agree, uponmutually-acceptable terms, to form a Governance Committee to provide publicly-accountableoversight of the project;

WHEREAS, the MPRWA has since developed, together with California-AmericanWater Company, the Monterey Peninsula Water Management District, and the County ofMonterey, an agreement to form the Monterey Peninsula Water Supply Project GovernanceCommittee; and

WHEREAS, this agreement, which is attached hereto, will ensure a strong publicvoice and transparency in the development of the Project;

NOW THEREFORE BE IT RESOLVED that the MPRWA approves the attachedagreement and its participation as a member of the Monterey Peninsula Water Supply ProjectGovernance Committee.

BE IT FURTHER RESOLVED that the MPRWA appoints ___________ as theMPRWAs representative and ___________ as an alternative representative to the saidcommittee.

PASSED AND ADOPTED BY THE MONTEREY PENINSULA REGIONAL WATERAUTHORITY this ___ day of ____ 201_, by the following vote:

AYES: DIRECTORS:NOES: DIRECTORS:ABSENT: DIRECTORS:ABSTAIN: DIRECTORS:

APPROVED:

ATTEST:


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Chuck Della Sala, President

Clerk to the Authority


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Revised February 7, 2013 DRAFT for Final Review

SB 636205 v3:015621.0002 1

AGREEMENT TO FORM THEMONTEREY PENINSULA WATER SUPPLY PROJECT GOVERNANCE COMMITTEE

This AGREEMENT TO FORM THE MONTEREY PENINSULA WATER SUPPLY PROJECTGOVERNANCE COMMITTEE (Agreement) is made and entered into as of February __, 2013, by andamong the MONTEREY PENINSULA REGIONAL WATERAUTHORITY (MPRWA), the MONTEREYPENINSULA WATER MANAGEMENT DISTRICT (MPWMD), the COUNTY OF MONTEREY(County), and the CALIFORNIA-AMERICAN WATER COMPANY (Cal-Am). The MPRWA, theMPWMD, the County, and Cal-Am are sometimes referred to herein as a Party, and collectively as theParties.

I. Formation of Governance Committee

Pursuant to the terms of this Agreement, the Parties hereby form the Monterey Peninsula Water SupplyProject Governance Committee (Governance Committee) comprised of representatives of theMPRWA, the MPWMD, the County, and Cal-Am to ensure efficient and effective public input into thedevelopment and operation of the Monterey Peninsula Water Supply Project (Project). Cal-Ams entryinto this Agreement is expressly conditioned upon its legal obligations to abide by the orders anddecisions of the California Public Utilities Commission (CPUC). Therefore, should the CPUC order Cal-Am not to participate in this Agreement, Cal-Am shall be relieved of all obligations set forth in this

Agreement and this Agreement may be terminated by Cal-Am upon such CPUC order. Further, if theCPUC issues any order or decision that conflicts with any particular provision of this Agreement, Cal-Amshall be relieved of any and all obligations to abide by the conflicting provision of this Agreement.

II. Definitions

A. Application A.12-04-019. Application of California-American Water Company (U210W)for Approval of the Monterey Peninsula Water Supply Project and Authorization to Recover All Presentand Future Costs in Rates, filed with the CPUC on or about April 23, 2012.

B. ASR Infrastructure. The facilities used to inject into and extract potable water from theSeaside Groundwater Basin, as described in Application A.12-04-019. These facilities will include theAquifer Storage and Recovery (ASR) wells and related appurtenances, the backflush pipeline, the

recirculation pipeline and the ASR pipeline.

C. Cal-Am Notification. The time when Cal-Am notifies the Governance Committee that amatter is ready for consideration, consultation, or action by the Governance Committee as providedherein, and as further defined within Section V.B.

D. Contracts. One or more of the following contracts between Cal-Am and a selectedcontractor: (1) design-build contract(s) for the Desalination Infrastructure, (2) design-build contract(s) forthe Source Water Infrastructure, (3) design-build contract(s) for the Brine Discharge Infrastructurecontracted for by Cal-Am, (4) design-bid-build contract(s) for the Product Water Pipeline, (5) design-bid-build contract(s) for the Raw Water Pipeline; (6) design-bid-build contract(s) for ASR Infrastructure, and(7) design-bid-build contract(s) for the Terminal Reservoir Infrastructure. One or more of the contractsidentified above in this definition may be combined into a single contract.

E. CPCN. The Certificate of Public Convenience and Necessity, if ordered by the CPUC,within Application A.12-04-019.

F. Brine Discharge Infrastructure. Facilities located outside the desalination plant site thatare used to dispose of brine into the ocean. These facilities will include the brine disposal pipeline, thebrine receiving station, any modification to the MRWPCA existing outfall, or a new outfall, or potentiallythe use of other existing outfalls with or without modifications.


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SB 636205 v3:015621.0002 2

G. Desalination Infrastructure. Facilities located within the desalination plant site that areused to create potable water from either an ocean source water, brackish source water or a combinationthereof, and appurtenant facilities needed to dispose of brine to the Brine Discharge Infrastructure,dispose of wastewater (i.e. process water and sanitary discharge), and any needed facilities that may berequired to return groundwater back to the Salinas Valley.

H. Desalination Project. The combination of the Desalination Infrastructure, the BrineDischarge Infrastructure, the Source Water Infrastructure, the Product Water Pipeline, the Raw WaterPipeline, and the Terminal Reservoir Infrastructure.

I. GWR Project. Groundwater replenishment project to be implemented by MRWPCAand/or MPWMD which involves advanced treatment of wastewater and the injection of this product waterinto the Seaside Groundwater Basin. This project includes facilities for the treatment, conveyance, andinjection of the product replenishment water.

J. MRWPCA. The Monterey Regional Water Pollution Control Agency.

K. Product Water Pipeline. Facilities used to convey potable water from the DesalinationInfrastructure to the Terminal Reservoir Infrastructure and to Cal-Ams existing distribution system at theEardley Pump Station.

L. Project. The Monterey Peninsula Water Supply Project as proposed in ApplicationA.12-04-019.

M. Public Entity Members of the Governance Committee. The MPRWA, the MPWMD,and the County. Cal-Am is not a Public Entity Member of the Governance Committee.

N. Raw Water Pipeline. Facilities used to convey feed water from the Source WaterInfrastructure to the Desalination Infrastructure.

O. Source Water Infrastructure. Wells and appurtenant facilities (or alternative contingentintake facilities) that are used to extract and convey feedwater (i.e., raw water) to the Raw Water Pipeline.These facilities will include the slant intake wells and related appurtenances (if permitted) as well as

alternate contingent intakes such as a Ranney Well or open ocean intake as submitted by Cal-Am in itscontingency plans.

P. Terminal Reservoir. Facilities used to pump and store potable water in storage tankseast of the City of Seaside along General Jim Moore Boulevard. These facilities will include the TerminalReservoir, Terminal Reservoir Pump Station, overflow facilities and related appurtenance needed toassist in the moving of water to and from the ASR Infrastructure, other ASR faculties, and Product WaterPipeline.

Q. Value Engineer. The professional engineer(s) to be retained by, or to consult with, Cal-Am to perform a value engineering analysis for the Desalination Project to potentially lower the costs of,or maximize the value of, the Desalination Project to Cal-Ams ratepayers, including matters concerningthe cost effectiveness, performance, reliability, quality, safety, durability, effectiveness, or other desirable

characteristics of the Desalination Project.

The Parties acknowledge that the Project is still under development and several aspects of the Projectmay be modified as planning continues and as may be ordered by the CPUC. If necessary to addressfuture modifications to the Project, the Parties agree to cooperate in good faith to reach agreement toamend the definitions set forth herein as necessary to fulfill the purpose of this Agreement.


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SB 636205 v3:015621.0002 3

III. Membership and Voting

Each of the public entities shall be represented on the Governance Committee by one elected memberand one alternate who shall also be an elected official. If MPWRA ceases to exists, then the cities that aremembers of the MPWRA at the time of the MPWRAs termination shall collectively choose a cityrepresentative that will take the place of the MPWRA representative on the Governance Committee. Cal

Am shall be represented by the President of Cal-Am or the Presidents alternate, which the President maydesignate to act on his or her behalf at anytime. The Governance Committee shall appoint a Chair andVice-Chair from the primary (non-alternate) elected officials appointed to the Governance Committee.Each of the Public Entity Members of the Governance Committee shall have a single equal vote indecision-making. Cal-Am shall not have a vote for purposes of the issuance of decisions orrecommendations by the Governance Committee. However, Cal-Am shall, unless it abstains from doingso, state its preference with respect to any decision or recommendation made by the GovernanceCommittee (the Cal-Am Preference) at the time that any decision or recommendation is made by theGovernance Committee and the Cal-Am Preference shall be recorded within the meeting minutestogether with a summary of any explanation provided by Cal-Am for the Cal-Am Preference.

IV. Powers

A. Purpose. The purpose and function of the Governance Committee shall be to: (i)

consult with, advise, and in some circumstances, provide direction, to Cal-Am concerning the design,permitting, construction, operations, maintenance, repairs, and replacements of the components of theDesalination Project; and (ii) serve as the entity which Cal-Am regularly updates as to DesalinationProject status and issues. The members of the Governance Committee shall diligently consider allmatters and cause the Governance Committee to timely and promptly issue decisions orrecommendations brought before it as provided pursuant to the terms of this Agreement.

B. Waiver of Action. Upon motion and affirmative vote of the Governance Committee, theGovernance Committee may choose to waive its right to issue a decision or recommendation with respectto any matter for which the Governance Committee is afforded such right herein. The purpose of theGovernance Committees right to waive its right to make any specified decision or recommendation hereinis to empower the Governance Committee to avoid issuing any decision or recommendation, which, in itsdetermination, would violate any law, unreasonably delay efforts to develop water supplies for the

Monterey Peninsula, or otherwise compromise the public interest.

V. Governance Committee Action; Procedures

A. Matters Subject to Governance Committee Action. Matters for consideration,consultation, decision, or recommendation by the Governance Committee shall be divided among threecategories, with varying processes for consultation, recommendations, and/or decision-making, asfollows:

Category A: The Governance Committee makes the decision or recommendationrespecting the matter after receipt of a written recommendation from Cal-Am, and upon issuanceof its decision or recommendation, the Governance Committee provides a written explanation ofthe reasons for its decision to Cal-Am within seven (7) calendar days following its decision or

recommendation. Thereafter, Cal-Am will comply with the decision or recommendation issued bythe Governance Committee so long as the decision or recommendation is consistent with theterms of this Agreement. However, notwithstanding any provision of this Agreement, for anymatter covered by Category A that relates to an action which may cause either a direct physicalchange in the environment, or a reasonably foreseeable indirect physical change in theenvironment, as defined by section 21065 of the California Public Resources Code, no decisionor recommendation shall be made by the Governance Committee as to the subject matter unlessand until such time as the action has been subject to review by an appropriate agency inaccordance with the California Environmental Quality Act (CEQA). The foregoing provision shallnot be construed as an agreement or determination by or among any of the Parties that CEQA


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SB 636205 v3:015621.0002 4

applies to any action of the Governance Committee. This Agreement is itself not a project asdefined by section 15378 of the CEQA Guidelines (California Code of Regulations, Title 14,Chapter 3) because it is an organizational activity that will not result in direct or indirect physicalchanges in the environment and this Agreement makes no commitment to any project.

Category B: The Governance Committee makes a recommendation respecting the matter

after receipt of a written recommendation from Cal-Am. However, Cal-Am may determine, at itssole discretion, whether or not to follow the Governance Committees recommendation, providedthat if Cal-Am chooses not to follow the recommendation, Cal-Am shall provide a writtenexplanation of Cal-Ams reasons for its decision not to follow the recommendation within ten (10)calendar days following the issuance of the Governance Committees recommendation. Further,should Cal-Am choose not to follow the recommendation of the Governance Committee, then anyParty may raise the issue for review by the CPUC during Cal-Ams next general rate case.

Category C: Cal-Am makes the decision respecting the matter after receiving arecommendation from the Governance Committee. Cal-Am need not issue a written explanationfor its decision, although should Cal-Am choose not to follow the recommendation of theGovernance Committee, then any Party may raise the issue for review by the CPUC during Cal-Ams next general rate case.

B. Procedure for Cal-Am Notification. Whenever Cal-Am is presented with, or becomesaware of, a matter that falls within any of the subjects identified herein for consideration, consultation, oraction by the Governance Committee that is ripe for presentation to the Governance Committee, Cal-Amshall, in writing, promptly notify the Chair of the Governance Committee (Cal-Am Notification), who shallschedule the matter for consideration by the Governance Committee. For purposes of this Agreement, amatter shall be deemed ripe for presentation to the Governance Committee at such time as eitherspecified within the matters set forth below, or for any matter for which no specification is provided, Cal-Am shall determine the time(s) at which the matter is appropriate for presentation for consultation,decision, or recommendation by the Governance Committee consistent with the purpose of thisAgreement. Unless a different period is specified herein, for all matters for which a decision orrecommendation is to be made by the Governance Committee, the Governance Committee shall issue itsdecision or recommendation within ten (10) calendar days following receipt of the Cal-Am Notification. Ifthe Public Entity Members of the Governance Committee determine that the Governance Committee

requires more than the prescribed time period provided for in this Agreement to act on any matter that isthe subject of the Cal-Am notification, the Chair of the Governance Committee may request a reasonableextension of time by written request to Cal-Am, and Cal-Am and the Public Entity Members of theGovernance Committee shall cooperate in good faith to set a reasonable alternative deadline for actionon the subject matter to the extent that such an extension would not unreasonably delay the Project, notunreasonable delay required CPUC filings by Cal-Am, or otherwise compromise the public interest. So asto avoid undue delay, if the Governance Committee fails to make any decision or provide anyrecommendation upon any matter brought before it (including all Category A decisions) on or before theexpiration of the prescribed period for action by the Governance Committee (or the period of anyextension agreed to by Cal-Am), or if the Governance Committee affirmatively waives its right to make adecision or recommendation respecting a matter before it, then Cal-Am may make the subject decisionwithout a decision or recommendation, as applicable, by the Governance Committee.

C. Cal-Am Status Presentations and Governance Committee RecommendationsThereon. At each meeting of the Governance Committee, Cal-Am shall provide a report as to the statusof the Project, which shall be presented by one or more individuals knowledgeable about the materialaspects of the Project. Upon reasonable advance, written notice, the Governance Committee mayrequest that Cal-Am include within its status presentation to the Governance Committee the status of anymatter that is set forth in any of the three categories for decision, recommendation, or consultationestablished below, together with an explanation of any pending or soon-to-be-pending decisions oroptions concerning the subject matter. The Governance Committee may issue, in writing, anyrecommendation concerning a subject matter included within Cal-Ams presentation. Cal-Am maydetermine, at its sole discretion, whether or not to follow the recommendation, provided that if Cal-Am


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chooses not to follow the recommendation and the subject matter is a matter covered by either CategoryA or Category B, Cal-Am shall, within ten (10) calendar days following issuance of the GovernanceCommittees recommendation, provide a written explanation of the reason(s) for Cal-Ams decision not tofollow the recommendation. If the subject matter is a matter covered by Category C or is not set forthwithin any of the three categories set forth below, Cal-Am need not issue a written explanation of Cal-Ams reasons for its decision not to follow the recommendation.

D. Categories for Matters Subject to Governance Committee Action. Matters forconsideration, consultation, decision, or recommendation by the Governance Committee shall be dividedamong the following three categories as follows:

Category A

1. This matter concerns the GWR Recommendation, which specifically is whetherCal-Am shall: (i) pursue a water purchase agreement, acceptable to Cal-Am, for the purchase of waterfrom the GWR Project, and consequently Cal-Am shall develop a smaller Desalination Infrastructure witha capacity of approximately 6.4 MGD (or as specified in the CPCN); or (ii) forgo the pursuit of a waterpurchase agreement for the GWR Project, and consequently Cal-Am shall develop a larger desalinationfacility with a capacity of approximately 9.6 MGD (or as specified in the CPCN). If the GWRRecommendation becomes ripe for recommendation before a CPCN is issued upon Application A.12-04-

019, the Governance Committee shall not issue any binding recommendation concerning the GWRRecommendation. If the GWR Recommendation becomes ripe for recommendation after a CPCN isissued upon Application A.12-04-019, the Governance Committee shall decide whether Cal-Am shallpursue the GWR Project or not (as set forth above), which recommendation shall then be subject toCPUC approval or rejection pursuant to the procedure specified herein. The Governance Committee shallmake this recommendation based upon criteria to be mutually-agreed to by the Parties, negotiating ingood-faith, after the execution of this Agreement. The GWR Recommendation shall become ripe for arecommendation to be made by the Governance Committee no later than that date upon which Cal-Am isprepared to commence construction of the Desalination Infrastructure, after the GWR Project hasreceived environmental review consistent with the provisions of CEQA, and there is sufficient time for theGWR Recommendation to be made and for the CPUC to review and approve that recommendation,without otherwise delaying the Project. The GWR Recommendation shall be made by the GovernanceCommittee, in writing with an explanation of the reasons for its decision, within sixty (60) days following

receipt of the Cal-Am Notification concerning this matter. The recommendation issued by the GovernanceCommittee shall be submitted by Cal-Am to the CPUC for approval or rejection pursuant to a Tier 2Advice Letter (or at the direction of the CPUC, an alternate form of submission) within ten (10) calendardays following issuance of the GWR Recommendation by the Governance Committee for the CPUCsreview and approval.

2. The Governance Committee shall select a Value Engineer(s) (to facilitate andreport on the proposed value engineering for the Desalination Project), with consideration given to anyrecommended engineer submitted by any member of the Governance Committee. This matter shall beripe for decision before Cal-Am accepts the 30% Design from the design-build contractor retained for theDesalination Infrastructure, or at any other time that Cal-Am intends to retain a Value Engineer for anyother infrastructure constructed as a component of the Desalination Project.

3. Subsequent to the issuance of the CPCN and subsequent to the selection of anydesign-build contractor(s) for the Desalination Infrastructure, the Governance Committee may issuedecisions concerning the Desalination Infrastructures architectural renderings. The GovernanceCommittee shall be presented with architectural renderings for decisions regarding the same when sucharchitectural renderings are complete and upon any subsequent modifications thereto. The GovernanceCommittee may also, in its discretion, appoint a representative to consult with Cal-Am regarding otherexternal features or aesthetics of the Desalination Project. Upon a determination of the GovernanceCommittee or its representative, the Governance Committees representative and Cal-Am shall present tothe Governance Committee options pertaining to the Desalination Projects external feature or aesthetics,upon which the Governance Committee may decide which option to pursue. Notwithstanding any


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provision of this paragraph, the Governance Committee may not issue a binding decision concerning theDesalination Infrastructures architectural renderings, or the Desalination Projects external features oraesthetics, if the decision would in the opinion of the design-build contractor, increase the capital oroperational cost of the Desalination Infrastructure.

4. Subsequent to the issuance of the CPCN and subsequent to the selection of the

design-build contractor for the Desalination Infrastructure, the Governance Committee may issuedecisions concerning procurement of additional (non-Pacific Gas & Electric) energy supplies for theDesalination Infrastructure, including but not limited to waste-to-energy, so long as such decisions resultin lowering the Desalination Infrastructures estimated unit price for power. This matter shall be ripe fordecision at any time a formal written proposal concerning alternative power is presented by one or moreof the Parties for consideration.

Category B

1. Prior to the issuance of a request for qualifications, request for proposals, orrequest for bids, as applicable, the Governance Committee may recommend qualifications and selectioncriteria for the Contracts not previously executed for the Project.

2. Prior to the execution of any Contract, and upon presentation andrecommendation by Cal-Am to the Governan

mprwa regular meeting agenda packet 02-14-13

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