mprwa revised special meeting agenda packet 04-26-16

8/18/2019 MPRWA Revised Special Meeting Agenda Packet 04-26-16

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AgendaMonterey Peninsula Regional Water Authority (MPRWA)

**Special Meeting**Revised Agenda

7:00 PM, Tuesday, April 26, 2016Seaside Council Chambers

440 Harcourt AveSeaside, 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 anysubject 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

CONSENT ITEMSCONSENT AGENDA consists of those items which are routine and for which a staff

recommendation has been prepared. A member of the public or a Councilmember may requestthat an item be placed on the regular agenda for further discussion.

1. Receive the Joint Motion for a Separate Phase 2 Decision on Ground Water Replenishment (GWR) - Cullem

AGENDA ITEMS

2. Receive, Discuss, and Provide Direction on a "To-Do" List including Possible Additions and Modifications to the Water Authority Policy Position Statement Currently Under Review by the Technical Advisory Committee (TAC) - Cullem

3. Receive Report, Discuss, Provide Staff Direction, and Authorize Preparation and Execution of an Application (or other documents as necessary) to the State Water Resources Control Board (SWRCB) on Proposed Modifications to the PreviouslySubmitted CDO Extension Application so as to Incorporate the CPUC EIR/EIS Schedule Delay - Cullem

4. Authorize Water Authority President to send follow up letter to Governor’s Military Council outlining any updates to the water supply project and modifications to the CDO - Burnett

5. Consider a Request from Mayor -Elect Steve Dallas to Retain Jason Burnett in an Unpaid

Position as Water Authority Liaison - Cullem

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Tuesday, April 26, 2016

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ADJOURNMENT

The City of Monterey is committed to including the disabled in all of its services, programs andactivities. In compliance with the Americans with Disabilities Act, if you need special assistanceto participate in this meeting, please contact the City Clerk’s Office at (831) 646-3935.Notification 30 hours prior to the meeting will enable the City to make reasonable arrangementsto ensure accessibility to this meeting [28 CFR 35.102-35.104 ADA Title II]. Later requests willbe accommodated to the extent feasible. For communication-related assistance, dial 711 to usethe California Relay Service (CRS) to speak to City offices. CRS offers free text-to-speech, speech-to-speech, and Spanish-language services 24 hours a day, 7 days a week. If you require a hearingamplification device to attend a meeting, dial 711 to use CRS to talk to the City Clerk's Office at(831) 646-3935 to coordinate use of a device.

Agenda related writings or documents provided to the MPRWA are available for publicinspection during the meeting or may be requested from the Monterey City Clerk’s 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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Monterey Peninsula Regional Water AuthorityAgenda Report

Date: April 26, 2016

Item No: 1.

№06/12

FROM: Executive Director Cullem

SUBJECT: Receive the Joint Motion for a Separate Phase 2 Decision on GroundWater Replenishment (GWR)

RECOMMENDATION:

Staff recommends that the Water Authority receive a copy of the Joint Motion.

DISCUSSION:

At its meeting on March 14, 2016, the Water Authority Board gave approval for supportfor construction of a 36 inch transfer pipeline needed to utilize GWR water as well asany and all movement of water in a north-south direction once Cal Am has reduced itstake of Carmel River Water.

It is necessary to consider the transfer pipeline at this time since it appears that GWRwill come on line before the Cal Am desal facility, due to delays at the CPUC incompleting the desal EIR/EIS. Cal Am cannot proceed with any meaningfulconstruction, even though contracts have been awarded, without the CPUC issuing a

certificate of public necessity and convenience (CPCN). The EIR/EIS must be certifiedbefore the CPCN can be issued.

Since the CPUC was conducting evidentiary hearings on GWR (Phase 2 of theMonterey Peninsula Water Supply Project) during the week of April 11 th it wasconsidered by the settling parties to be imperative to include a motion to expedite thepipeline and its associated pump facility.

ATTACHMENTS:

A- Joint Motion for a Separate Phase 2 Decision


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BEFORE THE PUBLIC UTILITIES COMMISSIONOF THE STATE OF CALIFORNIA

Application of California-American WaterCompany (U210W) for Approval of theMonterey Peninsula Water Supply Project andAuthorization to Recover All Present andFuture Costs in Rates.

Application 12-04-019(Filed April 23, 2012)

JOINT MOTION FOR A SEPARATE PHASE 2 DECISION

Sarah E. Leeper

Nicholas A. Subias

California American Water555 Montgomery Street, Suite 816

San Francisco, CA 94111

For: California-American Water [email protected]

(415) 863-2960

Bob McKenzie

Water Issues Consultant

Coalition of Peninsula BusinessesP.O. Box 223542

Carmel, CA 93922

For: Coalition of Peninsula [email protected]

(831) 596-4206

Dan L. Carroll

Attorney at Law

Downey Brand, LLP

621 Capitol Mall, 18th FloorSacramento, CA 95814

For: Both County of Monterey &

Monterey County Water Resources [email protected]

(916) 444-1000

John H. Farrow

M.R. Wolfe & Associates, P.C.

1 Sutter Street, Suite 300

San Francisco, CA 94104For: LandWatch Monterey County

[email protected]

(415) 369-9405

[ADDITIONAL COUNSEL LISTED BELOW]

Dated: April 18, 2016


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Mark Fogelman

Friedman & Springwater LLP

350 Sansome Street, Suite 210San Francisco, CA 94104

For: Marina Coast Water District

[email protected](415) 834-3800

Norman C. Groot

Monterey County Farm Bureau

P.O. Box 14491140 Abbott Street, Suite C

Salinas, CA 93902-1449

For: Monterey County Farm [email protected]

(831) 751-3100

Russell M. McGlothlin

Brownstein Hyatt Farber Schreck, LLP

21 East Carrillo Street

Santa Barbara, CA 93101For: Monterey Peninsula Regional Water

Authority

[email protected]

(805) 963-7000

David C. Laredo

De Lay & Laredo

606 Forest Avenue

Pacific Grove, CA 93950-4221For: Both Monterey Peninsula Water

Management District & City of Pacific Grove

[email protected]

(831) 646-1502

Robert WellingtonWellington Law Offices

857 Cass Street, Suite D

Monterey, CA 93940

For: Monterey Regional Water PollutionControl Agency

[email protected]

(831) 373-8733

Marcelo PoirierCalifornia Public Utilities Commission

505 Van Ness Avenue


For: Office of Ratepayer [email protected]

(415) 703-2913

Roger B. Moore

Rossmann and Moore, LLP2014 Shattuck Avenue

Berkeley, CA 94704

[email protected]

For: Planning and Conservation LeagueFoundation

[email protected]

(510) 548-1401

Michael Warburton

The Public Trust Alliance187 East Blithedale Avenue

Mill Valley, CA 94941

For: Public Trust Alliance

[email protected]@rri.org

(510) 610-0868

George Riley

1198 Castro RoadMonterey, CA 93940

For: Public Water Now

[email protected](831) 645-9914

Nancy Isakson

PresidentSalinas Valley Water Coalition

3203 Playa Court

Marina, CA 93933For: Salinas Valley Water Coalition

[email protected]

(831) 224-2879


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Laurens H. Silver

Attorney

California Environment Law ProjectP.O. Box 667

Mill Valley, CA 94942

For: Sierra [email protected]

(415) 515-5688

Gabriel M.B. Ross

Attorney

Shute, Mihaly & Weinberger LLP396 Hayes Street


For: Surfrider [email protected]

(415) 552-7272


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BEFORE THE PUBLIC UTILITIES COMMISSION

OF THE STATE OF CALIFORNIA

Application of California-American WaterCompany (U210W) for Approval of theMonterey Peninsula Water Supply Project andAuthorization to Recover All Present andFuture Costs in Rates.

Application 12-04-019(Filed April 23, 2012)

JOINT MOTION FOR A SEPARATE PHASE 2 DECISION

I.

INTRODUCTION

Pursuant to Article 11 of the Rules of Practice and Procedure of the California Public

Utilities Commission (“Commission”) and the November 17, 2015, Administrative Law

Judge’s Ruling Setting Evidentiary Issues and Schedule to Complete the Record for Phases 1

and 2 (“ALJ Ruling”), California-American Water Company (“California American Water”),

City of Pacific Grove, Coalition of Peninsula Businesses, County of Monterey, LandWatch

Monterey County, Marina Coast Water District, Monterey County Farm Bureau, Monterey

County Water Resources Agency, Monterey Peninsula Regional Water Authority, Monterey

Peninsula Water Management District (“MPWMD”), Monterey Regional Water Pollution

Control Agency (“MRWPCA”), Office of Ratepayer Advocates, Planning and Conservation

League Foundation, Public Trust Alliance, Public Water Now, Salinas Valley Water Coalition,

Sierra Club, and Surfrider Foundation (collectively “Joint Parties”) hereby submit this motion

for a separate Phase 2 decision.1 Specifically, the Joint Parties request that the Commission

address the following issues in a separate Phase 2 decision: (1) the Water Purchase Agreement

between California American Water, MPWMD and MRWPCA, (2) California American

1 Pursuant to Commission Rule 1.8(d), the Joint Parties have authorized California AmericanWater to sign this motion on their behalf.

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Water’s construction of the Monterey pipeline and pump station in advance of a decision on the

Certificate of Public Convenience and Necessity (“CPCN”) for the Monterey Peninsula Water

Supply Project (“MPWSP”), and (3) financing and ratemaking related to the Monterey pipeline

and pump station facilities.

II. NEED FOR A SEPARATE PHASE 2 DECISION

It is undisputed that the Monterey Peninsula faces substantial water supply shortages in

light of the impending deadline in the 2009 Cease and Desist Order (“CDO”) issued by the

State Water Resources Control Board that would greatly reduce California American Water’s

ability to withdraw water from the Carmel River. The Commission’s recent announcement that

the Final Environmental Impact Report/Environmental Impact Statement (“EIR/EIS”) for the

MPWSP will not be available until late 2017 has caused further significant delay in the

Commission’s consideration of California American Water’s request for a CPCN for the

MPWSP.

In light of this delay and the need for alternative sources of water for California

American Water customers, the Commission should issue a separate decision in Phase 2 on the

issues identified above, which could allow California American Water to take full advantage of

two alternative water sources: (1) the MPWMD/MRWPCA Pure Water Monterey Groundwater

Replenishment Project (“GWR Project”) and (2) Aquifer Storage and Recovery (“ASR”).

The GWR Project could supply up to 3,500 acre feet to the community as early as 2018.

MRWPCA certified the GWR Project’s Environmental Impact Report (“EIR”) on October 8,

2015 and no litigation was filed challenging the GWR Project’s EIR within the statute of

limitations. As MPWMD and MRWPCA have noted, however, the GWR Project cannot go

forward without a Water Purchase Agreement with California American Water. Thus, prompt

authorization for California American Water to enter into the Water Purchase Agreement is

essential. Similarly, an expeditious decision on the GWR Project Water Purchase Agreement is

critical to take advantage of the 1% interest rate available through the Clean Water State

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Revolving Find (“CWSRF”), which would result in savings for California American Water’s

ratepayers.

Additionally, California American Water asserts that the Monterey pipeline is necessary

for full deliverability of GWR Project water to California American Water’s customers from

the GWR Project. California American Water also asserts that the Monterey pipeline would

also be used to transport water for ASR and the Monterey pump station would allow California

American Water to maximize its existing ASR facilities.2 Assuming a normal-to-wet rainy

season, California American Water asserts the Monterey pipeline and pump station facilities

would allow it to get the most out of its current ASR operating permits and potentially enable it

to inject an additional 1,000 acre feet of winter water from ASR in the winter of 2017-2018.

If the Commission issues a timely decision in Phase 2, California American Water

would be able to complete construction of the Monterey pipeline and pump station by

December 2017. Before California American may proceed with the Monterey pipeline and

pump station, however, the Joint Parties request that the Commission address the associated

financing and ratemaking.

Although Commissioner Sandoval pledged at the recent prehearing conference to

introduce a resolution to address CDO milestones, that is no reason to delay a decision on these

three issues identified by the Joint Parties. As discussed in more detail below, it is possible to

treat the Phase 1 and Phase 2 issues reasonably and fairly in separate decisions. Moreover, the

public interest is served by acting quickly and efficiently to reach a decision on these issues.

III. PHASE 1 AND PHASE 2 ISSUES CAN BE TREATED REASONABLYANDFAIRLY IN SEPARATE DECISIONS

The ALJ Ruling directs any party seeking a separate Phase 2 decision to explain how

the Phase 1 and Phase 2 issues, which the Ruling characterizes as “substantially if not

inextricably intertwined,” could be reasonably and fairly treated in separate decisions.3

2 The Monterey pump station would not be used in connection with the GWR Project.

3 ALJ Ruling, p. 11.

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Moving forward with a decision in Phase 2, however, would not pre-judge California American

Water’s request for a CPCN for the MPWSP.

The GWR Project is a stand-alone project with independent utility from the MPWSP.

The GWR Project is pertinent to the MPWSP in this proceeding only because the availability of

the GWR Project’s product water means that California American Water could build smaller

desalination facilities than would be needed if the GWR Project did not exist. Similarly, the

ASR wells have already been constructed and are in use, and thus they already exist completely

independent of the MPWSP.

Authorizing the construction and use of the Monterey pipeline for the GWR Project and

ASR and the Monterey pump station for ASR does not commit the Commission to a position

on the MPWSP. The Monterey pipeline and pump station can be used independently of the

MPWSP. As new facilities within California American Water’s existing service territory, the

pipeline and pump station do not require a separate CPCN application.4 The Commission’s

approval can be limited to the construction of these facilities and their use for the GWR Project

and ASR only.

Additionally, the potential environmental impact of the Monterey pipeline was analyzed

in the GWR Project’s EIR.5 Issuing a decision including the Monterey Pipeline and pump

station as part of Phase 2 does not commit the CPUC to the MPWSP, and does not foreclose

4 “This article shall not be construed to require any such corporation to secure such certificatefor an extension within any city or city and county within which it has theretofore lawfullycommenced operations.” Pub. Util. Code §1001.

5 The potential environmental impacts of the Monterey pipeline were analyzed in the

Consolidated Final Environmental Impact Report for the Pure Water Monterey GroundwaterReplenishment Project (“GWR Project EIR”), available athttp://purewatermonterey.org/reports-docs/cfeir/. See § 2.11 (discussion of CalAm DistributionSystem component of GWR Project including Monterey Pipeline); § 6.3.2.4 (discussion ofalternative alignments for CalAm Distribution Pipeline, including Alternative MontereyPipeline) and § 2.3.2.6 (comparison of GWR Project to MPWSP, noting that “The ProposedProject could provide this quantity of replacement water even if the CPUC denies CalAm’sapplication to construct and operate a desalination plant.” ( Id . at p. 2-12.) ). MPWMD andMRWPCA as necessary will prepare an EIR addendum to address the Monterey pump station.

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analysis of the MPWSP project’s environmental impacts or of alternatives or mitigation

measure that may reduce or avoid those impacts.

Finally, addressing limited cost recovery issues related to the Monterey pipeline and

pump station in Phase 2 does not pre-approve the MPWSP or the cost recovery proposals

associated with the MPWSP as a whole.

IV. THE COMMISSION SHOULD ACT QUICKLY AND EFFICIENTLY TORESOLVE THE PHASE 2 ISSUES

While the ALJ Ruling did not commit to a separate Phase 2 decision, it did provide a

target of July 2016 for a proposed decision and August 2016 for a final decision if separate

decisions were issued.6 Considering that a separate Phase 2 decision is now necessary, the

Joint Parties urge the assigned Commissioner and Administrative Law Judge to retain these

target dates.

Although there is already information in the record regarding the Water Purchase

Agreement, the Monterey pipeline and related cost recovery, the Joint Parties recognize that it

may be necessary to provide supplemental testimony to ensure a full and complete record.

Additionally, to the extent that there are disputed issues of fact, a one-day hearing on the

supplemental testimony may be helpful. Thus, the Joint Parties propose the following

schedule:

May 9, 2016 Supplemental Testimony

May 19, 2016 Rebuttal Testimony

Week of May 23, 2016 Limited Evidentiary Hearing (if needed) and/or PossibleSettlement

June 1, 2016 Opening Briefs and/or Comments on Settlement

June 8, 2016 Reply Briefs and/or Reply Comments on Settlement

July 2016 Proposed Decision

August 18, 2016 Final Decision

6 ALJ Ruling, p. 12.

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V. CONCLUSION

For the reasons discussed above, the Joint Parties request that upon a showing the

Commission issue a separate Phase 2 decision on the following issues: (1) authorizing the

Water Purchase Agreement for the GWR Project, (2) moving up the construction of the

Monterey pipeline and pump station, and (3) addressing limited financing and cost recovery for

the Monterey pipeline and pump station facilities.

Dated: April 18, 2016By: /s/ Sarah E. Leeper

Sarah E. Leeper, Attorney

California-American Water Company

555 Montgomery Street, Suite 816San Francisco, CA 94111For: California-American Water Company

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Item No: 2.

№06/12


SUBJECT: Receive, Discuss, and Provide Direction on a "To-Do" List includingPossible Additions and Modifications to the Water Authority Policy PositionStatement Currently Under Review by the Technical Advisory Committee

RECOMMENDATION:

It is recommended that the Water Authority Board review the attached "to-do" list,including items to be added to the Policy Position Statement currently under review by

the TAC, and provide staff direction.

DISCUSSION:

Nearly three years have passed since the Water Authority Board adopted its PolicyPosition Statement (Attachment A). The Statement addresses a "Portfolio Approach" tonew water supplies. Further, it identifies four (4) requirements that any competing waterproject must satisfy as well as eight (8) requirements that Cal Am was required tosatisfy in order to gain Water Authority support.

As noted in the last Water Authority meeting, the TAC has formed a sub-committee to

review the Statement and recommend changes. The sub-committee has met severaltimes and is moving towards a simplified Policy Statement with the 8 requirementsincorporated as addenda to the Statement, restated to apply to all possible waterprojects, not just the Cal Am desal facility.

As Mayor Burnett departs the Board, he has provided a "to-do" list of remaining issues(Attachment B).Some of these are already being addressed, some could be included inthe Authority work plan, and some could be included in the revises Policy Statement.

Staff requests any additional guidance the Board may have as to how to best addressthese issues including incorporation into the Policy Position Statement.

ATTACHMENTS:

A- Water Authority Policy Position Statement of July 11, 2013.B- Burnett "To-Do" List


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DRAFT POLICY POSITION STATEMENT

The Authority considered and adopted this position statement as direction to our staff andconsultants in preparing Public Utilities Commission (PUC) testimony due

February 22

nd

, 2013. This position was adopted, in advance of a completed EIR and inrecognition that more information will be forthcoming, because the PUC decision process isunderway and the Authority seeks to have a voice in that process. This document was adoptedat the January 31, 2013 Special Meeting and amended at the June 13, 2013 Regular meeting.

POSITION STATEMENT

Reiterate our support for a portfolio approach. This includes Ground Water Replenishment(GWR), Aquifer Storage and Recovery (ASR), and Pacific Grove Small Projects, all of whichhave public ownership, in addition to a desal project described here. Benefits of a portfolioapproach allow each individual element (PG small projects, GWR, ASR, desal) ability to move

on its own track and schedule such that a delay in one doesn't necessarily delay others. Assuch, the Authority supports efforts to move forward with any individual element on its own,especially if one element of the portfolio can move faster than the rest. For example, wesupport ASR (and the associated pipeline infrastructure) moving forward even if desal isdelayed." The Authority’s position is consistent with the powers afforded to the GovernanceCommittee and as set forth in the Authority’s direct PUC testimony submitted on February 22,2013.

Any project must meet four basic criteria:

1. Project economics must be competitive.

2. Project must have suitable public governance, public accountability and publictransparency.3. Project must have clear path to permitting and constructing the facility as near to the

CDO deadline as feasible.4. Project must have contingency plans to address significant technical, permitting and

legal risks.

None of the three projects (Cal Am, Deepwater Desal or DWD, or People’s Moss Landing orPML) as proposed meet these criteria. Therefore, none of the three projects as proposedwarrant Authority support. However, at this time Cal Am’s proposed project appears to beclosest to meeting these four criteria. Cal Am’s Project would earn our support if Cal Am

makes certain modifications. Consequently, the Authority’s support for the Cal Am Project issubject to the following conditions:

FINANCIAL CONSIDERATIONS

1. Cal Am must accept a significant contribution of public funds consistent with theparameters set forth within the Authority’s direct testimony submitted to the PUC onFebruary 22, 2013. Without the interest rate advantages afforded by such approach,the costs of water from the Cal Am Project will be materially higher, and likelysubstantially in excess of the cost of water from the alternative projects. A significant

ATTACHMENT A


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contribution of public funds will avoid such an unwarranted expense to Cal Am’s ratepayers. At the May 23, 2013 meeting, the Authority approved the refinement of thepreviously adopted position to define “significant contribution of public funds” to meanthat Cal Am must accept the contribution of public funds of approximately 50% of thecost of the project to include both surcharge two and the rate reduction bonds to count

toward the public contribution of 50%. Cal Am's traditional financing entails a blendof 53% equity and 47% debt. A significant public contribution (combined withSurcharge 2) should be of sufficient size to reduce Cal Am's equity toapproximately half that much (26 to 27%).

2. Cal Am must diligently seek to secure lower electricity rates for the project (e.g., $0.08-$0.09 cents/kWh as most recently estimated by Cal Am) including agreement topurchasing power through a municipal electrical utility, generation of on-site power ifnecessary, other public entity or other source of low-cost power.

3. Cal Am must agree to limit the use of revenue from Cal Am’s Surcharge 2 to reduce riskto Cal Am ratepayers in the event the Cal Am project does not move forward. Forexample, Cal Am could agree only to use Surcharge 2 to fund lower risk parts andphases of the project (such as only the construction phase after the issuance of aCoastal Development Permit from the Coastal Commission) or could provide othermechanisms of reducing the risk to Cal Am ratepayers.

4. Cal Am must show something in writing from the State demonstrating its ability tosecure SRF financing. Absent such a document, the Authority will work with the WaterManagement District to secure SRF financing as public agencies. Cal Am must accept apublic agency partner for SRF purposes if necessary, even if doing so results in areduction in Cal Am’s equity position.

GOVERNANCE

5. Cal Am must agree, upon mutually-acceptable terms, to form a Governance Committeeto provide publicly-accountable oversight of the project.

PERMITTING & CONTINGENCY PLANS

6. To promptly address concerns pertaining to Cal Am’s proposed intake wells, Cal Ammust:

a. Address or cause to be address all issues raised in the December 2012 TimDurbin testimony;

b. Proceed with the planned test wells and any other advanced geotechnical workto support the proposed intake wells as soon as practically feasible;

c. Collaborate with local public agencies to advance permitting efforts with otherresponsible agencies, including the California Coastal Commission;

d. Seek to clarify whether the installation of Cal Am’s intake wells will requireapproval from any federal agency, which would, in turn, require NEPAcompliance; and

ATTACHMENT A


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7. Continue to explore and advance alternative intake strategies as a contingency if CalAm's proposed intake wells prove legally or technically infeasible.

a. Cal Am must fully develop a contingency plan or plans and implement that planor those plans for source water that do not involve wells in the Salinas Basin.

This must be done concurrently along with Cal Am planning and testing of slantwells.

8. Cal Am must address questions about sea level rise and coastal erosion with respect tothe placement and longevity of their proposed slant wells. Coastal sands are also proneto liquefaction in seismic events and coastal facilities are susceptible to damage fromtsunami events as well.

If Cal Am meets the above conditions, the Authority conditionally supports the Cal Am Project

because:

1. Cal Am’s desal project size (9.6 desal only or 6.4 desal with GWR) appears to beconsistent with the Authority’s position of focusing on water for “replacement andreplenishment” including lots of record, pebble beach, allocation entitlement, andeconomic rebound and accommodates the policy desire to pursue a portfolio of projects tomeet the needs of our communities, thereby reducing the risk associated with any projectfailing or being delayed. The Coastal Commission identifies proposed projects with a“defined service area with a known level of build-out” as involving an “easier” review whileprojects with an “unknown or extensive service area” as involving a “more difficult” review.Cal Am’s project would involve this “easier” review while DWD would involve a “more

difficult” review.2. Cal Am’s project, DWD project and PML project are all in the planning stage although Cal

Am’s project is the most “advanced” according to both SPI and the TAC.

3. Permitting agencies will require the “least environmentally harmful feasible alternative” forsource water intake. The Coastal Commission states that a subsurface intake (such as CalAm’s proposed slant wells) involve an “easier” review while an open-water intake involvesa “more difficult” review. State Water Board staff likely will recommend that subsurface is“preferred.” If subsurface is not feasible, consider Track 2 (infiltration galleries or openwater intake). It is unlikely that open water intake will be permitted unless test slant wellshave shown subsurface intake to be infeasible. Any project must therefore include a testslant well. Only Cal Am’s project proposes to do so.

4. Only Cal Am has demonstrated ability to finance a project. Their financing plan iscomprised of four different sources of capital; short-term construction financing, Surcharge2, SRF, and equity. Neither of the other two projects have a detailed financing plan andneither would likely have access to short-term construction financing, Surcharge 2 or SRF,all advantageous forms of financing (Cal Am offers the short-term construction financingbut only for their project. Surcharge 2 is only permitted for a Cal Am facility. SRF is unlikelyto be available for open water intake.) We propose to include a significant public

ATTACHMENT A


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contribution as a fifth source of capital. Doing so would significantly lower the Net PresentValue (NPV) cost of the project.

5. Cal Am has the capital necessary to complete the permitting of its project. Neither of theother projects have demonstrated this ability.

6. Cal Am has indicated the potential for securing electricity at $0.087 per kwh and couldpossibly purchase electricity at a lower rate through a municipal electrical utility formed bya local public agency. DWD’s proposed municipal electrical utility involves the City ofSalinas and its success is therefore outside of the direct control of the Authority.

7. The ultimate unit cost of water from the Cal Am Project in comparison to the cost of waterfrom the DWD and PML projects are close in amount presuming a significant publiccontribution is made to lower the financing costs of the Cal Am Project and that Cal Amsecures electricity in the $0.08-0.09 per kwh range.

a. SPI estimates that Cal Am’s production cost would be $2,310/$3,015 per acre footfor the larger/smaller desal projects respectively if the cost of financing is broughtdown to 4% and the cost of electricity is reduced to $0.087 per kwh. This is withinabout 10% of the unit production costs of DWD ($2,100/$2,670) and is largely due tothe increased cost of slant wells.

b. The range of these estimates is minus 30% to plus 50%. The TAC recommends theAuthority focus its attention on the ranges.

c. For the larger plant, the range of the cost per acre foot of Cal Am’s project withAuthority conditions is $1617 to $3465. The corresponding range for DWD is $1470to $3150.

d. For the smaller plant, the range of the cost per acre foot of Cal Am’s project withAuthority conditions is $2110 to $4522. The corresponding range for DWD is $1870

to $4005.8. The DWD project involves a “complex” relationship of various entities, including a

municipal electrical utility, a data center, the formation of a regional JPA, a water purchaseagreement with Cal Am. The Authority is not aware that any of these relationships havebeen established. This unresolved complexity leaves more room for possible delay orfailure. In contrast, Cal Am’s organization structure is described as “good” by SPI.

9. Both DWD and PML will likely face questions from permitting agencies regarding theplacement of the desalination plant in relationship to the 100 year flood plain and sea levelrise. It is unclear how either project will respond to such questions.

10. The CEQA review for Cal Am’s project is well underway and is being handled by the

Public Utility Commission as the lead agency. Any court challenge to the CPUC’s EIRmust be made by a petition directly to the State Supreme Court (very few petition aregranted), reducing the legal risk of a challenge and also reducing the likelihood of projectdelay in comparison to a CEQA challenge to a project involving a local lead agency.Moreover, the Authority reiterates its request that both alternatives be reviewed at aproject level such that no further environmental review would be required if the Cal Amproject fails in whole or part.

11. The draft Governance Committee agreement strikes the right balance of ensuring that themost important decisions are either made by public agencies or are fully informed by

ATTACHMENT A


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recommendations from public agencies. The draft Governance Committee agreementavoids inserting the public agencies into decisions that are judged to be better made by aprivate entity.

ADDITIVE CONSIDERATIONS

• Water Allocation. The proposed project is sized based on an estimate of the water needed forreplacement, replenishment, economic rebound, Pebble Beach allocation entitlement, and lotsof record. The estimate has been established for project design, engineering, and financialplanning purposes. The Authority supports this size for this purpose. Allocation decisions aboutthe use of the water should not be made by the PUC but instead should be made locally. TheAuthority supports the MPWMD’s proposal to initiate a process, in collaboration with theAuthority and other public agencies, to develop proposed amendments to MPWMD’s waterallocation ordinances to address the allocation of water obtained from the Project. While theProject is not sized for General Plan build-out within Peninsula jurisdictions, the Authority has

requested that the EIR evaluate a full range of plant sizes up to and including the sizenecessary for full General Plan build-out. Further, the MPWMD, in collaboration with otherpublic agencies, should seek to update the estimate of the added capacity necessary to meetthe General Plan build-out projections for the Peninsula jurisdictions. The Authorityrecognizes that future circumstances may trigger a need for review of future watersupply needs for the Peninsula to either expand or develop a new water supply to avoidfuture pending shortage situations. The Authority will request Cal Am to initiate aprocess to address the adequacy of the water supply to meet the future serviceobligations of Cal Am customers as defined by the California Public UtilitiesCommission.

• Pacific Grove Non-Potable Water Projects. The Authority supports Cal Am’s inclusion in itsnext general rate case application proposals for Cal Am to collaborate with Pacific Grove in thedevelopment of its projects to generate as much as 500 acre-feet of recycled, non-potablewater per year.

• Project Cost Control. The Authority is working to reduce the Project’s ratepayer impactsthrough a significant public contribution, appropriate use of Surcharge 2, the GovernanceCommittee’s review of the RFP process, and the Governance Committee’s value engineeringprocess. Any cost cap imposed on the Project should be reasonably calculated to avoidfrustrating project financing or causing project delay.

• Contingency Planning. As described in condition #6 above, the Authority’s primary concern

regarding contingency planning involves contingencies for the source water intake. We alsorecognize the need to do contingency planning for certain other aspects of the Project,including brine discharge.

• Water Connection Fee. At the May 23, 2013 regular meeting the Authority approved support ofthe concept of a new water service connection fee with the reservation of seeing furtherinformation and study to refund the connection fee costs for possible integration.

ATTACHMENT A


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Jason Burnett's Suggested Edits for Policy Position Statement

SWRCB Cease and Desist Order (CDO) needs to be modified

• Effective Diversion Limit (EDL)

o Proposed 8310 acre feet per year (AFY)o PCL and Sierra Club proposed about 7700 AFY

• First proposed milestone re CPCN (September 30, 2017) may need to bemodified

• Community focus on meeting milestones over time

NOAA mitigation agreement needs to be modified

• Currently runs through early 2017• Needs to be extended by four years

• $1.1 million per year for river mitigation• Dr. Sullivan and Representative Farr

California Coastal Commission authorization to restart test well

• Data desired by farming community• We are told more data is not necessary for EIR• Continue to monitor salinity.

CPUC EIR/EIS needs to be proposed and finalized

• Proposed delay through end of 2017• Community is proposing workshop with CPUC• Letters from elected officials and groups

CPUC CPCN• Hopefully will follow settlements and subsequent decisions• May need to weigh in if not

City of Marina / CCC Coastal Development Permit

Permits from county and other cities

Ongoing legal challenges from Marina Coast / Ag Land Trust

Public Agency Coordination and Cooperation

• Provide support to the District re securitization and ensure debt

equivalency is not triggered


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• • (

)

•

•

• •

•


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Item No: 3.

№06/12


SUBJECT: Receive Report, Discuss, Provide Staff Direction, and Authorize

Preparation an Application (or other documents as necessary) to the State

Water Resources Control Board (SWRCB) on Proposed Modifications to

the Previously Submitted CDO Extension Application so as to Incorporate

the CPUC EIR/EIS Schedule Delay

RECOMMENDATION:

Staff recommends that the Water Authority authorize the President, Executive Directorand/or Authority Special Counsel, to sign a letter, motion, application or other document,

along with other parties, to the State Water Resources Control Board requesting

modifications to the CDO modification application submitted in November 2015.

DISCUSSION:

Additional delays in the California Public Utilities Commission (CPUC) schedule for

completion of the Monterey Peninsula Water Supply Project (MPWSP) EIR/EIS will

postpone the issuance of the project Certificate of Public Convenience and Necessity

(CPCN) until the first quarter 2018. As a consequence, the milestone scheduleapproved by the Water Authority Board on November 12, 2015 and included in the

application for the CDO extension is out-of-date.

The Water Authority, along with other parties, needs to send a revised application

previously submitted to account for the delays in the issuance of the CPCN. The revised

application also has an effective diversion limit (EDL) of 8310 acre-feet per year in each

of the five (5) years of the proposed extension while the previous application included a

somewhat higher EDL (8600 AF) in the first year. The revised application also includes

clarification that the water produced from Pure Water Monterey will be used to offset

unpermitted diversions from the Carmel River. The full list of changes will be shown in

an attachment that will be made available Monday.

The Water Authority has worked with the Water Management District, CalAm and

various other parties. It is likely that the revised CDO extension being considered today

will have even broader support than the November 2015 submittal including the full

support of certain parties had filed protest letters. If these protests are resolved, it is


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possible that the State Water Resources Control Board could approve the request more

expeditiously.

ATTACHMENTS:

A- Proposed CDO Milestone Changes and Schedule

B- November 20, 2015 Application to Modify CDO

C- Amended CDO Application, April 25, 2016

D- Attachment 1 to Amended CDO Application


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ATTACHMENT A

Water Year Current Milestone Proposed Milestone Deadline

WY 2016-2017 CPCN

Same or WPA signed for Pure

Water Monterey (or decision

from CPUC why CalAm

cannot do so) 30-Sep-17

WY 2017-2018

Construction start for

either desal or Pure Water

Monterey Same 30-Sep-18

WY 2018-2019

Various desal construction

milestones

Same or 50% completion of

Pure Water Monterey 30-Sep-19

WY 2019-2020

50% construction

milestones

Same or completion of Pure

Water Monterey 30-Sep-20

WY 2020-2021 and

beyond Substantial completion Same

3 year and 3 months

from CPCN


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CALIFORNIA-AMERICAN WATER COMPANY

Anthony J. Cerasuolo (State Bar. No. 800912)

1033 B Avenue, Suite 200

Coronado, California 92118

Telephone: (619) 522-6370

7:Th Iv 2 P11

: 9

1 E N T O

ELLISON, SCHNEIDER HARRIS L.L.P.

Robert E. Donlan (State Bar No . 186185)

Shane E. C. M cCoin (State Bar No. 258588)

2600 Capitol Avenue, Suite 400

Sacramento, California 95816

Telephone: (916) 447-2166

Attorneys for CALIFORNIA-AMERICAN WATER COMPANY

BROWN STEIN HYATT FARBER SHRECK, LLP

Russell M. M cGlothlin (State Bar No. 208826)

1020 State Street

Santa Barbara, California 93101

Telephone: (805) 963-7000

Atto rneys fo r MONTEREY PENINSULA REGIONAL W ATER A UTHORITY

DE LAY LAREDO

David C. Laredo (State Bar No. 66532)

606 Forest Avenue

Pacific Grove, CA 93950

Telephone: (831) 646-1502

Atto rneys fo r MONTEREY PENINSULA WATER MANA GEMENT DISTRICT and CITY OF

PACIFIC GROVE

FENTON KELLER

Thomas H . Jamison (State Bar No. 69710)

2801 Salinas Highway

Monterey, CA 93940

Telephone: (831) 373-1241

Attorneys for PEBBLE BEACH COMPA NY

STATE OF CA LIFORNIA

STATE WATER RESOURCES CONTROL BOARD

In the Mat ter of the Unauthor ized Diversion and Use APPL ICATION FOR O RDE R

of W ater by the California Am erican Water ODIFYING STATE WA TER

Com pany; Cease and Desist Order WR 2009-0060

OARD OR DER WR O 2009-0060

(CEASE AND DESIST ORDER)

Application for Order Modifying Cease and Desist Order WRO 2009-0060

ATTACHMENT B


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I.

ntroduction

F1

9

Pursuant to Water Code section 1832, California-Am erican W ater Com pany ( CA W ),

Mo nterey Peninsula Regional Water Authority ( MP RW A ) and Monterey Peninsula Water

Management Distr ict ( MPW MD ), the Pebble Beach Company ( PBC ) , and the City of

Pacific Grove

l

(collectively and/or individually, Petitioners ) hereby apply to the State Water

Resources Control Board ( SW RC B ) for an order modifying certain of the ordering provisions

of Order W RO 2009-0060 (referred to herein as Order or CD O ).

In Orders WR O 2009-

0060 as amended by W R 2010-0001, the SW RCB required CAW to comply with Condition 2 of

SW RC B Order W R 95-10. CAW has complied with these Orders by diligently implem enting

various actions in collaboration with the MPRW A, M PW M D and other comm unity interests,

including termination of unlawful diversions from the C armel River in accordance with the

schedule and conditions set forth in the CD O. Petitioners have diligently implemented m easures

to comply w ith the CDO , and CA W is currently meeting or has m et all of the conditions of the

CD O. D espite the best efforts of these parties as described below, factors beyond Petitioners '

control prevent CAW and Petitioners from implem enting a replacement water supply to

eliminate all unauthorized diversions from the C armel River before Decem ber 31, 2016 as

required in the CD O. Accordingly, Petitioners hereby request that the SW RC B issue a new order

modifying and restating certain of the ordering provisions of the CD O as specifically proposed in

Attachmen t 1 ( Proposed Order ) .

3

Although i t i s a mem ber of the M PRW A, the Ci ty of Paci f ic Grove joins as an indiv idual Pet i tioner due to i t s

specific interest in the City of Pacific Grove Recycled W ater Project described in Section III .A.3.f . , below.

2

Peti t ioners understand that , as of i ts effect ive date, the requested Order would supersede the ordering provisions of

Sta te Water Board WR O 200 9-0060. Al l o ther provis ions of Sta te Water Board WR O 2009-0060 and a l l o ther Sta te

W ater Board orders concerning CAW 's diversions f rom the Carm el River would rem ain in ef fec t unti l te rminated by

law or act ion of the State Water Board

The Prop osed O rder is the result of nearly two yea rs of analysis and negotiat ions by Peti t ioners, stakeholders,

resources agencies, and SW RCB s taff The Proposed Order includes s ignif icant commitments to measures to

protect and enhance aq uatic resources in the Carm el River through the extension period of the Proposed O rder, and

reflects an effort to maintain uneq ualed water conservation and u se standards on the Mo nterey Peninsula without

caus ing fur ther damage to the econom y of the Pen insula . The divers ion reduct ions proposed in the P roposed Order

wil l severely stretch the communit ies ' water conservation capabil i t ies, and therefore this Applicat ion is made with

the understanding and on the condit ion that the SWRCB adopt an order amending the CDO that is material ly the

same as the terms and condi t ions in the Proposed O rder in At tachment 1 . P et i tioners reserve a l l r ights and remedies

to protect the water supply necessary to m aintain health and safety of the Mo nterey Peninsula, and do not intend

with this Applicat ion to waive any rights or remedies necessary to protect an adeq uate water supp ly for the public

welfare of the Monterey Peninsula.

2

Appl ica tion for Order Modi fying Cease and Desis t Order WRO 2009-0060

ATTACHMENT B


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In summary, the Proposed Order would extend the deadline for CAW to terminate all

unlawful diversions from the Carmel River until December 31, 2020 to allow additional time to

complete development of a replacement water supply. The moratorium on new connections and

increased uses at existing connections that is described in more detail below would be

maintained during the extension period. The Proposed Order would require CAW to make an

immediate reduction of 1,000 afa from the existing diversion limit that is in place under Order

WRO 2009-0060 for Water Year 2015-16, resulting in a diversion limit for that year of 8,671. In

Water Year 2016-2017, the diversion limit would automatically be decreased again to 8,310 afa,

which is derived by using a five year average of CAW’s actual Carmel River production for the

period ending with Water Year 2014-15. If Petitioners meet annual milestones that are directly

tied to demonstrable progress on completing a new water supply during the extension period,

then this diversion limit (8,310 afa) would be maintained for the entire extension period. If

Petitioners fail to meet a milestone and the SWRCB does not grant an exception, then the

diversion limit for the subsequent Water Year would be reduced by 1,000 afa and such reduction

would remain in force until after the milestone was met. The Proposed Order includes provisions

describing the possibility of carrying over limited volumes of water from one Water Year to

another where CAW produces less than the diversion limit in place for a given Water Year. It

also includes modifications to how water that is diverted to Aquifer Storage and Recovery

(“ASR”) is treated with respect to the diversion limit, which modifications are aimed at

promoting maximum utilization of ASR to offset CAW’s unlawful diversions. The Proposed

Order also establishes a reporting structure through which Petitioners and other stakeholders

would provide annual updates to the SWRCB on progress towards developing a new water

supply and the status of the Carmel River fishery and habitat.

Petitioners also request cooperation and assistance from the SWRCB regarding certain

applications, permits, loans and grant funds to implement projects that will reduce unauthorized

diversion from, and increase the water in, the Carmel River, particularly during drier months of

the year. With the SWRCB’s support for those projects and modification of Order WRO 2009-

3


ATTACHMENT B


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0060, Petitioners can commit to carry out the actions, plans and projects described in Sections

III.A and III.C, which include:

• Continued development and implementation of efficiency and conservation measures;

•

Continued development and implementation of projects to develop alternative and

supplemental water supplies; and

• Continued development and implementation of fish and wildlife protection and

enhancement measures.

While not signatories to this Application, many other stakeholders participated

extensively in the development of this Application. Petitioners thank each of these groups and

request that the Board recognize them for their efforts to collaborate with Petitioners. Without

them, this Application would not be as robust and well-reasoned as it is today. These groups

include the Sierra Club, the Carmel River Steelhead Association, the Planning and Conservation

League Foundation, Quail Lodge, Bernardus Lodge, and the Carmel Valley Ranch, among

others. Included in Attachment 2 are letters of support from several stakeholder entities, each of

whom participated in the development of this Application.

Petitioners would also like to acknowledge the significant efforts and collaboration by

Staff of the SWRCB in the development of this Application. In the face of the worst drought in

California's history, SWRCB Staff professionally and cooperatively worked with Petitioners overa two year period to provide feedback, to help drive consensus among stakeholders and to assist

in the development of this Application and the Proposed Order. The Board should recognize the

efforts and professionalism of its Staff members and their contributions to this Application.

II. The SWRCB has Authority to Modify the CDO

The SWRCB has broad discretion to modify a CDO and to revise a schedule of

compliance contained in a CDO. See Order WR 2010-0002. Petitioners make this Application

pursuant to Water Code section 1832, which states, in relevant part: “The board may, after notice

and opportunity for hearing, upon its own motion or upon receipt of an application from an

aggrieved person, modify, revoke, or stay in whole or in part any cease and desist order issued

pursuant to this chapter.” For the reasons set forth below, including the fishery protection and

enhancement measures that will be implemented by Petitioners, Petitioners submit there is good

4


ATTACHMENT B


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cause for the SWRCB to modify the schedule and conditions in Order WRO 2009-0060.

III. It is Reasonable and in the Public Interest to Modify the CDO as Requested

A. CAW and Petitioners have Diligently and Aggressively Implemented

Measures to Comply with the CDO.

1. Efficiency and Conservation Measures

Prior to and since the issuance of the CDO, Petitioners have dedicated tremendous

resources to implement efficiency and conservation measures to control and reduce customer

demand and system losses within CAW’s Monterey district, such that the community is currently

outperforming the Carmel River diversion reduction targets set forth in the CDO. These include

the following specific measures:

a.

Moratorium on New Connections and Increased Uses at Existing

Connections

CAW has implemented and diligently enforced a moratorium on new service connections

within its Monterey district. CAW applied for, and the California Public Utilities Commission

(“CPUC”) approved on March 24, 2011, a moratorium on new service connections and an

increased use at existing connections caused by a change in use.4 See CPUC Decision D.11-03-

048. The moratorium has remained in effect since it was approved, and would be maintained

during the requested extension period under the Proposed Order.

b. Revised Conservation and Rationing Plan

On July 14, 2015 CAW submitted an application to the CPUC to modify revised Rule

No. 14.1.1 in CAW’s CPUC tariff, Water Conservation and Rationing Plan for the Monterey

District. CAW filed this application, with support and cooperation from MPWMD, in

recognition that Rule 14.1.1, which is based upon the MPWMD Regulation XV, Expanded

Water Conservation and Standby Rationing Plan, is outdated since it was last reviewed by the

CPUC in a 2007 proceeding. A prehearing conference was held by the CPUC Administrative

Law Judge on September 8, 2015 to discuss the parties’ proposed schedule and scope of the

4 Prior CPUC decisions require CAW to seek CPUC authorization prior to denying service to any customer within

its service area.

5


ATTACHMENT B


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proceeding. On November 4, 2015, the CPUC filed a scoping memo that sets the schedule for a

decision on CAW’s application by approximately October 2016.

c.

Water Conservation Programs

CAW and MPWMD have implemented a variety of customer water conservation and

efficiency programs, including programs targeting large commercial customers such as laundries,

hotels, and car washes. CAW’s efficiency standards have placed it in the lowest residential per-

capita usage tier under the SWRCB’s recently adopted emergency urban water conservation

regulations. CAW and MPWMD have also implemented programs targeting reductions in

outdoor irrigation, including replacement of irrigated turf with drought tolerant landscaping or

artificial turf, incentives for installation of weather-based irrigation controllers, mandatory

installation of rain sensors on irrigation systems, and mandatory water efficiency requirements

for all non-residential customers and certain residential customers. See MPWMD Regulation

XIV. In February 2010, CAW implemented, with CPUC approval, a new tiered conservation rate

structure with increases directed at the top tier users to promote conservation practices and

reduce overall water usage. Compared to the five year historical tier 4 and 5 usage, tier 4 and 5

usage was down approximately 71% in Water Year 2014-2015. See Table Nine in CAW’s 4th

Quarterly Report for the 2014-2015 Water Year to SWRCB pursuant to Order WRO 2009-0060.

d.

Infrastructure and Operational Improvements to Reduce System

Losses and Customer Leaks

CAW has implemented and continues to implement programs to detect and reduce non-

revenue system losses, including: replacement of older water mains and service lines in areas

shown to be more leak prone; water meter replacement; active leak detection; technological

solutions to manage lost water; and operational fixes such as pressure reduction. In addition,

CAW is currently conducting a pilot test with a group of Monterey customers using remote

technology that enables participants to receive real time water consumption data for their

residential water account on their smart phone. The technology can be used to set up an alert if

consumption is indicative of a water leak or if use increases. This allows customers the ability to

6


ATTACHMENT B


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detect water leaks as they occur and to monitor their water use closely, further encouraging water

conservation.

2. CAW is Diligently Pursuing Development of a Primary Alternative

Water Supply

As directed by Order 95-10 and the Order, Petitioners have diligently pursued the

Monterey Peninsula Water Supply Project (“MPWSP”), which will produce the replacement

water supply necessary to eliminate unauthorized diversions from the Carmel River.

a. Application for Approval of MPWSP and Permitting Activity

On April 23, 2012, CAW filed an application to the CPUC for approval of the MPWSP.

The MPWSP includes the following components: (1) a desalination plant and associated source-

water slant wells and conveyance system, which can produce up to 9,752 afa for system demand;

(2) an ASR project to store water lawfully diverted from the Carmel River in the Seaside

Groundwater Basin for subsequent recovery, with an expected long term average yield of 1,300

acre-feet annually; and possibly (3) a Groundwater Replenishment (“GWR”) project that could

treat recycled water and replenish up to 3,500 afa in the Seaside Basin. The GWR project is

being developed by the MPWMD and Monterey Regional Water Pollution Control Agency

(“MRWPCA”) and, if timely approved, could result in a down-sized desalination plant. The

Certificate of Public Convenience and Necessity (“CPCN”), approving the MPWSP, is

anticipated from the CPUC before the end of 2016.

Significant progress has been made on the MPWSP. CAW has undertaken – and

continues to advance – as many aspects of the project as can be done without regulatory permits.

In that regard, CAW acquired a 45-acre parcel of land near the City of Marina to serve as the

desalination plant site. CAW reached an agreement with CEMEX, Inc. that provides a

temporary easement to construct and operate a test slant well as well as an option to purchase a

permanent easement for purposes of constructing and operating a full scale subsurface seawater

intake system. CAW has awarded a design-build contract to CDM Smith to construct the

desalination plant once all necessary permits have been obtained. CAW is also in the process of

7


ATTACHMENT B


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conducting separate procurements to construct distribution system improvements and construct

the source water wells. These actions will expedite the construction of the MPWSP once all

regulatory agencies have issued their respective permits.

On April 30, 2015, the CPUC released its Draft Environmental Impact Report (“DEIR”)

for the MPWSP pursuant to the California Environmental Quality Act (“CEQA”). The release of

the DEIR began a 60-day public comment period, which was subsequently extended through

September 30, 2015. On September 8, 2015, the CPUC issued a statement that it will revise and

recirculate the MPWSP DEIR as a joint DEIR/Draft Environmental Impact Statement (“DEIS”).

The joint DEIR/DEIS will meet the requirements of the National Environmental Policy Act

(“NEPA”), and will be coordinated with the Monterey Bay National Marine Sanctuary

(“MBNMS”) as the federal lead agency. MBNMS’s parent agency the National Oceanic and

Atmospheric Administration (“NOAA”) published a Notice of Intent to Prepare Environmental

Impact Statement on August 26, 2015 under NEPA for the MPWSP and held a related scoping

meeting on September 10, 2015.

Substantial progress is also being made on the GWR component of the MPWSP. On

April 23, 2015, MPWMD and MRWPCA released a DEIR for a 45-day public comment period

that closed on June 5, 2015. On October 8, 2015 MRWPCA certified its final EIR for the GWR

project.

b.

Senate Bill 936 for Partial Public Financing

In September 2014, Governor Jerry Brown signed Senate Bill (SB) 936, authored by

Senators Bill Monning and Anthony Cannella and Assemblymen Mark Stone and Luis Alejo.

This legislation allows the MPWSP to utilize partial public financing if it is available at a lower

rate than conventional, private project financing.

c. Test Slant Well Project

In addition, a new test slant well located on the CEMEX property in Marina, California

was completed in March 2015. The test well was put into long term operation on April 22, 2015.

Data from the test well and an associated network of monitoring wells is posted weekly on

8


ATTACHMENT B


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CAW’s MPWSP website (http://www.watersupplyproject.org/). Preliminary test well results

have been promising and indicate that the test well is operating as designed. CAW and the

California Coastal Commission also successfully defended the Coastal Development Permits

underlying the test well in two separate lawsuits challenging their validity.

3. Petitioners Have Implemented Other Projects to Replace and Authorize

Carmel River Diversions

Petitioners have developed, permitted and implemented supplemental water supply

projects to reduce unauthorized Carmel River diversions. Petitioners have also facilitated or

supported efforts by other entities to complete multiple projects and water right transactions that

will permit beneficial uses within CAW’s service area.

a.

Table 13 Water Rights

CAW pursued and satisfied the requirements under SWRCB Decision 1632 to obtain

additional appropriative water rights under SWRCB Permit 21330 to lawfully divert up to 1,488

afa from the Carmel River; subject to the same by-pass flow requirements as ASR water. In

Water Year 2014-2015, CAW was able to divert 42.2 AF under the Permit, and reduce

unauthorized diversions by an equal amount.5

b. Pebble Beach Wastewater Reclamation Project

CAW has been a participant with PBC, the Carmel Area Wastewater District (“CAWD”),

the Pebble Beach Community Services District (“PBCSD”), and MPWMD in accomplishing

perhaps the most renowned golf course recycled water irrigation project in the country. The

CAWD-PBCSD Wastewater Reclamation Project (as it is known) treats wastewater at the

CAWD plant to a tertiary level, with advanced level micro-filtration which is then distributed by

PBCSD and MPWMD as recycled water to irrigate all of the Del Monte Forest golf courses. This

project is presently supplying an average of 1,000 afa of recycled water to the golf courses,

conserving that amount of diversions from the Carmel River. In addition to MPWMD’s

5 Decision 1632 Condition 10 provides an opportunity for the persons named in Table 13 of Decision 1632 to obtain

a water right permit with a priority superior to the MPWMD’s Permit 20808. Decision1632 delegates authority to

the Chief of the Division of Water Rights to modify the quantities identified in Table 13.

9


ATTACHMENT B


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conservation programs, this project is one of the largest water saving projects operating on the

Monterey Peninsula. In return for its financial commitment (of which PBC has funded over $22

million in operating shortfalls and debt service) which made the project possible, PBC (with

other Del Monte Forest landowners) received the Pebble Beach Water Entitlement, which was

fully recognized in SWRCB Order WRO 2009-0060, as modified by Order WR 2010-0001.

c. Additional Aquifer Storage and Recovery Capacity

As required by the Order, CAW and the MPWMD expanded the Carmel River ASR

Project to fulfill the Small Project requirement in Ordering Paragraph 3.a.(5). CAW and

MPWMD jointly hold water right Permit 20808C that allows for up to 2,900 afa to be diverted

from the Carmel River during periods of excess flow and then injected into the Seaside Basin as

part of the ASR program.6 CAW and MPWMD have completed two new wells (ASR Wells #3

and #4) at the Seaside Middle School since the CDO was issued. The addition of ASR Well #3

gives CAW and MPWMD the ability to store and recover an expected long term average of more

than 500 afa, and was completed to satisfy Condition 5 of the CDO. The addition of ASR Well

#4 provides the opportunity for CAW and MPWMD to realize an estimated additional 500 afa

available for diversion under the associated Permit.

d.

Carmel River Floodplain Restoration and Environmental

Enhancement Project and Interim Water Use Agreement

CAW supported and facilitated a water right change petition submitted by the Clint

Eastwood and Margaret Eastwood Trust (“Eastwood Trust”) and approved by the SWRCB on

July 3, 2015 in Division Decision 2015-0001. This project includes a significant donation of land

by the Eastwood Trust to the Big Sur Land Trust as an important component of the Carmel River

Floodplain Restoration and Environmental Enhancement Project. The Carmel River Floodplain

Restoration and Environmental Enhancement Project will, among other potential things, restore

the historic floodplain and wetlands and improve flood protection in the lower Carmel River and

increase riparian habitat.

6 The “face” amount of Permit 20808C presumes Carmel River flows meet or exceed minimum instream flowrequirements each day of the 183-day diversion season and that diversions occur each day at the maximuminstantaneous rate allowed under the Permit.

10


ATTACHMENT B


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The Eastwood Trust agreed to permanently dedicate 46 afa of its existing water right to

instream flows, and to grant temporary use of up to 85 afa to assist CAW to reduce its

unauthorized diversions from the Carmel River. CAW and the Eastwood Trust expended

significant time and effort to complete this transaction and expect to begin replacing CAW

diversions with water available through the associated water right (License 13868A) in the

immediate near term. Based upon an agreement with the Eastwood Trust, the SWRCB has

ordered that all municipal water pumped under License 13868A during 2015 will be used to

offset CAW’s Carmel River Diversions, and that at least 50 af and 25 af will be used to assist

CAW to reduce its unauthorized diversions from the Carmel River in 2016 and 2017,

respectively. Until the MPWSP is brought online and unauthorized diversions from the Carmel

River eliminated, the agreement with the Eastwood Trust authorizes CAW to use all water under

License 13868A that is not used by Eastwood pursuant to the License amendment.

e. Carmel River Instream Flow Enhancement Program

CAW has proposed to the SWRCB the Carmel River Instream Flow Enhancement

Program, whereby CAW will compensate Carmel River water rights holders to implement

conservation measures to reduce water diversions from the river in order to increase instream

flows for the benefit of fish and wildlife in the Carmel River. On September 8, 2015, CAW

submitted a Notice of Intent to Implement the Carmel River Flow Enhancement Program to the

SWRCB describing the proposed program which would temporarily modify the water users’

water rights to allow for the instream use of water in the Carmel River.

f. City of Pacific Grove Recycled Water Project

The City of Pacific Grove certified an EIR for its Local Water Project to reduce irrigation

on the City’s municipal golf course and El Carmelo Cemetery. MPWMD provided a feasibility

funding grant to assist planning this effort. Clean Water State Revolving Fund (“SRF”) financing

for this effort was approved by the SWRCB on November 17, 2015. The City expects to begin

construction during or before January 2016. CAW also has actively supported this project

throughout the proposal and approval process.

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4. CAW and Petitioners have Implemented and Propose Additional

Measures to Enhance and Improve Conditions for Fish and Wildlife

Resources

Petitioners have permitted and implemented significant measures to enhance and improve

conditions for fish and wildlife resources in the Carmel River watershed, and to minimize and

avoid potential impacts to fish and wildlife during the extension period for the CDO sought

through this Application.

a.

Funding for Carmel River Mitigation Projects

Pursuant to a 2009 agreement (amended in 2014) between CAW, the National Oceanic

and Atmospheric Administration (NOAA), and the California Department of Fish and Wildlife

(“CDFW”), CAW made a one-time payment of $3.5 million in 2009, annual payments of $1.1

million per year for 2010 through 2015, and has committed to make annual payments of $1.1

million per year through 2016 to the State Coastal Conservancy (“SCC”) for environmental

protection and enhancement projects in the Carmel River watershed.

CAW’s s payments, which total $10.1 million to date, are being used to fund the

following significant projects, which are designed to mitigate the impacts of CAW’s

unauthorized diversions and are identified by the SCC through ongoing consultations with the

NMFS, CDFW, and Carmel River stakeholders primarily through the Carmel River Task Force:

• Removal of Old Carmel River Dam to facilitate fish passage;

• Removal of Sleepy Hollow Ford to facilitate fish passage;

• Restoration of Carmel River upstream of San Clemente Dam;

• Sleepy Hollow Fish Rearing Facility Intake Improvements;

•

Carmel River Lagoon Large Wood Augmentation;

•

Carmel Lagoon Water Augmentation;

• Carmel Lagoon Ecological Barrier;

• Additional Fish Passage Barrier Removal;

• Off-stream Storage of Excess Flows in Exchange for Forbearance of Summer Pumping;

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Provided that NOAA and CAW mutually agree to terms for extending the 2009 agreement

described above, CAW will make additional annual payments of $1.1 million (pro-rated for any

partial years) until unpermitted diversions of water from the Carmel River are replaced by legal

sources of water for use on projects during the requested extension period for the CDO. Use of

these funds and administrative efforts will focus, with support of CAW and other Parties, on

projects that can be implemented during the extension period to mitigate potential effects of the

extension. MPWMD will use its best efforts and cooperate with NOAA, CDFW, SCC and the

Carmel River Steelhead Association, to identify, develop, and implement mitigation efforts that

benefit the Carmel River.

b.

Carmel River Reroute and San Clemente Dam Removal Project

CAW also has permitted, financed and completed significant construction activities to re-

route the Carmel River and remove the San Clemente Dam. The Carmel River Reroute and San

Clemente Dam Removal Project is the largest dam removal project in California history, and was

jointly developed and/or funded by the CAW, SCC, NOAA’s National Marine Fisheries Service,

the Planning and Conservation League Foundation, and the Nature Conservancy. This

monumental and innovative project will:

• Remove the 106 foot high San Clemente Dam and implement a watershed restoration

process that will bring the Carmel River back to life;

• Provide unimpaired access to over 25 miles of essential spawning and rearing habitat,

thereby aiding in the recovery of threatened South-Central California Coast steelhead;

• Restore the river’s natural sediment flow, helping replenish sand on Carmel Beach and

improve habitat downstream of the dam for steelhead;

•

Re-establish a healthy connection between the lower Carmel River and the watershed

above San Clemente Dam;

• Improve habitat for threatened California red-legged frogs;

• Reduce beach erosion that contributes to destabilization of structures;

• Provide a long-term solution to the public safety risk posed by the potential collapse of

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the dam, which potentially threatens 1,500 homes and other public buildings in the event

of a large flood or earthquake;

The various construction activities that have been completed or are nearly completed to date

include: complete excavation of the re-route cut, nearly complete installation of the diversion

dike and the stabilized sediment slope, the complete demolition of San Clemente Dam itself and

the near completion of the new river channel that allows for fish passage. An additional

component of the project is the ultimate transfer of CAW property around San Clemente Dam to

the U.S. Department of Interior Bureau of Land Management, which will create additional open

space and habitat in the watershed.

c.

Los Padres Dam Downstream Fish Passage Facilities

CAW and various stakeholders agreed to construct downstream fish passage facilities at

Los Padres Dam, located at approximately River Mile 24.8 on the Carmel River. CAW owns and

operates Los Padres Dam and has made various improvements to accommodate upstream fish

passage over the Dam. Currently, when lake elevations fall below the dam’s spillway crest, no

downstream fish passage corridor exists. To improve downstream fish passage opportunities, the

following facilities will be constructed: behavioral guidance system, floating weir surface

collector, fish bypass conduit, bypass access portals, and bypass outfall. Construction of these

facilities began in the second quarter of 2015, and will be completed before November 26, 2015.

d.

Los Padres Dam Long Term Planning Study

In its April 10, 2015 Decision Adopting the 2015, 2016, 2017 Revenue Requirement for

California-American Water Company, the CPUC authorized CAW to fund a study to determine

the ultimate disposition of the Los Padres Dam and its effects on the Carmel River. CAW will

fund MPWMD to continue independently studying the fate of the Los Padres Dam, including

contribution from CAW of approximately $1.0 million to assist MPWMD. Studies will include

evaluating upstream steelhead passage at Los Padres Dam, whether the public trust resources of

the Carmel River will be adversely affected or enhanced by removal or alteration of Los Padres

Dam, what options exist to maintain physical existing surface storage in Los Padres Reservoir,

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and analysis of the potential geomorphic effects of a resumption or increase of the natural flow

of sediment. In addition, CAW expects to work with MPWMD to develop the scope of work and

award the feasibility study to a qualified environmental consultant in the near future and

anticipates completing the study during 2018. CAW also will continue to fund mitigation

measures pursuant to MPWMD’s current mitigation program through December 31, 2020.

e. Commitment to Fund and Implement Additional Mitigation Projects

Upon SWRCB approval of this Application on terms substantially similar to those

requested herein, and subject to final approval from CDFW, NOAA, and other agencies with

permitting jurisdiction, CAW will implement up to $2.5 million in other projects on the Carmel

River to improve fish passage and habitat. These include, in order of priority and estimated costs:

additional spawning gravel injections below Los Padres reservoir ($0.2 million); improvements

to the existing upstream fish passage ladder and trap at Los Padres Dam ($0.2 million);

installation of a fish screen at the lower outlet pipe on Los Padres Dam ($0.8 million); a pit

tagging program ($0.8 million); and a through-reservoir survival study for Los Padres Reservoir

($0.5 million). Should the higher priority projects exceed the estimated amounts, funding will be

pulled from the lower priority projects until the entire $2.5 million is utilized. Additionally, the

estimated cost from the above projects may be used to supplement other related projects

occurring on the Carmel River (i.e., pit tagging work being contemplated by MPWMD).

B. Factors Beyond CAW’s and Petitioners’ Control Prevent Petitioners from

Achieving all CDO Conditions and Deadlines

The requested modifications are necessary because factors beyond CAW’s and

Petitioners’ control – namely the failure of the Regional Desalination Project and delays in the

CPUC approval schedule for the MPWSP – make it infeasible to complete the MPWSP and

eliminate unauthorized Carmel River diversions within the current CDO schedule (i.e., by

December 31, 2016). Petitioners anticipate a final CPUC decision approving the MPWSP and

authorizing construction before the end of 2016. Once authorized, CAW expects to begin

construction of the MPWSP by mid-2017, and to begin producing potable water to replace

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Carmel River diversions before the end of the requested extension period. Major infrastructure

projects of this size and scope are often subject to delays and litigation, but this anticipated

schedule reflects Petitioners’ best judgment if delays are kept to a minimum.

Taking into account the commitments, efforts and accomplishments described above,

Petitioners request that the SWRCB modify the CDO as shown in Attachment 1. Petitioners’

make this request upon the express understanding and condition that the hearing record

developed and adduced before the SWRCB for Orders WRO 2009-0060 and WRO 2010-0001

are incorporated within the proceedings on this Application, for all purposes. Further, this

Application is made upon the express understanding and condition that Petitioners each shall

preserve, and not waive, their collective or individual rights to petition for relief from any

provision of the order amending and restating the CDO, for any reason, upon a claim that the

order amending and restating the CDO causes a threat to public health or safety or otherwise

jeopardizes the water supply for the Monterey Peninsula. Should the SWRCB consider adoption

of an order amending and restating the CDO on terms or conditions different from the Proposed

Order submitted as Attachment 1 to this Application, Petitioners request that the SWRCB not

take action thereon until Petitioners have been provided notice of the draft order not less than 30

days prior to any meeting to adopt the order, and provided an opportunity to augment the record

of proceedings with respect to the Application.

IV. Petitioners Request Assistance from the SWRCB.

Taking into account the commitments, efforts and accomplishments described herein,

Petitioners request that the SWRCB commit to use reasonable efforts to assist Petitioners’ efforts

to eliminate unauthorized Carmel River diversions as follows:

1.

Support issuanc

mprwa revised special meeting agenda packet 04-26-16

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