June 18, 2007

1. Management Objectives

The District desires to maximize the long-term production potential and protect the environmental quality of the Carmel River and Seaside Groundwater Basins. In addition, the District desires to maximize the amount of water that can be diverted from the Carmel River Basin and injected into the Seaside Groundwater Basin while complying with the instream flow requirements recommended by the National Marine Fisheries Service (NMFS) to protect the Carmel River steelhead population. To accomplish these goals, a water supply strategy and budget for production within the California American Water (CAW) main water distribution system is reviewed quarterly to determine the optimal strategy for operations, given the current hydrologic and system conditions.

2. Quarterly Water Supply Strategy: July - September 2007

On June 6, 2007, staff from the District, CAW, the California Department of Fish and Game (CDFG), and NMFS met and discussed the proposed water supply strategy and related topics for the remainder of June 2007 and the July-September 2007 period. Currently, flow in the Carmel River is fully regulated and San Clemente Reservoir is being drawn down, as required by the Division of Safety of Dams (DSOD). Flow in the Carmel River is discontinuous below river mile 5.4, with dry reaches between river miles 3.3 and 2.5 and river miles 5.4 and 5.2. For the first eight months of Water Year 2007 (October 2006 through May 2007), rainfall at San Clemente Dam in the upper watershed totaled 11.4 inches or 54% of the long-term average at this site. Further, runoff at San Clemente Dam in the upper watershed totaled 11,790 AF or only 18% of the long-term average at this site.

Carmel River Basin Given these conditions and the assumption that “critically-dry” inflows (similar to flows that occurred in Water Year 1990) are expected to occur during the July- September 2007 period, it was agreed that CAW would divert no surface water from its San Clemente Reservoir and would divert no more than approximately 30 AF of groundwater each month from its wells in the Upper Carmel Valley. To meet customer demand, Cal-Am would operate its wells in the Lower Carmel Valley in a downstream-to-upstream sequence, as needed. For the quarterly budget, it was agreed that Cal-Am would produce approximately 1,208, 1,208, and 1,055 AF of groundwater from its wells in the Lower Carmel Valley during July, August, and September 2007, respectively. Table 1 shows projected monthly releases and diversions from Los Padres and San Clemente Reservoirs for the June through September 2007 period. As shown, water stored in Los Padres Reservoir will be released in June 2007 to maintain downstream streamflow.

Seaside Groundwater Basin It was also agreed that CAW would maximize production from the Seaside Basin during the July - September 2007 period consistent with the production limit specified in the 2006 Seaside Basin adjudication decision. Specifically, it was agreed that CAW would produce approximately 350 of groundwater from its wells in the coastal subareas of the Seaside Basin during July, August, and September 2007, respectively.

Lastly, it was assumed that no water would be diverted from the Carmel River Basin and injected into the Seaside Groundwater Basin during the July – September 2007 period.

U:\staff\word\boardpacket\2007\2007boardpackets\20070618\PubHrgs\23\item23_exh23b.doc