ITEM:		DISCUSSION ITEM
20.	DISCUSSION OF PURE WATER MONTEREY PROJECT CALIFORNIA PUBLIC UTILITIES COMMISSION SETTLEMENT AGREEMENT CRITERIA
Meeting Date:			November 16, 2015	Budgeted:	N/A
From:			David J. Stoldt	Program/
			General Manager	Line Item No.:
Prepared By:			David J. Stoldt	Cost Estimate:
General Counsel Approval: N/A
Committee Recommendation: N/A
CEQA Compliance: N/A

SUMMARY: In July 2013, the District participated with the various parties to A.12-04-019 at the Public Utilities Commission – the Cal-Am application – in developing a settlement and agreement for the proposed Monterey Peninsula Water Supply Project (MPWSP.) The MPWMD Board of Directors provided direction in closed session whether to approve and sign the settlement agreement(s). The District and other settling parties signed the agreements July 31, 2013.

At its January 30, 2013 and February 12, 2013 meetings the District Board indicated that it would consider support for the Cal-Am application if certain conditions were met. One of those conditions the Board proposed was a strong statement endorsing the Pure Water Monterey groundwater replenishment project (GWR). This was addressed in the General Settlement Agreement, Section 4, and included 9 findings or criteria for the acceptance of GWR as part of the MPWSP. In the Settlement, the Parties agreed “the Commission should make the GWR Decision based upon the findings set forth below and/or information supplied pursuant to the advice letter process in Section 4.3(f). If all of the findings are made or addressed through the advice letter process, then California American Water shall be ordered to enter into a WPA and build the smaller desalination plant.”

The purpose of this report is to update the board on where the Pure Water Monterey project currently stands relative to the 9 acceptance criteria in the July 2013 proposed Settlement Agreement.

RECOMMENDATION: The General Manager recommends the Board receive the update and discuss. The Board is urged to consider the current status report in relation to Action Item 22.

DISCUSSION: The 9 criteria and current status are as follows:

Criterion 1: MRWPCA has approved the GWR Project pursuant to a certified Final EIR; and no CEQA suit has been filed within 30 days of a Notice of Determination ("NOD"), or if a CEQA suit is filed, no stay of the GWR Project has been granted.

Status: Satisfied complete.

Criterion 2: The status of required permits is consistent with the published project schedule, and for any required permits not yet obtained, the weight of the evidence in the record does not show that any of the required permits for the GWR Project are unlikely to be obtained in a timeframe consistent the published project schedule.

Status: The GWR Project will need to receive a wide variety of permits and approvals from an equally wide variety of agencies in order to proceed to construction and operation. A separate criterion (#4) specifically addresses the permit/approvals required from the California Department of Public Health and Regional Water Quality Control Board; therefore, it is assumed this criterion addresses all other permits. Permits are listed in the EIR. Contracts have been provided to various consultants to work on those permits this fiscal year. There are more permits required if the Coastal Alignment of the product water pipeline is used. MRWPCA will prepare a detailed permitting plan that covers all of the components of the GWR Project. The permitting plan will identify each required permit or approval, the permitting entity, the steps to complete the permit, the party responsible for obtaining the permit, and the estimated schedule and cost for the permitting effort. At this time, there is no reason to believe that this criterion will not be met.

Criterion 3: There is sufficient legal certainty as to agreements or other determinations in place to secure delivery of source water(s) necessary to produce between 3,000 to 3,500 acre feet per year of GWR product water for the recommended project.

Status: The MRWPCA-MCWRA Amended and Restated Water Recycling Agreement was approved by both agencies and the County Board of Supervisors in the past 30 days. An Agreement between MRWPCA and the City of Salinas has also been approved. Hence, this criterion has been met.

Criterion 4: The weight of the evidence in the record does not show that the California Department of Health or the Regional Water Quality Control Board will decline to accept or approve the GWR extraction or GWR treatment and injection processes, respectively.

Status: The Division of Drinking Water (DDW), formerly part of CDPH but now part of SWRCB, provided a letter dated June 5, 2014 indicating that there were no issues they had to decline approval of GWR. DDW has been involved in the Independent Advisory Panel meetings and other update meetings along with their colleagues at the Regional Water Quality Control Board (RWQCB.) The RWQCB has emailed the SWRCB in support of the project due to their desire to see the diversion of Blanco Drain water away from the Salinas River. Hence, this criterion appears to have been met, but additional evidence will be produced as needed.

Criterion 5: The GWR Project is on schedule, as verified by a report issued by an engineer licensed in California, to be operable, on or before the later of (a) the then-effective date of the Cease and Desist Order of the SWRCB or such other date as the SWRCB states in writing is acceptable, or (b) the date the MPWSP desalination project is scheduled to become operable. The Parties acknowledge that the actual date of operation for the GWR Project and the desalination project could vary from the operation date projected in the schedules, and therefore agree to a range of up to an additional four months from the projected date of operation, before the GWR Project schedule would no longer be considered on an acceptable schedule.

Status: The project is on schedule to be operable long before the desalination project and the projected revised CDO effective date. However, an engineer’s report to that effect will be included in the GWR testimony at the CPUC.

Criterion 6: Preliminary design for the GWR Project is at least at the 10% level, represented by a basis of design report (so that an accurate project cost estimate can be generated) or is at a level similar to or more advanced than the level of design for the desalination project portion of the MPWSP.

Status: The MPWSP desalination facility design is between the 60% and 90% level. GWR has been designed at or beyond the 10% level of design and one component, connection between the Ag Wash water and the Salinas Pump Station has been constructed. The connection from the Salinas storm water and the Salinas Pump Station or the Salinas Industrial Ponds will be designed to 100%. Criterion met. No additional work required.

Criterion 7: A GWR Project funding plan, sufficient in detail to be accepted as an application for a State Revolving Fund loan, is in place.

Status: This is complete with one exception, an Approval Order on a change petition to the SWRCB for the discharge of Salinas Industrial Pond water to the MRWPCA Regional Treatment Plant, which is expected by the end of November.

Criterion 8: California American Water, MPWMD, and MRWPCA have agreed on a WPA whose terms are just and reasonable.

Status: A substantially complete version has been exchanged between the parties and looks like the form of agreement will be agreed to by the end of November. This is covered further under Agenda Item 21.

Criterion 9: The revenue requirement for the combination of the GWR Project and the smaller desalination project, including the projected debt equivalence for the GWR Project, if any, determined pursuant to Section 4.4, is just and reasonable when compared to the revenue requirement for a larger desalination project alone. The parties agree that a revenue requirement premium for the combination of the GWR Project and a smaller MPWSP desalination project may be determined just and reasonable, if the combined GWR/smaller desalination project affords significant net benefits including, but are not limited to, the following: (i) a material schedule advantage in that the GWR Project is anticipated to be operable sooner than the desalination plant; (ii) water supply resilience and reliability (benefit of the portfolio approach); and (iii) other positive externalities of the GWR Project, including, but not limited to reduced atmospheric carbon emissions, reduced brine discharge, and the implementation and encouragement of State policies regarding water recycling through early adoption of a water reuse project.

Status: An initial cost comparison analysis prepared by the District, but based on cost estimates made by Cal-Am and filed with the CPUC and estimates prepared by MRWPCA, has been shared with Cal-Am November 12^th, the Water Authority Technical Advisory Committee November 16^th, and will be presented to the District Board at its November 16^th meeting. The results of that analysis shows positive impact to ratepayers for the “Project Variant” of GWR-plus-6.4MGD Desal for both life-cycle savings and net present value of life-cycle savings, as shown below:

	9.6 MGD Desal Minus Project Variant
Total Lifecycle Savings	$1,779,000
NPV of Savings	$8,762,000

However, the CPUC on October 12^th held a prehearing conference on revisions to the Phase 2 proceedings on GWR. At that time, it was made clear that the economic cost comparison analysis shall be redone for purposes of testimony based on updated Cal-Am costs expected in December and then-current best available GWR cost estimates. As a result, this analysis shall be revisited with the Board. However, certain actions are requested to be taken now (Agenda Item 22) based on information known at the present.

Further, the District’s consultant, HDR, is undertaking a study or “triple bottom line” analysis to demonstrate the potential benefits environmentally and/or socially, of the externalities. The HDR study is expected to be complete by the end of the year and inform expert testimony in the CPUC Phase 2 proceedings on GWR.

EXHIBIT

None

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