ACTION ITEM
18.	CONSIDER EXPENDITURES FOR PRECONSTRUCTION COSTS FOR EXPANSION OF PURE WATER MONTEREY PROJECT
Meeting Date:		November 13, 2017	Budgeted:	No
From:		David J. Stoldt	Program/
		General Manager	Line Item No.:	35-03-786010
		David J. Stoldt	Cost Estimate:	$360,000
General Counsel Approval: N/A
Committee Recommendation: N/A
CEQA Compliance: Action does not constitute a project as defined by the California Environmental Quality Act Guidelines section 15378.

SUMMARY:  On August 28, 2017 the Administrative Law Judge in the CPUC application A.12-04-019 asked for testimony on several specific issues. Items 1 and 2 spoke directly to the sizing of the desalination plant and the capability of expansion of Pure Water Monterey to meet demands.

Specifically, Item 2 requested:

“2. Supply: updated estimates and analysis of supply including but not limited to:

a. Plans for expansion of the Pure Water Monterey (PWM) project, if any

b. Can expansion of the PWM project provide water to applicant in excess of 3,500 acre-feet per year, in what amounts, and at what cost

c. Is water available for purchase by applicant from Marina Coast Water District, in what amounts, and at what cost”

Cal-Am testimony was submitted September 15^th. The District and Monterey One Water submitted its testimony on these issues on September 29^th. Hearings were held October 25^th through November 3^rd. In many instances, several intervenors expressed strong interest in an expansion of Pure Water Monterey – in some cases as an alternative project if the desalination facility is stalled, and in other cases as a potential low cost interim measure.

During the hearings, two issues became evident:

(i) There was a call for additional discussion or a hearing on the potential expansion of Pure Water Monterey in April; and

(ii) There were multiple requests as to what the project sponsors (Monterey One Water “M1W” and The District) would do to further “qualify” the expansion as viable.

In advance of the hearings, the General Manager advised the Chair and the Vice Chair about the possible line of inquiry and the potential need to represent that the District and M1W would be willing to spend resources to further advance the concept by some future hearing date.

Recall that when the project was first approved, it was required to meet 9 tests:

(i) MRWPCA has approved the GWR Project pursuant to a certified Final EIR;

(ii) The status of required permits is consistent with the published project schedule;

(iii) There is sufficient legal certainty as to agreements or other determinations in place to secure delivery of source water(s)

(iv) 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;

(v) The GWR Project is on schedule, as verified by a report issued by an engineer licensed in California, to be operable;

(vi) Preliminary design for the GWR Project is at least at the 10% level, represented by a basis of design report;

(vii) A GWR Project funding plan is in place;

(viii) California American Water, MPWMD, and MRWPCA have agreed on a WPA whose terms are just and reasonable; and

(ix) The revenue requirement for the combination of the GWR Project and the desalination project is just and reasonable when compared to the revenue requirement for a larger desalination project alone.

To meet these tests for an expansion of the Pure Water Monterey project will potentially take close to a year and may cost $1.1 to $1.5 million. In order to gain greater certainty and make representative strides toward each of the 9 criteria by an April hearing date, it is estimated that $480,000 will need to be expended. Under Amendment 2 of the Cost Sharing Agreement (see Consent Calendar Item 6) the District would fund up to $360,000 of such costs. The source of the funds will be reimbursements for the Phase 1 Pure Water Monterey pre-construction costs, which were outside the District’s adopted FY 2017-18 budget.

It is possible that an expansion of Pure Water Monterey will be deemed unnecessary or infeasible and the costs will be stranded.

RECOMMENDATION:  The General Manager recommends the Board approve the expenditure of up to $360,000 in support of qualifying an expansion of Pure Water Monterey for approval by the CPUC on or about April 2018.

BACKGROUND: In its November 7, 2017 edition the Monterey County Herald wrote:

Pure Water Monterey, Marina Coast alternative water supply proposals get attention

By Jim Johnson, Monterey Herald 11/07/17

Monterey >> A state Public Utilities Commission judge has left the door open for additional hearings next spring on potential expansion of the Pure Water Monterey recycled water project. That could lead to a smaller California American Water desalination plant or serve as a bridge if the desal project is delayed, even as Monterey Peninsula water officials ponder a Marina Coast Water District proposal to provide an additional temporary water supply.

During CPUC hearings last week to address a number of key desal project issues, Judge Gary Weatherford suggested the Pure Water Monterey expansion proposal could be addressed in more detail at subsequent hearings, perhaps in April, if a formal request is made. Planning and Conservation League representative Jonas Minton indicated he would make the request, according to Peninsula water activist George Riley, who is a formal participant in the CPUC’s desal project proceeding.

“I think it’s exciting because there are low-cost options out there for ratepayers,” Riley said.

Riley said Monday that Minton had been advocating for additional consideration of alternative water supplies for the Peninsula for more than a month. He added that there “seemed to be a lot of interest” in additional hearings on the issue during last week’s hearings at CPUC headquarters in San Francisco. He acknowledged the additional hearings could end up delaying the CPUC’s schedule for considering a permit for the Cal Am desal project, further underscoring the need for a fall-back position.

Monterey Peninsula Water Management District general manager Dave Stoldt told the Peninsula mayors water authority technical advisory committee during a meeting Monday that the district board and the Monterey One Water board would be asked this month to authorize spending $480,000 on additional analysis and preparatory work for the Pure Water Monterey expansion proposal in advance of possible hearings.

Last month, Monterey One Water submitted testimony to the CPUC outlining potential expansion options for the current Pure Water Monterey advanced water treatment plant. The plant is designed to produce 3,500 acre-feet of water per year as part of the effort to create a new Peninsula water supply in conjunction with Cal Am’s proposed desal plant to offset the state-ordered cutback in pumping from the Carmel River.

The expansion options ranged from a $6.9 million, 650-acre-foot per year expansion to a $51.6 million, 2,250-acre-foot per year addition to a $132.9 million, 3,570-acre-foot per year doubling of the plant capacity.

Meanwhile, water authority executive director Jim Cullem asked the committee to weigh in on Marina Coast proposals to temporarily sell about 1,700 acre-feet per year in additional water to the Peninsula through the water management district and the Seaside basin watermaster to further meet the Peninsula’s water demand over the next 6-10 years. The Marina Coast proposal emerged as a result of talks between the water district, which has opposed the desal project and claimed its slant feeder wells would negatively impact its underground water supply, and the authority, water management district, Monterey One Water, city of Marina and Cal Am. The proposal is aimed at avoiding threatened litigation and the resulting cost and delay.

Combined, the recycled water and Marina Coast proposals with Cal Am’s authorized Carmel River allocation would provide nearly 11,000 acre-feet of water supply per year for the Peninsula, which is already using less than that.

Cullem said the committee will recommend the water authority board continue talks with Marina Coast while also advocating for timely CPUC approval of the Cal Am desal plant. He said the authority needed to “hedge its bets” and continue talks with Marina Coast. He also expressed concern that new discussions around alternative water supplies could affect the overall CPUC schedule and the ability to meet the state water board’s cutback order milestones.

EXHIBITS

None

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