MPRWA Regular Meeting Agenda Packet 07-25-13

Agenda
Monterey Peninsula Regional Water Authority (MPRWA)

Regular Meeting

7:00 PM, Thursday, July 25, 2013
Council Chamber
580 Pacific Street
Monterey, California

ROLL CALL

PLEDGE OF ALLEGIANCE

REPORTS FROM BOARD DIRECTORS AND STAFF

PUBLIC COMMENTS
PUBLIC COMMENTS allows you, the public, to speak for a maximum of three minutes on any
subject which is within the jurisdiction of the MPRWA and which is not on the agenda. Any person
or group desiring to bring an item to the attention of the Authority may do so by addressing the
Authority 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 contact
the sender concerning the details.

APPROVAL OF MINUTES

1. July 11, 2013

AGENDA ITEMS

2. Receive Presentation, Discuss and Provide Direction on Adopted Position Statement -
Cullem

3. Receive Report, Discuss and Provide Direction on Draft Scope of Services for Public
Outreach Consultant - Cullem

4. Review, Discuss and Provide Direction on Draft Opinion Editorials for Future Publication -
Cullem

ADJOURN TO CLOSED SESSION

5. Conference with Legal Counsel Existing Litigation, Gov. Code, section 54956.9
California Public Utilities Commission, In the Matter of Application of California-American
Water Company (U210W) for Approval of the Monterey Peninsula Water Supply Project
and Authorization to Recover All Present and Future Costs in Rates, A.12.04.019, Filed
April 23, 2012 - Burnett

ADJOURNMENT

Thursday, July 25, 2013
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The Monterey Peninsula Regional Water Authority is committed to include the disabled in all of
its services, programs and activities. For disabled access, dial 711 to use the California Relay
Service (CRS) to speak to staff at the Monterey City Clerks Office, the Principal Office of the
Authority. 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 hearing amplification device to attend a
meeting, dial 711 to use CRS to talk to staff at the Monterey City Clerks Office at
(831) 646-3935 to coordinate use of a device or for information on an agenda.

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

MI NUTES
MONTEREY PENINSULA REGIONAL WATER AUTHORITY (MPRWA)
Regular Meeting
7:00 PM, Thursday, July 11, 2013
CITY COUNCIL CHAMBER
580 PACIFIC STREET
MONTEREY, CALIFORNIA

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

Directors Absent:

None

Staff Present: Legal Counsel, Executive Director, Clerk

ROLL CALL

President Della Sala called the meeting to order at 7:00 p.m.
PLEDGE OF ALLEGIANCE

REPORTS FROM BOARD DIRECTORS AND STAFF

President Della Sala invited reports from Directors and Staff.
Executive Director Cullem reported about recent meetings to establish a Power Sales
Agreement and indicated that both parties are moving effectively toward a Memorandum of
Understanding. He noted that it could take up to a year for a proper needs analysis to be done
to know if the requirements can be met. Mr. Cullem reported that no projected costs are
available at this time and that any cost figure would be based on assumptions. He also reported
that there is a pending tour scheduled to facilities in Sothern California and hopes that the
attending Directors and staff will gain beneficial knowledge from the trip. Lastly he spoke to a
recent meeting he attended at the Water Management District Public Outreach Committee for
coordinating public outreach efforts to achieve economies of scale, and suggested the Authority
should move forward with an independent consultant who will coordinate with WMD and PCA
and Authority so the message of the authority is clear.
Vice President Burnett reported that the successful operation of the test well is a critical path
issue and spoke to a letter received from the Department of Fish and Wildlife. He noted in order
for the test well to remain on schedule, there is very little time for issues or delay.
Rich Svinland, Chief Engineer for Cal Am updated the Authority on the status of the test well.
submitted applications and noted that the new proposed location on the active Semex mining
area eliminated the need for many permits. He indicated that they are still restricted to building
in the non nesting season but are currently on track. On parallel path, Cal Am has proposed a
series of bore holes, which were requested by the State Water Resources Control Board and
intervening parties. A total of 12 bore holes are proposed and will be used for creating a 3-d
model of the underground aquatard. Some sites are controversial and are trying to work
through the details.
Vice President Burnett thanked Mr. Svinland for his report and his efforts.

MPRWA Meeting, 7/25/2013 , tem No. 1., tem Page 1, Packet Page 1
MPRWA Minutes Thursday, July 11, 2013

Monterey Peninsula Regional Water Authority
Regular Meeting Minutes - Thursday, July 11, 2013
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PUBLIC COMMENTS
President Della Sala open the floor to public comment. Tom Rowley, representing the Monterey
Peninsula Taxpayers Association indicated inaccurate information was distributed by the
Monterey Peninsula Water Management District regarding the water supply fee. He expressed
concern that working with the District could impact the Authority's credibility and reputation. He
then distributed a copy of an article published on July 5, 2013 in the Pacific Grove Times.
Nelson Vega requested an update regarding the CPUC settlement agreement and requested
opportunities for the public to remain involved. David Lifland expressed three major concerns 1)
sizing of the plant 2) holding capacity if the plants go offline and 3) if the public has contributed
over 75% equity in the plant he questioned why there will be no public ownership. Having no
additional requests to speak, President Della Sala closed public comment.
Vice President Burnett responded to Mr. Vega's question regarding the CPUC process and
expressed due to CPUC rules cannot give detailed information, but negotiations have been
going well. Second, the developed our policy position statement and his efforts are advocating
for a settlement agreement that is consistent with the position statement. When the settlement
is made public, the public and review and assess if he has been successful. He urged the
public to pay close attention to the position statement and direction as tonight is the opportunity
to give comments and engage as it is the guiding document in the settlement discussions.
President Della Sala spoke to Mr. Liflands question regarding facility size and reiterated that
the Authority is proposing a portfolio project approach and will not rely upon only one water
solution project. He then said that the Authority has been working in good faith with Cal Am but
it is not the Authority's position own the facility, but only to do what is necessary to deliver the
lowest cost water possible.

Rich Svinland, Director of Engineering for Cal Am responded to Mr. Liflands question regarding
holding capacity and stated that there is 21 million gallons of water storage currently available,
and Cal am has additional water tanks located around the peninsula in addition to the Seaside
basin aquifer. He assured the public that there are several days of water in reserve in the event
of power outage and could potentially supply water for up to a month if necessary.
Director Rubio spoke to planning for a larger facility in the event of drought conditions,
especially until the reliability of GWR is confirmed. He encouraged the physical plant to be
sized to accommodate the 9,000 acre feet, even if its reduced later as other projects come
online. President Della Sala shared that the Architectural students from Cal Poly provided the
idea of expandable capacity of the facility in the future and Cal Am might be considering.
APPROVAL OF MINUTES

1. June 13, 2013
Action: Approved

On a motion by Director Kampe seconded by Director Burnett, and carried by the following
vote, the Monterey Peninsula Regional Water Authority approved the minutes of June 13,
2013:

AYES: 6 DIRECTORS: Burnett, Edelen, Kampe, Pendergrass, Rubio, Della Sala
NOES: 0 DIRECTORS: None
ABSENT: 0 DIRECTORS: None
ABSTAIN: 0 DIRECTORS: None
RECUSED: 0 DIRECTORS: None

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AGENDA ITEMS

2. Receive Presentation, Discuss and Provide Direction to Staff Regarding the City of Salinas'
Efforts to Bring Additional Waste Water to the Monterey Regional Pollution Control Agency for
Use in the Ground Water Replenishment Project
Action: Approved

The City of Salinas staff presented to the Authority their efforts and future plans to collect
additional waste water from various city locations for treatment at the Monterey Regional water
Pollution Control Agency. Mayor Joe Gunter, Public Works Director Gary Peterson, and City
Manager Ray Corpus all presented.
Mayor Joe Gunter began the presentation by acknowledging that approximately 10, 000
residents of the City of Salinas work on the Monterey Peninsula and that a water shortage will
impact the economic vitality of the peninsula which will also directly impact the City of Salinas
so they are looking for ways to help.
Mr. Peterson noted that all of the future plans for the City cannot come to fruition without water
and that there up to a total of 9,950 acre feet of water available per year for GWR. He noted the
following sources available for source water:
Salinas Industrial waste water
Blanco drain
Storm water
Reclamation ditch
Secondary affluent
The City is rethinking how water moves through the community and what can be come of it.
The new process can an help address storm water needs, improve the processing of waste
water, create open space, remove chemicals from the environment and ultimately be able to
put cleaner water back into the Salinas river.
Additional projected benefits for the project: jobs protection and creation, revenue generation,
reinvesting in facilities, keeping rates down for the produce producers, NPDS Permit has
enormous amount of funding capital, good will, environmental stewardship, resource
management and balanced relationships.
City Manager Ray Corpus then spoke to a new project the City of Salinas has, in partnership
with Deep Water Desal. The project would be water reuse, recycling and a new water supply.
The project is estimated to generate upwards of 25,000 acre feet per year at a projected water
cost below $2,000 per acre foot. The City is also partnering with DWD for a power supply option
as DWD is also building data centers with a campus in Moss Landing regions which will require
affordable power costs.
President Della Sala thanked the City of Salinas for the presentation and restated that the
Authority was formed to find a solution to the water supply, but also to form a cooperative body
and that he welcomes th0e City of Salinas cooperative efforts. He said the projects appear to
be a win-win solution and is excited for the opportunity to help the Peninsula as well as the
Salinas valley.

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Director Rubio indicated that all were opportunities to be explored. Director Edelen thanked the
presenters for their cooperative spirit. Director Pendergrass said it was great that all were
proposing working together ,welcomes their vision and is in support of the proposed plan. He
requested Authority to encourage their efforts. Director Burnett commended the exploration and
particularly the storm water efforts, as it is a high priority from the State level. He suggested that
the Authority follow Salinas lead on storm water and make it a higher priority. Director Kampe
spoke to the presentation and talked to the water reclamation and the urban environmental
accords to be held in San Antonio, TX.
President Della Sala opened the item to public comment. Nelson Vega questioned how the
State Water Resources Control Board would regulate the reclaimed water and requested the
City of Salinas to allow the Peninsula to keep the 10 af of water that it provides to the Salinas
region. Having no additional requests to speak, public comment was closed.
Public Works Director Peterson responded by discussing the SESIP project, which takes
processed affluent and uses for irrigation as well as to keep salt water out of the basin. He said
that the growers are in control of that water and Salinas thinks they can help offset that
shortage of water that is due the growers. We need to make water available for that. Don't have
10K acre feet of water. The affluent is only processed in one location at the MRWPCA, which is
very costly.
3. Election of Officers for Fiscal Year 2013-14
Action: Approved

Director Pendergrass nominated Director Della for the position of President and was seconded
by Director Burnett. On motion and carried by the following vote, the Monterey Peninsula
Regional Water Authority elected Director Della Sala to Be President for Fiscal Year 2013-14 :

AYES: 6 DIRECTORS: Burnett, Edelen, Kampe, Pendergrass, Rubio, Della
Sala

Director Della Sala nominated Director Burnett for the position of Vice President and TAC Chair
and was seconded by Directors Kampe and Pendergrass. On motion and carried by the
following vote, the Monterey Peninsula Regional Water Authority elected Director Burnett to be
Vice President for Fiscal Year 2013-14 :

Sala


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Director Rubio nominated Director Edelen for the position of Treasurer and was seconded by
Director Kampe. On motion and carried by the following vote, the Monterey Peninsula Regional
Water Authority elected Director Edelen to be Treasurer for Fiscal Year 2013-14 :
Sala

Director Pendergrass nominated Director Rubio for the position of Secretary and was seconded
by Director Burnett. On motion and carried by the following vote, the Monterey Peninsula
Regional Water Authority elected Director Rubio to be Secretary for Fiscal Year 2013-14 :

Sala

4. Receive, Discuss, and Approve Revised Authority Position Statement and Provide Directions to
Staff on Outreach Opportunities for the Position Statement
Action: Approved

Executive Director Cullem spoke to the changes in the position statement and VP Burnett also
mentioned the reorganization of the reordering of the conditions into three categories as
described in the copy provided in the packet.
President Della Sala suggested minor edits, including one formatting issue. Director Rubio
requested that the statement from the last page which reads, "The position is adopted in
advance of the EIR. The authority has requested that the EIR evaluate a full range of plant
sizes up to and include the size necessary for full general plant build out." be moved to the first
page of the document.
Suggested by Legal Counsel Freeman, Director Rubio then requested a second amendment
that Cal Ams condition of support #1 to insert the words Based on current information before
the size of the facility is listed.
President Della Sala opened the item to public comment. Tom Rowley indicated that the
document is a great piece of work and will be useful in communicating the Authoritys position,
when many of the communities are un informed. He noted that there is confusion among the
general population about the current issues and requested that this document be reviewed
periodically. He then spoke concerning the EIR process and expressed concern moving
forward without a finalized EIR and urged the Directors to remain focused on the lowest cost
project. and indicated that it must be communicated to the public that the Authority is actively
putting constrains on Cal am to reduce the cost to the rate payers.
Nelson Vega suggested that the other two projects be eliminated from the document because
they are no longer active in the process. He also encouraged the Authority to indicate support
for the larger size facility unless another project can provide water at a reduced cost.

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David Lifland requested the document to reference the total amount of water that is needed
from all the projects. Having no further requests to speak, public comment was closed.
President Della Sala responded to comments about lowest cost and indicated that cost are
going to continue to change and the Authority needs to ensure they are moving on all fronts to
achieve the timeline.
Director Kampe indicated that it is a good workable draft, but had three concerns.
1) It should be expressed that if in sometime in the future another project proves to be
viable, then we are willing to address and support the second
2) Future needs: the statement that we have for future needs are truly not adequate fo
our future needs. Locally produced growth models and these plans do not account for
those plans. This moment is transitory and language should be used that is straight
forward for future growth needs as they are determined for state planning purposes.
3) The pricing - would like to make decisions based on the most economic outcome
however cost comparisons are not known because outcomes are not known , therefore
the Authority should chose the project that has the best probability of supplying for the
needs of the community.
Director Burnett responded to comments about adequate sizing of the facility and indicated that
within the document, requesting approximately 1700 acre foot of water above and beyond the
current demand 500 acre foot for economic rebound and 1200 acre foot for lots of record,
almost a 10% increase from the current supply.
Director Pendergrass spoke in support of the progress and choices the Authority has made
indicating the importance of having a project to show the State Water Resources Control Board.
Direct Rubio spoke again to the general policy statement. Suggested to ask the TAC or a
subcommittee to see which items are transferable to other projects and requested they be more
generic.
Director Burnett concluded by indicating this is a working document and by the end of the
month there will be more clarify after the settlement is finalized and, if necessary, we can take
up the item again.
On a Motion by Director Kampe, and Seconded by Director Rubio, and carried by the following
vote, the Monterey Peninsula Regional Water Authority adopted the Policy Statement as
amended to include the following two substantial changes:
1) Move the statement from the last page which reads, "The position is adopted in
advance of the EIR. The authority has requested that the EIR evaluate a full range of
plant sizes up to and include the size necessary for full general plant build out." to the
first page of the document.
2) Under Cal Ams condition of support #1, insert the words Based on current
information before the size of the facility is listed.
The Directors Discuss the motion. Director Pendergrass noted that this document is not final
and could again be revised. He is concerned that if too many conditions are imposed the
project might fail. Motion carries unanimously.

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AYES: 6 DIRECTORS: Burnett, Edelen, Kampe, Pendergrass Rubio, Della
Sala

The Directors then discussed outreach opportunities for this document and ways it could be
modified for distribution to the public.
Director Burnett suggested drafting opinion editorials to the locally circulated newspapers to
communicate the Authoritys position and progress made. He suggested the creation of four
opinion editorials;
1) Overview that outlines in general what we are trying
2) Financial considerations
3) Governance
4) Permitting and contingency plans
President Della Sala recommended publication after the settlement talks are solidified. Director
Burnett offered to draft and bring back to the Authority at the July 25
th
meeting.
President Della Sala opened the item on public outreach for public comment. Sue McCloud
indicated that the public would not be able to understand the position statement as is and
should be simplified. Suggested making a report card of what the Authority has accomplished,
but also include what the impacts will be to the average citizen and rate payer. It will be a way
to focus thoughts and to engage on what you are doing for them. Differentiate between the
different categories of rate payers. She also suggested having the Mayor of Salinas
endorsement as well as the Authoritys.
Tom Rowley indicated that any effort to clarify to the rate payers and tax payers what the
Authority is trying to do would be beneficial. He also encouraged incorporating how much rides
on the environmental process. This may be needed to be repeated in a variety of ways, and it
will pay dividends down the road.
David Lifland suggested waiting until after the CPUC settlement is completed, but come out
with a statement so the public knows where you have brought us. Having no further requests to
speak, public comment was closed.

The Authority Directors provided direction to staff to draft opinion editorials to include a focus on
what it will mean to the rate payer and decisions on how it will be disseminated and bring back
on the July 25, 2013 agenda.
Director Kampe followed up by saying that he likes the proposal and to be cautious with the
message. There is always a temptation to tell people everything we know, but it should provide
that which is most directly relevant to the reader. Do not make it a single guest editorial, but a
series and pick out the most critical points, elaborate all details in a simple way, then follow up
as necessary.

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5. Review, Discuss and Consider Execution of Legal Conflict Waiver Letter to Allow MPRWAs
Water Counsel, Brownstein Hyatt Farber Shcreck, LLP, to Represent the City of Carmel-by-the-
Sea with Respect to the Citys Efforts to Acquire Table 13 Water Rights (As Described in
SWRCB D. 1632 and Related Subsequent SWRCB Orders) from the Odello Ranch
Action: Approved

Della Sala introduced the item. Burnett gave a quick background, Mr. Eastwood owns in a trust
in Odello Ranch, and have legal rights to 200 acre feet of water and is proposing to make 85
feet of water available to users in the Carmel River Water Shed and noted that water rights can
usually be moved within the water shed. Mr. Eastwood had approached Carmel by the Sea for
usage but it is a complicated legal process, but the benefit would be that it would potentially
make water available before the desal project available, and the water provide would be lower
cost water than desal.
The water rights themselves could only be used for new usages within that boundary line. City
of Carmel recognizes the opportunity, and has sought out Russ McGlothlin, as an expert on
water rights, to retain for services to solidify this project.

Mr. McGlothlin also works for the City of Seaside and would need waivers from all agencies
that he represents. He identified potential areas of conflict, but no conflict actually arises at this
time. If one did arise, he would bring it to the agency, depending on the nature of the conflict
itself. Mr. Freeman noted that this is not unusual and that only a few legal counsels are
specialist in water rights and he is also familiar with regional issues.
President Della Sala opened the item to public comment. Tom Rowley spoke about a past
opportunity that the City of Monterey had to drill for water. Public comment was then closed.

On a motion by Director Edelen, seconded by Director Kampe and carried by the following vote,
the Monterey Peninsula Regional Water Authority authorized the Executive Director Jim Cullem
sign the waiver of conflict of interest for Russ McGlothlin.
Discussion of the motion. Director Rubio indicated that it would not be good to begrudge
Carmel the opportunity for water. He spoke in support of the item and in support of Mr.
McGlothlins capabilities. Motion passed unanimously
Sala

6. Adopt Resolution Memorializing the Approved Fiscal Year 2013-14 Operating Budget
Action: Approved

President Della Sala opened the item to the public and no requests to speak.


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On a motion by Director Kampe, seconded by Director Rubio, and carried by the following vote,
the Monterey Peninsula Regional Water Authority adopted Resolution 13-008 memorializing the
approved Fiscal Year 2013-14 operating budget:

Sala

ADJOURN TO CLOSED SESSION

7. Conference with Legal Counsel Existing Litigation, Gov. Code, section 54956.9 California
Public Utilities Commission, In the Matter of Application of California-American Water Company
(U210W) for Approval of the Monterey Peninsula Water Supply Project and Authorization to
Recover All Present and Future Costs in Rates, A.12.04.019, Filed April 23, 2012
Action: Provided Direction to Staff

The Authority Directors met in closed session, provided direction to staff and took no action.

ADJOURNMENT

ATTEST:

Lesley Milton, Clerk of the Authority Chuck Della Sala, President


Agenda Report

Date: July 25, 2013
Item No: 2.

06/12
FROM: Executive Director Cullem

SUBJECT: Receive Presentation, Discuss and Provide Direction on Adopted Position
Statement

RECCOMENDATION:
It is recommended that the Directors receive a presentation directed to the public about the
adopted Policy Position to assist with facilitating public understanding of the details.

DISCUSSION:
At the July 11, 2013 meeting, the Authority approved the attached Policy Position Statement to
clearly express what the Authoritys expectations are for considering any water supply project
and to guide Authority representatives engaged in settlement negotiations on Cal Ams
Peninsula Water Project application A.12-04-019 submitted to the CPUC in April 2012. The
attached presentation will be presented and discussed to assist with ensuring full public
understanding of the Position Statement which guides the Authoritys decision making
processes.

ATTACHMENTS:
Presentation Slides
Monterey Peninsula Regional Water Authority Policy Position Statement adopted July
11, 2013.

Policy Position Statement
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Ground Water Replenishment (GWR) - by Monterey Regional
Pollution Control Agency (MRWPCA)
Aquifer Storage (ASR) - by Monterey Peninsula Water
Management District (MPWMD) & Cal Am
Pacific Grove Small Water Projects
Salt Water Desalination (Desal) - by Deep Water Desal (DWD),
Peoples Moss Landing (PML), or Cal Am

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Competitive Economics
Public governance, accountability, &
transparency
Clear path to permits & construction as close
to CDO deadline of Jan 1, 2017 as possible
Includes contingency plans

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Financial Considerations

1. Cal Am must accept approx 50% public funds to reduce interest
rate and profit expenses

2. Cal Am must diligently seek lowest electricity rates for Desal

3. Surcharge 2 revenues may only be spent on actual construction

4. Cal Am must provide proof of ability to borrow State Revolving
Fund (SRF) financing and accept a public agency partner if
required by the SRF.
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Governance and Permitting consideration

5. Cal Am must agree to a Governance Committee for publically
accountable project oversight

6. Cal Am must agree to address concerns about intake well
permitting to include:

-Testimony of Hydrologist Tim Durbin (Dec 2012)

-Test wells and advanced geotechnical studies

-Working with public agencies to expedite/facilitate permits

-Clarifying if federal permits/approvals/ or NEPA
compliance are required
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Contingencies and Risk

7. Develop contingency intake water alternatives that:

-Do not include wells in the Salinas Basin

-Are developed concurrently with slant wells

8. Consider risks of coastal slant wells to include:

-Sea level rise and coastal erosion

-Vulnerability to earthquakes

-Vulnerability to tsunamis

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1. The 9.6mgd Desal only, or 6.4mgd Desal with 3.2 GWR, appears consistent with WA policy
of:

- Replacement of Carmel River water & replenishment of the Seaside aquifer

- Inclusion of lots of record, Pebble Beach allocation, and economic rebound

- Reduction of risk through a Portfolio approach

- Meets Coastal Commission preference for defined service areas and known build-out

2. Cal Am project is more advanced in planning stage than DWD and PML

3. Permitting agencies prefer subsurface wells and are unlikely to approve open water
intakes without first requiring slant well tests

4. Cal Am is the only Desal competitor to demonstrate an ability to finance a project

5. Cal Am has substantial corporate capital as well as access to Surcharge 2 and
SRF which could reduce project costs

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6. Cal Am has access to alternative sources of electricity at competitive cost and which are
subject to a better degree of Authority control than for DWD or PML

7. Final costs of water from the 3 competing projects are close, especially in light of the wide
range of variance in price estimates as noted by SPI

8. The DWD option involves high risk of failure or delay due to need for complex
relationships not yet established

9. DWD and PML carry risks associated with DESAL plant placement within the 100 year flood
plain

10. The CPUC is conducting the CEQA review for the Cal Am project with less likelihood of
successful court challenge than a local agency or private entity CEQA would experience

11. The draft Governance agreement ensures public agency decisions are made where
appropriate, deferring to Cal Am decisions best made by the private sector.

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Water Allocation decisions about water use are to be made locally

The EIR should evaluate a full range of plant sizes up to General Plan build-out,
though the Authority has only approved a maximum 9.6 mgd project at this
time

Should circumstances trigger the need, the Authority will request Cal Am, in
coordination with the CPUC, to initiate measures to match future water supply
with future requirements

The Authority supports Cal Ams collaboration with Pacific Grove to produce up
to 500 af of recycled, non-potable water per year

Given the degree of Authority oversight and measures taken to control project
costs, any cost caps should be calculated in a way to avoid project delay or
frustrate funding

The Authority recognizes that contingency planning is critical for source water
intake and brine disposal

The Authority approved the concept of a new water service connection fee
subject to further analysis as to how, and to what extent, fees can refund
project construction costs to current ratepayers

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1

POLICY POSITION STATEMENT

The Authority considered and adopted this position statement as direction to our staff and
consultants in preparing Public Utilities Commission (PUC) testimony due February 22
nd
, 2013.
This document was adopted at the January 31, 2013 Special Meeting, amended at the June
13 and July 11, 2013 Regular meetings.
This position was adopted, in advance of a completed EIR and in recognition that more
information will be forthcoming, because the PUC decision process is underway and the
Authority seeks to have a voice in that process. While the Project 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 size necessary for full General Plan build-out.
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 which
have public ownership, in addition to a desal project described here. Benefits of a portfolio
approach 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. As
such, 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, we
support ASR (and the associated pipeline infrastructure) moving forward even if desal is
delayed." The Authoritys position is consistent with the powers afforded to the Governance
Committee and as set forth in the Authoritys 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 public
transparency.
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 Peoples Moss Landing or
PML) as proposed meet these criteria. Therefore, none of the three projects as proposed
warrant Authority support. However, at this time Cal Ams proposed project appears to be
closest to meeting these four criteria. Cal Ams Project would earn our support if Cal Am
makes certain modifications. Consequently, the Authoritys support for the Cal Am Project is
subject to the following conditions:
FINANCIAL CONSIDERATIONS
2

1. Cal Am must accept a significant contribution of public funds consistent with the
parameters set forth within the Authoritys direct testimony submitted to the PUC on
February 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 likely
substantially in excess of the cost of water from the alternative projects. A significant
contribution of public funds will avoid such an unwarranted expense to Cal Ams rate
payers. At the May 23, 2013 meeting, the Authority approved the refinement of the
previously adopted position to define significant contribution of public funds to mean
that Cal Am must accept the contribution of public funds of approximately 50% of the
cost 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 blend of
53% equity and 47% debt. A significant public contribution (combined with Surcharge 2)
should be of sufficient size to reduce Cal Am's equity to approximately 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 to
purchasing power through a municipal electrical utility, generation of on-site power if
necessary, other public entity or other source of low-cost power.
3. Cal Am must agree to limit the use of revenue from Cal Ams Surcharge 2 to reduce risk
to Cal Am ratepayers in the event the Cal Am project does not move forward. For
example, Cal Am could agree only to use Surcharge 2 to fund lower risk parts and
phases of the project (such as only the construction phase after the issuance of a
Coastal Development Permit from the Coastal Commission) or could provide other
mechanisms of reducing the risk to Cal Am ratepayers.
4. Cal Am must show something in writing from the State demonstrating its ability to
secure SRF financing. Absent such a document, the Authority will work with the Water
Management District to secure SRF financing as public agencies. Cal Am must accept a
public agency partner for SRF purposes if necessary, even if doing so results in a
reduction in Cal Ams equity position.
GOVERNANCE
5. Cal Am must agree, upon mutually-acceptable terms, to form a Governance Committee
to provide publicly-accountable oversight of the project.
PERMITTING & CONTINGENCY PLANS
6. To promptly address concerns pertaining to Cal Ams proposed intake wells, Cal Am
must:
a. Address or cause to be addressed all issues raised in the December 2012 Tim
Durbin testimony;
b. Proceed with the planned test wells and any other advanced geotechnical work
to support the proposed intake wells as soon as practically feasible;
3

c. Collaborate with local public agencies to advance permitting efforts with other
responsible agencies, including the California Coastal Commission;
d. Seek to clarify whether the installation of Cal Ams intake wells will require
approval from any federal agency, which would, in turn, require NEPA
compliance; and
7. Continue to explore and advance alternative intake strategies as a contingency if Cal
Am's proposed intake wells prove legally or technically infeasible.
a. Cal Am must fully develop a contingency plan or plans and implement that plan
or 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 slant
wells.
8. Cal Am must address questions about sea level rise and coastal erosion with respect to
the placement and longevity of their proposed slant wells. Coastal sands are also prone
to liquefaction in seismic events and coastal facilities are susceptible to damage from
tsunami events as well.
If Cal Am meets the above conditions, the Authority conditionally supports the Cal Am Project
because:
1. Based on current information, Cal Ams desal project size (9.6 MGD desal only or 6.4
MGD desal with GWR) appears to be consistent with the Authoritys position of focusing
on water for replacement and replenishment including lots of record, pebble beach,
allocation entitlement, and economic rebound and accommodates the policy desire to
pursue a portfolio of projects to meet the needs of our communities, thereby reducing the
risk associated with any project failing 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 while projects with an unknown or extensive service area as
involving a more difficult review. Cal Ams project would involve this easier review while
DWD would involve a more difficult review.
2. Cal Ams project, DWD project and PML project are all in the planning stage although Cal
Ams project is the most advanced according to both SPI and the TAC.
3. Permitting agencies will require the least environmentally harmful feasible alternative for
source water intake. The Coastal Commission states that a subsurface intake (such as Cal
Ams proposed slant wells) involve an easier review while an open-water intake involves
a 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 open
water intake). It is unlikely that open water intake will be permitted unless test slant wells
have shown subsurface intake to be infeasible. Any project must therefore include a test
slant well. Only Cal Ams project proposes to do so.
4. Only Cal Am has demonstrated ability to finance a project. Their financing plan is
comprised of four different sources of capital; short-term construction financing, Surcharge
2, SRF, and equity. Neither of the other two projects have a detailed financing plan and
4

neither 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 financing
but only for their project. Surcharge 2 is only permitted for a Cal Am facility. SRF is unlikely
to be available for open water intake.) We propose to include a significant public
contribution as a fifth source of capital. Doing so would significantly lower the Net Present
Value (NPV) cost of the project.
5. Cal Am has the capital necessary to complete the permitting of its project. Neither of the
other projects have demonstrated this ability.
6. Cal Am has indicated the potential for securing electricity at $0.087 per kwh and could
possibly purchase electricity at a lower rate through a municipal electrical utility formed by
a local public agency. DWDs proposed municipal electrical utility involves the City of
Salinas 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 water
from the DWD and PML projects are close in amount presuming a significant public
contribution is made to lower the financing costs of the Cal Am Project and that Cal Am
secures electricity in the $0.08-0.09 per kwh range.
a. SPI estimates that Cal Ams production cost would be $2,310/$3,015 per acre foot
for the larger/smaller desal projects respectively if the cost of financing is brought
down to 4% and the cost of electricity is reduced to $0.087 per kwh. This is within
about 10% of the unit production costs of DWD ($2,100/$2,670) and is largely due to
the increased cost of slant wells.
b. The range of these estimates is minus 30% to plus 50%. The TAC recommends the
Authority focus its attention on the ranges.
c. For the larger plant, the range of the cost per acre foot of Cal Ams project with
Authority conditions is $1617 to $3465. The corresponding range for DWD is $1470
to $3150.
d. For the smaller plant, the range of the cost per acre foot of Cal Ams project with
Authority 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 purchase
agreement with Cal Am. The Authority is not aware that any of these relationships have
been established. This unresolved complexity leaves more room for possible delay or
failure. In contrast, Cal Ams organization structure is described as good by SPI.
9. Both DWD and PML will likely face questions from permitting agencies regarding the
placement of the desalination plant in relationship to the 100 year flood plain and sea level
rise. It is unclear how either project will respond to such questions.
10. The CEQA review for Cal Ams project is well underway and is being handled by the
Public Utility Commission as the lead agency. Any court challenge to the CPUCs EIR
must be made by a petition directly to the State Supreme Court (very few petition are
granted), reducing the legal risk of a challenge and also reducing the likelihood of project
delay 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 a
5

project level such that no further environmental review would be required if the Cal Am
project fails in whole or part.
11. The draft Governance Committee agreement strikes the right balance of ensuring that the
most important decisions are either made by public agencies or are fully informed by
recommendations from public agencies. The draft Governance Committee agreement
avoids inserting the public agencies into decisions that are judged to be better made by a
private entity.

ADDITIVE CONSIDERATIONS
Water Allocation. The proposed project is sized based on an estimate of the water needed for
replacement, replenishment, economic rebound, Pebble Beach allocation entitlement, and lots
of record. The estimate has been established for project design, engineering, and financial
planning purposes. The Authority supports this size for this purpose. Allocation decisions about
the use of the water should not be made by the PUC but instead should be made locally. The
Authority supports the MPWMDs proposal to initiate a process, in collaboration with the
Authority and other public agencies, to develop proposed amendments to MPWMDs water
allocation ordinances to address the allocation of water obtained from the Project. Further, the
MPWMD, in collaboration with other public agencies, should seek to update the estimate of the
added capacity necessary to meet the General Plan build-out projections for the Peninsula
jurisdictions. The Authority recognizes that future circumstances may trigger a need for review
of future water supply needs for the Peninsula to either expand or develop a new water supply
to avoid future pending shortage situations. The Authority will request Cal Am to initiate a
process to address the adequacy of the water supply to meet the future service obligations of
Cal Am customers as defined by the California Public Utilities Commission.
Pacific Grove Non-Potable Water Projects. The Authority supports Cal Ams inclusion in its
next general rate case application proposals for Cal Am to collaborate with Pacific Grove in the
development of its projects to generate as much as 500 acre-feet of recycled, non-potable
water per year.
Project Cost Control. The Authority is working to reduce the Projects ratepayer impacts
through a significant public contribution, appropriate use of Surcharge 2, the Governance
Committees review of the RFP process, and the Governance Committees value engineering
process. Any cost cap imposed on the Project should be reasonably calculated to avoid
frustrating project financing or causing project delay.
Contingency Planning. As described in condition #6 above, the Authoritys primary concern
regarding contingency planning involves contingencies for the source water intake. We also
recognize 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 of
the concept of a new water service connection fee with the reservation of seeing further
information and study to refund the connection fee costs for possible integration.

Agenda Report

Date: July 25, 2013
Item No: 3.

06/12

SUBJECT: Receive Report, Discuss and Provide Direction on Draft Scope of Services for
Public Outreach Consultant

RECCOMENDATION:
Staff is recommending that the Authority review the attached draft Scope of Services for a
public outreach consultant to facilitate the preparation and coordination of information to keep
the public fully informed on the Peninsula water supply problem in general and of the activities
of the Water Authority in particular.

DISCUSSION:
At the April 25, 2013 meeting, the Authority authorized the expenditure of up to $20,000 for
Speakers Bureau Support as part of the Public Outreach budget for FY 2013-2014. The
support was to include:
Research
Develop brochure
Key points
Cost/benefit analysis
Ratepayer impacts
Significant issues and concerns

Additionally, following discussions with the TAC on July 15, 2013 and with the Monterey
Peninsula Water Management District Public Outreach Committee on July 9, 2013, it has
become apparent that in order to facilitate the above items, the Authority needs to obtain the
services of a local Public Outreach consultant. Staff has prepared and included a draft scope of
services for public outreach and is recommending that the Authority follow the City of Monterey
Informal bid procedures for selection of services, which requires a minimum of three (3) informal
bids.

ATTACHMENTS:
Draft Scope of Services for Public Outreach Services

Cullem- revised 22 Jul 2013
1

Scope of Services for Public Outreach


The deliverables for this scope of work are:
- Develop a master plan for Public Outreach and Information
- Work with Directors and staff on identification of issues and message development
- Establish and maintain relations with the media and prepare bi-monthly opinion editorials
- Prepare articles for Member City Newsletters twice annually
- Prepare and maintain power point presentations for use by staff and Directors
- Prepare, produce and maintain handout materials for use by staff and Directors
- Prepare and maintain a list of Frequently Asked Questions (FAQs) with answers
- Assist with layout, content review, and consistent messaging on Water Authority Web
site
- Recommend Public Outreach options with regard to social media
- Coordinate all Public Outreach & messaging with Monterey Peninsula Water
Management District and Monterey Regional Water Pollution Control Agency via the
Public Outreach Committee
- Monitor Water Authority meetings
Agenda Report

Date: July 25, 2013
Item No: 4.

06/12

SUBJECT: Review, Discuss and Provide Direction on Draft Opinion Editorials for Future
Publication

RECCOMENDATION:
It is recommended that the Authority approve the outline for the Opinion Editorial articles for
publication to be prepared by Director Burnett and Executive Director Cullem.
DISCUSSION:
At the July 11, 2013, Authority meeting the Directors requested a review of proposed Opinion
Editorial articles being prepared by Director Burnett and Executive Director Cullem.
The first Op-Ed will provide an overview of the water situation and cover the following topics:
Introduction, Background, The Problem, Public Control, Cal Ams Solution, Water Authority
Position and future articles.
The second will covers the Policy Position Statement as follows: Background, The MRPWA
Policy Position Statement, Eight(8) Conditions of Approval, Conditional Approval of Cal Ams
Project, Additive Considerations and Future Articles.
Drafts of the first two Op-Ed articles are in preparation and draft copies will be available at the
meeting.

Agenda Report

Date: July 25, 2013
Item No: 5.

06/12
FROM: Authority Clerk

SUBJECT: Conference with Legal Counsel Existing Litigation, Gov. Code, section 54956.9
California Public Utilities Commission, In the Matter of Application of California-
American Water Company (U210W) for Approval of the Monterey Peninsula
Water Supply Project and Authorization to Recover All Present and Future Costs
in Rates, A.12.04.019, Filed April 23, 2012

RECCOMENDATION:
There is no written report for this item.


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