TAC MPRWA Agenda Packet 03-18-13

Agenda
Monterey Peninsula Regional Water Authority (MPRWA)

Technical Advisory Committee (TAC)
Regular meeting

2:00 PM, Monday, March 18, 2013
Council Chamber
Few Memorial Hall
Monterey, California

CALL TO ORDER

ROLL CALL

PLEDGE OF ALLEGIANCE

REPORTS FROM TAC MEMBERS

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 TAC and which is not on the agenda. Any
person or group desiring to bring an item to the attention of the Committee may do so by
addressing the Committee during Public Comments or by addressing a letter of explanation to:
MPRWA TAC, 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. February 25, 2013

2. March 4, 2013

AGENDA ITEMS

3. Receive Report on First Governance Committee Meeting (Burnett)

4. Receive Report from Cal-Am Water Regarding Progress in Meeting Authority Adopted
Conditions for Monterey Peninsula Water Supply Project (Cal Am Rep Bowie)

5. Receive Report From Monterey Regional Water Pollution Control Agency Regarding The
Ground Water Replenishment Project (Israel, Stoldt)

6. Discuss and Review Benefits and Disadvantages of Private Investor-Owned vs. Public
Ownership of Desalination Facilities (Riley)

7. Approval of Meeting Dates Through June 30, 2013 (Milton)

ADJOURNMENT

Created date 03/15/2013 1:57 PM Monday, March 18, 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
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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.

M I N U T E S
MONTEREY PENINSULA WATER AUTHORITY (MPRWA)
TECHNICAL ADVISORY COMMITTEE (TAC)
Regular meeting
2:00 PM, Monday, February 25, 2013
580 PACIFIC STREET
CITY COUNCIL CHAMBERS
MONTEREY, CALIFORNIA

Members Present: Huss, Israel, Riedl, Riley, Seigfried, Stoldt, Burnett,

Members Absent: Narigi

Staff Present: Executive Director, Legal Counsel, Clerk

CALL TO ORDER

ROLL CALL



Chair Burnett reported on a meeting he attended with the California Coastal Commission and
Cal Am to discuss permitting issues for the Monterey Peninsula Water Supply Project test
wells. They also discussed the process of for obtaining parallel permits and requested that the
Authority host monthly meetings to stay informed about the project application status. He
indicated that several action items resulted from the meeting for Cal Am to follow up with. Chair
Burnett also took the opportunity to recognize two staff members for their efforts toward
submitting testimony to the California Public Utilities Commission prior to the deadline on
February 22, 2013.

PUBLIC COMMENTS

Chair Burnett opened the item to public comments for items not on the agenda and had no
requests to speak.
APPROVAL OF MINUTES

1. February 4, 2013

On a motion by Member Stoldt seconded by Member Riley and carried by the following vote,
the Monterey Peninsula Regional Water Authority TAC approved the minutes of February 4,
2013 as amended.

AYES: 7 DIRECTORS:
Huss, Israel, Riedl, Riley, Seigfried, Stoldt, Burnett,

NOES: 0 DIRECTORS: None
MPRWA TAC Meeting, 3/18/2013 , tem No. 1., tem Page 1, Packet Page 1
MPRWA TAC Minutes Monday, February 25, 2013

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ABSENT: 1 DIRECTORS: Narigi
ABSTAIN: 0 DIRECTORS: None

AGENDA ITEMS

2. Receive Report and Discuss Outside Agency Actions Regarding the Monterey Peninsula Water
Supply Project

a. Monterey County Board of Supervisors - (Burnett)

Chair Burnett reported that the Monterey County Board of Supervisors supported and adopted
the Authoritys position statement as well as discussed the issue of the statement of principles.
The Governance committee document was unanimously approved and the Board appointed to
the governance committee the primary representative Supervisor Potter and an alternate
representative the Supervisor from the Salinas region. Chair Burnett acknowledged it as an
important step to have a united voice with all six member city mayors and all five supervisors to
have the same stance. The Board endorsed the statement of principles in general, but did not
formally adopt the position statement as their own due to pending litigation and settlement
agreement with Cal Am. Chair Burnett opened this item to public comment, and having no
requests to speak, turned to the next report from Member Stoldt.

b. Monterey Peninsula Water Management District - (Stoldt)

Member Stoldt reported on the Monterey Peninsula Water Management District Board meeting
on January 30, 2013 and approved similar actions including stronger support for Ground Water
Replenishment, and pending the identification of non substantive changes, approved the
Governance document. MPWMD re-endorsed the concept of a public contribution as well as
several other financial suggestions. The Board voted 6-0, under further consideration voted 4 to
2, to oppose surcharge two, and continued to endorse further evaluation of backstops. The
issue of project sizing, a general statement of support, was deferred to a special meeting on
February 12, 2013 where the Board agreed with the demand forecast and project sizing, with
and without GWR.

Chair Burnett opened the item for comments from the public. Sue McCloud spoke to a letter
published in the Monterey Herald opinion page from Member Stoldt, thanking him for making a
complicated project more understandable to the public. She then suggested publication of the
same Article in the Salinas Californian. Nelson Vega questioned why Member Stoldt did not
include the costs per acre foot because he thinks the public is only concerned about the cost
and if the project can be built He then requested that the Authority help Cal Am attain the source
water need for the MPWSP project. With no further requests to speak, Chair Burnett closed
public comment.

c. Monterey Regional Water Pollution Control Agency - (Israel)

Member Israel deferred to report on this item until Agenda Item 4.

d. Monterey Regional Waste Management District Presentation of Availability of Landfill Gas for
Power Generation (W. Merry)

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William Merry from the Monterey Regional Waste Management District made a presentation on
efforts to make the landfill gas (LFG) to energy project viable enough to sell power to a
desalination facility. The District has been producing energy through the landfill gas to energy
program for 30 years. Mr. Merry discussed that the LFG program is an economic benefit for a
small to medium landfill however there have been many lessons learned over the course of the
project. He observed that when the developer began the project in 1983, energy prices declined
immediately even though PG&E had forecast a rise in prices, and the developer sold the LFG
project to the District. In the beginning years of operating the project, revenues fell short of
operating expenses. Lesson learned: be critical of forecasts.

Mr. Merry then discussed different types of power purchase agreements and optimal markets to
sell their converted power and indicated that PG&E has a strangle hold on small biomass
generators adding new generation to the grid. That would be a disincentive to go forward with
energy production, but an agreement with the MPWSP project would be an over the fence or
direct access agreement and would eliminate most or all PGE fees. He also indicated that the
District currently has the opportunity to sell gas as boiler fuel and in the future is considering
increasing generation of energy to 7 megawatts. Mr. Merry also explained that the District is
exploring the option to turn the landfill gas into compressed natural gas to fuel vehicles and
currently has an informal agreement with the MRWPCA to explore options for converting biogas
to CNG to run vehicles on the alternative fuel. Mr. Merry further explained that efforts to
diversify opportunities to utilize landfill gas is a redundancy that small producers can use to stay
profitable. He encouraged the Authority to urge Cal Am to consider the District energy as a way
to close the loop by buying local energy.
Items/challenges that would need to be addressed if the MPWSP would consider Purchasing
power from the District:
The district is actively engaged in making decisions for the next 10 to 20 years. They
need to use the LFG productively or flare it off.
Addressing the imbalance: if the demand is higher than the supply? On a growth scale.
They are producing 24/7. Tolerance for supply changes
Identification of the redundancy requirements
Identification of the demand including: continuous, average demand; maximum; and
seasonal
Identification of the tolerance for electric power supply to be down (in the event of a
PG&E mandated shut down, or Natural Disaster)
What is facilitys power redundancy requirements/plan
What is facilitys anticipated down time?
What would MPWSP be willing to pay for power on a kilowatt-hour basis? District will
need to be paid at market rates
When would MPWSP wish to negotiate, sign a power sales agreement?

Mr. Merry answered questions from the TAC. Member Siegfried asked if the District had the
ability or would consider selling the LFG in raw form to the desal facility instead of processing it
at your facility, so that the facility would be able to use that heat generated during combustion
to make the process more efficient. Mr. Merry responded by discussion of the supply source
and lifespan of the landfill. Regulations from the state are requiring greater diversion from the
landfill. On the waste water side, there is a push to develop power generation through solids.

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Over the last 5 to 7 years, the generation of in-District (ie, from the Peninsula) waste to the
landfill has decreased by 35% which is for a variety of reasons, including a fundamental shift by
consumers to buy smaller and construction and demolition waste has been repressed from the
economy. Contracts for bringing waste from other areas is making up for lost tonnage and
revenues and even with those contracts the District has an anticipated lifespan of 150 more
years. He indicated that the District property sits adjacent to the PG&E natural gas pipeline
serving the Peninsula and within a year or two may have the ability to feed natural gas into the
pipeline for sale.
Member Stoldt asked about proven reserves for landfill gas. Mr. Merry indicated that an
average forecast for LFG was thought to be 20 years, 30 to 40 years in a drier environment.
The District, however, is still generating gas from the part of the landfill that was filled 50 years
ago. In future years, they are looking at minimizing what is going into a landfill, but collection of
landfill gas will continue for the next 20 to 40 years.
Mr. Merry responded to the question about current power sales costs and indicated that power
the District sells as renewable in the bay area is making 8.5 cents per kilowatt-hour, whereas
PG&E is paying 7 to 8 cents. Two years ago renewable power could be sold for 10 cents/kw-hr,
or more, but depends on markets as solar and Wind overbuilt. Over the fence agreements are
advantageous because there are fewer fees and processing charges.

Chair Burnett opened for public comment. Libby Downey questioned the market rate of power
and how Marina Coast was able to get a better rate. She expressed frustration at the statement
made by Cal Am Representative Rich Svinland that the MPWSP would not purchase power
from any company outside of PG&E. Nelson Vega questioned the reliability of the power in the
event of a disaster and also questioned the financial ability to weather price fluctuations. With
no further requests to speak, Chair Burnett closed public comment.

Mr. Merry responded to Mrs. Downey, indicating that the District did hold preliminary
discussions with Marina Coast about price, but discussions did not proceed to the point of
agreeing on a price before other more pressing matters demanded attention at the MCWD. He
also clarified to her that the District will always look to make decisions that are in the best
interest of the residents, businesses and member agencies of the District. Speaking to Mr.
Vega's comment about reliability, if they were to form an agreement there would be
redundancies built into the system such as a contract with PG&E, the ability to tap into the
natural gas pipeline, or other options.

Mr. Merry urged the TAC to consider if purchasing power at the lowest possible cost was a
prime objective, even if it was not renewable power; and further, if it was important to buy
renewable power, was it a primary objective to purchase the power from the District, as
opposed to buying renewable power from a broker.

Chair Burnett clarified that one of the Authority adopted positions includes having direct
decision making ability with regard to the procurement of all non PG&E power. The pending
Governance committee could work together with the District on this issue.

3. Report from Cal-Am Regarding Test Well Design, Development and Permitting

Cal Am Representative Richard Svindland updated the TAC regarding the test well design,
development and permit progress indicating that there is a meeting scheduled with the

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company Semex this week to finalize their permission to proceed by accepting the operation
will not affect their ability to harvest sand. This permission is needed to be able to submit for
permits before the Coastal Commission as early as August, and as late as October, in time to
construct prior to the snowy plover nesting season.
Mr. Svindland reported that design is under way, using the first presented design and modifying
for the current site. The process of procuring the test well has begun with intention to drill
November 1, 2013. This schedule does include the process of obtaining the permits from City
of Marina. He then answered questions from the TAC.

Chair Burnett opened the item for public comment, having no requests to speak, closed public
comment. He requested at the next TAC meeting that Cal Am provide an update on all eight
conditions the Authority has approved.

4. Receive and Discuss Update on Ground Water Recharge, Aquifer Storage and Recovery, and
Pacific Grove Small Water Projects

Member Israel reported that MRWPCA approved a budget for Groundwater Replenishment at a
Special MRWPCA Board meeting on February 11. He also noted that the Pollution Control
Agency has been analyzing the downward wastewater flows trend, and projections for flows in
different scenarios, including combining other water sources. The PCA still anticipates the
project being completed on schedule by December 2016. Member Israel expressed gratitude
for the article in the Newspaper from the Water Management District as well as from the
Authority.

Member Israel then expressed concern that over the last year there has not been a significant
amount of money or effort on public outreach as budget approval was delayed. With this type
of project there are many issues and misconceptions, many being factual information,
competing with opinion and interpretation. The MRWPCA is intending to ramp up efforts
including scheduling trips to Orange County to work with staff that has a great outreach
program which they can learn from. Member Israel answered questions from the TAC.
Chair Burnett offered that as the public outreach effort begins, please look to Mayors and
Authority as a partner expressing the idea that the message and the messenger are important.
The Mayors have been unanimous in support of GWR and they should be used as a resource.
Member Riley expressed concern about the Authoritys future decision points undermining the
commitments of the PCA in the future. The TAC discussed the ability of the project to proceed,
the commitments that have been made and the potential hurdles that could obstruct the
process.

Chair Burnett opened the item to public comment. Nelson Vega spoke to the cost of water, and
the unresolved issue of source water. He requested that the TAC encourage the Authority to
request an extension to the Cease and Desist Order deadline and look at the most cost
effective way to get water. Jim Cullem spoke to and provided an article from the MIT
Technology Review Magazine indicating concerning points include the availability of funding for
public outreach and encouraged the Authority to be more proactive and focus on the public
outreach and the potential for GWR, with the yuck factor. Suggest we preempt with good
examples of effective GWR campaigns so people understand the water cycle before it is placed

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in the Seaside Aquifer. With no further requests to speak, public comment was closed.

Burnett responded that the Authority is working to re-engage the State Water Board on having
a periodic meeting regarding the CDO but clarified that they Authority would not be requesting
an extension at this point, but engaging now with the Board will allow them to see the progress
the region is making which will only help if they do ask for an extension in the future. The TAC
discussed optional outreach methods and tours that would help engage and educate the public
and local agencies on this issue, but refocused to say the goal is to focus efforts and keep
things moving at this time.
Member Stoldt then reported on the Monterey Peninsula Water Management Districts ASR
project indicating that six of the eight wells have been constructed. The Third and fourth well
are owned and operated at the Seaside Middle school and will be completed during summer
vacation. Wells five and six are part of the application for MPWSP. Permits will be restructured
to accept water from anywhere instead of a specific source. There is an eight well total capacity
at this time, and could potentially increase to 10 in the future. Additionally the WMD is
expanding a back flush pit for the third and forth site. He reported that funding is strong, and
progress is strong. Chair Burnett opened the ASR discussion for public comment, and having
no requests to speak, closed public comment.

Israel made a clarifying statement that bringing in more stormwater to the sewer system would
be beneficial for projects, such as the Groundwater Replenishment and other recycled water
projects. He also commented on the role of storm water indicating the PCA is exploring the
use of the winter water flows and that Pacific Grove has been using grant funding to divert
storm water from the bay, and wants to develop projects to help encourage the community to
divert storm water flow from the bay back to the PCA.

5. Receive Testimony Submitted to California Public Utilities Commission February 22, 2013
Deadline for Application (A- 12-04-019) Based on the MPRWA Approved Position Statement
(Information Only)

Burnett spoke to the item and indicated it was for information only then opened the item to the
public for comment. Having none, closed public comment.
Executive Director Reichmuth clarified the agenda items for the next meeting. Having no further
business to come before the TAC, Chair Burnett adjourned the meeting.

ADJOURNMENT

Respectfully Submitted, Approved,

Lesley Milton, Committee Clerk President MPRWA

M I N U T E S
MONTEREY PENINSULA WATER AUTHORITY (MPRWA)
TECHNICAL ADVISORY COMMITTEE (TAC)
Regular Meeting
2:00 PM, Monday, March 4, 2013
COUNCIL CHAMBER
FEW MEMORIAL HALL
MONTEREY, CALIFORNIA

Members Present: Israel, Narigi, Riedl, Riley, Siegfried, Stoldt, Burnett

Members Absent:

Huss

Staff Present: Executive Director, Legal Counsel, Clerk

CALL TO ORDER

ROLL CALL



Chair Burnett invited reports from TAC members and had no requests to speak.

PUBLIC COMMENTS

Chair Burnett invited public comments for items not on the agenda and had no requests to
speak.

APPROVAL OF MINUTES

1. February 25, 2013
Action: Continued

TAC Members Israel and Stoldt requested updates to the document for clarification and TAC
agreed to continue this item until the next meeting to allow for incorporation.

AGENDA ITEMS

2. Receive Report Regarding Pacific Grove Small Water Projects and Make Recommendations As
Necessary (Frutchey)
Action: Received Report and Discussed

Pacific Grove City Manager Tom Frutchey report on the current status of the Pacific Grove
Small Water Projects indicating a full project description was submitted to the California Public
Utilities Commission as well as intervener testimony regarding Cal Ams application (A-12-01-
019). He then indicated that the project is 20% through the design engineering phase and has
MPRWA TAC Minutes Monday, March 4, 2013

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applied for and received 3 grants to progress the project to 40%. Grants received total $2.6
million with matching funds of $975,000.

Mr. Frutchey then reported that financing options are open. They are working with Cal Am as a
partner on these projects, have had preliminary discussions with the Monterey Peninsula Water
Management District, as well as exploring SRF funds and additional grants. With regard to
storage all projects seem to have challenges and they are still exploring options. Water rights
also are being explored and discussions are occurring with the Pollution Control Agency as well
as meetings with Land Watch and The Farm Bureau. Staff will continue working with other
agencies and stakeholders to make these projects a reality. Mr. Frutchey then answered
questions from the TAC.

Member Riley requested clarification on the partnership with the City of Monterey. Mr. Frutchey
explained the Neighborhood Improvement Program is looking to address the storm water flow
that is feeding into the Areas of Biological Significance (ASBS) which flows through the David
Avenue reservoir area. Chair Burnett requested clarification if this project is identified as a
project alternative by the CPUC, what the direction to Cal am would be. Mr. Frutchey first
clarified this would be a NON-potable water purchase agreement and indicated that this would
replace current local potable water demands.

Chair Burnett questioned the status of the CEQA process. Mr. Frutchey responded that it is not
resolved at this time and that the CPUC is the potential lead agency. Chair Burnett then
questioned the impact of flows with regard to the Ground Water Replenishment project (GWR)
to which Mr. Frutchey responded all sewage flows will have to go to the MRWPCA however to
what extent that flow is expected to be placed in the aquifer and how much less water will go to
the PCA is dependent on a series of factors which he can provide at a later date.

Chair Burnett opened the item to public comment and having to requests to speak, brought the
item back to the TAC. He then reminded the TAC that the Authority has endorsed the Local
Water Projects in principle, but have not yet gotten into the level of detail.

Member Narigi questioned the price of water produced by these projects. Mr. Frutchey said that
two of the projects appear to be less costly than the cost of potable water, because they treat
storm water and dry water flows, but the cost avoidance is the overall advantage and will bring
down the costs. The cost avoidance is what makes the projects financially attractive.
Mr. Frutchey closed by expressing appreciation to Cal Am for all their assistance and informed
the TAC that he considers it a positive partnership. The TAC did not take any action at this time.

3. Receive Report Regarding Monterey Regional Water Pollution Control Agency Feb 27, 2013
Meeting Regarding The Ground Water Replenishment Project (Israel)
Action: Received Report and Discussed

Member Israel reported on the CEQA planning workshop hosted by the MRWPCA with a
purpose for preplanning to understand the issues to integrate within, in addition to talking about

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the series of feasibility options. Needed further input to understand what was necessary to
address. The conclusion of the meeting was that if new flows could be identified it would resolve
many future challenges of the parties and bring in enough water for the GWR that works around
the water rights issues. The next step is to pass on a summary to the consultants, and GWR
project team. The first phase has an anticipated completion by June 2013 and CEQA done by
second quarter of 2014. CEQA work has been awarded to the local firm Denise Duffy and
Associates. Also discussed was to develop Memorandum of Understandings to show and
document progress in advance of formal agreements and to discuss eventual water rights.
Member Israel then answered questions of the TAC.

Member Stoldt agreed that it was productive meeting but acknowledged that a few issue still
need to be addressed. Member Burnett questioned a comment made by a rep at the meeting to
the effect that the City of Salinas might want to be compensated in addition to the reduced
liability. Burnett questioned what other sources of waste water can they be looking at. Member
Israel responded by speaking to the increasing role of storm water and how it is considered a
liability. The PCA has capacity due to conservation efforts and had in the past rejected storm
water but acknowledged that it might be advantageous to consider it as an option. Storage is
the key, and certainly the GWR can use it in the winter time. No other use for it unless you can
find an alternative storage capability.

Executive Director Reichmuth questioned if the MRWPCA has considered splitting GWR into
two different flow options. Member Israel indicated it will be addressed in the feasibility study
and noted that some of the different sources may be problematic and not cost effective.

Member Riedl questioned if the Salinas River water is a potential source. Member Israel
affirmed but indicated there are water rights and permitting issues associated and it would be
difficult due to implement due to the short time frame.

Member Siegfried questioned the phasing of development and indicated that the Department of
Public Health requires experience with GWR before a District can initiate flow pipe to pipe. He
then questioned how much experience the MRWPCA has, then questioned if the issue has
been addressed where specific elements are picked up while the water is in the aquifer.
Member Israel indicated the MRWCPA has addressed the safety and the technological issues
but their major concern is the ability to move along as quickly as the public is comfortable with.
The technology is proven and there is 30 years of demonstrated ability in the Orange County
area.

Chair Burnett opened the item for public comment and had no requests to speak.

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a. Discuss Criteria Governance Committee Shall Use in Making Ground Water Replenishment
Recommendation as Specified in Category A.1 of the Governance Committee Agreement

Chair Burnett introduced the item indicating that this will be just an initial discussion and will be
brought back before the TAC as it progresses. He requested that the TAC identify the criteria
which the Governance Committee should adopt for making GWR decisions and how to work
toward those criteria. He identified the following items which need to be addressed or resolved:
cost, timing, completion of process, public outreach (perception) and water rights. The final
decision will not be made for a number of years; however a preliminary decision will be needed
within two years to have the project completed on schedule.
Executive Director Reichmuth encouraged making public outreach a much larger focus. In order
to advance the issue of reuse of treated waste water, substantial outreach should be completed
by all involved agencies, prior to the project coming online. To date agencies have only focused
on the desalination component and not the process for final water. It is time to shift the focus.
He recommended that the MRWPCA make a presentation to the Authority Directors at the
March 14
th
, 2013 meeting.
Member Narigi encouraged there be more communication about the quality of the finished
product as it will be the highest concern from the public. Member Riedl encouraged stable
pricing over the long term, and assurance that the project should be robust so it is not affected
by drought or water source fluctuation.
Member Siegfried spoke to the public outreach comments and indicated from experience it
takes at least 10 years to conduct proper outreach that will change behavior. However, there
are factors playing in our favor: desperation, as well as other successful examples. He then
suggested separation of the outreach of desalination from the GWR processes. He then
questioned why the GWR project will determine the desalination facility sizing.

Chair Burnett opened the item to the public for comments. Ron Cohen expressed concern over
GWR that we are pushing the edge of technology but the problem is that we are desperate for
water and any missteps are going to cost all of us dearly, with no reserve to make mistakes.
Cautioned the Authority to recognize not only the yuck factor, but also if mistake is made, such
as pathogen eradication is not complete, we could find ourselves subject to an outcry with using
the treated water. Cautioned if this is an essential part of the strategy for replenishment. With
no further requests to speak, Chair Burnett closed public comment.
Member Israel responded that there is an tremendous track record as there never has been an
association with anyone getting sick or having a problem by using GWR methods. The science
is extremely conservative, as compared to other sources of water. Member Stoldt reminded the
TAC that the Authority has already endorsed to GWR project and the TAC should try to remain
supportive of their policy decision. With no more discussion on the item at this time, Chair
Burnett continued to Item 4.

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4. Receive Report from Cal-Am Water Regarding Progress in Meeting Authority Adopted
Conditions for Monterey Peninsula Water Supply Project

Cal Am Representative Catherine Bowie presented the update on the eight Authority adopted
conditions of support for the Monterey Peninsula Water Supply Project. She indicated that
condition _ has been fully met with the adoption of the Governance Committee document. The
other conditions were spoken to in order of adoption:

Contribution of Public Funds. To date Cal Am has received a proposal from Monterey
Peninsula Water Management District to outline a structured proposal.
Everyone agrees they are good concepts but issue have been identified. All
three parties have been meeting to work through the issues.
Governance Committee: Rob McLean was authorized to execute the Governance
agreement and Chair Burnett clarified if the agreement has been finalized and
has been adopted by the Authority
Electricity Rates: Cal Am has been successful in revising the original estimate from 12.9
cents to 9 cents per hour and PG&E will continue to work to further reduce. Rich
Svinland offered to complete a formal study to analyze this and could work with
the TAC for that analysis.
Limiting the Use of Surcharge Two: Cal Am is open to continue discussions. A model has
been developed which outlines the impacts of delaying the use of surcharge two
and it was significant.
Test Wells: Addressing Tim Durbins testimony. The PUC EIR consultant for GEO science
has resealed a memo that refutes that of Mr. Durbins testimony. It has been
sent to the PUC. Second, the meeting with Semex last week granted the
permission necessary to complete the permit for the City of Marina. The permits
remaining are from the Coastal Commission and the State lands Commission.
All three should be filed in the next three weeks. The Coastal Commission
hearing should be in August or October. The project will also file an application
with army corps of engineers.
Collaborating with Local Public Agencies; Cal am and the Authority have been
participating in meeting with Coastal Commission and are willing to engage with
other necessary agencies. Clarification of NEPA requirement: Will be answered
by the EIR Team. She mentioned the determination of requiring a NEPA permit
will not be a decision made by Cal Am but by other permitting agencies.
Exploring Other Intake Methods: CPUC required a quarterly report be made available to
the public, which needs to include updates to the contingency plant. The first will
be due July 31, 2013 and will be required though 2017. Also, Mr. Svinlands
supplemental testimony includes detailed description of the contingency plans,
and that document is available on the project website www.mpwsp.org
SRF Funding: The State Water Resources Control Board cannot put into writing Cal Ams
ability to access to SRF funding, until the EIR is complete. There is a letter
between agencies that could apply, but a formal letter will have to wait.
Addressing Sea Level Rise: Spoke to Mr. Svinlands last presentation which explains that
this has been addressed and a detailed description can be found in the
supplemental testimony.

Ms. Bowie then answered questions from the TAC. Chair Burnet clarified that competing for a
NEPA permit would make the project eligible for federal funds, which makes it important to push
for an answer. He then requested clarification regarding the condition that Cal Am pursue a
contingent intake strategy, in parallel to the current strategy and questioned why Cal Am is not

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proceeding with this. He also asked if Cal Am is looking for more direction from the CPUC
before actually expending to develop the contingency further. Cal Am representative John
Kilpatrick responded that Cal Am has fully listed the contingency plans, but will pursue the slant
wells consistent with the ocean plan requirements. He indicated Cal Am wants to follow that one
through until that becomes unfeasible and does not want to develop other contingencies in
parallel. Chair Burnett countered that the Authority has a different position, and questioned how
to rectify the two positions. He questioned if it was an issue with funding and expressed that the
two groups need to work through this issue. Mr. Kilpatrick responded that their current funding
only allows for pursuing the test well at this time.

Chair Burnett opened the item for public comment. Tom Rowley expressed concern that it
seems like we are continually raising issue or sub issues that dont really have a deadline. He
encouraged the Authority to assign a deadline or a timeline with every project or issue for it to
be resolved or completed by. He also recommended that an alternate source of feed water
should be addressed. With no further requests to speak, Chair Burnett brought the discussion
back to the Board and requested that Executive Director Reichmuth review all eight conditions
adopted by the Authority regarding the MPSWP to see which ones have been competed or
mark a status of.

Member Stoldt questioned the response statement regarding the memo submitted by Tim
Durbin. Since it was rejected by the Administrative Law Judge and resubmitted last week, he
questioned if Cal Am will address it directly in the testimony so it becomes part of the public
record. Ms. Bowie indicated that she is not sure, but the testimony rebuttal is due Friday.

5. Discuss and Review Benefits and Disadvantages of Private Investor-Owned vs. Public
Ownership of Desalination Facilities (Riley)

In the interest of time, the TAC unanimously agreed to continue this item until the next meeting.

ADJOURNMENT

The meeting was adjourned at 3:51 p.m.

Respectfully Submitted, Approved,

Lesley Milton, Committee Clerk Jason Burnett, MPRWA TAC Chair
Monterey Peninsula Regional Water Authority
Agenda Report

Date: March 18, 2013
Item No: 3.

06/12
FROM: Clerk to the Authority

SUBJECT: Receive Report on First Governance Committee Meeting and Provide Direction

RECCOMENDATION:
There is no written material for this item. An oral report will take place at the meeting


Agenda Report

Item No: 4.

08/12

FROM: Prepared By: Clerk to the Authority

SUBJECT: Receive Report from Cal-Am Water Regarding Progress in Meeting Authority
Adopted Conditions for Monterey Peninsula Water Supply Project

DISCUSSION:

There is no written report for this item. An oral report will be given by a representative from Cal
Am at the meeting.


Agenda Report

Item No: 5.

08/12


SUBJECT: Receive Report Regarding Monterey Regional Water Pollution Control
Association Feb 27, 2013 Meeting Regarding the Ground Water Replenishment
Project (Israel)

DISCUSSION:

There is no written report for this item. An oral presentation from TAC Member Israel will take
place at the meeting.


Agenda Report

Item No: 6.

08/12


SUBJECT: Discuss and Review Benefits and Disadvantages of Private Investor-Owned vs.
Public Ownership of Desalination Facilities (Riley)

DISCUSSION:

There is no written report for this item. An oral presentation given by TAC Member Riley will
take place at the meeting.

ATTACHMENTS:
1. Public Ownership Of Desal Facilities By George Riley
2. Water and Public Ownership
To: TAC of MPRWA March 12, 2013 revised
From: George Riley

Subj: Public Ownership of Desal Facilities

Cal Am proposes that it fully own all infrastructure. MPRWA proposes various
financing options to Cal Am's plans in order to reduce costs to ratepayers. Two
private entrepreneurs have proposed desals with public ownership, in general
tying to the county ordinance that requires public ownership via a public sponsor
or partner. Lately the two private sponsors seem to be pursuing other options,
including going forward as private developers to sell water to Cal Am for
purveying. Also MPWMD is pursuing a public ownership back-up in case Cal
Am falters or fails.

It is my contention that public ownership of desal facilities will lower costs,
simplify financing, elevate public interest over corporate profit, establish
straightforward governance, and commit to public trust oversight.

One way to discuss public ownership is through the implications of the various
financing schemes under consideration. The desal facility and infrastructure are
my focus. Not ASR, GWR, nor the Cal Am only Peninsula pipeline.

State Revolving Fund loans are limited. They are typically made for public
projects, and generally in amounts much smaller than Cal Am's proposal. Loans
for water reprocessing facilities are more typical. GWR is a better candidate,
not desal, and possibly in larger amounts. However, a publicly owned desal
is a better applicant than a corporate utility. 1. What are the current loan
capacities of entities making revolving fund loans? 2. What parts of Cal Am's
proposal fall within the scope of such revolving fund loans? 3. Would there
be competition between MRWPCA and Cal Am? 4. What assurances must a
public partner make to qualify for a partnership application? 5. What risk
evaluations will the SRF process require?

Public bond financing by MPWMD or a wider partnership has been
suggested to substitute for Cal Am equity financing. Various arrangements have
been described. However the simplest and easiest path is public financing for a
project owned by the agency seeking the financing. 1. Is MPWMD to function
as broker? 2. If MPWMD were to actually assume or guarantee a loan, what
liabilities would it incur? 3. Would it conceivably guarantee a loan? 4. Can
MPRWA be a partner? Does MPRWA have any ability to pledge long term
creditworthiness? 5. What risk assessments will an underwriter require? 6.
What justifies assumptions of 4% financing when numerous potential risks have
been identified? 7. How do the problems of inadequate information relate to this
(i.e., lack of test well data until 2015-2016)? 8. Will interest rates be higher
because of the complications in structure and legal relationships? 9. What is
the status of the facility asset at the end of debt financing? 10. Will the residual
asset become fully owned by Cal Am? 11. How would this be valued by Cal Am,
and how would it show on financial statements? 12. Would liabilities and
commitments be more direct and manageable if the bond financing were based
on public ownership by MPWMD? Would it be less costly? 13. Is an equivalent
share of equity a possibility?
Public ownership will simplify all public financing opportunities.

Surcharge 2 is Cal Am's suggestion. Both SRF and public bond financing will
undergo risk evaluation, but not the surcharge. The $99 million surcharge is
most exposed to risk, yet has none of the institutional risk evaluations expected
for SRF and public bond financing. Furthermore there are no interest rate
assumptions about this financing; therefore the real value of this early money is
undervalued. 1. Are early risks not getting adequate attention when the
assumed discount rate of 4% in MPWMD financing models generally reflects a
low risk project? 2. What would be the likely level of current interest rates for
high risk projects, and should it be estimated for calculating the value of the
surcharge? For example, what would be the interest rate for the first $100
million invested in the highest risk period? 3. Would the first $100 million by
surcharge ease the acquisition of later funding? 4. Is avoidance of rate shock
adequate justification? 5. What level of oversight is expected to judge Cal Am
prudence, and by what agency? 6. What assurances do ratepayers have that
the surcharge is fair? 7. What do ratepayers receive in return for fronting the
early high risk capital? Ownership? Of what? How? 8. Will the surcharge help
overcome Cal Am's deficiency in its bond rating? 9. What is Cal Am's bond
rating?

Financing is not the only area of interest. Not presented here are issues of
overall lowering of costs, elevation of the public interest over corporate profit,
establishing straightforward governance, and committing to public trust and
oversight.

I think it would it be cheaper, easier, quicker if the desal facilities were publicly
financed and owned by an appropriate local agency?

WATER AND PUBLIC OWNERSHIP

March 10, 2013

BACKGROUND
Water is a natural resource vital for all life and survival. Local supplies from Carmel River and Seaside
Basin have been over-drafted by Cal Am.
Fundamental differences exist between private corporate for-profit ownership (Cal Am) and public
ownership by a local agency. Many are cited below.

CAL AM CORPORATE
MONOPOLY
PUBLIC OWNERSHIP
AGENCY/PARTNERSHIP

BASIC DIFFERENCES
Fundamental corporate requirement to
generate profit and grow investment equity.
Fundamental requirement to serve the public
interest and honor a public trust.
Profit and equity growth can conflict with
public trust and public interest
Public agency accountability does not include
any profit or equity considerations.
About 20% of Californians get water from
corporate or private providers. 15%
nationwide
About 80% of Californians get water from
public agencies. 85% nationally.
Investor Owned Utilities (i.e., Cal Am) are
regulated by CA Public Utilities Commission
(CPUC)
Public agency utilities are regulated locally,
under state law.
CPUC procedures in San Francisco control
most aspects of privately owned utilities.
CPUC has no jurisdiction over public agency
owned systems.
Distribution of product water to customers is
a natural monopoly. Production of product
water for distribution is not a natural
monopoly.
Supply water from public agency production
can be sold to a monopoly distribution
purveyor.
Cal Am has no local meetings open to the
public, and no requirement to do so. Only
the CPUC holds local meetings, and then
only to review a specific Cal Am project.
Public agencies are subject to state law
regarding public notice, public hearings, open
meetings, public access, and public official
accountability to conflict of interest and
campaign contribution laws.

COSTS AND SAVINGS
Return to Cal Am is 8% +/- (based on an
average of return on equity of 10% and
interest on debt of 6%.
Public agencies make no profit. Debt cost is
about 4%, substantially less than corporate
debt.
Corporate bonds are taxable Public bonds are tax free.
A $400 million capital project financed over
30 years will have profit and interest costs of
another $600 million
A $400 million capital project with public
bond financing will add about $400 million, a
savings of about $200 million over 30 years.
Corporate utilities must pay income and
property taxes
Public agencies pay no income taxes. They
pay no property taxes, but may make 'in lieu'
payments to other public agencies.
Corporate utilities are not eligible for federal
and state grants.
Public agencies are eligible, and can lower
costs with grants.
Corporate utilities are eligible for limited
public low interest loans.
Low interest loans were initially intended for
public agencies, and are more likely to be
available, and in larger amounts.

OFF-SITE VS LOCAL
Cal Am headquarters are in San Diego. It is
a is wholly owned subsidiary of American
Water Works, with its headquarters in New
Jersey.
The full range of decision-makers would be
known, and they would be local.
American Water Works is a powerful market
force in the water industry. No. 1 in the
USA. Guided by corporate priorities.
Local control by people who live here will
more likely consider our needs; current and
future, economic and environmental, growth
and sustainability, cost and convenience, and
our grandchildren.
Administrative costs for off-site activities
such as policy and financial management,
computer and call center services, are
exported out of the Monterey Peninsula
economy.
Public ownership would reduce the amount
of expenses that are exported. The monies
needed for local services would churn in the
local economy.
Cal Am lists no local phone numbers. Call
Center is out of state. Service reps are not
familiar with local area. .
Ratepayers could report leaks and complain
if necessary to a local office, and to someone
who knows the area.
All customer payments, including 8% profit
+/-, and 1%-2% administrative costs, are
exported out of the local economy.
Customer payments would go directly and
completely to the public entity, and through
local banks.
CA review and approval proceedings take
place at CPUC in San Francisco.
With a local public water agency, all project
proceedings at the CA Public Utilities
Commission (CPUC) would be eliminated.
Only rate-setting for Cal Am purchased water
and distribution would go to CPUC.


Agenda Report

Item No: 7.

08/12


SUBJECT: Approval of Meeting Dates Through June 30, 2013

DISCUSSION:

The Technical Advisory Committee has been meeting the first and third Monday of every month
at 2:00 p.m.

The following dates are recommended for future meetings through June 30
th
, 2013.

April, 1, 2013
April 15, 2013

May 6, 2013
May 20, 2013

June 3, 2013
June 17, 2013

RECOMMENDATION:

It is recommended that the TAC approve the above meeting dates through June 30, 2013


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