BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

ApplicationofCaliforniaAmericanWater Company(U210W)forApprovaloftheMonterey PeninsulaWaterSupplyProjectand AuthorizationtoRecoverAllPresentandFuture CostsinRates.

A.1204019 (Filed April 23, 2012)

NOTESFROMJUNE12,2013 GWRWORKSHOP WorkshopParticipants: WorkshopPresentations: PresentationonStatusofGroundwaterReplenishmentProject(GWR):KeithIsrael,MRWPCA PresentationonDraftCriteria:MayorJasonBurnett,RWA RegionalWaterAuthority(RWA) MontereyResourcesWaterPollution ControlAgency(MRWPCA) CaliforniaAmericanWater(CAW) MontereyPeninsulaWater ManagementDistrict(MPWMD) Landwatch Surfrider PlanningandConservationLeague (PCL) CoalitionofPeninsulaBusinesses (CPB) MontereyCountyFarmBureau DivisionofRatepayerAdvocates (DRA) CitizensforPublicWater(CPW) SalinasValleyWaterCoalition (SVWC) PublicTrustAlliance(PTA) PercWaterCorp. MarinaCoastWaterDistrict EnvironmentalScienceAssociates WaterPlus APTWater MontereyCountyAssociationof Realtors Brezack&AssociatesPlanning

 ReviewofDraftCriteria,DiscussionFacilitatedbyMessrs.RaviKumraandMichaelZelazoof theDivisionofWater&Audits(DWA) ITEM1. TheCEQAprocessfortheGWRProjectiscomplete,withacertifiedFinal EnvironmentalImpactReport,theMRWPCAhasapprovedtheProject,andthestatus ofrequiredpermitsisconsistentwiththepublishedprojectschedule.

Thepartiesdiscussedthiscriteria,andDWAaddressedproposaltosplitthecriteriaintothe followingfoursubparts:A)TheCEQAprocessoftheGWRProjectiscomplete.B)Acertified FEIRiscomplete.C)MRWPCAhasapprovedtheProject.D)Thestatusofrequiredpermitsis consistentwiththepublishedprojectschedule.(PermitlistprovidedandscheduleofGWR project). LandWatchRaisedpossibilityofconsolidatingthesubpartsA)throughC),andchangedtothe issuanceofaNoticeofDetermination. ITEM2. Agreementsorotherdeterminationsareinplaceorreasonablyadvancedinprogress tosecurethesourcewater(s)forrecommendedproject.

MontereyCountyFarmBureau,NormGrootstipulationsofintent,etc.shouldnotberelied upon;instead,signedagreementsconcerningsourcewatershouldbecreated. MCWRA,DavidChardavoyneStrike"reasonablyadvancedinprogress",suchthatthereisan agreementbetweenPCAandMCWRAaffirmingsource. PCAfinalagreementsshouldnotbeanabsoluterequirement. CPB,JohnNarigiBelievesthisisthemostcriticalcriteria.Startwithalegalagreement. Confirmthefollowing(1)agriculturalinterests(19,500AFforsourcewater);(2)whatwillbe soldtoCAWisforcustomersonly;and(3)sustainabilityofwatersource. ITEM3. THECALIFORNIADEPARTMENTOFPUBLICHEALTH,TOTHEEXTENTFEASIBLE,HAS EXPRESSEDAREASONABLELEVELOFACCEPTANCEORAPPROVALASTOTHEGWR TREATMENTPROCESS,INJECTIONANDOVERALLPERMITTING,CONSISTENTWITHTHE STAGEOFDEVELOPMENTOFTHEPROJECT.

WaterPlus,R.Weitzmanwantsminimumtimeforinjectedwatertostayinground.Mr. Kumracharacterizedthisas,essentiallyadesireforproperpermits. PCA,KeithIsraelindependentadvisorycommitteepanelcanreviewandensurethaton scheduletogetthepermits. RWA,MayorJasonBurnettbothdesalandGWRwillhavesomeissues,likepermits,which cannotbeissuedatthisstage.TheGovernanceCommitteeanditselectedofficialswillmake therecommendationonlyiftheybelieveitwilldeliverwatertotheircommunity.It recommendsagainstrequirementofholdingpermits,andsupportsrequirementofadvancing totherightstagewherepermitcanbeobtained. PTA,R.Weitzmanwantsthepermitsinadvance. DWA,Mr.KumraRequestedCAWprovideupdateonpermitrequirements. ITEM4. ThecostofwateroftheGWRProjectis$_______orless.

RWA,MayorJasonBurnetttherearetwoversions.ThesimplestwayistouseadollarperAF criteria.Downsideisthisrequiresjudgmentoninformationaswecurrentlyhaveittoday,as opposedtoinformationatthetimethedecisionismade.Healsowantstimetohireoutside expertstoconsiderexternalities.Secondapproachwouldconsiderinformationinthefuture, i.e.,additionalinformationwouldbefactoredin. MPWMD,DaveStoldtCitestohandoutwith4items:(1)reliability,(2)reducecarbon footprint,(3)diversifiedwaterportfolio,and(4)schedulingadvantage. CPW,GeorgeReillywantsarelativemeasureforwaterquantifyinpolicies.Debt equivalencyisbigunknownthatmaymakeitmoreexpensive.Wantsbox:doesdebt equivalencyapply?BelievesthatissueofdebtequivalencywillgiveCAWtherighttovetodue toprice. MPWMD,DaveStoldtdebtequivalencyisimputationofdebtwhichcreditagencycanview negatively.BelievesthatCAWcanwaivetreatment(oratleastseekingcompensationresulting fromdebtequivalency).DiscussedMoodyscriteriasetoutin2004and2009publications.Says theremaybewiggleroom.Withinayear,propertreatmentcouldbedeterminedinadvance ofthego/nogodecision. PTA,RonWeitzmansamecostcriteriatoGWRastoanyotherwaterservicesuggestionof premium.SuggestsGWRismoreexpensive.Citesstudythatitmaycost$1KmoreperAF.He wantsastoragefacilityproject.

CAW,RobMacLeanitseemssomearetryingtopiecetogetherenoughwatertomeetour demands.Weneed3500AF.ThatsimportantandwhatItem2isspeakingto.Changingthe sizeofGWRwillrequirechangingthesizeoftheplant. WithrespecttoItem4,thereisaquestionthatifyouputtoomanyvariationsinthecriteria,is thisstillaTier2adviceletterorwillthenatureoftheprocessneedtochange? Ifitisjustanumber,thatwouldbesimpler.Indiscussingthecostofwater,wearetalking aboutanestimate.Theactualcostwillnotbeknownuntilbothfacilitiesareupandrunning. DebtequivalenceIfdebtequivalenceistriggered(e.g.,CAWagreestobuyallthewater),the companycantjustwaiveitaway.Weoweittoourothercustomersindistrictsoutside Montereytotakecareofthis.Thepartiesshouldbemindfulthatchangesintheaccounting standardscouldoccur. DWA,MichaelZelazoifyoulookatthecostofGWRandthepossibleplantsthenyoushould havethefigure. CAW,RobMacLeanwecanrevisitthecostlaterwhentheprojectgetscloserandbydecision timewillhavebidsinhandforbothusandthem. WorkshopParticipantsDiscussionofexternalities:GWRprovidesforlowercarbonfootprint, etc.MPWMDwantscriteriatoalsoreflectthevalueofaportfolioapproach.Itisimportantin comparisonthatthereisarecognitionthatgivingupsomescaleeconomiesisnecessaryforthe portfolioapproach.Workshopparticipantsdiscussedthatwehavetime,andshouldworkuntil Februarytocomeupwithcriteria.Intheinterim,weshouldfigureoutwhatthewater purchaseagreementlookslikeandwhatthevalueofexternalitiesis. CAW,JeffLinamProvidedoverviewofratingagencyscriteriafordeterminingdebt equivalency. DRATotheextentthereisreluctancefortheCommissiontodelegateauthority,thenDRA suggeststhiscouldbedonebyanindependentadvisorypanelthattheCommissioncouldthen relyupon. CPBratepayersshouldnotpayapremium.Itwouldbedifficultandsubjectivetotryand quantifytheotherallegedbenefits. ITEM5. TheGWRProjectonscheduletobeoperablepriortothetheneffectivedateofthe CeaseandDesistOrderoftheStateWaterResourcesControlBoardor,ifnot,on scheduletomeetorbeatthedesalprojectschedule.

PCA,KeithIsraeldoingupdatesofschedulemonthlyandreporttoitsboardandthe governancecommitteewhentheymaketheirrecommendations. SVWC,NancyIsaksonwantsmilestonesatwhichpointdeterminationswillbemade. Landwatch,JohnFarrowhedoesnotthinkweneedmilestones,justneedtoknowifitson time. ITEM6. PreliminarydesignfortheGWRProjectisatleastatthe10%level(sothatanaccurate projectcostestimatecanbegenerated)orisatalevelsimilartoormoreadvanced thanthelevelofdesignfortheentiredesalproject.

RWA,MayorJasonBurnettthisinpartrelatestothedateavailabletodocostcomparisons discussedinthefourthcriteria.HedoesntwantGWRheldtoahigherstandardthanthe desalinationplant.Wantsthematcomparabledesignlevelsocancomparewithdesalplant. CAW,RichSvindlandexplainedwhatismeantby10%design. ITEM7. Therequiredwholesalewaterpurchaseagreementhasbeendraftedandtheparties thereto(CalAmandtheMPWMD)havereachedsubstantialagreementoftheterms oftheagreement.

CPBCAWshouldnotberesponsibleforpayingforwaternottakenorusedbyCAW customers. WaterPlusratepayersshouldnotrequirepaymentforwaternotsupplied;andratepayers shouldnotassumeriskifwaternotsupplied. DRAconcernedaboutallocationofrisk. CAW,RichSvindlandclarifiedthatdropdatefordecisionistimeofconstruction,whichis currentlyestimatedtofallbetweenOctober2015andApril2016. CPWnotedthattakeorpaycontracttriggersdebtequivalence.Discussionensuedwithinput fromMPWMDabouttriggersfordebtequivalenceandstructuringtheagreementtoavoiddebt equivalence.

LandwatchexpressedthatCAWcouldeffectivelyvetoagreementsifitchosenottoenterinto agreement. CAWcriteriashouldbecorrectedtoreflectthatcontractmustinvolveallpartiesto agreement(MPWMD,PCA,andCAW).Legalreasonswhycontractcannotjustbebetween CAWandMPWMD. ITEM8. Aprojectfundingplan,sufficientindetailtoqualifyforaStateRevolvingFundloan,is inplace.

RWA,MayorJasonBurnettDiscussedpurposeofthiscriteria,includingamongotherthings assurancesthatprojectismovingforward.Explaininglevelofdetail,hereferencesSWRCBs requirementsforapplicationforstaterevolvingfundsloan. RWA,MayorJasonBurnettproposesthatthreeissuesrequirefurtherdeliberationand warrantadditionaltimetoworkout:(1)WaterPurchaseAgreement,(2)determinationofdebt equivalence,(3)revenuerequirementassociatedwiththefourthcriteria. DRAcostcriteriadonotfitwellinchecklistformatsupportsconsideringexternalities. DWA,Mr.Kumracouldthesebequantifiable? DRAsuggestsreportfromfirmtoanalyzeexternalities.Mr.Kumrawantstoknowhowmuch weighttoassignbecauseifitspolicythenitsaTier3proceeding. CAW,RobMacLeanideathatthesettlingpartieswouldcomeupwiththenumberandthat wouldassignvalueregardingtheexternalities,thenseeksettlementapprovalforALJs/CPUCs consideration. Surfrider,GabeRossdesalalsohasnegativeexternalities.GWRhaspositiveonesthatshould beconsideredthoughitmaybetoughtocalculatethem.IftheGovernanceCommitteemakes adecisionwhetherthecommitteesaystheexternalitiesareworththeextracostornot,that wouldbeobjective,soTier2.Mr.Kumraquestionsthataportionofthedecisionisdelegated tothegovernancecommittee. CAW,RobMacLeaningeneral,althoughtheremaybesomelevelofsubjectivityonthese matters,onothersthereisnosubjectivity.Forexample,Item5maybewecangetacertified engineertosignoffandingeneral,maybewheresettlements,thentheCommissioncanaskfor moremeatontheboneswhereitneedsthat.