MPRWA Agenda Packet 05-08-2014

Agenda
Monterey Peninsula Regional Water Authority (MPRWA)

Regular Meeting

7:00 PM, Thursday, May 8, 2014
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.

CONSENT ITEMS

1. Minutes from March 13, 2014 Regular Meeting - Milton

2. Minutes from March 27, 2014 Regular Meeting - Milton

3. Minutes from April 10, 2014 Regular Meeting - Milton

4. Approve and File Checks through May 8, 2014 - Milton

5. Adopt Resolution Accepting the Amended Fiscal Year 2013-14 Budget and Adopting the
Fiscal Year 2014-15 Operating Budget - Cullem

AGENDA ITEMS

6. Receive Report, Discuss, and Provide Direction on Public Outreach - Beleny

7. Receive Report, Discuss and Provide Direction on Presentation from the Monterey
Peninsula Water Management District Regarding the Deep Water Desal Project - Stoldt

8. Receive Report, Discuss and Provide Direction Regarding Presentation from Monterey
Regional Water Pollution Control Agency Regarding Negotiations for Source and Product
Water for the Ground Water Replenishment Project - Israel

9. Receive Report, Discuss and Approve Adopting a Resolution Amending the Governance
Committee Agreement to Authorize the Governance Committee and Water Authority to
Advertise and Award The Value Engineering Contract - Cullem

Thursday, May 8, 2014
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10. Receive Report, Discuss and Provide Direction Regarding Commissioner Michael R.
Peevey and ALJ Gary Weatherford's Ruling Requesting Comments on Surcharge Options
and Proposals - Cullem

ADJOURNMENT

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, March 13, 2014
COUNCIL CHAMBER
580 PACIFIC STREET
MONTEREY, CALIFORNIA

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

Directors Absent: None

Staff Present: Executive Director, Legal Counsel, Authority Clerk

ROLL CALL

The meeting was called to order at 7:01 p.m.



There were no reports from Directors. Executive Director Cullem reported on changes to the
printed packet materials and questioned direction on how to proceed with Cal Ams request to
reduce Surcharge 1 from 15% to 4.5% and extend the period of time it was charged. The
Directors requested he handle it administratively.

PUBLIC COMMENTS

President Della Sala invited public comment for items not on the agenda.
Tom Rowley spoke to the Government Affairs Committee meeting where Nichole
Charles reported regarding SB 936. He requested re-ordering the agenda to take up
Agenda Item 8 first.
Doug Wilhelm questioned the proposed reduced surcharge asking if it would increase
the total amount of money over the course of the loan. Executive Director Cullem
responded that it would not.
George Breammer advocated strongly for residents to take care of themselves and
encouraged individuals to obtain personal rain water and grey water catchment, and
other self sustaining water supply systems.
Darby Mossworth spoke concerning future legislation that would allow unlimited
amounts of money to be contributed to elections.

APPROVAL OF MINUTES

On a motion by Director Pendergrass, seconded by Director Edelen, and carried by the
following vote, the Monterey Peninsula Regional Water Authority approved the minutes for both
January 30, 2014 and February 13, 2014.

AYES: 5 DIRECTORS: Burnett, Edelen, Kampe, Pendergrass, Rubio, Della
Sala
NOES: 0 DIRECTORS: None
MPRWA Minutes Thursday, March 13, 2014

Monterey Peninsula Regional Water Authority
Regular Meeting Minutes - Thursday, March 13, 2014
2
ABSENT: 0 DIRECTORS: None
ABSTAIN: 0 DIRECTORS: None
RECUSED: 0 DIRECTORS: None

1. January 30, 2014 Special Meeting
Action: Approved

2. February 13 2014
Action: Approved

AGENDA ITEMS

3. Approve and File Checks for the Period of February 2014.
Action: Approved

Authority Clerk Milton reported regarding checks processed during February 2014. Under public
comment David Lifland requested an update regarding reimbursement from the County of
Monterey and the Monterey Peninsula Water Management District, both which are still pending.
On a motion by Director Rubio, seconded by Director Kampe, and carried by the following vote,
the Monterey Peninsula Regional Water Authority approved to file the checks for the month of
February 2014

Sala

4. Authorize Staff to Send Letter Nominating the Salinas and Carmel River Basins Study for
Funding Under the Bureau of Reclamation's FY14 Basin Study Program

Dave Stoldt, General Manager of the Monterey Peninsula Water Management District spoke to
the item which would focus on assessing long term climate change on the local water supply
from the Salinas and Carmel river basins. Mr. Stolt requested a letter of support nominating this
study to the Bureau of Reclamation to accompany the application put forth by MRWPCA and
MRWMD. In closing, he informed the Directors he would not stay for Agenda Item 8 to maintain
the neutrality of the MPWMD. President Della Sala invited public comment on the item and had
no requests to speak.

On a motion by Vice President Burnett, seconded by Director Rubio, and carried by the
following vote, the Monterey Peninsula Regional Water Authority authorized staff to send a
letter nominating the Salinas and Carmel River Basins study for funding under the Bureau of
Reclamations FY 14 Basin Study Program.

Sala

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5. Adopt Resolution Approving Brownstein Hyatt Farber Schreck, LLP (Brownstein) as Special
Counsel for the period January 1, 2014 through December 31, 2014, Authorize the Executive
Director to sign a Consent and Waiver of Conflict of Interest, and Authorize the President to
execute the agreement for legal services.

Executive Director Cullem spoke to the item regarding extending the legal services contract
through December 31, 2014 and authorize changing the firm from being the Authoritys
Attorney of Record to being Special Legal Council.
President Della Sala invited public comment on the item. Salfwat Malek questioned the total
cost of the contract. Mr. Cullem indicated the budgeted amount is not to exceed $194,000 for
2014.
Mayor Rubio questioned if there was any ability to align the contract with the fiscal year. Mr.
Cullem spoke to the administrative effort required to process, renew and track all contracts at
one time. Director Kampe spoke to the substantial costs for the legal services but defended the
costs by saying that these are substantial projects which require a large level of collaboration,
cooperation and perseverance and that this is a very modest budge considering the total cost of
the project. The Directors spoke in support Mr. McGlothlin's efforts and experience noting that
although expensive, his efforts saved rate payers over 120 million dollars between the
Settlement Agreements and through Governance Committee structure and participation of the
RFQ and RFP process.

On a motion by Director Edelen and seconded by Director Rubio, and carried by the following
vote, the Monterey Peninsula Regional Water Authority approved the staff recommendation and
adopted Resolution 14-02 Approving Brownstein Hyatt Farber Schreck, LLP (Brownstein) as
Special Counsel for the period January 1, 2014 through December 31, 2014, authorized the
Executive Director to sign a Consent and Waiver of Conflict of Interest, and authorized the
President to execute the agreement for legal services.

Sala

6. Authorize Extension of Contract with the City of Monterey For Executive Director Services

On a motion by Director Rubio and seconded by Director Edelen, and carried by the following
vote, the Monterey Peninsula Regional Water Authority authorized extending the contract with
the City of Monterey for Executive Director services.

Sala
Authority Clerk Milton reported on the item requesting the Authority to authorize extension of
the contract for Executive Director services with the City of Monterey. President Della Sala
recused himself as mayor of the City of Monterey, the contracting agency. Vice President
Burnett invited public comment on the item and had no requests to speak. The Directors spoke
to the outstanding job Mr. Cullem has been doing.

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7. Adopt Financial Policies and Procedures

On a motion by Director Edelen and seconded by Director Kampe, and carried by the following
vote, the Monterey Peninsula Regional Water Authority adopted the presented Financial
Policies and Procedures as amended.

Sala

8. Receive Report, Discuss and Provide Direction Regarding Issues, Implications of
Commissioning a Study Regarding a Public Take Over of Cal Am.

Executive Director Cullem provided a report regarding the February 3, 2014. the Water
Authority TAC meeting which discussed the issues and implications of commissioning a study
regarding a public acquisition of Cal Am and recommended that the Authority first consider if
the issue was appropriate for consideration and authority under the formation agreement, and
second, how the action may be interpreted by state agencies, as well as any impact on future
bond funding. Mr. Cullem outlined the following four options for consideration should the Water
Authority decide to consider conducting a study of an acquisition of Cal-Am:

1. Commission a study of a public takeover of Cal-Am with the intent to provide information
prior to a vote by the public.
2. Commission a study of a public takeover of Cal-Am with the intent to provide a Water
Authority recommendation prior to a vote by the public.
3. Defer consideration of study until some undetermined time after a vote by the public.
4. Determine that commissioning a study of the subject is outside the purpose of the Water
Authority.
President Della Sala invited public comments on the item.
Executive Director Cullem provided the report and recommended adopting a policy that more
clearly outlines the procedures and operations with regard to financial operations for the
Authority. Director Kampe requested adding language to the whistle blower policy to report to
the President and/or Vice President any concerns.

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Tom Rowley, Nelson Vega, John Narigi and Rick Heuer said the public needs correct
facts regarding the impacts if the ballot measure passes and spoke in support of the
study.
Safwat Malek and Mike Baer spoke in support of publicly owned water utilities in the
county and expressed concern regarding costs and the PUC.
Phil Wellman, Darby Mossworth, a citizen, Sal Cardinale, Melanie Krislock, Charlie
Check, Alan Ebels, Andrew Bell, Doug Whilhelm, John Hall, Dan Turner, George
Brehmer, Jay Rowland and Jessie Williams requested the Directors to support Public
Water Now and spoke against Cal Am.
Dan Presser suggested having a public forum as a way to inform voters of Measure O.
Kevin Tilden from Cal Am spoke to the comments regarding water spikes and requested
anyone who experiences a spike should contact customer service who will help
recognize the leak and fix it. If it is identified and fixed they are not penalized. He
indicated that all political advertisements paid for by cal am are clearly labeled and most
are not done at rate payer or customer expense. He urged an impartial, factual analysis
and spoke in support of the study.
George Riley expressed disappointment regarding the TAC discussion of this item and
did not think that the staff report was objective or includes all the information available.
He spoke in support of Public Water Now and publicly owned water.
David Lifland Spoke in support of public water but indicated that the community should
focus their efforts on obtaining a water source first.
Ron Cohen Managing Director of Public Water Now spoke against the study indicating
the amount of money projected would only politicize the issue but not analyze it.
Public Comment was closed.

Director Edelen spoke to the Cease and Desist Order imposed and the requirement to find a
new water source and spoke to the challenges that the desal project is up against. He spoke in
support of the study, as an independent analysis from to provide factual information back to the
Board and the public.
Director Rubio spoke to the purpose of the Authority and to the need for non-biased, factual
information to help the voters understand the impacts of the Measure.
Director Burnett spoke to the TAC discussion on the item reiterating it was a regular, publicly
noticed meeting with an agenda distributed prior to the meeting and there was minimal public
participation. He spoke against comments that there was not an opportunities for proper or
equal debate. He spoke to the community debating water for generations and the Authority is
moving toward a decision. The TAC recommendation was for the Board to conduct an analysis
which focuses on the purpose of the Authority as written in the mission statement and listed the
reasons that this project falls within the scope of the authority.

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Director Kampe questioned the election dates and the ability to complete the project prior to the
election and then spoke to public sentiment of priorities presented 1.5 years ago within his
jurisdiction with the priority being sufficient water supply. He spoke in support of low cost water,
but noted it was more important is having sufficient water first. He lastly indicated that no matter
how objective the report is, it will always be viewed as partisan and also did not think that it
would be a wise use of money for timing purposes.
Director Pendergrass spoke against a study that the results will be taken as the Authority
position and will perpetuate skepticism. He spoke to the history of the failed desal project
which caused the formation of this group to provide governance of the public site. He reminded
the public of the concession by Cal Am to allow public oversight.
Vice President Burnett indicated we are operating in the realities of a water-constrained
environment faced with a regulatory guideline in the way the CDO was intended. This is not a
question of if we like or don't like Cal Am, it is about what will deliver a water supply solution to
have sufficient water, cost effectively with appropriate governance. He expressed fear that the
single greatest risk is losing the consensus that the community has built in the last two years.
This issue has the potential to be divisive enough to leave us in a position not to be able to
petition for a relaxation of the CDO because no project will be complete by January 1, 2016 and
the ramifications are severe because there will be no water supply, regardless of ownership.
Vice President Burnett then outlined the accomplishments of the Authority over the last two
years of its existence including the tenants of the Authority Governance committee and the
benefits it provides, the profit cuts achieved through the public financing work saving the rate
payers over 20 million dollars and then he spoke to the hurdles yet to come.
The Directors discussed their authority and weather the public would be better served by the
Authority taking a position or if the public would be better served by laying out impartial, factual
information. The Directors spoke against the study due to timing, unknown true cost charged
back to the member jurisdictions and many will not change their minds based on the report and
suggested taking a position as peninsula mayors.

On Motion by Director______ and seconded by Director Pendergrass and passed by the
following vote the Authority directed staff to write up and bring back for approval a document
which outlines the Authority position opposing ballot Measure O, described this evening, and
verify the legal ability to take such a position.
Sala

President Della Sala adjourned the meeting to recess at 10:09 p.m.

9. Receive Report, Discuss and Provide Recommendation on the Status of Monterey Peninsula
Water Supply Project

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The meeting reconvened at 10:14 p.m. Executive Director Cullem provided an update on the
status of the borehole construction project noting the second bore hole drilling was about to
begin and the results of the water analysis will be released once certified. He then spoke to the
power purchase agreement status and indicated the report regarding the capital costs of the
engineering solution will be published by the end of march. He further reported on the slippage
being reflected in the CPUC schedule reflected as a total 6-month delay being imposed by the
CPUC.
The Directors discussed the timeline and indicated that the City of Marinas ultimate approval
sped up the process by months and should be recognized and that the schedule as presented
is doable unless something else delays the project. President Della Sala invited public
comment on the item.

Tom Rowley expressed concern regarding lack of data in the draft EIR from the test
slant wells indicating since it is new technology it will be challenging and will invite
criticism. Suggested having the TAC review.
David Lifland requested getting Point Blue to sign off on a well, requested an update on
the remaining reports due to the City of Marina and asked if the Authority should or
could intervene.

Ian Crooks, Engineering Manager for Cal Am spoke to the issue of getting viable slant well
technology and reported that nearly all reports due to the City of Marina have been completed
and the consultant will have a draft MDNA ready in April for public review. Chair Burnett
indicated that if there is any desire by the Board for additional review or analysis of the Draft
EIR, or the issue of brine disposal it should be agendized in the near future.

ADJOURNMENT

Meeting was adjourned at 10:33 p.m.

ATTEST:

Lesley Milton, Authority Clerk Chuck Dells Sala, President

MI NUTES
Regular Meeting
7:00 PM, Thursday, March 27, 2014
SEASIDE CITY HALL
440 HARCOURT AVE
SEASIDE, CA 93955

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

Directors Absent: Kamp

Staff Present: Executive Director, Legal Counsel, Authority Clerk

ROLL CALL

The meeting was called to order at 5:30 p.m.



Vice President Burnett announced that the Governance Committee meeting on Monday, March
31, 2014 will begin the value engineering process for the design-build contract of the
desalination facility. The Committee will also receive a project update and alternative intake
strategies. Mr. Burnett further reported that SB 936 was introduced by Assemblymember Bill
Monning and that Dave Stoldt and Mr. Burnett will be testifying in support of the legislation.

Executive Director Cullem received notice from County Administrator Office that they are
pursuing approval and payment for their fair share contribution for FY 2012-13 which would
offset any additional funding needed for the current fiscal year, noting that the County is
represented on the Governance Committee, representing the rate payers of unincorporated
Monterey County.

PUBLIC COMMENTS

David Lifland expressed concern regarding the lack of storage during dry seasons and
suggested consideration of building additional reservoirs to hold the storm flows.
Dan Turner spoke to the relative costs of pubic and private water. Questioned Director
Edelens comment previously made regarding a study of public vs private water. He
spoke against the credibility of the organization and the complicated nature of the
findings.
Lee Willaby Pacific Grove resident spoke in support of Public Water Now.
Tina Holsten expressed concern regarding Cal Am taking advantage of the water politics
on the peninsula and expressed concerned that if the public wants to buy out Cal Am it
would be more expensive in the future.
Mr. Cardinale questioned the financing of the desal facility and how the bonds would be
paid to which Vice President Burnett spoke to how utilities are regulated in the State of
California.

AGENDA ITEMS

1. Consider Taking A Position on Monterey Peninsula Water Management District Measure "O"
(Discussion/Action)

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Executive Director Cullem spoke to the item, recapping the previous meeting where this item
was discussed and outlined the changes proposed to the draft resolution included in the packet.

President Della Sala invited public comment for the item.

Tom Rowley, Rick Heuer, Linda Doras, Dean Province and Lawson Little spoke in
support of adopting the proposed resolution taking a position against Measure O.
David Lifland expressed concern regarding unintended consequences for the efforts of
Public Water Now.
Dale Heikhaus, Safwat Malek, Lee Willaby and Ron Nelson requested that the Authority
not take a position on the measure.
Renee Boscoff, Nelson Vegas, Sam Teel, Chair of Monterey County Hospitality
association, Kevin Stone Monterey County Association of Realtors, Mike Zimmerman,
Coalition of Peninsula Businesses, Jody Hansen President of Monterey Peninsula
Chamber of Commerce, Rick Aldinger and Maria Buell spoke in support of taking a
position against Measure O citing the focus should be to obtain a sustainable water
supply and public vs. private water can be debated after. Residents and businesses
need water to survive.
Alvin Edwards, Seaside Council Member requested this decision be taken to each
Members City Councils before a decision is made.
Tina Holsten, Michael Baer, David Rodder, Suzie Yapley and Dianne Cotton spoke in
support of measure O and against Cal Am.
Malone Hodges spoke to the confusion of the water issue and how there are so many
agencies being so opposed. He thanked the Directors for the leadership by the
Authority.
Mike Bekker spoke as Chair of Pacific Grove Chamber of Commerce and requested
supporting Measure O. Speaking as a resident; he spoke to disinformation being spread
around regarding the ballot measure and is confusing voters.
George Riley spoke representing Public Water Now expressed disappointment that the
Authority did not request or allow Public Water Now to make a presentation on Measure
O and spoke with frustration to the limitation to 3 minutes. He reported on calling the
State Water Resources Control Board who said that passage of Measure O will not
impact the CDO.
Paul Bruno spoke with disagreement to Mr. Riley in that the passage of the measure will
impact the community with negative consequences and is a risk we cannot afford.
Scott Dick spoke to research conducted which provides solid, substantiated evidence of
other cities that facilitate public water, all being more expensive. He spoke to the study
done by Food and Water Watch which provided information that is being misinterpreted
by PWN for their benefit. He requested that the Authority oppose Measure O because it
will not produce cheaper water as advertised.

Having no further requests to speak, Public Comment was closed.

Mayor Edelen expressed disappointment that a large number of audience members left the
meeting after public comment before there was even a response given or a dialogue
facilitated. He spoke to the focus of the Board to provide a sustainable water supply and
anything that distracts from that is an issue, which Measure O would. He spoke concerning
the projected disastrous impacts to the Monterey Peninsula if the CDO was enforced.

Mayor Rubio spoke to his comments made during the last meeting and indicated he did not
hear any facts that were data driven, which changed his position on this issue. He believes

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that this action is consistent with the purpose of the Authority.

Director Kampe spoke to the responsibility as Mayors to ensure a water supply to support
the infrastructure of the community and assured the public that they are not immune from
the consequence as residents, if the community is forced to ration water. He spoke in
support of the resolution.

Director Pendergrass indicated that his position had not changed from the last meeting and
that Measure O will prohibit finding a water supply.

Vice President Burnett expressed concerned with the level of the misinformation being
distributed and spoke to the need to work collaboratively as a community to obtain a water
supply before the water cliff. He spoke to efforts the Mayors have been involved with to
make that happen, and that taking a position is not politically advantageous, but that he
thinks it is the right thing to do in this community.

President Della Sala thanked the community for their passion and their comments and the
Authority members for their courage. He cited this as politically risky position but is being
taken to obtain a water supply for the current citizens as well future generations. He felt that
Mayors are elected to make decisions in the best interest and for the betterment of their
communities.

The Directors discussed suggested resolution changes speaking to potential impacts of
base closures and that language should be added to say securing a water supply will help to
retain the military establishments here on the Monterey Peninsula, and the next round of
BRAC will align with the timing of the proposed completion of our water supply projects.

On motion by Director Rubio and seconded by Director Edelen and passed by the following
vote the Authority approved Resolution no. 14-02, as amended, in its entirety expressing
opposition to Measure O.

Sala

ADJOURNMENT

Having no further business to conduct, the meeting was adjourned at 7:33 p.m.

ATTEST:

Lesley Milton, Authority Clerk Chuck Della Sala, President

MI NUTES
Regular Meeting
7:00 PM, Thursday, April 10, 2014
580 PACIFIC STREET
MONTEREY, CALIFORNIA

Directors Present: Burnett, Edelen, Alt. Lucius, Pendergrass, Rubio, Della Sala

Directors Absent: None

Staff Present: Executive Director, Legal Counsel, Clerk

ROLL CALL

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

Alternate Director Casey Lucius was present representing the City of Pacific Grove.



No reports from Directors or staff.

PUBLIC COMMENTS

President Della Sala invited public comments for items not on the agenda.
Tom Rowley spoke representing the Monterey Peninsula Taxpayers Association regarding
Monterey Peninsula Water Management District use of Ordinance 152 funds, and is awaiting a
decision by the judge regarding a submitted referendum. He thanked the Directors for not
approving a study and for not supporting Measure O. Nelson Vega requested an update of the
projects that make up the portfolio and spoke to the potential to size the desalination facility at
over 12,000 acre/foot. David Lifland spoke to the proposed plan that the Seaside Basin would
be a mixture of water from all three water projects, but questioned the intentions to price that
water.

AGENDA ITEMS

1. Receive, Discuss, Revise, and Approve the Request for Proposal (RFP) and Scope of Work for
a Value Engineering (VE) Study of the Monterey Peninsula Water Supply Project (MPWSP)

Executive Director Cullem indicated that the Governance Committee voted for selecting and
contracting directly with the Value Engineering firm for the design build contract to ensure
public oversight and transparency. The purpose of the VE would be to look for fatal flaws and
identification of efficiencies and reduced costs through design improvements and is most
effectively done at 30% design build. The estimated costs is not to exceed $200,000 with all
costs reimbursable by Cal Am. The Authority would solicit and acquire the value engineer, but
the Governance Committee will select the firm. Vice President Burnett indicated the TAC
MPRWA Minutes Thursday, April 10, 2014

Regular Meeting Minutes - Thursday, April 10, 2014
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reviewed and recommended the attached RFP, contract and scope of work for the RFP.
Director Rubio requested that the Authority incur any undue liability from the contract.

President Della Sala invited public comment.
Nelson Vega questioned the assurance of this project and if the timing was premature
expressing concern regarding stranded costs. David Lifland questioned if there was a
performance clause. Tom Rowley spoke to Director Rubio's concern regarding liability and in
support of advice from the Legal Counsel Freeman.

Director Burnett spoke to the schedule and the process by which Cal Am would or would not
incorporate suggestions from the VE. Legal Counsel Freeman indicated that because we are
involved in the PUC process we have to maintain the adopted schedule. The performance
clause must be handled between Cal Am and the VE firm. Mr. Freeman further clarified the
common local government practice for City projects to require the project to fund an EIR but the
City would contract for the services, to ensure the extra layer of transparency and public
oversight and control.
On a motion by Director Lucius and seconded by Director Edelen and carried by the following
vote, the Authority approved authorizing the Executive Director to advertise the Request for
Proposal (RFP) and Scope of Work for a Value Engineering (VE) Study of the Monterey
Peninsula Water Supply Project (MPWSP), if approved by the Governance Committee:

AYES: 6 DIRECTORS:
Burnett, Edelen, Alt. Lucius, Pendergrass, Rubio,
Della Sala

2. Receive Update, Discuss and Provide Recommendation on Update to the Monterey Peninsula
Regional Water Authority Work Plan

Executive Director Cullem spoke to the status of the items approved in the previously adopted
work plan. He requested direction for additions to the work plan.
He noted that Monterey Peninsula Water Pollution Control Agency General Manager Israel
requested to make a full presentation to the public regarding the Ground Water Replenishment
"Pure Water Monterey" project to provide an update regarding the status of the project, the
status of the water negotiations, the status of the settlement agreement meetings to bring the
Authority and the public up to date. The Directors agreed to agendize a presentation by the
MRWPCA. Executive Director Cullem encouraged the public to attend educational tours of the
GWR testing facility.

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Director Burnett requested direction on when the Authority would like to proceed to request an
official extension of the Cease and Desist Order (CDO) from the State Water Resources
Control Board and suggested timing for a petition be submitted in 2014.
Director Rubio spoke to the definition of when the projects can be considered viable. Director
Edelen indicated it must be after the election deciding Measure O.
With regard to the required permits, the City of Marina requested more effort to keep the staff
and the City more informed regarding the project. The directors discussed the permitting
schedule that the level of involvement and requested to remain informed of the timelines and
participate when necessary.
President Della Sala invited public comment.
Tom Rowley spoke to the CDO extension request timing and things that need to be done prior
to the request, including more participation from the County of Monterey. Nelson Vega
requested that the Authority not lose sight of the cost per acre foot of water and spoke to the
impacts of uncertainty of water is going to have with regard to economic development. Source
water is the issue and cost per acre foot is paramount to a viable project. Citizens are not
serviced by water too expensive to drink. David Lifland spoke in support of having a successful
test well prior to the petition and questioned the hydrogeological report results.

Alternate Director Lucius requested adding to the strategy of the CDO that if this body is not
necessarily submitting a request for the extension, but a statement of support, a coordinated
strategy is important to demonstrate process and impact, including all of the agencies and
associations voices into these different statements of support could be more powerful one
representative to pleased. Its not just the request, but the impact of statement of support. The
Directors agreed and requested that the Authority continue to pursue the work plan as written
with the above additional directions

3. Approve Mid-Year FY 2013-2014 Amended Budget and Approve the FY 2014-2015 Budget

Executive Director Cullem spoke to the item outlining the previously adopted budget for the
2013-14 fiscal year, which accounted for a carry over balance that was never realized due to
the increase of legal services expenses. He indicated that the Authority would not be required
to request additional contributions from member cities if funds outstanding from Monterey
County are approved. He called attention to the contract assistance line item for value
engineering services approved as fully reimbursable earlier in the meeting indicating that the
contract will not be issued until the fund have been received for reimbursement.
Mr. Cullem then outlined the anticipated expenditures for Fiscal year 2014-15 and noted that
the funds were from Monterey County have not been factored into this budget yet as it is not
guaranteed however if the county agrees to the fair share contribution, the budget would be
amended.

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President Della Sala invited public comment
Neslon vega indicated that the Authority should include more funding for public outreach to
promote the benefits and accomplishments of the agency. The public needs to understand what
would happen if the Authority was not created. Tom Rowley suggested re-extending the
request to the County to participate in this agency. He also spoke in support of Mr. Vega's
comments regarding the Authority efforts to date.

On motion by Director Pendergrass and seconded by Director Rubio and passed by the
following vote the Authority approved the staff recommendation for amending the FY 13-14
budget and approving the proposed FY 14-15 operating budget as presented.

AYES: 6 DIRECTORS:
Burnett, Edelen, Alt. Lucius, Pendergrass, Rubio,
Della Sala

ADJOURNMENT

Having no further business to conduct, the meeting was adjourned at 8:31 p.m.

ATTEST:

Lesley Milton, Authority Clerk Chuck Della Sala, President

Agenda Report

Date: May 08, 2014
Item No: 4.

06/12
FROM: Authority Clerk Milton

SUBJECT: Approve and File Checks Through May 10, 2014

RECOMMENDATION:
It is recommended that the MPRWA approve and file the accounts payable payments
made during the period of March 8, 2014 through April 10, 2014. Total Accounts
Payable for the above referenced period is $69,634. It is recommended that the
Authority approve and file the below checks.
DISCUSSION:
At its meeting on September 12, 2013, the Authority Board approved a staff
recommendation to provide the Directors a listing of general checks issued since the last
report so that it can inspect and confirm these checks. Each invoiced expense has been
reviewed and approved by the Executive Director and Finance personnel prior to payment
to insure that it conforms to the approved budget.
The following checks are hereby submitted to the Authority for inspection and
confirmation.
$6,750 to Perry and Freeman For Legal Services for April and May
$1,575 to Access Monterey Peninsula
$1,225 to Environmental Relations for Public Outreach Services
$47,871.54 to Brownstein Hyatt Farber and Schreck for legal services invoices
from February and March 2014
$12,212.62 to City of Seaside for reimbursement of overpayment of Membership
fees, for website renewal feels and finance software costs.

FISCAL IMPACT
The listed checks have been budgeted and paid from the various funds, as appropriate
and the Budget to Actual is below and lists all checks issued to date.
There are still outstanding invoices from the Monterey Peninsula Water Management
District and the County of Monterey for their fair share of the Separation Processes Inc.
Services. An error was identified that the City of Seaside had overpaid their annual
member fair share contribution and the above check is reimbursement of that
overpayment. It is not reflected as a charge against the budget.

06/12

Budget to Actual (As
of 5/1/2014)

Professional Services
Amended
Adopted
Budget
Expended Remaining Encumbered Remaining

Legal Counsel $59,000 $27,000 $32,000 $0.00 $32,000.00
Attorney of Record $186,000 $124,403 $61,597 $61,596.91 $0.00
Clerk Services $35,000 $35,000 $0 $0.00 $0.00
Executive Director $90,680 $45,860 $44,820 $44,184.20 $636.00
Contract SPI $35,000 $34,610 $390 $0.00 $389.67
Constract
Services/Studies $3,000 $0 $3,000 $0.00 $3,000.00
Travel $1,000 $0 $1,000 $0.00 $1,000.00
Public Outreach $25,000 $11,636 $13,364 $8,026.00 $5,338.15
Insurance $7,000 $6,702 $298 $0.00 $298.12
Audit $6,700 $6,700 $0 $0.00 $0.00
Contingency $2,000 $2,118 -$118 $0.00 -$118
Value Engineer $200,000 $0 $200,000 $200,000.00 $200,000.00
$650,380 $294,029 $156,351 $313,807.11 $42,544.38

*ED Postion estimated 20 hrs per week, not 30 as budgeted

Agenda Report

Date: May 08, 2014
Item No: 5.

06/12
FROM: Executive Director Cullem

SUBJECT: Adopt Resolution Accepting the Amended Fiscal Year 2013-14 Budget and
Adopting the Fiscal year 2014-15 Operating Budget

DISCUSSION:
At the April 10, 2014 Authority Directors meeting the Board approved amending the operating
budget for Fiscal Year 2013-14 and approving the draft operating budget for Fiscal Year 2014-
15 as presented. This item is memorializing the action taking by adopting a resolution.
RESOLUTION NO.14- XX

A RESOLUTION OF THE MONTEREY PENINSULA
REGIONAL WATER AUTHORITY

APPROVING AMENDED OPERATING BUDGET FOR FISCAL YEAR 2013-14 AND FINAL
OPERATING BUDGET FOR FISCAL YEAR 2014-15

WHEREAS, the Monterey Peninsula Regional Water Authority (The Authority) has provided
direction for needs and services to carry out its purpose and mission, and

WHEREAS, actual expenditures incurred during the FY 2013-14 budget year were different
than anticipated and an adjustment of expenditure categories is needed to reflect appropriately; and

WHEREAS, the anticipated cost of carrying out the direction of the Authority will require
$458,680 in funding for fiscal year of 2014-15; and

WHEREAS, the Authority Directors approved the amended operating budget for Fiscal Year
2013-14 and operating budget for Fiscal Year 2014-15 on April 10, 2014 at a regular meeting, as
outlined in Exhibit 1; and

WHEREAS the Authority member cities have been allocated percentages based on water
usage and agreed upon within the Joint Powers Agreement and listed as Exhibit 2; and

WHEREAS the member contributions for FY 2014-15 derived from the above listed
percentages are included in Exhibit 2.

NOW, THEREFORE, BE IT RESOLVED that the Authority adopt this resolution
memorializing the operating budget for FY 2014-15 adopted on April 10, 2014; and

BE IT ALSO RESOLVED that the Authority requests that all Member Cities to forward this to
their respective Councils for approval of contributions for the operation of the Authority so that a
suitable solution for water can be found.

PASSED AND ADOPTED BY THE MONTEREY PENINSULA REGIONAL WATER
AUTHORITY at a regular meeting this ____ day of ______, 2014, by the following vote:

AYES: DIRECTORS:
NOES: DIRECTORS:
ABSENT: DIRECTORS:
ABSTAIN: DIRECTORS:

APPROVED:

ATTEST:

Chuck Della Sala, President

Lesley E. Milton, Authority Clerk
EXHIBIT 1 - Amended Budget for FY 2013-14 and Budget for FY 2014-15

Statement of Net Position 2013-14 Amended Funds Funds 2014-15
Budgeted Budget Received Outstanding DRAFT
OPERATING EXPENSES
Carryover from FY 2012-2013 $7,268 $7,268 $0

County Contributions from FY
2012-2013 $83,300 $0 $83,300 $0
Membership Fees $341,680 $341,263 $341,263 $458,680
Reimbursements for SPI Contract $18,562 $0 $18,562 $0
Reimbursement for VE Contract $200,000 $200,000 $0
Total Operating Revenue $341,680 $650,393 $348,531 $301,862 $458,680
OPERATING REVENUES Budgeted
Amended
Budget
Encumbered
thru 6/30/14
Budget
Remaining
Draft Budget
2014-2015
Administration and Clerical
Principal Office of the Authority $0 $0 $0 $0 $5,000
Clerk of the Board $35,000 $35,000 $35,000 $0 $24,000
Financial Services $0 $0 $0 $0 $6,000
Executive Director $94,680 $90,680 $90,044 $636 $94,680
Misc Admin Expenses $0 $0 $0 $500
Legal Services
Board Counsel $63,000 $59,000 $27,000 $32,000 $63,000
Special Counsel $100,000 $186,000 $186,000 $0 $152,000
Contract Services
Public Outreach $35,000 $15,000 $15,000 $0 $35,000
Audit Services $5,000 $6,700 $6,700 $0 $6,000
Televised Meetings $14,000 $10,000 $4,663 $5,338 $10,000
Contract Services & Studies $25,000 $3,000 $0 $3,000 $30,000
Contract SPI $20,000 $35,000 $34,610 $390 $0
Contract VE $0 $200,000 $200,000 $0 $0
Insurance $7,000 $7,000 $6,702 $298 $7,500
Travel Expenses $5,000 $1,000 $0 $1,000 $5,000
Contingency $20,000 $2,000 $1,657 $343 $20,000
TOTAL OPERATING EXPENSES $423,680 $650,380 $607,376 $43,005 $458,680

EXHIBIT 2
Based on the Authoritys Joint Powers Agreement, the below table is the approved Member City expense allocation
based on water usage and the Member City Annual Membership Contributions for Fiscal Year 2014-15

FY 2014-15 Member City Contributions

Member City
Approved %
Distribution
Total
Contributions
FY 2014-15

Carmel By the Sea 9.30% $42,657
Sand City 1.30% $5,963
City of Pacific Grove 18.80% $86,232
City of Seaside 22.00% $100,910
City of Monterey 46.50% $213,286
City of Del Rey Oaks 2.10% $9,632
Total Income 100.00% $458,680

Agenda Report

Date: May 08, 2014
Item No: 6.

06/12

SUBJECT: Receive Report, Discuss, and Provide Direction on Public Outreach

DISCUSSION:
A verbal report will be provided by Ashely Beleny, contracted public outreach consultant.
Agenda Report

Date: May 08, 2014
Item No: 7.

06/12

SUBJECT: Receive Report, Discuss and Provide Direction on Presentation from the
Monterey Peninsula Water Management District Regarding the Deep Water
Desal Project

DISCUSSION:
A verbal report will be provided by Dave Stoldt, General Manager of the Monterey Peninsula
Water Management District.
Agenda Report

Date: May 08, 2014
Item No: 8.

06/12

SUBJECT: Receive Report, Discuss and Provide Direction Regarding Presentation from
Monterey Regional Water Pollution Control Agency Regarding Negotiations for
Source and Product Water for the Ground Water Replenishment Project

DISCUSSION:
A verbal report will be provided by Keith Israel, General Manager of the Monterey Regional
Water Pollution Control Agency.
Agenda Report

Date: May 08, 2014
Item No: 9.

06/12
FROM: Water Authority Counsel Donald Freeman

SUBJECT: Approve Revised Governance Committee Agreement

RECOMMENDATION:
It is recommended that the Water Authority approve a revision to the Amended and Restated
Agreement for the Monterey Peninsula Regional Water Supply Project Governance Committee
in order to authorize the Committee or its designee to advertise for a Value Engineer
Consultant, and to award and administer the Contract.

DISCUSSION:
The revision under consideration was requested by the Governance Committee at its meeting of
April 16, 2014. The Governance Committee also requested that the Water Authority and/or the
Water Management District undertake the preparation and advertisement of an RFP and Scope
of Work for a VE Consultant, and to make a recommendation for selection following a review of
proposals received. Since time was of the essence, the Water Authority accepted the task, and
the RFP has now been sent out to potential consultants.
The Governance Committee will make the final selection and the Water Authority will then
award and administer the contract.

ATTACHMENT:
-Proposed revision to the October 10, 2013 Amended and Restated Agreement to form the
Monterey Peninsula Water Supply Project Governance Committee.
Execution Copy May 8, 2014

1

AMENDMENT TO THE AMENDED AND RESTATED AGREEMENT TO FORM THE MONTEREY
PENINSULA WATER SUPPLY PROJECT GOVERNANCE COMMITTEE
THIS AMENDMENT (Amendment), dated April 30, 2014, supplements and modifies the terms and
conditions of that certain Amended and Restated Agreement to Form The Monterey Peninsula Water
Supply Project Governance Committee, dated November 5, 2013 (Agreement), by and between the
MONTEREY PENINSULA REGIONAL WATER AUTHORITY (MPRWA), the MONTEREY PENINSULA
WATER MANAGEMENT DISTRICT, the COUNTY OF MONTEREY, and the CALIFORNIA-AMERICAN
WATER COMPANY (Cal-Am) (collectively, the Parties). The Parties agree to amend the Agreement as set
forth below.
1. Section II.R., defining the term Value Engineer, is deleted in its entirety and replaced with the
following:
R. Value Engineer. The professional engineer(s) to be retained by MPRWA upon the
selection of the Governance Committee to perform a value engineering analysis for the
Desalination Project to potentially lower the costs of, or maximize the value of, the
Desalination Project to Cal-Ams ratepayers, including matters concerning the cost
effectiveness, performance, reliability, quality, safety, durability, effectiveness, or other
desirable characteristics of the Desalination Project.
2. Section V.D., Category A, Paragraph 1., concerning the selection of the Value Engineer, is
deleted in its entirety and replaced with the following:
1. The Governance Committee shall select, and the MPRWA shall retain, a Value
Engineer(s) to facilitate and report on the proposed value engineering for the Desalination
Project. In selecting the Value Engineer(s), the Governance Committee shall consider any
recommended engineer submitted by any member of the Governance Committee. This
matter shall be ripe for decision before Cal-Am accepts the 30% Design from the
contractor retained for the design of the Desalination Infrastructure, or at any other time
that Cal-Am intends to retain a Value Engineer for any other infrastructure constructed as
a component of the Desalination Project. Cal-Am shall reimburse the MPRWA for all
payments made by MPRWA to the Value Engineer for expenses reasonably incurred in
the Value Engineers performance of the value engineering services for the Desalination
Project up to, but not to exceed, two hundred thousand dollars ($200,000). Cal-Am shall
make such reimbursement payments within 60 days following Cal-Ams receipt of a valid
invoice, with supporting documentation, from MPRWA.
3. In Section IX, concerning the term and termination of the Agreement, the first sentence of this
section is deleted in its entirety and replaced with the following:
This Agreement shall continue in effect until the earlier of (1) March 8, 2053, or (2) the
date that Cal-Am ceases to operate the Desalination Project, the earlier such date to be
known as the Expiration Date..
4. Section X.F., concerning the Parties bearing of costs, is deleted in its entirety and replaced
with the following:
Except as expressly set forth in this Agreement, each Party shall bear its own costs
relating to the rights and obligations of each Party arising from this Agreement and its
participation in the Governance Committee and, therefore, no Party shall be entitled to any
reimbursement from another Party as a result of any provision of this Agreement.

2

5, All provisions of the Agreement other than the provisions expressly amended above are
unaltered by this Amendment.
6. This Amendment may be executed in two or more counterparts, each of which shall be
deemed and original, but all of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Parties have executed this Amendment as of the date first stated
above.

California-American Water Company

By:_______________________________
Robert MacLean,
President

Monterey Peninsula Regional Water Authority By:_______________________________
Chuck Della Sala
President

Agreed as to form:

By:_______________________________
Donald Freeman
General Counsel

Monterey Peninsula Water Management District By:_______________________________
David Pendergrass
Chair

Agreed as to form:

By:_______________________________
David Laredo
General Counsel

County of Monterey By:_______________________________
Fernando Armenta
Chair of the Board of Supervisors

Agreed as to form:

By:_______________________________
Charles McKee
County Counsel

3

Agenda Report

Date: May 08, 2014
Item No: 10.

06/12

SUBJECT: Receive Report, Discuss and Provide Direction Regarding Commissioner
Michael R. Peevey and ALJ Gary Weatherford's Ruling Requesting Comments
on Surcharge Options and Proposals

RECOMMENDATION:

Since time is of the essence, Staff recommends that the Authority authorizes the
Executive Director, Authority Counsel, and Special Counsel to develop and submit a
response to the CPUC draft decision as well as to other responses from settling parties
by the deadline

90381618 - 1 -
MP1/GW2/sbf/ek4 5/2/2014

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

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.

Application 12-04-019
(Filed April 23, 2012)

ASSIGNED COMMISSIONER RULING, JOINED BY A CO-ASSIGNED
ADMINISTRATIVE LAW JUDGE, REQUESTING COMMENTS
ON SURCHARGE OPTIONS AND PROPOSALS
1. Summary
This Assigned Commissioner Ruling, joined by a co-assigned
Administrative Law Judge, requests comments of the Parties by May 12, 2014,
and reply comments by May 16, 2014, concerning a specific surcharge proposal
prepared by the Division of Water and Audits that is set out in this ruling at
Appendix 1. The proposal would have Surcharge 2 set at 15% starting July 1,
2014, 30% when Surcharge 1 expires (estimated to be by November 1, 2014), and
45% on January , 2015, where it would remain until the desal plant is put into
service.
2. Discussion
1
2.1. Settlement Agreement

1
Portions of this ruling rely heavily on language contained in filings of the parties and
documents prepared by the Division of Water and Audits (DWA).
FILED
5-02-14
12:14 PM
A.12-04-019 MP1/GW2/sbf/ek4

- 2 -
On July 31, 2013, the following was executed: Settlement Agreement of
California-American Water Company, Citizens for Public Water, City of
Pacific Grove, Coalition of Peninsula Businesses, County of Monterey, Division
of Ratepayer Advocates, LandWatch Monterey County, Monterey County
Farm Bureau, Monterey County WaterResources Agency, Monterey Peninsula
Regional Water Authority, Monterey Peninsula Water Management District,
Monterey Regional Water Pollution Control Agency, Planning and Conservation
League Foundation, Salinas Valley Water Coalition, Sierra Club, and Surfrider
Foundation (Settlement Agreement). It is Attachment A to the Settling Parties
Motion to Approve Settlement Agreement, filed in Application 12-04-019 on
July 31, 2013. All parties to the Settlement Agreement have signed onto in this
Joint Motion except LandWatch Monterey County, Monterey County Farm
Bureau, Monterey Regional Water Pollution Control Agency, Salinas Valley
Water Coalition, Sierra Club, and Surfrider Foundation, who stated they are not
joining in this motion because it goes beyond the scope of their involvement in
the proceeding.
2.2. Surcharge Background
See Appendix 3.
2.3. Joint Motion and Its Denial
On March 14, 2014, California-American Water Company (Cal Am),
Citizens for Public Water, City of Pacific Grove, Coalition of Peninsula
Businesses, County of Monterey, Monterey County Water Resources Agency,
Monterey Peninsula Regional Water Authority, Monterey Peninsula Water
Management District, the Office of Ratepayer Advocates, and Planning and
Conservation League Foundation filed a Joint Motion to Reduce the Special
Request I Surcharge. Assigned Administrative Law Judge (ALJ) Weatherford
A.12-04-019 MP1/GW2/sbf/ek4

- 3 -
denied that motion without prejudice by an e-mail ruling
2
on March 20, 2014,
stating:
The Joint Motion filed on Friday March 14, 2014, seeking a
reduction in Surcharge I, is denied without prejudice. I will
be consulting with staff concerning ratepayer impacts and
surcharge mechanisms generally and longer term relative to
this proceeding.
2.4. Division of Water and Audits Options and Proposals
After ALJ Weatherford conferred with staff, DWA developed the
surcharge options and proposals attached to this ruling as Appendix 1.
The essential factors taken into account by the staff are these. According to
the large settlement (at 23), Surcharge 2 is estimated to collect $71.5 million
(which is not the capped amount and the capped amount will be treated as
Contributions of Aid of Construction (CIAC)). The parties agreed to increase the
rate of collection of Surcharge 1 to 20% when the certificate of public convenience
and necessity (CPCN) would be issued to make for a smooth transition. Cal
Am's fixed equity investment of the project is capped at 27% of the value of the
total project costs for the desal plant and the CAW-only facilities. Costs of
implementing the securitization plan may be collected through Surcharge 2 in
addition to the $71.5 million for the plant and CAW-only facilities.
The DWA has calculated that letting Surcharge 1 expire naturally and
implementing Surcharge 2 thereafter provides the least fluctuation in customer
bills, increases the rate payer portion of the Monterey Peninsula Water Supply
Project (MPWSP), and decreases the total impact of the project on the rate payer
by increasing CIAC. Setting Surcharge 2 at 15% starting July 1, 2014, 30% when

2
By this reference that informal ruling is confirmed and memorialized.
A.12-04-019 MP1/GW2/sbf/ek4

- 4 -
Surcharge 1 expires (estimated to be by November 1, 2014), and 45% on
January 1, 2015, where it would remain until the desal plant is put into service,
accomplishes these goals.
In addition to the MPWSP, rates will increase around the 2nd quarter 2015
for the GRC and around the 3rd quarter for the Water Rate Adjustment
Mechanism, assuming a timely processing of the advice letter.
Commission precedence for surcharge collection of construction costs in
advance of construction can be found in Decision (D.) 12-06-040 (San Clemente
Dam) and D.11-05-002 (Klamath River Dams removal).
This Assigned Commissioner Ruling seeks comments of the Parties by
May 12, 2014, and reply comments by May 16, 2014, on the DWA options and
proposals set out in Appendix 1
IT IS RULED that Parties are requested to file and serve comments on the
Division of Water and Audits options and proposals contained in Appendix 1 by
May 12, 2014, and file and serve reply comments by May 16, 2014.
Dated May 2, 2014, at San Francisco, California.

Michael R. Peevey
Assigned Commissioner
Gary Weatherford
Co-Assigned
Administrative Law Judge
/s/ MICHAEL R. PEEVEY
/s/ GARY WEATHERFORD
A.12-04-019 MP1/GW2/sbf/ek4

Appendix 1
A.12-04-019 MP1/GW2/sbf/ek4
Appendix 1
A.12-04-019 MP1/GW2/sbf/ek4
A.12-04-019 MP1/GW2/sbf/ek4
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A.12-04-019 MP1/GW2/sbf/ek4

Appendix 2
A.12-04-019 MP1/GW2/sbf/ek4

- 1 -

Excerpt from Joint Motion
(Footnotes deleted)
California-American Water Company (California American Water), Citizens for Public
Water, City of Pacific Grove, Coalition of Peninsula Businesses, County of Monterey, Monterey
County Water Resources Agency, Monterey Peninsula Regional Water Authority, Monterey
Peninsula Water Management District, the Office of Ratepayer Advocates, and Planning and
Conservation League Foundation (collectively, the Settling Parties) file this joint motion to
reduce the Special Request 1 Surcharge (Surcharge 1). Specifically, the Settling Parties seek
authority for California American Water to reduce the amount of Surcharge 1 from 15% to 4.5%
of customer bills. This reduction is reasonable in light of the new Commission schedule for the
proposed Monterey Peninsula Water Supply Project (MPWSP). The reduction will also benefit
ratepayers by avoiding an unnecessary fluctuation in rates and by reducing current bills.
Additionally, parties have agreed that California American Water will not seek recovery of any
additional costs through Surcharge 1 beyond those requests currently pending before the
Commission in A.12-10-003 and A.13-05-017. The Settling Parties request that the Commission
act as soon as possible to authorize this agreement and the corresponding reduction in Surcharge
1 in order to maximize the benefit to customers.
II. Legal and Factual Background
In D.03-09-022, the Commission authorized California American Water to track
preconstruction costs related to a long-term water supply project in a memorandum account. In
D.06-12-040, the Commission authorized California American Water to recover via Surcharge 1
the long-term water supply project costs that it was tracking in that memorandum account. The
Commission also approved the Special Request 2 Surcharge (Surcharge 2), which would fund
the construction of a water supply solution on a pay-as-you-go basis, but delayed implementation
of Surcharge 2 until the issuance of a Certificate of Public Convenience and Necessity (CPCN)
for a long-term water supply project.
In D.11-09-039, the Commission authorized California American Water to
increase Surcharge 1 to 15%. The increase was approved based on a schedule that provided for
A.12-04-019 MP1/GW2/sbf/ek4

- 2 -
amortization of the approximately $30 million in preconstruction costs booked in the
memorandum account by the end of 2014.
In the current application for the MPWSP, California American Water proposed to
continue using Surcharge 1 at the 15% rate to recover preconstruction costs, and asked the
Commission to reinstate Surcharge 2. As part of the July 31, 2013 Settlement Agreement, the
parties agreed that Surcharge 1 will cease before Surcharge 2 collections begin, allowing for a
more gradual ramping up of rates that are directly attributed to the MPWSP. The parties also
agreed that the total to be collected under Surcharge 2 will be reduced in order to provide for a
smooth transition in rates from the final period under Surcharge 2 to the year 1 revenue
requirement of the desalination plant.
III. Justification For Relief
In its application, California American Water proposed a schedule that would provide a
Commission decision on the CPCN by February 2013. That schedule was rejected, and an
extended procedural schedule was adopted. Most recently, on January 27, 2014, assigned
Administrative Law Judge Minkin extended the current schedule for the proceeding to
accommodate a delay in the environmental review process. Under the new schedule, a
Commission decision on the MPWSP is not expected until the first quarter of 2015. In the
meantime, California American Water will continue to recover preconstruction costs through
Surcharge 1.
With the current 15% rate, California American Water expects to have recovered the
costs through Surcharge 1 by Fall 2014. The extended procedural schedule, however, allows
California American Water to be less aggressive in recovery of preconstruction costs and
justifies reducing Surcharge 1 to 4.5%. As shown in the attached schedule (Attachment 1), this
will still allow California American Water to recover the preconstruction costs in a timely
manner and will also smooth rate reductions during the transition from Surcharge 1 to Surcharge
2. Moreover, this reduction will benefit California American Waters Monterey County District
customers by reducing current bills. This relief will be helpful for all California American Water
customers, but will particularly assist low-income customers facing a variety of increases.
Furthermore, the parties have agreed that California American Water will not seek recovery of
A.12-04-019 MP1/GW2/sbf/ek4

- 3 -
any additional costs through Surcharge 1 beyond those requests currently pending before the
Commission in A.12-10-003 and A.13-05-017.
IV. Request For Timely Action
The Settling Parties request that the Commission act as soon as possible to authorize the
reduction of Surcharge 1. The sooner Surcharge 1 is reduced, the greater the benefit for
California American Waters customers. Furthermore, since California American Water is
currently on track to recover the existing preconstruction costs by Fall 2014 under the 15% rate,
a significant delay would render the issue moot. Timely action on this motion will serve the
public interest.
V. Conclusion
Given the delay in the proceeding and the extended period for recovery of preconstruction costs,
the Settling Parties request to reduce Surcharge 1 from 15% to 4.5% of customer bills is
justified. California American Water will still be able to recover costs in a timely manner, but
customers will benefit in the meantime from a reduced surcharge on their California-American
Water Company (California American Water), Citizens for Public Water, City of Pacific Grove,
Coalition of Peninsula Businesses, County of Monterey, Monterey County Water Resources
Agency, Monterey Peninsula Regional Water Authority, Monterey Peninsula Water
Management District, the Office of Ratepayer Advocates, and Planning and Conservation
League Foundation (collectively, the Settling Parties) file this joint motion to reduce the Special
Request 1 Surcharge (Surcharge 1). Specifically, the Settling Parties seek authority for
California American Water to reduce the amount of Surcharge 1 from 15% to 4.5% of customer
bills. This reduction is reasonable in light of the new Commission schedule for the proposed
Monterey Peninsula Water Supply Project (MPWSP). The reduction will also benefit ratepayers
by avoiding an unnecessary fluctuation in rates and by reducing current bills. Additionally,
parties have agreed that California American Water will not seek recovery of any additional
costs through Surcharge 1 beyond those requests currently pending before the Commission in
Application (A.) 12-10-003 and A.13-05-017. The Settling Parties request that the Commission
act as soon as possible to authorize this agreement and the corresponding reduction in Surcharge
1 in order to maximize the benefit to customers.
A.12-04-019 MP1/GW2/sbf/ek4

- 4 -
II. Legal And Factual Background
In D.03-09-022, the Commission authorized California American Water to track
preconstruction costs related to a long-term water supply project in a memorandum account. In
D.06-12-040, the Commission authorized California American Water to recover via Surcharge 1
the long-term water supply project costs that it was tracking in that memorandum account. The
Commission also approved the Special Request 2 Surcharge (Surcharge 2), which would fund
the construction of a water supply solution on a pay-as-you-go basis, but delayed implementation
of Surcharge 2 until the issuance of a Certificate of Public Convenience and Necessity (CPCN)
for a long-term water supply project.
In D.11-09-039, the Commission authorized California American Water to increase
Surcharge 1 to 15%. The increase was approved based on a schedule that provided for
amortization of the approximately $30 million in preconstruction costs booked in the
memorandum account by the end of 2014.
In the current application for the MPWSP, California American Water proposed to
continue using Surcharge 1 at the 15% rate to recover preconstruction costs, and asked the
Commission to reinstate Surcharge 2. As part of the July 31, 2013 Settlement Agreement, the
parties agreed that Surcharge 1 will cease before Surcharge 2 collections begin, allowing for a
more gradual ramping up of rates that are directly attributed to the MPWSP. The parties also
agreed that the total to be collected under Surcharge 2 will be reduced in order to provide for a
smooth transition in rates from the final period under Surcharge 2 to the year 1 revenue
requirement of the desalination plant.
III. Justification For Relief
In its application, California American Water proposed a schedule that would provide a
Commission decision on the CPCN by February 2013. That schedule was rejected, and an
extended procedural schedule was adopted. Most recently, on January 27, 2014, assigned
Administrative Law Judge Minkin extended the current schedule for the proceeding to
accommodate a delay in the environmental review process. Under the new schedule, a
Commission decision on the MPWSP is not expected until the first quarter of 2015. In the
meantime, California American Water will continue to recover preconstruction costs through
Surcharge 1.
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With the current 15% rate, California American Water expects to have recovered the
costs through Surcharge 1 by Fall 2014. The extended procedural schedule, however, allows
California American Water to be less aggressive in recovery of preconstruction costs and
justifies reducing Surcharge 1 to 4.5%. As shown in the attached schedule (Attachment 1), this
will still allow California American Water to recover the preconstruction costs in a timely
manner and will also smooth rate reductions during the transition from Surcharge 1 to Surcharge
2. Moreover, this reduction will benefit California American Waters Monterey County District
customers by reducing current bills. This relief will be helpful for all California American Water
customers, but will particularly assist low-income customers facing a variety of increases.
Furthermore, the parties have agreed that California American Water will not seek recovery of
any additional costs through Surcharge 1 beyond those requests currently pending before the
Commission in A.12-10-003 and A.13-05-017.
IV. Request For Timely Action
The Settling Parties request that the Commission act as soon as possible to authorize the
reduction of Surcharge 1. The sooner Surcharge 1 is reduced, the greater the benefit for
California American Waters customers. Furthermore, since California American Water is
currently on track to recover the existing preconstruction costs by Fall 2014 under the 15% rate,
a significant delay would render the issue moot. Timely action on this motion will serve the
public interest.
V. Conclusion
Given the delay in the proceeding and the extended period for recovery of
preconstruction costs, the Settling Parties request to reduce Surcharge 1 from 15% to 4.5% of
customer bills is justified. California American Water will still be able to recover costs in a
timely manner, but customers will benefit in the meantime from a reduced surcharge on their
bills. The Settling Parties urge the Commission to authorize the reduction of Surcharge 1 as soon
as possible in order to provide the greatest benefit to its customers.
(End of Appendix 2)
A.12-04-019 MP1/GW2/sbf/ek4

Appendix 3
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Excerpt from Application
(Footnotes deleted)
V. MODIFICATIONS OF EXISTING RATEMAKING MECHANISMS
California American Water is requesting that the Commission: (1) subcategorize the
types of costs tracked in the existing memorandum account, (2) reinstitute Surcharge 2 with
modifications, (3) adopt a cost cap similar to the one approved in D.10-12-016, and (4) continue
the previously authorized ratemaking treatment for the California American Water-only
facilities.
A. Memorandum Account
For several years, California American Water has been tracking costs related to a
long-term water supply solution for Monterey in a Commission-authorized memorandum
account and filing an annual application for review and recovery of the tracked costs. California
American Water recovers the reviewed and approved costs through Surcharge 1, which the
Commission approved in D.06-12-040. California American Water proposes to continue this
process, but to subdivide the various categories of costs. In order to avoid delay, California
American Water requests that the Commission issue an interim decision addressing this
particular proposal. Subcategory 1A will consist of costs related to the Regional Desalination
Project that California American Water incurred before the projects demise, as well as the costs
to unwind the Regional Desalination Project and related agreements. California American
Water proposes to recover these costs through the existing annual application process established
in D.08-12-034. California American Water will recover these costs through Surcharge 1A.
Subcategory 1B will consist of costs related to the Monterey Peninsula Water Supply
Project, including costs related to a test well and other pre-construction costs. California
American Water seeks to use the existing annual review process for review and recovery of the
test well and other pre-construction costs related to the Monterey Peninsula Water Supply
Project. California American Water will recover these costs through Surcharge 1B.
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It is particularly important that the Commission issue an interim decision addressing the
ability to track costs related to the test well and recover them in rates. Data from this well will
assist with the design of the Monterey Peninsula Water Supply Project, will assess the individual
well capacities to determine the final number of intake wells needed, and will help assess the
levels of salinity. California American Water seeks to proceed with the test well as soon as
possible.
The current estimated cost of the test well is $5 million. Although California American
Water believes that the Commissions earlier decisions authorize it to track and recover costs
related to any long-term water supply solution, it is concerned parties may attempt to prevent
recovery of the test well and related pre-construction costs as a way to derail the Monterey
Peninsula Water Supply Project. Therefore, California American Water requests that the
Commission issue an interim decision authorizing California American Water to track the costs
for the test well for the Monterey Peninsula Water Supply Project, as well as all other
preconstruction costs for the Project, in subcategory B of the memorandum account.
An interim decision will allow California American Water to proceed with these crucial
activities and avoid delay. Although California American Water believes this application, along
with appendices and supporting testimony, provides sufficient information to rule on its request
for interim relief, if after protests and responses to the application are filed the assigned
Administrative Law Judge requires more information, California American Water recommends
that the parties to this proceeding file concurrent pleadings on the issue, in accordance with the
schedule provided below.
B. Surcharge 2
Surcharge 1 provides recovery of preconstruction costs. The Commission approved
Surcharge 2 in D.06-12-040 to fund construction costs on a pay-as-you-go basis.27
In D.06-12-040, the Commission authorized California American Water to implement
Surcharge 2 immediately after the Commission issued a CPCN for the Coastal Water Project or
an alternative long-term supply solution. Initially, the surcharge was to be 15% on customer
bills, increasing to 30%, 45% and 60%, respectively, on July 1 and January 1 each year, and was
to remain at the 60% level through completion of the approved long-term water supply project.
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In D.10-12-016, the Commission found that Surcharge 2 was no longer applicable
because the Regional Desalination Project would be financed by the public agencies.29
However, Surcharge 2 is necessary to avoid rate shock and reduces the overall cost of the
project to customers. Now that California American Water will be financing and owning the
facilities, reinstatement of Surcharge 2, with a few modifications, is appropriate. For example,
while Surcharge 2 should still commence immediately after issuance of a CPCN, the surcharge
should be 30% initially, increase to 45% and 60% on the subsequent July 1 and January 1, and
the remain at the 60% level through completion of the Monterey Peninsula Water Supply
Project. Based on the $260 million capital cost for the 9.0 mgd plant, Surcharge 2 will collect
38% of the capital costs. Based on the $213 million capital cost for the 5.4 mgd plant, the
surcharge will collect 47% of the capital costs. On May 15 of each year after approval, California
American Water will file an advice letter to adjust the rate downward if it estimates that the
surcharge collection will cover more than those percentages of project costs, effective July 1 of
that year. Surcharge 2 should remain in place until the Monterey Peninsula Water Supply Project
is in service. California American Water will track the surcharge collections in a memorandum
account. Since the surcharge collections will offset costs, those costs should therefore not be
included in the capitalized costs and the surcharge collections should not be included as
contributions.
C. Desalination Facility Cost Cap
In D.10-12-016, the Commission approved an overall cost cap for the Regional
Desalination Project, but provided for review and recovery of reasonable cost above the cap,
upon a showing that these costs were the result of extraordinary circumstances and subject to a
heightened level of scrutiny. California American Water requests that the Commission take the
same approach to a cost cap for the Monterey Peninsula Water Supply Project. This would create
an incentive for California American Water to manage the Project responsibly, since the
Commission could easily disallow unreasonable costs, but would avoid unfairly penalizing
California American Water for increased costs beyond its control. Although California American
Water is confident that its cost estimates are accurate based on the information currently
available, a number of factors beyond California American Waters control could still affect the
cost estimate, including escalating costs of labor and materials, actions mandated by other
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regulatory agencies, and other project unknowns. California American Water requests that the
Commission adopt a $281.2 cost cap for the 9.0 mgd facility and a $227.1 cost cap for the 5.4
mgd facility. The cost caps include the estimated capital expenditures, capitalized operating
expenses, and allowance for funds used during construction (AFUDC).
D. California American Water-Only Facilities
In D.10-12-016, the Commission approved with minor modification to the requested
interest rate, the exact request made by the settling parties with respect to the California
American Water-only facilities. The Commission established a $106.875 cost cap for the
California American Water facilities, with recovery of costs above the cap upon a showing of
extraordinary circumstances and subject to heightened scrutiny. The Commission approved
treatment of the California American Water-only facilities as used and useful as soon as they are
constructed, even if the Regional Desalination Project was delayed. With the exception of the
Transfer Pipeline, California American Water was to record the total cost of the California
American Water-only facilities, subject to the capital cost cap and AFUDC calculation, that are
completed and used to provide service to customers in its Utility Plant In Service (UPIS)
Account and the total costs of the projects that are not providing service to customers in the
Construction Work in Progress (CWIP) Account. Under D.10-12-016, the ratebase for the
California American Water-only facilities was to be calculated by determining the sum of UPIS
and CWIP, less any grant funds and less any accumulated depreciation.
The Commission authorized California American Water to file a Tier 2 advice letter on
May 15 and November 15 each year to include all prudently expended costs related to
construction of the California American Water-only facilities into rate base as either CWIP or
UPIS, with the increase in January 1, or July 1 regardless of the status of the review. The
Commission authorized California American Water to earn AFUDC on all project costs until
they were in ratebase and found that it was appropriate to adopt an initial AFUDC rate that is
representative of current rates, and allow this rate to be trued-up to reflect actual carrying costs.
California American Water requests that the Commission adopt the same treatment for
the California American Water-only facilities in this proceeding that it approved in D.10-12-016,
with clarifications to the process set forth in the Direct Testimony of David P. Stephenson.
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Generally, however, since the California American Water-only facilities will be the same as the
Commission approved in D.10-12-016, there is no reason to change the ratemaking treatment.
(End of Appendix 3)

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