This decision certifies and applies the combined Final Environmental Impact Report /Environmental Impact Statement, adopts a Statement of Overriding Considerations, and authorizes a Certificate of Public Convenience and Necessity for California-American Water Company’s (Cal-Am) Modified Monterey Peninsula Water Supply Project at a size of 6.4 million gallons per day. It also addresses four proposed settlement agreements. The Commission adopts two of these settlement agreements (Brine Discharge Settlement and Return Water Settlement). This decision declines to adopt the Comprehensive Settlement but does adopt the framework set forth in that agreement based on the proceeding record independent of the proposed settlement. The fourth settlement agreement is rejected (Sizing Settlement).This decision finds that water rate relief bonds issued by the Public Agency will provide savings to customers on the Monterey Peninsula. It directs Cal-Am to prepare progress reports during construction of the Monterey Peninsula Water Supply Project, and publish them on its website. It discusses the need for water supplies in Cal-Am’s Monterey District, reviewing demand and supply estimates and selecting estimates supported by the best evidence. The decision takes into account and apportions between ratepayers and Cal-Am the risks associated with various water supplies. Compliance conditions are imposed in the decision. The settlement agreements submitted and other relevant documents are attached as appendices. To the extent they are not otherwise discussed here, any and all outstanding motions are deemed denied. The proceeding is closed.
O R D E R
IT IS ORDERED that:
1. The Final Environmental Impact Report is hereby certified for the Monterey Peninsula Water Supply Project, and is certified for use by responsible agencies in considering subsequent approvals.
2. California-American Water Company is granted a Certificate of Public Convenience and Necessity for the Monterey Peninsula Water Supply Project (Alternative 5a), subject to California-American Water Company complying with all feasible mitigation measures identified in the combined Final Environmental Report/Environmental Impact Statement, as set forth and in compliance with the Mitigation Monitoring and Reporting Program contained in Appendix D of this decision.
3. The California Environmental Quality Act Findings for the Monterey Peninsula Water Supply Project in Appendix C accurately reflect the independent analysis contained in the combined Final Environmental Report/Environmental Impact Statement, are supported by substantial evidence in the administrative record, and are incorporated as findings herein.
4. The Monterey Peninsula Water Supply Project (MPWSP) (Alternative 5a) benefits and economic, legal, social, environmental and other considerations associated with the MPWSP outweigh and make acceptable the unavoidable impacts identified, for the reasons set forth in the statement of overriding considerations in the California Environmental Quality Act Findings attached to and incorporated as part of this decision, and the Commission adopts and makes this statement of overriding considerations.
5. The benefits identified in the statement of overriding considerations in the California Environmental Quality Act Findings attached to and incorporated as part of this decision each independently provide a sufficient basis to outweigh the MPWSP’s significant unavoidable impacts.
6. The benefits of the MPWSP outweigh the benefits of any of the other alternatives examined, including the alternatives deemed infeasible, and including the no project alternative
7. The Mitigation Monitoring and Reporting Program set forth at Appendix D is adopted.
8. California-American Water Company shall implement the environmentally superior alternative (Alternative 5a) of the Monterey Peninsula Water Supply Project identified in the Final Environmental Impact Report.
9. The Return Water Settlement Agreement, filed on June 14, 2016, is approved, subject to the condition that if the return water obligation is greater than an average of six percent (6%) for years 0-7; four percent (4%) in years 8-15; or 1.5% annually from year 16 forward, ratepayers will not bear any costs for meeting the return obligation above these amounts.
10. Consistent with the understanding that the Commission retains authority to determine appropriate mitigation, compliance, and enforcement as to measures concerning environmental protection pursuant and with respect to California Environmental Quality Act, the Brine Discharge Settlement Agreement, filed on June 14, 2016, and as updated on July 1, 2016, is adopted.
11. The Commission’s Executive Director shall monitor and enforce the mitigation measures set forth in the Mitigation Monitoring and Reporting Program for the Monterey Peninsula Water Supply Project and may delegate such duties to the Commission staff or outside staff.
12. The Executive Director is authorized to employ staff independent of the Commission staff to carry out such functions, including, without limitation, the on-site environmental inspection, monitoring and mitigation supervision of construction of the Monterey Peninsula Water Supply Project. Such staff shall be individually qualified professional environmental monitors or be employed by one or more qualified firms or organizations.
13. California-American Water Company shall comply with all orders and directives of the Executive Director concerning implementation of the environmental mitigation measures described in the Monitoring and Reporting Program.
14. The Executive Director shall not authorize California-American Water Company (Cal-Am) to commence actual construction until Cal-Am has entered into a cost reimbursement agreement with the Commission for the recovery of the costs of complying with the Monitoring and Reporting Program set forth at Appendix D including, but not limited to, special studies, outside staff, or Commission staff costs directly attributable to mitigation monitoring.
15. In monitoring the implementation of the environmental mitigation measures set forth in the Mitigation Monitoring and Reporting Program and required as conditions of this approval, the Executive Director shall attribute the acts and omissions of California-American Water Company’s employees, contractors, subcontractors or other agents to California-American Water Company.
16. California-American Water Company shall submit a Tier 2 advice letter to
reflect the service area extensions set out in Section 5 of the Return Water Settlement to provide water to Castroville Community Services District and Castroville Seawater Intrusion Project.
17. Beginning January 1, 2019, California-American Water Company shall submit quarterly status reports on the permitting, financing, design, bidding, and construction of the Monterey Peninsula Water Supply Project to the Executive Director and to the Director of the Office of Ratepayer Advocates, and publish the reports on a company maintained web site dedicated to the project.
18. California-American Water Company shall meet quarterly with staff of the Office of Ratepayer Advocates and Commission Water Division during the period prior to the plant going into operation and up until at least six (6) months after the date that the Monterey Peninsula Water Supply Project becomes operational.
19. Beginning with the commencement of operation of the Monterey Peninsula Water Supply Project and continuing until otherwise directed to stop, California-American Water Company shall submit regular quarterly filings to the Office of Ratepayer Advocates (ORA) and Water Division as to the volume of water delivered to customers, capacity that the MPWSP is operating, amount of return water needed to meet Cal-Am’s obligation, and whether and why the facility has been offline for any reason. These filings shall be served on the Directors of the ORA and Water Division, and published on a company maintained web site dedicated to the project.
20. Rate recovery for any Operations and Maintenance expenditures will not be authorized absent prior Commission authorization as part of the first general rate case after the Monterey Peninsula Water Supply Project is in operation.
21. The cost cap for the MPWSP and the remaining California-American Water Company (Cal-Am) Only Facilities is $279.1 million excluding the amounts authorized in D.16-09-021. To expend funds that Cal-Am intends to recover from ratepayers beyond the capital cost cap, Cal-Am must file a petition to modify this decision.
22. The Commission’s Energy Division may approve requests by California-American Water Company for minor project refinements that may be necessary due to the final engineering of the project, so long as such minor project refinements are located within the geographic boundary of the study area of the Environmental Impact Report/Environmental Impact Statement and do not, without mitigation, result in a new significant impact or a substantial increase in the severity of a previously identified significant impact based on the criteria used in the Final Environmental Impact Report/Environmental Impact Statement; conflict with any mitigation measure or applicable law or policy; or trigger an additional permit requirement. California-American Water Company shall seek any other project refinements by a petition to modify today’s decision.
23. The Construction Funding Surcharge set forth in this decision is authorized consistent with this decision and the provisions that will be included in the Tier 3 advice letter adjusting the framework set out in the Comprehensive Settlement Agreement.
24. California-American Water Company shall file an application with the Commission requesting issuance of a financing order to allow for the securitization financing option consistent with this decision.
25. California-American Water Company shall submit a Tier 3 advice letter to the Commission that provides for specific adjustments to the framework set out in sections 7, 8 and 10-15 of the proposed Comprehensive Settlement Agreement, after consultation with Commission Water Division Staff and parties to the proceeding. The Tier 3 advice letters shall also provide specific detail to implement the provisions consistent with this decision. The Tier 3 advice letter shall be submitted no later than January 1, 2019.
26. Prior to submitting the Tier 2 advice letters to implement the tariffs in Appendix E of the Return Water Settlement, California-American Water Company shall meet with Commission Water Division Staff and parties to this proceeding to ensure that the tariffs and Tier 2 advice letters submitted consistent with the Return Water Settlement include conditions that limit liability to ratepayers, and clearly recognize that California-American Water Company bears the risk for non-compliance or increased return water deliveries consistent with this decision.
27. California-American Water Company shall record and track separately all collections and expenditures of the Construction Funding Charge in a memorandum account. If the Monterey Peninsula Water Supply Project does not go online or become used or useful to ratepayers the funds collected shall be returned to ratepayers.
28. California-American Water Company shall record and track all capital costs for the MPWSP in a memorandum account. All financing, expenditures, schedule, and progress with construction for the Monterey Peninsula Water Supply Project shall be included in Cal-Am’s quarterly reports, along with any information that the Commission Water Division staff reasonably requires, and any other information reasonably necessary for a full and complete reporting to the Commission.
29. California-American Water Company shall include in its quarterly reports the amounts collected and expended pursuant to the Construction Funding Charge, and all other expenditures for capital costs as of the date of the quarterly report, any other information that Commission Water Division staff reasonably requires, and any other further information reasonably necessary for a full and complete reporting to the Commission of construction costs for the Monterey Peninsula Water Supply Project and remaining Cal-Am Only Facilities.
30. California-American Water Company shall file a Tier 2 advice letter, after consulting with parties and Commission Water Division Staff, for the first year revenue requirement after the facility has been built and is online.
31. If the Monterey Peninsula Water Supply Project goes offline for any reason other than routine maintenance or operates below production capacity levels required to meet customer need for four weeks or more Cal-Am must immediately notify Commission Water Division staff and explain why the facility is offline or operating below capacity. The notification shall be filed no later than the beginning of the fifth week of outage or subpar performance. The notification is to include the reasons for the outage or lower capacity.
32. If the Monterey Peninsula Water Supply Project (MPWSP) is offline, or the slant wells fail to produce at a level that is cost effective for ratepayers for two or more months, California American Water Company (Cal-Am) shall notify and meet with Commission Water Division staff. The notification and meeting shall occur no later than the beginning of the ninth week of outage or subpar performance. Cal-Am shall provide a proposed process to have the plant back online with a timeline, or proposal to remove the MPWSP from ratebase and determine an appropriate mechanism to reimburse ratepayers for any recovery of costs for the time the MPWSP is not used and useful.
33. California-American Water Company (Cal-Am) must make a showing that the expenditures at issue for the Monterey Peninsula Water Supply Project (MPWSP) are reasonable. Each reasonableness showing must include evidence that the MPWSP financing is the lowest cost and most beneficial for ratepayers; that construction is progressing in a timely manner within the cost caps authorized in this decision. Cal-Am will be required to demonstrate the reasonableness of such costs in the first General Rate Case after the MPWSP is operational.
34. If circumstances require the Commission may require California American Water Company to submit a separate application or issue an order instituting an investigation to determine the reasonableness of its expenditures on the Monterey Peninsula Water Supply Project (MPWSP) if the MPWSP is not constructed in a timely manner or fails to operate appropriately.
35. Three cost factors will be considered by the Commission when reviewing the advice letters submitted pursuant to this decision. These cost factors are: 1) costs are for facilities that are used and useful; 2) costs must be reasonable; and 3) costs are for facilities that operate at an appropriate capacity to minimize costs for ratepayers.
36. The motion submitted for adoption of the Brine Discharge Settlement is hereby granted. California American Water Company shall comply with each term and condition set forth in the Settlement Agreement set out at Appendix I to this decision.
37. The motion submitted for adoption of the Return Water Settlement Agreement is hereby granted. California American Water Company shall comply with each term and condition set forth in the Settlement Agreement set out at Appendix H to this decision.
38. The motion submitted for adoption of the Sizing Settlement Agreement is hereby denied.
39. The framework set forth in the Comprehensive Settlement is adopted consistent with this decision, independent of the proposed settlement agreement, based on the testimony and briefing submitted into the record by the parties.
40. The motion submitted for adoption of the Comprehensive Settlement Agreement is denied.
41. To the extent they are not addressed here, any and all outstanding motions are hereby deemed denied.
42. Application 12-04-019 is closed.
NOTE: 08/22/18 2:00 p.m. – 4:00 p.m. ALJ Haga ALJ Houck ALJ Weatherford Comr Randolph A.12-04-019 (OA) - 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, Commission Courtroom, San Francisco
PROPOSED DECISION OF ALJS HAGA, HOUCK, AND WEATHERFORD (Mailed 8/13/2018)DECISION APPROVING A MODIFIED MONTEREY PENINSULA WATER SUPPLY PROJECT, ADOPTING SETTLEMENT AGREEMENTS, ISSUING CERTIFICATE OF PUBLIC CONVENIENCE AND NECESSITY AND CERTIFYING COMBINED ENVIRONMENTAL REPORT
Procedural History and Glossary
Parties Positions on Supply and Demand