Summary
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
FILED 08/13/18
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
APPENDIX A
Procedural History and Glossary
Parties Positions on Supply and Demand
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