ABSTRACT: The Governance sections, specifically Governance, Discussion: Governance and Ratepayer Protection and Status Reports, of the proposed decision of Administrative Law Judge (ALJ) Angela K. Minkin and the alternate proposed decision of Commissioner John Bohn are reproduced. Governance and Status Reports sections are identical; differnces in Discussion: Governance and Ratepayer Protection section are in Bold type.
DRAFT proposed decision of ALJ Angela K. Minkin:
DRAFT
DECISION APPROVING REGIONAL PROJECT, ADOPTING SETTLEMENT AGREEMENT, WITH MODIFICATIONS, AND ISSUING CERTIFICATE OF PUBLIC CONVENIENCE AND NECESSITY FOR CALIFORNIA-AMERICAN WATER FACILITIES
ALTERNATE DRAFT alternate proposed decision of Commissioner John Bohn:
DECISION APPROVING REGIONAL PROJECT, ADOPTING SETTLEMENT AGREEMENT, WITH MODIFICATIONS, AND ISSUING CERTIFICATE OF PUBLIC CONVENIENCE AND NECESSITY FOR CALIFORNIA-AMERICAN WATER FACILITIES
11.4. Governance
As amended by MCWD’s reply brief, the Water Purchase Agreement provides for the establishment of an Advisory Committee, consisting of four members, i.e., a representative of Cal-Am, MCWD, MCWRA, and a “Municipal Advisor.” As defined in the Water Purchase Agreement, the Municipal Advisor refers to two representatives appointed from time to time by the Cities of Carmel-by-the Sea, Monterey, Pacific Grove, Sand City, and Seaside. Certain limits are placed on the role of the Municipal Advisor and the Cities, including that they are deemed not be a third-party beneficiary under the Water Purchase Agreement and have no rights as a party to the Water Purchase Agreement. In essence, as proposed by the Settling Parties, the Municipal Advisor is an advisory role and would not act as a decision-maker for purposes of the Water Purchase Agreement. MCWD, MCWRA, and Cal-Am state that they amended the Water Purchase Agreement to recognize the strong desire of the Peninsula ratepayers to have an enhanced participatory role in the Regional Project.
The purpose of the Advisory Committee is to provide a formal means for the parties to coordinate the design, permitting, construction, operations, maintenance, repairs, and replacement of the various components of the Regional Project, in consultation with the selected Project Manager. The Advisory Committee members commit to consider, among other things, “the best available scientific evidence relevant to the matter including but not limited to data and analysis generated by numeric models that meet prevailing publicly-owned and privately-owned water utility industry standards for accuracy and reliability, and apply Best Industry Practices.”
Parties will also strive to arrive at consensus-driven unanimous decisions
regarding construction, operation, and maintenance of the Regional Project facilities. To the extent that is not possible, they have provided for appointment of an independent third party to help them work through the issues. If parties cannot agree on a neutral third-party, they have agreed to submit the selection of the independent third-party to a dispute resolution service, such as the Judicial Arbitration and Mediation Services, Inc.
Section 6.7 of the Water Purchase Agreement also provides for the establishment of a public Community Involvement Forum to discuss regional water supply issues, including but not limited to, test wells, groundwater modeling, source well type and configuration, construction timelines, progress reports, costs, equity among stakeholders, compliance with public heath considerations, environmental laws, consideration of public trust resources, and compliance with the Agency Act. The Water Purchase Agreement provides for quarterly meetings of the Community Involvement Forum, which shall be open to all members of the public, press, governmental agencies, non-governmental agencies, and elected and appointed officials. The public meetings are to be conducted by Cal-Am, MCWD, and MCWRA on a rotating basis, or with the assistance of a contract facilitator, and the Water Purchase Agreement provides that the meetings are to be held at a facility that is available at no cost or at minimal cost.
DRA recommends that the Commission modify the proposed Settlement Agreement and Water Purchase Agreement to ensure that ratepayers are fairly represented on the Advisory Committee. DRA recommends that both MPWMD and the Monterey Peninsula Cities have a decision-making role on the Advisory Committee. DRA states that it is important for these groups to have voting rights and full Party status under the Water Purchase Agreement, because they possess different areas of technical and managerial expertise and can offer varying political perspectives. DRA contends that such an approach will afford Cal-Am ratepayers the protection they need in considering costs, water quality, opportunities for the sale of desalinated water, expansion parameters to serve the former Fort Ord, and the quantity, timing, and quality of water diverted to the ASR system. DRA notes that while Cal-Am has a fiduciary duty to its shareholders and MCWRA must represent the interests of the agricultural community, the constituencies and interest served by MPWMD and the Monterey Peninsula Cities are also Cal-Am ratepayers.
MPWMD explains that it holds express authority to regulate all local water
systems, including the Cal-Am system, particularly regarding integrated water management and conservation. Accordingly, MPWMD recommends that the Advisory Committee should consist of one representative from Cal-Am, MCWD, MCWRA, and MPWMD. As MPWMD sees it, this would not be a substantive change, since the version of the Water Purchase Agreement that was approved by Cal-Am’s parent company on March 26, 2010, the MCWD Board of Directors and the MCWRA Board of Directors on April 5, 2010, and the Monterey County Board of Supervisors on April 6, 2010 included MPWMD on the Advisory Committee.108 After the MPWMD Board voted not to join the Settlement Agreement on April 5, 2010, MPWMD was removed from the Advisory Committee in the Settlement Agreement and Water Purchase Agreement filed with the Commission on April 7, 2010.
MPWMD contends that appropriate governance is needed to protect Cal-Am ratepayers and to address water supply and water management needs of the Monterey Peninsula and the Salinas Valley. Because Cal-Am ratepayers on the Monterey Peninsula directly elect representatives to the MPWMD, the addition of the MPWMD to the Advisory Committee provides the necessary ratepayer protection, in MPWMD’s view. In addition, because the Regional Project replaces existing water supply and because MPWMD estimates that approximately 4,500 afy will be needed to meet future water needs in the Monterey Peninsula through 2020, MPWMD contends that it must be on the Advisory Committee to ensure that Monterey Peninsula ratepayers are appropriately represented to ensure that expansion of the Regional Project can be addressed in a viable fashion.
MPWMD also contends that the Water Purchase Agreement must be amended to require the Advisory Committee’s compliance with the Brown Act (Government Code §§ 54950 et seq.), which provides for open, transparent, participatory public decision-making similar to the Bagley-Keene Act (Government Code §§ 11120 et seq.), which governs the State of California decision-making bodies, such as this Commission. MPWMD recommends that records of the Regional Project must be retained and disclosed in accordance with the California Public Records Act (Government Code §§ 6250 et seq.) Finally, MPWMD recommends that the Water Purchase Agreement be revised to require officials making substantive decisions related to the Regional Project to comply with the Fair Political Practices Act (Government Code §§ 81000 et seq.) to ensure disclosure of political contributions, as well as compliance with ethics requirements, and strict financial limitations required by the Fair Political Practices Act.
ALJ Minkin:
11.4.1. Discussion: Governance and Ratepayer Protection
As contemplated by the Settling Parties and set forth in Section 6 of the Water Purchase Agreement, the Advisory Committee would consist of a representative of Cal-Am, MCWD, and MCWRA, each of whom would have full decision-making authority. Consensus would be sought, but to the extent that differences could not be resolved, the participants on the Advisory Committee have the right to seek dispute resolution by a neutral third-party. In its reply brief, MCWD proposed, and Cal-Am and MCWRA supported in their reply briefs, the concept of a Municipal Advisor as an additional member of the Advisory Committee.
The purpose of the Advisory Committee is to ensure a coordinated approach to the construction and operation of the Regional Project. MCWD contends that there is no need to provide MPWMD a seat at this particular table; in fact, Cal-Am, MCWD, and MCWRA are adamant that allowing MPWMD to have party status for purposes of the Advisory Committee and the Water Purchase Agreement would ensure that the Settlement Agreement unravels.
The parties to the Water Purchase Agreement explain that ratepayer interests are adequately represented without including MPWMD. They assert that Citizens for Public Water, recognized by DRA as a ratepayer representative, will help to ensure such protection, because Citizens for Public Water is now a signatory to the Settlement Agreement. In addition, they explain that MCWRA’s Board of Supervisors represents citizens within Monterey County, including those within Cal-Am’s Monterey service territory. The parties to the Water Purchase Agreement also state that the Public Agencies’ transparent and open review processes for budget and Regional Project implementation will ensure ratepayer representation and protection.
The Settling Parties also assert that the Community Involvement Forum will provide ratepayers and other members of the community the opportunity to voice their concerns and to participate directly in the Regional Project discussion as the project evolves. As noted, they have now agreed to ensure that the Monterey Peninsula Cities have a role on the Advisory Committee, but decline to give this Municipal Advisor full party status for purposes of decision-making. The Settling Parties state that they wish to foster a cooperative, productive, and long-term association with the Monterey Peninsula Cities, and are “sensitive to the desire of Peninsula ratepayers to have an enhanced participatory role” in the Regional Project. 109
In comments to the proposed revision to Section 6 of the Water Purchase
Agreement, the Cities of Carmel-By-The-Sea, Pacific Grove, Sand City, Seaside, and Del Rey Oaks accept this modification and believe it is adequate to protect their interests. DRA, MPWMD, and the City of Monterey contend that the
revision does not go far enough. These parties maintain that representation on
the Advisory Committee is insufficient for true ratepayer protection; instead, the Municipal Advisor must be defined as a Party for purposes of seeking third-party dispute resolution. As the City of Monterey explains, unequal decision-making power does not provide the Peninsula ratepayers with the necessary transparency, public process, and enhanced participation in the Regional Project that is required.110
DRA and MPWMD concur, although both of these parties assert that MPWMD should be included as a voting member of the Advisory Committee. DRA explains that it is Section 6.6 of the Water Purchase Agreement that gives the Advisory Committee members their power; and under the proposed arrangement, the Municipal Advisor has no rights as a Party under the proposed amendments to Section 6. We agree that this approach is problematic and that the Cities must be provided with a meaningful role in the governance of the Regional Project.
The Settling Parties argue that the proposed revisions to Section 6 must be accepted as a whole and that any modifications amount to “cherry-picking” of the settlement. We cannot agree. While the Commission must consider the Settlement Agreement as a whole, we must also ensure that the various provisions of the Settlement and the Water Purchase Agreement are in the public interest. On balance, therefore, we find that adding the Municipal Advisor role to the Advisory Committee with full voting rights for decision-making purposes strikes the right compromise between moving forward expeditiously with the Regional Project and ensuring that Monterey Peninsula ratepayers are adequately represented, as the Regional Project moves forward. The Public Trust Alliance observes that it is important to ensure the “responsiveness to broad regional goals rather than the narrow goals of local self interest that have paralyzed water decisionmaking in the past.”111 We concur.
We find that providing the Monterey Peninsula Cities with a meaningful role on the Advisory Committee provides adequate ratepayer protection and eliminates the need for MPWMD participation on the Advisory Committee. There is no need for duplicative roles and there are obviously some charged dynamics among the various water agencies on the Monterey Peninsula. Because elected Peninsula City officials will coordinate on the appointment of the Municipal Advisor and because there is some overlap with the governance of MPWMD and the Monterey County Board of Supervisors, we are satisfied that MPWMD’s concerns with integrated water management will be addressed.112
Here, we require a modification to the Water Purchase Agreement and Settlement Agreement such that we can be satisfied that the Monterey Peninsula ratepayers are protected and also that the Settling Parties are not stymied in implementing the Regional Project. We believe this modification is a compromise that both achieves the goals promoted by DRA and MPWMD and provides the flexibility required by Cal-Am, MCWD, and MCWRA to ensure that the Regional Project moves forward in a timely way.
As Public Agencies, both MCWD and MCWRA are subject to the requirements of the Brown Act (Government Code Sections 54950 et seq.) and the California Public Records Act (Government Code Sections 6250 et seq.) We do not find that the Advisory Committee must be subject to these same requirements. The procedures we have adopted today, along with the procedures that the Public Agencies must adhere to, provide sufficient information for the public and adequate avenues for public participation.
Commissioner John Bohn:
11.4.1. Discussion: Governance and Ratepayer Protection
As contemplated by the Settling Parties and set forth in Section 6 of the Water Purchase Agreement, the Advisory Committee would consist of a representative of Cal-Am, MCWD, and MCWRA, each of whom would have full decision-making authority. Consensus would be sought, but to the extent that differences could not be resolved, the participants on the Advisory Committee have the right to seek dispute resolution by a neutral third-party. In its reply brief, MCWD proposed, and Cal-Am and MCWRA supported in their reply briefs, the concept of a Municipal Advisor as an additional member of the Advisory Committee.
The purpose of the Advisory Committee is to ensure a coordinated approach to the construction and operation of the Regional Project. MCWD contends that there is no need to provide MPWMD a seat at this particular table; in fact, Cal-Am, MCWD, and MCWRA are adamant that allowing MPWMD to have party status for purposes of the Advisory Committee and the Water Purchase Agreement would ensure that the Settlement Agreement unravels.
The parties to the Water Purchase Agreement explain that ratepayer interests are adequately represented without including MPWMD. They assert that Citizens for Public Water, recognized by DRA as a ratepayer representative, will help to ensure such protection, because Citizens for Public Water is now a signatory to the Settlement Agreement. In addition, they explain that MCWRA’s Board of Supervisors represents citizens within Monterey County, including those within Cal-Am’s Monterey service territory. The parties to the WPA also state that the Public Agencies’ transparent and open review processes for budget and Regional Project implementation will ensure ratepayer representation and protection.
The Settling Parties also assert that the Community Involvement Forum will provide ratepayers and other members of the community the opportunity to voice their concerns and to participate directly in the Regional Project discussion as the project evolves. As noted, they have now agreed to ensure that the Monterey Peninsula Cities have a role on the Advisory Committee, but decline to give this Municipal Advisor full party status for purposes of decision-making. The Settling Parties state that they wish to foster a cooperative, productive, and long-term association with the Monterey Peninsula Cities, and are “sensitive to the desire of Peninsula ratepayers to have an enhanced participatory role” in the Regional Project.108
In comments to the proposed revision to Section 6 of the Water Purchase Agreement, the Cities of Carmel-By-The-Sea, Pacific Grove, Sand City, Seaside, and Del Rey Oaks accept this modification and believe it is adequate to protect their interests. DRA, MPWMD, and the City of Monterey contend that the revision does not go far enough. These parties maintain that representation on the Advisory Committee is insufficient for true ratepayer protection; instead, the Municipal Advisor must be defined as a Party for purposes of seeking third-party dispute resolution. As the City of Monterey explains, unequal decision-making power does not provide the Peninsula ratepayers with the necessary transparency, public process, and enhanced participation in the Regional Project that is required.109
DRA and MPWMD concur, although both of these parties assert that MPWMD should be included as a voting member of the Advisory Committee. DRA explains that it is Section 6.6 of the Water Purchase Agreement that gives the Advisory Committee members their power; and under the proposed arrangement, the Municipal Advisor has no rights as a Party under the proposed amendments to Section 6.
While the Commission must consider the Settlement Agreement as a whole, we must also ensure that the various provisions of the Settlement and the Water Purchase Agreement are in the public interest. On balance, we find that adding the Municipal Advisor role to the Advisory Committee is reasonable. We disagree with DRA and MPWMD’s arguments that MPWMD should be included as a voting member of the Advisory Committee. We find that by providing the Monterey Peninsula Cities with a meaningful advisory role on the Advisory Committee provides adequate ratepayer protection. There is no need for duplicative roles and there are obviously some charged dynamics among the various water agencies on the Monterey Peninsula. Elected Peninsula City officials will coordinate on the appointment of the Municipal Advisor and with the overlap of governance between the MPWMD and the Monterey County Board of Supervisors, we are satisfied that MPWMD’s concerns with integrated water management will be addressed.110
As Public Agencies, both MCWD and MCWRA are subject to the requirements of the Brown Act (Government Code Sections 54950 et seq.) and the California Public Records Act (Government Code Sections 6250 et seq.) We do not find that the Advisory Committee must be subject to these same requirements. The procedures we have adopted today, along with the procedures that the Public Agencies must adhere to, provide sufficient information for the public and adequate avenues for public participation.
ALJ Minkin:
11.4.1.1. Status Reports
Commissioner John Bohn:
11.4.1.1. Status Reports
The Settling Parties have stated their willingness to provide regular, detailed status reports to the Commission. MCWD explains that, during the construction phase, § 4.5 of the Water Purchase Agreement provides for the Project Manager to submit monthly status reports to each party to the Water Purchase Agreement.113 After construction, during the operational phase of this long-running project, Section 11.13 provides that Cal-Am, in consultation with
the Public Agencies, prepare an annual report on the Regional Project that will be posted on Cal-Am’s website. The Settling Parties agree that Cal-Am may use the monthly status reports to prepare detailed quarterly reports that will be
provided to the Commission’s Executive Director and the Director of the DWA.
DRA prefers that the monthly Project Manager reports be provided without
additional, unnecessary reports being prepared. DRA is concerned that details regarding financing may be provided on a confidential basis.
We are pleased that the Settling Parties have agreed to provide detailed status reports to the Executive Director and the Director of the DWA.114 We require Cal-Am to also provide a copy of the report to the Director of DRA. This is a reasonable approach to ensuring that the Commission is fully informed as to the progress of the Regional Project. Quarterly reports should be sufficient. Cal-Am has also agreed to meet quarterly with DRA. This is also a very reasonable approach and we direct Cal-Am to include DWA staff in these meetings. This approach is similar to the procurement review groups that are in place for energy utilities and provide an opportunity for informal discussion and resolution of concerns.115
Each status report should specifically delineate details as to the competitive procurement process, value engineering, contracting terms, project management, the constructability review, and the milestones achieved for each aspect of the project. DWA staff should be included in the inspection and audit protocols set forth in Section 4.11, as appears to be contemplated by the Water Purchase Agreement.
Transparency is essential, although there may be particular reasons to submit certain components related to the status reports on a confidential basis. It is premature to address confidentiality concerns at this time. We prefer to wait until the reports have been submitted and staff can review and assess the
adequacy of these reports at that time. The quarterly meetings with Cal-Am,
DRA, and DWA will provide a viable forum for resolving such concerns.
In sum, we are satisfied with the status report agreements, and see no reason to modify the Settlement Agreement or Water Purchase Agreement, since Settling Parties have agreed to comply with this approach.
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