UPDATE: California Public Utilities Commission Approved the Regional Desalination Project, a water desalination plant for the Monterey Peninsula at their meeting today in San Francisco. “The Regional Desalination Project will be developed by California American Water, a regulated utility and water provider to the Monterey Peninsula, and the Marina Coast Water District and the Monterey County Water Resources Agency, two local public water agencies. The cities of the Monterey Peninsula will also participate in oversight of the project through an advisory committee.” And "Today's decision balances the need for adequate water with the need to provide water at a reasonable price," said CPUC Commissioner John A. Bohn, author of today's decision. "The CPUC must balance the cost burden contemplated on Cal-Am ratepayers from the construction of the Regional Project, generally regarded as the only feasible project with the likelihood being completed within the time limit imposed by the State Water Resources Control Board, with the burden on those same ratepayers if no alternative source of water is produced."
ADDENDUM:
Cal-Am Gets the Go Ahead for Regional Water Desalination Plant, KION CENTRAL COAST NEWS, Dec 2, 2010
CPUC Approves Peninsula Water Project
Desalination Project Has Been In Works Since 2003, KSBW, December 2, 2010
CPUC Approves Regional Desalination Project
Community Water Supply Passes Major Milestone, Business Wire, December 2, 2010
ABSTRACT: DECISION APPROVING REGIONAL PROJECT, ADOPTING SETTLEMENT AGREEMENT AND ISSUING CERTIFICATE OF PUBLIC CONVENIENCE AND NECESSITY FOR CALIFORNIA-AMERICAN WATER FACILITIES (December 2010) is uploaded. A link to “Monterey Peninsula desalination plant could skip changes,” published today in The Monterey County Herald, is provided.
Decision ALTERNATE PROPOSED DECISION OF COMMISSIONER BOHN
Bohn Alternate (Rev 2) Approving Regional Proj., Adopting Settlement Agreement and Issuing CPCN for CalAm Water Facilities.
Proceeding: A0409019
ADDENDUM:
Bohn Agenda Dec Approving Regional Proj., Adopting Settlement Agreement and Issuing CPCN for CalAm Water Facilities (REDLINED VERSION).
Proceeding: A0409019
Monterey Peninsula desalination plant could skip changes
PUC member calls for OK of backers' agreements
By JIM JOHNSON
Herald Salinas Bureau
Posted: 12/02/2010
Showing posts with label Coastal Water Project. Show all posts
Showing posts with label Coastal Water Project. Show all posts
Thursday, December 02, 2010
Friday, October 22, 2010
ADMINISTRATIVE LAW JUDGE’S RULING REGARDING COMMENTS ON PROPOSED DECISION AND ALTERNATE PROPOSED DECISION, AND SCHEDULING ORAL ARGUMENT
ABSTRACT: The ADMINISTRATIVE LAW JUDGE’S RULING REGARDING COMMENTS ON PROPOSED DECISION AND ALTERNATE PROPOSED DECISION, AND SCHEDULING ORAL ARGUMENT document is uploaded. Comments on the Proposed Decision (PD) and the Alternate Proposed Decision (APD) shall be filed and served no later than November 17, 2010 and reply comments shall be filed and served by November 22, 2010 (limit 25 pages to comment on the PD, the APD, or both). Oral argument scheduled on November 2, 2010 at 10 A.M., Hearing Room A, Commission’s San Francisco Headquarters, 505 Van Ness Avenue, San Francisco, California.
ADMINISTRATIVE LAW JUDGE’S RULING REGARDING COMMENTS ON PROPOSED DECISION AND ALTERNATE PROPOSED DECISION, AND SCHEDULING ORAL ARGUMENT
ALJ RULING ON COMMENTS
ADMINISTRATIVE LAW JUDGE’S RULING REGARDING COMMENTS ON PROPOSED DECISION AND ALTERNATE PROPOSED DECISION, AND SCHEDULING ORAL ARGUMENT
ALJ RULING ON COMMENTS
11.4 Governance by Administrative Law Judge (ALJ) Angela K. Minkin & Commissioner John Bohn
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.
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.
Administrative Law Judge (ALJ) Angela K. Minkin’s Proposed Decision
ABSTRACT: On Thursday, 21 October 2010, the proposed decision of Administrative Law Judge (ALJ) Angela K. Minkin was filed regarding the Matter of the Application of California-American Water Company (U210W) for a Certificate of Public Convenience and Necessity to Construct and Operate its Coastal Water Project to Resolve the Long-Term Water Supply Deficit in its Monterey District and to Recover All Present and Future Costs in Connection Therewith in Rates. DRAFT “Digest of Differences Between ALJ Minkin’s Proposed Decision and the Alternate Proposed Decision of Commissioner Bohn” is reproduced and ALJ Minkin’s DRAFT DECISION APPROVING REGIONAL PROJECT, ADOPTING SETTLEMENT AGREEMENT, WITH MODIFICATIONS, AND ISSUING CERTIFICATE OF PUBLIC CONVENIENCE AND NECESSITY FOR CALIFORNIA-AMERICAN WATER FACILITIES is uploaded for review and Summary is reproduced.
Digest of Differences Between ALJ Minkin’s Proposed Decision and the Alternate Proposed Decision of Commissioner Bohn
A.04-09-019: In the Matter of the Application of California-American Water
Company (Cal-AM) (U210W) for a Certificate of Public Convenience and Necessity to Construct and Operate its Coastal Water Project to Resolve the Long-Term Water Supply Deficit in its Monterey District and to Recover All Present and Future Costs in Connection Therewith in Rates
Pursuant to Public Utilities Code § 311(e), this is the digest of the substantive differences between the proposed decision (PD) of Administrative Law Judge Angela Minkin (mailed on October 21, 2010) and the proposed alternate decision (APD) of Commissioner John Bohn (also mailed on October 21, 2010).
The proposed decision in this matter finds that the following modifications to the proposed Settlement Agreement and Water Purchase Agreement should be adopted:
1. The PD finds that the capital cost cap for the Regional Project facilities should be limited to $227.4 million. The PD sets an absolute cost cap ceiling of $275.5 million, beyond which cost recovery from California-American Water Company’s (Cal-Am) ratepayers will not be allowed.
2. The PD removes the idea of a fees “limit” and concludes that any fees charged by Marina Coast Water District for new connections as the former Fort Ord area is developed should be contributed to offset the indebtedness of the
Regional Project, which will reduce overall costs to Cal-Am ratepayers.
3. Because the financing plans are not final, the PD modifies the Settlement Agreement and Water Purchase Agreement to require Cal-Am to file and serve the financing plans in this proceeding. To the extent that the financing plan
determines that the cost of debt will not exceed 6%, the debt service coverage is set at 1.0 and that State Revolving Fund loans or grants can be accessed, the PD states that the Commission will accept the filing as a compliance filing. While not asserting jurisdiction over the Public Agencies, if the terms of the financing plan exceed these limits, the PD states that the Commission must review and approve the financing plan.
4. As proposed by the Settling Parties, the PD finds that a representative of the Monterey Peninsula Cities known as the Municipal Advisor should be added to the Advisory Committee. The PD modifies this provision by determining that the Municipal Advisor should be granted full voting Party status for purposes of decision-making for the Regional Project, as defined in the Water Purchase
Agreement.
5. The PD adopts a capital cost cap of $95 million for the Cal-Am only facilities, the most probable estimated cost of construction. The PD also sets an absolute cost cap of $106.875 million, beyond which Cal-Am ratepayer funding will not be authorized.
6. The PD revises the interest rate applied to the Allowance for Funds Used During Construction and applies the rate proposed by DRA, i.e., the risk-adjusted two-year corporate borrowing rate (currently 2.46%) to compensate Cal-Am for its carrying costs.
7. To the extent that the capital costs exceed the initial cost caps established but are less than the absolute ceiling placed on the Regional Facilities and the Cal-Am-owned facilities, the PD requires Cal-Am to file an application to justify why ratepayers should pay for additional costs.
8. The PD also makes three modifications to the advice letter procedure proposed by the Settling Parties. First, Cal-Am is required to file Tier 3 advice letters to recover its purchased water costs and requires 120 days for staff processing of these advice letters. Second, in order to recover the costs for Cal-Am facilities, the PD also requires Cal-Am to file Tier 3 advice letters and requires 120 days for staff processing of these advice letters. Finally, because the PD requires Cal-Am to file an application requesting
recovery of capital costs incurred above the capital cost cap of $95 million (but below the absolute cap of $106.875 million), the Settlement Agreement must be modified to revise the procedure for the final advice letter filing. To the
extent that costs for the Cal-Am facilities are equal to or less than $95 million, Cal-Am may file a final advice letter. To the extent that those costs exceed $95 million but are less than $106.875 million, Cal-Am must file an application to request recovery of the incremental costs.
9. The PD finds that it is reasonable to review Operation and Maintenance (O&M) costs in a separate phase of this proceeding, or in a successor proceeding.
As the Settling Parties have agreed, the PD requires Cal-Am to submit regular
status reports on the permitting, financing, design, bidding, and construction of the Regional Project to the Executive Director and to the Director of the Division of Water and Audits (DWA). The PD also requires Cal-Am to meet quarterly with the Division of Ratepayer Advocates (DRA) and DWA staff. No
modification is required to effectuate this requirement.
The APD differs from the Proposed Decision in the following areas:
1. The APD adopts a capital cost cap for the Regional Project facilities of $224.4 million, and sets a cost cap ceiling of $272.5 million. Cost recovery from Cal-Am’s ratepayers above the cost cap ceiling will only be allowed upon a showing of exceptional circumstances and subject to a rigorous reasonableness review.
2. The APD increases Marina Coast Water District’s (MCWD) contribution to $25 million, which consists of $22 million associated with new connection fees and $3 million for the associated intangible benefits that MCWD will receive from participating in the Regional Project.
3. As with the PD, the APD finds that a representative of the Monterey Peninsula Cities known as the Municipal Advisor should be added to the Advisory Committee. However, the APD does not conclude that the Municipal Advisor should be granted full voting Party status.
4. The APD adopts a capital cost cap of $95 million for the Cal-Am only facilities, and sets a cost cap ceiling of $106.875 million. Cost recovery from Cal Am’s ratepayers above the cost cap ceiling will be allowed upon a showing
of exceptional circumstances and subject to a rigorous reasonableness review.
5. The APD revises the interest rate applied to the Allowance for Funds Used during Construction to reflect the actual cost of borrowing. The APD adopts an interim rate of 4.00%, with a true-up for the actual carrying cost.
DRAFT
Decision PROPOSED DECISION OF ALJ MINKIN (Mailed 10/21/2010)
BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA
In the Matter of the Application of California-American Water Company
(U210W) for a Certificate of Public Convenience and Necessity to Construct and Operate its Coastal Water Project to Resolve the Long-Term Water Supply Deficit in its Monterey District and to Recover All Present and Future Costs in Connection Therewith in Rates.
_ALJ_ Angela K. Minkinproposeddecision
DRAFT
DECISION APPROVING REGIONAL PROJECT, ADOPTING SETTLEMENT AGREEMENT, WITH MODIFICATIONS, AND ISSUING CERTIFICATE OF PUBLIC CONVENIENCE AND NECESSITY FOR CALIFORNIA-AMERICAN WATER FACILITIES
1. Summary
California-American Water Company (Cal-Am) has applied for a Certificate of Public Convenience and Necessity (CPCN) in order to provide a solution to the long-standing constraints on water supply on the Monterey Peninsula. This effort is known as the Coastal Water Project. Cal-Am is under order from the State Water Resources Control Board to cease diverting water to which it has no legal rights, determined in 1995 to be 10,730 acre feet of water per year from the Carmel River. The utility must also replace 2,975 acre feet of water per year in allocations from the Seaside Basin.1
By today’s decision, we modify the proposed Settlement Agreement that has been filed by Cal-Am, Marina Coast Water District, Monterey County Water Resources Agency, Monterey Water Regional Pollution Control Agency, the Surfrider Foundation, the Public Trust Alliance, and Citizens for Public Water (Settling Parties).2 The Settlement Agreement proposes a public-private partnership, known as the Regional Project, to solve the long-standing water supply deficit on the Monterey Peninsula. With these modifications, we approve the Settlement Agreement and Implementing Agreements, and approve the Regional Project, as discussed below.
As proposed by the Settling Parties, Monterey County Water Resources Agency would own, construct, operate, and maintain the source water wells and raw water conveyance facilities to the desalination plant. Marina Coast Water District would own, construct, operate, and maintain the desalination plant and
the product water conveyance facilities to the delivery point, which then becomes Cal-Am’s intake point. Cal-Am would own, construct, operate, and
maintain the pipeline, conveyance, and pumping facilities necessary to deliver the water to its customers. The Monterey Regional Water Pollution Control
Authority would own, operate, and maintain the outfall for return of the brine to the sea.
In approving the modified Settlement Agreement and Water Purchase Agreement, we approve Cal-Am’s participation in the Settlement Agreement and issue a CPCN to Cal-Am for the following components of the Regional Project: the transfer pipeline, the Seaside pipeline, the Monterey pipeline, including the Valley Greens pump station, the Terminal Reservoirs, and the Aquifer Storage and Recovery facilities.
With the modifications we adopt today, and assuming that lower cost financing can be obtained by the Public Agencies, that the construction period does not exceed 3.5 years, and that the debt service coverage does not exceed 1.0, the incremental first year revenue requirement to the Monterey District ratepayers is not anticipated to exceed $44.1 million. We recognize that even under the best case scenario, the revenue requirement for Cal-Am’s Monterey District customers would increase by approximately 63%, as compared to the projected trend of the current revenue requirement.3 Cost allocation and rate design related to the Coastal Water Project will be addressed in Phase 3 of this proceeding and will be coordinated with Cal-Am’s current General Rate Case proceeding, Application (A.) 10-07-007.
We do not undertake these modifications lightly. We recognize the pressing need for the Regional Project, as well as the aligned goals of all parties and the residents and businesses on the Monterey Peninsula to ensure that a secure supply of water is available before the severe water restrictions imposed by the State Water Resource Control Board’s Cease and Desist Order are fully implemented in 2016.
Digest of Differences Between ALJ Minkin’s Proposed Decision and the Alternate Proposed Decision of Commissioner Bohn
A.04-09-019: In the Matter of the Application of California-American Water
Company (Cal-AM) (U210W) for a Certificate of Public Convenience and Necessity to Construct and Operate its Coastal Water Project to Resolve the Long-Term Water Supply Deficit in its Monterey District and to Recover All Present and Future Costs in Connection Therewith in Rates
Pursuant to Public Utilities Code § 311(e), this is the digest of the substantive differences between the proposed decision (PD) of Administrative Law Judge Angela Minkin (mailed on October 21, 2010) and the proposed alternate decision (APD) of Commissioner John Bohn (also mailed on October 21, 2010).
The proposed decision in this matter finds that the following modifications to the proposed Settlement Agreement and Water Purchase Agreement should be adopted:
1. The PD finds that the capital cost cap for the Regional Project facilities should be limited to $227.4 million. The PD sets an absolute cost cap ceiling of $275.5 million, beyond which cost recovery from California-American Water Company’s (Cal-Am) ratepayers will not be allowed.
2. The PD removes the idea of a fees “limit” and concludes that any fees charged by Marina Coast Water District for new connections as the former Fort Ord area is developed should be contributed to offset the indebtedness of the
Regional Project, which will reduce overall costs to Cal-Am ratepayers.
3. Because the financing plans are not final, the PD modifies the Settlement Agreement and Water Purchase Agreement to require Cal-Am to file and serve the financing plans in this proceeding. To the extent that the financing plan
determines that the cost of debt will not exceed 6%, the debt service coverage is set at 1.0 and that State Revolving Fund loans or grants can be accessed, the PD states that the Commission will accept the filing as a compliance filing. While not asserting jurisdiction over the Public Agencies, if the terms of the financing plan exceed these limits, the PD states that the Commission must review and approve the financing plan.
4. As proposed by the Settling Parties, the PD finds that a representative of the Monterey Peninsula Cities known as the Municipal Advisor should be added to the Advisory Committee. The PD modifies this provision by determining that the Municipal Advisor should be granted full voting Party status for purposes of decision-making for the Regional Project, as defined in the Water Purchase
Agreement.
5. The PD adopts a capital cost cap of $95 million for the Cal-Am only facilities, the most probable estimated cost of construction. The PD also sets an absolute cost cap of $106.875 million, beyond which Cal-Am ratepayer funding will not be authorized.
6. The PD revises the interest rate applied to the Allowance for Funds Used During Construction and applies the rate proposed by DRA, i.e., the risk-adjusted two-year corporate borrowing rate (currently 2.46%) to compensate Cal-Am for its carrying costs.
7. To the extent that the capital costs exceed the initial cost caps established but are less than the absolute ceiling placed on the Regional Facilities and the Cal-Am-owned facilities, the PD requires Cal-Am to file an application to justify why ratepayers should pay for additional costs.
8. The PD also makes three modifications to the advice letter procedure proposed by the Settling Parties. First, Cal-Am is required to file Tier 3 advice letters to recover its purchased water costs and requires 120 days for staff processing of these advice letters. Second, in order to recover the costs for Cal-Am facilities, the PD also requires Cal-Am to file Tier 3 advice letters and requires 120 days for staff processing of these advice letters. Finally, because the PD requires Cal-Am to file an application requesting
recovery of capital costs incurred above the capital cost cap of $95 million (but below the absolute cap of $106.875 million), the Settlement Agreement must be modified to revise the procedure for the final advice letter filing. To the
extent that costs for the Cal-Am facilities are equal to or less than $95 million, Cal-Am may file a final advice letter. To the extent that those costs exceed $95 million but are less than $106.875 million, Cal-Am must file an application to request recovery of the incremental costs.
9. The PD finds that it is reasonable to review Operation and Maintenance (O&M) costs in a separate phase of this proceeding, or in a successor proceeding.
As the Settling Parties have agreed, the PD requires Cal-Am to submit regular
status reports on the permitting, financing, design, bidding, and construction of the Regional Project to the Executive Director and to the Director of the Division of Water and Audits (DWA). The PD also requires Cal-Am to meet quarterly with the Division of Ratepayer Advocates (DRA) and DWA staff. No
modification is required to effectuate this requirement.
The APD differs from the Proposed Decision in the following areas:
1. The APD adopts a capital cost cap for the Regional Project facilities of $224.4 million, and sets a cost cap ceiling of $272.5 million. Cost recovery from Cal-Am’s ratepayers above the cost cap ceiling will only be allowed upon a showing of exceptional circumstances and subject to a rigorous reasonableness review.
2. The APD increases Marina Coast Water District’s (MCWD) contribution to $25 million, which consists of $22 million associated with new connection fees and $3 million for the associated intangible benefits that MCWD will receive from participating in the Regional Project.
3. As with the PD, the APD finds that a representative of the Monterey Peninsula Cities known as the Municipal Advisor should be added to the Advisory Committee. However, the APD does not conclude that the Municipal Advisor should be granted full voting Party status.
4. The APD adopts a capital cost cap of $95 million for the Cal-Am only facilities, and sets a cost cap ceiling of $106.875 million. Cost recovery from Cal Am’s ratepayers above the cost cap ceiling will be allowed upon a showing
of exceptional circumstances and subject to a rigorous reasonableness review.
5. The APD revises the interest rate applied to the Allowance for Funds Used during Construction to reflect the actual cost of borrowing. The APD adopts an interim rate of 4.00%, with a true-up for the actual carrying cost.
DRAFT
Decision PROPOSED DECISION OF ALJ MINKIN (Mailed 10/21/2010)
BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA
In the Matter of the Application of California-American Water Company
(U210W) for a Certificate of Public Convenience and Necessity to Construct and Operate its Coastal Water Project to Resolve the Long-Term Water Supply Deficit in its Monterey District and to Recover All Present and Future Costs in Connection Therewith in Rates.
_ALJ_ Angela K. Minkinproposeddecision
DRAFT
DECISION APPROVING REGIONAL PROJECT, ADOPTING SETTLEMENT AGREEMENT, WITH MODIFICATIONS, AND ISSUING CERTIFICATE OF PUBLIC CONVENIENCE AND NECESSITY FOR CALIFORNIA-AMERICAN WATER FACILITIES
1. Summary
California-American Water Company (Cal-Am) has applied for a Certificate of Public Convenience and Necessity (CPCN) in order to provide a solution to the long-standing constraints on water supply on the Monterey Peninsula. This effort is known as the Coastal Water Project. Cal-Am is under order from the State Water Resources Control Board to cease diverting water to which it has no legal rights, determined in 1995 to be 10,730 acre feet of water per year from the Carmel River. The utility must also replace 2,975 acre feet of water per year in allocations from the Seaside Basin.1
By today’s decision, we modify the proposed Settlement Agreement that has been filed by Cal-Am, Marina Coast Water District, Monterey County Water Resources Agency, Monterey Water Regional Pollution Control Agency, the Surfrider Foundation, the Public Trust Alliance, and Citizens for Public Water (Settling Parties).2 The Settlement Agreement proposes a public-private partnership, known as the Regional Project, to solve the long-standing water supply deficit on the Monterey Peninsula. With these modifications, we approve the Settlement Agreement and Implementing Agreements, and approve the Regional Project, as discussed below.
As proposed by the Settling Parties, Monterey County Water Resources Agency would own, construct, operate, and maintain the source water wells and raw water conveyance facilities to the desalination plant. Marina Coast Water District would own, construct, operate, and maintain the desalination plant and
the product water conveyance facilities to the delivery point, which then becomes Cal-Am’s intake point. Cal-Am would own, construct, operate, and
maintain the pipeline, conveyance, and pumping facilities necessary to deliver the water to its customers. The Monterey Regional Water Pollution Control
Authority would own, operate, and maintain the outfall for return of the brine to the sea.
In approving the modified Settlement Agreement and Water Purchase Agreement, we approve Cal-Am’s participation in the Settlement Agreement and issue a CPCN to Cal-Am for the following components of the Regional Project: the transfer pipeline, the Seaside pipeline, the Monterey pipeline, including the Valley Greens pump station, the Terminal Reservoirs, and the Aquifer Storage and Recovery facilities.
With the modifications we adopt today, and assuming that lower cost financing can be obtained by the Public Agencies, that the construction period does not exceed 3.5 years, and that the debt service coverage does not exceed 1.0, the incremental first year revenue requirement to the Monterey District ratepayers is not anticipated to exceed $44.1 million. We recognize that even under the best case scenario, the revenue requirement for Cal-Am’s Monterey District customers would increase by approximately 63%, as compared to the projected trend of the current revenue requirement.3 Cost allocation and rate design related to the Coastal Water Project will be addressed in Phase 3 of this proceeding and will be coordinated with Cal-Am’s current General Rate Case proceeding, Application (A.) 10-07-007.
We do not undertake these modifications lightly. We recognize the pressing need for the Regional Project, as well as the aligned goals of all parties and the residents and businesses on the Monterey Peninsula to ensure that a secure supply of water is available before the severe water restrictions imposed by the State Water Resource Control Board’s Cease and Desist Order are fully implemented in 2016.
Alternate Proposed Decision of Commissioner John Bohn
ABSTRACT: On Thursday, 21 October 2010, the alternate proposed decision of Commissioner John Bohn was filed regarding the Matter of the Application of California-American Water Company (U210W) for a Certificate of Public Convenience and Necessity to Construct and Operate its Coastal Water Project to Resolve the Long-Term Water Supply Deficit in its Monterey District and to Recover All Present and Future Costs in Connection Therewith in Rates. ALTERNATE DRAFT “Digest of Differences Between ALJ Minkin’s Proposed Decision and the Alternate Proposed Decision of Commissioner Bohn” is reproduced and Commissioner John Bohn’s ALTERNATIVE DRAFT DECISION APPROVING REGIONAL PROJECT, ADOPTING SETTLEMENT AGREEMENT, WITH MODIFICATIONS, AND ISSUING CERTIFICATE OF PUBLIC CONVENIENCE AND NECESSITY FOR CALIFORNIA-AMERICAN WATER FACILITIES is uploaded for review and Summary reproduced.
Digest of Differences Between ALJ Minkin’s Proposed Decision and the Alternate Proposed Decision of Commissioner Bohn
A.04-09-019: In the Matter of the Application of California-American Water
Company (Cal-AM) (U210W) for a Certificate of Public Convenience and
Necessity to Construct and Operate its Coastal Water Project to Resolve the
Long-Term Water Supply Deficit in its Monterey District and to Recover All
Present and Future Costs in Connection Therewith in Rates
Pursuant to Public Utilities Code § 311(e), this is the digest of the substantive differences between the proposed decision (PD) of Administrative Law Judge Angela Minkin (mailed on October 21, 2010) and the proposed alternate decision (APD) of Commissioner John Bohn (also mailed on October 21, 2010).
The proposed decision in this matter finds that the following modifications to the proposed Settlement Agreement and Water Purchase Agreement should be adopted:
1. The PD finds that the capital cost cap for the Regional Project facilities should be limited to $227.4 million. The PD sets an absolute cost cap ceiling of $275.5 million, beyond which cost recovery from California-American Water Company’s (Cal-Am) ratepayers will not be allowed.
2. The PD removes the idea of a fees “limit” and concludes that any fees charged by Marina Coast Water District for new connections as the former Fort Ord area is developed should be contributed to offset the indebtedness of the
Regional Project, which will reduce overall costs to Cal-Am ratepayers.
3. Because the financing plans are not final, the PD modifies the Settlement Agreement and Water Purchase Agreement to require Cal-Am to file and serve the financing plans in this proceeding. To the extent that the financing plan
determines that the cost of debt will not exceed 6%, the debt service coverage is set at 1.0 and that State Revolving Fund loans or grants can be accessed, the PD states that the Commission will accept the filing as a compliance filing. While not asserting jurisdiction over the Public Agencies, if the terms of the financing plan exceed these limits, the PD states that the Commission must review and approve the financing plan.
4. As proposed by the Settling Parties, the PD finds that a representative of the Monterey Peninsula Cities known as the Municipal Advisor should be added to the Advisory Committee. The PD modifies this provision by determining that the Municipal Advisor should be granted full voting Party status for purposes of decision-making for the Regional Project, as defined in the Water Purchase Agreement.
5. The PD adopts a capital cost cap of $95 million for the Cal-Am only facilities, the most probable estimated cost of construction. The PD also sets an absolute cost cap of $106.875 million, beyond which Cal-Am ratepayer funding will not be authorized.
6. The PD revises the interest rate applied to the Allowance for Funds Used During Construction and applies the rate proposed by DRA, i.e., the risk-adjusted two-year corporate borrowing rate (currently 2.46%) to compensate
Cal-Am for its carrying costs.
7. To the extent that the capital costs exceed the initial cost caps established but are less than the absolute ceiling placed on the Regional Facilities and the Cal-Am-owned facilities, the PD requires Cal-Am to file an application to justify why ratepayers should pay for additional costs.
8. The PD also makes three modifications to the advice letter procedure proposed by the Settling Parties. First, Cal-Am is required to file Tier 3 advice letters to recover its purchased water costs and requires 120 days for staff processing of these advice letters. Second, in order to recover the costs for Cal-Am facilities, the PD also requires Cal-Am to file Tier 3 advice letters and requires 120 days for staff processing of these advice letters. Finally, because the PD requires Cal-Am to file an application requesting
recovery of capital costs incurred above the capital cost cap of $95 million (but below the absolute cap of $106.875 million), the Settlement Agreement must be modified to revise the procedure for the final advice letter filing. To the
extent that costs for the Cal-Am facilities are equal to or less than $95 million, Cal-Am may file a final advice letter. To the extent that those costs exceed $95 million but are less than $106.875 million, Cal-Am must file an application to request recovery of the incremental costs.
9. The PD finds that it is reasonable to review Operation and Maintenance (O&M) costs in a separate phase of this proceeding, or in a successor proceeding.
As the Settling Parties have agreed, the PD requires Cal-Am to submit regular
status reports on the permitting, financing, design, bidding, and construction of the Regional Project to the Executive Director and to the Director of the Division of Water and Audits (DWA). The PD also requires Cal-Am to meet quarterly with the Division of Ratepayer Advocates (DRA) and DWA staff. No
modification is required to effectuate this requirement.
The APD differs from the Proposed Decision in the following areas:
1. The APD adopts a capital cost cap for the Regional Project facilities should be limited to $224.4 million, and sets a cost cap ceiling of $272.5 million. Cost recovery from Cal-Am’s ratepayers above the cost cap ceiling will only be allowed upon a showing of exceptional circumstances and subject to a rigorous reasonableness review.
2. The APD increases Marina Coast Water District’s (MCWD) contribution to $25 million, which consists of $22 million associated with new connection fees and $3 million for the associated intangible benefits that MCWD will receive from participating in the Regional Project.
3. As with the PD, the APD finds that a representative of the Monterey Peninsula Cities known as the Municipal Advisor should be added to the Advisory Committee. However, the APD does not conclude that the Municipal Advisor should be granted full voting Party status.
4. The APD adopts a capital cost cap of $95 million for the Cal-Am only facilities, and sets a cost cap ceiling of $106.875 million. Cost recovery from Cal Am’s ratepayers above the cost cap ceiling will be allowed upon a showing of exceptional circumstances and subject to a rigorous reasonableness review.
5. The APD revises the interest rate applied to the Allowance for Funds Used during Construction to reflect the actual cost of borrowing. The APD adopts an interim rate of 4.00%, with a true-up for the actual carrying cost.
ALTERNATE DRAFT
Decision ALTERNATE PROPOSED DECISION OF COMMISSIONER BOHN (Mailed 10/21/2010)
BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA
In the Matter of the Application of California-American Water Company (U210W) for a Certificate of Public Convenience and Necessity to Construct and Operate its Coastal Water Project to Resolve the Long-Term Water Supply
Deficit in its Monterey District and to Recover All Present and Future Costs in Connection Therewith in Rates.
COMMISSIONER BOHNproposed decision
DECISION APPROVING REGIONAL PROJECT, ADOPTING SETTLEMENT AGREEMENT, WITH MODIFICATIONS, AND ISSUING CERTIFICATE OF PUBLIC CONVENIENCE AND NECESSITY FOR CALIFORNIA-AMERICAN WATER FACILITIES
1. Summary
California-American Water Company (Cal-Am) has applied for a Certificate of Public Convenience and Necessity (CPCN) in order to provide a solution to the long-standing constraints on water supply on the Monterey Peninsula. This effort is known as the Coastal Water Project. Cal-Am is under order from the State Water Resources Control Board to cease diverting water to which it has no legal rights, determined in 1995 to be 10,730 acre feet of water per year from the Carmel River. The utility must also replace 2,975 acre feet of water per year in allocations from the Seaside Basin.1
By today’s decision, we modify the proposed Settlement Agreement that has been filed by Cal-Am, Marina Coast Water District, Monterey County Water Resources Agency, Monterey Water Regional Pollution Control Agency, the Surfrider Foundation, the Public Trust Alliance, and Citizens for Public Water Settling Parties).2 The Settlement Agreement proposes a public-private partnership, known as the Regional Project, to solve the long-standing water supply deficit on the Monterey Peninsula. With these modifications, we approve the Settlement Agreement and Implementing Agreements, and approve the Regional Project, as discussed below.
As proposed by the Settling Parties, Monterey County Water Resources Agency would own, construct, operate, and maintain the source water wells and raw water conveyance facilities to the desalination plant. Marina Coast Water District would own, construct, operate, and maintain the desalination plant and
the product water conveyance facilities to the delivery point, which then
becomes Cal-Am’s intake point. Cal-Am would own, construct, operate, and
maintain the pipeline, conveyance, and pumping facilities necessary to deliver
the water to its customers. The Monterey Regional Water Pollution Control
Authority would own, operate, and maintain the outfall for return of the brine to the sea.
In approving the modified Settlement Agreement and Water Purchase Agreement, we approve Cal-Am’s participation in the Settlement Agreement and issue a CPCN to Cal-Am for the following components of the Regional Project: the transfer pipeline, the Seaside pipeline, the Monterey pipeline, including the Valley Greens pump station, the Terminal Reservoirs, and the Aquifer Storage and Recovery facilities.
With the modifications we adopt today, and assuming that lower cost financing can be obtained by the Public Agencies, that the construction period does not exceed 3.5 years, and that the debt service coverage does not exceed 1.0, the incremental first year revenue requirement to the Monterey District ratepayers is not anticipated to exceed $45.99 million. We recognize that even under the best case scenario, the revenue requirement for Cal-Am’s Monterey District customers would increase by approximately 63%, as compared to the projected trend of the current revenue requirement.3 Cost allocation and rate design related to the Coastal Water Project will be addressed in Phase 3 of this proceeding and will be coordinated with Cal-Am’s current General Rate Case proceeding, Application (A.) 10-07-007.
We do not undertake these modifications lightly. We recognize the pressing need for the Regional Project, as well as the aligned goals of all parties and the residents and businesses on the Monterey Peninsula to ensure that a secure supply of water is available before the severe water restrictions imposed by the State Water Resource Control Board’s Cease and Desist Order are fully implemented in 2016.
Digest of Differences Between ALJ Minkin’s Proposed Decision and the Alternate Proposed Decision of Commissioner Bohn
A.04-09-019: In the Matter of the Application of California-American Water
Company (Cal-AM) (U210W) for a Certificate of Public Convenience and
Necessity to Construct and Operate its Coastal Water Project to Resolve the
Long-Term Water Supply Deficit in its Monterey District and to Recover All
Present and Future Costs in Connection Therewith in Rates
Pursuant to Public Utilities Code § 311(e), this is the digest of the substantive differences between the proposed decision (PD) of Administrative Law Judge Angela Minkin (mailed on October 21, 2010) and the proposed alternate decision (APD) of Commissioner John Bohn (also mailed on October 21, 2010).
The proposed decision in this matter finds that the following modifications to the proposed Settlement Agreement and Water Purchase Agreement should be adopted:
1. The PD finds that the capital cost cap for the Regional Project facilities should be limited to $227.4 million. The PD sets an absolute cost cap ceiling of $275.5 million, beyond which cost recovery from California-American Water Company’s (Cal-Am) ratepayers will not be allowed.
2. The PD removes the idea of a fees “limit” and concludes that any fees charged by Marina Coast Water District for new connections as the former Fort Ord area is developed should be contributed to offset the indebtedness of the
Regional Project, which will reduce overall costs to Cal-Am ratepayers.
3. Because the financing plans are not final, the PD modifies the Settlement Agreement and Water Purchase Agreement to require Cal-Am to file and serve the financing plans in this proceeding. To the extent that the financing plan
determines that the cost of debt will not exceed 6%, the debt service coverage is set at 1.0 and that State Revolving Fund loans or grants can be accessed, the PD states that the Commission will accept the filing as a compliance filing. While not asserting jurisdiction over the Public Agencies, if the terms of the financing plan exceed these limits, the PD states that the Commission must review and approve the financing plan.
4. As proposed by the Settling Parties, the PD finds that a representative of the Monterey Peninsula Cities known as the Municipal Advisor should be added to the Advisory Committee. The PD modifies this provision by determining that the Municipal Advisor should be granted full voting Party status for purposes of decision-making for the Regional Project, as defined in the Water Purchase Agreement.
5. The PD adopts a capital cost cap of $95 million for the Cal-Am only facilities, the most probable estimated cost of construction. The PD also sets an absolute cost cap of $106.875 million, beyond which Cal-Am ratepayer funding will not be authorized.
6. The PD revises the interest rate applied to the Allowance for Funds Used During Construction and applies the rate proposed by DRA, i.e., the risk-adjusted two-year corporate borrowing rate (currently 2.46%) to compensate
Cal-Am for its carrying costs.
7. To the extent that the capital costs exceed the initial cost caps established but are less than the absolute ceiling placed on the Regional Facilities and the Cal-Am-owned facilities, the PD requires Cal-Am to file an application to justify why ratepayers should pay for additional costs.
8. The PD also makes three modifications to the advice letter procedure proposed by the Settling Parties. First, Cal-Am is required to file Tier 3 advice letters to recover its purchased water costs and requires 120 days for staff processing of these advice letters. Second, in order to recover the costs for Cal-Am facilities, the PD also requires Cal-Am to file Tier 3 advice letters and requires 120 days for staff processing of these advice letters. Finally, because the PD requires Cal-Am to file an application requesting
recovery of capital costs incurred above the capital cost cap of $95 million (but below the absolute cap of $106.875 million), the Settlement Agreement must be modified to revise the procedure for the final advice letter filing. To the
extent that costs for the Cal-Am facilities are equal to or less than $95 million, Cal-Am may file a final advice letter. To the extent that those costs exceed $95 million but are less than $106.875 million, Cal-Am must file an application to request recovery of the incremental costs.
9. The PD finds that it is reasonable to review Operation and Maintenance (O&M) costs in a separate phase of this proceeding, or in a successor proceeding.
As the Settling Parties have agreed, the PD requires Cal-Am to submit regular
status reports on the permitting, financing, design, bidding, and construction of the Regional Project to the Executive Director and to the Director of the Division of Water and Audits (DWA). The PD also requires Cal-Am to meet quarterly with the Division of Ratepayer Advocates (DRA) and DWA staff. No
modification is required to effectuate this requirement.
The APD differs from the Proposed Decision in the following areas:
1. The APD adopts a capital cost cap for the Regional Project facilities should be limited to $224.4 million, and sets a cost cap ceiling of $272.5 million. Cost recovery from Cal-Am’s ratepayers above the cost cap ceiling will only be allowed upon a showing of exceptional circumstances and subject to a rigorous reasonableness review.
2. The APD increases Marina Coast Water District’s (MCWD) contribution to $25 million, which consists of $22 million associated with new connection fees and $3 million for the associated intangible benefits that MCWD will receive from participating in the Regional Project.
3. As with the PD, the APD finds that a representative of the Monterey Peninsula Cities known as the Municipal Advisor should be added to the Advisory Committee. However, the APD does not conclude that the Municipal Advisor should be granted full voting Party status.
4. The APD adopts a capital cost cap of $95 million for the Cal-Am only facilities, and sets a cost cap ceiling of $106.875 million. Cost recovery from Cal Am’s ratepayers above the cost cap ceiling will be allowed upon a showing of exceptional circumstances and subject to a rigorous reasonableness review.
5. The APD revises the interest rate applied to the Allowance for Funds Used during Construction to reflect the actual cost of borrowing. The APD adopts an interim rate of 4.00%, with a true-up for the actual carrying cost.
ALTERNATE DRAFT
Decision ALTERNATE PROPOSED DECISION OF COMMISSIONER BOHN (Mailed 10/21/2010)
BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA
In the Matter of the Application of California-American Water Company (U210W) for a Certificate of Public Convenience and Necessity to Construct and Operate its Coastal Water Project to Resolve the Long-Term Water Supply
Deficit in its Monterey District and to Recover All Present and Future Costs in Connection Therewith in Rates.
COMMISSIONER BOHNproposed decision
DECISION APPROVING REGIONAL PROJECT, ADOPTING SETTLEMENT AGREEMENT, WITH MODIFICATIONS, AND ISSUING CERTIFICATE OF PUBLIC CONVENIENCE AND NECESSITY FOR CALIFORNIA-AMERICAN WATER FACILITIES
1. Summary
California-American Water Company (Cal-Am) has applied for a Certificate of Public Convenience and Necessity (CPCN) in order to provide a solution to the long-standing constraints on water supply on the Monterey Peninsula. This effort is known as the Coastal Water Project. Cal-Am is under order from the State Water Resources Control Board to cease diverting water to which it has no legal rights, determined in 1995 to be 10,730 acre feet of water per year from the Carmel River. The utility must also replace 2,975 acre feet of water per year in allocations from the Seaside Basin.1
By today’s decision, we modify the proposed Settlement Agreement that has been filed by Cal-Am, Marina Coast Water District, Monterey County Water Resources Agency, Monterey Water Regional Pollution Control Agency, the Surfrider Foundation, the Public Trust Alliance, and Citizens for Public Water Settling Parties).2 The Settlement Agreement proposes a public-private partnership, known as the Regional Project, to solve the long-standing water supply deficit on the Monterey Peninsula. With these modifications, we approve the Settlement Agreement and Implementing Agreements, and approve the Regional Project, as discussed below.
As proposed by the Settling Parties, Monterey County Water Resources Agency would own, construct, operate, and maintain the source water wells and raw water conveyance facilities to the desalination plant. Marina Coast Water District would own, construct, operate, and maintain the desalination plant and
the product water conveyance facilities to the delivery point, which then
becomes Cal-Am’s intake point. Cal-Am would own, construct, operate, and
maintain the pipeline, conveyance, and pumping facilities necessary to deliver
the water to its customers. The Monterey Regional Water Pollution Control
Authority would own, operate, and maintain the outfall for return of the brine to the sea.
In approving the modified Settlement Agreement and Water Purchase Agreement, we approve Cal-Am’s participation in the Settlement Agreement and issue a CPCN to Cal-Am for the following components of the Regional Project: the transfer pipeline, the Seaside pipeline, the Monterey pipeline, including the Valley Greens pump station, the Terminal Reservoirs, and the Aquifer Storage and Recovery facilities.
With the modifications we adopt today, and assuming that lower cost financing can be obtained by the Public Agencies, that the construction period does not exceed 3.5 years, and that the debt service coverage does not exceed 1.0, the incremental first year revenue requirement to the Monterey District ratepayers is not anticipated to exceed $45.99 million. We recognize that even under the best case scenario, the revenue requirement for Cal-Am’s Monterey District customers would increase by approximately 63%, as compared to the projected trend of the current revenue requirement.3 Cost allocation and rate design related to the Coastal Water Project will be addressed in Phase 3 of this proceeding and will be coordinated with Cal-Am’s current General Rate Case proceeding, Application (A.) 10-07-007.
We do not undertake these modifications lightly. We recognize the pressing need for the Regional Project, as well as the aligned goals of all parties and the residents and businesses on the Monterey Peninsula to ensure that a secure supply of water is available before the severe water restrictions imposed by the State Water Resource Control Board’s Cease and Desist Order are fully implemented in 2016.
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