Exhibit 10-B

Monterey Peninsula Water Management District

Quarterly Water Supply Strategy Report: April - June 2003

March 17, 2003

1. Management Objectives

The District desires to maximize the long-term production potential and protect the environmental quality of the Seaside and Carmel Valley basins. To accomplish these goals, a water supply strategy and budget for production within the Cal-Am water distribution system is reviewed quarterly to determine the optimal strategy for operations, given the current hydrologic and system conditions.

2. Quarterly Water Supply Strategy: April - June 2003

On March 5, 2003, staff from the District, Cal-Am, CDFG, and the NMFS discussed the proposed water supply strategy and related topics for the remainder of March 2003 and the April – June 2003 period. Currently, San Clemente and Los Padres Dams are spilling and are expected to remain full until June 2003. Because of this, the parties agreed that Cal-Am would attempt to maintain a maximum daily diversion rate of 1.5 cfs for the remainder of March 2003. The proposed budget allows Cal-Am to divert 0.5 to 1.2 cfs in April, May, and June, depending on streamflow at the MPWMD gaging station at Don Juan Bridge. Once streamflow declines to 20 cfs for five consecutive days at the Don Juan Gage, Cal-Am will reduce diversions to 0.5 cfs from its sources upstream of and including Scarlett Well No. 8. The operation of Cal-Am wells in the upper Carmel Valley and the diversion of 0.5 to 1.5 cfs during the April to June period is based on the assumption that daily inflows will average 54 cfs in April, 25 cfs in May and 11 cfs in June.

Based on the runoff and pattern of rainfall that occurred during the October 2002 to February 2003 period and that is anticipated for the remainder of March, it was agreed that the projections for the upcoming quarter should be based on below-normal inflow conditions for the remainder of WY 2003. Based on this technique, staff projected monthly unimpaired inflows at San Clemente Dam of 5,426, 3,350, 1,600 and 600 AF for the months of March, April, May, and June 2003, respectively.

Table 1 shows a monthly breakdown of the recommended diversion and release schedule under the projected inflow condition. Table 1 also shows expected inflows, outflows, and storage volumes at Los Padres and San Clemente Reservoirs for the March – June 2003 period. The total runoff for the projected period is equivalent to the sum exceeded 75% of the time (below-normal conditions) at San Clemente Dam.

U:\staff\word\boardpacket\2003\2003boardpacket\20030317\PublicHearings\10\item10_exh10b.doc