MPWMD BOARD MEETING--JULY 19, 2004--ITEM 16--CONSIDER RESOLUTION IN OPPOSITION TO AN ANTICIPATED REQUEST BY CALIFORNIA-AMERICAN WATER THAT THE CALIFORNIA PUBLIC UTILITIES COMMISSION ESTABLISH A TEMPORARY MORATORIUM ON NEW WATER CONNECTIONS AND EXPANSION OF EXISTING WATER CONNECTIONS IN THE SHORTAGE-AFFECTED AREAS OF ITS MONTEREY DISTRICT

ITEM:	ACTION ITEMS

16.	CONSIDER RESOLUTION IN OPPOSITION TO AN ANTICIPATED REQUEST BY CALIFORNIA-AMERICAN WATER THAT THE CALIFORNIA PUBLIC UTILITIES COMMISSION ESTABLISH A TEMPORARY MORATORIUM ON NEW WATER CONNECTIONS AND EXPANSION OF EXISTING WATER CONNECTIONS IN THE SHORTAGE-AFFECTED AREAS OF ITS MONTEREY DISTRICT

Meeting Date:		July 19, 2004	Budgeted: N/A

Staff Contact:		Fran Farina	Program/Line Item No.: N/A
			Cost Estimate: N/A

General Counsel Approval: Prepared materials
Committee Recommendation: N/A
CEQA Compliance: N/A

SUMMARY: The Board will consider draft Resolution 2004-11, expressing opposition to an anticipated request by California-American Water to the California Public Utilities Commission for establishment of a temporary moratorium on new water connections and expansion of existing water connections. The Resolution is attached as Exhibit 16-A.

On June 16, 2004, California-American Water (Cal-Am) filed an application with the California Public Utilities Commission (CPUC) for a temporary rate increase to avoid State Water Resources Control Board (SWRCB) Order No. WR 95-10 (Order 95-10) violations. Cal-Am also indicated in the application that it would soon file a separate application “seeking temporary moratorium on all new and expanded water service connections” in its Monterey District. On July 8, 2004, the CPUC approved the temporary rate increase and directed Cal-Am to file an application seeking to impose a moratorium on new water connections and expansion of existing water connections within 90 days

In support of its anticipated request for a moratorium with the CPUC, Cal-Am held a hastily called public hearing on July 7, 2004 to comply with California Water Code Section 351. This hearing was to allow consumers to protest against Cal-Am’s declaration that a water shortage emergency condition exists in the Monterey service area which prevents the water distributor (Cal-Am) from satisfying the ordinary requirements of its consumers “without depleting the water supply of the distributor to the extent that there would be insufficient water for human consumption, sanitation, and fire protection.” California Water Code Section 350.

Neither Cal-Am nor the CPUC acknowledges the authority granted to the Chief of the Division of Water Rights under Order 95-10 to modify the 20 percent conservation goal if it conflicts with prior commitments (allocations) by the Monterey Peninsula Water Management District (MPWMD or District). In addition, the authority which MPWMD has to declare a water emergency as set forth in Section 332 of the District Law is also ignored.

RECOMMENDATION: The Board should consider approval of Resolution 2004-11 and may wish to suggest refinements to the text.

BACKGROUND: Cal-Am’s Monterey District provides water service to approximately 38,200 customers on the Monterey Peninsula. Its water supply comes primarily from Carmel River surface water and wells in the Carmel Valley. In 1995, the State Water Resources Control Board (SWRCB) determined that about 69 percent of those waters were being extracted without a valid legal right. In Order 95-10, Cal-Am was directed to reduce its Carmel River diversions from 14,106 acre-feet annually (AFA) with a 20 percent conservation goal to 11,285 AFA. Of note is the language contained in the Order at paragraph 3(b) which reads:

“To the extent that this requirement conflicts with prior commitments (allocations) by the District, the Chief, Division of Water Rights shall have the authority to modify the conservation requirement.”

Imposition of a moratorium has significant, direct and indirect economic consequences. Jurisdictional allocations have been committed to projects which have not yet reached the point of receiving water connections or expansion to existing connections. Thus, many projects currently in the development process would be adversely impacted if a moratorium were implemented. The uncertainty about these development projects going forward will create a secondary or “ripple” effect, as companies poised to provide materials, supplies and services during and after their development may need to defer hiring or even lay off workers.

Prior to any consideration of a moratorium, consultation with the SWRCB Chief, Division of Water Rights, should occur to seek a determination of whether the language of paragraph 3(b) will recognize existing allocations made by the MPWMD to the jurisdictions within its boundary. Allocations include Paralta credits, pre-Paralta credits, and public credits. As of June 30, 2004, they totaled 60.408 AF, 49.077 AF, and 46.923 AF, respectively.

In contrast to the 156.408 AF of water available for allocation by the District which could be affected by a moratorium is the unaccounted-for water in Cal-Am’s system, much of which is water lost to leaks in an aging infrastructure. Reduction of the unaccounted-for water would more than offset any water available for allocation.

Paralta Allocation

In 1993, the Paralta Well came on line in the Seaside Coastal Ground Water Basin and ended a moratorium imposed by the District in 1991. The supply of water available for allocation was also expanded by 385 AF to the eight jurisdictions within the District boundary. About 60 AF remain unallocated by the District. However, jurisdictional commitments for this water may have previously been made.

Order 95-10 directed that water production from the Seaside Basin be maximized. However, in paragraph 4 of the Order, it recognized the need to maximize production “for the purpose of serving existing connections, honoring existing commitments (allocations), and to reduce diversions from the Carmel River….” (emphasis added).

The SWRCB Chief, Division of Water Rights, must have an opportunity to determine whether the District allocations will be recognized or modified.

District Authority to Declare Moratorium

The District has the authority under District law at Section 332 to restrict the use of water during any emergency caused by an existing water shortage. Should the SWRCB Chief, Division of Water Rights, determine that the existing allocations will not be honored or must be modified to conform to Order 95-10, then the proper agency to carry out the directive is the District.

The use of Water Code Sections 350 and 351 as proposed by Cal-Am is inappropriate for the existing circumstances. Section 350 allows a water distributor’s governing body to declare a water shortage emergency condition if it determines that “the ordinary demands and requirements of water consumers cannot be satisfied without depleting the water supply of the distributor to the extent that there would be insufficient water for human consumption, sanitation, and fire protection.” Section 351 requires that a public hearing be conducted prior to declaration of a water shortage emergency.

Cal-Am is faced with a regulatory constraint pursuant to Order 95-10. The current water supply is adequate for human consumption, sanitation, and fire protection. A fine may be assessed if consumers exceed a target conservation goal. Only the SWRCB Chief, Division of Water Rights, has the authority to determine whether District allocations will be recognized or modified. If they are recognized, there is no need for a moratorium. If they are not recognized, then the appropriate body to impose the moratorium is the District.

LIST OF EXHIBITS:

16-A Draft Resolution No. 2004-11

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