ITEM: PUBLIC HEARINGS
12.	Consider First Reading of Ordinance No. 134 -- An Ordinance of the Board of Directors of the Monterey Peninsula Water Management District Amending the Definition of the Monterey Peninsula Water Resource System and Modifying Regulation XV, The Expanded Water Conservation and Standby Rationing Plan (A) Consider Setting New STANDARD for California American Water Unaccounted For WATER USES (B) Consider First Reading of Ordinance No. 134
Meeting Date:		May 19, 2008	Budgeted:	N/A
From:		Darby Fuerst,	Program/	N/A
		General Manager	Line Item No.:
Prepared By:		Stephanie Pintar Darby Fuerst	Cost Estimate:	N/A
General Counsel Approval: Approved
Committee Recommendation: The Water Demand Committee reviewed this item at its April 29 and May 9, 2008 meetings, and recommended approval.
CEQA Compliance: Negative Declaration, CEQA Initial Study and Notice of Intent to Adopt a Negative Declaration filed with County Clerk on April 18, 2008. The comment period ended May 7, 2008. No comments were received.

SUMMARY: Proposed Ordinance No. 134 (Exhibit 12-A) amends the District Rules and Regulations to correct the definition of the Monterey Peninsula Water Resource System (MPWRS) to include the Northern Inland Subarea and the Laguna Seca Subarea of the Seaside Groundwater Basin. Amending the definition of the MPWRS is necessary to respond to present and threatened water emergencies that will occur when consumption forces production to exceed the legal limits set by the Seaside Basin adjudication decision. California American Water (CAW) has an adjudicated water right to 345 acre-feet (AF) from the Laguna Seca Subarea in Water Year 2008. This amount is expected to gradually reduce to zero AF. Historical water use in this area by CAW’s satellite systems, i.e., Ryan Ranch, Bishop and Hidden Hills, exceeds this year’s limit by over 100 AF per year. Use above the adjudicated water right must be offset by reductions in the main CAW system or, eventually, made up with replenishment water purchased with replenishment assessments. Replenishment assessments may be passed to all local CAW customers.

As a result of amending the definition of the MPWRS, all water distribution systems, private wells, or water users who derive their source of supply from the Laguna Seca Subarea would be subject to the District’s Expanded Water Conservation and Standby Rationing Plan (Regulation XV). This change impacts property within the unincorporated County area along Highway 68 to Los Laureles Grade Road and property in the City of Monterey located in Ryan Ranch. These areas are currently subject to Stage 1 Water Waste and Non-Essential Water Use restrictions. Adoption of the amended definition would require these water users to provide CAW with survey information (i.e., number of residents and/or type of business); large residential, irrigators of over three acres and dedicated landscape irrigation meters would be required to have a water audit performed and, based on the audit, have a water budget prepared and submitted to the District and CAW (the audit and budget would be provided at no charge by CAW and the District); use within the outdoor water budget would be mandatory for those users during Stages 2 and 3; and interim emergency rates would be imposed during Stage 3 if approved by the California Public Utilities Commission (CPUC). CAW water users within the Laguna Seca area would also become subject to Stages 4-7 water rationing in the event of a physical water shortage.

Amendments to Regulation XV include a number of edits to clarify the provisions of the ordinance to recognize the Seaside Adjudication Decision and to bring about consistency with CAW Rule 14.1, Water Conservation and Rationing Plan—Monterey District, which is also being amended by CAW and is under consideration by the CPUC. Other changes to the Expanded Water Conservation and Standby Rationing Plan proposed in draft Ordinance No. 134 include:

· Adding definitions for Carmel River System, Certified Landscape Irrigation Auditor, Dwelling Unit (needed for Multi-Family Residential rationing), Rationing Year, Satellite Systems, and Seaside Adjudication Decision.

· Amending definitions for Monterey Peninsula Water Resource System and Water Waste (to include water in excess of a ration).

· The General Provision declaring Unaccounted For Water Use in the CAW system above 7 percent as Water Waste has been deleted as there has been no enforcement. Discussion of this provision and direction to staff is requested prior to consideration of first reading.

· The enforcement section has been modified to refer to the Administrative Enforcement Process (Ordinance No. 133) currently being considered by the Board of Directors.

· Water Rationing Fines have been added to Rule 175, Water Rationing Enforcement.

· All Non-Residential Water Permits issued after August 1, 2008, that include irrigated areas beyond ten (10) feet of any building shall require the Water User to install a separate water meter to measure all exterior water uses.

· All New Structures receiving a Water Permit after August 1, 2008, shall have separate water meters for fire suppression systems.

Actions undertaken in each stage of the Expanded Water Conservation and Standby Rationing Plan are summarized below. In addition, changes/amendments for each stage are shown:

Stage 1 Water Conservation

• Survey of the number of residents or type/size of non-residential use. This information is used to determine base water rates, as well as, water rations.
• Landscape water audits/budgets required for specific water users
• Odd/even watering days

Changes/Amendments

· The procedure for Landscape Water Audits and Landscape Water Budgets required in Stage 1 has been amended to reflect the procedure used by MPWMD in its current contracts with the irrigation system auditors. These procedures are modeled after those used by the Irrigation Association.

· MPWRS definition revised to include Northern Inland and Laguna Seca Subareas of the Seaside Groundwater Basin.

· Requirement added for metering fire and non-residential irrigation separately.

Stage 2 Water Conservation

• Users with Landscape Budgets required to maintain use within budget

Changes/Amendments

• The triggers for Stages 2 and 3, Water Conservation have been modified to be more responsive to increased consumption later in the water year. These modified triggers have been coordinated with CAW to match the triggers in CAW’s Rule 14.1, Water Conservation Plan—Monterey District.

Stage 3 Water Conservation (15% Regulatory Reduction)

• CAW Emergency Rates kick in

Changes/Amendments

• Stage 2 water budget requirements are carried over (previously implied)

Stage 4 Water Rationing (15% System-Wide Reduction)

• Non-CAW systems in MPWRS brought into rationing program
• Preparation for rationing

Changes/Amendments

• CAW moves to Stage 3, if not already there
• Superior, unimpaired water rights exempted (Stages 4-7)
• Noticing requirements for CAW begin to increase

Stage 5 Water Rationing (20% Rationing Reduction)

• Water rations enforced
• Water banking allows water users to flex rations
• Moratorium on water permits for intensification of use

Changes/Amendments

• Rationing rates implemented upon CPUC approval (Stages 5-7). Rationing rates are currently under consideration By the CPUC (CAW Application 07-12-020).
• 4-month delay in moratorium
• MPWMD water rationing fine schedule for exceeding ration (Stages 5-7)
• Water banks reset on a “ration year” rather than on January 1.

Stage 6 Water Rationing (35% Rationing Reduction)

• Water rations enforced
• Moratorium on all water permits

Changes/Amendments

• No changes/amendments proposed

Stage 7 Water Rationing (50% Rationing Reduction)

• Water rations enforced
• Moratorium on all water permits
• Consideration of additional outdoor watering restrictions
• Possible modification to non-residential variances
• No portable or hydrant water meters allowed

Changes/Amendments

• No changes/amendments proposed

DISCUSSION: The impetus for this amendment to Regulation XV is the March 2006 Seaside Adjudication decision whereby CAW water use within its satellite systems within the District (i.e., Bishop, Hidden Hills, and Ryan Ranch) is restricted. Under the decision, CAW’s current production allocation for the Laguna Seca Subarea is 345 acre-feet per year (AFY). This production allocation will be reduced to zero AFY. Current production for the satellite systems within the District averages approximately 480 AF per year and exceeds the limit specified in the decision. Presently, the satellite systems must reduce demand by almost 30% to remain within the production limit. In Water Year (WY) 2009, the satellite systems will need to reduce demand by more than 40%. By including the Laguna Seca Subarea in the MPWRS, the area becomes subject to the District’s Expanded Water Conservation and Standby Rationing Plan; a plan designed to keep water user within the limits set by the SWRCB and now the Seaside Adjudication.

CAW and MPWMD have been working together to adopt regulations that mirror each other’s rules related to the Expanded Water Conservation and Standby Rationing Plan. CAW submitted amendments to Rule 14.1, Water Conservation and Rationing Plan—Monterey District, as part of Proceeding A.07-12-010 before the CPUC. These amendments were coordinated with the District and considered during the drafting of Ordinance No. 134. MPWMD and CAW are continuing to work together, along with the CPUC’s Division of Ratepayer Advocates (DRA), to reach agreement on the provisions of these rules. At this time, DRA, CAW and the District are mostly in agreement about changes. There are a few areas needing Board guidance. These are identified below:

Moratorium

The current language of Rule 165-F reads:

“On October 1 following implementation of Stage 5 Water Rationing, the District shall suspend the issuance of Water Permits associated with Intensification of Use. This provision shall not suspend the issuance of Water Permits that utilize public or private Water Use Credits or where issuance of a Permit is required by prior agreement of the District.”

The Water Demand Committee discussed timing of a moratorium at its May 9, 2008 meeting and recommended the moratorium occur upon declaration of Stage 5 to send a clear message to the community. A similar position is taken by the CPUC Division of Ratepayer Advocates (DRA), who would like to see a full moratorium, including a moratorium on the use of water credits, in Stage 4. The Technical Advisory Committee (TAC) recommended that a moratorium be implemented four months following declaration of Stage 5. Staff recommends the moratorium be implemented immediately upon declaration to avoid an increased “rush to the pump.” Direction is needed from the Board.

Similarly, the language in Rule 166-F, Stage 6 Moratorium, which places a moratorium on water permit utilizing water credits, delays implementation by four months. Direction is needed on this as well.

Water Rationing Enforcement

DRA expressed concerns about MPWMD fines for users that exceed their water rations in Stages 5-7. CAW has proposed a new rationing rate schedule that the CPUC is currently considering that would eliminate the upper blocks in the rate structure and dramatically increase the remaining top block. For example, current residential rates have five blocks. Under the proposed rationing rate structure, there would be three blocks, with the third block at 1,000 percent of the base rate. In addition, MPWMD has proposed rationing fines that would be calculated based on rationing stage, meter size and the number of times the ration is exceeded. The combination of CAW’s rationing rate and MPWMD’s water waste fines concerns the DRA. An example of the MPWMD fine can be found at Rule 175-A.

Outdoor Water Use Restrictions

Outdoor water use restrictions come into play in Stage 7, Rule 167-L. This rule reads:

“The Board shall consider adopting restrictions on Non-Residential outdoor water use that may include any or all of the following: Limit outdoor watering to one day per week, one day every other week, or prohibit outdoor irrigation with water from the affected water resource system(s); prohibit irrigation of non-turf areas with water from the affected water resource system(s); reduce Golf Course irrigation from the affected Water Distribution System(s) to a percentage of the amount required to water tees, greens and landing areas only. The use of Reclaimed Water, when available, shall not be restricted by this requirement.”

The PUC judges currently reviewing CAW’s conservation filing, the General Rate Case, and CAW’s Request for Expedited Review of its Application for Memorandum Account Authorization for Pre-Rationing Costs, indicated on May 9, 2008, that they do not agree with the strategy of delaying outdoor watering restrictions until Stage 6. This paragraph is not currently shown in Stage 5, the first stage of water rationing. There is also a “restriction on the use of water from the Monterey Peninsula Water Resource System for dust control purposes” shown at Stage 6 (Rule 166-P) that might appropriately be moved to Stage 5. Staff would like direction from the Board.

Unaccounted-for-Water Uses Standard

Presently, Rule 160-G requires that CAW maintain its Unaccounted-for-Water Uses in its main system to no more than seven percent (7%). Average losses of more than 7% during any twelve-month period is considered Water Waste and subject to Water Waste fees. In addition, under current Rule 163-A, Stage 3 Water Conservation, CAW is required to submit a plan to the General Manager to reduce Unaccounted-for Water Uses to 7% or less, based on the most recent twelve-month rolling average, and immediately act on the plan. Further, CAW is required to provide a progress report to the Board monthly until Stage 3 is sunset. Presently, the 7% Unaccounted-for-Water Uses standard does not apply to CAW’s satellite systems.

As drafted, Ordinance No. 134 would eliminate the section in Rule 160 that requires CAW to maintain its Unaccounted-for-Water Uses to no more than 7% and defines Unaccounted-for-Water Uses in excess of 7%, based on a twelve-month rolling average, as Water Waste. The proposed ordinance would keep the requirement that CAW must submit a plan to reduce its Unaccounted-for Water Uses to 7% or less, based on the most recent twelve-month rolling average, and immediately act on the plan. As drafted, the proposed ordinance would expand this reporting requirement to all of CAW’s systems that derive their source of supply from the MPWRS, including the Ryan Ranch, Hidden Hills, and Bishop systems. During times of water rationing, CAW would have a 7% ration for Unaccounted For Water Use.

During its review, the Water Demand Committee recommended that the Board discuss whether or not the existing 7% Unaccounted-for-Water Uses standard should be modified. Options discussed by the committee included:

(1) maintaining the 7% Unaccounted-for-Water Uses standard,

(2) changing the 7% Unaccounted-for-Water Uses standard to a 10% standard, which is considered an “industry standard”[1],

(3) changing the 7% Unaccounted-for-Water Uses standard to a 10% standard, and reducing this standard to a 7% standard over time, and

(4) eliminating the 7% Unaccounted-for-Water Uses standard.

Staff has contacted current CAW management regarding this issue and noted the previous CAW managers had agreed to provide documentation requesting and justifying a change from the 7% Unaccounted-for-Water Uses standard for CAW’s systems. Although two recent water audits have been performed on CAW’s systems, no documentation requesting or justifying a change in the 7% Unaccounted-for-Water Uses standard has been provided to the District to date.

DRA staff has expressed concern over the Water Waste fees that the District could assess CAW if the 7% Unaccounted-for-Water Uses standard is maintained and Unaccounted-for-Water Uses greater than7% are defined as Water Waste.

Water Demand Committee

The Water Demand Committee reviewed this ordinance on April 29 and May 9, 2008. The committee supports the changes proposed in the ordinance and recommends moratorium implementation upon declaration of Stage 5 and 6.

Technical Advisory Committee

The TAC reviewed the draft ordinance at its May 6, 2008 meeting. The TAC supported the ordinance and offered the following:

1. Sand City asked for clarification that water from its desalination plant would be exempt from moratorium. Rule 165-F addresses their concern.

2. Seaside requested consideration of modification to the landscape water meter requirements for areas of minimal landscaping. Text has been added to address non-residential landscaping.

3. The TAC supported maintaining the Unaccounted-for-Water Uses standard at 7%.

Public Information Meeting

A public information meeting for Laguna Seca area water users and CAW customers within the Ryan Ranch, Bishop and Hidden Hills systems took place on May 7, 2008 at York School. Approximately 40 people attended. Staff presented information about the proposed draft Ordinance No. 134 and answered questions for the audience. Directors Brower and Lehman attended.

California Environmental Quality Act (CEQA) Compliance

An Initial Study and Notice of Intent to Adopt a Negative Declaration for Ordinance No. 134 were filed with the County Recorder on April 18, 2008. The comment period ended on May 7, 2008. No comments were received. The Board will consider adopting the Negative Declaration upon adoption of Ordinance No. 134 following second reading.

BACKGROUND: Since 1999, MPWMD’s Regulation XV, Expanded Water Conservation and Standby Rationing Program, in combination with an extensive public awareness campaign and comprehensive water rate structure for conservation, emergency and rationing rates, has enabled compliance with State Water Resources Control Board (SWRCB) Order WR 95-10. The plan also provides the foundation for water rationing in the event of drought or other emergency reductions in water supply.

RECOMMENDATION: The Board should receive comments from the public, discuss the ordinance, provide direction to staff on moratorium timing, rationing fines, and outdoor water use restrictions and approve the first reading of draft Ordinance No. 134. The Board should also discuss the possibility and process for changing the 7% Unaccounted-for-Water Uses standard for CAW’s main and satellite systems.

IMPACT ON STAFF/RESOURCES: Amending the Expanded Water Conservation and Standby Rationing Plan is a key component of CAW’s Rule 14.1, Water Conservation and Rationing Plan—Monterey District, and CPUC consideration of the conservation proceeding (A.07-12-010). Staff has spent considerable time coordinating changes in Ordinance No. 134 to match CAW’s amended Rule 14.1 to provide a consistent and District-wide conservation plan. Approval of the proposed changes is integral in the approval process for the CAW’s conservation filing.

EXHIBIT

12-A Draft First Reading Version of Ordinance No. 134

U:\staff\word\boardpacket\2008\2008boardpackets\20080519\PublicHrgs\12\item12.doc

---

[1] Water Accountability, Appendix A, Janet A. Beecher and John E. Flowers, in Water Loss Control Manual, Julian Thornton, McGraw-Hill, 2002, pages 492 and 493.