ITEM:		ACTION ITEM
19.	PROVIDE GUIDANCE TO STAFF REGARDING DISTRICT POSITIONS FOR TESTIMONY DUE FEBRUARY 22, 2013 IN CPUC APPLICATION 12-04-019
Meeting Date:			January 30, 2013	Budgeted:	N/A
From:			David J. Stoldt	Program/
			General Manager	Line Item No.:
Prepared By:			David J. Stoldt	Cost Estimate:
General Counsel Approval: N/A
Committee Recommendation: N/A
CEQA Compliance: N/A

SUMMARY: In September 2012, the Board considered several items for inclusion in its October 1, 2012 public participation proposal. At this time, the District is asked to file its first testimony as an intervenor in the proceeding. This testimony can encompass issues raised in California American Water’s (Cal-Am) initial application and testimony from April 2012 and its supplemental testimony filed January 11, 2013, as well as any of the other filings made by Cal-Am and intervenors over the course of the past ten months. The Cal-Am application and testimony can be found at the following website: http://www.watersupplyproject.org/downloads. The board needs to consider several areas related to the proceeding and recommend guidance to staff for development of testimony due February 22, 2013.

RECOMMENDATION: The Board should discuss and recommend “high level” policy guidance on key subject areas identified below, to be incorporated into District testimony to be filed in February. The General Manager recommends the following.

General Statement of Support for the Application – The Board should determine if the District supports, does not support, or is neutral with respect to Cal-Am’s application. The General Manager recommends qualified or conditional support based on Cal-Am’s incorporation of the governance and financial proposals the District made in its October 1 Public Participation filing (discussed more fully below.)

Groundwater Replenishment (GWR) – The Board should consider a strong statement endorsing GWR. MPWMD’s testimony can refer to and attach SWRCB 84-7 as an exhibit, and the text can amplify that this mandate was referenced in the Cease and Desist Order (CDO) requiring dischargers in “water short areas who propose to discharge treated wastewater to the ocean to evaluate the potential for water reclamation.”  This will tie the CDO to SWRCB 84-7, and provide a logical basis for the CPUC to weigh in as to Cal-Am’s obligations in this arena. We can further cite the SWRCB proposed Recycled Water Policy, the draft of which was circulated in January 2013.

Governance – The mayors and the District continue to advance discussions with Cal-Am for formation of a Governance Committee and revisions have been made to the document approved by the District in September 2013. The Board should consider approval of the current draft of the governance proposal, attached as Exhibit 19-A.

Public Contribution – One of the financing proposals the District made in its October filing was the use of low-cost public debt to reduce the cost of the project to ratepayers. This has become a key proposal in the discussions between Cal-Am, the Mayors Authority and the District. The Board should consider reconfirming its commitment to a financial contribution to the benefit of ratepayers, as well as the other financial suggestions recommended at its September 2012 meeting and included in the District’s October 1 filing regarding State Revolving Fund Loans; Issuing tax-exempt debt on Cal-Am’s behalf (conduit); and providing a public “credit back-stop.” A description of a potential contribution of public funds is included as Exhibit 19-B.

Surcharge 2 – The Board may wish to state a position on the proposed collection of Surcharge 2, approximately $99 million of pay-as-you-go financing to be raised from Cal-Am rates during the construction period. This surcharge is designed to ease in or “step up” the revenue requirement for the project costs incrementally each year. Its use does reduce the overall cost to the community during the life of the project, but does increase the burden on ratepayers in the first few years. Opponents are also concerned it places the early, riskier expenditures on ratepayers. One option to mitigate this perceived risk is to allocate those funds specifically for the Cal-Am investments in transmission, storage, and Aquifer Storage and Recovery (ASR) – projects that must be undertaken irrespective of the desalination facility undertaken.

Alternative Desalination Project – The Board should discuss how the District should introduce this topic to its testimony. This aspect of the District’s testimony will also address the Pacific Grove filing on behalf of the Peoples Moss Landing project.

Pacific Grove Small Projects – The Board should consider testimony in general support of Pacific Grove’s proposal(s) for small water projects that might allow it to shift irrigation of its municipal golf course from potable water to recycled water, thereby increasing supplies available for development.

Project Sizing – This topic was discussed under Agenda Item 18.

EXHIBITS

19-A District and Authority’s Proposal on Governance, as of 1-24-13

19-B Example of Potential Contribution of Public Funds

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