ITEM:		DISCUSSION ITEM
13.	SETTLEMENT AGREEMENT – CALIFORNIA AMERICAN WATER APPLICATION TO THE CALIFORNIA PUBLIC UTILITIES COMMISSION NO. 12-04-019
Meeting Date:			August 19, 2013	Budgeted:	N/A
From:			David J. Stoldt	Program/	N/A
			General Manager	Line Item No.: N/A
Prepared By:			David J. Stoldt	Cost Estimate:	N/A
General Counsel Approval: N/A
Committee Recommendation: N/A
CEQA Compliance: N/A

SUMMARY: The District has been participating with the various parties to A.12-04-019 at the Public Utilities Commission – the Cal-Am application – relating to settlement and agreement for the proposed Monterey Peninsula Water Supply Project. The MPWMD Board of Directors provided direction in closed session whether to approve and sign the settlement agreement(s). The District and other settling parties signed the agreements July 31, 2013.

Signed Settlement Agreements for the Monterey Peninsula Water Supply Project are to be returned to the California Public Utilities Commission’s Administrative Law Judge by 5:00 p.m. on July 31, 2013.

There are three agreements for discussion. Separate agreements were necessitated by the desire of certain intervenors to participate in some, but not all settlement issues. The agreements are:

· Settlement Agreement on plant size and level of operation

· Settlement Agreement on pre-construction activities related to certain pipeline facilities

· The General Settlement Agreement which covers the topics of the groundwater replenishment project, execution of hydrogeologic studies, the desalination plant, CAW-only facilities, operations & maintenance costs, environmental factors, contingencies, securitization, surcharge 2, SRF financing, ratemaking, project cash flow, and governance.

The Agreements are included in the Exhibits.

At its January 30, 2013 and February 12, 2013 meetings the District Board indicated that it would consider support for the Cal-Am application if certain conditions were met. Those conditions included the following and are annotated to show the section in the settlement agreements where the condition is covered:

Groundwater Replenishment (GWR) – The Board proposed a strong statement endorsing GWR. This is addressed in the General Settlement Agreement (Exhibit 13-C), Section 4.

Governance – The Mayors and the District advanced discussions with Cal-Am for formation of a Governance Committee. This is addressed in the General Settlement Agreement (Exhibit 13-C), Section 16.

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 became a key proposal in the discussions between Cal-Am, the Mayors’ Authority and the District. This is addressed in the General Settlement Agreement (Exhibit 13-C), Section 11. The District Board also encouraged the use of State Revolving Fund monies. This is addressed in the General Settlement Agreement (Exhibit 13-C), Section 13.

Surcharge 2 – The Board stated a position on the proposed collection of Surcharge 2 of pay-as-you-go financing to be raised from Cal-Am rates during the construction period. The Board was concerned it placed the early, riskier expenditures on ratepayers. To mitigate this perceived risk the Board suggested allocating 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. This is addressed in the General Settlement Agreement (Exhibit 13-C), Section 12. The first $35 million of Surcharge 2 will be applied to the Cal-Am-Only facilities which are needed irrespective of the source of supply. The remaining Surcharge 2 would be spent after permits for construction have been received.

Pacific Grove Local Project – The Board stated its 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. This is addressed in the Sizing Settlement (Exhibit 13-A), Section 4.

Project Sizing – The Board endorsed the revised plant sizing which included legal lots of record, economic “bounce back”, Pebble Beach build-out, replenishment of the Seaside Groundwater Basin, and the 5-year average consumption. This is addressed in the Sizing Settlement (Exhibit 13-A), Section 3.

The District Board also endorsed the 8 conditions included in the Mayors’ Authority position paper. Exhibit 13-D is a letter from Cal-Am to the Authority addressing each of the conditions.

EXHIBITS

13-A Settlement Agreement on Plant Size and Level of Operation

13-B Settlement Agreement on Pre-Construction Activities Related to Certain Pipeline

Facilities

13-C The General Settlement Agreement

13-D Letter from Robert MacLean of Cal-Am to Authority dated July 31, 2013

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