ITEM:		ACTION ITEM
15.	CONSIDER FUNDING PREPARATION OF SUPPLEMENT TO FINAL CONSOLIDATED EIR AND ADDENDUM FOR THE PURE WATER MONTEREY GROUNDWATER REPLENISHMENT PROJECT
Meeting Date:			March 18, 2019	Budgeted:	No
From:			David J. Stoldt	Program/
			General Manager	Line Item No.:	35-03-786010
			David J. Stoldt	Cost Estimate:	$1,000,000
General Counsel Approval: N/A
Committee Recommendation: N/A
CEQA Compliance: This action does not constitute a project as defined by the California Environmental Quality Act Guidelines section 15378.

SUMMARY:  On August 28, 2017 the Administrative Law Judge in the California Public Utilities Commission (CPUC) application A.12-04-019 asked for testimony on the capability of expansion of Pure Water Monterey to meet Peninsula water demands. Specifically, plans for expansion of the Pure Water Monterey (PWM) project, if any, and “whether expansion of the PWM project could provide water to California American Water (Cal-Am) in excess of 3,500 acre-feet per year, in what amounts, and at what cost?”

The District and Monterey One Water (M1W) submitted its testimony on these issues on September 29^th. Hearings were held October 25^th through November 3^rd. In many instances, several intervenors expressed strong interest in an expansion of Pure Water Monterey – in some cases as an alternative project if the desalination facility is stalled, and in other cases as a potential low-cost interim measure.

Cal-Am’s application for a Certificate of Public Convenience and Necessity (CPCN) for the Monterey Peninsula Water Supply Project (MPWSP) resulted in CPUC Decision 18-09-017 on September 13, 2018. In granting the CPCN, the Commission, by Ordering Paragraph 37, at page 214 of D.18-09-017, directed Cal-Am to do the following:

“37. Within 180 days of the date of this decision Cal-Am shall file a Tier 2 advice letter providing specific additional information and its assessment as to whether it intends to file an application with the Commission to pursue a Water Purchase Agreement (WPA) for additional water supply to be provided by a PWM [Pure Water Monterey] expansion. Cal-Am shall serve the Tier 2 advice letter on the service list for this proceeding.”

D.18-09-017 Finding of Fact 20, at page 168, and its discussion at pages 39 and 42 to 43 states:

“20. The Commission would like to determine if, in conjunction with the MPWSP approved in this decision, PWM expansion could provide an affordable, specific, concrete, and reliable additional or supplemental source water supply for Cal-Am ratepayers in the Monterey district.”

In response, on March 1, 2019 Cal-Am filed an extension request that seeks a seven (7) month delay (from March 12, 2019 to October 31, 2019) in complying with Ordering Paragraph 37. Cal-Am offers two grounds in support of that request: (1) The MPWSP “is currently proceeding according to schedule, and as such there is no reason to believe that there will be a delay in the MPWSP desalination plant coming online before December 31, 2021,” and (2) “the information necessary to determine whether PWM expansion should be used to supply California American Water customers is not yet available.” Cal-Am concludes that, therefore, there is “insufficient information” for it to make an informed assessment. The CPUC denied the extension request on March11th, requiring Cal-Am to respond by March 19^th.

The potential for expansion of Pure Water Monterey will remain burdened by “insufficient information” until the full environmental (CEQA) and design work is completed. In order for expansion to be ready to go in the event the desalination plant becomes stalled, completion of the CEQA process would need to get started now, such that the future “go/no go” decision would only involve completion of design, permitting, amendment of the Water Purchase Agreement (WPA), and construction.

In order to gain greater certainty on just the CEQA process and to make representative strides toward a ready-to-go project, it is estimated that $1,000,000 will need to be expended to continue and substantially complete the environmental and permitting work. In addition, these funds would allow detailed design, of the AWPF and injection facilities to be further developed to inform the environmental and permitting work. Such amounts would be expended over the next year, positioning the project to complete bid documents within another 6 months, and to construct in an additional 12. Under Amendment 2 of the Cost Sharing Agreement with M1W, the District would fund up to $750,000 of such costs and M1W would provide the rest, as well as staff the effort.

The estimated work description and amounts are:

Supplemental EIR, EA, Permit $400,000

Source Water Designs $ 50,000

AWPF Design Continuation $250,000

Engineering Report Revisions (DDW) $150,000

Injection Wells $150,000

It is possible that an expansion of Pure Water Monterey will be deemed unnecessary or infeasible and the costs will be stranded. Therefore, the District board should consider reimbursing M1W for its fiscal share if the expansion does not move forward. This would ensure that wastewater revenues were not sunk on a water supply project in contravention of Proposition 218. Such a reimbursement could be made over an extended period such as five years.

RECOMMENDATION:  The General Manager recommends the Board approve the expenditure of up to $1,000,000 in support of qualifying an expansion of Pure Water Monterey for CEQA approval, in order to have a ready-to-go alternative in place if the desalination facility is stalled. Up to $750,000 will be contributed during project execution and the remainder only reimbursed to M1W over 5 years if expansion is abandoned.

EXHIBITS

None

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