EXHIBIT 3-A

WATER DEMAND COMMITTEE

ITEM:		ACTION ITEMS
3.	PROVIDE POLICY GUIDANCE TO STAFF ON CAL-AM CONNECTIONS SERVING USERS LOCATED BEYOND THE CAL-AM SERVICE AREA
Meeting Date:			August 10, 2004	Budgeted:	N/A
From:			David A. Berger,	Program/	N/A
			General Manager	Line Item No.:
Prepared By:			Stephanie Pintar	Cost Estimate:	N/A
General Counsel Approval: N/A
Committee Recommendation: N/A
CEQA Compliance: N/A

SUMMARY: Staff is seeking guidance from the Water Demand Committee on policy to address enforcement of the District’s regulations on remote Cal-Am connections (i.e. a Cal-Am connection that serves property outside of the water distribution system service area). District Rule 23-A-5 states that the District will not issue permits when any portion of the expansion or extension lies outside of the affected distribution system service area. However, an unknown number of these connections predate the District or have been made without the District’s knowledge.

Late last year, staff was notified by a member of the Hitchcock Canyon Water Association that the Association had approved a new connection to its water system. The Hitchcock Canyon Water Association is located at the end of Hitchcock Canyon in Carmel Valley, outside of the Cal-Am service area. Cal-Am supplies water to the system through a meter at its boundary, and the water is pumped to holding tanks that serve 14 properties (15 as of September 14, 2002). Historically, the District has issued permits and debited the County’s water allocation when a permit application is received for a use within this system without the knowledge that the properties being served are outside the Cal-Am service area. Although the inquiry made last year did not involve construction of a new home without a permit, a mobile home trailer was reported to have connected to the system.

Staff has consulted with District Counsel regarding enforcement of the District’s permit requirements on these Cal-Am sub-systems. District Counsel recommended that the Board should implement a comprehensive response plan. The first step in the process is discussion by the Water Demand Committee.

DISCUSSION: In the past year, staff has received two inquiries regarding water use on remote meters. One inquiry involved a new connection to the master meter that supplies water to the Hitchcock Canyon Water Association. The other involved a private property on Carmel Valley Road where a homeowner’s water service was disconnected from a water meter serving a neighbors property. In both of these instances, the properties receiving water are located beyond the service area boundary. Staff believes that there are also several connections near Point Lobos that serve property situated beyond the border of the service area.

Sleepy Hollow Subdivision

In addition to the examples discussed above, another District-sanctioned remote connection is located at the 23-lot Sleepy Hollow Subdivision. The Monterey County Department of Environmental Health determined that the water quality of the Sleepy Hollow wells did not meet drinking water health standards and condemned the potable water supply at Sleepy Hollow. Customers were forced to use bottled water. In late 1983, Sleepy Hollow Mutual Water Company requested annexation to the Cal-Am service area and service by Cal-Am.

Cal-Am opposed creation of a dual system (potable and subpotable water distribution lines). Before agreeing to annex the Sleepy Hollow subdivision into its service area, Cal-Am requested it seal the contaminated wells, and if the District persisted with a dual system concept, Cal-Am would not agree to the annexation. If ordered by the District, Cal-Am would set a master meter between the boundary of Cal-Am and Sleepy Hollow to provide potable water and backflow prevention. On February 13, 1984, the District ordered Cal-Am to seek PUC approval for the emergency master meter. In making this determination, the Board concluded that domestic potable water should be supplied by Cal-Am and irrigation and fire protection should be supplied from the Sleepy Hollow Mutual wells. Sleepy Hollow has maintained its nonpotable water distribution system and the District requires that the subpotable system be used for outdoor uses.

Numbers of Remote Connections on the Cal-Am System

Cal-Am was unable to provide information about the number of remote connections that it has, based on a telephone call to Lesley Silva of Cal-Am during July 2004. District staff has traditionally relied on Cal-Am to ensure that a property is located within their service area boundary before they provide water service. However, in a recent example of the potential for error, Monterey County approved subdivision of a property in Carmel Valley Ranch that is only partially located in the Cal-Am service area. Cal-Am had provided a “Can and Will Serve” letter to the applicant for the existing parcel of land, but did not indicate that a portion of the property was outside the Cal-Am service area. Approximately half of the proposed new lots are located beyond the service area. The County conditioned approval of the subdivision on annexation of the land after the District informed the County of the circumstances. It is advisable that no subdivisions be authorized until the District has completed its review and approval of an annexation.

Bypassing the Permit Process

Finally, the Hitchcock Canyon inquiry highlighted the fact that new users may be able to bypass the permit process when connecting to a remote system, or that the property owners may misunderstand the requirements for connection to a remote connection served by Cal-Am.

The Hitchcock Canyon Water Association added a vacant parcel to its list of properties in September 2002, and in February 2004, the District received word that a connection had been made to the Cal-Am system for a trailer on the recently-added vacant parcel. The Hitchcock Canyon Water Association Terms and Agreement that were rerecorded on September 3, 1997 provides “each property owner shall have access to one “T” (or hook-up) connection per parcel owned regardless of acreage.” At this time, the connection by the trailer has not been investigated or permitted pending direction from the Board. As a building permit is not required for a mobile home trailer, the District’s permit process can be circumvented, particularly when there is an existing water connection to the property.

Defeating the Goals of the Expanded Water Conservation and Standby Rationing Plan

An issue related to remote connections, such as the Sleepy Hollow subdivision, is the fact that water is not being individually metered by Cal-Am, thereby defeating the purpose of the District’s Expanded Water Conservation and Standby Rationing Plan. In preparing this report, staff learned that Cal-Am may be calculating the base water rate for each customer in Sleepy Hollow using the maximum exterior water allowance due to the size of the properties. This is alarming in that Sleepy Hollow water users have a dual water system and are required to use subpotable water from the Sleepy Hollow Mutual Subpotable system for outdoor uses. No outdoor water should be calculated into the rates for Sleepy Hollow.

Cal-Am’s tiered rate structure is designed to reduce water use by the highest water users. If the customers are not subject to the increasing block rates and “penalty” rates for high water use, the system will fail. Remote connections exacerbate water waste and non-essential water use by eliminating individual accountability. In addition, as illustrated by the possible Sleepy Hollow situation, errors may be made when establishing the appropriate base rate because the true nature of use on a meter is not known.

RECOMMENDATION: The Water Demand Committee should discuss the following questions and provide direction to staff:

1. Should Cal-Am be required to identify all remote connections and report the location of remote connections to the District?

2. Should Cal-Am require each connection to a remote meter to individually meter use and to report individual use to Cal-Am?

3. Should the District record documents on the titles of properties to notify future property owners of potential restrictions when the property is located in an area that is supplied by a remote water meter?

4. What action should the District take against connections to remote meters that occur without benefit of a water permit?

5. Should Cal-Am be required to apply to the District to annex properties currently served by remote connections into its service area?

6. How should the District address enforcement of its Expanded Water Conservation and Standby Rationing Plan on remote meters?

7. When a new subdivision located beyond the Cal-Am service area is proposed that relies on water from Cal-Am, should the District policy require approval of the annexation into the water distribution system prior to consideration by the local land use agency?

U:\staff\word\committees\waterdemand\2005\06142005\03\item3_exh3a.doc