WATER SUPPLY PLANNING COMMITTEE
ITEM:		DISCUSSION ITEM
4.	ESTABLISH / INCREASE USER FEE TO FUND WATER SUPPLY PLANNING AND IMPLEMENTATION
Meeting Date:			October 11, 2011	Budgeted:	N/A
From:			David J. Stoldt,	Program/	N/A
			General Manager	Line Item No.:
Prepared By:			David J. Stoldt	Cost Estimate:	N/A
General Counsel Review: N/A
Committee Recommendation: N/A
CEQA Compliance: N/A

SUMMARY: The District has identified five water supply projects which it would like to implement. In order to perform feasibility analysis, and eventual design and construction, a secure funding source must be identified. The User Fee has traditionally been the primary source of revenue for projects, but the collection of the fee through the California American Water Company (Cal-Am) water bills has come under attack at the California Public Utilities Commission (CPUC), and its continued viability is questionable. In the recommendation below, the Committee is asked to approve investigating alternative collection mechanisms.

DISCUSSION: CPUC Decision D.11-03-035 rejected the all-party Settlement Agreement that included in it continued collection of a User Fee for the Aquifer Storage & Recovery (ASR) and mitigation expenses. Working with its Outside Counsel, the District has taken three approaches to attempt to restore the collection of the user fee or otherwise collect a similar amount through a surcharge. The approaches include (a) Application for Rehearing was filed in April 2011 which might result in reinstating the fee, (b) An Amended Application of Cal-Am to the CPUC was filed in August which might result in collecting the desired amounts through a surcharge, and (c) a petition to Modify was filed in October, which might result in a reinstatement of the all-party Settlement Agreement. All three approaches only address the amounts budgeted for mitigation and ASR in the previously existing User Fee and do not provide a significant legal basis to guarantee that the User Fee would not become subject to CPUC regulation again in the future.

What the District needs is to have greater control over its User Fee in order to ensure a secure funding source for its activities, including future water supply projects. Should the District desire to utilize borrowing for capital projects in the future, a secure funding source is a prerequisite. Therefore it is desirable to examine ways to better secure our control over collection of the user fee going forward.

Possible alternative approaches include: (a) obtaining clear legal authority to collect the fee as a pass-through on the Cal-Am bills, either through a validation proceeding or a challenge of the CPUC decision in court, or a legislative action, (b) examine other third party collection mechanisms, such as contracting with Monterey County to collect it through the semi-annual property tax billing process, or (c) billing directly.

RECOMMENDATION: Staff recommends that Water Supply Planning Committee seek Board approval to direct the General Manager and Administrative Services Division Manager to examine alternate approaches to secure the collection of the User Fee going forward.

IMPACT ON STAFF/RESOURCES: Examining these alternative approaches will require legal services and staff time. Further, any change in the collection method would likely require extensive calculation of benefit and allocation of the costs to property owners, which would be a data driven process and might require a consultant to perform the equivalent of a rate study.

EXHIBITS

None

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