TAC MPRWA Agenda Packet 03-18-13

7/29/2019 TAC MPRWA Agenda Packet 03-18-13

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AgendaMonterey Peninsula Regional Water Authority (MPRWA)

Technical Advisory Committee (TAC)Regular meeting

2:00 PM, Monday, March 18, 2013Council ChamberFew Memorial Hall

Monterey, California

CALL TO ORDER

ROLL CALL

PLEDGE OF ALLEGIANCE

REPORTS FROM TAC MEMBERS

PUBLIC COMMENTSPUBLIC COMMENTS allows you, the public, to speak for a maximum of three minutes on anysubject which is within the jurisdiction of the MPRWA TAC and which is not on the agenda. Anyperson or group desiring to bring an item to the attention of the Committee may do so byaddressing the Committee during Public Comments or by addressing a letter of explanation to:MPRWA TAC, Attn: Monterey City Clerk, 580 Pacific St, Monterey, CA 93940. The appropriatestaff person will contact the sender concerning the details.

APPROVAL OF MINUTES

1. February 25, 2013

2. March 4, 2013

AGENDA ITEMS

3. Receive Report on First Governance Committee Meeting (Burnett)

4. Receive Report from Cal-Am Water Regarding Progress in Meeting Authority AdoptedConditions for Monterey Peninsula Water Supply Project (Cal Am Rep Bowie)

5. Receive Report From Monterey Regional Water Pollution Control Agency Regarding The

Ground Water Replenishment Project (Israel, Stoldt)

6. Discuss and Review Benefits and Disadvantages of Private Investor-Owned vs. PublicOwnership of Desalination Facilities (Riley)

7. Approval of Meeting Dates Through June 30, 2013 (Milton)

ADJOURNMENT


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Created date 03/15/2013 1:57 PM Monday, March 18, 2013

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The Monterey Peninsula Regional Water Authority is committed to include the disabled in all ofits services, programs and activities. For disabled access, dial 711 to use the California RelayService (CRS) to speak to staff at the Monterey City Clerks Office, the Principal Office of theAuthority. CRS offers free text-to-speech, speech-to-speech, and Spanish-language services24 hours a day, 7 days a week. If you require a hearing amplification device to attend ameeting, dial 711 to use CRS to talk to staff at the Monterey City Clerks Office at(831) 646-3935 to coordinate use of a device or for information on an agenda.

Agenda related writings or documents provided to the MPRWA are available for publicinspection during the meeting or may be requested from the Monterey City Clerks Office at 580Pacific St, Room 6, Monterey, CA 93940. This agenda is posted in compliance with CaliforniaGovernment Code Section 54954.2(a) or Section 54956.


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M I N U T E SMONTEREY PENINSULA WATER AUTHORITY (MPRWA)

TECHNICAL ADVISORY COMMITTEE (TAC)Regular meeting

2:00 PM, Monday, February 25, 2013580 PACIFIC STREET

CITY COUNCIL CHAMBERSMONTEREY, CALIFORNIA

Members Present: Huss, Israel, Riedl, Riley, Seigfried, Stoldt, Burnett,

Members Absent: Narigi

Staff Present: Executive Director, Legal Counsel, Clerk

CALL TO ORDER

ROLL CALL



Chair Burnett reported on a meeting he attended with the California Coastal Commission andCal Am to discuss permitting issues for the Monterey Peninsula Water Supply Project testwells. They also discussed the process of for obtaining parallel permits and requested that theAuthority host monthly meetings to stay informed about the project application status. Heindicated that several action items resulted from the meeting for Cal Am to follow up with. ChairBurnett also took the opportunity to recognize two staff members for their efforts toward

submitting testimony to the California Public Utilities Commission prior to the deadline onFebruary 22, 2013.

PUBLIC COMMENTS

Chair Burnett opened the item to public comments for items not on the agenda and had norequests to speak.

APPROVAL OF MINUTES

1. February 4, 2013

On a motion by Member Stoldt seconded by Member Riley and carried by the following vote,the Monterey Peninsula Regional Water Authority TAC approved the minutes of February 4,2013 as amended.

AYES: 7 DIRECTORS:Huss, Israel, Riedl, Riley, Seigfried, Stoldt, Burnett,

NOES: 0 DIRECTORS: None


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MPRWA TAC Minutes Monday, February 25, 2013

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ABSENT: 1 DIRECTORS: NarigiABSTAIN: 0 DIRECTORS: None

AGENDA ITEMS

2. Receive Report and Discuss Outside Agency Actions Regarding the Monterey Peninsula WaterSupply Project

a. Monterey County Board of Supervisors - (Burnett)

Chair Burnett reported that the Monterey County Board of Supervisors supported and adoptedthe Authoritys position statement as well as discussed the issue of the statement of principles.The Governance committee document was unanimously approved and the Board appointed tothe governance committee the primary representative Supervisor Potter and an alternaterepresentative the Supervisor from the Salinas region. Chair Burnett acknowledged it as animportant step to have a united voice with all six member city mayors and all five supervisors to

have the same stance. The Board endorsed the statement of principles in general, but did notformally adopt the position statement as their own due to pending litigation and settlementagreement with Cal Am. Chair Burnett opened this item to public comment, and having norequests to speak, turned to the next report from Member Stoldt.

b. Monterey Peninsula Water Management District - (Stoldt)

Member Stoldt reported on the Monterey Peninsula Water Management District Board meetingon January 30, 2013 and approved similar actions including stronger support for Ground WaterReplenishment, and pending the identification of non substantive changes, approved theGovernance document. MPWMD re-endorsed the concept of a public contribution as well asseveral other financial suggestions. The Board voted 6-0, under further consideration voted 4 to

2, to oppose surcharge two, and continued to endorse further evaluation of backstops. Theissue of project sizing, a general statement of support, was deferred to a special meeting onFebruary 12, 2013 where the Board agreed with the demand forecast and project sizing, withand without GWR.

Chair Burnett opened the item for comments from the public. Sue McCloud spoke to a letterpublished in the Monterey Herald opinion page from Member Stoldt, thanking him for making acomplicated project more understandable to the public. She then suggested publication of thesame Article in the Salinas Californian. Nelson Vega questioned why Member Stoldt did notinclude the costs per acre foot because he thinks the public is only concerned about the costand if the project can be built He then requested that the Authority help Cal Am attain the sourcewater need for the MPWSP project. With no further requests to speak, Chair Burnett closed

public comment.

c. Monterey Regional Water Pollution Control Agency - (Israel)

Member Israel deferred to report on this item until Agenda Item 4.

d. Monterey Regional Waste Management District Presentation of Availability of Landfill Gas forPower Generation (W. Merry)


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William Merry from the Monterey Regional Waste Management District made a presentation onefforts to make the landfill gas (LFG) to energy project viable enough to sell power to adesalination facility. The District has been producing energy through the landfill gas to energyprogram for 30 years. Mr. Merry discussed that the LFG program is an economic benefit for asmall to medium landfill however there have been many lessons learned over the course of the

project. He observed that when the developer began the project in 1983, energy prices declinedimmediately even though PG&E had forecast a rise in prices, and the developer sold the LFGproject to the District. In the beginning years of operating the project, revenues fell short ofoperating expenses. Lesson learned: be critical of forecasts.

Mr. Merry then discussed different types of power purchase agreements and optimal markets tosell their converted power and indicated that PG&E has a strangle hold on small biomassgenerators adding new generation to the grid. That would be a disincentive to go forward withenergy production, but an agreement with the MPWSP project would be an over the fence ordirect access agreement and would eliminate most or all PGE fees. He also indicated that theDistrict currently has the opportunity to sell gas as boiler fuel and in the future is consideringincreasing generation of energy to 7 megawatts. Mr. Merry also explained that the District is

exploring the option to turn the landfill gas into compressed natural gas to fuel vehicles andcurrently has an informal agreement with the MRWPCA to explore options for converting biogasto CNG to run vehicles on the alternative fuel. Mr. Merry further explained that efforts todiversify opportunities to utilize landfill gas is a redundancy that small producers can use to stayprofitable. He encouraged the Authority to urge Cal Am to consider the District energy as a wayto close the loop by buying local energy.

Items/challenges that would need to be addressed if the MPWSP would consider Purchasingpower from the District:

The district is actively engaged in making decisions for the next 10 to 20 years. Theyneed to use the LFG productively or flare it off.

Addressing the imbalance: if the demand is higher than the supply? On a growth scale.They are producing 24/7. Tolerance for supply changes

Identification of the redundancy requirements Identification of the demand including: continuous, average demand; maximum; and

seasonal Identification of the tolerance for electric power supply to be down (in the event of a

PG&E mandated shut down, or Natural Disaster) What is facilitys power redundancy requirements/plan What is facilitys anticipated down time? What would MPWSP be willing to pay for power on a kilowatt-hour basis? District will

need to be paid at market rates When would MPWSP wish to negotiate, sign a power sales agreement?

Mr. Merry answered questions from the TAC. Member Siegfried asked if the District had theability or would consider selling the LFG in raw form to the desal facility instead of processing itat your facility, so that the facility would be able to use that heat generated during combustionto make the process more efficient. Mr. Merry responded by discussion of the supply sourceand lifespan of the landfill. Regulations from the state are requiring greater diversion from thelandfill. On the waste water side, there is a push to develop power generation through solids.


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Over the last 5 to 7 years, the generation of in-District (ie, from the Peninsula) waste to thelandfill has decreased by 35% which is for a variety of reasons, including a fundamental shift byconsumers to buy smaller and construction and demolition waste has been repressed from theeconomy. Contracts for bringing waste from other areas is making up for lost tonnage andrevenues and even with those contracts the District has an anticipated lifespan of 150 moreyears. He indicated that the District property sits adjacent to the PG&E natural gas pipeline

serving the Peninsula and within a year or two may have the ability to feed natural gas into thepipeline for sale.

Member Stoldt asked about proven reserves for landfill gas. Mr. Merry indicated that anaverage forecast for LFG was thought to be 20 years, 30 to 40 years in a drier environment.The District, however, is still generating gas from the part of the landfill that was filled 50 yearsago. In future years, they are looking at minimizing what is going into a landfill, but collection oflandfill gas will continue for the next 20 to 40 years.

Mr. Merry responded to the question about current power sales costs and indicated that powerthe District sells as renewable in the bay area is making 8.5 cents per kilowatt-hour, whereasPG&E is paying 7 to 8 cents. Two years ago renewable power could be sold for 10 cents/kw-hr,

or more, but depends on markets as solar and Wind overbuilt. Over the fence agreements areadvantageous because there are fewer fees and processing charges.

Chair Burnett opened for public comment. Libby Downey questioned the market rate of powerand how Marina Coast was able to get a better rate. She expressed frustration at the statementmade by Cal Am Representative Rich Svinland that the MPWSP would not purchase powerfrom any company outside of PG&E. Nelson Vega questioned the reliability of the power in theevent of a disaster and also questioned the financial ability to weather price fluctuations. Withno further requests to speak, Chair Burnett closed public comment.

Mr. Merry responded to Mrs. Downey, indicating that the District did hold preliminarydiscussions with Marina Coast about price, but discussions did not proceed to the point of

agreeing on a price before other more pressing matters demanded attention at the MCWD. Healso clarified to her that the District will always look to make decisions that are in the bestinterest of the residents, businesses and member agencies of the District. Speaking to Mr.Vega's comment about reliability, if they were to form an agreement there would beredundancies built into the system such as a contract with PG&E, the ability to tap into thenatural gas pipeline, or other options.

Mr. Merry urged the TAC to consider if purchasing power at the lowest possible cost was aprime objective, even if it was not renewable power; and further, if it was important to buyrenewable power, was it a primary objective to purchase the power from the District, asopposed to buying renewable power from a broker.

Chair Burnett clarified that one of the Authority adopted positions includes having directdecision making ability with regard to the procurement of all non PG&E power. The pendingGovernance committee could work together with the District on this issue.

3. Report from Cal-Am Regarding Test Well Design, Development and Permitting

Cal Am Representative Richard Svindland updated the TAC regarding the test well design,development and permit progress indicating that there is a meeting scheduled with the


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company Semex this week to finalize their permission to proceed by accepting the operationwill not affect their ability to harvest sand. This permission is needed to be able to submit forpermits before the Coastal Commission as early as August, and as late as October, in time toconstruct prior to the snowy plover nesting season.

Mr. Svindland reported that design is under way, using the first presented design and modifying

for the current site. The process of procuring the test well has begun with intention to drillNovember 1, 2013. This schedule does include the process of obtaining the permits from Cityof Marina. He then answered questions from the TAC.Chair Burnett opened the item for public comment, having no requests to speak, closed publiccomment. He requested at the next TAC meeting that Cal Am provide an update on all eightconditions the Authority has approved.

4. Receive and Discuss Update on Ground Water Recharge, Aquifer Storage and Recovery, andPacific Grove Small Water Projects

Member Israel reported that MRWPCA approved a budget for Groundwater Replenishment at aSpecial MRWPCA Board meeting on February 11. He also noted that the Pollution ControlAgency has been analyzing the downward wastewater flows trend, and projections for flows indifferent scenarios, including combining other water sources. The PCA still anticipates theproject being completed on schedule by December 2016. Member Israel expressed gratitudefor the article in the Newspaper from the Water Management District as well as from theAuthority.

Member Israel then expressed concern that over the last year there has not been a significantamount of money or effort on public outreach as budget approval was delayed. With this typeof project there are many issues and misconceptions, many being factual information,competing with opinion and interpretation. The MRWPCA is intending to ramp up efforts

including scheduling trips to Orange County to work with staff that has a great outreachprogram which they can learn from. Member Israel answered questions from the TAC.

Chair Burnett offered that as the public outreach effort begins, please look to Mayors andAuthority as a partner expressing the idea that the message and the messenger are important.The Mayors have been unanimous in support of GWR and they should be used as a resource.

Member Riley expressed concern about the Authoritys future decision points undermining thecommitments of the PCA in the future. The TAC discussed the ability of the project to proceed,the commitments that have been made and the potential hurdles that could obstruct theprocess.

Chair Burnett opened the item to public comment. Nelson Vega spoke to the cost of water, andthe unresolved issue of source water. He requested that the TAC encourage the Authority torequest an extension to the Cease and Desist Order deadline and look at the most costeffective way to get water. Jim Cullem spoke to and provided an article from the MITTechnology Review Magazine indicating concerning points include the availability of funding forpublic outreach and encouraged the Authority to be more proactive and focus on the publicoutreach and the potential for GWR, with the yuck factor. Suggest we preempt with goodexamples of effective GWR campaigns so people understand the water cycle before it is placed


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in the Seaside Aquifer. With no further requests to speak, public comment was closed.

Burnett responded that the Authority is working to re-engage the State Water Board on havinga periodic meeting regarding the CDO but clarified that they Authority would not be requestingan extension at this point, but engaging now with the Board will allow them to see the progressthe region is making which will only help if they do ask for an extension in the future. The TAC

discussed optional outreach methods and tours that would help engage and educate the publicand local agencies on this issue, but refocused to say the goal is to focus efforts and keepthings moving at this time.

Member Stoldt then reported on the Monterey Peninsula Water Management Districts ASRproject indicating that six of the eight wells have been constructed. The Third and fourth wellare owned and operated at the Seaside Middle school and will be completed during summervacation. Wells five and six are part of the application for MPWSP. Permits will be restructuredto accept water from anywhere instead of a specific source. There is an eight well total capacityat this time, and could potentially increase to 10 in the future. Additionally the WMD isexpanding a back flush pit for the third and forth site. He reported that funding is strong, andprogress is strong. Chair Burnett opened the ASR discussion for public comment, and having

no requests to speak, closed public comment.

Israel made a clarifying statement that bringing in more stormwater to the sewer system wouldbe beneficial for projects, such as the Groundwater Replenishment and other recycled waterprojects. He also commented on the role of storm water indicating the PCA is exploring theuse of the winter water flows and that Pacific Grove has been using grant funding to divertstorm water from the bay, and wants to develop projects to help encourage the community todivert storm water flow from the bay back to the PCA.

5. Receive Testimony Submitted to California Public Utilities Commission February 22, 2013Deadline for Application (A- 12-04-019) Based on the MPRWA Approved Position Statement(Information Only)

Burnett spoke to the item and indicated it was for information only then opened the item to thepublic for comment. Having none, closed public comment.

Executive Director Reichmuth clarified the agenda items for the next meeting. Having no furtherbusiness to come before the TAC, Chair Burnett adjourned the meeting.

ADJOURNMENT

Respectfully Submitted, Approved,

Lesley Milton, Committee Clerk President MPRWA


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M I N U T E SMONTEREY PENINSULA WATER AUTHORITY (MPRWA)

TECHNICAL ADVISORY COMMITTEE (TAC)Regular Meeting

2:00 PM, Monday, March 4, 2013COUNCIL CHAMBER

FEW MEMORIAL HALLMONTEREY, CALIFORNIA

Members Present: Israel, Narigi, Riedl, Riley, Siegfried, Stoldt, Burnett

Members Absent: Huss

Staff Present: Executive Director, Legal Counsel, Clerk

CALL TO ORDER

ROLL CALL



Chair Burnett invited reports from TAC members and had no requests to speak.

PUBLIC COMMENTS

Chair Burnett invited public comments for items not on the agenda and had no requests tospeak.

APPROVAL OF MINUTES

1. February 25, 2013Action: Continued

TAC Members Israel and Stoldt requested updates to the document for clarification and TACagreed to continue this item until the next meeting to allow for incorporation.

AGENDA ITEMS

2. Receive Report Regarding Pacific Grove Small Water Projects and Make Recommendations AsNecessary (Frutchey)Action: Received Report and Discussed

Pacific Grove City Manager Tom Frutchey report on the current status of the Pacific Grove

Small Water Projects indicating a full project description was submitted to the California Public

Utilities Commission as well as intervener testimony regarding Cal Ams application (A-12-01-

019). He then indicated that the project is 20% through the design engineering phase and has


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applied for and received 3 grants to progress the project to 40%. Grants received total $2.6

million with matching funds of $975,000.

Mr. Frutchey then reported that financing options are open. They are working with Cal Am as a

partner on these projects, have had preliminary discussions with the Monterey Peninsula Water

Management District, as well as exploring SRF funds and additional grants. With regard tostorage all projects seem to have challenges and they are still exploring options. Water rights

also are being explored and discussions are occurring with the Pollution Control Agency as well

as meetings with Land Watch and The Farm Bureau. Staff will continue working with other

agencies and stakeholders to make these projects a reality. Mr. Frutchey then answered

questions from the TAC.

Member Riley requested clarification on the partnership with the City of Monterey. Mr. Frutchey

explained the Neighborhood Improvement Program is looking to address the storm water flow

that is feeding into the Areas of Biological Significance (ASBS) which flows through the David

Avenue reservoir area. Chair Burnett requested clarification if this project is identified as a

project alternative by the CPUC, what the direction to Cal am would be. Mr. Frutchey first

clarified this would be a NON-potable water purchase agreement and indicated that this would

replace current local potable water demands.

Chair Burnett questioned the status of the CEQA process. Mr. Frutchey responded that it is not

resolved at this time and that the CPUC is the potential lead agency. Chair Burnett then

questioned the impact of flows with regard to the Ground Water Replenishment project (GWR)

to which Mr. Frutchey responded all sewage flows will have to go to the MRWPCA however to

what extent that flow is expected to be placed in the aquifer and how much less water will go to

the PCA is dependent on a series of factors which he can provide at a later date.

Chair Burnett opened the item to public comment and having to requests to speak, brought the

item back to the TAC. He then reminded the TAC that the Authority has endorsed the Local

Water Projects in principle, but have not yet gotten into the level of detail.

Member Narigi questioned the price of water produced by these projects. Mr. Frutchey said that

two of the projects appear to be less costly than the cost of potable water, because they treat

storm water and dry water flows, but the cost avoidance is the overall advantage and will bring

down the costs. The cost avoidance is what makes the projects financially attractive.

Mr. Frutchey closed by expressing appreciation to Cal Am for all their assistance and informed

the TAC that he considers it a positive partnership. The TAC did not take any action at this time.

3. Receive Report Regarding Monterey Regional Water Pollution Control Agency Feb 27, 2013Meeting Regarding The Ground Water Replenishment Project (Israel)Action: Received Report and Discussed

Member Israel reported on the CEQA planning workshop hosted by the MRWPCA with a

purpose for preplanning to understand the issues to integrate within, in addition to talking about


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the series of feasibility options. Needed further input to understand what was necessary to

address. The conclusion of the meeting was that if new flows could be identified it would resolve

many future challenges of the parties and bring in enough water for the GWR that works around

the water rights issues. The next step is to pass on a summary to the consultants, and GWR

project team. The first phase has an anticipated completion by June 2013 and CEQA done by

second quarter of 2014. CEQA work has been awarded to the local firm Denise Duffy andAssociates. Also discussed was to develop Memorandum of Understandings to show and

document progress in advance of formal agreements and to discuss eventual water rights.

Member Israel then answered questions of the TAC.

Member Stoldt agreed that it was productive meeting but acknowledged that a few issue still

need to be addressed. Member Burnett questioned a comment made by a rep at the meeting to

the effect that the City of Salinas might want to be compensated in addition to the reduced

liability. Burnett questioned what other sources of waste water can they be looking at. Member

Israel responded by speaking to the increasing role of storm water and how it is considered a

liability. The PCA has capacity due to conservation efforts and had in the past rejected storm

water but acknowledged that it might be advantageous to consider it as an option. Storage is

the key, and certainly the GWR can use it in the winter time. No other use for it unless you can

find an alternative storage capability.

Executive Director Reichmuth questioned if the MRWPCA has considered splitting GWR into

two different flow options. Member Israel indicated it will be addressed in the feasibility study

and noted that some of the different sources may be problematic and not cost effective.

Member Riedl questioned if the Salinas River water is a potential source. Member Israel

affirmed but indicated there are water rights and permitting issues associated and it would be

difficult due to implement due to the short time frame.

Member Siegfried questioned the phasing of development and indicated that the Department of

Public Health requires experience with GWR before a District can initiate flow pipe to pipe. He

then questioned how much experience the MRWPCA has, then questioned if the issue has

been addressed where specific elements are picked up while the water is in the aquifer.

Member Israel indicated the MRWCPA has addressed the safety and the technological issues

but their major concern is the ability to move along as quickly as the public is comfortable with.

The technology is proven and there is 30 years of demonstrated ability in the Orange County

area.

Chair Burnett opened the item for public comment and had no requests to speak.


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a. Discuss Criteria Governance Committee Shall Use in Making Ground Water ReplenishmentRecommendation as Specified in Category A.1 of the Governance Committee Agreement

Chair Burnett introduced the item indicating that this will be just an initial discussion and will be

brought back before the TAC as it progresses. He requested that the TAC identify the criteria

which the Governance Committee should adopt for making GWR decisions and how to work

toward those criteria. He identified the following items which need to be addressed or resolved:

cost, timing, completion of process, public outreach (perception) and water rights. The final

decision will not be made for a number of years; however a preliminary decision will be needed

within two years to have the project completed on schedule.

Executive Director Reichmuth encouraged making public outreach a much larger focus. In order

to advance the issue of reuse of treated waste water, substantial outreach should be completed

by all involved agencies, prior to the project coming online. To date agencies have only focused

on the desalination component and not the process for final water. It is time to shift the focus.

He recommended that the MRWPCA make a presentation to the Authority Directors at the

March 14

th

, 2013 meeting.

Member Narigi encouraged there be more communication about the quality of the finished

product as it will be the highest concern from the public. Member Riedl encouraged stable

pricing over the long term, and assurance that the project should be robust so it is not affected

by drought or water source fluctuation.

Member Siegfried spoke to the public outreach comments and indicated from experience it

takes at least 10 years to conduct proper outreach that will change behavior. However, there

are factors playing in our favor: desperation, as well as other successful examples. He then

suggested separation of the outreach of desalination from the GWR processes. He then

questioned why the GWR project will determine the desalination facility sizing.

Chair Burnett opened the item to the public for comments. Ron Cohen expressed concern over

GWR that we are pushing the edge of technology but the problem is that we are desperate for

water and any missteps are going to cost all of us dearly, with no reserve to make mistakes.

Cautioned the Authority to recognize not only the yuck factor, but also if mistake is made, such

as pathogen eradication is not complete, we could find ourselves subject to an outcry with using

the treated water. Cautioned if this is an essential part of the strategy for replenishment. With

no further requests to speak, Chair Burnett closed public comment.

Member Israel responded that there is an tremendous track record as there never has been an

association with anyone getting sick or having a problem by using GWR methods. The scienceis extremely conservative, as compared to other sources of water. Member Stoldt reminded theTAC that the Authority has already endorsed to GWR project and the TAC should try to remainsupportive of their policy decision. With no more discussion on the item at this time, ChairBurnett continued to Item 4.


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4. Receive Report from Cal-Am Water Regarding Progress in Meeting Authority AdoptedConditions for Monterey Peninsula Water Supply Project

Cal Am Representative Catherine Bowie presented the update on the eight Authority adoptedconditions of support for the Monterey Peninsula Water Supply Project. She indicated thatcondition _ has been fully met with the adoption of the Governance Committee document. The

other conditions were spoken to in order of adoption:

Contribution of Public Funds. To date Cal Am has received a proposal from MontereyPeninsula Water Management District to outline a structured proposal.Everyone agrees they are good concepts but issue have been identified. Allthree parties have been meeting to work through the issues.

Governance Committee: Rob McLean was authorized to execute the Governanceagreement and Chair Burnett clarified if the agreement has been finalized andhas been adopted by the Authority

Electricity Rates: Cal Am has been successful in revising the original estimate from 12.9cents to 9 cents per hour and PG&E will continue to work to further reduce. RichSvinland offered to complete a formal study to analyze this and could work with

the TAC for that analysis.Limiting the Use of Surcharge Two: Cal Am is open to continue discussions. A model has

been developed which outlines the impacts of delaying the use of surcharge twoand it was significant.

Test Wells: Addressing Tim Durbins testimony. The PUC EIR consultant for GEO sciencehas resealed a memo that refutes that of Mr. Durbins testimony. It has beensent to the PUC. Second, the meeting with Semex last week granted thepermission necessary to complete the permit for the City of Marina. The permitsremaining are from the Coastal Commission and the State lands Commission.All three should be filed in the next three weeks. The Coastal Commissionhearing should be in August or October. The project will also file an applicationwith army corps of engineers.

Collaborating with Local Public Agencies; Cal am and the Authority have beenparticipating in meeting with Coastal Commission and are willing to engage withother necessary agencies. Clarification of NEPA requirement: Will be answeredby the EIR Team. She mentioned the determination of requiring a NEPA permitwill not be a decision made by Cal Am but by other permitting agencies.

Exploring Other Intake Methods: CPUC required a quarterly report be made available tothe public, which needs to include updates to the contingency plant. The first willbe due July 31, 2013 and will be required though 2017. Also, Mr. Svinlandssupplemental testimony includes detailed description of the contingency plans,and that document is available on the project website www.mpwsp.org

SRF Funding: The State Water Resources Control Board cannot put into writing Cal Amsability to access to SRF funding, until the EIR is complete. There is a letter

between agencies that could apply, but a formal letter will have to wait.Addressing Sea Level Rise: Spoke to Mr. Svinlands last presentation which explains that

this has been addressed and a detailed description can be found in thesupplemental testimony.

Ms. Bowie then answered questions from the TAC. Chair Burnet clarified that competing for aNEPA permit would make the project eligible for federal funds, which makes it important to pushfor an answer. He then requested clarification regarding the condition that Cal Am pursue acontingent intake strategy, in parallel to the current strategy and questioned why Cal Am is not


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proceeding with this. He also asked if Cal Am is looking for more direction from the CPUCbefore actually expending to develop the contingency further. Cal Am representative JohnKilpatrick responded that Cal Am has fully listed the contingency plans, but will pursue the slantwells consistent with the ocean plan requirements. He indicated Cal Am wants to follow that onethrough until that becomes unfeasible and does not want to develop other contingencies inparallel. Chair Burnett countered that the Authority has a different position, and questioned how

to rectify the two positions. He questioned if it was an issue with funding and expressed that thetwo groups need to work through this issue. Mr. Kilpatrick responded that their current fundingonly allows for pursuing the test well at this time.

Chair Burnett opened the item for public comment. Tom Rowley expressed concern that itseems like we are continually raising issue or sub issues that dont really have a deadline. Heencouraged the Authority to assign a deadline or a timeline with every project or issue for it tobe resolved or completed by. He also recommended that an alternate source of feed watershould be addressed. With no further requests to speak, Chair Burnett brought the discussionback to the Board and requested that Executive Director Reichmuth review all eight conditionsadopted by the Authority regarding the MPSWP to see which ones have been competed ormark a status of.

Member Stoldt questioned the response statement regarding the memo submitted by TimDurbin. Since it was rejected by the Administrative Law Judge and resubmitted last week, hequestioned if Cal Am will address it directly in the testimony so it becomes part of the publicrecord. Ms. Bowie indicated that she is not sure, but the testimony rebuttal is due Friday.

5. Discuss and Review Benefits and Disadvantages of Private Investor-Owned vs. PublicOwnership of Desalination Facilities (Riley)

In the interest of time, the TAC unanimously agreed to continue this item until the next meeting.

ADJOURNMENT

The meeting was adjourned at 3:51 p.m.

Respectfully Submitted, Approved,

Lesley Milton, Committee Clerk Jason Burnett, MPRWA TAC Chair


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Monterey Peninsula Regional Water Authority

Agenda Report

Date: March 18, 2013

Item No: 3.

06/12

FROM: Clerk to the Authority

SUBJECT: Receive Report on First Governance Committee Meeting and Provide Direction

RECCOMENDATION:

There is no written material for this item. An oral report will take place at the meeting


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Agenda Report


Item No: 4.

08/12

FROM: Prepared By: Clerk to the Authority

SUBJECT: Receive Report from Cal-Am Water Regarding Progress in Meeting Authority

Adopted Conditions for Monterey Peninsula Water Supply Project

DISCUSSION:

There is no written report for this item. An oral report will be given by a representative from CalAm at the meeting.


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19/28


Agenda Report


Item No: 5.

08/12


SUBJECT: Receive Report Regarding Monterey Regional Water Pollution Control

Association Feb 27, 2013 Meeting Regarding the Ground Water Replenishment

Project (Israel)

DISCUSSION:

There is no written report for this item. An oral presentation from TAC Member Israel will take

place at the meeting.


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21/28


Agenda Report


Item No: 6.

08/12


SUBJECT: Discuss and Review Benefits and Disadvantages of Private Investor-Owned vs.

Public Ownership of Desalination Facilities (Riley)

DISCUSSION:

There is no written report for this item. An oral presentation given by TAC Member Riley willtake place at the meeting.

ATTACHMENTS:

1. Public Ownership Of Desal Facilities By George Riley

2. Water and Public Ownership


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To: TAC of MPRWA March 12, 2013 revisedFrom: George Riley

Subj: Public Ownership of Desal Facilities

Cal Am proposes that it fully own all infrastructure. MPRWA proposes variousfinancing options to Cal Am's plans in order to reduce costs to ratepayers. Twoprivate entrepreneurs have proposed desals with public ownership, in generaltying to the county ordinance that requires public ownership via a public sponsoror partner. Lately the two private sponsors seem to be pursuing other options,including going forward as private developers to sell water to Cal Am forpurveying. Also MPWMD is pursuing a public ownership back-up in case CalAm falters or fails.

It is my contention that public ownership of desal facilities will lower costs,

simplify financing, elevate public interest over corporate profit, establishstraightforward governance, and commit to public trust oversight.

One way to discuss public ownership is through the implications of the variousfinancing schemes under consideration. The desal facility and infrastructure aremy focus. Not ASR, GWR, nor the Cal Am only Peninsula pipeline.

State Revolving Fund loans are limited. They are typically made for publicprojects, and generally in amounts much smaller than Cal Am's proposal. Loans

for water reprocessing facilities are more typical. GWR is a better candidate,not desal, and possibly in larger amounts. However, a publicly owned desal

is a better applicant than a corporate utility. 1. What are the current loancapacities of entities making revolving fund loans? 2. What parts of Cal Am'sproposal fall within the scope of such revolving fund loans? 3. Would therebe competition between MRWPCA and Cal Am? 4. What assurances must apublic partner make to qualify for a partnership application? 5. What riskevaluations will the SRF process require?

Public bond financing by MPWMD or a wider partnership has beensuggested to substitute for Cal Am equity financing. Various arrangements havebeen described. However the simplest and easiest path is public financing for aproject owned by the agency seeking the financing. 1. Is MPWMD to functionas broker? 2. If MPWMD were to actually assume or guarantee a loan, whatliabilities would it incur? 3. Would it conceivably guarantee a loan? 4. CanMPRWA be a partner? Does MPRWA have any ability to pledge long termcreditworthiness? 5. What risk assessments will an underwriter require? 6.


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What justifies assumptions of 4% financing when numerous potential risks havebeen identified? 7. How do the problems of inadequate information relate to this(i.e., lack of test well data until 2015-2016)? 8. Will interest rates be higherbecause of the complications in structure and legal relationships? 9. What isthe status of the facility asset at the end of debt financing? 10. Will the residual

asset become fully owned by Cal Am? 11. How would this be valued by Cal Am,and how would it show on financial statements? 12. Would liabilities andcommitments be more direct and manageable if the bond financing were basedon public ownership by MPWMD? Would it be less costly? 13. Is an equivalentshare of equity a possibility?Public ownership will simplify all public financing opportunities.

Surcharge 2 is Cal Am's suggestion. Both SRF and public bond financing willundergo risk evaluation, but not the surcharge. The $99 million surcharge ismost exposed to risk, yet has none of the institutional risk evaluations expected

for SRF and public bond financing. Furthermore there are no interest rateassumptions about this financing; therefore the real value of this early money isundervalued. 1. Are early risks not getting adequate attention when theassumed discount rate of 4% in MPWMD financing models generally reflects alow risk project? 2. What would be the likely level of current interest rates forhigh risk projects, and should it be estimated for calculating the value of thesurcharge? For example, what would be the interest rate for the first $100million invested in the highest risk period? 3. Would the first $100 million bysurcharge ease the acquisition of later funding? 4. Is avoidance of rate shock

adequate justification? 5. What level of oversight is expected to judge Cal Amprudence, and by what agency? 6. What assurances do ratepayers have thatthe surcharge is fair? 7. What do ratepayers receive in return for fronting theearly high risk capital? Ownership? Of what? How? 8. Will the surcharge helpovercome Cal Am's deficiency in its bond rating? 9. What is Cal Am's bondrating?

Financing is not the only area of interest. Not presented here are issues ofoverall lowering of costs, elevation of the public interest over corporate profit,establishing straightforward governance, and committing to public trust and

oversight.

I think it would it be cheaper, easier, quicker if the desal facilities were publiclyfinanced and owned by an appropriate local agency?


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WATER AND PUBLIC OWNERSHIP

March 10, 2013

BACKGROUND

Water is a natural resource vital for all life and survival. Local supplies from Carmel River and SeasideBasin have been over-drafted by Cal Am.Fundamental differences exist between private corporate for-profit ownership (Cal Am) and publicownership by a local agency. Many are cited below.

CAL AM CORPORATE

MONOPOLY

PUBLIC OWNERSHIP

AGENCY/PARTNERSHIP

BASIC DIFFERENCES

Fundamental corporate requirement togenerate profit and grow investment equity.

Fundamental requirement to serve the publicinterest and honor a public trust.

Profit and equity growth can conflict withpublic trust and public interest

Public agency accountability does not includeany profit or equity considerations.

About 20% of Californians get water fromcorporate or private providers. 15%nationwide

About 80% of Californians get water frompublic agencies. 85% nationally.

Investor Owned Utilities (i.e., Cal Am) areregulated by CA Public Utilities Commission(CPUC)

Public agency utilities are regulated locally,under state law.

CPUC procedures in San Francisco controlmost aspects of privately owned utilities.

CPUC has no jurisdiction over public agencyowned systems.

Distribution of product water to customers isa natural monopoly. Production of productwater for distribution is not a naturalmonopoly.

Supply water from public agency productioncan be sold to a monopoly distributionpurveyor.

Cal Am has no local meetings open to thepublic, and no requirement to do so. Onlythe CPUC holds local meetings, and thenonly to review a specific Cal Am project.

Public agencies are subject to state lawregarding public notice, public hearings, openmeetings, public access, and public officialaccountability to conflict of interest and

campaign contribution laws.

COSTS AND SAVINGS

Return to Cal Am is 8% +/- (based on anaverage of return on equity of 10% andinterest on debt of 6%.

Public agencies make no profit. Debt cost isabout 4%, substantially less than corporatedebt.


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Corporate bonds are taxable Public bonds are tax free.

A $400 million capital project financed over30 years will have profit and interest costs ofanother $600 million

A $400 million capital project with publicbond financing will add about $400 million, asavings of about $200 million over 30 years.

Corporate utilities must pay income andproperty taxes

Public agencies pay no income taxes. Theypay no property taxes, but may make 'in lieu'payments to other public agencies.

Corporate utilities are not eligible for federaland state grants.

Public agencies are eligible, and can lowercosts with grants.

Corporate utilities are eligible for limitedpublic low interest loans.

Low interest loans were initially intended forpublic agencies, and are more likely to beavailable, and in larger amounts.

OFF-SITE VS LOCAL

Cal Am headquarters are in San Diego. It isa is wholly owned subsidiary of AmericanWater Works, with its headquarters in NewJersey.

The full range of decision-makers would beknown, and they would be local.

American Water Works is a powerful marketforce in the water industry. No. 1 in theUSA. Guided by corporate priorities.

Local control by people who live here willmore likely consider our needs; current andfuture, economic and environmental, growthand sustainability, cost and convenience, andour grandchildren.

Administrative costs for off-site activities

such as policy and financial management,computer and call center services, areexported out of the Monterey Peninsulaeconomy.

Public ownership would reduce the amount

of expenses that are exported. The moniesneeded for local services would churn in thelocal economy.

Cal Am lists no local phone numbers. CallCenter is out of state. Service reps are notfamiliar with local area. .

Ratepayers could report leaks and complainif necessary to a local office, and to someonewho knows the area.

All customer payments, including 8% profit+/-, and 1%-2% administrative costs, areexported out of the local economy.

Customer payments would go directly andcompletely to the public entity, and throughlocal banks.

CA review and approval proceedings takeplace at CPUC in San Francisco.

With a local public water agency, all projectproceedings at the CA Public UtilitiesCommission (CPUC) would be eliminated.Only rate-setting for Cal Am purchased waterand distribution would go to CPUC.


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Agenda Report


Item No: 7.

08/12


SUBJECT: Approval of Meeting Dates Through June 30, 2013

DISCUSSION:

The Technical Advisory Committee has been meeting the first and third Monday of every monthat 2:00 p.m.

The following dates are recommended for future meetings through June 30 th, 2013.

April, 1, 2013April 15, 2013

May 6, 2013May 20, 2013

June 3, 2013June 17, 2013

RECOMMENDATION:

It is recommended that the TAC approve the above meeting dates through June 30, 2013


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Documents

TAC MPRWA Agenda Packet 03-18-13