3. Overview of D.10-12-016

In D.10-12-016, we approved a Settlement Agreement that set forth a public-private partnership among Cal-Am, MCWD, and MCWRA known as the Regional Desalination Project. As part of the Settlement Agreement, we granted a CPCN to Cal-Am for its participation in the Project, and approved without modification the Water Purchase Agreement associated with the Regional Desalination Project. As we stated in D.10-12-016:

As proposed by the Settling Parties, Monterey County Water Resources Agency would own, construct, operate, and maintain the source water wells and raw water conveyance facilities to the desalination plant. Marina Coast Water District would own, construct, operate, and maintain the desalination plant and the product water conveyance facilities to the delivery point, which then becomes Cal-Am's intake point. Cal-Am would own, construct, operate, and maintain the pipeline, conveyance, and pumping facilities necessary to deliver the water to its customers. The Monterey Regional Water Pollution Control Authority would own, operate, and maintain the outfall for return of the brine to the sea.

In approving the modified Settlement Agreement and Water Purchase Agreement, we approve Cal-Am's participation in the Settlement Agreement and issue a CPCN to Cal-Am for the following components of the Regional Project: the transfer pipeline, the Seaside pipeline, the Monterey pipeline, including the Valley Greens pump station, the Terminal Reservoirs, and the Aquifer Storage and Recovery facilities.

With the decision we adopt today, this Commission takes the highly unusual step of finding, after thorough review, that conditioned upon full compliance with the terms and conditions of the agreements and with the current law and practice which constrains the local agencies, there are sufficient procedural, contractual, and other legal safeguards contained in the parties' agreement, when taken together with the legal mandates imposed on Cal-Am's partner agencies under current law, to be reasonably certain to produce the lowest cost, viable, and timely solution to Cal-Am's immediate source water needs so as to provide adequate water for
Cal-Am's ratepayers.

In so doing we are guided by the good faith engineering estimates provided by the parties, the committed willingness of the parties to work together according to the terms of the agreements to achieve the plan as outlined, and the results of extensive public vetting of the severity of the water problem and the widespread public support of the proposed solution. We recognize that even under the best case scenario, the revenue requirement for Cal-Am's Monterey District customers would increase by approximately 63%, as compared to the projected trend of the current revenue requirement (footnote omitted). Cost allocation and rate design related to the Coastal Water Project will be addressed in Phase 3 of this proceeding and will be coordinated with Cal-Am's current General Rate Case proceeding, Application (A.) 10-07-007.

We do not make this decision lightly but only after extensive review of the information supplied by the parties over many months, extensive discussion, and a thorough analysis of the agreements, the circumstances surrounding those agreements, vigorous public vetting, a review of the applicable law, and an assessment of the political and economic situation surrounding this application, we recognize the pressing need for the Regional Project, as well as the historic alignment of the goals of virtually all parties and the residents and businesses on the Monterey Peninsula to ensure that a secure supply of water is available before severe water restrictions imposed by the State Water Resource Control Board's Cease and Desist Order are fully implemented in 2016.⁵

In sum, we approved Cal-Am's participation in the Regional Desalination Project in recognition that time was of the essence to ensure that the ratepayers on the Monterey Peninsula would be supplied with adequate sources of potable water well before the onset of the provisions of the Cease and Desist Order. We recognized that permitting, testing, and project development and construction would be time-consuming and difficult. In December 2010, the Regional Desalination Project appeared to be a feasible project that could be constructed in time to meet the requirements of the Cease and Desist Order.

⁵ D.10-12-016 at 5-7.