4. Petition to Modify Sought, Opposed and Withdrawn

In its October 2011 Petition to Modify, Cal-Am stated that "[d]ue to certain developments" the parties to the Water Purchase Agreement, i.e., Cal-Am, MCWD, and MCWRA, entered into mediation with a Commission-sponsored mediator.⁶ In that filing, Cal-Am stated that it is "seeking confirmation that it may continue with the construction of the California-American Water facilities (minus the transfer pipeline) no matter what the status of the Regional Desalination Project, (footnote omitted)."⁷

Cal-Am stated that there could be "setbacks" associated with the Regional Desalination Project which could require modification or replacement with an alternative project.⁸ Cal-Am recognized that Commission approval would be required for any proposed modified or alternative project. In its Petition to Modify, Cal-Am stated that whether or not the Regional Desalination Project proceeds, the Cal-Am facilities approved in D.10-12-016 would be needed to more expeditiously move water between the northern and southern areas of
Cal-Am's distribution system, improve storage, and expand the aquifer storage and recovery (ASR) system. More specifically, Cal-Am contended that the Monterey Pipeline, the Seaside Pipeline, the Terminal Reservoir, the ASR Pipeline, the ASR Recirculation and Backflush Pipelines, the ASR Pump Station, and the Valley Green Pump Station would all be necessary to improve and enhance Cal-Am's system. Although not proposing a particular path forward, Cal-Am included a range of eleven possible alternatives to the Regional Desalination Project to demonstrate that the Cal-Am facilities are necessary, no matter what project goes forward. In addition, Cal-Am maintained that the stand-alone facilities should be approved to enhance fire safety and ensure full use of the ASR system water.

DRA⁹ and MCWD¹⁰ each objected to the Petition to Modify on various grounds and Cal-Am countered.¹¹ The dispute over the petition became moot on April 23, 2012, when Cal-Am withdrew the petition¹² in conjunction with the filing of A.12-04-019 that seeks approval of the Monterey Peninsula Water Supply Project.

⁶ Petition to Modify at 1.

⁷ Id. at 3.

⁸ Id. at 6.

⁹ DRA objected to the Petition to Modify because these facilities were approved in conjunction with the Regional Desalination Project and Cal-Am would not have the authority to construct the facilities if the Regional Desalination Project did not go forward. If a new project were proposed, DRA stated that any authorized alternate water supply could require changes to the Cal-Am facilities approved in D.10-12-016. DRA thought it reasonable to consider the uncertainty surrounding the Regional Desalination Project, because former MCWRA Board Member Steve Collins was under indictment by the Monterey County District Attorney and investigation by the Fair Political Practices Commission for alleged violations of the Fair Political Practices Act. DRA essentially maintained that the record of this proceeding only addressed the
Cal-Am facilities in conjunction with the Regional Desalination Project - not as
stand-alone facilities, to be pursued no matter what ultimate water supply project was approved by the Commission. DRA stated that there were material issues of disputed fact associated with Cal-Am's assertions, which have not been tested and are not supported. DRA acknowledges Cal-Am's concerns regarding timing of the approval of its facilities but contends that an adequate record is required to assess its assertions and that the facilities must be considered holistically, i.e., in light of the project ultimately proposed by Cal-Am. DRA proposes informal meetings, formal workshops, and a new phase to this proceeding (with a new Scoping Memo) to address Cal-Am's concerns. To do otherwise, DRA suggests, could result in harm to ratepayers since it is not clear how the Regional Desalination Project may ultimately be modified or replaced.

¹⁰ MCWD stated that the Petition to Modify was unnecessary and would add to the confusion and uncertainty surrounding the Regional Desalination Project. MCWD contended that to the extent that the petition sought a modification of the authority to construct the facilities approved in D.10-12-016 in order to support a proposed modification of or alternative to the Regional Desalination Project, such a proposal could not be considered in a Petition to Modify. Because Cal-Am included an attachment with eleven alternative projects that it was in the process of evaluating, MCWD contended that any such project must be the subject of an application to consider the proposed CPCN, cost, and environmental review. MCWD further contended that Cal-Am's Petition to Modify was premature because there are no facts before the Commission to justify the consideration of any potential new project. MCWD also raised concerns related to the Water Purchase Agreement and Cal-Am's obligation to uphold its contractual obligations, as MCWD saw them.

¹¹ Cal-Am disputed DRA's and MCWD's contentions that its proposed modifications had to be considered in light of any proposed change to the Regional Desalination Project. Instead, Cal-Am contended that its proposed modifications are very narrow and were required to allow Cal-Am to achieve the full promise of Monterey County's water supplies. At that point, Cal-Am was seeking only clarification that it could proceed with the facilities approved in D.10-12-016 to forestall "the mistaken conclusion that [Cal-Am] may only progress with the [Cal-Am] facilities if the Regional Desalination Project will be implemented as approved." Cal-Am Petition for Modification (October 14, 2011), at 6-7. Cal-Am argued that DRA's proposal to consider the Petition to Modify in a new phase of the proceeding with a new Scoping Memo Ruling was an attempt to expand the scope of the relief requested. Because Cal-Am meets with DRA (and the Division of Water and Audits) staff on a quarterly basis,
Cal-Am contended that there were reasonable procedures in place to allow for discussion of the size, scope, and cost of the Cal-Am facilities. Cal-Am contended that further delay in consideration of its Petition to Modify would lead to increased construction costs and additional, unnecessary uncertainty. Cal-Am included letters from various stakeholders urging that the Commission approve its Petition to Modify.

¹² Cal-Am Withdrawal of its Petition for Clarification and Modification of D.10-12-016.