CalAm's Monterey Peninsula Water Supplies

CalAm has two large storage facilities on the Carmel River, San Clemente Dam (1921) and Los Padres Dam (1947). Since it arrived on the scene in 1966, CalAm has been aware of and publicized to its customers that its water supplies were vulnerable in the event of a prolonged drought, but the economics prevented any serious effort on its part to construct new, major storage facilities during those early years. A serious flood in 1969 precipitated a U.S. Army Corps of Engineers flood and water supply study begun in 1970. In 1975, the Commission, responding to issues of supply and distribution system inadequacy, ordered a moratorium on new connections until CalAm improved its capacity to transport water from the Carmel River to the urbanized areas of the Monterey Peninsula. The drought of 1976-1977 brought water rationing and heightened public awareness of the Peninsula's vulnerability. By 1976, the Corps of Engineers had developed estimates for a proposed New San Clemente Dam, but local opposition to costs higher than those initially expected left it unfulfilled. As the drought worsened and water rationing was tightened in 1977, the state enacted the Monterey Peninsula Water Management District Law, followed in 1978 by local voters' approval creating MPWMD.

MPWMD's mission is to "manage, augment, and protect water resources for the benefit of the community and the environment" of the greater Monterey Peninsula area. Its charges include managing and regulating water use, reuse, reclamation and conservation, and financing water public works projects. Almost all of CalAm's Monterey Division water system lies within MPWMD's 170 square mile jurisdiction. In 1984, MPWMD began developing an annual forward looking water supply strategy which included projected demands and proposed targets for CalAm's various production sources. In 1989, MPWMD stepped this up to a quarterly exercise and, as part of a larger, ongoing effort to restore the Carmel River, reduced CalAm's annual surface water diversions to no more than 29% of total system production, the remainder to be derived from subsurface water in the Carmel Valley and Seaside. Today the quarterly strategy and water budget values are developed jointly by CalAm, MPWMD and the California Department of Fish and Game in conformance with an annual memorandum of agreement intended to balance fish and wildlife resource requirements and CalAm customers' needs, considering projected storage and inflow conditions for the year.

It eventually became apparent that despite the best efforts of CalAm, MPWMD, the local community and others, during periods of drought there is simply not sufficient water to satisfy fully both environmental requirements and unrestrained municipal water demands.

And then in 1995 the SWRCB added a major new legal constraint to the Monterey Peninsula's physical water supply limitations. SWRCB, following hearings begun in 1992, acted on complaints alleging that CalAm's Carmel River water use was without valid rights and adversely impacted environmental and public trust values. In Order WR 95-10, it directed CalAm to cut its Carmel River diversions to 14,106 acre-feet annually and implement conservation measures to bring that figure down by 20% more (to 11,285 acre-feet) beginning with the 1997 water year.

To further complicate matters, two Carmel River animal species have recently been listed as threatened, bringing the possibility of further regulatory limits imposed under the federal Endangered Species Act.

In November, 1995, voters turned down MPWMD's proposal to improve supplies by financing approximately $116.5 million to construct a 24,000 acre-foot New Los Padres Dam on the Carmel River. MPWMD has since "directed its staff to re-examine non-dam alternatives, while at the same time taking all necessary action to preserve and maintain the permits and approvals already obtained" for the dam project.

CalAm characterizes the SWRCB in Order WR 95-10 as having, "in essence, directed CalAm to solve the water supply problem." According to CalAm:

To correct the unauthorized diversion, the Order directed CalAm to either "(1) obtain appropriative permits for water being unlawfully diverted from the Carmel River, (2) obtain water from other sources of supply... and/or (3) contract with another agency having appropriative rights to divert and use water from the Carmel River" [i.e., the MPWMD per SWRCB Decision 1632].

In response, CalAm has proposed constructing a new facility, the Carmel River Dam and Reservoir Project, "physically identical the New Los Padres Project previously proposed by MPWMD, except no water is dedicated for growth." CalAm currently has pending before the Commission Application (A.) 97-03-052 for the certificate of public convenience and necessity it would need to proceed.

In a further effort to reduce demand, CalAm proposed in its test year 1997 GRC, A.96-03-008, a temporary, three-year experimental rate design that would greatly increase conservation incentives by lowering, and for some low-income customers eliminating, residential service charges, and establishing tiered usage rates with a high consumption surcharge. MPWMD supported the new rate structure and the Commission authorized it in D.96-12-005. At the same time, the Commission ordered CalAm to perform a study of the experimental rate design's effectiveness and submit it in its 1999 GRC filing, or not later than December 31, 1999. CalAm has included that study in this application.

CalAm was able to meet the SWRCB-mandated cutback during the first water year ending September 30, 1996 following Order WR 95-10. It was unable to meet the cutback in the second year, however, and the SWRCB levied a $168,000 fine on CalAm for the violation. When early figures made it appear that consumption would be too high in the third year, CalAm filed four applications seeking Commission authority to take steps aimed at helping it better ensure compliance with Order WR 95-10 over the short term until a long term solution to the water supply problem could be achieved. The Commission dismissed all four applications without prejudice and directed CalAm to pursue relief in this GRC application we address today.² Specifically, we directed CalAm to: (1) establish a memorandum account for the water years ending September 30, 1998 and 1999 to record any fines resulting from failure to meet the Order WR 95-10 cutback requirement, saying we would consider in this GRC whether to extend the memorandum account to fines in future years; (2) seek GRC authorization for a mandatory conservation plan, an associated balancing account, and a specific rationing plan for water supply emergencies; (3) seek GRC authorization to implement a connection moratorium during water supply emergencies; and (4) include in this GRC a comprehensive short term contingency plan for managing water shortages, to include mandatory conservation, rationing and moratorium components, and a long term contingency plan for addressing water shortages should its proposed Carmel River Dam not go forward. With respect to points (2) and (3), we expressed our strong preference that CalAm work cooperatively to propose measures consistent with complementary measures to be developed by MPWMD. MPWMD has since enacted Ordinance No. 92 effective March 1, 1999, establishing an expanded water conservation and standby rationing plan, and CalAm has included these required items in this GRC as part of a series of "Special Requests" listed below.