2. Overview of Today's Decision
In Decision (D.) 09-12-017, issued on December 17, 2009, we certified the Final Environmental Impact Report (FEIR) as the environmental impact report for the Coastal Water Project.4 The FEIR analyzed three water supply projects at an equal level of detail: the project proposed by California-American Water Company (Cal-Am or CAW) to be sited at the Moss Landing Power Plant; the North Marina Alternative, and the Regional Project. In compliance with the California Environmental Quality Act (CEQA), we certified the FEIR for use by the Commission and responsible agencies in considering approvals for the Coastal Water Project, or for portions thereof.
On April 7, 2010, Cal-Am, Marina Coast Water District (MCWD), Monterey County Water Resources Agency (MCWRA), Monterey Regional Water Pollution Control Agency (MRWPCA), Surfrider Foundation, Public Trust Alliance, and Citizens for Public Water (Settling Parties) filed a Motion to Approve Settlement Agreement.5 The Motion attached the proposed Settlement Agreement and two Implementing Agreements, namely a Water Purchase Agreement (WPA) and an Outfall Agreement. The proposed Settlement Agreement and Implementing Agreements provide for the development, construction and operation of the Regional Project. As proposed by the Settling Parties, the costs of the Regional Project and the Water Purchase Agreement would be recovered from Cal-Am's Monterey District ratepayers who will benefit directly from its construction and operation. We distinguish here between Phase 1 of the Regional Project and the Regional Project facilities we approve today.6 Phase 1 of the Regional Project is designed to supply 10,400 acre-feet of water per year (afy) to Cal-Am in a normal weather year and 12,500 afy in a critically dry weather year7. Conservation, water storage, and an existing desalination plant in Sand City are expected to supply 1,600 afy to Cal-Am. The Regional Project facilities we approve today include the desalination plant, source water wells, and the associated facilities, including those water transmission and distribution facilities to be owned by Cal-Am. In a normal weather year, 8,800 afy will be supplied from a new regional reverse osmosis desalination plant located in the Salinas Basin and served by new source water intake wells. The desalination plant will provide 10,900 acre-feet of water in a critically dry year.
The findings required by CEQA are attached as Appendix B and the Mitigation Monitoring and Reporting Program is attached as Appendix C. Consistent with Pub. Util. Code § 1002, we adopt the Regional Project as the approved Project. While we find that the Regional Project results in certain significant environmental impacts that cannot be mitigated, as we discuss below, we determine that there are substantial benefits that outweigh those impacts and which constitute overriding considerations under CEQA. We acknowledge the support of the community for the Regional Project, as expressed at the Public Participation Hearings (PPHs) held in June, 2010, and we also acknowledge the stated concerns regarding the anticipated and significant rate increases that will occur as a result of the Regional Project.
Monterey Peninsula residents and businesses have been struggling with water constraints since the 1940s. As detailed in Sections 6 and 7 of this decision, public and private interests have a long and contentious history of trying to find a viable solution to this problem. Conflicting community values have rendered other proposals unworkable and unachievable. We have been addressing these concerns at this Commission alone since 1997 - well over a decade. It is evident and timely that we must arrive at a supply-based solution and approve a project. No solution will be perfect or easy, but we are persuaded that approving the Settlement Agreement and Implementing Agreements will allow the Regional Project to proceed. The structure adopted here provides a viable framework to begin addressing the water constraints on the Monterey Peninsula in a manner that will avoid the harshest strictures that could be imposed by the State Water Resources Control Board's (SWRCB) Order 2009-0060, also known as the Cease and Desist Order, issued on October 20, 2009.
Pursuant to Rule 12.1(d) of the Commission's Rules of Practice and Procedure, the Commission will not approve any settlement unless it is reasonable in light of the whole record, consistent with the law, and in the public interest. We find that the Settlement Agreement and the Water Purchase Agreement are reasonable and are in the public interest. We acknowledge the hard work and long hours from the signatories and non-signatories in the effort to reach settlement. We also acknowledge the competing considerations and concessions considered by the parties in arriving at the proposed Settlement Agreement and Water Purchase Agreement. We agree with the Settling Parties that time is of the essence. The Cease and Desist Order may well lead to water rationing and potentially severe economic constraints on the Monterey Peninsula.
Accordingly, we find that the Regional Project is a reasonable and fair solution to the water constraints on the Monterey Peninsula that will satisfy the Cease and Desist Order provisions and still provide protection for the Cal-Am ratepayers in the Monterey District.
We recognize the valid concerns that the Division of Ratepayer Advocates (DRA) has advocated, which comport with its statutory mission, as set forth in Pub. Util. Code § 309.5(a): "The goal of the division shall be to obtain the lowest possible rate for service consistent with reliable and safe service levels. For revenue allocation and rate design matters, the division shall primarily consider the interests of residential and small commercial customers." In many rate cases, DRA concerns itself mainly with the rate implications in the current test year. This mission influences and informs DRA's analysis and recommendations. We consider DRA's position an important perspective in our deliberation of a proceeding, especially when, as is the case here, there will be a significant impact to ratepayers. However, this proceeding, unique in so many ways, extends beyond obtaining safe and reliable levels of water service at reasonable rates today. As we observed recently in Decision (D.) 10-08-008, "While it is DRA's mission to focus on costs and their impact on rates (footnote omitted), the Commission must consider the viability of the Coastal Water Project as a whole and the need for water on the Monterey Peninsula."8 The Commission's broader mission means that we must look beyond a single rate cycle.
Unlike DRA, the Commission must consider and balance the viability of the project, and the interests of all ratepayers, the interests of the utilities. Indeed, this proceeding highlights the fact that there are competing interests and that the conflicts within the Monterey community have been long-standing. As this proceeding has evolved, parties have found common ground and common interests. We commend DRA for initiating the dialogue in the community with the Regional Plenary Oversight Group (REPOG) meetings that led to the development of the Regional Project.
During the pendency of this proceeding, the challenges and complexity of ensuring adequate water supply for the state as a whole have increased. We must therefore take into consideration the deeper implications of our decisions. Among other things, compliance with environmental regulations, meeting water quality standards, and obtaining financing have added to the cost of proposed projects. At the same time, we must consider supply diversity, reliability, timeliness and feasibility of project completion.
In light of the above, we balance the objections raised by DRA and by the Monterey Peninsula Water Management District (MPWMD) against the need to ensure that the Regional Project can move forward in a timely way, reasonably-priced financing can be obtained, and in light of the widespread public support for this project which will help assure that this project is brought to completion along the lines outlined in these agreements. We also note that the historic nature of the partnerships that have come together across the county will contribute to assure that these long standing water issues can be resolved. As the Settling Parties have agreed, we require Cal-Am to submit regular status reports on the permitting, financing, design, bidding, and construction of the Regional Water Project to the Director of DWA. We also require Cal-Am to meet quarterly with DRA and DWA staff. No modification is required to effectuate this requirement. We also require Cal-Am to submit regular filings as to the adequacy of the water received and any issues with respect to adequate ratepayer representation, and a filing in five years regarding the water allocation it receives.
4 The FEIR includes the Addendum to the FEIR, issued on March 24, 2010 to address errata in the text of the FEIR. None of the errata recommend any changes to the project or to the level of significance of impacts or to mitigation measures. The Addendum also presents and responds to seven additional comment letters that were inadvertently omitted from the published FEIR. None of the letters or responses have raised or identified any issues that would require changes to the FEIR as published.
5 Citizens for Public Water became a signatory to the Settlement Agreement on June 10, 2010.
6 We provide additional detail regarding the distinction between Phase 1 of the Regional Project and Regional Project facilities we approve today in Section 8.1.3.
7 An acre-foot of water, described as enough to cover an acre of land with one foot of water, is equivalent to 325,851 gallons of water.
8 D.10-08-008 at 17-18.
