COM/JB2/avs Date of Issuance 12/3/2010
Decision 10-12-016 December 2, 2010
BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA
In the Matter of the Application of California-American Water Company (U210W) for a Certificate of Public Convenience and Necessity to Construct and Operate its Coastal Water Project to Resolve the Long-Term Water Supply Deficit in its Monterey District and to Recover All Present and Future Costs in Connection Therewith in Rates. |
Application 04-09-019 (Filed September 20, 2004; Amended July 14, 2005) |
DECISION APPROVING REGIONAL PROJECT,
ADOPTING SETTLEMENT AGREEMENT AND ISSUING CERTIFICATE OF PUBLIC CONVENIENCE AND NECESSITY FOR CALIFORNIA-AMERICAN WATER FACILITIES
DECISION APPROVING REGIONAL PROJECT, 44
ADOPTING SETTLEMENT AGREEMENT, AND ISSUING CERTIFICATE OF PUBLIC CONVENIENCE AND NECESSITY FOR CALIFORNIA-AMERICAN WATER FACILITIES 44
2. Overview of Today's Decision 77
4. Scope of Issues in Phase 2 1515
5. California-American Water Company's Monterey District 1717
6. Constraints on Water Supply 1818
9. Findings of the Environmental Process 4646
9.1. Significant and Unavoidable Environmental
Impacts that Cannot be Mitigated 5050
10. Overview of Proposed Settlement Agreement 5656
11. Water Purchase Agreement 6262
11.1. Ownership and Cost Containment 6262
11.2. Cost Recovery and Ratemaking
Associated with Product Water Costs 6868
11.3. Financing and Debt Equivalence 8888
11.5. Water Supply, Water Delivery, Brackish
Source Water Supply and Management 109109
13.1. Discussion: Cal-Am Only Facilities 132132
13.2. Proposed Ratemaking 135135
13.2.1. Used and Useful Determination 135135
13.2.2. Revenue Requirement Components 136136
13.3. Additional Ratepayer Protections if the
Regional Project is Not Approved 146146
14. Conclusion and Proposed Modifications 152152
15. Comments of Proposed Decision 153153
16. Assignment of Proceeding 156156
APPENDIX B - CEQA Findings of Fact
APPENDIX C - Mitigation Monitoring and Reporting Program
APPENDIX D - Financing and Revenue Requirements
DECISION APPROVING REGIONAL PROJECT,
ADOPTING SETTLEMENT AGREEMENT, AND ISSUING CERTIFICATE OF PUBLIC CONVENIENCE AND NECESSITY FOR CALIFORNIA-AMERICAN WATER FACILITIES
1. Summary
California-American Water Company (Cal-Am) has applied for a Certificate of Public Convenience and Necessity (CPCN) seeking approval to enter into an agreement with various local government agencies designed to produce additional source water for the benefit of the Cal-Am ratepayer. This additional source water is needed to make up for water now taken illegally from the Carmel River, which taking, by order of the State Water Resources Control Board, must cease by December 31, 2016. This effort is known as the Coastal Water Project. Cal-Am is under order from the State Water Resources Control Board to cease diverting this water, determined in 1995 to be 10,730 acre feet of water per year. The utility must also replace 2,975 acre feet of water per year in allocations from the Seaside Basin.1
By today's decision, we approve the proposed Settlement Agreement, as amended, that has been filed by Cal-Am, Marina Coast Water District, Monterey County Water Resources Agency, Monterey Water Regional Pollution Control Agency, the Surfrider Foundation, the Public Trust Alliance, and Citizens for Public Water (Settling Parties).2 The Settlement Agreement proposes a public-private partnership, known as the Regional Project, to solve the long-standing water supply deficit on the Monterey Peninsula. We approve the Settlement Agreement and Implementing Agreements, and approve the Regional Project, as discussed below.
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.3 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.
1 The State Water Resources Control Board issued Order WR 95-10 in 1995 and Order 2009-0060 in 2009, which requires Cal-Am to undertake additional measures to reduce its diversions from the Carmel River and to terminate all such diversions no later than December 31, 2016. In 2006, the Monterey County Superior Court issued a final decision regarding adjudication of water rights of various parties who use groundwater from the Seaside Basin (California American Water v. City of Seaside et al. Case No. 66343).
2 We also refer to the Marin Coast Water District and Monterey County Water Resources Agency as the Public Agencies.
3 Our analysis of the revenue requirement increase is limited to the impact of the Regional Project only. The revenue requirement projections do not include any increases that may result from the Commission's consideration of A.10-07-007 or the pending application to remove the San Clemente Dam (A.10-09-018).
