II. Background

The Coastal Water Project, or an alternative water supply solution, is necessary for CalAm to comply with State Water Resources Control Board (SWRCB) Order 95-10, which directed CalAm to develop and implement a plan to replace the 10,730 acre-feet per year of water it historically diverted from the Carmel Valley Aquifer. This amounts to approximately 69% of CalAm's water supply for its Monterey District.

The Coastal Water Project proposal replaced the Carmel River Dam and Reservoir Project, which CalAm originally proposed to meet the requirements of SWRCB Order 95-10. CalAm had sought a CPCN to construct and operate the Carmel River Dam and Reservoir Project (A.97-03-052) in 1997. Despite CalAm's attempts to move forward with the Carmel River Dam and Reservoir Project, it stalled due to various circumstances, including active opposition to dams on live streams and newly listed "threatened" species under the Endangered Species Act. The Commission subsequently issued Decision (D.) 98-08-036, which required CalAm to prepare a long-term water supply contingency plan describing the program or combination of programs that it would pursue if it could not complete the Carmel River Dam and Reservoir Project. In 1998, Assembly Bill 1182 directed the Commission, in consultation with CalAm and other interested parties, to prepare this long-term contingency plan.

In August 2002, the Commission issued its long-term contingency plan (commonly referred to as Plan B) recommending the construction of a desalination facility and aquifer storage and recovery (ASR) project. CalAm determined that the desalination and ASR facilities, which became the proposed Coastal Water Project, would address the directives of the SWRCB and the Endangered Species Act issues on the Carmel River and that it could construct and operate the Coastal Water Project in a manner to minimize environmental impacts and maximize operational efficiency. In D.03-09-022, the Commission dismissed CalAm's Carmel River Dam application without prejudice, ordered it to file a new application for the Coastal Water Project, and authorized two memorandum accounts, one to track on-going costs and the other to track public information costs.

CalAm then filed the instant Application (A.) 04-09-019 and undertook steps to proceed with the Coastal Water Project, including environmental review and preparation of its PEA.