3. Moratorium

All parties agree that the moratorium should be extended, but they differ on the length of the extension and the remedies CalWater should pursue to lift the moratorium. Below, we address these issues:

All parties agree that CalWater has to continue the service connection moratorium in Coast Springs. The moratorium was first established because the Commission found that Coast Springs had reached the limits of its capacity and was unable to serve more customers without injuriously diminishing the supply available to its current users. The moratorium was expected to be in place for three years while CalWater made system improvements that would increase supplies and allow the moratorium to be lifted. However, the Commission had to extend the moratorium in D.06-04-006, when it found that despite some improvements, Coast Springs still faced capacity limitation.

That situation has not changed. The record shows that while Coast Springs has sufficient water supplies for its existing customers, it does not have sufficient supplies to serve new customers. None of the parties object to the continuation of the moratorium. In our view, as long as DHS has a moratorium in Coast Springs, a service connection moratorium should also be in place. Therefore, we order the existing moratorium to continue and adjust automatically to any new level DHS may permit.

CalWater claims that 22 customers are on the waiting. However, the record shows only seven of the 22 claimed applicants have submitted the documentation the Commission requires to establish eligibility. Below, we discuss this in detail.

D.03-03-037 ordered CalWater to follow a standard procedure for establishing and maintaining a waiting list. CalWater claims, based on the directive of D.03-03-037, the waiting list holds 12 names, 11 individuals, and a 14-lot parcel (Parcel K). Young argues that CalWater should not have included the names of customers who did not have written applications on the waiting list. Had CalWater followed the established procedure, according to Young, the waiting list would include only seven customers instead of 22. DRA also believes that CalWater has violated D.03-03-037 and the number on the waiting list should be seven.

One of the conditions of D.03-03-037 in establishing the waiting list was that "[a]ll future applications for new service connections are to be in writing."1

In other words, the Commission expressly required that only written applications be placed on the waiting list. In addition, the Commission required that "only a lot owner may apply for a new service connection to that lot."2 CalWater's waiting list3 contains four individuals,4 added after D.03-03-037, but without written application dates. The waiting list also included a group of 14 spaces under "Parcel K"5 with no application dates. CalWater contends it placed the 14 spaces on the waiting list based on the request from a developer, Dunmoore Communities (Dunmoore). Although CalWater asserts that Dunmoore has a business relationship with the owner of Parcel K, which gives it the authority to act on the owner's behalf, we cannot determine from the record if that business relationship was in effect at the time of the alleged request for service for Parcel K. Even if we could establish that Dunmoore was either the owner or acting on behalf of the owner, as CalWater suggests, the 14 spaces do not have written application dates and have therefore not met the Commission's criteria for inclusion on the waiting list. Consistent with the procedure set in D.03-03-037 for establishing the waiting list, the four individuals and Parcel K -- all without application dates -- are not eligible to be on CalWater's waiting list. The number of applicants on the waiting list for the purpose of this proceeding is seven.

In the comments on the proposed decision, CalWater proposes that we address removal of these four individuals from the waiting list in its next GRC. DRA also in its reply comments on the proposed decision notes that if these individuals indeed have complete applications, it would be unfair to remove them from the waiting list. We allow CalWater to file an advice letter to present evidence demonstrating that the four individuals are eligible to be included in the waiting list. CalWater should file a Tier 2 advice letter correcting the waiting list no later than 10 days from the date of this decision.

Because the duration of the moratorium depends on the remedies and the amount of time they would require to complete, we address the remedial measures first.

Marine Desalination Unit: CalWater originally requested authorization to either install a desalination unit or construct a new well; however, CalWater now proposes the installation of a desalination unit as the best option for lifting the moratorium. The proposed desalination unit would produce 5.6 gpm of water for up to 22 residential customers at an estimated capital cost of $450,450, and an estimated annual operation and maintenance costs of $25,000.

DRA opposes the desalination unit and proposes a number of options as potential sources of additional supplies. DRA recommends CalWater pursue the following:

· Obtaining water from the Cline Well;

· Reactivating the Tunnel Well;

· Using the collection pond;

· Reducing the amount of unaccounted-for water in the district; and

· Considering the recommendations provided in the 2005 CH2M HILL report.

Young and Pareas also oppose the installation of a desalination unit and endorse several of DRA's options.

The widespread opposition to CalWater's proposed marine desalination unit is due to the $450,450 estimate for the plant. DRA and other parties are concerned that the actual cost of a desalination unit would be considerably higher because the estimate does not include all costs of the project.

We agree that CalWater's estimate of the cost of building a desalination unit is deficient, and reject CalWater's proposal for this and several other reasons.

First, the cost estimate appears to be only a "rough estimate" that is used "to give a general cost of a desalination plant,"6 not an "official" estimate for the project. CalWater's witness, John Foth (Foth) testified that neither he nor CalWater has any experience with desalination units. The estimate is from a proposal by the developer of Parcel K. There is no breakdown or a description of the estimate. It does not contain detailed analysis of the proposed desalination unit. Nor does it consider all the costs of a desalination plant. For example, it does not include the cost associated with addressing potential opposition by environmental groups even though CalWater's witness acknowledges that "there is and has been opposition to various plants."7

According to Foth, "The numerous permits required for the desalination unit may require other upgrades or delays in construction"8 and cause the estimate to increase. Although Foth does not provide an estimate of how much higher the cost of permitting would be, he testifies that because a desalination plant would require many permits and take many years to build, costs associated with the items that were included in the estimate would be significantly higher.9 Without the information on the types of permits that would be required for a desalination unit, it is difficult to ascertain if CalWater's estimate is reasonable. Foth characterizes the estimate as being rough, and the estimate accounts for only some of the costs of obtaining the required environmental permits to build a desalination unit. Consequently, we conclude that the estimate is deficient and likely understated.

Second, there is uncertainty that the desalination unit would ever be built. Because of the process involved in obtaining all the permits for building a desalination unit, CalWater may face difficulty building the proposed unit in Coast Springs.

Third, the proposed desalination unit would produce substantially more water than needed to serve customers on the waiting list in Coast Springs. As discussed above, the number of applicants eligible for inclusion on the waiting list for new service connections is seven. Foth testified that generally DHS requires an additional capacity of one gpm for every eight customers. At that rate, CalWater would need about 0.875 gpm for seven additional customers. The 5.6 gpm capacity of the proposed desalination unit is well beyond this limit, making the economics of the project even more questionable. We see no reason to pursue higher than needed capacity.

We also reject CalWater's argument that the desalination unit can be used for redundancy purposes. CalWater claims that "Well No. 4 provides 70%-75% of the supply in the Coast Springs and if it were to be out of service, the only back up would be the supplies in the storage tank."10 CalWater then argues that "having only storage to provide back up and emergency supply is a risk and not the best policy for long term management and reliability of the Coast Springs water system."11 Based on this argument, and without any further evidence, CalWater claims "the desalination unit would provide improved redundancy and reliability for Coast Springs Water System."12

The purpose of this proceeding is to explore viable options to increase supplies to Coast Springs to help lift the DHS moratorium in that area. An examination of Coast Springs' redundancy needs is beyond the scope of this proceeding. Even if we were to undertake such an investigation here, we would have to examine different sets of facts and data (for example, the level of redundancy required in Coast Springs) from what the record supports in this proceeding. We decline to consider the potential benefit or the use of the desalination unit for redundancy purposes at this time. Since CalWater has raised Coast Springs' reliability needs, we order CalWater to file a plan for meeting the redundancy needs and providing back up service in Coast Springs with its next GRC.

In their comments on the proposed decision, DRA, Young, and Pareas agree with the proposed decision's argument that an examination of Coast Spring's redundancy needs is beyond the scope of this proceeding, but they do not support the proposed decision ordering CalWater to file a plan for meeting the Coast Spring's redundancy needs in its next GRC. The parties states that by requiring CalWater to file a redundancy plan, the proposed decision is accepting CalWater's argument that additional redundancy is needed in the area.13 We disagree. The proposed decision does not make any conclusions regarding CalWater's supply redundancy. It merely requests information to be used in a future Commission review.

CalWater also argues in its comments on the proposed decision that the proposed decision should clarify that redundancy needs are to be considered in lifting the moratorium and reference the need for "reliable" supplies in addition to total supplies. CalWater did not introduce redundancy or reliability in its application and those issues were not included in the scope of this proceeding. Therefore, reliability of supplies and redundancy issues are not addressed here.

Finally, even if a desalination unit is built, it may never be used to provide water to Coast Springs. It is suggested by Foth that CalWater maintains sufficient storage to cover water usage in Coast Springs to current and proposed customers during peak periods. Therefore, even if the unit is built, CalWater might never need to take water from the desalination unit to supply Coast Springs because storage would be utilized to cover the demand. Due to cost and lack of need for the proposed amount of surplus water, a desalination unit is not a viable option.

In its comments on the proposed decision, CalWater asks to modify the proposed decision to clarify that the cost estimate for the desalination unit was provided only to support the "substantial nature" prong of the memorandum account test.14 However, the record shows that the cost data was presented for purposes beyond the memorandum account test. CalWater's brief states that CalWater recommends installation of a desalination unit because it is the most cost effective option.15 CalWater's application also states that CalWater recommends a desalination unit over a new well, although the estimated costs are higher for a desalination unit.16

We now turn to other remedies proposed by the parties.

Cline Well: The Cline Well is an existing well near Well No. 4. It is not owned by CalWater. Foth testified that the Cline Well would be a viable source of water for Coast Springs and it would not be a very expensive option, although an exact estimate of the cost was not provided.17 CH2M HILL's February 17, 2005 report also identifies the Cline Well as one of the options for potentially capturing some additional flow that bypasses Well No. 4. The report notes that the Cline Well is used for landscape irrigation and is pumped at an average rate of 1.5 gpm in dry season and 1.0 gpm in wet season. The report then suggests that "there is likely some additional pumping capacity for the well."18

The record shows that CalWater made some effort to contact the owner of the Cline Well, but was not successful.

Reactivating the Tunnel Well: The Tunnel Well is a tunnel that develops the same source of water as some of CalWater's existing wells, but because it is not an approved source of water by DHS, it is not currently connected to CalWater's system.19 According to the CH2M HILL 2003 report, the Tunnel Well has a reported flow of between 0.5 and 1.0 gpm. The record shows that CalWater is obtaining a water supply permit from DHS for the Tunnel/Side Well. CalWater's reply brief also indicates that CalWater is already pursuing this option.20

Collection Pond: The CH2M HILL 2005 report identified a collection pond with about 400,000 to 500,000 gallons of capacity and states that water in the pond could be used to help meet short-term peak needs.21 Although currently the water is not an acceptable source of water, Foth testified that if the water from the collection pond was approved by DHS, it would provide adequate water to accommodate the number of customers on the waiting list.

Unaccounted-for Water: The record shows that CalWater has 30.95% unaccounted-for water. The average level of unaccounted- for water for a small water system is between 10% and 14% and the Commission has adopted a settled level of 22% for ratemaking purposes for CalWater. Although CalWater argues that the unaccounted-for water can be attributed to many factors, not just leakage, there is no explanation as to why CalWater's rate is higher than the average small water system. If any of the unaccounted-for water is due to leakage in the transmission system, infrastructure improvements could remedy the leakage and augment CalWater's water supply.

New Well: The February 2005 CH2M HILL report noted that the "yield in the shoestring aquifer22 can be increased from a range of 11-16 gpm to a range of 16-26 gpm by installing an additional well downstream of Well No. 4."23 Young and Pareas support this alternative. DRA believes "there are other less costly options that CalWater should pursue first."24 CalWater rejects the proposed well on the basis that "the amount or quality of the additional capacity does not justify the cost."25 CalWater estimates a new well would cost about $420,000. About $120,000 of this amount is for the capital cost of the well and the rest is for obtaining the land.

During the hearing Foth testified that there may be alternative locations on CalWater's own property for a new well, which would reduce the land cost estimate. Foth also testified that that CalWater may be able to drill pilot holes to determine whether additional water is available for a well at less cost than CalWater's original estimate.

CH2M HILL 2003 and 2005 Recommendations: CH2M HILL made five recommendations in its 2003 and four recommendations in its 2005 reports.26 The 2005 report specifically identified the shoestring aquifer "as the most viable source of additional supply" and suggested the potential yield may be developed by 1) altering the physical characteristics of the creek; 2) installing an additional well downstream of Well No. 4; and 3) diverting downstream water to above-ground storage near Well No. 4.

CalWater claims it considered the options in both reports and rejected several of them because of the cost, or the added value.27 In particular, CalWater claims the environmental permitting issues, which could restrict how much of the flow could be captured downstream, as the primary reason for not pursuing the diversion of surface water in the shoestring aquifer option.

Discussion: Actions towards lifting the moratorium should be taken as quickly as possible and with no further delay. We find that many of the above proposed options have the potential to directly affect CalWater supplies and help lift the moratorium if further pursued. Some can be implemented immediately (such as identifying the source of unaccounted-for water), while others may require obtaining DHS approval as a source (such as the collection pond). Also, some projects will have a shorter timeframe because no lengthy permit will be required.

While the exact estimate of the cost of each project is unknown, many seem to cost less than a desalination unit. For example, one of CH2M HILL's 2005 recommendations, which was rejected in favor of the desalination unit, had an estimated cost of $50,000, much less than the estimate of building a desalination unit. It is unclear why such projects were not considered as part of CalWater's solutions. In our view, many of the proposed alternatives may be more economical than a desalination unit and could provide faster and more effective ways to obtain additional capacity in Coast Springs.

However, specific information, such as cost, the amount of additional water that each project could produce, the required permits, and the amount of time required to complete each project are needed in order to determine the most viable solutions. The record does not provide this data. Due to lack of information, we do not select a project at this time. Instead, we order CalWater to examine all of the above options and submit a report for our review in its next GRC. The report should include information such as the expected additional water supply, the estimated cost, the status of DHS and other permits required to implement each project, and the timeframe for completing each project listed above.

Finally, broader measures such as conservation and recycling were not addressed by the parties in this proceeding. Although these measures do not provide new supplies, because they reduce water consumption, they may be acceptable to DHS as an additional source to help lift the moratorium. CalWater should explore these options as well, because from an efficiency perspective, it would make sense to pursue solutions that save water before embarking on a more ambitious and costly projects like building a new desalination unit.

In their comments on the proposed decision, DRA, Young, and Pareas reargue that the Commission should require CalWater to take immediate action to remove the moratorium. The proposed decision properly finds that the options proposed by the parties could produce additional capacity, but also notes that additional information, such as cost, the amount of additional water that each project could produce, the required permits, and the amount of time required to complete each project would be needed in order to determine the most viable solutions.

Parties have different views on the length of the moratorium extension. CalWater proposes a seven-year moratorium to pursue installation of a desalination plant.28 DRA recommends the moratorium be continued until the Commission reviews CalWater's progress towards lifting the moratorium in CalWater's next GRC for Coast Springs, scheduled for July 2009. Young recommends only a one-year extension, because the projects he proposes are either underway, or require a short time to complete. Pareas, who originally recommended a five-year extension, changed his recommendation to one year after the hearings.

The length of the extension depends on the specific project we choose to increase water supplies in Coast Springs, and the length of time that project would require for completion. As stated above, because of lack of data, we defer the selection of a project until CalWater's next GRC. Therefore, the moratorium should continue until the Commission's review of project information is completed in CalWater's next GRC.

1 D.03-03-037, p. 12.

2 Id.

3 Exhibit 303. This waiting list was an updated (June 6, 2007) version of the list that CalWater had attached to its application. The update reflects one name being removed and another added. The applicant who was removed from the list was at the top of the waiting list and granted connection. The applicant who was added was a customer who had connection and was previously on the approved list but, consistent with D.03-03-037, was removed from that list and placed on the waiting list because of failure to provide the required building permits.

4 Exhibit 303, Applicant Nos. 4, 5, 6, and 24.

5 Id., Applicant No. 23.

6 Transcript (TR), p. 98.

7 Id., p. 93.

8 Exhibit 1, p. 5.

9 TR, p. 84.

10 CalWater Reply Brief, p. 3.

11 Id., p. 9.

12 Id., p. 3.

13 See joint comments of DRA, Young and Pareas on the proposed decision, p. 5.

14 Comments of CalWater on the proposed decision, p. 7.

15 CalWater Brief, p. 2.

16 Exhibit 1, p. 6.

17 TR, pp. 39-40.

18 Exhibit 1- Appendix C, CH2M Hill report, p. 4.

19 Id., p. 4.

20 CalWater Reply Brief, p. 7.

21 Exhibit 1- Appendix C, CH2M Hill 2005 report, p. 4.

22 Shoestring aquifer is the term used for the aquifer near Well No. 4.

23 Id.

24 DRA's Opening Brief, p. 11.

25 Exhibit 1, p. 5.

26 Exhibit 1, Appendix C.

27 CalWater Reply Brief, p. 6.

28 CalWater originally proposed a five-year moratorium in its application, but later changed that to seven. See CalWater's application.

Previous PageTop Of PageNext PageGo To First Page