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Monterey Peninsula Water Supply Project
Phase 1: Desalination Plant

Background

Note: This phase of the proceeding is on hold, while Phase 2 of the Water Supply Project is proceeding.  

 

In January 2012, Cal Am withdrew its support from the 2010 Regional Desalination Project public-private partnership with the Monterey water agencies as the solution to address Monterey water supply needs.  

 In April 2012, Cal Am filed an Application to obtain CPUC approval for an alternative Monterey Peninsula Water Supply Project, proposing two Desalination Plant scenarios at North Marina:   

  • A 9.6 million gallons per day (MGD) plant at a capital cost of $277 million with Operations and Maintenance costs (O&M) of $11.9 million. 
  • A 6.4 MGD plant at a capital cost of $223.5 million with O&M costs of $9.6 million. 

In June 2012, the CPUC issued a Ruling requesting that parties address two key foundational legal issues of preemption and water rights before advancing to the details of Cal Am’s MPWSP proposal. 

Public Hearings were held by the CPUC in Monterey on January 9, 2013. Evidentiary hearings were held at the CPUC April 2 – 11, 2013. 

On July 31, 2013, the majority of parties filed a Settlement Agreement with the CPUC to resolve a number of key issues in the establishment of a Water Supply Project that would aid in mitigating water constraints on the Monterey Peninsula. These parties support the construction of a Desalination Plant and outline in the Agreement a process that considers scenarios with and without a Groundwater Replenishment Project, which would be evaluated in a second phase. The Agreement:   

  • Sets the following capital cost cap scenarios, including contingency plans:  
    • $253.4 million for the 9.6 MGD plant   
    • $210.6 million for the 6.4 MGD plant,  if the Groundwater Replenishment Project supplies 3,500  acre-feet/year (af/yr) 
    • $214.1 million for a 6.9 MGD plant, if the Groundwater Replenishment Project supplies 3,000 af/yr   
    • $85 million for the Cal Am-Only Facilities
       
       
  • Estimates net operations and maintenance costs of $11.13 million for the 9.6 mgd plant and $9.12 million for the 6.4 mgd plant.  
      
  • Determines that Surcharge 2 would be collected from customers after Surcharge 1 ceases to allow for a gradual increase of rates.   
    • Surcharge 1: Previously authorized, this surcharge funds project development costs until the CPUC approves the new project   
    • Surcharge 2: Capped at $71.5 million, this surcharge is collected in advance of the new project being completed, thereby lowering overall project financing costs  
        
  • Applies the initial $35 million of Surcharge 2 to the Cal Am-Only facilities in order to reduce the risk of customers funding stranded assets. 

To ensure community and public agency representation in all aspects of the Water Supply Project process, a Governance Committee will be formed in which both Cal Am and the Monterey Peninsula Regional Water Authority will participate. Settling parties agree that if the Water Supply Project should stall for a prolonged period, collection of Surcharge 2 will cease until Cal Am demonstrates via a CPUC filing the ability to move forward. However, if the Project terminates prior to completion, Cal Am will file an Application with the CPUC to return any over-collections to customers.  

Also on July 31, a smaller subset of parties filed an additional Settlement Agreement with the CPUC on how the CPUC should establish new desalination plant size and level of operation. Local public agencies that are affected by the Water Supply Project will work together to solve water allocation issues. The Agreement poses 3 scenarios: 

  • A 9.6 MGD Plant. 
  • A 6.4 MGD Plant, if the Monterey Regional Water Pollution Control Agency’s (MRWPCA) Groundwater Replenishment Project comes online with 3,500 af/yr. 
  • A 6.9 MGD to accommodate 3,000 af/yr from the Groundwater Replenishment Project. 

The plant is projected to be completed by the end of 2017.  

See more Background details.  

Hearings were held at the CPUC on November 12-13, 2013. 

At the end of November 2013, the CPUC advised parties that it was requesting additional information and that the schedule for filing Briefs would be extended. 

  

 

ORA's Policy Position

ORA supports a Monterey Water Supply Project that provides safe and reliable water to the Peninsula, requiring Cal Am to make all reasonable efforts to include a Ground Water Replenishment strategy, in order to achieve a diversified and potentially less-costly water supply portfolio.  Ground Water Replenishment would be a joint project between the Monterey Regional Water Pollution Agency (MRWPA) and the Monterey Peninsula Water Management District (MPWMD), which proposes to supply water to the peninsula by injecting a highly treated product water from a new advanced water treatment plant into the Seaside Basin Aquifer, where it would be diluted and stored. 

ORA signed on to the July 31, 2013 Settlement Agreements because they articulate a robust plan to supply the needed water to the Monterey Peninsula balanced with reasonable costs.  The Settlements also demonstrate the ability of a diverse group of stakeholders to find common ground for this essential endeavor. The Settlements resulted in a savings for ratepayers from Cal Am’s original proposal: 

  • 10% reduction in capital costs for the desalination plant  
  • 20% reduction for the Cal Am Only facilities 

See ORA’s position on CPUC’s June 2012 Key Foundational Legal Issues. 

See ORA’s February 22, 2013 Testimony. 

  

Current Proceeding Status

See the Proceeding docket. 

 

Other Resources

Comparison Table of 6.4 MGD Desalination Plant:  Cal Am vs. DRA Cost Estimates.  

Comparison Table of 9.6 MGD Desalination Plant:  Cal Am vs. DRA Cost Estimates. 

Cal Am filings and testimony on the Water Supply Project. 

See historical background on 2010 Regional Project.