BEFORE THE

PUBLIC UTILITIES COMMISSION FILED

04/19/18

OF THE STATE OF CALIFORNIA 04:59 PM

In the Matter of the Application of California A.12-04-019

American Water Company (U 210 W) for (Filed April 23, 2012)
Approval of the Monterey Peninsula Water
Supply Project and Authorization to Recover
All Present and Future Costs in Rates.

OPENING BRIEF OF PUBLIC WATER NOW

RE FEIR/FEIS and CPCN

April 19, 2018

George T. Riley

Managing Director, Public Water Now

1198 Castro Road. Monterey CA 93940

831-645-9914, georgetriley@gmail.com

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BEFORE THE
PUBLIC UTILITIES COMMISSION
OF THE STATE OF CALIFORNIA

In the Matter of the Application of California A.12-04-019

American Water Company (U 210 W) for (Filed April 23, 2012)
Approval of the Monterey Peninsula Water
Supply Project and Authorization to Recover
All Present and Future Costs in Rates.

OPENING BRIEF OF PUBLIC WATER NOW

RE FEIR/FEIS and CPCN

Administrative Law Judges Weatherford, Haga and Houck ruling dated March 28, 2018 called for opening
briefs by April 19, 2018, and replies by May 3, 2018. In accordance with CPUC rules, this opening brief
is submitted by Public Water Now, consistent with the prescribed outline.

Summary of Recommendations

Demand a public report on all factors of slant well feasibility, as required by SWRCB’s Ocean Plan.

Recommend a Phase 3 proceeding to fully understand urgent, workable and lower cost options.

Pay particular attention to ratepayer liability for historic costs, current and future project costs, and the
potential for litigation costs.

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I. Introduction

Public Water Now represents residential ratepayers. PWN has consistently advocated for an affordable
and sustainable water supply. PWN emphasizes agency cooperation and shared values as the best path to
affordability and sustainability.

PWN believes the MPWSP has reached a tipping point. It might go forward based on old thinking, 6 year
old politics, stale data and limited options. Or it might go forward with full recognition that new facts and
options apply.

Since 2012 when MPWSP was initiated, conservation has taken root, demand is reduced, regional
commonalities between urban and agriculture interests have been developed, have Pure Water Monterey
has caught and passed desal planning, local leadership and partnership are active and succeeding, seawater
intrusion has accelerated, new scientific data is available, new legal demands for groundwater
management have been added, yet workable and affordable supply options are available. This new local
optimism is real, and is offering new project components for addressing supply. Administrative deadlines
are fostering a schedule panic. But the best approach is to use all available time wisely, and to consider all
the changed circumstances in the decision s going forward.

Therefore, PWN supports a new Phase 3 to encourage and use this new local partnering for problem
solving. A Phase 3 will address the increasing costs that are hammering ratepayers, will see community
values in a full light, and will protect ratepayers.

II. FEIR/FEIS Issues

A. Water Demand, Supply and Water Rights

1. The record is stale. Data filed in 2015 and earlier have been superseded by recent experience.
More accurate projections can be made. Updated data is required, and must be considered.
2. The FEIR/FEIS prominently repeats the water rights letter from SWRCB that was issued in 2014,
which referred regularly to intake from under the bay. Yet Cal Am changed its intake screen
locations to be about 80% inland of mean high water line. This fact engages water rights law, and
negates many suggestions in the SWRCB letter. Water rights questions should be clarified by

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 SWRCB prior to any CPCN decision. Otherwise litigation will ensue, CDO restrictions may be
imposed, and delays will further deprive the Peninsula of progress toward a new supply.
3. The FEIR/FEIS makes frequent reference to the Large Settlement Agreement executed in 2013, yet
many events have made that language obsolete. These are noted throughout this brief.

B. Project Description

1. Test Slant Well Feasibility. There is no report on feasibility factors prescribed by SWRCB.
This is the FEIR/FEIS response to Public Water Now comment PWN2-8:
“...for clarification, the definition of “feasible” from the Ocean Plan is provided as a revision in Final
EIR/EIS Section 5.3.1.1, as follows:
Section 13142.5 of the California Water Code requires new or expanded coastal industrial facilities,
including desalination plants, to use the “best available site, design, technology, and mitigation measures
feasible” to minimize the intake and mortality of marine life. The SWRCB prefers subsurface intakes, but
allows surface water intakes where subsurface intakes are not feasible or economically viable. For the
purposes of Water Code Section 13142.5(b) and implementation of the Ocean Plan, “feasible” means
“capable of being accomplished in a successful manner within a reasonable period of time, taking
into account economic, environmental, social, and technological factors” as defined in Appendix I of
the Ocean Plan. (SWRCB, 2016) “

The state requirements for a feasibility analysis demands a specific report.

There is no such report.
All state agencies, including the CPUC, are deprived of such analysis.
Economic factors have not been addressed.
The full cost picture from initial estimates has not been presented.
The public deserves to know the facts, to know the economics.

2. Engineering mishap in test slant well.

There has been no reporting or analysis of an engineering mishap with the test slant well.
The Mayors group – Monterey Peninsula Regional Water Authority – commissioned Geosyntec for an
early analysis of intake issues (dated June 24, 2015). This report was submitted to the CPUC and the
CEQA/NEPA staff. On page 2 is this quote:
“Drilling and construction of the test slant well was challenging and the drill rig was unable to retract a
portion of temporary casing, which remains in the ground and limits flow into a 150-ft-length of the
nearly 600-ft-long well screen.”

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This observation was made after only one month of pumping. Here was no discussion of this mishap by
the HWG. It was not discussed in the FEIR/FEIS. No objective professional review of this fact would
allow it to go without some follow up. What happened? Hydrogeologic Working Group (HWG) reports
do not mention this mishap. No report has been made by Cal Am. No testimony exists on this. Where is
the science? Where is the professional concern? What change has been made to avoid repetition? Was
there a design issue? Has there been any implications in readings? Or intake? Future implications with
the proposed lower 14 degree angle has not been made public.
The lack of a specific public report on slant well feasibility is a remarkable and substantive deficiency.
The lack of transparency is appalling. The lack of forthrightness is appalling. The lack of professionalism
is appalling.

C. Environmental, Setting, Impacts and Mitigation Measures

1. This project continues to be forced onto a community without any identifiable benefits and with
specific exposure to known risks. This is an egregious bitter pill for Marina communities to
swallow. Mitigation costs must be specifically identified and cost estimates must be included, in
any CPCN discussion. Ratepayers must be informed of all aspects of the cost of this experimental
intake well, and the mitigation costs for locating in another water jurisdiction without permission.
2. The CPUC can, and must, provide a way for a win-win potential. This is possible with a Phase 3
proceeding whereby additional water supply options can be fully analyzed and vetted. A Phase 3
proceeding will honor the initiative by the ALJs when they asked for incremental options. Phase 3
will also allow a reasonable approach to the CDO ramp-down schedule. It will address the water
supply needs, and may avoid litigation altogether. The ALJs initiated this option, and should
provide for its full development.

D. Alternatives No comment.

E. Other No comment.

III. Present and Future Public Convenience and Necessity of Project – Environmental Factors
A. Public Utilities Code Section 1002(a)(4) and Other Law

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 1. This specific reference narrowly addresses one issue in Section 1002(a), environmental impacts.
Three matters are omitted, (1), (2), (3), but they are required to be included in any CPCN
consideration.
PUC Code Section 1002(a) The commission, as a basis for granting any certificate pursuant
to Section 1001 shall give consideration to the following factors:
(1) Community values.
(2) Recreational and park areas.
(3) Historical and aesthetic values.
(4) Influence on environment....

2. Community Values – Marina

(1) Community values are not addressed in the FEIR/FEIS. The only reference is in the Executive
Summary (ES-18) as follows:
The Settlement Agreement entered into between CalAm and other parties in August 2013 includes
provisions that address project governance and financing that are intended to ensure the consideration of
community values and public agency representation in all the important aspects of the MPWSP and to
lower project costs, respectively. While the CPUC decisions and provisions of the proposed Settlement
Agreement address concerns related to the private ownership of the MPWSP, it is expected that some
concerns about this issue may remain.

This is ridiculous over-simplification. The Settlement Agreement language is from 2013. It is

stale. It does not address changes since then. Very extensive local cooperation is taking place,
mainly between the three local public water agencies – Marina Coast Water District, Monterey
One Water, and Monterey Peninsula Water Management District. This is exactly what ‘community
values’ is about. The Monterey Peninsula ratepayers can no longer rely on Cal Am for water
leadership. Cal Am is not trusted. Cal Am has a very unpopular 25-year record that includes a)
degrading water resources, b) failed projects, c) ratepayer assuming all costs of stranded
investments, and recently d) the most expensive water bills in the entire country.

Community values is a foundation of Marina City and Marina Coast Water District concerns. The
regional impact on these jurisdictions from Cal Am’s desal plans are huge, and dominated by
Marina’s need to protect its water supply for its future. Cal Am’s MPWSP and the FEIR/FEIS are
silent on these impacts. Which means the CPUC must address this omission.

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 Community values are also a concern of Monterey Peninsula ratepayers. We do not condone Cal
Am’s invasion of MCWD and Marina jurisdictions to access its water. Our values do not condone
a theft from one population to benefit a neighboring population. Cal Am’s cavalier attitude has
been expressed in two ways: 1) its priority is water for the Peninsula; and 2) if the CDO is missed,
Cal Am claims it will not be Cal Am’s fault. Cal Am’s narrow-mindedness should not become
CPUC’s narrow-mindedness.

This is particularly disheartening when other lower cost alternatives are available and can remove the
rush to judgment on this shaky and litigious path with MPWSP. Phase 3 is a remedy.

3. Community Values – Regional

Community values include regional leadership and partnering. Several public water agencies are
working on compromises and proposals to deal with the CDO milestones. Cal Am is not on board
with this thinking. If it were, there would be new settlement agreements in the works. The local
agencies represent a regional perspective, to cooperate and find solutions to problems. These local
agencies will be here long after the CPUC renders its decision. But the CPUC must not ignore this
regional cooperation. CPUC has promoted regional cooperation in the past. CPUC must continue
to promote it.
Cal Am’s project contradicts all aspects of regionalism. In fact the antitheses is occurring: Cal Am
has invaded one water jurisdiction in order to benefit another jurisdiction. Furthermore even the
return water agreement, exports water away from the Marina community to further expose Marina
to harm. The FEIR/FEIS omits a serious mention of this negative impact on Marina.
CPUC must not support Cal Am’s tunnel vision that diminishes local interests, local leadership,
and shared regional interests. CPUC should specifically promote these local priorities.

B. Other

1. Clarify/Identify component costs.

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Public Water Now (PWN) pleads with CPUC to include a specific clarifying presentation of the cost of
key components that have been lumped together by Cal Am. Transparency is lacking. Cal
Am generally presents costs in certain categories, as follows, in the 2017 4th Quarter Newsletter.
Category Amount (Calculations added)
Subsurface Intake System and $79M (27% spent to date) $21.3M
Supply Return Facilities:
Desalination Plant: $115M (18% spent to date) $20.7M
Pipeline Facilities: $128M (37% spent to date) $47.4M
Pre-Construction Cost: $8M (100% spent to date) $ 8.0M
(Totals added) $330M $97.4M

Cal Am’s newsletter refers to the $322M project, which excludes Pre-Construction cost. It’s not
explained. What the public does not know is how much is the new WPA for Monterey One Water. Or the
investment into slant wells to date. O the Monterey Pipeline. Or the estimate for return water. Or the
investment to date into desal. The pre-construction costs could also be clarified by component.

The public also believes different components will come on line at different times. What are the estimated
costs on water bills, and when is the estimated time for inclusion? For example, the WPA will be
relatively soon, compared to desal. The sequence for bill increases should be estimated as best as can be
predicted, and it should be transparent.

Similarly, the costs of mitigation measures should be estimated, and shown.

2. Authorize a Phase 3.

PWN pleads with CPUC to authorize a Phase 3 proceeding to this MPWSP, prior to considering a CPCN,
so that there will be full understanding of the options the ALJs recently asked for, and the numerous
advantages for lower cost and speedy progress across many fronts. A Phase 3 has these advantages:
water available at lower cost, uses recent science, supply sources are largely already approved, local
public leadership and agencies are partnering, outcome will moderate CDO restrictions, local leadership is
building on already approved projects. Most of these advantages do not exist with Cal Am’s MPWSP
desal. This has to be emphasized. Most of these advantages do not exist with Cal Am’s desal.

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3. Ratepayer liability is enormous.

The FEIR/FEIS response to PWN2-22 states:

“...The issue of ratepayer liability is outside the scope of CEQA and NEPA requirements;
however, as described in Draft EIR/EIS Section 1.5.4.1, the CPUC decision to grant or deny a
Certificate of Public Convenience and Necessity for the project (i.e., project approval) would
follow a process after certification of the EIR during which the Commission will consider any
other issues that have been established in the record of the proceeding, including but not limited
to economic issues, social impacts, specific routing and alignments, and the need for the
project. Therefore, comments regarding ratepayer liability are relevant to and will be
considered as part of that proceeding.“ (Bold added.)

a There has not been a focused economic analysis on the feasibility of slant wells, as required by
SWRCB. Ratepayers are facing the brunt of massive R and D costs (research and development)
for a state mandate. This is totally unfair to local ratepayers. Cal Am has gotten a miniscule grant
of about $300,000 to offset over $20 million of costs. The slant well project at Doheny Point
received about 50% in grant funds. Yet it is still wallowing since 4 of the 5 initial sponsors
withdrew because of high costs. Ratepayer exposure it too great to rely only on Cal Am judgment.
There must be deeper professional reporting, greater transparency and wider discussions.
b Monterey residents pay the highest water bill in the entire United States, according to a national
study of the 500 largest water systems by Food and Water Watch. (See Attachments A and B for
documentation.) The results are astonishing. Between 2015 and 2017, a typical Tier 2 residential
bills increased 68%, when no new projects costs were added. Impacts on ratepayers must be
moderated with every opportunity. A new Phase 3 would be a move toward fairness.
c Return water agreement –
“For groundwater modeling and impact analysis purposes in the EIR/EIS, it is estimated that somewhere
between 0 and 12 percent of the source water withdrawn for the project would comprise water
originating from the inland aquifers, and thus would be returned to the basin.” (FEIR/FEIS response to
PWN2-27)
However all HWG data shows 7% to 12%, on the high side. Thus estimates of volumes and costs
in the return water agreement are low, and not reflective of reality. This needs to be revisited. This
is a subsidy from ratepayers for the privilege of taking water from the Salinas Basin with its
restrictive Agency Act. At some point, the cost of the subsidy is excessive. This cost should be
updated regarding projected ratepayer liability.

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 d Ratepayers have already paid all stranded costs for three Cal Am efforts that have failed – new
Carmel River Dam for $3.5 million, pilot desal at Moss Landing for $12 million, and the regional
desal project for $20 million. Economic justice requires that future costs on ratepayers must be
balanced by prior costs of Cal Am failures. While Cal Am can argue that past costs have been
reasonable and prudent under the circumstances, at some point historical costs must be balanced
for ratepayers fairness.
e Ratepayers have been hammered by Cal Am and the CPUC. Ratepayers deserve better.

4. Test Slant Well Feasibility Analysis

No overview feasibility analysis of the most unique project component.
State guidelines for feasibility analysis have been prescribed. It is a research and development expense,
being new and unique. So far, no report addresses all the feasibility factors. Not in the FEIR/FEIS. Not
by the HWG. Not by Cal Am in its filings. The CPUC must correct for this by demanding such a full
discussion of original and recent cost projections, full economic impacts, cost transparency and for what
aspects, discussions of similarities and differences with other slant well reports, particularly the Doheny
Point project, and operational experiences. The complete lack of a specific report is a snub of
fundamental expectations for the state agencies that required such an analysis. The CPUC should demand
a report for itself, and to inform SWRCB, CA Coastal Commission, and the public.

5. Lack of cost transparency for test slant well.

Ratepayers do not have any summary of test slant well costs. Cal Am hides it in its quarterly cost
summary of all wells, pumps and pipelines. The key component is the new and experimental slant well,
drilled at never-before-tried 19 degrees, and for never-before-tried ocean intake for desal.
PWN tried to solicit clarifications from Cal Am witnesses at evidentiary hearings last October and
November, 2017. PWN was frustrated with Cal Am witnesses passing the slant well cost question onto
the next witness, until the last witness passed the buck back to those who already testified. The CPUC
and the ALJs must not tolerate such avoidance. Through this avoidance, the record is incomplete.
Because the record is incomplete, the CPUC is not in position to make a definitive ruling on feasibility.
Yet if the CPUC proceeds without a careful review of all feasibility factors, it will be ruling without key
information. Another litigation window is open here.

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 The CPUC must shed light on the total cost and the full feasibility aspects of this widely hyped
experimental test slant well.

IV. Conclusion

Ratepayers are being hammered by high costs. More high costs are coming for new supply infrastructure.
Full transparency is required so ratepayers are informed. This includes a full report on slant well
feasibility. It also includes realistic estimating and costing of return water, and mitigations. Hiding from
full disclosure, or from difficult explanations, will only make matters worse.

A Phase 3 proceeding will allow lower cost options to get full vetting. It is extremely important to
acknowledge that pressures from administrative deadlines only makes matters worse, but for the wrong
reasons. The coming decision on MPWSP is huge. It needs to be made with full knowledge. Facts that
matter must not be sidelined. The cost, the impact, the community, all deserve the latest facts and the best
deliberation possible. Do not short-circuit the need to be fully informed.

Pay particular attention to ratepayer liability for historic costs, current and future project costs, and the
potential for litigation costs. Water bills are already among the highest in the country. The poor ratepayer
must not hold the bag for everything Cal Am plans. The community deserves better. Ratepayers deserve
better.

Respectfully submitted,

/s/George T. Riley

George T. Riley, Managing Directors

Public Water Now

1198 Castro Road, Monterey CA, 93940

April 19, 2018

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