Desal Project

UPDATE: Monterey Water Supply Test Well Update for the Month of February

Desal will be the largest component of the Peninsula’s water supply solutions. Depending on the success of the Ground Water Replenishment project, the desal plant will create either 6.4 or 9.6 MGD of water.

The Authority chose to support CalAm’s desal project because, when taking into consideration the Authority’s portfolio conditions and the timeline, CalAm’s project was the most advanced and came the closest to meeting the conditions. CalAm was then required to align with eight further conditions so that the project was one that fully addressed the conditions of the Authority and the concerns of Peninsula residents.  A full list of policy conditions can be seen below.

Given the current timeline, CalAm’s desal project is not anticipated to be completed by the January 1, 2017 deadline. However, the Authority is in conversations with the  CPUC (California Public Utilities Commission) to request a deadline extension based on the Peninsula’s progress toward resolving our water shortage problem.

Visit CalAm’s Water Supply website  and watch a brief explanation by Dave Stoldt , Executive Director of the Water Management District to learn more about the desal project.

Policy Conditions for Desal

The Authority’s Policy Position Statement was adopted and amended by The Authority to formalize the conditions for support for any proposed solutions and processes for development for a new water supply.

July 31, 2013: Letter from Cal Am President MacLean to Authority President Della Sala

July 25, 2013: Authority Policy Presentation

The Authority has taken a position of supporting a portfolio approach. This includes Ground Water Replenishment (GWR), Aquifer Storage and Recovery (ASR), and Pacific Grove Small Projects, all of which have public ownership, in addition to a desal project. Benefits of a portfolio approach allow each individual element (PG small projects, GWR, ASR, desal) ability to move on its own track and schedule such that a delay in one doesn’t necessarily delay others.

Authority Support for a desal project must include the following:

    1. Project must be economically competitive.
    2. Project must have suitable public governance, public accountability and public transparency.
    3. Project must have clear path to permitting and constructing the facility as near to the Cease and Desist Order deadline as feasible.
    4. Project must have contingency plans to address significant technical, permitting and legal risks.

At this time Cal Am’s proposed project appears to be closest to meeting the above criteria.

The Authority’s support for the Cal Am Project is subject to the following conditions:

Financial Considertions

  1. Cal Am must accept a significant contribution of public funds consistent with the parameters set forth within the Authority’s direct testimony submitted to the PUC on February 22, 2013.  Without the interest rate advantages afforded by such approach, the costs of water from the Cal Am Project will be materially higher, and likely substantially in excess of the cost of water from the alternative projects. A significant contribution of public funds will avoid such an unwarranted expense to Cal Am’s rate payers. At the May 23, 2013 meeting, the Authority approved the refinement of the previously adopted position to define “significant contribution of public funds” to mean that Cal Am must accept the contribution of public funds of approximately 50% of the cost of the project to include both surcharge two and the rate reduction bonds to count toward the public contribution of 50%.  Cal Am’s traditional financing entails a blend of 53% equity and 47% debt. A significant public contribution (combined with Surcharge 2) should be of sufficient size to reduce Cal Am’s equity to approximately half that much (26 to 27%).  2.1 Final ltr fr USEPA to SWRCB Monterey Desal Project May 4 2011
  2. Cal Am must diligently seek to secure lower electricity rates for the project (e.g., $0.08-$0.09 cents/kWh as most recently estimated by Cal Am) including agreement to purchasing power through a municipal electrical utility, generation of on-site power if necessary, other public entity or other source of low-cost power. Meetings are occurring between the Monterey Regional Waste Management District, Cal Am and the Authority
  3. Cal Am must agree to limit the use of revenue from Cal Am’s Surcharge 2 to reduce risk to Cal Am ratepayers in the event the Cal Am project does not move forward. For example, Cal Am could agree only to use Surcharge 2 to fund lower risk parts and phases of the project (such as only the construction phase after the issuance of a Coastal Development Permit from the Coastal Commission) or could provide other mechanisms of reducing the risk to Cal Am ratepayers. 
  4. Cal Am must show something in writing from the State demonstrating its ability to secure SRF financing. Absent such a document, the Authority will work with the Water Management District to secure SRF financing as public agencies. Cal Am must accept a public agency partner for SRF purposes if necessary, even if doing so results in a reduction in Cal Am’s equity position.

Governance

  1. Cal Am must agree, upon mutually-acceptable terms, to form a Governance Committee to provide publicly-accountable oversight of the project. Status: Completed  Agreement – MPWSP Governance Committee – Executed – 3-8-13

Permitting & Contingency Plans

  1. To promptly address concerns pertaining to Cal Am’s proposed intake wells, Cal Am must:
      1. Address or cause to be addressed all issues raised in the December 2012 Tim Durbin testimony;
      2. Proceed with the planned test wells and any other advanced geotechnical work to support the proposed intake wells as soon as practically feasible;
      3. Collaborate with local public agencies to advance permitting efforts with other responsible agencies, including the California Coastal Commission;
      4. Seek to clarify whether the installation of Cal Am’s intake wells will require approval from any federal agency, which would, in turn, require NEPA compliance; Status: Pending – Cal Am has agreed to develop a series of bore holes and other geotechnical research to address potential impacts. Additionally, Cal Am has regularly been meeting with permitting agencies and has submitted the majority of the permits required for the test wells.
  1. Continue to explore and advance alternative intake strategies as a contingency if Cal Am’s proposed intake wells prove legally or technically infeasible.
      1. Cal Am must fully develop a contingency plan or plans and implement that plan or those plans for source water that do not involve wells in the Salinas Basin. This must be done concurrently along with Cal Am planning and testing of slant wells. Status: Pending – Multiple locations are being proposed and none have been permitted to date
  1. Cal Am must address questions about sea level rise and coastal erosion with respect to the placement and longevity of their proposed slant wells. Coastal sands are also prone to liquefaction in seismic events and coastal facilities are susceptible to damage from tsunami events as well. Status: Pending