Water District asks state regulators to compel Cal Am to sign off on Pure Water Monterey expansion.

If Cal Am won’t voluntarily play ball to expand Pure Water Monterey, a recycled water project that could preclude the need for a local desalination project for decades, perhaps a strongly worded petition to the California Public Utilities Commission might help.

On Dec. 16, David Laredo, attorney for the Monterey Peninsula Water Management District, sent such a petition to the CPUC, the state commission that regulates private utilities, alleging that Cal Am is acting in bad faith in its request for a rehearing on the rate structure connected to Pure Water Monterey expansion. 

The petition asks that the commission compel the private water utility to sign an amended water purchase agreement—essentially, a promise that Cal Am will buy the water a PWM expansion would produce—so that construction of the project would begin and add 2,250 acre-feet of water annually to the local portfolio. (Current annual demand on the Peninsula is just under 10,000 acre-feet.)

At issue is whether Cal Am can recover some $21 million of sunk costs that the CPUC previously denied, on advice of the Office of Ratepayer Advocates. 

In Laredo’s petition, he writes, “Monterey ratepayers will be held hostage by an investor-owned utility that gives lip service to support for the project while it argues for additional funding that has already been reviewed and denied by the commission.”

The CPUC approved the water purchase agreement for the Pure Water Monterey expansion Dec. 1, but Cal Am has thus far refused to sign it and plans instead to ask for a rehearing at the CPUC.

This comes despite Cal Am officials testifying before the Coastal Commission last month—while advocating for a permit for their desal project—that they supported the Pure Water Monterey expansion, and that they fully intended to sign the agreement once it was approved. Water is desperately needed for housing, they said. 

Then on Dec. 6, Cal Am President Kevin Tilden wrote a letter to the CPUC’s five commissioners indicating Cal Am would not be signing the water purchase agreement. A day later he called project partners Paul Sciuto and Dave Stoldt, general managers for Monterey One Water and MPWMD, respectively, indicating Cal Am would not sign the agreement, and that the company planned to file for a rehearing to recover its costs. (The utility company could sign the agreement while simultaneously applying for a rehearing, which would allow the expansion to move forward immediately.)

“Mr. Tilden also stated Cal Am would not like to lose its leverage by proceeding with the expansion,” Laredo's petition reads, “and if water is needed in the next few years Cal Am would over-pump the adjudicated Seaside Basin.” 

Laredo concludes the petition with, “All this leaves the Monterey community hostage. It has sponsored a project to provide a needed water supply. That project is ready for bid, and financing has been arranged, but this recalcitrant investor-owned utility is digging in its heels to the detriment of its customers, and in violation of water supply requirements set by the State Water Resources Control Board.”

Cal Am spokesperson Josh Stratton, in an email, reiterates Cal Am’s commitment to the expansion, adding, “We expect that the right decision will be made by the CPUC so that we can sign the [water purchase agreement] and proceed right away with Pure Water Monterey expansion. Our financial investment in Pure Water Monterey expansion evidences our support of the project.”

Though “right away” won’t be for many months: Stoldt says the hope is the petition his district filed Friday makes the CPUC pay attention and at least speed up the process by highlighting the critical importance of the project to forward in a timely manner. If it succeeds in doing that, he says, it could put Cal Am’s cost recovery rehearing, and MPWMD's petition to compel Cal Am to sign the agreement, before the CPUC on a track of three to four months, instead of six to 10 months.

In an email, Stoldt also outlines the potential grants, already awarded to the project, that are now potentially at risk: $10.32 million in federal grants, and two state grants totalling $19.8 million. Also potentially at risk of expiring at some point, he writes, is a federal EPA low-interest financing commitment of over $70 million.