In the midst of a legal battle, Cal Am seeks to raise desalination project cost cap by 3.5.

It’s been roughly eight years since California-American Water provided an estimate of how much it would cost to build a desalination project it argues would address the long-term water supply constraints plaguing the Monterey Peninsula.

In 2018, that estimate was $239 million, a figure that has continued to be quoted in project plans as inflation, labor and material costs have been on the rise. In an application filed with the California Public Utilities Commission on Oct. 23, Cal Am has updated its estimate to $825 million, roughly 3.5 times more than the amount the CPUC approved in 2018.

In its CPUC filing, the company says the desal project’s current estimate covers only Phase 1, which would produce 4.8 million gallons per day (mgd), 25-percent less than the 6.4mgd project proposed in 2018. The project is intended to be sized for future expansion to 6.4mgd, but the cost associated with that expansion hasn’t yet been estimated, and would hinge on whether there is additional future demand for water.

“California American Water remains committed to ensuring the Monterey Peninsula has a reliable water supply into the future,” the company says in a written statement. “We are taking steps to pursue alternative sources of financing to minimize rate impacts and protect affordability for our customers.”

To lessen the sticker shock, Cal Am is pursuing grants from the Department of Water Resources and up to $50 million in state revolving-fund loans. The company estimates that these financing measures, among others, can reduce costs by around $588 million over the 40-year life of the project.

The filing comes at a time when Cal Am faces a legal battle with the Monterey Peninsula Water Management District over whether the district has “latent powers,” or the authority to provide retail water service. The trial could pave the way for eminent domain proceedings, in which the district seeks to take over Cal Am’s water system, following voter approval of Measure J in 2018.

The revised desalination project estimate could also affect the cost of acquiring Cal Am’s system, depending on how the desalination project factors into the valuation. Impacts to the potential buyout remain unclear.

Cal Am is also asking the CPUC to update the ratemaking framework, which governs what is recovered from customers. A bill impact summary provided by the company shows rates roughly doubling on average among single family, multifamily and nonresidential units.

A public review process will provide opportunities for other parties to weigh in and discuss how costs will affect different ratepayers, all of which will likely take more than a year, according to Dave Stoldt, MPWMD’s general manager.

“You get three-quarters of the plant at three-and-a-half times the cost, not a great look,” Stoldt says. “There’s a lot of discussion that has to be had, so it’s likely to drag out for at least that long.”