Cal Am proves yet again it is driven by investor benefit, not public interest.

Sarah Leeper, president of California American Water, has been out in public recently arguing that its proposed desalination plant ought to be a precondition for lifting the state’s cease-and-desist order on the Carmel River. Her argument is that the Monterey Peninsula’s water supply isn’t secure enough to allow new connections, and the only real solution is desalination.

She’s hoping that state regulators will buy this story. The problem is she’s wrong – and she has every financial reason to be.

Fifteen years ago, water demand ran around 12,000 acre-feet annually. Today it’s under 9,000, a 25-percent reduction through conservation. Using the California Public Utilities Commission’s findings, available supply will exceed demand for at least the next 11 years, through 2036 – and until at least 2046 with storage, which existing infrastructure already supports.

This reality is what prompted the Monterey Peninsula Water Management District to petition the State Water Resources Control Board six months ago to ask regulators to modify the cease-and-desist order, issued in 1995 to protect the Carmel River from overpumping. A combination of conservation and smart engineering (the Pure Water Monterey recycled water project) have solved the issue.

MPWMD General Manager Dave Stoldt reported there are 8,682 acre-feet of stored water on hand, nearly a full year of customer demand. The district’s application to the State Water Board states, “The proposed desalination plant is NOT a necessary condition to modify the [order] now.”

In her objections, Leeper cites a state projection of a shortfall of 815 million gallons annually, by 2050. What she doesn’t mention is that this figure is bitterly disputed. MPWMD, Marina Coast Water District, the City of Marina, and the state’s own Public Advocates Office all presented expert testimony that the 2050 demand figure will be between 10,600 and 11,200 acre-feet, below the 13,700-plus Cal Am forecasts.

This project was first proposed in 2012. Cal Am has since spent over $100 million on engineering, design, slant tests and environmental review – all of which ratepayers will be responsible for in future water bills if the plant comes online.

In 2018, Cal Am testified that the plant – with construction costs then estimated at $329 million – would produce water at $3,711 per acre-foot, a figure MPWMD showed is understated. If the desal plant is built and then operates below its designed capacity (a likely scenario, given actual demand), the real cost could reach as high as $15,442 per acre-foot.

Under California utility regulation, investor-owned utilities earn a guaranteed rate of return – historically 8 to 9 percent – on their invested capital. The more they spend on infrastructure, the larger their guaranteed profit, paid for by you and me. A $300 million desalination plant generates an estimated $20 million or more in annual guaranteed profit for American Water’s shareholders. We pay to build it, they own it and then they charge us for the water we use.

This is not just a local phenomenon. A 2022 peer-reviewed study by researchers at Cornell University and the University of Pittsburgh, published in the journal Water Policy, examined the 500 largest community water systems in the U.S. and found that private ownership is the single most significant factor driving up water bills – more than aging infrastructure, drought or population growth.

Meanwhile, the community has spoken. The Monterey County Water Resources Agency and cities of Monterey, Carmel, Pacific Grove, Seaside, Sand City and Del Rey Oaks all submitted letters of support of MPWMD’s application to the State Water Board.

Desalination should be taken off the table, and hopefully a court ruling is coming soon in favor of the public buyout effort underway. Not because public ownership automatically means lower costs – that’s a hopeful and probably false promise – but because water is a public resource that should be managed by people who live here, not by a corporation aiming to deliver dividends to its investors. With publicly traded American Water now in the throes of merging with Essential Utilities, a desal project will artificially inflate Cal Am’s value, on our dime.

Bradley Zeve is Founder & CEO of Monterey County Weekly/Monterey County Now. Reach him at bradley@montereycountynow.com.